• Umpqua Holdings Corporation
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  • Umpqua Holdings Reports Third Quarter 2008 Results
    Net income of $13.6 million or $0.23 per diluted share - an increase of 5% from prior year Reserve build - increased allowance for credit loss from 1.22% to 1.54% of total loans Non-performing assets ended quarter at 1.54% of total assets Deposits increased $134 million, or 2%, Core deposits increased $168 million, or 3% Significant increase in non-interest bearing demand deposit accounts 
    Company Release - 10/16/2008 08:00

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

    Umpqua Holdings Corporation (NASDAQ: UMPQ), parent company of Umpqua Bank and Strand, Atkinson, Williams & York, Inc., today announced third quarter 2008 net income of $13.6 million, or $0.23 per diluted share, compared to $13.2 million, or $0.22 per diluted share, for the third quarter of 2007, an increase of 5% on a diluted per share basis. For the year to date, the Company reports net income of $48.4 million, or $0.80 per diluted share, compared to $53.8 million, or $0.89 per diluted share a year ago, a decrease of 10% on a diluted per share basis.

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

        --  Deposits increased $134 million during the quarter, an
            increase of 2%;
    
        --  Core deposits increased $168 million, an increase of 3%;
    
        --  Provision for loan losses of $35.5 million, represented a
            reduction of $0.35 per diluted share. This includes a reserve
            build of $20.3 million, increasing the allowance for credit
            losses from 1.22% to 1.54% of total loans;
    
        --  Total net charge-offs of $15.2 million, or 0.98% of average
            loans on an annualized basis;
    
        --  Non-performing assets ended the quarter at 1.54% of total
            assets. Non-performing loans ended the quarter at 1.92% of
            total loans. Non-performing assets have been written-down
            (reduced) to their estimated net realizable value;
    
        --  Gain on fair value of junior subordinated debentures of $25.3
            million, based on widening spreads for new issuances,
            increased earnings per diluted share by $0.25;
    
        --  Loss on investment securities of $2.5 million, primarily
            represented an other than temporary impairment related to
            non-agency mortgage backed securities which have deteriorated
            in value during the third quarter, decreased earnings per
            diluted share by $0.03;
    
        --  Loss on other real estate owned of $2.2 million, representing
            a reduction of $0.02 per diluted share;
    
        --  Mortgage banking revenue includes a $1.4 million decline in
            the value of the mortgage servicing right (MSR) asset, which
            reduced earnings per diluted share by $0.01;
    
        --  Interest income reversals on loans of $0.7 million reduced
            earnings per diluted share by $0.01 and reduced net interest
            margin by 4 basis points;
    
        --  The cost of interest bearing deposits decreased 13 basis
            points during the quarter;
    
        --  Net interest margin, on a tax equivalent basis, decreased 3
            basis points during the quarter to 4.12%. Excluding reversals
            of interest on loans of 4 basis points, the net interest
            margin would have increased 1 basis point during the quarter.
    

    "It goes without saying that the current economic situation is truly unprecedented as it relates to the financial markets and financial institutions. Despite the economic environment, Umpqua is in a strong position for the future--we are well-capitalized, with strong liquidity, and continue to make good progress in reducing our loan portfolio risks," said Ray Davis, president and CEO of Umpqua Holdings Corporation. "We are optimistic that the recently approved economic actions, once implemented, will have a positive impact on the financial services industry as a whole, as well as on the country's community banks."

    Credit Quality

    Non-performing assets were $128.1 million, or 1.54% of total assets, as of September 30, 2008, compared to $104.4 million, or 1.25% of total assets as of June 30, 2008. Of this amount, $6.4 million represented loans past due greater than 90 days and still accruing interest, $111.9 million represent non-accrual loans, and $9.8 million is other real estate owned. Approximately 71% of non-performing assets are from the residential development loan segment of the portfolio.

    Total net charge-offs were $15.2 million in the third quarter of 2008, a decrease of 60% from the second quarter of 2008. Prior to the second quarter of 2008, the Company recognized the charge-off of an impairment reserve when the loan was resolved, sold, or foreclosed/transferred to other real estate owned. Starting in the second quarter of 2008, 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 $111.9 million as of September 30, 2008 have already been written-down to their estimated net realizable value, based on disposition value, and are expected to be resolved over the coming quarters with no additional material loss.

    The provision for loan losses for the third quarter of 2008 was $35.5 million, which was $20.3 million above the net charge-off level for the quarter. This difference represents a reserve build, increasing the allowance for credit losses from 1.22% of total loans as of June 30, 2008 to 1.54% of total loans as of September 30, 2008. Approximately $8 million of the provision for loan losses, and allowance for credit losses, is unallocated to specific loans, and was provided for in the third quarter of 2008 given the economic environment. There was no unallocated allowance as of June 30, 2008.

