Umpqua Holdings Reports Third Quarter Earnings

Umpqua Holdings Corporation (NASDAQ:UMPQ), parent company of Umpqua Bank and Strand, Atkinson, Williams & York, Inc., today announced third quarter 2007 operating earnings of $13.3 million, or $0.22 per diluted share, compared to $24.3 million, or $0.42 per diluted share, for the third quarter of 2006. Operating earnings exclude merger-related expenses, net of tax.

Including merger-related expenses, net income for the third quarter of 2007 was $13.2 million, or $0.22 per diluted share, compared to $22.9 million, or $0.39 per diluted share for the third quarter of 2006.

Significant items for the third quarter include:

  • Increase in non-performing loans to $68.9 million, or 1.13% of total loans, related primarily to the residential development portfolio in our northern California operation;
  • Provision for loan losses of $20.4 million, representing a $0.17 per diluted share additional charge over the second quarter;
  • Reversal of $1.3 million in interest income related to $20.8 million net increase in non-accrual loans;
  • Other real estate owned increased to $10.3 million, which was sold with no loss subsequent to quarter end;
  • Net charge-offs of $806 thousand year to date, represents 0.02% of average loans;
  • Year to date annualized organic loan growth of 7%, excluding the acquisition;
  • Year to date annualized organic deposit growth of 5%, excluding the acquisition;
  • Core deposits increased 3% during the third quarter in the Oregon/Washington region;
  • Net interest margin, on a tax equivalent basis, declined 14 basis points during the third quarter, to 4.20%, of which 7 basis points related to interest reversal on new non-accrual loans noted above;
  • Cost of interest bearing deposits increased 3 basis points during third quarter, but declined 10 basis points during the month of September;
  • Issued $60 million of new junior subordinated debentures during the third quarter, with a weighted average adjustable interest rate of 3 month LIBOR plus 182 basis points;
  • Total non-interest income increased 16% on a sequential quarter basis, related primarily to positive fair value adjustments related to junior subordinated debentures;
  • Bank efficiency ratio, excluding merger-related expenses, of 55.3% in the third quarter;

The following is a comparison of net income to operating earnings for all periods presented:

Quarter ended: Sequential Quarter Year over Year
(Dollars in thousands, except per share data) 9/30/07 6/30/07 9/30/06 % Change % Change
Net Income $ 13,177 $ 19,913 $ 22,856 (34 )% (42 )%

Add Back: Merger-related expenses, net of tax

158 1,430 1,471 (89 )% (89 )%
Operating Earnings $ 13,335 $ 21,343 $ 24,327 (38 )% (45 )%

Earnings per diluted share:

Net Income $ 0.22 $ 0.32 $ 0.39 (31 )% (44 )%
Operating Earnings $ 0.22 $ 0.35 $ 0.42 (37 )% (48 )%
Nine months ended: Year over Year
(Dollars in thousands, except per share data) 9/30/07 9/30/06 % Change
Net Income $ 53,752 $ 59,914 (10 )%

Add Back: Merger-related expenses, net of tax

1,920 2,615 (27 )%
Operating Earnings $ 55,672 $ 62,529 (11 )%

Earnings per diluted share:

Net Income $ 0.89 $ 1.17 (24 )%
Operating Earnings $ 0.92 $ 1.23 (25 )%

During this past quarter, the California housing down-turn negatively impacted Umpqua. I have instructed our credit professionals to take an aggressive posture in identifying, reserving for, and resolving problem loans. Accordingly, we believe the third quarter provision for loan losses will be adequate for subsequent charge-offs related to these non-performing assets, said Umpqua Holdings Corporation president and CEO Ray Davis.

During the third quarter, the Company experienced an increase in non-performing assets related primarily to deterioration in the northern California residential development market. Non-performing loans increased $21 million during the quarter, to $68.9 million. Non-performing assets increased $31 million during the quarter, to $79.2 million. Subsequent to quarter end, the Company sold $10 million of other real estate owned with no loss recognized. This other real estate owned was recorded as a non-accrual loan in the second quarter. The residential development segment represents $66.7 million, or 84% of the total $79.2 million in non-performing assets.

