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~~June 30, ~~2021~~2022
	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~~1400

Portland, Oregon 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: ~~216,621,803~~217,050,683 shares outstanding as of ~~October 31, 2021~~July 28, 2022.

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
Bank Merger						The proposed merger of Columbia State Bank, a Washington state-chartered bank and a wholly owned subsidiary of Columbia, with the Bank, with the Bank as the surviving 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~~
COVID-19						Coronavirus Disease 2019
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.
FOMC						Federal Open Market Committee

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~~Mergers						Merger Sub will merge with and into Umpqua, with Umpqua as the surviving entity, and immediately following such merger, Umpqua will merge with and into Columbia, with Columbia as the surviving corporation.
Merger Agreement						Agreement and Plan of Merger dated as of October 11, 2021, by and among ~~Umpqua,~~the Company, 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~~SOFR						~~Merger Sub will merge with and into Umpqua, with Umpqua surviving the Merger~~Secured Overnight Financing Rate

TDR						Troubled debt restructuring
~~USDA~~Umpqua						~~United States Department of Agriculture~~Umpqua Holdings Corporation and its subsidiaries

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)	(in thousands, except shares)	September 30, 2021		December 31, 2020		(in thousands, except shares)	June 30, 2022		December 31, 2021
ASSETS	ASSETS					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
Cash and due from banks (restricted cash of $0 and $3,593)						Cash and due from banks (restricted cash of $0 and $3,593)	$	315,348	$	222,015
Interest bearing cash and temporary investments (restricted cash of $0 and $400)						Interest bearing cash and temporary investments (restricted cash of $0 and $400)	687,233		2,539,606
Total cash and cash equivalents	Total cash and cash equivalents	3,744,589		2,573,181		Total cash and cash equivalents	1,002,581		2,761,621
Investment securities	Investment securities					Investment securities
Equity and other, at fair value	Equity and other, at fair value	81,575		83,077		Equity and other, at fair value	75,347		81,214
Available for sale, at fair value	Available for sale, at fair value	3,723,171		2,932,558		Available for sale, at fair value	3,416,707		3,870,435
Held to maturity, at amortized cost	Held to maturity, at amortized cost	2,795		3,034		Held to maturity, at amortized cost	2,637		2,744
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
Loans held for sale, at fair value						Loans held for sale, at fair value	228,889		353,105
Loans and leases (at fair value: $309,628 and $345,634)						Loans and leases (at fair value: $309,628 and $345,634)	24,432,678		22,553,180
Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	(257,560)		(328,401)		Allowance for credit losses on loans and leases	(261,111)		(248,412)
Net loans and leases	Net loans and leases	21,712,380		21,450,966		Net loans and leases	24,171,567		22,304,768
Restricted equity securities	Restricted equity securities	10,946		41,666		Restricted equity securities	10,867		10,916
Premises and equipment, net	Premises and equipment, net	172,624		178,050		Premises and equipment, net	165,196		171,125
Operating lease right-of-use assets	Operating lease right-of-use assets	88,379		104,937		Operating lease right-of-use assets	87,249		82,366
Goodwill		—		2,715

Other intangible assets, net	Other intangible assets, net	9,970		13,360		Other intangible assets, net	6,789		8,840
Residential mortgage servicing rights, at fair value	Residential mortgage servicing rights, at fair value	105,834		92,907		Residential mortgage servicing rights, at fair value	179,558		123,615
Bank owned life insurance	Bank owned life insurance	325,646		323,470		Bank owned life insurance	328,764		327,745
Deferred tax asset, net	Deferred tax asset, net	8,402		—		Deferred tax asset, net	70,134		—
Other assets	Other assets	552,702		669,029		Other assets	389,409		542,442
Total assets	Total assets	$	30,891,479	$	29,235,175	Total assets	$	30,135,694	$	30,640,936
LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY					LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits	Deposits					Deposits
Non-interest bearing	Non-interest bearing	$	11,121,127	$	9,632,773	Non-interest bearing	$	11,129,209	$	11,023,724
Interest bearing	Interest bearing	15,787,270		14,989,428		Interest bearing	15,003,214		15,570,961
Total deposits	Total deposits	26,908,397		24,622,201		Total deposits	26,132,423		26,594,685
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	467,760		375,384		Securities sold under agreements to repurchase	527,961		492,247
Borrowings	Borrowings	6,367		771,482		Borrowings	6,252		6,329
Junior subordinated debentures, at fair value	Junior subordinated debentures, at fair value	299,508		255,217		Junior subordinated debentures, at fair value	321,268		293,081
Junior subordinated debentures, at amortized cost	Junior subordinated debentures, at amortized cost	88,098		88,268		Junior subordinated debentures, at amortized cost	87,927		88,041
Operating lease liabilities	Operating lease liabilities	100,557		113,593		Operating lease liabilities	101,352		95,427
Deferred tax liability, net	Deferred tax liability, net	—		5,441		Deferred tax liability, net	—		4,353
Other liabilities	Other liabilities	298,413		299,012		Other liabilities	440,235		317,503
Total liabilities	Total liabilities	28,169,100		26,530,598		Total liabilities	27,617,418		27,891,666
COMMITMENTS AND CONTINGENCIES (NOTE 6)	COMMITMENTS AND CONTINGENCIES (NOTE 6)	0		0		COMMITMENTS AND CONTINGENCIES (NOTE 6)	0		0
SHAREHOLDERS' EQUITY	SHAREHOLDERS' EQUITY					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
Common stock, no par value, shares authorized: 400,000,000 in 2022 and 2021; issued and outstanding: 217,048,967 in 2022 and 216,625,506 in 2021						Common stock, no par value, shares authorized: 400,000,000 in 2022 and 2021; issued and outstanding: 217,048,967 in 2022 and 216,625,506 in 2021	3,445,531		3,444,849
Accumulated deficit	Accumulated deficit	(739,915)		(932,767)		Accumulated deficit	(619,108)		(697,338)
Accumulated other comprehensive income		20,209		122,745
Accumulated other comprehensive (loss) income						Accumulated other comprehensive (loss) income	(308,147)		1,759
Total shareholders' equity	Total shareholders' equity	2,722,379		2,704,577		Total shareholders' equity	2,518,276		2,749,270
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	30,891,479	$	29,235,175	Total liabilities and shareholders' equity	$	30,135,694	$	30,640,936

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					Three Months Ended				Six Months Ended
(in thousands, except per share amounts)	(in thousands, except per share amounts)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands, except per share amounts)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
INTEREST INCOME	INTEREST INCOME									INTEREST INCOME
Interest and fees on loans and leases	Interest and fees on loans and leases	$	224,403	$	229,457	$	669,014	$	710,624	Interest and fees on loans and leases	$	234,674	$	223,470	$	449,078	$	444,611
Interest and dividends on investment securities:	Interest and dividends on investment securities:									Interest and dividends on investment securities:
Taxable	Taxable	16,102		10,168		43,833		35,788		Taxable	17,256		14,619		35,981		27,731
Exempt from federal income tax	Exempt from federal income tax	1,470		1,490		4,491		4,572		Exempt from federal income tax	1,369		1,487		2,741		3,021
Dividends	Dividends	213		710		1,216		1,956		Dividends	84		405		170		1,003
Interest on temporary investments and interest bearing deposits	Interest on temporary investments and interest bearing deposits	1,237		474		2,635		4,208		Interest on temporary investments and interest bearing deposits	2,919		774		4,272		1,398
Total interest income	Total interest income	243,425		242,299		721,189		757,148		Total interest income	256,302		240,755		492,242		477,764
INTEREST EXPENSE	INTEREST EXPENSE									INTEREST EXPENSE
Interest on deposits	Interest on deposits	5,100		19,121		22,794		85,633		Interest on deposits	4,015		7,016		7,931		17,694
Interest on securities sold under agreement to repurchase and federal funds purchased	Interest on securities sold under agreement to repurchase and federal funds purchased	88		84		232		673		Interest on securities sold under agreement to repurchase and federal funds purchased	66		68		129		144
Interest on borrowings	Interest on borrowings	149		3,271		2,787		11,156		Interest on borrowings	50		866		99		2,638
Interest on junior subordinated debentures	Interest on junior subordinated debentures	3,014		3,249		9,108		12,074		Interest on junior subordinated debentures	4,001		3,042		7,150		6,094
Total interest expense	Total interest expense	8,351		25,725		34,921		109,536		Total interest expense	8,132		10,992		15,309		26,570
Net interest income	Net interest income	235,074		216,574		686,268		647,612		Net interest income	248,170		229,763		476,933		451,194
(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
PROVISION (RECAPTURE) FOR CREDIT LOSSES										PROVISION (RECAPTURE) FOR CREDIT LOSSES	18,692		(22,996)		23,496		(22,996)
Net interest income after provision (recapture) for credit losses										Net interest income after provision (recapture) for credit losses	229,478		252,759		453,437		474,190
NON-INTEREST INCOME	NON-INTEREST INCOME									NON-INTEREST INCOME
Service charges on deposits	Service charges on deposits	10,941		10,405		30,898		30,635		Service charges on deposits	12,011		10,310		23,594		19,957
Card-based fees	Card-based fees	9,111		7,118		26,759		20,436		Card-based fees	10,530		10,274		19,238		17,648
Brokerage revenue	Brokerage revenue	31		3,686		5,081		11,506		Brokerage revenue	27		1,135		38		5,050
Residential mortgage banking revenue, net	Residential mortgage banking revenue, net	34,150		90,377		143,626		191,794		Residential mortgage banking revenue, net	30,544		44,443		91,330		109,476
Gain on sale of debt securities, net	Gain on sale of debt securities, net	—		—		4		190		Gain on sale of debt securities, net	—		—		2		4
(Loss) gain on equity securities, net	(Loss) gain on equity securities, net	(343)		(112)		(1,045)		942		(Loss) gain on equity securities, net	(2,075)		4		(4,736)		(702)
Gain on loan and lease sales, net	Gain on loan and lease sales, net	4,208		1,092		10,899		3,333		Gain on loan and lease sales, net	1,303		5,318		3,640		6,691
Bank owned life insurance income	Bank owned life insurance income	2,038		2,087		6,201		6,332		Bank owned life insurance income	2,110		2,092		4,197		4,163
Other income		13,569		17,271		51,157		22,881
Other income (losses)										Other income (losses)	785		17,499		(2,099)		37,588
Total non-interest income	Total non-interest income	73,705		131,924		273,580		288,049		Total non-interest income	55,235		91,075		135,204		199,875
NON-INTEREST EXPENSE	NON-INTEREST EXPENSE									NON-INTEREST EXPENSE
Salaries and employee benefits	Salaries and employee benefits	117,636		120,337		363,343		346,787		Salaries and employee benefits	110,942		121,573		224,080		245,707
Occupancy and equipment, net	Occupancy and equipment, net	33,944		36,720		103,236		109,892		Occupancy and equipment, net	34,559		34,657		69,388		69,292
Communications	Communications	2,866		2,943		8,633		9,010		Communications	2,585		3,004		5,339		5,767
Marketing	Marketing	1,651		1,859		5,077		6,148		Marketing	1,649		2,054		4,047		3,426
Services	Services	12,017		13,193		36,279		34,319		Services	14,402		13,512		25,739		24,262
FDIC assessments	FDIC assessments	2,136		2,989		6,342		9,502		FDIC assessments	2,954		1,607		7,470		4,206
Intangible amortization	Intangible amortization	1,130		1,247		3,390		3,740		Intangible amortization	1,026		1,130		2,051		2,260
Merger related expenses										Merger related expenses	2,672		—		4,950		—

Goodwill impairment		—		—		—		1,784,936
Other expenses	Other expenses	12,373		10,919		34,445		30,441		Other expenses	8,785		11,863		18,940		22,072
Total non-interest expense	Total non-interest expense	183,753		190,207		560,745		2,334,775		Total non-interest expense	179,574		189,400		362,004		376,992
Income (loss) before provision for income taxes		143,945		158,629		441,018		(1,603,946)
Income before provision for income taxes										Income before provision for income taxes	105,139		154,434		226,637		297,073
Provision for income taxes	Provision for income taxes	35,879		33,758		109,072		70,204		Provision for income taxes	26,548		38,291		56,889		73,193
Net income (loss)		$	108,066	$	124,871	$	331,946	$	(1,674,150)
Earnings (loss) per common share:
Net income										Net income	$	78,591	$	116,143	$	169,748	$	223,880
Earnings per common share:										Earnings per common share:
Basic	Basic	$0.49		$0.57		$1.51		($7.60)		Basic	$0.36		$0.53		$0.78		$1.02
Diluted	Diluted	$0.49		$0.57		$1.51		($7.60)		Diluted	$0.36		$0.53		$0.78		$1.01
Weighted average number of common shares outstanding:	Weighted average number of common shares outstanding:									Weighted average number of common shares outstanding:
Basic	Basic	218,416		220,221		219,791		220,216		Basic	217,030		220,593		216,906		220,481
Diluted	Diluted	218,978		220,418		220,278		220,216		Diluted	217,279		221,022		217,333		220,928

See notes to condensed consolidated financial statements

Table of Contents

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
(in thousands)	(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Net income (loss)		$	108,066	$	124,871	$	331,946	$	(1,674,150)
Net income										Net income	$	78,591	$	116,143	$	169,748	$	223,880
Available for sale securities:	Available for sale securities:									Available for sale securities:
Unrealized (losses) gains arising during the period	Unrealized (losses) gains arising during the period	(29,009)		2,996		(93,533)		115,327		Unrealized (losses) gains arising during the period	(152,399)		22,821		(389,445)		(64,524)
Income tax benefit (expense) related to unrealized (losses) gains		7,463		(771)		24,058		(29,663)
Income tax benefit (expense) related to unrealized losses										Income tax benefit (expense) related to unrealized losses	39,197		(5,870)		100,165		16,595

Reclassification adjustment for net realized gains in earnings	Reclassification adjustment for net realized gains in earnings	—		—		(4)		(190)		Reclassification adjustment for net realized gains in earnings	—		—		(2)		(4)
Income tax expense related to realized gains	Income tax expense related to realized gains	—		—		1		49		Income tax expense related to realized gains	—		—		1		1
Net change in unrealized (losses) gains for available for sale securities	Net change in unrealized (losses) gains for available for sale securities	(21,546)		2,225		(69,478)		85,523		Net change in unrealized (losses) gains for available for sale securities	(113,202)		16,951		(289,281)		(47,932)

Junior subordinated debentures, at fair value:	Junior subordinated debentures, at fair value:									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
Unrealized losses arising during the period										Unrealized losses arising during the period	(15,064)		(5,996)		(27,767)		(32,558)
Income tax benefit related to unrealized losses										Income tax benefit related to unrealized losses	3,875		1,542		7,142		8,374
Net change in unrealized losses for junior subordinated debentures, at fair value										Net change in unrealized losses for junior subordinated debentures, at fair value	(11,189)		(4,454)		(20,625)		(24,184)
Other comprehensive (loss) income, net of tax	Other comprehensive (loss) income, net of tax	(30,420)		(8,586)		(102,536)		105,473		Other comprehensive (loss) income, net of tax	(124,391)		12,497		(309,906)		(72,116)
Comprehensive income (loss)		$	77,646	$	116,285	$	229,410	$	(1,568,677)
Comprehensive (loss) income										Comprehensive (loss) income	$	(45,800)	$	128,640	$	(140,158)	$	151,764

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 Deficit)				Accumulated Other Comprehensive Income									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	—										—
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
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	—										—			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				150,730								150,730			Net income						108,066								108,066
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax								(12,277)				(12,277)			Other comprehensive loss, net of tax										(30,420)				(30,420)
Stock-based compensation	Stock-based compensation		2,473										2,473			Stock-based compensation				2,765										2,765
Stock repurchased and retired	Stock repurchased and retired	(2,022)	(27)										(27)			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	6,159	—										—			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)				(46,566)								(46,566)			Cash dividends on common stock ($0.21 per share)						(46,027)								(46,027)
Balance at December 31, 2020		220,226,335	$	3,514,599	$	(932,767)			$	122,745			$	2,704,577
Balance at September 30, 2021																Balance at September 30, 2021		216,621,803		$	3,442,085	$	(739,915)			$	20,209			$	2,722,379
Net income																Net income						88,354								88,354
Other comprehensive loss, net of tax																Other comprehensive loss, net of tax										(18,450)				(18,450)
Stock-based compensation																Stock-based compensation				2,800										2,800
Stock repurchased and retired																Stock repurchased and retired		(1,790)		(36)										(36)
Issuances of common stock under stock plans																Issuances of common stock under stock plans		5,493		—										—
Cash dividends on common stock ($0.21 per share)																Cash dividends on common stock ($0.21 per share)						(45,777)								(45,777)

~~Table of Contents~~

~~UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES~~

~~CONDENSEDCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY~~

~~(Continued)~~

~~(UNAUDITED)~~
Common Stock Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss)
(in thousands, except shares) Shares Amount Total
Balance at January 1, 2021 220,226,335 $ 3,514,599 $ (932,767) $ 122,745 $ 2,704,577
Net income 107,737 107,737
Other comprehensive loss, net of tax (84,613) (84,613)
Stock-based compensation 2,964 2,964
Stock repurchased and retired (143,832) (2,315) (2,315)
Issuances of common stock under stock plans 408,700 — —
Cash dividends on common stock ($0.21 per share) (46,481) (46,481)
Balance at March 31, 2021 220,491,203 $ 3,515,248 $ (871,511) $ 38,132 $ 2,681,869
Net income 116,143 116,143
Other comprehensive income, net of tax 12,497 12,497
Stock-based compensation 2,377 2,377
Stock repurchased and retired (957) (18) (18)
Issuances of common stock under stock plans 136,206 34 34
Cash dividends on common stock ($0.21 per share) (46,586) (46,586)
Balance at June 30, 2021 220,626,452 $ 3,517,641 $ (801,954) $ 50,629 $ 2,766,316
Net income 108,066 108,066
Other comprehensive loss, net of tax (30,420) (30,420)
Stock-based compensation 2,765 2,765
Stock repurchased and retired (4,011,808) (78,321) (78,321)
Issuances of common stock under stock plans 7,159 — —
Cash dividends on common stock ($0.21 per share) (46,027) (46,027)
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 the allowance for credit losses on January 1, 2020.~~




Balance at December 31, 2021	216,625,506	$	3,444,849	$	(697,338)	$	1,759	$	2,749,270
Net income				91,157				91,157
Other comprehensive loss, net of tax						(185,515)		(185,515)
Stock-based compensation		2,454						2,454
Stock repurchased and retired	(194,792)	(4,037)						(4,037)
Issuances of common stock under stock plans	536,157	—						—
Cash dividends on common stock ($0.21 per share)				(45,731)				(45,731)
Balance at March 31, 2022	216,966,871	$	3,443,266	$	(651,912)	$	(183,756)	$	2,607,598
Net income				78,591				78,591
Other comprehensive loss, net of tax						(124,391)		(124,391)
Stock-based compensation		2,283						2,283
Stock repurchased and retired	(4,267)	(72)						(72)
Issuances of common stock under stock plans	86,363	54						54
Cash dividends on common stock ($0.21 per share)				(45,787)				(45,787)
Balance at June 30, 2022	217,048,967	$	3,445,531	$	(619,108)	$	(308,147)	$	2,518,276

See notes to condensed consolidated financial statements

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UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Nine Months Ended					Six Months Ended
(in thousands)	(in thousands)	September 30, 2021		September 30, 2020		(in thousands)	June 30, 2022		June 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	331,946	$	(1,674,150)
Adjustments to reconcile net income to net cash used in operating activities:
Goodwill impairment		—		1,784,936
Net income						Net income	$	169,748	$	223,880
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of investment premiums, net	Amortization of investment premiums, net	10,934		20,911		Amortization of investment premiums, net	3,771		8,181
Gain on sale of investment securities, net	Gain on sale of investment securities, net	(4)		(190)		Gain on sale of investment securities, net	(2)		(4)

(Recapture) provision for credit losses		(41,915)		204,832
Provision (recapture) for credit losses						Provision (recapture) for credit losses	23,496		(22,996)
Change in cash surrender value of bank owned life insurance	Change in cash surrender value of bank owned life insurance	(6,302)		(6,433)		Change in cash surrender value of bank owned life insurance	(4,270)		(4,236)
Depreciation, amortization and accretion	Depreciation, amortization and accretion	23,492		28,494		Depreciation, amortization and accretion	14,681		15,769
Loss (gain) on sale of premises and equipment		436		(369)
Gain on store divestiture		—		(5,945)
(Gain) loss on sale of premises and equipment						(Gain) loss on sale of premises and equipment	(1,865)		593

Additions to residential mortgage servicing rights carried at fair value	Additions to residential mortgage servicing rights carried at fair value	(30,845)		(37,484)		Additions to residential mortgage servicing rights carried at fair value	(15,203)		(22,395)
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	17,918		59,246		Change in fair value of residential mortgage servicing rights carried at fair value	(40,740)		12,603

Stock-based compensation	Stock-based compensation	8,106		6,781		Stock-based compensation	4,737		5,341
Net decrease (increase) in equity and other investments		457		(1,662)
Loss (gain) on equity securities, net		1,045		(942)
Gain on sale of loans and leases, net		(124,764)		(212,353)
Net decrease in equity and other investments						Net decrease in equity and other investments	1,131		276
Loss on equity securities, net						Loss on equity securities, net	4,736		702
Loss (gain) on sale of loans and leases, net						Loss (gain) on sale of loans and leases, net	5,376		(87,786)
Change in fair value of loans held for sale	Change in fair value of loans held for sale	21,727		(16,519)		Change in fair value of loans held for sale	6,852		17,215
Origination of loans held for sale	Origination of loans held for sale	(3,875,836)		(4,897,068)		Origination of loans held for sale	(1,225,654)		(2,888,555)
Proceeds from sales of loans held for sale	Proceeds from sales of loans held for sale	4,065,846		4,958,265		Proceeds from sales of loans held for sale	1,323,515		2,973,721
Change in other assets and liabilities:	Change in other assets and liabilities:					Change in other assets and liabilities:
Net decrease (increase) in other assets		161,119		(232,499)
Net decrease in other liabilities		(21,816)		(59,519)
Net cash provided by (used in) operating activities		541,544		(81,668)
Net decrease in other assets						Net decrease in other assets	204,548		49,333
Net increase in other liabilities						Net increase in other liabilities	105,658		4,755
Net cash provided by operating activities						Net cash provided by operating activities	580,515		286,397
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	(1,473,840)		(595,396)		Purchases of investment securities available for sale	(175,656)		(1,023,892)

Proceeds from investment securities available for sale	Proceeds from investment securities available for sale	578,240		604,553		Proceeds from investment securities available for sale	236,066		408,950

Purchases of restricted equity securities		(34)		(20,001)

Redemption of restricted equity securities	Redemption of restricted equity securities	30,754		16,402		Redemption of restricted equity securities	67		26,453
Net change in loans and leases	Net change in loans and leases	(85,539)		(1,343,715)		Net change in loans and leases	(1,947,302)		(213,070)
Proceeds from sales of loans and leases	Proceeds from sales of loans and leases	182,605		60,777		Proceeds from sales of loans and leases	70,503		140,011
Change in premises and equipment	Change in premises and equipment	(13,121)		(11,526)		Change in premises and equipment	(4,971)		(8,822)
Proceeds from bank owned life insurance death benefits	Proceeds from bank owned life insurance death benefits	3,401		57		Proceeds from bank owned life insurance death benefits	3,251		2,708

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

Other	Other	1,879		1,037		Other	191		1,700
Net cash used in investing activities	Net cash used in investing activities	$	(764,874)	$	(1,368,984)	Net cash used in investing activities	$	(1,817,851)	$	(655,181)

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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					Six Months Ended
(in thousands)	(in thousands)	September 30, 2021		September 30, 2020		(in thousands)	June 30, 2022		June 30, 2021
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit liabilities		$	2,286,225	$	2,288,262
Net (decrease) increase in deposit liabilities						Net (decrease) increase in deposit liabilities	$	(462,251)	$	1,531,374
Net increase in securities sold under agreements to repurchase	Net increase in securities sold under agreements to repurchase	92,376		76,720		Net increase in securities sold under agreements to repurchase	35,714		104,918
Proceeds from borrowings		—		600,000

Repayment of borrowings	Repayment of borrowings	(765,000)		(510,000)		Repayment of borrowings	—		(660,000)

Net proceeds from issuance of common stock	Net proceeds from issuance of common stock	34		—		Net proceeds from issuance of common stock	54		34
Dividends paid on common stock	Dividends paid on common stock	(138,243)		(138,731)		Dividends paid on common stock	(91,112)		(92,579)

Repurchase and retirement of common stock	Repurchase and retirement of common stock	(80,654)		(8,628)		Repurchase and retirement of common stock	(4,109)		(2,333)
Net cash provided by financing activities		1,394,738		2,307,623
Net increase in cash and cash equivalents		1,171,408		856,971
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(521,704)		881,414
Net (decrease) increase in cash and cash equivalents						Net (decrease) increase in cash and cash equivalents	(1,759,040)		512,630
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	2,573,181		1,362,756		Cash and cash equivalents, beginning of period	2,761,621		2,573,181
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	3,744,589	$	2,219,727	Cash and cash equivalents, end of period	$	1,002,581	$	3,085,811

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	$	35,085	$	115,016	Interest	$	17,535	$	26,646
Income taxes	Income taxes	$	81,482	$	105,579	Income taxes	$	31,477	$	78,592
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	$	(69,478)	$	85,523	Changes in unrealized gains and losses on investment securities available for sale, net of taxes	$	(289,281)	$	(47,932)

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	$	(33,058)	$	19,950	Changes in unrealized gains and losses on junior subordinated debentures carried at fair value, net of taxes	$	(20,625)	$	(24,184)
Cumulative effect adjustment to retained earnings		$	—	$	40,181

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

Transfer of loans held for sale to loans held for investment						Transfer of loans held for sale to loans held for investment	$	10,487	$	315,887

See notes to condensed consolidated financial statements

109

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. All references in this report to "Umpqua," "we," "our," or "us" or similar references mean 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.~~ FinPac is the Bank's wholly-owned subsidiary, 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 ~~2020~~2021 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 ~~2020~~2021 Annual Report filed on Form 10-K.

