Operating earnings1 of $53.9
million, or $0.27 per share, up 29% sequentiallyOrganic
non-covered loan growth of $294 million, or 8%
annualizedOrganic deposit growth of $189 million, or 5%
annualizedTangible book value per share1 of
$8.69; up 2% sequentiallySterling integration on
track
Umpqua Holdings Corporation (NASDAQ: UMPQ) (the “Company”)
reported net earnings available to common shareholders of $17.1
million for the second quarter of 2014, as compared to $18.7
million for the first quarter 2014, and $26.1 million for the
second quarter of 2013. Earnings per diluted common share was $0.09
for the second quarter of 2014, as compared to $0.17 for the first
quarter of 2014, and $0.23 for the second quarter of 2013.
Operating earnings1, which represent earnings available to
common shareholders before gains or losses on junior subordinated
debentures carried at fair value, net of tax, and merger related
expenses, net of tax, were $53.9 million for the second quarter of
2014, as compared to $24.0 million for the first quarter of 2014,
and $26.9 million for the second quarter of 2013. Operating
earnings per diluted common share was $0.27 for the second quarter
of 2014, as compared to $0.21 for the first quarter of 2014, and
$0.24 for the second quarter of 2013.
“Our results this quarter reflect our ability to continue to
grow Umpqua in a profitable manner,” said Ray Davis, president and
CEO of Umpqua Holdings Corporation. “The Company's second quarter
2014 performance includes strong organic loan and deposit growth, a
higher net interest margin, increased mortgage banking revenues and
strong credit quality, while at the same time completing the
Sterling acquisition. We remain on track with the integration, and
believe we are well-positioned to leverage the franchise value of
the combined company to drive future growth.”
Second Quarter 2014 Financial
Highlights:
- Delivered improved operating results:
- Adjusted net interest margin1 increased
to 4.85%, from 4.12% in the prior quarter;
- Efficiency ratio (operating basis)1
improved to 60.33%, from 68.34% in the prior quarter;
- Return on average tangible common
equity (operating basis)1 improved to 12.76%;
- Continued to generate organic loan
growth and gather core deposits:
- Non-covered loans and leases grew
organically (exclusive of loans acquired or divested) by $338.0
million, partially offset by $44.4 million in loan sales, for net
growth of $293.6 million, or 8% annualized;
- Deposits grew organically (exclusive of
deposits acquired or divested) by $188.5 million, or 5%
annualized;
- Credit quality remained strong:
- Non-covered, non-performing assets to
total assets decreased to 0.36%, from 0.53% for the prior
quarter;
- Disciplined capital management:
- Tangible common equity ratio1 of 9.34%,
up from 8.67% in the prior quarter;
- Tangible book value per share1 of
$8.69, up 2% from $8.54 in the prior quarter;
- Estimated total risk-based capital of
14.7% and Tier 1 common to risk weighted asset ratio of 11.0%;
- Declared a dividend of $0.15 per common
share;
For the six months ended June 30, 2014, the Company
reported net earnings available to common shareholders of $35.8
million, or $0.23 per diluted common share, as compared to $49.2
million, or $0.44 per diluted common share, for the six months
ended June 30, 2013. For the six months ended June 30, 2014,
operating earnings1 were $77.9 million, or $0.50 per diluted common
share, as compared to $51.3 million, or $0.46 per diluted common
share, for the six months ended June 30, 2013.
Acquisition of Sterling
Financial
The Company completed its acquisition of Sterling Financial
Corporation (“Sterling”) on April 18, 2014, and as required under
purchase accounting rules, recorded Sterling’s balance sheet at its
estimated fair value as of that date. After fair value adjustments,
Umpqua Bank acquired assets totaling $9.9 billion, loans and leases
(including loans held for sale) totaling $7.3 billion, and deposits
totaling $7.1 billion.
The results of operations from Sterling have been included in
the Company’s current quarter results since the completion of the
acquisition beginning on April 19, 2014.
Subsequent to the acquisition, and prior to the end of the
second quarter of 2014, the Company completed the required
divestiture of six branches to another financial institution, in
which it sold $83.0 million of non-covered loans and $224.6 million
of deposits.
The table below provides additional information related to the
preliminary fair value determinations of the assets acquired and
the liabilities assumed as a result of the acquisition of
Sterling.
(In thousands)
April 18, 2014
Fair value of consideration to Sterling shareholders:
Cash paid $ 136,200 Liability recorded for warrants 6,453 Fair
value of common shares issued 1,939,497 Fair value of warrants,
common stock options, and restricted stock exchanged 50,317 Total
purchase price 2,132,467
Fair value of assets acquired: Cash
and cash equivalents $ 253,067 Investment securities 1,378,300
Loans held for sale 215,208 Non-covered loans and leases, net
7,122,989 Premises and equipment, net 124,881 Residential mortgage
servicing rights 62,770 Other intangible assets, net 54,561
Non-covered other real estate owned 8,140 Bank owned life insurance
193,246 Deferred tax asset, net 295,371 Accrued interest receivable
23,553 Other assets 147,338 Total assets acquired 9,879,424
Fair value of liabilities assumed: Deposits 7,086,052
Securities sold under agreements to repurchase 584,746 Term debt
854,737 Junior subordinated debentures 156,171 Other liabilities
80,679 Total liabilities assumed $ 8,762,385 Net assets
acquired 1,117,039 Preliminary goodwill $ 1,015,428
The net assets acquired from Sterling were recorded at their
estimated fair value as of the date of acquisition. Subsequent to
the acquisition, the Company paid off the majority of the Sterling
repurchase agreements, which was funded by the sale of investment
securities.
For the second quarter of 2014, the Sterling acquisition was 32%
accretive to operating earnings per share1. Under Generally
Accepted Accounting Principles, the Sterling allowance for loan
losses was eliminated and a fair value discount of approximately
$315 million was recorded against the loans. This included a credit
discount of approximately $264 million as of the date of
acquisition. Of this credit discount, approximately $180 million is
expected to accrete into interest income over the life of the
Sterling loan portfolio. During the second quarter of 2014, $24.5
million of the credit discount accreted into interest income.
New loans originated by the former Sterling workforce since
April 19, 2014 are accounted for separately from the discounted
acquired loans. As a result, the Company recognized $7.7 million in
provision for loan losses, related primarily to new loan
production, along with loans that matured and renewed, from the
former Sterling offices.
Together, the accretion from the credit discount, offset by the
provision for loan losses related to new production by former
Sterling offices, added $10.1 million to net income, or $0.05 per
diluted share. Excluding the net items above, the Sterling
acquisition was 7% accretive to operating earnings per share1 for
the second quarter of 2014. This is in line with the previously
announced earnings per share accretion target of 12% following full
realization of cost synergies.
Integration efforts are proceeding as planned, with previously
announced store consolidations in process, system conversions
scheduled through early 2015, and the organization chart finalized
on the date of acquisition. Cost synergies are on track to the
previously announced target of $87 million (annualized), which are
expected to be fully realized following system conversions.
Balance Sheet
Total consolidated assets were $22.0 billion as of June 30,
2014, as compared to $11.8 billion as of March 31, 2014 and
$11.4 billion as of June 30, 2013. Total gross loans and leases
(covered and non-covered) and deposits, were $15.1 billion and
$16.3 billion, respectively, as of June 30, 2014, as compared
to $7.8 billion and $9.3 billion, respectively, as of March 31,
2014, and $7.2 billion and $9.0 billion, respectively, as of June
30, 2013.
Total non-covered loans and leases held for investment increased
to $14.8 billion as of June 30, 2014, as compared to $7.4
billion as of March 31, 2014 and $6.8 billion as of June 30, 2013.
This included organic growth (exclusive of loans acquired via
Sterling acquisition and loans sold as part of branch divestiture)
of $338.0 million from the prior quarter. This growth was partially
offset by other loan sales of $44.4 million during the quarter,
which included $24.0 million in multifamily loans and $20.4 million
in government guaranteed loans, resulting in net organic loan
growth of $293.6 million.