    For the past six 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 accelerated charge off of impairment reserves discussed above was implemented in the second quarter of 2008:

                                     Ending                    Change in
    (Dollars in thousands)                                      ratio of
            Provision     Net       specific  Allowance           non-
                                                               performing
                                                for     30-89
               for    charge-offs  impairment  credit    days  assets to
                                                 loss
                                              to loans  past
            loan loss (recoveries)  reserve       %      due  total assets
                                                          %
            --------------------------------------------------------------
    Q1 2007       $83        $(90)       $857     1.14% 0.17%        0.06%
    Q2 2007     3,413           31      5,088     1.17% 0.56%        0.41%
    Q3 2007    20,420          865     16,244     1.47% 0.99%        0.37%
    Q4 2007    17,814       21,188      9,893     1.42% 0.64%        0.22%
    Q1 2008    15,132       13,476     13,281     1.45% 1.13%      (0.12)%
    Q2 2008    25,137       37,976         --     1.22% 0.31%        0.19%
    Q3 2008    35,454       15,193         --     1.54% 1.16%        0.29%
            ----------------------
    Total    $117,453      $88,639
            ======================
    

    Total construction loans decreased 16% from September 30, 2007. Within the construction loan portfolio, the residential development loan segment is $465 million, or 7.5% of the total loan portfolio. This segment has decreased $299 million, or 39%, from September 30, 2007. Oregon/Washington residential development loans total $272 million, a decrease of 36% from a year ago. California residential development loans total $193 million, a decrease of 43% from a year ago. The remaining $535 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 September 30, 2008:

    Residential Development Loans               Non-             Remaining
    (Dollars in thousands)                     accrual Remaining  average
                Balance   Balance    Balance    loans   balance   balance
                9/30/07   6/30/08    9/30/08   9/30/08  9/30/08   9/30/08
                ----------------------------------------------------------
    Northwest
     Oregon     $244,586   $158,588   $152,686 $10,244  $142,442      $982
    Central
     Oregon       59,660     51,594     47,213   4,208    43,005     1,162
    Southern
     Oregon       56,756     44,781     38,048   5,488    32,560       638
    Washington    61,818     36,324     34,327   4,235    30,092     1,157
    Greater
     Sacramento  225,468    135,648    126,629  40,376    86,253       958
    Northern
     California  116,084     74,730     66,414  18,438    47,976       631
    
                ------------------------------------------------
    Total       $764,372   $501,665   $465,317 $82,989  $382,328      $900
                ================================================
    
    Change from
     9/07 $              $(262,707) $(299,055)
    Change from
     9/07 %                   (34)%      (39)%
    

    Net Interest Margin

    The Company reported a tax equivalent net interest margin of 4.12% for the third quarter of 2008, compared to 4.15% for the second quarter of 2008, and 4.20% for the third quarter of 2007. The decrease in net interest margin from the second quarter of 2008 resulted primarily from interest reversals on loans of 4 basis points. The Company reversed $0.7 million in interest income during the third quarter. The cost of interest bearing deposits was 13 basis points lower than the second quarter of 2008, while the yield on interest earning assets was 12 basis points lower.

    Mortgage Servicing Rights

    Mortgage interest rates decreased in the third quarter of 2008, resulting in the Company recognizing a $1.4 million decline in value of the MSR asset. On September 30, 2008, the MSR asset was valued at 1.14% of the total serviced loan portfolio.

    Loss on Investment Securities

    During the third quarter of 2008, the Company recognized a net loss of $2.5 million on investment securities. This represented an other than temporary impairment charge related to non-agency mortgage backed securities (impairment of $2.5 million), and trust preferred securities (impairment of $0.1 million), which have deteriorated in value during the third quarter. The Company reclassified the non-agency mortgage backed security portfolio, totaling $12.2 million or 1% of the total investment portfolio, from investment securities available for sale to investment securities held to maturity. Offsetting the $2.6 million total other than temporary impairment charge was a gain on sale of investments of $0.1 million, resulting in the net $2.5 million loss on investment securities in the third quarter of 2008.

    Fair Value of Junior Subordinated Debentures

    The Company recognized a gain on the fair value of junior subordinated debentures of $25.3 million during the third quarter of 2008. This fair value gain resulted from widening credit spreads for similar issuances in the market. The Company utilizes a pricing service along with internal models to determine the valuation of this liability. The majority of the gain relates to the $61.8 million of junior subordinated debentures issued in the third quarter of 2007, which carried spreads of 135 and 275 basis points over the 3 month LIBOR. As of September 30, 2008, the spread for new issuance was significantly higher. The difference between spreads represents the gain in fair value of the Company's junior subordinated debentures compared to new instruments in the market. This fair value adjustment will reverse and be recognized as a reduction in non-interest income over the remaining period to maturity of the related instrument. As of September 30, 2008, the total par value of junior subordinated debentures carried at fair value was $134.0 million, and the fair value was $101.2 million.

    Non-Interest Expense

    Total non-interest expense for the third quarter of 2008 was $54.2 million, compared to $51.4 million for the second quarter of 2008. The increase on a sequential quarter basis related primarily to normal increases in compensation, occupancy, professional services and marketing costs.

    Balance Sheet

    Total consolidated assets as of September 30, 2008 were $8.3 billion, compared to $8.2 billion a year ago. Total gross loans and leases, and deposits, were $6.2 billion and $6.5 billion, respectively, as of September 30, 2008, compared to $6.1 billion and $6.5 billion, respectively, a year ago.

