• Umpqua Holdings Corporation
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  • Umpqua Holdings Reports Stronger Second Quarter 2010 Results
    Company Release - 07/27/2010 08:00

    Second quarter 2010 net income of $0.03 per diluted share, operating income of $0.04 per diluted share

    Non-covered, non-performing assets declined to 1.90% of total assets

    Allowance for credit losses increased to 2.00% of non-covered loans

    FDIC-assisted assumption of Nevada Security Bank, Reno, Nevada during second quarter of 2010

    PORTLAND, Ore.--(BUSINESS WIRE)-- Umpqua Holdings Corporation (NASDAQ: UMPQ), parent company of Umpqua Bank and Umpqua Investments, Inc. today announced second quarter 2010 net earnings available to common shareholders of $3.4 million, or $0.03 per diluted common share, compared to a net loss available to common shareholders of $107.5 million, or $1.79 per diluted common share, for the same period in the prior year.

    Operating income, defined as earnings available to common shareholders before gains or losses on junior subordinated debentures carried at fair value, net of tax, bargain purchase gains on acquisitions, net of tax, merger related expenses, net of tax, and goodwill impairment, was $4.7 million, or $0.04 per diluted common share for the second quarter of 2010, compared to an operating loss of $0.7 million, or $0.01 per diluted common share, for the same period in the prior year. 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 second quarter of 2010 include:

    • Provision for loan losses of $29.8 million, a 29% decrease, and total net charge-offs of $26.6 million, a 32% decrease, on a sequential quarter basis;
    • The allowance for credit losses increased to 2.00% of non-covered total loans;
    • Non-covered, non-performing assets ended the quarter at 1.90% of total assets;
    • Total deposits increased $352 million, or 4%, on a sequential quarter basis and 26% over June 30, 2009;
    • Net interest income of $92.3 million, an increase of 6% on a sequential quarter basis, and an increase of 17% over the same period in the prior year;
    • Net interest margin, on a tax equivalent basis, remained stable at 4.05%;
    • The cost of interest bearing deposits for the second quarter of 2010 was 1.10%, a decrease of 9 basis points on a sequential quarter basis;
    • Tangible common equity ratio increased from 7.82% to 9.54% during the quarter, resulting from the conversion of preferred stock into common equity;
    • Total risk-based capital of 17.60%.

    “This past quarter the company experienced continued improvement in our credit quality metrics resulting in improved operating earnings. We remain aggressive in resolving non-performing assets at this stage of the credit cycle, and will continue to position Umpqua for improved performance in the future,” said Ray Davis, president and CEO of Umpqua Holdings Corporation. “We are also pleased to have acquired the banking operations of Nevada Security Bank in Reno, Nevada, adding a new state to the Company’s footprint.”

    FDIC-assisted acquisitions

    On June 18, 2010, the Nevada State Financial Institutions Division closed Nevada Security Bank (“Nevada Security”), Reno, Nevada and appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. That same date, Umpqua Bank assumed the banking operations of Nevada Security from the FDIC under a whole bank purchase and assumption agreement with loss sharing. After purchase accounting fair value adjustments, Umpqua Bank acquired assets totaling $438 million, including $209 million of loans, and assumed deposit liabilities of $437 million. With this acquisition, Umpqua Bank added five store locations, including three in Reno, Nevada, one in Incline Village, Nevada, and one in Roseville, California.

    We believe the loss sharing agreement for this acquisition substantially covers the future losses of the loan portfolio and other real estate owned acquired. We refer to the acquired loan portfolio and other real estate owned as “covered loans” and “covered other real estate owned,” respectively, and these are presented as separate line items in our consolidated balance sheet. Collectively these balances will be referred to as “covered assets.” The loss sharing agreements and acquisition-date fair value adjustments significantly mitigate the risk of future financial losses being recognized as a result of credit losses on the covered assets acquired.

    The acquisition of Nevada Security has been immediately accretive to operating earnings per share. Nevada Security has contributed operating earnings of approximately $0.2 million since acquisition. We expect to complete the rebranding of the acquired banking locations in the third quarter of 2010 and integrate the systems by the fourth quarter of 2010.

    Please refer to table 7 on page 23 of this release for additional information related to the fair values of assets acquired and liabilities assumed with the Nevada Security acquisition.

    In the first quarter of 2010, Umpqua Bank assumed the banking operations of EvergreenBank (“Evergreen”) and Rainier Pacific Bank (“Rainier”), both located in the greater Seattle-Tacoma area of Washington. The operations of Evergreen and Rainier have contributed operating earnings of $1.4 million and $2.0 million, respectively, in the second quarter of 2010, and $3.0 million and $2.7 million, respectively, since their assumptions. The operating systems of both institutions have been converted onto Umpqua’s platform.

    Asset quality – Non-covered loan portfolio

    Non-performing assets were $205.5 million, or 1.90% of total assets, as of June 30, 2010, compared to $209.6 million, or 1.99% of total assets as of March 31, 2010, and $150.0 million, or 1.73% of total assets as of June 30, 2009. Of this amount, $170.6 million represented non-accrual loans, $9.2 million represented loans past due greater than 90 days and still accruing interest, and $25.7 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 June 30, 2010, the non-performing assets of $205.5 million have been written down by 43%, or $154.3 million, from their original balance of $359.8 million.

    The provision for loan losses for the second quarter of 2010 was $29.8 million. Total net charge-offs for the second quarter of 2010 were $26.6 million, resulting in a reserve build of the allowance for credit losses to 2.00% of non-covered loans and leases at June 30, 2010, as compared to 1.91% of total non-covered loans as of March 31, 2010 and 1.63% of total non-covered loans as of June 30, 2009. The annualized net charge-off rate of 1.84% for the second quarter represents a 31% decline in this rate as compared to the first quarter 2010.

    Loans past due 30-89 days were $40.1 million, or 0.70% of non-covered loans and leases as of June 30, 2010, as compared to $53.9 million, or 0.93% as of March 31, 2010, and $48.8 million, or 0.80% as of June 30, 2009.

    Since 2007, the Company has been aggressively resolving problems arising from the current economic downturn. The following table recaps the Company’s credit quality trends since the second quarter of 2007 as it relates to the non-covered loan portfolio:

    Credit quality trends – Non-covered loans

    (Dollars in thousands)

     

        Allowance         Non-covered,
          Provision     Netfor credit lossesnon-performing
    forcharge-offsto non-covered30-89 daysassets to
    loan loss     (recoveries)     loans %     past due %     total assets %
    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%
    Q1 2010 42,106 38,979 1.91% 0.93% 1.99%
    Q2 2010   29,767       26,637 2.00% 0.70% 1.90%
    Total $ 430,322     $ 381,749
     

    Non-covered construction loan portfolio

    Total non-covered construction loans as of June 30, 2010 were $495 million, representing a decrease of 11% from December 31, 2009, and a decrease of 38% from June 30, 2009. Within this portfolio, the residential development loan segment was $176 million, or 3% of the total non-covered loan portfolio. Of this amount, $33 million represented non-performing loans, and $143 million represented performing loans. The residential development loan segment has decreased $125 million, or 42%, since June 30, 2009.

