• Umpqua Holdings Corporation
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  • Umpqua Holdings Reports Improved Third Quarter 2010 Results
    Company Release - 10/21/2010 08:00

    Third Quarter 2010 Net Income of $0.07 Per Diluted Share, Operating Income of $0.08 Per Diluted Share

    Non-Covered, Non-Performing Assets Declined to 1.59% of Total Assets

    Deposits Increased $743 Million, or 9%, over Prior Quarter

    PORTLAND, Ore.--(BUSINESS WIRE)-- Umpqua Holdings Corporation (NASDAQ: UMPQ), parent company of Umpqua Bank and Umpqua Investments Inc. today announced third quarter 2010 net earnings available to common shareholders of $8.2 million, or $0.07 per diluted common share, compared to a net loss available to common shareholders of $10.4 million, or $0.14 per diluted common share, for the same period in the prior year.

    Operating income, defined as earnings available to common shareholders before gains or losses on junior subordinated debentures carried at fair value, net of tax, bargain purchase gains on acquisitions, net of tax, merger related expenses, net of tax, and goodwill impairment, was $9.5 million, or $0.08 per diluted common share for the third quarter of 2010, compared to an operating loss of $11.0 million, or $0.15 per diluted common share, for the same period in the prior year. Operating income or loss is considered a “non-GAAP” financial measure. More information regarding this measurement and reconciliation to the comparable GAAP measurement is provided under the heading Non-GAAP Financial Measures below.

    Significant financial statement items for the third quarter of 2010 include:

    • Non-covered, non-performing assets ended the quarter at 1.59% of total assets, the lowest level in more than two years;
    • Provision for non-covered loan losses of $24.2 million, a 19% decrease, and total net charge-offs of $30.0 million, a 13% increase, on a sequential quarter basis. Net charge-offs exceeded the provision for non-covered loan losses during the quarter because impairment reserves established in the prior quarter were charged off in the current quarter;
    • The allowance for credit losses ended the quarter at 1.91% of non-covered total loans and lease;
    • Total deposits increased $743 million, or 9%, on a sequential quarter basis due to organic growth during the quarter;
    • Net interest margin, on a tax equivalent basis, increased 37 basis points to 4.42%, related to covered loan payoffs ahead of expectations, with a corresponding offset to the change in FDIC indemnification asset in other non-interest income;
    • The cost of interest bearing deposits for the third quarter of 2010 was 1.08%, a decrease of 2 basis points on a sequential quarter basis;
    • Tangible common equity ratio decreased to 8.95%, resulting from the growth in total assets;
    • Total risk-based capital of 17.52%, and Tier 1 common to risk weighted asset ratio of 13.1%.

    “The results from this past quarter once again attest to the strength of the core growth strategy of Umpqua as organic deposit growth exceeded $700 million. We are also pleased to report that for the third quarter in a row, our credit professionals lowered our non-covered, non-performing assets, which are now down to 1.59% of total assets,” said Ray Davis, CEO of Umpqua Holdings Corporation. “We believe the actions management has taken over the last several quarters have positioned the Company for continued growth.”

    FDIC-assisted acquisitions

    In the first quarter of 2010, Umpqua Bank assumed the banking operations of EvergreenBank (“Evergreen”) and Rainier Pacific Bank (“Rainier”), both located in the greater Seattle-Tacoma area of Washington. In the second quarter of 2010, Umpqua Bank assumed the banking operations of Nevada Security Bank (“Nevada Security”), Reno, Nevada. The operations of Evergreen and Rainier (combined), and Nevada Security, have contributed operating earnings of $7.5 million and $1.2 million, respectively, since their assumptions. The operating systems of all three institutions have been converted onto Umpqua’s platform.

    Asset quality – Non-covered loan portfolio

    Non-performing assets were $183.6 million, or 1.59% of total assets, as of Sept. 30, 2010, compared to $205.5 million, or 1.90% of total assets as of June 30, 2010, and $156.0 million, or 1.70% of total assets as of Sept. 30, 2009. Of this amount, as of Sept. 30, 2010, $139.7 million represented non-accrual loans, $11.9 million represented loans past due greater than 90 days and still accruing interest, and $32.0 million was other real estate owned (“OREO”).

    The Company has aggressively charged-down impaired assets to their disposition values, and the assets are expected to be resolved at those levels, absent further declines in market prices. As of Sept. 30, 2010, the non-performing assets of $183.6 million have been written down by 39%, or $118.8 million, from their original balance of $302.4 million.

    The provision for loan losses for the third quarter of 2010 was $24.2 million, the lowest level of provision since the second quarter of 2008, due to improving credit quality of the loan portfolio. Total net charge-offs for the third quarter of 2010 were $30.0 million, reducing the allowance for credit losses to 1.91% of non-covered loans and leases at Sept. 30, 2010, as compared to 2.00% of total non-covered loans as of June 30, 2010 and 1.71% of total non-covered loans as of Sept. 30, 2009. Net charge-offs exceeded the provision for loan losses during the third quarter of 2010, related to impairment reserves established in the prior quarter being charged off in the current quarter. The annualized net charge-off rate for the third quarter of 2010 was 2.08%.

    Loans past due 30 to 89 days were $80.2 million, or 1.41% of non-covered loans and leases as of Sept. 30, 2010, as compared to $40.1 million, or 0.70% as of June 30, 2010, and $46.1 million, or 0.76% as of Sept. 30, 2009.

    Since 2007, the Company has been aggressively resolving problems arising from the current economic downturn. The following table recaps the Company’s credit quality trends since the second quarter of 2007 as it relates to the non-covered loan portfolio:

    Credit quality trends – Non-covered loans

    (Dollars in thousands)    

     

           

     

    Allowance

    Non-covered,

        Provision     Netfor credit lossesnon-performing
    forcharge-offsto non-covered30-89 daysassets to
    loan loss     (recoveries)     loans %     past due %     total assets %
    Q2 2007 $ 3,413 $ 31 1.17 % 0.56 % 0.59 %
    Q3 2007 20,420 865 1.47 % 0.99 % 0.96 %
    Q4 2007 17,814 21,188 1.42 % 0.64 % 1.18 %
    Q1 2008 15,132 13,476 1.45 % 1.13 % 1.06 %
    Q2 2008 25,137 37,976 1.22 % 0.31 % 1.25 %
    Q3 2008 35,454 15,193 1.54 % 1.16 % 1.66 %
    Q4 2008 31,955 30,072 1.58 % 0.96 % 1.88 %
    Q1 2009 59,092 59,871 1.58 % 1.47 % 1.82 %
    Q2 2009 29,331 26,047 1.63 % 0.80 % 1.73 %
    Q3 2009 52,108 47,342 1.71 % 0.76 % 1.70 %
    Q4 2009 68,593 64,072 1.81 % 0.69 % 2.38 %
    Q1 2010 42,106 38,979 1.91 % 0.93 % 1.99 %
    Q2 2010 29,767 26,637 2.00 % 0.70 % 1.90 %
    Q3 2010   24,228       30,044 1.91 % 1.41 % 1.59 %
    Total $ 454,633     $ 411,703
     

    Non-covered construction loan portfolio

    Total non-covered construction loans as of Sept. 30, 2010 were $463 million, representing a decrease of 7% since June 30, 2010, and a decrease of 38% from Sept. 30, 2009. Within this portfolio, the residential development loan segment was $160 million, or 3% of the total non-covered loan portfolio. Of this amount, $30 million represented non-performing loans, and $130 million represented performing loans. The residential development loan segment has decreased $98 million, or 38%, since Sept. 30, 2009.

    The remaining $303 million in non-covered construction loans as of Sep. 30, 2010 primarily represents commercial construction projects. Total non-covered, non-performing commercial construction loans were $26.4 million at Sept. 30, 2010, and $5.5 million were past due 30 to 89 days as of Sept. 30, 2010.

