• Umpqua Holdings Corporation
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  • Umpqua Holdings Reports First Quarter 2009 Results
    Non-performing assets ended quarter at 1.87% of total assets, flat from year-end 2008  Proactive credit management resulted in $55.2 million in net charge-offs during quarter  Net loss of $10.6 million  Tangible common equity ratio of 6.42%  Total regulatory risk based capital of 14.32%, up from 11.15% a year ago 
    Company Release - 04/16/2009 08:00

    PORTLAND, Ore.--(BUSINESS WIRE)-- Umpqua Holdings Corporation (NASDAQ: UMPQ), parent company of Umpqua Bank and Strand, Atkinson, Williams & York, Inc. today announced a first quarter 2009 net loss of $10.6 million, compared to net income of $3.8 million for the fourth quarter of 2008. Including preferred stock dividends of $3.2 million, the net loss applicable to common shareholders was $13.8 million, or $0.23 per diluted share, compared to net earnings applicable to common shareholders of $2.2 million, or $0.04 per diluted share, for the fourth quarter of 2008.

    Significant financial statement items for the first quarter of 2009 include:

        --  Provision for loan losses of $51.4 million, an increase of 61% from the
            fourth quarter of 2008;
        --  Total net charge-offs of $55.2 million, majority of which relate to the
            residential development portfolio;
        --  Total residential development portfolio decreased 44% from a year ago;
        --  The allowance for credit losses ended the quarter at 1.53% of total
            loans, up from 1.45% a year ago;
        --  Non-performing assets ended the quarter at 1.87% of total assets.
            Non-performing loans ended the quarter at 2.16% of total loans. Both
            were consistent with year-end 2008 levels;
        --  Deposits increased $204 million during the quarter, an increase of 3% on
            a sequential quarter basis, and includes $167 million remaining from the
            FDIC assisted Bank of Clark County deposit assumption in January 2009;
        --  Mortgage banking revenue was $4.1 million based on significant
            refinancing activity. Closed loan volume was $192 million, up 172% from
            $70 million in fourth quarter of 2008;
        --  Included in mortgage banking revenue was a $1.4 million decline in the
            value of the mortgage servicing right (MSR) asset;
        --  A loss on other real estate owned of $2.3 million was recognized;
        --  Net interest margin, on a tax equivalent basis, increased 5 basis points
            during the quarter to 4.07%;
        --  The cost of interest bearing deposits for the first quarter was 1.82%, a
            decrease of 33 basis points from the fourth quarter of 2008. The cost of
            total deposits was 1.48% for the first quarter; and
        --  Total risk based capital of 14.32%, up from 11.15% a year ago.
    
    

    "By continuing to aggressively reduce exposure within our residential development portfolio, we are beginning to see light at the end of the tunnel," said Ray Davis, president and CEO of Umpqua Holdings Corporation. "Our total risk-based capital ratio is in excess of 14.3%, tangible common equity is above 6.4%, liquidity is in excess of $2.2 billion, and our non-performing assets are well under our peer banks' average. As a result, we remain confident that Umpqua will bounce back strong and well positioned to take advantage of opportunities within our footprint when the economy recovers."

    Credit Quality

    Non-performing assets were $164.2 million, or 1.87% of total assets, as of March 31, 2009, compared to $161.3 million, or 1.88% of total assets as of December 31, 2008. Of this amount, $13.8 million represented loans past due greater than 90 days and still accruing interest, $117.6 million represented non-accrual loans, and $32.8 million was other real estate owned (OREO).

    Total net charge-offs were $55.2 million in the first quarter of 2009, which represented 3.65% of average loans on an annualized basis. 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 $117.6 million as of March 31, 2009 have been written-down to their estimated net realizable value, based on disposition value, and are expected to be resolved over the coming quarters at those levels, absent further declines in market prices.

    The provision for loan losses for the first quarter of 2009 was $51.4 million. The allowance for credit losses was 1.53% of total loans as of March 31, 2009, compared to 1.58% of total loans as of December 31, 2008 and 1.45% of total loans as of March 31, 2008.

    Second Quarter 2009 Credit Quality Guidance

    Over the following pages, we provide detail on many aspects of the residential development loan portfolio, non-performing assets by region, and loans past due 30-89 days. The Company expects the second quarter 2009 provision for loan losses and net charge-offs will be significantly reduced from the first quarter, and non-performing assets will remain at or about current levels. The majority of these amounts will be related to residential development loans as that segment of the portfolio winds down.

    Additional Detail on Credit Quality, Trends, Residential Development and Non-Performing Assets

    For the past two years, the Company has been aggressively resolving problems arising from the current economic downturn. The following is a recap of the Company's credit quality trends since the start of 2007, noting the accelerated charge-off of impairment reserves, discussed above, was implemented in the second quarter of 2008:

    
    Credit quality trends
    
    (Dollars in thousands)            Ending                         Change in
                                                                     ratio of
    
             Provision  Net           specific    Allowance          non-performing
    
                                                  for        30-89
             for        charge-offs   impairment  credit     days    assets to
                                                  loss
    
             loan loss  (recoveries)  reserve     to loans   past    total assets
                                                  %          due %
    
    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%   0.41%
    
    Q4 2008  31,955     30,072        --          1.58%      0.96%   0.22%
    
    Q1 2009  51,400     55,179        --          1.53%      1.47%*  (0.01)%
    
    Total    $200,808   $173,890
    
    * See additional comments for loans past due 30-89 days on page 6 of this
    release.
    