    The remaining $319 million in non-covered construction loans as of June 30, 2010 primarily represents commercial construction projects. Total non-covered non-performing commercial construction loans were $26.0 million at June 30, 2010, and $0.9 million were past due 30-89 days as of June 30, 2010.

    Non-covered commercial real estate loan portfolio

    The total non-covered term commercial real estate loan portfolio was $3.5 billion as of June 30, 2010. Of this total, $2.3 billion are non-owner occupied and $1.2 billion are owner occupied. Of the total term commercial real estate portfolio, $22.9 million, or 0.66%, are past due 30-89 days as of June 30, 2010. Of the total non-covered commercial real estate portfolio, 4% matures in 2010, 4% in 2011, 14% in years 2012-2013, and 21% in years 2014-2015. The remaining 57% 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 18 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 believe we are well positioned to manage the exposure and work with our customers until the economic climate improves.

    Non-covered restructured loans

    Restructured loans on accrual status were $80.5 million as of June 30, 2010, down 18% from $98.0 million as of March 31, 2010, and down 36% from $126.0 million as of June 30, 2009. The decrease during the second quarter primarily resulted from payments received and reclassifications of loans previously restructured to non-accrual status. 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 generally 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 information related to asset quality

    Additional tables can be found at the end of this earnings release covering the following aspects of the Company's non-covered loan portfolio, including: 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, and restructured loans by type and by region.

    Asset quality – Covered loan portfolio

    Covered non-performing assets were $87.1 million, or 0.80% of total assets, as of June 30, 2010. Of this amount, $58.8 million represented non-accrual loans, and $28.3 million was OREO. These covered non-performing assets were written-down to their estimated fair value on their acquisition date, incorporating our estimate of future expected cash flows until the ultimate resolution of these credits. The estimated credit losses embedded in these acquired non-performing loan portfolios were based on management’s and third-party consultants’ credit reviews of the portfolios performed during the due diligence process related to the Evergreen, Rainier and Nevada Security transactions. To the extent actual or projected cash flows are less than originally estimated, additional provisions for loan losses on the covered loan portfolio will be recognized; however, these provisions would be mostly offset by a corresponding increase in the FDIC indemnification (loss sharing) asset recorded in non-interest income.

    Net interest margin

    The Company reported a tax equivalent net interest margin of 4.05% for the second quarter of 2010, compared to 4.04% for the first quarter of 2010, and 4.20% for the second quarter of 2009. The increase in net interest margin on a sequential quarter basis resulted primarily from an increase in average covered loans outstanding and declining costs of interest bearing deposits, partially offset by interest reversals of new non-accrual loans, a decline in non-covered loans outstanding and the impact of holding much higher levels of interest bearing cash. Interest reversals on new non-accrual loans during the second quarter of 2010 were $0.7 million, negatively impacting the net interest margin by 3 basis points. Excluding the reversals of interest, the net interest margin would have been 4.08% during the quarter. The Company continues to drive down the cost of interest bearing deposits. As a result of these efforts, the cost of interest bearing deposits was 1.10%, 9 basis points lower than the first quarter of 2010 and 50 basis points lower than the second quarter of 2009.

    Mortgage banking revenue

    The Company generated $3.2 million in total mortgage banking revenue during the second quarter of 2010, on closed loan volume of $145 million. In the second quarter of 2010 the Company recognized a decline in the fair value of the mortgage servicing right assets of $1.7 million resulting from the historically low market mortgage interest rates. Income from the origination and sale of mortgage loans was $3.9 million in the second quarter, representing a 46% increase on a sequential quarter basis. As of June 30, 2010, the Company serviced $1.4 billion of mortgage loans for others, and the related mortgage servicing right asset was valued at $12.9 million, or 0.92% of the total serviced portfolio principal balance.

    Fair value of junior subordinated debentures

    The Company recognized no change in fair value of junior subordinated debentures during the second quarter of 2010. 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 June 30, 2010, the credit risk adjusted interest spread for potential new issuances was forecasted to be significantly higher than the contractual spread. The difference between these 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. The cumulative fair value adjustment will reverse and be recognized as a reduction in non-interest income over the remaining period to maturity of each related instrument. As of June 30, 2010, the total par value of junior subordinated debentures carried at fair value was $134.0 million, and the fair value was $79.6 million.

    Non-interest expense

    Total non-interest expense for the second quarter of 2010 was $74.8 million, compared to $69.9 million for the first quarter of 2010 and $178.6 million for the second quarter of 2009. Included in non-interest expense are several categories which are outside of the operational control of the Company, including FDIC deposit insurance assessments, gain or loss on other real estate owned, and infrequently occurring expenses such as merger related costs and goodwill impairments. Excluding these non-controllable or infrequently occurring items, the remaining non-interest expense items totaled $70.1 million for the second quarter of 2010, compared to $62.2 million for the first quarter of 2010 and $56.7 million for the second quarter of 2009. The increase related primarily to increases in variable expenses related to the assumption of Evergreen’s, Rainier’s and Nevada Security’s banking operations, as well as various other growth initiatives underway.

    Total FDIC deposit insurance assessments during the second quarter of 2010 were $3.6 million. The increase over the prior period is a result of the deposit growth in the second quarter, largely resulting from the three FDIC-assisted acquisitions completed in 2010. The FDIC deposit insurance assessment for the second quarter of 2009 includes a $4.0 million special assessment imposed by the FDIC in efforts to rebuild the Deposit Insurance Fund.

    Income taxes

    The Company recorded a provision for income taxes of $2.8 million in the second quarter of 2010. The increase in the effective income tax rate in the quarter reflects the effects of permanent differences on our taxable income year to date.

    Balance sheet

    Total consolidated assets as of June 30, 2010 were $10.8 billion, compared to $10.5 billion on March 31, 2010 and $8.7 billion a year ago. Total gross loans and leases (covered and non-covered), and deposits, were $6.6 billion and $8.6 billion, respectively, as of June 30, 2010, compared to $6.1 billion and $6.8 billion, respectively, as of June 30, 2009.

    The following table presents the year-to-date 2010 organic growth rates, which excludes the effects of the Evergreen, Rainier and Nevada Security FDIC-assisted acquisitions and the related run-off of assumed brokered time deposits, which the Bank is not renewing upon maturity:

          Non-covered        

    (Dollars in thousands)

    loans and leases     Deposits     Assets
    As reported, 6/30/10 $5,726,673 $8,558,744 $10,827,268
    Less: 12/31/09 balances 5,999,267     7,440,434     9,381,372
    Total growth year-to-date (272,594) 1,118,310 1,445,895
     
    Less:

     

    Evergreen acquisition (1) -- 272,142 355,298
    Rainier Pacific acquisition (1) -- 416,430 721,174
    Nevada Security acquisition (1) -- 428,329 437,595

    Add back:

    Run-off of assumed brokered time deposits not renewed

     

    --     81,799     81,799
    Organic growth $(272,594)     $83,208     $13,627
     
    Annualized organic growth rate (9.2)% 2.3% 0.3%
     

    (1) Excludes run-off of non-brokered deposits occurring in the quarter of acquisition.

