Operating earnings1 increased
to $65.1 million, or $0.30 per share7% annualized growth in
non-covered loans and leases (gross of sales) and 10% annualized
growth in depositsImproved regulatory capital ratios and
significant increase in on-balance sheet liquidity
Umpqua Holdings Corporation (NASDAQ: UMPQ) (the “Company”)
reported net earnings available to common shareholders of $58.8
million for the third quarter of 2014, an increase from $17.1
million for the second quarter of 2014 and $23.3 million for the
third quarter of 2013. Earnings per diluted common share increased
to $0.27 for the third quarter of 2014, as compared to $0.09 for
the second quarter of 2014 and $0.21 for the third 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, increased to $65.1 million for the third
quarter of 2014, as compared to $53.9 million for the second
quarter of 2014 and $26.5 million for the third quarter of 2013.
Operating earnings per diluted common share increased to $0.30 for
the third quarter of 2014, as compared to $0.27 for the second
quarter of 2014 and $0.24 for the third quarter of 2013.
“Umpqua continues to build on the momentum started earlier this
year, reporting strong organic loan and deposit growth, higher
top-line revenues, and increased capital and liquidity levels,
while making good progress on our integration of Sterling,” said
Ray Davis, president and CEO of Umpqua Holdings Corporation. “We
expect to complete the majority of the integration by the end of
the first quarter of 2015, and look forward to introducing new
creative strategies early next year to enhance Umpqua's organic
growth and further strengthen our unique brand and innovative
product delivery systems.”
Third Quarter 2014 Financial
Highlights:
- Delivered improved operating results:
- Net interest income increased by $13.5
million from the prior quarter;
- Adjusted net interest margin1 declined
from 4.85% to 4.71% due to a slight reduction in interest income
from credit discount accretion and a higher balance of
interest-bearing cash;
- Non-interest income increased by $17.4
million from the prior quarter, and included $7.1 million in gains
arising from multi-family and portfolio residential loan
sales;
- Efficiency ratio (operating basis)1
improved to 59.83%, from 60.33% in the prior quarter;
- Return on average tangible common
equity (operating basis)1 improved to 13.80%, from 12.76% in the
prior quarter;
- Continued strong growth in loans and
deposits:
- Non-covered loans and leases (gross of
sales) grew by $263.1 million, or 7% annualized, from the prior
quarter. This growth was partially offset by sales of loans and
leases of $117.6 million, for net growth of $145.5 million;
- Strong deposit growth of $404.6
million, or 10% annualized, from the prior quarter, driven by 14%
annualized growth in core deposits;
- Credit quality remained strong:
- Non-covered, non-performing assets to
total assets remained at 0.36%;
- Increased capital and liquidity:
- Tangible book value per common share1
increased to $8.78, from $8.69 in the prior quarter;
- Estimated total risk-based capital
ratio of 14.3% and estimated Tier 1 common to risk weighted assets
ratio of 10.8%, up from 14.2% and 10.7%, respectively;
- Declared a dividend of $0.15 per common
share; and
- Interest bearing cash increased to $1.2
billion, from $0.5 billion in the prior quarter.
For the nine months ended September 30, 2014, the Company
reported net earnings available to common shareholders of $94.6
million, or $0.54 per diluted common share, as compared to $72.5
million, or $0.65 per diluted common share, for the nine months
ended September 30, 2013. For the nine months ended
September 30, 2014, operating earnings1 were $143.0 million,
or $0.81 per diluted common share, as compared to $77.8 million, or
$0.69 per diluted common share, for the nine months ended September
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.
Update on Acquisition of Sterling
Financial
The Company completed its acquisition of Sterling Financial
Corporation (“Sterling”) on April 18, 2014, and as required under
acquisition accounting rules, recorded the acquired assets and
liabilities from Sterling’s balance sheet at their estimated fair
values as of that date. The results of operations from Sterling
have been included in the Company’s financial results since the
completion of the acquisition, beginning on April 19, 2014. Under
Generally Accepted Accounting Principles, the Sterling allowance
for loan losses was eliminated and a fair value discount was
recorded against the loans acquired as of the acquisition date.
During the third quarter of 2014, the Company reported $21.7
million of accretion from the credit discount in interest income,
as compared to $24.5 million during the second quarter of 2014. As
of September 30, 2014, the purchased non-credit impaired loans had
approximately $139 million of remaining credit discount that will
accrete into interest income over the life of the loans, and the
purchased credit impairment loan pools had approximately $72
million of remaining total discount.
New loans originated and subsequent advances by the former
Sterling workforce since April 19, 2014 are accounted for
separately from the discounted acquired loans. As a result, the
Company recognized $9.7 million during the quarter in provision for
loan losses, related primarily to new loan production from the
former Sterling offices.
In total, the Sterling acquisition was 49% accretive to third
quarter of 2014 operating earnings per share1. Together, the
accretion from the credit discount, offset by the provision for
loan losses related to new production by former Sterling offices,
added $7.1 million to net income, or $0.03 per diluted share.
Excluding those two items, the Sterling acquisition would have been
33% accretive to third quarter of 2014 operating earnings per
share1.
Integration efforts continue to proceed as planned, with the
previously announced store consolidations currently in process and
expected to be completed by the end of 2014. System conversions are
scheduled through early 2015. Cost synergies remain on track to the
previously announced target of $87 million (annualized), which is
expected to be fully realized following system conversions.
Balance Sheet
Total consolidated assets were $22.5 billion as of
September 30, 2014, as compared to $22.0 billion as of
June 30, 2014 and $11.6 billion as of September 30, 2013.
Total gross loans and leases (covered and non-covered) and
deposits, were $15.3 billion and $16.7 billion, respectively, as of
September 30, 2014, as compared to $15.1 billion and $16.3
billion, respectively, as of June 30, 2014, and $7.6 billion and
$9.1 billion, respectively, as of September 30, 2013.
Total non-covered loans and leases held for investment increased
to $15.0 billion as of September 30, 2014, as compared to
$14.8 billion as of June 30, 2014 and $7.2 billion as of September
30, 2013. Gross non-covered loan and leases grew by $263.1 million,
or 7% annualized, from the prior quarter. This growth was partially
offset by sales of $117.6 million, which was primarily composed of
$54.9 million in portfolio residential mortgage loan sales, $35.3
million in multifamily loan sales and $25.1 million in government
guaranteed loan sales, resulting in net organic loan growth of
$145.5 million.
Total covered loans were $275.6 million as of September 30,
2014, a $22.0 million decline from the prior quarter and a $121.5
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.
Total deposits increased to $16.7 billion as of
September 30, 2014, as compared to $16.3 billion as of June
30, 2014 and $9.1 billion as of September 30, 2013. This $404.6
million increase, or 10% annualized, from the prior quarter was
primarily driven by strong growth in demand and savings accounts,
as the Company continues its emphasis on core deposit
gathering.
