Umpqua Reports First Quarter 2015 Results

Operating earnings1 of $56.4 million, or $0.26 per share
Loan and lease (gross of sales) growth of $294 million, or 8% annualized
Deposit growth of $330 million, or 8% annualized
Core system conversion completed April 2015

PORTLAND, Ore.--()--Umpqua Holdings Corporation (NASDAQ: UMPQ) (the “Company”) reported net earnings available to common shareholders of $47.0 million for the first quarter of 2015, as compared to $52.4 million for the fourth quarter of 2014 and $18.5 million for the first quarter of 2014. Earnings per diluted common share were $0.21 for the first quarter of 2015, as compared to $0.24 for the fourth quarter of 2014 and $0.16 for the first quarter of 2014.

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 $56.4 million for the first quarter of 2015, as compared to $59.4 million for the fourth quarter of 2014 and $23.9 million for the first quarter of 2014. Operating earnings per diluted common share were $0.26 for the first quarter of 2015, as compared to $0.27 for the fourth quarter of 2014 and $0.21 for the first quarter of 2014.

“The results of the first quarter of 2015 reflect Umpqua’s continued focus on disciplined growth while we progress in the completion of integrating Sterling,” said Ray Davis, president and CEO of Umpqua Holdings Corporation. “With the core system conversion now behind us, we have turned our attention to the final steps of integration and realizing the remaining expense synergies, which should accelerate over the next two quarters as major obstacles have now been eliminated. We are now able to concentrate more on our growth initiatives, reducing the company's efficiency ratio to below 60%, and continuing to innovate with new technologies and delivery systems.”

Highlights:

  • First quarter of 2015 operating earnings1 of $56.4 million:
    • Net interest income decreased by $11.0 million from the prior quarter, driven by a $6.4 million decrease in interest income related to the Sterling credit discount accretion and two fewer days in the quarter;
    • Provision for loan and lease losses increased by $8.5 million from the prior quarter, driven by higher net charge-offs and stronger loan growth;
    • Mortgage banking revenue increased by $11.7 million from the prior quarter, driven by an improvement in gain on sale margin and higher volume, partially offset by a $1.5 million increase in the loss related to the change in fair value of the mortgage servicing rights (MSR);
    • Non-interest expense (excluding merger-related expense) decreased by $1.7 million from the prior quarter, driven by synergies from reduced store costs, lower services and marketing expenses, and a lower loss on other real estate owned, partially offset by higher variable mortgage banking expense primarily reflected in salaries and benefits;
  • Continued growth in loans and deposits:
    • Loans and leases (gross of sales) grew by $294.1 million, or 8% annualized, from the prior quarter. This growth was partially offset by loan sales of $72.8 million, for net growth of $221.2 million, or 6% annualized;
    • Deposits grew by $330.5 million, or 8% annualized, from the prior quarter;
  • Capital and liquidity position remained strong:
    • Tangible book value per common share1 increased to $8.88, from $8.79 in the prior quarter;
    • Under Basel III rules, estimated total risk-based capital ratio of 14.3% and estimated Tier 1 common to risk weighted assets ratio of 10.8%;
    • Declared a dividend of $0.15 per common share, and
    • Interest bearing cash of $1.1 billion, as compared to $1.3 billion in the prior quarter.

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.

Balance Sheet

Total consolidated assets were $23.0 billion as of March 31, 2015, as compared to $22.6 billion as of December 31, 2014 and $11.8 billion as of March 31, 2014. Including secured off-balance sheet lines of credit, total available liquidity to the Company was $7.8 billion as of March 31, 2015, representing 34% of total assets and 45% of total deposits.

Gross loans and leases were $15.5 billion as of March 31, 2015, an increase of $221.2 million, or 6% annualized, from $15.3 billion as of December 31, 2014. During the first quarter of 2015, the Company had loan sales of $72.8 million, primarily comprised of portfolio residential mortgage loans. Excluding the impact of these sales, gross loan growth was $294.1 million, or 8% annualized.

Total deposits were $17.2 billion as of March 31, 2015, an increase of $330.5 million, or 8% annualized, from $16.9 billion as of December 31, 2014. This increase was primarily driven by an increase in non-interest bearing demand, savings and money market accounts, partially offset by a decrease in time deposits.

Net Interest Income

Net interest income was $217.0 million for the first quarter of 2015, down $11.0 million from the prior quarter but up $109.1 million from the same period in the prior year. The decrease from the prior quarter was primarily driven by a $6.4 million decrease in interest income arising from the accretion of the credit discount recorded on the loans acquired from Sterling, along with two fewer days in the 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 first quarter of 2015 included $15.2 million in interest income arising from the accretion of the credit discount recorded on the loans acquired from Sterling, as compared to $21.6 million in the prior quarter.