     

    Total loans held for investment increased $68 million during the second quarter of 2010. This increase is principally attributable to the $209 million of covered loans assumed through the Nevada Security acquisition, partially offset by charge-offs of $32 million and transfers to other real estate owned of $15 million. The remaining decline in loan balances represents loan payments in excess of disbursements.

    Total deposits increased $352 million, or 4%, over the first quarter of 2010, attributable to the assumption of Nevada Security in June. Total deposits have increased $1.1 billion or 15%, since December 31, 2009. The deposits acquired from the Evergreen, Rainier and Nevada Security acquisitions included $135 million of brokered time deposits as of their respective acquisition date. The Bank is not renewing these brokered deposits as they mature. Excluding the impact of the deposits assumed and the run-off of brokered time deposits that have matured, total deposits increased $83 million in 2010, representing a 2.3% annualized organic growth rate.

    Due to unattractive bond market conditions since the second half of 2009, the Company has been holding larger levels of interest bearing cash rather than investing in the bond market. At June 30, 2010, the Company had $818 million of interest bearing cash earning 0.25%, the target Federal Funds Rate. This excess balance sheet liquidity has increased since the prior year as investment security alternatives in the current market are unattractive given the historically low interest rate environment. The Company plans to hold increased interest bearing cash position relative to historical levels until the investment alternatives in the market improve from both a return and duration standpoint. Including secured off-balance sheet lines of credit, total available liquidity to the Company was $3.9 billion as of June 30, 2010, representing 36% of total assets and 46% of total deposits.

    Capital

    As of June 30, 2010, total shareholders’ equity was $1.7 billion, comprised entirely of common equity. Book value per common share was $14.44, tangible book value per common share was $8.45 and the ratio of tangible common equity to tangible assets was 9.54%.

    In April 2010, the Company’s preferred stock (Common Stock Equivalent Series B) of $198.3 million converted into common stock following the Company's annual shareholder meeting at which shareholders of the Company approved, among other items, an increase in authorized total common shares from 100 million to 200 million.

    The Company’s estimated total risk-based capital ratio as of June 30, 2010 is 17.60%. This represents a slight decrease from the 17.77% as of March 31, 2010 as a result of the Nevada Security acquisition. The total risk-based capital ratio has increased from 14.27% as of June 30, 2009 as a result of two successful capital raises completed subsequent to the second quarter of 2009. 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 June 30, 2010 is an estimate pending completion and filing of the Company’s regulatory reports.

    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 recognizes gains or losses on our junior subordinated debentures carried at fair value resulting from changes in interest rates and the estimated market credit risk adjusted spread that do not directly correlate with the Company’s operating performance. Also, Umpqua incurs significant expenses related to the completion and integration of mergers and acquisitions. 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. Lastly, Umpqua may recognize one-time bargain purchase gains on certain FDIC-assisted acquisitions that are not reflective of Umpqua’s ongoing earnings power. Accordingly, management believes that our operating results are best measured on a comparative basis excluding the impact of gains or losses on junior subordinated debentures measured at fair value, net of tax, merger-related expenses, net of tax, and other charges related to business combinations such as goodwill impairment charges or bargain purchase gains, net of tax. We define operating earnings (loss) as earnings available to common shareholders before gains or losses on junior subordinated debentures carried at fair value, net of tax, bargain purchase gains on acquisitions, net of tax, merger related expenses, net of tax, and goodwill impairment, and we calculate operating earnings (loss) per diluted share by dividing operating earnings by the same diluted share total used in determining diluted earnings per common share.

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

              Sequential     Year over
    Quarter ended:QuarterYear
    (Dollars in thousands, except per share data)Jun 30, 2010     Mar 31, 2010     Jun 30, 2009     % Change     % Change
           

    Net earnings (loss) available to common shareholders

    $3,447 $(2,482) $(107,514) (239)% (103)%
    Adjustments:

    Net gain on junior subordinated debentures carried at fair value, net of tax

    -- (3,653) (5,167) (100)% (100)%
    Bargain purchase gain on acquisitions, net of tax -- (5,074) -- (100)% nm
    Goodwill impairment -- -- 111,952 (100)% (100)%
    Merger related expenses, net of tax 1,301     1,144     44 14% 2857%
    Operating earnings (loss) $4,748     $(10,065)     $(685) (147)% (793)%
     

    Earnings (loss) per diluted share:

    Earnings (loss) available to common shareholders $0.03 $(0.03) $(1.79) (200)% (102)%
    Operating earnings (loss) $0.04 $(0.11) $(0.01) (136)% (500)%
     

    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 data)

          Jun 30, 2010     Mar 31, 2010     Jun 30, 2009
           
    Total shareholders' equity $1,654,053 $1,646,858 $1,356,423
    Subtract:
    Preferred stock -- 198,289 203,231

    Goodwill and other intangible assets, net

    686,447     679,679     643,080
    Tangible common shareholders' equity $967,606     $768,890     $510,112
     
    Total assets $10,827,268 $10,511,015 $8,656,677
    Subtract:

    Goodwill and other intangible assets, net

    686,447     679,679     643,080
    Tangible assets $10,140,821     $9,831,336     $8,013,597
     
    Common shares outstanding at period end 114,524,973 95,527,427 60,237,042
     
    Tangible common equity ratio 9.54% 7.82% 6.37%
    Tangible book value per common share $8.45 $8.05 $8.47
     

    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 184 locations between San Francisco, Calif., and Seattle, Wash., along the Oregon and Northern California Coast, and in Central Oregon and Northern Nevada. 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 Tuesday, July 27, 2010, at 10:00 a.m. PDT (1:00 p.m. EDT) during which the Company will discuss second quarter 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 “82132563.” 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 success in resolving remaining credit issues, the mitigating effect of FDIC loss sharing agreements, our expectation that any weakness in our CRE portfolio will arise from local market weakness and not a systemic weakness, growth plans in the northern Nevada market, conversion of the Nevada Security operating systems to our platform in the fourth quarter of 2010, valuations of junior subordinated debentures and our plans to hold a large interest bearing cash position.Specific risks that could cause results to differ from the forward-looking statements are set forth in our filings with the SEC and include, without limitation, our inability to effectively manage problem credits, collateral values fall below projected disposition values, certain loan assets become ineligible for loss sharing, unanticipated deterioration in the commercial real estate loan portfolio, delays or problems in converting the operating systems of acquired banks and continued negative pressure on interest income associated with our large cash position.

