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Umpqua Holdings Corporation$23.99($.01)(.04%)

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 Umpqua Reports Quarterly and Annual Results
   Tuesday, January 23, 2018 4:15:11 PM ET

Fourth quarter 2017 net earnings of $82.8 million, or $0.38 per common share

Full-year 2017 net earnings of $246.9 million, or $1.12 per common share

Annual loan and lease growth of $1.6 billion, or 9%, and deposit growth of $927.3 million, or 5%

Umpqua Holdings Corporation (UMPQ ) (the "Company") reported net earnings available to common shareholders of $82.8 million for the fourth quarter of 2017, compared to $61.3 million for the third quarter of 2017 and $69.2 million for the fourth quarter of 2016. Earnings per diluted common share were $0.38 for the fourth quarter of 2017, compared to $0.28 for the third quarter of 2017 and $0.31 for the fourth quarter of 2016.

For the twelve months ended December 31, 2017, the Company reported net earnings available to common shareholders of $246.9 million, or $1.12 per diluted common share, up from $232.8 million, or $1.05 per diluted common share, for the twelve months ended December 31, 2016.

"2017 was a pivotal year for Umpqua. We delivered solid financial performance and strong balance sheet growth, while developing and making good progress on Umpqua Next Gen, our long-term strategic initiative to deliver enhanced profitability while modernizing and evolving the institution to implement our human digital banking strategy," said Cort O’Haver, president and CEO of Umpqua Holdings Corporation. "The organization’s discipline and hard work last year has positioned us well for 2018 and beyond. Building on that foundation, and in light of recent tax reform, Umpqua is planning to accelerate strategic investments in our associates, communities, and digital and technology projects to enhance the customer experience, which we believe will enhance shareholder value."

Notable items that impacted the fourth quarter 2017 financial results included:

-- $26.9 million net benefit to the provision for income taxes related to a revaluation of the net deferred tax liability and amortization of tax credit investments associated with the passage of the Tax Cuts and Jobs Act ("Tax Act"), partially offset by the non-deductibility of certain executive compensation.

-- In light of the Tax Act, the Company took the opportunity to make additional investments, including expenses of $3.2 million related to employee profit sharing and $2.0 million in donations to the Umpqua Bank Charitable Foundation.

-- $2.0 million gain related to the fair value change of the MSR asset, compared to a negative adjustment of $9.2 million in the prior quarter and a $16.5 million gain in the same period of the prior year.

-- $0.2 million gain related to the fair value change of the debt capital market swap derivatives, compared to a negative adjustment of $0.2 million in the prior quarter and a gain of $4.6 million in the same period of the prior year.

-- $3.1 million of exit or disposal costs, related primarily to planned store consolidations, compared to $1.6 million in the prior quarter and $1.2 million in the same period of the prior year.

-- $10.0 million net loss on junior subordinated debentures carried at fair value, compared to a loss of $1.6 million in both the prior quarter and the same period of the prior year. The incremental net loss this quarter, relative to prior quarter levels, reflected the change in fair value for continued tightening of market credit spreads.

Full-Year 2017 Highlights (comparisons are to prior year):

-- Gross loan and lease growth of $1.6 billion, or 9%;

-- Deposit growth of $927.3 million, or 5%;

-- Net interest income increased by $15.3 million, driven primarily by higher average balances of loans and leases, partially offset by lower net interest margin and a lower level of accretion of the credit discount;

-- Provision for loan and lease losses increased by $5.6 million primarily due to loan and lease growth, along with a $2.6 million increase in net charge-offs;

-- Non-interest income decreased by $21.1 million, driven primarily by lower residential mortgage banking revenue and the higher net loss on junior subordinated debentures carried at fair value (see notable items above), partially offset by higher other income;

-- Non-interest expense increased by $10.7 million, driven primarily by higher salaries and benefits expense; and

-- Paid dividends of $0.68 per common share, repurchased 325,000 shares of stock, and grew tangible book value by 5%, or $0.48 per share.

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.

Fourth Quarter 2017 Highlights (comparisons are to prior quarter):

-- Gross loan and lease growth of $402.4 million, or 9% annualized;

-- Deposit growth of $96.4 million, or 2% annualized;

-- Net interest income was flat, as the growth in the loan and lease portfolio was offset by lower accretion of the credit discount;

-- Provision for loan and lease losses increased by $0.9 million;

-- Non-interest income decreased by $3.4 million, driven primarily by the $8.4 million increase in net loss on junior subordinated debentures carried at fair value (see notable items above) and lower gains from portfolio loan sales, partially offset by higher mortgage banking revenue attributable to a linked quarter increase in the fair value change of the MSR asset;

-- Non-interest expense increased by $4.4 million, reflecting the additional investments resulting from tax reform (see notable items above), partially offset by lower merger-related expense;

-- Non-performing assets to total assets increased to 0.37%, driven primarily by two larger non-performing loans;

-- Estimated total risk-based capital ratio of 14.0% and estimated Tier 1 common to risk weighted assets ratio of 11.0%;

-- Declared quarterly cash dividend of $0.18 per common share; and

-- Repurchased 100,000 shares of common stock for $2.1 million.

Balance Sheet

Total consolidated assets were $25.7 billion as of December 31, 2017, compared to $25.7 billion as of September 30, 2017 and $24.8 billion as of December 31, 2016. Including secured off-balance sheet lines of credit, total available liquidity was $9.8 billion as of December 31, 2017, representing 38% of total assets and 49% of total deposits.