In preparing these condensed consolidated financial statements, the Company has evaluated events and transactions subsequent to ~~September~~June 30, ~~2021,~~2022, 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, including the reclassification of the line items within non-interest income to add the card-based fees line item, as well as changes to the segment reporting structure.

~~Recent~~Application of new accounting ~~pronouncements~~ guidance

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.~~ 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 ~~LIBOR~~London Inter-Bank Offered Rate or another reference rate expected to be discontinued. The ~~last~~guidance further provides an expedient isof 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 will be able to use the 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.~~848 for contract modifications. 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.

The Company has an enterprise-wide LIBOR transition program which includes business strategy, product design and pricing strategy, instrument contract remediation, and systems and processes. The Company continues to use the expedients in the Topic 848 guidance to manage through the LIBOR transition, specifically for our loan portfolio. Umpqua has stopped originating new instruments using LIBOR, and consistent with regulatory guidance, Umpqua has stopped extensions of, or any increase in exposure in, current LIBOR instruments.

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Recent accounting pronouncements

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this ASU improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. The ASU specifies for all acquired revenue contracts regardless of their timing of payment (1) the circumstances in which the acquirer should recognize contract assets and contract liabilities that are acquired in a business combination and (2) how to measure those contract assets and contract liabilities. The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The guidance is applicable and the Company will apply the amendments prospectively to business combinations occurring on or after the effective date. This standard is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The ASU addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted CECL and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. As the Company has adopted CECL, ASU No. 2022-02 will be effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of this ASU on the Company's consolidated financial statements.

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in this ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The amendments also update the disclosures for equity securities subject to contractual restrictions. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, with early adoption permitted. The amendment will be applied prospectively. The Company is currently evaluating the impact of this ASU on the Company's consolidated financial statements.

Note 2 – Investment Securities

The following tables present the amortized cost, unrealized gains, unrealized losses and approximate fair values of debt securities ~~at September~~as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021									June 30, 2022
(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	$	806,469	$	35,304	$	(2,796)	$	838,977	U.S. Treasury and agencies	$	936,537	$	—	$	(63,662)	$	872,875
Obligations of states and political subdivisions	Obligations of states and political subdivisions	272,275		11,851		(717)		283,409		Obligations of states and political subdivisions	314,260		672		(22,824)		292,108
Residential mortgage-backed securities and collateralized mortgage obligations		2,606,906		29,272		(35,393)		2,600,785
Mortgage-backed securities and collateralized mortgage obligations										Mortgage-backed securities and collateralized mortgage obligations	2,549,277		266		(297,819)		2,251,724

Total available for sale securities	Total available for sale securities	$	3,685,650	$	76,427	$	(38,906)	$	3,723,171	Total available for sale securities	$	3,800,074	$	938	$	(384,305)	$	3,416,707
Held to maturity:	Held to maturity:									Held to maturity:

Residential mortgage-backed securities and collateralized mortgage obligations		$	2,795	$	786	$	—	$	3,581
Mortgage-backed securities and collateralized mortgage obligations										Mortgage-backed securities and collateralized mortgage obligations	$	2,637	$	748	$	—	$	3,385

Total held to maturity securities	Total held to maturity securities	$	2,795	$	786	$	—	$	3,581	Total held to maturity securities	$	2,637	$	748	$	—	$	3,385

December 31, 2020
(in thousands)
Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Available for sale:
U.S. Treasury and agencies $ 698,243 $ 64,271 $ (312) $ 762,202
Obligations of states and political subdivisions 263,546 15,996 (31) 279,511
Residential mortgage-backed securities and collateralized mortgage obligations 1,839,711 51,583 (449) 1,890,845
Total available for sale securities $ 2,801,500 $ 131,850 $ (792) $ 2,932,558
Held to maturity:
Residential mortgage-backed securities and collateralized mortgage obligations $ 3,034 $ 849 $ — $ 3,883
Total held to maturity securities $ 3,034 $ 849 $ — $ 3,883

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	December 31, 2021
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale:
U.S. Treasury and agencies	$	894,969	$	27,279	$	(4,195)	$	918,053
Obligations of states and political subdivisions	320,338		11,734		(1,288)		330,784
Mortgage-backed securities and collateralized mortgage obligations	2,649,048		19,093		(46,543)		2,621,598

Total available for sale securities	$	3,864,355	$	58,106	$	(52,026)	$	3,870,435
Held to maturity:

Mortgage-backed securities and collateralized mortgage obligations	$	2,744	$	770	$	—	$	3,514

Total held to maturity securities	$	2,744	$	770	$	—	$	3,514

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 ~~$12.2~~$10.6 million and ~~$8.9~~$10.4 million as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and is included in Other Assets.

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Debt securities that were in an unrealized loss position as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 are presented in the following tables, based on the length of time individual securities have been in an unrealized loss position.


		September 30, 2021													June 30, 2022
		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	$	119,093	$	1,773	$	18,805	$	1,023	$	137,898	$	2,796	U.S. Treasury and agencies	$	848,104	$	58,599	$	24,771	$	5,063	$	872,875	$	63,662
Obligations of states and political subdivisions	Obligations of states and political subdivisions	53,099		717		—		—		53,099		717		Obligations of states and political subdivisions	200,165		21,898		4,073		926		204,238		22,824
Residential mortgage-backed securities and collateralized mortgage obligations		1,500,804		34,346		23,561		1,047		1,524,365		35,393
Mortgage-backed securities and collateralized mortgage obligations														Mortgage-backed securities and collateralized mortgage obligations	1,584,947		172,958		640,877		124,861		2,225,824		297,819
Total temporarily impaired securities	Total temporarily impaired securities	$	1,672,996	$	36,836	$	42,366	$	2,070	$	1,715,362	$	38,906	Total temporarily impaired securities	$	2,633,216	$	253,455	$	669,721	$	130,850	$	3,302,937	$	384,305

December 31, 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 $ 29,493 $ 312 $ — $ — $ 29,493 $ 312
Obligations of states and political subdivisions 4,357 31 — — 4,357 31
Residential mortgage-backed securities and collateralized mortgage obligations 215,165 449 — — 215,165 449
Total temporarily impaired securities $ 249,015 $ 792 $ — $ — $ 249,015 $ 792


	December 31, 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	$	197,529	$	2,749	$	28,378	$	1,446	$	225,907	$	4,195
Obligations of states and political subdivisions	75,200		1,153		2,162		135		77,362		1,288
Mortgage-backed securities and collateralized mortgage obligations	1,777,288		40,579		129,943		5,964		1,907,231		46,543

Total temporarily impaired securities	$	2,050,017	$	44,481	$	160,483	$	7,545	$	2,210,500	$	52,026

These unrealized losses on the 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 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~~June 30, ~~2021~~2022 are issued or guaranteed by government sponsored enterprises. Because the decline in fair value of the 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~~June 30, ~~2021.~~2022.

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The following table presents the contractual maturities of debt securities at ~~September~~June 30, ~~2021:~~2022:


		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	$	16,913	$	17,150	$	—	$	—	Due within one year	$	9,861	$	9,865	$	—	$	—
Due after one year through five years	Due after one year through five years	122,809		128,548		2		2		Due after one year through five years	417,691		402,577		4		4
Due after five years through ten years	Due after five years through ten years	967,343		1,004,037		8		8		Due after five years through ten years	866,834		799,668		3		3
Due after ten years	Due after ten years	2,578,585		2,573,436		2,785		3,571		Due after ten years	2,505,688		2,204,597		2,630		3,378
Total securities	Total securities	$	3,685,650	$	3,723,171	$	2,795	$	3,581	Total securities	$	3,800,074	$	3,416,707	$	2,637	$	3,385

The following table presents, as of ~~September~~June 30, ~~2021,~~2022, investment securities ~~that~~which were pledged to secure borrowings, public deposits, and repurchase agreements as permitted or required by law:


(in thousands)	(in thousands)	Amortized Cost		Fair Value		(in thousands)	Amortized Cost		Fair Value

To state and local governments to secure public deposits	To state and local governments to secure public deposits	$	293,931	$	301,370	To state and local governments to secure public deposits	$	337,668	$	311,000
Other securities pledged principally to secure repurchase agreements		746,122		770,020
To secure repurchase agreements						To secure repurchase agreements	675,878		624,604
Other securities pledged						Other securities pledged	243,131		225,458
Total pledged securities	Total pledged securities	$	1,040,053	$	1,071,390	Total pledged securities	$	1,256,677	$	1,161,062

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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~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(in thousands)	(in thousands)	September 30, 2021		December 31, 2020		(in thousands)	June 30, 2022		December 31, 2021
Commercial real estate	Commercial real estate					Commercial real estate
Non-owner occupied term, net	Non-owner occupied term, net	$	3,561,764	$	3,505,802	Non-owner occupied term, net	$	3,798,242	$	3,786,887
Owner occupied term, net	Owner occupied term, net	2,330,338		2,333,945		Owner occupied term, net	2,497,553		2,332,422
Multifamily, net	Multifamily, net	3,813,024		3,349,196		Multifamily, net	4,768,273		4,051,202
Construction & development, net	Construction & development, net	882,778		828,478		Construction & development, net	1,017,297		890,338
Residential development, net	Residential development, net	177,148		192,761		Residential development, net	194,909		206,990
Commercial	Commercial					Commercial
Term, net	Term, net	3,159,466		4,024,467		Term, net	2,904,861		3,008,473
Lines of credit & other, net	Lines of credit & other, net	930,350		862,760		Lines of credit & other, net	920,604		910,733
Leases & equipment finance, net	Leases & equipment finance, net	1,457,248		1,456,630		Leases & equipment finance, net	1,576,144		1,467,676
Residential	Residential					Residential
Mortgage, net	Mortgage, net	4,330,860		3,871,906		Mortgage, net	5,168,457		4,517,266
Home equity loans & lines, net	Home equity loans & lines, net	1,133,823		1,136,064		Home equity loans & lines, net	1,415,722		1,197,170
Consumer & other, net	Consumer & other, net	193,141		217,358		Consumer & other, net	170,616		184,023
Total loans and leases, net of deferred fees and costs	Total loans and leases, net of deferred fees and costs	$	21,969,940	$	21,779,367	Total loans and leases, net of deferred fees and costs	$	24,432,678	$	22,553,180

As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the net deferred costs were ~~$47.7~~$77.3 million and ~~$38.6~~$57.5 million, respectively. 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. As of September 30, 2021, the Bank had approximately 7,500 PPP loans, totaling $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 for the loan portfolio include the net deferred fees for the origination of PPP loans of $21.2 million and $26.9 million as of September 30, 2021 and December 31, 2020, respectively. The PPP net deferred fees and costs 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, which will accelerate the recognition of these net deferred fees at the forgiveness date.

Total loans and leases also include discounts on acquired loans of ~~$11.4~~$7.3 million and ~~$17.9~~$9.8 million as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. As of ~~September~~June 30, ~~2021,~~2022, loans totaling ~~$14.4~~$15.6 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 ~~$63.3~~$62.0 million and ~~$74.8~~$60.1 million as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and is included in Other Assets.

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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~~leases and equipment finance segment within the loans and leases, net line item. These direct financing leases typically have terms of three to five ~~years and are considered to be direct financing leases.~~years. Interest income recognized on these leases was ~~$6.1~~$4.7 million and ~~$17.3~~$9.8 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021, respectively,~~2022, as compared to ~~$6.7~~$5.6 million and ~~$20.5~~$11.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, respectively.~~2021.

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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~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
(in thousands)	(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Commercial real estate	Commercial real estate									Commercial real estate
Non-owner occupied term, net	Non-owner occupied term, net	$	14,828	$	3,009	$	38,124	$	12,767	Non-owner occupied term, net	$	6,648	$	17,866	$	24,708	$	23,296
Owner occupied term, net	Owner occupied term, net	12,692		6,138		25,115		15,330		Owner occupied term, net	8,421		10,812		18,884		12,423
Multifamily, net	Multifamily, net	—		—		3,776		—		Multifamily, net	—		3,776		—		3,776

Commercial	Commercial									Commercial
Term, net	Term, net	10,866		8,628		39,180		28,780		Term, net	9,582		19,321		21,778		28,314
Lines of credit & other, net		—		159		—		159
Leases & equipment finance, net		—		—		—		43

Residential	Residential									Residential
Mortgage, net	Mortgage, net	—		365		1,712		365		Mortgage, net	—		389		1,493		1,712

Consumer & other	Consumer & other	—		—		63,799		—		Consumer & other	—		—		—		63,799
Total loans and leases sold, net	Total loans and leases sold, net	$	38,386	$	18,299	$	171,706	$	57,444	Total loans and leases sold, net	$	24,651	$	52,164	$	66,863	$	133,320

Note 4 – Allowance for Credit Losses

Allowance for Credit Losses Methodology

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 utilized in 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 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 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.

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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~~June 30, ~~2021,~~2022, were primarily related to changes in the economic assumptions.The Bank opted to use Moody's Analytics' ~~August~~May consensus economic forecast for estimating the ACL as of ~~September~~June 30, ~~2021.~~2022. This scenario is based on Moody's 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. 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' approach is to give greater consideration to 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.

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

•U.S. real GDP average annualized growth of ~~4.9% through 2022;~~3.1% in2022, 2.3% in 2023 and 2.1% in 2024;

•U.S. unemployment rate average ~~for 2021~~ of ~~5.5%, dropping to 4.2% in 2022;~~3.6% through 2024;

•~~COVID infections abate in November 2021;~~

•The Federal Reserve is expected to ~~keep~~increase the ~~target range for~~federal funds rate to 2.5% by the ~~Fed Funds rate at 0%~~end of 2022 with an additional increase to ~~0.25% until early~~3.0% in 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' ~~August~~May 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:

•The ~~stimulus is less effective~~economy falls into a mild recession in the third quarter of 2022;

•The military conflict between Russia and Ukraine persists longer than ~~expected because~~anticipated. As a result, worries remain elevated that there could be an even larger interruption of ~~slower consumer spending. More of the funds end up in savings, and thus fiscal multipliers are smaller~~global oil supplies. This causes oil prices to rise more than ~~assumed~~ in the consensus ~~scenario;~~and thereby increases inflationary pressures. Higher gasoline prices cut into disposable income that would otherwise be available for other spending;

•Supply-chain issues also worsen, increasing shortages of affected goods, also boosting inflation;

•New cases, hospitalizations and deaths from COVID-19 start to rise again, slowing growth in spending on air travel, retail, and ~~then diminish more slowly than anticipated, with fewer people than expected receiving vaccines;~~hotels;

•~~U.S.~~U.S real GDP average annualized growth ~~of 3.5% through 2022;~~is expected to be 2.1% in 2022, 0.3% in 2023 and 3.2% in 2024;

•U.S. unemployment rate average ~~for 2021~~ of ~~5.9% with return~~4.3% in 2022, peaking at 6.4% in Q3 2023, returning to ~~less than 5.0% unemployment~~an average of 4.3% in ~~2023;~~2024;

•~~COVID infections abate in January 2022;~~

•The Federal Reserve is expected to ~~keep target range for~~increase the ~~Fed Funds~~federal funds rate ~~near 0% until mid-2024.~~to 2.3% by the end of 2022 with a slight decrease to 2.1% in 2023.

The results using the comparison scenario for sensitivity analysis were reviewed by management and were considered when evaluating the 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: Non-owner occupied commercial real estate, multifamily, and construction loans are analyzed using a model that uses four primary property variables: net operating income, property value, property type, and location. For PD estimation, the model simulates potential future paths of 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, 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.

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The owner-occupied commercial real-estate portfolio utilizes a top-down macroeconomic model using linear regression. This model produces portfolio level quarterly net charge-off rates for 10 years and carries forward the last quarter's ~~projected~~ expected loss percentage projection 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.

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 of 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 for the commercial real estate, commercial and industrial and consumer portfolios and a forward curve approach that changes with macro-economic input variables for the residential ~~portfolio.~~and leases portfolios. 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.

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•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~~June 30, ~~2021,~~2022, and ~~made qualitative overlay adjustments of approximately $16.9 million~~concluded that a material adjustment to ~~increase~~ the amounts indicated by the models was not necessary as ~~considered necessary to~~the models adequately ~~reflect~~reflected the significant changes in credit conditions and overall portfolio ~~risk, including $13.8 million qualitative overlay increase related to loans collateralized by hotel, retail, and office properties.~~risk.

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~~non-DCF 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~~non-DCF method uses the exposure at default, along with the expected credit losses adjusted for prepayments to calculate the required allowance.

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The following tables summarize activity related to the allowance for credit losses by portfolio segment for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30, 2021											Three Months Ended June 30, 2022
(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	$	128,951	$	121,390	$	25,296	$	4,250	$	279,887	Balance, beginning of period	$	91,638	$	121,072	$	31,946	$	3,908	$	248,564

(Recapture) provision for credit losses for loans and leases	(Recapture) provision for credit losses for loans and leases	(20,141)		2,719		1,703		(413)		(16,132)		(Recapture) provision for credit losses for loans and leases	(2,720)		16,484		4,424		599		18,787

Charge-offs	Charge-offs	(916)		(8,521)		—		(936)		(10,373)		Charge-offs	(8)		(9,035)		—		(836)		(9,879)
Recoveries	Recoveries	120		3,346		281		431		4,178		Recoveries	73		2,934		216		416		3,639
Net (charge-offs) recoveries		(796)		(5,175)		281		(505)		(6,195)
Net recoveries (charge-offs)												Net recoveries (charge-offs)	65		(6,101)		216		(420)		(6,240)
Balance, end of period	Balance, end of period	$	108,014	$	118,934	$	27,280	$	3,332	$	257,560	Balance, end of period	$	88,983	$	131,455	$	36,586	$	4,087	$	261,111
Reserve for unfunded commitments	Reserve for unfunded commitments											Reserve for unfunded commitments
Balance, beginning of period	Balance, beginning of period	$	10,094	$	2,145	$	1,710	$	590	$	14,539	Balance, beginning of period	$	8,738	$	1,620	$	2,193	$	367	$	12,918

(Recapture) provision for credit losses on unfunded commitments	(Recapture) provision for credit losses on unfunded commitments	(3,273)		440		247		(201)		(2,787)		(Recapture) provision for credit losses on unfunded commitments	(1,387)		612		542		138		(95)
Balance, end of period	Balance, end of period	6,821		2,585		1,957		389		11,752		Balance, end of period	7,351		2,232		2,735		505		12,823
Total allowance for credit losses	Total allowance for credit losses	$	114,835	$	121,519	$	29,237	$	3,721	$	269,312	Total allowance for credit losses	$	96,334	$	133,687	$	39,321	$	4,592	$	273,934

		Nine Months Ended September 30, 2021											Six Months Ended June 30, 2022
(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	$	141,710	$	150,864	$	27,964	$	7,863	$	328,401	Balance, beginning of period	$	99,075	$	117,573	$	29,068	$	2,696	$	248,412
(Recapture) provision for credit losses for loans and leases	(Recapture) provision for credit losses for loans and leases	(33,199)		4,180		(1,212)		(3,150)		(33,381)		(Recapture) provision for credit losses for loans and leases	(10,182)		25,296		7,296		2,073		24,483

Charge-offs	Charge-offs	(1,086)		(44,228)		(70)		(2,983)		(48,367)		Charge-offs	(8)		(16,893)		(167)		(1,721)		(18,789)
Recoveries	Recoveries	589		8,118		598		1,602		10,907		Recoveries	98		5,479		389		1,039		7,005
Net (charge-offs) recoveries		(497)		(36,110)		528		(1,381)		(37,460)
Net recoveries (charge-offs)												Net recoveries (charge-offs)	90		(11,414)		222		(682)		(11,784)
Balance, end of period	Balance, end of period	$	108,014	$	118,934	$	27,280	$	3,332	$	257,560	Balance, end of period	$	88,983	$	131,455	$	36,586	$	4,087	$	261,111
Reserve for unfunded commitments	Reserve for unfunded commitments											Reserve for unfunded commitments
Balance, beginning of period	Balance, beginning of period	15,360		2,190		1,661		1,075		20,286		Balance, beginning of period	8,461		2,028		1,957		321		12,767
(Recapture) provision for credit losses on unfunded commitments	(Recapture) provision for credit losses on unfunded commitments	(8,539)		395		296		(686)		(8,534)		(Recapture) provision for credit losses on unfunded commitments	(1,110)		204		778		184		56
Balance, end of period	Balance, end of period	6,821		2,585		1,957		389		11,752		Balance, end of period	7,351		2,232		2,735		505		12,823
Total allowance for credit losses	Total allowance for credit losses	$	114,835	$	121,519	$	29,237	$	3,721	$	269,312	Total allowance for credit losses	$	96,334	$	133,687	$	39,321	$	4,592	$	273,934

Table of Contents


													Three Months Ended June 30, 2021
(in thousands)												(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
Balance, beginning of period												Balance, beginning of period	$	154,475	$	128,838	$	21,090	$	6,880	$	311,283
(Recapture) provision for credit losses for loans and leases												(Recapture) provision for credit losses for loans and leases	(25,484)		5,964		3,997		(2,252)		(17,775)
Charge-offs												Charge-offs	(129)		(16,093)		—		(857)		(17,079)
Recoveries												Recoveries	89		2,681		209		479		3,458
Net (charge-offs) recoveries												Net (charge-offs) recoveries	(40)		(13,412)		209		(378)		(13,621)
Balance, end of period												Balance, end of period	$	128,951	$	121,390	$	25,296	$	4,250	$	279,887
Reserve for unfunded commitments												Reserve for unfunded commitments
Balance, beginning of period												Balance, beginning of period	$	15,668	$	1,801	$	1,288	$	1,003	$	19,760
(Recapture) provision for credit losses on unfunded commitments												(Recapture) provision for credit losses on unfunded commitments	(5,574)		344		422		(413)		(5,221)
Balance, end of period												Balance, end of period	10,094		2,145		1,710		590		14,539
Total allowance for credit losses												Total allowance for credit losses	$	139,045	$	123,535	$	27,006	$	4,840	$	294,426

		Three Months Ended September 30, 2020											Six Months Ended June 30, 2021
(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	$	152,828	$	152,615	$	40,548	$	10,754	$	356,745	Balance, beginning of period	$	141,710	$	150,864	$	27,964	$	7,863	$	328,401
(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		(Recapture) provision for credit losses for loans and leases	(13,058)		1,461		(2,915)		(2,737)		(17,249)
Charge-offs	Charge-offs	—		(15,426)		(120)		(1,100)		(16,646)		Charge-offs	(170)		(35,707)		(70)		(2,047)		(37,994)
Recoveries	Recoveries	61		2,044		407		653		3,165		Recoveries	469		4,772		317		1,171		6,729
Net recoveries (charge-offs)	Net recoveries (charge-offs)	61		(13,382)		287		(447)		(13,481)		Net recoveries (charge-offs)	299		(30,935)		247		(876)		(31,265)
Balance, end of period	Balance, end of period	$	134,055	$	164,836	$	35,194	$	10,964	$	345,049	Balance, end of period	$	128,951	$	121,390	$	25,296	$	4,250	$	279,887
Reserve for unfunded commitments	Reserve for unfunded commitments											Reserve for unfunded commitments
Balance, beginning of period	Balance, beginning of period	$	20,808	$	2,921	$	2,061	$	578	$	26,368	Balance, beginning of period	$	15,360	$	2,190	$	1,661	$	1,075	$	20,286
(Recapture) provision for credit losses on unfunded commitments	(Recapture) provision for credit losses on unfunded commitments	(380)		(1,198)		(542)		58		(2,062)		(Recapture) provision for credit losses on unfunded commitments	(5,266)		(45)		49		(485)		(5,747)
Balance, end of period	Balance, end of period	20,428		1,723		1,519		636		24,306		Balance, end of period	10,094		2,145		1,710		590		14,539
Total allowance for credit losses	Total allowance for credit losses	$	154,483	$	166,559	$	36,713	$	11,600	$	369,355	Total allowance for credit losses	$	139,045	$	123,535	$	27,006	$	4,840	$	294,426

		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 CECL adoption		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		77,664		96,577		7,701		6,829		188,771
Charge-offs		—		(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 CECL adoption		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		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

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


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

~~Table of Contents~~

Asset Quality and Non-Performing Loans and Leases

The Bank manages asset quality and 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.