The Company’s net interest margin was 4.55% for the first quarter of 2015, down from 4.69% for the fourth quarter of 2014, but up from 4.28% for the first quarter of 2014. The decrease from the prior quarter was primarily driven by the lower level of Sterling credit discount accretion in interest income. The increase from the prior year was primarily driven by the acquisition of Sterling, and to a lesser degree, a higher yield on interest-earning assets and a lower cost of funds.

Credit Quality

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 loan and lease portfolio acquired from Sterling as of the acquisition date. The 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.

Loans acquired with deteriorated credit quality are accounted for as purchased credit impaired pools. Accordingly, loans included in the purchased credit impaired pools are not reported as non-performing loans based upon their individual performance status.

During the first quarter of 2015, the Company reported $15.2 million of accretion from the Sterling credit discount in interest income. As of March 31, 2015, the purchased non-credit impaired loans had approximately $107.7 million of remaining credit discount that will accrete into interest income over the life of the loans, and the purchased credit impaired loan pools had approximately $61.1 million of remaining total discount.

The allowance for loan and lease losses was $120.1 million, or 0.77% of loans and leases, as of March 31, 2015. To provide better comparability to prior periods, this pro-forma ratio would have been approximately 1.8% after grossing up the allowance for loan and lease losses and the loans and leases by the amount of the remaining credit mark remaining as of quarter-end. This compares to a ratio of approximately 2.0% as of December 31, 2014.

The provision for loan and lease losses was $13.7 million for the first quarter of 2015, an increase of $8.5 million from the prior quarter. This increase was primarily driven by an increase in net charge-offs and a higher level of loan growth, as compared to the prior quarter. Charge-offs, net of recoveries, increased to $9.8 million for the first quarter of 2015, as compared to $4.7 million in the prior quarter.

Non-performing assets decreased to $82.7 million, or 0.36% of total assets, as of March 31, 2015, as compared to $97.5 million, or 0.43% of total assets, as of December 31, 2014. Loans past due 31 to 89 days were $20.5 million, or 0.13% of loans and leases, as of March 31, 2015, as compared to $24.7 million, or 0.16% of loans and leases, as of December 31, 2014. Restructured loans on accrual status were $60.9 million as of March 31, 2015, as compared to $54.8 million as of December 31, 2014.

Non-interest Income

Total non-interest income was $63.6 million for the first quarter of 2015, up $13.3 million from the prior quarter and $40.4 million from the same period in the prior year. The increase from the prior quarter was primarily driven by higher mortgage banking revenue and other income. The increase from the prior year was primarily driven by the acquisition of Sterling.

Residential mortgage banking revenue, which includes revenue from the origination and sale of residential mortgage loans, revenue from the servicing of residential mortgage loans and changes to the fair value of the residential mortgage servicing rights (“MSR”) asset, increased by $11.7 million from the prior quarter. Revenue from the origination and sale of residential mortgages increased by $13.1 million from the prior quarter, driven by an improvement in gain on sale margin and higher mortgage originations. Loss related to the change in fair value of the MSR increased to $9.7 million for the first quarter of 2015 due to a decline in interest rates, as compared to $8.2 million for the prior quarter.

The Company’s gain on sale margin was 3.65% for the first quarter of 2015, up from 2.95% in the prior quarter. Of the current quarter’s mortgage production, 45% related to purchase activity, as compared to 63% for the prior quarter and 69% for the same period in the prior year.

As of March 31, 2015, the Company serviced $11.9 billion of residential mortgage loans for others, and its related MSR asset was valued at $116.4 million, or 0.98% of the total serviced portfolio principal balance. This compares to $11.6 billion of residential mortgage loans for others as of December 31, 2014, with a related MSR asset of $117.3 million, or 1.01% of the total serviced portfolio principal balance. As of March 31, 2014, the Company serviced $4.5 billion of residential mortgage loans serviced for others, and its related MSR asset was valued at $49.2 million, or 1.09% of the total serviced portfolio principal balance.

Non-interest Expense

Non-interest expense was $193.1 million for the first quarter of 2015, which included $14.1 million of merger-related expenses. This compares to $190.9 million, including $10.2 million of merger-related expenses, for the fourth quarter of 2014 and $96.5 million, including $6.0 million of merger-related expenses, for the first quarter of 2014.

Excluding merger-related expenses, non-interest expense decreased by $1.7 million from the prior quarter. This decrease was primarily driven by synergies related to the store consolidations, lower services and marketing expenses, and a lower loss on other real estate owned property. These were partially offset by a $5.0 million increase in variable mortgage expenses, primarily reflected in salaries and benefits, related to higher production in the quarter.

The first quarter of 2015 non-interest expense run-rate does not reflect the full benefit of the anticipated Sterling merger cost synergies. The Company recently completed the core system conversion, and plans to complete the remaining integration over the next two quarters. Cost synergies remain on track to the previously announced target of $87 million (annualized), which is expected to be realized following integration.

Income taxes

The Company recorded a provision for income taxes of $26.6 million for the first quarter of 2015, representing an effective tax rate of 36.1% for the quarter, as compared to $29.6 million, with an effective tax rate of 36.0%, for the fourth quarter of 2014.