Gross loans and leases were $19.1 billion as of December 31, 2017, an increase of $402.4 million from $18.7 billion as of September 30, 2017. This increase reflects balanced growth across the Company’s commercial, equipment finance, multifamily and residential real estate portfolios. During the fourth quarter of 2017, the Company sold $29.8 million of leases and equipment finance loans.

Total deposits were $19.9 billion as of December 31, 2017, an increase of $96.4 million from $19.9 billion as of September 30, 2017. This increase was primarily attributable to growth in money market accounts, partially offset by a decline in time deposits.

Net Interest Income

Net interest income was $220.6 million for the fourth quarter of 2017, up $0.2 million from the prior quarter. This increase was driven primarily by higher average interest-earning assets resulting from the strong growth in loans and leases during the quarter. This was partially offset by a lower level of accretion of the credit discount on loans acquired from Sterling Financial Corporation ("Sterling"), which decreased by $3.9 million from the prior quarter level.

The Company’s net interest margin was 3.88% for the fourth quarter of 2017, down 6 basis points from 3.94% for the third quarter of 2017. The linked quarter decrease was driven primarily by the lower level of accretion on purchased credit impaired loans.

Credit Quality

The allowance for loan and lease losses was $140.6 million, or 0.74% of loans and leases, as of December 31, 2017. During the fourth quarter of 2017, the Company recorded $4.1 million of accretion related to the credit discount on acquired loans from Sterling, compared to $8.0 million in the prior quarter. As of December 31, 2017, the Sterling purchased non-credit impaired loans had approximately $26.2 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 $25.4 million of remaining total discount.

The provision for loan and lease losses was $12.9 million for the fourth quarter of 2017, up $0.9 million from the prior quarter level. Net charge-offs increased by 5 basis points from the prior quarter to 0.25% of average loans and leases for the fourth quarter of 2017 (annualized). As of December 31, 2017, non-performing assets increased to 0.37% of total assets, from 0.30% as of September 30, 2017 and from 0.25% as of December 31, 2016. This increase was driven primarily by two larger loans which moved to non-performing status during the quarter.

Non-interest Income

Non-interest income was $72.0 million for the fourth quarter of 2017, down $3.4 million from the prior quarter. The current quarter’s non-interest income included gains of $2.0 million and $0.2 million related to fair value changes of the MSR asset and the debt capital market swap derivatives, respectively. This compares to fair value losses of $9.2 million and $0.2 million for the MSR asset and debt capital market swap derivatives, respectively, during the third quarter of 2017. The net loss on junior subordinated debentures carried at fair value was $10.0 million for the fourth quarter of 2017, compared to a net loss of $1.6 million in the prior quarter, reflecting the change in fair value related to the continued tightening of market credit spreads.

Net revenue from the origination and sale of residential mortgages was $29.9 million for the fourth quarter of 2017, down $2.9 million from the prior quarter. For-sale mortgage origination volume decreased by 5% from the prior quarter, while the home lending gain on sale margin decreased by 17 basis points to 3.51% for the fourth quarter of 2017. Of the current quarter’s mortgage production, 67% related to purchase activity, compared to 74% for the prior quarter and 63% for the same period in the prior year.

Gain on loan sales decreased by $4.3 million from the prior quarter, reflecting a lower level of portfolio loan sales compared to the prior quarter.

Non-interest Expense

Non-interest expense was $192.8 million for the fourth quarter of 2017, up $4.4 million from the prior quarter level. This increase over the prior quarter level was primarily driven by additional investments made by the Company as a result of the Tax Act, including a $3.2 million increase in salaries and benefits expense related to employee profit sharing and a $2.0 million increase in other expense related to donations to the Umpqua Bank Charitable Foundation. These were partially offset by lower merger-related expenses.

Capital

As of December 31, 2017, the Company’s tangible book value per share increased to $9.98 from $9.83 in the prior quarter. During the fourth quarter of 2017, the Company repurchased 100,000 shares of common stock for $2.1 million.

The Company’s estimated total risk-based capital ratio was 14.0% and its estimated Tier 1 common equity to risk weighted assets ratio was 11.0% as of December 31, 2017. The Company remains above current "well-capitalized" regulatory minimums. The regulatory capital ratios as of December 31, 2017 are estimates, pending completion and filing of the Company’s regulatory reports.

1 "Non-GAAP" financial measure. More information regarding this measurement and a reconciliation to the comparable GAAP measurement is provided under the heading Non-GAAP Financial Measures below.

Non-GAAP Financial Measures

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

(Dollars in thousands, except per share data)  Dec 31, 2017          Sep 30, 2017          Jun 30, 2017          Mar 31, 2017          Dec 31, 2016
Total shareholders’ equity                     $    4,015,763        $    3,985,260        $    3,958,845        $    3,931,150        $    3,916,795
Subtract:
Goodwill                                       1,787,651             1,787,651             1,787,651             1,787,651             1,787,651
Other intangible assets, net                   30,130                31,819                33,508                35,197                36,886
Tangible common shareholders’ equity           $    2,197,982        $    2,165,790        $    2,137,686        $    2,108,302        $    2,092,258
Total assets                                   $    25,742,416       $    25,695,663       $    25,257,784       $    24,861,458       $    24,813,119
Subtract:
Goodwill                                       1,787,651             1,787,651             1,787,651             1,787,651             1,787,651
Other intangible assets, net                   30,130                31,819                33,508                35,197                36,886
Tangible assets                                $    23,924,635       $    23,876,193       $    23,436,625       $    23,038,610       $    22,988,582
Common shares outstanding at period end        220,149               220,225               220,205               220,349               220,177
Common equity ratio                            15.60           %     15.51           %     15.67           %     15.81           %     15.79           %
Tangible common equity ratio                   9.19            %     9.07            %     9.12            %     9.15            %     9.10            %
Book value per common share                    $    18.24            $    18.10            $    17.98            $    17.84            $    17.79
Tangible book value per common share           $    9.98             $    9.83             $    9.71             $    9.57             $    9.50

About Umpqua Holdings Corporation

Umpqua Holdings Corporation (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 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 umpquabank.com.