    Total loans increased $60 million, or 1%, during the third quarter of 2008, while deposits increased $134 million, or 2%. Core deposits (total deposits excluding time deposits greater than $100,000) increased $168 million, or 3%, during the third quarter of 2008. The total number of deposit accounts and relationships continue to increase, with an increase of 4,300 demand deposit accounts during the quarter.

    Based on the increase in deposits during the quarter, short term borrowings were reduced by $108 million.

    Capital

    The Company's estimated total risk-based capital as of September 30, 2008 is 11.2%, and has increased from 11.0% as of June 30, 2008, and 10.8% as of September 30, 2007. Our total risk-based capital level is in excess of the regulatory definition of "well capitalized" of 10.0%. The increase during the quarter related to the recognition of net income, and continued management of risk-weighted assets. This capital ratio as of September 30, 2008 is an estimate pending filing of the Company's regulatory reports.

    As of September 30, 2008, total shareholders' equity was $1.25 billion. Book value per share was $20.76, tangible book value per share was $8.12 and tangible equity to assets was 6.45%. These measures increased slightly during the third quarter of 2008.

    There have been no repurchases of common stock during 2008. The total remaining available common shares authorized for repurchase is approximately 1.54 million as of September 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 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 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 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 September 30, 2008, the value of the Class A shares was $61.39 per share. The value of unredeemed Class A equivalent shares owned by the Company was $20.6 million as of September 30, 2008, and has not been reflected in the accompanying financial statements.

    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 impact of government programs under the Emergency Economic Stabilization Act of 2008 and the expected resolution of existing non-accrual loans without further loss. 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 148 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, October 16, 2008, at 10:00 a.m. PT (1:00
     p.m. ET) during which the Company will discuss third 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 "59371867." 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                 Sep 30, 2008 Jun 30, 2008 Sep 30, 2007
                                    --------------------------------------
    Interest income
      Loans and leases                   $98,180      $97,963     $116,111
      Interest and dividends on
       investments:
         Taxable                           9,725       10,882        9,137
         Exempt from federal income
          tax                              1,644        1,677        1,588
         Dividends                           104          116           96
      Temporary investments                   69           87          929
                                    --------------------------------------
        Total interest income            109,722      110,725      127,861
    Interest expense
      Deposits                            30,025       31,468       48,138
      Repurchase agreements and fed
       funds purchased                       714          495          530
      Junior subordinated
       debentures                          3,211        3,216        4,444
      Term debt                            2,064        2,011          874
                                    --------------------------------------
        Total interest expense            36,014       37,190       53,986
    Net interest income                   73,708       73,535       73,875
    Provision for loan and lease
     losses                               35,454       25,137       20,420
    Non-interest income
      Service charges                      8,911        8,819        8,448
      Brokerage fees                       2,319        2,070        2,498
      Mortgage banking revenue             1,027        3,687        1,366
      Net loss on investment
       securities                        (2,477)          (2)         (13)
      Gain on junior subordinated
       debentures carried at fair
       value                              25,311        3,199        4,138
      Net loss on other real estate
       owned                             (2,193)      (2,851)           --
      Other income                         1,573        2,206        2,106
                                    --------------------------------------
    Total non-interest income             34,471       17,128       18,543
    Non-interest expense
      Salaries and benefits               29,131       27,668       28,005
      Occupancy and equipment              9,340        9,149        9,166
      Intangible amortization              1,437        1,491        1,767
      Other                               14,304       13,130       13,692
      Merger related expenses                 --           --          263
                                    --------------------------------------
    Total non-interest expense            54,212       51,438       52,893
    Income before provision for
     income taxes                         18,513       14,088       19,105
    Provision for income tax               4,899        3,932        5,928
                                    --------------------------------------
    Net income                           $13,614      $10,156      $13,177
                                    ======================================
    
    Weighted average shares
     outstanding                      60,096,637   60,074,920   60,489,522
    Weighted average diluted shares
     outstanding                      60,443,949   60,406,466   61,065,401
    
    Earnings per share - Basic             $0.23        $0.17        $0.22
    Earnings per share - Diluted           $0.23        $0.17        $0.22
    
    
    
                                                --------------------------
                                                 Sequential   Year over
                                                  Quarter        Year
    Dollars in thousands, except per share data   % Change     % Change
                                                --------------------------
    Interest income
      Loans and leases                                   0%          (15)%
      Interest and dividends on investments:
         Taxable                                      (11)%             6%
         Exempt from federal income tax                (2)%             4%
         Dividends                                    (10)%             8%
      Temporary investments                           (21)%          (93)%
        Total interest income                          (1)%          (14)%
    Interest expense
      Deposits                                         (5)%          (38)%
      Repurchase agreements and fed funds
       purchased                                        44%            35%
      Junior subordinated debentures                     0%          (28)%
      Term debt                                          3%           136%
        Total interest expense                         (3)%          (33)%
    Net interest income                                  0%             0%
    Provision for loan and lease losses                 41%            74%
    Non-interest income
      Service charges                                    1%             5%
      Brokerage fees                                    12%           (7)%
      Mortgage banking revenue                        (72)%          (25)%
      Net loss on investment securities                  nm             nm
      Gain on junior subordinated debentures
       carried at fair value                           691%           512%
      Net loss on other real estate owned             (23)%           100%
      Other income                                    (29)%          (25)%
    Total non-interest income                          101%            86%
    Non-interest expense
      Salaries and benefits                              5%             4%
      Occupancy and equipment                            2%             2%
      Intangible amortization                          (4)%          (19)%
      Other                                              9%             4%
      Merger related expenses                            0%         (100)%
    Total non-interest expense                           5%             2%
    Income before provision for income taxes            31%           (3)%
    Provision for income tax                            25%          (17)%
    Net income                                          34%             3%
    
