• Umpqua Holdings Corporation
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  • Umpqua Holdings Reports First Quarter 2011 Results
    Company Release - 04/21/2011 08:00

    First quarter 2011 net income and operating income of $0.12 per diluted share

    Non-covered, non-performing assets at 1.53% of total assets

    Non-covered provision for loan and lease losses of $15.0 million, the lowest quarterly level since 2007

    Non-interest bearing demand deposits increased 3% on a sequential quarter basis

    Non-covered commercial & industrial loans increased $14 million, or 1%, over prior quarter

    PORTLAND, Ore.--(BUSINESS WIRE)-- Umpqua Holdings Corporation (NASDAQ: UMPQ), parent company of Umpqua Bank and Umpqua Investments Inc. today announced first quarter 2011 net earnings available to common shareholders of $13.4 million, or $0.12 per diluted common share, compared to a net loss available to common shareholders of $3.7 million, or $0.04 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 $13.8 million, or $0.12 per diluted common share for the first quarter of 2011, compared to an operating loss of $10.1 million, or $0.11 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 first quarter of 2011 include:

    • Net interest margin increases to 4.23% due to larger investment portfolio balances, increased yields on the covered loan portfolio, and decreased cost of interest bearing liabilities;
    • Non-covered, non-performing assets remained stable at 1.53% of total assets;
    • Provision for non-covered loan losses of $15.0 million, a 14% decrease, and total net charge-offs of $19.1 million, a 19% decrease, on a sequential quarter basis. Net charge-offs exceeded the provision for non-covered loan losses during the quarter due to improving credit quality of the loan portfolio and specific reserves from the previous quarter which were charged off in the first quarter;
    • The allowance for credit losses ended the quarter at 1.75% of non-covered total loans and leases;
    • Provision for covered loan losses of $7.3 million, mostly offset by a corresponding gain in the FDIC indemnification asset;
    • Loss on other real estate owned of $3.8 million, compared to a loss of $4.9 million for the fourth quarter of 2010;
    • Non-covered loans ended the quarter at $5.63 billion, a decline of $26.6 million, or 0.5%, on a sequential quarter basis;
    • The cost of interest bearing deposits for the first quarter of 2011 was 0.83%, a decrease of 14 basis points on a sequential quarter basis;
    • Opened Debt Capital Markets Group to enhance available credit product offerings to commercial clientele, including interest rate swap products and loan syndications;
    • Tangible common equity ratio of 8.93%; and
    • Total risk-based capital of 17.53%, and tier 1 common to risk weighted asset ratio of 13.17%.

    “This quarter’s results demonstrate the Company’s strong position as loan production and earnings momentum are building as a result of management’s success positioning the Bank for continued growth,” said Ray Davis, CEO of Umpqua Holdings Corporation. “Umpqua has emerged from this difficult economic period and challenging credit cycle with a stronger balance sheet. This financial strength provides us the flexibility to continue pursuing strategic growth opportunities that will build shareholder value over time.”

    Asset quality – Non-covered loan portfolio

    Non-performing assets were $177.0 million, or 1.53% of total assets, as of March 31, 2011, compared to $178.0 million, or 1.53% of total assets as of December 31, 2010, and $209.6 million, or 1.99% of total assets as of March 31, 2010. Of this amount, as of March 31, 2011, $136.1 million represented non-accrual loans, $6.3 million represented loans past due greater than 90 days and still accruing interest, and $34.5 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 March 31, 2011, the non-performing assets of $177.0 million have been written down by 41%, or $121.1 million, from their current par balance of $298.1 million.

    The provision for loan losses for the first quarter of 2011 was $15.0 million, the lowest level of provision since the second quarter of 2007, due to improving credit quality of the loan portfolio and stabilization of non-performing loans. Total net charge-offs for the first quarter of 2011 were $19.1 million, reducing the allowance for credit losses to 1.75% of non-covered loans and leases at March 31, 2011, as compared to 1.82% of total non-covered loans as of December 31, 2010 and 1.91% of total non-covered loans as of March 31, 2010. The annualized net charge-off rate for the first quarter of 2011 was 1.38%.

    Non-covered loans past due 30 to 89 days were $70.7 million, or 1.25% of non-covered loans and leases as of March 31, 2011, as compared to $48.2 million, or 0.85% as of December 31, 2010, and $53.9 million, or 0.93% as of March 31, 2010.

    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     for credit lossesnon-performing
    forNetto non-covered30-89 daysassets to
    loan loss     charge-offs     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%
    Q4 2010 17,567 23,744 1.82% 0.85% 1.53%
    Q1 2011 15,030     19,118 1.75% 1.25% 1.53%
    Total $487,147     $454,655
     

    Non-covered construction loan portfolio

    Total non-covered construction loans continued to decline in the quarter to $367 million as of March 31, 2011, representing a decrease of 11% since December 31, 2010, and a decrease of 34% from March 31, 2010. Within this portfolio, the residential development loan segment was $132 million, or 2% of the total non-covered loan portfolio. Of this amount, $34 million represented non-performing loans, and $98 million represented performing loans. The residential development loan segment has decreased $70 million, or 35%, since March 31, 2010.

    The remaining $235 million in non-covered construction loans as of March 31, 2011 primarily represents commercial construction projects. Total non-covered, non-performing commercial construction loans were $19.7 million at March 31, 2011, and $5.5 million were past due 30 to 89 days as of March 31, 2011.