Including secured off-balance sheet lines of credit, total
available liquidity to the Company was $7.6 billion as of
September 30, 2014, representing 34% of total assets and 46%
of total deposits. This compares to total available liquidity to
the Company of $7.0 billion, or 32% of total assets and 43% of
total deposits, as of June 30, 2014.
Net Interest Income
Net interest income was $225.7 million for the third quarter of
2014, up $13.5 million from the prior quarter and $118.9 million
from the same period in the prior year. The increase from the prior
quarter was primarily driven by higher interest-earning assets, as
well as 19 additional days of Sterling net interest income due to
the timing of the acquisition in the prior quarter. The increase
from prior year was primarily driven by the acquisition of
Sterling, along with continued organic loan growth. Net interest
income for the third quarter of 2014 included $21.7 million in
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 4.75% for the third
quarter of 2014, as compared to 5.01% for the second quarter of
2014, and 4.22% for the third quarter of 2013. The decrease from
the prior quarter was primarily driven by lower average balances of
covered loans and a decrease in interest income arising from lower
accretion of the credit discount, as well as a higher balance of
interest-bearing cash. The increase from the prior year was
primarily driven by the acquisition of Sterling, an improvement in
the yield earned on interest-earnings assets, and a 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 $2.3 million of interest income for the
third quarter of 2014, as compared to $7.1 million for the second
quarter of 2014 and $1.8 million for the third 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 third quarter of 2014 totaled $74 thousand, as
compared to $450 thousand for the second quarter of 2014 and $203
thousand for third quarter of 2013.
Adjusted net interest income was $225.0 million for the third
quarter of 2014, as compared to $207.0 million for the second
quarter of 2014 and $106.3 million for the third quarter of 2013.
The Company’s adjusted net interest margin was 4.71% for the third
quarter of 2014, as compared to 4.85% for the second quarter of
2014 and 4.16% for the third quarter of 2013.
Non-Interest Income
Total non-interest income was $61.9 million for the third
quarter of 2014, up $17.4 million from the prior quarter and $35.8
million from the same period in the prior year. Non-interest income
in the third quarter of 2014 included $7.1 million of gains arising
from multi-family and portfolio residential loan sales. The
remainder of the increase from the prior quarter was primarily
driven by higher Sterling mortgage banking and fee revenues from 19
additional days due to the timing of the acquisition in the prior
quarter. The increase from the prior year was primarily driven by
the acquisition of Sterling, as well as the gains arising from loan
sales.
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 $26.0 million for the third
quarter of 2014, up $1.7 million from the prior quarter, and up
$10.9 million from the same period in the prior year.
The Company’s gain on sale margin, as a percentage of total
residential mortgage production, was 2.44% for the third quarter of
2014, down slightly from 2.47% in the prior quarter due to a
decline in the locked mortgage pipeline. Of the current quarter’s
mortgage production, 71% related to purchase activity, as compared
to 74% for the prior quarter and 66% for the same period in the
prior year.
As of September 30, 2014, the Company serviced $11.3
billion of residential mortgage loans for others, and its related
MSR asset was valued at $118.7 million, or 1.05% of the total
serviced portfolio principal balance. This compares to $10.8
billion of residential mortgage loans serviced for others as of
June 30, 2014, with a related MSR asset of $114.2 million, or
1.05% of the total serviced portfolio principal balance. As of
September 30, 2013, the Company serviced $4.2 billion of
residential mortgage loans serviced for others, and its related MSR
asset was valued at $41.9 million, or 1.00% of the total serviced
portfolio principal balance.
Non-interest Expense
Non-interest expense was $182.6 million for the third quarter of
2014, which included $8.6 million of merger-related expenses. This
compares to $214.1 million, including $57.5 million of
merger-related expenses, for the second quarter of 2014 and $95.6
million, including $4.9 million of merger-related expenses, for the
third quarter of 2013. The increase in the Company’s non-interest
expense from the prior quarter was primarily driven by 19
additional days of Sterling non-interest expense due to the timing
of the acquisition in the prior quarter. The third quarter of 2014
non-interest expense run-rate does not reflect the full benefit of
the anticipated Sterling merger cost synergies.
On an operating basis1, which excludes merger-related expenses,
the Company’s efficiency ratio improved to 59.83% for the third
quarter of 2014, from 60.33% for the second quarter of 2014 and
67.40% for the third quarter of 2013.
Income taxes
The Company recorded a provision for income taxes of $31.8
million for the third quarter of 2014, representing an effective
tax rate of 35.0% for the quarter. The year-to-date effective tax
rate was 35.4%, which is the anticipated full-year 2014 effective
tax rate.
Capital
As of September 30, 2014, the Company’s tangible book value
per common share1 was $8.78 and its ratio of tangible common equity
to tangible assets1 was 9.24%, as compared to $8.69 and 9.34%,
respectively, in the prior quarter.
The Company made no open market nor privately negotiated
purchases of common stock under the Company’s previously announced
share repurchase plan during the third 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 14.3%
and its estimated Tier 1 common to risk weighted assets ratio was
10.8% as of September 30, 2014, up from 14.2% and 10.7%,
respectively. The Company remains well above current
“well-capitalized” regulatory minimums. These capital ratios, as of
September 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 September 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 September 30, 2014, the Company’s total net deferred
tax asset was $250.9 million, and the portion related to NOLs was
$211.7 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 as of the acquisition date. This credit portion of the
fair value 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 similar
ratios in periods prior to the acquisition of Sterling.
The allowance for non-covered loan losses was $107.8 million, or
0.72% of non-covered loans and leases, as of September 30,
2014. To provide better comparability to prior periods, this
pro-forma ratio would have been approximately 2.1% 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. This compares to a ratio of approximately 2.2% as of
June 30, 2014.
The provision for non-covered loan losses was $14.4 million for
the third quarter of 2014, down from $15.4 million for the second
quarter of 2014 and an increase from $3.0 million for the third
quarter of 2013. Of the third quarter of 2014 provision for loan
losses, $9.7 million related primarily to new loan production from
former Sterling offices, $5.1 million related to growth in the
Financial Pacific Leasing portfolio, and the remaining recapture
related to legacy Umpqua Bank.
Non-covered, non-performing assets were $81.6 million, or 0.36%
of total assets, as of September 30, 2014, as compared to
$79.4 million, or 0.36% of total assets, as of June 30, 2014,
and $63.0 million, or 0.54% of total assets, as of
September 30, 2013.
Non-covered loans past due 31 to 89 days were $34.0 million, or
0.23% of non-covered loans and leases, as of September 30,
2014, as compared to $28.9 million, or 0.19% of non-covered loans
and leases, as of June 30, 2014, and $22.1 million, or 0.31%
of non-covered loans and leases, as of September 30, 2013.
Non-covered restructured loans on accrual status were $63.5 million
as of September 30, 2014, as compared to $67.5 million as of
June 30, 2014, and $69.5 million as of September 30,
2013.