    Non-covered commercial real estate loan portfolio

    The total non-covered term commercial real estate loan portfolio was $3.5 billion as of Sept. 30, 2010. Of this total, $2.3 billion are non-owner occupied and $1.2 billion are owner occupied. Of the total term commercial real estate portfolio, $38.7 million, or 1.11%, are past due 30-89 days as of Sept. 30, 2010. Of the total non-covered commercial real estate portfolio, 7% matures in 2010-2011, 13% in years 2012-2013, and 21% in years 2014-2015. The remaining 59% of the portfolio matures in or after the year 2016.

    The portfolio was conservatively underwritten at origination to a minimum debt service coverage ratio of 1.20, and as a result, in many cases, the loan-to-value was substantially less than our in-house maximum of 75%. This underwriting serves to protect against the low capitalization rate environment of the past several years.

    During the past two years, the Company has completed several rounds of stress testing on the commercial real estate portfolio, focusing on items such as capitalization rate, interest rate and vacancy factors. The results of the stress testing showed no significant unidentified risks, unlike our experience in the residential development construction portfolio. However, given the economic climate, we expect any potential issues that may arise in this portfolio will result from individual loans within distinct geographic areas and not represent a systemic weakness. We believe we are well positioned to manage the exposure and work with our customers until the economic climate improves.

    Non-covered restructured loans

    Restructured loans on accrual status were $75.6 million as of Sept. 30, 2010, down 6% from $80.5 million as of June 30, 2010, and down 59% from $182.2 million as of Sept. 30, 2009. The decrease during the third quarter primarily resulted from payments received, and the decrease from the same period in the prior year primarily resulted from payments received and reclassifications of loans previously restructured to non-accrual status. The Company will consider a loan for restructuring only if it is current on payments. The Company does not enter into restructurings on loans in non-performing status, and generally requires the customer to pledge additional collateral, maintain a minimum debt service coverage ratio of 1.0, and show substantial external sources of repayment prior to the Company agreeing to restructure.

    Additional information related to asset quality

    Additional tables can be found at the end of this earnings release covering the following aspects of the Company's non-covered loan portfolio: residential development loan trends by region, residential development loan stratification by size and by region, non-performing asset detail by type and by region, loans past due 30 to 89 days by type and by region, loans past due 30 to 89 days trends, and restructured loans on accrual status by type and by region.

    Asset quality – Covered loan portfolio

    Covered non-performing assets were $54.5 million, or 0.47% of total assets, as of Sept. 30, 2010, as compared to $87.1 million, or 0.80% of total assets, as of June 30, 2010. Of the amount at Sept. 30, 2010, $24.2 million represented non-accrual loans and $30.3 million was OREO. The reduction in covered non-performing assets in the current quarter primarily resulted from the reclassification of some Evergreen and Rainier impaired loan pools into accrual status. As cash flows and other assets have been received in excess of original estimates, the carrying value of these impaired loan pools have decreased and the total expected cash flows associated with the pool have increased, resulting in accretable yield. It is important to note that at this time, the difference between the cash flows related to principal expected to be received and the carrying value of these loan pools is the only amount included in accretable yield and available to be recognized into interest income, and that the contractual interest income on the underlying loans has not been included in our estimation of expected future cash flows to be received, or considered to be accretable yield of the pool, as the loans are considered non-performing. These covered non-performing assets were written-down to their estimated fair value on their acquisition date, incorporating our estimate of future expected cash flows until the ultimate resolution of these credits. The estimated credit losses embedded in these acquired non-performing loan portfolios were based on management’s and third-party consultants’ credit reviews of the portfolios performed during the due diligence process related to the Evergreen, Rainier and Nevada Security transactions. To the extent actual or projected cash flows are less than originally estimated, additional provisions for loan losses on the covered loan portfolio will be recognized; however, these provisions would be mostly offset by a corresponding increase in the FDIC indemnification (loss sharing) asset recognized within non-interest income.

    Net interest margin

    The Company reported a tax equivalent net interest margin of 4.42% for the third quarter of 2010, compared to 4.05% for the second quarter of 2010, and 4.05% for the third quarter of 2009. The increase in net interest margin on a sequential quarter basis resulted primarily from an increase in average covered loans outstanding, increased yield on the covered loan portfolio as a result of payoffs ahead of expectations and declining costs of interest bearing deposits, partially offset by interest reversals of new non-accrual loans, a decline in non-covered loans outstanding, the impact of holding much higher levels of interest bearing cash, and the purchase of short-term, low-yielding investment securities during the quarter. The increase in net interest margin related to covered loan yields was offset by a corresponding decrease to the change in FDIC indemnification asset in other non-interest income. Interest reversals on new non-accrual loans during the third quarter of 2010 were $0.6 million, negatively impacting the net interest margin by 2 basis points. Excluding the reversals of interest, the net interest margin would have been 4.44% during the quarter. For the twelfth consecutive quarter, the Company has continued to reduce the cost of interest bearing deposits. As a result of these efforts, the cost of interest bearing deposits was 1.08%, 2 basis points lower than the second quarter of 2010 and 42 basis points lower than the third quarter of 2009.

    Mortgage banking revenue

    The Company generated a record $7.1 million in total mortgage banking revenue during the third quarter of 2010, on closed loan volume of $232 million. In the third quarter of 2010, the Company recognized a decline in the fair value of the mortgage servicing right assets of $1.1 million resulting from the historically low market for mortgage interest rates. Income from the origination and sale of mortgage loans was $7.2 million in the third quarter, representing an 82% increase on a sequential quarter basis. As of Sept. 30, 2010, the Company serviced $1.5 billion of mortgage loans for others, and the related mortgage servicing right asset was valued at $13.5 million, or 0.91% of the total serviced portfolio principal balance.

    Fair value of junior subordinated debentures

    The Company recognized a $0.6 million loss from the change in fair value of junior subordinated debentures during the third quarter of 2010. The Company utilizes internal models to determine the valuation of this liability. The majority of the fair value difference over par value relates to the $61.8 million of junior subordinated debentures issued in the third quarter of 2007, which carry interest rate spreads of 135 and 275 basis points during the 3 month LIBOR. As of Sept. 30, 2010, the credit risk adjusted interest spread for potential new issuances was forecasted to be significantly higher than the contractual spread. The difference between these spreads creates the gain in fair value of the Company’s junior subordinated debentures which results from their carrying amount compared to the estimated amount that would be paid to transfer the liability in an orderly transaction among market participants. Because these instruments are no longer being originated in the market, the quarterly fair value adjustments are not likely to be volatile in the future, and the cumulative fair value adjustment will continue to reverse and be recognized as a reduction in non-interest income over the remaining period to maturity of each related instrument. As of Sept. 30, 2010, the total par value of junior subordinated debentures carried at fair value was $134.0 million, and the fair value was $80.1 million.

    Non-interest expense

    Total non-interest expense for the third quarter of 2010 was $85.2 million, compared to $74.8 million for the second quarter of 2010 and $68.3 million for the third quarter of 2009. Included in non-interest expense are several categories which are outside of the operational control of the Company, including FDIC deposit insurance assessments, gain or loss on other real estate owned, and infrequently occurring expenses such as merger related costs and goodwill impairments. Excluding these non-controllable or infrequently occurring items, the remaining non-interest expense items totaled $79.9 million for the third quarter of 2010, compared to $70.1 million for the second quarter of 2010 and $56.4 million for the third quarter of 2009. Approximately $4.75 million of other expense in the third quarter of 2010 is considered non-recurring, relating primarily to professional fees and severance costs. The remaining increase related primarily to increases in variable expenses related to the mortgage banking division’s production in the quarter, and the assumption of Evergreen’s, Rainier’s and Nevada Security’s banking operations, higher loan collection and OREO management expense, as well as various other growth initiatives underway.