Table of Contents

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

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 is determined by the LGD calculated by the CECL model and therefore leases and equipment finance agreements on non-accrual will have an allowance for credit losses until they become 181 days past due, at which time they are charged-off. The Company recognized no interest income on non-accrual loans and leases during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

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, 2021, loans of approximately $132.5 million are currently deferred under 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 carrying value of the loans and leases past due, by loan and lease class, as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021															June 30, 2022
(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 (1)		Current		Total Loans and Leases		(in thousands)	Greater than 30 to 59 Days Past Due		60 to 89 Days Past Due		90 Days or More and Accruing		Total Past Due		Non-Accrual (1)		Current		Total Loans and Leases
Commercial real estate	Commercial real estate															Commercial real estate
Non-owner occupied term, net	Non-owner occupied term, net	$	1,750	$	—	$	—	$	1,750	$	3,417	$	3,556,597	$	3,561,764	Non-owner occupied term, net	$	517	$	—	$	—	$	517	$	3,313	$	3,794,412	$	3,798,242
Owner occupied term, net	Owner occupied term, net	1,416		343		1		1,760		2,535		2,326,043		2,330,338		Owner occupied term, net	24		1		23		48		2,201		2,495,304		2,497,553
Multifamily, net	Multifamily, net	9,389		—		—		9,389		—		3,803,635		3,813,024		Multifamily, net	249		—		—		249		—		4,768,024		4,768,273
Construction & development, net	Construction & development, net	—		—		—		—		—		882,778		882,778		Construction & development, net	—		—		—		—		—		1,017,297		1,017,297
Residential development, net	Residential development, net	—		—		—		—		—		177,148		177,148		Residential development, net	—		—		—		—		—		194,909		194,909
Commercial	Commercial															Commercial
Term, net	Term, net	211		82		2		295		5,511		3,153,660		3,159,466		Term, net	209		198		210		617		4,056		2,900,188		2,904,861
Lines of credit & other, net	Lines of credit & other, net	501		5,820		3		6,324		930		923,096		930,350		Lines of credit & other, net	425		475		12		912		—		919,692		920,604
Leases & equipment finance, net	Leases & equipment finance, net	8,502		7,347		2,449		18,298		11,759		1,427,191		1,457,248		Leases & equipment finance, net	11,417		11,554		3,089		26,060		8,589		1,541,495		1,576,144
Residential	Residential															Residential
Mortgage, net	Mortgage, net	943		2,728		23,957		27,628		—		4,303,232		4,330,860		Mortgage, net	1,251		5,499		21,118		27,868		—		5,140,589		5,168,457
Home equity loans & lines, net	Home equity loans & lines, net	1,182		414		962		2,558		—		1,131,265		1,133,823		Home equity loans & lines, net	870		896		1,578		3,344		—		1,412,378		1,415,722
Consumer & other, net	Consumer & other, net	455		243		116		814		—		192,327		193,141		Consumer & other, net	432		642		196		1,270		—		169,346		170,616
Total, net of deferred fees and costs	Total, net of deferred fees and costs	$	24,349	$	16,977	$	27,490	$	68,816	$	24,152	$	21,876,972	$	21,969,940	Total, net of deferred fees and costs	$	15,394	$	19,265	$	26,226	$	60,885	$	18,159	$	24,353,634	$	24,432,678

(1) Loans and leases on non-accrual with an amortized cost basis of ~~$24.2~~$18.2 million had a related allowance for credit losses of ~~$7.3~~$7.6 million at ~~September~~June 30, ~~2021.~~2022.

2120

Table of Contents


		December 31, 2020															December 31, 2021
(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 (1)		Current and Other		Total Loans and Leases		(in thousands)	Greater than 30 to 59 Days Past Due		60 to 89 Days Past Due		90 Days or More 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	$	1,214	$	21,309	$	815	$	23,338	$	3,809	$	3,478,655	$	3,505,802	Non-owner occupied term, net	$	388	$	1,138	$	—	$	1,526	$	3,384	$	3,781,977	$	3,786,887
Owner occupied term, net	Owner occupied term, net	182		103		208		493		5,984		2,327,468		2,333,945		Owner occupied term, net	101		65		1		167		2,383		2,329,872		2,332,422
Multifamily, net	Multifamily, net	—		215		—		215		—		3,348,981		3,349,196		Multifamily, net	—		—		—		—		—		4,051,202		4,051,202
Construction & development, net	Construction & development, net	3,991		—		—		3,991		—		824,487		828,478		Construction & development, net	—		—		—		—		—		890,338		890,338
Residential development, net	Residential development, net	—		—		—		—		—		192,761		192,761		Residential development, net	—		—		—		—		—		206,990		206,990
Commercial	Commercial															Commercial
Term, net	Term, net	562		—		4		566		2,205		4,021,696		4,024,467		Term, net	4,627		2,345		4		6,976		4,225		2,997,272		3,008,473
Lines of credit & other, net	Lines of credit & other, net	1,491		2,667		7		4,165		336		858,259		862,760		Lines of credit & other, net	300		2		357		659		—		910,074		910,733
Leases & equipment finance, net	Leases & equipment finance, net	14,242		18,220		4,796		37,258		18,742		1,400,630		1,456,630		Leases & equipment finance, net	6,806		8,951		3,799		19,556		8,873		1,439,247		1,467,676
Residential	Residential															Residential
Mortgage, net	Mortgage, net	1,587		3,912		27,713		33,212		—		3,838,694		3,871,906		Mortgage, net	802		3,668		27,249		31,719		—		4,485,547		4,517,266
Home equity loans & lines, net	Home equity loans & lines, net	844		544		2,463		3,851		—		1,132,213		1,136,064		Home equity loans & lines, net	1,214		491		732		2,437		—		1,194,733		1,197,170
Consumer & other, net	Consumer & other, net	678		286		355		1,319		—		216,039		217,358		Consumer & other, net	396		386		194		976		—		183,047		184,023
Total, net of deferred fees and costs	Total, net of deferred fees and costs	$	24,791	$	47,256	$	36,361	$	108,408	$	31,076	$	21,639,883	$	21,779,367	Total, net of deferred fees and costs	$	14,634	$	17,046	$	32,336	$	64,016	$	18,865	$	22,470,299	$	22,553,180

(1) Loans and leases on non-accrual with an amortized cost basis of ~~$31.1~~$18.9 million had a related allowance for credit losses of ~~$16.7~~$7.5 million at December 31, ~~2020.~~2021.

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~~June 30, ~~2021.~~2022. 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	$	—	$	3,121	$	—	$	—	$	3,121	Non-owner occupied term, net	$	—	$	3,071	$	—	$	—	$	3,071
Owner occupied term, net	Owner occupied term, net	—		2,123		—		—		2,123		Owner occupied term, net	—		1,911		—		—		1,911

Commercial	Commercial											Commercial
Term, net	Term, net	1,356		536		779		2,454		5,125		Term, net	1,094		520		844		1,188		3,646
Line of credit & other, net	Line of credit & other, net	—		—		930		1		931		Line of credit & other, net	—		—		—		1		1
Leases & equipment finance, net	Leases & equipment finance, net	—		—		11,759		—		11,759		Leases & equipment finance, net	—		—		8,589		—		8,589
Residential	Residential											Residential
Mortgage, net	Mortgage, net	27,988		—		—		—		27,988		Mortgage, net	23,720		—		—		—		23,720
Home equity loans & lines, net	Home equity loans & lines, net	2,937		—		—		—		2,937		Home equity loans & lines, net	3,533		—		—		—		3,533

Total net of deferred fees and costs	Total net of deferred fees and costs	$	32,281	$	5,780	$	13,468	$	2,455	$	53,984	Total net of deferred fees and costs	$	28,347	$	5,502	$	9,433	$	1,189	$	44,471

2221

Table of Contents

Troubled Debt Restructuring

At ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, troubled debt restructured loans of ~~$9.8~~$7.6 million and ~~$15.0~~$6.7 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~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021								June 30, 2022
(in thousands)	(in thousands)	Accrual Status		Non-Accrual Status		Total Modification		# of Contracts	(in thousands)	Accrual Status		Non-Accrual Status		Total Modification		# of Contracts
Commercial real estate, net	Commercial real estate, net	$	1,061	$	70	$	1,131	5	Commercial real estate, net	$	959	$	43	$	1,002	5

Residential, net	Residential, net	8,762		—		8,762		45	Residential, net	6,656		—		6,656		42
Consumer & other, net	Consumer & other, net	26		—		26		3	Consumer & other, net	16		—		16		2
Total, net of deferred fees and costs	Total, net of deferred fees and costs	$	9,849	$	70	$	9,919	53	Total, net of deferred fees and costs	$	7,631	$	43	$	7,674	49

		December 31, 2020								December 31, 2021
(in thousands)	(in thousands)	Accrual Status		Non-Accrual Status		Total Modification		# of Contracts	(in thousands)	Accrual Status		Non-Accrual Status		Total Modification		# of Contracts
Commercial real estate, net	Commercial real estate, net	$	1,345	$	289	$	1,634	7	Commercial real estate, net	$	1,031	$	59	$	1,090	5
Commercial, net		1,231		—		1,231		1

Residential, net	Residential, net	12,415		—		12,415		75	Residential, net	5,641		—		5,641		35

Consumer & other, net									Consumer & other, net	22		—		22		3
Total, net of deferred fees and costs	Total, net of deferred fees and costs	$	14,991	$	289	$	15,280	83	Total, net of deferred fees and costs	$	6,694	$	59	$	6,753	43

The following table presents loans that were determined to be TDRs during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
(in thousands)	(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021

Commercial, net		$	—	$	—	$	—	$	8,508

Residential, net	Residential, net	1,661		7,029		5,903		13,463		Residential, net	$	1,409	$	2,532	4,206		4,242
Consumer & other, net	Consumer & other, net	—		—		36		74		Consumer & other, net	—		9		—		36
Total, net of deferred fees and costs	Total, net of deferred fees and costs	$	1,661	$	7,029	$	5,939	$	22,045	Total, net of deferred fees and costs	$	1,409	$	2,541	$	4,206	$	4,278

Table of Contents

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 Company's board of directors 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 initially risk rated on a single risk rating scale based on the past due status of the loan or lease. Homogeneous loans and leases that have risk-based modifications or forbearances enter into an alternative elevated risk rating scale that freezes the elevated risk rating and requires six consecutive months of scheduled payments without delinquency before the loan or lease can return to the delinquency-based risk rating scale. Homogeneous loans and leases with other defined risk factors such as confirmed bankruptcy, business closure, death of a guarantor or fraud will be set to a floor substandard rating.

~~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/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. 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~~loan or lease is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. ~~Assets~~Loans and leases classified as substandard 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.

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.

2423

Table of Contents

The following 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~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(in thousands)	(in thousands)		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving to Non-Revolving Loans Amortized Cost						(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			June 30, 2022				2022			2021			2020			2019			2018			Prior					Total
Commercial real estate:	Commercial real estate:																								Commercial real estate:
Non-owner occupied term, net	Non-owner occupied term, net																						Non-owner occupied term, net
Credit quality indicator:	Credit quality indicator:																						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			Pass/Watch			$	402,052		$	801,602		$	405,467		$	596,076		$	406,634		$	1,087,126			$	979			$	4,554			$	3,704,490
		Special mention	10,693		933		5,791		36,676		—		48,995		—		—			103,088				Special mention			897			—			578			—			36,382			12,980		—				—				50,837
		Substandard	829		2,020		2,616		20,787		3,008		24,296		—		—			53,556				Substandard			—			19,081			1,975			2,573			12,342			6,640		—				—				42,611
		Doubtful	—		—		—		—		—		86		—		—			86				Doubtful			—			—			—			—			—			60		—				—				60
		Loss	—		—		—		—		—		244		—		—			244				Loss			—			—			—			—			—			244		—				—				244
Total non-owner occupied term, net	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		Total non-owner occupied term, net				$	402,949		$	820,683		$	408,020		$	598,649		$	455,358		$	1,107,050	$	979			$	4,554			$	3,798,242
Owner occupied term, net	Owner occupied term, net																						Owner occupied term, net
Credit quality indicator:	Credit quality indicator:																						Credit quality indicator:
		Pass/Watch	$	375,653	$	254,143	$	390,432	$	283,285	$	282,030	$	674,773	$	5,187	$	748		$	2,266,251			Pass/Watch			$	362,514		$	570,637		$	220,353		$	360,788		$	227,802		$	705,367	$	4,675			$	122			$	2,452,258
		Special mention	550		897		7,977		11,685		9,322		19,095		—		—			49,526				Special mention			—			—			—			5,559			4,259			14,531		—				—				24,349
		Substandard	—		—		703		968		—		12,393		—		—			14,064				Substandard			—			1,668			1,279			660			6,959			10,231		—				—				20,797
		Doubtful	—		—		—		—		—		67		—		—			67				Doubtful			—			—			—			—			—			45		—				—				45
		Loss	—		—		—		—		—		430		—		—			430				Loss			—			—			—			—			—			104		—				—				104
Total owner occupied term, net	Total owner occupied term, net		$	376,203	$	255,040	$	399,112	$	295,938	$	291,352	$	706,758	$	5,187	$	748		$	2,330,338		Total owner occupied term, net				$	362,514		$	572,305		$	221,632		$	367,007		$	239,020		$	730,278	$	4,675			$	122			$	2,497,553
Multifamily, net	Multifamily, net																						Multifamily, net
Credit quality indicator:	Credit quality indicator:																						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			Pass/Watch			$	1,200,814		$	1,662,230		$	371,902		$	661,065		$	235,127		$	604,539	$	29,428			$	2,919			$	4,768,024
		Special mention	—		—		—		—		—		1,250		—		—			1,250				Special mention			—			—			—			—			—			249		—				—				249
		Substandard	—		—		—		—		9,389		—		—		—			9,389				Substandard			—			—			—			—			—			—		—				—				—
		Doubtful	—		—		—		—		—		—		—		—			—				Doubtful			—			—			—			—			—			—		—				—				—
		Loss	—		—		—		—		—		—		—		—			—				Loss			—			—			—			—			—			—		—				—				—
Total multifamily, net	Total multifamily, net		$	1,124,021	$	386,911	$	794,320	$	427,943	$	430,919	$	622,792	$	23,182	$	2,936		$	3,813,024		Total multifamily, net				$	1,200,814		$	1,662,230		$	371,902		$	661,065		$	235,127		$	604,788	$	29,428			$	2,919			$	4,768,273
Construction & development, net	Construction & development, net																						Construction & development, net
Credit quality indicator:	Credit quality indicator:																						Credit quality indicator:
		Pass/Watch	$	132,710	$	321,591	$	275,301	$	105,270	$	27,688	$	172	$	2,380	$	—		$	865,112			Pass/Watch			$	70,018		$	408,520		$	297,481		$	134,028		$	45,010		$	26,193	$	2,388			$	—			$	983,638
		Special mention	—		1,635		—		7,600		—		—		—		—			9,235				Special mention			—			11,637			—			22,022			—			—		—				—				33,659
		Substandard	—		—		—		8,431		—		—		—		—			8,431				Substandard			—			—			—			—			—			—		—				—				—
		Doubtful	—		—		—		—		—		—		—		—			—				Doubtful			—			—			—			—			—			—		—				—				—
		Loss	—		—		—		—		—		—		—		—			—				Loss			—			—			—			—			—			—		—				—				—
Total construction & development, net	Total construction & development, net		$	132,710	$	323,226	$	275,301	$	121,301	$	27,688	$	172	$	2,380	$	—		$	882,778		Total construction & development, net				$	70,018		$	420,157		$	297,481		$	156,050		$	45,010		$	26,193	$	2,388			$	—			$	1,017,297
Residential development, net	Residential development, net																						Residential development, net
Credit quality indicator:	Credit quality indicator:																						Credit quality indicator:
		Pass/Watch	$	15,260	$	15,391	$	—	$	—	$	—	$	—	$	136,948	$	9,549		$	177,148			Pass/Watch			$	17,706		$	24,520		$	13,974		$	—		$	—		$	—	$	137,104			$	1,605			$	194,909
		Special mention	—		—		—		—		—		—		—		—			—				Special mention			—			—			—			—			—			—		—				—				—
		Substandard	—		—		—		—		—		—		—		—			—				Substandard			—			—			—			—			—			—		—				—				—
		Doubtful	—		—		—		—		—		—		—		—			—				Doubtful			—			—			—			—			—			—		—				—				—
		Loss	—		—		—		—		—		—		—		—			—				Loss			—			—			—			—			—			—		—				—				—
Total residential development, net	Total residential development, net		$	15,260	$	15,391	$	—	$	—	$	—	$	—	$	136,948	$	9,549		$	177,148		Total residential development, net				$	17,706		$	24,520		$	13,974		$	—		$	—		$	—	$	137,104			$	1,605			$	194,909

Total commercial real estate	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		Total commercial real estate				$	2,054,001		$	3,499,895		$	1,313,009		$	1,782,771		$	974,515		$	2,468,309	$	174,574			$	9,200			$	12,276,274

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
	June 30, 2022	2022		2021		2020		2019		2018		Prior						Total
Commercial:
Term, net
Credit quality indicator:
	Pass/Watch	$	381,624	$	833,230	$	204,425	$	168,367	$	146,689	$	320,578	$	739,641	$	13,942	$	2,808,496
	Special mention	—		7		181		44		609		30,636		—		—		31,477
	Substandard	1,017		—		7,944		—		28,366		2,610		21,960		1,878		63,775
	Doubtful	—		—		657		—		—		—		—		39		696
	Loss	—		—		—		—		417		—		—		—		417
Total term, net		$	382,641	$	833,237	$	213,207	$	168,411	$	176,081	$	353,824	$	761,601	$	15,859	$	2,904,861
Lines of credit & other, net
Credit quality indicator:
	Pass/Watch	$	19,347	$	17,686	$	5,414	$	15,925	$	9,276	$	1,366	$	819,106	$	8,909	$	897,029
	Special mention	—		—		—		—		—		—		9,673		990		10,663
	Substandard	—		934		—		—		—		1,105		7,181		3,685		12,905
	Doubtful	—		—		—		—		—		—		7		—		7
	Loss	—		—		—		—		—		—		—		—		—
Total lines of credit & other, net		$	19,347	$	18,620	$	5,414	$	15,925	$	9,276	$	2,471	$	835,967	$	13,584	$	920,604
Leases & equipment finance, net
Credit quality indicator:
	Pass/Watch	$	450,126	$	463,513	$	256,503	$	205,166	$	97,056	$	55,033	$	—	$	—	$	1,527,397
	Special mention	2,188		5,536		2,492		2,710		1,036		467		—		—		14,429
	Substandard	4,122		6,394		3,050		2,719		1,918		497		—		—		18,700
	Doubtful	1,230		6,229		3,162		2,501		835		351		—		—		14,308
	Loss	—		786		202		210		57		55		—		—		1,310
Total leases & equipment finance, net		$	457,666	$	482,458	$	265,409	$	213,306	$	100,902	$	56,403	$	—	$	—	$	1,576,144

Total commercial		$	859,654	$	1,334,315	$	484,030	$	397,642	$	286,259	$	412,698	$	1,597,568	$	29,443	$	5,401,609

Residential:
Mortgage, net
Credit quality indicator:
	Pass/Watch	$	962,257	$	2,325,196	$	498,372	$	491,363	$	152,602	$	711,155	$	—	$	—	$	5,140,945
	Special mention	—		296		778		1,284		581		3,812		—		—		6,751
	Substandard	—		1,049		954		2,722		1,359		11,246		—		—		17,330
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		324		970		497		1,640		—		—		3,431
Total mortgage, net		$	962,257	$	2,326,541	$	500,428	$	496,339	$	155,039	$	727,853	$	—	$	—	$	5,168,457

Home equity loans & lines, net
Credit quality indicator:
	Pass/Watch	$	468	$	673	$	—	$	—	$	17	$	8,960	$	1,371,577	$	30,685	$	1,412,380
	Special mention	—		—		—		—		—		115		1,202		449		1,766
	Substandard	—		—		—		—		—		135		935		339		1,409
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		61		56		50		167
Total home equity loans & lines, net		$	468	$	673	$	—	$	—	$	17	$	9,271	$	1,373,770	$	31,523	$	1,415,722

Total residential		$	962,725	$	2,327,214	$	500,428	$	496,339	$	155,056	$	737,124	$	1,373,770	$	31,523	$	6,584,179

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


(in thousands)		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving to Non-Revolving Loans Amortized Cost
	June 30, 2022	2022		2021		2020		2019		2018		Prior						Total
Consumer & other, net:
Credit quality indicator:
	Pass/Watch	$	10,758	$	9,610	$	8,644	$	8,575	$	3,829	$	6,009	$	121,147	$	778	$	169,350
	Special mention	—		8		4		72		16		184		263		527		1,074
	Substandard	—		—		—		14		—		82		62		27		185
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		7		—		—		7
Total consumer & other, net		$	10,758	$	9,618	$	8,648	$	8,661	$	3,845	$	6,282	$	121,472	$	1,332	$	170,616

Grand total		$	3,887,138	$	7,171,042	$	2,306,115	$	2,685,413	$	1,419,675	$	3,624,413	$	3,267,384	$	71,498	$	24,432,678


(in thousands)		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving to Non-Revolving Loans Amortized Cost
	December 31, 2021	2021		2020		2019		2018		2017		Prior						Total
Commercial real estate:
Non-owner occupied term, net
Credit quality indicator:
	Pass/Watch	$	901,230	$	434,875	$	618,879	$	431,098	$	308,872	$	942,501	$	1,313	$	3,679	$	3,642,447
	Special mention	—		1,311		1,411		12,252		844		38,268		—		—		54,086
	Substandard	19,270		2,214		2,605		53,312		2,990		9,641		—		—		90,032
	Doubtful	—		—		—		—		—		78		—		—		78
	Loss	—		—		—		—		—		244		—		—		244
Total non-owner occupied term, net		$	920,500	$	438,400	$	622,895	$	496,662	$	312,706	$	990,732	$	1,313	$	3,679	$	3,786,887
Owner occupied term, net
Credit quality indicator:
	Pass/Watch	$	594,677	$	237,814	$	369,483	$	245,707	$	227,201	$	601,934	$	5,017	$	737	$	2,282,570
	Special mention	—		—		7,445		10,739		4,936		12,219		—		—		35,339
	Substandard	—		897		674		1,815		—		10,697		—		—		14,083
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		430		—		—		430
Total owner occupied term, net		$	594,677	$	238,711	$	377,602	$	258,261	$	232,137	$	625,280	$	5,017	$	737	$	2,332,422
Multifamily, net
Credit quality indicator:
	Pass/Watch	$	1,700,221	$	380,506	$	748,207	$	346,192	$	334,688	$	510,385	$	26,475	$	2,931	$	4,049,605
	Special mention	—		—		—		—		—		1,597		—		—		1,597
	Substandard	—		—		—		—		—		—		—		—		—
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		—		—		—		—
Total multifamily, net		$	1,700,221	$	380,506	$	748,207	$	346,192	$	334,688	$	511,982	$	26,475	$	2,931	$	4,051,202

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
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


(in thousands)		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving to Non-Revolving Loans Amortized Cost
	December 31, 2021	2021		2020		2019		2018		2017		Prior						Total
Construction & development, net
Credit quality indicator:
	Pass/Watch	$	264,489	$	310,207	$	237,435	$	48,911	$	18,375	$	136	$	2,382	$	—	$	881,935
	Special mention	—		—		—		—		—		—		—		—		—
	Substandard	—		—		—		8,403		—		—		—		—		8,403
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		—		—		—		—
Total construction & development, net		$	264,489	$	310,207	$	237,435	$	57,314	$	18,375	$	136	$	2,382	$	—	$	890,338
Residential development, net
Credit quality indicator:
	Pass/Watch	$	28,744	$	15,623	$	—	$	—	$	—	$	—	$	156,587	$	6,036	$	206,990
	Special mention	—		—		—		—		—		—		—		—		—
	Substandard	—		—		—		—		—		—		—		—		—
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		—		—		—		—
Total residential development, net		$	28,744	$	15,623	$	—	$	—	$	—	$	—	$	156,587	$	6,036	$	206,990

Total commercial real estate		$	3,508,631	$	1,383,447	$	1,986,139	$	1,158,429	$	897,906	$	2,128,130	$	191,774	$	13,383	$	11,267,839

Commercial:
Term, net
Credit quality indicator:
	Pass/Watch	$	1,102,310	$	306,969	$	200,352	$	179,217	$	206,405	$	215,105	$	699,230	$	14,075	$	2,923,663
	Special mention	—		4,454		97		28,971		587		825		27,909		1,501		64,344
	Substandard	1,217		9,827		—		1,095		2,648		1,264		—		3,189		19,240
	Doubtful	—		—		—		—		809		—		—		—		809
	Loss	—		—		—		417		—		—		—		—		417
Total term, net		$	1,103,527	$	321,250	$	200,449	$	209,700	$	210,449	$	217,194	$	727,139	$	18,765	$	3,008,473
Lines of credit & other, net
Credit quality indicator:
	Pass/Watch	$	31,836	$	9,170	$	16,529	$	10,945	$	334	$	1,605	$	812,207	$	8,498	$	891,124
	Special mention	—		—		—		—		—		—		8,830		752		9,582
	Substandard	714		414		—		—		—		1,118		3,238		4,540		10,024
	Doubtful	—		—		—		—		—		—		1		—		1
	Loss	—		—		—		—		—		—		1		1		2
Total lines of credit & other, net		$	32,550	$	9,584	$	16,529	$	10,945	$	334	$	2,723	$	824,277	$	13,791	$	910,733
Leases & equipment finance, net
Credit quality indicator:
	Pass/Watch	$	599,301	$	325,379	$	282,101	$	138,627	$	43,950	$	38,965	$	—	$	—	$	1,428,323
	Special mention	2,512		1,965		1,782		1,690		572		130		—		—		8,651
	Substandard	4,280		7,333		2,682		1,448		578		160		—		—		16,481
	Doubtful	3,781		3,232		3,238		1,343		663		636		—		—		12,893
	Loss	614		258		187		84		179		6		—		—		1,328
Total leases & equipment finance, net		$	610,488	$	338,167	$	289,990	$	143,192	$	45,942	$	39,897	$	—	$	—	$	1,467,676

Total commercial		$	1,746,565	$	669,001	$	506,968	$	363,837	$	256,725	$	259,814	$	1,551,416	$	32,556	$	5,386,882

