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Umpqua Reports First Quarter 2019 Results

First quarter 2019 net income of $74.0 million, or $0.34 per common share

Non-interest expense decreased 8% from first quarter 2018

Umpqua Next Gen initiatives creating positive operating leverage as shown in reduction of the efficiency ratio

Exploring ways to reduce future income statement fair value volatility of the MSR asset

PORTLAND, Ore., April 17, 2019 /PRNewswire/ -- Umpqua Holdings Corporation (UMPQ) (the "Company") reported net income of $74.0 million for the first quarter of 2019, compared to $80.3 million for the fourth quarter of 2018 and $79.0 million for the first quarter of 2018.  Earnings per diluted common share were $0.34 for the first quarter of 2019, compared to $0.36 for the fourth quarter of 2018 and $0.36 for the first quarter of 2018.

(PRNewsfoto/Umpqua Holdings Corporation)

"Umpqua's financial performance in the first quarter illustrates how our Next Gen strategy is driving enhanced profitability and creating long-term shareholder value," said Cort O'Haver, president and CEO of Umpqua Holdings Corporation. "Although higher than usual payoffs in our commercial real estate portfolio impacted sequential quarter loan growth, it was otherwise an effective quarter of loan production across all lines of business. And the Company's operational excellence initiative led to total non-interest expense of $171.6 million, which represents a $14.5 million, or 8%, decrease when compared to results from the first quarter of 2018. In addition, we continue to be focused on generating consistent earnings, both by generating increased fee income and by exploring how to reduce future income statement volatility of the MSR asset."

Notable items that impacted the first quarter 2019 financial results included:

  • $14.0 million loss on fair value change of the MSR asset, compared to a $13.1 million loss in the prior quarter and a $5.1 million gain in the same period of the prior year.
  • $2.5 million loss related to the fair value of the debt capital market swap derivatives, compared to a loss of $3.0 million in the prior quarter and a gain of $1.1 million in the same period of the prior year.
  • $1.9 million in restructuring charges related to operational excellence initiatives, all in professional fees. This compares to $4.0 million in the prior quarter and $2.7 million in the same period of the prior year.
  • $1.4 million of exit and disposal costs, compared to $0.8 million in the prior quarter and $2.5 million in the same period of the prior year.

First Quarter 2019 Highlights (compared to prior quarter):

  • Net interest income decreased by $9.7 million on a quarter to quarter basis primarily driven by bond premium amortization as compared to the bond premium recapture recorded in the prior quarter.
  • Provision for loan and lease losses decreased by $3.5 million, as net charge-offs decreased by five basis points to 0.27% of average loans and leases (annualized);
  • Non-interest income decreased by $11.1 million, driven primary by the nonrecurring $5.8 million gain on sale of Pivotus assets in the fourth quarter of 2018 and lower residential mortgage banking revenue in the current quarter;
  • Non-interest expense decreased by $6.9 million, driven primarily by operational excellence initiatives, lower restructuring charges (see notable items above), lower mortgage banking-related expense, lower group insurance charges, and lower loss on OREO, partially offset by a seasonal increase in payroll taxes.
  • Non-performing assets to total assets improved to 0.32%;
  • Estimated total risk-based capital ratio of 13.5% and estimated Tier 1 common to risk weighted assets ratio of 10.7%;
  • Declared a quarterly cash dividend of $0.21 per common share.

Balance Sheet
Total consolidated assets were $27.4 billion as of March 31, 2019, compared to $26.9 billion as of December 31, 2018 and $25.8 billion as of March 31, 2018.  Including secured off-balance sheet lines of credit, total available liquidity was $10.9 billion as of March 31, 2019, representing 40% of total assets and 51% of total deposits.

Gross loans and leases were $20.4 billion as of March 31, 2019, a decrease of $16.7 million relative to December 31, 2018.  The timing of commercial and corporate loan closings in the prior quarter as well as an increase in payoffs of our commercial real estate portfolio offset new loan production.

Total deposits were $21.2 billion as of March 31, 2019, an increase of $106.4 million from $21.1 billion as of December 31, 2018.  This increase was attributable to higher time deposits partially offset with the seasonal run-off of public money market deposits.

Net Interest Income
Net interest income was $237.7 million for the first quarter of 2019, down $9.7 million from the prior quarter driven primarily by the amortization of bond purchase premium in the quarter as compared to the recapture in the prior quarter.

The Company's net interest margin was 4.03% for the first quarter of 2019, down 12 basis points from 4.15% for the fourth quarter of 2018.  This decrease was primarily attributable to a quarter over quarter change in bond purchase premium amortization/recapture.