    Non-covered commercial real estate loan portfolio

    The total non-covered term commercial real estate loan portfolio was $3.5 billion as of March 31, 2011. Of this total, $2.24 billion are non-owner occupied and $1.25 billion are owner occupied. Of the total term commercial real estate portfolio, $55.1 million were on non-accrual status, and $32.8 million, or 0.94%, are past due 30-89 days as of March 31, 2011. Of the total non-covered commercial real estate portfolio, 8% matures in 2011-2012, 17% in years 2013-2014, and 24% in years 2015-2016. The remaining 51% of the portfolio matures in or after the year 2017.

    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 rates, interest rates and vacancy factors. The results of the stress testing showed no significant unidentified risks, unlike our experience in the residential development construction portfolio. As we remain in a difficult economic environment, we anticipate that some borrowers will struggle, but that potential issues within the commercial real estate portfolio will result from individual loans within distinct geographic areas and not represent a systemic weakness in the portfolio. 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 $67.5 million as of March 31, 2011, down 20% from $84.4 million as of December 31, 2010, and down 31% from $98.0 million as of March 31, 2010. The decrease during the first quarter primarily resulted from the reclassification of certain commercial real estate relationships previously restructured to non-accrual status. 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 $29.5 million, or 0.26% of total assets, as of March 31, 2011, as compared to $29.9 million, or 0.26% of total assets, as of December 31, 2010. The amount at March 31, 2011 represents OREO. In conjunction with the guidance governing the accounting for purchased loan portfolios with evidence of credit deterioration subsequent to origination, the covered loans acquired have been assembled into pools of loans. As a result, individual loans underlying the loan pools are not reported as non-performing. Rather, accretable yield of the pool is recognized to the extent pool level expected future cash flows discounted at the effective rate exceed the carrying value of the pool. To the extent discounted expected future cash flows are less than the carrying value of the pool, provisions for covered credit losses are recognized as a charge to earnings, but the adjusted carrying value of loan pool continues to accrete income at the effective rate.

    As of acquisition date, covered non-performing assets were written-down to their estimated fair value, 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 due diligence. 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. To the extent actual or projected cash flows are more than originally estimated, the increase in cash flows is prospectively recognized in interest income; however, the increase in interest income would be offset by a corresponding decrease 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 4.23% for the first quarter of 2011, as compared to 4.14% for the fourth quarter of 2010, and 4.04% for the first quarter of 2010. The increase in net interest margin in the current quarter over the prior quarter resulted primarily from investing excess interest bearing cash into the investment portfolio and declining costs of interest bearing deposits, partially offset by an increase in interest and fee reversals on non-accrual loans and a decline in loans outstanding. The increase in net interest margin in the current quarter over the same quarter of the prior year resulted from investing excess interest bearing cash into the investment portfolio, an increase in 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 an increase in interest and fee reversals on non-accrual loans, a decline in loans outstanding and an increase in interest bearing liabilities.

    Loan disposal related activities within the covered loan portfolio, either through loans being paid off in full or transferred to OREO, result in gains within covered loan interest income to the extent assets received in satisfaction of debt (such as cash or the net realizable value of OREO received) exceeds the allocated carrying value of the loan disposed of from the pool. Loan disposal activities contributed $7.6 million of interest income in the first quarter of 2011, as compared to $13.3 million in the fourth quarter of 2010 and none in the first quarter of 2010. While dispositions of covered loans positively impact net interest margin, we recognize a corresponding decrease to the change in FDIC indemnification asset at the incremental loss-sharing rate within other non-interest income. Excluding the impact of covered loan disposal gains, consolidated net interest margin would have been 3.93% for the current quarter, 3.64% for the prior quarter, and 4.04% in the same quarter of the prior year.

    Interest and fee reversals on non-accrual loans during the first quarter of 2011 were $1.3 million, negatively impacting the net interest margin by 5 basis points, as compared to $0.9 million for the fourth quarter of 2010 and $1.1 million in the first quarter of 2010. Excluding the impact of loan disposal gains and interest and fee reversals on non-accrual loans, net interest margin would have been 3.98% for the first quarter of 2011, 3.67% for the fourth quarter of 2010 and 4.09% for the first quarter of 2010.

    For the fourteenth 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 0.83%, 14 basis points lower than the fourth quarter of 2010 and 36 basis points lower than the first quarter of 2010.

    Mortgage banking revenue

    The Company recorded $5.3 million in total mortgage banking revenue during the first quarter of 2011, on closed loan volume of $167 million. In the first quarter of 2011, the Company recognized a decrease in the fair value of the mortgage servicing right assets of $0.2 million. The decline primarily related to the passage of time as the market for mortgage interest rates has remained stable throughout the quarter. Income from the origination and sale of mortgage loans was $4.3 million in the first quarter, representing a 60% increase over the same quarter of the prior year. As of March 31, 2011, the Company serviced $1.7 billion of mortgage loans for others, and the related mortgage servicing right asset is valued at $15.6 million, or 0.92% of the total serviced portfolio principal balance.

    Fair value of junior subordinated debentures

    The Company recognized a $0.5 million loss from the change in fair value of junior subordinated debentures during the first quarter of 2011. 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 over the 3 month LIBOR. As of March 31, 2011, the credit risk adjusted interest spread for potential new issuances was estimated to be significantly higher than the contractual spread. The difference between these spreads has created a cumulative 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 difficult to estimate, but are not likely to be volatile in the future, and the cumulative fair value adjustment will continue to reverse over time and be recognized as a reduction in non-interest income over the remaining period to maturity of each related instrument. As of March 31, 2011, the total par value of junior subordinated debentures carried at fair value was $134.0 million, and the fair value was $81.2 million.

