Umpqua Reports Second Quarter 2018 Results


Net earnings of $67.8 million, or $0.31 per common share
Quarterly loan and lease growth of $379.4 million, or 8% annualized, and deposit growth of $637.7 million, or 13% annualized
Organization simplification and design complete, results include pre-tax restructuring charges of $8.2 million

PORTLAND, Ore., July 18, 2018 (GLOBE NEWSWIRE) -- Umpqua Holdings Corporation (NASDAQ:UMPQ) (the “Company”) reported net earnings available to common shareholders of $67.8 million for the second quarter of 2018, compared to $77.7 million for the first quarter of 2018 and $56.8 million for the second quarter of 2017.  Earnings per diluted common share were $0.31 for the second quarter of 2018, compared to $0.35 for the first quarter of 2018 and $0.26 for the second quarter of 2017.

“Our second quarter results were highlighted by strong growth in loans and deposits, higher net interest income and stable credit quality,” said Cort O'Haver, president and CEO of Umpqua Holdings Corporation.  “Building on the foundation of Umpqua Next Gen, during the second quarter we completed important elements of our operational excellence initiative, including organizational simplification and design phases, while advancing our human digital strategy.  We are starting to see good traction from these Phase I levers, and remain on pace to deliver on the previously announced $18 to $24 million in annual savings.”

Notable items that impacted the second quarter 2018 financial results included:

  • $8.2 million in restructuring charges related to the organization simplification and design and procurement phases of Umpqua Next Gen, including $4.1 million in severance-related expense and $4.1 million in professional fees.  This compares to $0.8 million in severance-related expense and $2.7 in professional fees in the prior quarter.
  • $5.4 million negative adjustment related to the fair value change of the MSR asset, compared to $5.1 million gain in the prior quarter and $8.3 million negative adjustment in the same period of the prior year.
  • $0.3 million gain related to the fair value change of the debt capital market swap derivatives, compared to a gain of $1.1 million in the prior quarter and a loss of $0.8 million in the same period of the prior year.
  • $2.6 million of exit or disposal costs, compared to $2.5 million in the prior quarter and $0.7 million in the same period of the prior year.
  • $1.4 million unrealized holding loss on equity securities, compared to no gain or loss recorded in the prior quarters.

Second Quarter 2018 Highlights (compared to prior quarter):

  • Net interest income increased by $4.1 million, or 2%, attributable to the strong growth in loans and leases and the benefit from increases in short-term interest rates.
  • Provision for loan and lease losses decreased by $0.3 million, driven primarily by lower net charge-offs, which decreased by four basis points to 0.22% of average loans and leases (annualized).
  • Non-interest income decreased by $6.9 million, reflecting the $10.5 million linked quarter change in fair value of the MSR asset (see notable items above), partially offset by higher net revenue from the origination and sale of residential mortgages.
  • Non-interest expense increased by $9.5 million, driven primarily by higher restructuring charges (see notable items above) and higher mortgage banking-related expense, consistent with the increase in mortgage originations.
  • Non-performing assets to total assets increased by one basis point to 0.34%.
  • Estimated total risk-based capital ratio of 13.7% and estimated Tier 1 common to risk weighted assets ratio of 10.8%.
  • Declared quarterly cash dividend of $0.20 per common share.
  • Repurchased 327,000 shares of common stock for $8.0 million.

Balance Sheet
Total consolidated assets were $26.5 billion as of June 30, 2018, compared to $25.9 billion as of March 31, 2018 and $25.3 billion as of June 30, 2017.  Including secured off-balance sheet lines of credit, total available liquidity was $10.4 billion as of June 30, 2018, representing 39% of total assets and 50% of total deposits.

Gross loans and leases were $19.7 billion as of June 30, 2018, an increase of $379.4 million, or 8% annualized, from $19.3 billion as of March 31, 2018.  This increase reflects balanced growth within the commercial term, leasing, multifamily, and residential mortgage loan portfolios, partially offset by a decline in consumer loans attributable to the Company's decision to wind down its indirect auto loan business.

Total deposits were $20.7 billion as of June 30, 2018, an increase of $637.7 million, or 13% annualized, from $20.1 billion as of March 31, 2018.  This increase was attributable to higher balances of time and non-interest bearing deposits, partially offset by lower money market deposits.

Net Interest Income
Net interest income was $227.3 million for the second quarter of 2018, up $4.1 million from the prior quarter.  This increase reflects higher average loans and leases, driven by strong growth during the quarter, as well as higher average yields on earning assets from the short-term rate increases.  Accretion of the credit discount recorded on acquired loans from Sterling Financial Corporation (“Sterling”) increased by $1.7 million from the prior quarter level, driven by a higher level of accretion on credit impaired loans associated with higher pay-offs.

The Company’s net interest margin was 3.93% for the second quarter of 2018, down 3 basis points from 3.96% for the first quarter of 2018, reflecting an increase in the cost of interest bearing liabilities and a higher average balance of interest-bearing cash, partially offset by higher average yields on interest-earning assets.  The increase in the cost of interest-bearing liabilities was attributable to an increase in average rates paid on interest-bearing deposits, as well as a higher percentage mix of time deposits, relative to the prior quarter.

Credit Quality
The allowance for loan and lease losses was $144.6 million, or 0.73% of loans and leases, as of June 30, 2018.  During the second quarter of 2018, the Company recorded $6.0 million of accretion related to the credit discount on acquired loans from Sterling, compared to $4.3 million in the prior quarter.  As of June 30, 2018, the Sterling purchased non-credit impaired loans had approximately $19.3 million of remaining credit discount that will accrete into interest income over the life of the loans, and the Sterling purchased credit impaired loan pools had approximately $21.6 million of remaining total discount.

