• Umpqua Holdings Corporation
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  • Umpqua Holdings Reports Fourth Quarter and Full Year 2007 Results
    Company Release - 01/24/2008 08:00

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

    Umpqua Holdings Corporation (NASDAQ:UMPQ), parent company of Umpqua Bank and Strand, Atkinson, Williams & York, Inc., today announced fourth quarter 2007 operating earnings of $9.6 million, or $0.16 per diluted share, compared to $24.8 million, or $0.42 per diluted share, for the fourth quarter of 2006. Operating earnings exclude merger related expenses, net of tax. Including merger related expenses, net income for the fourth quarter of 2007 was $9.5 million, or $0.16 per diluted share, compared to $24.5 million, or $0.42 per diluted share for the fourth quarter of 2006.

    For the full year 2007, the Company reports operating earnings of $65.3 million, or $1.08 per diluted share, compared to $87.3 million, or $1.65 per diluted share, for the full year 2006. Including merger related expenses, net income for the full year 2007 was $63.3 million, or $1.05 per diluted share, compared to $84.4 million, or $1.59 per diluted share for the full year 2006.

    Significant income statement items for the fourth quarter of 2007 include:

        --  Accrual for estimated pro-rata share of VISA membership
            litigation related to American Express ($3.9 million) and
            Discover ($1.2 million), reduced earnings per diluted share by
            $0.05 after tax;
    
        --  Reversal of $2.3 million in interest income related to new
            non-accrual loans, representing a reduction in earnings per
            diluted share of $0.02 after tax;
    
        --  Provision for loan losses of $17.8 million, representing a
            reduction of $0.18 per diluted share after tax; and,
    
        --  Lower effective tax rate to approximately 25% of pre-tax
            income based on increased impact of tax-credit investments,
            represents an addition of $0.02 per diluted share from the
            year to date September 2007 effective tax rate of 35%.
    
        In addition:
    
        --  Non-performing assets ended the quarter at 1.18% of total
            assets, related primarily to the housing market downturn over
            the last two quarters and its impact on our residential
            development portfolio. Approximately $4.8 million of the
            non-performing assets were paid current in the first week of
            January 2008;
    
        --  Fourth quarter 2007 net charge-offs were $21.2 million. For
            the full year, net charge-offs were $22.0 million, or 0.38% of
            average loans;
    
        --  Full year organic loan and deposit growth was 5%, excluding
            the North Bay acquisition;
    
        --  Net interest margin, on a tax equivalent basis, declined 20
            basis points during the fourth quarter, to 4.00%, of which 13
            basis points related to interest reversal on new non-accrual
            loans noted above;
    
        --  Cost of interest bearing deposits decreased 16 basis points
            during the fourth quarter.
    

    "Umpqua's management team has been quick to identify and report problem credits associated with the economic down-turn plaguing the country. This has resulted in another quarter where the Company incurred a higher than normal provision for loan losses," said Ray Davis, president and CEO of Umpqua Holdings Corporation. "We have been active in aggressively resolving these credits and look forward to improved credit quality results in the future."

    The following is a comparison of net income to operating earnings for
     all periods presented:
    
                                                    Sequential  Year over
                               Quarter ended:        Quarter      Year
                          -------------------------
        (Dollars in
      thousands, except
       per share data)    12/31/07 9/30/07 12/31/06  % Change   % Change
                          ------------------------------------------------
    Net Income              $9,516 $13,177  $24,533      (28)%       (61)%
    Add Back: Merger
     related expenses,
     net of tax                 71     158      249      (55)%       (71)%
                          -------------------------
         Operating
          Earnings          $9,587 $13,335  $24,782      (28)%       (61)%
                          =========================
    
    Earnings per diluted
     share:
    ---------------------
         Net Income          $0.16   $0.22    $0.42      (27)%       (62)%
         Operating
          Earnings           $0.16   $0.22    $0.42      (27)%       (62)%
    
                                                                Year over
                                                Year ended:       Year
                                             -----------------
    (Dollars in thousands, except per share
                      data)                  12/31/07 12/31/06  % Change
                                             -----------------------------
    Net Income                                $63,268  $84,447       (25)%
    Add Back: Merger related expenses, net
     of tax                                     1,991    2,864       (30)%
                                             -----------------
         Operating Earnings                   $65,259  $87,311       (25)%
                                             =================
    
    Earnings per diluted share:
    ----------------------------------------
         Net Income                             $1.05    $1.59       (34)%
         Operating Earnings                     $1.08    $1.65       (35)%
    

    Credit Quality

    Non-performing assets were $98.0 million, or 1.18% of total assets, as of December 31, 2007. Of this amount, $9.8 million represented loans past due greater than 90 days and still accruing interest, $81.3 million of non-accrual loans, and $6.9 million of other real estate owned. Included in non-accrual loans is one $24.7 million relationship where management anticipates no loss on future resolution. Excluding this relationship, non-accrual loans total $56.6 million, with an average balance of $1.6 million. Approximately $4.8 million of the loans past due greater than 90 days were paid current in the first week of January 2008.

    Within other real estate owned, there were $14.5 million of additions during the fourth quarter, and $17.9 million of sales, resulting in the ending balance of $6.9 million at December 31, 2007.

    Within the allowance for credit losses, the Company has identified $9.9 million of reserves related to these non-accrual loans, which are specifically measured for impairment. Management views this reserve as adequate to absorb future losses that may arise from resolution of these loans. The calculated provision for loan losses for the fourth quarter was $13.8 million. An additional provision of $4.0 million was added to the unallocated portion of the allowance due to the current economic environment, increasing the total provision recognized in the fourth quarter to $17.8 million. The unallocated portion of the allowance for credit losses was 4.8% as of December 31, 2007, compared to an insignificant unallocated allowance in the previous quarter.

