• Umpqua Holdings Corporation
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  • Umpqua Reports Third Quarter 2014 Results
    Company Release - 10/15/2014 16:15

    Operating earnings1 increased to $65.1 million, or $0.30 per share
    7% annualized growth in non-covered loans and leases (gross of sales) and 10% annualized growth in deposits
    Improved regulatory capital ratios and significant increase in on-balance sheet liquidity

    PORTLAND, Ore.--(BUSINESS WIRE)-- Umpqua Holdings Corporation (NASDAQ: UMPQ) (the “Company”) reported net earnings available to common shareholders of $58.8 million for the third quarter of 2014, an increase from $17.1 million for the second quarter of 2014 and $23.3 million for the third quarter of 2013. Earnings per diluted common share increased to $0.27 for the third quarter of 2014, as compared to $0.09 for the second quarter of 2014 and $0.21 for the third quarter of 2013.

    Operating earnings1, which represent earnings available to common shareholders before gains or losses on junior subordinated debentures carried at fair value, net of tax, and merger related expenses, net of tax, increased to $65.1 million for the third quarter of 2014, as compared to $53.9 million for the second quarter of 2014 and $26.5 million for the third quarter of 2013. Operating earnings per diluted common share increased to $0.30 for the third quarter of 2014, as compared to $0.27 for the second quarter of 2014 and $0.24 for the third quarter of 2013.

    “Umpqua continues to build on the momentum started earlier this year, reporting strong organic loan and deposit growth, higher top-line revenues, and increased capital and liquidity levels, while making good progress on our integration of Sterling,” said Ray Davis, president and CEO of Umpqua Holdings Corporation. “We expect to complete the majority of the integration by the end of the first quarter of 2015, and look forward to introducing new creative strategies early next year to enhance Umpqua's organic growth and further strengthen our unique brand and innovative product delivery systems.”

    Third Quarter 2014 Financial Highlights:

    • Delivered improved operating results:
      • Net interest income increased by $13.5 million from the prior quarter;
      • Adjusted net interest margin1 declined from 4.85% to 4.71% due to a slight reduction in interest income from credit discount accretion and a higher balance of interest-bearing cash;
      • Non-interest income increased by $17.4 million from the prior quarter, and included $7.1 million in gains arising from multi-family and portfolio residential loan sales;
      • Efficiency ratio (operating basis)1 improved to 59.83%, from 60.33% in the prior quarter;
      • Return on average tangible common equity (operating basis)1 improved to 13.80%, from 12.76% in the prior quarter;
    • Continued strong growth in loans and deposits:
      • Non-covered loans and leases (gross of sales) grew by $263.1 million, or 7% annualized, from the prior quarter. This growth was partially offset by sales of loans and leases of $117.6 million, for net growth of $145.5 million;
      • Strong deposit growth of $404.6 million, or 10% annualized, from the prior quarter, driven by 14% annualized growth in core deposits;
    • Credit quality remained strong:
      • Non-covered, non-performing assets to total assets remained at 0.36%;
    • Increased capital and liquidity:
      • Tangible book value per common share1 increased to $8.78, from $8.69 in the prior quarter;
      • Estimated total risk-based capital ratio of 14.3% and estimated Tier 1 common to risk weighted assets ratio of 10.8%, up from 14.2% and 10.7%, respectively;
      • Declared a dividend of $0.15 per common share; and
      • Interest bearing cash increased to $1.2 billion, from $0.5 billion in the prior quarter.

    For the nine months ended September 30, 2014, the Company reported net earnings available to common shareholders of $94.6 million, or $0.54 per diluted common share, as compared to $72.5 million, or $0.65 per diluted common share, for the nine months ended September 30, 2013. For the nine months ended September 30, 2014, operating earnings1 were $143.0 million, or $0.81 per diluted common share, as compared to $77.8 million, or $0.69 per diluted common share, for the nine months ended September 30, 2013.

    1 "Non-GAAP" financial measure. More information regarding this measurement and a reconciliation to the comparable GAAP measurement is provided under the heading Non-GAAP Financial Measures below.

    Update on Acquisition of Sterling Financial

    The Company completed its acquisition of Sterling Financial Corporation (“Sterling”) on April 18, 2014, and as required under acquisition accounting rules, recorded the acquired assets and liabilities from Sterling’s balance sheet at their estimated fair values as of that date. The results of operations from Sterling have been included in the Company’s financial results since the completion of the acquisition, beginning on April 19, 2014. Under Generally Accepted Accounting Principles, the Sterling allowance for loan losses was eliminated and a fair value discount was recorded against the loans acquired as of the acquisition date.

    During the third quarter of 2014, the Company reported $21.7 million of accretion from the credit discount in interest income, as compared to $24.5 million during the second quarter of 2014. As of September 30, 2014, the purchased non-credit impaired loans had approximately $139 million of remaining credit discount that will accrete into interest income over the life of the loans, and the purchased credit impairment loan pools had approximately $72 million of remaining total discount.

    New loans originated and subsequent advances by the former Sterling workforce since April 19, 2014 are accounted for separately from the discounted acquired loans. As a result, the Company recognized $9.7 million during the quarter in provision for loan losses, related primarily to new loan production from the former Sterling offices.

    In total, the Sterling acquisition was 49% accretive to third quarter of 2014 operating earnings per share1. Together, the accretion from the credit discount, offset by the provision for loan losses related to new production by former Sterling offices, added $7.1 million to net income, or $0.03 per diluted share. Excluding those two items, the Sterling acquisition would have been 33% accretive to third quarter of 2014 operating earnings per share1.

    Integration efforts continue to proceed as planned, with the previously announced store consolidations currently in process and expected to be completed by the end of 2014. System conversions are scheduled through early 2015. Cost synergies remain on track to the previously announced target of $87 million (annualized), which is expected to be fully realized following system conversions.

    Balance Sheet

    Total consolidated assets were $22.5 billion as of September 30, 2014, as compared to $22.0 billion as of June 30, 2014 and $11.6 billion as of September 30, 2013. Total gross loans and leases (covered and non-covered) and deposits, were $15.3 billion and $16.7 billion, respectively, as of September 30, 2014, as compared to $15.1 billion and $16.3 billion, respectively, as of June 30, 2014, and $7.6 billion and $9.1 billion, respectively, as of September 30, 2013.

    Total non-covered loans and leases held for investment increased to $15.0 billion as of September 30, 2014, as compared to $14.8 billion as of June 30, 2014 and $7.2 billion as of September 30, 2013. Gross non-covered loan and leases grew by $263.1 million, or 7% annualized, from the prior quarter. This growth was partially offset by sales of $117.6 million, which was primarily composed of $54.9 million in portfolio residential mortgage loan sales, $35.3 million in multifamily loan sales and $25.1 million in government guaranteed loan sales, resulting in net organic loan growth of $145.5 million.

    Total covered loans were $275.6 million as of September 30, 2014, a $22.0 million decline from the prior quarter and a $121.5 million decline from the same period in the prior year. This portfolio will continue to decrease over time as loan payments are received, covered loans are refinanced or modified out of loss sharing, and as troubled credits are resolved and worked out.

    Total deposits increased to $16.7 billion as of September 30, 2014, as compared to $16.3 billion as of June 30, 2014 and $9.1 billion as of September 30, 2013. This $404.6 million increase, or 10% annualized, from the prior quarter was primarily driven by strong growth in demand and savings accounts, as the Company continues its emphasis on core deposit gathering.

    Including secured off-balance sheet lines of credit, total available liquidity to the Company was $7.6 billion as of September 30, 2014, representing 34% of total assets and 46% of total deposits. This compares to total available liquidity to the Company of $7.0 billion, or 32% of total assets and 43% of total deposits, as of June 30, 2014.

    Net Interest Income

    Net interest income was $225.7 million for the third quarter of 2014, up $13.5 million from the prior quarter and $118.9 million from the same period in the prior year. The increase from the prior quarter was primarily driven by higher interest-earning assets, as well as 19 additional days of Sterling net interest income due to the timing of the acquisition in the prior quarter. The increase from prior year was primarily driven by the acquisition of Sterling, along with continued organic loan growth. Net interest income for the third quarter of 2014 included $21.7 million in interest income arising from the accretion of the credit discount recorded on the loans acquired from the acquisition of Sterling.

