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: | SeptemberJune 30, 20212022 |
| 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 12001400
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: 216,621,803217,050,683 shares outstanding as of October 31, 2021July 28, 2022.
UMPQUA HOLDINGS CORPORATION
FORM 10-Q
Table of Contents
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Item 1. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
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Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
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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 |
MergerMergers | | 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 EntitySOFR | | Merger Sub will merge with and into Umpqua, with Umpqua surviving the MergerSecured Overnight Financing Rate |
| | |
TDR | | Troubled debt restructuring |
USDAUmpqua | | United States Department of AgricultureUmpqua Holdings Corporation and its subsidiaries |
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
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
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
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) | |
|
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 | |
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See notes to condensed consolidated financial statements
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) | |
| |
| | | 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
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 20202021 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 20202021 Annual Report filed on Form 10-K.
In preparing these condensed consolidated financial statements, the Company has evaluated events and transactions subsequent to SeptemberJune 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.
RecentApplication 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 LIBORLondon Inter-Bank Offered Rate or another reference rate expected to be discontinued. The lastguidance 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.
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 Septemberas of June 30, 20212022 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 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively, and is included in Other Assets.
Debt securities that were in an unrealized loss position as of SeptemberJune 30, 20212022 and December 31, 20202021 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 SeptemberJune 30, 20212022 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 SeptemberJune 30, 2021.2022.
The following table presents the contractual maturities of debt securities at SeptemberJune 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 SeptemberJune 30, 2021,2022, investment securities thatwhich 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 | |
Note 3 – Loans and Leases
The following table presents the major types of loans and leases, net of deferred fees and costs, as of SeptemberJune 30, 20212022 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 SeptemberJune 30, 20212022 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 SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. As of SeptemberJune 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 SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively, and is included in Other Assets.
The Bank, through its commercial equipment leasing subsidiary, FinPac, is a provider of commercial equipment leasing and financing. Direct finance leases are included within the leaseleases 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 ninesix months ended SeptemberJune 30, 2021, respectively,2022, as compared to $6.7$5.6 million and $20.5$11.2 million for the three and ninesix months ended SeptemberJune 30, 2020, respectively.2021.
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 ninesix months ended SeptemberJune 30, 20212022 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.
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 SeptemberJune 30, 2021,2022, were primarily related to changes in the economic assumptions.The Bank opted to use Moody's Analytics' AugustMay consensus economic forecast for estimating the ACL as of SeptemberJune 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 consensusbaseline 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 keepincrease the target range forfederal funds rate to 2.5% by the Fed Funds rate at 0%end of 2022 with an additional increase to 0.25% until early3.0% 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' AugustMay 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 effectiveeconomy falls into a mild recession in the third quarter of 2022;
•The military conflict between Russia and Ukraine persists longer than expected becauseanticipated. 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 smallerglobal 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 return4.3% in 2022, peaking at 6.4% in Q3 2023, returning to less than 5.0% unemploymentan average of 4.3% in 2023;2024;
•COVID infections abate in January 2022;
•The Federal Reserve is expected to keep target range forincrease the Fed Fundsfederal 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.
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.
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.
•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.
The Company evaluated each qualitative factor as of SeptemberJune 30, 2021,2022, and made qualitative overlay adjustments of approximately $16.9 millionconcluded that a material adjustment to increase the amounts indicated by the models was not necessary as considered necessary tothe models adequately reflectreflected 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 flowDCF method, which is used for all loans except lines of credit and 2) the non-discounted cash flownon-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 flownon-DCF method uses the exposure at default, along with the expected credit losses adjusted for prepayments to calculate the required allowance.
The following tables summarize activity related to the allowance for credit losses by portfolio segment for the three and ninesix months ended SeptemberJune 30, 20212022 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 | |
|
| | | | 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 | |
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.
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 ninesix months ended SeptemberJune 30, 20212022 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.
The following tables present the carrying value of the loans and leases past due, by loan and lease class, as of SeptemberJune 30, 20212022 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 SeptemberJune 30, 2021.2022.
| | | 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 SeptemberJune 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 | |
Troubled Debt Restructuring
At SeptemberJune 30, 20212022 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 SeptemberJune 30, 20212022 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 ninesix months ended SeptemberJune 30, 20212022 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 | |
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.