The following represents a summary of non-performing assets by region as of September 30, 2007:

Non-performing assets
Oregon/
(dollars in thousands) Washington California Total

90 days past due and accruing:

Residential development $ -- $ 166 $ 166
Commercial real estate -- 346 346
Commercial -- 496 496
Other 153 327 480
Total $ 153 $ 1,335 $ 1,488

Non-accrual loans:

Residential development $ 9,984 $ 46,581 $ 56,565
Commercial real estate 1,474 537 2,011
Commercial 6,456 2,387 8,843
Other -- -- --
Total $ 17,914 $ 49,505 $ 67,419
Total non-performing loans $ 18,067 $ 50,840 $ 68,907

Other real estate owned:

Residential development $ 10,000 $ -- $ 10,000
Commercial real estate -- -- --
Commercial -- -- --
Other -- 310 310
Total $ 10,000 $ 310 $ 10,310
Total non-performing assets $ 28,067 $ 51,150 $ 79,217
Total Loans and leases $ 3,452,645 $ 2,626,790 $ 6,079,435
Non-performing loans to total loans and leases 0.52 % 1.94 % 1.13 %

Within the allowance for credit losses, the Company has identified $16.2 million of impairment reserve related to $67.4 million of non-accrual loans, which are specifically measured for impairment. This impairment reserve increased $11.2 million during the quarter. The net increase in impairment reserve, combined with downgrades within the portfolio related primarily to residential development, led to the $20.4 million provision for loan losses during the third quarter. The third quarter provision for loan losses is expected to cover subsequent charge-offs on these non-performing loans.

The following represents a summary of our non-accrual loan impairment estimate as of September 30, 2007:

Non-accrual loan impairment estimate
Impairment
(dollars in thousands) # of Loans Balance Estimate

Non-accrual loans:

Residential development 47 $ 56,565 $ 14,761
Commercial real estate 13 2,011 98
Commercial 23 8,843 1,385
Total non-accrual loans 83 $ 67,419 $ 16,244

During the first nine months of 2007, the Company had net charge-offs of $806 thousand, compared to net charge-offs of $64 thousand for the first nine months of 2006. non-performing loans and leases were $68.9 million at September 30, 2007, representing 1.13% of total loans and leases. The allowance for credit losses was 1.47% of total loans and leases at September 30, 2007, compared to 1.17% of total loans and leases at June 30, 2007.

The Company completed its acquisition of North Bay Bancorp on April 26, 2007, by issuing 5,163,573 shares in connection with this acquisition, with a total deal value of $142.3 million. The system integration with North Bay Bancorp was completed in May 2007.

The following table presents the year to date 2007 organic growth rates, which exclude the effects of the North Bay Bancorp acquisition:

(dollars in thousands) Loans and Leases Deposits Assets
As reported, 9/30/07 $ 6,079,435 $ 6,518,217 $ 8,225,811
less: 12/31/06 balances 5,361,862 5,840,294 7,344,236
Total growth 717,573 677,923 881,575
less: acquisition 442,950 462,624 727,799
Organic growth $ 274,623 $ 215,299 $ 153,776
Annualized organic growth rate 7 % 5 % 3 %

Total consolidated assets as of September 30, 2007, were $8.2 billion, compared to $7.2 billion a year ago. Total gross loans and leases, and deposits, were $6.1 billion and $6.5 billion, respectively, as of September 30, 2007, compared to $5.4 billion and $5.7 billion, respectively, a year ago.

The Company reported a tax equivalent net interest margin of 4.20% for the third quarter of 2007, compared to 4.83% for the third quarter of 2006, and 4.34% for the second quarter of 2007. The decrease in net interest margin over these time periods resulted from increases in short-term market interest rates and the competitive climate, characterized by increasing deposit costs combined with declining earning asset yields, which was partially attributed to the interest income reversal discussed previously. The $1.3 million interest reversal on new non-accrual loans noted above resulted in a 7 basis point decline in the tax equivalent net interest margin during the quarter.

Excluding merger-related expenses, the Bank efficiency ratio was 55.15% for the nine months ended September 30, 2007, compared to 52.08% for the same period a year ago. The increase related primarily to the decline in net interest margin discussed previously.

During the first quarter of 2007, the Company elected early adoption of Statements of Financial Accounting Standard (SFAS) 157 and 159, effective January 1, 2007. SFAS 159, which was issued in February 2007, permits the measurement of selected financial instruments at fair value as of specified election dates. Upon adoption of SFAS 159, the Company selected the fair value measurement option only on certain junior subordinated debentures. During the third quarter, the Company issued $60 million in new junior subordinated debentures (net of common stock investment), carrying a weighted adjustable interest rate of 3 month LIBOR plus 182 basis points. The Company elected fair value measurement on these debentures. As a result, the Company recognized a $4.1 million gain in fair value on junior subordinated debentures during the third quarter, as market interest rate spreads increased significantly on like instruments. This compares to a $279 thousand fair value increase during the second quarter. Also during the third quarter, the Company redeemed a $25 million junior subordinated debenture (net of common stock investment) prior to its maturity.

As of September 30, 2007, total shareholders equity was $1.2 billion. Book value per share was $20.60 and tangible book value per share was $7.78. During the third quarter, the Company repurchased 1.65 million shares of stock at a weighted average price of $21.23 per share. For the first nine months of 2007, the company repurchased 4.01 million shares of stock at a weighted average price of $23.73 per share. The total remaining available common shares authorized for repurchase is approximately 1.54 million.