    The Company’s net interest margin was 4.75% for the third quarter of 2014, as compared to 5.01% for the second quarter of 2014, and 4.22% for the third quarter of 2013. The decrease from the prior quarter was primarily driven by lower average balances of covered loans and a decrease in interest income arising from lower accretion of the credit discount, as well as a higher balance of interest-bearing cash. The increase from the prior year was primarily driven by the acquisition of Sterling, an improvement in the yield earned on interest-earnings assets, and a lower cost of funds.

    Adjusted Net Interest Income1

    The Company’s adjusted net interest income and margin excludes gains on covered loan disposals, and interest and fee reversals related to non-accrual loans.

    Loan disposal 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) exceed the allocated carrying value of the loan disposed of from the pool. Loan disposal activities contributed $2.3 million of interest income for the third quarter of 2014, as compared to $7.1 million for the second quarter of 2014 and $1.8 million for the third quarter of 2013. While dispositions of covered loans positively impact interest income and net interest margin, the Company recognizes a corresponding decrease to the change in the FDIC indemnification asset within non-interest income that partially offsets the impact to net income. Interest and fee reversals related to non-accrual loans during the third quarter of 2014 totaled $74 thousand, as compared to $450 thousand for the second quarter of 2014 and $203 thousand for third quarter of 2013.

    Adjusted net interest income was $225.0 million for the third quarter of 2014, as compared to $207.0 million for the second quarter of 2014 and $106.3 million for the third quarter of 2013. The Company’s adjusted net interest margin was 4.71% for the third quarter of 2014, as compared to 4.85% for the second quarter of 2014 and 4.16% for the third quarter of 2013.

    Non-Interest Income

    Total non-interest income was $61.9 million for the third quarter of 2014, up $17.4 million from the prior quarter and $35.8 million from the same period in the prior year. Non-interest income in the third quarter of 2014 included $7.1 million of gains arising from multi-family and portfolio residential loan sales. The remainder of the increase from the prior quarter was primarily driven by higher Sterling mortgage banking and fee revenues from 19 additional days due to the timing of the acquisition in the prior quarter. The increase from the prior year was primarily driven by the acquisition of Sterling, as well as the gains arising from loan sales.

    Residential mortgage banking revenue, which includes income generated from the origination and sale of residential mortgage loans, income from the servicing of residential mortgage loans and changes to the fair value of the residential mortgage servicing rights (“MSR”) asset, increased to $26.0 million for the third quarter of 2014, up $1.7 million from the prior quarter, and up $10.9 million from the same period in the prior year.

    The Company’s gain on sale margin, as a percentage of total residential mortgage production, was 2.44% for the third quarter of 2014, down slightly from 2.47% in the prior quarter due to a decline in the locked mortgage pipeline. Of the current quarter’s mortgage production, 71% related to purchase activity, as compared to 74% for the prior quarter and 66% for the same period in the prior year.

    As of September 30, 2014, the Company serviced $11.3 billion of residential mortgage loans for others, and its related MSR asset was valued at $118.7 million, or 1.05% of the total serviced portfolio principal balance. This compares to $10.8 billion of residential mortgage loans serviced for others as of June 30, 2014, with a related MSR asset of $114.2 million, or 1.05% of the total serviced portfolio principal balance. As of September 30, 2013, the Company serviced $4.2 billion of residential mortgage loans serviced for others, and its related MSR asset was valued at $41.9 million, or 1.00% of the total serviced portfolio principal balance.

    Non-interest Expense

    Non-interest expense was $182.6 million for the third quarter of 2014, which included $8.6 million of merger-related expenses. This compares to $214.1 million, including $57.5 million of merger-related expenses, for the second quarter of 2014 and $95.6 million, including $4.9 million of merger-related expenses, for the third quarter of 2013. The increase in the Company’s non-interest expense from the prior quarter was primarily driven by 19 additional days of Sterling non-interest expense due to the timing of the acquisition in the prior quarter. The third quarter of 2014 non-interest expense run-rate does not reflect the full benefit of the anticipated Sterling merger cost synergies.

    On an operating basis1, which excludes merger-related expenses, the Company’s efficiency ratio improved to 59.83% for the third quarter of 2014, from 60.33% for the second quarter of 2014 and 67.40% for the third quarter of 2013.

    Income taxes

    The Company recorded a provision for income taxes of $31.8 million for the third quarter of 2014, representing an effective tax rate of 35.0% for the quarter. The year-to-date effective tax rate was 35.4%, which is the anticipated full-year 2014 effective tax rate.

    Capital

    As of September 30, 2014, the Company’s tangible book value per common share1 was $8.78 and its ratio of tangible common equity to tangible assets1 was 9.24%, as compared to $8.69 and 9.34%, respectively, in the prior quarter.

    The Company made no open market nor privately negotiated purchases of common stock under the Company’s previously announced share repurchase plan during the third quarter of 2014. The Company may repurchase up to 12.0 million of additional shares under this plan.

    The Company’s estimated total risk-based capital ratio was 14.3% and its estimated Tier 1 common to risk weighted assets ratio was 10.8% as of September 30, 2014, up from 14.2% and 10.7%, respectively. The Company remains well above current “well-capitalized” regulatory minimums. These capital ratios, as of September 30, 2014, are estimates pending completion and filing of the Company’s regulatory reports.

    On July 2, 2013, federal banking regulators approved the final proposed rules that revise the regulatory capital rules to incorporate certain revisions by the Basel Committee on Banking Supervision to the Basel capital framework (“Basel III”). Under Basel III, the Company's combined trust preferred issuances must be phased out of Tier 1 and into Tier 2 capital (75% in 2015 and 100% in 2016). As of September 30, 2014, the total par value of trust preferred securities was $461.2 million. In addition, the Company is required under Basel III to exclude the entire deferred tax asset related to net operating losses (“NOLs”) from Tier 1 capital. As of September 30, 2014, the Company’s total net deferred tax asset was $250.9 million, and the portion related to NOLs was $211.7 million.

    Credit Quality – Non-covered Loan Portfolio

    Under purchase accounting rules, loans (including those considered non-performing) acquired from Sterling were recorded at their estimated fair value, and the related allowance for loan losses was eliminated. As a result, the Company wrote down the value of the non-covered loan and lease portfolio acquired from Sterling as of the acquisition date. This credit portion of the fair value mark is not reflected in the reported allowance for loan losses, or its related allowance coverage ratios, but should be considered when comparing the current quarter ratios to similar ratios in periods prior to the acquisition of Sterling.

    The allowance for non-covered loan losses was $107.8 million, or 0.72% of non-covered loans and leases, as of September 30, 2014. To provide better comparability to prior periods, this pro-forma ratio would have been approximately 2.1% after grossing up the allowance for loan losses and the non-covered loans and leases by the amount of the remaining credit mark remaining as of quarter-end. This compares to a ratio of approximately 2.2% as of June 30, 2014.

    The provision for non-covered loan losses was $14.4 million for the third quarter of 2014, down from $15.4 million for the second quarter of 2014 and an increase from $3.0 million for the third quarter of 2013. Of the third quarter of 2014 provision for loan losses, $9.7 million related primarily to new loan production from former Sterling offices, $5.1 million related to growth in the Financial Pacific Leasing portfolio, and the remaining recapture related to legacy Umpqua Bank.

    Non-covered, non-performing assets were $81.6 million, or 0.36% of total assets, as of September 30, 2014, as compared to $79.4 million, or 0.36% of total assets, as of June 30, 2014, and $63.0 million, or 0.54% of total assets, as of September 30, 2013.

    Non-covered loans past due 31 to 89 days were $34.0 million, or 0.23% of non-covered loans and leases, as of September 30, 2014, as compared to $28.9 million, or 0.19% of non-covered loans and leases, as of June 30, 2014, and $22.1 million, or 0.31% of non-covered loans and leases, as of September 30, 2013. Non-covered restructured loans on accrual status were $63.5 million as of September 30, 2014, as compared to $67.5 million as of June 30, 2014, and $69.5 million as of September 30, 2013.