    Total FDIC deposit insurance assessments during the third quarter of 2010 were $3.9 million. The increase over the prior period of $3.6 million is a result of the deposit growth in the third quarter and a full quarter of outstanding deposits related to the Nevada Security FDIC-assisted acquisition.

    Income taxes

    The Company recorded a provision for income taxes of $2.2 million in the third quarter of 2010. The change in the effective income tax rate in the quarter reflects the effects of permanent differences on our taxable income year to date.

    Balance sheet

    Total consolidated assets as of Sept. 30, 2010 were $11.5 billion, compared to $10.8 billion on June 30, 2010 and $9.2 billion a year ago. Total gross loans and leases (covered and non-covered), and deposits, were $6.5 billion and $9.3 billion, respectively, as of Sept. 30, 2010, compared to $6.1 billion and $7.2 billion, respectively, as of Sept. 30, 2009.

    The following table presents the year-to-date 2010 organic growth rates, which excludes the effects of the Evergreen, Rainier and Nevada Security FDIC-assisted acquisitions and the related run-off of assumed brokered time deposits, which the Bank is not renewing upon maturity:

        Non-covered        

    (Dollars in thousands)

    loans and leases     Deposits     Assets
    As reported, 9/30/10 $5,698,267 $9,301,340 $11,532,971
    Less: 12/31/09 balances 5,999,267     7,440,434     9,381,372
    Total growth year-to-date (301,000) 1,860,906 2,151,598
     
    Less:

     

    Evergreen acquisition (1) -- 272,142 355,298
    Rainier Pacific acquisition (1) -- 416,430 721,174
    Nevada Security acquisition (1) -- 428,329 437,595
    Add back:

    Run-off of assumed brokered time deposits not renewed

    --     102,871     102,871
    Organic growth $(301,000)     $846,876     $740,402
     
    Annualized organic growth rate (6.7)% 15.2% 10.6%
     

    (1) Excludes run-off of non-brokered deposits occurring in the quarter of acquisition.

     

    Total loans held for investment (including covered and non-covered) decreased $58 million during the third quarter of 2010. This decrease is principally attributable to non-covered charge-offs and transfers to other real estate owned.

    Total deposits increased $743 million, or 9%, during the third quarter of 2010. Total deposits have increased $1.9 billion, or 25%, since Dec. 31, 2009. The deposits acquired from the Evergreen, Rainier and Nevada Security acquisitions included $135 million of brokered time deposits as of their respective acquisition dates. The Bank is not renewing these brokered deposits as they mature. Excluding the impact of the deposits assumed in acquisitions of and the run-off of brokered time deposits that have matured, total deposits increased $846 million in 2010, representing a 15.2% annualized organic growth rate.

    Due to unattractive bond market conditions since the second half of 2009, the Company has been holding larger levels of interest bearing cash rather than investing all excess liquidity into the bond market. At Sept. 30, 2010, the Company had $934 million of interest bearing cash earning 0.25%, the target Federal Funds Rate. This excess balance sheet liquidity has increased since the prior year, as investment security alternatives in the current market are unattractive given the historically low interest rate environment. However, in the third quarter of 2010 we did purchase short duration government-sponsored investment securities to match and offset the interest expense associated with the growth in deposits during the quarter. The Company plans to hold an increased interest bearing cash position relative to historical levels until the investment alternatives in the market improve from both a return and duration standpoint. Including secured off-balance sheet lines of credit, total available liquidity to the Company was $4.8 billion as of Sept. 30, 2010, representing 42% of total assets and 51% of total deposits.

    Capital

    As of Sept. 30, 2010, total shareholders’ equity was $1.65 billion, comprised entirely of common equity. Book value per common share was $14.42, tangible book value per common share was $8.48 and the ratio of tangible common equity to tangible assets was 8.95%.

    In April 2010, the Company’s preferred stock (Common Stock Equivalent Series B) of $198.3 million converted into common stock following the Company's annual shareholder meeting at which shareholders of the Company approved, among other items, an increase in authorized total common shares from 100 million to 200 million.

    The Company’s estimated total risk-based capital ratio as of Sept. 30, 2010 is 17.52%. This represents a slight decrease from June 30, 2010, as a result asset growth during the quarter. Our total risk-based capital level is well in excess of the regulatory definition of “well-capitalized” of 10.00%. The Company’s estimated Tier 1 common to risk weighted assets ratio is 13.1% as of Sept. 30, 2010. These capital ratios as of Sept. 30, 2010 are estimates pending completion and filing of the Company’s regulatory reports.

    Non-GAAP Financial Measures

    In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Umpqua believes that certain non-GAAP financial measures provide investors with information useful in understanding Umpqua’s financial performance; however, readers of this report are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.

    Umpqua recognizes gains or losses on our junior subordinated debentures carried at fair value resulting from changes in interest rates and the estimated market credit risk adjusted spread that do not directly correlate with the Company’s operating performance. Also, Umpqua incurs significant expenses related to the completion and integration of mergers and acquisitions. Additionally, we may recognize goodwill impairment losses that have no direct effect on the Company’s or the Bank’s cash balances, liquidity, or regulatory capital ratios. Lastly, Umpqua may recognize one-time bargain purchase gains on certain FDIC-assisted acquisitions that are not reflective of Umpqua’s on-going earnings power. Accordingly, management believes that our operating results are best measured on a comparative basis excluding the impact of gains or losses on junior subordinated debentures measured at fair value, net of tax, merger-related expenses, net of tax, and other charges related to business combinations such as goodwill impairment charges or bargain purchase gains, net of tax. We define operating earnings (loss) as earnings available to common shareholders before gains or losses on junior subordinated debentures carried at fair value, net of tax, bargain purchase gains on acquisitions, net of tax, merger related expenses, net of tax, and goodwill impairment, and we calculate operating earnings (loss) per diluted share by dividing operating earnings by the same diluted share total used in determining diluted earnings per common share.

    The following table provides the reconciliation of earnings (loss) available to common shareholders (GAAP) to operating earnings (loss) (non-GAAP), and earnings (loss) per diluted common share (GAAP) to operating earnings (loss) per diluted share (non-GAAP) for the periods presented:

                  Sequential     Year over
    Quarter ended:QuarterYear
    (Dollars in thousands, except per share data)Sep 30, 2010     Jun 30, 2010     Sep 30, 2009     % Change     % Change
     

    Net earnings (loss) available to common shareholders

    $8,173 $3,447 $(10,376) 137% (179)%
    Adjustments:

    Net loss (gain) on junior subordinated debentures carried at fair value, net of tax (1)

    332 -- (589) nm (156)%

    Merger related expenses, net of tax (1)

    986     1,301     -- (24)% nm
    Operating earnings (loss) $9,491     $4,748     $(10,965) 100% (187)%
     

    Earnings (loss) per diluted share:

    Earnings (loss) available to common shareholders $0.07 $0.03 $(0.14) 133% (150)%
    Operating earnings (loss) $0.08 $0.04 $(0.15) 100% (153)%

     

     
    Year over
    Nine Months Ended:Year
    (Dollars in thousands, except per share data)Sep 30, 2010     Sep 30, 2009     % Change
     

    Net earnings (loss) available to common shareholders

    $9,138 $(136,338) (107)%
    Adjustments:

    Net gain on junior subordinated debentures carried at fair value, net of tax (1)

    (3,320) (6,104) (46)%
    Bargain purchase gain on acquisitions, net of tax (1) (5,074) -- nm
    Goodwill impairment -- 111,952 (100)%
    Merger related expenses, net of tax (1) 3,431     164     1992%
    Operating earnings (loss) $4,175     $(30,326)     (114)%
     

    Earnings (loss) per diluted share:

    Earnings (loss) available to common shareholders

    $0.09 $(2.10) (104)%
    Operating earnings (loss) $0.04 $(0.47) (109)%
     

    (1) Income tax effect of pro forma operating earnings adjustments at 40%.