Capital

As of March 31, 2015, the Company’s tangible book value per common share1 was $8.88 and its ratio of tangible common equity to tangible assets1 was 9.28%, as compared to $8.79 and 9.31%, 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 first quarter of 2015. The Company may repurchase up to 12.0 million of additional shares under this plan.

Based on Basel III rules, as of March 31, 2015, 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 December 31, 2014, which is based on Basel I rules, the Company's total risk-based capital ratio was 15.2% and its Tier 1 common to risk weighted assets ratio was 11.5%. The Company remains well above current “well-capitalized” regulatory minimums. The regulatory capital ratios as of March 31, 2015 are estimates, pending completion and filing of the Company’s regulatory reports.

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. 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)

Mar 31,
2015

 

Dec 31,
2014

 

Sep 30,
2014

 

Jun 30,
2014

 

Mar 31,
2014

Seq.
Quarter

 

Year
over
Year

Net earnings available to common shareholders $ 47,045   $ 52,436   $ 58,741   $ 17,459   $ 18,538 (10 )%   154 %
Adjustments:
Net loss on junior subordinated debentures carried at fair value, net of tax (1) 933 953 955 821 325 (2 )% 187 %
Merger related expenses, net of tax (1) 8,449     6,038     5,274     35,926     5,073   40

 %

67 %
Operating earnings $ 56,427     $ 59,427     $ 64,970     $ 54,206     $ 23,936   (5 )% 136 %
 

Earnings per diluted share:

Earnings available to common shareholders $ 0.21 $ 0.24 $ 0.27 $ 0.09 $ 0.16 (13 )% 31 %
Operating earnings $ 0.26 $ 0.27 $ 0.30 $ 0.27 $ 0.21 (4 )% 24 %
 
(1) Income tax effect of pro forma operating earnings adjustments at 40% for tax-deductible items.
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)   Mar 31, 2015   Dec 31, 2014   Sep 30, 2014   Jun 30, 2014   Mar 31, 2014
Total shareholders' equity $ 3,800,970   $ 3,777,332   $ 3,748,807   $ 3,725,465   $ 1,730,560
Subtract:
Goodwill and other intangible assets, net 1,842,567     1,842,958     1,845,242     1,842,670     775,488  
Tangible common shareholders' equity $ 1,958,403     $ 1,934,374     $ 1,903,565     $ 1,882,795     $ 955,072  
Total assets $ 22,953,158 $ 22,609,609 $ 22,484,358 $ 22,038,634 $ 11,834,810
Subtract:
Goodwill and other intangible assets, net 1,842,567     1,842,958     1,845,242     1,842,670     775,488  
Tangible assets $ 21,110,591     $ 20,766,651     $ 20,639,116     $ 20,195,964     $ 11,059,322  
Common shares outstanding at period end 220,453,729 220,161,120 217,261,722 217,190,721 112,319,525
Tangible common equity ratio 9.28 % 9.31 % 9.22 % 9.32 % 8.64 %
Tangible book value per common share $ 8.88 $ 8.79 $ 8.76 $ 8.67 $ 8.50
 

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 first quarter 2015 earnings conference call on Thursday, April 16, 2015, 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 first quarter 2015 financial results. There will be a live question-and-answer session following the presentation. To join the call, please dial (888) 503-8171 ten minutes prior to the start time and enter conference ID: 5683622. A re-broadcast will be available approximately two hours after the call by dialing (888) 203-1112 and entering conference ID 5683622. 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 the integration of the merger with Sterling Financial Corporation; timing and amount of merger-related synergies; and credit discount accretion related to the merger. 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; 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)

Mar 31,
2015

 

Dec 31,
2014

 

Sep 30,
2014

 

Jun 30,
2014

 

Mar 31,
2014

Seq.
Quarter

 

Year
over
Year

Interest income:    
Loans and leases $ 215,721 $ 226,853 $ 223,972 $ 208,992 $ 103,986 (5 )% 107

 %

Interest and dividends on investments:
Taxable 11,551 11,629 12,136 12,728 9,291 (1 )% 24

 %

Exempt from federal income tax 2,720 2,746 2,790 2,697 2,112 (1 )% 29

 %

Dividends 101 66 81 128 50 53

 %

102

 %

Temporary investments & interest bearing deposits 825     857     544     422     441   (4 )% 87

 %

Total interest income 230,918 242,151 239,523 224,967 115,880 (5 )% 99

 %

Interest expense:
Deposits 7,103 7,119 6,773 6,075 3,848 0

 %

85

 %

Repurchase agreements and fed funds purchased 48 48 54 203 41 0

 %

17

 %

Term debt 3,464 3,570 3,586 3,364 2,273 (3 )% 52

 %

Junior subordinated debentures 3,337     3,399     3,394     3,066     1,880   (2 )% 78

