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UMPQUA REPORTS FIRST QUARTER 2022 RESULTS

First quarter 2022 Results

  • Net income of $91.2 million, or $0.42 per common share

  • Operating net income of $77.6 million, or $0.36 per common share

  • Non-PPP loan balances increased $630.2 million or 2.8%

  • Deposit balances increased $104.9 million or 0.4%

  • Provision for credit losses of $4.8 million

PORTLAND, Ore., April 20, 2022 /PRNewswire/ --

(PRNewsfoto/Umpqua Holdings Corporation)
(PRNewsfoto/Umpqua Holdings Corporation)

$0.42


$91


13.66%


14.0%

Net earnings per diluted
common share


Net income ($ in millions)


Return on average tangible
common equity ("ROATCE")1


Total risk-based capital ratio
(estimated)

CEO Commentary

"Umpqua's first quarter results demonstrate our ability to organically grow the franchise while planning for our pending combination with Columbia Banking System," said Cort O'Haver, President and CEO. "First quarter non-PPP (Paycheck Protection Program) loan growth of $630 million is commendable in its own right given typical seasonal trends, but it is particularly notable on the heels of fourth quarter's record growth. We actively monitor evolving trends in our markets and beyond, and we will continue to manage our business to support our associates, customers, and communities while creating shareholder value."

Cort O'Haver, President and CEO of Umpqua Holdings Corporation

1Q22 HIGHLIGHTS (COMPARED TO 4Q21)



Net Interest
Income and
NIM

• Net interest income decreased by $4.6 million on a quarter-to-quarter basis due to lower PPP-related income as net interest income was otherwise stable despite two fewer days in the quarter.

• Net interest margin was 3.14%, down one basis point from the prior period due entirely to lower PPP fees. The impact was nearly offset by higher average non-PPP loan balances and lower interest expense.



Non-Interest
Income and
Expense

Non-interest income decreased by $2.8 million. The quarter's results were notably impacted by fair value adjustments captured in mortgage banking revenue and other income that reflect the quarter's interest rate changes.

Non-interest expense decreased by $17.3 million due to lower merger-related charges and salaries and benefits expense.



Credit
Quality

Net charge-offs remained low at 0.10% of average loans and leases (annualized).

A provision expense of $4.8 million compares to a provision recapture of $(0.7) million in the prior quarter.

Non-performing assets to total assets declined to 0.14%, down 3 bps from the prior quarter end.



Capital

Estimated total risk-based capital ratio of 14.0% and estimated Tier 1 Risk Based Capital ratio of 11.3%.

Paid a quarterly cash dividend of $0.21 per common share on February 25, 2022, to shareholders of record as of February 15, 2022.



Notable
items

Executing structural changes in the mortgage banking segment, inclusive of evaluating MSR hedges.

$2.3 million in merger-related expenses and $3.0 million in exit and disposal costs.

1Q22 KEY FINANCIAL DATA







PERFORMANCE METRICS

1Q22


4Q21


1Q21

Return on average assets

1.21%


1.13%


1.49%

Return on average tangible common equity1

13.66%


12.94%


16.43%

Operating return on average assets1

1.03%


1.23%


1.41%

Operating return on average tangible common equity1

11.62%


14.03%


15.59%

Net interest margin

3.14%


3.15%


3.18%

Efficiency ratio - consolidated

59.02%


63.10%


56.74%

Loan to deposit ratio

86.05%


84.80%


85.61%







INCOME STATEMENT
($ in 000s, excl. per share data)

1Q22


4Q21


1Q21

Net interest income

$228,763


$233,379


$221,431

Provision (recapture) for credit losses

$4,804


($736)