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 assetloan or lease is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. AssetsLoans 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.
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 SeptemberJune 30, 20212022 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 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | | Term Loans Amortized Cost Basis by Origination Year | | Revolving Loans Amortized Cost Basis | | Revolving to Non-Revolving Loans Amortized Cost | | |
| September 30, 2021 | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | | | Total |
Consumer & other, net: | | | | | | | | | | | | | | | | | | |
Credit quality indicator: | | | | | | | | | | | | | | | | | | |
| Pass/Watch | | $ | 13,616 | | | $ | 12,411 | | | $ | 14,605 | | | $ | 6,621 | | | $ | 4,589 | | | $ | 5,729 | | | $ | 132,063 | | | $ | 2,692 | | | $ | 192,326 | |
| Special mention | | — | | | 39 | | | 58 | | | — | | | 175 | | | 186 | | | 203 | | | 38 | | | 699 | |
| Substandard | | — | | | — | | | 22 | | | — | | | — | | | 15 | | | 10 | | | 59 | | | 106 | |
| Doubtful | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Loss | | — | | | — | | | — | | | — | | | — | | | 7 | | | 3 | | | — | | | 10 | |
Total consumer & other, net | | $ | 13,616 | | | $ | 12,450 | | | $ | 14,685 | | | $ | 6,621 | | | $ | 4,764 | | | $ | 5,937 | | | $ | 132,279 | | | $ | 2,789 | | | $ | 193,141 | |
| | | | | | | | | | | | | | | | | | | |
Grand total | | $ | 5,465,818 | | | $ | 3,081,443 | | | $ | 3,410,167 | | | $ | 2,039,304 | | | $ | 1,584,686 | | | $ | 3,457,600 | | | $ | 2,847,236 | | | $ | 83,686 | | | $ | 21,969,940 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | | Term Loans Amortized Cost Basis by Origination Year | | Revolving Loans Amortized Cost Basis | | Revolving to Non-Revolving Loans Amortized Cost | | |
| December 31, 2020 | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | | | Total |
Commercial real estate: | | | | | | | | | | | | | | | | | | |
Non-owner occupied term, net | | | | | | | | | | | | | | | | |
Credit quality indicator: | | | | | | | | | | | | | | | | | | |
| Pass/Watch | | $ | 496,412 | | | $ | 677,975 | | | $ | 489,350 | | | $ | 379,691 | | | $ | 338,257 | | | $ | 932,207 | | | $ | 2,855 | | | $ | 4,139 | | | $ | 3,320,886 | |
| Special mention | | 13,281 | | | 1,432 | | | 40,899 | | | 2,800 | | | 31,699 | | | 27,167 | | | — | | | — | | | 117,278 | |
| Substandard | | 3,129 | | | 2,668 | | | 19,951 | | | 3,062 | | | 19,806 | | | 18,586 | | | — | | | — | | | 67,202 | |
| Doubtful | | — | | | — | | | — | | | — | | | — | | | 103 | | | — | | | — | | | 103 | |
| Loss | | — | | | — | | | — | | | — | | | — | | | 333 | | | — | | | — | | | 333 | |
Total non-owner occupied term, net | | $ | 512,822 | | | $ | 682,075 | | | $ | 550,200 | | | $ | 385,553 | | | $ | 389,762 | | | $ | 978,396 | | | $ | 2,855 | | | $ | 4,139 | | | $ | 3,505,802 | |
Owner occupied term, net | | | | | | | | | | | | | | | | | | |
Credit quality indicator: | | | | | | | | | | | | | | | | | | |
| Pass/Watch | | $ | 284,698 | | | $ | 414,715 | | | $ | 321,900 | | | $ | 344,606 | | | $ | 257,969 | | | $ | 610,893 | | | $ | 6,270 | | | $ | 783 | | | $ | 2,241,834 | |
| Special mention | | 3,641 | | | 8,373 | | | 13,143 | | | 7,365 | | | 3,425 | | | 18,386 | | | — | | | — | | | 54,333 | |
| Substandard | | 2,657 | | | 1,694 | | | 9,868 | | | 2,846 | | | 4,356 | | | 14,609 | | | 282 | | | 975 | | | 37,287 | |
| Doubtful | | — | | | — | | | — | | | — | | | — | | | 61 | | | — | | | — | | | 61 | |
| Loss | | — | | | — | | | — | | | — | | | — | | | 430 | | | — | | | — | | | 430 | |
Total owner occupied term, net | | $ | 290,996 | | | $ | 424,782 | | | $ | 344,911 | | | $ | 354,817 | | | $ | 265,750 | | | $ | 644,379 | | | $ | 6,552 | | | $ | 1,758 | | | $ | 2,333,945 | |
Multifamily, net | | | | | | | | | | | | | | | | | | |
Credit quality indicator: | | | | | | | | | | | | | | | | | | |
| Pass/Watch | | $ | 383,871 | | | $ | 870,871 | | | $ | 593,076 | | | $ | 574,185 | | | $ | 276,108 | | | $ | 618,031 | | | $ | 23,282 | | | $ | 2,956 | | | $ | 3,342,380 | |
| Special mention | | — | | | — | | | — | | | — | | | — | | | 6,601 | | | — | | | — | | | 6,601 | |
| Substandard | | — | | | — | | | — | | | 215 | | | — | | | — | | | — | | | — | | | 215 | |
| Doubtful | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Loss | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total multifamily, net | | $ | 383,871 | | | $ | 870,871 | | | $ | 593,076 | | | $ | 574,400 | | | $ | 276,108 | | | $ | 624,632 | | | $ | 23,282 | | | $ | 2,956 | | | $ | 3,349,196 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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 | |