    
    
    

    As presented in the table above, the cumulative charge-off rate since the beginning of 2007 was $173.9 million, or 3.24%, of beginning loans as calculated in the table below:

    
    Cumulative charge-off rate
    
    (Dollars in thousands)
    
    Cumulative net charge-offs since 1/1/07     $173,890
    
    Gross loan balance, 12/31/06                $5,361,862
    
    Cumulative charge-off rate since 1/1/07     3.24%
    
    
    
    

    Total construction loans as of March 31, 2009 decreased 5% from December 31, 2008, and decreased 23% from March 31, 2008. Within the construction loan portfolio, the residential development loan segment is $329 million, or 5% of the total loan portfolio. Of this amount, $80 million represent non-performing loans, and $249 million represent performing loans, which are 4% of the total loan portfolio. This segment has decreased $253 million, or 44%, from March 31, 2008.

    The remaining $532 million in construction loans are commercial construction projects. These commercial construction loans are uniquely different from the residential development loans and are performing with only $2.1 million, or 0.40%, in loans past due 30-89 days. Total non-performing assets related to commercial construction loans were $16.3 million at March 31, 2009, down 9% from $17.8 million at December 31, 2008. All non-accrual loans were written down to their estimated net realizable values at quarter end.

    The following is a geographic distribution of the residential development portfolio as of March 31, 2009, December 31, 2008 and March 31, 2008:

    
    Residential development loans
    
    (Dollars in thousands)                                      Non-        Accrual
    
                                                      % change  performing  status
    
                     Balance    Balance    Balance    from      loans       loans
    
                     3/31/08    12/31/08   3/31/09    3/31/08   3/31/09     3/31/09
    
    Northwest        $201,368   $134,506   $120,460   (40)%     $8,689      $111,771
    Oregon
    
    Central Oregon   56,346     31,186     20,951     (63)%     12,415      8,536
    
    Southern Oregon  48,220     33,850     29,738     (38)%     8,246       21,492
    
    Washington       42,519     27,531     26,514     (38)%     216         26,298
    
    Greater          146,140    109,181    92,744     (37)%     37,264      55,480
    Sacramento
    
    Northern         87,424     47,905     38,266     (56)%     13,271      24,995
    California
    
    Total            $582,017   $384,159   $328,673   (44)%     $80,101     $248,572
    
    % of total loan  10%        6%         5%                               4%
    portfolio
    
    Quarter change   $(92,188)  $(71,158)  $(55,486)
    $
    
    Quarter change   (14)%      (16)%      (14)%
    %
    
    
    
    

    The following is a stratification by size and region of the remaining residential development loans still on accrual status (excludes non-performing loans) as of March 31, 2009:

    
    Residential development loans - stratification of remaining accrual basis
    loans by region by size of loan
    
    (Dollars in thousands)
    
                          $250k    $1       $3       $5 million
                                   million  million
    
                $250k     to       to       to       to          $10
                                                                 million
    
                and less  $1       $3       $5       $10         and      Total
                          million  million  million  million     greater
    
    Northwest   $3,434    $16,424  $28,374  $16,479  $47,060     $--      $111,771
    Oregon
    
    Central     1,705     3,285    3,546    --       --          --       8,536
    Oregon
    
    Southern    2,778     10,218   8,496    --       --          --       21,492
    Oregon
    
    Washington  --        3,093    5,082    12,772   5,351       --       26,298
    
    Greater     4,245     8,985    10,115   3,435    11,497      17,203   55,480
    Sacramento
    
    Northern    2,780     9,463    12,752   --       --          --       24,995
    California
    
    Total       $14,942   $51,468  $68,365  $32,686  $63,908     $17,203  $248,572
    
    % of Total  6%        21%      28%      13%      26%         7%       100%
    
    
    
    

    Only 33% of the remaining portfolio is comprised of loans greater than $5 million, with 55% representing loans with balances less than $3 million.

    The following is a distribution of non-performing assets by type and by region as of March 31, 2009:

    
    Non-performing asset balances by region
    
    (Dollars in thousands)
    
                    Northwest  Central  Southern              Greater     Northern
    
                    Oregon     Oregon   Oregon    Washington  Sacramento  California  Total
    
    Loans 90 days
    past due:
    
    Residential     $659       $195     $2,259    $--         $6,718      $--         $9,831
    development
    
    Commercial      --         --       --        --          --          --          --
    construction
    
    Commercial      --         --       --        --          --          --          --
    real estate
    
    Commercial      --         602      --        --          37          30          669
    
    Other           3,202      --       --        --          78          --          3,280
    
    Total 90 days   $3,861     $797     $2,259    $--         $6,833      $30         $13,780
    past due
    
    Non-accrual
    loans:
    
    Residential     $8,030     $12,220  $5,987    $216        $30,547     $13,270     $70,270
    development
    
    Commercial      --         --       --        629         14,735      367         15,731
    construction
    
    Commercial      5,785      1,767    1,175     170         3,709       12,177      24,783
    real estate
    
    Commercial      337        3,396    244       --          52          2,828       6,857
    
    Other           --         --       --        --          --          --          --
    
    Total
    non-accrual     $14,152    $17,383  $7,406    $1,015      $49,043     $28,642     $117,641
    loans
    