 %

Total interest expense 13,952 14,136 13,807 12,708 8,042 (1 )% 73

 %

Net interest income 216,966 228,015 225,716 212,259 107,838 (5 )% 101

 %

Provision for loan and lease losses 13,695 5,241 14,333 14,696 5,971 161

 %

129

 %

Non-interest income:
Service charges 14,296 15,472 16,090 15,371 7,767 (8 )% 84

 %

Brokerage fees 4,769 4,960 4,882 4,566 3,725 (4 )% 28

 %

Residential mortgage banking revenue, net 28,227 16,489 25,996 24,341 10,439 71

 %

170

 %

Net gain on investment securities 116 1,026 902 976 (89 )% nm
Loss on junior subordinated debentures carried at fair value (1,555 ) (1,589 ) (1,590 ) (1,369 ) (542 ) (2 )% 187

 %

Change in FDIC indemnification asset (1,286 ) (1,982 ) (2,728 ) (5,601 ) (4,840 ) (35 )% (73 )%
BOLI income 2,781 1,971 2,161 1,967 736 41

 %

278

 %

Other income 16,247     13,958     16,452     5,215     5,953   16

 %

173

 %

Total non-interest income 63,595 50,305 62,165 45,466 23,238 26

 %

174

 %

Non-interest expense:
Salaries and employee benefits 107,923 104,039 102,564 95,560 53,218 4

 %

103

 %

Net occupancy and equipment 32,150 32,987 33,029 28,746 16,501 (3 )% 95

 %

Intangible amortization 2,806 3,102 3,103 2,808 1,194 (10 )% 135

 %

FDIC assessments 3,214 3,522 3,038 2,575 1,863 (9 )% 73

 %

Net loss (gain) on other real estate owned 1,814 3,609 313 258 (64 ) (50 )% nm
Merger related expenses 14,082 10,171 8,632 57,531 5,983 38

 %

135

 %

Other expense 31,109     33,426     31,879     26,653     17,823   (7 )% 75

 %

Total non-interest expense 193,098 190,856 182,558 214,131 96,518 1

 %

100

 %

Income before provision for income taxes 73,768 82,223 90,990 28,898 28,587 (10 )% 158

 %

Provision for income taxes 26,639     29,641     32,107     11,356     9,936   (10 )% 168

 %

Net income 47,129 52,582 58,883 17,542 18,651 (10 )% 153

 %

Dividends and undistributed earnings allocated to participating securities 84     146     142     83     113   (42 )% (26 )%
Net earnings available to common shareholders $ 47,045     $ 52,436     $ 58,741     $ 17,459     $ 18,538   (10 )% 154

 %

 
Weighted average basic shares outstanding 220,349 218,963 217,245 196,312 112,170 1

 %

96

 %

Weighted average diluted shares outstanding 221,051 219,974 218,941 197,638 112,367 0

 %

97

 %

Earnings per common share – basic $ 0.21 $ 0.24 $ 0.27 $ 0.09 $ 0.17 (13 )% 24

 %

Earnings per common share – diluted $ 0.21 $ 0.24 $ 0.27 $ 0.09 $ 0.16 (13 )% 31

 %

nm = not meaningful
 
Umpqua Holdings Corporation

Consolidated Balance Sheets

(Unaudited)
           
% Change
(In thousands, except per share data) Mar 31, 2015   Dec 31, 2014   Sep 30, 2014   Jun 30, 2014   Mar 31, 2014

Seq.
Quarter

 

Year
over
Year

Assets:  
Cash and due from banks $ 292,558 $ 282,455 $ 266,624 $ 347,152 $ 196,963 4

 %

49

 %

Interest bearing deposits 1,087,913 1,322,214 1,176,599 492,739 887,620 (18 )% 23

 %

Temporary investments 403 502 487 529 525 (20 )% (23 )%
Investment securities:
Trading, at fair value 10,452 9,999 9,727 9,420 4,498 5

 %

132

 %

Available for sale, at fair value 2,535,121 2,298,555 2,400,061 2,588,969 1,701,730 10

 %

49

 %

Held to maturity, at amortized cost 4,953 5,211 5,356 5,519 5,465 (5 )% (9 )%
Loans held for sale 406,487 286,802 265,800 328,968 73,106 42

 %

456

 %

Loans and leases 15,548,957 15,327,732 15,259,201 15,136,455 7,763,691 1

 %

100

 %

Allowance for loan and lease losses (120,104 )   (116,167 )   (115,635 )   (106,495 )   (97,029 ) 3

 %

24

 %

Loans and leases, net 15,428,853 15,211,565 15,143,566 15,029,960 7,666,662 1

 %

101

 %

Restricted equity securities 117,218 119,334 120,759 122,194 29,948 (2 )% 291

 %

Premises and equipment, net 322,925 317,834 314,364 310,407 180,199 2

 %

79

 %

Goodwill 1,788,640 1,786,225 1,785,407 1,779,732 764,304 0

 %

134

 %

Other intangible assets, net 53,927 56,733 59,835 62,938 11,184 (5 )% 382

 %

Residential mortgage servicing rights, at fair value 116,365 117,259 118,725 114,192 49,220 (1 )% 136

