UMPQ

Umpqua Holdings Corporation (UMPQ)

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Umpqua Holdings Corporation. (UMPQ)

Q1 2008 Conference Call

April 17, 2008 01:00 pm ET

Executives

Ron Farnsworth - Chief Financial Officer

Raymond P. Davis - President and Chief Executive Officer

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

Mark Wardlow - Senior Credit Officer

Dave Edson - President of Northwest Region

Bill Fike - President of California Region

Analysts

Brett Rabatin

Brent Christ

Todd Hagerman

Joe Morford

Jim Bradshaw

Dustin Brumbaugh

Norman Jaffe

Bill Ken

Jim [Doyle]

Matthew Clark

Russell Gunter

Presentation

Operator

Good day everyone. My name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Umpqua Holdings First 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. [Operator Instructions].

Thank you. I would now like to turn today’s conference over to Ron Farnsworth, Chief Financial Officer. Sir, you may begin your conference.

Ron Farnsworth - Chief Financial Officer

Thank you, Christie. Good morning and thank you for joining us today as we discuss the results of operations for the first quarter of 2008 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 10-K, 10-Qs 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 and 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 Wardlow, 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 - President and Chief Executive Officer

Thank you, Ron and good morning. As our press release indicated, for the first quarter of 2008 the company reported earnings of $24.7 million or $0.41 per diluted share compared to $20.7 million or $0.35 for the same quarter a year ago, and 9.6 million or $0.16 for the fourth quarter 2007.

We are pleased with several aspects of the company’s performance this past quarter. Specifically, our mortgage banking division reported strong results in origination and sales revenue, our aggressive efforts in managing our net interest margin, which finished about flat this quarter with last and after five sequential quarters of increasing non-performing assets, we are pleased to report that during this past quarter the company realized a decrease in our level of non-performing assets. Also, the Umpqua [Olympics] store deposit promotion, which we kicked off in February is increasing customer relationships and demand deposits and has been very successful over the last two months. And finally, our cost control initiatives continue to be successful.

The improvement in these areas are critical to the overall efforts to return the company to normalized earnings. Even though our organic growth in loans and deposits slowed this past quarter due to seasonal trends and the economy, we are confident that the company’s growth strategy remains as viable as ever.

During this past quarter, the company also reported other significant actions that impacted our earnings that are outlined in our quarterly press release. For a more complete review of these transactions and their impact on the company, I am going to turn the call over to Ron for his remarks and explanation. Ron?

Ron Farnsworth - Chief Financial Officer

Thank you Ray. Our first quarter net interest margin was 3.98% and declined only 2 basis points from the fourth quarter. On an asset yields declined 40 basis points this quarter based primarily on the recent reductions in the prime rate. We were successful in reducing the cost of interest bearing deposits by 50 basis points this quarter, beginning the earning asset yield pressure. The interest reversals on new non-accrual loans in Q1 of $300,000 caused the decline of 2 basis points in our loan yield and margin. Excluding the interest reversal, our first quarter margin would have been flat with Q4.

While we have $2 billion in loans tied to prime and 3.3 billion repricing within one year, we also have 3.2 billion in interest bearing non-time deposits available for repricing. In addition, we have 715 million in time deposits maturing within 90 days and $1.8 billion maturing within a year. These time deposits are expected to reprice up to 100 basis points lower based on current market rate. Given these sources of funds, we believe we have the continued ability to match future Fed cuts with downward repricing on deposits.

The decline in earning asset yields and interest bearing deposit costs occurred steadily throughout the quarter. For the month of March, our loan yield was 6.69%, down 20 basis points from the overall Q1 total, while our cost of interest bearing deposits were 2.74%, down 29 basis points.

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