• Umpqua Holdings Corporation
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  • Umpqua Holdings Reports Fourth Quarter & Full Year 2009 Results
    Company Release - 01/28/2010 08:00

    Net loss available to common shareholders of $0.34 per share for fourth quarter

    Non-performing assets ended the quarter at 2.38% of total assets

    Deposits increased $225 million, or 3%, during fourth quarter, and 13% for full year

    Non-interest bearing demand deposits increased 5% during fourth quarter, 12% for full year

    Reduction in loans past due 30-89 days of 10% during fourth quarter, 30% for full year

    PORTLAND, Ore.--(BUSINESS WIRE)-- Umpqua Holdings Corporation (NASDAQ: UMPQ), parent company of Umpqua Bank and Umpqua Investments, Inc. today announced a fourth quarter 2009 net loss of $26.7 million. Including preferred stock dividends of $3.2 million, the net loss available to common shareholders was $29.9 million, or $0.34 per diluted share. For the full year 2009, the Company reported a net loss of $153.4 million. Including preferred stock dividends of $12.9 million, the net loss available to common shareholders was $166.3 million, or $2.36 per diluted share. Operating loss, defined as earnings available to common shareholders before merger related expenses, net of tax, and goodwill impairment, was $54.1 million for the year ended 2009, or $0.77 per diluted share. Operating income or loss is considered a "non-GAAP" financial measure. More information regarding this measurement and reconciliation to the comparable GAAP measurement is provided under the heading Non-GAAP Financial Measures below.

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

    • Provision for loan losses of $68.6 million;
    • Total net charge-offs of $64.1 million;
    • The allowance for credit losses increased from 1.71% to 1.81% of total loans during the fourth quarter;
    • Non-performing assets ended the quarter at $223.6 million, or 2.38% of total assets, resulting in part from reclassification of portion of restructured loans to non-accrual status;
    • Loans past due 30-89 days declined 10% on a sequential quarter basis;
    • Total deposits increased $225 million, or 3%, on a sequential quarter basis;
    • Net interest income of $85 million, an increase of 3% on a sequential quarter basis;
    • Net interest margin, on a tax equivalent basis, increased during the quarter to 4.06%;
    • The cost of interest bearing deposits for the fourth quarter was 1.35%, a decrease of 15 basis points from the third quarter of 2009;
    • Mortgage banking revenue was $4.1 million on closed mortgage loan volume of $172 million;
    • Loss on fair value of junior subordinated debentures of $3.7 million during the fourth quarter of 2009;
    • Net loss on other real estate owned was $9.1 million during the fourth quarter of 2009;
    • Tangible common equity ratio of 8.27% and tangible book value per common share of $8.33; and
    • Total risk based capital of 17.07%.

    "During this past quarter the Company experienced the continuation of core deposit growth, strong results from our residential mortgage lending division, and a steady net interest margin," said Ray Davis, president and CEO of Umpqua Holdings Corporation. "Unfortunately these successes have been overshadowed by continued earnings pressure from our credit quality numbers resulting in a loss for the period due to economic issues that have plagued our industry for the last several years. Our management team continues to actively deal with troubled credits and is focused on returning the company to normalized earnings, as the country emerges from the national recession."

    Asset quality

    Non-performing assets were $223.6 million, or 2.38% of total assets, as of December 31, 2009, compared to $156.0 million, or 1.70% of total assets as of September 30, 2009, and $161.3 million, or 1.88% of total assets as of December 31, 2008. Of this amount, $5.9 million represented loans past due greater than 90 days and still accruing interest, $193.1 million represented non-accrual loans, and $24.6 million was other real estate owned (OREO).

    The Company has aggressively charged-down impaired assets to their disposition values, and they are expected to be resolved at those levels, absent further declines in market prices. As of December 31, 2009, the non-performing assets of $223.6 million have been written down by 41%, or $154.8 million, from their original balance of $378.4 million.

    The provision for loan losses for the fourth quarter of 2009 was $68.6 million. Total net charge-offs for the fourth quarter of 2009 were $64.1 million, which represented 4.19% of average loans on an annualized basis. The allowance for credit losses increased to 1.81% of total loans as of December 31, 2009, compared to 1.71% of total loans as of September 30, 2009 and 1.58% of total loans as of December 31, 2008.

    Loans past due 30-89 days were $41.5 million, or 0.69% of total loans as of December 31, 2009, down 10% from $46.1 million as of September 30, 2009, and down 30% from $59.1 million as of December 31, 2008.

    Since 2007, 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:

    
    Credit quality trends
    
    (Dollars in thousands)
    
               Provision   Net            Allowance                 Non-performing
    
               for         charge-offs    for credit   30-89 days   assets to
                                          losses
    
               loan loss   (recoveries)   to loans %   past due %   total assets %
    
    Q1 2007    $83         $(90)          1.14%        0.17%        0.18%
    
    Q2 2007    3,413       31             1.17%        0.56%        0.59%
    
    Q3 2007    20,420      865            1.47%        0.99%        0.96%
    
    Q4 2007    17,814      21,188         1.42%        0.64%        1.18%
    
    Q1 2008    15,132      13,476         1.45%        1.13%        1.06%
    
    Q2 2008    25,137      37,976         1.22%        0.31%        1.25%
    
    Q3 2008    35,454      15,193         1.54%        1.16%        1.66%
    
    Q4 2008    31,955      30,072         1.58%        0.96%        1.88%
    
    Q1 2009    59,092      59,871         1.58%        1.47%        1.82%
    
    Q2 2009    29,331      26,047         1.63%        0.80%        1.73%
    
    Q3 2009    52,108      47,342         1.71%        0.76%        1.70%
    
    Q4 2009    68,593      64,072         1.81%        0.69%        2.38%
    
    Total      $358,532    $316,043
    
    
    
    

    Loan portfolio

    Construction loan portfolio

    Total construction loans as of December 31, 2009 decreased 17% from September 30, 2009, and decreased 32% from December 31, 2008. Within the construction loan portfolio, the residential development loan segment was $225.8 million, or 4% of the total loan portfolio. Of this amount, $45.5 million represented non-performing loans, and $180.3 million represented performing loans, which were 3% of the total loan portfolio. The residential development loan segment has decreased $158 million, or 41%, from December 31, 2008.

    The remaining $393 million in construction loans as of December 31, 2009 was primarily commercial construction projects. Total non-performing assets related to commercial construction loans were $41.4 million at December 31, 2009, with $1.2 million, or 0.3% of total commercial construction projects, past due 30-89 days as of December 31, 2009.

    Commercial real estate loan portfolio

    The total term commercial real estate loan portfolio was $3.5 billion as of December 31, 2009. Of this total, $2.4 billion are non-owner occupied and $1.1 billion are owner occupied. Of the total portfolio, $18.6 million, or 0.53%, are past due 30-89 days as of December 31, 2009. As shown in table 8 on page 24 of this release, 6% of the total commercial real estate portfolio matures in 2010, 4% in 2011, 13% in years 2012-2013, and 21% in years 2014-2015. The remaining 56% of the portfolio matures in or after the year 2016.

    The portfolio was conservatively underwritten at origination to a minimum debt service coverage ratio of 1.20, and as a result in many cases the loan-to-value was substantially less than our in-house maximum of 75%. This underwriting serves to protect against the low capitalization rate environment of the past several years.

    During the past 12 months, the Company has completed several rounds of stress testing on the commercial real estate portfolio, focusing on items such as capitalization rate, interest rate and vacancy factors. The results of the stress testing showed no significant unidentified risks, unlike our experience in the residential development construction portfolio. However, given the economic climate, we expect any potential issues that may arise in this portfolio will result from individual loans within distinct geographic areas and not represent a systemic weakness. We are well positioned to manage the exposure and work with our customers until the economic climate improves.

    Restructured loans

    Restructured loans were $134 million as of December 31, 2009, down 26% from $182 million as of September 30, 2009. The decrease during the fourth quarter resulted from reclassifications to non-accrual status of loans previously restructured based on projected performance. The Company will consider a loan for restructuring only if it is current on payments. The Company does not enter into restructurings on loans in non-performing status, and requires the customer to pledge additional collateral, maintain a minimum debt service coverage ratio of 1.0, and show substantial external sources of repayment prior to the Company agreeing to restructure.

    Additional detail on credit quality, trends, the loan portfolio by segment and non-performing assets

    Additional tables are included at the end of this earnings release covering the following aspects of the Company's loan portfolio: residential development loan trends by region, residential development loan stratification by size and by region, non-performing asset detail by type and by region, loans past due 30-89 days by type and by region, loans past due 30-89 days trends, restructured loans by type and by region, commercial real estate loan portfolio by type and by region, commercial real estate loan portfolio by type and by year of maturity, commercial real estate loan portfolio by type and by year of origination, commercial construction loan portfolio by type and by region, and commercial loan portfolio by type and by region.