Total covered loans were $297.6 million as of June 30, 2014, a
$44.7 million decline from the prior quarter and a $121.4 million
decline from the same period in the prior year. This portfolio will
continue to decrease over time as loan payments are received,
covered loans are refinanced or modified out of loss sharing, and
as troubled credits are resolved and worked out. The Company did
not acquire any covered loans as a result of the acquisition of
Sterling.
Total deposits increased to $16.3 billion as of June 30,
2014, as compared to $9.3 billion as of March 31, 2014 and $9.0
billion as of June 30, 2013. This included organic growth
(exclusive of deposits acquired via Sterling acquisition and
deposits sold as part of branch divestiture) of $188.5 million from
the prior quarter.
Including secured off-balance sheet lines of credit, total
available liquidity to the Company was $7.0 billion as of
June 30, 2014, representing 32% of total assets and 43% of
total deposits. This compares to total available liquidity to the
Company of $4.5 billion, or 38% of total assets and 48% of total
deposits, as of March 31, 2014.
Net Interest Income
Net interest income was $212.3 million for the second quarter of
2014, up $104.4 million from the prior quarter and $118.4 million
from the same period in the prior year. The increases from prior
periods were primarily driven by the acquisition of Sterling, along
with continued organic loan growth. Net interest income for the
second quarter of 2014 included interest income arising from the
accretion of the credit discount recorded on the loans acquired
from the acquisition of Sterling.
The Company’s net interest margin was 5.01% for the second
quarter of 2014, as compared to 4.28% for the first quarter of
2014, and 3.73% for the second quarter of 2013. The increases from
prior periods were primarily driven by the acquisition of Sterling,
an improvement in the yield earned on interest-earnings assets, and
a slightly lower cost of funds.
Adjusted Net Interest
Income1
The Company’s adjusted net interest income and margin excludes
gains on covered loan disposals, and interest and fee reversals
related to non-accrual loans.
Loan disposal activities within the covered loan portfolio,
either through loans being paid off in full or transferred to OREO,
result in gains within covered loan interest income to the extent
assets received in satisfaction of debt (such as cash or the net
realizable value of OREO received) exceed the allocated carrying
value of the loan disposed of from the pool. Loan disposal
activities contributed $7.1 million of interest income for the
second quarter of 2014, as compared to $4.3 million for the first
quarter of 2014 and $4.2 million for the second quarter of 2013.
While dispositions of covered loans positively impact interest
income and net interest margin, the Company recognizes a
corresponding decrease to the change in the FDIC indemnification
asset within non-interest income that partially offsets the impact
to net income. Interest and fee reversals related to non-accrual
loans during the second quarter of 2014 totaled $450 thousand, as
compared to $122 thousand for the first quarter of 2014 and $33
thousand for second quarter of 2013.
Adjusted net interest income was $207.0 million for the second
quarter of 2014, as compared to $104.8 million for the first
quarter of 2014 and $90.8 million for the second quarter of 2013.
The Company’s adjusted net interest margin was 4.85% for the second
quarter of 2014, as compared to 4.12% for the first quarter of 2014
and 3.57% for the second quarter of 2013.
Non-Interest Income
Total non-interest income was $44.5 million for the second
quarter of 2014, up $21.5 million from the prior quarter and $10.0
million from the same period in the prior year. The increases from
prior periods were primarily driven by the acquisition of
Sterling.
Residential mortgage banking revenue, which includes income
generated from the origination and sale of residential mortgage
loans, income from the servicing of residential mortgage loans and
changes to the fair value of the residential mortgage servicing
rights (“MSR”) asset, increased to $24.3 million for the second
quarter of 2014, up $13.9 million from the prior quarter, and flat
with the same period in the prior year. The linked quarter increase
was primarily driven by the acquisition of Sterling, partially
offset by a decrease in the fair value of the MSR asset due to a
decline in mortgage interest rates, which resulted in a loss of
$3.2 million for the quarter.
The Company’s gain on sale margin, as a percentage of total
residential mortgage production, was 2.47% for the second quarter
of 2014, down from 2.87% in the prior quarter, primarily related to
the acquisition of Sterling. Of the current quarter’s mortgage
production, 74% related to purchase activity, as compared to 69%
for the prior quarter and 49% for the same period in the prior
year.
As of June 30, 2014, the Company serviced $10.8 billion of
residential mortgage loans for others, and its related MSR asset
was valued at $114.2 million, or 1.05% of the total serviced
portfolio principal balance. This compares to $4.5 billion of
residential mortgage loans serviced for others as of March 31,
2014, with a related MSR asset of $49.2 million, or 1.09% of the
total serviced portfolio principal balance. As of June 30 2013, the
Company serviced $3.9 billion of residential mortgage loans
serviced for others, and its related MSR asset was valued at $38.2
million, or 0.98% of the total serviced portfolio principal
balance.
Total other non-interest income decreased by $1.4 million from
the prior quarter and by $2.7 million from the same period in the
prior year. The largest recurring component of other non-interest
income is Debt Capital Markets revenue, which was a loss of $1.2
million for the second quarter of 2014, as compared to a gain of
$0.8 million for the first quarter of 2014 and a gain of $2.4
million for the second quarter of 2013. The decrease from the prior
quarter was primarily driven by a fair value loss on the related
swap derivatives.
Non-interest Expense
Non-interest expense was $214.1 million for the second quarter
of 2014, which included $57.5 million of merger-related expenses.
This compares to $96.5 million, including $6.0 million of
merger-related expenses, for the first quarter of 2014 and $87.9
million, including $0.8 million of merger-related expenses, for the
second quarter of 2013. The increase in the Company’s non-interest
expense from the prior quarter was primarily driven by increased
salaries, benefits, and occupancy and equipment expenses associated
with Sterling. The second quarter of 2014 run-rate does not reflect
the full benefit of the anticipated merger cost synergies.
On an operating basis1, which excludes merger-related expenses,
the Company’s efficiency ratio was 60.33% for the second quarter of
2014, an improvement from 68.34% for the first quarter of 2014 and
66.97% for the second quarter of 2013.
Income taxes
The Company recorded a provision for income taxes of $10.7
million for the second quarter of 2014, representing an effective
tax rate of 38% for the quarter. The increase in the quarterly
effective tax rate was driven by higher actual and projected income
resulting from the acquisition of Sterling. This increased the
year-to-date effective tax rate to 36%, which is the anticipated
full-year 2014 effective tax rate.
Capital
As of June 30, 2014, the Company’s tangible book value per
common share1 was $8.69 and its ratio of tangible common equity to
tangible assets1 was 9.34%. These are up from $8.54 and 8.67%,
respectively, from the prior quarter.
The Company made no open market or privately negotiated
purchases of common stock under the Company’s previously announced
share repurchase plan during the second quarter of 2014. The
Company may repurchase up to 12.0 million of additional shares
under this plan.
The Company’s estimated total risk-based capital ratio was 14.7%
as of June 30, 2014, and its estimated Tier 1 common to risk
weighted assets ratio was 11.0% of June 30, 2014. The Company
remains well above current “well-capitalized” regulatory minimums.
These capital ratios, as of June 30, 2014, are estimates
pending completion and filing of the Company’s regulatory
reports.
On July 2, 2013, federal banking regulators approved the final
proposed rules that revise the regulatory capital rules to
incorporate certain revisions by the Basel Committee on Banking
Supervision to the Basel capital framework (“Basel III”). Under
Basel III, the Company's combined trust preferred issuances must be
phased out of Tier 1 and into Tier 2 capital (75% in 2015 and 100%
in 2016). As of June 30, 2014, the total par value of trust
preferred securities was $461.2 million. In addition, the Company
is required under Basel III to exclude the entire deferred tax
asset related to net operating losses (“NOLs”) from Tier 1 capital.
As of June 30, 2014, the Company’s total deferred tax asset was
$260.0 million, and the portion related to NOLs was $214.5
million.
