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Umpqua Holdings Corporation$20.57($.06)(.29%)

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 Umpqua Reports Quarterly and Annual Results
   Wednesday, January 25, 2017 4:19:41 PM ET

Fourth quarter 2016 net earnings of $0.31 per share and full-year 2016 of $1.05 per share Operating earnings of $0.27 per share for fourth quarter 2016 and $1.19 per share for full-year 2016

Umpqua Holdings Corporation (UMPQ ) (the "Company") reported net earnings available to common shareholders of $69.2 million for the fourth quarter of 2016, up from $61.8 million for the third quarter of 2016 and $62.9 million for the fourth quarter of 2015. Earnings per diluted common share were $0.31 for the fourth quarter of 2016, up from $0.28 for the third quarter of 2016 and $0.28 for the fourth quarter of 2015.

For the twelve months ended December 31, 2016, the Company reported net earnings available to common shareholders of $232.8 million, or $1.05 per diluted common share, up from $222.2 million, or $1.01 per diluted common share, for the twelve months ended December 31, 2015.

"We continued to build positive momentum during 2016; restructuring the balance sheet, entering new markets, expanding our product offerings, and enhancing the digital customer experience, while streamlining operations and demonstrating expense discipline," said Cort O’Haver, president and CEO of Umpqua Holdings Corporation. "With all of the heavy lifting we completed over the past two years, I believe there is now a tremendous opportunity in front of us. Given Umpqua’s unique franchise and strong brand recognition, combined with the size of the balance sheet and attractive footprint, I feel we are well-positioned to capitalize on that opportunity. I look forward to sharing more details over the coming year."

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Reconciliation of Net Earnings (GAAP) to Operating Earnings (non-GAAP):</span>

The Company’s financial results include several significant items which have been excluded in the presentation of operating earnings, which is a non-GAAP financial measure. A summary of these items, and a reconciliation of earnings available to common shareholders (GAAP) to operating earnings (non-GAAP), is presented below. More information is provided in the non-GAAP financial measures section of this release, which we urge you to read.

                                                                  Quarter Ended
(In thousands, except per share data)                             Dec 31,           Sep 30,           Jun 30,           Mar 31,           Dec 31,
                                                                  2016              2016              2016              2016              2015
Net earnings available to common shareholders                     $    69,242       $    61,778       $    54,255       $    47,540       $    62,923
Adjustments:
(Gain) loss from change in fair value of MSR asset                (16,465     )     7,826             13,940            20,625            469
Gain on investment securities, net                                --                --                (162        )     (696        )     (2,567      )
Net loss on junior subordinated debentures carried at fair value  1,589             1,590             1,572             1,572             1,589
(Gain) loss from change in fair value of swap derivatives         (4,601      )     (182        )     1,493             1,793             (715        )
Merger related expenses                                           3,218             2,011             6,634             3,450             3,712
Goodwill impairment                                               --                --                --                142               --
Exit or disposal costs                                            1,207             1,728             1,434             347               --
Total pre-tax adjustments                                         (15,052     )     12,973            24,911            27,233            2,488
Income tax effect (1)                                             6,020             (5,188      )     (9,965      )     (10,836     )     (995        )
Net adjustments                                                   (9,032      )     7,785             14,946            16,397            1,493
Operating earnings                                                $    60,210       $    69,563       $    69,201       $    63,937       $    64,416
Earnings per diluted share:
Earnings available to common shareholders                         $    0.31         $    0.28         $    0.25         $    0.22         $    0.28
Operating earnings                                                $    0.27         $    0.32         $    0.31         $    0.29         $    0.29
(1)  Income tax effect of operating earnings adjustments at 40% for tax-deductible items.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Full-Year 2016 Highlights (comparisons are to prior year):</span>

-- Total revenue of $1.1 billion, unchanged from prior year as increased mortgage banking revenues were offset by lower average yields on interest-earning assets, along with a lower level of interest income arising from the accretion of the credit discount recorded on acquired loans;

-- Total non-interest expense decreased by 3%, reflecting lower merger-related expenses and lower salaries and benefits expense, partially offset by higher mortgage banking expenses due to the increase in mortgage originations;

-- Gross loan and lease growth of $642 million, or 4% (excluding the impact of loan sales, loan growth of $1.3 billion, or 8%);

-- Deposit growth of $1.3 billion, or 7%; and

-- Paid dividends of $0.64 per common share, repurchased 635,000 shares of stock, and grew tangible book value by 4%, or $0.34 per share.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Fourth Quarter 2016 Highlights (comparisons are to prior quarter):</span>

-- Total revenue increased by $15.8 million:

- Net interest income decreased by $2.1 million, reflecting lower accretion of the credit discount recorded on acquired loans, lower prepayment fee income and higher premium amortization on investment securities, partially offset by growth in in interest-earning assets;

- Non-interest income increased by $17.9 million, driven primarily by gains related to fair value changes of the mortgage servicing rights ("MSR") asset and debt capital market swap derivatives, partially offset by lower revenues from the origination and sale of mortgages due to a decrease in the home lending gain on sale margin;

-- Non-interest expense increased by $2.3 million due primarily to higher merger-related and other expense;

-- Gross loans and leases grew to $17.5 billion;

-- Deposits grew to $19.0 billion;

-- Stable asset quality, with non-performing assets to total assets of 0.25%;

-- Estimated total risk-based capital ratio of 14.6% and estimated Tier 1 common to risk weighted assets ratio of 11.4%;

-- Declared quarterly cash dividend of $0.16 per common share; and

-- Repurchased 75,000 shares of common stock for $1.3 million.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Balance Sheet</span>

Total consolidated assets increased to $24.8 billion as of December 31, 2016, compared to $24.7 billion as of September 30, 2016 and $23.4 billion as of December 31, 2015. Including secured off-balance sheet lines of credit, the Company had total available liquidity of $9.2 billion as of December 31, 2016, representing 37% of total assets and 49% of total deposits.

Gross loans and leases were up 1% from the prior quarter to $17.5 billion as of December 31, 2016, driven by growth in the commercial and commercial real estate portfolios, partially offset by a decline in multi-family loans. During the fourth quarter of 2016, the Company sold $26.9 million of leasing and equipment finance loans.

Total deposits increased 1% from the prior quarter to $19.0 billion as of December 31, 2016. This increase was primarily attributable to growth in interest bearing demand and money market accounts, partially offset by lower non-interest bearing demand deposits.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Net Interest Income</span>

Net interest income was $207.8 million for the fourth quarter of 2016, down $2.1 million from the prior quarter. This decrease was primarily attributable to a $1.4 million linked quarter decrease in interest income arising from the accretion of the credit discount recorded on acquired loans, as well as lower prepayment fee income and lower average yields on loans and leases and taxable investments. These items were partially offset by growth in average interest-earning assets.