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)	(in thousands)		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving to Non-Revolving Loans Amortized Cost						(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			December 31, 2021				2021			2020			2019			2018			2017			Prior					Total
Residential:	Residential:																								Residential:
Mortgage, net	Mortgage, net																						Mortgage, net
Credit quality indicator:	Credit quality indicator:																						Credit quality indicator:
		Pass/Watch	$	809,232	$	1,136,220	$	393,041	$	406,069	$	424,270	$	669,862	$	—	$	—		$	3,838,694			Pass/Watch			$	2,252,704		$	606,671		$	585,923		$	190,673		$	209,990		$	639,585			$	—			$	—			$	4,485,546
		Special mention	—		397		286		688		946		3,183		—		—			5,500				Special mention			372			—			555			81			632			2,830		—				—				4,470
		Substandard	335		1,398		1,822		4,133		6,381		11,113		—		—			25,182				Substandard			—			1,379			4,430			1,147			3,098			15,692		—				—				25,746
		Doubtful	—		—		—		—		—		—		—		—			—				Doubtful			—			—			—			—			—			—		—				—				—
		Loss	—		1,314		—		—		—		1,216		—		—			2,530				Loss			—			—			907			—			—			597		—				—				1,504
Total mortgage, net	Total mortgage, net		$	809,567	$	1,139,329	$	395,149	$	410,890	$	431,597	$	685,374	$	—	$	—		$	3,871,906		Total mortgage, net				$	2,253,076		$	608,050		$	591,815		$	191,901		$	213,720		$	658,704	$	—			$	—			$	4,517,266

Home equity loans & lines, net	Home equity loans & lines, net																						Home equity loans & lines, net
Credit quality indicator:	Credit quality indicator:																						Credit quality indicator:
		Pass/Watch	$	40	$	—	$	20	$	—	$	259	$	16,575	$	1,077,753	$	37,008		$	1,131,655			Pass/Watch			$	972		$	—		$	—		$	18		$	—		$	10,973	$	1,151,063			$	31,708			$	1,194,734
		Special mention	—		—		—		—		—		211		1,537		198			1,946				Special mention			—			—			—			—			—			102		1,355				248				1,705
		Substandard	—		—		—		—		—		43		254		233			530				Substandard			—			—			—			—			—			96		280				213				589
		Doubtful	—		—		—		—		—		—		—		—			—				Doubtful			—			—			—			—			—			—		—				—				—
		Loss	—		—		—		—		—		182		1,107		644			1,933				Loss			—			—			—			—			—			36		42				64				142
Total home equity loans & lines, net	Total home equity loans & lines, net		$	40	$	—	$	20	$	—	$	259	$	17,011	$	1,080,651	$	38,083		$	1,136,064		Total home equity loans & lines, net				$	972		$	—		$	—		$	18		$	—		$	11,207	$	1,152,740			$	32,233			$	1,197,170

Total residential	Total residential		$	809,607	$	1,139,329	$	395,169	$	410,890	$	431,856	$	702,385	$	1,080,651	$	38,083		$	5,007,970		Total residential				$	2,254,048		$	608,050		$	591,815		$	191,919		$	213,720		$	669,911	$	1,152,740			$	32,233			$	5,714,436

Consumer & other, net:	Consumer & other, net:																						Consumer & other, net:
Credit quality indicator:	Credit quality indicator:																						Credit quality indicator:
		Pass/Watch	$	24,408	$	22,802	$	11,372	$	4,170	$	2,582	$	4,101	$	143,813	$	2,789		$	216,037			Pass/Watch			$	15,375		$	10,955		$	12,167		$	5,395		$	3,983		$	5,070	$	128,264			$	1,835			$	183,044
		Special mention	—		95		79		27		28		3		660		74			966				Special mention			—			23			41			1			113			113		391				101				783
		Substandard	—		25		—		—		2		—		205		110			342				Substandard			—			3			15			—			17			25		55				71				186
		Doubtful	—		—		—		—		—		—		—		—			—				Doubtful			—			—			—			—			—			—		—				—				—
		Loss	—		—		—		—		—		10		3		—			13				Loss			—			—			—			—			—			7		3				—				10
Total consumer & other, net	Total consumer & other, net		$	24,408	$	22,922	$	11,451	$	4,197	$	2,612	$	4,114	$	144,681	$	2,973		$	217,358		Total consumer & other, net				$	15,375		$	10,981		$	12,223		$	5,396		$	4,113		$	5,215	$	128,713			$	2,007			$	184,023

Grand total	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		Grand total				$	7,524,619		$	2,671,479		$	3,097,145		$	1,719,581		$	1,372,464		$	3,063,070	$	3,024,643			$	80,179			$	22,553,180

Note 5 – Residential Mortgage Servicing Rights

The Company measures its ~~mortgage servicing rights~~MSR asset at fair value with changes in fair value reported in residential mortgage banking revenue, net. The following table presents the changes in the Company's residential ~~mortgage servicing rights~~MSR for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
(in thousands)	(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Balance, beginning of period	Balance, beginning of period	$	102,699	$	96,356	$	92,907	$	115,010	Balance, beginning of period	$	165,807	$	100,413	$	123,615	$	92,907
Additions for new MSR capitalized	Additions for new MSR capitalized	8,450		14,014		30,845		37,484		Additions for new MSR capitalized	7,813		8,330		15,203		22,395
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	(4,681)		(4,878)		(13,592)		(15,249)		Changes due to collection/realization of expected cash flows over time	(4,961)		(4,366)		(10,308)		(8,911)
Changes due to valuation inputs or assumptions (1)	Changes due to valuation inputs or assumptions (1)	(634)		(12,244)		(4,326)		(43,997)		Changes due to valuation inputs or assumptions (1)	10,899		(1,678)		51,048		(3,692)
Balance, end of period	Balance, end of period	$	105,834	$	93,248	$	105,834	$	93,248	Balance, end of period	$	179,558	$	102,699	$	179,558	$	102,699

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

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Table of Contents

Information related to the ~~Bank's~~ serviced loan portfolio as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 is as follows:


(dollars in thousands)	(dollars in thousands)	September 30, 2021			December 31, 2020			(dollars in thousands)	June 30, 2022			December 31, 2021
Balance of loans serviced for others	Balance of loans serviced for others	$	12,853,291		$	13,026,720		Balance of loans serviced for others	$	12,932,747		$	12,755,671
MSR as a percentage of serviced loans	MSR as a percentage of serviced loans	0.82		%	0.71		%	MSR as a percentage of serviced loans	1.39		%	0.97		%

The amount of contractually specified servicing fees, late fees and ancillary fees earned, recorded in residential mortgage banking revenue, was ~~$9.2~~$9.5 million and ~~$27.4~~$18.6 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, as compared to ~~$8.8~~$9.1 million and ~~$26.2~~$18.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, 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~~June 30, ~~2021~~2022
Commitments to extend credit	$	~~6,180,820~~7,533,982
Forward sales commitments	$	~~555,170~~327,666
Commitments to originate residential mortgage loans held for sale	$	~~432,659~~201,663
Standby letters of credit	$	~~122,078~~117,330

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 no financial guarantees in connection with standby letters of credit that the Bank was required to perform on during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021. At ~~September~~June 30, ~~2021,~~2022, approximately ~~$113.4~~$107.7 million of standby letters of credit expire within one year, and ~~$8.7~~$9.6 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, 2021, the Company had a residential mortgage loan repurchase reserve liability of $545,000.~~

Legal Proceedings and Regulatory Matters—We are subject to litigation in court and arbitral proceedings, as well as proceedings, investigations, examinations and other actions brought or considered by governmental and self-regulatory agencies. We are a party to various pending and threatened claims and legal proceedings arising in the normal course of business activities, some of which involve claims for substantial or uncertain amounts.

At least quarterly, we assess liabilities and contingencies in connection with all outstanding or new legal matters, utilizing the most recent information available. If we determine that a loss from a matter is probable and the amount of the loss can be reasonably estimated, we establish an accrual for the loss. Once established, each accrual is adjusted as appropriate to reflect any subsequent developments in the specific legal matter. It is inherently difficult to determine whether any loss is probable or even possible. It is also inherently difficult to estimate the amount of any loss and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Actual losses may be in excess of any established accrual or the range of reasonably possible loss. Management's estimate will change from time to time. For matters where a loss is not probable, or the amount of the loss cannot be estimated, no accrual is established. The Company does not have any amounts accrued related to legal matters as of June 30, 2022.

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Resolution and the outcome of legal claims is ~~involved~~unpredictable, exacerbated by the following: damages sought are unsubstantiated or indeterminate; it is unclear whether a case brought as a class action will be allowed to proceed on that basis; discovery or motion practice is not complete; the proceeding is not yet in its final stages; the matters present legal ~~proceedings occurring~~uncertainties; there are significant facts in dispute; there are a large number of parties, including multiple defendants; or there is a wide range of potential results. Any estimate or determination relating to the future resolution of legal and regulatory matters is uncertain and involves significant judgment. We usually are unable to determine whether a favorable or unfavorable outcome is remote, reasonably likely, or probable, or to estimate the amount or range of a probable or reasonably likely loss, until relatively late in the ~~ordinary course~~process.

Although there can be no assurance as to the ultimate outcome of ~~business.~~ specific legal matter, we believe we have meritorious defenses to the claims asserted against us in our currently outstanding legal matters, and we intend to continue to vigorously defend ourselves. We will consider settlement of legal matters when, in management's judgment, it is in the best interests of the Company and its shareholders.

Based on information currently available, advice of counsel, ~~and~~ available insurance coverage, ~~management~~and established reserves, the Company believes that the eventual outcome of the actions against ~~the Company or its subsidiaries~~us will not ~~individually or in the aggregate,~~ have a material adverse effect on ~~its~~the Company's consolidated financial condition. However, it is possible that the ultimate resolution of a matter, if unfavorable, may be material to the Company's 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 athe 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,~~the third quarter of 2022, subject to satisfaction of customary closing conditions, including receipt of regulatory ~~approvals~~approvals. The Merger Agreement provides certain termination rights for both Umpqua and ~~approvals from each company's shareholders. Refer~~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 ~~subsequent event footnote for additional information.~~other party a termination fee of $145.0 million.

Concentrations of Credit Risk— The Bank grants real estate mortgage, real estate construction, commercial, agricultural and installment loans and leases to customers ~~throughout~~in Oregon, Washington, California, Idaho, Nevada, Arizona and ~~Nevada.~~Colorado. In management's judgment, a concentration exists in real estate-related loans, which represented approximately ~~75%~~78% and ~~71%~~76% of the Bank's loan and lease portfolio at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. 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.

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The Bank enters into forward delivery contracts to sell residential mortgage loans or mortgage-backed securities to 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 no counterparty default losses on forward contracts in the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021. 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. 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 equal to the increase or decrease in the market value of the forward contract. At ~~September~~June 30, ~~2021,~~2022, the Bank had commitments to originate mortgage loans held for sale totaling ~~$432.7~~$201.7 million and forward sales commitments of ~~$555.2~~$327.7 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~~June 30, ~~2021,~~2022, the Bank had ~~914~~944 interest rate swaps with an aggregate notional amount of ~~$6.6~~$7.3 billion related to this program. As of December 31, ~~2020,~~2021, the Bank had ~~886~~936 interest rate swaps with an aggregate notional amount of ~~$6.2~~$7.0 billion related to this program.

As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, 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 ~~$8.9~~$137.9 million and ~~$370,000,~~$8.7 million, 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 ~~$89.0~~$84.9 million and $92.6 million as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. In 2021, the Bank began to collateralize a portion of its initial margin with U.S. Treasury securities.

~~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 certain 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.~~liability As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the variation margin adjustments ~~were negative adjustments~~consisted of ~~$198.7~~a positive adjustment of $119.4 million and ~~$330.5~~a negative adjustment of $172.9 million, respectively.

The Bank incorporates credit valuation adjustments 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 $9.7 million and $18.5 million as of September 30, 2021 and December 31, 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. The following table summarizes the types of derivatives, separately by assets and liabilities, and the fair values of such derivatives as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(in thousands)	(in thousands)	Asset Derivatives				Liability Derivatives				(in thousands)	Asset Derivatives				Liability Derivatives
Derivatives not designated as hedging instrument	Derivatives not designated as hedging instrument	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020		Derivatives not designated as hedging instrument	June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Interest rate lock commitments	Interest rate lock commitments	$	8,258	$	28,144	$	—	$	—	Interest rate lock commitments	$	71	$	4,641	$	188	$	—
Interest rate forward sales commitments	Interest rate forward sales commitments	3,367		7		374		7,257		Interest rate forward sales commitments	2,920		615		777		699
Interest rate swaps	Interest rate swaps	198,607		313,090		8,944		370		Interest rate swaps	2,748		171,827		137,940		8,671
Foreign currency derivatives	Foreign currency derivatives	456		1,269		343		1,155		Foreign currency derivatives	225		340		156		305
Total derivative assets and liabilities	Total derivative assets and liabilities	$	210,688	$	342,510	$	9,661	$	8,782	Total derivative assets and liabilities	$	5,964	$	177,423	$	139,061	$	9,675

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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~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


(in thousands)	(in thousands)	Three Months Ended				Nine Months Ended				(in thousands)	Three Months Ended				Six Months Ended
Derivatives not designated as hedging instrument	Derivatives not designated as hedging instrument	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		Derivatives not designated as hedging instrument	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Interest rate lock commitments	Interest rate lock commitments	$	(4,952)	$	3,303	$	(19,886)	$	21,784	Interest rate lock commitments	$	736	$	(1,545)	$	(4,758)	$	(14,934)
Interest rate forward sales commitments	Interest rate forward sales commitments	(2,550)		(11,650)		15,336		(51,952)		Interest rate forward sales commitments	14,200		(10,285)		39,451		17,886
Interest rate swaps	Interest rate swaps	1,429		1,765		8,698		(13,364)		Interest rate swaps	7,337		(4,481)		14,384		7,269
Foreign currency derivatives	Foreign currency derivatives	718		585		1,985		1,567		Foreign currency derivatives	803		712		1,504		1,267
Total derivative gains (losses)	Total derivative gains (losses)	$	(5,355)	$	(5,997)	$	6,133	$	(41,965)	Total derivative gains (losses)	$	23,076	$	(15,599)	$	50,581	$	11,488

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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~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
(in thousands, except per share data)	(in thousands, except per share data)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands, except per share data)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Net income (loss)		$	108,066	$	124,871	$	331,946	$	(1,674,150)
Net income										Net income	$	78,591	$	116,143	$	169,748	$	223,880

Weighted average number of common shares outstanding - basic	Weighted average number of common shares outstanding - basic	218,416		220,221		219,791		220,216		Weighted average number of common shares outstanding - basic	217,030		220,593		216,906		220,481
Effect of potentially dilutive common shares (1)	Effect of potentially dilutive common shares (1)	562		197		487		—		Effect of potentially dilutive common shares (1)	249		429		427		447
Weighted average number of common shares outstanding - diluted	Weighted average number of common shares outstanding - diluted	218,978		220,418		220,278		220,216		Weighted average number of common shares outstanding - diluted	217,279		221,022		217,333		220,928
Earnings (loss) per common share:
Earnings per common share:										Earnings per common share:
Basic	Basic	$	0.49	$	0.57	$	1.51	$	(7.60)	Basic	$	0.36	$	0.53	$	0.78	$	1.02
Diluted	Diluted	$	0.49	$	0.57	$	1.51	$	(7.60)	Diluted	$	0.36	$	0.53	$	0.78	$	1.01

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

The following table represents the weighted average outstanding restricted shares that were not included in the computation of diluted earnings ~~(loss)~~ per share because their effect would be anti-dilutive for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

(in thousands)

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

(in thousands)

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Restricted stock awards

—

763

1,164

Restricted stock awards

515

342

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 2 segments: Core Banking and Mortgage Banking. ~~The prior periods have been restated to reflect these two segments. Management periodically updates the allocation methods and assumptions within the current segment structure.~~

The Core Banking segment includes all lines of business, except Mortgage Banking, including ~~wholesale,~~commercial, 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 investment are included in the Core Banking segment as portfolio loans are an anchor product for the consumer and wealth channels and are originated through a variety of channels throughout the Company. Management periodically updates the allocation methods and assumptions within the current segment structure.

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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 June 30, 2022						Three Months Ended June 30, 2021
(in thousands)		Core Banking		Mortgage Banking		Consolidated		Core Banking		Mortgage Banking		Consolidated
Net interest income		$	247,009	$	1,161	$	248,170	$	226,915	$	2,848	$	229,763
Provision (recapture) for credit losses		18,692		—		18,692		(22,996)		—		(22,996)
Non-interest income
	Residential mortgage banking revenue:
	Origination and sale	—		15,101		15,101		—		41,367		41,367
	Servicing	—		9,505		9,505		—		9,120		9,120
	Change in fair value of MSR asset:
	Changes due to collection/realization of expected cash flows over time	—		(4,961)		(4,961)		—		(4,366)		(4,366)
	Changes due to valuation inputs or assumptions	—		10,899		10,899		—		(1,678)		(1,678)

	(Loss) gain on equity securities, net	(2,075)		—		(2,075)		4		—		4
	Gain (loss) on swap derivatives, net	7,337		—		7,337		(4,481)		—		(4,481)
	Change in fair value of certain loans held for investment	(15,210)		—		(15,210)		2,782		—		2,782
	Non-interest income (excluding above items)	34,461		178		34,639		48,151		176		48,327
	Total non-interest income	24,513		30,722		55,235		46,456		44,619		91,075
Non-interest expense
	Merger related expenses	2,672		—		2,672		—		—		—
	Exit and disposal costs	442		—		442		4,728		—		4,728
	Non-interest expense (excluding above items)	148,946		27,514		176,460		146,877		37,795		184,672
	Allocated expenses, net (1)	3,702		(3,702)		—		970		(970)		—
	Total non-interest expense	155,762		23,812		179,574		152,575		36,825		189,400
Income before income taxes		97,068		8,071		105,139		143,792		10,642		154,434
Provision for income taxes		24,530		2,018		26,548		35,630		2,661		38,291
Net income		$	72,538	$	6,053	$	78,591	$	108,162	$	7,981	$	116,143
(1) Represents the internal charges for 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.

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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.


		Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
(in thousands)		Core Banking		Mortgage Banking		Consolidated		Core Banking		Mortgage Banking		Consolidated
Net interest income		$	474,096	$	2,837	$	476,933	$	444,489	$	6,705	$	451,194
Provision (recapture) for credit losses		23,496		—		23,496		(22,996)		—		(22,996)
Non-interest income
	Residential mortgage banking revenue:
	Origination and sale	—		31,945		31,945		—		103,872		103,872
	Servicing	—		18,645		18,645		—		18,207		18,207
	Change in fair value of MSR asset:
	Changes due to collection/realization of expected cash flows over time	—		(10,308)		(10,308)		—		(8,911)		(8,911)
	Changes due to valuation inputs or assumptions	—		51,048		51,048		—		(3,692)		(3,692)
	Gain on sale of debt securities, net	2		—		2		4		—		4
	Loss on equity securities, net	(4,736)		—		(4,736)		(702)		—		(702)
	Gain on swap derivatives, net	14,384		—		14,384		7,269		—		7,269
	Change in fair value of certain loans held for investment	(36,259)		—		(36,259)		2,272		—		2,272
	Non-interest income (excluding above items)	70,111		372		70,483		81,064		492		81,556
	Total non-interest income	43,502		91,702		135,204		89,907		109,968		199,875
Non-interest expense
	Merger related expenses	4,950		—		4,950		—		—		—
	Exit and disposal costs	3,475		—		3,475		5,928		—		5,928
	Non-interest expense (excluding above items)	297,369		56,210		353,579		292,038		79,026		371,064
	Allocated expenses, net (1)	7,437		(7,437)		—		180		(180)		—
	Total non-interest expense	313,231		48,773		362,004		298,146		78,846		376,992
Income before income taxes		180,871		45,766		226,637		259,246		37,827		297,073
Provision for income taxes		45,447		11,442		56,889		63,736		9,457		73,193
Net income		$	135,424	$	34,324	$	169,748	$	195,510	$	28,370	$	223,880
(1) Represents the internal charges for centrally provided support services and other corporate overhead to the Mortgage Banking segment, offset by allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs.

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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


	June 30, 2022						December 31, 2021
(in thousands)	Core Banking		Mortgage Banking		Consolidated		Core Banking		Mortgage Banking		Consolidated
Total assets	$	29,721,590	$	414,104	$	30,135,694	$	30,155,058	$	485,878	$	30,640,936
Loans held for sale	$	—	$	228,889	$	228,889	$	—	$	353,105	$	353,105
Total loans and leases	$	24,432,678	$	—	$	24,432,678	$	22,553,180	$	—	$	22,553,180
Total deposits	$	25,925,294	$	207,129	$	26,132,423	$	26,370,568	$	224,117	$	26,594,685

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Note 10 – Fair Value Measurement

The following table presents estimated fair values of the Company's financial instruments as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, whether or not recognized or recorded at fair value in the Condensed Consolidated Balance Sheets:


			September 30, 2021				December 31, 2020						June 30, 2022				December 31, 2021
(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	$	3,744,589	$	3,744,589	$	2,573,181	$	2,573,181	Cash and cash equivalents	1	$	1,002,581	$	1,002,581	$	2,761,621	$	2,761,621
Equity and other investment securities	Equity and other investment securities	1,2	81,575		81,575		83,077		83,077		Equity and other investment securities	1,2	75,347		75,347		81,214		81,214
Investment securities available for sale	Investment securities available for sale	2	3,723,171		3,723,171		2,932,558		2,932,558		Investment securities available for sale	1,2	3,416,707		3,416,707		3,870,435		3,870,435
Investment securities held to maturity	Investment securities held to maturity	3	2,795		3,581		3,034		3,883		Investment securities held to maturity	3	2,637		3,385		2,744		3,514
Loans held for sale	Loans held for sale	2	352,466		352,466		766,225		766,225		Loans held for sale	2	228,889		228,889		353,105		353,105
Loans and leases, net	Loans and leases, net	2,3	21,712,380		21,853,775		21,450,966		21,904,189		Loans and leases, net	2,3	24,171,567		23,619,471		22,304,768		22,356,321
Restricted equity securities	Restricted equity securities	1	10,946		10,946		41,666		41,666		Restricted equity securities	1	10,867		10,867		10,916		10,916
Residential mortgage servicing rights	Residential mortgage servicing rights	3	105,834		105,834		92,907		92,907		Residential mortgage servicing rights	3	179,558		179,558		123,615		123,615
Bank owned life insurance	Bank owned life insurance	1	325,646		325,646		323,470		323,470		Bank owned life insurance	1	328,764		328,764		327,745		327,745
Derivatives	Derivatives	2,3	210,688		210,688		342,510		342,510		Derivatives	2,3	5,964		5,964		177,423		177,423
Financial liabilities:	Financial liabilities:										Financial liabilities:
Deposits	Deposits	1,2	$	26,908,397	$	26,911,910	$	24,622,201	$	24,641,876	Deposits	1,2	$	26,132,423	$	26,106,007	$	26,594,685	$	26,593,521
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	2	467,760		467,760		375,384		375,384		Securities sold under agreements to repurchase	2	527,961		527,961		492,247		492,247
Borrowings	Borrowings	2	6,367		7,160		771,482		774,586		Borrowings	2	6,252		6,224		6,329		7,073
Junior subordinated debentures, at fair value	Junior subordinated debentures, at fair value	3	299,508		299,508		255,217		255,217		Junior subordinated debentures, at fair value	3	321,268		321,268		293,081		293,081
Junior subordinated debentures, at amortized cost	Junior subordinated debentures, at amortized cost	3	88,098		76,686		88,268		67,425		Junior subordinated debentures, at amortized cost	3	87,927		80,150		88,041		75,199
Derivatives	Derivatives	2	9,661		9,661		8,782		8,782		Derivatives	2,3	139,061		139,061		9,675		9,675

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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~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(in thousands)	(in thousands)	September 30, 2021								(in thousands)	June 30, 2022
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	$	69,157	$	51,820	$	17,337	$	—	Investments in mutual funds and other securities	$	63,956	$	46,619	$	17,337	$	—
Equity securities held in rabbi trusts	Equity securities held in rabbi trusts	12,418		12,418		—		—		Equity securities held in rabbi trusts	11,391		11,391		—		—

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	838,977		—		838,977		—		U.S. Treasury and agencies	872,875		128,464		744,411		—
Obligations of states and political subdivisions	Obligations of states and political subdivisions	283,409		—		283,409		—		Obligations of states and political subdivisions	292,108		—		292,108		—
Residential mortgage-backed securities and collateralized mortgage obligations		2,600,785		—		2,600,785		—
Mortgage-backed securities and collateralized mortgage obligations										Mortgage-backed securities and collateralized mortgage obligations	2,251,724		—		2,251,724		—

Loans held for sale, at fair value	Loans held for sale, at fair value	352,466		—		352,466		—		Loans held for sale, at fair value	228,889		—		228,889		—
Loans and leases, at fair value	Loans and leases, at fair value	353,912		—		353,912		—		Loans and leases, at fair value	309,628		—		309,628		—
Residential mortgage servicing rights, at fair value	Residential mortgage servicing rights, at fair value	105,834		—		—		105,834		Residential mortgage servicing rights, at fair value	179,558		—		—		179,558
Derivatives	Derivatives									Derivatives
Interest rate lock commitments	Interest rate lock commitments	8,258		—		—		8,258		Interest rate lock commitments	71		—		—		71
Interest rate forward sales commitments	Interest rate forward sales commitments	3,367		—		3,367		—		Interest rate forward sales commitments	2,920		—		2,920		—
Interest rate swaps	Interest rate swaps	198,607		—		198,607		—		Interest rate swaps	2,748		—		2,748		—
Foreign currency derivative		456		—		456		—
Foreign currency derivatives										Foreign currency derivatives	225		—		225		—
Total assets measured at fair value	Total assets measured at fair value	$	4,827,646	$	64,238	$	4,649,316	$	114,092	Total assets measured at fair value	$	4,216,093	$	186,474	$	3,849,990	$	179,629
Financial liabilities:	Financial liabilities:									Financial liabilities:
Junior subordinated debentures, at fair value	Junior subordinated debentures, at fair value	$	299,508	$	—	$	—	$	299,508	Junior subordinated debentures, at fair value	$	321,268	$	—	$	—	$	321,268
Derivatives	Derivatives									Derivatives
Interest rate lock commitments										Interest rate lock commitments	188		—		—		188
Interest rate forward sales commitments	Interest rate forward sales commitments	374		—		374		—		Interest rate forward sales commitments	777		—		777		—
Interest rate swaps	Interest rate swaps	8,944		—		8,944		—		Interest rate swaps	137,940		—		137,940		—
Foreign currency derivative		343		—		343		—
Foreign currency derivatives										Foreign currency derivatives	156		—		156		—
Total liabilities measured at fair value	Total liabilities measured at fair value	$	309,169	$	—	$	9,661	$	299,508	Total liabilities measured at fair value	$	460,329	$	—	$	138,873	$	321,456

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(in thousands) December 31, 2020
Description Total Level 1 Level 2 Level 3
Financial assets:
Equity and other investment securities
Investments in mutual funds and other securities $ 70,203 $ 52,866 $ 17,337 $ —
Equity securities held in rabbi trusts 12,814 12,814 — —
Other investments securities (1)
60 — 60 —
Investment securities available for sale
U.S. Treasury and agencies 762,202 — 762,202 —
Obligations of states and political subdivisions 279,511 — 279,511 —
Residential mortgage-backed securities and collateralized mortgage obligations 1,890,845 — 1,890,845 —
Loans held for sale, at fair value 688,079 — 688,079 —
Residential mortgage servicing rights, at fair value 92,907 — — 92,907
Derivatives
Interest rate lock commitments 28,144 — — 28,144
Interest rate forward sales commitments 7 — 7 —
Interest rate swaps 313,090 — 313,090 —
Foreign currency derivative 1,269 — 1,269 —
Total assets measured at fair value $ 4,139,131 $ 65,680 $ 3,952,400 $ 121,051
Financial liabilities:
Junior subordinated debentures, at fair value $ 255,217 $ — $ — $ 255,217
Derivatives
Interest rate forward sales commitments 7,257 — 7,257 —
Interest rate swaps 370 — 370 —
Foreign currency derivative 1,155 — 1,155 —
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.~~


(in thousands)	December 31, 2021
Description	Total		Level 1		Level 2		Level 3
Financial assets:
Equity and other investment securities

Investments in mutual funds and other securities	$	68,692	$	51,355	$	17,337	$	—
Equity securities held in rabbi trusts	12,522		12,522		—		—

Investment securities available for sale
U.S. Treasury and agencies	918,053		89,038		829,015		—
Obligations of states and political subdivisions	330,784		—		330,784		—
Mortgage-backed securities and collateralized mortgage obligations	2,621,598		—		2,621,598		—

Loans held for sale, at fair value	353,105		—		353,105		—
Loans and leases, at fair value	345,634		—		345,634		—
Residential mortgage servicing rights, at fair value	123,615		—		—		123,615
Derivatives
Interest rate lock commitments	4,641		—		—		4,641
Interest rate forward sales commitments	615		—		615		—
Interest rate swaps	171,827		—		171,827		—
Foreign currency derivatives	340		—		340		—
Total assets measured at fair value	$	4,951,426	$	152,915	$	4,670,255	$	128,256
Financial liabilities:
Junior subordinated debentures, at fair value	$	293,081	$	—	$	—	$	293,081
Derivatives
Interest rate forward sales commitments	699		—		699		—
Interest rate swaps	8,671		—		8,671		—
Foreign currency derivatives	305		—		305		—
Total liabilities measured at fair value	$	302,756	$	—	$	9,675	$	293,081

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~~June 30, ~~2021,~~2022, there were ~~$353.9~~$309.6 million in mortgage loans recorded at fair value as they were ~~previous~~previously transferred from held for sale to loans held for investment.