    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. The Company believes that certain non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance; however, readers of this document are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.

    The Company recognizes gains or losses on its 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, the Company incurs significant expenses related to the completion and integration of mergers and acquisitions. Additionally, it 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, the Company may recognize one-time bargain purchase gains on certain acquisitions that are not reflective of the Company’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. The Company defines operating earnings 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 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 available to common shareholders (GAAP) to operating earnings (non-GAAP), and earnings per diluted common share (GAAP) to operating earnings per diluted share (non-GAAP) for the periods presented:

       
    Quarter Ended% Change  
    (Dollars in thousands, except per share data)

    Sep 30,
    2014

     

    Jun 30,
    2014

     

    Mar 31,
    2014

     

    Dec 31,
    2013

     

    Sep 30,
    2013

    Seq.
    Quarter

     

    Year over
    Year

    Net earnings available to common shareholders $ 58,847   $ 17,138   $ 18,651   $ 25,058   $ 23,281

    243

    %

     

    153

    %

    Adjustments:
    Net loss on junior subordinated debentures carried at fair value, net of tax (1) 955 821 325 332 332

    16

    %

    188

    %

    Merger related expenses, net of tax (1) 5,274   35,926   5,073     2,502   2,914

    (85

    )

    %

    81

    %

    Operating earnings $ 65,076   $ 53,885   $ 24,049     $ 27,892   $ 26,527

    21

    %

    145

    %

     

    Earnings per diluted share:

    Earnings available to common shareholders $ 0.27 $ 0.09 $ 0.17 $ 0.22 $ 0.21

    200

    %

    29

    %

    Operating earnings $ 0.30 $ 0.27 $ 0.21 $ 0.25 $ 0.24

    11

    %

    25

    %

     
    Nine Months Ended% Change  

    Sep 30,
    2014

    Sep 30,
    2013

    Year over
    Year

    Net earnings available to common shareholders $ 94,636 $ 72,515

    31

    %

     

    Adjustments:
    Net loss on junior subordinated debentures carried at fair value, net of tax (1) 2,101 986

    113

    %

    Merger related expenses, net of tax (1) 46,273   4,318 nm
    Operating earnings $ 143,010   $ 77,819

    84

    %

     

    Earnings per diluted share:

    Earnings available to common shareholders $ 0.54 $ 0.65

    (17

    )%

    Operating earnings $ 0.81 $ 0.69

    17

    %

     
    (1) Income tax effect of pro forma operating earnings adjustments at 40% for tax-deductible items.
    nm = not meaningful.
     

    Management believes adjusted net interest income and adjusted net interest margin are useful financial measures because they enable investors to evaluate the underlying growth or compression in these values excluding interest income adjustments related to credit quality. Management uses these measures to evaluate adjusted net interest income operating results exclusive of credit costs, in order to monitor our effectiveness in growing higher interest yielding assets and managing our cost of interest bearing liabilities over time. Adjusted net interest income is calculated as net interest income, adjusting tax exempt interest income to its taxable equivalent, adding back interest and fee reversals related to new non-accrual loans during the period, and deducting the interest income gains recognized from loan disposition activities within covered loan pools. Adjusted net interest margin is calculated by dividing annualized adjusted net interest income by a period’s average interest earning assets.

    The following table provides the reconciliation of net interest income (GAAP) to adjusted net interest income (non-GAAP), and net interest margin (GAAP) to adjusted net interest margin (non-GAAP) for the periods presented:

       
    Quarter Ended% Change
    (Dollars in thousands)

    Sep 30, 2014

     

    Jun 30, 2014

     

    Mar 31, 2014

     

    Dec 31, 2013

     

    Sep 30, 2013

    Seq.
    Quarter

     

    Year over
    Year

    Net interest income $ 225,716   $ 212,259   $ 107,838   $ 110,074   $ 106,809

    6

    %

     

    111

    %

    Tax equivalent adjustment (1) 1,443       1,394       1,092       1,119       1,137    

    4

    %

    27

    %

    Net interest income (1) 227,159 213,653 108,930 111,193 107,946

    6

    %

    110

    %

    Adjustments:
    Interest and fee reversals (recoveries) on non-accrual loans 74 450 122

    (399

    )

     

    203

    (84

    )

    %

    (64

    )

    %

    Covered loan disposal gains

    (2,262

     

    )

     

    (7,128

     

    )

     

    (4,259

    )

     

     

    (3,908

    )

     

     

    (1,836

    )

     

    (68

    )

    %

    23

    %

    Adjusted net interest income (1) $ 224,971       $ 206,975       $ 104,793       $ 106,886       $ 106,313    

    9

    %

    112

    %

    Average interest earning assets $ 18,963,760 $ 17,116,070 $ 10,310,116 $ 10,292,996 $ 10,136,677

    11

    %

    87

    %

    Net interest margin – consolidated (1)

    4.75

    %

    5.01

    %

    4.28

    %

    4.29

    %

    4.22

    %

    Adjusted net interest margin – consolidated (1)

    4.71

    %

    4.85

    %

    4.12

    %

    4.12

    %

    4.16

    %

     
    Nine Months Ended% Change

    Sep 30, 2014

     

    Sep 30, 2013

    Year over
    Year

    Net interest income $ 545,813 $ 294,891

    85

    %

    Tax equivalent adjustment (1) 3,929       3,460    

    14

    %

    Net interest income (1) 549,742 298,351

    84

    %

    Adjustments:
    Interest and fee reversals on non-accrual loans 646 1,321

    (51

    )

    %

    Covered loan disposal gains

    (13,649

    )

     

     

    (9,227

    )

     

    48

    %

    Adjusted net interest income (1) $ 536,739       $ 290,445    

    85

    %

    Average interest earning assets $ 15,495,014 $ 10,201,559

    52

    %

    Net interest margin – consolidated (1)

    4.74

    %

    3.91

    %

    Adjusted net interest margin – consolidated (1)

    4.63

    %

    3.81

    %

     
    (1) Tax equivalent basis. Tax exempt interest has been adjusted to a taxable equivalent basis using a 35% tax rate.
     

    Management believes tangible common equity and the tangible common equity ratio are meaningful measures of capital adequacy because they provide a meaningful base for period-to-period and company-to-company comparisons, which management believes will assist investors in assessing the capital of the Company and the ability to absorb potential losses. Tangible common equity is calculated as total shareholders' equity less goodwill and other intangible assets, net (excluding MSRs). 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, 2014   Jun 30, 2014   Mar 31, 2014   Dec 31, 2013   Sep 30, 2013
    Total shareholders' equity $ 3,752,508   $ 3,729,060   $ 1,734,476   $ 1,727,426   $ 1,725,995
    Subtract:
    Goodwill and other intangible assets, net 1,845,242     1,842,670     775,488     776,683     778,094  
    Tangible common shareholders' equity $ 1,907,266     $ 1,886,390     $ 958,988     $ 950,743     $ 947,901  
    Total assets $ 22,488,059 $ 22,042,229 $ 11,838,726 $ 11,636,112 $ 11,569,297
    Subtract:
    Goodwill and other intangible assets, net 1,845,242     1,842,670     775,488     776,683     778,094  
    Tangible assets $ 20,642,817     $ 20,199,559     $ 11,063,238     $ 10,859,429     $ 10,791,203  
    Common shares outstanding at period end 217,261,722 217,190,721 112,319,525 111,973,203 111,928,762
    Tangible common equity ratio 9.24 % 9.34 % 8.67 % 8.75 % 8.78 %
    Tangible book value per common share $ 8.78 $ 8.69 $ 8.54 $ 8.49 $ 8.47

    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 locations across Idaho, Washington, Oregon, California 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 Private Bank serves high net worth individuals and nonprofits, providing trust and investment services. Umpqua Holdings Corporation is headquartered in Portland, Oregon. For more information, visit www.umpquaholdingscorp.com.