    Net interest margin

    The Company reported a tax equivalent net interest margin of 4.06% for the fourth quarter of 2009, compared to 4.05% for the third quarter of 2009, and 4.02% for the fourth quarter of 2008. The increase in net interest margin, net of interest reversals, resulted primarily from declining costs of interest bearing deposits, partially offset by the impact of holding higher levels of interest bearing cash. Interest reversals on new non-accrual loans during the fourth quarter of 2009 were $1.4 million, negatively impacting the net interest margin by 7 basis points. Excluding the reversals of interest, the net interest margin would have been 4.13% during the quarter. The cost of interest bearing deposits was 15 basis points lower than the third quarter of 2009.

    Mortgage banking revenue

    The Company generated $4.1 million in total mortgage banking revenue during the fourth quarter of 2009, on closed loan volume of $172 million. For the full year 2009, total closed loan volume was a record $757 million, an increase of 131% from $328 million for the full year 2008. As of December 31, 2009, the Company serviced $1.3 billion of mortgage loans for others, and the related mortgage servicing right asset was valued at $12.6 million, or 0.99% of the total serviced portfolio.

    Fair value of junior subordinated debentures

    The Company recognized a loss from the change in fair value of junior subordinated debentures of $3.7 million during the fourth quarter of 2009. The Company utilizes a pricing service along with internal models to determine the valuation of this liability. The majority of the fair value difference over par value 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 December 31, 2009, the credit adjusted interest spread for potential new issuances was forecasted to be significantly higher. The difference between spreads creates the gain in fair value of the Company's junior subordinated debentures which results from their carrying amount compared to the estimated amount that would be paid to transfer the liability in an orderly transaction among market participants. 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 December 31, 2009, the total par value of junior subordinated debentures carried at fair value was $134.0 million, and the fair value was $86.0 million.

    Non-interest expense

    Total non-interest expense for the fourth quarter of 2009 was $72.5 million, compared to $68.3 million for the third quarter of 2009. Included in non-interest expense are several categories which are outside of the control of the Company, including FDIC deposit insurance assessments, gain or loss on other real estate owned valuations, VISA litigation and infrequently occurring expenses such as merger costs and goodwill impairments. Excluding the non-controllable or infrequently occurring items, the remaining non-interest expense items totaled $60.2 million for the fourth quarter of 2009, compared to $56.4 million for the third quarter of 2009. This increase related mainly to increases in variable expense related to our mortgage operation (on increased volume), $0.8 million of accelerated intangible amortization, and growth initiatives underway.

    Total FDIC deposit insurance assessments during the fourth quarter of 2009 were $3.2 million, and for the full year were $15.8 million. The increase over the prior year resulted from an overall industry-wide increase in assessments as the FDIC is replenishing the deposit insurance fund.

    Balance sheet

    Total consolidated assets as of December 31, 2009 were $9.4 billion, compared to $9.2 billion on September 30, 2009 and $8.6 billion a year ago. Total gross loans and leases, and deposits, were $6.0 billion and $7.4 billion, respectively, as of December 31, 2009, compared to $6.1 and $6.6 billion, respectively, as of December 31, 2008.

    Total net loan fundings during the fourth quarter of 2009 were $447 million. Of this amount, $162 million represents originations of mortgage loans held for sale and $285 million represents net loan advances on loans held for investment. Net loan advances is calculated as gross advances on non-revolving notes plus net advances (gross advances less gross payments) on revolving notes. Total loans held for investment decreased $72 million during the fourth quarter of 2009. This decrease is principally attributable to charge-offs of $66 million and transfers to other real estate owned of $17 million.

    Total deposits increased $225 million, or 3%, over the third quarter of 2009. For the full year 2009, total deposits increased $851 million, or 13%. Average non-interest bearing demand deposits increased 5% over the third quarter of 2009, and increased 5% for the full year 2009 over 2008.

    Due to poor/unattractive bond market conditions during the second half of 2009, the Company has been holding larger levels of interest bearing cash rather than investing into the bond portfolio. At December 31, 2009, the Company had $491 million of interest bearing cash earning 0.25%, the target Federal Funds Rate. This excess balance sheet liquidity has been increased as investment security alternatives in the current market are unattractive given the historically low interest rate environment. The Company plans to hold this extra interest bearing cash position until the investment alternatives in the market improve from a return/duration standpoint. Including secured off-balance sheet lines of credit, total available liquidity to the Company was $3 billion as of December 31, 2009, representing 32% of total assets and 39% of total deposits.

    Capital

    As of December 31, 2009, total shareholders' equity was $1.6 billion, comprised of $204 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 equity available to common shareholders of $1.4 billion. Book value per common share was $15.70, tangible book value per common share was $8.33 and the ratio of tangible common equity to tangible assets was 8.27%.

    In August 2009, the Company completed an underwritten public offering of common stock raising $258.7 million by issuing 26,538,461 shares of the Company's common stock, including 3,461,538 shares pursuant to the underwriters' over-allotment option, at a price of $9.75 per share. The net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were approximately $245.7 million. The net proceeds from the offering qualify as tangible common equity and Tier 1 capital and will be used for general corporate purposes, which may include capital to support growth and acquisition opportunities and to position the Company for eventual redemption of preferred stock issued to the U.S. Treasury under the Capital Purchase Program.

    The Company's estimated total risk-based capital ratio as of December 31, 2009 is 17.07%, and has increased from 14.62% as of December 31, 2008. Our total risk-based capital level is well in excess of the regulatory definition of "well capitalized" of 10.00%. This capital ratio as of December 31, 2009 is an estimate pending completion and filing of the Company's regulatory reports.

    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.

    After completion of the underwritten public offering of common stock in August 2009, the number of shares of common stock underlying the warrant issued to the U.S. Treasury were reduced by 50%, and now total 1,110,898 at the same exercise price of $14.46 per share.

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

    Non-GAAP Financial Measures

    In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Umpqua believes that certain non-GAAP financial measures provide investors with information useful in understanding Umpqua's financial performance; however, readers of this report are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.

    Umpqua incurs significant expenses related to the completion and integration of mergers. Additionally, we may recognize goodwill impairment losses that have no direct effect on the Company's or the Bank's cash balances, liquidity, or regulatory capital ratios. Accordingly, management believes that our operating results are best measured on a comparative basis excluding the impact of merger-related expenses, net of tax, and other charges related to business combinations such as goodwill impairment charges. We define operating earnings as earnings available to common shareholders before merger related expenses, net of tax, and goodwill impairment, and we calculate operating earnings per diluted share by dividing operating income by the same diluted share total used in determining diluted earnings per common share.

    The following table provides the reconciliation of net (loss) earnings available to common shareholders (GAAP) to operating (loss) earnings (non-GAAP), and net (loss) earnings per diluted common share (GAAP) to operating (loss) earnings per diluted share (non-GAAP) for the periods presented:

    
                                                              Sequential   Year over
    
                           Quarter ended:                     Quarter      Year
    
    (Dollars in
    thousands, except      12/31/09    9/30/09     12/31/08   % Change     % Change
    per share data)
    
    Net (loss) earnings
    available to common    $(29,924)   $(10,376)   $2,205     188%         (1457)%
    shareholders
    
    Add back: Merger
    expense, net of tax,   --          --          982        nm           nm
    and goodwill
    impairment
    
    Operating (loss)       $(29,924)   $(10,376)   $3,187     188%         (1039)%
    earnings
    
    Earnings (loss) per
    diluted share:
    
    Net (loss) earnings
    available to common    $(0.34)     $(0.14)     $0.04      143%         (950)%
    shareholders
    
    Operating (loss)       $(0.34)     $(0.14)     $0.05      143%         (780)%
    earnings
    
    
    
    
    
                                              Year ended:             Year over Year
    
                                              12/31/09     12/31/08   % Change
    
    Net (loss) earnings available to common   $(166,262)   $49,270    (437)%
    shareholders
    
    Add back: Merger expense, net of tax,     112,116      982        nm
    and goodwill impairment
    
    Operating (loss) earnings                 $(54,146)    $50,252    (208)%
    
    Earnings (loss) per diluted share:
    
    Net (loss) earnings available to common   $(2.36)      $0.82      (388)%
    shareholders
    
    Operating (loss) earnings                 $(0.77)      $0.83      (193)%
    
    nm = not meaningful
    
    
    
    

    Management believes "tangible common equity" and the "tangible common equity ratio" are meaningful measures of capital adequacy. Tangible common equity is calculated as total shareholders' equity less preferred stock and less goodwill and other intangible assets, net (excluding MSRs). In addition, tangible assets are total assets less goodwill and other intangible assets, net (excluding MSRs). The tangible common equity ratio is calculated as tangible common shareholders' equity divided by tangible assets.

    The following table provides reconciliations of ending shareholders' equity (GAAP) to ending tangible common equity (non-GAAP), and ending assets (GAAP) to ending tangible assets (non-GAAP).