$—

Non-interest income

$79,969


$82,738


$108,800

Non-interest expense

$182,430


$199,711


$187,592

Pre-provision net revenue1

$126,302


$116,406


$142,639

Operating pre-provision net revenue1

$108,125


$122,633


$135,315

Earnings per common share - diluted

$0.42


$0.41


$0.49

Operating earnings per common share - diluted1

$0.36


$0.44


$0.46

Dividends paid per share

$0.21


$0.21


$0.21







BALANCE SHEET

1Q22


4Q21


1Q21

Total assets

$30.6B


$30.6B


$30.0B

Loans and leases

$23.0B


$22.6B


$22.2B

Total deposits

$26.7B


$26.6B


$25.9B

Book value per common share

$12.02


$12.69


$12.16

Tangible book value per share1

$11.98


$12.65


$12.10

Tangible book value per share, ex AOCI1

$12.83


$12.64


$11.92

Balance Sheet
Total consolidated assets were $30.6 billion as of March 31, 2022, compared to $30.6 billion as of December 31, 2021 and $30.0 billion as of March 31, 2021. Including secured off-balance sheet lines of credit, total available liquidity was $15.7 billion as of March 31, 2022, representing 51% of total assets and 59% of total deposits.

Gross loans and leases were $23.0 billion as of March 31, 2022, an increase of $422.6 million relative to December 31, 2021. The increase is due to non-PPP loan growth of $630.2 million that offset a 55% decline in PPP balances to $172.8 million as related loan forgiveness continued. Commercial real estate and residential mortgage portfolios drove the quarter's net expansion. Excluding PPP balances, commercial loans contracted by 1.0% in the first quarter as 3.9% growth in the fourth quarter reduced the associated pipeline, which now sits at a normalized level in April. Please refer to additional loan tables in the Q1 2022 Earnings Presentation available on our website for select underwriting characteristics of the loan portfolio.

Total deposits were $26.7 billion as of March 31, 2022, an increase of $104.9 million or 0.4% from $26.6 billion as of December 31, 2021. The increase is attributable to growth in demand and savings deposits, which offset a continued decline in time deposits and lower money market balances.

Net Interest Income
Net interest income was $228.8 million for the first quarter of 2022, down $4.6 million from the prior quarter. The decrease was driven by a $4.3 million decline in PPP fees and related interest income due to loan forgiveness that continued through the quarter. The increase in net interest income from higher average loans and the 25-basis point increase in the fed funds rate in mid-March was offset by two fewer days in the period compared to the fourth quarter.

The Company's net interest margin was 3.14% for the first quarter of 2022, down one basis point from 3.15% for the fourth quarter of 2021. The decrease is attributable to the aforementioned decline in PPP-related fees as the deployment of cash into loans and upward interest rate movements had a favorable impact on net interest margin in the first quarter of 2022 compared to the fourth quarter of 2021. Please refer to the Q1 2022 Earnings Presentation available on our website for additional net interest margin change details and interest rate sensitivity information.

Credit Quality
The allowance for credit losses was $261.5 million, or 1.14% of loans and leases, as of March 31, 2022, compared to $261.2 million, or 1.16% of loans and leases, as of December 31, 2021. The provision for credit losses of $4.8 million for the first quarter of 2022 compares to a recapture of provision of $0.7 million for the fourth quarter of 2021. The current quarter's provision reflects allowance requirements for new loan generation, loan mix changes, and changes between the December 2021 and March 2022 economic forecasts used in credit models. Please refer to the Q1 2022 Earnings Presentation available on our website for additional details related to the allowance for credit losses.

Net charge-offs decreased by three basis points to 0.10% of average loans and leases (annualized) for the first quarter of 2022 as net charge-off activity within the FinPac portfolio remained below its historical average for the third consecutive quarter. As of March 31, 2022, non-performing assets were 0.14% of total assets, compared to 0.17% as of December 31, 2021 and 0.19% as of March 31, 2021.

Non-interest Income
Non-interest income was $80.0 million for the first quarter of 2022, down $2.8 million from the prior quarter. A higher net fair value gain related to cumulative fair value adjustments did not fully offset other declines, including lower swap and syndication revenue following outsized volume in the fourth quarter of 2021 and lower revenue from the origination and sale of mortgages.