We have expanded disclosure of our loan, deposit and core deposit portfolios by region within the financial tables of this earnings release.

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Umpqua believes that non-GAAP financial measures provide investors with information useful in understanding Umpquas financial performance. Umpqua provides measures based on operating earnings, which exclude merger-related expenses. Operating earnings per diluted share is calculated by dividing operating earnings by the same diluted share total used in determining diluted earnings per share. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent is included in the attached financial tables or where the non-GAAP measure is presented.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to various risk factors, including those set forth from time to time in our filings with the SEC. You should not place undue reliance on forward-looking statements and we undertake no obligation to update any such statements. In this press release we make forward-looking statements about identification and management of problem loans, the level of expected gross loan charge-offs and the adequacy of the provision for loan losses taken in the third quarter.

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 146 locations between Napa, Calif., and Bellevue, Wash., along the Oregon and Northern California Coast and in Central Oregon. Umpqua Holdings also owns a retail brokerage subsidiary Strand, Atkinson, Williams & York, Inc., which has locations in Umpqua Bank stores and in dedicated offices throughout Oregon and Southwest Washington. Umpqua Banks Private Client Services Division provides tailored financial services and products to individual customers. Umpqua Holdings Corporation is headquartered in Portland, Ore. For more information, visit www.umpquaholdingscorp.com.

Umpqua Holdings Corporation will conduct a quarterly earnings conference call Thursday, October 18, 2007, at 10:00 a.m. PDT (1:00 p.m. EDT) during which the Company will discuss third quarter 2007 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 18219442. Information to be discussed in the teleconference will be available on the Companys 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, or by visiting the Companys website.

Umpqua Holdings Corporation

Consolidated Statements of Income
(Unaudited)
Quarter Ended:
SequentialYear over
QuarterYear
Dollars in thousands, except per share dataSept 30, 2007Jun 30, 2007Sept 30, 2006% Change% Change
Interest income
Loans and leases $ 116,111 $ 111,797 $ 106,320 4 % 9 %
Interest and dividends on investments:
Taxable 9,137 8,720 6,797 5 % 34 %
Exempt from federal income tax 1,588 1,335 1,142 19 % 39 %
Dividends 96 88 105 9 % (9 )%
Temporary investments 929 616 374 51 % 148 %
Total interest income 127,861 122,556 114,738 4 % 11 %

Interest expense

Deposits 48,138 44,581 34,121 8 % 41 %
Repurchase agreements and fed funds purchased
530 824 2,155 (36 )% (75 )%
Junior subordinated debentures 4,444 4,022 3,971 10 % 12 %
Term debt 874 813 692 8 % 26 %
Total interest expense 53,986 50,240 40,939 7 % 32 %
Net interest income 73,875 72,316 73,799 2 % 0 %
Provision for loan and lease losses 20,420 3,413 2,352 498 % 768 %
Non-interest income
Service charges 8,448 8,148 7,606 4 % 11 %
Brokerage fees 2,498 2,679 2,506 (7 )% 0 %
Mortgage banking revenue 1,366 2,607 1,445 (48 )% (5 )%
Loss on sale of securities (13 ) (2 ) -- nm nm
Other income 6,244 2,498 1,919 150 % 225 %
Total non-interest income 18,543 15,930 13,476 16 % 38 %

Non-interest expense

Salaries and benefits 28,005 28,898 26,387 (3 )% 6 %
Occupancy and equipment 9,166 8,782 8,540 4 % 7 %
Intangible amortization 1,767 1,490 1,195 19 % 48 %
Other 13,692 12,392 12,113 10 % 13 %

Merger-related expenses

263 2,383 2,451 (89 )% (89 )%
Total non-interest expense 52,893 53,945 50,686 (2 )% 4 %
Income before provision for income taxes 19,105 30,888 34,237 (38 )% (44 )%
Provision for income tax 5,928 10,975 11,381 (46 )% (48 )%
Net income $ 13,177 $ 19,913 $ 22,856 (34 )% (42 )%
Weighted average shares outstanding 60,489,522 60,679,485 57,802,381 0 % 5 %
Weighted average diluted shares outstanding 61,065,401 61,397,575 58,452,461 (1 )% 4 %
Earnings per share Basic $ 0.22 $ 0.33 $ 0.40 (33 )% (45 )%
Earnings per share Diluted $ 0.22 $ 0.32 $ 0.39 (31 )% (44 )%
nm = not meaningful
Umpqua Holdings Corporation
Consolidated Statements of Income
(Unaudited)
Nine months ended:
Dollars in thousands, except per share dataSept 30, 2007Sept 30, 2006% Change
Interest income
Loans and leases $ 331,889 $ 265,444 25 %
Interest and dividends on investments:
Taxable 25,376 20,201 26 %
Exempt from federal income tax 4,151 2,740 51 %
Dividends 249 205 21 %
Temporary investments 2,439 837 191 %
Total interest income 364,104 289,427 26 %
Interest expense
Deposits 133,750 81,112 65 %