    Total
    non-performing  $18,013    $18,180  $9,665    $1,015      $55,876     $28,672     $131,421
    loans
    
    Other real
    estate owned:
    
    Residential     $3,247     $13,083  $2,530    $1,876      $7,330      $--         $28,066
    development
    
    Commercial      520        --       --        --          --          --          520
    construction
    
    Commercial      --         --       324       381         1,700       --          2,405
    real estate
    
    Commercial      750        --       --        --          --          293         1,043
    
    Other           520        --       --        --          212         --          732
    
    Total OREO      $5,037     $13,083  $2,854    $2,257      $9,242      $293        $32,766
    
    Total
    non-performing  $23,050    $31,263  $12,519   $3,272      $65,118     $28,965     $164,187
    assets
    
    % of total      14%        19%      8%        2%          40%         18%         100%
    
    
    
    

    The Company has aggressively charged-down impaired assets to their disposition values, and expects to resolve these assets over the next few quarters. As of March 31, 2009, the non-performing assets of $164.2 million have been written down by 37%, or $95.9 million, from their original balance of $260.1 million.

    The following is a distribution of loans past due 30-89 days by loan type by region as of March 31, 2009:

    
    Loans past due 30-89 days by category by region
    
    (Dollars in thousands)
    
                  Northwest  Central  Southern              Greater     Northern
    
                  Oregon     Oregon   Oregon    Washington  Sacramento  California  Total
    
    Loans 30-89
    days past
    due:
    
    Residential   $1,086     $1,340   $4,464    $4,720      $4,239      $1,891      $17,740
    development
    
    Commercial    --         2,120    --        --          --          --          2,120
    construction
    
    Commercial    491        3,171    2,184     2,881       963         7,007       16,697
    real estate
    
    Commercial    5,053      5,427    324       32,332      1,698       4,612       49,446
    
    Other         3,021      --       --        --          675         --          3,696
    
    Total 30-89
    days past     $9,651     $12,058  $6,972    $39,933     $7,575      $13,510     $89,699
    due
    
    
    
    

    Within the 30-89 day past due category, the commercial total of $49.4 million includes two loans in the Washington region representing $32 million of the balance. We expect these two loans to be brought current in the second quarter of 2009.

    Net Interest Margin

    The Company reported a tax equivalent net interest margin of 4.07% for the first quarter of 2009, compared to 4.02% for the fourth quarter of 2008, and 3.98% for the first quarter of 2008. The increase in net interest margin from the fourth quarter of 2008 resulted primarily from our cost of interest bearing liabilities decreasing more than earning asset yields. Interest reversals on new non-accrual loans during the first quarter of 2009 were $1.0 million, or 5 basis points on the net interest margin. Excluding the reversals of interest, the net interest margin would have increased 10 basis points during the quarter. The cost of interest bearing deposits was 33 basis points lower than the fourth quarter of 2008.

    Mortgage Banking Revenue

    Mortgage interest rates decreased significantly in the first quarter of 2009, resulting in a significant increase in refinance activity within the market. The Company recognized $4.1 million in total mortgage banking revenue during the first quarter of 2009, on closed loan volume of $192 million, compared to losses of $408 thousand during the fourth quarter of 2008, on closed loan volume of $70 million.

    Included in mortgage banking revenue for the first quarter of 2009 was an MSR valuation impairment of $1.4 million, related to increased refinancing and higher future prepayment speed expectations. On March 31, 2009, the MSR asset was valued at 0.84% of the total serviced loan portfolio, compared to 0.86% at December 31, 2008.

    Gain on Sale of Investment Securities

    During the first quarter of 2009, the Company recognized a net gain of $35 thousand on sale of investment securities. Included in this was a $2.1 million other-than-temporary impairment charge related to non-agency mortgage-backed securities in the held to maturity (HTM) classification, offset by gains on sale of investments of $2.2 million. At March 31, 2009, the HTM non-agency mortgage-backed security portfolio totaled $9.9 million, or 0.7% of the total investment portfolio.

    Fair Value of Junior Subordinated Debentures

    The Company recognized a gain on the fair value of junior subordinated debentures of $580 thousand during the first quarter of 2009. This fair value gain was based upon reductions in market interest rates, which will result in lower forecasted cash outflows in the future. 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 carry interest rate spreads of 135 and 275 basis points over the 3 month LIBOR. As of March 31, 2009, the credit adjusted interest spread for potential new issuances was forecasted to be significantly higher. The difference between spreads represents the gain in fair value of the Company's junior subordinated debentures compared to potential 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. On March 31, 2009, the total par value of junior subordinated debentures carried at fair value was $134.0 million, and the fair value was $91.7 million.

    Non-Interest Expense

    Total non-interest expense for the first quarter of 2009 was $60.0 million, compared to $56.3 million for the fourth quarter of 2008, an increase of $3.6 million, or 6%. Included in non-interest expense are several categories which are either nonrecurring or outside of the control of the Company, including FDIC deposit insurance assessments, gain or loss on other real estate owned valuations, VISA litigation and non-recurring expenses such as merger costs and goodwill impairments. Excluding these non-controllable or non-recurring items, operating expenses totaled $54.8 million for the first quarter of 2009, compared to $53.4 million for the fourth quarter of 2008, an increase of $1.4 million, or 3%. This increase related to an increase of $1.6 million in variable expense related to our mortgage operation, which recognized an increase of $4.5 million in mortgage banking revenue during the quarter based on a 172% increase in closed loan volume of $192 million due to significant increases in mortgage refinancing activity.