The Company’s net interest margin was 3.83% for the fourth quarter of 2016, down from 3.95% for the third quarter of 2016. The linked quarter decrease reflects the lower level of accretion of the credit discount recorded on acquired loans, as well as lower average yields on taxable investments and loans and leases. The lower average yield on taxable investments was primarily attributable to $1.1 million increase in premium amortization from faster prepayment speeds on the Company’s agency mortgage-backed securities portfolio. This trend occurred prior to the increase in long-term mortgage interest rates late in the quarter.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Credit Quality</span>

Under acquisition accounting, 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 and lease losses, or its related allowance coverage ratios, but we believe should be considered when comparing the current quarter ratios to similar ratios in periods prior to the acquisition of Sterling.

Loans acquired with significantly 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 fourth quarter of 2016, the Company reported $7.7 million of accretion related to the Sterling credit discount in interest income, as compared to $9.1 million in the prior quarter. As of December 31, 2016, the purchased non-credit impaired loans had approximately $43.9 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 $32.2 million of remaining total discount.

The allowance for loan and lease losses was $134.0 million, or 0.77% of loans and leases, as of December 31, 2016. To provide better comparability to prior periods, this pro-forma ratio would have been approximately 1.2% after grossing up the allowance for loan and lease losses and the loans and leases by the amount of the credit discount remaining as of quarter-end. This compares to a pro-forma ratio of approximately 1.3% as of September 30, 2016.

The provision for loan and lease losses increased slightly from the prior quarter to $13.2 million, driven primarily by higher net charge-offs, which increased to $12.9 million for the fourth quarter of 2016, compared to $10.4 million for the third quarter of 2016. As of December 31, 2016, non-performing assets represented 0.25% of total assets, unchanged from September 30, 2016 and down from 0.28% as of December 31, 2015.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Non-interest Income</span>

Non-interest income was $98.6 million for the fourth quarter of 2016, up $17.9 million from the prior quarter. This increase reflects income of $16.5 million and $4.6 million related to the fair value change of the MSR asset and the debt capital market swap derivatives, respectively, both attributable to the increase in long-term interest rates late in the quarter. This compares to a loss of $7.8 million on the MSR asset, and a gain of $0.2 million on the debt capital markets swap derivative, for the third quarter of 2016.

Excluding the impacts of the changes in fair value on the MSR asset and debt capital markets swap derivative, non-interest income decreased by $10.8 million from the prior quarter, driven primarily by lower revenue from the origination and sale of residential mortgages. This decrease was driven by a lower home lending gain on sale margin, which decreased to 3.05%, compared to 4.08% in the prior quarter, along with a 5% linked quarter decrease in for sale mortgage originations. The decrease in home lending gain on sale margin was attributable to the dramatic increase in mortgage rates and a decline in the overall locked loan pipeline. Of the current quarter’s mortgage production, 63% related to purchase activity, as compared to 68% for the prior quarter and 63% for the same period in the prior year.

Revenue related to the servicing of residential mortgage loans increased by 2% from the prior quarter, reflecting growth in the residential mortgage loans serviced for others portfolio.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Non-interest Expense</span>

Non-interest expense was $183.5 million for the fourth quarter of 2016, which included $3.2 million of merger-related expenses and $1.2 million of exit or disposal costs. This compares to $181.2 million, including $2.0 million of merger-related expenses and $1.7 million of exit or disposal costs for the third quarter of 2016.

Excluding the impact of merger-related and exit or disposal costs, non-interest expense increased by $1.6 million from the prior quarter. The linked quarter increase was driven primarily by higher expenses across several categories, including employee group insurance and benefits, severance, technology and marketing expense, as well as lower cost deferrals. This was partially offset by a $2.9 million linked quarter decline in mortgage banking expenses, consistent with the lower level of mortgage origination volume in the quarter.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Capital</span>

As of December 31, 2016, the Company’s tangible book value per common share decreased slightly to $9.50. During the fourth quarter of 2016, the Company repurchased 75,000 shares of common stock for $1.3 million. For the twelve months ended 2016, the Company repurchased 635,000 shares for $9.8 million.

The Company’s estimated total risk-based capital ratio was 14.6% and its estimated Tier 1 common to risk weighted assets ratio was 11.4% as of December 31, 2016. The Company remains above current "well-capitalized" regulatory minimums. The regulatory capital ratios as of December 31, 2016 are estimates, pending completion and filing of the Company’s regulatory reports.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Non-GAAP Financial Measures</span>

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 incurs significant expenses related to the completion and integration of mergers and acquisitions. It also 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. 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. The Company recognizes gains and losses related to the change in the fair value of its MSR, which are primarily tied to movements in interest rates, and are not indicative of the fundamental operating activities for the period. It also recognizes gains or losses related to the change in the fair value of its swap derivatives, which are driven by movements in interest rates and are beyond our control. On occasion, the Company may sell certain securities in its investment portfolio, and recognize an associated gain or loss, which can be highly discretionary based on the timing of the sales, market opportunities, and interest rates, and therefore are not reflective of the Company’s operating performance. The Company also may incur expenses related to the exit or disposal of certain business activities, such as the consolidation of bank branches, which do not reflect the on-going operating performance of the Company. 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 after-tax impact of merger-related expenses, gains or losses on junior subordinated debentures measured at fair value, gains or losses from the change in fair value of the MSR, gains or losses from the change in fair value of swap derivatives, net gains or losses on investment securities, exit or disposal costs and other charges related to business combinations such as goodwill impairment charges or bargain purchase gains. The Company defines operating earnings as earnings available to common shareholders before these items, and calculates 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)                     Dec 31,          Sep 30,          Jun 30,         Mar 31,         Dec 31,         Seq.      Year
                                                                  2016             2016             2016            2016            2015            Quarter   over
                                                                                                                                                              Year
Net earnings available to common shareholders                     $   69,242       $   61,778       $   54,255      $   47,540      $   62,923      12   %    10   %
Adjustments:
(Gain) loss from change in fair value of MSR asset                (16,465     )    7,826            13,940          20,625          469             (310 )%   nm
Gain on investment securities, net                                --               --               (162       )    (696       )    (2,567     )    0    %    (100 )%
Net loss on junior subordinated debentures carried at fair value  1,589            1,590            1,572           1,572           1,589           0    %    0    %
(Gain) loss from change in fair value of swap derivatives         (4,601      )    (182        )    1,493           1,793           (715       )    nm        543  %
Merger related expenses                                           3,218            2,011            6,634           3,450           3,712           60   %    (13  )%
Goodwill impairment                                               --               --               --              142             --              nm        nm
Exit or disposal costs                                            1,207            1,728            1,434           347             --              (30  )%   nm
Total pre-tax adjustments                                         (15,052     )    12,973           24,911          27,233          2,488           (216 )%   (705 )%
Income tax effect(1)                                              6,020            (5,188      )    (9,965     )    (10,836    )    (995       )    (216 )%   (705 )%
Net adjustments                                                   (9,032      )    7,785            14,946          16,397          1,493           (216 )%   (705 )%
Operating earnings                                                $   60,210       $   69,563       $   69,201      $   63,937      $   64,416      (13  )%   (7   )%
Earnings per diluted share:
Earnings available to common shareholders                         $   0.31         $   0.28         $   0.25        $   0.22        $   0.28        11   %    11   %
Operating earnings                                                $   0.27         $   0.32         $   0.31        $   0.29        $   0.29        (16  )%   (7   )%
                                                                  Year Ended                        %
                                                                                                    Change
                                                                  Dec 31,          Dec 31,          Year
                                                                  2016             2015             over
                                                                                                    Year
Net earnings available to common shareholders                     $   232,815      $   222,182      5          %
Adjustments:
Loss from change in fair value of MSR asset                       25,926           20,723           25         %
Gain on investment securities, net                                (858        )    (2,922      )    (71        )%
Net loss on junior subordinated debentures carried at fair value  6,323            6,306            0          %
Gain from change in fair value of swap derivatives                (1,497      )    (162        )    824        %
Merger related expenses                                           15,313           45,582           (66        )%
Goodwill impairment                                               142              --               nm
Exit or disposal costs                                            4,716            --               nm
Total pre-tax adjustment                                          50,065           69,527           (28        )%
Income tax effect                                                 (19,969     )    (27,811     )    (28        )%
Net adjustments                                                   30,096           41,716           (28        )%
Operating earnings                                                $   262,911      $   263,898      0          %
Earnings per diluted share:
Earnings available to common shareholders                         $   1.05         $   1.01         4          %
Operating earnings                                                $   1.19         $   1.19         0          %
(1)  Income tax effect of operating earnings adjustments at 40% for tax-deductible items.
nm = not meaningful.