Credit Quality – Non-covered Loan
Portfolio
Under purchase accounting rules, loans (including those
considered non-performing) acquired from Sterling were recorded at
their estimated fair value, and the related allowance for loan
losses was eliminated. As a result, the Company wrote down the
value of the non-covered loan and lease portfolio acquired from
Sterling. This credit mark is not reflected in the reported
allowance for loan losses, or its related allowance coverage
ratios, but should be considered when comparing the current quarter
ratios to prior periods.
The allowance for non-covered loan losses was $98.0 million, or
0.66% of non-covered loans and leases, as of June 30, 2014. To
provide better comparability to prior periods, this ratio would
have been approximately 2.2% after grossing up the allowance for
loan losses and the non-covered loans and leases by the amount of
the remaining credit mark remaining as of quarter-end. The
allowance for non-covered loan losses to non-covered loans and
leases was 1.17% as of March 31, 2014 and 1.26% as of
June 30, 2013.
The provision for non-covered loan losses was $15.4 million for
the second quarter of 2014, up from $5.4 million for the first
quarter of 2014 and $3.0 million for the second quarter of 2013. Of
the second quarter of 2014 provision for loan losses, $7.7 million
related to new loan production from former Sterling offices, $5.5
million related to growth in the Financial Pacific Leasing
portfolio, and the remaining amount was driven primarily by organic
loan growth from legacy Umpqua Bank.
Non-covered, non-performing assets were $79.4 million, or 0.36%
of total assets, as of June 30, 2014, as compared to $62.2
million, or 0.53% of total assets, as of March 31, 2014, and
$68.1 million, or 0.60% of total assets, as of June 30, 2013.
The level of non-covered, non-performing assets increased from
prior periods as a result of the merger with Sterling and expected
fluctuations in the legacy Umpqua portfolio, while the ratio of
non-covered, non-performing assets to total assets decreased due to
the increase in total assets.
Non-covered loans past due 30 to 89 days were $28.9 million, or
0.19% of non-covered loans and leases, as of June 30, 2014, as
compared to $29.4 million, or 0.40% of non-covered loans and
leases, as of March 31, 2014, and $22.0 million, or 0.32% of
non-covered loans and leases, as of June 30, 2013. The
decreases in the ratio of non-covered loans past due 30 to 89 days
to non-covered loans and leases from prior periods were due to the
increase in non-covered loans and leases. Non-covered restructured
loans on accrual status were $67.5 million as of June 30,
2014, as compared to $67.9 million as of March 31, 2014, and
$73.9 million as of June 30, 2013.
1 “Non-GAAP” financial measure. More information regarding this
measurement and a reconciliation to the comparable GAAP measurement
is provided under the heading Non-GAAP Financial Measures
below.
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. The Company believes that certain non-GAAP financial
measures provide investors with information useful in understanding
the Company’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.
The Company recognizes gains or losses on its 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, the Company incurs significant
expenses related to the completion and integration of mergers and
acquisitions. Additionally, it 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, the
Company may recognize one-time bargain purchase gains on certain
acquisitions that are not reflective of the Company’s on-going
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.
The Company defines operating earnings 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
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
available to common shareholders (GAAP) to operating earnings
(non-GAAP), and earnings per diluted common share (GAAP) to
operating earnings per diluted share (non-GAAP) for the periods
presented:
Quarter Ended: % Change (Dollars in
thousands, except per share data)
Jun 30,2014
Mar 31,2014
Dec 31,2013
Sep 30,2013
Jun 30,2013
Seq.Quarter
Year overYear
Net earnings available to common shareholders $ 17,138 $
18,651 $ 25,058 $ 23,281 $ 26,056 (8 )%
(34 )% Adjustments: Net loss on junior subordinated debentures
carried at fair value, net of tax (1) 821 325 332 332 328 153 % 150
% Merger related expenses, net of tax (1) 35,926
5,073 2,502 2,914 486
608 % nm Operating earnings $ 53,885 $ 24,049
$ 27,892 $ 26,527 $
26,870 124 % 101 %
Earnings per diluted
share:
Earnings available to common shareholders $ 0.09 $ 0.17 $ 0.22 $
0.21 $ 0.23 (47 )% (61 )% Operating earnings $ 0.27 $ 0.21 $ 0.25 $
0.24 $ 0.24 29 % 13 %
Six Months Ended: %
Change
Jun 30,2014
Jun 30,2013
Year overYear
Net earnings available to common shareholders $ 35,789 $
49,234 (27 )% Adjustments: Net loss on junior subordinated
debentures carried at fair value, net of tax (1) 1,147 653 76 %
Merger related expenses, net of tax (1) 40,999 1,405
nm Operating earnings $ 77,935 $ 51,292
52 %
Earnings per diluted
share:
Earnings available to common shareholders $ 0.23 $ 0.44 (48 )%
Operating earnings $ 0.50 $ 0.46 9 % (1) Income tax effect
of pro forma operating earnings adjustments at 40% for
tax-deductible items. nm = not meaningful.
Management believes adjusted net interest income and adjusted
net interest margin are useful financial measures because they
enable investors to evaluate the underlying growth or compression
in these values excluding interest income adjustments related to
credit quality. Management uses these measures to evaluate adjusted
net interest income operating results exclusive of credit costs, in
order to monitor our effectiveness in growing higher interest
yielding assets and managing our cost of interest bearing
liabilities over time. Adjusted net interest income is calculated
as net interest income, adjusting tax exempt interest income to its
taxable equivalent, adding back interest and fee reversals related
to new non-accrual loans during the period, and deducting the
interest income gains recognized from loan disposition activities
within covered loan pools. Adjusted net interest margin is
calculated by dividing annualized adjusted net interest income by a
period’s average interest earning assets.
The following table provides the reconciliation of net interest
income (GAAP) to adjusted net interest income (non-GAAP), and net
interest margin (GAAP) to adjusted net interest margin (non-GAAP)
for the periods presented:
Quarter Ended: % Change (Dollars in
thousands) Jun 30, 2014 Mar 31, 2014
Dec 31, 2013 Sep 30, 2013 Jun
30, 2013
Seq.Quarter
Year overYear
Net interest income $ 212,259 $ 107,838 $ 110,074
$ 106,809 $ 93,893 97 % 126 % Tax equivalent
adjustment (1) 1,394 1,092 1,119
1,137 1,153 28 % 21 % Net interest
income (1) 213,653 108,930 111,193 107,946 95,046 96 % 125 %
Adjustments: Interest and fee reversals (recoveries) on non-accrual
loans 450 122 (399 ) 203 33 269 % nm Covered loan disposal gains
(7,128 ) (4,259 ) (3,908 ) (1,836 )
(4,237 ) 67 % 68 % Adjusted net interest income (1) $ 206,975
$ 104,793 $ 106,886 $
106,313 $ 90,842 98 % 128 % Average interest
earning assets $ 17,116,070 $ 10,310,116 $ 10,292,996 $ 10,136,677
$ 10,218,611 66 % 67 % Net interest margin – consolidated (1) 5.01
% 4.28 % 4.29 % 4.22 % 3.73 % Adjusted net interest margin –
consolidated (1) 4.85 % 4.12 % 4.12 % 4.16 % 3.57 %
Six
Months Ended: % Change Jun 30, 2014 Jun
30, 2013 Year over Year Net interest income $ 320,097 $
188,082 70 % Tax equivalent adjustment (1) 2,486
2,323 7 % Net interest income (1) 322,583 190,405 69 %
Adjustments: Interest and fee reversals on non-accrual loans 572
1,118 (49 )% Covered loan disposal gains (11,387 ) (7,391 )
54 % Adjusted net interest income (1) $ 311,768 $
184,132 69 % Average interest earning assets $ 13,731,892 $
10,234,539 34 % Net interest margin – consolidated (1) 4.74 % 3.75
% Adjusted net interest margin – consolidated (1) 4.58 % 3.63 %
(1) Tax equivalent basis. Tax exempt interest has been
adjusted to a taxable equivalent basis using a 35% tax rate. nm =
not meaningful.
