Umpqua Holdings Reports Fourth Quarter and Full Year 2007 Results

Umpqua Holdings Corporation (NASDAQ:UMPQ), parent company of Umpqua Bank and Strand, Atkinson, Williams & York, Inc., today announced fourth quarter 2007 operating earnings of $9.6 million, or $0.16 per diluted share, compared to $24.8 million, or $0.42 per diluted share, for the fourth quarter of 2006. Operating earnings exclude merger related expenses, net of tax. Including merger related expenses, net income for the fourth quarter of 2007 was $9.5 million, or $0.16 per diluted share, compared to $24.5 million, or $0.42 per diluted share for the fourth quarter of 2006.

For the full year 2007, the Company reports operating earnings of $65.3 million, or $1.08 per diluted share, compared to $87.3 million, or $1.65 per diluted share, for the full year 2006. Including merger related expenses, net income for the full year 2007 was $63.3 million, or $1.05 per diluted share, compared to $84.4 million, or $1.59 per diluted share for the full year 2006.

Significant income statement items for the fourth quarter of 2007 include:

  • Accrual for estimated pro-rata share of VISA membership litigation related to American Express ($3.9 million) and Discover ($1.2 million), reduced earnings per diluted share by $0.05 after tax;
  • Reversal of $2.3 million in interest income related to new non-accrual loans, representing a reduction in earnings per diluted share of $0.02 after tax;
  • Provision for loan losses of $17.8 million, representing a reduction of $0.18 per diluted share after tax; and,
  • Lower effective tax rate to approximately 25% of pre-tax income based on increased impact of tax-credit investments, represents an addition of $0.02 per diluted share from the year to date September 2007 effective tax rate of 35%.

In addition:

  • Non-performing assets ended the quarter at 1.18% of total assets, related primarily to the housing market downturn over the last two quarters and its impact on our residential development portfolio. Approximately $4.8 million of the non-performing assets were paid current in the first week of January 2008;
  • Fourth quarter 2007 net charge-offs were $21.2 million. For the full year, net charge-offs were $22.0 million, or 0.38% of average loans;
  • Full year organic loan and deposit growth was 5%, excluding the North Bay acquisition;
  • Net interest margin, on a tax equivalent basis, declined 20 basis points during the fourth quarter, to 4.00%, of which 13 basis points related to interest reversal on new non-accrual loans noted above;
  • Cost of interest bearing deposits decreased 16 basis points during the fourth quarter.

Umpquas management team has been quick to identify and report problem credits associated with the economic down-turn plaguing the country. This has resulted in another quarter where the Company incurred a higher than normal provision for loan losses, said Ray Davis, president and CEO of Umpqua Holdings Corporation. We have been active in aggressively resolving these credits and look forward to improved credit quality results in the future.

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

Sequential

Year over

Quarter ended: Quarter Year
(Dollars in thousands, except per share data) 12/31/07 9/30/07 12/31/06 % Change % Change
Net Income $9,516 $13,177 $24,533 (28)% (61)%
Add Back: Merger related expenses, net of tax 71 158 249 (55)% (71)%
Operating Earnings $9,587 $13,335 $24,782 (28)% (61)%

Earnings per diluted share:

Net Income $0.16 $0.22 $0.42 (27)% (62)%
Operating Earnings $0.16 $0.22 $0.42 (27)% (62)%

Year over

Year ended: Year
(Dollars in thousands, except per share data) 12/31/07 12/31/06 % Change
Net Income $63,268 $84,447 (25)%
Add Back: Merger related expenses, net of tax 1,991 2,864 (30)%
Operating Earnings $65,259 $87,311 (25)%

Earnings per diluted share:

Net Income $1.05 $1.59 (34)%
Operating Earnings $1.08 $1.65 (35)%

Credit Quality

Non-performing assets were $98.0 million, or 1.18% of total assets, as of December 31, 2007. Of this amount, $9.8 million represented loans past due greater than 90 days and still accruing interest, $81.3 million of non-accrual loans, and $6.9 million of other real estate owned. Included in non-accrual loans is one $24.7 million relationship where management anticipates no loss on future resolution. Excluding this relationship, non-accrual loans total $56.6 million, with an average balance of $1.6 million. Approximately $4.8 million of the loans past due greater than 90 days were paid current in the first week of January 2008.