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
document 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)
Sep 30,2014
Jun 30,2014
Mar 31,2014
Dec 31,2013
Sep 30,2013
Seq.Quarter
Year overYear
Net earnings available to common shareholders $ 58,847 $
17,138 $ 18,651 $ 25,058 $ 23,281
243
%
153
%
Adjustments: Net loss on junior subordinated debentures carried at
fair value, net of tax (1) 955 821 325 332 332
16
%
188
%
Merger related expenses, net of tax (1) 5,274 35,926
5,073 2,502 2,914
(85
)
%
81
%
Operating earnings $ 65,076 $ 53,885 $ 24,049
$ 27,892 $ 26,527
21
%
145
%
Earnings per diluted
share:
Earnings available to common shareholders $ 0.27 $ 0.09 $ 0.17 $
0.22 $ 0.21
200
%
29
%
Operating earnings $ 0.30 $ 0.27 $ 0.21 $ 0.25 $ 0.24
11
%
25
%
Nine Months Ended % Change
Sep 30,2014
Sep 30,2013
Year overYear
Net earnings available to common shareholders $ 94,636 $ 72,515
31
%
Adjustments: Net loss on junior subordinated debentures carried at
fair value, net of tax (1) 2,101 986
113
%
Merger related expenses, net of tax (1) 46,273 4,318 nm
Operating earnings $ 143,010 $ 77,819
84
%
Earnings per diluted
share:
Earnings available to common shareholders $ 0.54 $ 0.65
(17
)%
Operating earnings $ 0.81 $ 0.69
17
%
(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)
Sep 30, 2014
Jun 30, 2014
Mar 31, 2014
Dec 31, 2013
Sep 30, 2013
Seq.Quarter
Year overYear
Net interest income $ 225,716 $ 212,259 $ 107,838
$ 110,074 $ 106,809
6
%
111
%
Tax equivalent adjustment (1) 1,443 1,394
1,092 1,119
1,137
4
%
27
%
Net interest income (1) 227,159 213,653 108,930 111,193 107,946
6
%
110
%
Adjustments: Interest and fee reversals (recoveries) on non-accrual
loans 74 450 122
(399
)
203
(84
)
%
(64
)
%
Covered loan disposal gains
(2,262
)
(7,128
)
(4,259
)
(3,908
)
(1,836
)
(68
)
%
23
%
Adjusted net interest income (1) $ 224,971 $
206,975 $ 104,793 $
106,886 $ 106,313
9
%
112
%
Average interest earning assets $ 18,963,760 $ 17,116,070 $
10,310,116 $ 10,292,996 $ 10,136,677
11
%
87
%
Net interest margin – consolidated (1)
4.75
%
5.01
%
4.28
%
4.29
%
4.22
%
Adjusted net interest margin – consolidated (1)
4.71
%
4.85
%
4.12
%
4.12
%
4.16
%
Nine Months Ended % Change
Sep 30, 2014
Sep 30, 2013
Year overYear
Net interest income $ 545,813 $ 294,891
85
%
Tax equivalent adjustment (1) 3,929 3,460
14
%
Net interest income (1) 549,742 298,351
84
%
Adjustments: Interest and fee reversals on non-accrual loans 646
1,321
(51
)
%
Covered loan disposal gains
(13,649
)
(9,227
)
48
%
Adjusted net interest income (1) $ 536,739 $
290,445
85
%
Average interest earning assets $ 15,495,014 $ 10,201,559
52
%
Net interest margin – consolidated (1)
4.74
%
3.91
%
Adjusted net interest margin – consolidated (1)
4.63
%
3.81
%
(1) Tax equivalent basis. Tax exempt interest has been
adjusted to a taxable equivalent basis using a 35% tax rate.
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) Sep
30, 2014 Jun 30, 2014 Mar 31, 2014
Dec 31, 2013 Sep 30, 2013 Total
shareholders' equity $ 3,752,508 $ 3,729,060 $
1,734,476 $ 1,727,426 $ 1,725,995 Subtract: Goodwill
and other intangible assets, net 1,845,242 1,842,670
775,488 776,683 778,094
Tangible common shareholders' equity $ 1,907,266
$ 1,886,390 $ 958,988 $ 950,743
$ 947,901 Total assets $ 22,488,059 $
22,042,229 $ 11,838,726 $ 11,636,112 $ 11,569,297 Subtract:
Goodwill and other intangible assets, net 1,845,242
1,842,670 775,488 776,683
778,094 Tangible assets $ 20,642,817 $
20,199,559 $ 11,063,238 $ 10,859,429
$ 10,791,203 Common shares outstanding at
period end 217,261,722 217,190,721 112,319,525 111,973,203
111,928,762 Tangible common equity ratio 9.24 % 9.34 % 8.67 % 8.75
% 8.78 % Tangible book value per common share $ 8.78 $ 8.69 $ 8.54
$ 8.49 $ 8.47
About Umpqua Holdings
Corporation
Umpqua Holdings Corporation (NASDAQ: UMPQ) is the parent company
of Umpqua Bank, an Oregon-based community bank recognized for its
entrepreneurial approach, innovative use of technology, and
distinctive banking solutions. Umpqua Bank has 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 third quarter 2014 earnings conference
call on Thursday, October 16, 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 third quarter 2014 financial results.
There will be a live question-and-answer session following the
presentation. To join the call, please dial (888) 487-0340 ten
minutes prior to the start time and enter conference ID: 9952803. A
re-broadcast will be available approximately two hours after the
call by dialing (888) 203-1112 and entering conference ID 9952803.