    For the full year 2007, the Company had net charge-offs of $22.0 million, compared to net charge-offs of $574 thousand for the full year 2006. The ratio of net charge-offs to average loans was 0.38% for the full year 2007. The allowance for credit losses was 1.42% of total loans and leases at December 31, 2007, compared to 1.15% of total loans and leases at December 31, 2006.

    Total construction loans at December 31, 2007, were $1.2 billion. Within this total, the residential development loan segment is $674 million, and decreased $90 million, or 12%, from September 30, 2007. The average residential development loan is $894 thousand. Oregon/Washington residential development loans total $391 million, a decrease of 7% from the third quarter. California residential development loans total $283 million, a decrease of 17% from the third quarter. The remaining $514 million in construction loans are commercial construction projects. These commercial construction loans are uniquely different than the residential development loans and are performing with no notable issues.

    Net Interest Margin

    The Company reported a tax equivalent net interest margin of 4.00% for the fourth quarter of 2007, compared to 4.73% for the fourth quarter of 2006, and 4.20% for the third quarter of 2007. The decrease in net interest margin over the last year resulted from volatility in short-term market interest rates and the competitive climate, characterized by increasing deposit costs combined with declining earning asset yields, which was partially attributed to the interest income reversal discussed previously. The $2.3 million interest reversal on new non-accrual loans noted above resulted in a 13 basis point decline in the tax equivalent net interest margin during the quarter.

    Balance Sheet

    The Company completed its acquisition of North Bay Bancorp on April 26, 2007, by issuing 5,163,573 shares in connection with this acquisition, with a total deal value of $142.3 million. The following table presents the 2007 organic growth rates, which exclude the effects of the North Bay Bancorp acquisition:

    (dollars in thousands)         Loans and Leases   Deposits    Assets
                                   ---------------------------------------
    As reported, 12/31/07                 $6,055,635 $6,589,326 $8,340,053
    less: 12/31/06 balances                5,361,862  5,840,294  7,344,236
                                   ---------------------------------------
       Total growth                          693,773    749,032    995,817
    
    less: acquisition                        442,950    462,624    727,799
                                   ---------------------------------------
       Organic growth                       $250,823   $286,408   $268,018
                                   =======================================
    
    Annual organic growth rate                    5%         5%         4%
    

    Total consolidated assets as of December 31, 2007, were $8.3 billion, compared to $7.3 billion a year ago. Total gross loans and leases, and deposits, were $6.1 billion and $6.6 billion, respectively, as of December 31, 2007, compared to $5.4 billion and $5.8 billion, respectively, a year ago.

    As of December 31, 2007, total shareholders' equity was $1.2 billion. Book value per share was $20.67 and tangible book value per share was $7.92. During 2007, the company repurchased 4.01 million shares of stock at a weighted average price of $23.73 per share. There were no repurchases of common stock during the fourth quarter of 2007. The total remaining available common shares authorized for repurchase is approximately 1.54 million.

    VISA Related Accruals

    On November 7, 2007, Visa Inc. announced that it had reached a settlement with American Express related to an antitrust lawsuit. Umpqua Bank and certain other Visa member banks are obligated to fund the settlement and share in losses resulting from litigation.

    Previously, Visa Inc. announced that it completed restructuring transactions in preparation for an initial public offering of its Class A stock planned for early 2008, and, as part of those transactions, Umpqua's membership interest in Visa was exchanged for Class B stock of Visa, Inc. In connection with Visa's planned offering, it is expected that a portion of the Class B shares will be redeemed for cash, with the remaining shares to be converted to Class A shares three years after the offering or upon settlement of certain covered litigation, whichever is later. Visa is expected to set aside a portion of the proceeds from the offering to fund the American Express settlement and other litigation judgments or settlements that may occur.

    In connection with the announced American Express settlement, Umpqua recorded, in the fourth quarter of 2007, a liability and corresponding expense of $3.9 million pre-tax. In addition, Visa notified the Company of a contingency reserve related to unsettled litigation with Discover Card. In connection with this potential contingency, Umpqua recorded, in the fourth quarter of 2007, a liability and corresponding expense of $1.2 million pre-tax. These membership litigation accruals, combined, represent $0.05 per diluted share after tax.

    Although the outcome of Visa's initial public offering is currently not known, Umpqua anticipates that its proportionate share of the proceeds of the planned initial public offering by Visa will more than offset any liabilities related to Visa litigation, and no cash payments from Umpqua will be made in settlement of these liabilities.

    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 non-GAAP financial measures provide 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 identification and management of problem loans, resolution of non-accrual loans, the level of anticipated non-performing assets and gross loan charge-offs in 2008, the adequacy of the allowance for loan losses, Visa's planned initial public offering, redemption and conversion of Visa Class B stock and the value of proceeds of redemption of Class B Visa stock. Specific risks that could cause results to differ from the forward-looking statements are set forth in our filings with the SEC and include, without limitation, further deterioration in credit quality, our ability to resolve non-accrual loans in a satisfactory manner, Visa's ability to complete its public offering as planned, Visa's financial performance and fluctuations in the value of Visa stock, additional Visa Inc. litigation and the timing of and our ability to liquidate equity interests in Visa.

    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 147 locations between Napa, Calif. and Bellevue, Wash., along the Oregon and Northern California Coast and in Central Oregon. Umpqua Holdings also owns a 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, January 24, 2008, at 10:00 a.m. PST (1:00 p.m. EST) during which the Company will discuss fourth quarter and full year 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 800-752-8363 a few minutes before 10:00 a.m. The conference ID is "29921028." Information to be discussed in the teleconference will be available on the Company's website prior to the call at www.umpquaholdingscorp.com. A rebroadcast can be found approximately two hours after the conference call by dialing 800-642-1687, or by visiting the Company's website.