    
    Dollars in thousands, except per share      12/31/09     9/30/09      12/31/08
    data
    
    Total shareholders' equity                  $1,566,517   $1,606,150   $1,487,008
    
    Subtract:
    
    Preferred stock                             204,335      203,779      202,178
    
    Goodwill and other intangible assets, net   639,634      641,759      757,833
    
    Tangible common shareholders' equity        $722,548     $760,612     $526,997
    
    Total assets                                $9,381,372   $9,204,346   $8,597,550
    
    Subtract:
    
    Goodwill and other intangible assets, net   639,634      641,759      757,833
    
    Tangible assets                             $8,741,738   $8,562,587   $7,839,717
    
    Common shares outstanding at period end     86,785,588   86,780,559   60,146,400
    
    Tangible common equity ratio                8.27%        8.88%        6.72%
    
    Tangible book value per common share        $8.33        $8.76        $8.76
    
    
    
    

    Subsequent event - FDIC assisted acquisition of EvergreenBank of Seattle, WA

    On January 22, 2010, the Washington Department of Financial Institutions closed EvergreenBank, Seattle, Washington and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. That same date, Umpqua Bank assumed the banking operations of EvergreenBank from the FDIC under a whole bank purchase and assumption agreement with loss sharing. In connection with the assumption, Umpqua Bank acquired assets totaling $420 million, including $370 million of loans, along with liabilities of $347 million, including $306 million of deposits. These amounts represent gross book values from interim balances, and do not include fair value adjustments. With this agreement, Umpqua Bank now operates seven additional store locations the greater Seattle, Washington market. The agreement includes loss sharing between the FDIC and Umpqua Bank, which after fair value adjustments, significantly mitigates the risk of future loss on the loan portfolio acquired. The acquisition is expected to be immediately accretive to operating earnings per share.

    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 162 locations between San Francisco, Calif., and Seattle, Wash., along the Oregon and Northern California Coast and in Central Oregon. Umpqua Holdings also owns a retail brokerage subsidiary, Umpqua Investments, Inc., which has locations in Umpqua Bank stores and in dedicated offices in Oregon. Umpqua Bank's Private Bank Division serves high net worth individuals and non-profits providing customized financial solutions and offerings. Umpqua Holdings Corporation is headquartered in Portland, Ore. For more information, visit www.umpquaholdingscorp.com.

    Umpqua Holdings Corporation will conduct a quarterly earnings conference call Thursday, January 28, 2010, at 10:00 a.m. PT (1:00 p.m. ET) during which the Company will discuss fourth quarter and 2009 year end 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 800-784-9386 a few minutes before 10:00 a.m. The conference ID is "49390663." 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 return to normalized earnings, limitations on exposure in our commercial real estate loan portfolio, our ability to effectively identify and manage that exposure and our expectation that the acquisition of certain EvergreenBank assets and liabilities will be immediately accretive to operating earnings per share. 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, unanticipated deterioration in the commercial real estate loan portfolio, and loss of, or inability to recruit, personnel to manage problem credits, unanticipated deterioration of the economy in our markets and unanticipated operating expenses, deposit runoff and/or loan losses relating to the EvergreenBank acquisition, that were not covered by fair value adjustments at the date of acquisition.

    
    Umpqua Holdings Corporation
    
    Consolidated Statements of Operations
    
    (Unaudited)
    
                    Quarter Ended:
    
                                                             Sequential   Year over
    
                                                             Quarter      Year
    
    Dollars in
    thousands,      Dec 31,      Sep 30,      Dec 31, 2008   % Change     % Change
    except per      2009         2009
    share data
    
    Interest
    income
    
    Loans and       $88,608      $89,474      $93,632        (1)%         (5)%
    leases
    
    Interest and
    dividends on
    investments:
    
    Taxable         16,570       15,365       11,253         8%           47%
    
    Exempt from
    federal         2,039        2,020        1,653          1%           23%
    income tax
    
    Dividends       --           22           36             (100)%       (100)%
    
    Temporary
    investments &   268          207          84             29%          219%
    interest
    bearing cash
    
    Total
    interest        107,485      107,088      106,658        0%           1%
    income
    
    Interest
    expense
    
    Deposits        20,190       22,132       28,252         (9)%         (29)%
    
    Repurchase
    agreements      153          163          262            (6)%         (42)%
    and fed funds
    purchased
    
    Junior
    subordinated    1,957        2,114        3,306          (7)%         (41)%
    debentures
    
    Term debt       641          917          1,794          (30)%        (64)%
    
    Total
    interest        22,941       25,326       33,614         (9)%         (32)%
    expense
    
    Net interest    84,544       81,762       73,044         3%           16%
    income
    
    Provision for
    loan and        68,593       52,108       31,955         32%          115%
    lease losses
    
    Non-interest
    income
    
    Service         8,392        8,542        8,668          (2)%         (3)%
    charges
    
    Brokerage       2,480        1,993        2,384          24%          4%
    fees
    
    Mortgage
    banking         4,071        4,288        (408)          (5)%         nm
    revenue, net
    
    Net (loss)
    gain on         (600)        158          (73)           (480)%       nm
    investment
    securities
    
    Gain (loss)
    on junior
    subordinated    (3,691)      982          8,751          (476)%       (142)%
    debentures
    carried at
    fair value
    
    Other income    2,372        1,962        1,559          21%          52%
    
    Total
    non-interest    13,024       17,925       20,881         (27)%        (38)%
    income
    
    Non-interest
    expense
    
    Salaries and    32,153       31,583       29,557         2%           9%
    benefits
    
    Occupancy and   10,407       9,937        9,442          5%           10%
    equipment
    
    Intangible      2,122        1,319        1,438          61%          48%
    amortization
    
    FDIC            3,180        3,321        1,368          (4)%         132%
    assessments
    
    Net loss on
    other real      9,094        8,641        2,658          5%           242%
    estate owned
    
    VISA            --           --           (2,085)        nm           (100)%
    litigation
    
    Goodwill        --           --           982            nm           (100)%
    impairment
    
    Merger
    related         --           --           --             --           --
    expenses
    
    Other           15,544       13,548       12,944         15%          20%
    
    Total
    non-interest    72,500       68,349       56,304         6%           29%
    expense
    
    (Loss) income
    before
    (benefit        (43,525)     (20,770)     5,666          110%         (868)%
    from)
    provision for
    income taxes
    
    (Benefit
    from)           (16,843)     (13,626)     1,836          24%          (1017)%
    provision for
    income taxes
    
    Net (loss)      (26,682)     (7,144)      3,830          273%         (797)%
    income
    
    Dividends and
    undistributed
    earnings        8            7            5              14%          60%
    allocated to
    participating
    securities
    
    Preferred
    stock           3,234        3,225        1,620          0%           100%
    dividend -
    undeclared
    
    Net (loss)
    earnings
    available to    $(29,924)    $(10,376)    $2,205         188%         (1457)%
    common
    shareholders
    
    Weighted
    average         86,782,397   74,084,640   60,134,062     17%          44%
    shares
    outstanding
    
    Weighted
    average
    diluted         86,782,397   74,084,640   60,491,507     17%          43%
    shares
    outstanding
    
    (Loss)
    earnings per    $(0.34)      $(0.14)      $0.04          143%         (950)%
    common share
    - Basic
    
    (Loss)
    earnings per    $(0.34)      $(0.14)      $0.04          143%         (950)%
    common share
    - Diluted
    
    nm = not meaningful
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Consolidated Statements of Operations
    
    (Unaudited)
    
                                              Year Ended:
    
    Dollars in thousands, except per share    Dec 31, 2009   Dec 31, 2008   % Change
    data
    
    Interest income
    
    Loans and leases                          $355,195       $393,927       (10)%
    
    Interest and dividends on investments:
    
    Taxable                                   60,195         41,189         46%
    
    Exempt from federal income tax            7,794          6,653          17%
    
    Dividends                                 22             334            (93)%
    
    Temporary investments & interest          526            443            19%
    bearing cash
    
    Total interest income                     423,732        442,546        (4)%
    
    Interest expense
    
    Deposits                                  88,742         129,370        (31)%
    
    Repurchase agreements and fed funds       680            2,220          (69)%
    purchased
    
    Junior subordinated debentures            9,026          13,655         (34)%
    
    Other borrowings                          4,576          6,994          (35)%
    
    Total interest expense                    103,024        152,239        (32)%
    
    Net interest income                       320,708        290,307        10%
    
    Provision for loan and lease losses       209,124        107,678        94%
    
    Non-interest income
    
    Service charges                           32,957         34,775         (5)%
    
    Brokerage fees                            7,597          8,948          (15)%
    
    Mortgage banking revenue, net             18,688         2,436          667%
    
    Net gain (loss) on investment             (1,677)        1,349          (224)%
    securities
    
    Gain on junior subordinated debentures    6,482          38,903         (83)%
    carried at fair value
    
    Proceeds from Visa mandatory partial      --             12,633         (100)%
    redemption
    