The provision for loan and lease losses was $13.3 million for the second quarter of 2018, a decrease of $0.3 million from the prior quarter level, driven primarily by lower net charge-offs, which decreased by four basis points to 0.22% of average loans and leases (annualized).  As of June 30, 2018, non-performing assets were 0.34% of total assets, compared to 0.33% as of March 31, 2018 and 0.23% as of June 30, 2017.

Non-interest Income
Non-interest income was $71.7 million for the second quarter of 2018, down $6.9 million from the prior quarter, reflecting the negative linked quarter fair value change on the MSR asset (see notable items above), partially offset by an increase in net revenue from the origination and sale of residential mortgages.

Net revenue from the origination and sale of residential mortgages was $28.2 million for the second quarter of 2018, up $5.3 million from the prior quarter, reflecting stronger seasonal purchase activity.  For-sale mortgage origination volume increased by 22% from the prior quarter, and the home lending gain on sale margin increased by 3 basis points to 3.35% for the second quarter of 2018.  Of the current quarter’s mortgage production, 81% related to purchase activity, compared to 68% for the prior quarter and 77% for the same period of the prior year.

Non-interest Expense
Non-interest expense was $195.6 million for the second quarter of 2018, and included $8.2 million in restructuring charges related to the organization simplification and design and procurement phases of Umpqua Next Gen.  Excluding the impact of restructuring charges, non-interest expense increased by $4.7 million from the prior quarter.  This increase included $2.6 million in higher mortgage banking-related expense, reflecting the increase in mortgage originations, and $1.3 million in higher marketing expense.

Capital
As of June 30, 2018, the Company’s tangible book value per common share1 was $10.02, compared to $9.97 in the prior quarter and $9.71 in the same period of the prior year.  During the second quarter of 2018, the Company repurchased 327,000 shares of common stock for $8.0 million.

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.

The Company’s estimated total risk-based capital ratio was 13.7% and its estimated Tier 1 common to risk weighted assets ratio was 10.8% as of June 30, 2018.  The Company remains above current “well-capitalized” regulatory minimums.  The regulatory capital ratios as of June 30, 2018 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 these 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.

Management believes tangible common equity and the tangible common equity ratio are useful 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).

           
(In thousands, except per share data) Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017
Total shareholders' equity $4,021,643  $4,013,882  $4,014,786  $3,985,260  $3,958,845 
Subtract:          
Goodwill 1,787,651  1,787,651  1,787,651  1,787,651  1,787,651 
Other intangible assets, net 27,047  28,589  30,130  31,819  33,508 
Tangible common shareholders' equity $2,206,945  $2,197,642  $2,197,005  $2,165,790  $2,137,686 
Total assets $26,533,230  $25,875,643  $25,741,439  $25,695,663  $25,257,784 
Subtract:          
Goodwill 1,787,651  1,787,651  1,787,651  1,787,651  1,787,651 
Other intangible assets, net 27,047  28,589  30,130  31,819  33,508 
Tangible assets $24,718,532  $24,059,403  $23,923,658  $23,876,193  $23,436,625 
Common shares outstanding at period end 220,205  220,461  220,149  220,225  220,205 
           
Total shareholders' equity to total assets ratio 15.16% 15.51% 15.60% 15.51% 15.67%
Tangible common equity ratio 8.93% 9.13% 9.18% 9.07% 9.12%
Book value per common share $18.26  $18.21  $18.24  $18.10  $17.98 
Tangible book value per common share $10.02  $9.97  $9.98  $9.83  $9.71 
                     

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 customer experience, and distinctive banking solutions. Umpqua Bank has locations across Oregon, Washington, California, Idaho and 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, and Pivotus Ventures, an enterprise software and innovation company headquartered in Silicon Valley.  Umpqua Holdings Corporation is headquartered in Portland, Oregon. For more information, visit umpquabank.com.

Earnings Conference Call Information

The Company will host its second quarter 2018 earnings conference call on Thursday, July 19, 2018, at 10:00 a.m. PDT (1:00 p.m. EDT).  During the call, the Company will provide an update on recent activities and discuss its second quarter 2018 financial results.  There will be a live question-and-answer session following the presentation.  To join the call, please dial (888) 505-4378 ten minutes prior to the start time and enter conference ID: 5308253.  A re-broadcast will be available approximately two hours after the call by dialing (888) 203-1112 and entering conference ID 5308253.  The earnings conference call will also be available as an audiocast, which can be accessed on the Company’s investor relations page at umpquabank.com.

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 corporate initiatives and related cost savings.  Risks that could cause results to differ from forward-looking statements we make are set forth in our filings with the SEC and include, without limitation, prolonged low interest rate environment; the effect of interest rate increases on the cost of deposits; unanticipated weakness in loan demand or loan pricing; deterioration in the economy; lack of strategic growth opportunities or our failure to execute on those opportunities; our ability to effectively manage problem credits; our ability to successfully implement efficiency and operational excellence initiatives on time and in amounts projected; our ability to successfully develop and market new products and technology; and changes in laws or regulations.