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Residential Mortgage Servicing Rights— The fair value of ~~the MSRs~~MSR is estimated using a ~~discounted cash flow~~DCF 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.

Junior Subordinated Debentures— The fair value of junior subordinated debentures is estimated using an income approach valuation technique. The significant unobservable input utilized in the estimation of fair value of these instruments is the credit risk adjusted 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~~DCF 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~~June 30, ~~2021,~~2022, 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~~June 30, ~~2021:~~2022:

Financial Instrument

Fair Value ~~(in~~
(in thousands)

Valuation Technique

Unobservable Input

Range of Inputs

Weighted Average

Assets:

Residential mortgage servicing rights

~~105,834~~179,558

Discounted cash flow

Constant prepayment rate

~~8.20%~~6.07% - ~~72.17%~~24.52%

~~16.21%~~6.55%

Discount rate

~~9.50%~~9.00% - ~~12.50%~~14.92%

~~9.69%~~9.50%

Liabilities:

Interest rate lock commitments, net

~~8,258~~117

Internal pricing model

Pull-through rate

~~70.00%~~73.00% - 100.00%

~~88.03%~~88.34%

Junior subordinated debentures

~~299,508~~321,268

Discounted cash flow

Credit spread

~~1.57%~~2.25% - ~~4.42%~~3.77%

~~3.46%~~3.01%

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.

Table of Contents

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.

~~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. 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 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~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:

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
	June 30, 2022						June 30, 2021
(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	$	165,807	$	(853)	$	(305,719)	$	100,413	$	14,755	$	(281,580)

Change included in earnings	5,938		(2,437)		(3,137)		(6,044)		2,356		(2,367)
Change in fair values included in comprehensive income/loss	—		—		(15,064)		—		—		(5,996)
Purchases and issuances	7,813		3,047		—		8,330		21,548		—
Sales and settlements	—		126		2,652		—		(25,449)		2,220
Ending balance	$	179,558	$	(117)	$	(321,268)	$	102,699	$	13,210	$	(287,723)
Change in unrealized gains or losses for the period included in earnings for assets and liabilities held at end of period	$	10,899	$	(117)	$	(3,137)	$	(1,678)	$	13,210	$	(2,367)
Change in unrealized gains or losses for the period included in other comprehensive income for assets and liabilities held at end of period	$	—	$	—	$	(15,064)	$	—	$	—	$	(5,996)

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	Six Months Ended						Six Months Ended
	June 30, 2022						June 30, 2021
(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	$	123,615	$	4,641	$	(293,081)	$	92,907	$	28,144	$	(255,217)

Change included in earnings	40,740		(6,707)		(5,593)		(12,603)		(1,102)		(4,743)
Change in fair values included in comprehensive income/loss	—		—		(27,767)		—		—		(32,558)
Purchases and issuances	15,203		7,698		—		22,395		51,723		—
Sales and settlements	—		(5,749)		5,173		—		(65,555)		4,795
Ending balance	$	179,558	$	(117)	$	(321,268)	$	102,699	$	13,210	$	(287,723)
Change in unrealized gains or losses for the period included in earnings for assets held at end of period	$	51,048	$	(117)	$	(5,593)	$	(3,692)	$	13,210	$	(4,743)
Change in unrealized gains or losses for the period included in other comprehensive income for assets held at end of period	$	—	$	—	$	(27,767)	$	—	$	—	$	(32,558)

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 ~~$11.9~~$15.1 million and ~~$44.5~~$27.8 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, are recorded net of tax as an other comprehensive loss of ~~$8.9~~$11.2 million and ~~$33.1~~$20.6 million, respectively. Comparatively, unrealized losses of ~~$14.6~~$6.0 million and ~~unrealized gains of $26.9~~$32.6 million were recorded net of tax as an other comprehensive ~~loss~~losses of ~~$10.8~~$4.5 million and ~~other comprehensive income of $20.0~~$24.2 million, ~~respectively,~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021, respectively. The loss recorded for the three and six months ended June 30, 2022 was due primarily to an increase in the implied forward curve, partially offset by an increase in the discount rate, which resulted in an increase in the liability.

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. The following ~~tables present~~table presents 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, 2021									June 30, 2022
(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	$	5,835	$	—	$	—	$	5,835	Loans and leases	$	1,759	$	—	$	—	$	1,759

Total assets measured at fair value on a nonrecurring basis	Total assets measured at fair value on a nonrecurring basis	$	5,835	$	—	$	—	$	5,835	Total assets measured at fair value on a nonrecurring basis	$	1,759	$	—	$	—	$	1,759


		December 31, 2020									December 31, 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	$	—	$	—	$	8,231	Loans and leases	$	4,129	$	—	$	—	$	4,129

Total assets measured at fair value on a nonrecurring basis	Total assets measured at fair value on a nonrecurring basis	$	8,231	$	—	$	—	$	8,231	Total assets measured at fair value on a nonrecurring basis	$	4,129	$	—	$	—	$	4,129

Table of Contents

The following table presents the losses resulting from nonrecurring fair value adjustments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
(in thousands)	(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021

Loans and leases	Loans and leases	$	8,470	$	14,797	$	43,480	$	53,336	Loans and leases	$	8,741	$	16,697	$	16,532	$	35,010
Goodwill impairment		—		—		—		1,784,936
Total loss from nonrecurring measurements		$	8,470	$	14,797	$	43,480	$	1,838,272

Total losses from nonrecurring measurements										Total losses from nonrecurring measurements	$	8,741	$	16,697	$	16,532	$	35,010

~~Goodwill was evaluated for impairment as of March 31, 2020, resulting in an impairment charge of $1.8 billion for the 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.

~~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.

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~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021						December 31, 2020							June 30, 2022						December 31, 2021
(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	$	352,466	$	340,670	$	11,796	$	688,079	$	654,555	$	33,524	Loans held for sale	$	228,889	$	223,644	$	5,245	$	353,105	$	341,008	$	12,097
Loans	Loans	$	353,912	$	340,664	$	13,248	$	—	$	—	$	—	Loans	$	309,628	$	335,311	$	(25,683)	$	345,634	$	335,058	$	10,576

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~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company recorded net ~~decreases~~increase in fair value of ~~$4.5~~$4.2 million and ~~$13.5~~decrease of $6.9 million, respectively. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company recorded a net increase in fair value of ~~$2.2~~$10.6 million and ~~$16.5~~decrease of $9.0 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~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company recorded net decreases in fair value of $15.2 million and $36.3 million, as compared to a net increase in fair value of ~~$3.4~~$2.8 million for the three and ~~$5.7 million,~~six months ended June 30, 2021, 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.

~~Note 11 - 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. As of September 30, 2021, the Company has a net deferred tax asset of $8.4 million, which includes $1.3 million of state net operating loss 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 $3.4 million as of September 30, 2021. If recognized, the unrecognized tax benefit would reduce the 2021 annual effective tax rate by 0.56%.

The Company's consolidated effective tax rate as a percentage of pre-tax income (loss) for the nine months ended September 30, 2021 was 24.7%, as compared to (4.4)% for the nine months ended September 30, 2020. The effective tax rate 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 life insurance, income on tax-exempt investment securities and tax credits arising from low-income housing investments.

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~~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.

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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 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; 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 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~~MSR 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; 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 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. Risks and uncertainties include those set forth in our filings with the Securities and Exchange Commission and the following factors that might cause actual results to differ materially from those presented:

•changes in general economic, political, or industry conditions; the ~~ability to complete, or any delays in completing,~~magnitude and duration of the ~~proposed transaction between us~~COVID-19 pandemic and ~~Columbia;~~

•its impact on the ~~significant risks~~global economy and ~~uncertainties for our~~financial market conditions and Umpqua's 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;condition;

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

•uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Federal Reserve or the effects of any declines in housing and commercial real estate prices, high or increasing unemployment rates, inflation, or any slowdown in economic growth particularly in the western United States;

•volatility and disruptions in global capital and credit markets;

•movements in interest rates;

•transition of LIBOR to other indexes including SOFR;

•competitive pressures, including on product pricing and services;

•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~~consolidations and the pendency of ~~Contents~~the Mergers;

•demand for financial services in our market areas;

•~~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, cost, 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 manage climate change concerns and related regulations;

•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;~~ Company and that could impact the timing and amount of dividends to shareholders;

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

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

•success, impact, and timing of Umpqua's business strategies, including market acceptance of any new products or services;

•the occurrence of any event, change, or other circumstances that could give rise to the right of one or both of the parties to terminate the Merger Agreement;

•the outcome of legal proceedings;

•delays in completing the proposed transaction with Columbia;

•the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction) to complete the Mergers or the Bank Merger;

•the failure to satisfy any of the other conditions to the proposed transaction with Columbia on a timely basis or at all;

•the possibility that the anticipated benefits of the proposed transaction with Columbia are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where Umpqua and Columbia do business;

•certain restrictions during the pendency of the proposed transaction with Columbia that may impact the parties' ability to pursue certain business opportunities or strategic transactions;

•the possibility that the proposed transaction with Columbia may be more expensive to complete than anticipated, including as a result of unexpected factors or events;

•diversion of management's attention from ongoing business operations and opportunities during the pendency of the Mergers;

•potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the transaction and the integration of the two companies and banks;

•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; and

•~~competition, including from financial technology companies.~~our ability to successfully negotiate with landlords or reconfigure facilities.

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

The Company is an Oregon corporation and the financial holding company of the Bank. The Bank is the largest bank with headquarters in the Pacific Northwest and is considered one of the most innovative banks in the United States, recognized for its company culture and customer experience strategy. The Bank provides a broad range of banking, private banking, mortgage and other financial services to corporate, institutional, and individual customers. FinPac, a commercial equipment leasing company, is a Bank subsidiary.

On October 12, 2021, Umpqua announced entering into a definitive agreement to join together with Columbia. Once the transaction is completed, the combined organization is expected to be a leading West Coast franchise with more than $50 billion in assets. The transaction 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.

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,~~On October 12, 2021, we announced that we and Columbia, the ~~SEC issued Final Rule 33-10890, Management’s Discussion and Analysis, Selected Financial Data and Supplementary Financial Information,~~parent company of Columbia State Bank, entered into a definitive agreement under which ~~modernizes and simplifies certain disclosure requirements~~the companies will join together in an all-stock combination. Once the transaction is completed, the combined organization will be a leading West Coast franchise with more than $50 billion in assets. The transaction is expected to close in the third quarter of ~~Regulation S-K. One update~~2022, subject to satisfaction of customary closing conditions, including receipt of regulatory approvals.

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~~Umpqua has 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 thecompare our results for the three months ended ~~September 30, 2021 and~~ June 30, ~~2021,~~2022 and March 31, 2022, where applicable, throughout this Management's Discussion and Analysis.

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Executive Overview

The following is a discussion of our results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, as compared to the applicable prior periods.

Financial Performance

•~~Net income~~Earnings per diluted common share was ~~$0.49 for the three months ended September 30, 2021, as compared to $0.53~~$0.36 for the three months ended June 30, ~~2021. Net~~2022, as compared to $0.42 for the three months ended March 31, 2022. Earnings per diluted common share was $0.78 for the six months ended June 30, 2022, as compared to a net income per diluted common share ~~was $1.51~~of $1.01 for the ~~nine~~six months ended ~~September~~June 30, ~~2021, as compared to a net loss per diluted common share of ($7.60) for the nine months ended September 30, 2020.~~2021. The decrease for the three and six months ended ~~September~~June 30, ~~2021,~~2022, as compared to the prior ~~quarter,~~periods, was primarily driven by a ~~decline~~decrease in non-interest income due to ~~the decrease~~a decline in residential mortgage banking revenue and a decrease in the fair value of certain loans held for investment, as well as ~~the decrease~~an increase in ~~recapture of~~ the provision for credit ~~losses in the current quarter.~~losses. The decrease was offset slightly by ~~a decrease in non-interest expense and~~ an increase in ~~net-interest income. The increase in~~ net interest income ~~for the nine months ended September 30, 2021 as compared~~due to the same period in the prior year, is due mainly to the goodwill impairment taken in 2020. In addition, for the nine months ended September 30, 2021, we recorded a recapture of provision for credit losses compared to provision expense for the same period in the prior year.rising interest rate environment.

•Net interest margin, on a tax equivalent basis, was ~~3.21% for the three months ended September 30, 2021, as compared to 3.20%~~3.41% for the three months ended June 30, ~~2021.~~2022, as compared to 3.14% for the three months ended March 31, 2022. Net interest margin, on a tax equivalent basis, was ~~3.20%~~3.28% for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, as compared to 3.19% for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The increase for the three months ended ~~September~~June 30, ~~2021~~2022, was due to a higher mix of loans as ~~compared to the prior quarter was driven by~~a percentage of earning assets as well as an increase in individual category earning asset yields given upward 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.~~rate movements. The increase in net interest margin for the ~~nine~~six months ended ~~September~~June 30, ~~2021, compared to the same period in the prior year, was driven by lower costs on interest-bearing liabilities due to~~2022, primarily resulted from the decline in deposit costs. ~~The decrease was partially offset by a decrease in yields on interest-earning assets.~~

•Residential mortgage banking revenue was ~~$34.2 million for the three months ended September 30, 2021, as compared to $44.4~~$30.5 million for the three months ended June 30, ~~2021.~~2022, as compared to $60.8 million for the three months ended March 31, 2022. Residential mortgage banking revenue was ~~$143.6~~$91.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, as compared to ~~$191.8~~$109.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The ~~decrease~~variance for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022 as compared to ~~the~~ prior periods, was ~~driven by a decline in for-sale originations~~primarily due to lower origination and sale revenue and changes in the ~~gain on sale margin~~fair value of the MSR assets, due to ~~normalizing margins, caused by~~ rising rates which has resulted in a slow-down in refinancing demand. The decrease for the nine months ended September 30, 2021, as compared to the previous period, was slightly offset by a lower loss on fair value on the MSR asset during the period.long term interest rates.

•For-sale mortgage closed loan volume decreased by ~~21%~~11% for the three months ended ~~September~~June 30, ~~2021,~~2022, as compared to the three months ended ~~June 30, 2021.~~March 31, 2022. For-sale mortgage closed loan volume also decreased ~~21%~~58% for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020. In addition,~~2021. The gain on sale margin increased to 2.62% for the three months ended June 30, 2022, as compared to 2.59% for the three months ended March 31, 2022. For the six months ended June 30, 2022, the gain on sale margin decreased to ~~3.07% for the three months ended September 30, 2021,~~2.61%, as compared to ~~3.30%~~3.60% for the ~~three~~six months ended June 30, 2021. ~~For the nine months ended September 30, 2021, the~~The lower gain on sale margin ~~decreased to 3.46%,~~for the six months ended June 30, 2022 as compared to ~~4.59% for~~ the ~~nine months ended September 30, 2020.~~prior period reflects the adverse impact from rising rates on the pipeline.

•Total loans and leases were ~~$22.0~~$24.4 billion as of ~~September~~June 30, ~~2021,~~2022, an increase of ~~$190.6 million,~~$1.9 billion, as compared to December 31, ~~2020.~~2021. The increase in total loans is primarily due to an increase in the commercial real estate balances of ~~$554.9 million,~~$1.0 billion, 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 of $1.0 billion during the period, as the majority of these loans are forgiven by the SBA, as expected.$869.7 million.

•Total deposits were ~~$26.9~~$26.1 billion as of ~~September~~June 30, ~~2021, an increase~~2022, a decrease of ~~$2.3 billion,~~$462.3 million, compared to December 31, ~~2020. This increase~~2021. The decline was due to ~~growth~~lower balances in ~~demand,~~ money market and ~~savings~~time deposits, ~~which is attributable to customer saving habits~~offset partially by increases in ~~the current economic environment, resulting in higher average balances per deposit account. The increase in deposits is partially offset by a decline in higher cost time~~non-interest demand and savings deposits.

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•Total consolidated assets were ~~$30.9~~$30.1 billion and $30.6 billion as of ~~September~~June 30, ~~2021, compared to $29.2 billion at~~2022 and December 31, ~~2020. The increase was mainly~~2021, with the decline due to ~~an increase~~the decrease in ~~on-balance sheet liquidity, as well as an increase in~~cash and cash equivalents and available for sale securities, ~~and~~offset by the growth in loans.

Credit Quality

•Non-performing assets decreased to ~~$53.5~~$45.9 million, or 0.15% of total assets, as of June 30, 2022, compared to $53.1 million, or 0.17% of total assets, as of ~~September 30, 2021, as compared to $69.2 million, or 0.24% of total assets, as of~~ December 31, ~~2020.~~2021. Non-performing loans and leases were ~~$51.6~~$44.0 million, or ~~0.24%~~0.18% of total loans and leases, as of ~~September~~June 30, ~~2021, as~~2022, compared to ~~$67.4~~$51.2 million, or ~~0.31%~~0.23% of total loans and leases, as of December 31, ~~2020.~~2021.

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•The allowance for credit losses ~~on loans and leases~~ was ~~$257.6~~$273.9 million as of ~~September~~June 30, ~~2021, a decrease~~2022, an increase of ~~$70.8~~$12.8 million as compared to December 31, ~~2020.~~2021. The ~~reserve for unfunded commitments was $11.8 million, as of September 30, 2021, a decrease of $8.5 million, as compared to December 31, 2020. The decrease~~increase in the allowance for credit losses is due to the ~~improvement~~growth of the loan portfolio, as well as changes in the economic forecasts used in the credit models.

•The Company had a ~~recapture of the~~ provision for credit losses of ~~$18.9~~$18.7 million and ~~$41.9~~$23.5 million for the three and ~~nine~~six months ended ~~September~~June 30, 2022, respectively. This compares to a provision for credit losses of $4.8 million for the three months ended March 31, 2022. For the six months ended June 30, 2021, ~~respectively. This~~there 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, the provision for credit losses was $204.8~~ million. The ~~recapture of the~~ provision for credit losses in the current periods was due to ~~stabilization of credit quality metrics~~allowance requirements for new loan generation, loan mix changes, and ~~improved~~changes to the economic forecasts used in credit ~~models as of September 30, 2021.~~models.

Liquidity

•Total cash and cash equivalents was ~~$3.7~~$1.0 billion as of ~~September~~June 30, ~~2021, an increase~~2022, a decrease of ~~$1.2~~$1.8 billion from December 31, ~~2020.~~2021. The ~~increase~~decrease in cash and cash equivalents is ~~consistent with~~due primarily to an increase in loan balances and a decrease in deposits for the ~~growth in deposit balances, which will provide flexibility to fund growth in the lending and investment portfolios as economic conditions permit.~~period.

Capital and Growth Initiatives

•In October 2021, Umpqua ~~launched "Next Gen 2.0" as a continuation~~and Columbia announced their entering into the Merger Agreement under which the two companies will combine in an all-stock transaction, which is expected to close in the third quarter of ~~our initiative to modernize~~2022, pending 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 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 customer experience, and planned consolidationreceipt of ~~stores and back-office facilities for expense reduction. We have also launched new products to provide digital offerings, as well as consolidated payment options for commercial customers.~~regulatory approvals.

•The Company's total ~~risk based~~risk-based capital ratio was ~~14.9%~~13.5% and its Tier 1 common to ~~risk weighted~~risk-based assets ratio was ~~12.0%~~11.0% as of ~~September~~June 30, ~~2021.~~2022. As of December 31, ~~2020,~~2021, the Company's total ~~risk based~~risk-based capital ratio was ~~15.6%~~14.3% and its Tier 1 common to ~~risk weighted~~risk-based assets ratio was ~~12.3%~~11.6%.

•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 quarterly cash dividends of $0.21 per common share to shareholders on ~~February 26, 2021,~~ May ~~28, 2021 and~~27, 2022. In addition, the Company declared a quarterly cash dividend of $0.21 per common share on July 20, 2022, payable August ~~31, 2021. The Company may not increase quarterly dividends during the pendency~~15, 2022, to shareholders of ~~the Merger.~~record as of August 1, 2022.

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~~Summary of~~ Critical Accounting ~~Policies~~Estimates

Our critical accounting ~~policies~~estimates are described in detail in the ~~Summary of~~ Critical Accounting ~~Policies~~Estimates section of the Form 10-K for the year ended December 31, ~~2020,~~2021, filed with the SEC on February 25, ~~2021.~~2022. The ~~SEC defines "critical accounting policies"~~condensed consolidated financial statements are prepared in conformity with GAAP and follow general practices within the financial services industry, in which the Company operates. This preparation requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as ~~those~~of the date of the financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements. Certain estimates inherently have a greater reliance on the use of assumptions and judgments and, as such, have a greater possibility of producing results that ~~require application~~could be materially different than originally reported. Management believes that the ACL estimate is important to the portrayal of ~~management's most~~the Company's financial condition and results of operations and requires 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. The Company's critical accounting policies include the allowance for credit losses, residential mortgage servicing rights, and fair value.judgments. There have been no material changes in ~~these policies~~the ACL estimate methodology during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.

Results of Operations

~~Overview~~

For the three months ended September 30, 2021, net income was $108.1 million or $0.49 per diluted common share, 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.

~~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~~Banking, which 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,~~commercial, 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 and wealth 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.~~

Table of Contents

The Core Banking segment had net income of ~~$102.3 million for the three months ended September 30, 2021, compared to net income of $108.2~~$72.5 million for the three months ended June 30, ~~2021.~~2022, compared to net income of $62.9 million for the three months ended March 31, 2022. The ~~decrease~~increase in net income is mainly attributable to ~~a decrease~~an increase in net interest income and non-interest income, ~~as well as a decrease in the recapture of the provision for credit losses,~~partially offset by an increase in ~~net interest income. Net income~~the provision for credit losses. For the six months ended June 30, 2022, the Core Banking segment ~~increased for the nine months ended September 30, 2021,~~had net income of $135.4 million, a decrease of $60.1 million, as compared to the same period in the prior year, ~~due~~mainly attributable to ~~the impact of goodwill impairment~~a decrease in ~~2020, as well as the recapture of~~non-interest income, an increase in the provision for credit losses, ~~as economic forecasts improved~~and the change in ~~the current period.~~fair value of certain residential real estate loans held for investment, partially offset by an increase in net interest income.