    Non-interest expense

    Total non-interest expense for the first quarter of 2011 was $84.2 million, compared to $87.9 million for the fourth quarter of 2010 and $69.9 million for the first quarter of 2010. Included in non-interest expense are several categories which are outside of the operational control of the Company or depend on changes in market values, including FDIC deposit insurance assessments and gain or loss on other real estate owned, as well as infrequently occurring expenses such as merger related costs. Excluding these non-controllable or infrequently occurring items, the remaining non-interest expense items totaled $76.4 million for the first quarter of 2011, compared to $77.8 million for the fourth quarter of 2010 and $62.2 million for the first quarter of 2010. The decline in non-interest expense from the prior quarter results from cost control measures related to compensation and other expenses. The increase over the same period prior year relates to the assumption of Evergreen’s, Rainier’s and Nevada Security’s banking operations, increases in variable expenses related to the mortgage banking division’s production, higher loan collection and OREO management expenses, and investment in various infrastructure and growth initiatives.

    During the first quarter of 2011, the Company incurred loan collection and OREO management expense of $4.8 million, compared to $5.0 million for the fourth quarter of 2010, and $1.7 million for the first quarter of 2010. Mortgage production related expense was $4.3 million in the first quarter of 2011, compared to $4.9 million in the fourth quarter of 2010, and $3.1 million for the first quarter of 2010. Total FDIC deposit insurance assessments during the first quarter of 2011 were $3.9 million. The decrease as compared to the prior quarter’s assessment of $4.2 million is a result of the seasonal decline in average deposit balances that typically occurs in the first quarter of the year and termination of the special assessment for the Bank’s participations in the Transaction Account Guarantee Program of the FDIC.

    Income taxes

    The Company recorded a provision for income taxes of $6.5 million in the first quarter of 2011, representing an effective tax rate of 32.6%. 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 March 31, 2011 were $11.6 billion, compared to $11.7 billion on December 31, 2010 and $10.5 billion a year ago. Total gross loans and leases (covered and non-covered), and deposits, were $6.4 billion and $9.3 billion, respectively, as of March 31, 2011, as compared to $6.4 billion and $9.4 billion, respectively, as of December 31, 2010, and $6.5 billion and $8.2 billion, respectively, as of March 31, 2010.

    Total loans held for investment (including covered and non-covered) decreased $70.9 million during the first quarter of 2011. This decrease is principally attributable to non-covered charge-offs, paydowns on the covered loans, and transfers to other real estate owned. Excluding non-covered charge-offs of $20.9 million, the non-covered loan portfolio decreased only $5.7 million in the current quarter.

    Total deposits decreased $141 million, or 1%, during the first quarter of 2011, which is consistent with the seasonal drop in deposits that typically occurs in the first quarter of any given year. Of this amount, $164 million of the decrease relates to the run-off of higher cost time deposits. Despite the decline in total deposits in the quarter, non-interest bearing deposits increased $55 million, or 3%, and low cost savings accounts increased $21 million, or 6%, on a sequential quarter basis. Total deposits have increased $1.1 billion, or 13%, since March 31, 2010.

    Due to the significant amount of liquidity in the banking system and generally 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 March 31, 2011, the Company had $515 million of interest bearing cash earning 0.25%, the target Federal Funds Rate. This on balance sheet liquidity has declined since the prior year as investment security yields in the current market have improved over the prior year. Beginning in the third quarter of 2010 we began purchasing short duration government-sponsored investment securities to match and offset the interest expense associated with the growth in deposits. The Company’s available for sale investment portfolio was $3.3 billion as of March 31, 2011, representing an 84% increase over the prior year. 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 and/or to fund future loan production. Including secured off-balance sheet lines of credit, total available liquidity to the Company was $4.9 billion as of March 31, 2011, representing 43% of total assets and 52% of total deposits.

    Capital

    As of March 31, 2011, total shareholders’ equity was $1.65 billion, comprised entirely of common equity. Book value per common share was $14.41, tangible book value per common share was $8.47 and the ratio of tangible common equity to tangible assets was 8.93% (see explanation and reconciliation of these items in the Non-GAAP Financial Measures section below).

    The Company’s estimated total risk-based capital ratio as of March 31, 2011 is 17.53%. This represents a slight decrease from December 31, 2010, as a result of the increased investment portfolio during the quarter. Our total risk-based capital level is substantially 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 13.17% as of March 31, 2011. These capital ratios as of March 31, 2011 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)Mar 31, 2011     Dec 31, 2010     Mar 31, 2010     % Change     % Change
           

    Net earnings (loss) available to common shareholders

    $13,405 $8,140 $(3,693) 65% (463)%
    Adjustments:

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

    325 332 (3,653) (2)% (109)%

    Bargain purchase gain on acquisition, net of tax

    -- -- (3,862) nm (100)%
    Merger related expenses, net of tax (1) 109     574     1,144 (81)% (90)%
    Operating earnings (loss) $13,839     $9,046     $(10,064) 53% (238)%
     

    Earnings (loss) per diluted share:

    Earnings (loss) available to common shareholders $0.12 $0.07 $(0.04) 71% (400)%
    Operating earnings (loss) $0.12 $0.08 $(0.11) 50% (209)%
     

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

     

    Management believes pre-tax, pre-credit cost operating income is a useful financial measure because it enables investors to assess the Company’s ability to generate income and capital to cover credit losses through a credit cycle. Management uses this measure to evaluate core operating results exclusive of credit costs, which are often market driven or outside of the Company’s control, to monitor how we are growing core pre-tax income of the Company over time, through organic growth and acquisitions. Pre-tax, pre-credit cost operating income is calculated starting with operating earnings (as defined above) and adding back operating provision for income taxes, preferred stock dividends, earnings allocated to participating securities, provision for loan and lease losses, net gains or losses on other real estate owned and credit related external workout costs. For covered losses and expenses that are subject to loss-share, we have also deducted the associated gain recognized on FDIC indemnification asset.