The following tables provide the reconciliation of non-interest income (GAAP) to non-interest income, on an operating basis, (non-GAAP), and non-interest expense (GAAP) to non-interest expense, on an operating basis, (non-GAAP) for the periods presented:

                                                                  Quarter ended
(Dollars in thousands)                                            Dec 31,         Sep 30,         Jun 30,         Mar 31,         Dec 31,
                                                                  2016            2016            2016            2016            2015
Non-interest income (GAAP)                                        $   98,620      $   80,710      $   74,659      $   45,951      $   69,345
Adjustments:
(Gain) loss from change in fair value of MSR asset                (16,465     )   7,826           13,940          20,625          469
(Gain) loss from change in fair value of swap derivatives         (4,601      )   (182        )   1,493           1,793           (715        )
Net loss on junior subordinated debentures carried at fair value  1,589           1,590           1,572           1,572           1,589
Gain on investment securities, net                                --              --              (162        )   (696        )   (2,567      )
Non-interest income (operating basis)                             $   79,143      $   89,944      $   91,502      $   69,245      $   68,121
                                                                  Quarter ended
                                                                  Dec 31,         Sep 30,         Jun 30,         Mar 31,         Dec 31,
                                                                  2016            2016            2016            2016            2015
Non-interest expense (GAAP)                                       $   183,468     $   181,187     188,511         $   183,989     $   185,911
Adjustments:
Merger related expenses                                           (3,218      )   (2,011      )   (6,634      )   (3,450      )   (3,712      )
Goodwill impairment                                               --              --              --              (142        )   --
Exit or disposal costs                                            (1,207      )   (1,728      )   (1,434      )   (347        )   --
Non-interest expense (operating basis)                            $   179,043     $   177,448     $   180,443     $   180,050     $   182,199
                                                                  Year Ended
(Dollars in thousands)                                            Dec 31,         Dec 31,
                                                                  2016            2015
Non-interest income (GAAP)                                        $   299,940     $   275,724
Adjustments:
Loss from change in fair value of MSR asset                       25,926          20,723
Gain from change in fair value of swap derivatives                (1,497      )   (162        )
Net loss on junior subordinated debentures carried at fair value  6,323           6,306
Gain on investment securities, net                                (858        )   (2,922      )
Non-interest income (operating basis)                             $   329,834     $   299,669
                                                                  Year Ended
                                                                  Dec 31,         Dec 31,
                                                                  2016            2015
Non-interest expense (GAAP)                                       $   737,155     $   763,642
Adjustments:
Merger related expenses                                           (15,313     )   (45,582     )
Goodwill impairment                                               (142        )   --
Exit or disposal costs                                            (4,716      )   --
Non-interest expense (operating basis)                            $   716,984     $   718,060

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)  Dec 31, 2016          Sep 30, 2016          Jun 30, 2016          Mar 31, 2016          Dec 31, 2015
Total shareholders’ equity                     $    3,916,795        $    3,920,208        $    3,902,158        $    3,878,630        $    3,849,334
Subtract:
Goodwill                                       1,787,651             1,787,651             1,787,651             1,787,651             1,787,793
Other intangible assets, net                   36,886                38,753                40,620                42,948                45,508
Tangible common shareholders’ equity           $    2,092,258        $    2,093,804        $    2,073,887        $    2,048,031        $    2,016,033
Total assets                                   $    24,813,119       $    24,744,214       $    24,132,507       $    23,935,686       $    23,406,381
Subtract:
Goodwill                                       1,787,651             1,787,651             1,787,651             1,787,651             1,787,793
Other intangible assets, net                   36,886                38,753                40,620                42,948                45,508
Tangible assets                                $    22,988,582       $    22,917,810       $    22,304,236       $    22,105,087       $    21,573,080
Common shares outstanding at period end        220,177               220,207               220,482               220,171               220,171
Common equity ratio                            15.79           %     15.84           %     16.17           %     16.20           %     16.45           %
Tangible common equity ratio                   9.10            %     9.14            %     9.30            %     9.26            %     9.35            %
Book value per common share                    $    17.79            $    17.80            $    17.70            $    17.62            $    17.48
Tangible book value per common share           $    9.50             $    9.51             $    9.41             $    9.30             $    9.16

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">About Umpqua Holdings Corporation</span>

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Umpqua Holdings Corporation</span> (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 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 innovation studio headquartered in Silicon Valley focused on creating key technologies and business models that transform finance and commerce. Umpqua Holdings Corporation is headquartered in Portland, Oregon. For more information, visit https://www.umpquabank.com/ask-us/investor-relations/.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Earnings Conference Call Information</span>

The Company will host its fourth quarter 2016 earnings conference call on Thursday, January 26, 2017, at 10:00 a.m. PT (1:00 p.m. ET). During the call, the Company will provide an update on recent activities and discuss its fourth quarter and full-year 2016 financial results. There will be a live question-and-answer session following the presentation. To join the call, please dial (877) 718-5106 ten minutes prior to the start time and enter conference ID: 4736138. A re-broadcast will be available approximately two hours after the call by dialing (888) 203-1112 and entering conference ID 4736138. The earnings conference call will also be available as an audiocast, which can be accessed on the Company’s investor relations page at https://www.umpquabank.com/ask-us/investor-relations/. A slide presentation to accompany the call will also be posted on the website before the call.

<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Forward-Looking Statements</span>

This press release and our earnings call and related slide presentation include 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. We make forward-looking statements about credit discount accretion on acquired loans and 2017 initiatives and growth opportunities. Specific risks that could cause results to differ from these forward-looking statements include our ability to successfully develop and market new products and technology. Additional 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; significant volatility in interest rates; unanticipated weakness in loan demand or loan pricing; lack of strategic growth opportunities or our failure to execute on those opportunities; our inability to effectively manage problem credits; unanticipated increases in the cost of deposits; changes in laws or regulations; changes in regulatory or compliance costs; and changes in general economic conditions.