Earnings Conference Call Information

The Company will host its fourth quarter 2017 earnings conference call on Wednesday, January 24, 2018, 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 2017 financial results. There will be a live question-and-answer session following the presentation. To join the call, please dial (877) 440-5803 ten minutes prior to the start time and enter conference ID: 8419276. A re-broadcast will be available approximately two hours after the call by dialing (888) 203-1112 and entering conference ID 8419276. 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 the timing and impact of digital and technology initiatives and the credit discount accretion related to loans acquired from Sterling. 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 initiatives; 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)                                       Dec 31,         Sep 30,         Jun 30,         Mar 31,         Dec 31,         Seq.      Year
                                                                            2017            2017            2017            2017            2016            Quarter   over
                                                                                                                                                                      Year
Interest income:
Loans and leases                                                            $   223,206     $   223,321     $   212,998     $   205,996     $   209,812     0    %    6    %
Interest and dividends on investments:
Taxable                                                                     14,857          13,979          15,220          13,931          10,630          6    %    40   %
Exempt from federal income tax                                              2,121           2,125           2,237           2,242           2,229           0    %    (5   )%
Dividends                                                                   386             357             360             388             336             8    %    15   %
Temporary investments and interest bearing deposits                         1,565           934             324             1,557           1,696           68   %    (8   )%
Total interest income                                                       242,135         240,716         231,139         224,114         224,703         1    %    8    %
Interest expense:
Deposits                                                                    13,241          12,052          10,641          9,648           9,288           10   %    43   %
Repurchase agreements and federal funds purchased                           43              81              321             30              32              (47  )%   34   %
Term debt                                                                   3,496           3,491           3,662           3,510           3,413           0    %    2    %
Junior subordinated debentures                                              4,734           4,628           4,437           4,201           4,174           2    %    13   %
Total interest expense                                                      21,514          20,252          19,061          17,389          16,907          6    %    27   %
Net interest income                                                         220,621         220,464         212,078         206,725         207,796         0    %    6    %
Provision for loan and lease losses                                         12,928          11,997          10,657          11,672          13,171          8    %    (2   )%
Non-interest income:
Service charges on deposits                                                 15,413          15,849          15,478          14,729          15,323          (3   )%   1    %
Brokerage revenue                                                           4,226           3,832           3,903           4,122           4,230           10   %    0    %
Residential mortgage banking revenue, net                                   42,118          33,430          33,894          26,834          58,448          26   %    (28  )%
(Loss) gain on investment securities, net                                   --              (6          )   35              (2          )   --              (100 )%   0    %
Gain on loan sales                                                          3,688           7,969           3,310           1,754           4,060           (54  )%   (9   )%
Loss on junior subordinated debentures carried at fair value                (10,010     )   (1,590      )   (1,572      )   (1,555      )   (1,589      )   530  %    530  %
BOLI income                                                                 2,015           2,041           2,089           2,069           2,107           (1   )%   (4   )%
Other income                                                                14,595          13,877          13,982          12,274          16,041          5    %    (9   )%
Total non-interest income                                                   72,045          75,402          71,119          60,225          98,620          (4   )%   (27  )%
Non-interest expense:
Salaries and employee benefits                                              114,414         108,732         108,561         106,473         105,406         5    %    9    %
Occupancy and equipment, net                                                37,269          37,648          36,955          38,673          37,618          (1   )%   (1   )%
Intangible amortization                                                     1,689           1,689           1,689           1,689           1,867           0    %    (10  )%
FDIC assessments                                                            2,075           4,405           4,447           4,087           3,985           (53  )%   (48  )%
(Gain) loss on other real estate owned, net                                 (83         )   (99         )   (457        )   82              (197        )   (16  )%   (58  )%
Merger related expenses                                                     --              6,664           1,640           1,020           3,218           (100 )%   (100 )%
Other expense                                                               37,422          29,315          31,186          30,690          31,571          28   %    19   %
Total non-interest expense                                                  192,786         188,354         184,021         182,714         183,468         2    %    5    %
Income before provision for income taxes                                    86,952          95,515          88,519          72,564          109,777         (9   )%   (21  )%
Provision for income taxes                                                  4,105           34,182          31,707          26,561          40,502          (88  )%   (90  )%
Net income                                                                  82,847          61,333          56,812          46,003          69,275          35   %    20   %
Dividends and undistributed earnings allocated to participating securities  16              14              14              12              33              14   %    (52  )%
Net earnings available to common shareholders                               $   82,831      $   61,319      $   56,798      $   45,991      $   69,242      35   %    20   %
Weighted average basic shares outstanding                                   220,194         220,215         220,310         220,287         220,190         0    %    0    %
Weighted average diluted shares outstanding                                 220,873         220,755         220,753         220,779         220,756         0    %    0    %
Earnings per common share - basic                                           $   0.38        $   0.28        $   0.26        $   0.21        $   0.31        36   %    23   %
Earnings per common share - diluted                                         $   0.38        $   0.28        $   0.26        $   0.21        $   0.31        36   %    23   %
Umpqua Holdings Corporation
Consolidated Statements of Income
(Unaudited)
                                                                            Year Ended                            % Change
(In thousands, except per share data)                                       Dec 31, 2017       Dec 31, 2016       Year
                                                                                                                  over
                                                                                                                  Year
Interest income:
Loans and leases                                                            $    865,521       $    850,067       2    %
Interest and dividends on investments:
Taxable                                                                     57,987             46,427             25   %
Exempt from federal income tax                                              8,725              8,828              (1   )%
Dividends                                                                   1,491              1,399              7    %
Temporary investments and interest bearing deposits                         4,380              3,918              12   %
Total interest income                                                       938,104            910,639            3    %
Interest expense:
Deposits                                                                    45,582             35,240             29   %
Repurchase agreements and federal funds purchased                           475                132                260  %
Term debt                                                                   14,159             15,005             (6   )%
Junior subordinated debentures                                              18,000             15,674             15   %
Total interest expense                                                      78,216             66,051             18   %
Net interest income                                                         859,888            844,588            2    %
Provision for loan and lease losses                                         47,254             41,674             13   %
Non-interest income:
Service charges on deposits                                                 61,469             61,268             0    %
Brokerage revenue                                                           16,083             17,033             (6   )%