Repurchase agreements and fed funds purchased

1,757 6,346 (72 )%
Trust preferred securities 12,329 10,359 19 %
Other borrowings 1,767 2,775 (36 )%
Total interest expense 149,603 100,592 49 %
Net interest income 214,501 188,835 14 %
Provision for loan and lease losses 23,916 2,427 885 %
Non-interest income
Service charges 23,648 19,540 21 %
Brokerage fees 7,594 7,408 3 %
Mortgage banking revenue 5,772 5,792 0 %
Loss on sale of securities (10 ) (1 ) nm
Other income 11,434 6,745 70 %
Total non-interest income 48,438 39,484 23 %
Non-interest expense
Salaries and benefits 85,172 71,525 19 %
Occupancy and equipment 26,774 22,907 17 %
Intangible amortization 4,400 2,533 74 %
Other 37,304 31,586 18 %

Merger-related expenses

3,200 4,358 (27 )%

Total non-interest expense

156,850 132,909 18 %
Income before income taxes 82,173 92,983 (12 )%
Provision for income tax 28,421 33,069 (14 )%
Net income $ 53,752 $ 59,914 (10 )%
Weighted average shares outstanding 59,790,297 50,377,923 19 %
Weighted average diluted shares outstanding 60,450,412 51,010,413 19 %
Earnings per share Basic $ 0.90 $ 1.19 (24 )%
Earnings per share Diluted $ 0.89 $ 1.17 (24 )%
nm = not meaningful
Umpqua Holdings Corporation
Consolidated Balance Sheets
(Unaudited)
SequentialYear over
QuarterYear
Dollars in thousands, except per share dataSept 30, 2007Jun 30, 2007Sept 30, 2006% Change% Change
Assets:
Cash and due from banks $ 148,434 $ 182,739 $ 151,334 (19 )% (2 )%
Temporary investments 46,787 40,904 40,700 14 % 15 %
Investment securities:
Trading 4,144 3,090 682 34 % nm
Available for sale 911,883 893,125 689,841 2 % 32 %
Held to maturity 7,116 8,333 9,494 (15 )% (25 )%
Loans held for sale 19,964 16,953 18,951 18 % 5 %
Loans and leases 6,079,435 5,981,750 5,385,262 2 % 13 %
Less: Allowance for loan and lease losses (88,278 ) (68,723 ) (60,475 ) 28 % 46 %
Loans and leases, net 5,991,157 5,913,027 5,324,787 1 % 13 %
Restricted equity securities 15,297 16,715 15,255 (8 )% 0 %
Premises and equipment, net 107,189 108,656 99,251 (1 )% 8 %
Other real estate owned 10,310 -- 31 nm nm
Mortgage servicing rights, net 9,474 9,966 10,427 (5 )% (9 )%
Goodwill and other intangibles 767,210 767,710 680,722 0 % 13 %
Other assets 186,846 183,340 157,373 2 % 19 %
Total assets $ 8,225,811 $ 8,144,558 $ 7,198,848 1 % 14 %
Liabilities:
Deposits $ 6,518,217 $ 6,414,425 $ 5,650,338 2 % 15 %
Securities sold under agreements to repurchase
52,883 59,553 65,471 (11 )% (19 )%
Fed funds purchased 20,000 48,000 -- (58 )% nm
Term debt 75,010 75,095 57,072 0 % 31 %
Junior subordinated debentures, at fair value 131,984 99,808 -- 32 % nm
Junior subordinated debentures, at amortized cost 104,947 105,213 203,955 0 % (49 )%
Other liabilities 89,580 86,426 80,332 4 % 12 %
Total liabilities 6,992,621 6,888,520 6,057,168 2 % 15 %
Shareholders' equity:
Common stock 987,543 1,019,618 929,893 (3 )% 6 %
Retained earnings 253,487 251,715 220,726 1 % 15 %
Accumulated other comprehensive loss (7,840 ) (15,295 ) (8,939 ) (49 )% (12 )%
Total shareholders' equity 1,233,190 1,256,038 1,141,680 (2 )% 8 %
Total liabilities and shareholders' equity $ 8,225,811 $ 8,144,558 $ 7,198,848 1 % 14 %
Common shares outstanding at period end 59,864,335 61,315,960 58,028,555 (2 )% 3 %
Book value per share $ 20.60 $ 20.48 $ 19.67 1 % 5 %
Tangible book value per share $ 7.78 $ 7.96 $ 7.94 (2 )% (2 )%