Within other real estate owned, there were $14.5 million of additions during the fourth quarter, and $17.9 million of sales, resulting in the ending balance of $6.9 million at December 31, 2007.

Within the allowance for credit losses, the Company has identified $9.9 million of reserves related to these non-accrual loans, which are specifically measured for impairment. Management views this reserve as adequate to absorb future losses that may arise from resolution of these loans. The calculated provision for loan losses for the fourth quarter was $13.8 million. An additional provision of $4.0 million was added to the unallocated portion of the allowance due to the current economic environment, increasing the total provision recognized in the fourth quarter to $17.8 million. The unallocated portion of the allowance for credit losses was 4.8% as of December 31, 2007, compared to an insignificant unallocated allowance in the previous quarter.

For the full year 2007, the Company had net charge-offs of $22.0 million, compared to net charge-offs of $574 thousand for the full year 2006. The ratio of net charge-offs to average loans was 0.38% for the full year 2007. The allowance for credit losses was 1.42% of total loans and leases at December 31, 2007, compared to 1.15% of total loans and leases at December 31, 2006.

Total construction loans at December 31, 2007, were $1.2 billion. Within this total, the residential development loan segment is $674 million, and decreased $90 million, or 12%, from September 30, 2007. The average residential development loan is $894 thousand. Oregon/Washington residential development loans total $391 million, a decrease of 7% from the third quarter. California residential development loans total $283 million, a decrease of 17% from the third quarter. The remaining $514 million in construction loans are commercial construction projects. These commercial construction loans are uniquely different than the residential development loans and are performing with no notable issues.

Net Interest Margin

The Company reported a tax equivalent net interest margin of 4.00% for the fourth quarter of 2007, compared to 4.73% for the fourth quarter of 2006, and 4.20% for the third quarter of 2007. The decrease in net interest margin over the last year resulted from volatility 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 $2.3 million interest reversal on new non-accrual loans noted above resulted in a 13 basis point decline in the tax equivalent net interest margin during the quarter.

Balance Sheet

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

(dollars in thousands) Loans and Leases Deposits Assets
As reported, 12/31/07 $6,055,635 $6,589,326 $8,340,053
less: 12/31/06 balances 5,361,862 5,840,294 7,344,236
Total growth 693,773 749,032 995,817
less: acquisition 442,950 462,624 727,799
Organic growth $250,823 $286,408 $268,018
Annual organic growth rate 5% 5% 4%

Total consolidated assets as of December 31, 2007, were $8.3 billion, compared to $7.3 billion a year ago. Total gross loans and leases, and deposits, were $6.1 billion and $6.6 billion, respectively, as of December 31, 2007, compared to $5.4 billion and $5.8 billion, respectively, a year ago.

As of December 31, 2007, total shareholders equity was $1.2 billion. Book value per share was $20.67 and tangible book value per share was $7.92. During 2007, the company repurchased 4.01 million shares of stock at a weighted average price of $23.73 per share. There were no repurchases of common stock during the fourth quarter of 2007. The total remaining available common shares authorized for repurchase is approximately 1.54 million.

VISA Related Accruals

On November 7, 2007, Visa Inc. announced that it had reached a settlement with American Express related to an antitrust lawsuit. Umpqua Bank and certain other Visa member banks are obligated to fund the settlement and share in losses resulting from litigation.

Previously, Visa Inc. announced that it completed restructuring transactions in preparation for an initial public offering of its Class A stock planned for early 2008, and, as part of those transactions, Umpquas membership interest in Visa was exchanged for Class B stock of Visa, Inc. In connection with Visas planned offering, it is expected that a portion of the Class B shares will be redeemed for cash, with the remaining shares to be converted to Class A shares three years after the offering or upon settlement of certain covered litigation, whichever is later. Visa is expected to set aside a portion of the proceeds from the offering to fund the American Express settlement and other litigation judgments or settlements that may occur.