                         Umpqua Holdings Corporation
                      Consolidated Statements of Income
                                 (Unaudited)
    ----------------------------------------------------------------------
    
                                                Quarter Ended:
                                    --------------------------------------
    
    
    Dollars in thousands, except
     per share data                 Dec 31, 2007 Sep 30, 2007 Dec 31, 2006
                                    --------------------------------------
    Interest income
      Loans and leases                  $112,050     $116,111     $106,757
      Interest and dividends on
       investments:
         Taxable                           9,515        9,137        7,169
         Exempt from federal income
          tax                              1,671        1,588        1,142
         Dividends                            76           96           80
      Temporary investments                  976          929        1,366
                                    --------------------------------------
        Total interest income            124,288      127,861      116,514
    Interest expense
      Deposits                            47,090       48,138       38,769
      Repurchase agreements and
        fed funds purchased                  378          530          483
      Junior subordinated
       debentures                          4,492        4,444        3,856
      Term debt                              875          874          117
                                    --------------------------------------
        Total interest expense            52,835       53,986       43,225
    Net interest income                   71,453       73,875       73,289
    Provision for loan and lease
     losses                               17,814       20,420          125
    Non-interest income
      Service charges                      8,478        8,448        7,435
      Brokerage fees                       2,444        2,498        2,241
      Mortgage banking revenue             2,019        1,366        1,768
      Loss on sale of securities             (3)         (13)         (20)
      Other income                         3,449        6,244        2,689
                                    --------------------------------------
    Total non-interest income             16,387       18,543       14,113
    Non-interest expense
      Salaries and benefits               27,692       28,005       27,315
      Occupancy and equipment              9,011        9,166        8,845
      Intangible amortization              1,694        1,767        1,195
      Other                               18,753       13,692       11,270
      Merger related expenses                118          263          415
                                    --------------------------------------
    Total non-interest expense            57,268       52,893       49,040
    Income before provision for
     income taxes                         12,758       19,105       38,237
    Provision for income tax               3,242        5,928       13,704
                                    --------------------------------------
    Net income                            $9,516      $13,177      $24,533
                                    ======================================
    
    Weighted average shares
     outstanding                      59,939,649   60,489,522   58,045,755
    Weighted average diluted shares
     outstanding                      60,343,710   61,065,401   58,774,890
    
    Earnings per share - Basic             $0.16        $0.22        $0.42
    Earnings per share - Diluted           $0.16        $0.22        $0.42
    
    nm = not meaningful
    
    
                                          --------------------------------
                                             Sequential       Year over
                                               Quarter          Year
    Dollars in thousands, except per share
     data                                     % Change        % Change
                                          --------------------------------
    Interest income
      Loans and leases                                (3)%              5%
      Interest and dividends on
       investments:
         Taxable                                        4%             33%
         Exempt from federal income tax                 5%             46%
         Dividends                                   (21)%            (5)%
      Temporary investments                             5%           (29)%
        Total interest income                         (3)%              7%
    Interest expense
      Deposits                                        (2)%             21%
      Repurchase agreements and
        fed funds purchased                          (29)%           (22)%
      Junior subordinated debentures                    1%             16%
      Term debt                                         0%            648%
        Total interest expense                        (2)%             22%
    Net interest income                               (3)%            (3)%
    Provision for loan and lease losses              (13)%              nm
    Non-interest income
      Service charges                                   0%             14%
      Brokerage fees                                  (2)%              9%
      Mortgage banking revenue                         48%             14%
      Loss on sale of securities                        nm              nm
      Other income                                   (45)%             28%
    Total non-interest income                        (12)%             16%
    Non-interest expense
      Salaries and benefits                           (1)%              1%
      Occupancy and equipment                         (2)%              2%
      Intangible amortization                         (4)%             42%
      Other                                            37%             66%
      Merger related expenses                        (55)%           (72)%
    Total non-interest expense                          8%             17%
    Income before provision for income
     taxes                                           (33)%           (67)%
    Provision for income tax                         (45)%           (76)%
    Net income                                       (28)%           (61)%
    
    Weighted average shares outstanding               (1)%              3%
    Weighted average diluted shares
     outstanding                                      (1)%              3%
    
    Earnings per share - Basic                       (27)%           (62)%
    Earnings per share - Diluted                     (27)%           (62)%
    
    nm = not meaningful
    
                         Umpqua Holdings Corporation
                      Consolidated Statements of Income
                                 (Unaudited)
    ----------------------------------------------------------------------
                                           Twelve months ended:
                                 -----------------------------------------
    Dollars in thousands, except
     per share data              Dec 31, 2007 Dec 31, 2006    % Change
                                 -----------------------------------------
    Interest income
      Loans and leases               $443,939     $372,201             19%
      Interest and dividends on
       investments:
         Taxable                       34,891       27,370             27%
         Exempt from federal
          income tax                    5,822        3,882             50%
         Dividends                        325          285             14%
      Temporary investments             3,415        2,203             55%
                                 -----------------------------------------
        Total interest income         488,392      405,941             20%
    Interest expense
      Deposits                        180,840      119,881             51%
      Repurchase agreements and
        fed funds purchased             2,135        6,829           (69)%
      Trust preferred securities       16,821       14,215             18%
      Other borrowings                  2,642        2,892            (9)%
                                 -----------------------------------------
        Total interest expense        202,438      143,817             41%
    Net interest income               285,954      262,124              9%
    Provision for loan and lease
     losses                            41,730        2,552           1535%
    Non-interest income
      Service charges                  32,126       26,975             19%
      Brokerage fees                   10,038        9,649              4%
      Mortgage banking revenue          7,791        7,560              3%
      Loss on sale of securities         (13)         (21)              nm
      Other income                     14,883        9,434             58%
                                 -----------------------------------------
    Total non-interest income          64,825       53,597             21%
    Non-interest expense
      Salaries and benefits           112,864       98,840             14%
      Occupancy and equipment          35,785       31,752             13%
      Intangible amortization           6,094        3,728             63%
      Other                            56,057       42,856             31%
      Merger related expenses           3,318        4,773           (30)%
                                 -----------------------------------------
    Total noninterest expense         214,118      181,949             18%
    Income before income taxes         94,931      131,220           (28)%
    Provision for income tax           31,663       46,773           (32)%
                                 -----------------------------------------
    Net income                        $63,268      $84,447           (25)%
                                 =========================================
    
