• Umpqua Holdings Corporation
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  • Umpqua Holdings Reports Second Quarter 2008 Results
    Net income of $10.2 million or $0.17 per diluted share Loans past due 30-89 days decreased 72% from first quarter Non-performing assets ended quarter at 1.25% of total assets Net interest margin increased 17 basis points from first quarter to 4.15% 
    Company Release - 07/17/2008 08:00

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

    Umpqua Holdings Corporation (NASDAQ:UMPQ), parent company of Umpqua Bank and Strand, Atkinson, Williams & York, Inc., today announced second quarter 2008 net income of $10.2 million, or $0.17 per diluted share, compared to $19.9 million, or $0.32 per diluted share, for the second quarter of 2007.

    Significant financial statement items for the second quarter of 2008 include:

                --  Non-performing assets ended the quarter at 1.25% of
                    total assets. Non-performing loans ended the quarter
                    at 1.61% of total loans;
    
                --  Loans past due 30-89 days decreased $49.3 million or
                    72% during the quarter to end at $18.9 million, or
                    0.31% of total loans, the lowest level since March
                    2007;
    
                --  Total net charge-offs for the second quarter of 2008
                    were $38.0 million, or 2.51% of average loans on an
                    annualized basis. Approximately $13.8 million of the
                    charge-offs related to resolved non-performing loans
                    in the second quarter, with the balance of $24.2
                    million for accelerated charge-offs of loss estimates
                    on remaining non-performing loans, reducing their
                    balance to the estimated net realizable value;
    
                --  Provision for loan losses of $25.1 million,
                    representing a reduction of $0.25 per diluted share;
    
                --  Loss on sale of other real estate owned of $2.9
                    million (recorded in other non-interest income),
                    representing a reduction of $0.03 per diluted share;
    
                --  Interest income reversals on new non-accrual loans of
                    $1.4 million reduced earnings per diluted share by
                    $0.01 and reduced net interest margin by 8 basis
                    points;
    
                --  Gain on fair value of junior subordinated debentures
                    of $3.2 million (recorded in other non-interest
                    income) based on widening spreads for new issuances,
                    increased earnings per diluted share by $0.03;
    
                --  Mortgage banking revenue includes a $1.8 million gain
                    in the value of the mortgage servicing right (MSR)
                    asset, increased earnings per diluted share by $0.02;
    
                --  Cost of interest bearing deposits decreased 58 basis
                    points during the quarter;
    
                --  Net interest margin, on a tax equivalent basis,
                    increased 17 basis points during the quarter to 4.15%.
                    The improvement was attributable to reductions in cost
                    of interest bearing deposits which more than offset
                    reductions in earning asset yields. Excluding
                    reversals of interest on new non-accrual loans, the
                    net interest margin would have increased 25 basis
                    points during the quarter.
    

    "It should be clear from this quarter's results that management continues to take an aggressive stance to remedy all known credit issues affecting the Company. Unfortunately, the housing market downturn and other serious global economic issues continue to place negative pressure on the financial industry resulting in depressed bank earnings and stock values. Although Umpqua has not been immune to this cycle, it is important to note that, except for our unusual credit charges, all other aspects of the company are performing well," said Ray Davis, president and CEO of Umpqua Holdings Corporation. "Umpqua Holdings is a strong and viable company with a management team committed to addressing issues quickly and efficiently as we stay focused on building a strong company for the future."

    Operating earnings exclude merger related expense, net of tax, although the Company had no merger related expense in 2008. 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)  6/30/08 3/31/08 6/30/07 % Change   % Change
                             ---------------------------------------------
    Net Income               $10,156 $24,671 $19,913      (59)%      (49)%
    Add Back: Merger related
     expenses, net of tax         --      --   1,430       --       (100)%
                             -----------------------
       Operating Earnings    $10,156 $24,671 $21,343      (59)%      (52)%
                             =======================
    
    Earnings per diluted
     share:
    ------------------------
       Net Income              $0.17   $0.41   $0.32      (59)%      (47)%
       Operating Earnings      $0.17   $0.41   $0.35      (59)%      (51)%
    
    
                                                                Year over
                                              Six months ended:    Year
                                              -----------------
    (Dollars in thousands, except per share
     data)                                     6/30/08  6/30/07 % Change
                                              ----------------------------
    Net Income                                  $34,827 $40,575      (14)%
    Add Back: Merger related expenses, net of
     tax                                             --   1,762     (100)%
                                              -----------------
       Operating Earnings                       $34,827 $42,337      (18)%
                                              =================
    
    Earnings per diluted share:
    -----------------------------------------
       Net Income                                 $0.58   $0.67      (13)%
       Operating Earnings                         $0.58   $0.70      (17)%
    
    

    Credit quality

    Non-performing assets were $104.4 million, or 1.25% of total assets, as of June 30, 2008, compared to $88.3 million, or 1.06% of total assets as of March 31, 2008. Of this amount, $3.9 million represented loans past due greater than 90 days and still accruing interest, $94.7 million of non-accrual loans, and $5.8 million of other real estate owned.

    Other real estate owned decreased 56% in the second quarter, to $5.8 million as of June 30, 2008. During the second quarter, the Company recognized a loss on sale of other real estate owned of $2.9 million, which is recognized as a reduction of other non-interest income.

    Loans past due 30-89 days total $18.9 million, or 0.31% of total loans, as of June 30, 2008. This delinquent loan total decreased $49.3 million, or 72%, during the quarter from the total 30-89 day past due amount of $68.2 million, or 1.13% of total loans as of March 31, 2008. The current level of loans past due 30-89 days is the lowest since March 2007.

    The Company identified $24.2 million of reserves related to non-accrual loans, which historically were specifically reserved as estimates for potential future loss. Prior to the second quarter, the Company would recognize the charge-off of the impairment reserve when the loan was resolved, sold, or foreclosed/transferred to other real estate owned. Starting in the second quarter, the Company accelerated the charge-off of the impairment reserve to the period when it arises for collateral dependent loans. Therefore, the non-accrual loans of $94.7 million as of June 30, 2008 have already been charged-off to their estimated net realizable value, and are expected to be resolved over the coming quarters with no additional material loss.

    Total net charge-offs were $38.0 million in the second quarter of 2008, an increase of 182% over the first quarter of 2008. As discussed above, $24.2 million of the second quarter charge-offs were from acceleration of the impairment reserve estimate on non-accrual loans. This, in addition to $13.8 million of other charge-offs on resolved problem loans, combine for the total $38.0 million in charge-offs for the quarter.

    The provision for loan losses for the second quarter of 2008 was $25.1 million. At March 31, 2008, the impairment reserve for non-accrual loans was $13.3 million, which was created through charges to the provision for loan loss in previous quarters. The combined total of $38.4 million covered the net charge-offs taken in the second quarter of 2008.

    The allowance for credit losses was 1.22% of total loans and leases at June 30, 2008, compared to 1.45% of total loans and leases at March 31, 2008. The reduction in the second quarter results directly from the immediate charge-off of the impairment reserve on non-accrual loans. Excluding the impairment reserve from March 31, 2008, the allowance for credit losses was unchanged during the quarter.

    For the past five quarters, the Company has been aggressively resolving problems arising from the current economic downturn. The following is a recap of the credit quality trends of the Company since the start of 2007, noting the change discussed above was implemented in the second quarter of 2008:

    (Dollars in thousands)
    
                                                                 Ending
                                        Provision     Net       specific
                                           for    charge-offs  impairment
                                        loan loss (recoveries)  reserve
                                        ----------------------------------
    Q1 2007                                   $83        $(90)       $857
    Q2 2007                                 3,413          31       5,088
    Q3 2007                                20,420         865      16,244
    Q4 2007                                17,814      21,188       9,893
    Q1 2008                                15,132      13,476      13,281
    Q2 2008                                25,137      37,976          --
    
                                        ----------------------
    Total                                 $81,999     $73,446
                                        ======================
    
    
                                                        Change in ratio of
                                Allowance                 non-performing
                             for credit loss 30-89 days     assets to
                               to loans %    past due %    total assets
                             ---------------------------------------------
    Q1 2007                            1.14%      0.17%             0.06%
    Q2 2007                            1.17%      0.56%             0.41%
    Q3 2007                            1.47%      0.99%             0.37%
    Q4 2007                            1.42%      0.64%             0.22%
    Q1 2008                            1.45%      1.13%            (0.12)%
    Q2 2008                            1.22%      0.31%             0.19%
    
    Total
    
    

    Total construction loans at June 30, 2008 were $1.07 billion, a decrease of 4% from March 31, 2008. Within this total, the residential development loan segment is $502 million. This segment has decreased $80 million, or 14%, from March 31, 2008, and decreased $263 million, or 34%, from September 30, 2007. Oregon/Washington residential development loans total $291 million, a decrease of 16% from the first quarter. California residential development loans total $210 million, a decrease of 10% from the first quarter. The remaining $569 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.

    The following is a geographic distribution of the residential development portfolio at June 30, 2008:

    Residential Development Loans
    (Dollars in thousands)
    
    
    
                                          Balance   Balance     Balance
                                          9/30/07  12/31/07    3/31/08
                                          --------------------------------
    Northwest Oregon                      $244,586 $237,780    $201,368
    Central Oregon                          59,660   57,933      56,346
    Southern Oregon                         56,756   50,437      48,220
    Washington                              61,818   45,206      42,519
    Greater Sacramento                     225,468  167,245     146,140
    Northern California                    116,084  115,604      87,424
    
                                          --------------------------------
    Total                                 $764,372 $674,205    $582,017
                                          ================================
    
    Quarter change $                               $(90,167)   $(92,188)
    Quarter change %                                    (12)%       (14)%
    
    Change from 9/07 $                             $(90,167)  $(182,355)
    Change from 9/07 %                                  (12)%       (24)%
    
                                             Non-              Remaining
                                            accrual Remaining average loan
                                  Balance    loans   balance    balance
                                 6/30/08    6/30/08  6/30/08    6/30/08
                                ------------------------------------------
    Northwest Oregon             $158,588    $4,366  $154,222         $871
    Central Oregon                 51,594     2,050    49,544        1,270
    Southern Oregon                44,781     4,503    40,278          671
    Washington                     36,324     5,645    30,679        1,058
    Greater Sacramento            135,648    32,188   103,460          924
    Northern California            74,730    22,744    51,986          553
    
                                -----------------------------
    Total                        $501,665   $71,496  $430,169         $842
                                =============================
    
    Quarter change $             $(80,352)
    Quarter change %                  (14)%
    
    Change from 9/07 $          $(262,707)
    Change from 9/07 %                (34)%
    

    Net interest margin

    The Company reported a tax equivalent net interest margin of 4.15% for the second quarter of 2008, compared to 3.98% for the first quarter of 2008, and 4.34% for the second quarter of 2007. The increase in net interest margin from the first quarter of 2008 resulted primarily from a 58 basis point reduction in the cost of interest bearing deposits, more than offsetting the decline in earning asset yields from recent prime rate decreases. The $1.4 million interest reversal on non-accrual loans in the second quarter resulted in an 8 basis point decline in the tax equivalent net interest margin during the quarter.

    Mortgage servicing rights

    Mortgage interest rates increased in the second quarter of 2008, resulting in the Company recognizing a $1.8 million gain in the MSR asset. At June 30, 2008, the MSR asset was valued at 1.26% of the total serviced loan portfolio.

    Other non-interest income

    Other non-interest income was $2.6 million for the second quarter of 2008, compared to $16.4 million for the first quarter of 2008. During the second quarter of 2008, this line item included a fair value gain on junior subordinated debentures of $3.2 million, offset by a loss on sale of other real estate owned of $2.9 million. Excluding these two items, other non-interest income for the second quarter would have been $2.3 million.

    As discussed in more detail later in this release, the first quarter of 2008 included a gain on mandatory redemption of Visa Inc. (Visa) shares of $12.6 million, and a fair value gain on junior subordinated debentures of $1.6 million. Excluding these two items, other non-interest income for the first quarter of 2008 would have been $2.2 million.

    Non-interest expense

    Total non-interest expense for the second quarter of 2008 was $51.4 million, compared to $46.9 million for the first quarter of 2008. As discussed in more detail later in this release, the first quarter of 2008 included a Visa related litigation accrual recovery of $5.2 million. Excluding this item, total non-interest expense for the first quarter of 2008 would have been $52.1 million. Salary and benefit expense decreased $576,000, or 2%, during the second quarter, based on the Company's continued cost saving initiatives.

    Balance sheet

    Total consolidated assets as of June 30, 2008 were $8.3 billion, compared to $8.1 billion a year ago. Total gross loans and leases, and deposits, were $6.1 billion and $6.4 billion, respectively, as of June 30, 2008, compared to $6.0 billion and $6.4 billion, respectively, a year ago.

    Total loans increased $66.5 million during the second quarter of 2008, while deposits decreased $153.3 million. The decrease in deposits during the quarter resulted from housing dependent segments of the customer base carrying lower balances given the current economic downturn. Non-interest bearing demand deposits increased to 20% of total deposits as of June 30, 2008, and service charge revenue on deposit accounts increased 5% during the quarter. The total number of deposit accounts and relationships continued to increase during the quarter, consistent with the Company's growth strategy.

    During the quarter, the Company increased term debt with $175 million in new borrowings with maturities through April 2010. The weighted average rate on the new borrowings was 3.19%.

    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 $143.2 million. This acquisition led to an increase in assets, loans and deposits of $728 million, $443 million and $463 million, respectively, in the second quarter of 2007.

    Capital

    The Company's estimated total risk-based capital as of June 30, 2008 is 11.06%, compared to 11.15% as of March 31, 2008, and is in excess of the regulatory definition of "well capitalized" of 10.00%. The reduction during the quarter related to the loan growth noted above. The level as of June 30, 2008 is an estimate pending filing of the Company's regulatory reports. The Company expects the total risk-based capital ratio to range from 10.80% to 11.00% for the remainder of 2008.

    As of June 30, 2008, total shareholders' equity was $1.24 billion. Book value per share was $20.71, tangible book value per share was $8.03 and tangible equity to assets was 6.36% as of June 30, 2008. These measures decreased slightly during the second quarter of 2008, and were related to an increase in market interest rates causing an unrealized loss on investment securities of $10.2 million, after tax, compared to an unrealized gain of $2.3 million, after tax, as of March 31, 2008.

    There were no repurchases of common stock during 2008. The total remaining available common shares authorized for repurchase is approximately 1.54 million as of June 30, 2008.

    VISA related activity

    In March 2008, Visa completed its initial public offering. Umpqua Bank and certain other Visa member banks are shareholders in Visa. Following the initial public offering, the Company received $12.6 million in proceeds from the offering, as a mandatory partial redemption of 295,377 shares, reducing the Company's holdings from 764,036 shares to 468,659 shares of Class B common stock. Using proceeds from this offering, Visa established a $3.0 billion escrow account to cover the resolution of pending litigation and related claims. The partial redemption proceeds are reflected in other non-interest income in the first quarter of 2008.

    In connection with Visa's establishment of the litigation escrow account, the Company reversed a $5.2 million reserve in the first quarter of 2008, reflected as a reduction of other non-interest expense. This reserve was created in the fourth quarter of 2007, pending completion of the Visa initial public offering, as a charge to other non-interest expense.

    The remaining unredeemed shares of Visa Class B common stock are restricted and may not be transferred until the later of (i) three years from the date of the initial public offering, or (ii) the period of time necessary to resolve the covered litigation. A conversion ratio of 0.71429 was established for the conversion rate of Class B shares into Class A shares. If the funds in the escrow account are insufficient to settle all the covered litigation, Visa may sell additional Class A shares, use the proceeds to settle litigation, and further reduce the conversion ratio. If funds remain in the escrow account after all litigation is settled, the Class B conversion ratio will be increased to reflect that surplus.

    As of June 30, 2008, the value of the Class A shares was $81.31 per share. The value of unredeemed Class A equivalent shares owned by the Company was $27.2 million as of June 30, 2008, and has not been reflected in the accompanying financial statements.

    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 the prospect of improved performance, the expected resolution of existing non-accrual loans without further loss and the expected level of total risk-based capital for the remainder of 2008. Specific risks that could cause results to differ from the forward-looking statements are set forth in our filings with the SEC and include, without limitation, our ability to realize expected recoveries of non-accrual loans, further deterioration in credit quality and our ability to resolve non-accrual loans in a satisfactory manner.

    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, July 17, 2008, at 10:00 a.m. PT (1:00 p.m. ET) during which the Company will discuss second quarter 2008 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 "53849246." Information to be discussed in the teleconference will be available on the Company's website prior to the call at www.umpquaholdingscorp.com. A rebroadcast can be found approximately two hours after the conference call by dialing 800-642-1687 with the conference ID noted above, or by visiting the Company's website.

                         Umpqua Holdings Corporation
                      Consolidated Statements of Income
                                 (Unaudited)
    ----------------------------------------------------------------------
                                                                   Quarter
                                                                    Ended:
                                                                   -------
    
    
    
    Dollars in thousands, except
     per share data                Jun 30, 2008 Mar 31, 2008 Jun 30, 2007
                                   ---------------------------------------
    Interest income
     Loans and leases                  $97,963     $104,152     $111,797
     Interest and dividends on
      investments:
       Taxable                          10,882        9,329        8,720
       Exempt from federal income
        tax                              1,677        1,679        1,335
       Dividends                           116           78           88
     Temporary investments                  87          203          616
                                   --------------------------------------
      Total interest income            110,725      115,441      122,556
    Interest expense
     Deposits                           31,468       39,625       44,581
     Repurchase agreements and fed
      funds purchased                      495          749          824
     Junior subordinated
      debentures                         3,216        3,922        4,022
     Term debt                           2,011        1,125          813
                                   --------------------------------------
      Total interest expense            37,190       45,421       50,240
    Net interest income                 73,535       70,020       72,316
    Provision for loan and lease
     losses                             25,137       15,132        3,413
    Non-interest income
     Service charges                     8,819        8,377        8,148
     Brokerage fees                      2,070        2,175        2,679
     Mortgage banking revenue            3,687       (1,870)       2,607
     Gain (loss) on sale of
      securities                            (2)       3,901           (2)
     Other income                        2,554       16,400        2,498
                                   --------------------------------------
    Total non-interest income           17,128       28,983       15,930
    Non-interest expense
     Salaries and benefits              27,668       28,244       28,898
     Occupancy and equipment             9,149        9,116        8,782
     Intangible amortization             1,491        1,491        1,490
     Other                              13,130        8,025       12,392
     Merger related expenses                --           --        2,383
                                   --------------------------------------
    Total non-interest expense          51,438       46,876       53,945
    Income before provision for
     income taxes                       14,088       36,995       30,888
    Provision for income tax             3,932       12,324       10,975
                                   --------------------------------------
    Net income                         $10,156      $24,671      $19,913
                                   ======================================
    
    Weighted average shares
     outstanding                    60,074,920   60,028,839   60,679,485
    Weighted average diluted
     shares outstanding             60,406,466   60,377,224   61,397,575
    
    Earnings per share - Basic           $0.17        $0.41        $0.33
    Earnings per share - Diluted         $0.17        $0.41        $0.32
    
    
                                                     Sequential Year over
                                                      Quarter      Year
    Dollars in thousands, except per share data      % Change   % Change
                                                     ---------------------
    Interest income
     Loans and leases                                      (6)%      (12)%
     Interest and dividends on investments:
       Taxable                                             17%        25%
       Exempt from federal income tax                       0%        26%
       Dividends                                           49%        32%
     Temporary investments                                (57)%      (86)%
      Total interest income                                (4)%      (10)%
    Interest expense
     Deposits                                             (21)%      (29)%
     Repurchase agreements and fed funds purchased        (34)%      (40)%
     Junior subordinated debentures                       (18)%      (20)%
     Term debt                                             79%       147%
      Total interest expense                              (18)%      (26)%
    Net interest income                                     5%         2%
    Provision for loan and lease losses                    66%       637%
    Non-interest income
     Service charges                                        5%         8%
     Brokerage fees                                        (5)%      (23)%
     Mortgage banking revenue                             297%        41%
     Gain (loss) on sale of securities                   (100)%        0%
     Other income                                         (84)%        2%
    Total non-interest income                             (41)%        8%
    Non-interest expense
     Salaries and benefits                                 (2)%       (4)%
     Occupancy and equipment                                0%         4%
     Intangible amortization                                0%         0%
     Other                                                 64%         6%
     Merger related expenses                                0%      (100)%
    Total non-interest expense                             10%        (5)%
    Income before provision for income taxes              (62)%      (54)%
    Provision for income tax                              (68)%      (64)%
    Net income                                            (59)%      (49)%
    
    Weighted average shares outstanding                     0%        (1)%
    Weighted average diluted shares outstanding             0%        (2)%
    
    Earnings per share - Basic                            (59)%      (48)%
    Earnings per share - Diluted                          (59)%      (47)%
    
    
    nm = not meaningful
    
                         Umpqua Holdings Corporation
                      Consolidated Statements of Income
                                 (Unaudited)
    ----------------------------------------------------------------------
                                               Six months ended:
                                      ------------------------------------
    Dollars in thousands, except per
     share data                       Jun 30, 2008 Jun 30, 2007 % Change
                                      ------------------------------------
    Interest income
     Loans and leases                     $202,115     $215,778       (6)%
     Interest and dividends on
      investments:
       Taxable                              20,211       16,239       24%
       Exempt from federal income tax        3,356        2,563       31%
       Dividends                               194          153       27%
     Temporary investments                     290        1,510      (81)%
                                      ------------------------------------
      Total interest income                226,166      236,243       (4)%
    Interest expense
     Deposits                               71,093       85,612      (17)%
     Repurchase agreements and fed
      funds purchased                        1,244        1,227        1%
     Trust preferred securities              7,138        7,885       (9)%
     Other borrowings                        3,136          893      251%
                                      ------------------------------------
      Total interest expense                82,611       95,617      (14)%
    Net interest income                    143,555      140,626        2%
    Provision for loan and lease
     losses                                 40,269        3,496     1052%
    Non-interest income
     Service charges                        17,196       15,200       13%
     Brokerage fees                          4,245        5,096      (17)%
     Mortgage banking revenue                1,817        4,406      (59)%
     Gain on sale of securities              3,899            3         nm
     Other income                           18,954        5,190      265%
                                      ------------------------------------
    Total non-interest income               46,111       29,895       54%
    Non-interest expense
     Salaries and benefits                  55,912       57,167       (2)%
     Occupancy and equipment                18,265       17,608        4%
     Intangible amortization                 2,982        2,633       13%
     Other                                  21,155       23,612      (10)%
     Merger related expenses                    --        2,937     (100)%
                                      ------------------------------------
    Total non-interest expense              98,314      103,957       (5)%
    Income before income taxes              51,083       63,068      (19)%
    Provision for income tax                16,256       22,493      (28)%
                                      ------------------------------------
    Net income                             $34,827      $40,575      (14)%
                                      ====================================
    
    Weighted average shares
     outstanding                        60,051,880   59,434,889        1%
    Weighted average diluted shares
     outstanding                        60,393,038   60,131,603        0%
    
    Earnings per share - Basic               $0.58        $0.68      (15)%
    Earnings per share - Diluted             $0.58        $0.67      (13)%
    
    nm = not meaningful
    
    
                         Umpqua Holdings Corporation
                         Consolidated Balance Sheets
                                 (Unaudited)
    ----------------------------------------------------------------------
    
    
    
                                   --------------------------------------
    Dollars in thousands, except
     per share data                Jun 30, 2008 Mar 31, 2008 Jun 30, 2007
                                   ---------------------------------------
    Assets:
     Cash and due from banks          $194,458     $173,472     $182,739
     Temporary investments               1,353       19,707       40,904
     Investment securities:
       Trading                           2,087        2,379        3,090
       Available for sale              998,307    1,068,914      893,125
       Held to maturity                  5,115        5,266        8,333
     Loans held for sale                12,694       39,623       16,953
     Loans and leases                6,111,488    6,044,956    5,981,750
     Less: Allowance for loan and
      lease losses                     (73,721)     (86,560)     (68,723)
                                   --------------------------------------
       Loans and leases, net         6,037,767    5,958,396    5,913,027
     Restricted equity securities       18,892       15,269       16,715
     Premises and equipment, net       104,861      104,505      108,656
     Other real estate owned             5,826       13,348           --
     Mortgage servicing rights,
      net                               11,576        8,640        9,966
     Goodwill and other
      intangibles                      761,738      763,275      767,710
     Other assets                      191,315      183,098      183,340
                                   --------------------------------------
    Total assets                    $8,345,989   $8,355,892   $8,144,558
                                   ======================================
    
    Liabilities:
     Deposits                       $6,359,909   $6,513,238   $6,414,425
     Securities sold under
      agreements to repurchase          41,281       38,296       59,553
     Fed funds purchased               147,945       55,000       48,000
     Term debt                         236,774      173,853       75,095
     Junior subordinated
      debentures, at fair value        126,539      129,803       99,808
     Junior subordinated
      debentures, at amortized
      cost                             104,146      104,413      105,213
     Other liabilities                  85,161       84,499       86,426
                                   --------------------------------------
      Total liabilities              7,101,755    7,099,102    6,888,520
    
    Shareholders' equity:
     Common stock                      990,952      989,764    1,019,618
     Retained earnings                 263,446      264,767      251,715
     Accumulated other
      comprehensive loss               (10,164)       2,259      (15,295)
                                   --------------------------------------
      Total shareholders' equity     1,244,234    1,256,790    1,256,038
                                   --------------------------------------
    Total liabilities and
     shareholders' equity           $8,345,989   $8,355,892   $8,144,558
                                   ======================================
    
    
    Common shares outstanding at
     period end                     60,087,850   60,059,908   61,315,960
    Book value per share                $20.71       $20.93       $20.48
    Tangible book value per share        $8.03        $8.22        $7.96
    Tangible equity                   $482,496     $493,515     $488,328
    Tangible equity to tangible
     assets                               6.36%        6.50%        6.62%
    
                                                     Sequential Year over
                                                      Quarter      Year
    Dollars in thousands, except per share data      % Change   % Change
                                                     ---------------------
    Assets:
     Cash and due from banks                               12%         6%
     Temporary investments                                (93)%      (97)%
     Investment securities:
       Trading                                            (12)%      (32)%
       Available for sale                                  (7)%       12%
       Held to maturity                                    (3)%      (39)%
     Loans held for sale                                  (68)%      (25)%
     Loans and leases                                       1%         2%
     Less: Allowance for loan and lease losses            (15)%        7%
       Loans and leases, net                                1%         2%
     Restricted equity securities                          24%        13%
     Premises and equipment, net                            0%        (3)%
     Other real estate owned                              (56)%         nm
     Mortgage servicing rights, net                        34%        16%
     Goodwill and other intangibles                         0%        (1)%
     Other assets                                           4%         4%
    Total assets                                            0%         2%
    
    Liabilities:
     Deposits                                              (2)%       (1)%
     Securities sold under agreements to repurchase         8%       (31)%
     Fed funds purchased                                  169%       208%
     Term debt                                             36%       215%
     Junior subordinated debentures, at fair value         (3)%       27%
     Junior subordinated debentures, at amortized
      cost                                                  0%        (1)%
     Other liabilities                                      1%        (1)%
      Total liabilities                                     0%         3%
    
    Shareholders' equity:
     Common stock                                           0%        (3)%
     Retained earnings                                      0%         5%
     Accumulated other comprehensive loss                (550)%      (34)%
      Total shareholders' equity                           (1)%       (1)%
    Total liabilities and shareholders' equity              0%         2%
    
    
    Common shares outstanding at period end                 0%        (2)%
    Book value per share                                   (1)%        1%
    Tangible book value per share                          (2)%        1%
    Tangible equity                                        (2)%       (1)%
    Tangible equity to tangible assets
    
    nm = not meaningful
    
    
                         Umpqua Holdings Corporation
                                Loan Portfolio
                                 (Unaudited)
    ----------------------------------------------------------------------
    
    
    Dollars in
     thousands           Jun 30, 2008     Mar 31, 2008     Jun 30, 2007
                       --------------------------------------------------
    Loans and leases
     by class:           Amount    Mix    Amount    Mix    Amount    Mix
                       ---------------------------------------------------
    
     Commercial real
      estate           $3,161,908   52% $3,104,288   51% $3,058,774   51%
     Residential real
      estate              401,245    7%    371,565    6%    371,894    6%
     Construction       1,070,429   18%  1,111,931   18%  1,148,726   19%
                       -----------      -----------      -----------
      Total real
       estate           4,633,582   76%  4,587,784   75%  4,579,394   77%
     Commercial         1,406,339   23%  1,380,860   23%  1,323,640   22%
     Leases                40,839    1%     40,968    1%     35,477    1%
     Installment and
      other                42,131    1%     46,585    1%     54,504    1%
     Deferred loan
      fees, net           (11,403)   0%    (11,241)   0%    (11,265)   0%
                       -----------      -----------      -----------
      Total loans and
       leases          $6,111,488  100% $6,044,956  100% $5,981,750  100%
                       ===========      ===========      ===========
    
    
                                                     Sequential Year over
    Dollars in thousands                              Quarter      Year
    Loans and leases by class:                       % Change   % Change
                                                     ---------------------
    
     Commercial real estate                                 2%         3%
     Residential real estate                                8%         8%
     Construction                                          (4)%       (7)%
      Total real estate                                     1%         1%
     Commercial                                             2%         6%
     Leases                                                 0%        15%
     Installment and other                                (10)%      (23)%
     Deferred loan fees, net                                1%         1%
      Total loans and leases                                1%         2%
    
    
                         Umpqua Holdings Corporation
                        Deposits by Type/Core Deposits
                                 (Unaudited)
    ----------------------------------------------------------------------
    
    
                           Jun 30, 2008    Mar 31, 2008    Jun 30, 2007
                          --------------- --------------- ---------------
    Dollars in thousands    Amount   Mix    Amount   Mix    Amount   Mix
                          --------------- --------------- ----------------
    Demand, non interest-
     bearing              $1,256,236  20% $1,260,756  19% $1,358,235  21%
    Demand, interest-
     bearing               2,857,116  45%  2,950,827  46%  2,801,455  44%
    Savings                  310,542   5%    341,173   5%    373,438   6%
    Time                   1,936,015  30%  1,960,482  30%  1,881,297  29%
                          -----------------------------------------------
      Total Deposits      $6,359,909 100% $6,513,238 100% $6,414,425 100%
                          ===============================================
    
    
      Total Core deposits $5,207,125  82% $5,347,970  82% $5,373,520  84%
    
    
                                                     Sequential Year over
                                                      Quarter      Year
    Dollars in thousands                             % Change   % Change
                                                     ---------------------
    Demand, non interest-bearing                            0%        (8)%
    Demand, interest-bearing                               (3)%        2%
    Savings                                                (9)%      (17)%
    Time                                                   (1)%        3%
      Total Deposits                                       (2)%       (1)%
    
    
      Total Core deposits                                  (3)%       (3)%
    
    
    (1) Core deposits are defined as total deposits less time deposits
     greater than $100,000.
    
    
                         Umpqua Holdings Corporation
                                Credit Quality
                                 (Unaudited)
    ----------------------------------------------------------------------
    
    
                                Quarter Ended Quarter Ended Quarter Ended
    Dollars in thousands        Jun 30, 2008  Mar 31, 2008  Jun 30, 2007
                                ------------------------------------------
    Allowance for credit losses
    Balance beginning of period      $86,560       $84,904       $60,263
      Provision for loan and
       lease losses                   25,137        15,132         3,413
      Acquisitions                        --            --         5,078
    
    Charge-offs                      (38,752)      (13,970)         (870)
    Less: Recoveries                     776           494           839
                                -----------------------------------------
      Net charge-offs                (37,976)      (13,476)          (31)
    
    Total Allowance for loan
     and lease losses                 73,721        86,560        68,723
    
    Reserve for unfunded
     commitments                       1,112         1,141         1,273
                                -----------------------------------------
     Total Allowance for credit
      losses                         $74,833       $87,701       $69,996
                                =========================================
    
    Net charge-offs to average
     loans and leases
     (annualized)                       2.51%         0.89%         0.00%
    Recoveries to gross charge-
     offs                                  2%            4%           96%
    Allowance for credit losses
     to loans and leases                1.22%         1.45%         1.17%
    
    Past due 30-89 days              $18,897       $68,238       $33,395
    
    Past due 30-89 days to
     total loans and leases             0.31%         1.13%         0.56%
    
    Nonperforming assets:
     Loans on non-accrual
      status                         $94,666       $71,664       $46,642
     Loans past due 90+ days &
      accruing                         3,911         3,327         1,313
                                -----------------------------------------
    Total nonperforming loans         98,577        74,991        47,955
     Other real estate owned           5,826        13,348            --
                                -----------------------------------------
    Total nonperforming assets      $104,403       $88,339       $47,955
                                =========================================
    
    Nonperforming loans to
     total loans and leases             1.61%         1.24%         0.80%
    
    Nonperforming assets to
     total assets                       1.25%         1.06%         0.59%
    
    
                                                     Sequential Year over
                                                      Quarter      Year
    Dollars in thousands                             % Change   % Change
                                                     ---------------------
    Allowance for credit losses
    Balance beginning of period
      Provision for loan and lease losses                  66%       637%
      Acquisitions
    
    Charge-offs                                           177%     4,354%
    Less: Recoveries                                       57%        (8)%
      Net charge-offs                                     182%          nm
    
    Total Allowance for loan and lease losses             (15)%        7%
    
    Reserve for unfunded commitments
     Total Allowance for credit losses                    (15)%        7%
    
    Net charge-offs to average loans and leases
     (annualized)
    Recoveries to gross charge-offs
    Allowance for credit losses to loans and leases
    
    Past due 30-89 days                                   (72)%      (43)%
    
    Past due 30-89 days to total loans and leases
    
    Nonperforming assets:
     Loans on non-accrual status                           32%       103%
     Loans past due 90+ days & accruing                    18%       198%
    Total nonperforming loans                              31%       106%
     Other real estate owned                              (56)%         nm
    Total nonperforming assets                             18%       118%
    
    Nonperforming loans to total loans and leases
    
    Nonperforming assets to total assets
    
    
    nm = not meaningful
    
    
                         Umpqua Holdings Corporation
                          Credit Quality (continued)
                                 (Unaudited)
    ----------------------------------------------------------------------
                                               Six Months ended:
    Dollars in thousands              Jun 30, 2008 Jun 30, 2007 % Change
                                      ------------------------------------
    Allowance for credit losses
    Balance beginning of period           $84,904      $60,090
      Provision for loan and lease
       losses                              40,269        3,496     1,052%
      Acquisitions                             --        5,078
    
    Charge-offs                           (52,722)      (1,583)    3,231%
    Less: Recoveries                        1,270        1,642       (23)%
                                      -------------------------
      Net (charge-offs) recoveries        (51,452)          59          nm
    
    Total Allowance for loan and
     lease losses                          73,721       68,723         7%
    
    Reserve for unfunded commitments        1,112        1,273
                                      -------------------------
     Total Allowance for credit
      losses                              $74,833      $69,996         7%
                                      =========================
    
    Net charge-offs to average loans
     and leases                              1.70%        0.00%
    Recoveries to gross charge-offs             2%         104%
    
    nm = not meaningful
    
    
                         Umpqua Holdings Corporation
                               Selected Ratios
                                 (Unaudited)
    ----------------------------------------------------------------------
                                                      Sequential Year over
                                    Quarter Ended:     Quarter     Year
                                 --------------------
                                  Jun    Mar    Jun
                                  30,    31,    30,
                                  2008   2008   2007    Change    Change
                                 -----------------------------------------
    Net Interest Spread:
     Yield on loans and leases    6.44%  6.89%  7.74%     (0.45)    (1.30)
     Yield on taxable
      investments                 4.93%  4.29%  4.72%       0.64      0.21
     Yield on tax-exempt
      investments (1)             5.62%  5.55%  5.06%       0.07      0.56
     Yield on temporary
      investments                 2.00%  3.18%  5.13%     (1.18)    (3.13)
      Total yield on earning
       assets (1)                 6.23%  6.53%  7.33%     (0.30)    (1.10)
    
     Cost of interest bearing
      deposits                    2.45%  3.03%  3.66%     (0.58)    (1.21)
     Cost of securities sold
      under agreements to
      repurchase and fed funds
      purchased                   2.09%  3.09%  3.74%     (1.00)    (1.65)
     Cost of term debt            3.51%  4.07%  4.63%     (0.56)    (1.12)
     Cost of junior subordinated
      debentures                  5.53%  6.68%  7.62%     (1.15)    (2.09)
      Total cost of interest
       bearing liabilities        2.61%  3.21%  3.84%     (0.60)    (1.23)
    
    Net interest spread (1)       3.62%  3.32%  3.49%       0.30      0.13
       Net interest margin -
        Consolidated (1)          4.15%  3.98%  4.34%       0.17    (0.19)
    
       Net interest margin -
        Bank (1)                  4.33%  4.19%  4.57%       0.14    (0.24)
    
    As reported:
    ----------------------------
    Return on average assets      0.49%  1.20%  1.02%     (0.71)    (0.53)
    Return on average tangible
     assets                       0.54%  1.32%  1.13%     (0.78)    (0.59)
    Return on average equity      3.25%  7.94%  6.44%     (4.69)    (3.19)
    Return on average tangible
     equity                       8.23% 20.44% 16.11%    (12.21)    (7.88)
    Efficiency ratio -
     Consolidated                56.27% 47.00% 60.76%       9.27    (4.49)
    Efficiency ratio - Bank      55.13% 44.71% 56.98%      10.42    (1.85)
    
    Excluding merger related
     expense (2):
    ----------------------------
    Return on average assets      0.49%  1.20%  1.09%     (0.71)    (0.60)
    Return on average tangible
     assets                       0.54%  1.32%  1.21%     (0.78)    (0.67)
    Return on average equity      3.25%  7.94%  6.91%     (4.69)    (3.66)
    Return on average tangible
     equity                       8.23% 20.44% 17.26%    (12.21)    (9.03)
    Efficiency ratio -
     Consolidated                56.27% 47.00% 58.08%       9.27    (1.81)
    Efficiency ratio - Bank      55.13% 44.71% 54.32%      10.42      0.81
    
    (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)
    ----------------------------------------------------------------------
                                              Six Months Ended:
                                          -------------------------
                                          Jun 30, 2008 Jun 30, 2007 Change
                                          --------------------------------
    Net Interest Spread:
     Yield on loans and leases                   6.66%        7.77% (1.11)
     Yield on taxable investments                4.61%        4.66% (0.05)
     Yield on tax-exempt investments (1)         5.59%        5.42%  0.17
     Yield on temporary investments              2.70%        5.22% (2.52)
      Total yield on earning assets (1)          6.38%        7.37% (0.99)
    
     Cost of interest bearing deposits           2.74%        3.64% (0.90)
     Cost of securities sold under
      agreements to repurchase and fed
      funds purchased                            2.60%        3.46% (0.86)
     Cost of term debt                           3.69%        4.54% (0.85)
     Cost of junior subordinated
      debentures                                 6.11%        7.61% (1.50)
      Total cost of interest bearing
       liabilities                               2.91%        3.81% (0.90)
    
    Net interest spread (1)                      3.47%        3.56% (0.09)
       Net interest margin - Consolidated
        (1)                                      4.06%        4.40% (0.34)
    
       Net interest margin - Bank (1)            4.26%        4.64% (0.38)
    
    As reported:
    -------------------------------------
    Return on average assets                     0.84%        1.08% (0.24)
    Return on average tangible assets            0.93%        1.20% (0.27)
    Return on average equity                     5.59%        6.81% (1.22)
    Return on average tangible equity           14.27%       16.72% (2.45)
    Efficiency ratio - Consolidated             51.43%       60.59% (9.16)
    Efficiency ratio - Bank                     49.63%       56.75% (7.12)
    
    Excluding merger related expense (2):
    -------------------------------------
    Return on average assets                     0.84%        1.13% (0.29)
    Return on average tangible assets            0.93%        1.25% (0.32)
    Return on average equity                     5.59%        7.11% (1.52)
    Return on average tangible equity           14.27%       17.45% (3.18)
    Efficiency ratio - Consolidated             51.43%       58.88% (7.45)
    Efficiency ratio - Bank                     49.63%       55.08% (5.45)
    
    (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         Jun 30,   Mar 31,   Jun 30,
     thousands            2008      2008      2007   % Change   % Change
                       ---------------------------------------------------
    
     Temporary
      investments        $17,538   $25,685   $48,142      (32)%      (64)%
     Investment
      securities,
      taxable            892,619   876,813   746,721        2%        20%
     Investment
      securities, tax-
      exempt             173,171   173,749   148,071        0%        17%
     Loans held for
      sale                23,290    19,278    15,468       21%        51%
     Loans and leases  6,091,914 6,063,088 5,777,447        0%         5%
                       -----------------------------
      Total earning
       assets          7,198,532 7,158,613 6,735,849        1%         7%
     Goodwill & other
      intangibles        762,398   763,989   743,801        0%         3%
     Total assets      8,320,962 8,287,643 7,840,422        0%         6%
    
     Non interest
      bearing demand
      deposits         1,248,093 1,250,628 1,271,311        0%        (2)%
     Interest bearing
      deposits         5,172,049 5,254,826 4,881,499       (2)%        6%
                       -----------------------------
     Total deposits    6,420,142 6,505,454 6,152,810       (1)%        4%
     Interest bearing
      liabilities      5,731,942 5,699,639 5,252,179        1%         9%
    
     Total
      shareholders'
      equity           1,258,591 1,249,391 1,239,691        1%         2%
     Tangible equity     496,193   485,402   495,890        2%         0%
    
    
                         Umpqua Holdings Corporation
                               Average Balances
                                 (Unaudited)
    ----------------------------------------------------------------------
                                          Six Months Ended:
                                      -------------------------
    Dollars in thousands              Jun 30, 2008 Jun 30, 2007 % Change
                                      ------------------------------------
    
     Temporary investments                 $21,612      $58,368      (63)%
     Investment securities, taxable        884,716      702,951       26%
     Investment securities, tax-
      exempt                               173,460      133,520       30%
     Loans held for sale                    21,284       15,237       40%
     Loans and leases                    6,077,501    5,581,789        9%
                                      -------------------------
      Total earning assets               7,178,573    6,491,865       11%
     Goodwill & other intangibles          763,194      711,369        7%
     Total assets                        8,304,302    7,550,217       10%
    
     Non interest bearing demand
      deposits                           1,249,360    1,215,069        3%
     Interest bearing deposits           5,213,438    4,739,228       10%
                                      -------------------------
     Total deposits                      6,462,798    5,954,297        9%
     Interest bearing liabilities        5,715,791    5,059,432       13%
    
     Total shareholders' equity          1,253,991    1,200,655        4%
     Tangible equity                       490,797      489,286        0%
    
    
                         Umpqua Holdings Corporation
                          Mortgage Banking Activity
                                 (unaudited)
    ----------------------------------------------------------------------
                                                     Sequential Year over
                              Quarter Ended:          Quarter      Year
                      ------------------------------
    Dollars in        Jun 30,   Mar 31,    Jun 30,
     thousands           2008      2008      2007    % Change   % Change
                      ----------------------------------------------------
    
    Mortgage
     Servicing Rights
     (MSR):
    -----------------
    Mortgage loans
     serviced for
     others           $922,039  $866,652  $897,696          6%         3%
    
    MSR Asset, at
     fair value        $11,576    $8,640    $9,966         34%        16%
    
    MSR as % of
     serviced
     portfolio            1.26%     1.00%     1.11%
    
    
    Mortgage Banking
     Revenue:
    -----------------
    Origination and
     sale               $1,284    $1,852    $1,700        (31)%      (24)%
    Servicing              603       600       670          0%       (10)%
    Change in fair
     value of MSR
     asset               1,800    (1,924)      237        194%       659%
    Change in fair
     value of MSR
     hedge                  --    (2,398)       --        100%          nm
                      ------------------------------
     Total Mortgage
      Banking Revenue   $3,687   $(1,870)   $2,607        297%        41%
                      ==============================
    
    
                       Six Months Ended:
                      -------------------
    Dollars in        Jun 30,   Jun 30,
     thousands           2008      2007   % Change
                      ------------------------------
    
    Mortgage Banking
     Revenue:
    -----------------
    Origination and
     sale               $3,136    $3,428        (9)%
    Servicing            1,203     1,307        (8)%
    Change in fair
     value of MSR
     asset                (124)     (329)       62%
    Change in fair
     value of MSR
     hedge              (2,398)       --          nm
                      -------------------
     Total Mortgage
      Banking Revenue   $1,817    $4,406       (59)%
                      ===================
    
    nm = not meaningful
    

    Source: Umpqua Holdings Corporation


    Contact: Umpqua Holdings Corporation President/CEO Ray Davis, 503-727-4101 raydavis@umpquabank.com or EVP/Chief Financial Officer Ron Farnsworth, 503-727-4108 ronfarnsworth@umpquabank.com