In connection with the announced American Express settlement, Umpqua recorded, in the fourth quarter of 2007, a liability and corresponding expense of $3.9 million pre-tax. In addition, Visa notified the Company of a contingency reserve related to unsettled litigation with Discover Card. In connection with this potential contingency, Umpqua recorded, in the fourth quarter of 2007, a liability and corresponding expense of $1.2 million pre-tax. These membership litigation accruals, combined, represent $0.05 per diluted share after tax.

Although the outcome of Visas initial public offering is currently not known, Umpqua anticipates that its proportionate share of the proceeds of the planned initial public offering by Visa will more than offset any liabilities related to Visa litigation, and no cash payments from Umpqua will be made in settlement of these liabilities.

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, resolution of non-accrual loans, the level of anticipated non-performing assets and gross loan charge-offs in 2008, the adequacy of the allowance for loan losses, Visas planned initial public offering, redemption and conversion of Visa Class B stock and the value of proceeds of redemption of Class B Visa stock. 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, further deterioration in credit quality, our ability to resolve non-accrual loans in a satisfactory manner, Visas ability to complete its public offering as planned, Visas financial performance and fluctuations in the value of Visa stock, additional Visa Inc. litigation and the timing of and our ability to liquidate equity interests in Visa.

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 147 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, January 24, 2008, at 10:00 a.m. PST (1:00 p.m. EST) during which the Company will discuss fourth quarter and full year 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 29921028. 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 dataDec 31, 2007Sep 30, 2007Dec 31, 2006% Change% Change
Interest income
Loans and leases $112,050 $116,111 $106,757 (3)% 5%
Interest and dividends on investments:
Taxable 9,515 9,137 7,169 4% 33%
Exempt from federal income tax 1,671 1,588 1,142 5% 46%
Dividends 76 96 80 (21)% (5)%
Temporary investments 976 929 1,366 5% (29)%
Total interest income 124,288 127,861 116,514 (3)% 7%

Interest expense

Deposits 47,090 48,138 38,769 (2)% 21%
Repurchase agreements and
fed funds purchased 378 530 483 (29)% (22)%
Junior subordinated debentures 4,492 4,444 3,856 1% 16%
Term debt 875 874 117 0% 648%
Total interest expense 52,835 53,986 43,225 (2)% 22%
Net interest income 71,453 73,875 73,289 (3)% (3)%
Provision for loan and lease losses 17,814 20,420 125 (13)% nm
Non-interest income
Service charges 8,478 8,448 7,435 0% 14%
Brokerage fees 2,444 2,498 2,241 (2)% 9%
Mortgage banking revenue 2,019 1,366 1,768 48% 14%
Loss on sale of securities (3) (13) (20) nm nm
Other income 3,449 6,244 2,689 (45)% 28%
Total non-interest income 16,387 18,543 14,113 (12)% 16%

Non-interest expense

Salaries and benefits 27,692 28,005 27,315 (1)% 1%
Occupancy and equipment 9,011 9,166 8,845 (2)% 2%
Intangible amortization 1,694 1,767 1,195 (4)% 42%
Other 18,753 13,692 11,270 37% 66%
Merger related expenses 118 263 415 (55)% (72)%
Total non-interest expense 57,268 52,893 49,040 8% 17%
Income before provision for income taxes 12,758 19,105 38,237 (33)% (67)%
Provision for income tax 3,242 5,928 13,704 (45)% (76)%
Net income $9,516 $13,177 $24,533 (28)% (61)%
Weighted average shares outstanding 59,939,649 60,489,522 58,045,755 (1)% 3%
Weighted average diluted shares outstanding 60,343,710 61,065,401 58,774,890 (1)% 3%
Earnings per share Basic $0.16 $0.22 $0.42 (27)% (62)%
Earnings per share Diluted $0.16 $0.22 $0.42 (27)% (62)%
nm = not meaningful
Umpqua Holdings Corporation
Consolidated Statements of Income
(Unaudited)
Twelve months ended:
Dollars in thousands, except per share dataDec 31, 2007Dec 31, 2006