    Umpqua Holdings Corporation

    Consolidated Statements of Operations
    (Unaudited)
              Sequential     Year over
    Quarter Ended:QuarterYear
    (Dollars in thousands, except per share data)Jun 30, 2010     Mar 31, 2010     Jun 30, 2009     % Change     % Change
    Interest income        
    Loans and leases $97,240 $90,708 $88,940 7% 9%
    Interest and dividends on investments:
    Taxable 15,569 16,075 13,889 (3)% 12%
    Exempt from federal income tax 2,247 2,187 1,935 3% 16%
    Dividends 3 -- -- nm nm
    Temporary investments & interest bearing cash 545     399     19 37% 2768%
     
    Total interest income 115,604 109,369 104,783 6% 10%
     

    Interest expense

    Deposits 18,463 18,789 21,957 (2)% (16)%

    Repurchase agreements and fed funds purchased

    123 123 180 0% (32)%
    Junior subordinated debentures 1,939 1,885 2,395 3% (19)%
    Term debt 2,779     1,520     1,262 83% 120%
     
    Total interest expense 23,304 22,317 25,794 4% (10)%
     
    Net interest income 92,300 87,052 78,989 6% 17%
     
    Provision for loan and lease losses 29,767 42,106 29,331 (29)% 1%
    Non-interest income
    Service charges 9,585 8,365 8,322 15% 15%
    Brokerage fees 3,139 2,639 1,745 19% 80%
    Mortgage banking revenue, net 3,209 3,478 6,259 (8)% (49)%
    Net loss on investment securities -- (288) (1,270) (100)% (100)%

    Gain on junior subordinated debentures carried at fair value

    -- 6,088 8,611 (100)% (100)%
    Bargain purchase gain on acquisitions -- 8,456 -- (100)% nm
    Change in FDIC indemnification asset 263 610 -- (57)% nm
    Other income 2,367     2,718     3,383 (13)% (30)%
     
    Total non-interest income 18,563 32,066 27,050 (42)% (31)%
     
    Non-interest expense
    Salaries and benefits 39,604 36,240 32,041 9% 24%
    Occupancy and equipment 11,472 10,676 9,708 7% 18%
    Intangible amortization 1,368 1,308 1,362 5% 0%
    FDIC assessments 3,555 3,444 6,699 3% (47)%
    Net (gain) loss on other real estate owned (952) 2,311 3,170 (141)% (130)%
    Goodwill impairment -- -- 111,952 (100)% (100)%
    Merger related expenses 2,169 1,906 73 14% 2871%
    Other 17,617     13,986     13,598 26% 30%
     
    Total non-interest expense 74,833 69,871 178,603 7% (58)%

    Income (loss) before provision for (benefit from) income taxes

     

    6,263 7,141 (101,895) (12)% (106)%
    Provision for (benefit from) income taxes 2,800     (2,584)     2,396 (208)% 17%
     
    Net income (loss) 3,463 9,725 (104,291) (64)% (103)%
     

    Dividends and undistributed earnings allocated to participating securities

    16 15 7 7% 129%
    Preferred stock dividend --     12,192     3,216 (100)% (100)%
     

    Net earnings (loss) available to common shareholders

    $3,447     $(2,482)     $(107,514) (239)% (103)%
     
    Weighted average shares outstanding 110,134,674 92,176,174 60,221,023 19% 83%
    Weighted average diluted shares outstanding 114,733,357 92,176,174 60,221,023 24% 91%
     
    Earnings (loss) per common share – basic $0.03 $(0.03) $(1.79) (200)% (102)%
    Earnings (loss) per common share – diluted $0.03 $(0.03) $(1.79) (200)% (102)%
    nm = not meaningful
     

    Umpqua Holdings Corporation

    Consolidated Statements of Operations
    (Unaudited)
             
    Six Months Ended:
    (Dollars in thousands, except per share data)Jun 30, 2010     Jun 30, 2009     % Change
    Interest income    
    Loans and leases $187,948 $177,113 6%
    Interest and dividends on investments:
    Taxable 31,644 28,260 12%
    Exempt from federal income tax 4,434 3,735 19%
    Dividends 3 -- nm
    Temporary investments & interest bearing cash 944     51 1751%
     
    Total interest income 224,973 209,159 8%
     

    Interest expense

    Deposits 37,252 46,420 (20)%

    Repurchase agreements and fed funds purchased

    246 364 (32)%
    Junior subordinated debentures 3,824 4,955 (23)%
    Term debt 4,299     3,018 42%
     
    Total interest expense 45,621 54,757 (17)%
     
    Net interest income 179,352 154,402 16%
     
    Provision for loan and lease losses 71,873 88,423 (19)%
    Non-interest income
    Service charges 17,950 16,023 12%
    Brokerage fees 5,778 3,124 85%
    Mortgage banking revenue, net 6,687 10,329 (35)%
    Net loss on investment securities (288) (1,235) (77)%

    Gain on junior subordinated debentures carried at fair value

    6,088 9,191 (34)%
    Bargain purchase gain on acquisitions 8,456 -- nm
    Change in FDIC indemnification asset 873 -- nm
    Other income 5,085     5,135 (1)%
     
    Total non-interest income 50,629 42,567 19%
     
    Non-interest expense
    Salaries and benefits 75,844 63,114 20%
    Occupancy and equipment 22,148 19,329 15%
    Intangible amortization 2,676 2,724 (2)%
    FDIC assessments 6,999 9,324 (25)%
    Net (gain) loss on other real estate owned 1,359 5,469 (75)%
    Goodwill impairment -- 111,952 (100)%
    Merger related expenses 4,075 273 1393%
    Other 31,603     26,369 20%
     
    Total non-interest expense 144,704 238,554 (39)%

    Income (loss) before provision for (benefit from) income taxes

    13,404 (130,008) (110)%
    Provision for (benefit from) income taxes 216     (10,468) (102)%
     
    Net income (loss) 13,188 (119,540) (111)%
     

    Dividends and undistributed earnings allocated to participating securities

    31 15 107%
    Preferred stock dividend 12,192     6,407 90%
    Net earnings (loss) available to common shareholders $965     $(125,962) (101)%
     
    Weighted average shares outstanding 101,205,033 60,198,570 68%
    Weighted average diluted shares outstanding 101,434,758 60,198,570 69%
     
    Earnings (loss) per common share – basic $0.01 $(2.09) (100)%
    Earnings (loss) per common share – diluted $0.01 $(2.09) (100)%
    nm = not meaningful
     

    Umpqua Holdings Corporation

    Consolidated Balance Sheets
    (Unaudited)
                      Sequential     Year over
    QuarterYear
    (Dollars in thousands, except per share data)Jun 30, 2010     Mar 31, 2010     Jun 30, 2009     % Change     % Change
    Assets:
    Cash and due from banks, non-interest bearing $143,098 $125,909 $115,476 14% 24%
    Cash and due from banks, interest bearing 818,186 895,905 15,878 (9)% 5053%
    Temporary investments 9,296 600 962 1449% 866%
    Investment securities:
    Trading 1,743 2,047 2,247 (15)% (22)%
    Available for sale 1,933,647 1,782,744 1,465,342 8% 32%
    Held to maturity 5,493 6,062 6,344 (9)% (13)%
    Loans held for sale 40,114 34,068 52,863 18% (24)%
    Non-covered loans and leases 5,726,673 5,831,858 6,093,957 (2)% (6)%
    Less: Allowance for loan and lease losses (113,914)     (110,784)     (98,370) 3% 16%
    Loans and leases, net 5,612,759 5,721,074 5,995,587 (2)% (6)%
    Covered loans and leases 865,175 691,618 -- 25% nm
    Restricted equity securities 34,855 31,996 16,491 9% 111%
    Premises and equipment, net 128,586 101,686 103,553 26% 24%
    Mortgage servicing rights, at fair value 12,895 13,628 10,631 (5)% 21%
    Goodwill and other intangibles, net 686,447 679,679 643,080 1% 7%
    Non-covered other real estate owned 25,653 18,872 36,030 36% (29)%
    Covered other real estate owned 28,290 8,995 -- 215% nm
    FDIC indemnification asset 247,848 152,440 -- 63% nm
    Other assets 233,183     243,692     192,193 (4)% 21%
    Total assets $10,827,268     $10,511,015     $8,656,677 3% 25%
     