    The following table provides the reconciliation of operating earnings (loss) (non-GAAP) to pre-tax, pre-credit cost operating income (non-GAAP) for the periods presented (the reconciliation of earnings (loss) available to common shareholders (GAAP) to operating earnings (loss) (non-GAAP) is provided in the preceding tables):

              Sequential     Year over
    Quarter ended:QuarterYear
    (Dollars in thousands, except per share data)Mar 31, 2011     Dec 31, 2010     Mar 31, 2010     % Change     % Change
           
    Operating earnings (loss) $13,839 $9,046 $(10,064) 53% (238)%
    Adjustments:

    Provision for non-covered loan and lease losses

    15,030 17,567 42,106 (14)% (64)%
    Provision for covered loan and lease losses 7,268 4,484 -- 62% nm
    Non-covered net loss on other real estate owned 2,833 4,555 2,311 (38)% 23%
    Covered net loss on other real estate owned 951 328 -- 190% nm
    Non-covered loan & OREO workout cost 2,488 3,242 1,638 (23)% 52%
    Covered loan & OREO workout cost 2,354 1,749 92 35% nm%

    Covered losses impact on FDIC indemnification asset

    (8,458) (4,849) (87) 74% nm%
    Operating provision for (benefit from) income taxes 6,810 4,807 (7,640) 42% (189)%

    Dividends and undistributed earnings allocated to participating securities

    62 18 15 244% 313%
    Preferred stock dividends --     --     12,192 100% (100)%
    Pre-tax, pre-credit cost operating income $43,177     $40,948     $40,563 5% 6%
     

    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)

         

    Mar 31, 2011

       

    Dec 31, 2010

       

    Mar 31, 2010

           
    Total shareholders' equity $1,651,427 $1,642,574 $1,645,647
    Subtract:
    Preferred stock -- -- 198,289
    Goodwill and other intangible assets, net 680,922     681,969     680,482
    Tangible common shareholders' equity $970,505     $960,605     $766,876
     
    Total assets $11,550,728 $11,668,710 $10,509,804
    Subtract:

    Goodwill and other intangible assets, net

    680,922     681,969     680,482
    Tangible assets $10,869,806     $10,986,741     $9,829,322
     
    Common shares outstanding at period end 114,642,471 114,536,814 95,527,427
     
    Tangible common equity ratio 8.93% 8.74% 7.80%
    Tangible book value per common share $8.47 $8.39 $8.03
     

    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 184 locations between San Francisco, California, and Seattle, Washington, 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, April 21, 2011, at 10:00 a.m. PDT (1:00 p.m. EDT) during which the company will discuss first 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 “55946376.” A re-broadcast will be available approximately two hours after the conference call by dialing 800-642-1687 or by visiting www.umpquaholdingscorp.com. Information to be discussed in the teleconference will be available on the company’s website in the morning prior to the call.

    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 improved loan production, earnings momentum, the prospects for strategic growth that will build shareholder value, our success in resolving remaining credits at the estimated disposition value of related collateral, the mitigating effect of FDIC loss sharing agreements on the covered loan portfolio, 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, relative to historical levels.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, unanticipated weakness in loan demand, deterioration in the economy, material reductions in revenue or material increases in expenses, lack of strategic growth opportunities or our failure to execute on those opportunities, our stock trades at historically low earnings multiples, our inability to effectively manage problem credits, unanticipated further declines in real estate values, certain loan assets becoming 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)Mar 31, 2011     Dec 31, 2010     Mar 31, 2010     % Change     % Change
           
    Interest income
    Loans and leases $101,588 $109,532 $90,708 (7)% 12%
    Interest and dividends on investments:
    Taxable 22,043 18,323 16,075 20% 37%
    Exempt from federal income tax 2,165 2,184 2,187 (1)% (1)%
    Dividends 3 5 -- (40)% 100%
    Temporary investments & interest bearing cash 401     633     399 (37)% 1%
    Total interest income 126,200 130,677 109,369 (3)% 15%
     

    Interest expense

    Deposits 15,666 19,076 18,789 (18)% (17)%

    Repurchase agreements and fed funds purchased

    122 135 123 (10)% (1)%
    Junior subordinated debentures 1,913 1,954 1,885 (2)% 1%
    Term debt 2,289     2,397     1,520 (5)% 51%
     
    Total interest expense 19,990 23,562 22,317 (15)% (10)%
     
    Net interest income 106,210 107,115 87,052 (1)% 22%
     
    Provision for non-covered loan and lease losses 15,030 17,567 42,106 (14)% (64)%
    Provision for covered loan and lease losses 7,268 4,484 -- 62% nm
     
    Non-interest income
    Service charges 7,821 8,168 8,365 (4)% (7)%
    Brokerage fees 3,377 3,274 2,639 3% 28%
    Mortgage banking revenue, net 5,275 7,389 3,478 (29)% 52%
    Net loss on investment securities (25) (87) (288) (71)% (91)%

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

    (542) (554) 6,088 (2)% (109)%
    Bargain purchase gain on acquisitions -- -- 6,437 nm (100)%
    Change in FDIC indemnification asset 1,597 (5,370) 610 (130)% 162%
    Other income 2,774     2,341     2,718 18% 2%
     
    Total non-interest income 20,277 15,161 30,047 34% (33)%
     
    Non-interest expense
    Salaries and benefits 44,610 44,067 36,240 1% 23%
    Occupancy and equipment 12,517 12,344 10,676 1% 17%
    Intangible amortization 1,251 1,357 1,308 (8)% (4)%
    FDIC assessments 3,873 4,186 3,444 (7)% 12%
    Net loss on other real estate owned 3,784 4,883 2,311 (23)% 64%
    Merger related expenses 181 957 1,906 (81)% (91)%
    Other 17,985     20,070     13,986 (10)% 29%
     