 %

Other real estate owned 32,064 37,942 34,456 27,982 23,780 (15 )% 35

 %

FDIC indemnification asset 1,861 4,417 7,811 11,293 18,362 (58 )% (90 )%
Bank owned life insurance 294,697 294,296 293,511 292,714 97,589 0

 %

202

 %

Deferred tax assets, net 198,778 230,258 251,670 260,686 12,287 (14 )% nm
Other assets 259,943     228,008     229,600     253,240     111,368   14

 %

133

 %

Total assets $ 22,953,158     $ 22,609,609     $ 22,484,358     $ 22,038,634     $ 11,834,810   2

 %

94

 %

Liabilities:
Deposits $ 17,222,566 $ 16,892,099 $ 16,727,610 $ 16,323,000 $ 9,273,583 2

 %

86

 %

Securities sold under agreements to repurchase 321,202 313,321 339,367 315,025 262,483 3

 %

22

 %

Term debt 965,675 1,006,395 1,057,140 1,057,915 250,964 (4 )% 285

 %

Junior subordinated debentures, at fair value 250,652 249,294 247,528 246,077 87,800 1

 %

185

 %

Junior subordinated debentures, at amortized cost 101,496 101,576 101,657 101,737 101,818 0

 %

0

 %

Other liabilities 290,597     269,592     262,249     269,415     127,602   8

 %

128

 %

Total liabilities 19,152,188 18,832,277 18,735,551 18,313,169 10,104,250 2

 %

90

 %

Shareholders' equity:
Common stock 3,521,201 3,519,316 3,515,621 3,512,507 1,514,969 0

 %

132

 %

Retained earnings 260,128 245,948 226,601 200,514 215,770 6

 %

21

 %

Accumulated other comprehensive income (loss) 19,641     12,068     6,585     12,444     (179 ) 63

 %

nm
Total shareholders' equity 3,800,970     3,777,332     3,748,807     3,725,465     1,730,560   1

 %

120

 %

Total liabilities and shareholders' equity $ 22,953,158     $ 22,609,609     $ 22,484,358     $ 22,038,634     $ 11,834,810   2

 %

94

 %

 
Common shares outstanding at period end 220,453,729 220,161,120 217,261,722 217,190,721 112,319,525 0

 %

96

 %

Book value per common share $ 17.24 $ 17.16 $ 17.25 $ 17.15 $ 15.41 0

 %

12

 %

Tangible book value per common share $ 8.88 $ 8.79 $ 8.76 $ 8.67 $ 8.50 1

 %

4

 %

Tangible equity - common $ 1,958,403 $ 1,934,374 $ 1,903,565 $ 1,882,795 $ 955,072 1

 %

105

 %

Tangible common equity to tangible assets 9.28 % 9.31 % 9.22 % 9.32 % 8.64 % 0

 %

7

 %

nm = not meaningful

 
Umpqua Holdings Corporation
Loan & Lease Portfolio
(Unaudited)
             
(Dollars in thousands) Mar 31, 2015   Dec 31, 2014   Sep 30, 2014   Jun 30, 2014   Mar 31, 2014 % Change
Amount   Amount   Amount   Amount   Amount

Seq.
Quarter

 

Year
over
Year

Loans & leases:

Commercial real estate:
Non-owner occupied term, net $ 3,296,263 $ 3,290,610 $ 3,423,453 $ 3,517,328 $ 2,511,770 0

 %

31

 %

Owner occupied term, net 2,594,312 2,633,864 2,682,870 2,714,319 1,331,969 (2 )% 95

 %

Multifamily, net 2,764,403 2,638,618 2,565,711 2,506,864 428,489 5

 %

545

 %

Commercial construction, net 238,303 258,722 247,816 264,150 232,708 (8 )% 2

 %

Residential development, net 81,160 81,846 76,849 94,857 96,723 (1 )% (16 )%
Commercial:
Term, net 1,128,986 1,102,987 1,119,658 1,114,315 745,813 2

 %

51

 %

Lines of credit & other, net 1,266,409 1,322,722 1,344,741 1,330,771 1,015,251 (4 )% 25

 %

Leases & equipment finance, net 570,492 523,114 492,221 463,784 388,418 9

 %

47

 %

Residential real estate:
Mortgage, net 2,330,325 2,233,735 2,102,333 1,976,934 672,845 4

 %

246

 %

Home equity lines & loans, net 863,269 852,478 836,054 817,391 287,491 1

 %

200

 %

Consumer & other, net 415,035     389,036     367,495     335,742     52,214   7

 %

695

 %

Total, net of deferred fees and costs $ 15,548,957     $ 15,327,732     $ 15,259,201     $ 15,136,455     $ 7,763,691   1

 %

100

 %

 

Loan & leases mix:

Commercial real estate:
Non-owner occupied term, net 20 % 20 % 22 % 23 % 31 %
Owner occupied term, net 17 % 17 % 18 % 18 % 17 %
Multifamily, net 17 % 17 % 17 % 17 % 6 %
Commercial construction, net 2 % 2 % 2 % 2 % 3 %
Residential development, net 1 % 1 % 1 % 1 % 1 %
Commercial:
Term, net 7 % 7 % 7 % 7 % 10 %
Lines of credit & other, net 8 % 9 % 9 % 9 % 13 %
Leases & equipment finance, net 4 % 3 % 3 % 3 % 5 %
Residential real estate:
Mortgage, net 15 % 15 % 14 % 13 % 9 %
Home equity lines & loans, net 6 % 6 % 5 % 5 % 4 %
Consumer & other, net 3 %   3 %   2 %   2 %   1 %
Total 100 %   100 %   100 %   100 %   100 %
 
Umpqua Holdings Corporation
Deposits by Type/Core Deposits
(Unaudited)
             
(Dollars in thousands) Mar 31, 2015   Dec 31, 2014   Sep 30, 2014   Jun 30, 2014   Mar 31, 2014 % Change
Amount   Amount   Amount   Amount   Amount

Seq.
Quarter

 

Year
over
Year

Deposits:

Demand, non-interest bearing $ 4,930,642 $ 4,744,804 $ 4,741,897 $ 4,363,710 $ 2,465,606 4

 %

100 %
Demand, interest bearing 2,085,368 2,054,994 1,942,792 1,869,626 1,182,634 1

 %

76 %
Money market 6,287,165 6,113,138 5,998,339 5,973,197 3,526,368 3

 %

78 %
Savings 1,022,829 971,185 952,122 912,073 578,238 5

 %

77 %
Time 2,896,562     3,007,978     3,092,460     3,204,394     1,520,737   (4 )% 90 %
Total $ 17,222,566     $ 16,892,099     $ 16,727,610     $ 16,323,000     $ 9,273,583   2

 %

86 %
 
Total core deposits (1) $ 15,304,001 $ 15,126,378 $ 14,653,183 $ 14,171,946 $ 8,205,636 1

 %

87 %
 

Deposit mix:

Demand, non-interest bearing 29 % 28 % 28 % 26 % 27 %
Demand, interest bearing 12 % 12 % 12 % 11 % 13 %
Money market 36 % 36 % 36 % 37 % 38 %
Savings 6 % 6 % 6 % 6 % 6 %
Time 17 %   18 %   18 %   20 %   16 %
Total 100 %   100 %   100 %   100 %   100 %
 

Number of open accounts:

Demand, non-interest bearing 368,701 367,854 366,279 363,378 190,298
Demand, interest bearing 85,082 86,135 87,223 88,162 46,291
Money market 61,991 63,095 63,979 65,216 34,913
Savings 150,989 150,548 150,527 149,877 84,686
Time 52,179     53,530     54,565     56,285     22,755  
Total 718,942     721,162     722,573     722,918     378,943  
 

Average balance per account:

Demand, non-interest bearing $ 13.4 $ 12.9 $ 12.9 $ 12.3 $ 13.0
Demand, interest bearing 24.5 23.9 22.3 21.2 25.5
Money market 101.4 96.9 93.8 91.6 101.0
Savings 6.8 6.5 6.3 6.1 6.8
Time 55.5 56.2 56.7 56.9 66.8
Total $ 24.0 $ 23.4 $ 23.2 $ 22.7 $ 24.5
 

(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)

Mar 31,
2015

Dec 31,
2014

Sep 30,
2014

 

Jun 30,
2014

Mar 31,
2014

Seq.
Quarter

 

Year
over
Year

Non-performing assets:
Loans and leases on non-accrual status $ 40,246 $ 52,041 $ 42,397 $ 48,358 $ 37,884 (23 )% 6

 %

Loans and leases past due 90+ days & accruing 10,416     7,512     7,416     4,919     2,269   39

 %

359

 %

Total non-performing loans and leases 50,662 59,553 49,813 53,277 40,153 (15 )% 26

 %

Other real estate owned 32,064     37,942     34,456     27,982     23,780   (15 )% 35

 %

Total $ 82,726     $ 97,495     $ 84,269     $ 81,259     $ 63,933   (15 )% 29

 %

 
Performing restructured loans and leases $ 60,896 $ 54,836 $ 63,507 $ 67,464 $ 67,897 11

 %

(10 )%
Loans and leases past due 31-89 days $ 20,488 $ 24,659 $ 34,025 $ 28,913 $ 29,416 (17 )% (30 )%
Loans and leases past due 31-89 days to total loans and leases 0.13 % 0.16 % 0.22 % 0.19 % 0.38 %
Non-performing loans and leases to total loans and leases 0.33 % 0.39 % 0.33 % 0.35 % 0.52 %
Non-performing assets to total assets 0.36 % 0.43 % 0.37 % 0.37 % 0.54 %
 