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 our positioning relative to
changes in interest rates, growth and efficiency potential from the
acquisition of Sterling Financial Corporation; the integration of
the merger with Sterling Financial Corporation; timing and amount
of merger-related synergies and timing of systems conversions;
credit discount accretion related to the merger; planned creative
strategy initiatives; and projected effective tax rate. Specific
risks that could cause results to differ from 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)
Sep 30,2014
Jun 30,2014
Mar 31,2014
Dec 31,2013
Sep 30,2013
Seq.Quarter
YearoverYear
Interest income: Non-covered loans and leases $
215,197 $ 193,061 $ 91,268 $ 93,032 $ 93,706 11 % 130 % Covered
loans and leases 8,775 15,931 12,718 13,330 11,837 (45 )% (26 )%
Interest and dividends on investments: Taxable 12,136 12,728 9,291
9,517 7,882 (5 )% 54 % Exempt from federal income tax 2,790 2,697
2,112 2,173 2,200 3 % 27 % Dividends 81 128 50 87 51 (37 )% 59 %
Temporary investments & interest bearing deposits 544
422 441 399 284
29 % 92 % Total interest income 239,523 224,967 115,880
118,538 115,960 6 % 107 % Interest expense: Deposits 6,773 6,075
3,848 4,168 4,845 11 % 40 % Repurchase agreements and fed funds
purchased 54 203 41 42 35 (73 )% 54 % Term debt 3,586 3,364 2,273
2,332 2,338 7 % 53 % Junior subordinated debentures 3,394
3,066 1,880 1,922
1,933 11 % 76 % Total interest expense 13,807 12,708 8,042
8,464 9,151 9 % 51 % Net interest income 225,716 212,259 107,838
110,074 106,809 6 % 111 % Provision for non-covered loan and lease
losses 14,431 15,399 5,400 3,840 3,008 (6 )% 380 % (Recapture of)
provision for covered loan and lease losses (98 ) (703 ) 571 (1,369
) (1,904 ) (86 )% (95 )% Non-interest income: Service charges
16,090 15,371 7,767 8,108 8,374 5 % 92 % Brokerage fees 4,882 4,566
3,725 3,584 3,854 7 % 27 % Residential mortgage banking revenue,
net 25,996 24,341 10,439 15,957 15,071 7 % 72 % Net gain on
investment securities 902 976 — 191 3 (8 )% nm Loss on junior
subordinated debentures carried at fair value (1,590 ) (1,369 )
(542 ) (554 ) (554 ) 16 % 187 % Change in FDIC indemnification
asset (2,728 ) (5,601 ) (4,840 ) (5,708 ) (6,474 ) (51 )% (58 )%
BOLI income 2,161 1,967 736 621 763 10 % 183 % Other income 16,211
4,278 5,722 4,586
5,107 279 % 217 % Total non-interest income 61,924
44,529 23,007 26,785 26,144 39 % 137 % Non-interest expense:
Salaries and employee benefits 102,564 95,560 53,218 52,720 53,699
7 % 91 % Net occupancy and equipment 33,029 28,746 16,501 16,254
16,019 15 % 106 % Intangible amortization 3,103 2,808 1,194 1,186
1,186 11 % 162 % FDIC assessments 3,038 2,575 1,863 1,922 1,709 18
% 78 % Net loss (gain) on non-covered other real estate owned 271
178 (18 ) 1,416 (27 ) 52 % nm Net loss (gain) on covered other real
estate owned 42 80 (46 ) (19 ) (68 ) (48 )% (162 )% Merger related
expenses 8,632 57,531 5,983 1,639 4,856 (85 )% 78 % Other expense
31,879 26,653 17,823
20,246 18,230 20 % 75 % Total non-interest
expense 182,558 214,131 96,518 95,364 95,604 (15 )% 91 % Income
before provision for income taxes 90,749 27,961 28,356 39,024
36,245 225 % 150 % Provision for income taxes 31,760
10,740 9,592 13,754
12,768 196 % 149 % Net income 58,989 17,221 18,764 25,270
23,477 243 % 151 % Dividends and undistributed earnings allocated
to participating securities 142 83 113
212 196 71 % (28 )% Net earnings
available to common shareholders $ 58,847 $ 17,138
$ 18,651 $ 25,058 $
23,281 243 % 153 % Weighted average basic shares
outstanding 217,245 196,312 112,170 111,949 111,912 11 % 94 %
Weighted average diluted shares outstanding 218,941 197,638 112,367
112,214 112,195 11 % 95 % Earnings per common share – basic $ 0.27
$ 0.09 $ 0.17 $ 0.22 $ 0.21 200 % 29 % Earnings per common share –
diluted $ 0.27 $ 0.09 $ 0.17 $ 0.22 $ 0.21 200 % 29 % nm = not
meaningful
Umpqua Holdings Corporation
Consolidated Statements of Income (Unaudited)
Nine Months Ended % Change (In thousands,
except per share data) Sep 30, 2014 Sep 30,
2013
Year overYear
Interest income Non-covered loans and leases $ 499,526 $
250,685 99 % Covered loans and leases 37,424 41,167 (9 )% Interest
and dividends on investments: Taxable 34,155 24,629 39 % Exempt
from federal income tax 7,599 6,725 13 % Dividends 259 165 57 %
Temporary investments & interest bearing deposits 1,407
937 50 % Total interest income 580,370 324,308 79 %
Interest expense Deposits 16,696 16,587 1 % Repurchase agreements
and fed funds purchased 298 99 201 % Term debt 9,223 6,916 33 %
Junior subordinated debentures 8,340 5,815 43
% Total interest expense 34,557 29,417 17 % Net interest income
545,813 294,891 85 % Provision for non-covered loan and lease
losses 35,230 12,989 171 % Recapture of provision for covered loan
and lease losses (230 ) (4,744 ) (95 )% Non-interest income Service
charges 39,228 22,844 72 % Brokerage fees 13,173 11,152 18 %
Residential mortgage banking revenue, net 60,776 62,928 (3 )% Net
gain on investment securities 1,878 18 nm Loss on junior
subordinated debentures carried at fair value (3,501 ) (1,643 ) 113
% Change in FDIC indemnification asset (13,169 ) (19,841 ) (34 )%
BOLI Income 4,864 2,432 100 % Other income 26,211
16,766 56 % Total non-interest income 129,460 94,656 37 %
Non-interest expense Salaries and employee benefits 251,340 157,271
60 % Net occupancy and equipment 78,276 45,813 71 % Intangible
