• Umpqua Holdings Corporation
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  • Umpqua Holdings Reports First Quarter 2007 Operating Earnings of $0.36 Per Diluted Share
    Credit quality excellent, Loan pipeline strongĀ 
    Company Release - 04/19/2007 08:00

    PORTLAND, Ore.--(BUSINESS WIRE)--

    Umpqua Holdings Corporation (NASDAQ:UMPQ), parent company of Umpqua Bank and Strand, Atkinson, Williams & York, Inc., today announced first quarter 2007 operating earnings of $21.0 million, or $0.36 per diluted share, compared to $17.6 million, or $0.39 per diluted share, for the first quarter of 2006. Operating earnings exclude merger related expenses, net of tax.

    Including merger related expenses, net income for the first quarter of 2007 was $20.7 million, or $0.35 per diluted share, compared to $17.4 million, or $0.39 per diluted share for the first quarter of 2006.

                                                  Quarter ended:
                                        ----------------------------------
     (Dollars in thousands, except per
      share data)                        3/31/2007  12/31/2006  3/31/2006
                                        ----------------------------------
    Net Income                          $   20,662 $    24,533 $   17,427
    Add Back: Merger related expenses,
     net of tax                                332         249        151
                                        ----------------------------------
         Operating Earnings             $   20,994 $    24,782 $   17,578
                                        ==================================
    
    Earnings per diluted share:
    ------------------------------------
         Net Income                     $     0.35 $      0.42 $     0.39
         Operating Earnings             $     0.36 $      0.42 $     0.39
    

    Total consolidated assets as of March 31, 2007 were $7.3 billion, compared to $5.5 billion a year ago. Total gross loans and leases, and deposits, were $5.4 billion and $5.8 billion, respectively, as of March 31, 2007, compared to $4.1 billion and $4.2 billion, respectively, a year ago. The Company completed the acquisition of Western Sierra Bancorp in June 2006.

    Umpqua Bank, Umpqua Holdings' bank subsidiary, reported on a tax equivalent basis a net interest margin of 4.72% for the first quarter of 2007, compared to 4.95% for the first quarter of 2006, and 4.97% for the fourth quarter of 2006. The decrease in net interest margin over these time periods resulted from increases in short-term market interest rates and the competitive climate, with the cost of deposits increasing more than earning asset yields.

    "Our first quarter 2007 earnings reflected the economic pressures facing the banking industry as a whole," said Ray Davis, Umpqua Holdings Corporation president and CEO. "In response, management has made multiple changes to lower the cost structure of the Company, and are confident that these adjustments, combined with our long term strategy, have positioned us for improved earnings over the balance of the year."

    During the first quarter of 2007, the Company had net recoveries of $90 thousand or 0.01% of average loans and leases. This compares to net recoveries of $640 thousand and net charge-offs of $510 thousand for the first and fourth quarters of 2006, respectively. Non-performing loans and leases were $13.3 million at March 31, 2007, representing just 0.25% of total loans and leases. The allowance for credit losses was 1.14% of total loans and leases at March 31, 2007.

    Excluding merger related expenses, the Bank efficiency ratio was 55.9% for the first quarter of 2007, compared to 53.6% for the first quarter of 2006. The increase related primarily to the decline in the net interest margin as discussed previously.

    During the first quarter of 2007, the Company elected early adoption of Statements of Financial Accounting Standard (SFAS) 157 and 159, effective January 1, 2007. SFAS 159, which was issued in February 2007, generally permits the measurement of selected financial instruments at fair value as of specified election dates. Upon adoption of SFAS 159, the Company selected the fair value measurement option only on certain junior subordinated debentures. The initial fair value measurement of these debentures resulted in a $2.1 million cumulative-effect adjustment, net of tax, recorded as a reduction in retained earnings as of January 1, 2007.

    As of March 31, 2007, total shareholders' equity was $1.2 billion. Book value per share was $20.07 and tangible book value per share was $8.42.

    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 providing non-GAAP financial measures provides investors with information useful in understanding Umpqua's financial performance. Umpqua provides measures based on "operating earnings," which exclude merger-related expenses. Operating earnings per diluted share is calculated by dividing operating earnings by the same diluted share total used in determining diluted earnings per share.

    A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent is included in the attached financial tables or where the non-GAAP measure is presented.

    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 the prospects for growth and the positive effect of adjustments to Umpqua Bank's cost structure.