    Other income                              9,469          8,074          17%
    
    Total non-interest income                 73,516         107,118        (31)%
    
    Non-interest expense
    
    Salaries and benefits                     126,850        114,600        11%
    
    Occupancy and equipment                   39,673         37,047         7%
    
    Intangible amortization                   6,165          5,857          5%
    
    FDIC assessments                          15,825         5,182          205%
    
    Net loss on other real estate owned       23,204         8,313          179%
    
    Visa litigation                           --             (5,183)        (100)%
    
    Goodwill impairment                       111,952        982            nm
    
    Merger related expenses                   273            --             nm
    
    Other                                     55,461         49,772         11%
    
    Total non-interest expense                379,403        216,570        75%
    
    (Loss) income before (benefit from)       (194,303)      73,177         (366)%
    provision for income taxes
    
    (Benefit from) provision for income       (40,937)       22,133         (285)%
    taxes
    
    Net (loss) income                         (153,366)      51,044         (400)%
    
    Dividends and undistributed earnings      30             154            (81)%
    allocated to participating securities
    
    Preferred stock dividend - undeclared     12,866         1,620          694%
    
    Net (loss) earnings available to common   $(166,262)     $49,270        (437)%
    shareholders
    
    Weighted average shares outstanding       70,399,201     60,083,788     17%
    
    Weighted average diluted shares           70,399,201     60,423,867     17%
    outstanding
    
    (Loss) earnings per share - Basic         $(2.36)        $0.82          (388)%
    
    (Loss) earnings per share - Diluted       $(2.36)        $0.82          (388)%
    
    nm = not meaningful
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Consolidated Balance Sheets
    
    (Unaudited)
    
                                                             Sequential   Year over
    
                                                             Quarter      Year
    
    Dollars in
    thousands,      Dec 31,      Sep 30,      Dec 31, 2008   % Change     % Change
    except per      2009         2009
    share data
    
    Assets:
    
    Cash and due
    from banks,     $113,353     $108,768     $139,909       4%           (19)%
    non-interest
    bearing
    
    Cash and due
    from banks,     491,462      261,642      8,155          88%          nm
    interest
    bearing
    
    Temporary       598          575          56,612         4%           (99)%
    investments
    
    Investment
    securities:
    
    Trading         2,273        1,912        1,987          19%          14%
    
    Available for   1,795,616    1,848,482    1,238,712      (3)%         45%
    sale
    
    Held to         6,061        6,211        15,812         (2)%         (62)%
    maturity
    
    Loans held      33,715       23,614       22,355         43%          51%
    for sale
    
    Loans and       5,999,267    6,071,042    6,131,374      (1)%         (2)%
    leases
    
    Less:
    Allowance for   (107,657)    (103,136)    (95,865)       4%           12%
    loan and
    lease losses
    
    Loans and       5,891,610    5,967,906    6,035,509      (1)%         (2)%
    leases, net
    
    Restricted
    equity          15,211       15,211       16,491         0%           (8)%
    securities
    
    Premises and
    equipment,      103,266      101,883      104,694        1%           (1)%
    net
    
    Mortgage
    servicing       12,625       11,552       8,205          9%           54%
    rights, at
    fair value
    
    Goodwill and
    other           639,634      641,759      757,833        0%           (16)%
    intangibles,
    net
    
    Other real      24,566       26,705       27,898         (8)%         (12)%
    estate owned
    
    Other assets    251,382      188,126      163,378        34%          54%
    
    Total assets    $9,381,372   $9,204,346   $8,597,550     2%           9%
    
    Liabilities:
    
    Deposits        $7,440,434   $7,215,821   $6,588,935     3%           13%
    
    Securities
    sold under      45,180       50,031       47,588         (10)%        (5)%
    agreements to
    repurchase
    
    Term debt       76,274       76,329       206,531        0%           (63)%
    
    Junior
    subordinated    85,666       81,992       92,520         4%           (7)%
    debentures,
    at fair value
    
    Junior
    subordinated
    debentures,     103,188      103,269      103,655        0%           0%
    at amortized
    cost
    
    Other           64,113       70,754       71,313         (9)%         (10)%
    liabilities
    
    Total           7,814,855    7,598,196    7,110,542      3%           10%
    liabilities
    
    Shareholders'
    equity:
    
    Preferred       204,335      203,779      202,178        0%           1%
    stock
    
    Common stock    1,253,288    1,252,786    1,005,820      0%           25%
    
    Retained        83,939       118,204      264,938        (29)%        (68)%
    earnings
    
    Accumulated
    other           24,955       31,381       14,072         (20)%        77%
    comprehensive
    income
    
    Total
    shareholders'   1,566,517    1,606,150    1,487,008      (2)%         5%
    equity
    
    Total
    liabilities
    and             $9,381,372   $9,204,346   $8,597,550     2%           9%
    shareholders'
    equity
    
    Common shares
    outstanding     86,785,588   86,780,559   60,146,400     0%           44%
    at period end
    
    Book value
    per common      $15.70       $16.16       $21.36         (3)%         (27)%
    share
    
    Tangible book
    value per       $8.33        $8.76        $8.76          (5)%         (5)%
    common share
    
    Tangible
    equity -        $722,548     $760,612     $526,997       (5)%         37%
    common
    
    Tangible
    common equity   8.27%        8.88%        6.72%
    to tangible
    assets
    
    nm = not
    meaningful
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Loan Portfolio
    
    (Unaudited)
    
                                                                            Sequential   Year
                                                                                         over
    
    Dollars in     Dec 31, 2009       Sep 30, 2009       Dec 31, 2008       Quarter      Year
    thousands
    
    Loans and                                                                            %
    leases by      Amount      Mix    Amount      Mix    Amount      Mix    % Change     Change
    class:
    
    Commercial     $3,523,104  59%    $3,438,923  57%    $3,257,796  53%    2%           8%
    real estate
    
    Residential    443,731     7%     441,613     7%     435,287     7%     0%           2%
    real estate
    
    Construction   618,974     10%    748,337     12%    909,532     15%    (17)%        (32)%
    
    Total real     4,585,809   76%    4,628,873   76%    4,602,615   75%    (1)%         0%
    estate
    
    Commercial     1,354,469   23%    1,381,549   22%    1,460,909   24%    (2)%         (7)%
    
    Leases         34,528      1%     36,720      1%     40,155      1%     (6)%         (14)%
    
    Installment    35,863      1%     34,833      1%     39,145      1%     3%           (8)%
    and other
    
    Deferred
    loan fees,     (11,402)    0%     (10,933)    0%     (11,450)    0%     4%           0%
    net
    
    Total loans    $5,999,267  100%   $6,071,042  100%   $6,131,374  100%   (1)%         (2)%
    and leases
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Deposits by Type/Core Deposits
    
    (Unaudited)
    
                                                                                Sequential  Year
                                                                                            over
    
    Dollars in         Dec 31, 2009       Sep 30, 2009       Dec 31, 2008       Quarter     Year
    thousands
    
                       Amount      Mix    Amount      Mix    Amount      Mix    % Change    %
                                                                                            Change
    
    Demand, non        $1,398,332  19%    $1,337,280  19%    $1,254,079  19%    5%          12%
    interest-bearing
    
    Demand,            3,388,696   46%    3,185,128   44%    2,810,935   43%    6%          21%
    interest-bearing
    
    Savings            297,293     4%     294,482     4%     277,154     4%     1%          7%
    
    Time               2,356,113   32%    2,398,931   33%    2,246,767   34%    (2)%        5%
    
    Total Deposits     $7,440,434  100%   $7,215,821  100%   $6,588,935  100%   3%          13%
    
    Total Core
    deposits-ending    $5,837,024  78%    $5,608,058  78%    $5,277,728  80%    4%          11%
    (1)
    
    Number of open
    accounts:
    
    Demand, non        157,199            156,659            147,395            0%          7%
    interest-bearing
    
    Demand,            62,883             63,483             59,938             (1)%        5%
    interest-bearing
    
    Savings            74,884             74,421             69,661             1%          7%
    
    Time               34,249             35,495             33,023             (4)%        4%
    
    Total              329,215            330,058            310,017            0%          6%
    
    Average balance
    per account:
    
    Demand, non        $8.9               $8.5               $8.5
    interest-bearing
    
    Demand,            53.9               50.2               46.9
    interest-bearing
    
    Savings            4.0                4.0                4.0
    
    Time               68.8               67.6               68.0
    
    Total              22.6               21.9               21.3
    
    (1) Core deposits are defined as total deposits less time deposits greater than $100,000.
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Credit Quality
    
    (Unaudited)
    
                                                             Sequential   Year over
    
                    Quarter Ended                            Quarter      Year
    
    Dollars in      Dec 31,    Sep 30, 2009   Dec 31, 2008   % Change     % Change
    thousands       2009
    
    Allowance for
    credit
    losses:
    
    Balance
    beginning of    $103,136   $98,370        $93,982
    period
    
    Provision for
    loan and        68,593     52,108         31,955         32%          115%
    lease losses
    