    Liabilities:
    Deposits $8,558,744 $8,207,235 $6,814,705 4% 26%
    Securities sold under agreements to repurchase 44,715 42,043 56,358 6% (21)%
    Fed funds purchased -- -- 66,000 nm (100)%
    Term debt 291,505 363,828 106,396 (20)% 174%
    Junior subordinated debentures, at fair value 79,590 79,563 83,036 0% (4)%
    Junior subordinated debentures, at amortized cost 103,027 103,108 103,349 0% 0%
    Other liabilities 95,634     68,380     70,410 40% 36%
    Total liabilities 9,173,215 8,864,157 7,300,254 3% 26%
     
    Shareholders' equity:
    Preferred stock -- 198,289 203,231 (100)% (100)%
    Common stock 1,538,793 1,339,627 1,006,660 15% 53%
    Retained earnings 73,062 75,344 132,923 (3)% (45)%
    Accumulated other comprehensive income 42,198     33,598     13,609 26% 210%
    Total shareholders' equity 1,654,053     1,646,858     1,356,423 0% 22%
    Total liabilities and shareholders' equity $10,827,268     $10,511,015     $8,656,677 3% 25%
     
    Common shares outstanding at period end 114,524,973 95,527,427 60,237,042 20% 90%
    Book value per common share $14.44 $15.16 $19.14 (5)% (25)%
    Tangible book value per common share $8.45 $8.05 $8.47 5% 0%
    Tangible equity - common $967,606 $768,890 $510,112 26% 90%
    Tangible common equity to tangible assets 9.54% 7.82% 6.37%
     
    nm = not meaningful

     

     

    Umpqua Holdings Corporation

    Non-covered Loan & Lease Portfolio
    (Unaudited)
                      Sequential     Year over
    (Dollars in thousands)Jun 30, 2010Mar 31, 2010Jun 30, 2009QuarterYear
    Amount     MixAmount     MixAmount     Mix% Change     % Change

    Non-covered loans & leases:

               
    Commercial real estate $3,496,374 61% $3,519,965 60% $3,373,624 55% (1)% 4%
    Residential real estate 456,357 8% 451,628 8% 429,775 7% 1% 6%
    Construction 495,456 9% 554,688 10% 797,352 13% (11)% (38)%
    Total real estate 4,448,187 78% 4,526,281 78% 4,600,751 75% (2)% (3)%
    Commercial 1,223,927 21% 1,252,418 21% 1,429,856 23% (2)% (14)%
    Leases 32,375 1% 32,740 1% 37,806 1% (1)% (14)%
    Installment and other 33,188 1% 31,451 1% 36,314 1% 6% (9)%
    Deferred loan fees, net (11,004) 0% (11,032) 0% (10,770) 0% 0% 2%
    Total $5,726,673 100% $5,831,858 100% $6,093,957 100% (2)% (6)%
     
    Umpqua Holdings Corporation
    Covered Loan & Lease Portfolio
    (Unaudited)
                  Sequential
    (Dollars in thousands)Jun 30, 2010Mar 31, 2010Quarter
    Amount     MixAmount     Mix% Change

    Covered loans & leases:

           
    Commercial real estate $586,899 68% $469,385 68% 25%
    Residential real estate 84,011 10% 118,033 17% (29)%
    Construction 73,771 9% 46,087 7% 60%
    Total real estate 744,681 86% 633,505 92% 18%
    Commercial 108,123 12% 43,854 6% 147%
    Installment and other 12,413 1% 14,316 2% (13)%
    Deferred loan fees, net (42) 0% (57) 0% (26)%
    Total $865,175 100% $691,618 100% 25%
     

    Covered loan & lease portfolio balances represent the loan portfolios acquired through the assumption of EvergreenBank on January 22, 2010, Rainier Pacific Bank on February 26, 2010, and Nevada Security Bank on June 18, 2010, from the FDIC through whole bank purchase and assumption agreements with loss sharing.

    Umpqua Holdings Corporation

    Deposits by Type/Core Deposits
    (Unaudited)
                      Sequential     Year over
    (Dollars in thousands)Jun 30, 2010Mar 31, 2010Jun 30, 2009QuarterYear
    Amount     MixAmount     MixAmount     Mix% Change     % Change

    Deposits:

               
    Demand, non-interest bearing $1,509,222 18% $1,472,408 18% $1,316,648 19% 3% 15%
    Demand, interest bearing 3,789,122 44% 3,690,025 45% 2,875,843 43% 3% 32%
    Savings 355,428 4% 342,883 4% 293,972 4% 4% 21%
    Time 2,904,972 34% 2,701,919 33% 2,328,242 34% 8% 25%
    Total $8,558,744 100% $8,207,235 100% $6,814,705 100% 4% 26%
     
    Total core deposits-ending (1) $6,697,773 78% $6,405,118 78% $5,465,814 80% 5% 23%
     

    Number of open accounts:

    Demand, non-interest bearing 180,499 177,152 152,251 2% 19%
    Demand, interest bearing 71,537 70,082 61,199 2% 17%
    Savings 96,019 95,367 72,381 1% 33%
    Time 41,882 40,269 33,475 4% 25%
    Total 389,937 382,870 319,306 2% 22%
     

    Average balance per account:

    Demand, non-interest bearing $8.4 $8.3 $8.6
    Demand, interest bearing 53.0 52.7 47.0
    Savings 3.7 3.6 4.1
    Time 69.4 67.1 69.6
    Total 21.9 21.4 21.3
     

    (1) Core deposits are defined as total deposits less time deposits greater than $100,000.