Tangible equity $ 465,980 $ 488,328 $ 460,958 (5 )% 1 %
Tangible equity to tangible assets 6.25 % 6.62 % 7.07 %
nm = not meaningful
Umpqua Holdings Corporation
Loan Portfolio Total and by Region
(Unaudited)
SequentialYear over
Dollars in thousandsQuarterYear
Loans and leases by class: Sept 30, 2007Jun 30, 2007Sept 30, 2006% Change% Change
Total Consolidated:
Commercial real estate $ 3,071,588 $ 3,058,774 $ 2,697,218 0.4 % 13.9 %
Residential real estate 379,657 371,894 312,639 2.1 % 21.4 %
Construction 1,191,757 1,148,726 1,238,369 3.7 % (3.8 )%
Total real estate 4,643,002 4,579,394 4,248,226 1.4 % 9.3 %
Commercial 1,365,786 1,323,640 1,085,014 3.2 % 25.9 %
Leases 37,095 35,477 19,514 4.6 % 90.1 %
Installment and other 44,970 54,504 45,119 (17.5 )% (0.3 )%
Deferred loan fees, net (11,418 ) (11,265 ) (12,611 ) 1.4 % (9.5 )%
Total loans and leases $ 6,079,435 $ 5,981,750 $ 5,385,262 1.6 % 12.9 %
Oregon/Washington region:
Commercial real estate $ 1,710,224 $ 1,672,094 $ 1,594,723 2.3 % 7.2 %
Residential real estate 250,751 244,654 202,228 2.5 % 24.0 %
Construction 631,087 595,264 515,064 6.0 % 22.5 %
Total real estate 2,592,062 2,512,012 2,312,015 3.2 % 12.1 %
Commercial 799,598 826,760 766,913 (3.3 )% 4.3 %
Leases 37,005 35,333 19,134 4.7 % 93.4 %
Installment and other 31,216 36,770 25,907 (15.1 )% 20.5 %
Deferred loan fees, net (7,236 ) (7,012 ) (7,966 ) 3.2 % (9.2 )%
Total loans and leases $ 3,452,645 $ 3,403,863 $ 3,116,003 1.4 % 10.8 %
% of consolidated total 57 % 57 % 58 %
California region:
Commercial real estate $ 1,361,364 $ 1,386,680 $ 1,102,495 (1.8 )% 23.5 %
Residential real estate 128,906 127,240 110,411 1.3 % 16.8 %
Construction 560,670 553,462 723,305 1.3 % (22.5 )%
Total real estate 2,050,940 2,067,382 1,936,211 (0.8 )% 5.9 %
Commercial 566,188 496,880 318,101 13.9 % 78.0 %
Leases 90 144 380 (37.5 )% (76.3 )%
Installment and other 13,754 17,734 19,212 (22.4 )% (28.4 )%
Deferred loan fees, net (4,182 ) (4,253 ) (4,645 ) (1.7 )% (10.0 )%
Total loans and leases $ 2,626,790 $ 2,577,887 $ 2,269,259 1.9 % 15.8 %
% of consolidated total 43 % 43 % 42 %
Umpqua Holdings Corporation
Credit Quality
(Unaudited)
SequentialYear over
Quarter EndedQuarter EndedQuarter EndedQuarterYear
Dollars in thousandsSept 30, 2007Jun 30, 2007Sept 30, 2006% Change% Change
Allowance for credit losses
Balance beginning of period $ 68,723 $ 60,263 $ 58,516
Provision for loan and lease losses 20,420 3,413 2,352
Acquisitions -- 5,078 184
Charge-offs (1,414 ) (870 ) (1,027 ) 63 % 38 %
Less: Recoveries 549 839 450 (35 )% 22 %
Net charge-offs (865 ) (31 ) (577 ) 2690 % 50 %
Total Allowance for loan and lease losses 88,278 68,723 60,475 28 % 46 %
Reserve for unfunded commitments 1,246 1,273 2,021
Total Allowance for credit losses $ 89,524 $ 69,996 $ 62,496 28 % 43 %
Net charge-offs to average loans and leases (annualized)
0.06 % 0.00 % 0.04 %
Recoveries to gross charge-offs 39 % 96 % 44 %
Allowance for credit losses to loans and leases
1.47 % 1.17 % 1.16 %

Allowance for credit losses to non-performing loans

130 % 146 % 591 %

Non-performing loans to total loans and leases

1.13 % 0.80 % 0.20 %

Non-performing assets to total assets

0.96 % 0.59 % 0.15 %

Non-performing assets:

Loans on non-accrual status $ 67,419 $ 46,642 $ 10,158 45 % 564 %
Loans past due 90+ days & accruing 1,488 1,313 416 13 % 258 %