     

    Management believes tangible common equity and the tangible common equity ratio are meaningful measures of capital adequacy. Tangible common equity is calculated as total shareholders' equity less preferred stock and less goodwill and other intangible assets, net (excluding MSRs). In addition, tangible assets are total assets less goodwill and other intangible assets, net (excluding MSRs). The tangible common equity ratio is calculated as tangible common shareholders’ equity divided by tangible assets.

    The following table provides reconciliations of ending shareholders’ equity (GAAP) to ending tangible common equity (non-GAAP), and ending assets (GAAP) to ending tangible assets (non-GAAP).

    (Dollars in thousands, except per share data)

        Sep 30, 2010     Jun 30, 2010     Sep 30, 2009
           
    Total shareholders' equity $1,651,714 $1,654,053 $1,606,150
    Subtract:
    Preferred stock -- -- 203,779
    Goodwill and other intangible assets, net 680,893     682,249     641,759
    Tangible common shareholders' equity $970,821     $971,804     $760,612
     
    Total assets $11,532,971 $10,827,268 $9,204,346
    Subtract:
    Goodwill and other intangible assets, net 680,893     682,249     641,759
     
    Tangible assets $10,852,078     $10,145,019     $8,562,587
     
    Common shares outstanding at period end 114,531,514 114,524,973 86,780,559
     
    Tangible common equity ratio 8.95% 9.58% 8.88%
    Tangible book value per common share $8.48 $8.49 $8.76
     

    About Umpqua Holdings Corporation

    Umpqua Holdings Corporation (NASDAQ: UMPQ) is the parent company of Umpqua Bank, an Oregon-based community bank recognized for its entrepreneurial approach, innovative use of technology, and distinctive banking solutions. Umpqua Bank has 183 locations between San Francisco, Calif., and Seattle, Wash., along the Oregon and Northern California Coast, Central Oregon and Northern Nevada. Umpqua Holdings also owns a retail brokerage subsidiary, Umpqua Investments, Inc., which has locations in Umpqua Bank stores and in dedicated offices in Oregon. Umpqua Bank’s Private Bank Division serves high net worth individuals and non-profits providing customized financial solutions and offerings. Umpqua Holdings Corporation is headquartered in Portland, Ore. For more information, visit www.umpquaholdingscorp.com.

    Umpqua Holdings Corporation will conduct a quarterly earnings conference call Thursday, Oct. 21, 2010, at 10:00 a.m. PDT (1:00 p.m. EDT) during which the company will discuss third quarter results and provide an update on recent activities. There will be a question-and-answer session following the presentation. Shareholders, analysts and other interested parties are invited to join the call by dialing 800-752-8363 a few minutes before 10:00 a.m. The conference ID is “14703182.” Information to be discussed in the teleconference will be available on the company’s website prior to the call at www.umpquaholdingscorp.com. A rebroadcast can be found approximately two hours after the conference call by dialing 800-642-1687 with the conference ID noted above, or by visiting the Company’s website.

    Forward-Looking Statements

    This press release includes forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders.These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to various risk factors, including those set forth from time to time in our filings with the SEC.You should not place undue reliance on forward-looking statements and we undertake no obligation to update any such statements.In this press release we make forward-looking statements about our success in resolving remaining credits at the estimated disposition value of related collateral, the mitigating effect of FDIC loss sharing agreements, our expectation that any weakness in our CRE portfolio will arise from local market weakness and not a systemic weakness, valuations of junior subordinated debentures and our plans to hold a large interest bearing cash position.Specific risks that could cause results to differ from the forward-looking statements are set forth in our filings with the SEC and include, without limitation, our inability to effectively manage problem credits, unanticipated further declines in real estate values, certain loan assets become ineligible for loss sharing, unanticipated deterioration in the commercial real estate loan portfolio, and continued negative pressure on interest income associated with our large cash position.

    Umpqua Holdings Corporation

    Consolidated Statements of Operations
    (Unaudited)
            Sequential     Year over
    Quarter Ended:QuarterYear
    (Dollars in thousands, except per share data)Sep 30, 2010     Jun 30, 2010     Sep 30, 2009     % Change     % Change
    Interest income        
    Loans and leases $112,652 $97,240 $89,474 16% 26%
    Interest and dividends on investments:
    Taxable 17,421 15,569 15,365 12% 13%
    Exempt from federal income tax 2,221 2,247 2,020 (1)% 10%
    Dividends 6 3 22 100% (73)%
    Temporary investments & interest bearing cash 646     545     207 19% 212%
    Total interest income 132,946 115,604 107,088 15% 24%
     

    Interest expense

    Deposits 19,913 18,463 22,132 8% (10)%

    Repurchase agreements and fed funds purchased

    136 123 163 11% (17)%
    Junior subordinated debentures 2,047 1,939 2,114 6% (3)%
    Term debt 2,533     2,779     917 (9)% 176%
     
    Total interest expense 24,629 23,304 25,326 6% (3)%
     
    Net interest income 108,317 92,300 81,762 17% 32%
     
    Provision for non-covered loan and lease losses 24,228 29,767 52,108 (19)% (54)%
    Provision for covered loan and lease losses 667 -- -- nm nm
     
    Non-interest income
    Service charges 8,756 9,585 8,542 (9)% 3%
    Brokerage fees 2,609 3,139 1,993 (17)% 31%
    Mortgage banking revenue, net 7,138 3,209 4,288 122% 66%
    Net gain on investment securities 2,287 -- 158 nm 1347%

    (Loss) gain on junior subordinated debentures carried at fair value

    (554) -- 982 nm (156)%
    Change in FDIC indemnification asset (11,948) 263 -- nm nm
    Other income 3,845     2,367     1,962 62% 96%
     
    Total non-interest income 12,133 18,563 17,925 (35)% (32)%
     
    Non-interest expense
    Salaries and benefits 42,964 39,604 31,583 8% 36%
    Occupancy and equipment 11,448 11,472 9,937 0% 15%
    Intangible amortization 1,356 1,368 1,319 (1)% 3%
    FDIC assessments 3,910 3,555 3,321 10% 18%
    Net (gain) loss on other real estate owned (317) (952) 8,641 (67)% (104)%
    Merger related expenses 1,643 2,169 -- (24)% nm
    Other 24,166     17,617     13,548 37% 78%
     
    Total non-interest expense 85,170 74,833 68,349 14% 25%

    Income (loss) before provision for (benefit from) income taxes

    10,385 6,263 (20,770) 66% (150)%
    Provision for (benefit from) income taxes 2,194     2,800     (13,626) (22)% (116)%
     
    Net income (loss) 8,191 3,463 (7,144) 137% (215)%
     

    Dividends and undistributed earnings allocated to participating securities

    18 16 7 13% 157%
    Preferred stock dividend --     --     3,225 (100)% (100)%

    Net earnings (loss) available to common shareholders

    $8,173     $3,447     $(10,376) (137)% (179)%
     
    Weighted average shares outstanding 114,527,619 110,134,674 74,084,640 4% 55%
    Weighted average diluted shares outstanding 114,760,063 114,733,357 74,084,640 0% 55%
    Earnings (loss) per common share – basic $0.07 $0.03 $(0.14) 133% (150)%
    Earnings (loss) per common share – diluted $0.07 $0.03 $(0.14) 133% (150)%
    nm = not meaningful
     

    Umpqua Holdings Corporation

    Consolidated Statements of Operations
    (Unaudited)
           
    Nine Months Ended:
    (Dollars in thousands, except per share data)Sep 30, 2010     Sep 30, 2009     % Change
    Interest income    
    Loans and leases $300,600 $266,587 13%
    Interest and dividends on investments:
    Taxable 49,065 43,625 12%
    Exempt from federal income tax 6,655 5,755 16%
    Dividends 9 22 (59)%
    Temporary investments & interest bearing cash 1,590     258 516%
     