    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 134 locations between Sacramento, Calif. and Bellevue, Wash., along the Oregon and Northern California Coast and in Central Oregon. Umpqua Holdings also owns retail brokerage subsidiary Strand, Atkinson, Williams & York, Inc., which has locations in Umpqua Bank stores and in dedicated offices throughout Oregon and Southwest Washington. Umpqua Bank's Private Client Services Division provides tailored financial services and products to individual customers. 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 19, 2007, at 10:00 a.m. PST (1:00 p.m. EST) during which the Company will discuss first quarter 2007 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 800-857-1742 a few minutes before 10:00 a.m. The password is "UMPQUA." Information to be discussed in the teleconference will be available on the Company's website prior to the call at www.umpquaholdingscorp.com. A rebroadcast can be found approximately one hour after the conference call by dialing 800-860-4707, or by visiting that website.

                         Umpqua Holdings Corporation
                      Consolidated Statements of Income
                                 (Unaudited)
                                                  Quarter Ended:
                                         ---------------------------------
    Dollars in thousands, except per     March 31,   December  March 31,
     share data                              2007     31, 2006     2006
                                         ---------------------------------
    Interest income
      Loans and leases                     $103,981   $106,757    $73,120
      Interest and dividends on
       investments:
         Taxable                              7,519      7,169      6,711
         Exempt from federal income tax       1,228      1,141        744
         Dividends                               65         80         44
      Temporary investments                     894      1,367        127
                                         ---------------------------------
        Total interest income               113,687    116,514     80,746
    Interest expense
      Deposits                               41,031     38,769     21,038
      Repurchase agreements and fed funds
       purchased                                403        483      2,389
      Junior subordinated debentures          3,534      3,856      3,012
      Term debt                                  80        117         28
                                         ---------------------------------
        Total interest expense               45,048     43,225     26,467
    Net interest income                      68,639     73,289     54,279
    Provision for loan and lease losses          83        125         21
    Non-interest income
      Service charges                         7,052      7,435      5,484
      Brokerage fees                          2,417      2,241      2,368
      Mortgage banking revenue                1,799      1,768      1,844
      Gain (loss) on sale of securities           5        (20)        --
      Other income                            2,363      2,689      2,506
                                         ---------------------------------
    Total non-interest income                13,636     14,113     12,202
    Non-interest expense
      Salaries and benefits                  28,269     27,315     21,801
      Occupancy and equipment                 8,826      8,845      7,168
      Other                                  12,363     12,465      9,760
      Merger related expenses                   554        415        251
                                         ---------------------------------
    Total non-interest expense               50,012     49,040     38,980
    Income before provision for income
     taxes                                   32,180     38,237     27,480
    Provision for income tax                 11,518     13,704     10,053
                                         ---------------------------------
    Net income                              $20,662    $24,533    $17,427
                                         =================================
    
    Weighted average shares outstanding  58,176,465 58,045,755 44,658,423
    Weighted average diluted shares
     outstanding                         58,830,444 58,774,890 45,029,063
    
    Earnings per share - Basic                $0.36      $0.42      $0.39
    Earnings per share - Diluted              $0.35      $0.42      $0.39
    
                         Umpqua Holdings Corporation
                         Consolidated Balance Sheets
                                 (Unaudited)
    
    Dollars in thousands, except per     March 31,   December  March 31,
     share data                              2007     31, 2006     2006
                                         ---------------------------------
    Assets:
      Cash and due from banks              $140,986   $169,769   $120,615
      Temporary investments                  87,877    165,879      1,855
      Investment securities:
         Trading                              3,010      4,204        372
         Available for sale                 786,301    715,187    648,487
         Held to maturity                     8,698      8,762      7,633
      Loans held for sale                    16,515     16,053     11,760
      Loans and leases                    5,392,137  5,361,862  4,096,194
      Less: Allowance for loan and lease
       losses                               (60,263)   (60,090)   (44,546)
                                         ---------------------------------
        Loans and leases, net             5,331,874  5,301,772  4,051,648
      Restricted equity securities           15,510     15,255     14,264
      Premises and equipment, net           100,189    101,830     88,857
      Other real estate owned                    --         --         69
      Mortgage servicing rights, net          9,524      9,952     11,203
      Goodwill and other intangibles        677,854    679,493    408,156
      Other assets                          159,700    156,080    110,925
                                         ---------------------------------
    Total assets                         $7,338,038 $7,344,236 $5,475,844
                                         =================================
    
    Liabilities:
      Deposits                           $5,830,905 $5,840,294 $4,229,648
      Securities sold under agreements to
       repurchase                            48,434     47,985     65,490
      Fed funds purchased                        --         --    207,500
      Term debt                               7,461      9,513      3,111
      Junior subordinated debentures, at
       fair value                           100,076         --         --
      Junior subordinated debentures, at
       amortized cost                       105,480    203,688    165,643
      Other liabilities                      77,323     86,545     53,670
                                         ---------------------------------
        Total liabilities                 6,169,679  6,188,025  4,725,062
    