As detailed in our segment and non-GAAP disclosures, non-interest income for the Core Banking segment includes a fair value loss of $16.7 million for the first quarter of 2022, driven by an increase in long-term interest rates and their effect on fair value adjustments related to investment securities, swap derivatives, and loans carried at fair value. This compares to a fair value loss of $3.4 million in the fourth quarter of 2021, and the $13.2 million decline in fair value change between periods is primarily captured in other income. Please refer to the Q1 2022 Earnings presentation available on our website for additional details related to other non-interest income.

Revenue from the origination and sale of residential mortgages was $16.8 million for the first quarter of 2022, a decrease of $6.8 million from the prior quarter. This decline reflects a sequential quarter decrease of $222.1 million or 25.5% in for-sale mortgage origination volume given anticipated seasonal trends that were exacerbated by rising long-term interest rates. Of the current quarter's mortgage production, 58% related to purchase activity, compared to 54% for the prior quarter and 37% for the same period of the prior year. A 12-basis point linked-quarter decrease in the mortgage banking gain on sale margin to 2.59% for the first quarter of 2022 reflects the negative impact from rising rates on the pipeline. Interest rate movements favorably impacted valuation of the MSR asset, resulting in a net write-up during the quarter of $34.8 million, which includes a $40.1 million fair value gain related to model inputs.

Over the next one-to-two quarters, we expect to put hedges in place to reduce the volatility of MSR fair value impacts on a net basis in future quarters. Additionally, we undertook structural changes in the mortgage banking segment in April, including a headcount reduction, to adjust our capacity and expense run rate to meet the origination volume we anticipate over the foreseeable future.

Non-interest Expense
Non-interest expense was $182.4 million for the first quarter of 2022, down $17.3 million from the prior quarter level. The decrease is primarily due to a $4.3 million decline in salaries and employee benefits and a $12.9 million decrease in merger related expenses. The first quarter of 2022 included $2.3 million in merger-related expenses and $3.0 million in exit and disposal costs. Please refer to the Q1 2022 Earnings Presentation available on our website for additional quarterly expense change details.

Capital
As of March 31, 2022, the Company's tangible book value per common share[2] decreased to $11.98, compared to $12.65 in the prior quarter and $12.10 in the same period of the prior year. Rising interest rates drove a decline in the fair value of available-for-sale investment securities and an increase in junior subordinated debt accounted for at fair value during the quarter. The impact of these items is reflected by a decline in accumulated other comprehensive income (AOCI) to $(183.8) million, compared to $1.8 million in the prior quarter and $38.1 million in the prior-year period. Excluding AOCI, tangible book2 increased to $12.83 at March 31, 2022, compared to $12.64 and $11.92 in the linked-quarter and year-ago periods, respectively.

AOCI has no effect on our regulatory capital ratios as the company opted to exclude it from our common equity tier 1 capital calculations. The Company's estimated total risk-based capital ratio was 14.0% and its estimated tier 1 common to risk weighted assets ratio was 11.3% as of March 31, 2022. The Company remains above current "well-capitalized" regulatory minimums. The regulatory capital ratios as of March 31, 2022 are estimates, pending completion and filing of the Company's regulatory reports.

Segment Disclosures
Segment disclosures on pages 14-15 of this press release provide additional detail on the Company's two operating segments: Core Banking and Mortgage Banking.

The Core Banking segment includes all lines of business, except Mortgage Banking, including wholesale, retail, wealth management, as well as the operations, technology, and administrative functions of the Bank and Holding Company. The Mortgage Banking segment includes the revenue earned from the production and sale of residential real estate loans, the servicing income from our serviced loan portfolio, the quarterly changes to the mortgage servicing rights (MSR) asset, and the specific expenses that are related to mortgage banking activities including variable commission expenses. Revenue and related expenses for residential real estate loans held for investment are included in the Core Banking segment as portfolio loans are an anchor product for our consumer channels and are originated through a variety of channels throughout the Company.