 
Umpqua Holdings Corporation
Consolidated Statements of Income
(Unaudited)
  Quarter Ended % Change
(In thousands, except per share data) Jun 30,
2018
 Mar 31,
2018
 Dec 31,
2017
 Sep 30,
2017
 Jun 30,
2017
 Seq.
Quarter
 Year
over
Year
Interest income:              
Loans and leases $237,343  $227,738  $223,206  $223,321  $212,998  4% 11%
Interest and dividends on investments:              
Taxable 15,678  15,699  14,857  13,979  15,220  0% 3%
Exempt from federal income tax 2,057  2,128  2,121  2,125  2,237  (3)% (8)%
Dividends 433  468  386  357  360  (7)% 20%
Temporary investments and interest bearing deposits 2,080  1,164  1,565  934  324  79% 542%
Total interest income 257,591  247,197  242,135  240,716  231,139  4% 11%
Interest expense:              
Deposits 21,259  15,610  13,241  12,052  10,641  36% 100%
Securities sold under agreement to repurchase and federal funds purchased 155  63  43  81  321  146% (52)%
Term debt 3,478  3,361  3,496  3,491  3,662  3% (5)%
Junior subordinated debentures 5,400  4,932  4,734  4,628  4,437  9% 22%
Total interest expense 30,292  23,966  21,514  20,252  19,061  26% 59%
Net interest income 227,299  223,231  220,621  220,464  212,078  2% 7%
Provision for loan and lease losses 13,319  13,656  12,928  11,997  10,657  (2)% 25%
Non-interest income:              
Service charges on deposits 15,520  14,995  15,413  15,849  15,478  4% 0%
Brokerage revenue 4,161  4,194  4,226  3,832  3,903  (1)% 7%
Residential mortgage banking revenue, net 33,163  38,438  42,118  33,430  33,894  (14)% (2)%
Gain (loss) on sale of investment securities, net 14      (6) 35  nm  (60)%
Unrealized holding losses on equity securities not held for trading (1,432)         nm  nm 
Gain on loan sales, net 1,348  1,230  3,688  7,969  3,310  10% (59)%
Loss on junior subordinated debentures carried at fair value     (10,010) (1,590) (1,572) 0% (100)%
BOLI income 2,060  2,070  2,015  2,041  2,089  0% (1)%
Other income 16,817  17,640  13,000  13,877  13,982  (5)% 20%
Total non-interest income 71,651  78,567  70,450  75,402  71,119  (9)% 1%
Non-interest expense:              
Salaries and employee benefits 113,340  106,551  114,414  108,732  108,561  6% 4%
Occupancy and equipment, net 37,584  38,661  37,269  37,648  36,955  (3)% 2%
Intangible amortization 1,542  1,541  1,689  1,689  1,689  0% (9)%
FDIC assessments 4,692  4,480  2,075  4,405  4,447  5% 6%
Gain on other real estate owned, net (92) (38) (83) (99) (457) 142% (80)%
Merger related expenses       6,664  1,640  0% (100)%
Other expenses 38,506  34,918  37,422  29,315  31,186  10% 23%
Total non-interest expense 195,572  186,113  192,786  188,354  184,021  5% 6%
Income before provision for income taxes 90,059  102,029  85,357  95,515  88,519  (12)% 2%
Provision for income taxes 22,273  24,360  3,486  34,182  31,707  (9)% (30)%
Net income 67,786  77,669  81,871  61,333  56,812  (13)% 19%
Dividends and undistributed earnings allocated to participating securities 4  6  16  14  14  (33)% (71)%
Net earnings available to common shareholders $67,782  $77,663  $81,855  $61,319  $56,798  (13)% 19%
               
Weighted average basic shares outstanding 220,283  220,370  220,194  220,215  220,310  0% 0%
Weighted average diluted shares outstanding 220,647  220,825  220,873  220,755  220,753  0% 0%
Earnings per common share – basic $0.31  $0.35  $0.37  $0.28  $0.26  (11)% 19%
Earnings per common share – diluted $0.31  $0.35  $0.37  $0.28  $0.26  (11)% 19%
               
nm = not meaningful              
               


 
Umpqua Holdings Corporation
Consolidated Statements of Income
(Unaudited)
  Six Months Ended % Change
(In thousands, except per share data) Jun 30, 2018 Jun 30, 2017 Year
over
Year
Interest income      
Loans and leases $465,081  $418,994  11%
Interest and dividends on investments:      
Taxable 31,377  29,151  8%
Exempt from federal income tax 4,185  4,479  (7)%
Dividends 901  748  20%
Temporary investments and interest bearing deposits 3,244  1,881  72%
Total interest income 504,788  455,253  11%
Interest expense      
Deposits 36,869  20,289  82%
Securities sold under agreement to repurchase and federal funds purchased 218  351  (38)%
Term debt 6,839  7,172  (5)%
Junior subordinated debentures 10,332  8,638  20%
Total interest expense 54,258  36,450  49%
Net interest income 450,530  418,803  8%
Provision for loan and lease losses 26,975  22,329  21%
Non-interest income      
Service charges on deposits 30,515  30,207  1%
Brokerage revenue 8,355  8,025  4%
Residential mortgage banking revenue, net 71,601  60,728  18%
Gain on sale of investment securities, net 14  33  (58)%
Unrealized holding losses on equity securities not held for trading (1,432)   nm 
Gain on loan sales, net 2,578  5,064  (49)%
Loss on junior subordinated debentures carried at fair value   (3,127) (100)%
BOLI income 4,130  4,158  (1)%
Other income 34,457  26,256  31%
Total non-interest income 150,218  131,344  14%
Non-interest expense      
Salaries and employee benefits 219,891  215,034  2%
Occupancy and equipment, net 76,245  75,628  1%
Intangible amortization 3,083  3,378  (9)%
FDIC assessments 9,172  8,534  7%
Gain on other real estate owned, net (130) (375) (65)%
Merger related expenses   2,660  (100)%
Other expenses 73,424  61,876  19%
Total non-interest expense 381,685  366,735  4%
Income before provision for income taxes 192,088  161,083  19%
Provision for income taxes 46,633  58,268  (20)%
Net income 145,455  102,815  41%
Dividends and undistributed earnings allocated to participating securities 10  26  (62)%
Net earnings available to common shareholders $145,445  $102,789  41%
       