Residential mortgage banking revenue, net                                   136,276            157,863            (14  )%
Gain on investment securities, net                                          27                 858                (97  )%
Gain on loan sales                                                          16,721             13,356             25   %
Loss on junior subordinated debentures carried at fair value                (14,727      )     (6,323       )     133  %
BOLI income                                                                 8,214              8,514              (4   )%
Other income                                                                54,728             47,371             16   %
Total non-interest income                                                   278,791            299,940            (7   )%
Non-interest expense:
Salaries and employee benefits                                              438,180            424,830            3    %
Occupancy and equipment, net                                                150,545            151,944            (1   )%
Intangible amortization                                                     6,756              8,622              (22  )%
FDIC assessments                                                            15,014             15,508             (3   )%
Gain on other real estate owned, net                                        (557         )     (279         )     100  %
Merger related expenses                                                     9,324              15,313             (39  )%
Goodwill impairment                                                         --                 142                nm
Other expense                                                               128,613            121,075            6    %
Total non-interest expense                                                  747,875            737,155            1    %
Income before provision for income taxes                                    343,550            365,699            (6   )%
Provision for income taxes                                                  96,555             132,759            (27  )%
Net income                                                                  246,995            232,940            6    %
Dividends and undistributed earnings allocated to participating securities  56                 125                (55  )%
Net earnings available to common shareholders                               $    246,939       $    232,815       6    %
Weighted average basic shares outstanding                                   220,251            220,282            0    %
Weighted average diluted shares outstanding                                 220,836            220,908            0    %
Earnings per common share - basic                                           $    1.12          $    1.06          6    %
Earnings per common share - diluted                                         $    1.12          $    1.05          7    %
nm = not meaningful
Umpqua Holdings Corporation
Consolidated Balance Sheets
(Unaudited)
                                                                                                                                                                        % Change
(In thousands, except per share data)                Dec 31, 2017           Sep 30, 2017           Jun 30, 2017           Mar 31, 2017           Dec 31, 2016           Seq.      Year
                                                                                                                                                                        Quarter   over
                                                                                                                                                                                  Year
Assets:
Cash and due from banks                              $     330,856          $     304,760          $     320,027          $     262,655          $     331,994          9    %    0    %
Interest bearing cash and temporary investments      303,424                540,806                295,937                421,991                1,117,438              (44  )%   (73  )%
Investment securities:
Trading, at fair value                               12,255                 11,919                 11,467                 11,241                 10,964                 3    %    12   %
Available for sale, at fair value                    3,065,769              3,047,358              3,132,566              3,243,408              2,701,220              1    %    13   %
Held to maturity, at amortized cost                  3,803                  3,905                  4,017                  4,121                  4,216                  (3   )%   (10  )%
Loans held for sale                                  259,518                417,470                451,350                372,073                387,318                (38  )%   (33  )%
Loans and leases                                     19,080,184             18,677,762             18,321,142             17,829,638             17,508,663             2    %    9    %
Allowance for loan and lease losses                  (140,608         )     (139,503         )     (136,867         )     (136,292         )     (133,984         )     1    %    5    %
Loans and leases, net                                18,939,576             18,538,259             18,184,275             17,693,346             17,374,679             2    %    9    %
Restricted equity securities                         43,508                 45,509                 45,511                 45,522                 45,528                 (4   )%   (4   )%
Premises and equipment, net                          269,182                276,316                288,853                293,133                303,882                (3   )%   (11  )%
Goodwill                                             1,787,651              1,787,651              1,787,651              1,787,651              1,787,651              0    %    0    %
Other intangible assets, net                         30,130                 31,819                 33,508                 35,197                 36,886                 (5   )%   (18  )%
Residential mortgage servicing rights, at fair value 153,151                141,225                141,832                142,344                142,973                8    %    7    %
Other real estate owned                              11,734                 4,160                  4,804                  6,518                  6,738                  182  %    74   %
Bank owned life insurance                            306,864                305,572                303,894                301,777                299,673                0    %    2    %
Deferred tax assets, net                             --                     --                     --                     8,464                  34,322                 0    %    (100 )%
Other assets                                         224,995                238,934                252,092                232,017                227,637                (6   )%   (1   )%
Total assets                                         $     25,742,416       $     25,695,663       $     25,257,784       $     24,861,458       $     24,813,119       0    %    4    %
Liabilities:
Deposits                                             $     19,948,300       $     19,851,910       $     19,459,950       $     19,167,293       $     19,020,985       0    %    5    %
Securities sold under agreements to repurchase       294,299                321,542                330,189                304,280                352,948                (8   )%   (17  )%
Term debt                                            802,357                852,306                852,219                852,308                852,397                (6   )%   (6   )%
Junior subordinated debentures, at fair value        277,155                266,875                265,423                263,605                262,209                4    %    6    %
Junior subordinated debentures, at amortized cost    100,609                100,690                100,770                100,851                100,931                0    %    0    %
Deferred tax liability, net                          37,503                 51,423                 34,296                 --                     --                     (27  )%   100  %
Other liabilities                                    266,430                265,657                256,092                241,971                306,854                0    %    (13  )%
Total liabilities                                    21,726,653             21,710,403             21,298,939             20,930,308             20,896,324             0    %    4    %
Shareholders’ equity:
Common stock                                         3,517,258              3,516,558              3,514,094              3,516,537              3,515,299              0    %    0    %
Retained earnings                                    519,067                476,226                454,802                433,417                422,839                9    %    23   %
Accumulated other comprehensive loss (1)             (20,562          )     (7,524           )     (10,051          )     (18,804          )     (21,343          )     173  %    (4   )%
Total shareholders’ equity                           4,015,763              3,985,260              3,958,845              3,931,150              3,916,795              1    %    3    %
Total liabilities and shareholders’ equity           $     25,742,416       $     25,695,663       $     25,257,784       $     24,861,458       $     24,813,119       0    %    4    %
Common shares outstanding at period end              220,149                220,225                220,205                220,349                220,177                0    %    0    %
Book value per common share                          $     18.24            $     18.10            $     17.98            $     17.84            $     17.79            1    %    3    %
Tangible book value per common share                 $     9.98             $     9.83             $     9.71             $     9.57             $     9.50             2    %    5    %
Tangible equity - common                             $     2,197,982        $     2,165,790        $     2,137,686        $     2,108,302        $     2,092,258        1    %    5    %
Tangible common equity to tangible assets            9.19             %     9.07             %     9.12             %     9.15             %     9.10             %     0.12      0.09