Earnings Conference Call Information
The Company will host its first quarter 2022 earnings conference call on April 21, 2022, 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 2022 financial results. There will be a live question-and-answer session following the presentation. To join the call, please dial (866) 440-7407 ten minutes prior to the start time and enter conference ID: 9884055. A re-broadcast will be available approximately two hours after the call by dialing (855) 859-2056 and entering conference ID 9884055. The earnings conference call will also be available as an audio cast, which can be accessed on the Company's investor relations page at https://www.umpquabank.com/investor-relations/.

About Umpqua Holdings Corporation
Umpqua Holdings Corporation (NASDAQ: UMPQ), headquartered in Portland, Oregon, is the parent company of Umpqua Bank, an Oregon-based regional bank with locations across Oregon, Washington, California, Idaho and Nevada. Umpqua Bank has been recognized for its innovative customer experience and banking strategy by national publications including The Wall Street Journal, The New York Times, BusinessWeek, Fast Company and CNBC. The company was named #1 in Customer Satisfaction for the Northwest Region in the J.D. Power 2021 U.S. Retail Banking Satisfaction StudySM, and Forbes consistently ranks Umpqua as one of America's Best Banks. The Portland Business Journal has also recognized Umpqua as the Most Admired Financial Services Company in Oregon for seventeen consecutive years. In addition to its retail and commercial banking presence, Umpqua Bank owns Financial Pacific Leasing, Inc., a nationally recognized commercial finance company that provides equipment leases to businesses. For more information, visit 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. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "target," "projects," "outlook," "forecast," "will," "may," "could," "should," "can" and similar references to future periods. In this press release we make forward-looking statements about strategic and growth initiatives, potential MSR hedging activity and the result of such activity, the impact of structural changes in our home lending division, and mortgage activity. 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: current and future economic and market conditions, including the effects of declines in housing and commercial real estate prices, high unemployment rates, and any slowdown in economic growth particularly in the western United States; the effect of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions; economic forecast variables that are either materially worse or better than end of quarter projections and deterioration in the economy that exceeds current consensus estimates; our ability to effectively manage problem credits; our ability to successfully implement efficiency and operational excellence initiatives; our ability to successfully develop and market new products and technology; changes in laws or regulations; the ability to complete, or any delays in completing, the proposed transaction between us and Columbia Banking System, Inc.; any failure to realize the anticipated benefits of the transaction when expected or at all; certain restrictions during the pendency of the proposed transaction that may impact our ability to pursue certain business opportunities or strategic transactions; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events, diversion of management's attention from ongoing business operations and opportunities; and potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the transaction and integration of the companies. We also caution that the amount and timing of any future common stock dividends or repurchases will depend on the earnings, cash requirements and financial condition of the Company, market conditions, capital requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by the Company's Board of Directors, and may be subject to regulatory approval or conditions.





1 "Non-GAAP" financial measure. See GAAP to Non-GAAP Reconciliation for the comparable GAAP measurement.

2 "Non-GAAP" financial measure. See GAAP to Non-GAAP Reconciliation for the comparable GAAP measurement.

TABLE INDEX


Page

Consolidated Statements of Operations

7

Consolidated Balance Sheets

8

Financial Highlights

10

Loan & Lease Portfolio Balances and Mix

11

Deposit Balances, Mix, and Select Account Details

12

Credit Quality - Non-performing Assets

13

Credit Quality - Allowance for Credit Losses

13

Consolidated Average Balance Sheets, Net Interest Income, and Yields/Rates

15

Segments

16

GAAP to Non-GAAP Reconciliation

18

Umpqua Holdings Corporation

Consolidated Statements of Operations

(Unaudited)


Quarter Ended


% Change

(In thousands, except per share data)

Mar 31, 2022


Dec 31, 2021


Sep 30, 2021


Jun 30, 2021


Mar 31, 2021


Seq.