Credit Quality
The allowance for loan and lease losses was $144.9 million, or 0.71% of loans and leases, as of March 31, 2019, which was unchanged from $144.9 million, or 0.71% of loans and leases, as of December 31, 2018.  The provision for loan and lease losses was $13.7 million for the first quarter of 2019, a decrease of $3.5 million from the prior quarter level, driven by the reduction of net charge-offs in the quarter. Net charge-offs decreased by five basis points to 0.27% of average loans and leases (annualized).  As of March 31, 2019, non-performing assets were 0.32% of total assets, compared to 0.36% as of December 31, 2018 and 0.33% as of March 31, 2018.

Non-interest Income
Non-interest income was $45.7 million for the first quarter of 2019, down $11.1 million from the prior quarter,  reflecting the nonrecurring $5.8 million gain on sale of Pivotus assets in the fourth quarter of 2018, and lower net revenue from the origination and sale of residential mortgages.

Net revenue from the origination and sale of residential mortgages was $14.4 million for the first quarter of 2019, down $2.3 million from the prior quarter.  This decrease reflects a 17% sequential quarter decrease in for-sale mortgage origination volume, partially offset by a 12 basis point increase in the home lending gain on sale margin to 2.95% for the first quarter of 2019.  The increase in the home lending gain on sale margin was primarily related to an increase in the mortgage rate lock pipeline.  Of the current quarter's mortgage production, 71% related to purchase activity, compared to 80% for the prior quarter and 68% for the same period of the prior year.

Non-interest Expense
Non-interest expense was $171.6 million for the first quarter of 2019, down $6.9 million from the prior quarter level.  This decrease was driven primarily by the Company's operational excellence initiatives, lower restructuring charges (see notable items above), lower mortgage banking-related expense, lower group insurance charges, and lower loss on OREO, partially offset by a seasonal increase in payroll taxes.

Capital
As of March 31, 2019, the Company's tangible book value per common share1 was $10.44, compared to $10.19 in the prior quarter and $9.77 in the same period of the prior year.  During the first quarter of 2019, the Company declared a dividend of $0.21 per common share.

The Company's estimated total risk-based capital ratio was 13.5% and its estimated Tier 1 common to risk weighted assets ratio was 10.7% as of March 31, 2019.  The Company remains above current "well-capitalized" regulatory minimums.  The regulatory capital ratios as of March 31, 2019 are estimates, pending completion and filing of the Company's regulatory reports.

Presentation of Prior Period Financials
Certain prior period amounts in the financial statements presented in this earnings release have been re-stated from prior earnings releases, due to prior period adjustments as disclosed in the notes to the financial statements for the December 31, 2018 10-K.  Additional explanation will be included in Note 1 to the financial statements for the quarter ended March 31, 2019 as part of the Form 10-Q.

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).

(In thousands, except per share data)


Mar 31, 2019


Dec 31, 2018


Sep 30, 2018


Jun 30, 2018


Mar 31, 2018

Total shareholders' equity


$

4,112,326



$

4,056,442



$

4,003,893



$

3,981,087



$

3,969,766


Subtract:











Goodwill


1,787,651



1,787,651



1,787,651



1,787,651



1,787,651


Other intangible assets, net


22,560



23,964



25,506



27,047



28,589


Tangible common shareholders' equity


$

2,302,115



$

2,244,827



$

2,190,736



$

2,166,389



$

2,153,526


Total assets


$

27,355,625



$

26,939,781



$

26,615,067



$

26,480,601



$

25,816,401


Subtract:











Goodwill


1,787,651



1,787,651



1,787,651



1,787,651



1,787,651


Other intangible assets, net


22,560



23,964



25,506



27,047



28,589


Tangible assets


$

25,545,414



$

25,128,166



$

24,801,910



$

24,665,903



$

24,000,161


Common shares outstanding at period end


220,457



220,255



220,238



220,205



220,461













Total shareholders' equity to total assets ratio


15.03

%


15.06

%


15.04

%


15.03

%


15.38

%

Tangible common equity ratio


9.01

%


8.93

%


8.83

%


8.78

%


8.97

%

Book value per common share


$

18.65



$

18.42



$

18.18



$

18.08



$

18.01


Tangible book value per common share


$

10.44



$

10.19



$

9.95



$

9.84



$

9.77


 

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. Umpqua Holdings Corporation is headquartered in Portland, Oregon. For more information, visit umpquabank.com.