Total non-performing loans

$ 68,907 $ 47,955 $ 10,574 44 % 552 %
Other real estate owned 10,310 -- 31 nm nm

Total non-performing assets

$ 79,217 $ 47,955 $ 10,605 65 % 647 %
nm = not meaningful
Umpqua Holdings Corporation
Credit Quality (continued)
(Unaudited)
Nine Months ended:
Dollars in thousandsSept 30, 2007Sept 30, 2006% Change
Allowance for credit losses
Balance beginning of period $ 60,090 $ 43,885
Provision for loan and lease losses 23,916 2,427
Acquisitions 5,078 14,227
Charge-offs (2,997 ) (2,587 ) 16 %
Less: Recoveries 2,191 2,523 (13 )%
Net charge-offs (806 ) (64 ) 1159 %
Total Allowance for loan and lease losses 88,278 60,475
Reserve for unfunded commitments 1,246 2,021
Total Allowance for credit losses $ 89,524 $ 62,496
Net charge-offs to average loans and leases (annualized)
0.02 % 0.00 %
Recoveries to gross charge-offs 73 % 98 %
Umpqua Holdings Corporation
Deposits by Type
(Unaudited)
SequentialYear over
Sept 30, 2007Jun 30, 2007Sept 30, 2006QuarterYear
Dollars in thousandsAmountMixAmountMixAmountMix% Change% Change
Demand, non interest-bearing $ 1,294,334 20 % $ 1,358,235 21 % $ 1,246,499 22 % (4.7 )% 3.8 %
Demand, interest-bearing 2,950,605 45 % 2,801,455 44 % 2,420,474 43 % 5.3 % 21.9 %
Savings 358,825 6 % 373,438 6 % 380,587 7 % (3.9 )% (5.7 )%
Time 1,914,453 29 % 1,881,297 29 % 1,602,778 28 % 1.8 % 19.4 %
Total Deposits $ 6,518,217 100 % $ 6,414,425 100 % $ 5,650,338 100 % 1.6 % 15.4 %
Umpqua Holdings Corporation
Deposits/Core Deposits by Region
(Unaudited)
SequentialYear over
Sept 30, 2007Jun 30, 2007Sept 30, 2006QuarterYear
Dollars in thousandsAmountMixAmountMixAmountMix% Change% Change
Deposits by region:
Oregon/Washington $ 3,700,826 57 % $ 3,604,939 56 % $ 3,426,675 61 % 2.7 % 8.0 %
California 2,817,391 43 % 2,809,486 44 % 2,223,663 39 % 0.3 % 26.7 %
Total Deposits $ 6,518,217 100 % $ 6,414,425 100 % $ 5,650,338 100 % 1.6 % 15.4 %
Core deposits by region (1):
Oregon/Washington $ 3,183,550 58 % $ 3,095,630 58 % $ 3,006,830 62 % 2.8 % 5.9 %
California 2,270,478 42 % 2,277,890 42 % 1,864,027 38 % (0.3 )% 21.8 %
Total Core deposits $ 5,454,028 100 % $ 5,373,520 100 % $ 4,870,857 100 % 1.5 % 12.0 %
% of total deposits 84 % 84 % 86 %
(1) Core deposits are defined as total deposits less time deposits greater than $100,000.
Umpqua Holdings Corporation
Organic Growth by Region
(Unaudited)
Oregon/WashingtonCaliforniaTotal
Dollars in thousands Loans Deposits Loans Deposits Loans Deposits
Balance, 9/30/07 $ 3,452,645 $ 3,700,826 $ 2,626,790 $ 2,817,391 $ 6,079,435 $ 6,518,217
Less: 12/31/06 balance 3,168,596 3,500,965 2,193,266 2,339,329 5,361,862 5,840,294
Total growth year to date 284,049 199,861 433,524 478,062 717,573 677,923
Less: acquisition 16,166 3,559 426,784 459,065 442,950 462,624
Organic Growth$267,883$196,302$6,740$18,997$274,623$215,299
Year to date organic growth % 8.5 % 5.6 % 0.3 % 0.8 % 5.1 % 3.7 %
Year to date acquisition growth % 0.5 % 0.1 % 19.5 % 19.6 % 8.3 % 7.9 %
Total year to date growth % 9.0 % 5.7 % 19.8 % 20.4 % 13.4 % 11.6 %
Annualized organic growth rate - 200711.3%7.5%0.4%1.1%6.8%4.9%
Organic growth rate 2006 18.1 % 16.3 % (5.4 )% 3.7 % 10.7 % 12.6 %
Organic growth rate 2005 13.3 % 12.9 % 12.7 % 12.7 % 13.1 % 12.8 %
Organic growth rate 2004 17.7 % 8.0 % 4.7 % 3.2 % 20.2 % 9.6 %
Umpqua Holdings Corporation
Selected Ratios
(Unaudited)
SequentialYear over
Quarter Ended:QuarterYear
Sept 30, 2007Jun 30, 2007Sept 30, 2006ChangeChange
Net Interest Spread:
Yield on loans and leases 7.62 % 7.74 % 7.88 % (0.12 ) (0.26 )
Yield on taxable investments 4.83 % 4.72 % 4.53 % 0.11 0.30
Yield on tax-exempt investments (1) 5.62 % 5.06 % 6.08 % 0.56 (0.46 )
Yield on temporary investments 5.18 % 5.13 % 3.99 % 0.05 1.19
Total yield on earning assets (1) 7.24 % 7.33 % 7.49 % (0.09 ) (0.25 )
Cost of interest bearing deposits 3.69 % 3.66 % 3.19 % 0.03 0.50
Cost of securities sold under agreements to repurchase and fed funds purchased
3.28 % 3.74 % 4.45 % (0.46 ) (1.17 )
Cost of term debt 4.62 % 4.63 % 4.81 % (0.01 ) (0.19 )
Cost of junior subordinated debentures 7.59 % 7.62 % 7.72 % (0.03 ) (0.13 )
Total cost of interest bearing liabilities 3.86 % 3.84 % 3.45 % 0.02 0.41
Net interest spread (1) 3.38 % 3.49 % 4.04 % (0.11 ) (0.66 )
Net interest margin Consolidated (1) 4.20 % 4.34 % 4.83 % (0.14 ) (0.63 )
Net interest margin Bank (1) 4.45 % 4.57 % 5.08 % (0.12 ) (0.63 )