    Weighted average shares
     outstanding                   59,827,942   52,310,637             14%
    Weighted average diluted
     shares outstanding            60,427,571   53,050,201             14%
    
    Earnings per share - Basic          $1.06        $1.61           (34)%
    Earnings per share - Diluted        $1.05        $1.59           (34)%
    
    nm = not meaningful
    
                         Umpqua Holdings Corporation
                         Consolidated Balance Sheets
                                 (Unaudited)
    ----------------------------------------------------------------------
    
    
    
                                    --------------------------------------
    Dollars in thousands, except
     per share data                 Dec 31, 2007 Sep 30, 2007 Dec 31, 2006
                                    --------------------------------------
    Assets:
      Cash and due from banks           $188,782     $148,434     $169,769
      Temporary investments                3,288       46,787      165,879
      Investment securities:
         Trading                           2,837        4,144        4,204
         Available for sale            1,050,756      911,883      715,187
         Held to maturity                  6,005        7,116        8,762
      Loans held for sale                 13,047       19,964       16,053
      Loans and leases                 6,055,635    6,079,435    5,361,862
      Less: Allowance for loan and
       lease losses                     (84,904)     (88,278)     (60,090)
                                    --------------------------------------
        Loans and leases, net          5,970,731    5,991,157    5,301,772
      Restricted equity securities        15,273       15,297       15,255
      Premises and equipment, net        106,267      107,189      101,830
      Other real estate owned              6,943       10,310           --
      Mortgage servicing rights,
       net                                10,088        9,474        9,952
      Goodwill and other
       intangibles                       764,906      767,210      679,493
      Other assets                       201,130      186,846      156,080
                                    --------------------------------------
    Total assets                      $8,340,053   $8,225,811   $7,344,236
                                    ======================================
    
    Liabilities:
      Deposits                        $6,589,326   $6,518,217   $5,840,294
      Securities sold under
       agreements to repurchase           36,294       52,883       47,985
      Fed funds purchased                 69,500       20,000           --
      Term debt                           73,927       75,010        9,513
      Junior subordinated
       debentures, at fair value         131,686      131,984           --
      Junior subordinated
       debentures, at amortized
       cost                              104,680      104,947      203,688
      Other liabilities                   94,702       89,580       86,545
                                    --------------------------------------
        Total liabilities              7,100,115    6,992,621    6,188,025
    
    Shareholders' equity:
      Common stock                       988,780      987,543      930,867
      Retained earnings                  251,545      253,487      234,783
      Accumulated other
       comprehensive loss                  (387)      (7,840)      (9,439)
                                    --------------------------------------
        Total shareholders' equity     1,239,938    1,233,190    1,156,211
                                    --------------------------------------
    Total liabilities and
     shareholders' equity             $8,340,053   $8,225,811   $7,344,236
                                    ======================================
    
    
    Common shares outstanding at
     period end                       59,980,161   59,864,335   58,080,171
    Book value per share                  $20.67       $20.60       $19.91
    Tangible book value per share          $7.92        $7.78        $8.21
    Tangible equity                     $475,032     $465,980     $476,718
    Tangible equity to tangible
     assets                                6.27%        6.25%        7.15%
    nm = not meaningful
    
                                                   Sequential  Year over
                                                    Quarter       Year
    Dollars in thousands, except per share data     % Change    % Change
                                                  ------------------------
    Assets:
      Cash and due from banks                             27%          11%
      Temporary investments                             (93)%        (98)%
      Investment securities:
         Trading                                        (32)%        (33)%
         Available for sale                               15%          47%
         Held to maturity                               (16)%        (31)%
      Loans held for sale                               (35)%        (19)%
      Loans and leases                                     0%          13%
      Less: Allowance for loan and lease losses          (4)%          41%
        Loans and leases, net                              0%          13%
      Restricted equity securities                         0%           0%
      Premises and equipment, net                        (1)%           4%
      Other real estate owned                           (33)%           nm
      Mortgage servicing rights, net                       6%           1%
      Goodwill and other intangibles                       0%          13%
      Other assets                                         8%          29%
    Total assets                                           1%          14%
    
    Liabilities:
      Deposits                                             1%          13%
      Securities sold under agreements to
       repurchase                                       (31)%        (24)%
      Fed funds purchased                                248%           nm
      Term debt                                          (1)%         677%
      Junior subordinated debentures, at fair
       value                                               0%           nm
      Junior subordinated debentures, at amortized
       cost                                                0%           nm
      Other liabilities                                    6%           9%
        Total liabilities                                  2%          15%
    
    Shareholders' equity:
      Common stock                                         0%           6%
      Retained earnings                                  (1)%           7%
      Accumulated other comprehensive loss              (95)%        (96)%
        Total shareholders' equity                         1%           7%
    Total liabilities and shareholders' equity             1%          14%
    
    
    Common shares outstanding at period end                0%           3%
    Book value per share                                   0%           4%
    Tangible book value per share                          2%         (3)%
    Tangible equity                                        2%           0%
    Tangible equity to tangible assets
    nm = not meaningful
    
                         Umpqua Holdings Corporation
                     Loan Portfolio - Total and by Region
                                 (Unaudited)
    ----------------------------------------------------------------------
    
    
    Dollars in thousands
    Loans and leases by class:      Dec 31, 2007 Sep 30, 2007 Dec 31, 2006
                                    --------------------------------------
    