    Total FDIC deposit insurance assessments during the first quarter of 2009 were $2.6 million, an increase of 92% over the fourth quarter of 2008, and 116% over the first quarter of 2008. This increase results from an industry wide increase in assessments as the FDIC is replenishing the deposit insurance fund.

    Balance Sheet

    Total consolidated assets as of March 31, 2009 were $8.8 billion, compared to $8.4 billion a year ago. Total gross loans and leases, and deposits, were $6.1 billion and $6.8 billion, respectively, as of March 31, 2009, compared to $6.0 and $6.5 billion, respectively, as of March 31, 2008.

    Total loans declined $44 million during the first quarter of 2009. Total gross loan fundings during the first quarter of 2009 were $455 million, which were offset by payments received on previously funded loans of $444 million, and net charge-offs of $55 million, resulting in the overall decline of $44 million in loans during the first quarter.

    Total deposits increased $204 million, or 3%, during the first quarter. On January 16, 2009, the Federal Deposit Insurance Corporation (FDIC) placed the Bank of Clark County, Vancouver, Washington, into receivership. Umpqua Bank assumed the insured, non-brokered deposit balances from the FDIC, which as of March 31, 2009, totaled $167 million. Through this agreement, Umpqua Bank now operates two additional store locations in Vancouver, Wash. In addition, the FDIC is reimbursing Umpqua Bank for all overhead costs related to the acquired Bank of Clark County operations for 90 days following closing, while Umpqua Bank will pay the FDIC a minimal servicing fee per assumed deposit account.

    Excluding the Bank of Clark County deposit assumption, total deposits increased $37 million during the first quarter of 2009. This was the first time in four years that deposits increased in the first quarter, a time in which we typically experience seasonal declines in customer deposit balances.

    Other comprehensive income, which represents the unrealized gain on the investment portfolio, net of tax, increased 24% during the first quarter of 2009, to $17.5 million. This increase resulted from a decrease in market investment rates. The average yield on the investment portfolio was higher than market yields at March 31, 2009, resulting in the unrealized gain.

    Capital

    As of March 31, 2009, total shareholders' equity was $1.5 billion, comprised of $203 million in preferred stock (par value of $214.2 million issued to the U.S. Treasury on November 14, 2008 and described below), and common stock of $1.3 billion. Book value per common share was $21.14, tangible book value per share was $8.57 and tangible common equity to assets was 6.42%. These measures decreased slightly during the first quarter of 2009 related primarily to the net loss during the quarter, and 13 basis points of the tangible common equity ratio decline related to the FDIC assisted Bank of Clark County deposit assumption.

    The Company's estimated total risk-based capital ratio as of March 31, 2009 is 14.32%, and has increased from 11.15% as of March 31, 2008. Our total risk-based capital level is in excess of the regulatory definition of "well capitalized" of 10.00%. This capital ratio as of March 31, 2009 is an estimate pending completion and filing of the Company's regulatory reports.

    Excluding the sale of preferred stock during the fourth quarter of 2008, the Company's total risk-based capital ratio as of March 31, 2009 would have been 11.40%, which increased from 11.15% as of March 31, 2008.

    On November 14, 2008, in exchange for an aggregate purchase price of $214.2 million, Umpqua Holdings Corporation issued and sold to the United States Department of the Treasury (U.S. Treasury) pursuant to the TARP Capital Purchase Program the following: (i) 214,181 shares of the Company's newly designated Fixed Rate Cumulative Perpetual Preferred Stock, Series A, no par value per share, with a liquidation preference of $1,000 per share ($214,181,000 liquidation preference in the aggregate) and (ii) a warrant to purchase up to 2,221,795 shares of the Company's common stock, no par value per share, at an exercise price of $14.46 per share, subject to certain anti-dilution and other adjustments. The warrant may be exercised for up to ten years after it was issued.

    In connection with the issuance and sale of the Company's securities, the Company entered into a Letter Agreement including the Securities Purchase Agreement - Standard Terms, dated November 14, 2008, with the U.S. Treasury (the "Agreement"). The Agreement contains limitations on the payment of quarterly cash dividends on the Company's common stock in excess of $0.19 per share, and on the Company's ability to repurchase its common stock. The Agreement also grants registration rights to the holders of the Series A Preferred Stock, the Warrant and the common stock to be issued under the Warrant and subjects the Company to executive compensation limitations included in the Emergency Economic Stabilization Act of 2008.

    The Series A Preferred Stock bear cumulative dividends at a rate of 5% per annum for the first five years and 9% per annum thereafter, in each case, applied to the $1,000 per share liquidation preference, but will only be paid when, as and if declared by the Company's board of directors out of funds legally available therefore. The Series A Preferred Stock has no maturity date and ranks senior to our common stock (and on an equivalent basis with the Company's other authorized series of preferred stock, of which no shares are currently outstanding) with respect to the payment of dividends and distributions and amounts payable upon liquidation, dissolution and winding up of the Company.

    There were no repurchases of common stock during the first quarter of 2009. The total remaining available common shares authorized for repurchase is approximately 1.5 million as of March 31, 2009.

    Reclassification

    During the quarter, we reclassified other real estate owned (OREO) valuation gains/losses from non-interest income to non-interest expense. All prior period amounts have been reclassified accordingly, without adjustments to earnings or retained earnings.