Weighted average basic shares outstanding 220,326  220,298  0%
Weighted average diluted shares outstanding 220,760  220,790  0%
Earnings per common share – basic $0.66  $0.47  40%
Earnings per common share – diluted $0.66  $0.47  40%
       
nm = not meaningful      
       


 
Umpqua Holdings Corporation
Consolidated Balance Sheets
(Unaudited)
            % Change
(In thousands, except per share data) Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Seq.
Quarter
 Year
over
Year
Assets:              
Cash and due from banks $314,513  $304,681  $330,856  $304,760  $320,027  3% (2)%
Interest bearing cash and temporary investments 488,499  264,508  303,424  540,806  295,937  85% 65%
Investment securities:              
Equity and other, at fair value 64,297  63,295  12,255  11,919  11,467  2% 461%
Available for sale, at fair value 2,854,398  2,947,414  3,065,769  3,047,358  3,132,566  (3)% (9)%
Held to maturity, at amortized cost 3,586  3,667  3,803  3,905  4,017  (2)% (11)%
Loans held for sale, at fair value 432,642  299,739  259,518  417,470  451,350  44% (4)%
Loans and leases 19,693,955  19,314,589  19,080,184  18,677,762  18,321,142  2% 7%
Allowance for loan and lease losses (144,556) (141,933) (140,608) (139,503) (136,867) 2% 6%
Loans and leases, net 19,549,399  19,172,656  18,939,576  18,538,259  18,184,275  2% 8%
Restricted equity securities 42,320  43,501  43,508  45,509  45,511  (3)% (7)%
Premises and equipment, net 245,954  259,354  269,182  276,316  288,853  (5)% (15)%
Goodwill 1,787,651  1,787,651  1,787,651  1,787,651  1,787,651  0% 0%
Other intangible assets, net 27,047  28,589  30,130  31,819  33,508  (5)% (19)%
Residential mortgage servicing rights, at fair value 166,217  164,760  153,151  141,225  141,832  1% 17%
Other real estate owned 12,101  13,055  11,734  4,160  4,804  (7)% 152%
Bank owned life insurance 309,844  307,745  306,864  305,572  303,894  1% 2%
Other assets 234,762  215,028  224,018  238,934  252,092  9% (7)%
Total assets $26,533,230  $25,875,643  $25,741,439  $25,695,663  $25,257,784  3% 5%
Liabilities:              
Deposits $20,744,526  $20,106,856  $19,948,300  $19,851,910  $19,459,950  3% 7%
Securities sold under agreements to repurchase 273,666  291,984  294,299  321,542  330,189  (6)% (17)%
Term debt 801,739  801,868  802,357  852,306  852,219  0% (6)%
Junior subordinated debentures, at fair value 280,669  278,410  277,155  266,875  265,423  1% 6%
Junior subordinated debentures, at amortized cost 88,838  88,895  100,609  100,690  100,770  0% (12)%
Deferred tax liability, net 39,328  39,277  37,503  51,423  34,296  0% 15%
Other liabilities 282,821  254,471  266,430  265,657  256,092  11% 10%
Total liabilities 22,511,587  21,861,761  21,726,653  21,710,403  21,298,939  3% 6%
Shareholders' equity:              
Common stock 3,509,146  3,515,506  3,517,258  3,516,558  3,514,094  0% 0%
Retained earnings 569,933  546,330  522,520  476,226  454,802  4% 25%
Accumulated other comprehensive loss (57,436) (47,954) (24,992) (7,524) (10,051) 20% 471%
Total shareholders' equity 4,021,643  4,013,882  4,014,786  3,985,260  3,958,845  0% 2%
Total liabilities and shareholders' equity $26,533,230  $25,875,643  $25,741,439  $25,695,663  $25,257,784  3% 5%
               
Common shares outstanding at period end 220,205  220,461  220,149  220,225  220,205  0% 0%
Book value per common share $18.26  $18.21  $18.24  $18.10  $17.98  0% 2%
Tangible book value per common share $10.02  $9.97  $9.98  $9.83  $9.71  1% 3%
Tangible equity - common $2,206,945  $2,197,642  $2,197,005  $2,165,790  $2,137,686  0% 3%
Tangible common equity to tangible assets 8.93% 9.13% 9.18% 9.07% 9.12% (0.20) (0.19)
                      


 
Umpqua Holdings Corporation
Loan and Lease Portfolio
(Unaudited)
(Dollars in thousands) Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 % Change
  Amount Amount Amount Amount Amount Seq.
Quarter
 Year
over
Year
Loans and leases:              
Commercial real estate:              
Non-owner occupied term, net $3,525,001  $3,526,221  $3,491,137  $3,475,243  $3,401,679  0% 4%
Owner occupied term, net 2,484,960  2,476,287  2,488,251  2,467,995  2,593,395  0% (4)%
Multifamily, net 3,210,796  3,131,275  3,087,792  2,993,203  2,964,851  3% 8%
Construction & development, net 568,572  522,680  540,707  521,666  464,690  9% 22%
Residential development, net 183,114  179,871  165,865  186,400  165,956  2% 10%
Commercial:              
Term, net 2,106,804  2,025,213  1,944,987  1,819,664  1,686,597  4% 25%
Lines of credit & other, net 1,152,841  1,147,028  1,166,173  1,134,045  1,153,409  1% 0%
Leases & equipment finance, net 1,265,843  1,228,709  1,167,503  1,137,732  1,082,651  3% 17%
Residential real estate:              
Mortgage, net 3,414,216  3,283,945  3,192,185  3,094,361  3,021,331  4% 13%
Home equity loans & lines, net 1,136,378  1,107,822  1,103,297  1,079,931  1,056,848  3% 8%
Consumer & other, net 645,430  685,538  732,287  767,522  729,735  (6)% (12)%
Total, net of deferred fees and costs $19,693,955  $19,314,589  $19,080,184  $18,677,762  $18,321,142  2% 7%
               
Loan and leases mix:              
Commercial real estate:              
  Non-owner occupied term, net 18% 18% 18% 19% 19%    
  Owner occupied term, net 13% 13% 13% 13% 14%    
  Multifamily, net 16% 16% 16% 16% 16%    
Construction & development, net 3% 3% 3% 3% 3%    
Residential development, net 1% 1% 1% 1% 1%    
Commercial:              
Term, net 11% 10% 10% 10% 9%    
Lines of credit & other, net 6% 6% 6% 6% 6%    
Leases & equipment finance, net 6% 6% 6% 6% 6%    
Residential real estate:              
Mortgage, net 17% 17% 17% 16% 16%    
Home equity loans & lines, net 6% 6% 6% 6% 6%    
Consumer & other, net 3% 4% 4% 4% 4%    
Total 100% 100% 100% 100% 100%    
                    