Umpqua Holdings Corporation
Credit Quality – Allowance for Loan and Lease Losses
(Unaudited)
  Quarter Ended   % Change
(Dollars in thousands)

Mar 31,
2015

 

Dec 31,
2014

 

Sep 30,
2014

 

Jun 30,
2014

 

Mar 31,
2014

Seq.
Quarter

 

Year over
Year

Allowance for loan and lease losses:

         
Balance beginning of period $ 116,167 $ 115,635 $ 106,495 $ 97,029 $ 95,085
Provision for loan and lease losses 13,695 5,241 14,333 14,696 5,971 161

 %

129 %
Charge-offs (13,603 ) (9,088 ) (7,524 ) (7,332 ) (6,234 ) 50

 %

118 %
Recoveries 3,845     4,379     2,331     2,102     2,207   (12 )% 74 %
Net charge-offs (9,758 )   (4,709 )   (5,193 )   (5,230 )   (4,027 ) 107

 %

142 %
Total allowance for loan and lease losses 120,104 116,167 115,635 106,495 97,029 3

 %

24 %
Reserve for unfunded commitments 3,194     3,539     4,388     4,845     1,417  
Total allowance for credit losses $ 123,298     $ 119,706     $ 120,023     $ 111,340     $ 98,446  
 
Net charge-offs to average loans and leases (annualized) 0.26 % 0.12 % 0.14 % 0.15 % 0.21 %
Recoveries to gross charge-offs 28.27 % 48.18 % 30.98 % 28.67 % 35.40 %
Allowance for loan and lease losses to loans and leases 0.77 % 0.76 % 0.76 % 0.70 % 1.25 %
Allowance for credit losses to loans and leases 0.79 % 0.78 % 0.79 % 0.74 % 1.27 %
 
Umpqua Holdings Corporation
Selected Ratios
(Unaudited)
         
Quarter Ended % Change

Mar 31,
2015

 

Dec 31,
2014

 

Sep 30,
2014

 

Jun 30,
2014

 

Mar 31,
2014

Seq.
Quarter

 

Year
over
Year

Average Rates:

   
Yield on loans and leases 5.64 % 5.82 % 5.78 % 6.06 % 5.41 % (0.18 ) 0.23
Yield on loans held for sale 3.95 % 4.01 % 3.86 % 4.30 % 4.04 % (0.06 ) (0.09 )
Yield on taxable investments 2.10 % 2.16 % 2.12 % 2.29 % 2.39 % (0.06 ) (0.29 )
Yield on tax-exempt investments (1) 5.10 % 5.09 % 5.12 % 5.19 % 5.54 % 0.01 (0.44 )
Yield on temporary investments & interest bearing cash 0.25 % 0.25 % 0.25 % 0.25 % 0.25 %
Total yield on earning assets (1) 4.84 % 4.98 % 5.04 % 5.30 % 4.60 % (0.14 ) 0.24
 
Cost of interest bearing deposits 0.24 % 0.23 % 0.22 % 0.22 % 0.23 % 0.01 0.01

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

0.06 % 0.06 % 0.07 % 0.25 % 0.07 % (0.01 )
Cost of term debt 1.42 % 1.41 % 1.35 % 1.45 % 3.67 % 0.01 (2.25 )
Cost of junior subordinated debentures 3.86 % 3.86 % 3.87 % 3.87 % 4.03 % (0.17 )
Total cost of interest bearing liabilities 0.41 % 0.41 % 0.40 % 0.41 % 0.44 % (0.03 )
 
Net interest spread (1) 4.43 % 4.57 % 4.64 % 4.90 % 4.16 % (0.14 ) 0.27
Net interest margin – Consolidated (1) 4.55 % 4.69 % 4.75 % 5.01 % 4.28 % (0.14 ) 0.27
Net interest margin – Bank (1) 4.62 % 4.75 % 4.82 % 5.07 % 4.35 % (0.13 ) 0.27
 

As reported (GAAP):

Return on average assets 0.84 % 0.92 % 1.05 % 0.35 % 0.65 % (0.08 ) 0.19
Return on average tangible assets 0.92 % 1.00 % 1.14 % 0.38 % 0.69 % (0.08 ) 0.23
Return on average common equity 5.02 % 5.59 % 6.28 % 2.09 % 4.32 % (0.57 ) 0.70
Return on average tangible common equity 9.76 % 11.08 % 12.46 % 4.13 % 7.81 % (1.32 ) 1.95
Efficiency ratio – Consolidated 68.48 % 68.23 % 63.10 % 82.64 % 73.03 % 0.25 (4.55 )
Efficiency ratio – Bank 66.84 % 66.23 % 61.63 % 81.08 % 71.06 % 0.61 (4.22 )
 

Operating basis (non-GAAP): (2)