% Change

Interest income
Loans and leases $443,939 $372,201 19%
Interest and dividends on investments:
Taxable 34,891 27,370 27%
Exempt from federal income tax 5,822 3,882 50%
Dividends 325 285 14%
Temporary investments 3,415 2,203 55%
Total interest income 488,392 405,941 20%
Interest expense
Deposits 180,840 119,881 51%
Repurchase agreements and
fed funds purchased 2,135 6,829 (69)%
Trust preferred securities 16,821 14,215 18%
Other borrowings 2,642 2,892 (9)%
Total interest expense 202,438 143,817 41%
Net interest income 285,954 262,124 9%
Provision for loan and lease losses 41,730 2,552 1535%
Non-interest income
Service charges 32,126 26,975 19%
Brokerage fees 10,038 9,649 4%
Mortgage banking revenue 7,791 7,560 3%
Loss on sale of securities (13) (21)

nm

Other income 14,883 9,434 58%
Total non-interest income 64,825 53,597 21%
Non-interest expense
Salaries and benefits 112,864 98,840 14%
Occupancy and equipment 35,785 31,752 13%
Intangible amortization 6,094 3,728 63%
Other 56,057 42,856 31%
Merger related expenses 3,318 4,773 (30)%
Total noninterest expense 214,118 181,949 18%
Income before income taxes 94,931 131,220 (28)%
Provision for income tax 31,663 46,773 (32)%
Net income $63,268 $84,447 (25)%
Weighted average shares outstanding 59,827,942 52,310,637 14%
Weighted average diluted shares outstanding 60,427,571 53,050,201 14%
Earnings per share Basic $1.06 $1.61 (34)%
Earnings per share Diluted $1.05 $1.59 (34)%
nm = not meaningful
Umpqua Holdings Corporation
Consolidated Balance Sheets
(Unaudited)
SequentialYear over
QuarterYear
Dollars in thousands, except per share dataDec 31, 2007Sep 30, 2007Dec 31, 2006% Change% Change
Assets:
Cash and due from banks $188,782 $148,434 $169,769 27% 11%
Temporary investments 3,288 46,787 165,879 (93)% (98)%
Investment securities:
Trading 2,837 4,144 4,204 (32)% (33)%
Available for sale 1,050,756 911,883 715,187 15% 47%
Held to maturity 6,005 7,116 8,762 (16)% (31)%
Loans held for sale 13,047 19,964 16,053 (35)% (19)%
Loans and leases 6,055,635 6,079,435 5,361,862 0% 13%
Less: Allowance for loan and lease losses (84,904) (88,278) (60,090) (4)% 41%
Loans and leases, net 5,970,731 5,991,157 5,301,772 0% 13%
Restricted equity securities 15,273 15,297 15,255 0% 0%
Premises and equipment, net 106,267 107,189 101,830 (1)% 4%
Other real estate owned 6,943 10,310 -- (33)% nm
Mortgage servicing rights, net 10,088 9,474 9,952 6% 1%
Goodwill and other intangibles 764,906 767,210 679,493 0% 13%
Other assets 201,130 186,846 156,080 8% 29%
Total assets $8,340,053 $8,225,811 $7,344,236 1% 14%
Liabilities:
Deposits $6,589,326 $6,518,217 $5,840,294 1% 13%

Securities sold under agreements to repurchase

36,294 52,883 47,985 (31)% (24)%
Fed funds purchased 69,500 20,000 -- 248% nm
Term debt 73,927 75,010 9,513 (1)% 677%
Junior subordinated debentures, at fair value 131,686 131,984 -- 0% nm
Junior subordinated debentures, at amortized cost 104,680 104,947 203,688 0% nm
Other liabilities 94,702 89,580 86,545 6% 9%
Total liabilities 7,100,115 6,992,621 6,188,025 2% 15%
Shareholders' equity:
Common stock 988,780 987,543 930,867 0% 6%
Retained earnings 251,545 253,487 234,783 (1)% 7%
Accumulated other comprehensive loss (387) (7,840) (9,439) (95)% (96)%
Total shareholders' equity 1,239,938 1,233,190 1,156,211 1% 7%
Total liabilities and shareholders' equity $8,340,053 $8,225,811 $7,344,236 1% 14%
Common shares outstanding at period end 59,980,161 59,864,335 58,080,171 0% 3%
Book value per share $20.67 $20.60 $19.91 0% 4%
Tangible book value per share $7.92 $7.78 $8.21 2% (3)%
Tangible equity $475,032 $465,980 $476,718 2% 0%
Tangible equity to tangible assets 6.27% 6.25% 7.15%
nm = not meaningful
Umpqua Holdings Corporation
Loan Portfolio Total and by Region
(Unaudited)
SequentialYear over
Dollars in thousandsQuarterYear
Loans and leases by class: Dec 31, 2007Sep 30, 2007Dec 31, 2006% Change% Change