The 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~~$6.1 million for the three months ended June 30, ~~2021.~~2022, compared to net income of $28.3 million for the three months ended March 31, 2022. The decrease in net income for the three months ended ~~September~~June 30, ~~2021~~2022 for the Mortgage Banking segment, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, 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 non-interest income due to the lower increase in the valuation of the MSR asset. The increase in net income of $6.0 million for the Mortgage Banking segment for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to the same period of the prior year, was primarily due to a decrease in ~~for-sale~~non-interest expense, which is due to decreased incentives as originations have slowed due to the rising interest rates, and a ~~decline~~fair value gain due to an increase in the fair value of the MSR asset in the higher rate environment. These changes were offset by lower revenue from the origination and sale of residential mortgages given lower volumes and gain on sale ~~margin.~~margins.

~~Table of 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,~~2022 and March 31, 2022, respectively, as well as the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~September 30, 2020, respectively.~~2021. For each period presented, the table includes the calculated ratios based on reported net income. ~~Our~~To the extent 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 other intangible assets, net (excluding ~~MSRs)~~MSR). 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						Three Months Ended								Six Months Ended
(dollars in thousands)	(dollars in thousands)	September 30, 2021			June 30, 2021				September 30, 2021			September 30, 2020			(dollars in thousands)	June 30, 2022			March 31, 2022				June 30, 2022			June 30, 2021
Return on average assets	Return on average assets	1.40		%	1.54		%		1.48		%	(7.67)		%	Return on average assets	1.04		%	1.21		%		1.12		%	1.52		%
Return on average common shareholders' equity	Return on average common shareholders' equity	15.82		%	17.25		%		16.47		%	(72.01)		%	Return on average common shareholders' equity	12.20		%	13.62		%		12.92		%	16.80		%
Return on average tangible common shareholders' equity	Return on average tangible common shareholders' equity	15.88		%	17.33		%		16.55		%	(89.45)		%	Return on average tangible common shareholders' equity	12.23		%	13.66		%		12.96		%	16.89		%
Calculation of average common tangible shareholders' equity:	Calculation of average common tangible shareholders' equity:														Calculation of average common tangible shareholders' equity:
Average common shareholders' equity	Average common shareholders' equity	$	2,709,641		$	2,700,010			$	2,694,968		$	3,105,611		Average common shareholders' equity	$	2,584,836		$	2,715,059			$	2,649,406		$	2,687,510
Less: average goodwill and other intangible assets, net	Less: average goodwill and other intangible assets, net	(10,609)			(12,615)				(12,922)			(605,548)			Less: average goodwill and other intangible assets, net	(7,379)			(8,407)				(7,890)			(14,098)
Average tangible common shareholders' equity	Average tangible common shareholders' equity	$	2,699,032		$	2,687,395			$	2,682,046		$	2,500,063		Average tangible common shareholders' equity	$	2,577,457		$	2,706,652			$	2,641,516		$	2,673,412

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)~~MSR). In addition, tangible assets are total assets less goodwill and other intangible assets, net (excluding ~~MSRs)~~MSR). The tangible common equity ratio is calculated as tangible common shareholders' equity divided by tangible assets. ~~The tangible~~Tangible common equity and the tangible common equity ratio isare considered a non-GAAP financial ~~measure~~measures and should be viewed in conjunction with ~~the~~ total shareholders' equity and the total shareholders' equity ratio.

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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~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(dollars in thousands)	(dollars in thousands)	September 30, 2021			December 31, 2020			(dollars in thousands)	June 30, 2022			December 31, 2021
Total shareholders' equity	Total shareholders' equity	$	2,722,379		$	2,704,577		Total shareholders' equity	$	2,518,276		$	2,749,270
Subtract:	Subtract:							Subtract:
Goodwill		—			2,715

Other intangible assets, net	Other intangible assets, net	9,970			13,360			Other intangible assets, net	6,789			8,840
Tangible common shareholders' equity	Tangible common shareholders' equity	$	2,712,409		$	2,688,502		Tangible common shareholders' equity	$	2,511,487		$	2,740,430
Total assets	Total assets	$	30,891,479		$	29,235,175		Total assets	$	30,135,694		$	30,640,936
Subtract:	Subtract:							Subtract:
Goodwill		—			2,715

Other intangible assets, net	Other intangible assets, net	9,970			13,360			Other intangible assets, net	6,789			8,840
Tangible assets	Tangible assets	$	30,881,509		$	29,219,100		Tangible assets	$	30,128,905		$	30,632,096
Tangible common equity ratio	Tangible common equity ratio	8.78		%	9.20		%	Tangible common equity ratio	8.34		%	8.95		%

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.

Net Interest Income

Net interest income for the three months ended ~~September~~June 30, ~~2021~~2022 was ~~$235.1~~$248.2 million, an increase of ~~$5.3~~$19.4 million compared to the three months ended ~~June 30, 2021. Net interest income for the nine months ended September 30, 2021 was $686.3 million, an increase of $38.7 million compared to the nine months ended September 30, 2020.~~March 31, 2022. The increase for the three months ended ~~September~~June 30, ~~2021~~2022 compared to the prior quarter was driven by a $20.3 million increase in the total interest and fees on loans and leases, as the Company deployed cash to fund loan growth, and due to assets repricing higher in the rising rate environment. Net interest income for the six months ended June 30, 2022 was $476.9 million, an increase of ~~$2.7~~$25.7 million in interest income which is a result of higher non-PPP average loan balances and taxable securities income growth, and a decrease of $2.6 million in interest expense due to the decline in high-cost time deposits and term debt in the quarter compared to the ~~prior period.~~six months ended June 30, 2021. The increase for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022 was also due to ~~the lower cost of interest-bearing liabilities due to lower retail~~higher loan interest income from increasing rates and ~~brokered time deposits as the Bank has allowed these higher-cost deposits to runoff. The decrease in interest expense was partially~~loan volume, offset by ~~lower average yields on interest-earning assets for~~ the ~~period.~~decline in PPP-related income.

The net interest margin (net interest income as a percentage of average interest-earning assets) on a fully tax equivalent basis was ~~3.21% for the three months ended September 30, 2021, as compared to 3.20%~~3.41% for the three months ended June 30, ~~2021.~~2022, as compared to 3.14% for the three months ended March 31, 2022. The net interest margin on a fully tax equivalent basis was ~~3.20%~~3.28% for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, as compared to 3.19% for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The increase in net interest margin for the three months ended ~~September~~June 30, ~~2021,~~2022, as compared to the three months ended ~~June 30, 2021, was driven by the~~March 31, 2022, primarily resulted from an increase in ~~net~~the average yields on interest-earning assets, due to a higher mix of loans as a percentage of earning assets as well as an increase in individual category earning asset yields given upward interest ~~income.~~rate movements. The increase in net interest margin for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, primarily resulted from ~~a decrease in the cost of interest bearing liabilities, partially offset by~~ the decline in deposit costs, due to lower rates and fewer time deposits as compared to the average yields of interest-earning assets. The Federal Open Market Committee expects to maintain 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.prior period.

The yield on loans and leases for the three months ended ~~September~~June 30, ~~2021~~2022 increased by 315 basis points as compared to the three months ended ~~June 30, 2021,~~March 31, 2022, primarily attributable ~~higher rates on average~~to an increase in the volume of loans and leases ~~as PPP loan balances decline.~~and the favorable impact of higher interest rates. The yield on loans and leases for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 decreased by 2015 basis points as compared to the same period in ~~2020,~~2021, primarily attributable to a decline of PPP-related fee accretion in addition to an increase in the ~~decrease~~average loan and lease balances originated or repriced in ~~interest rates as compared to prior periods and~~a lower ~~average loans and leases.~~ rate environment.

The cost of interest-bearing liabilities ~~decreased 7 basis points,~~ for the three months ended ~~September~~June 30, ~~2021, as~~2022 increased by 2 basis points compared to the three months ended ~~June 30, 2021,~~March 31, 2022, due primarily to ~~the continued run off of higher-cost time deposits, as well as the paydown of borrowings during the period.~~rising interest rates. The cost of interest-bearing liabilities decreased by 5614 basis points for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, as compared to the same period in ~~2020, also~~2021, due to the ~~decrease in interest rates and corresponding~~Company's strategy of divesting higher cost borrowings, as well as the deposit pricing strategy ~~as well as decreased borrowings.~~that was in place during the period. 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." The decrease in yields on earning assets has continued to impact net interest margin, even as liabilities reprice downward.~~

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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,~~2022 and March 31, 2022, as well as the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~and 2020:~~respectively:

Three Months Ended
September 30, 2021 June 30, 2021
(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 $ 465,805 $ 3,672 3.15 % $ 468,960 $ 3,725 3.18 %
Loans and leases (1)
21,864,387 220,731 4.02 % 22,040,794 219,745 3.99 %
Taxable securities 3,436,895 16,315 1.90 % 3,210,771 15,024 1.87 %
Non-taxable securities (2)
245,904 1,848 3.01 % 247,282 1,864 3.02 %
Temporary investments and interest-bearing cash 3,224,846 1,237 0.15 % 2,835,474 774 0.11 %
Total interest-earning assets 29,237,837 $ 243,803 3.32 % 28,803,281 $ 241,132 3.35 %
Other assets 1,376,537 1,352,736
Total assets $ 30,614,374 $ 30,156,017
INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits $ 3,564,040 $ 468 0.05 % $ 3,385,336 $ 459 0.05 %
Money market deposits 7,800,144 1,492 0.08 % 7,614,474 1,533 0.08 %
Savings deposits 2,284,077 206 0.04 % 2,171,865 154 0.03 %
Time deposits 2,031,494 2,934 0.57 % 2,303,068 4,870 0.85 %
Total interest-bearing deposits 15,679,755 5,100 0.13 % 15,474,743 7,016 0.18 %
Repurchase agreements and federal funds purchased 496,822 88 0.07 % 440,881 68 0.06 %
Borrowings 31,500 149 1.88 % 214,670 866 1.62 %
Junior subordinated debentures 375,726 3,014 3.18 % 369,812 3,042 3.30 %
Total interest-bearing liabilities 16,583,803 $ 8,351 0.20 % 16,500,106 $ 10,992 0.27 %
Non-interest-bearing deposits 10,960,686 10,582,197
Other liabilities 360,244 373,704
Total liabilities 27,904,733 27,456,007
Common equity 2,709,641 2,700,010
Total liabilities and shareholders' equity $ 30,614,374 $ 30,156,017
NET INTEREST INCOME $ 235,452 $ 230,140
NET INTEREST SPREAD 3.12 % 3.08 %
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.


	Three Months Ended
	June 30, 2022						March 31, 2022
(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	$	264,320	$	2,742	4.15	%	$	286,307	$	2,262	3.16	%
Loans and leases (1)	23,550,796		231,932		3.94	%	22,566,109		212,142		3.79	%
Taxable securities	3,410,091		17,340		2.03	%	3,659,145		18,811		2.06	%
Non-taxable securities (2)	220,327		1,721		3.13	%	234,186		1,726		2.95	%
Temporary investments and interest-bearing cash	1,663,454		2,919		0.70	%	2,618,528		1,353		0.21	%
Total interest-earning assets	29,108,988		$	256,654	3.53	%	29,364,275		$	236,294	3.24	%
Other assets	1,247,915						1,233,138
Total assets	$	30,356,903					$	30,597,413
INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits	$	3,896,553	$	610	0.06	%	$	3,812,173	$	498	0.05	%
Money market deposits	7,366,987		1,717		0.09	%	7,640,810		1,408		0.07	%
Savings deposits	2,426,124		199		0.03	%	2,405,958		205		0.03	%
Time deposits	1,618,394		1,489		0.37	%	1,753,880		1,805		0.42	%
Total interest-bearing deposits	15,308,058		4,015		0.11	%	15,612,821		3,916		0.10	%
Repurchase agreements and federal funds purchased	512,641		66		0.05	%	486,542		63		0.05	%
Borrowings	6,273		50		3.21	%	6,313		49		3.16	%
Junior subordinated debentures	393,964		4,001		4.07	%	380,985		3,149		3.35	%
Total interest-bearing liabilities	16,220,936		$	8,132	0.20	%	16,486,661		$	7,177	0.18	%
Non-interest-bearing deposits	11,086,376						11,007,034
Other liabilities	464,755						388,659
Total liabilities	27,772,067						27,882,354
Common equity	2,584,836						2,715,059
Total liabilities and shareholders' equity	$	30,356,903					$	30,597,413
NET INTEREST INCOME			$	248,522					$	229,117
NET INTEREST SPREAD					3.33	%					3.06	%
NET INTEREST INCOME TO EARNING ASSETS OR NET INTEREST MARGIN (1), (2)					3.41	%					3.14	%

(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 $352,000 for the three months ended June 30, 2022, as compared to approximately $354,000 for the three months ended March 31, 2022.

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		Nine Months Ended													Six Months Ended
		September 30, 2021						September 30, 2020							June 30, 2022						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	$	545,237	$	12,242	2.99	%	$	551,583	$	14,955	3.61	%	Loans held for sale	$	275,253	$	5,004	3.64	%	$	585,611	$	8,570	2.93	%
Loans and leases (1)	Loans and leases (1)	21,866,569		656,772		4.01	%	22,063,582		695,669		4.21	%	Loans and leases (1)	23,061,173		444,074		3.86	%	21,867,678		436,041		4.01	%
Taxable securities	Taxable securities	3,199,653		45,049		1.88	%	2,778,460		37,744		1.81	%	Taxable securities	3,533,930		36,151		2.05	%	3,079,065		28,734		1.87	%
Non-taxable securities (2)	Non-taxable securities (2)	248,617		5,627		3.02	%	238,059		5,608		3.14	%	Non-taxable securities (2)	227,218		3,447		3.03	%	249,996		3,779		3.02	%
Temporary investments and interest bearing cash	Temporary investments and interest bearing cash	2,850,639		2,635		0.12	%	1,493,352		4,208		0.38	%	Temporary investments and interest bearing cash	2,138,352		4,272		0.40	%	2,660,435		1,398		0.11	%
Total interest-earning assets	Total interest-earning assets	28,710,715		$	722,325	3.36	%	27,125,036		$	758,184	3.73	%	Total interest-earning assets	29,235,926		$	492,948	3.38	%	28,442,785		$	478,522	3.38	%
Other assets	Other assets	1,348,054						2,024,722						Other assets	1,240,386						1,333,577
Total assets	Total assets	$	30,058,769					$	29,149,758					Total assets	$	30,476,312					$	29,776,362
INTEREST-BEARING LIABILITIES:	INTEREST-BEARING LIABILITIES:													INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits	Interest-bearing demand deposits	$	3,359,865	$	1,341	0.05	%	$	2,667,160	$	5,264	0.26	%	Interest-bearing demand deposits	$	3,854,596	$	1,108	0.06	%	$	3,256,085	$	873	0.05	%
Money market deposits	Money market deposits	7,593,320		4,516		0.08	%	7,187,615		18,080		0.34	%	Money market deposits	7,503,142		3,125		0.08	%	7,488,195		3,024		0.08	%
Savings deposits	Savings deposits	2,152,667		523		0.03	%	1,635,064		618		0.05	%	Savings deposits	2,416,096		404		0.03	%	2,085,874		317		0.03	%
Time deposits	Time deposits	2,336,261		16,414		0.94	%	4,159,926		61,671		1.98	%	Time deposits	1,685,763		3,294		0.39	%	2,491,169		13,480		1.09	%
Total interest-bearing deposits	Total interest-bearing deposits	15,442,113		22,794		0.20	%	15,649,765		85,633		0.73	%	Total interest-bearing deposits	15,459,597		7,931		0.10	%	15,321,323		17,694		0.23	%
Repurchase agreements and federal funds purchased	Repurchase agreements and federal funds purchased	444,919		232		0.07	%	363,957		673		0.25	%	Repurchase agreements and federal funds purchased	499,664		129		0.05	%	418,538		144		0.07	%
Borrowings	Borrowings	259,890		2,787		1.43	%	1,041,181		11,156		1.43	%	Borrowings	6,293		99		3.18	%	375,977		2,638		1.41	%
Junior subordinated debentures	Junior subordinated debentures	363,122		9,108		3.35	%	322,356		12,074		5.00	%	Junior subordinated debentures	387,510		7,150		3.72	%	356,715		6,094		3.44	%
Total interest-bearing liabilities	Total interest-bearing liabilities	16,510,044		$	34,921	0.28	%	17,377,259		$	109,536	0.84	%	Total interest-bearing liabilities	16,353,064		$	15,309	0.19	%	16,472,553		$	26,570	0.33	%
Non-interest-bearing deposits	Non-interest-bearing deposits	10,484,104						8,237,095						Non-interest-bearing deposits	11,046,925						10,241,863
Other liabilities	Other liabilities	369,653						429,793						Other liabilities	426,917						374,436
Total liabilities	Total liabilities	27,363,801						26,044,147						Total liabilities	27,826,906						27,088,852
Common equity	Common equity	2,694,968						3,105,611						Common equity	2,649,406						2,687,510
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	30,058,769					$	29,149,758					Total liabilities and shareholders' equity	$	30,476,312					$	29,776,362
NET INTEREST INCOME	NET INTEREST INCOME			$	687,404					$	648,648			NET INTEREST INCOME			$	477,639					$	451,952
NET INTEREST SPREAD	NET INTEREST SPREAD					3.08	%					2.89	%	NET INTEREST SPREAD					3.19	%					3.05	%
NET INTEREST INCOME TO EARNING ASSETS OR NET INTEREST MARGIN (1), (2)	NET INTEREST INCOME TO EARNING ASSETS OR NET INTEREST MARGIN (1), (2)					3.20	%					3.19	%	NET INTEREST INCOME TO EARNING ASSETS OR NET INTEREST MARGIN (1), (2)					3.28	%					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.
(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 $706,000 for the six months ended June 30, 2022, as compared to approximately $758,000 for the same period in 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 $706,000 for the six months ended June 30, 2022, as compared to approximately $758,000 for the same period in 2021.

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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 months ended ~~September~~June 30, ~~2021~~2022 as compared to three months ended ~~June 30, 2021,~~March 31, 2022, as well as the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~September 30, 2020,~~2021, 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							Three Months Ended
		September 30, 2021 compared June 30, 2021							June 30, 2022 compared to March 31, 2022
		Increase (decrease) in interest income and expense due to changes in							Increase (decrease) in interest income and expense due to changes in
(in thousands)	(in thousands)	Volume		Rate		Total				(in thousands)	Volume		Rate		Total
INTEREST-EARNING ASSETS:	INTEREST-EARNING ASSETS:									INTEREST-EARNING ASSETS:
Loans held for sale	Loans held for sale	$	(25)	$	(28)	$	(53)			Loans held for sale	$	(181)	$	661	$	480
Loans and leases	Loans and leases	(1,065)		2,051		986				Loans and leases	10,342		9,448		19,790
Taxable securities	Taxable securities	1,073		218		1,291				Taxable securities	(1,267)		(204)		(1,471)
Non-taxable securities (1)	Non-taxable securities (1)	(10)		(6)		(16)				Non-taxable securities (1)	(104)		99		(5)
Temporary investments and interest bearing cash		120		343		463
Temporary investments and interest-bearing cash										Temporary investments and interest-bearing cash	(645)		2,211		1,566
Total interest-earning assets (1)	Total interest-earning assets (1)	93		2,578		2,671				Total interest-earning assets (1)	8,145		12,215		20,360
INTEREST-BEARING LIABILITIES:	INTEREST-BEARING LIABILITIES:									INTEREST-BEARING LIABILITIES:
Interest bearing demand deposits	Interest bearing demand deposits	26		(17)		9				Interest bearing demand deposits	12		100		112
Money market deposits	Money market deposits	41		(82)		(41)				Money market deposits	(50)		359		309
Savings deposits	Savings deposits	9		43		52				Savings deposits	2		(8)		(6)
Time deposits	Time deposits	(516)		(1,420)		(1,936)				Time deposits	(126)		(190)		(316)
Repurchase agreements	Repurchase agreements	10		10		20				Repurchase agreements	4		(1)		3
Borrowings	Borrowings	(837)		120		(717)				Borrowings	—		1		1
Junior subordinated debentures	Junior subordinated debentures	59		(87)		(28)				Junior subordinated debentures	116		736		852
Total interest-bearing liabilities	Total interest-bearing liabilities	(1,208)		(1,433)		(2,641)				Total interest-bearing liabilities	(42)		997		955
Net increase in net interest income (1)	Net increase in net interest income (1)	$	1,301	$	4,011	$	5,312			Net increase in net interest income (1)	$	8,187	$	11,218	$	19,405
(1) Tax exempt income has been adjusted to a tax equivalent basis at a 21% tax rate.	(1) Tax exempt income has been adjusted to a tax equivalent basis at a 21% tax rate.							(1) Tax exempt income has been adjusted to a tax equivalent basis at a 21% tax rate.

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		Nine Months Ended							Six Months Ended
		September 30, 2021 compared to September 30, 2020							June 30, 2022 compared to June 30, 2021
		Increase (decrease) in interest income and expense due to changes in							Increase (decrease) in interest income and expense due to changes in
(in thousands)	(in thousands)	Volume		Rate		Total		(in thousands)	Volume		Rate		Total
INTEREST-EARNING ASSETS:	INTEREST-EARNING ASSETS:							INTEREST-EARNING ASSETS:
Loans held for sale	Loans held for sale	$	(170)	$	(2,543)	$	(2,713)	Loans held for sale	$	(5,273)	$	1,707	$	(3,566)
Loans and leases	Loans and leases	(6,219)		(32,678)		(38,897)		Loans and leases	23,596		(15,563)		8,033
Taxable securities	Taxable securities	5,880		1,425		7,305		Taxable securities	4,497		2,920		7,417
Non-taxable securities (1)	Non-taxable securities (1)	243		(224)		19		Non-taxable securities (1)	(345)		13		(332)
Temporary investments and interest bearing cash		2,345		(3,918)		(1,573)
Temporary investments and interest-bearing cash								Temporary investments and interest-bearing cash	(325)		3,199		2,874
Total interest-earning assets (1)	Total interest-earning assets (1)	2,079		(37,938)		(35,859)		Total interest-earning assets (1)	22,150		(7,724)		14,426
INTEREST-BEARING LIABILITIES:	INTEREST-BEARING LIABILITIES:							INTEREST-BEARING LIABILITIES:
Interest bearing demand deposits	Interest bearing demand deposits	1,099		(5,022)		(3,923)		Interest bearing demand deposits	169		66		235
Money market		967		(14,531)		(13,564)
Savings		163		(258)		(95)
Money market deposits								Money market deposits	6		95		101
Savings deposits								Savings deposits	53		34		87
Time deposits	Time deposits	(20,580)		(24,677)		(45,257)		Time deposits	(3,423)		(6,763)		(10,186)
Repurchase agreements	Repurchase agreements	124		(565)		(441)		Repurchase agreements	25		(40)		(15)
Borrowings	Borrowings	(8,388)		19		(8,369)		Borrowings	(4,022)		1,483		(2,539)
Junior subordinated debentures	Junior subordinated debentures	1,385		(4,351)		(2,966)		Junior subordinated debentures	548		508		1,056
Total interest-bearing liabilities	Total interest-bearing liabilities	(25,230)		(49,385)		(74,615)		Total interest-bearing liabilities	(6,644)		(4,617)		(11,261)
Net increase in net interest income (1)		$	27,309	$	11,447	$	38,756
Net increase (decrease) in net interest income (1)								Net increase (decrease) in net interest income (1)	$	28,794	$	(3,107)	$	25,687
(1) Tax exempt income has been adjusted to a tax equivalent basis at a 21% tax rate.	(1) Tax exempt income has been adjusted to a tax equivalent basis at a 21% tax rate.							(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~~a $18.7 million ~~recapture of~~ provision for credit losses for the three months ended ~~September~~June 30, ~~2021,~~2022, as compared to a ~~$23.0~~$4.8 million ~~recapture of~~provision for credit losses for the three months ended ~~June 30, 2021.~~March 31, 2022. The Company had a ~~$41.9~~$23.5 million provision for credit losses for the six months ended June 30, 2022, as compared to a recapture of provision for credit losses ~~for the nine months ended September 30, 2021, as compared to a provision for credit losses~~ of ~~$204.8~~$23.0 million for the ~~nine months ended September 30, 2020. The change for the three months ended September 30, 2021, as compared to the three~~six months ended June 30, ~~2021 was attributable to the stabilizing economic forecast used in the credit models~~2021. The June 30, 2022 provision reflects allowance requirements for new loan generation and loan mix changes, which allowed for a recapture of previous provision for credit losses. The change in the provision for credit losses for nine months ended September 30, 2021 as compared to the same prior year period, is primarily attributed to a stabilization of credit quality metrics and ~~the improvement in~~changes between economic forecasts used in credit 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 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, 2021 was (0.26)%. As an annualized percentage of average outstanding loans and leases, the provision for credit losses ~~for the nine months ended September 30, 2020 was 1.24%.~~

~~For the three months ended September 30, 2021, net charge-offs were $6.2 million, as compared to $13.6 million~~recorded for the three months ended June 30, ~~2021. For the nine months ended September 30, 2021, net charge-offs were $37.5 million,~~2022 was 0.32% as compared to ~~$51.4 million~~0.09% for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2022. As an annualized percentage of average outstanding loans and leases, the provision (recapture) for credit losses recorded for the six months ended June 30, 2022 was 0.21%, compared to (0.21)% for the six months ended June 30, 2021.

For the three months ended June 30, 2022, net charge-offs were $6.2 million, as compared to $5.5 million for the three months ended ~~September~~March 31, 2022. For the six months ended June 30, ~~2021 was 0.11%,~~2022, net charge-offs were $11.8 million, as compared to ~~0.25%~~$31.3 million for the ~~three~~six months ended June 30, 2021. As an annualized percentage of average outstanding loans and leases, net charge-offs for the ~~nine~~three months ended ~~September~~June 30, ~~2021 was 0.23%~~2022 were 0.11%, as compared to ~~0.31%~~0.10% for the ~~nine~~three months ended ~~September~~March 31, 2022. As an annualized percentage of average outstanding loans and leases, net charge-offs for the six months ended June 30, ~~2020.~~2022 were 0.10%, as compared to 0.29% for the six months ended June 30, 2021. The majority of net charge-offs relate to leases and equipment finance loans, included within the commercial loan portfolio.