(1) Preliminary. Pending FASB guidance regarding the Financial Reporting Effects of the Tax Cuts and Jobs Act.

Umpqua Holdings Corporation
Loan & Lease Portfolio
(Unaudited)
(Dollars in thousands)                 Dec 31, 2017          Sep 30, 2017          Jun 30, 2017          Mar 31, 2017          Dec 31, 2016          % Change
                                       Amount                Amount                Amount                Amount                Amount                Seq.     Year
                                                                                                                                                     Quarter  over
                                                                                                                                                              Year
Loans & leases:
Commercial real estate:
Non-owner occupied term, net           $    3,491,137        $    3,475,243        $    3,401,679        $    3,410,914        $    3,330,442        0   %    5  %
Owner occupied term, net               2,488,251             2,467,995             2,593,395             2,584,183             2,599,055             1   %    (4 )%
Multifamily, net                       3,087,792             2,993,203             2,964,851             2,885,164             2,858,956             3   %    8  %
Commercial construction, net           540,707               521,666               464,690               471,007               463,625               4   %    17 %
Residential development, net           165,865               186,400               165,956               145,479               142,984               (11 )%   16 %
Commercial:
Term, net                              1,944,987             1,819,664             1,686,597             1,620,311             1,508,780             7   %    29 %
Lines of credit & other, net           1,166,173             1,134,045             1,153,409             1,114,160             1,116,259             3   %    4  %
Leases & equipment finance, net        1,167,503             1,137,732             1,082,651             1,000,376             950,588               3   %    23 %
Residential real estate:
Mortgage, net                          3,192,185             3,094,361             3,021,331             2,916,924             2,887,971             3   %    11 %
Home equity lines & loans, net         1,103,297             1,079,931             1,056,848             1,015,138             1,011,844             2   %    9  %
Consumer & other, net                  732,287               767,522               729,735               665,982               638,159               (5  )%   15 %
Total, net of deferred fees and costs  $    19,080,184       $    18,677,762       $    18,321,142       $    17,829,638       $    17,508,663       2   %    9  %
Loan & leases mix:
Commercial real estate:
Non-owner occupied term, net           18              %     19              %     19              %     19              %     19              %
Owner occupied term, net               13              %     13              %     14              %     14              %     15              %
Multifamily, net                       16              %     16              %     16              %     16              %     16              %
Commercial construction, net           3               %     3               %     3               %     3               %     3               %
Residential development, net           1               %     1               %     1               %     1               %     1               %
Commercial:
Term, net                              10              %     10              %     9               %     9               %     9               %
Lines of credit & other, net           6               %     6               %     6               %     6               %     6               %
Leases & equipment finance, net        6               %     6               %     6               %     6               %     5               %
Residential real estate:
Mortgage, net                          17              %     16              %     16              %     16              %     16              %
Home equity lines & loans, net         6               %     6               %     6               %     6               %     6               %
Consumer & other, net                  4               %     4               %     4               %     4               %     4               %
Total                                  100             %     100             %     100             %     100             %     100             %
Umpqua Holdings Corporation
Deposits by Type/Core Deposits
(Unaudited)
(Dollars in thousands)        Dec 31, 2017          Sep 30, 2017          Jun 30, 2017          Mar 31, 2017          Dec 31, 2016          % Change
                              Amount                Amount                Amount                Amount                Amount                Seq.     Year
                                                                                                                                            Quarter  over
                                                                                                                                                     Year
Deposits:
Demand, non-interest bearing  $    6,505,628        $    6,571,471        $    6,112,480        $    6,021,585        $    5,861,469        (1  )%   11 %
Demand, interest bearing      2,384,133             2,394,240             2,371,386             2,327,226             2,296,532             0   %    4  %
Money market                  7,037,891             6,700,261             6,755,707             6,784,442             6,932,717             5   %    2  %
Savings                       1,446,860             1,444,801             1,427,677             1,400,330             1,325,757             0   %    9  %
Time                          2,573,788             2,741,137             2,792,700             2,633,710             2,604,510             (6  )%   (1 )%
Total                         $    19,948,300       $    19,851,910       $    19,459,950       $    19,167,293       $    19,020,985       0   %    5  %
Total core deposits (1)       $    18,263,802       $    18,005,730       $    17,561,956       $    17,427,832       $    17,318,003       1   %    5  %
Deposit mix:
Demand, non-interest bearing  33              %     33              %     32              %     31              %     31              %
Demand, interest bearing      12              %     12              %     12              %     12              %     12              %
Money market                  35              %     34              %     35              %     36              %     36              %
Savings                       7               %     7               %     7               %     7               %     7               %
Time                          13              %     14              %     14              %     14              %     14              %
Total                         100             %     100             %     100             %     100             %     100             %
Number of open accounts:
Demand, non-interest bearing  397,427               394,755               389,767               385,859               384,040
Demand, interest bearing      78,853                79,899                80,594                81,570                82,520
Money market                  55,175                55,659                55,795                55,903                56,031
Savings                       162,453               162,556               161,369               160,323               159,080
Time                          46,861                47,129                47,339                47,365                47,705
Total                         740,769               739,998               734,864               731,020               729,376
Average balance per account:
Demand, non-interest bearing  $    16.4             $    16.6             $    15.7             $    15.6             $    15.3
Demand, interest bearing      30.2                  30.0                  29.4                  28.5                  27.8
Money market                  127.6                 120.4                 121.1                 121.4                 123.7
Savings                       8.9                   8.9                   8.8                   8.7                   8.3
Time                          54.9                  58.2                  59.0                  55.6                  54.6
Total                         $    26.9             $    26.8             $    26.5             $    26.2             $    26.1