    Visa Related Activity

    In March 2008, Visa completed its initial public offering. Umpqua Bank and certain other Visa member banks are shareholders in Visa. The Company holds shares of Visa Class B common stock that are, under certain conditions, convertible into Visa Class A common stock, which class of stock is publicly traded on the New York Stock Exchange. Following the initial public offering of Visa's Class A common stock, 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.

    In October 2008, Visa announced that it had reached a settlement with Discover Card related to an antitrust lawsuit, and that it had established an additional reserve related to the settlement with Discover Card that has not already been funded into the escrow account. In connection with this settlement, the Company recorded, in the third quarter of 2008, a liability and corresponding expense of $2.1 million pre-tax, for its proportionate share of that liability. In December, this liability and expense was reversed when VISA deposited sufficient funds into the escrow account to cover the remaining amount of the settlement. The Company is not a party to the Visa litigation and its liability arises solely from the Bank's membership interest in Visa.

    The deposit of funds into the escrow account in December has the effect of a repurchase of Class A common share equivalents from the Class B shareholders and further reduces the conversion ratio applicable to Class B common stock outstanding from 0.7143 per Class A share to 0.6296 per Class A share.

    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. 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 March 31, 2009, the value of the Class A shares was $55.60 per share. The value of unredeemed Class A equivalent shares owned by the Company was $16.4 million as of March 31, 2009, and has not been reflected in the accompanying financial statements.

    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 150 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 in Oregon. Umpqua Bank's Private Client Services Division provides tailored financial services and products to individual customers. Umpqua Holdings Corporation is headquartered in Portland, Ore. For more information, visit www.umpquaholdingscorp.com.

    
    Umpqua Holdings Corporation will conduct a quarterly earnings conference call
    Thursday, April 16, 2009, at 10:00 a.m. PT (1:00 p.m. ET) during which the
    Company will discuss first quarter 2009 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 "93183923." 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.
    
    
    
    

    Forward-Looking Statements

    This press release includes forward-looking statements within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These statements are necessarily subject to risk and uncertainty, and actual results could differ materially due to various risk factors, including those set forth from time to time in our filings with the SEC. You should not place undue reliance on forward-looking statements, and we undertake no obligation to update any such statements. In this press release we make forward-looking statements about our ability to improve financial performance when the economy stabilizes; expecting no additional material loss from existing non-accrual loans; projected provisions for loan losses, charge-off levels, and non-performing asset levels; projected performance of segments of the loan portfolio and expectations about the overall stability of segments other than residential development; and expectations about specific loans. 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, economic conditions that continue to deteriorate and a continued decline in the value of assets that impact recoveries of non-accrual loans, and migration of non-performing assets to the segments of the portfolio other than residential development.

    
    Umpqua Holdings Corporation
    
    Consolidated Statements of Income
    
    (Unaudited)
    
                     Quarter Ended:
    
                                                               Sequential  Year over
    
                                                               Quarter     Year
    
    Dollars in
    thousands,       Mar 31, 2009  Dec 31, 2008  Mar 31, 2008  % Change    % Change
    except per
    share data
    
    Interest income
    
    Loans and        $88,173       $93,632       $104,152      (6)%        (15)%
    leases
    
    Interest and
    dividends on
    investments:
    
    Taxable          14,371        11,253        9,329         28%         54%
    
    Exempt from
    federal income   1,800         1,653         1,679         9%          7%
    tax
    
    Dividends        --            36            78            (100)%      (100)%
    
    Temporary        32            84            203           (62)%       (84)%
    investments
    
    Total interest   104,376       106,658       115,441       (2)%        (10)%
    income
    
    Interest
    expense
    
    Deposits         24,463        28,252        39,625        (13)%       (38)%
    
    Repurchase
    agreements and   184           262           749           (30)%       (75)%
    fed funds
    purchased
    
    Junior
    subordinated     2,560         3,306         3,922         (23)%       (35)%
    debentures
    
    Term debt        1,756         1,794         1,125         (2)%        56%
    
    Total interest   28,963        33,614        45,421        (14)%       (36)%
    expense
    
    Net interest     75,413        73,044        70,020        3%          8%
    income
    
    Provision for
    loan and lease   51,400        31,955        15,132        61%         240%
    losses
    
    Non-interest
    income
    
    Service charges  7,701         8,668         8,377         (11)%       (8)%
    
    Brokerage fees   1,379         2,384         2,175         (42)%       (37)%
    
    Mortgage         4,070         (408)         (1,870)       nm          nm
    banking revenue
    
    Net (loss) gain
    on investment    35            (73)          3,901         nm          (99)%
    securities
    
    Gain on junior
    subordinated
    debentures       580           8,751         1,642         (93)%       (65)%
    carried at fair
    value
    
    Proceeds from
    VISA mandatory   --            --            12,633        nm          (100)%
    redemption
    
    Other income     1,752         1,559         2,736         12%         (36)%
    
    Total
    non-interest     15,517        20,881        29,594        (26)%       (48)%
    income
    
    Non-interest
    expense
    
    Salaries and     31,073        29,557        28,244        5%          10%
    benefits
    
    Occupancy and    9,621         9,442         9,116         2%          6%
    equipment
    
    Intangible       1,362         1,438         1,491         (5)%        (9)%
    amortization
    
    FDIC             2,625         1,368         1,215         92%         116%
    assessments
    