~~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 ~~$11.8~~$8.6 million as of ~~September~~June 30, ~~2021~~2022 have a related allowance for credit losses of ~~$6.9~~$7.0 million, with the remaining loans written-down to 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.

Table of Contents

Non-Interest Income

Non-interest income for the three 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, 2021, was $273.6 million, a decrease of $14.5 million, compared to the nine months ended September 30, 2020. The following table presents the key components of non-interest income for the three months ended ~~September~~June 30, ~~2021,~~2022, compared to the three months ended ~~June 30, 2021,~~March 31, 2022, as well as the ~~nine~~comparison of the six months ended ~~September~~June 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~~2022 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.2021:


	Three Months Ended						Six Months Ended
(in thousands)	June 30, 2022		March 31, 2022		Change Amount		Change Percent		June 30, 2022		June 30, 2021		Change Amount		Change Percent
Service charges on deposits	$	12,011	$	11,583	$	428	4	%	$	23,594	$	19,957	$	3,637	18	%
Card-based fees	10,530		8,708		1,822		21	%	19,238		17,648		1,590		9	%
Brokerage revenue	27		11		16		145	%	38		5,050		(5,012)		(99)	%
Residential mortgage banking revenue, net	30,544		60,786		(30,242)		(50)	%	91,330		109,476		(18,146)		(17)	%
Gain on sale of debt securities, net	—		2		(2)		(100)	%	2		4		(2)		(50)	%
Loss on equity securities, net	(2,075)		(2,661)		586		(22)	%	(4,736)		(702)		(4,034)		575	%
Gain on loan and lease sales, net	1,303		2,337		(1,034)		(44)	%	3,640		6,691		(3,051)		(46)	%


Bank owned life insurance income	2,110		2,087		23		1	%	4,197		4,163		34		1	%
Other income (losses)	785		(2,884)		3,669		(127)	%	(2,099)		37,588		(39,687)		(106)	%
Total non-interest income	$	55,235	$	79,969	$	(24,734)	(31)	%	$	135,204	$	199,875	$	(64,671)	(32)	%

Brokerage revenue decreased for the ~~three and nine~~six months ended ~~September~~June 30, ~~2021~~2022 as compared to the same period of the prior ~~periods,~~year, due to the sale of Umpqua Investments, Inc. in April 2021.

~~The gain on loan and lease sales decreased~~Other income (losses) 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 $3.9 million~~2022, as compared to the three months ended March 31, 2022 increased primarily due to a loss on the fair value on certain loans held for investment decreasing by $5.8 million, as compared to the prior quarter. This was offset by a decrease in swap customer fee revenue for the three months ended June 30, 2022, as compared to the three months ended March 31, 2022 of $3.4 million and $4.9 million, respectively. For the six months ended June 30, 2022, the decrease was primarily attributable to a loss on the fair value on certain loans held for investment of $36.3 million, as compared to a gain of $2.3 million for the six months ended June 30, 2021. ~~The decrease is primarily due to the $4.4 million dollar~~Additionally, a one-time gain ~~related to~~on the sale of Umpqua Investments, Inc. ~~and a $2.3~~of $4.5 million ~~advisory fee earned~~was recorded for the six months ended June 30, 2021 that was not repeated in the ~~prior period,~~current period. This was partially 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~~change in ~~the gain on~~ the swap derivative ~~fair value~~gain of ~~$22.1~~$7.1 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 $5.7 million, respectively.

Residential mortgage banking revenue, which is the primary source of income for the Mortgage Banking segment, decreased ~~$10.3~~as compared to comparison periods. The variance for the three and six months ended June 30, 2022, as compared to prior periods was attributable to lower origination and sales revenue and changes in the fair value of the MSR asset, due to rising long-term interest rates. The gain on the fair value of the MSR asset was $5.9 million for the three months ended June 30, 2022, compared to a gain of $34.8 million for the three months ended March 31, 2022. The gain on the fair value of the MSR asset was $40.7 million for the six months ended June 30, 2022, compared to a loss of $12.6 million for the six months ended June 30, 2021. Revenue related to origination and sale of residential mortgages decreased by $1.7 million and ~~$48.2~~$71.9 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, as compared to ~~comparison periods, due to a decrease in originations driven by a slowdown in refinancing demand as well as a decline in gain on sale margins.~~the three months ended March 31, 2022 and the six months ended June 30, 2021.

For-sale mortgage closed loan volume for the three months ended ~~September~~June 30, ~~2021,~~2022, decreased ~~21%~~11%, as compared to the three months ended ~~June 30, 2021.~~March 31, 2022. In addition, the gain on sale margin ~~decreased~~increased to ~~3.07% for the three months ended September 30, 2021, as compared to 3.30%~~2.62% for the three months ended June 30, ~~2021. Direct expense related~~2022, as compared to ~~the origination of for-sale mortgage loans as a percentage of loan production was 2.02%~~2.59% for the three months ended ~~September 30, 2021, as compared to 2.03% for~~March 31, 2022. For the ~~three~~six months ended June 30, ~~2021.~~

~~For-sale~~2022, for-sale mortgage closed loan volume decreased ~~21% for the nine months ended September 30, 2021, as~~58% compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020. For the nine months ended September 30, 2021, the~~2021. Additionally, gain on sale margin decreased to ~~3.46%,~~2.61% for the six months ended June 30, 2022, as compared to ~~4.59%~~3.60% for the ~~nine~~six months ended ~~September~~June 30, 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 1.92% for the nine months ended September 30, 2020.2021.

Origination volume is generally linked to the level of interest rates. When rates fall, origination volume would be expected to be elevated relative to historical levels. When rates rise, origination volume would be expected to decline. ~~Margins observed in the current quarter could narrow somewhat in future periods as mortgage industry capacity constraints ease further and refinance demand wanes.~~ The MSR asset value is also sensitive to interest rates, and generally falls with lower rates and rises with higher ~~rates.~~rates, resulting in fair value losses and gains, respectively, due to changes in valuation inputs or assumptions, where applicable.

Table of Contents

Servicing income was $9.2 million for the three 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, servicing income was $27.4 million and $26.2 million, respectively.

The following table presents our residential mortgage banking revenue for the three months ended ~~September 30, 2021 and~~ June 30, ~~2021,~~2022 and March 31, 2022, as well as the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended						Nine Months Ended				Three Months Ended											Six Months Ended
(in thousands)	(in thousands)	September 30, 2021			June 30, 2021				September 30, 2021				September 30, 2020			(in thousands)	June 30, 2022			March 31, 2022				June 30, 2022			June 30, 2021
Origination and sale	Origination and sale	$	30,293		$	41,367			$	134,165			$	224,831		Origination and sale	$	15,101		$	16,844			$	31,945		$	103,872
Servicing	Servicing	9,172			9,120				27,379				26,209			Servicing	9,505			9,140				18,645			18,207
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	(4,681)			(4,366)				(13,592)				(15,249)			Changes due to collection/realization of expected cash flows over time	(4,961)			(5,347)				(10,308)			(8,911)
Changes in valuation inputs or assumptions (1)	Changes in valuation inputs or assumptions (1)	(634)			(1,678)				(4,326)				(43,997)			Changes in valuation inputs or assumptions (1)	10,899			40,149				51,048			(3,692)
Residential mortgage banking revenue, net	Residential mortgage banking revenue, net	$	34,150		$	44,443			$	143,626			$	191,794		Residential mortgage banking revenue, net	$	30,544		$	60,786			$	91,330		$	109,476

LHFS Production Statistics:
Loans Held for Sale Production Statistics:																Loans Held for Sale Production Statistics:
Closed loan volume for-sale	Closed loan volume for-sale	$	987,281		$	1,253,023			$	3,875,836			$	4,897,068		Closed loan volume for-sale	$	576,532		$	649,122			$	1,225,654		$	2,888,555
Gain on sale margin	Gain on sale margin	3.07		%	3.30		%		3.46		%		4.59		%	Gain on sale margin	2.62		%	2.59		%		2.61		%	3.60		%

(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~~

Non-Interest Expense

Non-interest expense for the three 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, 2021 was $560.7 million, a decrease of $1.8 billion or 76%, as compared to the nine months ended September 30, 2020. Excluding the goodwill impairment taken in 2020, non-interest expense for the nine months ended September 30, 2021, increased $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,~~2022 and March 31, 2022, as well as the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~ 2021.

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
Salaries and employee benefits $ 117,636 $ 121,573 $ (3,937) (3) % $ 363,343 $ 346,787 $ 16,556 5 %
Occupancy and equipment, net 33,944 34,657 (713) (2) % 103,236 109,892 (6,656) (6) %
Communications 2,866 3,004 (138) (5) % 8,633 9,010 (377) (4) %
Marketing 1,651 2,054 (403) (20) % 5,077 6,148 (1,071) (17) %
Services 12,017 13,512 (1,495) (11) % 36,279 34,319 1,960 6 %
FDIC assessments 2,136 1,607 529 33 % 6,342 9,502 (3,160) (33) %
Intangible amortization 1,130 1,130 — — % 3,390 3,740 (350) (9) %
Other expenses 12,373 11,863 510 4 % 34,445 30,441 4,004 13 %
Non-interest expense before goodwill impairment 183,753 189,400 (5,647) (3) % 560,745 549,839 10,906 2 %
Goodwill impairment — — — N/M — 1,784,936 (1,784,936) N/M
Total non-interest expense $ 183,753 $ 189,400 $ (5,647) (3) % $ 560,745 $ 2,334,775 $ (1,774,030) (76) %

Goodwill impairment of $1.8 billion was recorded as of March 31, 2020, 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. There was no impairment recorded in the current period.


	Three Months Ended						Six Months Ended
(in thousands)	June 30, 2022		March 31, 2022		Change Amount		Change Percent		June 30, 2022		June 30, 2021		Change Amount		Change Percent
Salaries and employee benefits	$	110,942	$	113,138	$	(2,196)	(2)	%	$	224,080	$	245,707	$	(21,627)	(9)	%
Occupancy and equipment, net	34,559		34,829		(270)		(1)	%	69,388		69,292		96		—	%
Communications	2,585		2,754		(169)		(6)	%	5,339		5,767		(428)		(7)	%
Marketing	1,649		2,398		(749)		(31)	%	4,047		3,426		621		18	%
Services	14,402		11,337		3,065		27	%	25,739		24,262		1,477		6	%
FDIC assessments	2,954		4,516		(1,562)		(35)	%	7,470		4,206		3,264		78	%

Intangible amortization	1,026		1,025		1		—	%	2,051		2,260		(209)		(9)	%
Merger related expenses	2,672		2,278		394		17	%	4,950		—		4,950		nm
Other expenses	8,785		10,155		(1,370)		(13)	%	18,940		22,072		(3,132)		(14)	%
Total non-interest expense	$	179,574	$	182,430	$	(2,856)	(2)	%	$	362,004	$	376,992	$	(14,988)	(4)	%
nm = Not meaningful

Salaries and employee benefits decreased ~~by $3.9 million~~ for the ~~three months ended September 30, 2021, compared to the three~~six months ended June 30, 2021. This was primarily due to the decrease in for-sale loan origination volume resulting in a decrease in Mortgage Banking compensation of $4.2 million. Salaries and employee benefits increased for the nine months ended September 30, 2021,2022, 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 consolidation of store and back-office locations.

~~Services for the three months ended September 30, 2021, decreased by $1.5 million as compared to the three~~six 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,~~primarily due to a decrease in incentive pay during the ~~Bank's assessment rate.~~period, due to increasing rates suppressing demand for mortgage products.

Merger related expenses, related to the proposed merger with Columbia, increased due to additional consulting and legal costs incurred. The merger is expected to close in the third quarter of 2022, pending receipt of regulatory approvals.

Other expenses ~~increased by $4.0 million for the nine months ended September 30, 2021,~~decreased, as compared to ~~the same period in the~~ prior ~~year. The increase for the nine months ended September 30, 2021 was~~periods, due to ~~increased~~a decrease in exit and disposal costs asof $2.5 million and $2.6 million for the ~~Company closed~~three and six months ended June 30, 2022, respectively. The prior elevated levels of exit and disposal costs was due to store ~~locations~~consolidations and ~~exited~~ back-office ~~leases~~lease exits 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.~~

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FINANCIAL CONDITION

Cash and Cash Equivalents

Cash and cash equivalents were ~~$3.7~~$1.0 billion ~~at September~~as of June 30, ~~2021,~~2022, compared to ~~$2.6~~$2.8 billion atas of December 31, ~~2020.~~2021. The ~~increase~~decrease of ~~interest bearing~~interest-bearing cash and temporary investments reflects strong ~~deposit~~loan portfolio growth of $1.9 billion and a decrease in deposits of $462.3 million in the period outpacing loan and investment growth as well as paydowns of the Company's borrowings. An elevated on-balance sheet liquidity position enhances the Company's liquidity flexibility given the market volatility and uncertainty in the current environment.

Investment Securities

Investment debt securities available for sale were ~~$3.7~~$3.4 billion as of ~~September~~June 30, ~~2021,~~2022, compared to ~~$2.9~~$3.9 billion at December 31, ~~2020.~~2021. The ~~increase~~decrease was due to ~~purchases of $1.5 billion of investment securities, offset by sales and paydowns of $578.2 million, as well as~~ a decrease of ~~$93.5~~$389.4 million in fair value of investment securities available for ~~sale.~~sale, due to the increase in rates during the period, as well as sales and paydowns of $236.1 million, offset partially by purchases of $175.7 million of investment securities.

The following tables present the available for sale and held to maturity investment debt securities portfolio by major type as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		Investment Securities Available for Sale									Investment Securities Available for Sale
		September 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
(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	$	838,977	23	%	$	762,202	26	%	U.S. Treasury and agencies	$	872,875	26	%	$	918,053	24	%
Obligations of states and political subdivisions	Obligations of states and political subdivisions	283,409		7	%	279,511		10	%	Obligations of states and political subdivisions	292,108		8	%	330,784		8	%
Residential mortgage-backed securities and collateralized mortgage obligations		2,600,785		70	%	1,890,845		64	%
Mortgage-backed securities and collateralized mortgage obligations										Mortgage-backed securities and collateralized mortgage obligations	2,251,724		66	%	2,621,598		68	%

Total available for sale securities	Total available for sale securities	$	3,723,171	100	%	$	2,932,558	100	%	Total available for sale securities	$	3,416,707	100	%	$	3,870,435	100	%


		Investment Securities Held to Maturity									Investment Securities Held to Maturity
		September 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
(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		$	2,795	100	%	$	3,034	100	%
Mortgage-backed securities and collateralized mortgage obligations										Mortgage-backed securities and collateralized mortgage obligations	$	2,637	100	%	$	2,744	100	%

Total held to maturity securities	Total held to maturity securities	$	2,795	100	%	$	3,034	100	%	Total held to maturity securities	$	2,637	100	%	$	2,744	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 ~~$38.9~~$384.3 million ~~at September~~as of June 30, ~~2021.~~2022. This consisted primarily of unrealized losses on ~~residential~~ mortgage-backed securities and collateralized mortgage obligations of ~~$35.4~~$297.8 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~~ACL was considered necessary on these debt securities as of ~~September~~June 30, ~~2021.~~

~~Restricted Equity Securities~~

Restricted equity securities were $10.9 million at September 30, 2021 and $41.7 million at December 31, 2020, the majority of which represents the Bank's investment in the FHLB of Des Moines. The decrease is attributable to redemptions of FHLB stock during the period due to decreased FHLB borrowing 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. 2022.

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Loans and Leases

Total loans and leases outstanding ~~at September~~as of June 30, ~~2021~~2022 were ~~$22.0~~$24.4 billion, an increase of ~~$190.6 million~~$1.9 billion as compared to December 31, ~~2020.~~2021. The increase is attributable to new loan and lease originations, with the majority being in multifamily and residential mortgage ~~loans,~~loans. The loan to deposit ratio as ~~well~~of June 30, 2022 is 93%, as ~~the transfer~~compared to 85% as of $315.9 million from loans held for sale to loans held for investment. The increase was partially offset by PPP loan forgiveness and payoffs, as well as loans sold of $171.7 million and net charge-offs of $37.5 million.December 31, 2021.

The following table presents the concentration distribution of the loan and lease portfolio, net of deferred fees and costs, as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
(dollars in thousands)	(dollars in thousands)	Amount		%		Amount		%		(dollars in thousands)	Amount		%		Amount		%
Commercial real estate	Commercial real estate									Commercial real estate
Non-owner occupied term, net	Non-owner occupied term, net	$	3,561,764	16	%	$	3,505,802	16	%	Non-owner occupied term, net	$	3,798,242	15	%	$	3,786,887	17	%
Owner occupied term, net	Owner occupied term, net	2,330,338		11	%	2,333,945		11	%	Owner occupied term, net	2,497,553		10	%	2,332,422		10	%
Multifamily, net	Multifamily, net	3,813,024		17	%	3,349,196		15	%	Multifamily, net	4,768,273		20	%	4,051,202		18	%
Construction & development, net	Construction & development, net	882,778		4	%	828,478		4	%	Construction & development, net	1,017,297		4	%	890,338		4	%
Residential development, net	Residential development, net	177,148		1	%	192,761		1	%	Residential development, net	194,909		1	%	206,990		1	%
Commercial	Commercial									Commercial
Term, net	Term, net	3,159,466		14	%	4,024,467		18	%	Term, net	2,904,861		12	%	3,008,473		13	%
Lines of credit & other, net	Lines of credit & other, net	930,350		4	%	862,760		4	%	Lines of credit & other, net	920,604		4	%	910,733		4	%
Leases & equipment finance, net	Leases & equipment finance, net	1,457,248		7	%	1,456,630		7	%	Leases & equipment finance, net	1,576,144		6	%	1,467,676		7	%
Residential	Residential									Residential
Mortgage, net	Mortgage, net	4,330,860		20	%	3,871,906		18	%	Mortgage, net	5,168,457		21	%	4,517,266		20	%
Home equity loans & lines, net	Home equity loans & lines, net	1,133,823		5	%	1,136,064		5	%	Home equity loans & lines, net	1,415,722		6	%	1,197,170		5	%
Consumer & other, net	Consumer & other, net	193,141		1	%	217,358		1	%	Consumer & other, net	170,616		1	%	184,023		1	%
Total, net of deferred fees and costs	Total, net of deferred fees and costs	$	21,969,940	100	%	$	21,779,367	100	%	Total, net of deferred fees and costs	$	24,432,678	100	%	$	22,553,180	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. The remaining unamortized balance of the PPP-related net loan processing fees will be recognized as a yield adjustment over the remaining term of these 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

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Asset Quality and Non-Performing Assets

The following table summarizes our non-performing assets, TDR loans, the ACL and asset quality ratios as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(dollars in thousands)		September 30, 2021			December 31, 2020
									(dollars in thousands)	June 30, 2022			December 31, 2021
Loans and leases on non-accrual status	Loans and leases on non-accrual status	$	24,152		$	31,076		Loans and leases on non-accrual status
									Commercial real estate, net	$	5,514		$	5,767
									Commercial, net	12,645			13,098
									Residential, net	—			—
									Consumer & other, net	—			—
									Total loans and leases on non-accrual status	18,159			18,865
Loans and leases past due 90 days or more and accruing	Loans and leases past due 90 days or more and accruing	27,490			36,361			Loans and leases past due 90 days or more and accruing
									Commercial real estate, net	23			1
									Commercial, net	3,311			4,160
									Residential, net	22,340			27,981
									Consumer & other, net	196			194
									Total loans and leases past due 90 days or more and accruing	25,870			32,336
Total non-performing loans and leases	Total non-performing loans and leases	51,642			67,437			Total non-performing loans and leases		44,029			51,201
Other real estate owned	Other real estate owned	1,868			1,810			Other real estate owned		1,868			1,868
Total non-performing assets	Total non-performing assets	$	53,510		$	69,247		Total non-performing assets		$	45,897		$	53,069
Restructured loans (1)	Restructured loans (1)	$	9,849		$	14,991		Restructured loans (1)		$	7,631		$	6,694
Allowance credit losses on loans and leases		$	257,560		$	328,401
Allowance for credit losses on loans and leases								Allowance for credit losses on loans and leases		$	261,111		$	248,412
Reserve for unfunded commitments	Reserve for unfunded commitments	11,752			20,286			Reserve for unfunded commitments		12,823			12,767
Allowance for credit losses	Allowance for credit losses	$	269,312		$	348,687		Allowance for credit losses		$	273,934		$	261,179
Asset quality ratios:	Asset quality ratios:							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		%
									Non-performing assets to total assets	0.15		%	0.17		%
									Non-performing loans and leases to total loans and leases	0.18		%	0.23		%
									Allowance for credit losses on loans and leases to total loans and leases	1.07		%	1.10		%
									Allowance for credit losses to total loans and leases	1.12		%	1.16		%
									Allowance for credit losses to total non-performing loans and leases	622		%	510		%

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

At September 30, 2021 and December 31, 2020, TDRs of $9.8 million and $15.0 million, respectively, were classified as accruing restructured loans. The restructurings were granted in response to borrower financial difficulty, and generally provide for a modification of loan repayment terms.

A ~~further~~ decline in the economic conditions ~~due to the COVID-19 pandemic as well as in our general market areas or~~and 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.

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

Table of Contents

~~A summary of outstanding loan balances with active payment deferral or forbearance as of September 30, 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 %

Excluded from the mortgage loans with payment deferrals or forbearance in the above table are $121.0 million of repurchased GNMA loans on deferral, as the credit risk of these loans are guaranteed by government programs such as the Federal Housing Agency, Veterans Affairs, and 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.

Allowance for Credit Losses

The ACL totaled ~~$269.3~~$273.9 million at ~~September~~June 30, ~~2021, a decrease~~2022, an increase of ~~$79.4~~$12.8 million from ~~$348.7 million at~~ December 31, ~~2020.~~2021. The following table shows the activity in the ACL for the three months ended ~~September 30, 2021 and~~ June 30, ~~2021,~~2022 and March 31, 2022, as well as ~~for~~ the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


			Three Months Ended						Nine Months Ended								Three Months Ended						Six Months Ended
(dollars in thousands)	(dollars in thousands)		September 30, 2021			June 30, 2021			September 30, 2021			September 30, 2020			(dollars in thousands)		June 30, 2022			March 31, 2022			June 30, 2022			June 30, 2021
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		$	248,564		$	248,412		$	248,412		$	328,401
Provision (recapture) for credit losses on loans and leases															Provision (recapture) for credit losses on loans and leases		18,787			5,696			24,483			(17,249)
Charge-offs															Charge-offs
		Balance, beginning of period	$	279,887		$	311,283		$	328,401		$	157,629			Commercial real estate, net	(8)			—			(8)			(170)
		Impact of CECL adoption	—			—			—			49,999				Commercial, net	(9,035)			(7,858)			(16,893)			(35,707)
		Adjusted balance, beginning of period	279,887			311,283			328,401			207,628				Residential, net	—			(167)			(167)			(70)
		(Recapture) provision for credit losses on loans and leases	(16,132)			(17,775)			(33,381)			188,771				Consumer & other, net	(836)			(885)			(1,721)			(2,047)
		Charge-offs	(10,373)			(17,079)			(48,367)			(60,554)				Total charge-offs	(9,879)			(8,910)			(18,789)			(37,994)
		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
Recoveries															Recoveries
		Balance, beginning of period	$	14,539		$	19,760		$	20,286		$	5,106			Commercial real estate, net	73			25			98			469
		Impact of CECL adoption	—			—			—			3,238				Commercial, net	2,934			2,545			5,479			4,772
		Adjusted balance, beginning of period	14,539			19,760			20,286			8,344				Residential, net	216			173			389			317
		(Recapture) provision for credit losses on unfunded commitments	(2,787)			(5,221)			(8,534)			15,962				Consumer & other, net	416			623			1,039			1,171
		Balance, end of period	11,752			14,539			11,752			24,306				Total recoveries	3,639			3,366			7,005			6,729
Net (charge-offs) recoveries															Net (charge-offs) recoveries
																Commercial real estate, net	65			25			90			299
																Commercial, net	(6,101)			(5,313)			(11,414)			(30,935)
																Residential, net	216			6			222			247
																Consumer & other, net	(420)			(262)			(682)			(876)
Total net charge-offs															Total net charge-offs		(6,240)			(5,544)			(11,784)			(31,265)
Balance, end of period															Balance, end of period		$	261,111		$	248,564		$	261,111		$	279,887
Reserve for unfunded commitments															Reserve for unfunded commitments
Balance, beginning of period															Balance, beginning of period		$	12,918		$	12,767		$	12,767		$	20,286
(Recapture) provision for credit losses on unfunded commitments															(Recapture) provision for credit losses on unfunded commitments		(95)			151			56			(5,747)
Balance, end of period															Balance, end of period		12,823			12,918			12,823			14,539
Total allowance for credit losses	Total allowance for credit losses		$	269,312		$	294,426		$	269,312		$	369,355		Total allowance for credit losses		$	273,934		$	261,482		$	273,934		$	294,426
As a percentage of average loans and leases (annualized):	As a percentage of average loans and leases (annualized):														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		%
Net charge-offs															Net charge-offs		0.11		%	0.10		%	0.10		%	0.29		%
Provision (recapture) for credit losses															Provision (recapture) for credit losses		0.32		%	0.09		%	0.21		%	(0.21)		%
Recoveries as a percentage of charge-offs	Recoveries as a percentage of charge-offs		40.28		%	20.25		%	22.55		%	15.20		%	Recoveries as a percentage of charge-offs		36.84		%	37.78		%	37.28		%	17.71		%

The provision for credit losses includes the provision (recapture) for loan and lease losses and the (recapture) provision for unfunded commitments. The increase in the provision is due to organic loan growth as well as updates to the economic forecasts used in credit models.