Total Consolidated:

Commercial real estate $3,020,573 $3,071,588 $2,657,040 (1.7)% 13.7%
Residential real estate 379,804 379,657 320,413 0.0% 18.5%
Construction 1,187,984 1,191,757 1,203,657 (0.3)% (1.3)%
Total real estate 4,588,361 4,643,002 4,181,110 (1.2)% 9.7%
Commercial 1,394,985 1,365,786 1,126,189 2.1% 23.9%
Leases 40,207 37,095 22,870 8.4% 75.8%
Installment and other 43,371 44,970 43,153 (3.6)% 0.5%
Deferred loan fees, net (11,289) (11,418) (11,460) (1.1)% (1.5)%
Total loans and leases $6,055,635 $6,079,435 $5,361,862 (0.4)% 12.9%

Oregon/Washington region:

Commercial real estate $1,686,007 $1,710,224 $1,581,882 (1.4)% 6.6%
Residential real estate 256,781 250,751 212,074 2.4% 21.1%
Construction 671,619 631,087 546,961 6.4% 22.8%
Total real estate 2,614,407 2,592,062 2,340,917 0.9% 11.7%
Commercial 824,113 799,598 785,067 3.1% 5.0%
Leases 40,146 37,005 22,580 8.5% 77.8%
Installment and other 30,659 31,216 27,785 (1.8)% 10.3%
Deferred loan fees, net (7,130) (7,236) (7,753) (1.5)% (8.0)%
Total loans and leases $3,502,195 $3,452,645 $3,168,596 1.4% 10.5%
% of consolidated total 58% 57% 59%

California region:

Commercial real estate $1,334,566 $1,361,364 $1,075,158 (2.0)% 24.1%
Residential real estate 123,023 128,906 108,339 (4.6)% 13.6%
Construction 516,365 560,670 656,696 (7.9)% (21.4)%
Total real estate 1,973,954 2,050,940 1,840,193 (3.8)% 7.3%
Commercial 570,872 566,188 341,122 0.8% 67.4%
Leases 61 90 290 (32.2)% (79.0)%
Installment and other 12,712 13,754 15,368 (7.6)% (17.3)%
Deferred loan fees, net (4,159) (4,182) (3,707) (0.5)% 12.2%
Total loans and leases $2,553,440 $2,626,790 $2,193,266 (2.8)% 16.4%
% of consolidated total 42% 43% 41%
Umpqua Holdings Corporation
Credit Quality
(Unaudited)
SequentialYear over
Quarter EndedQuarter EndedQuarter EndedQuarterYear
Dollars in thousandsDec 31, 2007Sep 30, 2007Dec 31, 2006% Change% Change
Allowance for credit losses
Balance beginning of period $88,278 $68,723 $60,475
Provision for loan and lease losses 17,814 20,420 125
Charge-offs (21,733) (1,414) (1,618) 1437% 1243%
Less: Recoveries 545 549 1,108 (1)% (51)%
Net charge-offs (21,188) (865) (510) 2349% 4055%
Total Allowance for loan and lease losses 84,904 88,278 60,090 (4)% 41%
Reserve for unfunded commitments 1,182 1,246 1,313
Total Allowance for credit losses $86,086 $89,524 $61,403 (4)% 40%