    Other            12,771        12,944        11,993        (1)%        6%
    
    Net loss on
    other real       2,299         2,658         611           (14)%       276%
    estate owned
    
    Visa litigation  --            (2,085)       (5,183)       (100)%      (100)%
    
    Goodwill         --            982           --            (100)%      nm
    impairment
    
    Merger related   200           --            --            nm          nm
    expenses
    
    Total
    non-interest     59,951        56,304        47,487        6%          26%
    expense
    
    Income (loss)
    before           (20,421)      5,666         36,995        (460)%      (155)%
    provision for
    income taxes
    
    Provision
    (benefit) for    (9,781)       1,836         12,324        (633)%      (179)%
    income tax
    
    Net income       $(10,640)     $3,830        $24,671       (378)%      (143)%
    (loss)
    
    Preferred stock
    dividend -       3,191         1,620         --            97%         nm
    undeclared
    
    Net earnings
    (loss)
    applicable to    $(13,831)     $2,210        $24,671       (726)%      (156)%
    common
    shareholders
    
    Weighted
    average shares   60,175,868    60,134,062    60,028,839    0%          0%
    outstanding
    
    Weighted
    average diluted  60,175,868    60,503,643    60,377,224    (1)%        0%
    shares
    outstanding
    
    Earnings (loss)
    per common       $(0.23)       $0.04         $0.41         nm          nm
    share - Basic
    
    Earnings (loss)
    per common       $(0.23)       $0.04         $0.41         nm          nm
    share - Diluted
    
    nm = not
    meaningful
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Consolidated Balance Sheets
    
    (Unaudited)
    
                                                               Sequential  Year over
    
                                                               Quarter     Year
    
    Dollars in
    thousands,       Mar 31, 2009  Dec 31, 2008  Mar 31, 2008  % Change    % Change
    except per
    share data
    
    Assets:
    
    Cash and due     $136,035      $148,064      $173,472      (8)%        (22)%
    from banks
    
    Temporary        70,565        56,612        19,707        25%         258%
    investments
    
    Investment
    securities:
    
    Trading          1,485         1,987         2,379         (25)%       (38)%
    
    Available for    1,435,293     1,238,712     1,068,914     16%         34%
    sale
    
    Held to          13,783        15,812        5,266         (13)%       162%
    maturity
    
    Loans held for   34,013        22,355        39,623        52%         (14)%
    sale
    
    Loans and        6,087,172     6,131,374     6,044,956     (1)%        1%
    leases
    
    Less: Allowance
    for loan and     (92,086)      (95,865)      (86,560)      (4)%        6%
    lease losses
    
    Loans and        5,995,086     6,035,509     5,958,396     (1)%        1%
    leases, net
    
    Restricted
    equity           16,491        16,491        15,269        0%          8%
    securities
    
    Premises and     103,712       104,694       104,505       (1)%        (1)%
    equipment, net
    
    Mortgage
    servicing        8,732         8,205         8,640         6%          1%
    rights, net
    
    Goodwill and
    other            756,468       757,833       763,275       0%          (1)%
    intangibles
    
    Other real       32,766        27,898        13,348        17%         145%
    estate owned
    
    Other assets     182,713       163,378       183,098       12%         0%
    
    Total assets     $8,787,142    $8,597,550    $8,355,892    2%          5%
    
    Liabilities:
    
    Deposits         $6,792,534    $6,588,935    $6,513,238    3%          4%
    
    Securities sold
    under            50,274        47,588        38,296        6%          31%
    agreements to
    repurchase
    
    Fed funds        --            --            55,000        0%          (100)%
    purchased
    
    Term debt        206,458       206,531       173,853       0%          19%
    
    Junior
    subordinated     91,682        92,520        129,803       (1)%        (29)%
    debentures, at
    fair value
    
    Junior
    subordinated     103,430       103,655       104,413       0%          (1)%
    debentures, at
    amortized cost
    
    Other            68,311        71,313        84,499        (4)%        (19)%
    liabilities
    
    Total            7,312,689     7,110,542     7,099,102     3%          3%
    liabilities
    
    Shareholders'
    equity:
    
    Preferred stock  202,692       202,178       --            0%          nm
    
    Common stock     1,006,199     1,005,820     989,764       0%          2%
    
    Retained         248,056       264,938       264,767       (6)%        (6)%
    earnings
    
    Accumulated
    other            17,506        14,072        2,259         24%         675%
    comprehensive
    income
    
    Total
    shareholders'    1,474,453     1,487,008     1,256,790     (1)%        17%
    equity
    
    Total
    liabilities and  $8,787,142    $8,597,550    $8,355,892    2%          5%
    shareholders'
    equity
    
    Common shares
    outstanding at   60,198,057    60,146,400    60,059,908    0%          0%
    period end
    
    Book value per   $21.13        $21.36        $20.93        (1)%        1%
    common share
    
    Tangible book
    value per        $8.56         $8.76         $8.22         (2)%        4%
    common share
    
    Tangible equity  $515,293      $526,997      $493,515      (2)%        4%
    - common
    
    Tangible common
    equity to        6.42%         6.72%         6.50%
    tangible assets
    
    nm = not meaningful
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Deposits by Type/Core Deposits
    
    (Unaudited)
    
                                                                            Sequential  Year
                                                                                        over
    
    Dollars in        Mar 31, 2009      Dec 31, 2008      Mar 31, 2008      Quarter     Year
    thousands
    