    Charge-offs     (65,502)   (48,443)       (31,222)       35%          110%
    
    Less:           1,430      1,101          1,150          30%          24%
    Recoveries
    
    Net             (64,072)   (47,342)       (30,072)       35%          113%
    charge-offs
    
    Total
    Allowance for   107,657    103,136        95,865         4%           12%
    loan and
    lease losses
    
    Reserve for
    unfunded        731        841            983
    commitments
    
    Total
    Allowance for   $108,388   $103,977       $96,848        4%           12%
    credit losses
    
    Net
    charge-offs
    to average      4.19%      3.07%          1.94%
    loans and
    leases
    (annualized)
    
    Recoveries to
    gross           2.18%      2.27%          3.68%
    charge-offs
    
    Allowance for
    credit losses   1.81%      1.71%          1.58%
    to loans and
    leases
    
    Nonperforming
    assets:
    
    Loans on
    non-accrual     $193,118   $123,714       $127,914       56%          51%
    status
    
    Loans past
    due 90+ days    5,909      5,614          5,452          5%           8%
    & accruing
    interest
    
    Total
    nonperforming   199,027    129,328        133,366        54%          49%
    loans
    
    Other real      24,566     26,705         27,898         (8)%         (12)%
    estate owned
    
    Total
    nonperforming   $223,593   $156,033       $161,264       43%          39%
    assets
    
    Nonperforming
    loans to        3.32%      2.13%          2.18%
    total loans
    and leases
    
    Nonperforming
    assets to       2.38%      1.70%          1.88%
    total assets
    
    Past due        $41,458    $46,069        $59,138        (10)%        (30)%
    30-89 days
    
    Past due
    30-89 days to   0.69%      0.76%          0.96%
    total loans
    and leases
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Credit Quality (continued)
    
    (Unaudited)
    
                                           Year Ended:
    
    Dollars in thousands                   Dec 31, 2009   Dec 31, 2008   % Change
    
    Allowance for credit losses
    
    Balance beginning of period            $95,865        $84,904
    
    Provision for loan and lease losses    209,124        107,678        94%
    
    Charge-offs                            (200,867)      (101,052)      99%
    
    Less: Recoveries                       3,535          4,335          (18)%
    
    Net charge-offs                        (197,332)      (96,717)       104%
    
    Total Allowance for loan and lease     107,657        95,865         12%
    losses
    
    Reserve for unfunded commitments       731            983
    
    Total Allowance for credit losses      $108,388       $96,848        12%
    
    Net charge-offs to average loans and   3.23%          1.58%
    leases (annualized)
    
    Recoveries to gross charge-offs        1.76%          4.29%
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Selected Ratios
    
    (Unaudited)
    
                                                             Sequential   Year over
    
                    Quarter Ended:                           Quarter      Year
    
                    Dec 31,    Sep 30, 2009   Dec 31, 2008   Change       Change
                    2009
    
    Net Interest
    Spread:
    
    Yield on
    loans and       5.75%      5.77%          6.03%          (0.02)       (0.28)
    leases
    
    Yield on
    taxable         4.03%      4.22%          4.88%          (0.19)       (0.85)
    investments
    
    Yield on
    tax-exempt      5.81%      5.86%          5.81%          (0.05)       0.00
    investments
    (1)
    
    Yield on
    temporary
    investments     0.28%      0.28%          0.82%          0.00         (0.54)
    & interest
    bearing cash
    
    Total yield
    on earning      5.15%      5.29%          5.85%          (0.14)       (0.70)
    assets (1)
    
    Cost of
    interest        1.35%      1.50%          2.15%          (0.15)       (0.80)
    bearing
    deposits
    
    Cost of
    securities
    sold under
    agreements
    to              1.09%      1.08%          1.36%          0.01         (0.27)
    repurchase
    and fed
    funds
    purchased
    
    Cost of term    3.33%      3.68%          3.45%          (0.35)       (0.12)
    debt
    
    Cost of
    junior          4.19%      4.50%          6.42%          (0.31)       (2.23)
    subordinated
    debentures
    
    Total cost
    of interest     1.45%      1.62%          2.34%          (0.17)       (0.89)
    bearing
    liabilities
    
    Net interest    3.70%      3.67%          3.51%          0.03         0.19
    spread (1)
    
    Net interest
    margin -        4.06%      4.05%          4.02%          0.01         0.04
    Consolidated
    (1)
    
    Net interest
    margin -        4.15%      4.15%          4.20%          0.00         (0.05)
    Bank (1)
    
    As reported
    (GAAP):
    
    Return on
    average         (1.27)%    (0.45)%        0.10%          (0.82)       (1.37)
    assets
    
    Return on
    average         (1.37)%    (0.49)%        0.11%          (0.88)       (1.48)
    tangible
    assets
    
    Return on
    average         (8.41)%    (3.19)%        0.70%          (5.22)       (9.11)
    common
    equity
    
    Return on
    average
    tangible        (15.39)%   (6.35)%        1.75%          (9.04)       (17.14)
    common
    equity
    
    Efficiency
    ratio -         73.57%     67.91%         59.46%         5.66         14.11
    Consolidated
    
    Efficiency      67.99%     65.21%         60.84%         2.78         7.15
    ratio - Bank
    
    Excluding
    merger
    expense &
    goodwill
    impairment:
    
    Return on
    average         (1.27)%    (0.45)%        0.15%          (0.82)       (1.42)
    assets
    
    Return on
    average         (1.37)%    (0.49)%        0.17%          (0.88)       (1.54)
    tangible
    assets
    
    Return on
    average         (8.41)%    (3.19)%        1.00%          (5.22)       (9.41)
    common
    equity
    
    Return on
    average
    tangible        (15.39)%   (6.35)%        2.52%          (9.04)       (17.91)
    common
    equity
    
    Efficiency
    ratio -         73.57%     67.91%         58.42%         5.66         15.15
    Consolidated
    
    Efficiency      67.99%     65.21%         60.84%         2.78         7.15
    ratio - Bank
    
    (1) Tax exempt interest has been adjusted to a taxable equivalent basis using a
    35% tax rate.
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Selected Ratios
    
    (Unaudited)
    
                                              Year Ended:
    
                                              Dec 31, 2009   Dec 31, 2008   Change
    
    Net Interest Spread:
    
    Yield on loans and leases                 5.78%          6.42%          (0.64)
    
    Yield on taxable investments              4.34%          4.70%          (0.36)
    
    Yield on tax-exempt investments (1)       5.80%          5.68%          0.12
    
    Yield on temporary investments &          0.27%          1.82%          (1.55)
    interest bearing cash
    
    Total yield on earning assets (1)         5.39%          6.18%          (0.79)
    
    Cost of interest bearing deposits         1.56%          2.49%          (0.93)
    
    Cost of securities sold under
    agreements to repurchase and fed funds    1.12%          2.23%          (1.11)
    purchased
    
    Cost of term debt                         3.53%          3.60%          (0.07)
    
    Cost of junior subordinated debentures    4.74%          6.03%          (1.29)
    
    Total cost of interest bearing            1.70%          2.66%          (0.96)
    liabilities
    
    Net interest spread (1)                   3.69%          3.52%          0.17
    
    Net interest margin - Consolidated (1)    4.09%          4.07%          0.02
    
    Net interest margin - Bank (1)            4.20%          4.25%          (0.05)
    
    As reported (GAAP):
    
    Return on average assets                  (1.85)%        0.59%          (2.44)
    
    Return on average tangible assets         (2.01)%        0.65%          (2.66)
    
    Return on average equity                  (12.63)%       3.93%          (16.56)
    
    Return on average tangible equity         (26.91)%       9.99%          (36.90)
    
    Efficiency ratio - Consolidated           95.34%         54.08%         41.26
    
    Efficiency ratio - Bank                   93.77%         56.34%         37.43
    
    Excluding merger expense & goodwill
    impairment:
    
    Return on average assets                  (0.60)%        0.60%          (1.20)
    
    Return on average tangible assets         (0.65)%        0.66%          (1.31)
    
    Return on average equity                  (4.11)%        4.01%          (8.12)
    
    Return on average tangible equity         (8.77)%        10.19%         (18.96)
    
    Efficiency ratio - Consolidated           67.14%         53.84%         13.30
    
    Efficiency ratio - Bank                   65.08%         56.34%         8.74
    
    (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      Dec 31,     Sep 30, 2009   Dec 31, 2008   % Change     % Change
    thousands       2009
    
    Temporary
    investments &   $384,492    $291,214       $40,961        32%          839%
    interest
    bearing cash
    
    Investment
    securities,     1,645,629   1,458,333      924,722        13%          78%
    taxable
    
    Investment
    securities,     207,984     203,676        167,127        2%           24%
    tax-exempt
    
    Loans held      43,662      39,915         14,900         9%           193%
    for sale
    
    Loans and       6,072,606   6,111,146      6,158,620      (1)%         (1)%
    leases
    