    Total interest income 357,919 316,247 13%
     

    Interest expense

    Deposits 57,165 68,552 (17)%

    Repurchase agreements and fed funds purchased

    382 527 (28)%
    Junior subordinated debentures 5,871 7,069 (17)%
    Term debt 6,832     3,935 74%
     
    Total interest expense 70,250 80,083 (12)%
     
    Net interest income 287,669 236,164 22%
     
    Provision for non-covered loan and lease losses 96,101 140,531 (32)%
    Provision for covered loan and lease losses 667 -- nm
     
    Non-interest income
    Service charges 26,706 24,565 9%
    Brokerage fees 8,387 5,117 64%
    Mortgage banking revenue, net 13,825 14,617 (5)%
    Net gain (loss) on investment securities 1,999 (1,077) (286)%

    Gain on junior subordinated debentures carried at fair value

    5,534 10,173 (46)%
    Bargain purchase gain on acquisitions 8,456 -- nm
    Change in FDIC indemnification asset (11,075) -- nm
    Other income 8,930     7,097 26%
     
    Total non-interest income 62,762 60,492 4%
     
    Non-interest expense
    Salaries and benefits 118,808 94,697 25%
    Occupancy and equipment 33,596 29,266 15%
    Intangible amortization 4,032 4,043 0%
    FDIC assessments 10,909 12,645 (14)%
    Net loss on other real estate owned 1,042 14,110 (93)%
    Goodwill impairment -- 111,952 (100)%
    Merger related expenses 5,718 273 1995%
    Other 55,769     39,917 40%
     
    Total non-interest expense 229,874 306,903 (25)%

    Income (loss) before provision for (benefit from) income taxes

    23,789 (150,778) (116)%

    Provision for (benefit from) income taxes

    2,410     (24,094) (110)%
     
    Net income (loss) 21,379 (126,684) (117)%
     

    Dividends and undistributed earnings allocated to participating securities

    49 22 123%
    Preferred stock dividend 12,192     9,632 27%
    Net earnings (loss) available to common shareholders $9,138     $(136,338) (107)%
     
    Weighted average shares outstanding 105,694,696 64,878,125 63%
    Weighted average diluted shares outstanding 105,923,776 64,878,125 63%
    Earnings (loss) per common share – basic $0.09 $(2.10) (104)%
    Earnings (loss) per common share – diluted $0.09 $(2.10) (104)%
     

    Umpqua Holdings Corporation

    Consolidated Balance Sheets
    (Unaudited)
                    Sequential     Year over
    QuarterYear
    (Dollars in thousands, except per share data)Sep 30, 2010     Jun 30, 2010     Sep 30, 2009     % Change     % Change
    Assets:
    Cash and due from banks, non-interest bearing $124,633 $143,098 $108,768 (13)% 15%
    Cash and due from banks, interest bearing 933.911 818,186 261,642 14% 257%
    Temporary investments 5,496 9,296 575 (41)% 856%
    Investment securities:
    Trading 2,155 1,743 1,912 24% 13%
    Available for sale 2,599,263 1,933,647 1,848,482 34% 41%
    Held to maturity 5,108 5,493 6,211 (7)% (18)%
    Loans held for sale 57,407 40,114 23,614 43% 143%
    Non-covered loans and leases 5,698,267 5,726,673 6,071,042 0% (6)%
    Less: Allowance for loan and lease losses (108,098)     (113,914)     (103,136) (5)% 5%
    Loans and leases, net 5,590,169 5,612,759 5,967,906 0% (6)%
    Covered loans and leases 840,469 870,238 -- (3)% nm
    Restricted equity securities 34,665 34,855 15,211 (1)% 128%
    Premises and equipment, net 133,728 128,586 101,883 4% 31%
    Mortgage servicing rights, at fair value 13,454 12,895 11,552 4% 16%
    Goodwill and other intangibles, net 680,893 682,249 641,759 0% 6%
    Non-covered other real estate owned 32,024 25,653 26,705 25% 20%
    Covered other real estate owned 30,348 28,290 -- 7% nm
    FDIC indemnification asset 217,696 246,983 -- (12)% nm
    Other assets 231,552     233,183     188,126 (1)% 23%
    Total assets $11,532,971     $10,827,268     $9,204,346 7% 25%
     
    Liabilities:
    Deposits $9,301,340 $8,558,744 $7,215,821 9% 29%
    Securities sold under agreements to repurchase 55,333 44,715 50,031 24% 11%
    Term debt 268,256 291,505 76,329 (8)% 251%
    Junior subordinated debentures, at fair value 80,146 79,590 81,992 1% (2)%
    Junior subordinated debentures, at amortized cost 102,946 103,027 103,269 0% 0%
    Other liabilities 73,236     95,634     70,754 (23)% 4%
    Total liabilities 9,881,257 9,173,215 7,598,196 8% 30%
     
    Shareholders' equity:
    Preferred stock -- -- 203,779 nm (100)%
    Common stock 1,540,029 1,538,793 1,252,786 0% 23%
    Retained earnings 75,502 73,062 118,204 3% (36)%
    Accumulated other comprehensive income 36,183     42,198     31,381 (14)% 15%
    Total shareholders' equity 1,651,714     1,654,053     1,606,150 0% 3%
    Total liabilities and shareholders' equity $11,532,971     $10,827,268     $9,204,346 7% 25%
     
    Common shares outstanding at period end 114,531,514 114,524,973 86,780,559 0% 32%
    Book value per common share $14.42 $14.44 $16.16 0% (11)%
    Tangible book value per common share $8.48 $8.49 $8.76 0% (3)%
    Tangible equity - common $970,821 $971,804 $760,612 0% 28%
    Tangible common equity to tangible assets 8.95% 9.58% 8.88%
     
    nm = not meaningful

     

     

    Umpqua Holdings Corporation

    Non-covered Loan & Lease Portfolio
    (Unaudited)
                    Sequential     Year over
    (Dollars in thousands)Sep 30, 2010Jun 30, 2010Sep 30, 2009QuarterYear
    Amount     MixAmount     MixAmount     Mix% Change     % Change

    Non-covered loans & leases:

               
    Commercial real estate $3,491,819 61% $3,496,374 61% $3,438,923 57% 0% 2%
    Residential real estate 462,515 8% 456,357 8% 441,613 7% 1% 5%
    Construction 462,801 8% 495,456 9% 748,337 12% (7)% (38)%
    Total real estate 4,417,135 78% 4,448,187 78% 4,628,873 76% (1)% (5)%
    Commercial 1,223,012 21% 1,223,927 21% 1,381,549 23% 0% (11)%
    Leases 32,428 1% 32,375 1% 36,720 1% 0% (12)%
    Installment and other 36,624 1% 33,188 1% 34,883 1% 10% 5%
    Deferred loan fees, net (10,932) 0% (11,004) 0% (10,933) 0% (1)% 0%
    Total $5,698,267 100% $5,726,673 100% $6,071,042 100% 0% (6)%
     
    Umpqua Holdings Corporation
    Covered Loan & Lease Portfolio
    (Unaudited)
                Sequential
    (Dollars in thousands)Sep 30, 2010Jun 30, 2010Quarter
    Amount     MixAmount     Mix% Change

    Covered loans & leases:

           
    Commercial real estate $589,540 70% $591,814 68% 0%
    Residential real estate 81,237 10% 84,187 10% (4)%
    Construction 57,250 7% 73,963 8% (23)%
    Total real estate 728,027 87% 749,964 86% (3)%
    Commercial 100,284 12% 107,860 12% (7)%
    Installment and other 12,158 1% 12,414 1% (2)%
    Total $840,469 100% $870,238 100% (3)%
     

    Covered loan & lease portfolio balances represent the loan portfolios acquired through the assumption of EvergreenBank on January 22, 2010, Rainier Pacific Bank on February 26, 2010, and Nevada Security Bank on June 18, 2010, from the FDIC through whole bank purchase and assumption agreements with loss sharing.