    Earnings Conference Call Information

    The Company will host its third quarter 2014 earnings conference call on Thursday, October 16, 2014, at 10:00 a.m. PST (1:00 p.m. EST). During the call, the Company will provide an update on recent activities and discuss its third quarter 2014 financial results. There will be a live question-and-answer session following the presentation. To join the call, please dial (888) 487-0340 ten minutes prior to the start time and enter conference ID: 9952803. A re-broadcast will be available approximately two hours after the call by dialing (888) 203-1112 and entering conference ID 9952803. The earnings conference call will also be available as an audiocast, which can be accessed on the Company’s investor relations page at www.umpquaholdingscorp.com. A slide presentation to accompany the call will also be posted on the website before 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 our positioning relative to changes in interest rates, growth and efficiency potential from the acquisition of Sterling Financial Corporation; the integration of the merger with Sterling Financial Corporation; timing and amount of merger-related synergies and timing of systems conversions; credit discount accretion related to the merger; planned creative strategy initiatives; and projected effective tax rate.Specific risks that could cause results to differ from forward-looking statements are set forth in our filings with the SEC and include, without limitation, changes in the discounted cash flow model used to determine the fair value of subordinated debentures; prolonged low interest rate environment; unanticipated weakness in loan demand or loan pricing; 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 inability to effectively manage problem credits; certain loan assets becoming ineligible for loss sharing; unanticipated increases in the cost of deposits; the consequences of a phase-out of junior subordinated debentures from Tier 1 capital; Umpqua’s ability to achieve the synergies and earnings accretion contemplated by the Sterling merger; Umpqua’s ability to promptly and effectively integrate the businesses of Sterling and Umpqua and complete system conversions; the diversion of management time on issues related to merger integration; changes in laws or regulations; and changes in general economic conditions.

     
    Umpqua Holdings Corporation
    Consolidated Statements of Income
    (Unaudited)
             
    Quarter Ended% Change
    (In thousands, except per share data)

    Sep 30,
    2014

     

    Jun 30,
    2014

     

    Mar 31,
    2014

     

    Dec 31,
    2013

     

    Sep 30,
    2013

    Seq.
    Quarter

     

    Year
    over
    Year

    Interest income:    
    Non-covered loans and leases $ 215,197 $ 193,061 $ 91,268 $ 93,032 $ 93,706 11 % 130 %
    Covered loans and leases 8,775 15,931 12,718 13,330 11,837 (45 )% (26 )%
    Interest and dividends on investments:
    Taxable 12,136 12,728 9,291 9,517 7,882 (5 )% 54 %
    Exempt from federal income tax 2,790 2,697 2,112 2,173 2,200 3 % 27 %
    Dividends 81 128 50 87 51 (37 )% 59 %
    Temporary investments & interest bearing deposits 544     422     441     399     284   29 % 92 %
    Total interest income 239,523 224,967 115,880 118,538 115,960 6 % 107 %
    Interest expense:
    Deposits 6,773 6,075 3,848 4,168 4,845 11 % 40 %
    Repurchase agreements and fed funds purchased 54 203 41 42 35 (73 )% 54 %
    Term debt 3,586 3,364 2,273 2,332 2,338 7 % 53 %
    Junior subordinated debentures 3,394     3,066     1,880     1,922     1,933   11 % 76 %
    Total interest expense 13,807 12,708 8,042 8,464 9,151 9 % 51 %
    Net interest income 225,716 212,259 107,838 110,074 106,809 6 % 111 %
    Provision for non-covered loan and lease losses 14,431 15,399 5,400 3,840 3,008 (6 )% 380 %
    (Recapture of) provision for covered loan and lease losses (98 ) (703 ) 571 (1,369 ) (1,904 ) (86 )% (95 )%
    Non-interest income:
    Service charges 16,090 15,371 7,767 8,108 8,374 5 % 92 %
    Brokerage fees 4,882 4,566 3,725 3,584 3,854 7 % 27 %
    Residential mortgage banking revenue, net 25,996 24,341 10,439 15,957 15,071 7 % 72 %
    Net gain on investment securities 902 976 191 3 (8 )% nm
    Loss on junior subordinated debentures carried at fair value (1,590 ) (1,369 ) (542 ) (554 ) (554 ) 16 % 187 %
    Change in FDIC indemnification asset (2,728 ) (5,601 ) (4,840 ) (5,708 ) (6,474 ) (51 )% (58 )%
    BOLI income 2,161 1,967 736 621 763 10 % 183 %
    Other income 16,211     4,278     5,722     4,586     5,107   279 % 217 %
    Total non-interest income 61,924 44,529 23,007 26,785 26,144 39 % 137 %
    Non-interest expense:
    Salaries and employee benefits 102,564 95,560 53,218 52,720 53,699 7 % 91 %
    Net occupancy and equipment 33,029 28,746 16,501 16,254 16,019 15 % 106 %
    Intangible amortization 3,103 2,808 1,194 1,186 1,186 11 % 162 %
    FDIC assessments 3,038 2,575 1,863 1,922 1,709 18 % 78 %
    Net loss (gain) on non-covered other real estate owned 271 178 (18 ) 1,416 (27 ) 52 % nm
    Net loss (gain) on covered other real estate owned 42 80 (46 ) (19 ) (68 ) (48 )% (162 )%
    Merger related expenses 8,632 57,531 5,983 1,639 4,856 (85 )% 78 %
    Other expense 31,879     26,653     17,823     20,246     18,230   20 % 75 %
    Total non-interest expense 182,558 214,131 96,518 95,364 95,604 (15 )% 91 %
    Income before provision for income taxes 90,749 27,961 28,356 39,024 36,245 225 % 150 %
    Provision for income taxes 31,760     10,740     9,592     13,754     12,768   196 % 149 %
    Net income 58,989 17,221 18,764 25,270 23,477 243 % 151 %
    Dividends and undistributed earnings allocated to participating securities 142     83     113     212     196   71 % (28 )%
    Net earnings available to common shareholders $ 58,847     $ 17,138     $ 18,651     $ 25,058     $ 23,281   243 % 153 %
     
    Weighted average basic shares outstanding 217,245 196,312 112,170 111,949 111,912 11 % 94 %
    Weighted average diluted shares outstanding 218,941 197,638 112,367 112,214 112,195 11 % 95 %
    Earnings per common share – basic $ 0.27 $ 0.09 $ 0.17 $ 0.22 $ 0.21 200 % 29 %
    Earnings per common share – diluted $ 0.27 $ 0.09 $ 0.17 $ 0.22 $ 0.21 200 % 29 %
    nm = not meaningful
     
     
    Umpqua Holdings Corporation
    Consolidated Statements of Income
    (Unaudited)
       
    Nine Months Ended% Change
    (In thousands, except per share data)Sep 30, 2014   Sep 30, 2013

    Year over
    Year

    Interest income  
    Non-covered loans and leases $ 499,526 $ 250,685 99 %
    Covered loans and leases 37,424 41,167 (9 )%
    Interest and dividends on investments:
    Taxable 34,155 24,629 39 %
    Exempt from federal income tax 7,599 6,725 13 %
    Dividends 259 165 57 %
    Temporary investments & interest bearing deposits 1,407     937   50 %
    Total interest income 580,370 324,308 79 %
    Interest expense
    Deposits 16,696 16,587 1 %
    Repurchase agreements and fed funds purchased 298 99 201 %
    Term debt 9,223 6,916 33 %
    Junior subordinated debentures 8,340     5,815   43 %
    Total interest expense 34,557 29,417 17 %
    Net interest income 545,813 294,891 85 %
    Provision for non-covered loan and lease losses 35,230 12,989 171 %
    Recapture of provision for covered loan and lease losses (230 ) (4,744 ) (95 )%
    Non-interest income
    Service charges 39,228 22,844 72 %
    Brokerage fees 13,173 11,152 18 %
    Residential mortgage banking revenue, net 60,776 62,928 (3 )%
    Net gain on investment securities 1,878 18 nm
    Loss on junior subordinated debentures carried at fair value (3,501 ) (1,643 ) 113 %
    Change in FDIC indemnification asset (13,169 ) (19,841 ) (34 )%
    BOLI Income 4,864 2,432 100 %
    Other income 26,211     16,766   56 %
    Total non-interest income 129,460 94,656 37 %
    Non-interest expense
    Salaries and employee benefits 251,340 157,271 60 %
    Net occupancy and equipment 78,276 45,813 71 %
    Intangible amortization 7,105 3,595 98 %
    FDIC assessments 7,476 5,032 49 %
    Net loss (gain) on non-covered other real estate owned 431 (303 ) nm
    Net loss on covered other real estate owned 76 154 (51 )%
    Merger related expenses 72,146 7,197 nm
    Other expense 76,357     50,538   51 %
    Total non-interest expense 493,207 269,297 83 %
    Income before provision for income taxes 147,066 112,005 31 %
    Provision for income taxes 52,092     38,914   34 %
    Net income 94,974 73,091 30 %