Management believes tangible common equity and the tangible
common equity ratio are meaningful measures of capital adequacy
because they provide a meaningful base for period-to-period and
company-to-company comparisons, which management believes will
assist investors in assessing the capital of the Company and the
ability to absorb potential losses. Tangible common equity is
calculated as total shareholders' equity less goodwill and other
intangible assets, net (excluding MSRs). 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, 2014 Mar 31, 2014
Dec 31, 2013 Sep 30, 2013 Jun
30, 2013 Total shareholders' equity $ 3,729,060 $ 1,734,476 $
1,727,426 $ 1,725,995 $ 1,715,352 Subtract: Goodwill and other
intangible assets, net 1,842,670 775,488
776,683 778,094 682,971
Tangible common shareholders' equity $ 1,886,390 $
958,988 $ 950,743 $ 947,901
$ 1,032,381 Total assets $ 22,042,229 $ 11,838,726 $
11,636,112 $ 11,569,297 $ 11,392,208 Subtract: Goodwill and other
intangible assets, net 1,842,670 775,488
776,683 778,094 682,971
Tangible assets $ 20,199,559 $ 11,063,238
$ 10,859,429 $ 10,791,203 $
10,709,237 Common shares outstanding at period end
217,190,721 112,319,525 111,973,203 111,928,762 111,898,620
Tangible common equity ratio 9.34 % 8.67 % 8.75 % 8.78 % 9.64 %
Tangible book value per common share $ 8.69 $ 8.54 $ 8.49 $ 8.47 $
9.23
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 locations across
Idaho, Washington, Oregon, California 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 Private Bank serves high net
worth individuals and nonprofits, providing trust and investment
services. Umpqua Holdings Corporation is headquartered in Portland,
Oregon. For more information, visit www.umpquaholdingscorp.com.
Earnings Conference Call
Information
The Company will host its second quarter 2014 earnings
conference call on Thursday, July 24, 2014, at 10:00 a.m. PST (1:00
p.m. EST). During the call, the Company will provide an update on
recent activities and discuss its second quarter 2014 financial
results. There will be a live question-and-answer session following
the presentation. To join the call, please dial (888) 349-9582 ten
minutes prior to the start time and enter conference ID: 3191295. A
re-broadcast will be available approximately two hours after the
call by dialing (888) 203-1112 and entering conference ID 3191295.
The earnings conference call will also be available as an
audiocast, which can be accessed on the Company’s investor
relations page at www.umpquaholdingscorp.com. A slide presentation
to accompany the call will also be posted on the website before the
call.
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 size and growth potential
from the acquisition of Sterling Financial Corporation; the
integration of the merger with Sterling Financial Corporation;
merger-related synergies and systems conversions; and credit
discount accretion related to the merger. 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,
changes in the discounted cash flow model used to determine the
fair value of subordinated debentures; prolonged low interest rate
environment; unanticipated weakness in loan demand or loan pricing;
deterioration in the economy; material reductions in revenue or
material increases in expenses; lack of strategic growth
opportunities or our failure to execute on those opportunities; our
inability to effectively manage problem credits; certain loan
assets becoming ineligible for loss sharing; unanticipated
increases in the cost of deposits; the consequences of a phase-out
of junior subordinated debentures from Tier 1 capital; Umpqua’s
ability to achieve the synergies and earnings accretion
contemplated by the Sterling merger; Umpqua’s ability to promptly
and effectively integrate the businesses of Sterling and Umpqua and
complete system conversions; the diversion of management time on
issues related to merger integration; changes in laws or
regulations; and changes in general economic conditions.
Umpqua Holdings Corporation Consolidated
Statements of Income (Unaudited)
Quarter Ended: % Change (In
thousands, except per share data)
Jun 30,2014
Mar 31,2014
Dec 31,2013
Sep 30,2013
Jun 30,2013
Seq.Quarter
Year overYear
Interest income: Non-covered loans and leases $
193,061 $ 91,268 $ 93,032 $ 93,706 $ 78,434 112 % 146 % Covered
loans and leases 15,931 12,718 13,330 11,837 14,750 25 % 8 %
Interest and dividends on investments: Taxable 12,712 9,291 9,517
7,882 8,103 37 % 57 % Exempt from federal income tax 2,653 2,112
2,173 2,200 2,237 26 % 19 % Dividends 128 50 87 51 90 156 % 42 %
Temporary investments & interest bearing deposits 482
441 399 284 401
9 % 20 % Total interest income 224,967 115,880 118,538
115,960 104,015 94 % 116 % Interest expense: Deposits 6,075 3,848
4,168 4,845 5,864 58 % 4 % Repurchase agreements and fed funds
purchased 203 41 42 35 33 395 % 515 % Term debt 3,364 2,273 2,332
2,338 2,305 48 % 46 % Junior subordinated debentures 3,066
1,880 1,922 1,933
1,920 63 % 60 % Total interest expense 12,708 8,042 8,464
9,151 10,122 58 % 26 % Net interest income 212,259 107,838 110,074
106,809 93,893 97 % 126 % Provision for non-covered loan and lease
losses 15,399 5,400 3,840 3,008 2,993 185 % 415 % (Recapture of)
provision for covered loan and lease losses (703 ) 571 (1,369 )
(1,904 ) (3,072 ) (223 )% (77 )% Non-interest income: Service
charges 15,371 7,767 8,108 8,374 7,478 98 % 106 % Brokerage fees
4,566 3,725 3,584 3,854 3,662 23 % 25 % Residential mortgage
banking revenue, net 24,341 10,439 15,957 15,071 24,289 133 % 0 %
Net gain on investment securities 976 — 191 3 8 nm nm Loss on
junior subordinated debentures carried at fair value (1,369 ) (542
) (554 ) (554 ) (547 ) 153 % 150 % Change in FDIC indemnification
asset (5,601 ) (4,840 ) (5,708 ) (6,474 ) (8,294 ) 16 % (32 )% BOLI
income 1,967 736 621 763 910 167 % 116 % Other income 4,278
5,722 4,586 5,107
6,991 (25 )% (39 )% Total non-interest income 44,529 23,007
26,785 26,144 34,497 94 % 29 % Non-interest expense: Salaries and
employee benefits 95,560 53,218 52,720 53,699 52,067 80 % 84 % Net
occupancy and equipment 28,746 16,501 16,254 16,019 15,059 74 % 91
% Intangible amortization 2,808 1,194 1,186 1,186 1,205 135 % 133 %
FDIC assessments 2,575 1,863 1,922 1,709 1,672 38 % 54 % Net loss