Umpqua Holdings Corporation
Consolidated Statements of Income
(Unaudited)
                                                                            Quarter Ended                                                                   % Change
(In thousands, except per share data)                                       Dec 31,         Sep 30,         Jun 30,         Mar 31,         Dec 31,         Seq.       Year
                                                                            2016            2016            2016            2016            2015            Quarter    over
                                                                                                                                                                       Year
Interest income:
Loans and leases                                                            $   209,812     $   212,037     $   210,290     $   217,928     $   219,440     (1    )%   (4   )%
Interest and dividends on investments:
Taxable                                                                     10,630          10,779          11,963          13,055          12,654          (1    )%   (16  )%
Exempt from federal income tax                                              2,229           2,181           2,183           2,235           2,363           2     %    (6   )%
Dividends                                                                   336             332             365             366             326             1     %    3    %
Temporary investments & interest bearing deposits                           1,696           1,090           652             480             422             56    %    302  %
Total interest income                                                       224,703         226,419         225,453         234,064         235,205         (1    )%   (4   )%
Interest expense:
Deposits                                                                    9,288           8,999           8,540           8,413           7,905           3     %    17   %
Repurchase agreements                                                       32              32              32              36              39              0     %    (18  )%
Term debt                                                                   3,413           3,558           3,848           4,186           3,885           (4    )%   (12  )%
Junior subordinated debentures                                              4,174           3,938           3,835           3,727           3,542           6     %    18   %
Total interest expense                                                      16,907          16,527          16,255          16,362          15,371          2     %    10   %
Net interest income                                                         207,796         209,892         209,198         217,702         219,834         (1    )%   (5   )%
Provision for loan and lease losses                                         13,171          13,091          10,589          4,823           4,545           1     %    190  %
Non-interest income:
Service charges on deposits                                                 15,323          15,762          15,667          14,516          15,039          (3    )%   2    %
Brokerage revenue                                                           4,230           4,129           4,580           4,094           4,061           2     %    4    %
Residential mortgage banking revenue, net                                   58,448          47,206          36,783          15,426          32,440          24    %    80   %
Gain on investment securities, net                                          --              --              162             696             2,567           0     %    (100 )%
Gain on loan sales                                                          4,060           1,285           5,640           2,371           1,729           216   %    135  %
Loss on junior subordinated debentures carried at fair value                (1,589      )   (1,590      )   (1,572      )   (1,572      )   (1,589      )   0     %    0    %
BOLI income                                                                 2,107           2,116           2,152           2,139           1,841           0     %    14   %
Other income                                                                16,041          11,802          11,247          8,281           13,257          36    %    21   %
Total non-interest income                                                   98,620          80,710          74,659          45,951          69,345          22    %    42   %
Non-interest expense:
Salaries and employee benefits                                              105,406         105,341         107,545         106,538         106,203         0     %    (1   )%
Occupancy and equipment, net                                                37,618          38,181          37,850          38,295          38,722          (1    )%   (3   )%
Intangible amortization                                                     1,867           1,867           2,328           2,560           2,806           0     %    (33  )%
FDIC assessments                                                            3,985           4,109           3,693           3,721           3,742           (3    )%   6    %
(Gain) loss on other real estate owned, net                                 (197        )   (14         )   (1,457      )   1,389           (242        )   1,307 %    (19  )%
Merger related expenses                                                     3,218           2,011           6,634           3,450           3,712           60    %    (13  )%
Goodwill impairment                                                         --              --              --              142             --              nm         nm
Other expense                                                               31,571          29,692          31,918          27,894          30,968          6     %    2    %
Total non-interest expense                                                  183,468         181,187         188,511         183,989         185,911         1     %    (1   )%
Income before provision for income taxes                                    109,777         96,324          84,757          74,841          98,723          14    %    11   %
Provision for income taxes                                                  40,502          34,515          30,470          27,272          35,704          17    %    13   %
Net income                                                                  69,275          61,809          54,287          47,569          63,019          12    %    10   %
Dividends and undistributed earnings allocated to participating securities  33              31              32              29              96              6     %    (66  )%
Net earnings available to common shareholders                               $   69,242      $   61,778      $   54,255      $   47,540      $   62,923      12    %    10   %
Weighted average basic shares outstanding                                   220,190         220,291         220,421         220,227         220,202         0     %    0    %
Weighted average diluted shares outstanding                                 220,756         220,751         220,907         221,052         220,930         0     %    0    %
Earnings per common share - basic                                           $   0.31        $   0.28        $   0.25        $   0.22        $   0.29        11    %    7    %
Earnings per common share - diluted                                         $   0.31        $   0.28        $   0.25        $   0.22        $   0.28        11    %    11   %
nm = not meaningful
Umpqua Holdings Corporation
Consolidated Statements of Income
(Unaudited)
                                                                            Year Ended                            % Change
(In thousands, except per share data)                                       Dec 31, 2016       Dec 31, 2015       Year
                                                                                                                  over
                                                                                                                  Year
Interest income:
Loans and leases                                                            $    850,067       $    869,433       (2   )%
Interest and dividends on investments:
Taxable                                                                     46,427             47,842             (3   )%
Exempt from federal income tax                                              8,828              9,647              (8   )%
Dividends                                                                   1,399              708                98   %
Temporary investments & interest bearing deposits                           3,918              2,236              75   %
Total interest income                                                       910,639            929,866            (2   )%
Interest expense:
Deposits                                                                    35,240             29,839             18   %
Repurchase agreements                                                       132                173                (24  )%
Term debt                                                                   15,005             14,470             4    %
Junior subordinated debentures                                              15,674             13,750             14   %
Total interest expense                                                      66,051             58,232             13   %
Net interest income                                                         844,588            871,634            (3   )%
Provision for loan and lease losses                                         41,674             36,589             14   %
Non-interest income:
Service charges on deposits                                                 61,268             59,740             3    %
Brokerage revenue                                                           17,033             18,481             (8   )%
Residential mortgage banking revenue, net                                   157,863            124,722            27   %
Gain on investment securities, net                                          858                2,922              (71  )%
Gain on loan sales                                                          13,356             22,380             (40  )%
Loss on junior subordinated debentures carried at fair value                (6,323       )     (6,306       )     0    %
BOLI income                                                                 8,514              8,351              2    %
Other income                                                                47,371             45,434             4    %
Total non-interest income                                                   299,940            275,724            9    %
Non-interest expense:
Salaries and employee benefits                                              424,830            430,936            (1   )%
Occupancy and equipment, net                                                151,944            142,975            6    %
Intangible amortization                                                     8,622              11,225             (23  )%
FDIC assessments                                                            15,508             13,480             15   %
(Gain) loss on other real estate owned, net                                 (279         )     1,894              (115 )%
Merger related expenses                                                     15,313             45,582             (66  )%
Goodwill Impairment                                                         142                --                 nm
Other expense                                                               121,075            117,550            3    %
Total non-interest expense                                                  737,155            763,642            (3   )%
Income before provision for income taxes                                    365,699            347,127            5    %
Provision for income taxes                                                  132,759            124,588            7    %
Net income                                                                  232,940            222,539            5    %
Dividends and undistributed earnings allocated to participating securities  125                357                (65  )%
Net earnings available to common shareholders                               $    232,815       $    222,182       5    %
Weighted average basic shares outstanding                                   220,282            220,327            0    %
Weighted average diluted shares outstanding                                 220,908            221,045            0    %
Earnings per common share - basic                                           $    1.06          $    1.01          5    %
Earnings per common share - diluted                                         $    1.05          $    1.01          4    %
nm = not meaningful
Umpqua Holdings Corporation
Consolidated Balance Sheets
(Unaudited)
