UMPQ

Umpqua Holdings Corporation (UMPQ)

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Umpqua Holdings Corporation (UMPQ)

Q4 2007 Earnings Call

January 24, 2008 1:00 pm ET

Executives

Ronald L. Farnsworth – Principal Financial Officer

Raymond P. Davis – President, Chief Financial Officer

Brad F. Copeland – Senior Executive Vice-President, Chief Credit Officer

David M. Edson – Executive Vice President

William T. Fike – President Umpqua Bank – California

Mark Wordlow – Senior Credit Officer

Analysts

Todd Hagerman – Credit Suisse

Brent Chris – Fox-Pitt Kelton

Morton O’Tool Smith

Brett Rabatan – FTN Midwest Securities Corp.

Joe Morford – RBC Capital Markets

Jim Bradshaw – D.A. Davidson & Co.

Mathew Clark – Keefe, Bruyette & Woods

Jeff Manning – Oregonian Newspaper

Presentation

Operator

Good afternoon. My name is Thia and I will be the conference operator today. At this time I would like to welcome everyone to the Umpqua Holdings fourth quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. (Operators Instructions) I will now turn the conference over to Ron Farnsworth. Sir please go ahead.

Ronald L. Farnsworth

Good morning and thank you for joining us today as we discuss results of operations for the fourth quarter and full year 2007 for Umpqua Holdings Corporation. In reviewing the company’s prospects today we will make forward-looking statements which are provided under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties and our actual results may differ materially from those that we anticipate and predict today. We encourage you to review the risk factors stated in the company’s 10K, 10Q and other reports filed with the SEC and we caution you not to place undue reliance on forward-looking statements. The company does not intend to correct or update any of the forward-looking statements that we make today. With us this morning are Ray Davis, President, CEO of Umpqua Holdings Corporation and Brad Copeland our Chief Credit Officer, Dave Edson President of our Northwest region, Bill Fike President of our California Region and Mark Wordlow our Senior Credit Officer will also be here for the question and answer session. A two week rebroadcast of this call will be available two hours after the call by dialing 800-642-1687. This number is also noted in the earnings release we issued this morning. I’ll now turn the call over to Ray Davis.

Raymond P. Davis

Thank you Ron and good morning everybody. For the year 2007 management reported operating earnings of $65.3 million or $1.08 per diluted share compared to $87.3 million or $1.65 per diluted share for the year of 2006. For the fourth quarter of 2007 the company reported operating earnings of $9.6 million or $0.16 per diluted share compared to $24.8 million or $0.42 per diluted share for the fourth quarter of 2006. Operating earnings exclude merger related expenses; no tax was totaled $71,000 for the fourth quarter and $2 million for the year 2007. Before we focus our call on credit quality there are several other actions that impacted our performance this past quarter including the following: we accrued $5.1 million for our estimated pro rata share of the Visa membership litigation expense related to their settlement with American Express and ongoing litigation with Discover. We anticipate our proportionate share of the proceeds of the planned public offering by Visa in the near future will more than offset this liability.

Deposit growth this past quarter was mixed. California deposits grew $71 million while Oregon, Washington remained flat. Our organic growth rate for deposits for the year was 5% made up of 6% growth in Oregon, Washington and 4% growth in California. Total deposit growth for the year including our acquisition was 13%. Excluding the acquisition of North Bay Bank Corp., the company’s loan growth also was 5%. Our Oregon, Washington credit team grew their organic loan totals by 10% for the year. In California we incurred a reduction in total loan’s outstanding of 3%. This result was due to management’s decision to eliminate loans that were stressed as well as to reduce our residential development portfolio. Before I turn the call over to Brad to discuss our credit quality status a few comments from me on our performance in this area.

First, I want to reiterate what has been said in previous calls that the credit and special assets teams here at Umpqua are experienced professionals that are more than capable of dealing with our problems. During our third quarter earnings call we provided you with specific credit quality measurement guidance for the fourth quarter which we are pleased to report we achieved in all areas. It is also important to comment that the loan issues that Umpqua is dealing with now are traditional credit issues they are not complicated investments or loan products but plain vanilla credit that has fallen victim to the current housing and economic downturn. This past quarter’s non-performing loan total which would have been better had it not been for one previously classified $24.7 million relationship that was placed on non-accrual late in the quarter. This property was a multi-use commercial residential asset that is well secured and we expect no loss on this property. Excluding this the average non-accrual loan relationship is $1.6 million. Our management team feels that we are near an inflection point with our credit quality issues in California. We are of this opinion due to the lack of any significant new classified loans for the last 90 days and due to the extensive loan audits our teams have completed this past quarter. We recognize that like other institutions we are somewhat at the mercy of economic conditions. However, at this point in the cycle we understand and have identified our issues and are working quickly towards a resolution and look forward to returning to the normalized earnings in the near future. Ron Farnsworth will provide more information on our net interest margin, capital and other financial matters in a few minutes. Now Brad will give you more detail on our credit quality status.

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