    Umpqua Holdings Corporation

    Deposits by Type/Core Deposits
    (Unaudited)
                    Sequential     Year over
    (Dollars in thousands)Sep 30, 2010Jun 30, 2010Sep 30, 2009QuarterYear
    Amount     MixAmount     MixAmount     Mix% Change     % Change

    Deposits:

               
    Demand, non-interest bearing $1,578,717 17% $1,509,222 18% $1,337,280 19% 5% 18%
    Demand, interest bearing 4,178,332 45% 3,789,122 44% 3,185,128 44% 10% 31%
    Savings 348,700 4% 355,428 4% 294,482 4% (2)% 18%
    Time 3,195,591 34% 2,904,972 34% 2,398,931 33% 10% 33%
    Total $9,301,340 100% $8,558,744 100% $7,215,821 100% 9% 29%
     
    Total core deposits-ending (1) $7,055,676 76% $6,697,773 78% $5,834,655 81% 5% 21%
     

    Number of open accounts:

    Demand, non-interest bearing 183,018 180,499 156,659 1% 17%
    Demand, interest bearing 76,202 71,537 63,483 7% 20%
    Savings 87,611 96,019 74,421 (9)% 18%
    Time 44,020 41,882 35,495 5% 24%
    Total 390,851 389,937 330,058 0% 18%
     

    Average balance per account:

    Demand, non-interest bearing $8.6 $8.4 $8.5
    Demand, interest bearing 54.8 53.0 50.2
    Savings 4 3.7 4.0
    Time 72.6 69.4 67.6
    Total 23.8 21.9 21.9
     

    (1) Core deposits are defined as total deposits less time deposits greater than $100,000.

     
    Umpqua Holdings Corporation
    Credit Quality – Non-performing Assets
    (Unaudited)
                    Sequential     Year over
    Quarter EndedQuarterYear
    (Dollars in thousands)Sep 30, 2010     Jun 30, 2010     Sep 30, 2009     % Change     % Change
     

    Non-covered, non-performing assets:

    Non-covered loans on non-accrual status $139,696 $170,636 $123,714 (18)% 13%
    Non-covered loans past due 90+ days & accruing 11,882     9,213     5,614 29% 112%
    Total non-performing loans 151,578 179,849 129,328 (16)% 17%
    Non-covered other real estate owned 32,024     25,653     26,705 25% 20%
    Total $183,602     $205,502     $156,033 (11)% 18%
     
    Performing restructured loans $75,577 $80,534 $182,199 (6)% (59)%
     
    Past due 30-89 days $80,186 $40,135 $46,069 100% 74%
    Past due 30-89 days to total loans and leases 1.41% 0.70% 0.76%
     

    Non-covered, non-performing loans to non-covered loans and leases

    2.66% 3.14% 2.13%
    Non-covered, non-performing assets to total assets 1.59% 1.90% 1.70%
     

    Covered non-performing assets:

    Covered loans on non-accrual status $24,160     $58,814     $-- (59)% nm
    Total non-performing loans 24,160 58,814 -- (59)% nm
    Covered other real estate owned 30,348     28,290     -- 7% nm
    Total $54,508     $87,104     $-- (37)% nm
     

    Covered non-performing loans to covered loans and leases

    2.87% 6.76% --
    Covered non-performing assets to total assets 0.47% 0.80% --
     

    Total non-performing assets:

    Loans on non-accrual status $163,856 $229,450 $123,714 (29)% 32%
    Loans past due 90+ days & accruing 11,882     9,213     5,614 29% 112%
    Total non-performing loans 175,738 238,663 129,328 (26)% 36%
    Other real estate owned 62,372     53,943     26,705 16% 134%
    Total $238,110     $292,606     $156,033 (19)% 53%
     
    Non-performing loans to loans and leases 2.69% 3.62% 2.13%
    Non-performing assets to total assets 2.06% 2.70% 1.70%
     
    Umpqua Holdings Corporation
    Credit Quality – Allowance for Non-covered Credit Losses
    (Unaudited)
                    Sequential     Year over
    Quarter EndedQuarterYear
    (Dollars in thousands)Sep 30, 2010     Jun 30, 2010     Sep 30, 2009     % Change     % Change

    Allowance for non-covered credit losses:

    Balance beginning of period $113,914 $110,784 $98,370

    Provision for non-covered loan and lease losses

    24,228 29,767 52,108 (19)% (54)%
     
    Charge-offs (31,418) (31,554) (48,443) 0% (35)%
    Recoveries 1,374     4,917     1,101 (72)% 25%
    Net charge-offs (30,044) (26,637) (47,342) 13% (37)%
                 

    Total allowance for non-covered loan and lease losses

    108,098 113,914 103,136 (5)% 5%
     
    Reserve for unfunded commitments 797     735     841

    Total allowance for non-covered credit losses

    $108,895     $114,649     $103,977 (5)% 5%
     

    Net charge-offs to average non-covered loans and leases (annualized)

    2.08% 1.84% 3.07%
    Recoveries to gross charge-offs 4.37% 15.58% 2.27%

    Allowance for credit losses to non-covered loans and leases

    1.91% 2.00% 1.71%
     
     
    Nine Months Ended:
    (Dollars in thousands)Sep 30, 2010     Sep 30, 2009     % Change

    Allowance for non-covered credit losses:

    Balance beginning of period $107,657 $95,865

    Provision for non-covered loan and lease losses

    96,101 140,531 (32)%
     
    Charge-offs (102,731) (135,365) (24)%
    Recoveries 7,071     2,105 236%
    Net charge-offs (95,660) (133,260) (28)%
           

    Total allowance for non-covered loan and lease losses

    108,098 103,136 5%
     
    Reserve for unfunded commitments 797     841

    Total allowance for non-covered credit losses

    $108,895     $103,977 5%
     

    Net charge-offs to average non-covered loans and leases (annualized)

    2.20% 2.91%
    Recoveries to gross charge-offs 6.88% 1.56%
     
    Umpqua Holdings Corporation
    Selected Ratios
    (Unaudited)
            Sequential     Year over
    Quarter Ended:QuarterYear
    Sep 30, 2010     Jun 30, 2010     Sep 30, 2009     Change     Change

    Net interest spread:

           
    Yield on non-covered loans and leases 5.77% 5.82% 5.77% (0.05) 0.00
    Yield on covered loans and leases 13.49% 7.27% N/A 6.22 nm
    Yield on taxable investments 3.51% 3.83% 4.22% (0.32) (0.71)
    Yield on tax-exempt investments (1) 5.71% 5.75% 5.86% (0.04) (0.15)
    Yield on temporary investments & interest bearing cash 0.26% 0.26% 0.28% 0.00 (0.02)
    Total yield on earning assets (1) 5.41% 5.07% 5.29% 0.34 0.12
     
    Cost of interest bearing deposits 1.08% 1.10% 1.50% (0.02) (0.42)

    Cost of securities sold under agreements to repurchase and fed funds purchased

    1.01% 1.02% 1.08% (0.01) (0.07)
    Cost of term debt 3.57% 3.54% 3.68% 0.03 (0.11)
    Cost of junior subordinated debentures 4.45% 4.26% 4.50% 0.19 (0.05)
    Total cost of interest bearing liabilities 1.24% 1.28% 1.62% (0.04) (0.38)
     
    Net interest spread (1) 4.17% 3.79% 3.67% 0.38 0.50
    Net interest margin – Consolidated (1) 4.42% 4.05% 4.05% 0.37 0.37
     
    Net interest margin – Bank (1) 4.49% 4.13% 4.15% 0.36 0.34
     

    As reported (GAAP):