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

1.38% 0.06% 0.04%
Recoveries to gross charge-offs 3% 39% 68%

Allowance for credit losses to loans and leases

1.42% 1.47% 1.15%

Allowance for credit losses to nonperforming loans

94% 130% 678%
Nonperforming loans to total loans and leases 1.50% 1.13% 0.17%
Nonperforming assets to total assets 1.18% 0.96% 0.12%
Nonperforming assets:
Loans on non-accrual status $81,317 $67,419 $8,629 21% 842%
Loans past due 90+ days & accruing 9,782 1,488 429 557% 2180%
Total nonperforming loans 91,099 68,907 9,058 32% 906%
Other real estate owned 6,943 10,310 -- (33)% nm
Total nonperforming assets $98,042 $79,217 $9,058 24% 982%
nm = not meaningful
Umpqua Holdings Corporation
Credit Quality (continued)
(Unaudited)
Twelve Months ended:
Dollars in thousandsDec 31, 2007Dec 31, 2006% Change
Allowance for credit losses
Balance beginning of period $60,090 $43,885
Provision for loan and lease losses 41,730 2,552
Acquisitions 5,078 14,227
Charge-offs (24,730) (4,205) 488%
Less: Recoveries 2,736 3,631 (25)%
Net charge-offs (21,994) (574) 3732%
Total Allowance for loan and lease losses 84,904 60,090
Reserve for unfunded commitments 1,182 1,313
Total Allowance for credit losses $86,086 $61,403
Net charge-offs to average
loans and leases 0.38% 0.01%
Recoveries to gross charge-offs 11% 86%
Umpqua Holdings Corporation
Deposits by Type
(Unaudited)
SequentialYear over
Dec 31, 2007Sep 30, 2007Dec 31, 2006QuarterYear
Dollars in thousandsAmountMixAmountMixAmountMix% Change% Change
Demand, non interest-bearing $1,272,872 19% $1,294,334 20% $1,222,107 21% (1.7)% 4.2%
Demand, interest-bearing 2,948,035 45% 2,950,605 45% 2,490,386 43% (0.1)% 18.4%
Savings 410,339 6% 358,825 6% 368,238 6% 14.4% 11.4%
Time 1,958,080 30% 1,914,453 29% 1,759,563 30% 2.3% 11.3%
Total Deposits $6,589,326 100% $6,518,217 100% $5,840,294 100% 1.1% 12.8%
Umpqua Holdings Corporation
Deposits/Core Deposits by Region
(Unaudited)
SequentialYear over
Dec 31, 2007Sep 30, 2007Dec 31, 2006QuarterYear
Dollars in thousandsAmountMixAmountMixAmountMix% Change% Change

Deposits by region:

Oregon/Washington $3,700,419 56% $3,700,826 57% $3,500,965 60% 0.0% 5.7%
California 2,888,907 44% 2,817,391 43% 2,339,329 40% 2.5% 23.5%
Total Deposits $6,589,326 100% $6,518,217 100% $5,840,294 100% 1.1% 12.8%

Core deposits - ending (1):

Oregon/Washington $3,137,684 58% $3,183,550 58% $3,044,448 61% (1.4)% 3.1%
California 2,313,104 42% 2,270,478 42% 1,911,228 39% 1.9% 21.0%
Total Core deposits $5,450,788 100% $5,454,028

100%

$4,955,676 100% (0.1)% 10.0%
% of total deposits 83% 84% 85%

Core deposits - average (1):

Oregon/Washington $3,165,254 58% $3,126,920 58% $2,993,706 61% 1.2% 5.7%
California 2,335,719 42% 2,305,912 42% 1,884,907 39% 1.3% 23.9%
Total Core deposits $5,500,973 100% $5,432,832 100% $4,878,613 100% 1.3% 12.8%
(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, 12/31/07 $3,502,195 $3,700,419 $2,553,440 $2,888,907 $6,055,635 $6,589,326
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 for year 333,599 199,454 360,174 549,578 693,773 749,032
Less: acquisition 16,166 3,559 426,784 459,065 442,950 462,624
Organic Growth$317,433$195,895$(66,610)$90,513$250,823$286,408
Organic growth % 10.0% 5.6%