 
Umpqua Holdings Corporation
Deposits by Type/Core Deposits
(Unaudited)
(Dollars in thousands) Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 % Change
  Amount Amount Amount Amount Amount Seq.
Quarter
 Year
over
Year
Deposits:              
Demand, non-interest bearing $6,819,325  $6,699,399  $6,505,628  $6,571,471  $6,112,480  2% 12%
Demand, interest bearing 2,321,691  2,354,873  2,384,133  2,394,240  2,371,386  (1)% (2)%
Money market 6,161,907  6,546,704  7,037,891  6,700,261  6,755,707  (6)% (9)%
Savings 1,465,154  1,482,560  1,446,860  1,444,801  1,427,677  (1)% 3%
Time 3,976,449  3,023,320  2,573,788  2,741,137  2,792,700  32% 42%
Total $20,744,526  $20,106,856  $19,948,300  $19,851,910  $19,459,950  3% 7%
               
Total core deposits (1) $17,743,888  $18,007,169  $18,263,802  $18,005,730  $17,561,956  (1)% 1%
               
Deposit mix:              
Demand, non-interest bearing 33% 33% 33% 33% 32%    
Demand, interest bearing 11% 12% 12% 12% 12%    
Money market 30% 33% 35% 34% 35%    
Savings 7% 7% 7% 7% 7%    
Time 19% 15% 13% 14% 14%    
Total 100% 100% 100% 100% 100%    
               
Number of open accounts:              
Demand, non-interest bearing 402,771  399,721  397,427  394,755  389,767     
Demand, interest bearing 77,918  78,181  78,853  79,899  80,594     
Money market 55,393  54,752  55,175  55,659  55,795     
Savings 162,414  162,841  162,453  162,556  161,369     
Time 51,073  48,529  46,861  47,129  47,339     
Total 749,569  744,024  740,769  739,998  734,864     
               
Average balance per account:              
Demand, non-interest bearing $16.9  $16.8  $16.4  $16.6  $15.7     
Demand, interest bearing 29.8  30.1  30.2  30.0  29.4     
Money market 111.2  119.6  127.6  120.4  121.1     
Savings 9.0  9.1  8.9  8.9  8.8     
Time 77.9  62.3  54.9  58.2  59.0     
Total $27.7  $27.0  $26.9  $26.8  $26.5     
                         
(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)
 Jun 30,
2018
 Mar 31,
2018
 Dec 31,
2017
 Sep 30,
2017
 Jun 30,
2017
 Seq.
Quarter
 Year
over
Year
Non-performing assets:
              
Loans and leases on non-accrual status
 $43,485  $45,775  $51,465  $44,573  $26,566  (5)% 64%
Loans and leases past due 90+ days and accruing (1)
 34,494  25,478  30,994  29,073  27,252  35% 27%
Total non-performing loans and leases
 77,979  71,253  82,459  73,646  53,818  9% 45%
Other real estate owned
 12,101  13,055  11,734  4,160  4,804  (7)% 152%
Total non-performing assets
 $90,080  $84,308  $94,193  $77,806  $58,622  7% 54%
               
Performing restructured loans and leases
 $27,144  $31,659  $32,157  $45,813  $52,861  (14)% (49)%
Loans and leases past due 31-89 days
 $45,114  $38,650  $43,870  $32,251  $31,153  17% 45%
Loans and leases past due 31-89 days to total loans and leases
 0.23% 0.20% 0.23% 0.17% 0.17%    
Non-performing loans and leases to total loans and leases (1)
 0.40% 0.37% 0.43% 0.39% 0.29%    
Non-performing assets to total assets(1)
 0.34% 0.33% 0.37% 0.30% 0.23%    

(1) Excludes non-performing mortgage loans guaranteed by Ginnie Mae, which Umpqua has the unilateral right to repurchase but has not done so, totaling $9.2 million, $6.3 million, $12.4 million, $12.3 million, and $16.3 million at June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017, and June 30, 2017, respectively.

 
Umpqua Holdings Corporation
Credit Quality – Allowance for Loan and Lease Losses
 (Unaudited)
  Quarter Ended % Change
(Dollars in thousands) Jun 30,
2018
 Mar 31,
2018
 Dec 31,
2017
 Sep 30,
2017
 Jun 30,
2017
 Seq.
Quarter
 Year
over
Year
Allowance for loan and lease losses:              
Balance beginning of period $141,933  $140,608  $139,503  $136,867  $136,292     
Provision for loan and lease losses 13,319  13,656  12,928  11,997  10,657  (2)% 25%
Charge-offs (14,815) (15,812) (15,751) (13,222) (13,944) (6)% 6%
Recoveries 4,119  3,481  3,928  3,861  3,862  18% 7%
Net charge-offs (10,696) (12,331) (11,823) (9,361) (10,082) (13)% 6%
Total allowance for loan and lease losses 144,556  141,933  140,608  139,503  136,867  2% 6%
Reserve for unfunded commitments 4,130  4,129  3,963  3,932  3,816  0% 8%
Total allowance for credit losses $148,686  $146,062  $144,571  $143,435  $140,683  2% 6%
               
Net charge-offs to average loans and leases (annualized) 0.22% 0.26% 0.25% 0.20% 0.22%    
Recoveries to gross charge-offs 27.80% 22.01% 24.94% 29.20% 27.70%    
Allowance for loan and lease losses to loans and leases 0.73% 0.73% 0.74% 0.75% 0.75%    
Allowance for credit losses to loans and leases 0.75% 0.76% 0.76% 0.77% 0.77%    
                    