     
    Umpqua Holdings Corporation
    Credit Quality – Non-performing Assets
    (Unaudited)
                      Sequential     Year over
    Quarter EndedQuarterYear
    (Dollars in thousands)Jun 30, 2010     Mar 31, 2010     Jun 30, 2009     % Change     % Change
     
     

    Non-covered non-performing assets:

    Non-covered loans on non-accrual status $170,636 $183,510 $104,726 (7)% 63%
    Non-covered loans past due 90+ days & accruing 9,213     7,200     9,207 28% 0%
    Total non-performing loans 179,849 190,710 113,933 (6)% 58%
    Non-covered other real estate owned 25,653     18,872     36,030 36% (29)%
    Total$205,502     $209,582     $149,963(2)%37%
     
    Performing restructured loans $80,534 $97,971 $126,040 (18)% (36)%
     
    Past due 30-89 days $40,135 $53,947 $48,755 (26)% (18)%
    Past due 30-89 days to total loans and leases 0.70% 0.93% 0.80%
     

    Non-covered non-performing loans to non-covered loans and leases

    3.14% 3.27% 1.87%
    Non-covered non-performing assets to total assets1.90%1.99%1.73%
     

    Covered non-performing assets:

    Covered loans on non-accrual status $58,814     $37,031     $-- 59% nm
    Total non-performing loans 58,814 37,031 -- 59% nm
    Covered other real estate owned 28,290     8,995     -- 215% nm
    Total $87,104     $46,026     $-- 89% nm
     

    Covered non-performing loans to covered loans and leases

    6.80% 5.35% --
    Covered non-performing assets to total assets 0.80% 0.44% --
     

    Total non-performing assets:

    Loans on non-accrual status $229,450 $220,541 $104,726 4% 119%
    Loans past due 90+ days & accruing 9,213     7,200     9,207 28% 0%
    Total non-performing loans 238,663 227,741 113,933 5% 109%
    Other real estate owned 53,943     27,867     36,030 94% 50%
    Total $292,606     $255,608     $149,963 14% 95%
     
    Non-performing loans to loans and leases 3.62% 3.49% 1.87%
    Non-performing assets to total assets 2.70% 2.43% 1.73%
     
    Umpqua Holdings Corporation
    Credit Quality – Allowance for Credit Losses
    (Unaudited)
                      Sequential     Year over
    Quarter EndedQuarterYear
    (Dollars in thousands)Jun 30, 2010     Mar 31, 2010     Jun 30, 2009     % Change     % Change

    Allowance for credit losses:

    Balance beginning of period $110,784 $107,657 $95,086
    Provision for loan and lease losses 29,767 42,106 29,331 (29)% 1%
     
    Charge-offs (31,554) (39,759) (26,508) (21)% 19%
    Recoveries 4,917     780     461 530% 967%
    Net charge-offs (26,637) (38,979) (26,047) (32)% 2%
                 
    Total allowance for loan and lease losses 113,914 110,784 98,370 3% 16%
     
    Reserve for unfunded commitments 735     765     860
    Total allowance for credit losses $114,649     $111,549     $99,230 3% 16%
     

    Net charge-offs to average non-covered loans and leases (annualized)

    1.84% 2.66% 1.71%
    Recoveries to gross charge-offs 15.58% 1.96% 1.74%

    Allowance for credit losses to non-covered loans and leases

    2.00% 1.91% 1.63%
     
     
    Six Months Ended:
    (Dollars in thousands)Jun 30, 2010     Jun 30, 2009     % Change

    Allowance for credit losses:

    Balance beginning of period $107,657 $95,865
    Provision for loan and lease losses 71,873 88,423 (19)%
     
    Charge-offs (71,313) (86,922) (18)%
    Recoveries 5,697     1,004 467%
    Net charge-offs (65,616) (85,918) (24)%
           
    Total allowance for loan and lease losses 113,914 98,370 16%
     
    Reserve for unfunded commitments 735     860
    Total allowance for credit losses $114,649     $99,230 16%
     

    Net charge-offs to average non-covered loans and leases (annualized)

    2.26% 2.83%

    Recoveries to gross charge-offs

    7.99%

    1.16%

     
    Umpqua Holdings Corporation
    Selected Ratios
    (Unaudited)
              Sequential     Year over
    Quarter Ended:QuarterYear
    Jun 30, 2010     Mar 31, 2010     Jun 30, 2009     Change     Change

    Net interest spread:

           
    Yield on non-covered loans and leases 5.82% 5.75% 5.81% 0.07 0.01
    Yield on covered loans and leases 7.27% 6.98% N/A 0.29 nm
    Yield on taxable investments 3.83% 3.99% 4.45% (0.16) (0.62)
    Yield on tax-exempt investments (1) 5.75% 5.84% 5.75% (0.09) 0.00
    Yield on temporary investments & interest bearing cash 0.26% 0.24% 0.18% 0.02 0.08
    Total yield on earning assets (1) 5.07% 5.07% 5.56% 0.00 (0.49)
     
    Cost of interest bearing deposits 1.10% 1.19% 1.60% (0.09) (0.50)

    Cost of securities sold under agreements to repurchase and fed funds purchased

    1.02% 1.02% 1.06% 0.00 (0.04)
    Cost of term debt 3.54% 3.41% 3.63% 0.13 (0.09)
    Cost of junior subordinated debentures 4.26% 4.05% 4.93% 0.21 (0.67)
    Total cost of interest bearing liabilities 1.28% 1.33% 1.75% (0.05) (0.47)
     
    Net interest spread (1) 3.79% 3.74% 3.81% 0.05 (0.02)
    Net interest margin – Consolidated (1) 4.05% 4.04% 4.20% 0.01 (0.15)
     
    Net interest margin – Bank (1) 4.13% 4.12% 4.33% 0.01 (0.20)
     

    As reported (GAAP):

    Return on average assets 0.13% (0.10)% (4.93)% 0.23 5.06
    Return on average tangible assets 0.14% (0.11)% (5.40)% 0.25 5.54
    Return on average common equity 0.86% (0.71)% (33.94)% 1.57 34.80
    Return on average tangible common equity 1.48% (1.30)% (83.54)% 2.78 85.05
    Efficiency ratio – Consolidated 66.85% 58.15% 166.97% 8.70 (100.12)
    Efficiency ratio – Bank 64.18% 58.53% 179.36% 5.65 (115.18)
     

    Operating basis (non-GAAP): (2)

    Return on average assets 0.18% (0.41)% (0.03)% 0.59 0.21
    Return on average tangible assets 0.19% (0.44)% (0.03)% 0.63 0.22
    Return on average common equity 1.18% (2.86)% (0.22)% 4.04 1.40
    Return on average tangible common equity 2.04% (5.27)% (0.53)% 7.31 2.57
    Efficiency ratio – Consolidated 64.91% 64.35% 67.69% 0.56 (2.78)
    Efficiency ratio – Bank 62.22% 61.44% 64.63% 0.78 (2.41)
     
    (1) Tax exempt interest has been adjusted to a taxable equivalent basis using a 35% tax rate.
    (2) Operating earnings is calculated as earnings available to common shareholders excluding gain (loss) on junior subordinated debentures carried at fair value, net of tax, bargain purchase gain on acquisitions, net of tax, goodwill impairment, and merger related expenses, net of tax.
     