(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
                                                                2017           2017           2017           2017           2016           Quarter  over
                                                                                                                                                    Year
Non-performing assets:
Loans and leases on non-accrual status                          $   51,465     $   44,573     $   26,566     $   28,915     $   27,765     15  %    85  %
Loans and leases past due 90+ days and accruing (1)             30,994         29,073         27,252         23,421         28,369         7   %    9   %
Total non-performing loans and leases                           82,459         73,646         53,818         52,336         56,134         12  %    47  %
Other real estate owned                                         11,734         4,160          4,804          6,518          6,738          182 %    74  %
Total non-preforming assets                                     $   94,193     $   77,806     $   58,622     $   58,854     $   62,872     21  %    50  %
Performing restructured loans and leases                        $   32,157     $   45,813     $   52,861     $   43,029     $   40,667     (30 )%   (21 )%
Loans and leases past due 31-89 days                            $   43,870     $   32,251     $   31,153     $   49,530     $   30,425     36  %    44  %
Loans and leases past due 31-89 days to total loans and leases  0.23       %   0.17       %   0.17       %   0.28       %   0.17       %
Non-performing loans and leases to total loans and leases (1)   0.43       %   0.39       %   0.29       %   0.29       %   0.32       %
Non-performing assets to total assets (1)                       0.37       %   0.30       %   0.23       %   0.24       %   0.25       %