                      Amount      Mix   Amount      Mix   Amount      Mix   % Change    %
                                                                                        Change
    
    Demand, non       $1,292,512  19%   $1,254,079  19%   $1,260,756  19%   3%          3%
    interest-bearing
    
    Demand,           2,902,691   43%   2,810,935   43%   2,950,827   46%   3%          (2)%
    interest-bearing
    
    Savings           295,895     4%    277,154     4%    341,173     5%    7%          (13)%
    
    Time              2,301,436   34%   2,246,767   34%   1,960,482   30%   2%          17%
    
    Total Deposits    $6,792,534  100%  $6,588,935  100%  $6,513,238  100%  3%          4%
    
    Total Core
    deposits-ending   $5,490,094  81%   $5,356,670  81%   $5,347,970  82%   2%          3%
    (1)
    
    Total Core
    deposits-average  $5,471,590        $5,356,987        $5,371,398        2%          2%
    (1)
    
    Number of open
    accounts:
    
    Demand, non       150,191           147,395           140,335           2%          7%
    interest-bearing
    
    Demand,           61,133            59,938            62,541            2%          (2)%
    interest-bearing
    
    Savings           70,966            69,661            70,705            2%          0%
    
    Time              33,654            33,023            35,522            2%          (5)%
    
    Total             315,944           310,017           309,103           2%          2%
    
    Average balance
    per account:
    
    Demand, non       $8.6              $8.5              $9.0
    interest-bearing
    
    Demand,           47.5              46.9              47.2
    interest-bearing
    
    Savings           4.2               4.0               4.8
    
    Time              68.4              68.0              55.2
    
    Total             21.5              21.3              21.1
    
    (1) Core deposits are defined as total deposits less time deposits greater than $100,000.
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Loan Portfolio
    
    (Unaudited)
    
                                                                        Sequential  Year
                                                                                    over
    
    Dollars in    Mar 31, 2009      Dec 31, 2008      Mar 31, 2008      Quarter     Year
    thousands
    
    Loans and                                                                       %
    leases by     Amount      Mix   Amount      Mix   Amount      Mix   % Change    Change
    class:
    
    Commercial    $3,268,762  54%   $3,257,796  53%   $3,104,288  51%   0%          5%
    real estate
    
    Residential   431,592     7%    435,287     7%    371,565     6%    (1)%        16%
    real estate
    
    Construction  860,389     14%   909,532     15%   1,111,931   18%   (5)%        (23)%
    
    Total real    4,560,743   75%   4,602,615   75%   4,587,784   75%   (1)%        (1)%
    estate
    
    Commercial    1,458,792   24%   1,460,909   24%   1,380,860   23%   0%          6%
    
    Leases        39,953      1%    40,155      1%    40,968      1%    (1)%        (2)%
    
    Installment   38,360      1%    39,145      1%    46,585      1%    (2)%        (18)%
    and other
    
    Deferred
    loan fees,    (10,676)    0%    (11,450)    0%    (11,241)    0%    (7)%        (5)%
    net
    
    Total loans   $6,087,172  100%  $6,131,374  100%  $6,044,956  100%  (1)%        1%
    and leases
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Credit Quality
    
    (Unaudited)
    
                                                               Sequential  Year over
    
                     Quarter Ended                             Quarter     Year
    
    Dollars in       Mar 31, 2009  Dec 31, 2008  Mar 31, 2008  % Change    % Change
    thousands
    
    Allowance for
    credit losses:
    
    Balance
    beginning of     $95,865       $93,982       $84,904
    period
    
    Provision for
    loan and lease   51,400        31,955        15,132        61%         240%
    losses
    
    Charge-offs      (55,722)      (31,222)      (13,970)      78%         299%
    
    Less:            543           1,150         494           (53)%       10%
    Recoveries
    
    Net charge-offs  (55,179)      (30,072)      (13,476)      83%         309%
    
    Total Allowance
    for loan and     92,086        95,865        86,560        (4)%        6%
    lease losses
    
    Reserve for
    unfunded         935           983           1,141
    commitments
    
    Total Allowance
    for credit       $93,021       $96,848       $87,701       (4)%        6%
    losses
    
    Net charge-offs
    to average
    loans and        3.65%         1.94%         0.89%
    leases
    (annualized)
    
    Recoveries to
    gross            1%            4%            4%
    charge-offs
    
    Allowance for
    credit losses    1.53%         1.58%         1.45%
    to loans and
    leases
    
    Nonperforming
    assets:
    
    Loans on
    non-accrual      $117,641      $127,914      $71,664       (8)%        64%
    status
    
    Loans past due
    90+ days &       13,780        5,452         3,327         153%        314%
    accruing
    
    Total
    nonperforming    131,421       133,366       74,991        (1)%        75%
    loans
    
    Other real
    estate owned     32,766        27,898        13,348        17%         145%
    (1)
    
    Total
    nonperforming    $164,187      $161,264      $88,339       2%          86%
    assets
    
    Nonperforming
    loans to total   2.16%         2.18%         1.24%
    loans and
    leases
    
    Nonperforming
    assets to total  1.87%         1.88%         1.06%
    assets
    
    Past due 30-89   $89,699       $59,138       $68,238       52%         31%
    days
    
    Past due 30-89
    days to total    1.47%         0.96%         1.13%
    loans and
    leases
    