Return on average assets 1.01 % 1.04 % 1.16 % 1.08 % 0.83 % (0.03 ) 0.18
Return on average tangible assets 1.10 % 1.13 % 1.26 % 1.18 % 0.89 % (0.03 ) 0.21
Return on average common equity 6.03 % 6.34 % 6.94 % 6.49 % 5.58 % (0.31 ) 0.45
Return on average tangible common equity 11.71 % 12.56 % 13.78 % 12.83 % 10.08 % (0.85 ) 1.63
Efficiency ratio – Consolidated 63.14 % 64.23 % 59.79 % 60.12 % 68.22 % (1.09 ) (5.08 )
Efficiency ratio – Bank 61.86 % 62.61 % 58.65 % 58.94 % 66.48 % (0.75 ) (4.62 )
 

(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)

Mar 31,
2015

 

Dec 31,
2014

 

Sep 30,
2014

 

Jun 30,
2014

 

Mar 31,
2014

Seq.
Quarter

 

Year
over
Year

Temporary investments & interest bearing cash $ 1,323,671   $ 1,368,726   $ 849,399   $ 672,587   $ 705,974 (3 )% 87 %
Investment securities, taxable 2,222,174 2,169,504 2,307,732 2,242,414 1,562,849 2

 %

42 %
Investment securities, tax-exempt 323,852 326,858 330,902 315,488 231,520 (1 )% 40 %
Loans held for sale 262,777 255,830 274,834 211,694 77,234 3

 %

240 %
Loans and leases 15,334,555   15,300,425   15,200,893   13,673,887   7,732,539   0

 %

98 %
Total interest earning assets 19,467,029 19,421,343 18,963,760 17,116,070 10,310,116 0

 %

89 %
Goodwill & other intangible assets, net 1,842,390 1,844,084 1,841,668 1,656,687 776,006 0

 %

137 %
Total assets 22,687,515 22,625,461 22,220,999 20,036,742 11,638,357 0

 %

95 %
 
Non-interest bearing demand deposits 4,808,062 4,836,517 4,558,672 3,963,233 2,414,001 (1 )% 99 %
Interest bearing deposits 12,187,132     12,153,481     11,948,731   10,948,991   6,696,029   0

 %

82 %
Total deposits 16,995,194 16,989,998 16,507,403 14,912,224 9,110,030 0

 %

87 %
Interest bearing liabilities 13,838,515 13,833,126 13,681,205 12,521,219 7,376,780 0

 %

88 %
 
Shareholders’ equity - common 3,797,108 3,721,003 3,712,813 3,350,836 1,738,680 2

 %

118 %
Tangible common equity (1) 1,954,718 1,876,919 1,871,145 1,694,149 962,674 4

 %

103 %
 

(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) Mar 31, 2015   Dec 31, 2014   Sep 30, 2014   Jun 30, 2014   Mar 31, 2014

Seq.
Quarter

 

Year
over
Year

Residential mortgage servicing rights:

       
Residential mortgage loans serviced for others $ 11,874,910 $ 11,590,310 $ 11,300,947 $ 10,838,313 $ 4,496,662 2

 %

164 %
MSR asset, at fair value 116,365 117,259 118,725 114,192 49,220 (1 )% 136 %
MSR as % of serviced portfolio 0.98 % 1.01 % 1.05 % 1.05 % 1.09 %

Residential mortgage banking revenue:

Origination and sale $ 31,498 $ 18,378 $ 24,097 $ 22,142 $ 8,421 71

 %

274 %
Servicing 6,457 6,306 6,178 5,359 2,970 2

 %

117 %
Change in fair value of MSR asset (9,728 )   (8,195 )   (4,279 )   (3,160 )   (952 ) 19

 %

922 %
Total $ 28,227     $ 16,489     $ 25,996     $ 24,341     $ 10,439   71

 %

170 %

 

Closed loan volume:

Closed loan volume - portfolio $ 311,149 $ 319,779 $ 292,154 $ 271,228 $ 88,819 (3 )% 250 %
Closed loan volume - for sale 862,155     622,133     695,877     623,727     204,356   39

 %

322 %
Closed loan volume - total $ 1,173,304     $ 941,912     $ 988,031     $ 894,955     $ 293,175   5

 %

237 %
 

Gain on sale margin:

Based on for sale volume 3.65 % 2.95 % 3.46 % 3.55 % 4.12 % 0.70 (0.47 )

Contacts

Umpqua Holdings Corporation
Ron Farnsworth, 503-727-4108
EVP/Chief Financial Officer
ronfarnsworth@umpquabank.com
Bradley Howes, 503-727-4226
SVP/Director of Investor Relations
bradhowes@umpquabank.com

Release Summary

Umpqua Holdings Corporation reports its earnings for the first quarter of 2015.

Contacts

Umpqua Holdings Corporation
Ron Farnsworth, 503-727-4108
EVP/Chief Financial Officer
ronfarnsworth@umpquabank.com
Bradley Howes, 503-727-4226
SVP/Director of Investor Relations
bradhowes@umpquabank.com