                                                                                                                                                                         % Change
(In thousands, except per share data)                 Dec 31, 2016           Sep 30, 2016           Jun 30, 2016           Mar 31, 2016           Dec 31, 2015           Seq.       Year
                                                                                                                                                                         Quarter    over
                                                                                                                                                                                    Year
Assets:
Noninterest bearing cash                              $     331,994          $     364,013          $     369,535          $     299,871          $     277,645          (9    )%   20    %
Interest bearing deposits and temporary investments   1,117,438              1,102,428              535,828                613,049                496,080                1     %    125   %
Investment securities:
Trading, at fair value                                10,964                 10,866                 10,188                 9,791                  9,586                  1     %    14    %
Available for sale, at fair value                     2,701,220              2,520,037              2,482,072              2,542,535              2,522,539              7     %    7     %
Held to maturity, at amortized cost                   4,216                  4,302                  4,382                  4,525                  4,609                  (2    )%   (9    )%
Loans held for sale                                   387,318                565,624                552,681                659,264                363,275                (32   )%   7     %
Loans and leases                                      17,508,663             17,392,051             17,355,240             16,955,583             16,866,536             1     %    4     %
Allowance for loan and lease losses                   (133,984         )     (133,692         )     (131,042         )     (130,243         )     (130,322         )     0     %    3     %
Loans and leases, net                                 17,374,679             17,258,359             17,224,198             16,825,340             16,736,214             1     %    4     %
Restricted equity securities                          45,528                 47,537                 47,542                 47,545                 46,949                 (4    )%   (3    )%
Premises and equipment, net                           303,882                306,287                312,647                322,822                328,734                (1    )%   (8    )%
Goodwill                                              1,787,651              1,787,651              1,787,651              1,787,651              1,787,793              0     %    0     %
Other intangible assets, net                          36,886                 38,753                 40,620                 42,948                 45,508                 (5    )%   (19   )%
Residential mortgage servicing rights, at fair value  142,973                114,446                112,095                117,172                131,817                25    %    8     %
Other real estate owned                               6,738                  8,309                  16,437                 20,411                 22,307                 (19   )%   (70   )%
Bank owned life insurance                             299,673                297,561                295,444                293,703                291,892                1     %    3     %
Deferred tax assets, net                              34,322                 27,587                 63,038                 108,865                138,082                24    %    (75   )%
Other assets                                          227,637                290,454                278,149                240,194                203,351                (22   )%   12    %
Total assets                                          $     24,813,119       $     24,744,214       $     24,132,507       $     23,935,686       $     23,406,381       0     %    6     %
Liabilities:
Deposits                                              $     19,020,985       $     18,918,780       $     18,258,474       $     18,162,974       $     17,707,189       1     %    7     %
Securities sold under agreements to repurchase        352,948                309,463                360,234                325,203                304,560                14    %    16    %
Term debt                                             852,397                902,678                902,999                903,382                888,769                (6    )%   (4    )%
Junior subordinated debentures, at fair value         262,209                260,114                258,660                256,917                255,457                1     %    3     %
Junior subordinated debentures, at amortized cost     100,931                101,012                101,093                101,173                101,254                0     %    0     %
Other liabilities                                     306,854                331,959                348,889                307,407                299,818                (8    )%   2     %
Total liabilities                                     20,896,324             20,824,006             20,230,349             20,057,056             19,557,047             0     %    7     %
Shareholders’ equity:
Common stock                                          3,515,299              3,514,858              3,517,240              3,518,792              3,520,591              0     %    0     %
Retained earnings                                     422,839                388,678                362,258                343,421                331,301                9     %    28    %
Accumulated other comprehensive (loss) income         (21,343          )     16,672                 22,660                 16,417                 (2,558           )     (228  )%   734   %
Total shareholders’ equity                            3,916,795              3,920,208              3,902,158              3,878,630              3,849,334              0     %    2     %
Total liabilities and shareholders’ equity            $     24,813,119       $     24,744,214       $     24,132,507       $     23,935,686       $     23,406,381       0     %    6     %
Common shares outstanding at period end               220,177                220,207                220,482                220,171                220,171                0     %    0     %
Book value per common share                           $     17.79            $     17.80            $     17.70            $     17.62            $     17.48            0     %    2     %
Tangible book value per common share                  $     9.50             $     9.51             $     9.41             $     9.30             $     9.16             0     %    4     %
Tangible equity - common                              $     2,092,258        $     2,093,804        $     2,073,887        $     2,048,031        $     2,016,033        0     %    4     %
Tangible common equity to tangible assets             9.10             %     9.14             %     9.30             %     9.26             %     9.35             %     (0.04 )    (0.25 )
Umpqua Holdings Corporation
Loan & Lease Portfolio
(Unaudited)
(Dollars in thousands)                 Dec 31, 2016          Sep 30, 2016          Jun 30, 2016          Mar 31, 2016          Dec 31, 2015          % Change
                                       Amount                Amount                Amount                Amount                Amount                Seq.     Year
                                                                                                                                                     Quarter  over
                                                                                                                                                              Year
Loans & leases:
Commercial real estate:
Non-owner occupied term, net           $    3,330,442        $    3,280,660        $    3,377,464        $    3,202,488        $    3,226,836        2   %    3  %
Owner occupied term, net               2,599,055             2,573,942             2,581,786             2,714,766             2,582,874             1   %    1  %
Multifamily, net                       2,858,956             2,968,019             3,004,890             2,959,975             3,151,516             (4  )%   (9 )%
Commercial construction, net           463,625               388,934               367,879               338,801               271,119               19  %    71 %
Residential development, net           142,984               127,447               111,941               121,025               99,459                12  %    44 %
Commercial:
Term, net                              1,508,780             1,480,173             1,440,704             1,412,816             1,408,676             2   %    7  %
Lines of credit & other, net           1,116,259             1,142,946             1,116,876             1,036,389             1,036,733             (2  )%   8  %
Leases & equipment finance, net        950,588               927,857               884,506               791,798               729,161               2   %    30 %
Residential real estate:
Mortgage, net                          2,887,971             2,868,337             2,882,076             2,879,600             2,909,306             1   %    (1 )%
Home equity lines & loans, net         1,011,844             1,008,219             989,814               943,254               923,667               0   %    10 %
Consumer & other, net                  638,159               625,517               597,304               554,671               527,189               2   %    21 %
Total, net of deferred fees and costs  $    17,508,663       $    17,392,051       $    17,355,240       $    16,955,583       $    16,866,536       1   %    4  %
Loan & leases mix:
Commercial real estate:
Non-owner occupied term, net           19              %     19              %     19              %     19              %     19              %
Owner occupied term, net               15              %     15              %     15              %     16              %     15              %
Multifamily, net                       16              %     17              %     17              %     17              %     19              %
Commercial construction, net           3               %     2               %     2               %     2               %     2               %
Residential development, net           1               %     1               %     1               %     1               %     1               %
Commercial:
Term, net                              9               %     8               %     8               %     8               %     9               %
Lines of credit & other, net           6               %     7               %     6               %     6               %     6               %
Leases & equipment finance, net        5               %     5               %     6               %     5               %     4               %
Residential real estate:
Mortgage, net                          16              %     16              %     17              %     17              %     17              %
Home equity lines & loans, net         6               %     6               %     6               %     6               %     5               %
Consumer & other, net                  4               %     4               %     3               %     3               %     3               %
Total                                  100             %     100             %     100             %     100             %     100             %
Umpqua Holdings Corporation
Deposits by Type/Core Deposits
(Unaudited)
(Dollars in thousands)        Dec 31, 2016          Sep 30, 2016          Jun 30, 2016          Mar 31, 2016          Dec 31, 2015          % Change
                              Amount                Amount                Amount                Amount                Amount                Seq.     Year
                                                                                                                                            Quarter  over
                                                                                                                                                     Year
Deposits:
Demand, non-interest bearing  $    5,861,469        $    5,993,793        $    5,475,986        $    5,460,310        $    5,318,591        (2  )%   10  %
Demand, interest bearing      2,296,532             2,218,782             2,186,164             2,178,446             2,157,376             4   %    6   %
Money market                  6,932,717             6,841,700             6,782,232             6,814,160             6,599,516             1   %    5   %
Savings                       1,325,757             1,303,816             1,254,675             1,213,049             1,136,809             2   %    17  %
Time                          2,604,510             2,560,689             2,559,417             2,497,009             2,494,897             2   %    4   %