(1) Excludes non-performing mortgage loans guaranteed by Ginnie Mae, which Umpqua has the unilateral right to repurchase but has not done so, totaling $12.4 million, $12.3 million, $16.3 million, $5.3 million, and $10.9 million at December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017, and December 31, 2016, 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
                                                          2017               2017            2017            2017            2016            Quarter  over
                                                                                                                                                      Year
Allowance for loan and lease losses:
Balance beginning of period                               $       139,503    $   136,867     $   136,292     $   133,984     $   133,692
Provision for loan and lease losses                       12,928             11,997          10,657          11,672          13,171          8   %    (2 )%
Charge-offs                                               (15,751         )  (13,222     )   (13,944     )   (13,002     )   (16,303     )   19  %    (3 )%
Recoveries                                                3,928              3,861           3,862           3,638           3,424           2   %    15 %
Net charge-offs                                           (11,823         )  (9,361      )   (10,082     )   (9,364      )   (12,879     )   26  %    (8 )%
Total allowance for loan and lease losses                 140,608            139,503         136,867         136,292         133,984         1   %    5  %
Reserve for unfunded commitments                          3,963              3,932           3,816           3,495           3,611           1   %    10 %
Total allowance for credit losses                         $       144,571    $   143,435     $   140,683     $   139,787     $   137,595     1   %    5  %
Net charge-offs to average loans and leases (annualized)  0.25            %  0.20        %   0.22        %   0.22        %   0.29        %
Recoveries to gross charge-offs                           24.94           %  29.20       %   27.70       %   27.98       %   21.00       %
Allowance for loan and lease losses to loans and leases   0.74            %  0.75        %   0.75        %   0.76        %   0.77        %
Allowance for credit losses to loans and leases           0.76            %  0.77        %   0.77        %   0.78        %   0.79        %
Umpqua Holdings Corporation
Credit Quality - Allowance for Loan and Lease Losses
(Unaudited)
                                             Year Ended                          % Change
(Dollars in thousands)                       Dec 31, 2017     Dec 31, 2016       Year over Year
Allowance for credit losses:
Balance beginning of period                  $     133,984    $    130,322
Provision for loan and lease losses          47,254           41,674             13      %
Charge-offs                                  (55,919       )  (49,923      )     12      %
Recoveries                                   15,289           11,911             28      %
Net charge-offs                              (40,630       )  (38,012      )     7       %
Total allowance for loan and lease losses    140,608          133,984            5       %
Reserve for unfunded commitments             3,963            3,611              10      %
Total allowance for credit losses            $     144,571    $    137,595       5       %
Net charge-offs to average loans and leases  0.22          %  0.22         %
Recoveries to gross charge-offs              27.34         %  23.86        %
Umpqua Holdings Corporation
Selected Ratios
(Unaudited)
                                                          Quarter Ended                                          % Change
                                                          Dec 31,    Sep 30,    Jun 30,    Mar 31,    Dec 31,    Seq.       Year
                                                          2017       2017       2017       2017       2016       Quarter    over
                                                                                                                            Year
Average Rates:
Yield on loans and leases                                 4.65  %    4.70  %    4.67  %    4.65  %    4.70  %    (0.05 )    (0.05 )
Yield on loans held for sale                              3.99  %    3.89  %    3.26  %    3.86  %    3.79  %    0.10       0.20
Yield on taxable investments                              2.17  %    2.00  %    2.07  %    2.10  %    1.85  %    0.17       0.32
Yield on tax-exempt investments (1)                       4.49  %    4.59  %    4.64  %    4.76  %    4.72  %    (0.10 )    (0.23 )
Yield on temporary investments and interest bearing cash  1.22  %    1.47  %    1.03  %    0.79  %    0.56  %    (0.25 )    0.66
Total yield on earning assets (1)                         4.26  %    4.30  %    4.26  %    4.18  %    4.14  %    (0.04 )    0.12
Cost of interest bearing deposits                         0.40  %    0.36  %    0.33  %    0.30  %    0.28  %    0.04       0.12
Cost of securities sold under agreements
to repurchase and fed funds purchased                     0.06  %    0.10  %    0.32  %    0.04  %    0.04  %    (0.04 )    0.02
Cost of term debt                                         1.67  %    1.63  %    1.72  %    1.67  %    1.53  %    0.04       0.14
Cost of junior subordinated debentures                    5.11  %    5.02  %    4.88  %    4.70  %    4.59  %    0.09       0.52
Total cost of interest bearing liabilities                0.58  %    0.55  %    0.52  %    0.48  %    0.46  %    0.03       0.12
Net interest spread (1)                                   3.68  %    3.75  %    3.74  %    3.70  %    3.68  %    (0.07 )    --
Net interest margin (1)                                   3.88  %    3.94  %    3.91  %    3.85  %    3.83  %    (0.06 )    0.05
Performance Ratios:
Return on average assets                                  1.28  %    0.96  %    0.92  %    0.75  %    1.11  %    0.32       0.17
Return on average tangible assets                         1.38  %    1.04  %    0.99  %    0.81  %    1.20  %    0.34       0.18
Return on average common equity                           8.22  %    6.10  %    5.76  %    4.74  %    7.04  %    2.12       1.18
Return on average tangible common equity                  15.08 %    11.23 %    10.67 %    8.83  %    13.19 %    3.85       1.89
Efficiency ratio - Consolidated                           65.63 %    63.43 %    64.71 %    68.15 %    59.65 %    2.20       5.98
Efficiency ratio - Bank                                   61.76 %    61.42 %    62.45 %    65.75 %    57.96 %    0.34       3.80

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

Umpqua Holdings Corporation
Selected Ratios
(Unaudited)
                                                          Year Ended                  % Change
                                                          Dec 31, 2017  Dec 31, 2016  Year over
                                                                                      Year
Average Rates:
Yield on loans and leases                                 4.67   %      4.83   %      (0.16 )
Yield on loans held for sale                              3.75   %      3.84   %      (0.09 )
Yield on taxable investments                              2.09   %      2.07   %      0.02
Yield on tax-exempt investments (1)                       4.62   %      4.71   %      (0.09 )
Yield on temporary investments and interest bearing cash  1.04   %      0.53   %      0.51
Total yield on earning assets (1)                         4.25   %      4.36   %      (0.11 )
Cost of interest bearing deposits                         0.35   %      0.28   %      0.07
Cost of securities sold under agreements
to repurchase and fed funds purchased                     0.14   %      0.04   %      0.10
Cost of term debt                                         1.67   %      1.67   %      --
Cost of junior subordinated debentures                    4.93   %      4.37   %      0.56
Total cost of interest bearing liabilities                0.53   %      0.46   %      0.07
Net interest spread (1)                                   3.72   %      3.90   %      (0.18 )
Net interest margin (1)                                   3.90   %      4.04   %      (0.14 )
Performance Ratios:
Return on average assets                                  0.98   %      0.97   %      0.01
Return on average tangible assets                         1.06   %      1.04   %      0.02
Return on average common equity                           6.22   %      5.97   %      0.25
Return on average tangible common equity                  11.49  %      11.25  %      0.24
Efficiency ratio - Consolidated                           65.42  %      64.15  %      1.27
Efficiency ratio - Bank                                   62.77  %      62.35  %      0.42

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

Umpqua Holdings Corporation
Average Balances
(Unaudited)
                                                Quarter Ended                                                                     % Change
(Dollars in thousands)                          Dec 31,         Sep 30,         Jun 30,         Mar 31,         Dec 31,           Seq.     Year
                                                2017            2017            2017            2017            2016              Quarter  over
                                                                                                                                           Year
Temporary investments and interest bearing cash $     509,187   $     253,015   $     125,886   $     804,354   $     1,194,904   101 %    (57 )%
Investment securities, taxable                  2,804,530       2,867,292       3,008,079       2,723,576       2,373,652         (2  )%   18  %
Investment securities, tax-exempt               286,345         281,139         292,553         286,444         287,359           2   %    0   %
Loans held for sale                             370,564         420,282         392,183         351,570         482,028           (12 )%   (23 )%
Loans and leases                                18,765,251      18,537,827      18,024,651      17,598,314      17,386,385        1   %    8   %
Total interest earning assets                   22,735,877      22,359,555      21,843,352      21,764,258      21,724,328        2   %    5   %
Goodwill and other intangible assets, net       1,818,730       1,820,394       1,822,032       1,823,799       1,825,491         0   %    0   %
Total assets                                    25,661,576      25,311,994      24,792,869      24,730,285      24,740,986        1   %    4   %
Non-interest bearing demand deposits            6,611,493       6,354,591       5,951,670       5,883,924       5,939,223         4   %    11  %
Interest bearing deposits                       13,281,502      13,155,462      13,037,064      13,119,736      13,026,614        1   %    2   %
Total deposits                                  19,892,995      19,510,053      18,988,734      19,003,660      18,965,837        2   %    5   %
Interest bearing liabilities                    14,790,883      14,705,842      14,659,650      14,661,558      14,606,120        1   %    1   %
Shareholders’ equity - common                   3,998,619       3,989,868       3,956,777       3,936,340       3,914,624         0   %    2   %
Tangible common equity (1)                      2,179,889       2,166,474       2,134,745       2,112,541       2,089,133         1   %    4   %
Umpqua Holdings Corporation
Average Balances
(Unaudited)
                                                 Year Ended                      % Change
(Dollars in thousands)                           Dec 31, 2017    Dec 31, 2016    Year over Year
Temporary investments and interest bearing cash  $     421,836   $     736,854   (43     )%
Investment securities, taxable                   2,851,136       2,314,062       23      %
Investment securities, tax-exempt                286,605         284,780         1       %
Loans held for sale                              383,802         416,724         (8      )%
Loans and leases                                 18,235,547      17,258,081      6       %
Total interest earning assets                    22,178,926      21,010,501      6       %
Goodwill and other intangible assets, net        1,821,223       1,828,575       0       %
Total assets                                     25,127,247      24,121,462      4       %
Non-interest bearing demand deposits             6,202,835       5,616,585       10      %
Interest bearing deposits                        13,148,903      12,730,866      3       %
Total deposits                                   19,351,738      18,347,451      5       %
Interest bearing liabilities                     14,704,841      14,320,838      3       %
Shareholders’ equity - common                    3,969,869       3,898,599       2       %
Tangible common equity (1)                       2,148,646       2,070,024       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
Residential Mortgage Banking Activity
(unaudited)
                                                Quarter Ended                                                                                                 % Change
(Dollars in thousands)                          Dec 31, 2017          Sep 30, 2017          Jun 30, 2017          Mar 31, 2017          Dec 31, 2016          Seq.       Year over
                                                                                                                                                              Quarter    Year
Residential mortgage servicing rights:
Residential mortgage loans serviced for others  $    15,336,597       $    15,007,942       $    14,797,242       $    14,541,171       $    14,327,368       2     %    7    %
MSR asset, at fair value                        153,151               141,225               141,832               142,344               142,973               8     %    7    %
MSR as % of serviced portfolio                  1.00            %     0.94            %     0.96            %     0.98            %     1.00            %
Residential mortgage banking revenue:
Origination and sale                            $    29,864           $    32,784           $    32,385           $    24,647           $    32,386           (9    )%   (8   )%
Servicing                                       10,287                9,879                 9,839                 9,858                 9,597                 4     %    7    %
Change in fair value of MSR asset               1,967                 (9,233          )     (8,330          )     (7,671          )     16,465                (121  )%   (88  )%
Total                                           $    42,118           $    33,430           $    33,894           $    26,834           $    58,448           26    %    (28  )%
Closed loan volume:
Closed loan volume - portfolio                  $    265,718          $    336,362          $    312,022          $    245,334          $    250,000          (21   )%   6    %
Closed loan volume - for-sale                   850,453               891,063               918,200               754,715               1,061,327             (5    )%   (20  )%
Closed loan volume - total                      $    1,116,171        $    1,227,425        $    1,230,222        $    1,000,049        $    1,311,327        (9    )%   (15  )%
Gain on sale margin:
Based on for-sale volume                        3.51            %     3.68            %     3.53            %     3.27            %     3.05            %     (0.17 )    0.46
                                                Year Ended                                  % Change
                                                Dec 31, 2017          Dec 31, 2016          Year over
                                                                                            Year
Residential mortgage banking revenue:
Origination and sale                            $    119,680          $    148,509          (19             )%
Servicing                                       39,863                35,280                13              %
Change in fair value of MSR asset               (23,267         )     (25,926         )     (10             )%
Total                                           $    136,276          $    157,863          (14             )%
Closed loan volume:
Closed loan volume - portfolio                  $    1,159,436        $    1,254,492        (8              )%
Closed loan volume - for-sale                   3,414,431             3,990,278             (14             )%
Closed loan volume - total                      $    4,573,867        $    5,244,770        (13             )%
Gain on sale margin:
Based on for-sale volume                        3.51            %     3.72            %     (0.21           )

Contacts:

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

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