    Weighted average shares outstanding                  0%           (1)%
    Weighted average diluted shares outstanding          0%           (1)%
    
    Earnings per share - Basic                          35%             5%
    Earnings per share - Diluted                        35%             5%
    
    
    nm = not meaningful
    
                         Umpqua Holdings Corporation
                      Consolidated Statements of Income
                                 (Unaudited)
    ----------------------------------------------------------------------
                                            Nine months ended:
                                 -----------------------------------------
    Dollars in thousands, except
     per share data              Sep 30, 2008 Sep 30, 2007    % Change
                                 -----------------------------------------
    Interest income
      Loans and leases               $300,295     $331,889           (10)%
      Interest and dividends on
       investments:
         Taxable                       29,936       25,376             18%
         Exempt from federal
          income tax                    5,000        4,151             20%
         Dividends                        298          249             20%
      Temporary investments               359        2,439           (85)%
                                 -------------------------
        Total interest income         335,888      364,104            (8)%
    Interest expense
      Deposits                        101,118      133,750           (24)%
      Repurchase agreements and
       fed funds purchased              1,958        1,757             11%
      Trust preferred securities       10,349       12,329           (16)%
      Other borrowings                  5,200        1,767            194%
                                 -------------------------
        Total interest expense        118,625      149,603           (21)%
    Net interest income               217,263      214,501              1%
    Provision for loan and lease
     losses                            75,723       23,916            217%
    Non-interest income
      Service charges                  26,107       23,648             10%
      Brokerage fees                    6,564        7,594           (14)%
      Mortgage banking revenue          2,844        5,772           (51)%
      Net gain (loss) on
       investment securities            1,422         (10)              nm
      Gain on junior
       subordinated debentures
       carried at fair value           30,152        4,746            535%
      Net loss on other real
       estate owned                   (5,655)           --            100%
      Proceeds from Visa
       mandatory partial
       redemption                      12,633           --            100%
      Other income                      6,515        6,688            (3)%
                                 -------------------------
    Total non-interest income          80,582       48,438             66%
    Non-interest expense
      Salaries and benefits            85,043       85,172              0%
      Occupancy and equipment          27,605       26,774              3%
      Intangible amortization           4,419        4,400              0%
      Other                            40,642       37,304              9%
      Visa litigation                 (5,183)           --            100%
      Merger related expenses              --        3,200          (100)%
                                 -------------------------
    Total non-interest expense        152,526      156,850            (3)%
    Income before income taxes         69,596       82,173           (15)%
    Provision for income tax           21,155       28,421           (26)%
                                 -------------------------
    Net income                        $48,441      $53,752           (10)%
                                 =========================
    
    Weighted average shares
     outstanding                   60,066,908   59,790,297              0%
    Weighted average diluted
     shares outstanding            60,413,653   60,450,412              0%
    
    Earnings per share - Basic          $0.81        $0.90           (10)%
    Earnings per share - Diluted        $0.80        $0.89           (10)%
    
    nm = not meaningful
    
                         Umpqua Holdings Corporation
                         Consolidated Balance Sheets
                                 (Unaudited)
    ----------------------------------------------------------------------
    
    
    
                                    --------------------------------------
    Dollars in thousands, except
     per share data                 Sep 30, 2008 Jun 30, 2008 Sep 30, 2007
                                    --------------------------------------
    Assets:
      Cash and due from banks           $161,282     $194,458     $148,434
      Temporary investments                5,556        1,353       46,787
      Investment securities:
         Trading                           1,531        2,087        4,144
         Available for sale              963,714      998,307      911,883
         Held to maturity                 16,609        5,115        7,116
      Loans held for sale                 14,061       12,694       19,964
      Loans and leases                 6,171,541    6,111,488    6,079,435
      Less: Allowance for loan and
       lease losses                     (93,982)     (73,721)     (88,278)
                                    --------------------------------------
        Loans and leases, net          6,077,559    6,037,767    5,991,157
      Restricted equity securities        19,573       18,892       15,297
      Premises and equipment, net        105,341      104,861      107,189
      Other real estate owned              9,753        5,826       10,310
      Mortgage servicing rights,
       net                                10,738       11,576        9,474
      Goodwill and other
       intangibles                       760,252      761,738      767,210
      Other assets                       181,664      191,315      186,846
                                    --------------------------------------
    Total assets                      $8,327,633   $8,345,989   $8,225,811
                                    ======================================
    