Total                         $    19,020,985       $    18,918,780       $    18,258,474       $    18,162,974       $    17,707,189       1   %    7   %
Total core deposits (1)       $    17,318,003       $    17,257,663       $    16,598,065       $    16,559,943       $    16,102,743       0   %    8   %
Deposit mix:
Demand, non-interest bearing  31              %     31              %     30              %     30              %     30              %
Demand, interest bearing      12              %     12              %     12              %     12              %     12              %
Money market                  36              %     36              %     37              %     37              %     37              %
Savings                       7               %     7               %     7               %     7               %     6               %
Time                          14              %     14              %     14              %     14              %     15              %
Total                         100             %     100             %     100             %     100             %     100             %
Number of open accounts:
Demand, non-interest bearing  384,040               382,687               379,996               375,913               371,745
Demand, interest bearing      82,520                83,501                84,434                85,731                86,745
Money market                  56,031                56,128                56,492                56,927                57,194
Savings                       159,080               158,760               157,849               156,846               154,176
Time                          47,705                47,689                47,850                47,794                47,672
Total                         729,376               728,765               726,621               723,211               717,532
Average balance per account:
Demand, non-interest bearing  $    15.3             $    15.7             $    14.4             $    14.5             $    14.3
Demand, interest bearing      27.8                  26.6                  25.9                  25.4                  24.9
Money market                  123.7                 121.9                 120.1                 119.7                 115.4
Savings                       8.3                   8.2                   7.9                   7.7                   7.4
Time                          54.6                  53.7                  53.5                  52.2                  52.3
Total                         $    26.1             $    26.0             $    25.1             $    25.1             $    24.7
(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)                                          Dec 31,                      Sep 30,                      Jun 30,                      Mar 31,                      Dec 31,                      Seq.             Year
                                                                2016                         2016                         2016                         2016                         2015                         Quarter          over
                                                                                                                                                                                                                                  Year
Non-performing assets:
Loans and leases on non-accrual status                          $            27,765          $            27,791          $            25,136          $            30,045          $            29,215          0            %   (5           )%
Loans and leases past due 90+ days & accruing (1)               28,369                       26,189                       23,076                       22,144                       15,169                       8            %   87           %
Total non-performing loans and leases                           56,134                       53,980                       48,212                       52,189                       44,384                       4            %   26           %
Other real estate owned                                         6,738                        8,309                        16,437                       20,411                       22,307                       (19          )%  (70          )%
Total non-preforming assets                                     $            62,872          $            62,289          $            64,649          $            72,600          $            66,691          1            %   (6           )%
Performing restructured loans and leases                        $            40,667          $            36,645          $            40,848          $            31,409          $            31,355          11           %   30           %
Loans and leases past due 31-89 days                            $            30,425          $            39,708          $            29,640          $            29,054          $            28,423          (23          )%  7            %
Loans and leases past due 31-89 days to total loans and leases  0.17                      %  0.23                      %  0.17                      %  0.17                      %  0.17                      %
Non-performing loans and leases to total loans and leases (1)   0.32                      %  0.31                      %  0.28                      %  0.31                      %  0.26                      %
Non-performing assets to total assets (1)                       0.25                      %  0.25                      %  0.27                      %  0.30                      %  0.28                      %
(1) Excludes non-performing mortgage loans guaranteed by Ginnie Mae, which Umpqua has the unilateral right to repurchase but has not done so, totaling $10.9 million, $7.3 million, $11.3 million, $14.2 million, and $19.2 million at December 31, 2016, September 30, 2016, June 30, 2016, March 31, 2016, and December 31, 2015, respectively.
Umpqua Holdings Corporation
Credit Quality - Allowance for Loan and Lease Losses
(Unaudited)
                                                          Quarter Ended                                                                      % Change
(Dollars in thousands)                                    Dec 31,            Sep 30,         Jun 30,         Mar 31,         Dec 31,         Seq.     Year over
                                                          2016               2016            2016            2016            2015            Quarter  Year
Allowance for loan and lease losses:
Balance beginning of period                               $       133,692    $   131,042     $   130,243     $   130,322     $   130,133
Provision for loan and lease losses                       13,171             13,091          10,589          4,823           4,545           1   %    190  %
Charge-offs                                               (16,303         )  (13,088     )   (12,682     )   (7,850      )   (7,108      )   25  %    129  %
Recoveries                                                3,424              2,647           2,892           2,948           2,752           29  %    24   %
Net charge-offs                                           (12,879         )  (10,441     )   (9,790      )   (4,902      )   (4,356      )   23  %    196  %
Total allowance for loan and lease losses                 133,984            133,692         131,042         130,243         130,322         0   %    3    %
Reserve for unfunded commitments                          3,611              3,536           3,531           3,482           3,574           2   %    1    %
Total allowance for credit losses                         $       137,595    $   137,228     $   134,573     $   133,725     $   133,896     0   %    3    %
Net charge-offs to average loans and leases (annualized)  0.29            %  0.24        %   0.23        %   0.12        %   0.10        %
Recoveries to gross charge-offs                           21.00           %  20.22       %   22.80       %   37.55       %   38.72       %
Allowance for loan and lease losses to loans and leases   0.77            %  0.77        %   0.76        %   0.77        %   0.77        %
Allowance for credit losses to loans and leases           0.79            %  0.79        %   0.78        %   0.79        %   0.79        %
Umpqua Holdings Corporation
Credit Quality - Allowance for Loan and Lease Losses
(Unaudited)
                                             Year Ended                          % Change
(Dollars in thousands)                       Dec 31, 2016     Dec 31, 2015       Year over Year
Allowance for credit losses:
Balance beginning of period                  $     130,322    $    116,167
Provision for loan and lease losses          41,674           36,589             14      %
Charge-offs                                  (49,923       )  (35,571      )     40      %
Recoveries                                   11,911           13,137             (9      )%
Net charge-offs                              (38,012       )  (22,434      )     69      %
Total allowance for loan and lease losses    133,984          130,322            3       %
Reserve for unfunded commitments             3,611            3,574              1       %
Total allowance for credit losses            $     137,595    $    133,896       3       %
Net charge-offs to average loans and leases  0.22          %  0.14         %
Recoveries to gross charge-offs              23.86         %  36.93        %
Umpqua Holdings Corporation
Selected Ratios
(Unaudited)
                                                        Quarter Ended                                          % Change
                                                        Dec 31,    Sep 30,    Jun 30,    Mar 31,    Dec 31,    Seq.       Year
                                                        2016       2016       2016       2016       2015       Quarter    over
                                                                                                                          Year
Average Rates:
Yield on loans and leases                               4.70  %    4.75  %    4.81  %    5.07  %    5.21  %    (0.05 )    (0.51 )
Yield on loans held for sale                            3.79  %    3.79  %    3.80  %    4.06  %    3.83  %    --         (0.04 )
Yield on taxable investments                            1.85  %    1.96  %    2.14  %    2.32  %    2.26  %    (0.11 )    (0.41 )
Yield on tax-exempt investments (1)                     4.72  %    4.68  %    4.73  %    4.73  %    4.76  %    0.04       (0.04 )
Yield on temporary investments & interest bearing cash  0.56  %    0.50  %    0.51  %    0.54  %    0.28  %    0.06       0.28
Total yield on earning assets (1)                       4.14  %    4.26  %    4.39  %    4.66  %    4.69  %    (0.12 )    (0.55 )
Cost of interest bearing deposits                       0.28  %    0.28  %    0.27  %    0.27  %    0.26  %    --         0.02
Cost of securities sold under agreements
to repurchase and fed funds purchased                   0.04  %    0.04  %    0.04  %    0.05  %    0.05  %    --         (0.01 )
Cost of term debt                                       1.53  %    1.57  %    1.72  %    1.88  %    1.73  %    (0.04 )    (0.20 )
Cost of junior subordinated debentures                  4.59  %    4.36  %    4.30  %    4.20  %    3.96  %    0.23       0.63
Total cost of interest bearing liabilities              0.46  %    0.46  %    0.46  %    0.47  %    0.44  %    --         0.02
Net interest spread (1)                                 3.68  %    3.80  %    3.93  %    4.19  %    4.25  %    (0.12 )    (0.57 )
Net interest margin (1)                                 3.83  %    3.95  %    4.07  %    4.34  %    4.39  %    (0.12 )    (0.56 )
As reported (GAAP):
Return on average assets                                1.11  %    1.01  %    0.91  %    0.82  %    1.08  %    0.10       0.03
Return on average tangible assets                       1.20  %    1.09  %    0.99  %    0.89  %    1.17  %    0.11       0.03
Return on average common equity                         7.04  %    6.28  %    5.61  %    4.93  %    6.49  %    0.76       0.55
Return on average tangible common equity                13.19 %    11.79 %    10.59 %    9.34  %    12.41 %    1.40       0.78
Efficiency ratio - Consolidated                         59.65 %    62.11 %    66.15 %    69.48 %    64.02 %    (2.46 )    (4.37 )
Efficiency ratio - Bank                                 57.96 %    60.45 %    64.44 %    67.29 %    62.40 %    (2.49 )    (4.44 )
Operating basis (non-GAAP): (2)
Return on average assets                                0.97  %    1.13  %    1.16  %    1.10  %    1.10  %    (0.16 )    (0.13 )
Return on average tangible assets                       1.05  %    1.22  %    1.26  %    1.19  %    1.20  %    (0.17 )    (0.15 )
Return on average common equity                         6.12  %    7.08  %    7.16  %    6.63  %    6.64  %    (0.96 )    (0.52 )
Return on average tangible common equity                11.47 %    13.28 %    13.51 %    12.57 %    12.70 %    (1.81 )    (1.23 )
Efficiency ratio - Consolidated                         62.15 %    58.96 %    59.78 %    62.49 %    63.00 %    3.19       (0.85 )
Efficiency ratio - Bank                                 60.67 %    57.66 %    58.48 %    60.89 %    61.72 %    3.01       (1.05 )