(gain) on non-covered other real estate owned 178 (18 ) 1,416 (27 )
(146 ) nm (222 )% Net loss (gain) on covered other real estate
owned 80 (46 ) (19 ) (68 ) (62 ) (274 )% (229 )% Merger related
expenses 57,531 5,983 1,639 4,856 810 862 % 7,003 % Other expense
26,653 17,823 20,246
18,230 17,326 50 % 54 % Total non-interest
expense 214,131 96,518 95,364 95,604 87,931 122 % 144 % Income
before provision for income taxes 27,961 28,356 39,024 36,245
40,538 (1 )% (31 )% Provision for income taxes 10,740
9,592 13,754 12,768
14,285 12 % (25 )% Net income 17,221 18,764 25,270 23,477
26,253 (8 )% (34 )% Dividends and undistributed earnings allocated
to participating securities 83 113 212
196 197 (27 )% (58 )% Net
earnings available to common shareholders $ 17,138 $
18,651 $ 25,058 $ 23,281
$ 26,056 (8 )% (34 )% Weighted average basic shares
outstanding 196,312 112,170 111,949 111,912 111,954 75 % 75 %
Weighted average diluted shares outstanding 197,638 112,367 112,214
112,195 112,145 76 % 76 % Earnings per common share – basic $ 0.09
$ 0.17 $ 0.22 $ 0.21 $ 0.23 (47 )% (61 )% Earnings per common share
– diluted $ 0.09 $ 0.17 $ 0.22 $ 0.21 $ 0.23 (47 )% (61 )% nm = not
meaningful
Umpqua Holdings Corporation
Consolidated Statements of Income (Unaudited)
Six Months Ended: % Change (In thousands,
except per share data) Jun 30, 2014 Jun 30,
2013
Year overYear
Interest income Non-covered loans and leases $ 284,329 $
156,979 81 % Covered loans and leases 28,649 29,330 (2 )% Interest
and dividends on investments: Taxable 21,990 16,747 31 % Exempt
from federal income tax 4,721 4,525 4 % Dividends 178 114 56 %
Temporary investments & interest bearing deposits 980
653 50 % Total interest income 340,847 208,348 64 %
Interest expense Deposits 9,923 11,742 (15 )% Repurchase agreements
and fed funds purchased 244 64 281 % Term debt 5,637 4,578 23 %
Junior subordinated debentures 4,946 3,882 27
% Total interest expense 20,750 20,266 2 % Net interest income
320,097 188,082 70 % Provision for non-covered loan and lease
losses 20,799 9,981 108 % Recapture of provision for covered loan
and lease losses (132 ) (2,840 ) (95 )% Non-interest income Service
charges 23,138 14,470 60 % Brokerage fees 8,291 7,298 14 %
Residential mortgage banking revenue, net 34,780 47,857 (27 )% Net
gain on investment securities 976 15 nm
Loss on junior subordinated debentures
carried at fair value
(1,911 ) (1,089 ) 75 % Change in FDIC indemnification asset (10,441
) (13,367 ) (22 )% BOLI Income 2,703 1,670 62 % Other income 10,000
11,658 (14 )% Total non-interest income 67,536
68,512 (1 )% Non-interest expense Salaries and employee benefits
148,776 103,572 44 % Net occupancy and equipment 45,247 29,794 52 %
Intangible amortization 4,002 2,409 66 % FDIC assessments 4,438
3,323 34 %
Net loss (gain) on non-covered other real
estate owned
160 (276 ) nm Net loss on covered other real estate owned 34 222
(85 )% Merger related expenses 63,514 2,341 nm Other expense 44,478
32,308 38 % Total non-interest expense 310,649
173,693 79 % Income before provision for income taxes 56,317 75,760
(26 )% Provision for income taxes 20,332 26,146
(22 )% Net income 35,985 49,614 (27 )%
Dividends and undistributed earnings
allocated to participating securities
196 380 (48 )% Net earnings available to
common shareholders $ 35,789 $ 49,234 (27 )%
Weighted average basic shares outstanding 154,473 111,946 38
% Weighted average diluted shares outstanding 155,276 112,133 38 %
Earnings per common share – basic $ 0.23 $ 0.44 (48 )% Earnings per
common share – diluted $ 0.23 $ 0.44 (48 )% nm = not meaningful
Umpqua Holdings Corporation
Consolidated Balance Sheets
(Unaudited) %
Change (In thousands, except per share data) Jun 30,
2014 Mar 31, 2014 Dec 31, 2013
Sep 30, 2013 Jun 30, 2013
Seq.Quarter
Year overYear
Assets: Cash and due from banks $ 347,152 $ 196,963 $
178,685 $ 193,188 $ 143,409 76 % 142 % Interest bearing deposits
492,739 887,620 611,224 503,369 659,817 (44 )% (25 )% Temporary
investments 529 525 514 534 1,768 1 % (70 )% Investment securities:
Trading, at fair value 9,420 4,498 5,958 4,012 3,863 109 % 144 %
Available for sale, at fair value 2,588,969 1,701,730 1,790,978
1,910,082 2,083,755 52 % 24 % Held to maturity, at amortized cost
5,519 5,465 5,563 5,766 3,741 1 % 48 % Loans held for sale 322,912
73,106 104,664 113,993 173,994 342 % 86 % Non-covered loans and
leases 14,830,345 7,411,108 7,354,403 7,228,904 6,787,117 100 % 119
% Allowance for non-covered loan and lease losses (97,995 )
(86,709 ) (85,314 ) (84,694 ) (85,836 ) 13 %
14 % Non-covered loans and leases, net 14,732,350 7,324,399
7,269,089 7,144,210 6,701,281 101 % 120 % Covered loans and leases,
net 297,610 342,263 363,992 397,083 419,059 (13 )% (29 )%
Restricted equity securities 122,194 29,948 30,685 31,444 32,112
308 % 281 % Premises and equipment, net 310,407 180,199 177,680
173,876 170,145 72 % 82 % Goodwill 1,779,732 764,304 764,305
764,530 668,218 133 % 166 % Other intangible assets, net 62,938
11,184 12,378 13,564 14,753 463 % 327 % Residential mortgage
servicing rights, at fair value 114,192 49,220 47,765 41,853 38,192
132 % 199 % Non-covered other real estate owned 26,172 22,034
21,833 18,249 13,235 19 % 98 % Covered other real estate owned
1,810 1,746 2,102 2,980 3,484 4 % (48 )% FDIC indemnification asset
11,293 18,362 23,174 29,427 36,263 (38 )% (69 )% Bank owned life
insurance 292,714 97,589 96,938 96,276 95,459 200 % 207 % Deferred
tax assets, net 259,993 11,393 16,627 20,342 22,747 nm nm Other
assets 263,584 116,178 111,958
104,519 106,913 127 % 147 % Total
assets $ 22,042,229 $ 11,838,726 $
11,636,112 $ 11,569,297 $ 11,392,208
86 % 93 %
Liabilities: Deposits $ 16,323,000 $
9,273,583 $ 9,117,660 $ 9,067,240 $ 8,956,325 76 % 82 % Securities
sold under agreements to repurchase 315,025 262,483 224,882 215,310
176,447 20 % 79 % Term debt 1,057,915 250,964 251,494 252,017
252,543 322 % 319 % Junior subordinated debentures, at fair value
246,077 87,800 87,274 86,718 86,159 180 % 186 % Junior subordinated
debentures, at amortized cost 101,737 101,818 101,899 101,979
102,060 0 % 0 % Other liabilities 269,415 127,602
125,477 120,038 103,322
111 % 161 % Total liabilities 18,313,169 10,104,250
9,908,686 9,843,302 9,676,856 81 % 89 %