    Return on average assets 0.29% 0.13% (0.45)% 0.16 0.74
    Return on average tangible assets 0.31% 0.14% (0.49)% 0.17 0.80
    Return on average common equity 1.95% 0.86% (3.19)% 1.09 5.14
    Return on average tangible common equity 3.31% 1.48% (6.34)% 1.83 9.65
    Efficiency ratio – Consolidated 70.09% 66.85% 67.91% 3.24 2.18
    Efficiency ratio – Bank 67.07% 64.18% 65.21% 2.89 1.86
     

    Operating basis (non-GAAP): (2)

    Return on average assets 0.34% 0.18% (0.48)% 0.16 0.82
    Return on average tangible assets 0.36% 0.19% (0.51)% 0.17 0.87
    Return on average common equity 2.26% 1.18% (3.37)% 1.08 5.63
    Return on average tangible common equity 3.84% 2.04% (6.70)% 1.80 10.54
    Efficiency ratio – Consolidated 68.42% 64.91% 68.58% 3.51 (0.16)
    Efficiency ratio – Bank 65.72% 62.22% 65.21% 3.50 0.51
     
    (1) Tax exempt interest has been adjusted to a taxable equivalent basis using a 35% tax rate.
    (2) Operating earnings is calculated as earnings available to common shareholders excluding gain (loss) on junior subordinated debentures carried at fair value, net of tax, bargain purchase gain on acquisitions, net of tax, goodwill impairment, and merger related expenses, net of tax.
     
    Umpqua Holdings Corporation
    Selected Ratios
    (Unaudited)
       

    Nine Months Ended:

       
    Sep 30, 2010     Sep 30, 2009     Change

    Net interest spread:

       
    Yield on non-covered loans and leases 5.78% 5.79% (0.01)
    Yield on covered loans and leases 10.00% N/A nm
    Yield on taxable investments 3.76% 4.48% (0.72)
    Yield on tax-exempt investments (1) 5.76% 5.80% (0.04)
    Yield on temporary investments & interest bearing cash 0.25% 0.27% (0.02)
    Total yield on earning assets (1) 5.19% 5.48% (0.29)
     
    Cost of interest bearing deposits 1.12% 1.63% (0.51)

    Cost of securities sold under agreements to repurchase and fed funds purchased

    1.02% 1.13% (0.11)
    Cost of term debt 3.52% 3.56% (0.04)
    Cost of junior subordinated debentures 4.25% 4.92% (0.67)
    Total cost of interest bearing liabilities 1.28% 1.78% (0.50)
     
    Net interest spread (1) 3.91% 3.70% 0.21
    Net interest margin – Consolidated (1) 4.18% 4.11% 0.07
     
    Net interest margin – Bank (1) 4.26% 4.22% 0.04
     

    As reported (GAAP):

    Return on average assets 0.12% (2.06)% 2.18
    Return on average tangible assets 0.12% (2.24)% 2.36
    Return on average common equity 0.78% (14.20)% 14.98
    Return on average tangible common equity 1.36% (32.21)% 33.57
    Efficiency ratio – Consolidated 65.00% 102.51% (37.51)
    Efficiency ratio – Bank 63.35% 102.79% (39.44)
     

    Operating basis (non-GAAP): (2)

    Return on average assets 0.05% (0.46)% 0.51
    Return on average tangible assets 0.06% (0.50)% 0.56
    Return on average common equity 0.36% (3.16)% 3.52
    Return on average tangible common equity 0.62% (7.16)% 7.78
    Efficiency ratio – Consolidated 66.00% 67.31% (1.31)
    Efficiency ratio – Bank 63.24% 64.06% (0.82)
     
    (1) Tax exempt interest has been adjusted to a taxable equivalent basis using a 35% tax rate.
    (2) Operating earnings is calculated as earnings available to common shareholders excluding gain (loss) on junior subordinated debentures carried at fair value, net of tax, bargain purchase gain on acquisitions, net of tax, goodwill impairment, and merger related expenses, net of tax.
     
    Umpqua Holdings Corporation
    Average Balances
    (Unaudited)
            Sequential     Year over
    Quarter Ended:QuarterYear
    (Dollars in thousands)Sep 30, 2010     Jun 30, 2010     Sep 30, 2009     % Change     % Change
           
    Temporary investments & interest bearing cash $993,092 $849,112 $291,214 17% 241%
    Investment securities, taxable 1,984,672 1,628,195 1,458,333 22% 36%
    Investment securities, tax-exempt 230,815 231,675 203,676 0% 13%
    Loans held for sale 45,933 41,183 39,915 12% 15%
    Non-covered loans and leases 5,718,584 5,792,010 6,111,146 (1)% (6)%
    Covered loans and leases 847,704     698,538     -- 21% nm
    Total earning assets 9,820,800 9,240,714 8,104,284 6% 21%
    Goodwill & other intangible assets, net 681,476 676,301 642,315 1% 6%
    Total assets 11,160,521 10,467,967 9,100,407 7% 23%
     
    Non-interest bearing demand deposits 1,565,525 1,475,852 1,325,328 6% 18%
    Interest bearing deposits 7,345,073     6,735,665     5,866,098 9% 25%
    Total deposits 8,891,598 8,211,517 7,191,426 9% 24%
    Interest bearing liabilities 7,863,059 7,281,191 6,211,237 8% 27%
     
    Shareholders’ equity - common 1,661,701 1,608,872 1,291,218 3% 29%
    Tangible common equity (1) 980,225 932,571 648,903 5% 51%
     
    Nine Months Ended:
    (Dollars in thousands)Sep 30, 2010     Sep 30, 2009     % Change
     
    Temporary investments & interest bearing cash $841,529 $129,118 552%
    Investment securities, taxable 1,742,463 1,299,791 34%
    Investment securities, tax-exempt 228,000 195,492 17%
    Loans held for sale 37,166 41,789 (11)%
    Non-covered loans and leases 5,814,340 6,114,133 (5)%
    Covered loans and leases 638,293     -- nm
    Total earning assets 9,301,791 7,780,323 20%
    Goodwill & other intangible assets, net 670,492 717,509 (7)%
    Total assets 10,539,767 8,854,682 19%
     
    Non-interest bearing demand deposits 1,497,110 1,294,005 16%
    Interest bearing deposits 6,826,779     5,607,089 22%
    Total deposits 8,323,889 6,901,094 21%
    Interest bearing liabilities 7,321,076 6,009,594 22%
     
    Shareholders’ equity - common 1,566,833 1,283,476 22%
    Tangible common equity (1) 896,341 565,967 58%
     

    (1) Average tangible common equity is a non-GAAP financial measure.  Average tangible common equity is calculated as average common shareholders’ equity less average goodwill and other intangible assets, net (excluding MSRs).

     
    Umpqua Holdings Corporation
    Mortgage Banking Activity
    (unaudited)
            Sequential     Year over
    Quarter Ended:QuarterYear
    (Dollars in thousands)Sep 30, 2010     Jun 30, 2010     Sep 30, 2009     % Change     % Change
           

    Mortgage Servicing Rights (MSR):

    Mortgage loans serviced for others $1,471,759 $1,400,120 $1,205,528 5% 22%
    MSR Asset, at fair value 13,454 12,895 11,552 4% 16%
     
    MSR as % of serviced portfolio 0.91% 0.92% 0.96%
     

    Mortgage Banking Revenue:

    Origination and sale $7,188 $3,947 $4,294 82% 67%
    Servicing 1,007 934 796 8% 27%
    Change in fair value of MSR asset (1,057)     (1,672)     (802) (37)% 32%
    Total $7,138     $3,209     $4,288 122% 66%
     
     
    Closed loan volume $231,952 $145,085 $158,957 60% 46%
     
     
    Nine Months Ended:
    (Dollars in thousands)Sep 30, 2010     Sep 30, 2009     % Change
     

    Mortgage Banking Revenue:

    Origination and sale $13,839 $15,040 (8)%
    Servicing 2,844 2,188 30%
    Change in fair value of MSR asset (2,858)     (2,611) 9%
    Total $13,825     $14,617 (5)%
     
    Closed loan volume $504,352 $584,693 (14)%
     

    Additional tables

    The following tables present additional detail covering the following aspects of the Company's non-covered loan portfolio.