| | | | | | | | | | | | | | | | | | | |
| (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 rightsMSR 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 rightsMSR for the three and ninesix months ended SeptemberJune 30, 20212022 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 changeschange in valuation inputs and assumptions principally reflect changes in discount rates and prepayment speeds, which are primarily affected by changes in interest rates.
Information related to the Bank's serviced loan portfolio as of SeptemberJune 30, 20212022 and December 31, 20202021 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 ninesix months ended SeptemberJune 30, 2021,2022, respectively, as compared to $8.8$9.1 million and $26.2$18.2 million for the three and ninesix months ended SeptemberJune 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) | SeptemberJune 30, 20212022 |
Commitments to extend credit | $ | 6,180,8207,533,982 | |
Forward sales commitments | $ | 555,170327,666 | |
Commitments to originate residential mortgage loans held for sale | $ | 432,659201,663 | |
Standby letters of credit | $ | 122,078117,330 | |
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 ninesix months ended SeptemberJune 30, 20212022 and 2020.2021. At SeptemberJune 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.
Resolution and the outcome of legal claims is involvedunpredictable, 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 occurringuncertainties; 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 courseprocess.
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, managementand established reserves, the Company believes that the eventual outcome of the actions against the Company or its subsidiariesus will not individually or in the aggregate, have a material adverse effect on itsthe 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.
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 approvalsapprovals. The Merger Agreement provides certain termination rights for both Umpqua and approvals from each company's shareholders. ReferColumbia 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 throughoutin 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 SeptemberJune 30, 20212022 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.
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 ninesix months ended SeptemberJune 30, 20212022 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 SeptemberJune 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 SeptemberJune 30, 2021,2022, the Bank had 914944 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 886936 interest rate swaps with an aggregate notional amount of $6.2$7.0 billion related to this program.
As of SeptemberJune 30, 20212022 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 SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. In 2021, the Bank began to collateralize a portion of its initial margin with U.S. Treasury securities.
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 SeptemberJune 30, 20212022 and December 31, 2020,2021, the variation margin adjustments were negative adjustmentsconsisted of $198.7a positive adjustment of $119.4 million and $330.5a 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 SeptemberJune 30, 20212022 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 | |
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 ninesix months ended SeptemberJune 30, 20212022 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 | |
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 ninesix months ended SeptemberJune 30, 20212022 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 ninesix months ended SeptemberJune 30, 20212022 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 |
Restricted stock awards | Restricted stock awards | — | | 763 | | 73 | | 1,164 | Restricted stock awards | 515 | | 97 | | 342 | | 62 |
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.
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. |
Table of Contents | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | |
Note 10 – Fair Value Measurement
The following table presents estimated fair values of the Company's financial instruments as of SeptemberJune 30, 20212022 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 | |
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 SeptemberJune 30, 20212022 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 | |
| | | | | | | | | | | | | | | | | | | | | | | |
(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 SeptemberJune 30, 2021,2022, there were $353.9$309.6 million in mortgage loans recorded at fair value as they were previouspreviously transferred from held for sale to loans held for investment.