    Total Consolidated:
    -------------------------------
      Commercial real estate          $3,020,573   $3,071,588   $2,657,040
      Residential real estate            379,804      379,657      320,413
      Construction                     1,187,984    1,191,757    1,203,657
                                    --------------------------------------
        Total real estate              4,588,361    4,643,002    4,181,110
      Commercial                       1,394,985    1,365,786    1,126,189
      Leases                              40,207       37,095       22,870
      Installment and other               43,371       44,970       43,153
      Deferred loan fees, net           (11,289)     (11,418)     (11,460)
                                    --------------------------------------
         Total loans and leases       $6,055,635   $6,079,435   $5,361,862
                                    ======================================
    
    Oregon/Washington region:
    -------------------------------
      Commercial real estate          $1,686,007   $1,710,224   $1,581,882
      Residential real estate            256,781      250,751      212,074
      Construction                       671,619      631,087      546,961
                                    --------------------------------------
        Total real estate              2,614,407    2,592,062    2,340,917
      Commercial                         824,113      799,598      785,067
      Leases                              40,146       37,005       22,580
      Installment and other               30,659       31,216       27,785
      Deferred loan fees, net            (7,130)      (7,236)      (7,753)
                                    --------------------------------------
         Total loans and leases       $3,502,195   $3,452,645   $3,168,596
                                    ======================================
         % of consolidated total             58%          57%          59%
    
    California region:
    -------------------------------
      Commercial real estate          $1,334,566   $1,361,364   $1,075,158
      Residential real estate            123,023      128,906      108,339
      Construction                       516,365      560,670      656,696
                                    --------------------------------------
        Total real estate              1,973,954    2,050,940    1,840,193
      Commercial                         570,872      566,188      341,122
      Leases                                  61           90          290
      Installment and other               12,712       13,754       15,368
      Deferred loan fees, net            (4,159)      (4,182)      (3,707)
                                    --------------------------------------
         Total loans and leases       $2,553,440   $2,626,790   $2,193,266
                                    ======================================
         % of consolidated total             42%          43%          41%
    
                                                      Sequential Year over
    Dollars in thousands                               Quarter     Year
    Loans and leases by class:                         % Change  % Change
                                                     ---------------------
    
    Total Consolidated:
    -------------------------------------------------
      Commercial real estate                              (1.7)%     13.7%
      Residential real estate                               0.0%     18.5%
      Construction                                        (0.3)%    (1.3)%
        Total real estate                                 (1.2)%      9.7%
      Commercial                                            2.1%     23.9%
      Leases                                                8.4%     75.8%
      Installment and other                               (3.6)%      0.5%
      Deferred loan fees, net                             (1.1)%    (1.5)%
         Total loans and leases                           (0.4)%     12.9%
    
    Oregon/Washington region:
    -------------------------------------------------
      Commercial real estate                              (1.4)%      6.6%
      Residential real estate                               2.4%     21.1%
      Construction                                          6.4%     22.8%
        Total real estate                                   0.9%     11.7%
      Commercial                                            3.1%      5.0%
      Leases                                                8.5%     77.8%
      Installment and other                               (1.8)%     10.3%
      Deferred loan fees, net                             (1.5)%    (8.0)%
         Total loans and leases                             1.4%     10.5%
         % of consolidated total
    
    California region:
    -------------------------------------------------
      Commercial real estate                              (2.0)%     24.1%
      Residential real estate                             (4.6)%     13.6%
      Construction                                        (7.9)%   (21.4)%
        Total real estate                                 (3.8)%      7.3%
      Commercial                                            0.8%     67.4%
      Leases                                             (32.2)%   (79.0)%
      Installment and other                               (7.6)%   (17.3)%
      Deferred loan fees, net                             (0.5)%     12.2%
         Total loans and leases                           (2.8)%     16.4%
         % of consolidated total
    
                         Umpqua Holdings Corporation
                                Credit Quality
                                 (Unaudited)
    ----------------------------------------------------------------------
                                                      Sequential Year over
                             Quarter  Quarter Quarter
                               Ended   Ended   Ended   Quarter     Year
                             Dec 31,  Sep 30, Dec 31,
    Dollars in thousands       2007     2007    2006   % Change  % Change
                             ---------------------------------------------
    Allowance for credit
     losses
    Balance beginning of
     period                   $88,278 $68,723 $60,475
        Provision for loan
         and lease losses      17,814  20,420     125
    
    Charge-offs              (21,733) (1,414) (1,618)      1437%     1243%
    Less: Recoveries              545     549   1,108       (1)%     (51)%
                             ------------------------
         Net charge-offs     (21,188)   (865)   (510)      2349%     4055%
    
    Total Allowance for loan
     and lease losses          84,904  88,278  60,090       (4)%       41%
    
    Reserve for unfunded
     commitments                1,182   1,246   1,313
                             ------------------------
       Total Allowance for
        credit losses         $86,086 $89,524 $61,403       (4)%       40%
                             ========================
    
    Net charge-offs to
     average loans and
     leases (annualized)        1.38%   0.06%   0.04%
    Recoveries to gross
     charge-offs                   3%     39%     68%
    Allowance for credit
     losses to loans and
     leases                     1.42%   1.47%   1.15%
    Allowance for credit
     losses to nonperforming
     loans                        94%    130%    678%
    
    Nonperforming loans to
     total loans and leases     1.50%   1.13%   0.17%
    Nonperforming assets to
     total assets               1.18%   0.96%   0.12%
    
    Nonperforming assets:
      Loans on non-accrual
       status                 $81,317 $67,419  $8,629        21%      842%
      Loans past due 90+
       days & accruing          9,782   1,488     429       557%     2180%
                             ------------------------
    Total nonperforming
     loans                     91,099  68,907   9,058        32%      906%
      Other real estate
       owned                    6,943  10,310      --      (33)%        nm
                             ------------------------
    Total nonperforming
     assets                   $98,042 $79,217  $9,058        24%      982%
                             ========================
    nm = not meaningful
    