    Dividends and undistributed earnings allocated to participating securities

    338     576   (41 )%
    Net earnings available to common shareholders $ 94,636     $ 72,515   31 %
     
    Weighted average basic shares outstanding 175,627 111,934 57 %
    Weighted average diluted shares outstanding 176,656 112,154 58 %
    Earnings per common share – basic $ 0.54 $ 0.65 (17 )%
    Earnings per common share – diluted $ 0.54 $ 0.65 (17 )%
    nm = not meaningful
     
     
    Umpqua Holdings Corporation

    Consolidated Balance Sheets

    (Unaudited)
               
    % Change
    (In thousands, except per share data)Sep 30, 2014   Jun 30, 2014   Mar 31, 2014   Dec 31, 2013   Sep 30, 2013

    Seq.
    Quarter

     

    Year
    over
    Year

    Assets:  
    Cash and due from banks $ 266,624 $ 347,152 $ 196,963 $ 178,685 $ 193,188 (23 )% 38 %
    Interest bearing deposits 1,176,599 492,739 887,620 611,224 503,369 139 % 134 %
    Temporary investments 487 529 525 514 534 (8 )% (9 )%
    Investment securities:
    Trading, at fair value 9,727 9,420 4,498 5,958 4,012 3 % 142 %
    Available for sale, at fair value 2,400,061 2,588,969 1,701,730 1,790,978 1,910,082 (7 )% 26 %
    Held to maturity, at amortized cost 5,356 5,519 5,465 5,563 5,766 (3 )% (7 )%
    Loans held for sale 265,800 328,968 73,106 104,664 113,993 (19 )% 133 %
    Non-covered loans and leases 14,975,811 14,830,345 7,411,108 7,354,403 7,228,904 1 % 107 %
    Allowance for non-covered loan and lease losses (107,807 )   (97,995 )   (86,709 )   (85,314 )   (84,694 ) 10 % 27 %
    Non-covered loans and leases, net 14,868,004 14,732,350 7,324,399 7,269,089 7,144,210 1 % 108 %
    Covered loans and leases, net 275,562 297,610 342,263 363,992 397,083 (7 )% (31 )%
    Restricted equity securities 120,759 122,194 29,948 30,685 31,444 (1 )% 284 %
    Premises and equipment, net 314,364 310,407 180,199 177,680 173,876 1 % 81 %
    Goodwill 1,785,407 1,779,732 764,304 764,305 764,530 0 % 134 %
    Other intangible assets, net 59,835 62,938 11,184 12,378 13,564 (5 )% 341 %
    Residential mortgage servicing rights, at fair value 118,725 114,192 49,220 47,765 41,853 4 % 184 %
    Non-covered other real estate owned 31,753 26,172 22,034 21,833 18,249 21 % 74 %
    Covered other real estate owned 2,703 1,810 1,746 2,102 2,980 49 % (9 )%
    FDIC indemnification asset 7,811 11,293 18,362 23,174 29,427 (31 )% (73 )%
    Bank owned life insurance 293,511 292,714 97,589 96,938 96,276 0 % 205 %
    Deferred tax assets, net 250,910 259,993 11,393 16,627 20,342 (3 )% nm
    Other assets 234,061     257,528     116,178     111,958     104,519   (9 )% 124 %
    Total assets $ 22,488,059     $ 22,042,229     $ 11,838,726     $ 11,636,112     $ 11,569,297   2 % 94 %
    Liabilities:
    Deposits $ 16,727,610 $ 16,323,000 $ 9,273,583 $ 9,117,660 $ 9,067,240 2 % 84 %
    Securities sold under agreements to repurchase 339,367 315,025 262,483 224,882 215,310 8 % 58 %
    Term debt 1,057,140 1,057,915 250,964 251,494 252,017 0 % 319 %
    Junior subordinated debentures, at fair value 247,528 246,077 87,800 87,274 86,718 1 % 185 %
    Junior subordinated debentures, at amortized cost 101,657 101,737 101,818 101,899 101,979 0 % 0 %
    Other liabilities 262,249     269,415     127,602     125,477     120,038   (3 )% 118 %
    Total liabilities 18,735,551 18,313,169 10,104,250 9,908,686 9,843,302 2 % 90 %
    Shareholders' equity:
    Common stock 3,515,621 3,512,507 1,514,969 1,514,485 1,513,225 0 % 132 %
    Retained earnings 230,302 204,109 219,686 217,917 209,597 13 % 10 %
    Accumulated other comprehensive income (loss) 6,585     12,444     (179 )   (4,976 )   3,173   (47 )% 108 %
    Total shareholders' equity 3,752,508     3,729,060     1,734,476     1,727,426     1,725,995   1 % 117 %
    Total liabilities and shareholders' equity $ 22,488,059     $ 22,042,229     $ 11,838,726     $ 11,636,112     $ 11,569,297   2 % 94 %
     
    Common shares outstanding at period end 217,261,722 217,190,721 112,319,525 111,973,203 111,928,762 0 % 94 %
    Book value per common share $ 17.27 $ 17.17 $ 15.44 $ 15.43 $ 15.42 1 % 12 %
    Tangible book value per common share $ 8.78 $ 8.69 $ 8.54 $ 8.49 $ 8.47 1 % 4 %
    Tangible equity - common $ 1,907,266 $ 1,886,390 $ 958,988 $ 950,743 $ 947,901 1 % 101 %
    Tangible common equity to tangible assets 9.24 % 9.34 % 8.67 % 8.75 % 8.78 % (1 )% 5 %

    nm = not meaningful

     
     
    Umpqua Holdings Corporation
    Non-covered Loan & Lease Portfolio
    (Unaudited)
                 
    (Dollars in thousands)Sep 30, 2014   Jun 30, 2014   Mar 31, 2014   Dec 31, 2013   Sep 30, 2013% Change
    Amount   Amount   Amount   Amount   Amount

    Seq.
    Quarter

     

    Year
    over
    Year

    Non-covered loans & leases:

    Commercial real estate:
    Non-owner occupied term, net $ 3,273,932 $ 3,348,029 $ 2,311,952 $ 2,328,260 $ 2,382,430 (2 )% 37 %
    Owner occupied term, net 2,636,951 2,666,128 1,282,482 1,259,583 1,230,417 (1 )% 114 %
    Multifamily, net 2,536,710 2,482,995 400,927 403,537 379,395 2 % 569 %
    Commercial construction, net 245,457 261,767 229,262 245,231 246,583 (6 )% 0 %
    Residential development, net 73,781 91,690 89,510 88,413 78,756 (20 )% (6 )%
    Commercial:
    Term, net 1,110,028 1,104,206 735,004 770,845 768,926 1 % 44 %
    Lines of credit & other, net 1,338,821 1,322,167 1,005,800 987,360 950,954 1 % 41 %
    Leases & equipment finance, net 492,221 463,784 388,418 361,591 335,580 6 % 47 %
    Residential real estate:
    Mortgage, net 2,085,266 1,958,597 651,042 597,201 553,285 6 % 277 %
    Home equity lines & loans, net 818,765 799,171 268,497 264,269 258,610 2 % 217 %
    Consumer & other, net 363,879     331,811     48,214     48,113     43,968   10 % 728 %
    Total, net of deferred fees and costs $ 14,975,811     $ 14,830,345     $ 7,411,108     $ 7,354,403     $ 7,228,904   1 % 107 %
     