    Total non-interest expense 84,201 87,864 69,871 (4)% 21%

    Income before provision for (benefit from) income taxes

    19,988 12,361 5,122 62% 290%
    Provision for (benefit from) income taxes 6,521     4,203     (3,392) 55% (292)%
     
    Net income 13,467 8,158 8,514 65% 58%

    Dividends and undistributed earnings allocated to participating securities

    62 18 15 244% 313%
    Preferred stock dividend --     --     12,192 nm (100)%

    Net earnings (loss) available to common shareholders

    $13,405     $8,140     $(3,693) 65% (463)%
     
    Weighted average shares outstanding 114,575,556 114,533,505 92,176,174 0% 24%
    Weighted average diluted shares outstanding 114,746,218 114,773,205 92,176,174 0% 24%
    Earnings (loss) per common share – basic $0.12 $0.07 $(0.04) 71% (400)%
    Earnings (loss) per common share – diluted $0.12 $0.07 $(0.04) 71% (400)%
    nm = not meaningful
     

    Umpqua Holdings Corporation

    Consolidated Balance Sheets
    (Unaudited)
                      Sequential     Year over
    QuarterYear
    (Dollars in thousands, except per share data)Mar 31, 2011     Dec 31, 2010     Mar 31, 2010     % Change     % Change
    Assets:
    Cash and due from banks, non-interest bearing $123,975 $111,946 $125,908 11% (2)%
    Cash and due from banks, interest bearing 515,429 891,634 895,905 (42)% (42)%
    Temporary investments 559 545 600 3% (7)%
    Investment securities:
    Trading 2,572 3,024 2,047 (15)% 26%
    Available for sale 3,285,219 2,919,180 1,782,744 13% 84%
    Held to maturity 4,634 4,762 6,062 (3)% (24)%
    Loans held for sale 52,655 75,626 34,068 (30)% 55%
    Non-covered loans and leases 5,632,363 5,658,987 5,831,858 0% (3)%
    Less: Allowance for loan and lease losses (97,833)     (101,921)     (110,784) (4)% (12)%
    Loans and leases, net 5,534,530 5,557,066 5,721,074 0% (3)%
    Covered loans and leases, net 741,630 785,898 691,618 (6)% 7%
    Restricted equity securities 34,295 34,475 31,996 (1)% 7%
    Premises and equipment, net 139,539 136,599 101,686 2% 37%
    Mortgage servicing rights, at fair value 15,605 14,454 13,628 8% 15%
    Goodwill and other intangibles, net 680,922 681,969 680,482 0% 0%
    Non-covered other real estate owned 34,512 32,791 18,872 5% 83%
    Covered other real estate owned 29,531 29,863 8,995 (1)% 228%
    FDIC indemnification asset 131,505 146,413 141,955 (10)% (7)%
    Other assets 223,616     242,465     252,164 (8)% (11)%
    Total assets $11,550,728     $11,668,710     $10,509,804 (1)% 10%
     
    Liabilities:
    Deposits $9,292,672 $9,433,805 $8,207,235 (1)% 13%
    Securities sold under agreements to repurchase 93,425 73,759 42,043 27% 122%
    Term debt 257,240 262,760 363,828 (2)% (29)%
    Junior subordinated debentures, at fair value 81,220 80,688 79,563 1% 2%
    Junior subordinated debentures, at amortized cost 102,785 102,866 103,108 0% 0%
    Other liabilities 71,959     72,258     68,380 0% 5%
    Total liabilities 9,899,301 10,026,136 8,864,157 (1)% 12%
     
    Shareholders' equity:
    Preferred stock -- -- 198,289 100% (100)%
    Common stock 1,541,539 1,540,928 1,339,627 0% 15%
    Retained earnings 84,405 76,701 74,133 10% 14%
    Accumulated other comprehensive income 25,483     24,945     33,598 2% (24)%
    Total shareholders' equity 1,651,427     1,642,574     1,645,647 1% 0%
    Total liabilities and shareholders' equity $11,550,728     $11,668,710     $10,509,804 (1)% 10%
     
    Common shares outstanding at period end 114,642,471 114,536,814 95,527,427 0% 20%
    Book value per common share $14.41 $14.34 $15.15 0% (5)%
    Tangible book value per common share $8.47 $8.39 $8.03 1% 5%
    Tangible equity - common $970,505 $960,605 $766,876 1% 27%
    Tangible common equity to tangible assets 8.93% 8.74% 7.80%
     
    nm = not meaningful

     

     

    Umpqua Holdings Corporation

    Non-covered Loan & Lease Portfolio
    (Unaudited)
                      Sequential     Year over
    (Dollars in thousands)Mar 31, 2011Dec 31, 2010Mar 31, 2010QuarterYear
    Amount     MixAmount     MixAmount     Mix% Change     % Change

    Non-covered loans & leases:

               
    Commercial real estate:
    Non-owner occupied $2,239,817 40% $2,251,996 40% $2,354,746 40% (1)% (5)%
    Owner occupied 1,248,263 22% 1,231,479 22% 1,165,219 20% 1% 7%
    Residential real estate 485,917 9% 484,185 9% 451,628 8% 0% 8%
    Construction 366,738 7% 412,892 7% 554,688 10% (11)% (34)%
    Total real estate 4,340,735 77% 4,380,552 77% 4,526,281 78% (1)% (4)%
    Commercial 1,238,541 22% 1,224,416 22% 1,252,418 21% 1% (1)%
    Leases 31,855 1% 31,008 1% 32,740 1% 3% (3)%
    Installment and other 32,516 1% 34,041 1% 31,451 1% (4)% 3%
    Deferred loan fees, net (11,284) 0% (11,030) 0% (11,032) 0% 2% 2%
    Total $5,632,363 100% $5,658,987 100% $5,831,858 100% 0% (3)%
     