    Umpqua Holdings Corporation
    Selected Ratios
    (Unaudited)
         
    Six months Ended:    
    Jun 30, 2010     Jun 30, 2009     Change

    Net interest spread:

       
    Yield on non-covered loans and leases 5.78% 5.80% (0.02)
    Yield on covered loans and leases 7.17% N/A nm
    Yield on taxable investments 3.91% 4.64% (0.73)
    Yield on tax-exempt investments (1) 5.80% 5.77% 0.03
    Yield on temporary investments & interest bearing cash 0.25% 0.22% 0.03
    Total yield on earning assets (1) 5.07% 5.59% (0.52)
     
    Cost of interest bearing deposits 1.14% 1.71% (0.57)

    Cost of securities sold under agreements to repurchase and fed funds purchased

    1.02% 1.15% (0.13)
    Cost of term debt 3.49% 3.52% (0.03)
    Cost of junior subordinated debentures 4.15% 5.12% (0.97)
    Total cost of interest bearing liabilities 1.31% 1.87% (0.56)
     
    Net interest spread (1) 3.76% 3.72% 0.04
    Net interest margin – Consolidated (1) 4.05% 4.14% (0.09)
     
    Net interest margin – Bank (1) 4.13% 4.26% (0.13)
     

    As reported (GAAP):

    Return on average assets 0.02% (2.91)% 2.93
    Return on average tangible assets 0.02% (3.19)% 3.21
    Return on average common equity 0.13% (19.85)% 19.98
    Return on average tangible common equity 0.23% (48.49)% 48.72
    Efficiency ratio – Consolidated 62.34% 120.03% (57.69)
    Efficiency ratio – Bank 61.33% 122.52% (61.19)
     

    Operating basis (non-GAAP): (2)

    Return on average assets (0.10)% (0.45)% 0.35
    Return on average tangible assets (0.11)% (0.49)% 0.38
    Return on average common equity (0.71)% (3.05)% 2.34
    Return on average tangible common equity (1.26)% (7.45)% 6.19
    Efficiency ratio – Consolidated 64.64% 66.64% (2.00)
    Efficiency ratio – Bank 61.84% 63.45% (1.61)
     
    (1) Tax exempt interest has been adjusted to a taxable equivalent basis using a 35% tax rate.
    (2) Operating earnings is calculated as earnings available to common shareholders excluding gain (loss) on junior subordinated debentures carried at fair value, net of tax, bargain purchase gain on acquisitions, net of tax, goodwill impairment, and merger related expenses, net of tax.
     
    Umpqua Holdings Corporation
    Average Balances
    (Unaudited)
                  Sequential     Year over
    Quarter Ended:       QuarterYear
    (Dollars in thousands)Jun 30, 2010     Mar 31, 2010     Jun 30, 2009     % Change     % Change
       
    Temporary investments & interest bearing cash $849,112 $678,930 $41,449 25% 1949%
    Investment securities, taxable 1,628,195 1,610,407 1,249,218 1% 30%
    Investment securities, tax-exempt 231,675 221,405 198,999 5% 16%
    Loans held for sale 41,183 24,141 41,273 71% 0%
    Non-covered loans and leases 5,792,010 5,934,805 6,095,815 (2)% (5)%
    Covered loans and leases 697,871     363,315     -- 92% nm
    Total earning assets 9,240,046 8,833,003 7,626,754 5% 21%
    Goodwill & other intangible assets, net 676,855 653,390 754,417 4% (10)%
    Total assets 10,467,967 9,977,816 8,745,547 5% 20%
     
    Non-interest bearing demand deposits 1,475,852 1,448,668 1,303,909 2% 13%
    Interest bearing deposits 6,735,665     6,389,093     5,499,990 5% 22%
    Total deposits 8,211,517 7,837,761 6,803,899 5% 21%
    Interest bearing liabilities 7,281,191 6,807,375 5,902,284 7% 23%
     
    Shareholders’ equity - common 1,608,872 1,427,352 1,270,439 13% 27%
    Tangible common equity (1) 932,017 773,962 516,022 20% 81%
     
    Six Months Ended:
    (Dollars in thousands)Jun 30, 2010     Jun 30, 2009     % Change
     
    Temporary investments & interest bearing cash $764,491 $46,727 1536%
    Investment securities, taxable 1,619,351 1,219,205 33%
    Investment securities, tax-exempt 226,569 191,333 18%
    Loans held for sale 32,709 42,741 (23)%
    Non-covered loans and leases 5,863,012 6,115,652 (4)%
    Covered loans and leases 531,517     -- nm
    Total earning assets 9,037,649 7,615,658 19%
    Goodwill & other intangible assets, net 665,187 755,728 (12)%
    Total assets 10,224,246 8,729,784 17%
     
    Non-interest bearing demand deposits 1,462,335 1,278,083 14%
    Interest bearing deposits 6,563,336     5,475,438 20%
    Total deposits 8,025,671 6,753,521 19%
    Interest bearing liabilities 7,045,592 5,907,101 19%
     
    Shareholders’ equity - common 1,518,614 1,279,541 19%
    Tangible common equity (1) 853,427 523,813 63%
     

    (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:QuarterYear
    (Dollars in thousands)Jun 30, 2010     Mar 31, 2010     Jun 30, 2009     % Change     % Change
           

    Mortgage Servicing Rights (MSR):

    Mortgage loans serviced for others $1,400,120 $1,345,550 $1,122,891 4% 25%
    MSR Asset, at fair value $12,895 $13,628 $10,631 (5)% 21%
     
    MSR as % of serviced portfolio 0.92% 1.01% 0.95%
     

    Mortgage Banking Revenue:

    Origination and sale $3,947 $2,704 $5,889 46% (33)%
    Servicing 934 903 738 3% 27%
    Change in fair value of MSR asset (1,672)     (129)     (368) 1196% 354%
    Total $3,209     $3,478     $6,259 (8)% (49)%
     
     
    Closed loan volume $145,085 $127,314 $234,023 14% (38)%
     
     
    Six Months Ended:
    (Dollars in thousands)Jun 30, 2010     Jun 30, 2009     % Change
     

    Mortgage Banking Revenue:

    Origination and sale $6,651 $10,746 (38)%
    Servicing 1,837 1,392 32%
    Change in fair value of MSR asset (1,801)     (1,809) 0%
    Total $6,687     $10,329 (35)%
     
    Closed loan volume $272,400 $425,736 (36)%
     

    Additional tables

    The following tables present additional detail covering the following aspects of the Company's non-covered loan portfolio, and other significant transactions occurring during the quarter.