Shareholders'
equity: Common stock 3,512,507 1,514,969 1,514,485 1,513,225
1,512,657 132 % 132 % Retained earnings 204,109 219,686 217,917
209,597 203,058 (7 )% 1 % Accumulated other comprehensive income
(loss) 12,444 (179 ) (4,976 ) 3,173
(363 ) nm nm Total shareholders' equity 3,729,060
1,734,476 1,727,426
1,725,995 1,715,352 115 % 117 % Total
liabilities and shareholders' equity $ 22,042,229 $
11,838,726 $ 11,636,112 $ 11,569,297
$ 11,392,208 86 % 93 % Common shares
outstanding at period end 217,190,721 112,319,525 111,973,203
111,928,762 111,898,620 93 % 94 % Book value per common share $
17.17 $ 15.44 $ 15.43 $ 15.42 $ 15.33 11 % (100 )% Tangible book
value per common share $ 8.69 $ 8.54 $ 8.49 $ 8.47 $ 9.23 2 % (100
)% Tangible equity - common $ 1,886,390 $ 958,988 $ 950,743 $
947,901 $ 1,032,381 97 % 83 % Tangible common equity to tangible
assets 9.34 % 8.67 % 8.75 % 8.78 % 9.64 % 8 % (3 )%
nm = not meaningful
Umpqua Holdings Corporation Non-covered
Loan & Lease Portfolio (Unaudited)
(Dollars in thousands)
Jun 30, 2014 Mar 31, 2014 Dec 31,
2013 Sep 30, 2013 Jun 30, 2013 %
Change Amount Amount Amount
Amount Amount
Seq.Quarter
Year overYear
Non-covered loans
& leases:
Commercial real estate: Non-owner occupied term, net $ 3,348,029 $
2,311,952 $ 2,328,260 $ 2,382,430 $ 2,341,657 45 % 43 % Owner
occupied term, net 2,666,128 1,282,482 1,259,583 1,230,417
1,221,853 108 % 118 % Multifamily, net 2,482,995 400,927 403,537
379,395 353,852 519 % 602 % Commercial construction, net 261,767
229,262 245,231 246,583 225,747 14 % 16 % Residential development,
net 91,690 89,510 88,413 78,756 66,607 2 % 38 % Commercial: Term,
net 1,104,206 735,004 770,845 768,926 769,647 50 % 43 % Lines of
credit & other, net 1,322,167 1,005,800 987,360 950,954 941,673
31 % 40 % Leases & equipment finance, net 463,784 388,418
361,591 335,580 51,924 19 % 793 % Residential real estate:
Mortgage, net 1,958,597 651,042 597,201 553,285 511,446 201 % 283 %
Home equity lines & loans, net 799,171 268,497 264,269 258,610
260,382 198 % 207 % Consumer & other, net 331,811
48,214 48,113 43,968
42,329 588 % 684 % Total, net of deferred fees and costs $
14,830,345 $ 7,411,108 $ 7,354,403
$ 7,228,904 $ 6,787,117 100 %
119 %
Non-covered loan
& leases mix:
Commercial real estate: Non-owner occupied term 23 % 31 % 33 % 32 %
34 % Owner occupied term 18 % 17 % 17 % 17 % 18 % Multifamily 17 %
5 % 5 % 5 % 5 % Commercial construction 2 % 3 % 3 % 3 % 3 %
Residential development 1 % 1 % 1 % 1 % 1 % Commercial: Term 7 % 10
% 10 % 11 % 11 % Lines of credit & other 9 % 14 % 13 % 13 % 14
% Leases & equipment finance 3 % 5 % 5 % 5 % 1 % Residential
real estate: Mortgage 13 % 9 % 8 % 8 % 8 % Home equity lines &
loans 5 % 4 % 4 % 4 % 4 % Consumer & other 2 % 1 %
1 % 1 % 1 % Total 100 % 100 %
100 % 100 % 100 %
Umpqua Holdings
Corporation Covered Loan & Lease Portfolio, Net
(Unaudited) (Dollars in thousands) Jun 30,
2014 Mar 31, 2014 Dec 31, 2013
Sep 30, 2013 Jun 30, 2013 %
Change Amount Amount Amount Amount
Amount
Seq.Quarter
Year overYear
Covered loans
& leases:
Commercial real estate: Non-owner occupied term, net $
166,969 $ 197,067 $ 204,052 $ 216,354 $ 229,874 (15 )% (27 )% Owner
occupied term, net 47,034 48,447 48,673 54,332 57,446 (3 )% (18 )%
Multifamily, net 23,409 27,079 37,185 40,052 40,891 (14 )% (43 )%
Commercial construction, net 1,972 2,779 2,803 6,654 6,783 (29 )%
(71 )% Residential development, net 2,562 6,083 6,311 7,468 7,025
(58 )% (64 )% Commercial: Term, net 7,516 7,861 13,280 13,864
17,394 (4 )% (57 )% Lines of credit & other, net 8,357 8,929
6,302 10,583 9,503 (6 )% (12 )% Residential real estate: Mortgage,
net 18,272 21,664 22,175 23,161 24,879 (16 )% (27 )% Home equity
lines & loans, net 17,736 18,501 19,119 20,037 20,769 (4 )% (15
)% Consumer & other, net 3,783 3,853 4,092
4,578 4,495 (2 )% (16 )% Total, net $ 297,610
$ 342,263 $ 363,992 $ 397,083 $ 419,059
(13 )% (29 )%
Covered loans
& leases Mix:
Commercial real estate: Non-owner occupied term 55 % 58 % 56 % 54 %
54 % Owner occupied term 16 % 14 % 13 % 14 % 14 % Multifamily 8 % 8
% 10 % 10 % 10 % Commercial construction 1 % 1 % 1 % 2 % 2 %
Residential development 1 % 2 % 2 % 2 % 2 % Commercial: Term 3 % 2
% 4 % 3 % 4 % Lines of credit & other 3 % 3 % 2 % 3 % 2 %
Residential real estate: Mortgage 6 % 6 % 6 % 6 % 6 % Home equity
lines & loans 6 % 5 % 5 % 5 % 5 % Consumer & other 1 %
1 % 1 % 1 % 1 % Total 100 % 100
% 100 % 100 % 100 %
Covered loan & lease portfolio balances represent the loan
portfolios acquired through the assumption of Evergreen Bank 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)
(Dollars in thousands) Jun 30, 2014
Mar 31, 2014 Dec 31, 2013 Sep
30, 2013 Jun 30, 2013 % Change
Amount Amount Amount
Amount Amount
Seq.Quarter
Year overYear
Deposits:
Demand, non-interest bearing $ 4,363,710 $ 2,465,606 $ 2,436,477 $
2,421,008 $ 2,218,536 77 % 97 % Demand, interest bearing 1,869,626
1,182,634 1,233,070 1,179,351 1,128,361 58 % 66 % Money market
5,973,197 3,526,368 3,349,946 3,283,085 3,254,117 69 % 84 % Savings
912,073 578,238 560,699 551,327 513,317 58 % 78 % Time 3,204,394
1,520,737 1,537,468
1,632,469 1,841,994 111 % 74 % Total $
16,323,000 $ 9,273,583 $ 9,117,660
$ 9,067,240 $ 8,956,325 76 % 82
% Total core deposits (1) $ 14,171,946 $ 8,205,636 $
8,052,280 $ 7,926,734 $ 7,655,237 73 % 85 %
Deposit
mix:
Demand, non-interest bearing 26 % 27 % 26 % 27 % 24 % Demand,
interest bearing 11 % 13 % 14 % 13 % 13 % Money market 37 % 38 % 37
% 36 % 36 % Savings 6 % 6 % 6 % 6 % 6 % Time 20 % 16 %
17 % 18 % 21 % Total 100 % 100 %
100 % 100 % 100 %
Number of open
accounts:
Demand, non-interest bearing 363,378 190,298 187,088 186,975
187,026 Demand, interest bearing 88,162 46,291 48,643 49,226 50,136
Money market 65,216 34,913 35,303 35,909 36,555 Savings 149,877
84,686 84,144 84,448 84,784 Time 56,285 22,755
23,688 24,618 26,653
Total 722,918 378,943 378,866
381,176 385,154
Average balance
per account:
Demand, non-interest bearing $ 12.3 $ 13.0 $ 13.0 $ 12.9 $ 11.9
Demand, interest bearing 21.2 25.5 25.3 24.0 22.5 Money market 91.6
101.0 94.9 91.4 89.0 Savings 6.1 6.8 6.7 6.5 6.1 Time 56.9 66.8
64.9 66.3 69.1 Total $ 22.7 $ 24.5 $ 24.1 $ 23.8 $ 23.3
(1) Core deposits are defined as total
deposits less time deposits greater than $100,000.