    Umpqua Holdings Corporation
    Covered Loan & Lease Portfolio
    (Unaudited)
                      Sequential     Year over

    (Dollars in thousands)

    Mar 31, 2011Dec 31, 2010Mar 31, 2010QuarterYear
    Amount     MixAmount     MixAmount     Mix% Change     % Change

    Covered loans & leases:

               
    Commercial real estate $544,575 73% $573,264 73% $464,221 67% (5)% 17%
    Residential real estate 76,205 10% 75,605 10% 118,033 17% 1% (35)%
    Construction 39,930 5% 42,213 5% 51,251 7% (5)% (22)%
    Total real estate 660,710 89% 691,082 88% 633,505 92% (4)% 4%
    Commercial 71,019 10% 83,722 11% 43,854 6% (15)% 62%
    Installment and other 9,901 1% 11,094 1% 14,316 2% (11)% (31)%
    Total $741,630 100% $785,898 100% $691,618 100% (6)% 7%
     

    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)Mar 31, 2011Dec 31, 2010Mar 31, 2010QuarterYear
    Amount     MixAmount     MixAmount     Mix% Change     % Change

    Deposits:

               
    Demand, non-interest bearing $1,671,797 18% $1,616,687 17% $1,472,408 18% 3% 14%
    Demand, interest bearing 4,341,994 47% 4,394,773 47% 3,690,025 45% (1)% 18%
    Savings 370,294 4% 349,695 4% 342,883 4% 6% 8%
    Time 2,908,588 31% 3,072,650 33% 2,701,919 33% (5)% 8%
    Total $9,292,673 100% $9,433,805 100% $8,207,235 100% (1)% 13%
     
    Total core deposits-ending (1) $7,227,087 78% $7,242,749 77% $6,405,118 78% 0% 13%
     

    Number of open accounts:

    Demand, non-interest bearing 185,929 182,741 177,152 2% 5%
    Demand, interest bearing 77,664 78,165 70,082 (1)% 11%
    Savings 86,933 86,773 95,367 0% (9)%
    Time 40,155 41,832 40,269 (4)% 0%
    Total 390,681 389,511 382,870 0% 2%
     

    Average balance per account:

    Demand, non-interest bearing $9.0 $8.8 $8.3
    Demand, interest bearing 55.9 56.2 52.7
    Savings 4.3 4.0 3.6
    Time 72.4 73.5 67.1
    Total 23.8 24.2 21.4
     

    (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)Mar 31, 2011     Dec 31, 2010     Mar 31, 2010     % Change     % Change
     

    Non-covered, non-performing assets:

    Non-covered loans on non-accrual status $136,125 $138,177 $183,510 (1)% (26)%
    Non-covered loans past due 90+ days & accruing 6,327     7,071     7,200 (11)% (12)%
    Total non-performing loans 142,452 145,248 190,710 (2)% (25)%
    Non-covered other real estate owned 34,512     32,791     18,872 5% 83%
    Total $176,964     $178,039     $209,582 (1)% (16)%
     
    Performing restructured loans $67,499 $84,442 $97,971 (20)% (31)%
     
    Past due 30-89 days $70,665 $48,217 $53,947 (47)% 31%
    Past due 30-89 days to total loans and leases 1.25% 0.85% 0.93%
     

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

    2.53% 2.57% 3.27%
    Non-covered, non-performing assets to total assets 1.53% 1.53% 1.99%
     

    Covered non-performing assets:

    Covered loans on non-accrual status $--     $--     $37,031 nm (100)%
    Total non-performing loans -- -- 37,031 nm (100)%
    Covered other real estate owned 29,531     29,863     8,995 (1)% 228%
    Total $29,531     $29,863     $46,026 (1)% (36)%
     

    Covered non-performing loans to covered loans and leases

    --% --% 5.35%
    Covered non-performing assets to total assets 0.26% 0.26% 0.44%
     

    Total non-performing assets:

    Loans on non-accrual status $136,125 $138,177 $220,541 (1)% (38)%
    Loans past due 90+ days & accruing 6,327     7,071     7,200 (11)% (12)%
    Total non-performing loans 142,452 145,248 227,741 (2)% (37)%
    Other real estate owned 64,043     62,654     27,867 2% 130%
    Total $206,495     $207,902     $255,608 (1)% (19)%
     
    Non-performing loans to loans and leases 2.23% 2.25% 3.49%
    Non-performing assets to total assets 1.79% 1.78% 2.43%
     
    Umpqua Holdings Corporation
    Credit Quality – Allowance for Non-covered Credit Losses
    (Unaudited)
                      Sequential     Year over
    Quarter EndedQuarterYear
    (Dollars in thousands)Mar 31, 2011     Dec 31, 2010     Mar 31, 2010     % Change     % Change

    Allowance for non-covered credit losses:

    Balance beginning of period $101,921 $108,098 $107,657

    Provision for non-covered loan and lease losses

    15,030 17,567 42,106 (14)% (64)%
     
    Charge-offs (20,875) (25,770) (39,759) (19)% (47)%
    Recoveries 1,757     2,026     780 (13)% 125%
    Net charge-offs (19,118) (23,744) (38,979) (19)% (51)%
                 