    (1) Other real estate owned for 3/31/09 and 12/31/08 includes $8.9 million and
    $10.0 million, respectively, of real estate legally sold, but for lack of
    initial investment of the purchaser, not accounted for as a sale, and therefore
    continues to be reported as other real estate owned.
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Selected Ratios
    
    (Unaudited)
    
                                                               Sequential  Year over
    
                     Quarter Ended:                            Quarter     Year
    
                     Mar 31, 2009  Dec 31, 2008  Mar 31, 2008  Change      Change
    
    Net Interest
    Spread:
    
    Yield on loans   5.79%         6.03%         6.89%         (0.24)      (1.10)
    and leases
    
    Yield on
    taxable          4.83%         4.88%         4.29%         (0.05)      0.54
    investments
    
    Yield on
    tax-exempt       5.79%         5.81%         5.55%         (0.02)      0.24
    investments (1)
    
    Yield on
    temporary        0.24%         0.82%         3.18%         (0.58)      (2.94)
    investments
    
    Total yield on
    earning assets   5.61%         5.85%         6.53%         (0.24)      (0.92)
    (1)
    
    Cost of
    interest         1.82%         2.15%         3.03%         (0.33)      (1.21)
    bearing
    deposits
    
    Cost of
    securities sold
    under
    agreements to    1.26%         1.36%         3.09%         (0.10)      (1.83)
    repurchase and
    fed funds
    purchased
    
    Cost of term     3.45%         3.45%         4.07%         0.00        (0.62)
    debt
    
    Cost of junior
    subordinated     5.30%         6.42%         6.68%         (1.12)      (1.38)
    debentures
    
    Total cost of
    interest         1.99%         2.34%         3.21%         (0.35)      (1.22)
    bearing
    liabilities
    
    Net interest     3.62%         3.51%         3.32%         0.11        0.30
    spread (1)
    
    Net interest
    margin -         4.07%         4.02%         3.98%         0.05        0.09
    Consolidated
    (1)
    
    Net interest
    margin - Bank    4.20%         4.20%         4.19%         0.00        0.01
    (1)
    
    Return on        (0.64)%       0.10%         1.20%         (0.74)      (1.84)
    average assets
    
    Return on
    average          (0.71)%       0.11%         1.32%         (0.82)      (2.03)
    tangible assets
    
    Return on
    average common   (4.35)%       0.70%         7.94%         (5.05)      (12.29)
    equity
    
    Return on
    average          (10.55)%      1.75%         20.44%        (12.30)     (30.99)
    tangible common
    equity
    
    Efficiency
    ratio -          65.32%        59.46%        47.32%        5.86        18.00
    Consolidated
    
    Efficiency       62.41%        60.84%        45.05%        1.57        17.36
    ratio - Bank
    
    (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       Mar 31, 2009  Dec 31, 2008  Mar 31, 2008  % Change    % Change
    thousands
    
    Temporary        $52,063       $40,961       $25,685       27%         103%
    investments
    
    Investment
    securities,      1,188,859     924,722       876,813       29%         36%
    taxable
    
    Investment
    securities,      183,581       167,127       173,749       10%         6%
    tax-exempt
    
    Loans held for   44,226        14,900        19,278        197%        129%
    sale
    
    Loans and        6,135,710     6,158,620     6,063,088     0%          1%
    leases
    
    Total earning    7,604,439     7,306,330     7,158,613     4%          6%
    assets
    
    Goodwill &
    other            757,055       759,424       763,989       0%          (1)%
    intangibles
    
    Total assets     8,713,845     8,425,353     8,287,643     3%          5%
    
    Non interest
    bearing demand   1,251,971     1,254,846     1,250,628     0%          0%
    deposits
    
    Interest
    bearing          5,450,614     5,235,651     5,254,826     4%          4%
    deposits
    
    Total deposits   6,702,585     6,490,497     6,505,454     3%          3%
    
    Interest
    bearing          5,911,972     5,723,779     5,699,639     3%          4%
    liabilities
    
    Shareholders'    1,288,744     1,262,566     1,249,391     2%          3%
    equity - common
    
    Tangible common  531,689       503,142       485,402       6%          10%
    equity
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Mortgage Banking Activity
    
    (unaudited)
    
                                                               Sequential  Year over
    
                     Quarter Ended:                            Quarter     Year
    
    Dollars in       Mar 31, 2009  Dec 31, 2008  Mar 31, 2008  % Change    % Change
    thousands
    
    Mortgage
    Servicing
    Rights (MSR):
    
    Mortgage loans
    serviced for     $1,038,715    $955,494      $866,652      9%          20%
    others
    
    MSR Asset, at    $8,732        $8,205        $8,640        6%          1%
    fair value
    
    MSR as % of
    serviced         0.84%         0.86%         1.00%
    portfolio
    
    Mortgage
    Banking
    Revenue:
    
    Origination and  $4,857        $1,987        $1,852        144%        162%
    sale
    
    Servicing        654           633           600           3%          9%
    
    Change in fair
    value of MSR     (1,441)       (3,028)       (1,924)       (52)%       (25)%
    asset
    
    Change in fair
    value of MSR     --            --            (2,398)       0%          (100)%
    hedge
    
    Total Mortgage   $4,070        $(408)        $(1,870)      nm          nm
    Banking Revenue
    
    Closed loan      $191,713      $70,430       $80,940       172%        137%
    volume
    
    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