amortization 7,105 3,595 98 % FDIC assessments 7,476 5,032 49 % Net
loss (gain) on non-covered other real estate owned 431 (303 ) nm
Net loss on covered other real estate owned 76 154 (51 )% Merger
related expenses 72,146 7,197 nm Other expense 76,357
50,538 51 % Total non-interest expense 493,207 269,297 83 %
Income before provision for income taxes 147,066 112,005 31 %
Provision for income taxes 52,092 38,914 34 %
Net income 94,974 73,091 30 %
Dividends and undistributed earnings
allocated to participating securities
338 576 (41 )% Net earnings available to
common shareholders $ 94,636 $ 72,515 31 %
Weighted average basic shares outstanding 175,627 111,934 57
% Weighted average diluted shares outstanding 176,656 112,154 58 %
Earnings per common share – basic $ 0.54 $ 0.65 (17 )% Earnings per
common share – diluted $ 0.54 $ 0.65 (17 )% nm = not meaningful
Umpqua Holdings Corporation
Consolidated Balance Sheets
(Unaudited) %
Change (In thousands, except per share data) Sep 30,
2014 Jun 30, 2014 Mar 31, 2014
Dec 31, 2013 Sep 30, 2013
Seq.Quarter
Year over Year
Assets: Cash and due from banks $ 266,624 $ 347,152 $
196,963 $ 178,685 $ 193,188 (23 )% 38 % Interest bearing deposits
1,176,599 492,739 887,620 611,224 503,369 139 % 134 % Temporary
investments 487 529 525 514 534 (8 )% (9 )% Investment securities:
Trading, at fair value 9,727 9,420 4,498 5,958 4,012 3 % 142 %
Available for sale, at fair value 2,400,061 2,588,969 1,701,730
1,790,978 1,910,082 (7 )% 26 % Held to maturity, at amortized cost
5,356 5,519 5,465 5,563 5,766 (3 )% (7 )% Loans held for sale
265,800 328,968 73,106 104,664 113,993 (19 )% 133 % Non-covered
loans and leases 14,975,811 14,830,345 7,411,108 7,354,403
7,228,904 1 % 107 % Allowance for non-covered loan and lease losses
(107,807 ) (97,995 ) (86,709 ) (85,314 )
(84,694 ) 10 % 27 % Non-covered loans and leases, net
14,868,004 14,732,350 7,324,399 7,269,089 7,144,210 1 % 108 %
Covered loans and leases, net 275,562 297,610 342,263 363,992
397,083 (7 )% (31 )% Restricted equity securities 120,759 122,194
29,948 30,685 31,444 (1 )% 284 % Premises and equipment, net
314,364 310,407 180,199 177,680 173,876 1 % 81 % Goodwill 1,785,407
1,779,732 764,304 764,305 764,530 0 % 134 % Other intangible
assets, net 59,835 62,938 11,184 12,378 13,564 (5 )% 341 %
Residential mortgage servicing rights, at fair value 118,725
114,192 49,220 47,765 41,853 4 % 184 % Non-covered other real
estate owned 31,753 26,172 22,034 21,833 18,249 21 % 74 % Covered
other real estate owned 2,703 1,810 1,746 2,102 2,980 49 % (9 )%
FDIC indemnification asset 7,811 11,293 18,362 23,174 29,427 (31 )%
(73 )% Bank owned life insurance 293,511 292,714 97,589 96,938
96,276 0 % 205 % Deferred tax assets, net 250,910 259,993 11,393
16,627 20,342 (3 )% nm Other assets 234,061 257,528
116,178 111,958 104,519
(9 )% 124 % Total assets $ 22,488,059 $
22,042,229 $ 11,838,726 $ 11,636,112
$ 11,569,297 2 % 94 %
Liabilities:
Deposits $ 16,727,610 $ 16,323,000 $ 9,273,583 $ 9,117,660 $
9,067,240 2 % 84 % Securities sold under agreements to repurchase
339,367 315,025 262,483 224,882 215,310 8 % 58 % Term debt
1,057,140 1,057,915 250,964 251,494 252,017 0 % 319 % Junior
subordinated debentures, at fair value 247,528 246,077 87,800
87,274 86,718 1 % 185 % Junior subordinated debentures, at
amortized cost 101,657 101,737 101,818 101,899 101,979 0 % 0 %
Other liabilities 262,249 269,415
127,602 125,477 120,038 (3 )%
118 % Total liabilities 18,735,551 18,313,169 10,104,250 9,908,686
9,843,302 2 % 90 %
Shareholders' equity: Common stock
3,515,621 3,512,507 1,514,969 1,514,485 1,513,225 0 % 132 %
Retained earnings 230,302 204,109 219,686 217,917 209,597 13 % 10 %
Accumulated other comprehensive income (loss) 6,585
12,444 (179 ) (4,976 ) 3,173 (47
)% 108 % Total shareholders' equity 3,752,508
3,729,060 1,734,476 1,727,426
1,725,995 1 % 117 % Total liabilities and
shareholders' equity $ 22,488,059 $ 22,042,229
$ 11,838,726 $ 11,636,112 $
11,569,297 2 % 94 % Common shares outstanding at
period end 217,261,722 217,190,721 112,319,525 111,973,203
111,928,762 0 % 94 % Book value per common share $ 17.27 $ 17.17 $
15.44 $ 15.43 $ 15.42 1 % 12 % Tangible book value per common share
$ 8.78 $ 8.69 $ 8.54 $ 8.49 $ 8.47 1 % 4 % Tangible equity - common
$ 1,907,266 $ 1,886,390 $ 958,988 $ 950,743 $ 947,901 1 % 101 %
Tangible common equity to tangible assets 9.24 % 9.34 % 8.67 % 8.75
% 8.78 % (1 )% 5 %
nm = not meaningful
Umpqua Holdings Corporation Non-covered
Loan & Lease Portfolio (Unaudited)
(Dollars in thousands)
Sep 30, 2014 Jun 30, 2014 Mar 31,
2014 Dec 31, 2013 Sep 30, 2013 %
Change Amount Amount Amount
Amount Amount
Seq.Quarter
Year over Year
Non-covered loans
& leases:
Commercial real estate: Non-owner occupied term, net $ 3,273,932 $
3,348,029 $ 2,311,952 $ 2,328,260 $ 2,382,430 (2 )% 37 % Owner
occupied term, net 2,636,951 2,666,128 1,282,482 1,259,583
1,230,417 (1 )% 114 % Multifamily, net 2,536,710 2,482,995 400,927
403,537 379,395 2 % 569 % Commercial construction, net 245,457
261,767 229,262 245,231 246,583 (6 )% 0 % Residential development,
net 73,781 91,690 89,510 88,413 78,756 (20 )% (6 )% Commercial:
Term, net 1,110,028 1,104,206 735,004 770,845 768,926 1 % 44 %
Lines of credit & other, net 1,338,821 1,322,167 1,005,800
987,360 950,954 1 % 41 % Leases & equipment finance, net
492,221 463,784 388,418 361,591 335,580 6 % 47 % Residential real
estate: Mortgage, net 2,085,266 1,958,597 651,042 597,201 553,285 6