    • Table 1 – Non-covered residential development loan trends by region
    • Table 2 – Non-covered residential development loan stratification by size and by region
    • Table 3 – Non-covered, non-performing asset detail by type and by region
    • Table 4 – Non-covered loans past due 30-89 days by type and by region
    • Table 5 – Non-covered loans past due 30-89 days trends
    • Table 6 – Non-covered restructured loans on accrual status by type and by region

    The following is a geographic distribution of the non-covered residential development portfolio as of Sept. 30, 2010, June 30, 2010 and Sept. 30, 2009:

    Table 1- Non-covered residential development loan trends by region
    (Dollars in thousands)         Non-    
                % changeperformingPerforming
    BalanceBalanceBalancefromloansLoans
    9/30/09     6/30/10     9/30/10     9/30/09     9/30/10     9/30/10
    Northwest Oregon $93,745 $75,373 $69,129 (26)% $8,353 $60,776
    Central Oregon 13,753 4,107 4,079 (70)% 109 3,970
    Southern Oregon 21,852 13,440 8,774 (60)% 2,840 5,934
    Washington 17,690 7,723 7,570 (57)% 1,260 6,310
    Greater Sacramento 80,107 54,710 52,761 (34)% 13,063 39,698
    Northern California 31,336     20,653     18,072 (42)% 4,453     13,619
    Total $258,483     $176,006     $160,385 (38)% $30,078     $130,307

    % of total non-covered loan portfolio

    4% 3% 3% 2%
     
    Quarter change $ $(42,807) $(25,792) $(15,621)
    Quarter change % (14)% (13)% (9)%
     

    The following is a stratification by size and region of the remaining non-covered performing residential development loans as of Sept. 30, 2010:

    Table 2 – Non-covered residential development loan stratification by size and by region
    (Dollars in thousands)
            $250k     $1 million     $3 million     $5 million     $10 million    
    $250ktotototoand
    and less     $1 million     $3 million     $5 million     $10 million     Greater     Total
    Northwest Oregon $2,189 $8,569 $10,141 $10,277 $15,049 $14,551 $60,776
    Central Oregon 500 1,037 2,433 -- -- -- 3,970
    Southern Oregon 1,187 3,647 1,100 -- -- -- 5,934
    Washington 487 352 5,471 -- -- -- 6,310
    Greater Sacramento 3,649 4,175 1,894 4,817 11,455 13,708 39,698
    Northern California 1,329     2,413     9,877     --     --     --     13,619
    Total $9,341     $20,193     $30,916     $15,094     $26,504     $28,259     $130,307
    % of Total 7% 15% 24% 12% 20% 22% 100%
     

    The following is a distribution of non-covered, non-performing assets by type and by region as of Sept. 30, 2010:

    Table 3 - Non-covered, non-performing asset detail by type and by region
    (Dollars in thousands)
        Northwest     Central     Southern         Greater     Northern    
    Oregon     Oregon     Oregon     Washington     Sacramento     California     Total

    Non-accrual loans:

    Residential development $8,353 $109 $1,809 $1,260 $13,063 $4,453 $29,047
    Commercial construction 12,926 -- -- 2,115 11,238 109 26,388
    Commercial real estate 24,629 3,373 1,938 -- 6,539 9,125 45,604
    Commercial 8,721 3,178 992 7,835 9,619 8,312 38,657
    Other --     --     --     --     --     --     --
    Total $54,629 $6,660 $4,739 $11,210 $40,459 $21,999 $139,696
     

    Loans 90 days past due:

    Residential development $-- $-- $1,031 $-- $-- $-- $1,031
    Commercial construction -- -- -- -- -- -- --
    Commercial real estate -- -- -- -- 2,753 -- 2,753
    Commercial 1,284 -- -- -- -- 67 1,351
    Other 5,717     --     --     100     930     --     6,747
    Total $7,001 $-- $1,031 $100 $3,683 $67 $11,882
                                         
    Total non-performing loans $61,630     $6,660     $5,770     $11,310     $44,142     $22,066     $151,578
     

    Other real estate owned:

    Residential development $888 $3,049 $968 $1,074 $1,648 $1,325 $8,952
    Commercial construction 3,442 586 -- 426 4,592 -- 9,046
    Commercial real estate 5,647 -- 635 -- 2,988 1,675 10,945
    Commercial -- 758 -- -- -- 50 808
    Other 2,273     --     --     --     --     --     2,273
    Total $12,250 $4,393 $1,603 $1,500 $9,228 $3,050 $32,024
                                         
    Total non-performing assets $73,880     $11,053     $7,373     $12,810     $53,370     $25,116     $183,602
    % of total40%6%4%7%29%14%100%
     

    The Company has aggressively charged-down impaired assets to their disposition values. As of Sept. 30, 2010, the non-performing assets of $183.6 million have been written down by 39%, or $118.8 million, from their original balance of $302.4 million.

    The following is a distribution of non-covered loans past due 30 to 89 days by loan type by region as of Sept. 30, 2010:

    Table 4 – Non-covered loans past due 30-89 days by type and by region
    (Dollars in thousands)
        Northwest     Central     Southern         Greater     Northern    
    Oregon     Oregon     Oregon     Washington     Sacramento     California     Total

    Loans 30-89 days past due:

    Residential development $9,176 $-- $1,178 $-- $282 $2,858 $13,494
    Commercial construction 2,608 -- 789 -- 2,094 -- 5,491
    Commercial real estate 14,874 2,514 -- 2,074 10,011 9,275 38,748
    Commercial 1,654 -- 298 6,104 5,040 3,369 16,465
    Other 5,323     --     --     204     461     --     5,988
    Total $33,635     $2,514     $2,265     $8,382     $17,888     $15,502     $80,186
     

    Table 5 – Non-covered loans past due 30-89 days trends

    (Dollars in thousands)
                    Sequential     Year
    QuarterOver Year
    Sep 30, 2010     Jun 30, 2010     Sep 30, 2009     % Change     % Change

    Loans 30-89 days past due:

    Residential development $13,494 $763 $8,766 1669% 54%
    Commercial construction 5,491 903 9,361 508% (41)%
    Commercial real estate 38,748 22,923 14,405 69% 169%
    Commercial 16,465 9,173 10,294 79% 60%
    Other 5,988     6,373     3,243 (6)% 85%
    Total $80,186     $40,135     $46,069 100% 74%
     

    The following is a distribution of non-covered restructured loans by loan type by region as of Sept. 30, 2010:

    Table 6 – Non-covered restructured loans on accrual status by type and by region
    (Dollars in thousands)
        Northwest     Central     Southern         Greater     Northern    
    Oregon     Oregon     Oregon     Washington     Sacramento     California     Total

    Restructured loans, accrual basis:

    Residential development $19,026 $-- $-- $5,471 $25,343 $-- $49,840
    Commercial construction -- -- -- -- -- -- --
    Commercial real estate -- -- 3,899 -- 12,448 3,686 20,033
    Commercial -- -- -- -- -- 1,215 1,215
    Other 4,454     --     --     --     35     --     4,489
    Total $23,480     $--     $3,899     $5,471     $37,826     $4,901     $75,577

    Source: Umpqua Holdings Corporation


    Contact:

    Umpqua Holdings Corporation

    President/CEO

    Ray Davis, 503-727-4101

    raydavis@umpquabank.com

    or

    EVP/Chief Financial Officer

    Ron Farnsworth, 503-727-4108

    ronfarnsworth@umpquabank.com