    Total allowance for non-covered loan and lease losses

    97,833 101,921 110,784 (4)% (12)%
     
    Reserve for unfunded commitments 911     818     765

    Total allowance for non-covered credit losses

    $98,744     $102,739     $111,549 (4)% (11)%
     

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

    1.38% 1.66% 2.66%
    Recoveries to gross charge-offs 8.42% 7.86% 1.96%

    Allowance for credit losses to non-covered loans and leases

    1.75% 1.82% 1.91%
     
    Umpqua Holdings Corporation
    Selected Ratios
    (Unaudited)
              Sequential     Year over
    Quarter Ended:QuarterYear
    Mar 31, 2011     Dec 31, 2010     Mar 31, 2010     Change     Change

    Net interest spread:

           
    Yield on non-covered loans and leases 5.63% 5.73% 5.75% (0.10) (0.12)
    Yield on covered loans and leases 12.07% 12.86% 6.98% (0.79) 5.09
    Yield on taxable investments 2.97% 2.87% 3.99% 0.10 (1.02)
    Yield on tax-exempt investments (1) 5.90% 5.74% 5.84% 0.16 0.06
    Yield on temporary investments & interest bearing cash 0.25% 0.25% 0.24% 0.00 0.01
    Total yield on earning assets (1) 5.02% 5.05% 5.07% (0.03) (0.05)
     
    Cost of interest bearing deposits 0.83% 0.97% 1.19% (0.14) (0.36)

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

    0.59% 0.79% 1.02% (0.20) (0.43)
    Cost of term debt 3.56% 3.57% 3.41% (0.01) 0.15
    Cost of junior subordinated debentures 4.23% 4.24% 4.05% (0.01) 0.18
    Total cost of interest bearing liabilities 0.99% 1.12% 1.33% (0.13) (0.34)
     
    Net interest spread (1) 4.03% 3.93% 3.74% 0.10 0.29
    Net interest margin – Consolidated (1) 4.23% 4.14% 4.04% 0.09 0.19
     
    Net interest margin – Bank (1) 4.30% 4.21% 4.12% 0.09 0.18
     

    As reported (GAAP):

    Return on average assets 0.47% 0.28% (0.15%) 0.19 0.62
    Return on average tangible assets 0.50% 0.29% (0.16%) 0.21 0.66
    Return on average common equity 3.30% 1.95% (1.05%) 1.35 4.35
    Return on average tangible common equity 5.62% 3.30% (1.94%) 2.32 7.56
    Efficiency ratio – Consolidated 66.01% 71.24% 59.14% (5.23) 6.87
    Efficiency ratio – Bank 63.47% 68.90% 59.60% (5.43) 3.87
     

    Operating basis (non-GAAP): (2)

    Return on average assets 0.48% 0.31% -0.41% 0.17 0.89
    Return on average tangible assets 0.52% 0.33% -0.44% 0.19 0.96
    Return on average common equity 3.40% 2.16% -2.86% 1.24 6.26
    Return on average tangible common equity 5.80% 3.67% -5.28% 2.13 11.08
    Efficiency ratio – Consolidated 65.59% 70.15% 64.35% (4.56) 1.24
    Efficiency ratio – Bank 63.33% 68.12% 61.44% (4.79) 1.89
     
    (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)Mar 31, 2011     Dec 31, 2010     Mar 31, 2010     % Change     % Change
           

    Temporary investments & interest bearing cash

    $652,844 $1,007,345 $678,930 (35)% (4)%
    Investment securities, taxable 2,964,410 2,550,856 1,610,407 16% 84%
    Investment securities, tax-exempt 219,523 226,371 221,405 (3)% (1)%
    Loans held for sale 47,646 68,982 24,141 (31)% 97%
    Non-covered loans and leases 5,623,811 5,691,794 5,934,805 (1)% (5)%
    Covered loans and leases 767,911     809,984     363,315 (5)% 111%
    Total earning assets 10,276,145 10,355,333 8,833,003 (1)% 16%
    Goodwill & other intangible assets, net 681,494 681,966 653,778 0% 4%
    Total assets 11,572,751 11,695,980 9,977,400 (1)% 16%
     
    Non-interest bearing demand deposits 1,644,452 1,624,285 1,448,668 1% 14%
    Interest bearing deposits 7,683,403     7,826,703     6,389,093 (2)% 20%
    Total deposits 9,327,855 9,450,988 7,837,761 (1)% 19%
    Interest bearing liabilities 8,211,760 8,343,628 6,807,376 (2)% 21%
     
    Shareholders’ equity - common 1,649,674 1,659,151 1,426,935 (1)% 16%
    Tangible common equity (1) 968,180 977,185 773,157 (1)% 25%
     

    (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)Mar 31, 2011     Dec 31, 2010     Mar 31, 2010     % Change     % Change
           

    Mortgage Servicing Rights (MSR):

    Mortgage loans serviced for others $1,691,112 $1,603,414 $1,345,550 5% 26%
    MSR Asset, at fair value 15,605 14,454 $13,628 8% 15%
     
    MSR as % of serviced portfolio 0.92% 0.90% 1.01%
     

    Mortgage Banking Revenue:

    Origination and sale $4,336 $7,395 $2,704 (41)% 60%
    Servicing 1,121 1,016 903 10% 24%
    Change in fair value of MSR asset (182)     (1,022)     (129) (82)% 41%
    Total $5,275     $7,389     $3,478 (29)% 52%
     
     
    Closed loan volume $166,737 $281,086 $127,314 (41)% 31%
     

    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 March 31, 2011, December 31, 2010 and March 31, 2010:

    Table 1- Non-covered residential development loan trends by region
    (Dollars in thousands)         Non-    
                  % changeperformingPerforming
    BalanceBalanceBalancefromloansLoans
    3/31/10     12/31/10     3/31/11     3/31/10     3/31/11     3/31/11
    Northwest Oregon $81,409 $64,263 $59,862 (26)% $13,871 $45,991
    Central Oregon 4,962 3,629 2,035 (59)% -- 2,035
    Southern Oregon 17,149 6,256 4,607 (73)% 829 3,778
    Washington 8,462 9,308 9,766 15% 3,033 6,733
    Greater Sacramento 67,676 49,329 41,537 (39)% 8,073 33,464
    Northern California 22,140     15,028     14,207 (36)% 7,954     6,253
    Total $201,798     $147,813     $132,014 (35)% $33,760     $98,254

    % of total non-covered loan portfolio

    3% 3% 2% 2%
     
    Quarter change $ $(24,011) $(12,572) $(15,799)
    Quarter change % (11)% (8)% (11)%
     

    The following is a stratification by size and region of the remaining non-covered performing residential development loans as of March 31, 2011:

    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 $1,889 $4,549 $8,742 $10,277 $6,160 $14,374 $45,991
    Central Oregon 379 1,656 -- -- -- -- 2,035
    Southern Oregon 833 1,845 1,100 -- -- -- 3,778
    Washington 1,110 339 5,284 -- -- -- 6,733
    Greater Sacramento 3,379 3,114 3,661 -- 11,455 11,855 33,464
    Northern California 1,083     1,026     4,144     --     --     --     6,253
    Total $8,673     $12,529     $22,931     $10,277     $17,615     $26,229     $98,254
    % of Total 9% 13% 23% 10% 18% 27% 100%
     

    The following is a distribution of non-covered, non-performing assets by type and by region as of March 31, 2011:

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

    Non-accrual loans:

    Residential development $13,871 $-- $829 $3,033 $8,073 $7,954 $33,760
    Commercial construction 10,061 -- 472 -- 9,039 109 19,681
    Commercial real estate 31,265 2,341 -- 2,074 9,379 10,054 55,113
    Commercial 8,021 2,488 369 4,176 7,251 5,266 27,571
    Other --     --     --     --     --     --     --
    Total $63,218 $4,829 $1,670 $9,283 $33,742 $23,383 $136,125
     

    Loans 90 days past due:

    Residential development $-- $-- $-- $-- $-- $-- $--
    Commercial construction -- -- -- -- -- -- --
    Commercial real estate -- -- -- -- -- -- --
    Commercial -- -- -- -- -- -- --
    Other 4,776     --     --     300     1,251     --     6,327
    Total $4,776 $-- $-- $300 $1,251 $-- $6,327
                                         
    Total non-performing loans $67,994     $4,829     $1,670     $9,583     $34,993     $23,383     $142,452
     

    Other real estate owned:

    Residential development $590 $1,934 $2,094 $83 $174 $1,064 $5,939
    Commercial construction 4,590 539 -- 313 3,991 -- 9,433
    Commercial real estate 5,826 837 2,063 -- 2,523 5,316 16,565
    Commercial -- 359 282 968 -- 44 1,653
    Other 922     --     --     --     --     --     922
    Total $11,928 $3,669 $4,439 $1,364 $6,688 $6,424 $34,512
                                         
    Total non-performing assets $79,922     $8,498     $6,109     $10,947     $41,681     $29,807     $176,964
    % of total45%5%3%6%24%17%100%
     

    The Company has aggressively charged-down impaired assets to their disposition values. As of March 31, 2011, the non-performing assets of $177.0 million have been written down by 41%, or $121.1 million, from their current par balance of $298.1 million.

    The following is a distribution of non-covered loans past due 30 to 89 days by loan type by region as of March 31, 2011:

    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 $3,285 $-- $156 $-- $6,736 $-- $10,177
    Commercial construction 2,627 -- 165 -- 2,742 -- 5,534
    Commercial real estate 12,308 -- 323 -- 8,068 12,065 32,764
    Commercial 1,952 448 371 5,995 2,113 5,564 16,443
    Other 5,222     --     --     6     519     --     5,747
    Total $25,394     $448     $1,015     $6,001     $20,178     $17,629     $70,665
     

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

    (Dollars in thousands)
                      Sequential     Year
    QuarterOver Year
    Mar 31, 2011     Dec 31, 2010     Mar 31, 2010     % Change     % Change

    Loans 30-89 days past due:

    Residential development $10,177 $640 $13,583 1490% (25)%
    Commercial construction 5,534 8,898 4,861 (38)% 14%
    Commercial real estate 32,764 22,924 21,672 43% 51%
    Commercial 16,443 9,422 8,306 75% 98%
    Other 5,747     6,333     5,525 (9)% 4%
    Total $70,665     $48,217     $53,947 47% 31%
     

    The following is a distribution of non-covered restructured loans by loan type by region as of March 31, 2011:

    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 $14,895 $-- $-- $5,284 $21,718 $-- $41,897
    Commercial construction -- -- -- -- 5,468 -- 5,468
    Commercial real estate -- -- 3,888 -- 11,336 3,536 18,760
    Commercial -- -- -- -- -- 1,196 1,196
    Other 178     --     --     --     --     --     178
    Total $15,073     $--     $3,888     $5,284     $38,522     $4,732     $67,499

    Source: Umpqua Holdings Corporation


    Contact:

    Umpqua Holdings Corporation

    Ray Davis, 503-727-4101

    President/CEO

    raydavis@umpquabank.com

    or

    Ron Farnsworth, 503-727-4108

    EVP/Chief Financial Officer

    ronfarnsworth@umpquabank.com