% 277 % Home equity lines & loans, net 818,765 799,171 268,497
264,269 258,610 2 % 217 % Consumer & other, net 363,879
331,811 48,214 48,113
43,968 10 % 728 % Total, net of deferred fees and
costs $ 14,975,811 $ 14,830,345 $
7,411,108 $ 7,354,403 $ 7,228,904
1 % 107 %
Non-covered loan
& leases mix:
Commercial real estate: Non-owner occupied term, net 22 % 23 % 31 %
33 % 32 % Owner occupied term, net 18 % 18 % 17 % 17 % 17 %
Multifamily, net 17 % 17 % 5 % 5 % 5 % Commercial construction, net
2 % 2 % 3 % 3 % 3 % Residential development, net 1 % 1 % 1 % 1 % 1
% Commercial: Term, net 7 % 7 % 10 % 10 % 11 % Lines of credit
& other, net 9 % 9 % 14 % 13 % 13 % Leases & equipment
finance, net 3 % 3 % 5 % 5 % 5 % Residential real estate: Mortgage,
net 14 % 13 % 9 % 8 % 8 % Home equity lines & loans, net 5 % 5
% 4 % 4 % 4 % Consumer & other, net 2 % 2 % 1 %
1 % 1 % Total 100 % 100 % 100 %
100 % 100 %
Umpqua Holdings Corporation
Covered Loan & Lease Portfolio, Net (Unaudited)
(Dollars in thousands) Sep 30, 2014
Jun 30, 2014 Mar 31, 2014 Dec 31,
2013 Sep 30, 2013 % Change
Amount Amount Amount Amount
Amount
Seq.Quarter
YearoverYear
Covered loans
& leases:
Commercial real estate: Non-owner occupied term, net $
147,695 $ 166,969 $ 197,067 $ 204,052 $ 216,354 (12 )% (32 )% Owner
occupied term, net 44,819 47,034 48,447 48,673 54,332 (5 )% (18 )%
Multifamily, net 28,545 23,409 27,079 37,185 40,052 22 % (29 )%
Commercial construction, net 1,990 1,972 2,779 2,803 6,654 1 % (70
)% Residential development, net 2,534 2,562 6,083 6,311 7,468 (1 )%
(66 )% Commercial: Term, net 7,096 7,516 7,861 13,280 13,864 (6 )%
(49 )% Lines of credit & other, net 5,813 8,357 8,929 6,302
10,583 (30 )% (45 )% Residential real estate: Mortgage, net 17,005
18,272 21,664 22,175 23,161 (7 )% (27 )% Home equity lines &
loans, net 16,565 17,736 18,501 19,119 20,037 (7 )% (17 )% Consumer
& other, net 3,500 3,783 3,853 4,092
4,578 (7 )% (24 )% Total, net $ 275,562 $
297,610 $ 342,263 $ 363,992 $ 397,083
(7 )% (31 )%
Covered loans
& leases Mix:
Commercial real estate: Non-owner occupied term, net 54 % 55 % 58 %
56 % 54 % Owner occupied term, net 16 % 16 % 14 % 13 % 14 %
Multifamily, net 10 % 8 % 8 % 10 % 10 % Commercial construction,
net 1 % 1 % 1 % 1 % 2 % Residential development, net 1 % 1 % 2 % 2
% 2 % Commercial: Term, net 3 % 3 % 2 % 4 % 3 % Lines of credit
& other, net 2 % 3 % 3 % 2 % 3 % Residential real estate:
Mortgage, net 6 % 6 % 6 % 6 % 6 % Home equity lines & loans,
net 6 % 6 % 5 % 5 % 5 % Consumer & other, net 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) Sep 30, 2014
Jun 30, 2014 Mar 31, 2014 Dec
31, 2013 Sep 30, 2013 % Change
Amount Amount Amount
Amount Amount
Seq.Quarter
YearoverYear
Deposits:
Demand, non-interest bearing $ 4,741,897 $ 4,363,710 $ 2,465,606 $
2,436,477 $ 2,421,008 9 % 96 % Demand, interest bearing 1,942,792
1,869,626 1,182,634 1,233,070 1,179,351 4 % 65 % Money market
5,998,339 5,973,197 3,526,368 3,349,946 3,283,085 0 % 83 % Savings
952,122 912,073 578,238 560,699 551,327 4 % 73 % Time 3,092,460
3,204,394 1,520,737
1,537,468 1,632,469 (3 )% 89 % Total $
16,727,610 $ 16,323,000 $ 9,273,583
$ 9,117,660 $ 9,067,240 2 % 84 %
Total core deposits (1) $ 14,653,183 $ 14,171,946 $
8,205,636 $ 8,052,280 $ 7,926,734 3 % 85 %
Deposit
mix:
Demand, non-interest bearing 28 % 26 % 27 % 26 % 27 % Demand,
interest bearing 12 % 11 % 13 % 14 % 13 % Money market 36 % 37 % 38
% 37 % 36 % Savings 6 % 6 % 6 % 6 % 6 % Time 18 % 20 %
16 % 17 % 18 % Total 100 % 100 %
100 % 100 % 100 %
Number of open
accounts:
Demand, non-interest bearing 366,279 363,378 190,298 187,088
186,975 Demand, interest bearing 87,223 88,162 46,291 48,643 49,226
Money market 63,979 65,216 34,913 35,303 35,909 Savings 150,527
149,877 84,686 84,144 84,448 Time 54,565 56,285
22,755 23,688 24,618
Total
722,573 722,918 378,943
378,866 381,176
Average balance
per account:
Demand, non-interest bearing $ 12.9 $ 12.3 $ 13.0 $ 13.0 $ 12.9
Demand, interest bearing 22.3 21.2 25.5 25.3 24.0 Money market 93.8
91.6 101.0 94.9 91.4 Savings 6.3 6.1 6.8 6.7 6.5 Time 56.7 56.9
66.8 64.9 66.3 Total $ 23.2 $ 22.7 $ 24.5 $ 24.1 $ 23.8
(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) Sep 30,
2014 Jun 30, 2014 Mar 31, 2013 Dec 31,
2013 Sep 30, 2013
Seq.Quarter
Year overYear
Non-covered,
non-performing assets:
Non-covered loans and leases on non-accrual status $ 42,397 $
48,358 $ 37,884 $ 31,891 $ 39,805 (12 )% 7 % Non-covered loans and
leases past due 90+ days & accruing 7,416 4,919
2,269 3,430 4,936
51 % 50 % Total non-performing loans and leases 49,813 53,277
40,153 35,321 44,741 (7 )% 11 % Non-covered other real estate owned
31,753 26,172 22,034
21,833 18,249 21 % 74 % Total $ 81,566
$ 79,449 $ 62,187 $ 57,154
$ 62,990 3 % 29 % Non-covered
performing restructured loans and leases $ 63,507 $ 67,464 $ 67,897
$ 68,791 $ 69,497 (6 )% (9 )% Non-covered loans and leases past due
31-89 days $ 34,025 $ 28,913 $ 29,416 $ 15,290 $ 22,060 18 % 54 %
Non-covered loans and leases past due 31-89 days to non-covered
loans and leases 0.23 % 0.19 % 0.40 % 0.21 % 0.31 % Non-covered,
non-performing loans and leases to non-covered loans and leases
0.33 % 0.36 % 0.54 % 0.48 % 0.62 % Non-covered, non-performing
assets to total assets 0.36 % 0.36 % 0.53 % 0.49 % 0.54 %
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 2,703 1,810
1,746 2,102 2,980 49 % (9 )%
Total $ 2,703 $ 1,810 $ 1,746
$ 2,102 $ 2,980 49 % (9 )%