                         Umpqua Holdings Corporation
                          Credit Quality (continued)
                                 (Unaudited)
    ----------------------------------------------------------------------
                                               Twelve Months ended:
    Dollars in thousands                Dec 31, 2007 Dec 31, 2006 % Change
                                        ----------------------------------
    Allowance for credit losses
    Balance beginning of period              $60,090      $43,885
        Provision for loan and lease
         losses                               41,730        2,552
        Acquisitions                           5,078       14,227
    
    Charge-offs                             (24,730)      (4,205)     488%
    Less: Recoveries                           2,736        3,631    (25)%
                                        -------------------------
         Net charge-offs                    (21,994)        (574)    3732%
    
    Total Allowance for loan and lease
     losses                                   84,904       60,090
    
    Reserve for unfunded commitments           1,182        1,313
                                        -------------------------
       Total Allowance for credit
        losses                               $86,086      $61,403
                                        =========================
    
    Net charge-offs to average
      loans and leases                         0.38%        0.01%
    Recoveries to gross charge-offs              11%          86%
    
                         Umpqua Holdings Corporation
                               Deposits by Type
                                 (Unaudited)
    ----------------------------------------------------------------------
    
    
                           Dec 31, 2007    Sep 30, 2007    Dec 31, 2006
                          --------------- --------------- ---------------
    Dollars in thousands    Amount   Mix    Amount   Mix    Amount   Mix
                          --------------- --------------- ----------------
    Demand, non interest-
     bearing              $1,272,872  19% $1,294,334  20% $1,222,107  21%
    Demand, interest-
     bearing               2,948,035  45%  2,950,605  45%  2,490,386  43%
    Savings                  410,339   6%    358,825   6%    368,238   6%
    Time                   1,958,080  30%  1,914,453  29%  1,759,563  30%
                          -----------------------------------------------
       Total Deposits     $6,589,326 100% $6,518,217 100% $5,840,294 100%
                          ===============================================
    
                                                      Sequential Year over
                                                       Quarter     Year
    Dollars in thousands                               % Change  % Change
                                                      --------------------
    Demand, non interest-bearing                          (1.7)%      4.2%
    Demand, interest-bearing                              (0.1)%     18.4%
    Savings                                                14.4%     11.4%
    Time                                                    2.3%     11.3%
       Total Deposits                                       1.1%     12.8%
    
                         Umpqua Holdings Corporation
                       Deposits/Core Deposits by Region
                                 (Unaudited)
    ----------------------------------------------------------------------
    
    
                            Dec 31, 2007    Sep 30, 2007    Dec 31, 2006
                           --------------- --------------- ---------------
    Dollars in thousands     Amount   Mix    Amount   Mix    Amount   Mix
                           --------------- --------------- ---------------
    
    Deposits by region:
    ----------------------
    Oregon/Washington      $3,700,419  56% $3,700,826  57% $3,500,965  60%
    California              2,888,907  44%  2,817,391  43%  2,339,329  40%
                           -----------------------------------------------
       Total Deposits      $6,589,326 100% $6,518,217 100% $5,840,294 100%
                           ===============================================
    
    Core deposits - ending
     (1):
    ----------------------
    Oregon/Washington      $3,137,684  58% $3,183,550  58% $3,044,448  61%
    California              2,313,104  42%  2,270,478  42%  1,911,228  39%
                           -----------------------------------------------
       Total Core deposits $5,450,788 100% $5,454,028 100% $4,955,676 100%
                           ===============================================
       % of total deposits    83%             84%             85%
    
    Core deposits -
     average (1):
    ----------------------
    Oregon/Washington      $3,165,254  58% $3,126,920  58% $2,993,706  61%
    California              2,335,719  42%  2,305,912  42%  1,884,907  39%
                           -----------------------------------------------
       Total Core deposits $5,500,973 100% $5,432,832 100% $4,878,613 100%
                           ===============================================
    
    
                                                      Sequential Year over
                                                       Quarter     Year
    Dollars in thousands                               % Change  % Change
                                                     ---------------------
    
    Deposits by region:
    -------------------------------------------------
    Oregon/Washington                                       0.0%      5.7%
    California                                              2.5%     23.5%
       Total Deposits                                       1.1%     12.8%
    
    Core deposits - ending (1):
    -------------------------------------------------
    Oregon/Washington                                     (1.4)%      3.1%
    California                                              1.9%     21.0%
       Total Core deposits                                (0.1)%     10.0%
       % of total deposits
    
    Core deposits - average (1):
    -------------------------------------------------
    Oregon/Washington                                       1.2%      5.7%
    California                                              1.3%     23.9%
       Total Core deposits                                  1.3%     12.8%
    
    
    (1) Core deposits are defined as total deposits less time deposits
     greater than $100,000.
    
                         Umpqua Holdings Corporation
                           Organic Growth by Region
                                 (Unaudited)
    ----------------------------------------------------------------------
    
                                 Oregon/Washington        California
    ----------------------------------------------------------------------
    Dollars in thousands         Loans     Deposits    Loans     Deposits
    ----------------------------------------------------------------------
    Balance, 12/31/07          $3,502,195 $3,700,419 $2,553,440 $2,888,907
    
    Less: 12/31/06 balance      3,168,596  3,500,965  2,193,266  2,339,329
                               -------------------------------------------
         Total growth for year    333,599    199,454    360,174    549,578
    
    Less: acquisition              16,166      3,559    426,784    459,065
                               -------------------------------------------
         Organic Growth          $317,433   $195,895  $(66,610)    $90,513
                               ===========================================
    
    Organic growth %                10.0%       5.6%     (3.0)%       3.9%
    Acquisition growth %             0.5%       0.1%      19.4%      19.6%
    Total growth %                  10.5%       5.7%      16.4%      23.5%
    
    Organic growth rate - 2007      10.0%       5.6%     (3.0)%       3.9%
    Organic growth rate - 2006      18.1%      16.3%     (5.4)%       3.7%
    Organic growth rate - 2005      13.3%      12.9%      12.7%      12.7%
    Organic growth rate - 2004      17.7%       8.0%       4.7%       3.2%
    
                                                             Total
    ----------------------------------------------------------------------
    Dollars in thousands                               Loans     Deposits
    ----------------------------------------------------------------------
    Balance, 12/31/07                                $6,055,635 $6,589,326
    
    Less: 12/31/06 balance                            5,361,862  5,840,294
                                                    ----------------------
         Total growth for year                          693,773    749,032
    
    Less: acquisition                                   442,950    462,624
                                                    ----------------------
         Organic Growth                                $250,823   $286,408
                                                    ======================
    
    Organic growth %                                       4.7%       4.9%
    Acquisition growth %                                   8.2%       7.9%
    Total growth %                                        12.9%      12.8%
    
    Organic growth rate - 2007                             4.7%       4.9%
    Organic growth rate - 2006                            10.7%      12.6%
    Organic growth rate - 2005                            13.1%      12.8%
    Organic growth rate - 2004                            20.2%       9.6%
    
                         Umpqua Holdings Corporation
                               Selected Ratios
                                 (Unaudited)
    ----------------------------------------------------------------------
                                                      Sequential Year over
                                    Quarter Ended:     Quarter     Year
                                 --------------------
                                  Dec    Sep    Dec
                                  31,    30,    31,
                                  2007   2007   2006    Change    Change
                                 -----------------------------------------
    Net Interest Spread:
      Yield on loans and leases   7.28%  7.62%  7.91%     (0.34)    (0.63)
      Yield on taxable
       investments                4.79%  4.83%  4.71%     (0.04)      0.08
      Yield on tax-exempt
       investments (1)            5.58%  5.62%  5.51%     (0.04)      0.07
      Yield on temporary
       investments                4.56%  5.18%  5.41%     (0.62)    (0.85)
        Total yield on earning
         assets (1)               6.93%  7.24%  7.50%     (0.31)    (0.57)
    
      Cost of interest bearing
       deposits                   3.53%  3.69%  3.44%     (0.16)      0.09
          Cost of securities
           sold under agreements
           to repurchase and fed
           funds purchased        2.70%  3.28%  2.90%     (0.58)    (0.20)
      Cost of term debt           4.63%  4.62%  4.19%       0.01      0.44
      Cost of junior
       subordinated debentures    7.53%  7.59%  7.50%     (0.06)      0.03
        Total cost of interest
         bearing liabilities      3.71%  3.86%  3.61%     (0.15)      0.10
    
    Net interest spread (1)       3.22%  3.38%  3.89%     (0.16)    (0.67)
         Net interest margin -
          Consolidated (1)        4.00%  4.20%  4.73%     (0.20)    (0.73)
    
         Net interest margin -
          Bank (1)                4.24%  4.45%  4.97%     (0.21)    (0.73)
    
    As reported:
    ----------------------------
    Return on average assets      0.46%  0.64%  1.35%     (0.18)    (0.89)
    Return on average tangible
     assets                       0.50%  0.70%  1.49%     (0.20)    (0.99)
    Return on average equity      3.04%  4.20%  8.47%     (1.16)    (5.43)
    Return on average tangible
     equity                       7.92% 10.92% 20.77%     (3.00)   (12.85)
    Efficiency ratio -
     Consolidated                64.68% 56.83% 55.80%       7.85      8.88
    Efficiency ratio - Bank      60.76% 55.57% 52.12%       5.19      8.64
    
    Excluding merger related
     expense (2):
    ----------------------------
    Return on average assets      0.46%  0.65%  1.37%     (0.19)    (0.91)
    Return on average tangible
     assets                       0.51%  0.71%  1.51%     (0.20)    (1.00)
    Return on average equity      3.06%  4.25%  8.56%     (1.19)    (5.50)
    Return on average tangible
     equity                       7.97% 11.05% 20.98%     (3.08)   (13.01)
    Efficiency ratio -
     Consolidated                64.55% 56.54% 55.33%       8.01      9.22
    Efficiency ratio - Bank      60.64% 55.30% 51.66%       5.34      8.98
    
    (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.
    
                         Umpqua Holdings Corporation
                               Selected Ratios
                                 (Unaudited)
    ----------------------------------------------------------------------
                                            Twelve Months Ended:
                                          -------------------------
                                          Dec 31, 2007 Dec 31, 2006 Change
                                          --------------------------------
    Net Interest Spread:
      Yield on loans and leases                  7.61%        7.72% (0.11)
      Yield on taxable investments               4.74%        4.55%   0.19
      Yield on tax-exempt investments (1)        5.52%        5.69% (0.17)
      Yield on temporary investments             5.00%        4.82%   0.18
        Total yield on earning assets (1)        7.22%        7.32% (0.10)
    
      Cost of interest bearing deposits          3.63%        3.09%   0.54
        Cost of securities sold under
         agreements to repurchase and fed
         funds purchased                         3.25%        4.09% (0.84)
      Cost of term debt                          4.60%        4.93% (0.33)
      Cost of junior subordinated
       debentures                                7.58%        7.56%   0.02
        Total cost of interest bearing
         liabilities                             3.80%        3.35%   0.45
    
    Net interest spread (1)                      3.42%        3.97% (0.55)
         Net interest margin -
          Consolidated (1)                       4.24%        4.74% (0.50)
    
         Net interest margin - Bank (1)          4.49%        4.99% (0.50)
    
    As reported:
    -------------------------------------
    Return on average assets                     0.80%        1.31% (0.51)
    Return on average tangible assets            0.88%        1.43% (0.55)
    Return on average equity                     5.17%        8.70% (3.53)
    Return on average tangible equity           13.08%       20.84% (7.76)
    Efficiency ratio - Consolidated             60.62%       57.33%   3.29
    Efficiency ratio - Bank                     57.47%       53.43%   4.04
    
    Excluding merger related expense (2):
    -------------------------------------
    Return on average assets                     0.83%        1.35% (0.52)
    Return on average tangible assets            0.91%        1.48% (0.57)
    Return on average equity                     5.34%        9.00% (3.66)
    Return on average tangible equity           13.50%       21.55% (8.05)
    Efficiency ratio - Consolidated             59.68%       55.82%   3.86
    Efficiency ratio - Bank                     56.55%       51.97%   4.58
    
    (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.
    
                         Umpqua Holdings Corporation
                               Average Balances
                                 (Unaudited)
    ----------------------------------------------------------------------
                                                      Sequential Year over
                               Quarter Ended:          Quarter     Year
                        -----------------------------
    Dollars in          Dec 31,   Sep 30,   Dec 31,
     thousands             2007      2007      2006    % Change  % Change
                        --------------------------------------------------
    
      Temporary
       investments        $84,964   $71,165  $100,301        19%     (15)%
      Investment
       securities,
       taxable            800,501   765,346   615,630         5%       30%
      Investment
       securities, tax-
       exempt             169,609   159,998   117,595         6%       44%
      Loans held for
       sale                15,123    10,732    17,936        41%     (16)%
      Loans and leases  6,087,801 6,032,388 5,339,111         1%       14%
                        -----------------------------
         Total earning
          assets        7,157,998 7,039,629 6,190,573         2%       16%
      Goodwill & other
       intangibles        766,109   766,591   680,030         0%       13%
      Total assets      8,288,478 8,190,032 7,201,791         1%       15%
    
      Non interest
       bearing demand
       deposits         1,304,484 1,319,280 1,228,026       (1)%        6%
      Interest bearing
       deposits         5,288,940 5,171,123 4,474,364         2%       18%
                        -----------------------------
      Total deposits    6,593,424 6,490,403 5,702,390         2%       16%
      Interest bearing
       liabilities      5,656,152 5,542,587 4,755,568         2%       19%
    
      Total
       shareholders'
       equity           1,243,095 1,245,390 1,148,682         0%        8%
      Tangible equity     476,986   478,799   468,652         0%        2%
    
                         Umpqua Holdings Corporation
                               Average Balances
                                 (Unaudited)
    ----------------------------------------------------------------------
                                          Twelve Months Ended:
                                        -------------------------
    Dollars in thousands                Dec 31, 2007 Dec 31, 2006 % Change
                                        ----------------------------------
    
      Temporary investments                  $68,297      $45,745      49%
      Investment securities, taxable         743,266      607,267      22%
      Investment securities, tax-exempt      149,291       97,723      53%
      Loans held for sale                     14,073       15,375     (8)%
      Loans and leases                     5,822,907    4,803,509      21%
                                        -------------------------
         Total earning assets              6,797,834    5,569,619      22%
      Goodwill & other intangibles           739,086      565,167      31%
      Total assets                         7,897,568    6,451,660      22%
    
      Non interest bearing demand
       deposits                            1,263,873    1,121,171      13%
      Interest bearing deposits            4,986,647    3,882,777      28%
                                        -------------------------
      Total deposits                       6,250,520    5,003,948      25%
      Interest bearing liabilities         5,331,620    4,296,287      24%
    
      Total shareholders' equity           1,222,628      970,394      26%
      Tangible equity                        483,542      405,227      19%
    
                         Umpqua Holdings Corporation
                          Mortgage Banking Activity
                                 (unaudited)
    ----------------------------------------------------------------------
                                                      Sequential Year over
                                 Quarter Ended:        Quarter     Year
                           --------------------------
                           Dec 31,  Sep 30,  Dec 31,
    Dollars in thousands     2007     2007     2006    % Change  % Change
                           -----------------------------------------------
    
    Mortgage Servicing
     Rights (MSR):
    ----------------------
    Mortgage loans
     serviced for others   $870,680 $877,648 $955,444       (1)%      (9)%
    
    MSR Asset               $10,088   $9,474  $13,553         6%        nm
    Less: Valuation
     reserve (1)                 --       --  (3,601)         --        nm
                           --------------------------
       MSR Asset net        $10,088   $9,474   $9,952         6%        1%
                           ==========================
    
    MSR net as % of
     serviced portfolio       1.16%    1.08%    1.04%
    
    
    Mortgage Banking
     Revenue:
    ----------------------
    Origination and sale     $1,530   $1,468   $1,753         4%     (13)%
    Servicing                   601      546      639        10%      (6)%
    Amortization of MSR
     (1)                         --       --    (264)         --        nm
    MSR valuation reserve
     change                      --       --    (360)         --        nm
    Change in fair value
     of MSR                     222    (648)       --     (134)%      100%
    Change in fair value
     of MSR hedge             (334)       --       --         nm        nm
                           --------------------------
       Total Mortgage
        Banking Revenue      $2,019   $1,366   $1,768        48%       14%
                           ==========================
    
    
                            Twelve Months
                                 Ended:
                           -----------------
                           Dec 31,  Dec 31,
    Dollars in thousands     2007     2006   % Change
                           --------------------------
    
    Mortgage Banking
     Revenue:
    ----------------------
    Origination and sale     $6,426   $7,354    (13)%
    Servicing                 2,455    2,631     (7)%
    Amortization of MSR
     (1)                         --  (1,198)       nm
    MSR valuation reserve
     change                      --  (1,227)       nm
    Change in fair value
     of MSR                   (756)       --       nm
    Change in fair value
     of MSR hedge             (334)       --       nm
                           -----------------
       Total Mortgage
        Banking Revenue      $7,791   $7,560       3%
                           =================
    
    nm = not meaningful
    
    (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 President/CEO Ray Davis, 503-727-4101 raydavis@umpquabank.com or SVP/Finance Ron Farnsworth, 503-727-4108 ronfarnsworth@umpquabank.com