Residential Mortgage Servicing Rights— The fair value of the MSRsMSR is estimated using a discounted cash flowDCF 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 flowDCF 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 SeptemberJune 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 SeptemberJune 30, 2021:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Instrument | | Fair Value (in (in thousands) | | Valuation Technique | | Unobservable Input | | Range of Inputs | | Weighted Average |
Assets: | | | | | | | | | | |
Residential mortgage servicing rights | | $ | 105,834179,558 | | | 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 | | $ | 8,258117 | | | Internal pricing model | | | | | | |
| | | | | | Pull-through rate | | 70.00%73.00% - 100.00% | | 88.03%88.34% |
Junior subordinated debentures | | $ | 299,508321,268 | | | 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.
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.
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 ninesix months ended SeptemberJune 30, 20212022 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) | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 ninesix months ended SeptemberJune 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 losslosses of $10.8$4.5 million and other comprehensive income of $20.0$24.2 million, respectively, for the three and ninesix months ended SeptemberJune 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 presenttable 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 | |
The following table presents the losses resulting from nonrecurring fair value adjustments for the three and ninesix months ended SeptemberJune 30, 20212022 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.
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 SeptemberJune 30, 20212022 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 ninesix months ended SeptemberJune 30, 2021,2022, the Company recorded net decreasesincrease in fair value of $4.5$4.2 million and $13.5decrease of $6.9 million, respectively. For the three and ninesix months ended SeptemberJune 30, 2020,2021, the Company recorded a net increase in fair value of $2.2$10.6 million and $16.5decrease 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 ninesix months ended SeptemberJune 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.
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.
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 rightsMSR 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 usCOVID-19 pandemic and Columbia;
•its impact on the significant risksglobal economy and uncertainties for ourfinancial 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;
•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;
•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 requirementsthe 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 update2022, 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 haveUmpqua 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.
Executive Overview
The following is a discussion of our results for the three and ninesix months ended SeptemberJune 30, 2021,2022, as compared to the applicable prior periods.
Financial Performance
•Net incomeEarnings 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. Net2022, 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 $1.51of $1.01 for the ninesix months ended SeptemberJune 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 SeptemberJune 30, 2021,2022, as compared to the prior quarter,periods, was primarily driven by a declinedecrease in non-interest income due to the decreasea decline in residential mortgage banking revenue and a decrease in the fair value of certain loans held for investment, as well as the decreasean 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 compareddue 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 ninesix months ended SeptemberJune 30, 2021,2022, as compared to 3.19% for the ninesix months ended SeptemberJune 30, 2020.2021. The increase for the three months ended SeptemberJune 30, 20212022, was due to a higher mix of loans as compared to the prior quarter was driven bya 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 ninesix months ended SeptemberJune 30, 2021, compared to the same period in the prior year, was driven by lower costs on interest-bearing liabilities due to2022, 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 ninesix months ended SeptemberJune 30, 2021,2022, as compared to $191.8$109.5 million for the ninesix months ended SeptemberJune 30, 2020.2021. The decreasevariance for the three and ninesix months ended SeptemberJune 30, 2021,2022 as compared to the prior periods, was driven by a decline in for-sale originationsprimarily due to lower origination and sale revenue and changes in the gain on sale marginfair 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 SeptemberJune 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 ninesix months ended SeptemberJune 30, 2021,2022, as compared to the ninesix months ended SeptemberJune 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 threesix months ended June 30, 2021. For the nine months ended September 30, 2021, theThe 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 SeptemberJune 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 SeptemberJune 30, 2021, an increase2022, a decrease of $2.3 billion,$462.3 million, compared to December 31, 2020. This increase2021. The decline was due to growthlower balances in demand, money market and savingstime deposits, which is attributable to customer saving habitsoffset 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 timenon-interest demand and savings deposits.
•Total consolidated assets were $30.9$30.1 billion and $30.6 billion as of SeptemberJune 30, 2021, compared to $29.2 billion at2022 and December 31, 2020. The increase was mainly2021, with the decline due to an increasethe decrease in on-balance sheet liquidity, as well as an increase incash and cash equivalents and available for sale securities, andoffset 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 SeptemberJune 30, 2021, as2022, compared to $67.4$51.2 million, or 0.31%0.23% of total loans and leases, as of December 31, 2020.2021.