Covered non-performing loans and leases to covered loans and leases
— % — % — % — % — % Covered non-performing assets to total assets
0.01 % 0.01 % 0.01 % 0.02 % 0.03 %
Total
non-performing assets:
Loans and leases on non-accrual status $ 42,397 $ 48,358 $ 37,884 $
31,891 $ 39,805 (12 )% 7 % Loans and leases past due 90+ days &
accruing 7,416 4,919 2,269
3,430 4,936 51 % 50 % Total
non-performing loans and leases 49,813 53,277 40,153 35,321 44,741
(7 )% 11 % Other real estate owned 34,456 27,982
23,780 23,935 21,229
23 % 62 % Total $ 84,269 $ 81,259
$ 63,933 $ 59,256 $ 65,970
4 % 28 % Non-performing loans and leases to loans and
leases 0.33 % 0.35 % 0.52 % 0.46 % 0.59 % Non-performing assets to
total assets 0.37 % 0.37 % 0.54 % 0.51 % 0.57 %
Umpqua Holdings Corporation
Credit Quality – Allowance for
Non-covered Credit Losses
(Unaudited)
Quarter Ended % Change (Dollars in thousands)
Sep 30,2014
Jun 30,2014
Mar 31,2013
Dec 31,2013
Sep 30,2013
Seq.Quarter
Year overYear
Allowance for
non-covered credit losses:
Balance beginning of period $ 97,995 $ 86,709 $ 85,314 $ 84,694 $
85,836 Provision for non-covered loan and lease losses 14,431
15,399 5,400 3,840 3,008 (6 )% 380 % Charge-offs (6,743 ) (5,814 )
(5,565 ) (11,349 ) (6,317 ) 16 % 7 % Recoveries 2,124
1,701 1,560 8,129 2,167
25 % (2 )%
Net charge-offs
(4,619 ) (4,113 ) (4,005 ) (3,220 )
(4,150 ) 12 % 11 % Total allowance for non-covered loan and lease
losses 107,807 97,995 86,709 85,314 84,694 10 % 27 % Reserve for
unfunded commitments 4,388 4,845 1,417
1,436 1,375 (9 )% 219 % Total
allowance for non-covered credit losses $ 112,195 $
102,840 $ 88,126 $ 86,750
$ 86,069 9 % 30 % Net charge-offs to average
non-covered loans and leases (annualized) 0.12 % 0.12 % 0.22 % 0.18
% 0.23 % Recoveries to gross charge-offs 31.50 % 29.26 % 28.03 %
71.63 % 34.30 % Allowance for non-covered loan losses to
non-covered loans and leases 0.72 % 0.66 % 1.17 % 1.16 % 1.17 %
Allowance for non-covered credit losses to non-covered loans and
leases 0.75 % 0.69 % 1.19 % 1.18 % 1.19 %
Nine Months
Ended % Change (Dollars in thousands) Sep 30,
2014 Sep 30, 2013 Year over Year
Allowance for
non-covered credit losses:
Balance beginning of period $ 85,314 $ 85,391 Provision for
non-covered loan and lease losses 35,230 12,989 171 % Charge-offs
(18,122 ) (19,646 ) (8 )% Recoveries 5,385 5,960
(10 )% Net charge-offs (12,737 ) (13,686 ) (7 )%
Total allowance for non-covered loan and lease losses 107,807
84,694 27 % Reserve for unfunded commitments 4,388
1,375 219 % Total allowance for non-covered credit losses $
112,195 $ 86,069 30 % Net charge-offs
to average non-covered loans and leases (annualized) 0.22 % 0.26 %
Recoveries to gross charge-offs 29.72 % 30.34 %
Umpqua Holdings Corporation Selected Ratios
(Unaudited) Quarter
Ended % Change
Sep 30,2014
Jun 30,2014
Mar 31,2014
Dec 31,2013
Sep 30,2013
Seq.Quarter
Year overYear
Average
Rates:
Yield on non-covered loans and leases 5.62 % 5.71 %
4.96 % 5.00 % 5.12 % (0.09 ) 0.50 Yield on covered loans and leases
12.24 % 20.07 % 14.82 % 13.99 % 11.67 % (7.83 ) 0.57 Yield on
taxable investments 2.12 % 2.29 % 2.39 % 2.31 % 1.77 % (0.17 ) 0.35
Yield on tax-exempt investments (1) 5.12 % 5.19 % 5.54 % 5.56 %
5.62 % (0.07 ) (0.50 ) Yield on temporary investments &
interest bearing cash 0.25 % 0.25 % 0.25 % 0.25 % 0.25 % — — Total
yield on earning assets (1) 5.04 % 5.30 % 4.60 % 4.61 % 4.58 %
(0.26 ) 0.46 Cost of interest bearing deposits 0.22 % 0.22 %
0.23 % 0.25 % 0.29 % — (0.07 )
Cost of securities sold under agreements
to repurchase and fed funds purchased
0.07 % 0.25 % 0.07 % 0.07 % 0.07 % (0.18 ) — Cost of term debt 1.35
% 1.45 % 3.67 % 3.68 % 3.67 % (0.10 ) (2.32 ) Cost of junior
subordinated debentures 3.87 % 3.87 % 4.03 % 4.04 % 4.08 % — (0.21
) Total cost of interest bearing liabilities 0.40 % 0.41 % 0.44 %
0.46 % 0.50 % (0.01 ) (0.10 ) Net interest spread (1) 4.64 %
4.90 % 4.16 % 4.15 % 4.08 % (0.26 ) 0.56 Net interest margin –
Consolidated (1) 4.75 % 5.01 % 4.28 % 4.29 % 4.22 % (0.26 ) 0.53
Net interest margin – Bank (1) 4.82 % 5.07 % 4.35 % 4.35 % 4.30 %
(0.25 ) 0.52
As reported
(GAAP):
Return on average assets 1.05 % 0.34 % 0.65 % 0.86 % 0.81 % 0.71
0.24 Return on average tangible assets 1.15 % 0.37 % 0.70 % 0.92 %
0.86 % 0.78 0.29 Return on average common equity 6.29 % 2.05 % 4.35
% 5.73 % 5.36 % 4.24 0.93 Return on average tangible common equity
12.48 % 4.06 % 7.86 % 10.38 % 9.79 % 8.42 2.69 Efficiency ratio –
Consolidated 63.15 % 82.94 % 73.15 % 69.12 % 71.30 % (19.79 ) (8.15
) Efficiency ratio – Bank 61.68 % 81.37 % 71.18 % 67.30 % 69.30 %
(19.69 ) (7.62 )
Operating basis
(non-GAAP): (2)
Return on average assets 1.16 % 1.08 % 0.84 % 0.95 % 0.92 % 0.08
0.24 Return on average tangible assets 1.27 % 1.18 % 0.90 % 1.02 %
0.99 % 0.09 0.28 Return on average common equity 6.95 % 6.45 % 5.61
% 6.38 % 6.11 % 0.50 0.84 Return on average tangible common equity
13.80 % 12.76 % 10.13 % 11.56 % 11.15 % 1.04 2.65 Efficiency ratio
– Consolidated 59.83 % 60.33 % 68.34 % 67.66 % 67.40 % (0.50 )
(7.57 ) Efficiency ratio – Bank 58.70 % 59.15 % 66.60 % 66.10 %
65.63 % (0.45 ) (6.93 )
(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) Nine Months
Ended % Change Sep 30, 2014 Sep 30,
2013
Year overYear
Average
Rates:
Yield on non-covered loans and leases 5.52 % 4.80 % 0.72
Yield on covered loans and leases 15.80 % 12.80 % 3.00 Yield on
taxable investments 2.25 % 1.61 % 0.64 Yield on tax-exempt