 
Umpqua Holdings Corporation
Credit Quality – Allowance for Loan and Lease Losses
(Unaudited)
  Six Months Ended % Change
(Dollars in thousands) Jun 30, 2018 Jun 30, 2017 Year over Year
Allowance for loan and lease losses:    
Balance beginning of period $140,608  $133,984   
Provision for loan and lease losses 26,975  22,329  21%
Charge-offs (30,627) (26,946) 14%
Recoveries 7,600  7,500  1%
Net charge-offs (23,027) (19,446) 18%
Total allowance for loan and lease losses 144,556  136,867  6%
Reserve for unfunded commitments 4,130  3,816  8%
Total allowance for credit losses $148,686  $140,683  6%
       
Net charge-offs to average loans and leases (annualized) 0.24% 0.22%  
Recoveries to gross charge-offs 24.81% 27.83%  
         


 
Umpqua Holdings Corporation
Selected Ratios
(Unaudited)
  Quarter Ended % Change
  Jun 30,
2018
 Mar 31,
2018
 Dec 31,
2017
 Sep 30,
2017
 Jun 30,
2017
 Seq.
Quarter
 Year
over
Year
Average Rates:              
Yield on loans and leases 4.81% 4.75% 4.65% 4.70% 4.67% 0.06  0.14 
Yield on loans held for sale 4.86% 4.21% 3.99% 3.89% 3.26% 0.65  1.60 
Yield on taxable investments 2.37% 2.31% 2.17% 2.00% 2.07% 0.06  0.30 
Yield on tax-exempt investments (1) 3.64% 3.68% 4.49% 4.59% 4.64% (0.04) (1.00)
Yield on interest bearing cash and temporary investments 1.82% 1.55% 1.22% 1.47% 1.03% 0.27  0.79 
Total yield on earning assets (1) 4.45% 4.39% 4.26% 4.30% 4.26% 0.06  0.19 
               
Cost of interest bearing deposits 0.62% 0.47% 0.40% 0.36% 0.33% 0.15  0.29 
Cost of securities sold under agreements to repurchase and fed funds purchased 0.22% 0.08% 0.06% 0.10% 0.32% 0.14  (0.10)
Cost of term debt 1.74% 1.70% 1.67% 1.63% 1.72% 0.04  0.02 
Cost of junior subordinated debentures 5.89% 5.36% 5.11% 5.02% 4.88% 0.53  1.01 
Total cost of interest bearing liabilities 0.80% 0.65% 0.58% 0.55% 0.52% 0.15  0.28 
               
Net interest spread (1) 3.65% 3.74% 3.68% 3.75% 3.74% (0.09) (0.09)
Net interest margin (1) 3.93% 3.96% 3.88% 3.94% 3.91% (0.03) 0.02 
               
Performance Ratios:              
Return on average assets 1.04% 1.23% 1.27% 0.96% 0.92% (0.19) 0.12 
Return on average tangible assets 1.12% 1.32% 1.36% 1.04% 0.99% (0.20) 0.13 
Return on average common equity 6.74% 7.84% 8.12% 6.10% 5.76% (1.10) 0.98 
Return on average tangible common equity 12.27% 14.30% 14.90% 11.23% 10.67% (2.03) 1.60 
Efficiency ratio – Consolidated 65.31% 61.56% 65.99% 63.43% 64.71% 3.75  0.60 
Efficiency ratio – Bank 62.53% 59.58% 62.09% 61.42% 62.45% 2.95  0.08 

(1) Tax exempt interest has been adjusted to a taxable equivalent basis using a 21% tax rate for 2018 and a 35% tax rate for 2017.

 
Umpqua Holdings Corporation
Selected Ratios
(Unaudited)
  Six Months Ended % Change
  Jun 30, 2018 Jun 30, 2017 Year over
Year
Average Rates:      
Yield on loans and leases 4.78% 4.66% 0.12 
Yield on loans held for sale 4.57% 3.54% 1.03 
Yield on taxable investments 2.34% 2.09% 0.25 
Yield on tax-exempt investments (1) 3.66% 4.70% (1.04)
Yield on interest bearing cash and temporary investments 1.72% 0.82% 0.90 
Total yield on earning assets (1) 4.43% 4.23% 0.20 
       
Cost of interest bearing deposits 0.55% 0.31% 0.24 
Cost of securities sold under agreements to repurchase and fed funds purchased 0.15% 0.19% (0.04)
Cost of term debt 1.72% 1.70% 0.02 
Cost of junior subordinated debentures 5.62% 4.79% 0.83 
Total cost of interest bearing liabilities 0.73% 0.50% 0.23 
       
Net interest spread (1) 3.70% 3.73% (0.03)
Net interest margin (1) 3.96% 3.89% 0.07 
       
Performance Ratios:      
Return on average assets 1.13% 0.84% 0.29 
Return on average tangible assets 1.22% 0.90% 0.32 
Return on average common equity 7.29% 5.25% 2.04 
Return on average tangible common equity 13.28% 9.76% 3.52 
Efficiency ratio – Consolidated 63.43% 66.38% (2.95)
Efficiency ratio – Bank 61.06% 64.05% (2.99)

(1) Tax exempt interest has been adjusted to a taxable equivalent basis using a 21% tax rate for 2018 and a 35% tax rate for 2017.