    Shareholders' equity:
      Common stock                          933,064    930,867    567,369
      Retained earnings                     242,870    234,783    195,639
      Accumulated other comprehensive
       loss                                  (7,575)    (9,439)   (12,226)
                                         ---------------------------------
        Total shareholders' equity        1,168,359  1,156,211    750,782
                                         ---------------------------------
    Total liabilities and shareholders'
     equity                              $7,338,038 $7,344,236 $5,475,844
                                         =================================
    
    Common shares outstanding at period
     end                                 58,223,810 58,080,171 44,721,027
    Book value per share                     $20.07     $19.91     $16.79
    Tangible book value per share             $8.42      $8.21      $7.66
    Tangible equity                        $490,505   $476,718   $342,626
    
                         Umpqua Holdings Corporation
                                Loan Portfolio
                                  (Unaudited)
                                         March 31,   December  March 31,
    Dollars in thousands                     2007     31, 2006     2006
                                         ---------------------------------
    Loans and leases by class:
      Commercial real estate             $2,732,029 $2,657,040 $2,231,075
      Residential real estate               315,764    320,412    216,740
      Construction                        1,155,821  1,203,657    712,454
                                         ---------------------------------
        Total real estate                 4,203,614  4,181,109  3,160,269
      Commercial                          1,123,654  1,126,189    877,102
      Leases                                 24,293     22,870     16,959
      Installment and other                  51,175     43,108     52,691
      Deferred loan fees, net               (10,599)   (11,414)   (10,827)
                                         ---------------------------------
      Total loans and leases             $5,392,137 $5,361,862 $4,096,194
                                         =================================
    
                                          Quarter    Quarter    Quarter
                                            Ended      Ended      Ended
                                         March 31,   December  March 31,
    Dollars in thousands                     2007     31, 2006     2006
                                         ---------------------------------
    Allowance for credit losses
    Balance beginning of period             $60,090    $60,475    $43,885
         Provision for loan and lease
          losses                                 83        125         21
    
    Charge-offs                                (713)    (1,618)      (613)
    Less recoveries                             803      1,108      1,253
                                         ---------------------------------
         Net (charge-offs) recoveries            90       (510)       640
    
    Total Allowance for loan and lease
     losses                                  60,263     60,090     44,546
    
    Reserve for unfunded commitments          1,231      1,313      1,642
                                         ---------------------------------
       Total Allowance for credit losses    $61,494    $61,403    $46,188
                                         =================================
    
    Net charge-offs (recoveries) to
     average
      loans and leases (annualized)          (0.01)%      0.04%    (0.06)%
    Recoveries to gross charge-offs             113%        68%       204%
    Allowance for credit losses to
      loans and leases                         1.14%      1.15%      1.13%
    Allowance for credit losses to
      nonperforming loans and leases            463%       678%       592%
    Nonperforming loans and leases
      to total loans and leases                0.25%      0.17%      0.19%
    
    Nonperforming assets:
      Nonperforming loans and leases        $13,296     $9,058     $7,796
      Real estate owned                          --         --         69
                                         ---------------------------------
    Total nonperforming assets              $13,296     $9,058     $7,865
                                         =================================
    
                         Umpqua Holdings Corporation
                               Selected Ratios
                                 (Unaudited)
                                                  Quarter Ended:
                                         ---------------------------------
                                         March 31, December 31, March 31,
                                            2007        2006       2006
                                         ---------------------------------
    Net Interest Spread:
      Yield on loans and leases               7.81%        7.91%     7.37%
      Yield on taxable investments            4.61%        4.71%     4.44%
      Yield on tax-exempt investments (1)     5.89%        5.51%     5.59%
      Yield on temporary investments          5.28%        5.41%     4.28%
        Total yield on earning assets (1)     7.42%        7.50%     6.96%
    
      Cost of interest bearing deposits       3.62%        3.44%     2.63%
      Cost of securities sold under
       agreements to repurchase and fed
       funds purchased                        3.00%        2.90%     4.14%
      Cost of term debt                       3.76%        4.19%     3.62%
      Cost of junior subordinated
       debentures                             6.96%        7.50%     7.37%
        Total cost of interest bearing
         liabilities                          3.76%        3.61%     2.94%
    
    Net interest spread (1)                   3.66%        3.89%     4.02%
    Net interest margin (1)                   4.49%        4.73%     4.69%
    