(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 the after-tax impact of merger-related expenses, gains or losses on junior subordinated debentures carried at fair value, gains or losses from the change in fair value of the MSR, gains or losses from the change in fair value of the swap derivative, net gains or losses in investment securities, exit or disposal costs, bargain purchase gain on acquisitions and goodwill impairment.

Umpqua Holdings Corporation
Selected Ratios
(Unaudited)
                                                        Year Ended                  % Change
                                                        Dec 31, 2016  Dec 31, 2015  Year over
                                                                                    Year
Average Rates:
Yield on loans and leases                               4.83   %      5.38   %      (0.55 )
Yield on loans held for sale                            3.84   %      3.72   %      0.12
Yield on taxable investments                            2.07   %      2.13   %      (0.06 )
Yield on tax-exempt investments (1)                     4.71   %      4.73   %      (0.02 )
Yield on temporary investments & interest bearing cash  0.53   %      0.26   %      0.27
Total yield on earning assets (1)                       4.36   %      4.74   %      (0.38 )
Cost of interest bearing deposits                       0.28   %      0.24   %      0.04
Cost of securities sold under agreements
to repurchase and fed funds purchased                   0.04   %      0.05   %      (0.01 )
Cost of term debt                                       1.67   %      1.57   %      0.10
Cost of junior subordinated debentures                  4.37   %      3.90   %      0.47
Total cost of interest bearing liabilities              0.46   %      0.42   %      0.04
Net interest spread (1)                                 3.90   %      4.32   %      (0.42 )
Net interest margin (1)                                 4.04   %      4.44   %      (0.40 )
As reported (GAAP):
Return on average assets                                0.97   %      0.97   %      --
Return on average tangible assets                       1.04   %      1.06   %      (0.02 )
Return on average common equity                         5.97   %      5.82   %      0.15
Return on average tangible common equity                11.25  %      12.08  %      (0.83 )
Efficiency ratio - Consolidated                         64.15  %      66.27  %      (2.12 )
Efficiency ratio - Bank                                 62.35  %      64.57  %      (2.22 )
Operating basis (non-GAAP): (2)
Return on average assets                                1.09   %      1.15   %      (0.06 )
Return on average tangible assets                       1.18   %      1.26   %      (0.08 )
Return on average common equity                         6.74   %      6.91   %      (0.17 )
Return on average tangible common equity                12.70  %      14.35  %      (1.65 )
Efficiency ratio - Consolidated                         60.81  %      61.04  %      (0.23 )
Efficiency ratio - Bank                                 59.40  %      59.76  %      (0.36 )