 
Umpqua Holdings Corporation
Average Balances
(Unaudited)
  Quarter Ended % Change
(Dollars in thousands) Jun 30,
2018
 Mar 31,
2018
 Dec 31,
2017
 Sep 30,
2017
 Jun 30,
2017
 Seq.
Quarter
 Year
over
Year
Temporary investments and interest bearing cash $458,133  $303,670  $509,187  $253,015  $125,886  51% 264%
Investment securities, taxable 2,723,406  2,793,449  2,804,530  2,867,292  3,008,079  (3)% (9)%
Investment securities, tax-exempt 279,158  286,603  286,345  281,139  292,553  (3)% (5)%
Loans held for sale 326,427  267,231  370,564  420,282  392,183  22% (17)%
Loans and leases 19,444,890  19,150,315  18,765,251  18,537,827  18,024,651  2% 8%
Total interest earning assets 23,232,014  22,801,268  22,735,877  22,359,555  21,843,352  2% 6%
Goodwill and other intangible assets, net 1,815,529  1,817,068  1,818,730  1,820,394  1,822,032  0% 0%
Total assets 26,127,935  25,686,471  25,661,566  25,311,994  24,792,869  2% 5%
               
Non-interest bearing demand deposits 6,645,689  6,450,364  6,611,493  6,354,591  5,951,670  3% 12%
Interest bearing deposits 13,745,089  13,492,965  13,281,502  13,155,462  13,037,064  2% 5%
Total deposits 20,390,778  19,943,329  19,892,995  19,510,053  18,988,734  2% 7%
Interest bearing liabilities 15,199,900  14,971,759  14,790,883  14,705,842  14,659,650  2% 4%
               
Shareholders’ equity - common 4,031,253  4,019,822  3,998,609  3,989,868  3,956,777  0% 2%
Tangible common equity (1) 2,215,724  2,202,754  2,179,879  2,166,474  2,134,745  1% 4%
                      


 
Umpqua Holdings Corporation
Average Balances
(Unaudited)
  Six Months Ended
 % Change
(Dollars in thousands) Jun 30, 2018 Jun 30, 2017 Year over Year
Temporary investments and interest bearing cash $381,328  $463,245  (18)%
Investment securities, taxable 2,758,235  2,866,614  (4)%
Investment securities, tax-exempt 282,860  289,515  (2)%
Loans held for sale 296,992  371,989  (20)%
Loans and leases 19,298,416  17,812,660  8%
Total interest earning assets 23,017,831  21,804,023  6%
Goodwill and other intangible assets, net 1,816,294  1,822,910  0%
Total assets 25,908,423  24,761,749  5%
       
Non-interest bearing demand deposits 6,548,566  5,917,984  11%
Interest bearing deposits 13,619,723  13,078,171  4%
Total deposits 20,168,289  18,996,155  6%
Interest bearing liabilities 15,086,460  14,660,598  3%
       
Shareholders’ equity - common 4,025,569  3,946,615  2%
Tangible common equity (1) 2,209,275  2,123,705  4%

(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
Average Rates and Balances
(unaudited)
(dollars in thousands)Quarter Ended
 June 30, 2018 March 31, 2018 June 30, 2017
 Average
Balance
 Interest
Income
or
Expense
 Average
Yields
or
Rates
 Average
Balance
 Interest
Income
or
Expense
 Average
Yields
or
Rates
 Average
Balance
 Interest
Income
or
Expense
 Average
Yields
or
Rates
INTEREST-EARNING ASSETS:                 
Loans held for sale$326,427  $3,967  4.86% $267,231  $2,815  4.21% $392,183  $3,193  3.26%
Loans and leases (1)19,444,890  233,376  4.81% 19,150,315  224,923  4.75% 18,024,651  209,805  4.67%
Taxable securities2,723,406  16,111  2.37% 2,793,449  16,167  2.31% 3,008,079  15,580  2.07%
Non-taxable securities (2)279,158  2,539  3.64% 286,603  2,640  3.68% 292,553  3,397  4.64%
Temporary investments and interest-bearing cash458,133  2,080  1.82% 303,670  1,164  1.55% 125,886  324  1.03%
Total interest-earning assets23,232,014  $258,073  4.45% 22,801,268  247,709  4.39% 21,843,352  $232,299  4.26%
Allowance for loan and lease losses(144,598)     (142,409)     (137,445)    
Other assets3,040,519      3,027,612      3,086,962     
Total assets$26,127,935      $25,686,471      $24,792,869     
INTEREST-BEARING LIABILITIES:                 
Interest-bearing demand deposits$2,322,359  $1,565  0.27% $2,323,232  $1,210  0.21% $2,311,555  $798  0.14%
Money market deposits6,332,372  5,896  0.37% 6,908,067  5,713  0.34% 6,682,937  2,975  0.18%
Savings deposits1,456,625  252  0.07% 1,463,058  163  0.05% 1,401,238  146  0.04%
Time deposits3,633,733  13,546  1.50% 2,798,608  8,524  1.24% 2,641,334  6,722  1.02%
Total interest-bearing deposits13,745,089  21,259  0.62% 13,492,965  15,610  0.47% 13,037,064  10,641  0.33%
Repurchase agreements and federal funds purchased285,338  155  0.22% 303,059  63  0.08% 405,892  321  0.32%
Term debt801,768  3,478  1.74% 802,297  3,361  1.70% 852,254  3,662  1.72%
Junior subordinated debentures367,705  5,400  5.89% 373,438  4,932  5.36% 364,440  4,437  4.88%
Total interest-bearing liabilities15,199,900  $30,292  0.80% 14,971,759  $23,966  0.65% 14,659,650  $19,061  0.52%
Non-interest-bearing deposits6,645,689      6,450,364      5,951,670     
Other liabilities251,093      244,526      224,772     
Total liabilities22,096,682      21,666,649      20,836,092     
Common equity4,031,253      4,019,822      3,956,777     
Total liabilities and shareholders' equity$26,127,935      $25,686,471      $24,792,869     
NET INTEREST INCOME  $227,781      $223,743      $213,238   
NET INTEREST SPREAD    3.65%     3.74%     3.74%
AVERAGE YIELD ON EARNING ASSETS (1), (2)    4.45%     4.39%     4.26%
INTEREST EXPENSE TO EARNING ASSETS    0.52%     0.43%     0.35%
NET INTEREST INCOME TO EARNING ASSETS OR NET INTEREST MARGIN (1), (2)    3.93%     3.96%     3.91%

(1) Non-accrual loans and leases are included in the average balance.