Earnings Conference Call Information
The Company will host its first quarter 2019 earnings conference call on Thursday, April 18, 2019, 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 first quarter 2019 financial results.  There will be a live question-and-answer session following the presentation.  To join the call, please dial (888) 394-8218 ten minutes prior to the start time and enter conference ID: 3915258.  A re-broadcast will be available approximately two hours after the call by dialing (888) 203-1112 and entering conference ID 3915258.  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 fee income initiatives and MSR fair value volatility. Risks that could cause results to differ from forward-looking statements we make are set forth in our filings with the SEC and include, without limitation, prolonged low interest rate environment; the effect of interest rate increases on the cost of deposits; unanticipated weakness in loan demand or loan pricing; deterioration in the economy; lack of strategic growth opportunities or our failure to execute on those opportunities; our ability to effectively manage problem credits; our ability to successfully implement efficiency and operational excellence initiatives on time and in amounts projected; our ability to successfully develop and market new products and technology; and changes in laws or regulations.

 

Umpqua Holdings Corporation

Consolidated Statements of Income

(Unaudited)



Quarter Ended


% Change

(In thousands, except per share data)


Mar 31,
2019


Dec 31,
2018


Sep 30,
2018


Jun 30,
2018


Mar 31,
2018


Seq.
Quarter


Year
over
Year

Interest income:















Loans and leases


$

258,747



$

254,093



$

246,410



$

242,123



$

229,488



2

%


13

%

Interest and dividends on investments:















Taxable


19,956



27,381



24,435



8,499



15,699



(27)

%


27

%

Exempt from federal income tax


2,114



2,135



2,048



2,057



2,128



(1)

%


(1)

%

Dividends


517



538



549



433



468



(4)

%


10

%

Temporary investments and interest bearing deposits


925



2,621



2,800



2,080



1,164



(65)

%


(21)

%

Total interest income


282,259



286,768



276,242



255,192



248,947



(2)

%


13

%

Interest expense:















Deposits


34,094



30,124



25,692



21,259



15,610



13

%


118

%

Securities sold under agreement to repurchase and federal funds purchased


810



185



103



155



63



338

%


1,186

%

Term debt


3,683



3,326



3,439



3,478



3,361



11

%


10

%

Junior subordinated debentures


5,987



5,743



5,640



5,400



4,932



4

%


21

%

Total interest expense


44,574



39,378



34,874



30,292



23,966



13

%


86

%

Net interest income


237,685



247,390



241,368



224,900



224,981



(4)

%


6

%

Provision for loan and lease losses


13,684



17,219



11,711



13,319



13,656



(21)

%


0

%

Non-interest income:















Service charges on deposits


15,278



16,035



15,574



15,520



14,995



(5)

%


2

%

Brokerage revenue


3,810



4,178



3,947



4,161



4,194



(9)

%


(9)

%

Residential mortgage banking revenue, net


11,231



15,150



31,484



33,163



38,438



(26)

%


(71)

%

Gain on sale of investment securities, net








14





0

%


0

%

Unrealized holding gains (losses) on equity securities


695



410



(462)



(1,432)





70

%


nm

Gain on loan sales, net


769



2,484



2,772



1,348



1,230



(69)

%


(37)

%

BOLI income


2,168



2,116



2,051



2,060



2,070



2

%


5

%

Other income


11,789



16,438



17,022



16,817



17,640



(28)

%


(33)

%

Total non-interest income


45,740



56,811



72,388



71,651



78,567



(19)

%


(42)

%

Non-interest expense:















Salaries and employee benefits


100,658



102,109



103,575



113,340



106,551



(1)

%


(6)

%

Occupancy and equipment, net


36,245



35,949



36,530



37,584



38,661



1

%


(6)

%

Intangible amortization


1,404



1,542



1,541



1,542



1,541



(9)

%


(9)

%

FDIC assessments


2,942



2,619



4,303



4,692



4,480



12

%


(34)

%

(Gain) loss on other real estate owned, net


(51)



1,125



(128)



(92)



(38)



(105)

%


34

%

Other expenses


30,394



35,144



33,471



38,506



34,918



(14)

%


(13)

%

Total non-interest expense


171,592



178,488



179,292



195,572



186,113



(4)

%


(8)

%

Income before provision for income taxes


98,149



108,494



122,753



87,660



103,779



(10)

%


(5)

%

Provision for income taxes


24,116



28,183



31,772



21,661



24,807



(14)

%


(3)

%

Net income


$

74,033



$

80,311



$

90,981



$

65,999



$

78,972



(8)

%


(6)