    • Table 1 – Non-covered residential development loan trends by region
    • Table 2 – Non-covered residential development loan stratification by size and by region
    • Table 3 – Non-covered, non-performing asset detail by type and by region
    • Table 4 – Non-covered loans past due 30-89 days by type and by region
    • Table 5 – Non-covered loans past due 30-89 days trends
    • Table 6 – Non-covered restructured loans by type and by region
    • Table 7 – Fair values of assets acquired and liabilities assumed through FDIC-assisted transactions

    The following is a geographic distribution of the non-covered residential development portfolio as of June 30, 2010, March 31, 2010 and June 30, 2009:

    Table 1- Non-covered residential development loan trends by region
    (Dollars in thousands)         Non-    
                  % changeperformingPerforming
    BalanceBalanceBalancefromloansLoans
    6/30/09     3/31/10     6/30/10     6/30/09     6/30/10     6/30/10
    Northwest Oregon $120,076 $81,409 $75,373 (37)% $7,799 $67,574
    Central Oregon 15,493 4,962 4,107 (73)% 109 3,998
    Southern Oregon 26,561 17,149 13,440 (49)% 2,366 11,074
    Washington 24,744 8,462 7,723 (69)% 1,497 6,226
    Greater Sacramento 84,522 67,676 54,710 (35)% 13,730 40,980
    Northern California 29,894     22,140     20,653 (31)% 7,108     13,545
    Total $301,290     $201,798     $176,006 (42)% $32,609     $143,397

    % of total non-covered loan portfolio

    5% 4% 3% 3%
     
    Quarter change $ $(27,383) $(24,011) $(25,792)
    Quarter change % (8)% (11)% (13)%
     

    The following is a stratification by size and region of the remaining non-covered performing residential development loans as of June 30, 2010:

    Table 2 – Non-covered residential development loan stratification by size and by region
    (Dollars in thousands)                
              $250k     $1 million$3 million$5 million$10 million
    $250ktotototoand
    and less     $1 million     $3 million     $5 million     $10 million     Greater     Total
    Northwest Oregon $2,555 $8,755 $11,881 $13,613 $16,134 $14,636 $67,574
    Central Oregon 506 1,044 2,448 -- -- -- 3,998
    Southern Oregon 1,424 4,857 4,793 -- -- -- 11,074
    Washington 352 356 5,518 -- -- -- 6,226
    Greater Sacramento 3,894 4,702 1,894 4,817 11,455 14,218 40,980
    Northern California 1,483     2,179     9,883     --     --     --     13,545
    Total $10,214     $21,893     $36,417     $18,430     $27,589     $28,854     $143,397
    % of Total 7% 15% 26% 13% 19% 20% 100%
     

    The following is a distribution of non-covered, non-performing assets by type and by region as of June 30, 2010:

    Table 3 - Non-covered, non-performing asset detail by type and by region
    (Dollars in thousands)            
          Northwest     Central     SouthernGreaterNorthern    
    Oregon     Oregon     Oregon     Washington     Sacramento     California     Total

    Non-accrual loans:

    Residential development $7,628 $109 $2,366 $1,497 $13,730 $7,108 $32,438
    Commercial construction 12,976 -- -- 2,197 10,793 -- 25,966
    Commercial real estate 25,233 3,906 4,245 -- 13,867 13,948 61,199
    Commercial 15,602 3,201 745 11,247 9,555 10,683 51,033
    Other --     --     --     --     --     --     --
    Total $61,439 $7,216 $7,356 $14,941 $47,945 $31,739 $170,636
     

    Loans 90 days past due:

    Residential development $171 $-- $-- $-- $-- $-- $171
    Commercial construction -- -- -- -- -- -- --
    Commercial real estate -- -- -- -- 544 1,052 1,596
    Commercial -- -- -- -- 96 99 195
    Other 5,752     --     --     2     1,497     --     7,251
    Total $5,923 $-- $-- $2 $2,137 $1,151 $9,213
                                         
    Total non-performing loans $67,362     $7,216     $7,356     $14,943     $50,082     $32,890     $179,849
     

    Other real estate owned:

    Residential development $476 $3,065 $720 $1,074 $1,897 $278 $7,510
    Commercial construction -- 586 -- 426 4,841 3,465 9,318
    Commercial real estate 2,318 -- 348 -- 3,639 -- 6,305
    Commercial -- 758 -- -- -- 95 853
    Other 1,667     --     --     --     --     --     1,667
    Total $4,461 $4,409 $1,068 $1,500 $10,377 $3,838 $25,653
                                         
    Total non-performing assets $71,823     $11,625     $8,424     $16,443     $60,459     $36,728     $205,502
    % of total35%6%4%8%29%18%100%
     

    The Company has aggressively charged-down impaired assets to their disposition values. As of June 30, 2010, the non-performing assets of $205.5 million have been written down by 43%, or $154.3 million, from their original balance of $359.8 million.

    The following is a distribution of non-covered loans past due 30-89 days by loan type by region as of June 30, 2010:

    Table 4 – Non-covered loans past due 30-89 days by type and by region
    (Dollars in thousands)            
          Northwest     Central     SouthernGreaterNorthern    
    Oregon     Oregon     Oregon     Washington     Sacramento     California     Total

    Loans 30-89 days past due:

    Residential development $-- $-- $268 $-- $495 $-- $763
    Commercial construction -- -- -- -- 903 -- 903
    Commercial real estate 14,817 1,819 1,031 1,898 1,760 1,598 22,923
    Commercial 5,204 -- 1,256 250 1,099 1,364 9,173
    Other 4,730     --     --     300     1,343     --     6,373
    Total $24,751     $1,819     $2,555     $2,448     $5,600     $2,962     $40,135
     

    Table 5 – Non-covered loans past due 30-89 days trends

    (Dollars in thousands)
                      Sequential     Year
    QuarterOver Year
    Jun 30, 2010     Mar 31, 2010     Jun 30, 2009     % Change     % Change

    Loans 30-89 days past due:

    Residential development $763 $13,583 $11,096 (94)% (93)%
    Commercial construction 903 4,861 -- (81)% nm
    Commercial real estate 22,923 21,672 25,712 6% (11)%
    Commercial 9,173 8,306 8,594 10% 7%
    Other 6,373     5,525     3,353 15% 90%
    Total $40,135     $53,947     $48,755 (26)% (18)%
     

    The following is a distribution of non-covered restructured loans by loan type by region as of June 30, 2010:

    Table 6 – Non-covered restructured loans on accrual status 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 development $20,111 $-- $-- $5,518 $25,853 $-- $51,482
    Commercial construction -- -- -- -- -- -- --
    Commercial real estate 3,985 -- 5,786 -- 9,691 3,826 23,288
    Commercial -- -- -- -- 26 1,236 1,262
    Other 4,467     --     --     --     35     --     4,502
    Total $28,563     $--     $5,786     $5,518     $35,605     $5,062     $80,534
     

    The following table summarizes the purchase price allocation, including the estimated fair values of the assets acquired and liabilities assumed from the FDIC-assisted assumption of Nevada Security at the date of acquisition. The fair values are preliminary estimates and are subject to refinement. Additionally, the Company has the option to purchase the owned and assume the leased bank premises, furniture and equipment at fair value. These purchase options expire 90 days following the assumption date. The Company has not yet determined which assets we will assume, and therefore, these balances are not yet reflected in the table below.

    Table 7 – Fair values of assets acquired and liabilities assumed through FDIC-assisted transactions
    (Dollars in thousands)
          Nevada
    Security Bank
    June 18, 2010
    Assets Acquired:
    Cash and equivalents $66,060
    Investment securities 22,626
    Covered loans 209,442
    Premises and equipment 50
    Restricted equity securities 2,951
    Goodwill 12,970
    Other intangible assets 322
    Covered other real estate owned 17,938
    FDIC indemnification asset 101,910
    Other assets 3,326
    Total assets acquired $437,595
     
    Liabilities Assumed:
    Deposits $437,299
    Other liabilities 296
    Total liabilities assumed $437,595

    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