•The allowance for credit losses on loans and leases was $257.6$273.9 million as of SeptemberJune 30, 2021, a decrease2022, 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 decreaseincrease in the allowance for credit losses is due to the improvementgrowth 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 ninesix months ended SeptemberJune 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. Thisthere 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 metricsallowance requirements for new loan generation, loan mix changes, and improvedchanges 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 SeptemberJune 30, 2021, an increase2022, a decrease of $1.2$1.8 billion from December 31, 2020.2021. The increasedecrease in cash and cash equivalents is consistent withdue 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 continuationand 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 modernize2022, 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 basedrisk-based capital ratio was 14.9%13.5% and its Tier 1 common to risk weightedrisk-based assets ratio was 12.0%11.0% as of SeptemberJune 30, 2021.2022. As of December 31, 2020,2021, the Company's total risk basedrisk-based capital ratio was 15.6%14.3% and its Tier 1 common to risk weightedrisk-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 and27, 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 pendency15, 2022, to shareholders of the Merger.record as of August 1, 2022.
Summary of Critical Accounting PoliciesEstimates
Our critical accounting policiesestimates are described in detail in the Summary of Critical Accounting PoliciesEstimates 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 thoseof 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 applicationcould be materially different than originally reported. Management believes that the ACL estimate is important to the portrayal of management's mostthe 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 policiesthe ACL estimate methodology during the ninesix months ended SeptemberJune 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. ThisBanking, 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.
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 decreaseincrease in net income is mainly attributable to a decreasean 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 incomethe 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, duemainly attributable to the impact of goodwill impairmenta decrease in 2020, as well as the recapture ofnon-interest income, an increase in the provision for credit losses, as economic forecasts improvedand 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 SeptemberJune 30, 20212022 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 ninesix months ended SeptemberJune 30, 2021,2022, compared to the same period of the prior year, was primarily due to a decrease in for-salenon-interest expense, which is due to decreased incentives as originations have slowed due to the rising interest rates, and a declinefair 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.
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 ninesix months ended SeptemberJune 30, 20212022 and September 30, 2020, respectively.2021. For each period presented, the table includes the calculated ratios based on reported net income. OurTo 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 tangibleTangible common equity and the tangible common equity ratio isare considered a non-GAAP financial measuremeasures and should be viewed in conjunction with the total shareholders' equity and the total shareholders' equity ratio.
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 SeptemberJune 30, 20212022 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 SeptemberJune 30, 20212022 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 SeptemberJune 30, 20212022 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 ninesix months ended SeptemberJune 30, 2021,2022 was also due to the lower cost of interest-bearing liabilities due to lower retailhigher 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 partiallyloan 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 ninesix months ended SeptemberJune 30, 2021,2022, as compared to 3.19% for the ninesix months ended SeptemberJune 30, 2020.2021. The increase in net interest margin for the three months ended SeptemberJune 30, 2021,2022, as compared to the three months ended June 30, 2021, was driven by theMarch 31, 2022, primarily resulted from an increase in netthe 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 ninesix months ended SeptemberJune 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 SeptemberJune 30, 20212022 increased by 315 basis points as compared to the three months ended June 30, 2021,March 31, 2022, primarily attributable higher rates on averageto 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 ninesix months ended SeptemberJune 30, 20212022 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 decreaseaverage loan and lease balances originated or repriced in interest rates as compared to prior periods anda lower average loans and leases. rate environment.
The cost of interest-bearing liabilities decreased 7 basis points, for the three months ended SeptemberJune 30, 2021, as2022 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 ninesix months ended SeptemberJune 30, 2021,2022, as compared to the same period in 2020, also2021, due to the decrease in interest rates and correspondingCompany'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.