    Total earning   8,354,373   8,104,284      7,306,330      3%           14%
    assets
    
    Goodwill &
    other           640,995     642,315        759,424        0%           (16)%
    intangible
    assets, net
    
    Total assets    9,332,737   9,100,407      8,425,353      3%           11%
    
    Non interest
    bearing         1,392,988   1,325,328      1,254,846      5%           11%
    demand
    deposits
    
    Interest
    bearing         5,943,110   5,866,098      5,235,651      1%           14%
    deposits
    
    Total           7,336,098   7,191,426      6,490,497      2%           13%
    deposits
    
    Interest
    bearing         6,260,408   6,211,237      5,723,779      1%           9%
    liabilities
    
    Shareholders'
    equity -        1,412,324   1,291,218      1,262,566      9%           12%
    common
    
    Tangible
    common equity   771,329     648,903        503,142        19%          53%
    (1)
    
    
    
    
    
    Umpqua Holdings Corporation
    
    Average Balances
    
    (Unaudited)
    
                                              Year Ended:
    
    Dollars in thousands                      Dec 31, 2009   Dec 31, 2008   % Change
    
    Temporary investments & interest          $193,486       $24,357        694%
    bearing cash
    
    Investment securities, taxable            1,386,960      883,987        57%
    
    Investment securities, tax-exempt         198,641        170,277        17%
    
    Loans held for sale                       42,261         17,840         137%
    
    Loans and leases                          6,103,666      6,118,540      0%
    
    Total earning assets                      7,925,014      7,215,001      10%
    
    Goodwill & other intangible assets, net   698,223        761,672        (8)%
    
    Total assets                              8,975,178      8,342,005      8%
    
    Non interest bearing demand deposits      1,318,954      1,255,263      5%
    
    Interest bearing deposits                 5,691,785      5,204,313      9%
    
    Total deposits                            7,010,739      6,459,576      9%
    
    Interest bearing liabilities              6,072,812      5,724,340      6%
    
    Shareholders' equity - common             1,315,953      1,254,730      5%
    
    Tangible common equity (1)                617,730        493,058        25%
    
    
    
    

    (1) Average tangible common equity is a non-GAAP financial measure. Average tangible common equity is calculated as average common shareholders' equity less average goodwill and other intangible assets, net (excluding MSRs).

    
    Umpqua Holdings Corporation
    
    Mortgage Banking Activity
    
    (unaudited)
    
                                                             Sequential   Year over
    
                  Quarter Ended:                             Quarter      Year
    
    Dollars in    Dec 31,      Sep 30, 2009   Dec 31, 2008   % Change     % Change
    thousands     2009
    
    Mortgage
    Servicing
    Rights
    (MSR):
    
    Mortgage
    loans         $1,277,832   $1,205,528     $955,494       6%           34%
    serviced
    for others
    
    MSR Asset,
    at fair       $12,625      $11,552        $8,205         9%           54%
    value
    
    MSR as % of
    serviced      0.99%        0.96%          0.86%
    portfolio
    
    Mortgage
    Banking
    Revenue:
    
    Origination   $3,804       $4,294         $1,987         (11)%        91%
    and sale
    
    Servicing     805          796            633            1%           27%
    
    Change in
    fair value    (538)        (802)          (3,028)        (33)%        (82)%
    of MSR
    asset
    
    Total
    Mortgage      $4,071       $4,288         $(408)         (5)%         nm
    Banking
    Revenue
    
    Closed loan   $172,303     $158,957       $70,430        8%           145%
    volume
    
                  Year Ended:
    
    Dollars in    Dec 31,      Dec 31, 2008   % Change
    thousands     2009
    
    Mortgage
    Banking
    Revenue:
    
    Origination   $18,844      $6,940         172%
    and sale
    
    Servicing     2,993        2,472          21%
    
    Change in
    fair value    (3,149)      (4,578)        (31)%
    of MSR
    asset
    
    Change in
    fair value    --           (2,398)        (100)%
    of MSR
    hedge
    
    Total
    Mortgage      $18,688      $2,436         667%
    Banking
    Revenue
    
    Closed loan   $756,997     $328,327       131%
    volume
    
    
    
    

    nm = not meaningful

    Additional detail on credit quality, trends, the loan portfolio by segment and non-performing assets

    The following tables present additional detail covering the following aspects of the Company's loan portfolio:

    • Table 1 - Residential development loan trends by region
    • Table 2 - Residential development loan stratification by size and by region
    • Table 3 - Non-performing asset detail by type and by region
    • Table 4 - Loans past due 30-89 days by type and by region
    • Table 5 - Loans past due 30-89 days trends
    • Table 6 - Restructured loans by type and by region
    • Table 7 - Commercial real estate loan portfolio by type and by region
    • Table 8 - Commercial real estate loan portfolio by type and by year of maturity
    • Table 9 - Commercial real estate loan portfolio by type and by year of origination
    • Table 10 - Commercial construction loan portfolio by type and by region
    • Table 11 - Commercial loan portfolio by type and by region

    The following is a geographic distribution of the residential development portfolio as of December 31, 2009, September 30, 2009 and December 31, 2008:

    
    Table 1- Residential development loan trends by region
    
    (Dollars in thousands)                                   Non-
    
                                                  % change   performing   Performing
    
                 Balance    Balance    Balance    from       loans        loans
    
                 12/31/08   9/30/09    12/31/09   12/31/08   12/31/09     12/31/09
    
    Northwest    $134,506   $93,745    $88,762    (34)%      $4,090       $84,672
    Oregon
    
    Central      31,186     13,753     9,059      (71)%      2,729        6,330
    Oregon
    
    Southern     33,850     21,852     19,006     (44)%      4,950        14,056
    Oregon
    
    Washington   27,531     17,690     8,616      (69)%      0            8,616
    
    Greater      109,181    80,107     74,993     (31)%      23,391       51,602
    Sacramento
    
    Northern     47,905     31,336     25,373     (47)%      10,324       15,049
    California
    
    Total        $384,159   $258,483   $225,809   (41)%      $45,484      $180,325
    
    % of total
    loan         6%         4%         4%                                 3%
    portfolio
    
    Quarter      $          $          $
    change $     (71,158)   (42,807)   (32,674)
    
    Quarter      (16)%      (14)%      (13)%
    change %
    
    
    
    

    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 December 31, 2009:

    
    Table 2 - Residential development loan stratification by size and by region
    
    (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    $4,674     $8,770    $22,307  $17,480  $16,635  $14,806  $84,672
    Oregon
    
    Central      514        2,115     3,701    --       --       --       6,330
    Oregon
    
    Southern     1,209      7,330     5,517    --       --       --       14,056
    Oregon
    
    Washington   --         632       4,792    3,192    --       --       8,616
    
    Greater      3,605      6,487     4,628    4,867    11,455   20,560   51,602
    Sacramento
    
    Northern     1,640      3,792     9,617    --       --       --       15,049
    California
    
    Total        $11,642    $29,126   $50,562  $25,539  $28,090  $35,366  $180,325
    
    % of Total   6%         16%       28%      14%      16%      20%      100%
    
    
    
    

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

    
    Table 3 - Non-performing asset detail by type and by region
    
    (Dollars in thousands)
    
                     Northwest   Central   Southern                Greater      Northern
    
                     Oregon      Oregon    Oregon     Washington   Sacramento   California   Total
    
    Loans 90 days
    past due:
    
    Residential      $--         $--       $--        $--          $--          $--          $--
    development
    
    Commercial       --          --        --         --           --           --           --
    construction
    
    Commercial       --          --        --         247          --           --           247
    real estate
    
    Commercial       --          --        --         1,000        266          --           1,266
    
    Other            4,222       --        --         --           174          --           4,396
    
    Total 90 days    $4,222      $--       $--        $1,247       $440         $--          $5,909
    past due
    
    Non-accrual
    loans:
    
    Residential      $4,090      $2,729    $4,950     $--          $23,391      $10,324      $45,484
    development
    
    Commercial       10,061      987       --         2,700        18,602       4,308        36,658
    construction
    
    Commercial       16,101      4,043     5,029      1,566        20,821       14,819       62,379
    real estate
    
    Commercial       31,329      3,591     481        9,963        328          2,905        48,597
    
    Other            --          --        --         --           --           --           --
    
    Total
    non-accrual      $61,581     $11,350   $10,460    $14,229      $63,142      $32,356      $193,118
    loans
    
    Total
    non-performing   $65,803     $11,350   $10,460    $15,476      $63,582      $32,356      $199,027
    loans
    
    Other real
    estate owned:
    
    Residential      $2,772      $4,643    $1,064     $4,885       $1,987       $144         $15,495
    development
    
    Commercial       359         392       --         426          3,595        --           4,772
    construction
    
    Commercial       430         --        514        --           --           --           944
    real estate
    
    Commercial       303         982       --         --           --           151          1,436
    
    Other            1,919       --        --         --           --           --           1,919
    
    Total OREO       $5,783      $6,017    $1,578     $5,311       $5,582       $295         $24,566
    
    Total
    non-performing   $71,586     $17,367   $12,038    $20,787      $69,164      $32,651      $223,593
    assets
    
    % of total       32%         8%        5%         9%           31%          15%          100%
    
    
    
    

    The Company has aggressively charged-down impaired assets to their disposition values. As of December 31, 2009, the non-performing assets of $223.6 million have been written down by 41%, or $154.8 million, from their original balance of $378.4 million.