investments (1) 5.25 % 5.42 % (0.17 ) Yield on temporary
investments & interest bearing cash 0.25 % 0.26 % (0.01 ) Total
yield on earning assets (1) 5.04 % 4.30 % 0.74 Cost of
interest bearing deposits 0.23 % 0.33 % (0.10 )
Cost of securities sold under agreements
to repurchase and fed funds purchased
0.13 % 0.08 % 0.05 Cost of term debt 1.64 % 3.66 % (2.02 ) Cost of
junior subordinated debentures 3.91 % 4.10 % (0.19 ) Total cost of
interest bearing liabilities 0.41 % 0.53 % (0.12 ) Net
interest spread (1) 4.63 % 3.77 % 0.86 Net interest margin –
Consolidated (1) 4.74 % 3.91 % 0.83 Net interest margin – Bank (1)
4.81 % 3.98 % 0.83
As reported
(GAAP):
Return on average assets 0.70 % 0.85 % (0.15 ) Return on average
tangible assets 0.76 % 0.90 % (0.14 ) Return on average common
equity 4.30 % 5.61 % (1.31 ) Return on average tangible common
equity 8.36 % 9.59 % (1.23 ) Efficiency ratio – Consolidated 72.62
% 68.52 % 4.10 Efficiency ratio – Bank 71.01 % 66.28 % 4.73
Operating basis
(non-GAAP): (2)
Return on average assets 1.06 % 0.91 % 0.15 Return on average
tangible assets 1.15 % 0.97 % 0.18 Return on average common equity
6.50 % 6.02 % 0.48 Return on average tangible common equity 12.64 %
10.29 % 2.35 Efficiency ratio – Consolidated 61.68 % 66.41 % (4.73
) Efficiency ratio – Bank 60.39 % 64.43 % (4.04 )
(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) Sep 30, 2014
Jun 30, 2014 Mar 31, 2014 Dec 31,
2013 Sep 30, 2013
Seq.Quarter
Year overYear
Temporary investments & interest bearing cash $ 849,399
$ 672,587 $ 705,974 $ 625,405 $ 443,148 26 %
92 % Investment securities, taxable 2,307,732 2,242,414 1,562,849
1,664,716 1,788,567 3 % 29 % Investment securities, tax-exempt
330,902 315,488 231,520 236,552 237,545 5 % 39 % Loans held for
sale 274,834 211,694 77,234 89,553 136,261 30 % 102 % Non-covered
loans and leases 14,916,541 13,355,455 7,384,555 7,298,622
7,128,753 12 % 109 % Covered loans and leases 284,352
318,432 347,984 378,148 402,403
(11 )% (29 )% Total interest earning assets 18,963,760
17,116,070 10,310,116 10,292,996 10,136,677 11 % 87 % Goodwill
& other intangible assets, net 1,841,668 1,656,687 776,006
777,188 779,294 11 % 136 % Total assets 22,220,999 20,036,742
11,638,357 11,624,424 11,460,729 11 % 94 % Non-interest
bearing demand deposits 4,558,672 3,963,233 2,414,001 2,452,554
2,317,932 15 % 97 % Interest bearing deposits 11,948,731
10,948,991 6,696,029 6,661,933
6,691,579 9 % 79 % Total deposits 16,507,403
14,912,224 9,110,030 9,114,487 9,009,511 11 % 83 % Interest bearing
liabilities 13,681,205 12,521,219 7,376,780 7,326,763 7,320,460 9 %
87 % Shareholders’ equity - common 3,712,813 3,350,836
1,738,680 1,734,583 1,722,881 11 % 116 % Tangible common equity (1)
1,871,145 1,694,149 962,674 957,395 943,587 10 % 98 %
Umpqua Holdings Corporation
Average Balances
(Unaudited) Nine Months Ended % Change
(Dollars in thousands) Sep 30, 2014 Sep 30,
2013 Year over Year Temporary investments & interest
bearing cash $ 743,179 $ 483,142 54 % Investment securities,
taxable 1,953,926 2,049,630 (5 )% Investment securities, tax-exempt
379,468 250,535 51 % Loans held for sale 188,646 154,839 22 %
Non-covered loans and leases 11,913,105 6,833,504 74 % Covered
loans and leases 316,690 429,909 (26 )% Total
interest earning assets 15,495,014 10,201,559 52 % Goodwill &
other intangible assets, net 1,428,705 716,137 100 % Total assets
18,004,316 11,468,348 57 % Non-interest bearing demand
deposits 3,653,158 2,228,530 64 % Interest bearing deposits
9,883,824 6,809,997 45 % Total deposits 13,536,982
9,038,527 50 % Interest bearing liabilities 11,216,190 7,414,449 51
% Shareholders’ equity - common 2,941,341 1,727,229 70 %
Tangible common equity (1) 1,512,636 1,011,092 50 %
(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) Sep 30, 2014
Jun 30, 2014 Mar 31, 2014 Dec 31,
2013 Sep 30, 2013
Seq.Quarter
Year overYear
Residential
mortgage servicing rights:
Residential mortgage loans serviced for
others $ 11,300,947 $ 10,838,313 $ 4,496,662 $ 4,362,499 $
4,195,759 4 % 169 % MSR asset, at fair value 118,725 114,192 49,220
47,765 41,853 4 % 184 % MSR as % of serviced portfolio 1.05 % 1.05
% 1.09 % 1.09 % 1.00 %
Residential
mortgage banking revenue:
Origination and sale $ 24,097 $ 22,142 $ 8,421 $ 9,915 $ 12,764 9 %
89 % Servicing 6,178 5,359 2,970 2,911 2,718 15 % 127 % Change in
fair value of MSR asset (4,279 ) (3,160 ) (952 )
3,131 (411 ) 35 % 941 % Total $ 25,996
$ 24,341 $ 10,439 $ 15,957
$ 15,071 7 % 72 %
Closed loan
volume:
Closed loan volume - total $ 988,031 $ 894,955 $ 293,175 $ 359,569
$ 463,036 10 % 113 % Closed loan volume - for sale $ 695,877 $
623,727 $ 204,356 $ 271,541 $ 357,371 12 % 95 %
Gain on sale
margin:
Based on total volume 2.44 % 2.47 % 2.87 % 2.76 % 2.76 % (0.03 )
(0.32 ) Based on for sale volume 3.46 % 3.55 % 4.12 % 3.65 % 3.57 %
(0.09 ) (0.11 )
Nine Months Ended % Change
Sep 30, 2014 Sep 30, 2013
Year overYear
Residential
mortgage banking revenue:
Origination and sale $ 54,660 $ 56,202 (3 )% Servicing 14,508 7,484
94 % Change in fair value of MSR asset (8,392 ) (758 ) 1,007
%
Total
$ 60,776 $ 62,928 (3 )%
Closed loan
volume:
Closed loan volume - total $ 2,176,161 $ 1,571,308 38 % Closed loan
volume - for sale 1,523,959 1,328,143 15 %
Gain on sale
margin:
Based on total volume 2.51 % 3.58 % (1.07 ) Based on for sale
volume 3.59 % 4.23 % (0.64 )
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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