    As reported:
    -------------------------------------
    Return on average assets                  1.15%        1.35%     1.31%
    Return on average tangible assets         1.27%        1.49%     1.41%
    Return on average equity                  7.22%        8.47%     9.50%
    Return on average tangible equity        17.36%       20.77%    21.04%
    
    Excluding merger related expense net
     of tax (2):
    -------------------------------------
    Return on average assets                  1.17%        1.37%     1.32%
    Return on average tangible assets         1.29%        1.51%     1.42%
    Return on average equity                  7.33%        8.56%     9.58%
    Return on average tangible equity        17.64%       20.98%    21.22%
    
    Bank Only Ratios:
    -------------------------------------
    Umpqua Bank efficiency ratio (2)         55.88%       51.66%    53.59%
    Umpqua Bank net interest margin (1)       4.72%        4.97%     4.95%
    
    
    (1) Tax exempt interest has been adjusted to a taxable equivalent
     basis using a 35% tax rate.
    
    (2) Excludes merger related expense, net of tax.
    
                               Deposits by Type
                                 (Unaudited)
                                         December 31,
                       March 31, 2007         2006        March 31, 2006
                     ------------------ ---------------- -----------------
    Dollars in
     thousands         Amount    Mix     Amount    Mix     Amount    Mix
                     ----------------- ----------------- -----------------
    Demand, non
     interest-
     bearing         $1,180,536  20.2% $1,222,107  20.9%   $990,803  23.4%
    Demand,
     interest-
     bearing          2,543,560  43.6%  2,490,386  42.7%  1,768,347  41.8%
    Savings             361,100   6.2%    368,238   6.3%    355,280   8.4%
    Time              1,745,709  30.0%  1,759,563  30.1%  1,115,218  26.4%
                     ----------------- ----------------- -----------------
       Total
        Deposits     $5,830,905 100.0% $5,840,294 100.0% $4,229,648 100.0%
                     ================= ================= =================
    
                         Umpqua Holdings Corporation
                               Average Balances
                                 (Unaudited)
                                                    Quarter Ended:
                                            ------------------------------
                                            March 31, December  March 31,
    Dollars in thousands                       2007    31, 2006    2006
                                            ------------------------------
    
      Loans held for sale                     $15,004   $17,936    $9,551
      Loans and leases                      5,383,958 5,339,111 4,015,579
      Earning assets                        6,245,170 6,190,573 4,721,904
      Goodwill & other intangibles            678,577   680,030   408,212
      Total assets                          7,256,788 7,201,791 5,411,417
    
      Non interest bearing demand deposits  1,158,203 1,228,026   968,506
      Interest bearing deposits             4,595,377 4,474,364 3,243,784
                                            ------------------------------
      Total deposits                        5,753,580 5,702,390 4,212,290
      Interest bearing liabilities          4,864,543 4,755,568 3,646,484
    
      Total shareholders' equity            1,161,185 1,148,682   744,190
      Tangible equity                         482,608   468,652   335,978
    
                         Umpqua Holdings Corporation
                    Mortgage Banking Statistical Analysis
                                 (unaudited)
                                                   Quarter Ended:
                                           -------------------------------
                                           March 31, December  March 31,
                                              2007    31, 2006     2006
                                           --------- --------- -----------
    Dollars in thousands
    Mortgage Servicing Rights (MSR):
    ---------------------------------------
    Mortgage loans serviced for others     $925,541  $955,444  $1,014,680
    
    MSR Asset                                $9,524   $13,553     $13,610
    Less: Valuation reserve (1)                  --    (3,601)     (2,407)
                                           --------- --------- -----------
       MSR Asset net                         $9,524    $9,952     $11,203
                                           ========= ========= ===========
    
    MSR net as % of serviced portfolio         1.03%     1.04%       1.10%
    
    Dollars in thousands
    Mortgage Banking Revenue:
    ---------------------------------------
    Origination and sale                     $1,728    $1,753      $1,523
    Servicing                                   637       639         675
    Amortization of MSR (1)                      --      (264)       (321)
    MSR valuation reserve change                 --      (360)        (33)
    Change in fair value of MSR                (566)       --          --
                                           --------- --------- -----------
       Total Mortgage Banking Revenue        $1,799    $1,768      $1,844
                                           ========= ========= ===========
    
    
    (1) The Company adopted SFAS No. 156 effective January 1, 2007,
     resulting in elimination of the mortgage servicing right valuation
     reserve and MSR amortization.
    

    Source: Umpqua Holdings Corporation


    Contact: Umpqua Holdings Corporation Ray Davis, President/CEO, 503-727-4101 raydavis@umpquabank.com or Dan Sullivan, EVP/CFO, 503-727-4103 dansullivan@umpquabank.com