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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) provision for credit losses includes the (recapture) provision for loan and lease losses, (recapture) provision for unfunded commitments, and the provision (recapture) for credit losses related to accrued interest on loans. The recapture of the provision for credit losses was $18.9 million and $41.9 million for the three and nine months ended September 30, 2021, respectively, which is due to the stabilization of credit quality metrics and economic forecasts used in credit models.

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~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
(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	$	108,014	49	%	$	141,710	47	%	Commercial real estate	$	88,983	50	%	$	99,075	50	%
Commercial	Commercial	118,934		25	%	150,864		29	%	Commercial	131,455		22	%	117,573		24	%
Residential	Residential	27,280		25	%	27,964		23	%	Residential	36,586		27	%	29,068		25	%
Consumer & other	Consumer & other	3,332		1	%	7,863		1	%	Consumer & other	4,087		1	%	2,696		1	%

Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	$	257,560			$	328,401			Allowance for credit losses on loans and leases	$	261,111			$	248,412

The following table shows the change in the allowance for credit losses from March 31, 2022 to June 30, ~~2021 to September 30, 2021:~~2022:


(dollars in thousands)	(dollars in thousands)	June 30, 2021			Q3 2021 net (charge-offs) recoveries		Reserve build/(release)		September 30, 2021			% of Loan and Leases Outstanding		(dollars in thousands)	March 31, 2022			Q2 2022 net (charge-offs) recoveries		Reserve build/(release)		June 30, 2022			% of Loan and Leases Outstanding
Commercial real estate	Commercial real estate	$	139,045		$	(796)	$	(23,414)	$	114,835		1.07	%	Commercial real estate	$	100,376		$	65	$	(4,107)	$	96,334		0.78	%
Commercial	Commercial	123,535			(5,175)		3,159		121,519			2.19	%	Commercial	122,692			(6,101)		17,096		133,687			2.47	%
Residential	Residential	27,006			281		1,950		29,237			0.54	%	Residential	34,139			216		4,966		39,321			0.60	%
Consumer & Other	Consumer & Other	4,840			(505)		(614)		3,721			1.93	%	Consumer & Other	4,275			(420)		737		4,592			2.69	%
Total allowance for credit losses	Total allowance for credit losses	$	294,426		$	(6,195)	$	(18,919)	$	269,312				Total allowance for credit losses	$	261,482		$	(6,240)	$	18,692	$	273,934		1.12	%
% of loans and leases outstanding	% of loans and leases outstanding	1.33		%					1.23		%			% of loans and leases outstanding	1.14		%					1.12		%

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~~second quarter of ~~2021,~~2022, the Bank used Moody's ~~Analytics August consensus~~Analytics' May Consensus economic forecast. Key components include a U.S. real GDP average annualized growth of ~~4.9% through~~ 3.1% in2022, decreasing to 2.3% in 2023, and 2.1% in 2024, as well as an average unemployment rate ~~for 2021~~ of ~~5.5% dropping~~3.6% through 2024. The Federal Reserve Fed Funds Rate is expected to ~~4.2%~~increase to 2.5% by the end of 2022 with an additional increase to 3.0% in ~~2022.~~2023. 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.~~

We believe that the ~~allowance for credit losses~~ACL as of ~~September~~June 30, ~~2021~~2022 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 decline, ~~or are worse than economic forecasts predict,~~ the Bank may need additional provisions for credit losses in future periods.

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Residential Mortgage Servicing Rights

The following table presents the changes in our residential ~~mortgage servicing rights~~MSR portfolio for the three months ended ~~September 30, 2021 and~~ June 30, ~~2021,~~2022 and March 31, 2022, as well as the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended				Nine Months Ended			Three Months Ended								Six Months Ended
(in thousands)	(in thousands)	September 30, 2021		June 30, 2021			September 30, 2021			September 30, 2020		(in thousands)	June 30, 2022		March 31, 2022			June 30, 2022		June 30, 2021
Balance, beginning of period	Balance, beginning of period	$	102,699	$	100,413		$	92,907		$	115,010	Balance, beginning of period	$	165,807	$	123,615		$	123,615	$	92,907
Additions for new MSR capitalized	Additions for new MSR capitalized	8,450		8,330			30,845			37,484		Additions for new MSR capitalized	7,813		7,390			15,203		22,395

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	(4,681)		(4,366)			(13,592)			(15,249)		Changes due to collection/realization of expected cash flows over time	(4,961)		(5,347)			(10,308)		(8,911)
Changes due to valuation inputs or assumptions (1)	Changes due to valuation inputs or assumptions (1)	(634)		(1,678)			(4,326)			(43,997)		Changes due to valuation inputs or assumptions (1)	10,899		40,149			51,048		(3,692)
Balance, end of period	Balance, end of period	$	105,834	$	102,699		$	105,834		$	93,248	Balance, end of period	$	179,558	$	165,807		$	179,558	$	102,699

(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.

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Information related to our residential serviced loan portfolio as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 was as follows:


(dollars in thousands)	(dollars in thousands)	September 30, 2021			December 31, 2020			(dollars in thousands)	June 30, 2022			December 31, 2021
Balance of loans serviced for others	Balance of loans serviced for others	$	12,853,291		$	13,026,720		Balance of loans serviced for others	$	12,932,747		$	12,755,671
MSR as a percentage of serviced loans	MSR as a percentage of serviced loans	0.82		%	0.71		%	MSR as a percentage of serviced loans	1.39		%	0.97		%

Residential ~~mortgage servicing rights~~MSR 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 fee collections decline. Historically, the fair value of our residential ~~mortgage servicing rights~~MSR will increase as market rates for mortgage loans rise and decrease if market rates fall. Mortgage ~~refinance volumes remain elevated; however, accelerated~~rates increased during the period and are expected to continue to rise, which has caused prepayment speeds ~~have slowed due~~ to ~~a flattening of long-term interest rates during the quarter.~~slow.

Due to changes to inputs in the valuation model including changes in discount rates and prepayment speeds, the fair value of the MSR asset ~~decreased~~increased by ~~$634,000~~$10.9 million and ~~$4.3~~$51.0 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021, respectively.~~2022, as compared to an increase of $40.1 million for the three months ended March 31, 2022 and a decrease of $3.7 million for the six months ended June 30, 2021. The fair value of the MSR asset decreased by ~~$4.7~~$5.0 million and ~~$13.6~~$10.3 million, ~~respectively,~~ due to the passage of time, including the impact of regularly scheduled repayments, paydowns and payoffs during the three and ~~nine~~six months ended ~~September~~June 30, 2022, as compared to a decrease of $5.3 million for the three months ended March 31, 2022 and $8.9 million for the six months ended June 30, 2021.

Deposits

Total deposits were ~~$26.9~~$26.1 billion at ~~September~~June 30, ~~2021, an increase~~2022, a decrease of ~~$2.3 billion,~~$462.3 million, as compared to December 31, ~~2020.~~2021. The ~~increase~~decrease is mainly attributable to a decline in money market and time deposits, offset by growth in non-interest ~~bearing~~demand 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 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. The decrease in time deposits is mainly due to the runoff of higher-cost time~~ deposits.

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The following table presents the deposit balances by category as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
(dollars in thousands)	(dollars in thousands)	Amount		%		Amount		%		(dollars in thousands)	Amount		%		Amount		%
Non-interest bearing demand	Non-interest bearing demand	$	11,121,127	41	%	$	9,632,773	39	%	Non-interest bearing demand	$	11,129,209	43	%	$	11,023,724	41	%
Interest bearing demand	Interest bearing demand	3,758,019		14	%	3,051,487		12	%	Interest bearing demand	3,723,650		14	%	3,774,937		14	%
Money market	Money market	7,780,442		29	%	7,173,920		29	%	Money market	7,284,641		28	%	7,611,718		29	%
Savings	Savings	2,325,929		9	%	1,912,752		8	%	Savings	2,446,876		9	%	2,375,723		9	%
Time, greater than $250,000	Time, greater than $250,000	524,752		2	%	899,563		4	%	Time, greater than $250,000	368,997		1	%	480,432		2	%
Time, $250,000 or less	Time, $250,000 or less	1,398,128		5	%	1,951,706		8	%	Time, $250,000 or less	1,179,050		5	%	1,328,151		5	%
Total deposits	Total deposits	$	26,908,397	100	%	$	24,622,201	100	%	Total deposits	$	26,132,423	100	%	$	26,594,685	100	%

The Company's total core deposits, which are deposits less time deposits greater than $250,000 and all brokered deposits, were $25.6 billion at June 30, 2022, compared to $26.0 billion at December 31, 2021. The Company's brokered deposits totaled ~~$353.8~~$143.9 million at ~~September~~June 30, ~~2021,~~2022, compared to ~~$424.1~~$149.9 million at December 31, ~~2020.~~2021.

Borrowings

At ~~September~~June 30, ~~2021,~~2022, the Bank had outstanding ~~$467.8~~$528.0 million of securities sold under agreements to repurchase, an increase of ~~$92.4~~$35.7 million from December 31, ~~2020.~~2021. The Bank had outstanding borrowings consisting of advances from the FHLB of ~~$6.4~~$6.3 million at ~~September~~June 30, ~~2021, which decreased $765.1 million from~~2022 and December 31, ~~2020. The decrease is attributable to maturity payoffs during the period.~~2021. The remaining FHLB advance has a fixed interest rate of 7.10% and matures in 2030.

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Junior Subordinated Debentures

We had junior subordinated debentures with carrying values of ~~$387.6~~$409.2 million and ~~$343.5~~$381.1 million at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The increase is mainly due to the ~~$44.5~~$27.8 million change in fair value for the junior subordinated debentures elected to be carried at fair value, which is due to ~~a decrease in the discount rates caused by a decrease in the credit spread paired with~~ an increase in the implied forward curve resulting in increased cash flows, partially offset by an increase in the ~~long end of the SWAP spot curve.~~discount rate. As of ~~September~~June 30, ~~2021,~~2022, substantially all of the junior subordinated debentures had interest rates that are adjustable on a quarterly basis based on a spread over three-month LIBOR. These instruments mature after June 2023 and we anticipate they will be covered under pending federal legislation that will allow us to replace the LIBOR index with SOFR under a safe-harbor provision.

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 includes ~~an elevated~~maintaining a sufficient on-balance sheet liquidity position to provide flexibility, to grow deposit balances ~~to provide flexibility to~~and fund growth in lending and investment portfolios, as well as to deleverage non-deposit 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~~current economic conditions, as well as meet its working capital and other needs. The Company will continue to prudently evaluate and maintain liquidity sources, including the ability to fund future loan growth and 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 5% of total deposits at ~~September~~June 30, ~~2021~~2022 and ~~7% of total deposits at~~ December 31, ~~2020.~~2021. 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.

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The Bank had available lines of credit with the FHLB totaling ~~$8.5~~$9.6 billion at ~~September~~June 30, ~~2021,~~2022, 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 ~~$915.8 million,~~$1.1 billion, subject to certain collateral requirements, ~~including eligibility and advance rates on~~namely the amount of certain pledged ~~loans and investment securities.~~loans. The Bank had uncommitted federal funds line of credit agreements with additional financial institutions totaling $460.0 million at ~~September~~June 30, ~~2021.~~2022. 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 ~~$350.0~~$96.0 million of dividends paid by the Bank to the Company in the ~~nine~~six months ended ~~September~~June 30, ~~2021, including the special dividend of $200.0 million paid in July 2021, to fund the repurchase plan announced by the Company.~~2022. There are statutory and regulatory provisions that limit the ability of the Bank to pay dividends to the Company. ~~The Company is required to seek~~ FDIC and Oregon Division of Financial Regulation approval is required for quarterly dividends from Umpqua Bank to the Company. The timing of the quarterly dividend is after each quarter's earnings release to provide the 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. 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 common ~~stock until the transaction is closed.~~stock.

As disclosed in the Condensed Consolidated Statements of Cash Flows, net cash provided by operating activities was ~~$541.5~~$580.5 million during the ~~nine~~six months ended ~~September~~June 30, 2022, 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 $1.3 billion, the decrease in other assets of $204.5 million, and the increase in other liabilities of $105.7 million, offset by originations of loans held for sale of $1.2 billion and the change in fair value of residential mortgage servicing rights carried at fair value of $40.7 million. This compares to net cash provided by operating activities of $286.4 million during the six months ended June 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~~$3.0 billion, and the decrease in other assets of ~~$161.1~~$49.3 million, offset by originations of loans held for sale of ~~$3.9~~$2.9 billion and the gain on sale of loans of ~~$124.8~~$87.8 million.

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Net cash of $1.8 billion used in investing activities during the six months ended June 30, 2022, consisted principally of net change in loans of $1.9 billion and purchases of available for sale investment securities of $175.7 million, offset by proceeds from available for sale investment securities of $236.1 million and ~~recapture~~the proceeds from sales of ~~provision for loan~~loans and ~~lease losses~~leases of ~~$41.9~~$70.5 million. This compares to net cash ~~used in operating activities~~ 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 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 $232.5 million and gain on sale of loans of $212.4 million.

~~Net cash of $764.9~~$655.2 million used in investing activities during the ~~nine~~six months ended ~~September~~June 30, 2021, consisted principally of purchases of available for sale investment securities of ~~$1.5~~$1.0 billion, and net loan originations of ~~$85.5~~$213.1 million, offset by proceeds from available for sale investment securities of ~~$578.2~~$409.0 million and the proceeds from sales of loans and leases of ~~$182.6~~$140.0 million.

Net cash of $521.7 million used in financing activities during the six months ended June 30, 2022, primarily consisted of $462.3 million net decrease in deposits and $91.1 million of dividends paid on common stock, partially offset by the net increase in securities sold under agreements to repurchase of $35.7 million. This compares to net cash of $1.4 billion used in investing activities during the nine months ended September 30, 2020, which primarily consisted of net loan originations of $1.3 billion, purchases of investment securities available for sale of $595.4$881.4 million ~~and net cash paid in divestiture of stores of $81.2 million, offset by proceeds from investment securities available for sale of $604.6 million and the proceeds from sales of loans of $60.8 million.~~

~~Net cash of $1.4 billion~~ provided by financing activities during the ~~nine~~six months ended ~~September~~June 30, 2021, primarily consisted of ~~$2.3~~$1.5 billion net increase in deposits and the net increase in securities sold under agreements to repurchase of ~~$92.4~~$104.9 million, offset by $765.0 million repayment of borrowings, $138.2 million of dividends paid on common stock, and the repurchase and retirement of common stock of $80.7 million. 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, proceeds from borrowings of $600.0 million, offset by $510.0$660.0 million repayment of borrowings and ~~$138.7~~$92.6 million of dividends paid on common stock.

Although we expect the Bank's and the Company's liquidity positions to remain satisfactory during 2022, it is possible that our deposit ~~growth~~balances may not be maintained at previous levels due to pricing pressure ~~store consolidations,~~ or customers' ~~spending habits.~~behavior in the current economic environment. 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~~We may ~~have an impact on Umpqua's~~utilize borrowings or other funding sources, which are generally more costly than deposit funding, to support our liquidity ~~position and strategy in the future.~~levels.

Off-balance-Sheet Arrangements

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

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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~~June 30, ~~2021~~2022 was ~~$2.7~~$2.5 billion. The ~~increase~~decrease in shareholders' equity during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was principally due to ~~net income, offset by~~ the other comprehensive loss, net of tax, of $309.9 million and cash dividends paid ~~and stock repurchased~~of $91.5 million offset by net income of $169.7 million during the 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~~agreed to refrain from paying quarterly cash dividends in excess of the ~~current~~then-current level ~~until~~($0.21 per share) at the time we entered into the Merger ~~is closed.~~Agreement.

The timing of the quarterly dividend is after each quarter's earnings release to provide the Company's Board of Directors with the opportunity to review final quarterly financial results and financial projections, prior to the announcement of any dividend. On ~~August 9, 2021,~~May 5, 2022, the Company declared a cash dividend in the amount of $0.21 per common share based on ~~second~~first quarter ~~2021~~2022 performance, which was paid on May 27, 2022. The Company also declared a quarterly cash dividend, based on second quarter 2022 performance, of $0.21 per common share on July 20, 2022, payable August ~~31, 2021.~~15, 2022, to shareholders of record as of August 1, 2022.

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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~~June 30, ~~2021~~2022 and March 31, 2022, and the six months ended June 30, 2022 and June 30, ~~2021, as well as the nine months ended September 30, 2021 and 2020:~~2021:


		Three Months Ended						Nine Months Ended				Three Months Ended								Six Months Ended
		September 30, 2021			June 30, 2021				September 30, 2021				September 30, 2020				June 30, 2022			March 31, 2022			June 30, 2022			June 30, 2021
Dividend declared per common share	Dividend declared per common share	$	0.21		$	0.21			$	0.63			$	0.42		Dividend declared per common share	$	0.21		$	0.21		$	0.42		$	0.42
Dividend payout ratio	Dividend payout ratio	43		%	40		%		42		%		(6)		%	Dividend payout ratio	58		%	50		%	54		%	42		%

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~~As of June 30, 2022, the ~~previously approved share repurchase~~Company repurchased a total of $78.2 million in shares under the program, which ~~was scheduled to expire~~expires on July 31, ~~2021. As of September 30, 2021, a total of $321.8 million remained available to repurchase shares under the new share repurchase program.~~2022. During the ~~nine~~six months ended ~~September~~June 30, ~~2021, 4.0 million~~2022, no shares were repurchased under the ~~new~~ plan.

The ~~repurchase program is currently~~Company halted repurchases, based on the announced merger with Columbia and in accordance with the Merger Agreement. ~~The Company may not purchase any shares under this program until the Merger is closed.~~ The timing and amount of future repurchases would depend upon the market price for our common stock, securities laws restricting repurchases, asset growth, earnings, our capital 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.

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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 III at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

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 %


	Actual				For Capital Adequacy purposes				To be Well Capitalized
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2022
Total Capital (to Risk Weighted Assets)
Consolidated	$	3,525,647	13.54	%	$	2,082,648	8.00	%	$	2,603,310	10.00	%
Umpqua Bank	$	3,308,808	12.71	%	$	2,082,311	8.00	%	$	2,602,888	10.00	%
Tier I Capital (to Risk Weighted Assets)
Consolidated	$	2,854,118	10.96	%	$	1,561,986	6.00	%	$	2,082,648	8.00	%
Umpqua Bank	$	3,088,278	11.86	%	$	1,561,733	6.00	%	$	2,082,311	8.00	%
Tier I Common (to Risk Weighted Assets)
Consolidated	$	2,854,118	10.96	%	$	1,171,490	4.50	%	$	1,692,152	6.50	%
Umpqua Bank	$	3,088,278	11.86	%	$	1,171,300	4.50	%	$	1,691,877	6.50	%
Tier I Capital (to Average Assets)
Consolidated	$	2,854,118	9.32	%	$	1,224,803	4.00	%	$	1,531,004	5.00	%
Umpqua Bank	$	3,088,278	10.08	%	$	1,225,002	4.00	%	$	1,531,252	5.00	%
December 31, 2021
Total Capital (to Risk Weighted Assets)
Consolidated	$	3,429,047	14.26	%	$	1,923,934	8.00	%	$	2,404,917	10.00	%
Umpqua Bank	$	3,085,848	12.83	%	$	1,924,015	8.00	%	$	2,405,019	10.00	%
Tier I Capital (to Risk Weighted Assets)
Consolidated	$	2,785,794	11.58	%	$	1,442,950	6.00	%	$	1,923,934	8.00	%
Umpqua Bank	$	2,893,593	12.03	%	$	1,443,011	6.00	%	$	1,924,015	8.00	%
Tier I Common (to Risk Weighted Assets)
Consolidated	$	2,785,794	11.58	%	$	1,082,213	4.50	%	$	1,563,196	6.50	%
Umpqua Bank	$	2,893,593	12.03	%	$	1,082,258	4.50	%	$	1,563,262	6.50	%
Tier I Capital (to Average Assets)
Consolidated	$	2,785,794	9.01	%	$	1,236,265	4.00	%	$	1,545,331	5.00	%
Umpqua Bank	$	2,893,593	9.36	%	$	1,236,518	4.00	%	$	1,545,648	5.00	%

In 2020, the federal bank regulatory authorities finalized a rule to provide banking organizations that implemented CECL 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 elected this capital relief ~~and will~~to delay the estimated regulatory capital impact of adopting CECL, relative to the incurred loss methodology's effect on regulatory capital. Currently, the Company is beginning to phase out the cumulative adjustment as calculated at the end of 2021, by adjusting it by 75% through 2022, 50% in 2023, and 25% in 2024.

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our assessment of market risk as of ~~September~~June 30, ~~2021~~2022 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, ~~2020.~~2021. However due to the impact of increasing interest rates resulting from Federal Reserve monetary policy and programs to address inflationary pressures, the estimated impact on our net interest income over a one-year time horizon has shifted.

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Interest Rate Simulation Impact on Net Interest Income

The following table presents interest rate simulations under different scenarios. Each 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. The scenarios presented are as of June 30, 2022, and December 31, 2021 and 2020:


	Q2 2022		2021		2020
Up 300 basis points	5.9	%	9.7	%	9.7	%
Up 200 basis points	4.0	%	6.3	%	6.5	%
Up 100 basis points	2.0	%	3.0	%	3.2	%
Down 100 basis points	(4.2)	%	(1.2)	%	(1.8)	%
Down 200 basis points	(7.9)	%	(2.4)	%	(2.9)	%
Down 300 basis points	(9.9)	%	(3.1)	%	(3.3)	%

As rates have increased in 2022, our asset sensitivity in an increasing rate environment has decreased and our sensitivity in a decreasing rate environment has increased as loans have moved off floors while interest bearing deposits have remained at a lower bound.

The short-term interest rate environment is primarily a function of the monetary policy of the Federal Reserve Board. 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 can also be influenced by Federal Reserve purchases and sales and expectations of monetary policy going forward.

Starting in March 2022, in response to persistent inflation, the FOMC raised the target range for the federal funds rate from 0.00% - 0.25% to a target range of 1.50% - 1.75% at June 30, 2022. Expectations are for the FOMC to continue increasing this target range until inflation is controlled and price stability is restored, and to that effect, on July 27, 2022, the FOMC raised the target range for the federal funds rate to 2.25% - 2.50%.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.

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~~June 30, ~~2021.~~2022.

No change in internal control over financial reporting occurred during the quarter ended ~~September~~June 30, ~~2021~~2022 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~~The information required by this item is set forth 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.Part I, Item 1 under Note 6 Commitments and Contingencies—Legal Proceedings and Regulatory Matters.

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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, ~~2020.~~2021. 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.

~~As a result of Umpqua entering into a merger agreement with Columbia, certain~~There have been no material changes from the risk factors ~~have been 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 fulfilleddescribed 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 merger could cause Umpqua not to realize, or be delayed in realizing, some or all of the benefits that the Company expects to achieve if the merger is successfully completed within the anticipated time frame.

~~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 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 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, which could have an adverse effect on Umpqua's financial results and the value of its common stock. If Umpqua experiences difficulties with the integration process, the anticipated benefits of the 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 move their business to competing financial institutions. Integration efforts between the 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.

~~Termination of the merger agreement could negatively impact Umpqua.~~

If the merger agreement is terminated, there may be various consequences. For example, Umpqua's businesses may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the merger. Also, Umpqua has devoted significant internal resources to the pursuit of the Merger and the 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 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 operations.~~

Uncertainty about the effect of 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 expenses in connection with the Merger without realizing the expected benefits of 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 for the year ended December 31, 2020.~~10-K.

~~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~~June 30, ~~2021:~~2022:

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


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
04/01/22 - 04/30/22	—	$	—	—	$	321,797,719
05/01/22 - 05/31/22	3,599	$	17.01	—	$	321,797,719
06/01/22 - 06/30/22	668	$	16.36	—	$	321,797,719
Total for quarter	4,267	$	16.91	—

(1)Common shares repurchased by the Company during the quarter consist of cancellation of ~~2,089~~4,267 shares to be issued upon vesting of restricted stock awards to pay withholding taxes. During the three months ended ~~September~~June 30, ~~2021, 4.0 million~~2022, there were no shares ~~were~~ repurchased pursuant to the Company's publicly announced corporate stock repurchase plan described in (2) below.

(2)~~As of~~On July 21, 2021, the Company 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. ~~This effectively ended the previous share repurchase plan.~~ As of ~~September~~June 30, ~~2021,~~2022, the Company repurchased a total of ~~$321.8~~$78.2 million ~~remained available to repurchase shares.~~in shares under the program, which expires on July 31, 2022. The Company halted repurchases under the program with the announcement of the proposed merger with Columbia and as required under the Merger Agreement. 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, our capital 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

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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			(b )(b) Restated Articles of Incorporation, as amended

3.2			(c )(c) Bylaws, as amended

4.1			(d )(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~~June 30, ~~2021,~~2022, 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

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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 4, 2021~~July 29, 2022	/s/ Cort L. O'Haver
		Cort L. O'Haver President and Chief Executive Officer

Dated	~~November 4, 2021~~July 29, 2022	/s/ Ronald L. Farnsworth
		Ronald L. Farnsworth Executive Vice President/Chief Financial Officer and Principal Financial Officer

Dated	~~November 4, 2021~~July 29, 2022	/s/ Lisa M. White
		Lisa M. White Senior Vice President/Corporate Controller and Principal Accounting Officer

7367


GLOSSARY		3
PART I. FINANCIAL INFORMATION		4
Item 1.	Financial Statements (unaudited)	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4442
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	6863
Item 4.	Controls and Procedures	6864
Part II. OTHER INFORMATION		6864
Item 1.	Legal Proceedings	6864
Item 1A.	Risk Factors	6865
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7065
Item 3.	Defaults Upon Senior Securities	7165
Item 4.	Mine Safety Disclosures	7165
Item 5.	Other Information	7165
Item 6.	Exhibits	7266

SIGNATURES		7367


	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	%