%
















Weighted average basic shares outstanding


220,366



220,247



220,224



220,283



220,370



0

%


0

%

Weighted average diluted shares outstanding


220,655



220,668



220,620



220,647



220,825



0

%


0

%

Earnings per common share – basic


$

0.34



$

0.36



$

0.41



$

0.30



$

0.36



(6)

%


(6)

%

Earnings per common share – diluted


$

0.34



$

0.36



$

0.41



$

0.30



$

0.36



(6)

%


(6)

%
















nm = not meaningful

 

Umpqua Holdings Corporation

Consolidated Balance Sheets

(Unaudited)













% Change

(In thousands, except per share data)


Mar 31, 2019


Dec 31, 2018


Sep 30, 2018


Jun 30, 2018


Mar 31, 2018


Seq.
Quarter


Year
over
Year

Assets:















Cash and due from banks


$

296,967



$

335,419



$

308,938



$

314,513



$

304,681



(11)

%


(3)

%

Interest bearing cash and temporary investments


605,841



287,218



570,321



488,499



264,508



111

%


129

%

Investment securities:















Equity and other, at fair value


63,327



61,841



62,454



64,297



63,295



2

%


0

%

Available for sale, at fair value


2,894,778



2,977,108



2,864,394



2,854,398



2,947,414



(3)

%


(2)

%

Held to maturity, at amortized cost


3,478



3,606



3,672



3,586



3,667



(4)

%


(5)

%

Loans held for sale, at fair value


240,302



166,461



289,537



432,642



299,739



44

%


(20)

%

Loans and leases


20,405,997



20,422,666



19,854,033



19,639,494



19,255,347



0

%


6

%

Allowance for loan and lease losses


(144,872)



(144,871)



(144,026)



(144,556)



(141,933)



0

%


2

%

Net loans and leases


20,261,125



20,277,795



19,710,007



19,494,938



19,113,414



0

%


6

%

Restricted equity securities


47,466



40,268



40,269



42,320



43,501



18

%


9

%

Premises and equipment, net


217,595



227,423



237,456



245,954



259,354



(4)

%


(16)

%

Operating lease right-of-use assets


109,807











nm


nm

Goodwill


1,787,651



1,787,651



1,787,651



1,787,651



1,787,651



0

%


0

%

Other intangible assets, net


22,560



23,964



25,506



27,047



28,589



(6)

%


(21)

%

Residential mortgage servicing rights, at fair value


158,946



169,025



175,038



166,217



164,760



(6)

%


(4)

%

Other real estate owned


10,488



10,958



11,774



12,101



13,055



(4)

%


(20)

%

Bank owned life insurance


314,303



313,626



311,922



309,844



307,745



0

%


2

%

Other assets


320,991



257,418



216,128



236,594



215,028



25

%


49

%

Total assets


$

27,355,625



$

26,939,781



$

26,615,067



$

26,480,601



$

25,816,401



2

%


6

%

Liabilities:















Deposits


$

21,243,894



$

21,137,486



$

20,892,774



$

20,744,526



$

20,106,856



1

%


6

%

Securities sold under agreements to repurchase


288,944



297,151



286,975



273,666



291,984



(3)

%


(1)

%

Term debt


932,420



751,788



751,764



801,739



801,868



24

%


16

%

Junior subordinated debentures, at fair value


294,121



300,870



282,846



280,669



278,410



(2)

%


6

%

Junior subordinated debentures, at amortized cost


88,667



88,724



88,781



88,838



88,895



0

%


0

%

Operating lease liabilities


118,520











nm


nm

Deferred tax liability, net


45,202



25,846



22,413



27,255



24,151



75

%


87

%

Other liabilities


231,531



281,474



285,621



282,821



254,471



(18)

%


(9)

%

Total liabilities


23,243,299



22,883,339



22,611,174



22,499,514



21,846,635



2

%


6

%

Shareholders' equity:















Common stock


3,511,731



3,512,874



3,510,949



3,509,146



3,515,506



0

%


0

%

Retained earnings


629,877



602,482



568,619



524,031



502,214



5

%


25

%

Accumulated other comprehensive loss


(29,282)



(58,914)



(75,675)



(52,090)



(47,954)



(50)

%


(39)

%

Total shareholders' equity


4,112,326



4,056,442



4,003,893



3,981,087



3,969,766



1

%


4

%

Total liabilities and shareholders' equity


$

27,355,625



$

26,939,781



$

26,615,067



$

26,480,601



$

25,816,401



2

%


6

%
















Common shares outstanding at period end


220,457



220,255



220,238



220,205



220,461



0

%


0

%

Book value per common share


$

18.65



$

18.42



$

18.18



$

18.08



$

18.01



1

%


4

%

Tangible book value per common share


$

10.44



$

10.19



$

9.95



$

9.84



$

9.77



2

%


7

%

Tangible equity - common


$

2,302,115



$

2,244,827



$

2,190,736



$

2,166,389



$

2,153,526



3

%


7

%

Tangible common equity to tangible assets


9.01

%


8.93

%


8.83

%


8.78

%


8.97

%


0.08



0.04


 

Umpqua Holdings Corporation

Loan and Lease Portfolio

(Unaudited)

(Dollars in thousands)


Mar 31, 2019


Dec 31, 2018


Sep 30, 2018


Jun 30, 2018


Mar 31, 2018


% Change



Amount


Amount


Amount


Amount


Amount


Seq.
Quarter


Year
over
Year

Loans and leases:















Commercial real estate:















Non-owner occupied term, net


$

3,476,972



$

3,573,065



$

3,527,357



$

3,518,982



$

3,519,366



(3)

%


(1)

%

Owner occupied term, net


2,449,648



2,480,371



2,474,845



2,473,734



2,464,705



(1)

%


(1)

%

Multifamily, net


3,302,936



3,304,763



3,225,538



3,185,923



3,103,794



0

%


6

%

Construction & development, net


686,107



736,254



646,684



568,562



522,670



(7)

%


31

%

Residential development, net


205,963



196,890



198,518



183,114



179,954



5

%


14

%

Commercial:















Term, net


2,185,322



2,232,923



2,149,376



2,106,658



2,025,052



(2)

%


8

%

Lines of credit & other, net


1,229,092



1,169,525



1,133,508



1,152,853



1,147,123



5

%


7

%

Leases & equipment finance, net


1,378,686



1,330,155



1,282,128



1,265,843



1,228,709



4

%


12

%

Residential:















Mortgage, net


3,768,955



3,635,073



3,468,569



3,405,775



3,275,088



4

%


15

%

Home equity loans & lines, net


1,170,252



1,176,477



1,143,351



1,132,329



1,103,048



(1)

%


6

%

Consumer & other, net


552,064



587,170



604,159



645,721



685,838



(6)

%


(20)

%

Total loans, net of deferred fees and costs


$

20,405,997



$

20,422,666



$

19,854,033



$

19,639,494



$

19,255,347



0

%


6

%
















Loan and leases mix:















Commercial real estate:















  Non-owner occupied term, net


17

%


17

%


18

%


18

%


18

%





  Owner occupied term, net


12

%


12

%


13

%


13

%


13

%





  Multifamily, net


16

%


16

%


16

%


16

%


16

%





Construction & development, net


3

%


4

%


3

%


3

%


3

%





Residential development, net


1

%


1

%


1

%


1

%


1

%





Commercial:















Term, net


11

%


11

%


11

%


11

%


11

%





Lines of credit & other, net


6

%


6

%


6

%


6

%


6

%





Leases & equipment finance, net


7

%


6

%


6

%


6

%


6

%





Residential:















Mortgage, net


18

%


18

%


17

%


17

%


17

%





Home equity loans & lines, net


6

%


6

%


6

%


6

%


6

%





Consumer & other, net


3

%


3

%


3

%


3

%


3

%





Total


100

%


100

%


100

%


100

%


100

%





 

null

Umpqua Holdings Corporation

Deposits by Type/Core Deposits

(Unaudited)

(Dollars in thousands)


Mar 31, 2019


Dec 31, 2018


Sep 30, 2018


Jun 30, 2018


Mar 31, 2018


% Change



Amount


Amount


Amount


Amount


Amount


Seq.
Quarter


Year
over
Year

Deposits:















Demand, non-interest bearing


$

6,495,562



$

6,667,467



$

6,859,411



$

6,819,325



$

6,699,399



(3)

%


(3)

%

Demand, interest bearing


2,341,441



2,340,471



2,320,560



2,321,691



2,354,873



0

%


(1)

%

Money market


6,469,286



6,645,390



6,325,808



6,161,907



6,546,704



(3)

%


(1)

%

Savings


1,479,509



1,492,685



1,499,872



1,465,154



1,482,560



(1)

%


0

%

Time


4,458,096



3,991,473



3,887,123



3,976,449



3,023,320



12

%


47

%

Total


$

21,243,894



$

21,137,486



$

20,892,774



$

20,744,526



$

20,106,856



1

%


6

%