    Liabilities:
      Deposits                        $6,493,671   $6,359,909   $6,518,217
      Securities sold under
       agreements to repurchase           52,174       41,281       52,883
      Fed funds purchased                 40,000      147,945       20,000
      Term debt                          206,694      236,774       75,010
      Junior subordinated
       debentures, at fair value         101,247      126,539      131,984
      Junior subordinated
       debentures, at amortized
       cost                              103,879      104,146      104,947
      Other liabilities                   81,673       85,161       89,580
                                    --------------------------------------
        Total liabilities              7,079,338    7,101,755    6,992,621
    
    Shareholders' equity:
      Common stock                       992,402      990,952      987,543
      Retained earnings                  265,606      263,446      253,487
      Accumulated other
       comprehensive loss                (9,713)     (10,164)      (7,840)
                                    --------------------------------------
        Total shareholders' equity     1,248,295    1,244,234    1,233,190
                                    --------------------------------------
    Total liabilities and
     shareholders' equity             $8,327,633   $8,345,989   $8,225,811
                                    ======================================
    
    
    Common shares outstanding at
     period end                       60,124,192   60,087,850   59,864,335
    Book value per share                  $20.76       $20.71       $20.60
    Tangible book value per share          $8.12        $8.03        $7.78
    Tangible equity                     $488,043     $482,496     $465,980
    Tangible equity to tangible
     assets                                6.45%        6.36%        6.25%
    
                                                      Sequential Year over
                                                       Quarter     Year
    Dollars in thousands, except per share data        % Change  % Change
                                                     ---------------------
    Assets:
      Cash and due from banks                              (17)%        9%
      Temporary investments                                 311%     (88)%
      Investment securities:
         Trading                                           (27)%     (63)%
         Available for sale                                 (3)%        6%
         Held to maturity                                   225%      133%
      Loans held for sale                                    11%     (30)%
      Loans and leases                                        1%        2%
      Less: Allowance for loan and lease losses              27%        6%
        Loans and leases, net                                 1%        1%
      Restricted equity securities                            4%       28%
      Premises and equipment, net                             0%      (2)%
      Other real estate owned                                67%      (5)%
      Mortgage servicing rights, net                        (7)%       13%
      Goodwill and other intangibles                          0%      (1)%
      Other assets                                          (5)%      (3)%
    Total assets                                              0%        1%
    
    Liabilities:
      Deposits                                                2%        0%
      Securities sold under agreements to repurchase         26%      (1)%
      Fed funds purchased                                  (73)%      100%
      Term debt                                            (13)%      176%
      Junior subordinated debentures, at fair value        (20)%     (23)%
      Junior subordinated debentures, at amortized
       cost                                                   0%      (1)%
      Other liabilities                                     (4)%      (9)%
        Total liabilities                                     0%        1%
    
    Shareholders' equity:
      Common stock                                            0%        0%
      Retained earnings                                       1%        5%
      Accumulated other comprehensive loss                  (4)%       24%
        Total shareholders' equity                            0%        1%
    Total liabilities and shareholders' equity                0%        1%
    
    
    Common shares outstanding at period end                   0%        0%
    Book value per share                                      0%        1%
    Tangible book value per share                             1%        4%
    Tangible equity                                           1%        5%
    Tangible equity to tangible assets
    
    nm = not meaningful
    
                         Umpqua Holdings Corporation
                        Deposits by Type/Core Deposits
                                 (Unaudited)
    ----------------------------------------------------------------------
    
    
    Dollars in thousands                    Sep 30, 2008    Jun 30, 2008
                                           --------------- ---------------
                                             Amount   Mix    Amount   Mix
                                           --------------- ---------------
    Demand, non interest-bearing           $1,263,520  19% $1,256,236  20%
    Demand, interest-bearing                2,872,953  44%  2,857,116  45%
    Savings                                   305,352   5%    310,542   5%
    Time                                    2,051,846  32%  1,936,015  30%
                                           -------------------------------
       Total Deposits                      $6,493,671 100% $6,359,909 100%
                                           ===============================
    
       Total Core deposits (1)             $5,375,170  83% $5,207,125  82%
    
    Number of open accounts:
    --------------------------------------
    Demand, non interest-bearing              148,507         145,435
    Demand, interest-bearing                   59,330          58,119
    Savings                                    70,272          70,620
    Time                                       33,085          33,760
                                           ----------      ----------
       Total                                  311,194         307,934
                                           ==========      ==========
    
    Average balance per account:
    --------------------------------------
    Demand, non interest-bearing                 $8.5            $8.6
    Demand, interest-bearing                     48.4            49.2
    Savings                                       4.3             4.4
    Time                                         62.0            57.3
       Total                                    $20.9           $20.7
    
    
    
                                                      Sequential Year over
    Dollars in thousands               Sep 30, 2007    Quarter     Year
                                      ---------------
                                        Amount   Mix   % Change  % Change
                                      ------------------------------------
    Demand, non interest-bearing      $1,294,334  20%         1%      (2)%
    Demand, interest-bearing           2,950,605  45%         1%      (3)%
    Savings                              358,825   6%       (2)%     (15)%
    Time                               1,914,453  29%         6%        7%
                                     ----------------
       Total Deposits                 $6,518,217 100%         2%        0%
                                     ================
    
       Total Core deposits (1)        $5,454,028  84%         3%      (1)%
    
    Number of open accounts:
    ---------------------------------
    Demand, non interest-bearing         140,066              2%        6%
    Demand, interest-bearing              62,932              2%      (6)%
    Savings                               71,532              0%      (2)%
    Time                                  38,841            (2)%     (15)%
                                      ----------
       Total                             313,371              1%      (1)%
                                      ==========
    
    Average balance per account:
    ---------------------------------
    Demand, non interest-bearing            $9.2
    Demand, interest-bearing                46.9
    Savings                                  5.0
    Time                                    49.3
       Total                               $20.8
    
    
    
    (1) Core deposits are defined as total deposits less time deposits
     greater than $100,000.
    
                         Umpqua Holdings Corporation
                                Loan Portfolio
                                 (Unaudited)
    ----------------------------------------------------------------------
    
    
    Dollars in thousands                    Sep 30, 2008    Jun 30, 2008
                                           --------------- ---------------
    Loans and leases by class:               Amount   Mix    Amount   Mix
                                           --------------- ---------------
    
      Commercial real estate               $3,234,180  52% $3,161,908  52%
      Residential real estate                 421,062   7%    401,245   7%
      Construction                            998,452  16%  1,070,429  18%
                                           ----------      ----------
        Total real estate                   4,653,694  75%  4,633,582  76%
      Commercial                            1,446,024  23%  1,406,339  23%
      Leases                                   40,927   1%     40,839   1%
      Installment and other                    42,757   1%     42,131   1%
      Deferred loan fees, net                (11,861)   0%   (11,403)   0%
                                           ----------      ----------
         Total loans and leases            $6,171,541 100% $6,111,488 100%
                                           ==========      ==========
    
                                                      Sequential Year over
    Dollars in thousands               Sep 30, 2007    Quarter     Year
                                      ---------------
    Loans and leases by class:          Amount   Mix   % Change  % Change
                                      ------------------------------------
    
      Commercial real estate          $3,071,588  51%         2%        5%
      Residential real estate            379,657   6%         5%       11%
      Construction                     1,191,757  20%       (7)%     (16)%
                                      ----------
        Total real estate              4,643,002  76%         0%        0%
      Commercial                       1,365,786  22%         3%        6%
      Leases                              37,095   1%         0%       10%
      Installment and other               44,970   1%         1%      (5)%
      Deferred loan fees, net           (11,418)   0%         4%        4%
                                      ----------
         Total loans and leases       $6,079,435 100%         1%        2%
                                      ==========
    
                         Umpqua Holdings Corporation
                                Credit Quality
                                  (Unaudited)
    ----------------------------------------------------------------------
                                                      Sequential Year over
                                  Quarter Ended        Quarter     Year
                            -------------------------
                            Sep 30,  Jun 30,  Sep 30,  % Change  % Change
    Dollars in thousands      2008     2008     2007
                            ----------------------------------------------
    Allowance for credit
     losses
    Balance beginning of
     period                  $73,721  $86,560 $68,723
        Provision for loan
         and lease losses     35,454   25,137  20,420
    
    Charge-offs             (17,108) (38,752) (1,414)      (56)%    1,110%
    Less: Recoveries           1,915      776     549       147%      249%
                            -------------------------
         Net charge-offs    (15,193) (37,976)   (865)      (60)%    1,656%
    
    Total Allowance for
     loan and lease losses    93,982   73,721  88,278        27%        6%
    
    Reserve for unfunded
     commitments               1,059    1,112   1,246
                            -------------------------
       Total Allowance for
        credit losses        $95,041  $74,833 $89,524        27%        6%
                            =========================
    
    Net charge-offs to
     average loans and
     leases (annualized)       0.98%    2.51%   0.06%
    Recoveries to gross
     charge-offs                 11%       2%     39%
    Allowance for credit
     losses to loans and
     leases                    1.54%    1.22%   1.47%
    
    Past due 30-89 days      $71,684  $18,897 $60,238
    Past due 30-89 days to
     total loans and leases    1.16%    0.31%   0.99%
    
    Nonperforming assets:
      Loans on non-accrual
       status               $111,895  $94,666 $67,419        18%       66%
      Loans past due 90+
       days & accruing         6,406    3,911   1,488        64%      331%
                            -------------------------
    Total nonperforming
     loans                   118,301   98,577  68,907        20%       72%
      Other real estate
       owned                   9,753    5,826  10,310        67%      (5)%
                            -------------------------
    Total nonperforming
     assets                 $128,054 $104,403 $79,217        23%       62%
                            =========================
    
    Nonperforming loans to
     total loans and leases    1.92%    1.61%   1.13%
    
    Nonperforming assets to
     total assets              1.54%    1.25%   0.96%
    
    nm = not meaningful
    
                         Umpqua Holdings Corporation
                          Credit Quality (continued)
                                 (Unaudited)
    ----------------------------------------------------------------------
                                                Nine Months ended:
    ----------------------------------------------------------------------
    Dollars in thousands                Sep 30, 2008 Sep 30, 2007 % Change
                                        ----------------------------------
    Allowance for credit losses
    Balance beginning of period              $84,904      $60,090
        Provision for loan and lease
         losses                               75,723       23,916
        Acquisitions                              --        5,078
    
    Charge-offs                             (69,830)      (2,997)   2,230%
    Less: Recoveries                           3,185        2,191      45%
                                        -------------------------
         Net (charge-offs) recoveries       (66,645)        (806)   8,169%
    
    Total Allowance for loan and lease
     losses                                   93,982       88,278       6%
    
    Reserve for unfunded commitments           1,059        1,246
                                        -------------------------
       Total Allowance for credit
        losses                               $95,041      $89,524       6%
                                        =========================
    
    
    Net charge-offs to average loans
     and leases                                1.46%        0.02%
    Recoveries to gross charge-offs               5%          73%
    
    nm = not meaningful
    
                         Umpqua Holdings Corporation
                               Selected Ratios
                                 (Unaudited)
    ----------------------------------------------------------------------
    
                                  Quarter Ended:      Sequential Year over
                              -----------------------
                              Sep 30, Jun 30, Sep 30,  Quarter     Year
                               2008    2008    2007     Change    Change
                              --------------------------------------------
    Net Interest Spread:
      Yield on loans and
       leases                   6.33%   6.44%   7.62%     (0.11)    (1.29)
      Yield on taxable
       investments              4.67%   4.93%   4.83%     (0.26)    (0.16)
      Yield on tax-exempt
       investments (1)          5.73%   5.62%   5.62%       0.11      0.11
      Yield on temporary
       investments              2.08%   2.00%   5.18%       0.08    (3.10)
        Total yield on
         earning assets (1)     6.11%   6.23%   7.24%     (0.12)    (1.13)
    
      Cost of interest
       bearing deposits         2.32%   2.45%   3.69%     (0.13)    (1.37)
      Cost of securities sold
       under agreements to
       repurchase and fed
       funds purchased          2.22%   2.09%   3.28%       0.13    (1.06)
      Cost of term debt         3.60%   3.51%   4.62%       0.09    (1.02)
      Cost of junior
       subordinated
       debentures               5.54%   5.53%   7.59%       0.01    (2.05)
        Total cost of
         interest bearing
         liabilities            2.50%   2.61%   3.86%     (0.11)    (1.36)
    
    Net interest spread (1)     3.61%   3.62%   3.38%     (0.01)      0.23
         Net interest margin
          - Consolidated (1)    4.12%   4.15%   4.20%     (0.03)    (0.08)
    
         Net interest margin
          - Bank (1)            4.29%   4.33%   4.45%     (0.04)    (0.16)
    
    
    Return on average assets    0.65%   0.49%   0.64%       0.16      0.01
    Return on average
     tangible assets            0.72%   0.54%   0.70%       0.18      0.02
    Return on average equity    4.34%   3.25%   4.20%       1.09      0.14
    Return on average
     tangible equity           11.11%   8.23%  10.92%       2.88      0.19
    Efficiency ratio -
     Consolidated              49.77%  56.27%  56.83%     (6.50)    (7.06)
    Efficiency ratio - Bank    61.28%  55.13%  55.57%       6.15      5.71
    
    
    (1) Tax exempt interest has been adjusted to a taxable equivalent
     basis using a 35% tax rate.
    
                         Umpqua Holdings Corporation
                               Selected Ratios
                                 (Unaudited)
    ----------------------------------------------------------------------
                                             Nine Months Ended:
                                          -------------------------
                                          Sep 30, 2008 Sep 30, 2007 Change
                                          --------------------------------
    Net Interest Spread:
      Yield on loans and leases                  6.55%        7.72% (1.17)
      Yield on taxable investments               4.63%        4.72% (0.09)
      Yield on tax-exempt investments (1)        5.63%        5.49%   0.14
      Yield on temporary investments             2.55%        5.20% (2.65)
        Total yield on earning assets (1)        6.29%        7.33% (1.04)
    
      Cost of interest bearing deposits          2.60%        3.66% (1.06)
      Cost of securities sold under
       agreements to repurchase and fed
       funds purchased                           2.44%        3.40% (0.96)
      Cost of term debt                          3.65%        4.58% (0.93)
      Cost of junior subordinated
       debentures                                5.92%        7.60% (1.68)
        Total cost of interest bearing
         liabilities                             2.77%        3.83% (1.06)
    
    Net interest spread (1)                      3.52%        3.50%   0.02
         Net interest margin -
          Consolidated (1)                       4.08%        4.33% (0.25)
    
         Net interest margin - Bank (1)          4.27%        4.57% (0.30)
    
    
    Return on average assets                     0.78%        0.93% (0.15)
    Return on average tangible assets            0.86%        1.02% (0.16)
    Return on average equity                     5.17%        5.91% (0.74)
    Return on average tangible equity           13.21%       14.79% (1.58)
    Efficiency ratio - Consolidated             50.83%       59.27% (8.44)
    Efficiency ratio - Bank                     53.24%       56.35% (3.11)
    
    
    (1) Tax exempt interest has been adjusted to a taxable equivalent
     basis using a 35% tax rate.
    
                         Umpqua Holdings Corporation
                               Average Balances
                                 (Unaudited)
    ----------------------------------------------------------------------
                                                      Sequential Year over
                               Quarter Ended:          Quarter     Year
                        -----------------------------
    Dollars in          Sep 30,   Jun 30,   Sep 30,    % Change  % Change
     thousands             2008      2008      2007
                        --------------------------------------------------
    
      Temporary
       investments        $13,182   $17,538   $71,165      (25)%     (81)%
      Investment
       securities,
       taxable            841,810   892,619   765,346       (6)%       10%
      Investment
       securities, tax-
       exempt             167,132   173,171   159,998       (3)%        4%
      Loans held for
       sale                13,966    23,290    10,732      (40)%       30%
      Loans and leases  6,159,644 6,091,914 6,032,388         1%        2%
                        -----------------------------
         Total earning
          assets        7,195,734 7,198,532 7,039,629         0%        2%
      Goodwill & other
       intangibles        760,911   762,398   766,591         0%      (1)%
      Total assets      8,333,242 8,320,962 8,190,032         0%        2%
    
      Non interest
       bearing demand
       deposits         1,267,356 1,248,093 1,319,280         2%      (4)%
      Interest bearing
       deposits         5,154,922 5,172,049 5,171,123         0%        0%
                        -----------------------------
      Total deposits    6,422,278 6,420,142 6,490,403         0%      (1)%
      Interest bearing
       liabilities      5,741,816 5,731,942 5,542,587         0%        4%
    
      Total
       shareholders'
       equity           1,248,357 1,258,591 1,245,390       (1)%        0%
      Tangible equity     487,446   496,193   478,799       (2)%        2%
    
                         Umpqua Holdings Corporation
                               Average Balances
                                 (Unaudited)
    ----------------------------------------------------------------------
                                           Nine Months Ended:
                                        -------------------------
    Dollars in thousands                Sep 30, 2008 Sep 30, 2007 % Change
                                        ----------------------------------
    
      Temporary investments                  $18,781      $62,680    (70)%
      Investment securities, taxable         870,311      723,978      20%
      Investment securities, tax-exempt      171,335      142,444      20%
      Loans held for sale                     18,827       13,719      37%
      Loans and leases                     6,105,082    5,733,639       6%
                                        -------------------------
         Total earning assets              7,184,336    6,676,460       8%
      Goodwill & other intangibles           762,427      729,979       4%
      Total assets                         8,314,019    7,765,832       7%
    
      Non interest bearing demand
       deposits                            1,255,403    1,250,188       0%
      Interest bearing deposits            5,193,790    4,884,775       6%
                                        -------------------------
      Total deposits                       6,449,193    6,134,963       5%
      Interest bearing liabilities         5,724,529    5,222,253      10%
    
      Total shareholders' equity           1,252,099    1,215,730       3%
      Tangible equity                        489,672      485,751       1%
    
                         Umpqua Holdings Corporation
                          Mortgage Banking Activity
                                 (unaudited)
    ----------------------------------------------------------------------
                                                      Sequential Year over
                                 Quarter Ended:        Quarter     Year
                           --------------------------
                           Sep 30,  Jun 30,  Sep 30,   % Change  % Change
    Dollars in thousands     2008     2008     2007
                           -----------------------------------------------
    
    Mortgage Servicing
     Rights (MSR):
    ----------------------
    Mortgage loans
     serviced for others   $939,876 $922,039 $877,648         2%        7%
    
    MSR Asset, at fair
     value                  $10,738  $11,576   $9,474       (7)%       13%
    
    MSR as % of serviced
     portfolio                1.14%    1.26%    1.08%
    
    
    Mortgage Banking
     Revenue:
    ----------------------
    Origination and sale     $1,817   $1,284   $1,468        42%       24%
    Servicing                   636      603      546         5%       16%
    Change in fair value
     of MSR asset           (1,426)    1,800    (648)     (179)%      120%
    Change in fair value
     of MSR hedge                --       --       --         0%        0%
                           --------------------------
       Total Mortgage
        Banking Revenue      $1,027   $3,687   $1,366      (72)%     (25)%
                           ==========================
    
    
                             Nine Months
                                 Ended:
                           -----------------
                           Sep 30,  Sep 30,
    Dollars in thousands     2008     2007   % Change
                           --------------------------
    
    Mortgage Banking
     Revenue:
    ----------------------
    Origination and sale     $4,953   $4,896       1%
    Servicing                 1,839    1,853     (1)%
    Change in fair value
     of MSR asset           (1,550)    (977)      59%
    Change in fair value
     of MSR hedge           (2,398)       --       nm
                           -----------------
       Total Mortgage
        Banking Revenue      $2,844   $5,772    (51)%
                           =================
    
    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