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

    
    Table 4 - Loans past due 30-89 days by type and by region
    
    (Dollars in thousands)
    
                   Northwest   Central   Southern                Greater      Northern
    
                   Oregon      Oregon    Oregon     Washington   Sacramento   California   Total
    
    Loans 30-89
    days past
    due:
    
    Residential    $7,500      $1,041    $--        $--          $283         $126         $8,950
    development
    
    Commercial     442         --        --         683          --           110          1,235
    construction
    
    Commercial     4,160       695       287        3,819        2,629        7,055        18,645
    real estate
    
    Commercial     1,553       529       --         --           772          5,531        8,385
    
    Other          3,171       --        --         --           1,072        --           4,243
    
    Total 30-89
    days past      $16,826     $2,265    $287       $4,502       $4,756       $12,822      $41,458
    due
    
    
    
    
    
    Table 5 - Loans past due 30-89 days trends
    
    (Dollars in thousands)
    
                                                              Sequential   Year
    
                                                              Quarter      Over Year
    
                              12/31/09   9/30/09   12/31/08   % Change     % Change
    
    Loans 30-89 days past
    due:
    
    Residential development   $8,950     $8,766    $29,472    2%           (70)%
    
    Commercial construction   1,235      9,361     629        (87)%        96%
    
    Commercial real estate    18,645     14,405    16,882     29%          10%
    
    Commercial                8,385      10,294    8,296      (19)%        1%
    
    Other                     4,243      3,243     3,859      31%          10%
    
    Total 30-89 days past     $41,458    $46,069   $59,138    (10)%        30%
    due
    
    
    
    

    The following is a distribution of restructured loans by loan type by region as of December 31, 2009:

    
    Table 6 - Restructured loans by type and by region
    
    (Dollars in thousands)
    
                   Northwest   Central   Southern                Greater      Northern
    
                   Oregon      Oregon    Oregon     Washington   Sacramento   California   Total
    
    Restructured
    loans,
    accrual
    basis:
    
    Residential    $26,994     $--       $306       $7,985       $33,103      $--          $68,388
    development
    
    Commercial     --          --        --         --           --           --           --
    construction
    
    Commercial     18,349      --        5,790      --           9,742        7,866        41,747
    real estate
    
    Commercial     715         --        --         --           279          18,628       19,622
    
    Other          4,634       --        --         --           48           --           4,682
    
    Total
    restructured   $50,692     $--       $6,096     $7,985       $43,172      $26,494      $134,439
    loans
    
    
    
    

    The following is a distribution of the term commercial real estate portfolio by type and by region as of December 31, 2009:

    
    Table 7 - Commercial real estate loan portfolio by type and by region
    
    (Dollars in thousands)
    
                   Northwest    Central   Southern                Greater      Northern                  % of
                                                                                                         total
    
                   Oregon       Oregon    Oregon     Washington   Sacramento   California   Total        Portfolio
    
    Non-owner
    occupied:
    
    Commercial     $110,805     $4,367    $37,924    $15,820      $106,502     $101,516     $376,934     11%
    building
    
    Medical        80,514       1,104     15,711     4,210        16,473       13,562       131,574      4%
    office
    
    Professional   176,920      8,649     54,413     26,213       106,395      65,559       438,149      12%
    office
    
    Storage        20,747       352       18,698     --           17,477       39,876       97,150       3%
    
    Multifamily    60,579       249       10,251     1,428        5,630        20,173       98,310       3%
    5+
    
    Resort         2,064        --        5,081      --           --           --           7,145        0%
    
    Retail         223,272      3,528     33,101     11,178       165,667      73,723       510,469      15%
    
    Residential    32,030       352       13,002     6,056        10,219       18,677       80,336       2%
    
    Farmland &     5,976        223       638        --           204          29,000       36,041       1%
    agriculture
    
    Apartments     61,395       --        9,925      --           11,330       22,601       105,251      3%
    
    Assisted       106,607      --        67,486     --           2,933        8,725        185,751      5%
    living
    
    Hotel/motel    50,782       --        1,023      11,112       18,066       18,653       99,636       3%
    
    Industrial     29,656       3,584     7,751      --           36,983       23,565       101,539      3%
    
    RV park        31,158       675       15,490     --           821          5,963        54,107       2%
    
    Warehouse      11,416       --        237        --           1,198        1,717        14,568       0%
    
    Other          31,851       1,055     3,668      3,522        3,746        5,599        49,441       1%
    
    Total
    non-owner      $1,035,772   $24,138   $294,399   $79,539      $503,644     $448,909     $2,386,401   68%
    occupied
    
    Owner
    occupied:
    
    Commercial     $163,314     $2,639    $31,417    $12,388      $61,729      $108,766     $380,253     11%
    building
    
    Medical        64,699       3,319     17,553     2,218        1,646        25,977       115,412      3%
    office
    
    Professional   49,118       2,830     12,479     3,324        21,489       17,174       106,414      3%
    office
    
    Storage        15,061       149       --         663          148          5,087        21,108       1%
    
    Multifamily    869          --        60         --           158          --           1,087        0%
    5+
    
    Resort         5,736        --        --         --           3,131        1,067        9,934        0%
    
    Retail         59,651       2,939     12,402     4,055        31,954       57,872       168,873      5%
    
    Residential    6,974        --        2,632      --           1,401        2,814        13,821       0%
    
    Farmland &     10,906       --        822        --           --           44,904       56,632       2%
    agriculture
    
    Apartments     202          --        741        --           51           --           994          0%
    
    Assisted       27,656       --        146        --           6,964        15,619       50,385       1%
    living
    
    Hotel/motel    12,226       --        192        716          --           24,330       37,464       1%
    
    Industrial     53,607       1,409     13,958     1,562        9,480        39,030       119,046      3%
    
    RV park        144          --        2,544      --           161          1,239        4,088        0%
    
    Warehouse      10,885       --        410        --           1,145        6,921        19,361       1%
    
    Other          28,417       1,513     --         --           276          1,625        31,831       1%
    
    Total owner    $509,465     $14,798   $95,356    $24,926      $139,733     $352,425     $1,136,703   32%
    occupied
    
    Total
    commercial     $1,545,237   $38,936   $389,755   $104,465     $643,377     $801,334     $3,523,104   100%
    real estate
    
    % of total     44%          1%        11%        3%           18%          23%          100%
    
    
    
    

    The following is a distribution of the term commercial real estate portfolio by type and by year of maturity as of December 31, 2009:

    
    Table 8 - Commercial real estate loan portfolio by type and by year of maturity
    
    (Dollars in thousands)
    
                                         2012-      2014-      2016-        2021 &
    
                   2010       2011       2013       2015       2020         Later      Total
    
    Non-owner
    occupied:
    
    Commercial     $17,630    $19,250    $61,651    $59,837    $202,742     $15,824    $376,934
    building
    
    Medical        1,280      955        5,181      34,265     79,066       10,827     131,574
    office
    
    Professional   32,221     7,338      89,564     101,780    194,867      12,379     438,149
    office
    
    Storage        1,317      2,125      14,182     21,593     54,559       3,374      97,150
    
    Multifamily    4,100      2,144      11,275     22,792     53,327       4,672      98,310
    5+
    
    Resort         --         --         692        871        1,193        4,389      7,145
    
    Retail         28,368     21,276     65,163     158,049    232,364      5,249      510,469
    
    Residential    23,840     10,661     8,952      10,548     21,662       4,673      80,336
    
    Farmland &     10,171     349        2,948      4,843      15,159       2,571      36,041
    agriculture
    
    Apartments     6,033      1,683      5,789      15,872     73,174       2,700      105,251
    
    Assisted       22,847     24,084     20,919     33,489     82,137       2,275      185,751
    living
    
    Hotel/motel    4,830      6,034      18,065     35,732     30,271       4,704      99,636
    
    Industrial     2,780      3,856      16,434     24,948     47,290       6,231      101,539
    
    RV park        1,308      846        6,712      14,685     28,894       1,662      54,107
    
    Warehouse      420        125        6,862      2,795      4,366        --         14,568
    
    Other          16,114     4,463      9,158      6,942      9,098        3,666      49,441
    
    Total
    non-owner      $173,259   $105,189   $343,547   $549,041   $1,130,169   $85,196    $2,386,401
    occupied
    
    Owner
    occupied:
    
    Commercial     $12,932    $4,284     $35,356    $56,324    $224,348     $47,009    $380,253
    building
    