As reported:

Return on average assets 0.64 % 1.02 % 1.27 % (0.38 ) (0.63 )
Return on average tangible assets 0.70 % 1.13 % 1.41 % (0.43 ) (0.71 )
Return on average equity 4.20 % 6.44 % 8.06 % (2.24 ) (3.86 )
Return on average tangible equity 10.92 % 16.11 % 20.50 % (5.19 ) (9.58 )
Efficiency ratio Consolidated 56.83 % 60.76 % 57.75 % (3.93 ) (0.92 )
Efficiency ratio Bank 55.57 % 56.98 % 53.95 % (1.41 ) 1.62

Excluding merger-related expense (2):

Return on average assets 0.65 % 1.09 % 1.35 % (0.44 ) (0.70 )
Return on average tangible assets 0.71 % 1.21 % 1.50 % (0.50 ) (0.79 )
Return on average equity 4.25 % 6.91 % 8.58 % (2.66 ) (4.33 )
Return on average tangible equity 11.05 % 17.26 % 21.82 % (6.21 ) (10.77 )
Efficiency ratio Consolidated 56.54 % 58.08 % 54.95 % (1.54 ) 1.59
Efficiency ratio Bank 55.30 % 54.32 % 51.20 % 0.98 4.10
(1) Tax exempt interest has been adjusted to a taxable equivalent basis using a 35% tax rate.

(2) Excludes merger-related expense, net of tax.

Umpqua Holdings Corporation
Selected Ratios
(Unaudited)
Nine Months Ended:
Sept 30, 2007Sept 30, 2006Change
Net Interest Spread:
Yield on loans and leases 7.72 % 7.65 % 0.07
Yield on taxable investments 4.72 % 4.50 % 0.22
Yield on tax-exempt investments (1) 5.49 % 5.77 % (0.28 )
Yield on temporary investments 5.20 % 4.09 % 1.11
Total yield on earning assets (1) 7.33 % 7.25 % 0.08
Cost of interest bearing deposits 3.66 % 2.94 % 0.72
Cost of securities sold under agreements to repurchase and fed funds purchased
3.40 % 4.23 % (0.83 )
Cost of term debt 4.58 % 4.97 % (0.39 )
Cost of junior subordinated debentures 7.60 % 7.59 % 0.01
Total cost of interest bearing liabilities 3.83 % 3.25 % 0.58
Net interest spread (1) 3.50 % 4.00 % (0.50 )
Net interest margin Consolidated (1) 4.33 % 4.74 % (0.41 )
Net interest margin Bank (1) 4.57 % 4.99 % (0.42 )

As reported:

Return on average assets 0.93 % 1.29 % (0.36 )
Return on average tangible assets 1.02 % 1.41 % (0.39 )
Return on average equity 5.91 % 8.80 % (2.89 )
Return on average tangible equity 14.79 % 20.87 % (6.08 )
Efficiency ratio Consolidated 59.27 % 57.91 % 1.36
Efficiency ratio Bank 56.35 % 53.94 % 2.41

Excluding merger-related expense (2):

Return on average assets 0.96 % 1.35 % (0.39 )
Return on average tangible assets 1.06 % 1.47 % (0.41 )
Return on average equity 6.12 % 9.18 % (3.06 )
Return on average tangible equity 15.32 % 21.78 % (6.46 )
Efficiency ratio Consolidated 58.06 % 56.01 % 2.05
Efficiency ratio Bank 55.15 % 52.08 % 3.07
(1) Tax exempt interest has been adjusted to a taxable equivalent basis using a 35% tax rate.