Umpqua Holdings Corporation
Credit Quality – Non-performing Assets (Unaudited)
Quarter
Ended: % Change (Dollars in thousands) Jun 30,
2014 Mar 31, 2014 Dec 31, 2013 Sep 30,
2013 Jun 30, 2013
Seq.Quarter
Year overYear
Non-covered,
non-performing assets:
Non-covered loans and leases on non-accrual status $ 48,358 $
37,884 $ 31,891 $ 39,805 $ 48,855 28 % (1 )% Non-covered loans and
leases past due 90+ days & accruing 4,919 2,269
3,430 4,936 6,052
117 % (19 )% Total non-performing loans and leases 53,277 40,153
35,321 44,741 54,907 33 % (3 )% Non-covered other real estate owned
26,172 22,034 21,833
18,249 13,235 19 % 98 % Total $ 79,449
$ 62,187 $ 57,154 $ 62,990
$ 68,142 28 % 17 % Non-covered
performing restructured loans and leases $ 67,464 $ 67,897 $ 68,791
$ 69,497 $ 73,884 (1 )% (9 )% Non-covered loans and leases past due
31-89 days $ 28,913 $ 29,416 $ 15,290 $ 22,060 $ 21,964 (2 )% 32 %
Non-covered loans and leases past due 31-89 days to non-covered
loans and leases 0.19 % 0.40 % 0.21 % 0.31 % 0.32 % Non-covered,
non-performing loans and leases to non-covered loans and leases
0.36 % 0.54 % 0.48 % 0.62 % 0.81 % Non-covered, non-performing
assets to total assets 0.36 % 0.53 % 0.49 % 0.54 % 0.60 %
Covered
non-performing assets:
Covered loans and leases on non-accrual status $ — $
— $ — $ — $ — nm
nm Total non-performing loans and leases — — — — — nm nm Covered
other real estate owned 1,810 1,746
2,102 2,980 3,484 4 % (48 )%
Total $ 1,810 $ 1,746 $ 2,102
$ 2,980 $ 3,484 4 % (48 )%
Covered non-performing loans and leases to covered loans and leases
— % — % — % — % — % Covered non-performing assets to total assets
0.01 % 0.01 % 0.02 % 0.03 % 0.03 %
Total
non-performing assets:
Loans and leases on non-accrual status $ 48,358 $ 37,884 31,891
39,805 $ 48,855 28 % (1 )% Loans and leases past due 90+ days &
accruing 4,919 2,269 3,430
4,936 6,052 117 % (19 )% Total
non-performing loans and leases 53,277 40,153 35,321 44,741 54,907
33 % (3 )% Other real estate owned 27,982 23,780
23,935 21,229 16,719
18 % 67 % Total $ 81,259 $ 63,933
$ 59,256 $ 65,970 $ 71,626
27 % 13 % Non-performing loans and leases to loans
and leases 0.35 % 0.52 % 0.46 % 0.59 % 0.76 % Non-performing assets
to total assets 0.37 % 0.54 % 0.51 % 0.57 % 0.63 %
Umpqua Holdings Corporation Credit Quality – Allowance
for Non-covered Credit Losses (Unaudited)
Quarter Ended: %
Change (Dollars in thousands) Jun 30, 2014
Mar 31, 2014 Dec 31, 2013 Sep 30,
2013 Jun 30, 2013
Seq.Quarter
Year overYear
Allowance for
non-covered credit losses:
Balance beginning of period $ 86,709 $ 85,314 $ 84,694 $ 85,836 $
84,692 Provision for non-covered loan and lease losses 15,399 5,400
3,840
3,008 2,993 185 % 415 % Charge-offs (5,814 ) (5,565 ) (11,349 )
(6,317 ) (4,604 ) 4 % 26 % Recoveries 1,701 1,560
8,129 2,167 2,755
9 % (38 )% Net charge-offs (4,113 ) (4,005 ) (3,220 )
(4,150 ) (1,849 ) 3 % 122 % Total allowance for
non-covered loan and lease losses 97,995 86,709 85,314 84,694
85,836 13 % 14 % Reserve for unfunded commitments 4,845
1,417 1,436 1,375
1,327 242 % 265 % Total allowance for non-covered credit
losses $ 102,840 $ 88,126 $ 86,750
$ 86,069 $ 87,163 17 % 18 %
Net charge-offs to average non-covered loans and leases
(annualized) 0.12 % 0.22 % 0.18 % 0.23 % 0.11 % Recoveries to gross
charge-offs 29.26 % 28.03 % 71.63 % 34.30 % 59.84 % Allowance for
non-covered loan losses to non-covered loans and leases 0.66 % 1.17
% 1.16 % 1.17 % 1.26 % Allowance for non-covered credit losses to
non-covered loans and leases 0.69 % 1.19 % 1.18 % 1.19 % 1.28 %
Six Months Ended: % Change (Dollars in
thousands) Jun 30, 2014 Jun 30, 2013
Year overYear
Allowance for
non-covered credit losses:
Balance beginning of period $ 85,314 $ 85,391 Provision for
non-covered loan and lease losses 20,799 9,981 108 % Charge-offs
(11,379 ) (13,329 ) (15 )% Recoveries 3,261 3,793
(14 )% Net charge-offs (8,118 ) (9,536 ) (15 )% Total
allowance for non-covered loan and lease losses 97,995 85,836 14 %
Reserve for unfunded commitments 4,845 1,327
265 % Total allowance for non-covered credit losses $ 102,840
$ 87,163 18 % Net charge-offs to
average non-covered loans and leases (annualized) 0.16 % 0.29 %
Recoveries to gross charge-offs 28.66 % 28.46 %
Umpqua Holdings Corporation Selected Ratios
(Unaudited) Quarter
Ended: % Change
Jun 30,2014
Mar 31,2014
Dec 31,2013
Sep 30,2013
Jun 30,2013
Seq.Quarter
Year overYear
Average
Rates:
Yield on non-covered loans and leases 5.71 % 4.96 %
5.00 % 5.12 % 4.59 % 0.75 1.12 Yield on covered loans and leases
20.07 % 14.82 % 13.99 % 11.67 % 13.82 % 5.25 6.25 Yield on taxable
investments 2.29 % 2.39 % 2.31 % 1.77 % 1.59 % (0.10 ) 0.70 Yield
on tax-exempt investments (1) 5.19 % 5.54 % 5.56 % 5.62 % 5.34 %
(0.35 ) (0.15 ) Yield on temporary investments & interest
bearing cash 0.25 % 0.25 % 0.25 % 0.25 % 0.26 % — (0.01 ) Total
yield on earning assets (1) 5.30 % 4.60 % 4.61 % 4.58 % 4.13 % 0.70
1.17 Cost of interest bearing deposits 0.22 % 0.23 % 0.25 %
0.29 % 0.35 % (0.01 ) (0.13 )
Cost of securities sold under agreements
to repurchase and fed funds purchased
0.25 % 0.07 % 0.07 % 0.07 % 0.08 % 0.18 0.17 Cost of term debt 1.45
% 3.67 % 3.68 % 3.67 % 3.66 % (2.22 ) (2.21 ) Cost of junior
subordinated debentures 3.87 % 4.03 % 4.04 % 4.08 % 4.10 % (0.16 )
(0.23 ) Total cost of interest bearing liabilities 0.41 % 0.44 %
0.46 % 0.50 % 0.55 % (0.03 ) (0.14 ) Net interest spread (1)
4.90 % 4.16 % 4.15 % 4.08 % 3.58 % 0.74 1.32 Net interest margin –
Consolidated (1) 5.01 % 4.28 % 4.29 % 4.22 % 3.73 % 0.73 1.28
Net interest margin – Bank (1) 5.07 % 4.35 % 4.35 % 4.30 %
3.80 % 0.72 1.27
As reported
(GAAP):
Return on average assets 0.34 % 0.65 % 0.86 % 0.81 % 0.91 % (0.31 )
(0.57 ) Return on average tangible assets 0.37 % 0.70 % 0.92 % 0.86
% 0.97 % (0.33 ) (0.60 ) Return on average common equity 2.05 %
4.35 % 5.73 % 5.36 % 6.04 % (2.30 ) (3.99 ) Return on average
tangible common equity 4.06 % 7.86 % 10.38 % 9.79 % 10.00 % (3.80 )
(5.94 ) Efficiency ratio – Consolidated 82.94 % 73.15 % 69.12 %
71.30 % 67.88 % 9.79 15.06 Efficiency ratio – Bank 81.37 % 71.18 %
67.30 % 69.30 % 65.56 % 10.19 15.81
Operating basis
(non-GAAP): (2)
Return on average assets 1.08 % 0.84 % 0.95 % 0.92 % 0.94 % 0.24
0.14 Return on average tangible assets 1.18 % 0.90 % 1.02 % 0.99 %
1.00 % 0.28 0.18 Return on average common equity 6.45 % 5.61 % 6.38