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 ninesix months ended SeptemberJune 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. |
| | | 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. |
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 SeptemberJune 30, 20212022 as compared to three months ended June 30, 2021,March 31, 2022, as well as the ninesix months ended SeptemberJune 30, 20212022 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. |
| | | 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 $18.9a $18.7 million recapture of provision for credit losses for the three months ended SeptemberJune 30, 2021,2022, as compared to a $23.0$4.8 million recapture ofprovision 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 threesix months ended June 30, 2021 was attributable to the stabilizing economic forecast used in the credit models2021. 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 inchanges 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 millionrecorded 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 million0.09% for the ninethree 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 SeptemberMarch 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 threesix months ended June 30, 2021. As an annualized percentage of average outstanding loans and leases, net charge-offs for the ninethree months ended SeptemberJune 30, 2021 was 0.23%2022 were 0.11%, as compared to 0.31%0.10% for the ninethree months ended SeptemberMarch 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.
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 SeptemberJune 30, 20212022 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.
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 SeptemberJune 30, 2021,2022, compared to the three months ended June 30, 2021,March 31, 2022, as well as the ninecomparison of the six months ended SeptemberJune 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 deposits2022 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 ninesix months ended SeptemberJune 30, 20212022 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 decreasedOther 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.
Other income for the three months ended September 30, 2021 decreased by $3.9 million2022, 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 dollarAdditionally, a one-time gain related toon the sale of Umpqua Investments, Inc. and a $2.3of $4.5 million advisory fee earnedwas 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 fluctuationchange in the gain on the swap derivative fair valuegain 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 $10.3as 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 ninesix months ended SeptemberJune 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 SeptemberJune 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 decreasedincreased 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 related2022, 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% forMarch 31, 2022. For the threesix months ended June 30, 2021.
For-sale2022, for-sale mortgage closed loan volume decreased 21% for the nine months ended September 30, 2021, as58% compared to the ninesix months ended SeptemberJune 30, 2020. For the nine months ended September 30, 2021, the2021. 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 ninesix months ended SeptemberJune 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.
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 ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
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|
| 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.
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 ninesix months ended SeptemberJune 30, 20212022 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 threesix 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 threesix 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 wasperiods, due to increaseda decrease in exit and disposal costs asof $2.5 million and $2.6 million for the Company closedthree and six months ended June 30, 2022, respectively. The prior elevated levels of exit and disposal costs was due to store locationsconsolidations and exited back-office leaseslease 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.
FINANCIAL CONDITION
Cash and Cash Equivalents
Cash and cash equivalents were $3.7$1.0 billion at Septemberas of June 30, 2021,2022, compared to $2.6$2.8 billion atas of December 31, 2020.2021. The increasedecrease of interest bearinginterest-bearing cash and temporary investments reflects strong depositloan 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 SeptemberJune 30, 2021,2022, compared to $2.9$3.9 billion at December 31, 2020.2021. The increasedecrease 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 SeptemberJune 30, 20212022 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 Septemberas 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 lossesACL was considered necessary on these debt securities as of SeptemberJune 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.
Loans and Leases
Total loans and leases outstanding at Septemberas of June 30, 20212022 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 wellof June 30, 2022 is 93%, as the transfercompared 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 SeptemberJune 30, 20212022 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 | |
Asset Quality and Non-Performing Assets
The following table summarizes our non-performing assets, TDR loans, the ACL and asset quality ratios as of SeptemberJune 30, 20212022 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 orand 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
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 the deferral guidance at the federal and state levels, these loans are generally classified based on their past due status prior to their deferral period; as such, are classified as performing loans that accrue interest.
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 SeptemberJune 30, 2021, a decrease2022, 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 ninesix months ended SeptemberJune 30, 20212022 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.
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 SeptemberJune 30, 20212022 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 thirdsecond quarter of 2021,2022, the Bank used Moody's Analytics August consensusAnalytics' 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% dropping3.6% 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 lossesACL as of SeptemberJune 30, 20212022 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.
Residential Mortgage Servicing Rights
The following table presents the changes in our residential mortgage servicing rightsMSR portfolio for the three months ended September 30, 2021 and June 30, 2021,2022 and March 31, 2022, as well as the ninesix months ended SeptemberJune 30, 20212022 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.
Information related to our residential serviced loan portfolio as of SeptemberJune 30, 20212022 and December 31, 20202021 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 rightsMSR 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 rightsMSR will increase as market rates for mortgage loans rise and decrease if market rates fall. Mortgage refinance volumes remain elevated; however, acceleratedrates 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 decreasedincreased by $634,000$10.9 million and $4.3$51.0 million for the three and ninesix months ended SeptemberJune 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 ninesix months ended SeptemberJune 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 SeptemberJune 30, 2021, an increase2022, a decrease of $2.3 billion,$462.3 million, as compared to December 31, 2020.2021. The increasedecrease is mainly attributable to a decline in money market and time deposits, offset by growth in non-interest bearingdemand 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.