(2) Tax-exempt income has been adjusted to a tax equivalent basis at a 21% tax rate for 2018 and a 35% tax rate for 2017. The amount of such adjustment was an addition to recorded income of approximately $482,000 for the three months ended June 30, 2018 as compared to $512,000 for March 31, 2018 and $1.2 million for June 30, 2017.

 
Umpqua Holdings Corporation
Average Rates and Balances
(unaudited)
(dollars in thousands)Six Months Ended
 June 30, 2018 June 30, 2017
 Average
Balance
 Interest
Income or
Expense
 Average
Yields or
Rates
 Average
Balance
 Interest
Income or
Expense
 Average
Yields or
Rates
INTEREST-EARNING ASSETS:           
Loans held for sale$296,992  $6,782  4.57% $371,989  $6,588  3.54%
Loans and leases (1)19,298,416  458,299  4.78% 17,812,660  412,406  4.66%
Taxable securities2,758,235  32,278  2.34% 2,866,614  29,899  2.09%
Non-taxable securities (2)282,860  5,179  3.66% 289,515  6,806  4.70%
Temporary investments and interest-bearing cash381,328  3,244  1.72% 463,245  1,881  0.82%
Total interest-earning assets23,017,831  $505,782  4.43% 21,804,023  $457,580  4.23%
Allowance for loan and lease losses(143,509)     (136,834)    
Other assets3,034,101      3,094,560     
Total assets$25,908,423      $24,761,749     
INTEREST-BEARING LIABILITIES:           
Interest-bearing demand deposits$2,322,793  $2,775  0.24% $2,288,870  $1,443  0.13%
Money market deposits6,618,629  11,609  0.35% 6,776,705  5,644  0.17%
Savings deposits1,459,824  414  0.06% 1,383,124  274  0.04%
Time deposits3,218,477  22,071  1.38% 2,629,472  12,928  0.99%
Total interest-bearing deposits13,619,723  36,869  0.55% 13,078,171  20,289  0.31%
Repurchase agreements and federal funds purchased294,150  218  0.15% 366,498  351  0.19%
Term debt802,031  6,839  1.72% 852,302  7,172  1.70%
Junior subordinated debentures370,556  10,332  5.62% 363,627  8,638  4.79%
Total interest-bearing liabilities15,086,460  $54,258  0.73% 14,660,598  $36,450  0.50%
Non-interest-bearing deposits6,548,566      5,917,984     
Other liabilities247,828      236,552     
Total liabilities21,882,854      20,815,134     
Common equity4,025,569      3,946,615     
Total liabilities and shareholders' equity$25,908,423      $24,761,749     
NET INTEREST INCOME  $451,524      $421,130   
NET INTEREST SPREAD    3.70%     3.73%
AVERAGE YIELD ON EARNING ASSETS (1), (2)    4.43%     4.23%
INTEREST EXPENSE TO EARNING ASSETS    0.47%     0.34%
NET INTEREST INCOME TO EARNING ASSETS OR NET INTEREST MARGIN (1), (2)    3.96%     3.89%

(1) Non-accrual loans and leases are included in the average balance.

(2) Tax-exempt income has been adjusted to a tax equivalent basis at a 21% tax rate for 2018 and a 35% tax rate for 2017. The amount of such adjustment was an addition to recorded income of approximately $1.0 million for the six months ended June 30, 2018 as compared to $2.3 million for the same period in 2017.

 
Umpqua Holdings Corporation
Residential Mortgage Banking Activity
(unaudited)
  Quarter Ended % Change
(Dollars in thousands) Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Seq.
Quarter
 Year over
Year
Residential mortgage servicing rights:              
Residential mortgage loans serviced for others $15,508,182  $15,442,915  $15,336,597  $15,007,942  $14,797,242  0% 5%
MSR asset, at fair value 166,217  164,760  153,151  141,225  141,832  1% 17%
MSR as % of serviced portfolio 1.07% 1.07% 1.00% 0.94% 0.96% 0% 11%
Residential mortgage banking revenue:              
Origination and sale $28,159  $22,837  $29,864  $32,784  $32,385  23% (13)%
Servicing 10,407  10,522  10,287  9,879  9,839  (1)% 6%
Change in fair value of MSR asset (5,403) 5,079  1,967  (9,233) (8,330) (206)% (35)%
Total $33,163  $38,438  $42,118  $33,430  $33,894  (14)% (2)%
               
Closed loan volume:              
Closed loan volume - portfolio $294,581  $237,783  $265,718  $336,362  $312,022  24% (6)%
Closed loan volume - for-sale 839,489  687,226  850,453  891,063  918,200  22% (9)%
Closed loan volume - total $1,134,070  $925,009  $1,116,171  $1,227,425  $1,230,222  23% (8)%
               
Gain on sale margin:              
Based on for-sale volume 3.35% 3.32% 3.51% 3.68% 3.53% 0.03  (0.18)
               
  Six Months Ended % Change        
(Dollars in thousands) Jun 30, 2018 Jun 30, 2017 Year over
Year
        
Residential mortgage banking revenue:              
Origination and sale $50,996  $57,032  (11)%        
Servicing 20,929  19,697  6%        
Change in fair value of MSR asset (324) (16,001) (98)%        
Total $71,601  $60,728  18%        
               
Closed loan volume:              
Closed loan volume - portfolio $532,364  $557,356  (4)%        
Closed loan volume - for-sale 1,526,715  1,672,915  (9)%        
Closed loan volume - total $2,059,079  $2,230,271  (8)%        
               
Gain on sale margin:              
Based on for-sale volume 3.34% 3.41% (0.07)        
                  

Contacts:

Ron FarnsworthBradley Howes
EVP/Chief Financial OfficerSVP/Director of Investor Relations
Umpqua Holdings CorporationUmpqua Holdings Corporation
503-727-4108503-727-4226
ronfarnsworth@umpquabank.combradhowes@umpquabank.com

 

 


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