    Medical        --         78         6,873      10,821     74,471       23,169     115,412
    office
    
    Professional   2,908      1,000      18,857     24,581     52,664       6,404      106,414
    office
    
    Storage        1,480      149        2,621      1,370      14,794       694        21,108
    
    Multifamily    25         --         638        244        180          --         1,087
    5+
    
    Resort         --         --         108        3,955      5,871        --         9,934
    
    Retail         1,545      5,078      19,517     32,809     99,310       10,614     168,873
    
    Residential    2,407      230        2,681      3,169      3,655        1,679      13,821
    
    Farmland &     1,128      3,677      2,585      11,961     34,678       2,603      56,632
    agriculture
    
    Apartments     --         --         --         51         943          --         994
    
    Assisted       175        --         4,932      18,576     24,500       2,202      50,385
    living
    
    Hotel/motel    1,744      9          8,657      6,846      11,038       9,170      37,464
    
    Industrial     3,520      3,788      16,441     23,826     52,617       18,854     119,046
    
    RV park        165        --         777        571        2,414        161        4,088
    
    Warehouse      1,149      338        1,618      9,128      7,024        104        19,361
    
    Other          1,768      715        169        762        3,238        25,179     31,831
    
    Total owner    $30,946    $19,346    $121,830   $204,994   $611,745     $147,842   $1,136,703
    occupied
    
    Total
    commercial     $204,205   $124,535   $465,377   $754,035   $1,741,914   $233,038   $3,523,104
    real estate
    
    % of total     6%         4%         13%        21%        49%          7%         100%
    
    
    
    

    The following is a distribution of the term commercial real estate portfolio by type and by year of origination as of December 31, 2009:

    
    Table 9 - Commercial real estate loan portfolio by type and by year of origination
    
    (Dollars in thousands)
    
                   Prior to   2000-        2005-      2007-
    
                   2000       2004         2006       2008       2009       Total
    
    Non-owner
    occupied:
    
    Commercial     $14,211    $90,648      $63,746    $144,016   $64,313    $376,934
    building
    
    Medical        627        48,475       17,947     47,143     17,382     131,574
    office
    
    Professional   13,804     168,057      140,227    83,757     32,304     438,149
    office
    
    Storage        1,940      49,505       26,866     18,487     352        97,150
    
    Multifamily    3,709      27,098       19,122     42,829     5,552      98,310
    5+
    
    Resort         737        5,715        --         693        --         7,145
    
    Retail         10,439     178,260      158,973    148,617    14,180     510,469
    
    Residential    1,328      10,029       27,581     27,379     14,019     80,336
    
    Farmland &     856        8,217        12,328     6,899      7,741      36,041
    agriculture
    
    Apartments     838        25,494       23,169     23,176     32,574     105,251
    
    Assisted       7,356      55,791       92,412     16,164     14,028     185,751
    living
    
    Hotel/motel    12,537     43,180       20,097     22,990     832        99,636
    
    Industrial     3,298      42,813       40,341     14,450     637        101,539
    
    RV park        3,127      17,656       16,553     11,071     5,700      54,107
    
    Warehouse      1,131      8,989        3,828      620        --         14,568
    
    Other          659        10,332       14,962     20,764     2,724      49,441
    
    Total
    non-owner      $76,597    $790,259     $678,152   $629,055   $212,338   $2,386,401
    occupied
    
    Owner
    occupied:
    
    Commercial     $10,711    $82,631      $91,642    $124,725   $70,544    $380,253
    building
    
    Medical        2,284      22,428       13,099     27,246     50,355     115,412
    office
    
    Professional   4,184      34,752       28,700     33,004     5,774      106,414
    office
    
    Storage        547        5,312        5,437      9,164      648        21,108
    
    Multifamily    179        908          --         --         --         1,087
    5+
    
    Resort         415        6,412        139        --         2,968      9,934
    
    Retail         6,024      39,775       61,738     56,705     4,631      168,873
    
    Residential    128        5,226        4,331      2,336      1,800      13,821
    
    Farmland &     1,499      10,066       15,010     19,343     10,714     56,632
    agriculture
    
    Apartments     51         --           --         943        --         994
    
    Assisted       4,975      7,831        21,212     14,200     2,167      50,385
    living
    
    Hotel/motel    3,927      15,956       5,765      1,592      10,224     37,464
    
    Industrial     2,929      46,104       36,049     13,852     20,112     119,046
    
    RV park        877        1,074        --         1,993      144        4,088
    
    Warehouse      114        9,410        2,666      2,409      4,762      19,361
    
    Other          --         1,877        21,260     7,911      783        31,831
    
    Total owner    $38,844    $289,762     $307,048   $315,423   $185,626   $1,136,703
    occupied
    
    Total
    commercial     $115,441   $1,080,021   $985,200   $944,478   $397,964   $3,523,104
    real estate
    
    % of total     3%         31%          28%        27%        11%        100%
    
    
    
    

    The following is a distribution of the commercial construction portfolio by type and by region as of December 31, 2009:

    
    Table 10 - Commercial construction loan portfolio by type and by region
    
    (Dollars in thousands)
    
                   Northwest   Central   Southern                Greater      Northern                % of
                                                                                                      total
    
                   Oregon      Oregon    Oregon     Washington   Sacramento   California   Total      Portfolio
    
    Non-owner
    occupied:
    
    Commercial     $19,726     $--       $3,023     $9,434       $31,565      $2,250       $65,998    18%
    building
    
    Medical        15,429      --        264        --           --           400          16,093     4%
    office
    
    Professional   16,472      --        --         --           15,180       3,500        35,152     10%
    office
    
    Storage        6,100       --        --         --           1,711        3,094        10,905     3%
    
    Multifamily    1,339       --        --         --           6,184        --           7,523      2%
    5+
    
    Retail         15,801      --        --         --           6,456        1,212        23,469     6%
    
    Residential    29,314      1,778     5,128      4,630        39,188       11,167       91,205     25%
    
    Apartments     13,621      --        --         --           --           --           13,621     4%
    
    Assisted       16,196      --        --         --           209          --           16,405     5%
    living
    
    Hotel/motel    --          --        --         --           --           4,070        4,070      1%
    
    Industrial     --          --        --         --           1,515        18           1,533      0%
    
    Other          249         --        --         --           --           3,000        3,249      1%
    
    Total
    non-owner      $134,247    $1,778    $8,415     $14,064      $102,008     $28,711      $289,223   79%
    occupied
    
    Owner
    occupied:
    
    Commercial     $14,342     $--       $171       $--          $10,421      $10,498      $35,432    10%
    building
    
    Medical        14,472      --        403        --           3,511        463          18,849     5%
    office
    
    Professional   --          --        --         --           --           --           --         0%
    office
    
    Storage        995         --        --         --           --           --           995        0%
    
    Multifamily    --          --        --         --           --           --           --         0%
    5+
    
    Retail         --          --        --         --           --           4,041        4,041      1%
    
    Residential    4,981       --        --         --           3,675        619          9,275      3%
    
    Apartments     860         --        --         --           --           --           860        0%
    
    Assisted       7,472       --        --         --           --           --           7,472      2%
    living
    
    Hotel/motel    --          --        --         --           --           --           --         0%
    
    Industrial     415         --        118        --           --           --           533        0%
    
    Other          --          --        --         --           --           --           --         0%
    
    Total owner    $43,537     $--       $692       $--          $17,607      $15,621      $77,457    21%
    occupied
    
    Total
    commercial     $177,784    $1,778    $9,107     $14,064      $119,615     $44,332      $366,680   100%
    construction
    
    % of total     48%         1%        2%         4%           33%          12%          100%
    
    
    
    

    The following is a distribution of the commercial loan portfolio by type and by region as of December 31, 2009:

    
    Table 11 - Commercial loan portfolio by type and by region
    
    (Dollars in thousands)
    
                  Northwest   Central   Southern                Greater      Northern                  % of
                                                                                                       total
    
                  Oregon      Oregon    Oregon     Washington   Sacramento   California   Total        Portfolio
    
    Commercial
    line of       $171,342    $3,050    $30,394    $28,005      $151,609     $80,017      $464,417     34%
    credit
    
    Asset based
    line of       82,518      160       580        6,501        3,918        53,697       147,374      11%
    credit
    
    Term loan     168,579     4,138     28,647     8,970        42,804       126,295      379,433      28%
    
    Agriculture   29,696      --        786        --           287          53,461       84,230       6%
    
    Municipal     15,680      --        20,778     --           73,640       9,798        119,896      9%
    
    Government    --          --        --         --           --           60,936       60,936       5%
    guaranteed
    
    Small         45,560      --        --         4,097        48,526       --           98,183       7%
    business
    
    Total
    commercial    $513,375    $7,348    $81,185    $47,573      $320,784     $384,204     $1,354,469   100%
    loans
    
    % of total    38%         1%        6%         3%           24%          28%          100%
    
    
    
    

    
        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