(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 the after-tax impact of merger-related expenses, gains or losses on junior subordinated debentures carried at fair value, gains or losses from the change in fair value of the MSR, gains or losses from the change in fair value of the swap derivative, net gains or losses in investment securities, exit or disposal costs, bargain purchase gain on acquisitions and goodwill impairment.

Umpqua Holdings Corporation
Average Balances
(Unaudited)
                                               Quarter Ended                                                                     % Change
(Dollars in thousands)                         Dec 31,           Sep 30,         Jun 30,         Mar 31,         Dec 31,         Seq.     Year
                                               2016              2016            2016            2016            2015            Quarter  over
                                                                                                                                          Year
Temporary investments & interest bearing cash  $     1,194,904   $     874,410   $     514,881   $     356,674   $     608,250   37  %    96 %
Investment securities, taxable                 2,373,652         2,265,883       2,304,998       2,311,589       2,293,429       5   %    3  %
Investment securities, tax-exempt              287,359           283,818         280,841         287,085         302,443         1   %    (5 )%
Loans held for sale                            482,028           481,740         403,964         297,732         334,404         0   %    44 %
Loans and leases                               17,386,385        17,400,657      17,234,220      17,008,084      16,514,770      0   %    5  %
Total interest earning assets                  21,724,328        21,306,508      20,738,904      20,261,164      20,053,296      2   %    8  %
Goodwill & other intangible assets, net        1,825,491         1,827,405       1,829,407       1,832,046       1,835,821       0   %    (1 )%
Total assets                                   24,740,986        24,422,986      23,896,315      23,415,439      23,196,052      1   %    7  %
Non-interest bearing demand deposits           5,939,223         5,766,022       5,466,098       5,289,810       5,285,992       3   %    12 %
Interest bearing deposits                      13,026,614        12,836,987      12,644,442      12,411,005      12,249,333      1   %    6  %
Total deposits                                 18,965,837        18,603,009      18,110,540      17,700,815      17,535,325      2   %    8  %
Interest bearing liabilities                   14,606,120        14,446,687      14,249,349      13,976,678      13,812,645      1   %    6  %
Shareholders’ equity - common                  3,914,624         3,911,323       3,889,593       3,878,540       3,847,587       0   %    2  %
Tangible common equity (1)                     2,089,133         2,083,918       2,060,186       2,046,494       2,011,766       0   %    4  %
Umpqua Holdings Corporation
Average Balances
(Unaudited)
                                               Year Ended                      % Change
(Dollars in thousands)                         Dec 31, 2016    Dec 31, 2015    Year over Year
Temporary investments & interest bearing cash  $     736,854   $     869,253   (15     )%
Investment securities, taxable                 2,314,062       2,275,512       2       %
Investment securities, tax-exempt              284,780         310,684         (8      )%
Loans held for sale                            416,724         333,455         25      %
Loans and leases                               17,258,081      15,938,127      8       %
Total interest earning assets                  21,010,501      19,727,031      7       %
Goodwill & other intangible assets, net        1,828,575       1,980,905       (8      )%
Total assets                                   24,121,462      22,905,541      5       %
Non-interest bearing demand deposits           5,616,585       5,015,508       12      %
Interest bearing deposits                      12,730,866      12,235,302      4       %
Total deposits                                 18,347,451      17,250,810      6       %
Interest bearing liabilities                   14,320,838      13,833,245      4       %
Shareholders’ equity - common                  3,898,599       3,820,505       2       %
Tangible common equity (1)                     2,070,024       1,839,600       13      %

(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)                          Dec 31, 2016          Sep 30, 2016          Jun 30, 2016          Mar 31, 2016          Dec 31, 2015          Seq.       Year over
                                                                                                                                                              Quarter    Year
Residential mortgage servicing rights:
Residential mortgage loans serviced for others  $    14,327,368       $    13,880,660       $    13,564,242       $    13,304,468       $    13,047,266       3     %    10    %
MSR asset, at fair value                        142,973               114,446               112,095               117,172               131,817               25    %    8     %
MSR as % of serviced portfolio                  1.00            %     0.82            %     0.83            %     0.88            %     1.01            %
Residential mortgage banking revenue:
Origination and sale                            $    32,386           $    45,631           $    42,083           $    28,409           $    25,363           (29   )%   28    %
Servicing                                       9,597                 9,401                 8,640                 7,642                 7,546                 2     %    27    %
Change in fair value of MSR asset               16,465                (7,826          )     (13,940         )     (20,625         )     (469            )     (310  )%   nm
Total                                           $    58,448           $    47,206           $    36,783           $    15,426           $    32,440           24    %    80    %
Closed loan volume:
Closed loan volume - portfolio                  $    250,000          $    305,648          $    365,926          $    332,918          $    352,465          (18   )%   (29   )%
Closed loan volume - for-sale                   1,061,327             1,118,526             1,046,349             764,076               794,820               (5    )%   34    %
Closed loan volume - total                      $    1,311,327        $    1,424,174        1,412,275             1,096,994             $    1,147,285        (8    )%   14    %
Gain on sale margin:
Based on for-sale volume                        3.05            %     4.08            %     4.02            %     3.72            %     3.19            %     (1.03 )    (0.14 )
                                                Year Ended                                  % Change
                                                Dec 31, 2016          Dec 31, 2015          Year over
                                                                                            Year
Residential mortgage banking revenue:
Origination and sale                            $    148,509          $    117,432          26              %
Servicing                                       35,280                28,013                26              %
Change in fair value of MSR asset               (25,926         )     (20,723         )     25              %
Total                                           $    157,863          $    124,722          27              %
Closed loan volume:
Closed loan volume - portfolio                  $    1,254,492        $    1,556,414        (19             )%
Closed loan volume - for-sale                   3,990,278             3,497,920             14              %
Closed loan volume - total                      $    5,244,770        $    5,054,334        4               %
Gain on sale margin:
Based on for-sale volume                        3.72            %     3.36            %     0.36
Contacts:

Ron Farnsworth
EVP/Chief Financial Officer
Umpqua Holdings Corporation
503-727-4108
ronfarnsworth@umpquabank.com

Bradley Howes
SVP/Director of Investor Relations
Umpqua Holdings Corporation
503-727-4226
bradhowes@umpquabank.com

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