    Non-covered loan & leases mix:

    Commercial real estate:
    Non-owner occupied term, net 22 % 23 % 31 % 33 % 32 %
    Owner occupied term, net 18 % 18 % 17 % 17 % 17 %
    Multifamily, net 17 % 17 % 5 % 5 % 5 %
    Commercial construction, net 2 % 2 % 3 % 3 % 3 %
    Residential development, net 1 % 1 % 1 % 1 % 1 %
    Commercial:
    Term, net 7 % 7 % 10 % 10 % 11 %
    Lines of credit & other, net 9 % 9 % 14 % 13 % 13 %
    Leases & equipment finance, net 3 % 3 % 5 % 5 % 5 %
    Residential real estate:
    Mortgage, net 14 % 13 % 9 % 8 % 8 %
    Home equity lines & loans, net 5 % 5 % 4 % 4 % 4 %
    Consumer & other, net 2 %   2 %   1 %   1 %   1 %
    Total 100 %   100 %   100 %   100 %   100 %
     
     
    Umpqua Holdings Corporation
    Covered Loan & Lease Portfolio, Net
    (Unaudited)
    (Dollars in thousands)   Sep 30, 2014   Jun 30, 2014   Mar 31, 2014   Dec 31, 2013   Sep 30, 2013   % Change
    AmountAmountAmountAmountAmount

    Seq.
    Quarter

     

    Year
    over
    Year

    Covered loans & leases:

     
    Commercial real estate:
    Non-owner occupied term, net $ 147,695 $ 166,969 $ 197,067 $ 204,052 $ 216,354 (12 )% (32 )%
    Owner occupied term, net 44,819 47,034 48,447 48,673 54,332 (5 )% (18 )%
    Multifamily, net 28,545 23,409 27,079 37,185 40,052 22 % (29 )%
    Commercial construction, net 1,990 1,972 2,779 2,803 6,654 1 % (70 )%
    Residential development, net 2,534 2,562 6,083 6,311 7,468 (1 )% (66 )%
    Commercial:
    Term, net 7,096 7,516 7,861 13,280 13,864 (6 )% (49 )%
    Lines of credit & other, net 5,813 8,357 8,929 6,302 10,583 (30 )% (45 )%
    Residential real estate:
    Mortgage, net 17,005 18,272 21,664 22,175 23,161 (7 )% (27 )%
    Home equity lines & loans, net 16,565 17,736 18,501 19,119 20,037 (7 )% (17 )%
    Consumer & other, net 3,500   3,783   3,853   4,092   4,578   (7 )% (24 )%
    Total, net $ 275,562   $ 297,610   $ 342,263   $ 363,992   $ 397,083   (7 )% (31 )%
     
     

    Covered loans & leases Mix:

    Commercial real estate:
    Non-owner occupied term, net 54 % 55 % 58 % 56 % 54 %
    Owner occupied term, net 16 % 16 % 14 % 13 % 14 %
    Multifamily, net 10 % 8 % 8 % 10 % 10 %
    Commercial construction, net 1 % 1 % 1 % 1 % 2 %
    Residential development, net 1 % 1 % 2 % 2 % 2 %
    Commercial:
    Term, net 3 % 3 % 2 % 4 % 3 %
    Lines of credit & other, net 2 % 3 % 3 % 2 % 3 %
    Residential real estate:
    Mortgage, net 6 % 6 % 6 % 6 % 6 %
    Home equity lines & loans, net 6 % 6 % 5 % 5 % 5 %
    Consumer & other, net 1 %   1 %   1 %   1 %   1 %
    Total 100 %   100 %   100 %   100 %   100 %

    Covered loan & lease portfolio balances represent the loan portfolios acquired through the assumption of Evergreen Bank 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)
                 
    (Dollars in thousands)Sep 30, 2014   Jun 30, 2014   Mar 31, 2014   Dec 31, 2013   Sep 30, 2013% Change
    Amount   Amount   Amount   Amount   Amount

    Seq.
    Quarter

     

    Year
    over
    Year

    Deposits:

    Demand, non-interest bearing $ 4,741,897 $ 4,363,710 $ 2,465,606 $ 2,436,477 $ 2,421,008 9 % 96 %
    Demand, interest bearing 1,942,792 1,869,626 1,182,634 1,233,070 1,179,351 4 % 65 %
    Money market 5,998,339 5,973,197 3,526,368 3,349,946 3,283,085 0 % 83 %
    Savings 952,122 912,073 578,238 560,699 551,327 4 % 73 %
    Time 3,092,460     3,204,394     1,520,737     1,537,468     1,632,469   (3 )% 89 %
    Total $ 16,727,610     $ 16,323,000     $ 9,273,583     $ 9,117,660     $ 9,067,240   2 % 84 %
     
    Total core deposits (1) $ 14,653,183 $ 14,171,946 $ 8,205,636 $ 8,052,280 $ 7,926,734 3 % 85 %
     

    Deposit mix:

    Demand, non-interest bearing 28 % 26 % 27 % 26 % 27 %
    Demand, interest bearing 12 % 11 % 13 % 14 % 13 %
    Money market 36 % 37 % 38 % 37 % 36 %
    Savings 6 % 6 % 6 % 6 % 6 %
    Time 18 %   20 %   16 %   17 %   18 %
    Total 100 %   100 %   100 %   100 %   100 %
     

    Number of open accounts:

    Demand, non-interest bearing 366,279 363,378 190,298 187,088 186,975
    Demand, interest bearing 87,223 88,162 46,291 48,643 49,226
    Money market 63,979 65,216 34,913 35,303 35,909
    Savings 150,527 149,877 84,686 84,144 84,448
    Time 54,565     56,285     22,755     23,688     24,618  

    Total

    722,573     722,918     378,943     378,866     381,176  
     

    Average balance per account:

    Demand, non-interest bearing $ 12.9 $ 12.3 $ 13.0 $ 13.0 $ 12.9
    Demand, interest bearing 22.3 21.2 25.5 25.3 24.0
    Money market 93.8 91.6 101.0 94.9 91.4
    Savings 6.3 6.1 6.8 6.7 6.5
    Time 56.7 56.9 66.8 64.9 66.3
    Total $ 23.2 $ 22.7 $ 24.5 $ 24.1 $ 23.8
     

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

     
     

    Umpqua Holdings Corporation

    Credit Quality – Non-performing Assets
    (Unaudited)
                 
    Quarter Ended% Change
    (Dollars in thousands)Sep 30, 2014Jun 30, 2014Mar 31, 2013   Dec 31, 2013Sep 30, 2013

    Seq.
    Quarter

     

    Year over
    Year

    Non-covered, non-performing assets:

    Non-covered loans and leases on non-accrual status $ 42,397 $ 48,358 $ 37,884 $ 31,891 $ 39,805 (12 )% 7 %
    Non-covered loans and leases past due 90+ days & accruing 7,416     4,919     2,269     3,430     4,936   51 % 50 %
    Total non-performing loans and leases 49,813 53,277 40,153 35,321 44,741 (7 )% 11 %
    Non-covered other real estate owned 31,753     26,172     22,034     21,833     18,249   21 % 74 %
    Total $ 81,566     $ 79,449     $ 62,187     $ 57,154     $ 62,990   3 % 29 %
     
    Non-covered performing restructured loans and leases $ 63,507 $ 67,464 $ 67,897 $ 68,791 $ 69,497 (6 )% (9 )%
    Non-covered loans and leases past due 31-89 days $ 34,025 $ 28,913 $ 29,416 $ 15,290 $ 22,060 18 % 54 %
    Non-covered loans and leases past due 31-89 days to non-covered loans and leases 0.23 % 0.19 % 0.40 % 0.21 % 0.31 %
    Non-covered, non-performing loans and leases to non-covered loans and leases 0.33 % 0.36 % 0.54 % 0.48 % 0.62 %
    Non-covered, non-performing assets to total assets 0.36 % 0.36 % 0.53 % 0.49 % 0.54 %
     

    Covered non-performing assets:

    Covered loans and leases on non-accrual status $     $     $     $     $   nm nm
    Total non-performing loans and leases nm nm
    Covered other real estate owned 2,703     1,810     1,746     2,102     2,980   49 % (9 )%
    Total $ 2,703     $ 1,810     $ 1,746     $ 2,102     $ 2,980   49 % (9 )%
     
    Covered non-performing loans and leases to covered loans and leases % % % % %
    Covered non-performing assets to total assets 0.01 % 0.01 % 0.01 % 0.02 % 0.03 %
     

    Total non-performing assets:

    Loans and leases on non-accrual status $ 42,397 $ 48,358 $ 37,884 $ 31,891 $ 39,805 (12 )% 7 %
    Loans and leases past due 90+ days & accruing 7,416     4,919     2,269     3,430     4,936   51 % 50 %
    Total non-performing loans and leases 49,813 53,277 40,153 35,321 44,741 (7 )% 11 %
    Other real estate owned 34,456     27,982     23,780     23,935     21,229   23 % 62 %
    Total $ 84,269     $ 81,259     $ 63,933     $ 59,256     $ 65,970   4 % 28 %
     
    Non-performing loans and leases to loans and leases 0.33 % 0.35 % 0.52 % 0.46 % 0.59 %
    Non-performing assets to total assets 0.37 % 0.37 % 0.54 % 0.51 % 0.57 %
     
     
    Umpqua Holdings Corporation

    Credit Quality – Allowance for Non-covered Credit Losses

    (Unaudited)
                 
    Quarter Ended% Change
    (Dollars in thousands)

    Sep 30,
    2014

     

    Jun 30,
    2014

     

    Mar 31,
    2013

     

    Dec 31,
    2013

     

    Sep 30,
    2013

    Seq.
    Quarter

     

    Year over
    Year

    Allowance for non-covered credit losses:

    Balance beginning of period $ 97,995 $ 86,709 $ 85,314 $ 84,694 $ 85,836
    Provision for non-covered loan and lease losses 14,431 15,399 5,400 3,840 3,008 (6 )% 380 %
    Charge-offs (6,743 ) (5,814 ) (5,565 ) (11,349 ) (6,317 ) 16 % 7 %
    Recoveries 2,124     1,701     1,560     8,129     2,167   25 % (2 )%

    Net charge-offs

    (4,619 )   (4,113 )   (4,005 )   (3,220 )   (4,150 ) 12 % 11 %
    Total allowance for non-covered loan and lease losses 107,807 97,995 86,709 85,314 84,694 10 % 27 %
    Reserve for unfunded commitments 4,388     4,845     1,417     1,436     1,375   (9 )% 219 %
    Total allowance for non-covered credit losses $ 112,195     $ 102,840     $ 88,126     $ 86,750     $ 86,069   9 % 30 %
     
    Net charge-offs to average non-covered loans and leases (annualized) 0.12 % 0.12 % 0.22 % 0.18 % 0.23 %
    Recoveries to gross charge-offs 31.50 % 29.26 % 28.03 % 71.63 % 34.30 %
    Allowance for non-covered loan losses to non-covered loans and leases 0.72 % 0.66 % 1.17 % 1.16 % 1.17 %
    Allowance for non-covered credit losses to non-covered loans and leases 0.75 % 0.69 % 1.19 % 1.18 % 1.19 %
     
    Nine Months Ended% Change
    (Dollars in thousands)Sep 30, 2014   Sep 30, 2013Year over Year

    Allowance for non-covered credit losses:

    Balance beginning of period $ 85,314 $ 85,391
    Provision for non-covered loan and lease losses 35,230 12,989 171 %
    Charge-offs (18,122 ) (19,646 ) (8 )%
    Recoveries 5,385     5,960   (10 )%
    Net charge-offs (12,737 )   (13,686 ) (7 )%
    Total allowance for non-covered loan and lease losses 107,807 84,694 27 %
    Reserve for unfunded commitments 4,388     1,375   219 %
    Total allowance for non-covered credit losses $ 112,195     $ 86,069   30 %
     
    Net charge-offs to average non-covered loans and leases (annualized) 0.22 % 0.26 %
    Recoveries to gross charge-offs 29.72 % 30.34 %
     
     
    Umpqua Holdings Corporation
    Selected Ratios
    (Unaudited)
             
    Quarter Ended% Change

    Sep 30,
    2014

     

    Jun 30,
    2014

     

    Mar 31,
    2014

     

    Dec 31,
    2013

     

    Sep 30,
    2013

    Seq.
    Quarter

     

    Year over
    Year

    Average Rates:

       
    Yield on non-covered loans and leases 5.62 % 5.71 % 4.96 % 5.00 % 5.12 % (0.09 ) 0.50
    Yield on covered loans and leases 12.24 % 20.07 % 14.82 % 13.99 % 11.67 % (7.83 ) 0.57
    Yield on taxable investments 2.12 % 2.29 % 2.39 % 2.31 % 1.77 % (0.17 ) 0.35
    Yield on tax-exempt investments (1) 5.12 % 5.19 % 5.54 % 5.56 % 5.62 % (0.07 ) (0.50 )
    Yield on temporary investments & interest bearing cash 0.25 % 0.25 % 0.25 % 0.25 % 0.25 %
    Total yield on earning assets (1) 5.04 % 5.30 % 4.60 % 4.61 % 4.58 % (0.26 ) 0.46
     
    Cost of interest bearing deposits 0.22 % 0.22 % 0.23 % 0.25 % 0.29 % (0.07 )

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

    0.07 % 0.25 % 0.07 % 0.07 % 0.07 % (0.18 )
    Cost of term debt 1.35 % 1.45 % 3.67 % 3.68 % 3.67 % (0.10 ) (2.32 )
    Cost of junior subordinated debentures 3.87 % 3.87 % 4.03 % 4.04 % 4.08 % (0.21 )
    Total cost of interest bearing liabilities 0.40 % 0.41 % 0.44 % 0.46 % 0.50 % (0.01 ) (0.10 )
     
    Net interest spread (1) 4.64 % 4.90 % 4.16 % 4.15 % 4.08 % (0.26 ) 0.56
    Net interest margin – Consolidated (1) 4.75 % 5.01 % 4.28 % 4.29 % 4.22 % (0.26 ) 0.53
    Net interest margin – Bank (1) 4.82 % 5.07 % 4.35 % 4.35 % 4.30 % (0.25 ) 0.52
     

    As reported (GAAP):

    Return on average assets 1.05 % 0.34 % 0.65 % 0.86 % 0.81 % 0.71 0.24
    Return on average tangible assets 1.15 % 0.37 % 0.70 % 0.92 % 0.86 % 0.78 0.29
    Return on average common equity 6.29 % 2.05 % 4.35 % 5.73 % 5.36 % 4.24 0.93
    Return on average tangible common equity 12.48 % 4.06 % 7.86 % 10.38 % 9.79 % 8.42 2.69
    Efficiency ratio – Consolidated 63.15 % 82.94 % 73.15 % 69.12 % 71.30 % (19.79 ) (8.15 )
    Efficiency ratio – Bank 61.68 % 81.37 % 71.18 % 67.30 % 69.30 % (19.69 ) (7.62 )
     

    Operating basis (non-GAAP): (2)

    Return on average assets 1.16 % 1.08 % 0.84 % 0.95 % 0.92 % 0.08 0.24
    Return on average tangible assets 1.27 % 1.18 % 0.90 % 1.02 % 0.99 % 0.09 0.28
    Return on average common equity 6.95 % 6.45 % 5.61 % 6.38 % 6.11 % 0.50 0.84
    Return on average tangible common equity 13.80 % 12.76 % 10.13 % 11.56 % 11.15 % 1.04 2.65
    Efficiency ratio – Consolidated 59.83 % 60.33 % 68.34 % 67.66 % 67.40 % (0.50 ) (7.57 )
    Efficiency ratio – Bank 58.70 % 59.15 % 66.60 % 66.10 % 65.63 % (0.45 ) (6.93 )
     

    (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% Change
    Sep 30, 2014   Sep 30, 2013

    Year over
    Year

    Average Rates:

     
    Yield on non-covered loans and leases 5.52 % 4.80 % 0.72
    Yield on covered loans and leases 15.80 % 12.80 % 3.00
    Yield on taxable investments 2.25 % 1.61 % 0.64
    Yield on tax-exempt investments (1) 5.25 % 5.42 % (0.17 )
    Yield on temporary investments & interest bearing cash 0.25 % 0.26 % (0.01 )
    Total yield on earning assets (1) 5.04 % 4.30 % 0.74
     
    Cost of interest bearing deposits 0.23 % 0.33 % (0.10 )

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

    0.13 % 0.08 % 0.05
    Cost of term debt 1.64 % 3.66 % (2.02 )
    Cost of junior subordinated debentures 3.91 % 4.10 % (0.19 )
    Total cost of interest bearing liabilities 0.41 % 0.53 % (0.12 )
     
    Net interest spread (1) 4.63 % 3.77 % 0.86
    Net interest margin – Consolidated (1) 4.74 % 3.91 % 0.83
    Net interest margin – Bank (1) 4.81 % 3.98 % 0.83
     

    As reported (GAAP):

    Return on average assets 0.70 % 0.85 % (0.15 )
    Return on average tangible assets 0.76 % 0.90 % (0.14 )
    Return on average common equity 4.30 % 5.61 % (1.31 )
    Return on average tangible common equity 8.36 % 9.59 % (1.23 )
    Efficiency ratio – Consolidated 72.62 % 68.52 % 4.10
    Efficiency ratio – Bank 71.01 % 66.28 % 4.73
     

    Operating basis (non-GAAP): (2)

    Return on average assets 1.06 % 0.91 % 0.15
    Return on average tangible assets 1.15 % 0.97 % 0.18
    Return on average common equity 6.50 % 6.02 % 0.48
    Return on average tangible common equity 12.64 % 10.29 % 2.35
    Efficiency ratio – Consolidated 61.68 % 66.41 % (4.73 )
    Efficiency ratio – Bank 60.39 % 64.43 % (4.04 )
     

    (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)
         
    Quarter Ended% Change
    (Dollars in thousands)Sep 30, 2014   Jun 30, 2014   Mar 31, 2014   Dec 31, 2013   Sep 30, 2013

    Seq.
    Quarter

     

    Year over
    Year

    Temporary investments & interest bearing cash $ 849,399   $ 672,587   $ 705,974   $ 625,405   $ 443,148 26 % 92 %
    Investment securities, taxable 2,307,732 2,242,414 1,562,849 1,664,716 1,788,567 3 % 29 %
    Investment securities, tax-exempt 330,902 315,488 231,520 236,552 237,545 5 % 39 %
    Loans held for sale 274,834 211,694 77,234 89,553 136,261 30 % 102 %
    Non-covered loans and leases 14,916,541 13,355,455 7,384,555 7,298,622 7,128,753 12 % 109 %
    Covered loans and leases 284,352     318,432     347,984   378,148     402,403   (11 )% (29 )%
    Total interest earning assets 18,963,760 17,116,070 10,310,116 10,292,996 10,136,677 11 % 87 %
    Goodwill & other intangible assets, net 1,841,668 1,656,687 776,006 777,188 779,294 11 % 136 %
    Total assets 22,220,999 20,036,742 11,638,357 11,624,424 11,460,729 11 % 94 %
     
    Non-interest bearing demand deposits 4,558,672 3,963,233 2,414,001 2,452,554 2,317,932 15 % 97 %
    Interest bearing deposits 11,948,731     10,948,991     6,696,029   6,661,933     6,691,579   9 % 79 %
    Total deposits 16,507,403 14,912,224 9,110,030 9,114,487 9,009,511 11 % 83 %
    Interest bearing liabilities 13,681,205 12,521,219 7,376,780 7,326,763 7,320,460 9 % 87 %
     
    Shareholders’ equity - common 3,712,813 3,350,836 1,738,680 1,734,583 1,722,881 11 % 116 %
    Tangible common equity (1) 1,871,145 1,694,149 962,674 957,395 943,587 10 % 98 %
     
     
    Umpqua Holdings Corporation

    Average Balances

    (Unaudited)
      Nine Months Ended% Change
    (Dollars in thousands)Sep 30, 2014   Sep 30, 2013Year over Year
    Temporary investments & interest bearing cash $ 743,179 $ 483,142 54 %
    Investment securities, taxable 1,953,926 2,049,630 (5 )%
    Investment securities, tax-exempt 379,468 250,535 51 %
    Loans held for sale 188,646 154,839 22 %
    Non-covered loans and leases 11,913,105 6,833,504 74 %
    Covered loans and leases 316,690   429,909   (26 )%
    Total interest earning assets 15,495,014 10,201,559 52 %
    Goodwill & other intangible assets, net 1,428,705 716,137 100 %
    Total assets 18,004,316 11,468,348 57 %
     
    Non-interest bearing demand deposits 3,653,158 2,228,530 64 %
    Interest bearing deposits 9,883,824   6,809,997   45 %
    Total deposits 13,536,982 9,038,527 50 %
    Interest bearing liabilities 11,216,190 7,414,449 51 %
     
    Shareholders’ equity - common 2,941,341 1,727,229 70 %
    Tangible common equity (1) 1,512,636 1,011,092 50 %
     

    (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

    Residential Mortgage Banking Activity

    (unaudited)
         
    Quarter Ended% Change
    (Dollars in thousands)Sep 30, 2014   Jun 30, 2014   Mar 31, 2014   Dec 31, 2013   Sep 30, 2013

    Seq.
    Quarter

     

    Year over
    Year

    Residential mortgage servicing rights:

           
    Residential mortgage loans serviced for others $ 11,300,947 $ 10,838,313 $ 4,496,662 $ 4,362,499 $ 4,195,759 4 % 169 %
    MSR asset, at fair value 118,725 114,192 49,220 47,765 41,853 4 % 184 %
    MSR as % of serviced portfolio 1.05 % 1.05 % 1.09 % 1.09 % 1.00 %

    Residential mortgage banking revenue:

    Origination and sale $ 24,097 $ 22,142 $ 8,421 $ 9,915 $ 12,764 9 % 89 %
    Servicing 6,178 5,359 2,970 2,911 2,718 15 % 127 %
    Change in fair value of MSR asset (4,279 )   (3,160 )   (952 )   3,131     (411 ) 35 % 941 %
    Total $ 25,996     $ 24,341     $ 10,439     $ 15,957     $ 15,071   7 % 72 %
     

    Closed loan volume:

    Closed loan volume - total $ 988,031 $ 894,955 $ 293,175 $ 359,569 $ 463,036 10 % 113 %
    Closed loan volume - for sale $ 695,877 $ 623,727 $ 204,356 $ 271,541 $ 357,371 12 % 95 %
     

    Gain on sale margin:

    Based on total volume 2.44 % 2.47 % 2.87 % 2.76 % 2.76 % (0.03 ) (0.32 )
    Based on for sale volume 3.46 % 3.55 % 4.12 % 3.65 % 3.57 % (0.09 ) (0.11 )
     
    Nine Months Ended% Change
    Sep 30, 2014   Sep 30, 2013

    Year over
    Year

    Residential mortgage banking revenue:

    Origination and sale $ 54,660 $ 56,202 (3 )%
    Servicing 14,508 7,484 94 %
    Change in fair value of MSR asset (8,392 )   (758 ) 1,007 %

    Total

    $ 60,776     $ 62,928   (3 )%
     

    Closed loan volume:

    Closed loan volume - total $ 2,176,161 $ 1,571,308 38 %
    Closed loan volume - for sale 1,523,959 1,328,143 15 %
     

    Gain on sale margin:

    Based on total volume 2.51 % 3.58 % (1.07 )
    Based on for sale volume 3.59 % 4.23 % (0.64 )

    Umpqua Holdings Corporation
    Ron Farnsworth, 503-727-4108
    EVP/Chief Financial Officer
    ronfarnsworth@umpquabank.com
    Bradley Howes, 503-727-4226
    SVP/Director of Investor Relations
    bradhowes@umpquabank.com

    Source: Umpqua Holdings Corporation