% 6.11 % 6.23 % 0.84 0.22 Return on average tangible common equity
12.76 % 10.13 % 11.56 % 11.15 % 10.31 % 2.63 2.45 Efficiency ratio
– Consolidated 60.33 % 68.34 % 67.66 % 67.40 % 66.97 % (8.01 )
(6.64 ) Efficiency ratio – Bank 59.15 % 66.60 % 66.10 % 65.63 %
64.93 % (7.45 ) (5.78 )
(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: % Change Jun 30, 2014 Jun 30,
2013
Year overYear
Average
Rates:
Yield on non-covered loans and leases 5.44 % 4.62 % 0.82
Yield on covered loans and leases 17.34 % 13.32 % 4.02 Yield on
taxable investments 2.33 % 1.55 % 0.78 Yield on tax-exempt
investments (1) 5.33 % 5.33 % — Yield on temporary investments
& interest bearing cash 0.25 % 0.26 % (0.01 ) Total yield on
earning assets (1) 5.04 % 4.15 % 0.89 Cost of interest
bearing deposits 0.23 % 0.34 % (0.11 )
Cost of securities sold under agreements
to repurchase and fed funds purchased
0.18 % 0.09 % 0.09 Cost of term debt 1.91 % 3.65 % (1.74 ) Cost of
junior subordinated debentures 3.93 % 4.12 % (0.19 ) Total cost of
interest bearing liabilities 0.42 % 0.55 % (0.13 ) Net
interest spread (1) 4.62 % 3.60 % 1.02 Net interest margin –
Consolidated (1) 4.74 % 3.75 % 0.99 Net interest margin –
Bank (1) 4.80 % 3.82 % 0.98
As reported
(GAAP):
Return on average assets 0.46 % 0.87 % (0.41 ) Return on average
tangible assets 0.49 % 0.92 % (0.43 ) Return on average common
equity 2.83 % 5.74 % (2.91 ) Return on average tangible common
equity 5.42 % 9.50 % (4.08 ) Efficiency ratio – Consolidated 79.63
% 67.08 % 12.55 Efficiency ratio – Bank 77.96 % 64.72 % 13.24
Operating basis
(non-GAAP): (2)
Return on average assets 0.99 % 0.90 % 0.09 Return on average
tangible assets 1.07 % 0.96 % 0.11 Return on average common equity
6.17 % 5.98 % 0.19 Return on average tangible common equity 11.81 %
9.89 % 1.92 Efficiency ratio – Consolidated 63.04 % 65.90 % (2.86 )
Efficiency ratio – Bank 61.64 % 63.80 % (2.16 )
(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) Quarter Ended: %
Change (Dollars in thousands) Jun 30, 2014
Mar 31, 2014 Dec 31, 2013 Sep 30,
2013 Jun 30, 2013
Seq.Quarter
Year overYear
Temporary investments & interest bearing cash $ 672,587
$ 705,974 $ 625,405 $ 443,148 $ 622,209 (5 )%
8 % Investment securities, taxable 2,242,414 1,562,849 1,664,716
1,788,567 2,062,819 43 % 9 % Investment securities, tax-exempt
315,488 231,520 236,552 237,545 253,975 36 % 24 % Loans held for
sale 211,694 77,234 89,553 136,261 140,802 174 % 50 % Non-covered
loans and leases 13,355,455 7,384,555 7,298,622 7,128,753 6,710,803
81 % 99 % Covered loans and leases 318,432 347,984
378,148 402,403 428,003
(8 )% (26 )% Total interest earning assets 17,116,070 10,310,116
10,292,996 10,136,677 10,218,611 66 % 67 % Goodwill & other
intangible assets, net 1,656,687 776,006 777,188 779,294 683,446
113 % 142 % Total assets 20,036,742 11,638,357 11,624,424
11,460,729 11,447,868 72 % 75 % Non-interest bearing demand
deposits 3,963,233 2,414,001 2,452,554 2,317,932 2,210,760 64 % 79
% Interest bearing deposits 10,948,991 6,696,029
6,661,933 6,691,579 6,803,879
64 % 61 % Total deposits 14,912,224 9,110,030 9,114,487
9,009,511 9,014,639 64 % 65 % Interest bearing liabilities
12,521,219 7,376,780 7,326,763 7,320,460 7,409,284 70 % 69 %
Shareholders’ equity - common 3,350,836 1,738,680 1,734,583
1,722,881 1,728,354 93 % 94 % Tangible common equity (1) 1,694,149
962,674 957,395 943,587 1,044,908 76 % 62 %
Umpqua
Holdings Corporation
Average Balances
(Unaudited) Six Months Ended: % Change
(Dollars in thousands) Jun 30, 2014 Jun 30,
2013 Year over Year Temporary investments & interest
bearing cash $ 689,188 $ 503,470 37 % Investment securities,
taxable 1,904,508 2,182,326 (13 )% Investment securities,
tax-exempt 273,736 257,137 6 % Loans held for sale 144,835 164,281
(12 )% Non-covered loans and leases 10,386,511 6,683,436 55 %
Covered loans and leases 333,114 443,889 (25 )% Total
interest earning assets 13,731,892 10,234,539 34 % Goodwill &
other intangible assets, net 1,218,780 684,035 78 % Total assets
15,860,749 11,472,221 38 % Non-interest bearing demand
deposits 3,192,896 2,183,089 46 % Interest bearing deposits
8,834,259 6,870,186 29 % Total deposits 12,027,155
9,053,275 33 % Interest bearing liabilities 9,963,210 7,462,223 34
% Shareholders’ equity - common 2,549,211 1,729,440 47 %
Tangible common equity (1) 1,330,432 1,045,405 27 %
(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
Residential Mortgage Banking
Activity
(unaudited) Quarter Ended: %
Change (Dollars in thousands) Jun 30, 2014
Mar 31, 2014 Dec 31, 2013 Sep 30,
2013 Jun 30, 2013
Seq.Quarter
Year overYear
Residential
mortgage servicing rights:
Residential mortgage loans serviced for
others $ 10,838,313 $ 4,496,662 $ 4,362,499 $ 4,195,759 $ 3,911,273
141 % 177 % MSR asset, at fair value 114,192 49,220 47,765 41,853
38,192 132 % 199 % MSR as % of serviced portfolio 1.05 % 1.09 %
1.09 % 1.00 % 0.98 %
Residential
mortgage banking revenue:
Origination and sale $ 22,142 $ 8,421 $ 9,915 $ 12,764 $ 20,381 163
% 9 % Servicing 5,359 2,970 2,911 2,718 2,521 80 % 113 % Change in
fair value of MSR asset (3,160 ) (952 ) 3,131
(411 ) 1,387 232 % (328 )% Total $ 24,341
$ 10,439 $ 15,957 $
15,071 $ 24,289 133 % 0 %
Closed loan
volume:
Closed loan volume - total $ 894,955 $ 293,175 $ 359,569 $ 463,036
$ 599,268 205 % 49 % Closed loan volume - for sale $ 623,727 $
204,356 $ 271,541 $ 357,371 $ 518,039 205 % 20 %
Gain on sale
margin:
Based on total volume 2.47 % 2.87 % 2.76 % 2.76 % 3.40 % (0.40 )
(0.93 ) Based on for sale volume 3.55 % 4.12 % 3.65 % 3.57 % 3.93 %
(0.57 ) (0.38 )
Six Months Ended: % Change
Jun 30, 2014 Jun 30, 2013
Year overYear
Residential
mortgage banking revenue:
Origination and sale $ 30,563 $ 43,438 (30 )% Servicing 8,329 4,766
75 % Change in fair value of MSR asset (4,112 ) (347 )
1,085 % Total $ 34,780 $ 47,857
(27 )%
Closed loan
volume:
Closed loan volume - total $ 1,188,129 $ 1,108,273 7 % Closed loan
volume - for sale 828,083 971,847 (15 )%
Gain on sale
margin:
Based on total volume 2.57 % 3.92 % (1.35 ) Based on for sale
volume 3.69 % 4.47 % (0.78 )
Umpqua Holdings CorporationRon Farnsworth, 503-727-4108EVP/Chief
Financial Officerronfarnsworth@umpquabank.comBradley Howes,
503-727-4226SVP/Director of Investor
Relationsbradhowes@umpquabank.com
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