(3.0)%

3.9% 4.7% 4.9%
Acquisition growth % 0.5% 0.1% 19.4% 19.6% 8.2% 7.9%
Total growth % 10.5% 5.7% 16.4% 23.5% 12.9% 12.8%
Organic growth rate - 200710.0%5.6%(3.0)%3.9%4.7%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
Dec 31, 2007Sep 30, 2007Dec 31, 2006ChangeChange
Net Interest Spread:
Yield on loans and leases 7.28% 7.62% 7.91% (0.34) (0.63)
Yield on taxable investments 4.79% 4.83% 4.71% (0.04) 0.08
Yield on tax-exempt investments (1) 5.58% 5.62% 5.51% (0.04) 0.07
Yield on temporary investments 4.56% 5.18% 5.41% (0.62) (0.85)
Total yield on earning assets (1) 6.93% 7.24% 7.50% (0.31) (0.57)
Cost of interest bearing deposits 3.53% 3.69% 3.44% (0.16) 0.09

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

2.70% 3.28% 2.90% (0.58) (0.20)
Cost of term debt 4.63% 4.62% 4.19% 0.01 0.44
Cost of junior subordinated debentures 7.53% 7.59% 7.50% (0.06) 0.03
Total cost of interest bearing liabilities 3.71% 3.86% 3.61% (0.15) 0.10
Net interest spread (1) 3.22% 3.38% 3.89% (0.16) (0.67)
Net interest margin Consolidated (1) 4.00% 4.20% 4.73% (0.20) (0.73)
Net interest margin Bank (1) 4.24% 4.45% 4.97% (0.21) (0.73)

As reported:

Return on average assets 0.46% 0.64% 1.35% (0.18) (0.89)
Return on average tangible assets 0.50% 0.70% 1.49% (0.20) (0.99)
Return on average equity 3.04% 4.20% 8.47% (1.16) (5.43)
Return on average tangible equity 7.92% 10.92% 20.77% (3.00) (12.85)
Efficiency ratio Consolidated 64.68% 56.83% 55.80% 7.85 8.88
Efficiency ratio Bank 60.76% 55.57% 52.12% 5.19 8.64

Excluding merger related expense (2):

Return on average assets 0.46% 0.65% 1.37% (0.19) (0.91)
Return on average tangible assets 0.51% 0.71% 1.51% (0.20) (1.00)
Return on average equity 3.06% 4.25% 8.56% (1.19) (5.50)
Return on average tangible equity 7.97% 11.05% 20.98% (3.08) (13.01)
Efficiency ratio Consolidated 64.55% 56.54% 55.33% 8.01 9.22
Efficiency ratio Bank 60.64% 55.30% 51.66% 5.34 8.98
(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)
Twelve Months Ended:
Dec 31, 2007Dec 31, 2006Change
Net Interest Spread:
Yield on loans and leases 7.61% 7.72% (0.11)
Yield on taxable investments 4.74% 4.55% 0.19
Yield on tax-exempt investments (1) 5.52% 5.69% (0.17)
Yield on temporary investments 5.00% 4.82% 0.18
Total yield on earning assets (1) 7.22% 7.32% (0.10)
Cost of interest bearing deposits 3.63% 3.09% 0.54

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

3.25% 4.09% (0.84)
Cost of term debt 4.60% 4.93% (0.33)
Cost of junior subordinated debentures 7.58% 7.56% 0.02
Total cost of interest bearing liabilities 3.80% 3.35% 0.45
Net interest spread (1) 3.42% 3.97% (0.55)
Net interest margin Consolidated (1) 4.24% 4.74% (0.50)
Net interest margin Bank (1) 4.49% 4.99% (0.50)

As reported:

Return on average assets 0.80% 1.31% (0.51)
Return on average tangible assets 0.88% 1.43% (0.55)
Return on average equity 5.17% 8.70% (3.53)
Return on average tangible equity 13.08% 20.84% (7.76)
Efficiency ratio Consolidated 60.62% 57.33% 3.29
Efficiency ratio Bank 57.47% 53.43% 4.04

Excluding merger related expense (2):

Return on average assets 0.83% 1.35% (0.52)
Return on average tangible assets 0.91% 1.48% (0.57)
Return on average equity 5.34% 9.00% (3.66)
Return on average tangible equity 13.50% 21.55% (8.05)
Efficiency ratio Consolidated 59.68% 55.82% 3.86
Efficiency ratio Bank 56.55% 51.97% 4.58
(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 thousandsDec 31, 2007Sep 30, 2007Dec 31, 2006% Change% Change
Temporary investments $84,964 $71,165 $100,301 19% (15)%
Investment securities, taxable 800,501 765,346 615,630 5% 30%
Investment securities, tax-exempt 169,609 159,998 117,595 6% 44%
Loans held for sale 15,123 10,732 17,936 41% (16)%
Loans and leases 6,087,801 6,032,388 5,339,111 1% 14%
Total earning assets 7,157,998 7,039,629 6,190,573 2% 16%
Goodwill & other intangibles 766,109 766,591 680,030 0% 13%
Total assets 8,288,478 8,190,032 7,201,791 1% 15%
Non interest bearing demand deposits 1,304,484 1,319,280 1,228,026 (1)% 6%
Interest bearing deposits 5,288,940 5,171,123 4,474,364 2% 18%
Total deposits 6,593,424 6,490,403 5,702,390 2% 16%
Interest bearing liabilities 5,656,152 5,542,587 4,755,568 2% 19%
Total shareholders equity 1,243,095 1,245,390 1,148,682 0% 8%
Tangible equity 476,986 478,799 468,652 0% 2%
Umpqua Holdings Corporation
Average Balances
(Unaudited)
Twelve Months Ended:
Dollars in thousandsDec 31, 2007Dec 31, 2006% Change
Temporary investments $68,297 $45,745 49%
Investment securities, taxable 743,266 607,267 22%
Investment securities, tax-exempt 149,291 97,723 53%
Loans held for sale 14,073 15,375 (8)%
Loans and leases 5,822,907 4,803,509 21%
Total earning assets 6,797,834 5,569,619 22%
Goodwill & other intangibles 739,086 565,167 31%
Total assets 7,897,568 6,451,660 22%
Non interest bearing demand deposits 1,263,873 1,121,171 13%
Interest bearing deposits 4,986,647 3,882,777 28%
Total deposits 6,250,520 5,003,948 25%
Interest bearing liabilities 5,331,620 4,296,287 24%
Total shareholders equity 1,222,628 970,394 26%
Tangible equity 483,542 405,227 19%
Umpqua Holdings Corporation
Mortgage Banking Activity
(unaudited)
SequentialYear over
Quarter Ended:QuarterYear
Dollars in thousandsDec 31, 2007Sep 30, 2007Dec 31, 2006% Change% Change

Mortgage Servicing Rights (MSR):

Mortgage loans serviced for others $870,680 $877,648 $955,444 (1)% (9)%
MSR Asset $10,088 $9,474 $13,553 6% nm
Less: Valuation reserve (1) -- -- (3,601) -- nm
MSR Asset net $10,088 $9,474 $9,952 6% 1%
MSR net as % of serviced portfolio 1.16% 1.08% 1.04%

Mortgage Banking Revenue:

Origination and sale $1,530 $1,468 $1,753 4% (13)%
Servicing 601 546 639 10% (6)%
Amortization of MSR (1) -- -- (264) -- nm
MSR valuation reserve change -- -- (360) -- nm
Change in fair value of MSR 222 (648) -- (134)% 100%
Change in fair value of MSR hedge (334) -- -- nm nm
Total Mortgage Banking Revenue $2,019 $1,366 $1,768 48% 14%
Twelve Months Ended:
Dollars in thousandsDec 31, 2007Dec 31, 2006% Change

Mortgage Banking Revenue:

Origination and sale $6,426 $7,354 (13)%
Servicing 2,455 2,631 (7)%
Amortization of MSR (1) -- (1,198) nm
MSR valuation reserve change -- (1,227) nm
Change in fair value of MSR (756) -- nm
Change in fair value of MSR hedge (334) -- nm
Total Mortgage Banking Revenue $7,791 $7,560 3%
nm = not meaningful
(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
President/CEO
Ray Davis, 503-727-4101
raydavis@umpquabank.com
or
SVP/Finance
Ron Farnsworth, 503-727-4108
ronfarnsworth@umpquabank.com

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