The following table presents the deposit balances by category as of SeptemberJune 30, 20212022 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 SeptemberJune 30, 2021,2022, compared to $424.1$149.9 million at December 31, 2020.2021.
Borrowings
At SeptemberJune 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 SeptemberJune 30, 2021, which decreased $765.1 million from2022 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.
Junior Subordinated Debentures
We had junior subordinated debentures with carrying values of $387.6$409.2 million and $343.5$381.1 million at SeptemberJune 30, 20212022 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 SeptemberJune 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 elevatedmaintaining a sufficient on-balance sheet liquidity position to provide flexibility, to grow deposit balances to provide flexibility toand 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 pandemiccurrent 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 SeptemberJune 30, 20212022 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.
The Bank had available lines of credit with the FHLB totaling $8.5$9.6 billion at SeptemberJune 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 onnamely 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 SeptemberJune 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 ninesix months ended SeptemberJune 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 ninesix months ended SeptemberJune 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.
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 recapturethe proceeds from sales of provision for loanloans and lease lossesleases 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 ninesix months ended SeptemberJune 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 ninesix months ended SeptemberJune 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 growthbalances 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 ColumbiaWe may have an impact on Umpqua'sutilize 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.
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 SeptemberJune 30, 20212022 was $2.7$2.5 billion. The increasedecrease in shareholders' equity during the ninesix months ended SeptemberJune 30, 20212022 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 repurchasedof $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 restrictedagreed to refrain from paying quarterly cash dividends in excess of the currentthen-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 secondfirst quarter 20212022 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.
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 SeptemberJune 30, 20212022 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 supersedesAs of June 30, 2022, the previously approved share repurchaseCompany repurchased a total of $78.2 million in shares under the program, which was scheduled to expireexpires 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 ninesix months ended SeptemberJune 30, 2021, 4.0 million2022, no shares were repurchased under the new plan.
The repurchase program is currentlyCompany 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.
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 SeptemberJune 30, 20212022 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 willto 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our assessment of market risk as of SeptemberJune 30, 20212022 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.
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 SeptemberJune 30, 2021.2022.
No change in internal control over financial reporting occurred during the quarter ended SeptemberJune 30, 20212022 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 involvedThe 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.
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, certainThere 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.
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.
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.
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 SeptemberJune 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 2,0894,267 shares to be issued upon vesting of restricted stock awards to pay withholding taxes. During the three months ended SeptemberJune 30, 2021, 4.0 million2022, there were no shares were repurchased pursuant to the Company's publicly announced corporate stock repurchase plan described in (2) below.
(2)As ofOn 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 SeptemberJune 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
Item 6. Exhibits
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Exhibit # | Description |
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2.1 | |
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3.1 | |
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3.2 | |
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4.1 | |
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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. |
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10.1* | |
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31.1 | |
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31.2 | |
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31.3 | |
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32 | |
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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 |
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101.SCH | Inline XBRL Taxonomy Extension Schema Document |
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101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 | The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 2021,2022, formatted in Inline XBRL (included in Exhibit 101) |
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* | Compensatory plan or arrangement |
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(a) | Incorporated by reference to Exhibit 2.1 to Form 8-K filed October 15, 2021 |
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(b) | Incorporated by reference to Exhibit 3.1 to Form 8-K filed April 23, 2018 |
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(c) | Incorporated by reference to Exhibit 99.2 to Form 8-K filed March 24, 2020 |
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(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.
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| | UMPQUA HOLDINGS CORPORATION |
| | (Registrant) |
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Dated | November 4, 2021July 29, 2022 | /s/ Cort L. O'Haver |
| | Cort L. O'Haver President and Chief Executive Officer |
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Dated | November 4, 2021July 29, 2022 | /s/ Ronald L. Farnsworth |
| | Ronald L. Farnsworth Executive Vice President/Chief Financial Officer and Principal Financial Officer |
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Dated | November 4, 2021July 29, 2022 | /s/ Lisa M. White |
| | Lisa M. White Senior Vice President/Corporate Controller and Principal Accounting Officer |