(2) Excludes merger-related expense, net of tax.

Umpqua Holdings Corporation
Average Balances
(Unaudited)
SequentialYear over
Quarter Ended:QuarterYear
Dollars in thousandsSept 30, 2007Jun 30, 2007Sept 30, 2006% Change% Change
Temporary investments $ 71,165 $ 48,142 $ 37,225 48 % 91 %
Investment securities, taxable 765,346 746,721 609,131 2 % 26 %
Investment securities, tax-exempt 159,998 148,071 107,851 8 % 48 %
Loans held for sale 10,732 15,468 19,258 (31 )% (44 )%
Loans and leases 6,032,388 5,777,447 5,333,728 4 % 13 %
Total earning assets 7,039,629 6,735,849 6,107,193 5 % 15 %
Goodwill & other intangibles 766,591 743,801 681,988 3 % 12 %
Total assets 8,190,032 7,840,422 7,135,488 4 % 15 %
Non interest bearing demand deposits 1,319,280 1,271,311 1,235,838 4 % 7 %
Interest bearing deposits 5,171,123 4,881,499 4,248,328 6 % 22 %
Total deposits 6,490,403 6,152,810 5,484,166 5 % 18 %
Interest bearing liabilities 5,542,587 5,252,179 4,701,582 6 % 18 %
Total shareholders equity 1,245,390 1,239,691 1,124,398 0 % 11 %
Tangible equity 478,799 495,890 442,410 (3 )% 8 %
Umpqua Holdings Corporation
Average Balances
(Unaudited)
Nine Months Ended:
Dollars in thousandsSept 30, 2007Sept 30, 2006% Change
Temporary investments $ 62,680 $ 27,360 129 %
Investment securities, taxable 723,978 604,448 20 %
Investment securities, tax-exempt 142,444 91,027 56 %
Loans held for sale 13,719 14,512 (5 )%
Loans and leases 5,733,639 4,623,013 24 %
Total earning assets 6,676,460 5,360,360 25 %
Goodwill & other intangibles 729,979 526,459 39 %
Total assets 7,765,832 6,198,868 25 %
Non interest bearing demand deposits 1,250,188 1,085,161 15 %
Interest bearing deposits 4,884,775 3,683,415 33 %
Total deposits 6,134,963 4,768,576 29 %
Interest bearing liabilities 5,222,253 4,141,511 26 %
Total shareholders equity 1,215,730 910,311 34 %
Tangible equity 485,751 383,852 27 %
Umpqua Holdings Corporation
Mortgage Banking Activity
(unaudited)
SequentialYear over
Quarter Ended:QuarterYear
Dollars in thousandsSept 30, 2007Jun 30, 2007Sept 30, 2006% Change% Change

Mortgage Servicing Rights (MSR):

Mortgage loans serviced for others $ 877,648 $ 897,696 $ 978,723 (2 )% (10 )%
MSR Asset $ 9,474 $ 9,966 $ 13,668 (5 )% (31 )%
Less: Valuation reserve (1) -- -- (3,241 ) -- (100 )%
MSR Asset net $ 9,474 $ 9,966 $ 10,427 (5 )% (9 )%
MSR net as % of serviced portfolio 1.08 % 1.11 % 1.07 %

Mortgage Banking Revenue:

Origination and sale $ 1,468 $ 1,700 $ 2,141 (14 )% (31 )%
Servicing 546 670 652 (19 )% (16 )%
Amortization of MSR (1) -- -- (292 ) -- (100 )%
MSR valuation reserve change -- -- (1,056 ) -- (100 )%
Change in fair value of MSR (648 ) 237 -- (373 )% 100 %
Total Mortgage Banking Revenue $ 1,366 $ 2,607 $ 1,445 (48 )% (5 )%
Nine Months Ended:
Dollars in thousandsSept 30, 2007Sept 30, 2006% Change
Mortgage Banking Revenue:
Origination and sale $ 4,896 $ 5,601 (13 )%
Servicing 1,853 1,992 (7 )%
Amortization of MSR (1) -- (934 ) (100 )%
MSR valuation reserve change -- (867 ) (100 )%
Change in fair value of MSR (977 ) -- 100 %
Total Mortgage Banking Revenue $ 5,772 $ 5,792 0 %
(1) The Company adopted SFAS No. 156 effective January 1, 2007, resulting in elimination of the mortgage servicing right valuation reserve and MSR amortization.

Contacts:

Umpqua Holdings Corporation
Ray Davis, President/CEO, 503-727-4101
raydavis@umpquabank.com
or
Ron Farnsworth, SVP/Finance, 503-727-4108
ronfarnsworth@umpquabank.com

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