Quarter


Year
over
Year

Interest income:














Loans and leases

$ 214,404


$ 221,501


$ 224,403


$ 223,470


$ 221,141


(3)%


(3)%

Interest and dividends on investments:














Taxable

18,725


16,566


16,102


14,619


13,112


13%


43%

Exempt from federal income tax

1,372


1,456


1,470


1,487


1,534


(6)%


(11)%

Dividends

86


102


213


405


598


(16)%


(86)%

Temporary investments and interest bearing deposits

1,353


1,229


1,237


774


624


10%


117%

Total interest income

235,940


240,854


243,425


240,755


237,009


(2)%


0%

Interest expense:














Deposits

3,916


4,357


5,100


7,016


10,678


(10)%


(63)%

Securities sold under agreement to
repurchase and federal funds purchased

63


48


88


68


76


31%


(17)%

Borrowings

49


51


149


866


1,772


(4)%


(97)%

Junior subordinated debentures

3,149


3,019


3,014


3,042


3,052


4%


3%

Total interest expense

7,177


7,475


8,351


10,992


15,578


(4)%


(54)%

Net interest income

228,763


233,379


235,074


229,763


221,431


(2)%


3%

Provision (recapture) for credit losses

4,804


(736)


(18,919)


(22,996)



nm


nm

Non-interest income:














Service charges on deposits

11,583


11,188


10,941


10,310


9,647


4%


20%

Card-based fees

8,708


9,355


9,111


10,274


7,374


(7)%


18%

Brokerage revenue

11


31


31


1,135


3,915


(65)%


(100)%

Residential mortgage banking revenue, net

60,786


43,185


34,150


44,443


65,033


41%


(7)%

Gain on sale of debt securities, net

2


4




4


nm


nm

(Loss) gain on equity securities, net

(2,661)


(466)


(343)


4


(706)


nm


277%

Gain on loan and lease sales, net

2,337


4,816


4,208


5,318


1,373


(51)%


70%

BOLI income

2,087


2,101


2,038


2,092


2,071


(1)%


1%

Other (loss) income

(2,884)


12,524


13,569


17,499


20,089


(123)%


(114)%

Total non-interest income

79,969


82,738


73,705


91,075


108,800


(3)%


(26)%

Non-interest expense:














Salaries and employee benefits

113,138


117,477


117,636


121,573


124,134


(4)%


(9)%

Occupancy and equipment, net

34,829


34,310


33,944


34,657


34,635


2%


1%

Intangible amortization

1,025


1,130


1,130


1,130


1,130


(9)%


(9)%

FDIC assessments

4,516


2,896


2,136


1,607


2,599


56%


74%

Merger related expenses

2,278


15,183





0%


nm

Other expenses

26,644


28,715


28,907


30,433


25,094


(7)%


6%

Total non-interest expense

182,430


199,711


183,753


189,400


187,592


(9)%


(3)%

Income before provision for income taxes

121,498


117,142


143,945


154,434


142,639


4%


(15)%

Provision for income taxes

30,341


28,788


35,879


38,291


34,902


5%


(13)%

Net income

$ 91,157


$ 88,354


$ 108,066


$ 116,143


$ 107,737


3%


(15)%















Weighted average basic shares outstanding

216,782


216,624


218,416


220,593


220,367


0 %


(2)%

Weighted average diluted shares outstanding

217,392


217,356


218,978


221,022


220,891


0 %


(2) %

Earnings per common share – basic

$ 0.42


$ 0.41


$ 0.49


$ 0.53


$ 0.49


2%


(14)%

Earnings per common share – diluted

$ 0.42


$ 0.41


$ 0.49


$ 0.53


$ 0.49


2%


(14)%















nm = not meaningful














Umpqua Holdings Corporation

Consolidated Balance Sheets

(Unaudited)












% Change

(In thousands, except per share data)

Mar 31, 2022


Dec 31, 2021


Sep 30, 2021


Jun 30, 2021


Mar 31, 2021


Seq.

Quarter


Year
over
Year

Assets: