As Filed with the Securities and Exchange Commission on May 10, 2000
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended: March 31, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____________ to
_____________.
Commission File Number: 000-25597
Umpqua Holdings Corporation
(Exact Name of Registrant as Specified in Its Charter)
OREGON 93-1261319
-------------------------------- ---------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
445 SE Main St
Roseburg, Oregon 97470
--------------------------------------------------
(address of Principal Executive Offices)(Zip Code)
(541) 440-3963
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes ____ No
Indicate the number of shares outstanding for each of the issuer's classes of
common stock, as of the latest practical date:
Common stock, no par value, outstanding as of April 30, 2000: 7,626,127
<PAGE>
UMPQUA HOLDINGS CORPORATION
FORM 10-Q
QUARTERLY REPORT
TABLE OF CONTENTS
-----------------
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Statements of Income:
Three months ended March 31, 2000 and 1999 3
Condensed Consolidated Statements of
Comprehensive Income: Three months ended March
31, 2000 and 1999 4
Condensed Consolidated Balance Sheets: March 31,
2000 and December 31, 1999 5
Condensed Consolidated Statements of Cash Flows:
Three months ended March 31, 2000 and 1999 6
Notes to Condensed Consolidated Financial
Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-14
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 14-15
PART II OTHER INFORMATION
Item 1. Legal Proceedings none
Item 2. Changes in Securities none
Item 3. Defaults Upon Senior Securities none
Item 4. Submission of Matters to a Vote of Security Holders none
Item 5. Other Information none
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
2
<PAGE>
PART I: FINANCIAL INFORMATION
UMPQUA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
------------- ------------------
<S> <C> <C>
Interest Income
Interest and fees on loans $5,741,260 $ 4,365,657
Interest on investment securities
available for sale 1,175,471 1,244,880
Interest bearing deposits with other banks 126,966 112,844
------------- ------------------
Total interest income 7,043,697 5,723,381
------------- ------------------
Interest Expense
Interest on deposits 2,119,091 1,618,078
Interest on borrowings 544,190 323,418
------------- ------------------
Total interest expense 2,663,281 1,941,496
------------- ------------------
Net Interest Income 4,380,416 3,781,885
Provision for loan losses 450,000 328,000
------------- ------------------
Net interest income after provision
for loan losses 3,930,416 3,453,885
Noninterest Income
Service charges 789,607 651,992
Brokerage fees and commissions 1,480,088 100,100
Other noninterest income 140,537 225,654
------------- ------------------
Total noninterest income 2,410,232 977,746
------------- ------------------
Noninterest Expense
Salaries and employee benefits 2,461,322 1,361,025
Premises and Equipment 573,239 365,529
Other noninterest expense 1,279,230 810,676
------------- ------------------
Total noninterest expense 4,313,791 2,537,230
------------- ------------------
Income before income taxes 2,026,857 1,894,401
Provision for income taxes 714,509 691,456
------------- ------------------
Net Income $1,312,348 $ 1,202,945
============= ==================
Earnings Per Share
Basic $ 0.17 $ 0.16
Diluted $ 0.17 $ 0.15
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
UMPQUA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
----------- -----------
<S> <C> <C>
Net income $ 1,312,348 $ 1,202,945
----------- -----------
Unrealized losses arising during the period on
investment securities available for sale (118,478) (804,012)
Income tax benefit related to unrealized losses
on investment securities (45,443) (274,048)
----------- -----------
Net unrealized losses on investment
securities available for sale (73,035) (529,964)
----------- -----------
Comprehensive Income $ 1,239,313 $ 672,981
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
UMPQUA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 27,429,974 $ 30,058,897
Interest bearing deposits in other banks 15,591,303 15,630,197
------------ ------------
Total Cash and Cash Equivalents 43,021,277 45,689,094
Trading account assets 653,319 474,782
Investment securities available for sale 75,714,637 76,868,536
Mortgage loans held for sale 1,185,480 -
Loans receivable 259,623,756 248,533,933
Less: Allowance for loan losses (3,777,133) (3,469,350)
------------ ------------
Loans, net 255,846,623 245,064,583
Federal Home Loan Bank stock at cost 2,384,100 2,346,200
Premises and equipment, net of depreciation 9,615,792 9,419,744
Interest receivable 2,703,163 1,141,308
Other assets 4,650,303 5,732,469
------------ ------------
Total Assets $395,774,694 $386,736,716
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest bearing $ 62,671,133 $ 59,709,104
Savings and interest-bearing checking 149,436,900 151,199,156
Time deposits 99,355,975 90,765,095
------------ ------------
Total Deposits 311,464,008 301,673,355
Term debt to Federal Home Loan Bank 44,148,000 46,158,000
Accrued interest payable 523,313 543,424
Other liabilities 1,989,210 1,645,715
------------ ------------
Total Liabilities 358,124,531 350,020,494
------------ ------------
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common stock 25,778,259 25,778,259
Retained earnings 13,715,344 12,708,368
Cumulative other comprehensive income (1,843,440) (1,770,405)
------------ ------------
Total Shareholders' Equity 37,650,163 36,716,222
------------ ------------
Total Liabilities and Shareholders' Equity $395,774,694 $386,736,716
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
UMPQUA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,312,348 $ 1,202,945
Adjustments to reconcile net income to net cash provided by
operating activities:
Federal Home Loan Bank stock dividends (37,900) (37,200)
Net increase in trading account assets (178,537) -
Amortization of investment premiums, net 39,926 48,646
Origination of loans held for sale (2,852,430) (4,354,450)
Proceeds from sales of loans held for sale 1,677,418 5,527,690
Provision for loan losses 450,000 328,000
Gain on sales of loans (10,468) (69,929)
Depreciation of premises and equipment 173,189 164,855
Net increase in other assets (434,246) (355,557)
Net increase in other liabilities 323,384 275,795
----------- -----------
Net cash provided by operating activities 462,684 2,730,795
----------- -----------
Cash flows from investing activities:
Purchases of investment securities - (5,114,945)
Maturities of investment securities - 4,518,056
Principal repayments received on mortgage-backed
and related securities 995,495 2,925,532
Net loan originations (12,235,930) (15,057,141)
Purchase of loans (5,362) (763,380)
Proceeds from sales of loans 1,009,252 1,275,864
Purchases of premises and equipment (369,237) (441,318)
----------- -----------
Net cash used in investing activities (10,605,782) (12,657,332)
----------- -----------
Cash flows from financing activities:
Net increase (decrease) in deposit liabilities 9,790,653 (2,170,036)
Dividends paid on common stock (305,372) (306,702)
Repurchase of common stock - (303,113)
Proceeds from stock options exercised - 91,316
Repayments of Federal Home Loan Bank borrowings (2,010,000) (10,000)
----------- -----------
Net cash provided by (used in) financing activities 7,475,281 (2,698,535)
----------- -----------
Net decrease in cash and cash equivalents (2,667,817) (12,625,072)
Cash and cash equivalents, beginning of period 45,689,094 36,967,543
----------- -----------
Cash and cash equivalents, end of period $43,021,277 $24,342,471
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 2,683,392 $ 1,751,126
Income taxes $ - $ -
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of financial statement preparation
The accompanying condensed consolidated financial statements have been
prepared by the Company without audit and in conformity with generally
accepted accounting principles for interim financial information.
Accordingly, certain financial information and footnotes have been
omitted or condensed. The condensed consolidated financial statements
include the accounts of Umpqua Holdings Corporation (the Company), South
Umpqua Bank (the Bank) and Strand, Atkinson, Williams & York, Inc. All
significant intercompany balances and transactions have been eliminated
in consolidation. In the opinion of management, the condensed
consolidated financial statements include all necessary adjustments
(which are of a normal and recurring nature) for the fair presentation of
the results of the interim periods presented. These financial statements
should be read in conjunction with the Company's 1999 annual report to
shareholders. The results of operations for the 2000 interim period shown
in this report is not necessarily indicative of the results for any
future interim period or the entire fiscal year.
(b) Earnings per share
Basic and diluted earnings per share are based on the weighted average
number of common shares outstanding during each period, with diluted
including the effect of potentially dilutive common shares. The weighted
average number of common shares outstanding for basic earnings per share
computations were 7,609,727 and 7,666,949 for the three months ended
March 31, 2000 and 1999 respectively. For diluted earnings per share
123,295 and 143,606 were added to weighted average shares outstanding for
the three months ended March 31, 2000 and 1999 respectively, representing
potential dilution for stock options outstanding, calculated using the
treasury stock method.
Options to purchase 296,600 shares of common stock for prices ranging
from $8.625 to $12.00 per share were outstanding during the quarter ended
March 31, 2000 but were not included in the computation of diluted
earnings per share because the options' exercise price was greater than
the average market price of the common shares during the period.
(2) SEGMENT INFORMATION
For purposes of measuring and reporting the financial results, the
Company is divided into two business segments; Community Banking and
Retail Brokerage Services. The Community Banking segment consists of the
operations conducted by the Company's subsidiary South Umpqua Bank. The
Bank provides a full array of credit and deposit products to meet the
banking needs of its market area and targeted customers. At March 31,
2000, the Bank had 13 full service stores. The Retail Brokerage Service
segment consists of the operations of the Company's subsidiary Strand,
Atkinson, Williams & York, Inc. which was acquired in December 1999.
Strand, Atkinson, Williams & York, Inc. provides a full range of retail
brokerage services to its clients through its two principal offices in
Portland and Medford, Oregon as well as sales counters at most of the
7
<PAGE>
Bank's stores. At March 31, 2000, Strand, Atkinson, Williams & York, Inc.
had 16 full time brokers. The following table presents summary income
statements and a reconciliation to the Company's consolidated totals for
the three months ended March 31, 2000.
<TABLE>
<CAPTION>
($ in thousands) Community Retail Brokerage
Banking Services Administration Eliminations Consolidated
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Income $ 7,037 $ 6 $ - $ - $ 7,043
Interest Expense 2,663 - - - 2,663
-------------------------------------------------------------------------------
Net Interest Income 4,374 6 - - 4,380
Provision for Loan Losses 450 - - - 450
Noninterest Income 960 1,465 - (15) 2,410
Noninterest Expense 3,123 1,186 19 (15) 4,313
-------------------------------------------------------------------------------
Income (loss) before Taxes 1,761 285 (19) - 2,027
Income Tax Expense (Benefit) 612 110 (7) - 715
-------------------------------------------------------------------------------
Net Income (loss) $ 1,149 $ 175 $ (12) $ - $ 1,312
===============================================================================
</TABLE>
Total assets by segment have not changed materially since December 31, 1999.
(2) IMPAIRED LOANS
The Company had loans totaling $770,000 and $1,051,700 at March 31, 2000
and December 31, 1999, respectively, that were considered impaired. At
March 31, 2000 and December 31, 1999 the allowance for loan losses
allocated to impaired loans was $540,000. The average investment in
impaired loans was $1,039,000 for the quarter ended March 31, 2000. All
payments received on the loans were applied to principal and consequently
no income was recognized during the quarter.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion contains a review of Umpqua Holdings
Corporation's (Company) financial condition at March 31, 2000 and the
operating results for the three months then ended. When warranted,
comparisons are made to the same period in 1999 and to December 31, 1999.
This discussion should be read in conjunction with the financial
statements (unaudited) contained elsewhere in this report. All numbers,
except per share data, are expressed in thousands of dollars.
This discussion contains certain forward-looking statements, which are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from
those stated. These risks and uncertainties include the Company's ability
to maintain or expand its market share, net interest margins, or
implement its marketing and growth strategies. Further, actual results
may be affected by the Company's ability to compete on price and other
factors with other financial institutions; customer acceptance of new
products and services; general trends in the banking and the regulatory
environment, as they relate to the Company's cost of funds and returns on
8
<PAGE>
assets. In addition there are risks inherent in the banking industry
relating to the collectability of loans and changes in interest rates.
The reader is advised that this list of risks is not exhaustive and
should not be construed as any prediction by the Company as to which
risks would cause actual results to differ materially from those
indicated by the forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements.
HIGHLIGHTS
The Company earned $1,312 during the first quarter of 2000, an increase of
9.1% over first quarter 1999 earnings of $1,203. Diluted earnings per share
for the first quarters of 2000 and 1999 were $0.17 and $0.15, respectively. At
March 31, 2000 total assets were $395,775, up slightly from December 31, 1999
total assets of $386,737. Comparing the first quarter of 2000 to the same
period in 1999, return on average equity improved from 13.3% in 1999 to 14.2%
in 2000.
Additionally, the Company opened its first store in Salem, Oregon and due to
its success announced plans for a second store in the Salem area. The Company
was also granted approval by the Federal Reserve Board to become a financial
holding company on March 13, 2000.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income is the primary source of the Company's revenue. Net
interest income is the difference between interest income earned from loans
and investment securities, and interest expense paid on customer deposits and
debt. Changes in net interest income result from changes in "volume" and
"rate". Volume refers to the dollar level of interest earning assets and
interest bearing liabilities. Rate refers to the underlying earnings yields on
assets and costs of liabilities.
Net interest income on a tax-equivalent basis for the first quarter 2000 was
$4,492, an increase of 16.5% over net interest income of $3,856 in the first
quarter of 1999 (see table 1). The primary reason for the improvement was an
increase in average volume of earning assets.
The overall earning asset yield for the first quarter of 2000 was 8.42%, up
0.27% from the comparable prior year period. Average loans during the first
quarter of 2000 were $253,962, a 31.7% increase over the first quarter of
1999. Average investment securities decreased $6,719 in the first quarter of
2000 compared with the same period in 1999 due to principal payments on
mortgage backed securities and maturities.
The cost of interest bearing liabilities during the first quarter 2000 was
3.85%, up 0.33% from the first quarter of 1999. The increase was due to
increased rates paid on time deposits and term debt as well as a shift in the
mix of interest bearing deposits to more expensive sources of funds. Interest
bearing checking and savings accounts, traditionally the least expensive
source of funds for the Company, decreased to 51.2% of total interest bearing
liabilities for the first quarter of 2000 compared with 56.6% in the first
quarter of 1999. Interest bearing liabilities comprised 81.5% of the earning
asset base during the first quarter of 2000 compared to 77.5% during the first
quarter of 1999.
9
<PAGE>
Table 1
AVERAGE BALANCES AND AVERAGE RATES EARNED AND PAID The following table
shows average balances and interest income or interest expense, with the
resulting average yield or rates by category of average earning asset or
interest-bearing liability:
<TABLE>
<CAPTION>
Three Months ended Three Months ended
March 31, 2000 March 31, 1999 INCREASE (DECREASE)
AVERAGE INCOME/ AVERAGE INCOME/ DUE TO CHANGE IN NET
BALANCE EXPENSE RATE BALANCE EXPENSE RATE VOLUME RATE CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(in thousands)
INTEREST-EARNING ASSETS:
Loans (1)(2) $253,962 $ 5,735 9.08% $192,792 $ 4,348 9.15% $ 1,391 $ (4) $ 1,387
Loans held for sale 213 7 13.22% 632 18 11.55% (12) 1 (11)
Trading Account Assets 527 9 6.87% - - 0.00% 0 9 9
Investment securities
Taxable securities 56,972 926 6.50% 69,877 1,072 6.14% (198) 52 (146)
Nontaxable securities (1) 21,319 357 6.70% 15,133 247 6.53% 101 9 110
Temporary investments 8,764 121 5.55% 10,057 113 4.56% (15) 23 8
---------------- ---------------- --------------------------
Total interest earning assets 341,757 7,155 8.42% 288,491 5,798 8.15% 1,267 90 1,357
Cash and due from banks 16,456 16,456
Allowance for loan losses (2,729) (2,729)
Other assets 10,171 10,171
--------- ---------
Total assets $365,655 $312,389
========= =========
INTEREST-BEARING LIABILITIES:
Interest-bearing checking and
savings accounts $142,606 862 2.43% $126,622 775 2.48% 99 (12) 87
Time deposits 96,818 1,257 5.22% 71,507 844 4.79% 301 112 413
Term debt 39,074 544 5.60% 25,425 323 5.15% 175 46 221
---------------- ---------------- --------------------------
Total interest-bearing
liabilities 278,498 2,663 3.85% 223,554 1,942 3.52% 575 146 721
--------------------------
Non interest bearing deposits 50,300 50,300
Other liabilities 1,840 1,840
--------- ---------
Total liabilities 330,638 275,694
Shareholders' equity 36,695 36,695
--------- ---------
Total liabilities and
shareholders' equity $367,333 $312,389
========= =========
NET INTEREST INCOME (1) $ 4,492 $ 3,856 $ 692 $ (56) $ 636
======== ======== ==========================
NET INTEREST SPREAD 4.57% 4.63%
AVERAGE YIELD ON EARNING 8.42% 8.15%
ASSETS (1),(2)
INTEREST EXPENSE TO 3.13% 2.73%
EARNING ASSETS
--------- -------
NET INTEREST INCOME TO 5.29% 5.42%
========= =======
</TABLE>
(1) Tax exempt income has been adjusted to a tax equivalent basis at a 34%
effective rate. The amount of such adjustment was an addition to recorded
income of $112 and $74 for the three months ended March 31, 2000 and
1999, respectively.
(2) Non-accrual loans are included in average balance.
Provision for Loan Losses
The provision for loan losses is management's estimate of the amount necessary
to maintain an allowance for loan losses that is considered adequate based on
the risk of future losses in the loan portfolio (see additional discussion
under Allowance for Loan Losses). The provision for loan losses for the first
quarter of 2000 was $450 compared with $328 during the first quarter of 1999.
Net charge-offs were $147 for the three months ended March 31, 2000 compared
with net charge-offs of $80 for the same period in 1999. Nonperforming assets
10
<PAGE>
decreased from $1,604 at December 31, 1999 to $1,398 at March 31, 2000. The
decrease in nonperforming assets was primarily attributable to principal
payments received on nonaccrual loans. The allowance for loan losses totaled
$3,777, or 1.45% of total loans, at March 31, 2000 compared with $3,469, or
1.40% of total loans at December 31, 1999.
Noninterest Income
Noninterest income increased $1,432 from $978 to $2,410 during the first
quarter of 2000 compared with the same period in 1999. This increase was
primarily attributable to the revenues generated by the Company's brokerage
subsidiary Strand, Atkinson, Williams & York, Inc.(see additional discussion
under business segments). Brokerage fees and commissions were $1,480 in the
first quarter of 2000 compared with $100 in the first quarter of 1999. Service
charges increased $138 compared with the first quarter of 1999 to $790 in the
first quarter of 2000. This increase was primarily attributable to increased
service charges on deposit accounts and increased ATM fees due to expansion of
the Company's ATM network. Other income decreased $85 due primarily to
decreases in servicing release premiums on mortgages sold.
Noninterest Expense
Noninterest expense for the first quarter of 2000 was $4,314, an increase of
$1,777 over the first quarter of 1999. The primary reason for the increase was
expenses generated by the Company's brokerage subsidiary Strand, Atkinson,
Williams & York, Inc. (see additional discussion under business segments). The
following table details noninterest expenses by company:
<TABLE>
<CAPTION>
NONINTEREST EXPENSE DETAIL For the quarter ended March 31, 2000
Community Retail Brokerage
Banking Services Administration Eliminations Consolidated
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits $ 1,582 $ 879 $ - $ - $ 2,461
Premises and Equipment 541 32 - - 573
Other noninterest expense 1,002 270 19 (11) 1,280
-----------------------------------------------------------------------------------
Total noninterest expense $ 3,125 $ 1,181 $ 19 $ (11) $ 4,314
===================================================================================
For the quarter ended March 31, 1999
Community Retail Brokerage
Banking Services Administration Eliminations Consolidated
-----------------------------------------------------------------------------------
Salaries and employee benefits $ 1,361 $ - $ - $ - $ 1,361
Premises and Equipment 366 - - - 366
Other noninterest expense 811 - - - 811
-----------------------------------------------------------------------------------
Total noninterest expense $ 2,538 $ - $ - $ - $ 2,538
===================================================================================
</TABLE>
11
<PAGE>
The increase in salaries and benefits at the Bank was due to expansion of the
lending staff and related support areas as well as employee costs related to
the Portland store which opened in July 1999 and the Salem store which opened
in January 2000. Occupancy and equipment costs were up at the Bank due
primarily to expenses associated with the new Portland and Salem stores and
expansion of the Bank's ATM network. Other expense at the Bank was up $191 due
to increased supplies, communications and marketing expenses associated with
expansion into new markets and new account growth.
Income taxes
The effective tax rate for the Company decreased to 35.3% during the first
quarter of 2000 from 36.5% during the first quarter of 1999. The decrease was
due to increased tax-exempt municipal interest income during the first quarter
of 2000 compared with the same period in the prior year.
Financial Condition
Significant changes in the Company's financial position from December 31, 1999
to March 31, 2000 are as follows:
Loans
Loans have increased $11.1 million since December 31, 1999 to $259.6 million
at March 31, 2000. This increase was primarily due to increases in commercial
real estate loans outstanding which have increased $9.8 million during the
period. Loans outstanding at March 31, 2000 and December 31, 1999 were as
follows:
<TABLE>
<CAPTION>
LOAN DETAIL
March 31, 2000 December 31, 1999
---------------------------------------
<S> <C> <C>
Commercial & Industrial $56,515 $60,137
Real Estate:
Construction 33,633 29,962
Residential Mortgage 24,398 23,099
Commercial Real Estate 114,595 104,823
Individuals 30,287 30,309
Other 196 204
---------------------------------------
Total Loans $259,624 $248,534
=======================================
</TABLE>
The Company had no off balance sheet derivative financial instruments as of
March 31, 2000 or December 31, 1999.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level considered by
management to be adequate to absorb losses inherent in the loan portfolio.
12
<PAGE>
Management monitors and evaluates the adequacy of the allowance on an ongoing
basis. The following tools are used to manage and evaluate the loan portfolio:
o Internal credit review and risk grading system
o Regulatory examination results
o Monitoring of charge-off, past due and non-performing activity and trends
o Assessment of economic and business conditions in our market areas
On a quarterly basis losses inherent in the portfolio are estimated by
reviewing the following key elements of the loan portfolio:
o Portfolio performance measures
o Portfolio mix
o Portfolio growth rates
o Historical loss rates
o Portfolio concentrations
o Current economic conditions in our market areas
The Company also tests the adequacy of the allowance for loan losses using
the following methodologies:
o Loss allocation by internally assigned risk rating
o Loss allocation by portfolio type based on historic loan loss experience
o The allowance as a percentage of total loans
The allowance for loan losses is based upon estimates of losses inherent in
the portfolio. The amount of losses actually incurred can vary significantly
from these estimates. Assessing the adequacy of the allowance on a quarterly
basis allows management to adjust these estimates based upon the most recent
information available.
Activity in the allowance for loan losses was as follows for the three month
period ending March 31, 2000:
<TABLE>
<CAPTION>
ALLOWANCE ACTIVITY
Three months ended
March 31, 2000
-------------------
<S> <C>
Beginning Balance $ 3,469
Provision for Loan Losses 450
Charge-offs (157)
Recoveries 15
-------------------
Net charge-offs/recoveries (142)
-------------------
Ending Balance $ 3,777
===================
</TABLE>
Liquidity
Liquidity enables the Company to meet the borrowing needs of its customers
and withdrawals of its depositors. The Company meets its liquidity needs
through the maintenance of cash resources, lines of credit with other
financial institutions, maturities and sales of investments securities
available for sale, and a stable base of core deposits. Having a stable and
13
<PAGE>
diversified deposit base is a significant factor in the Company's long-term
liquidity structure. At March 31, 2000 that Company had a total funding line
with the Federal Home Loan Bank of $96.1 million of which $44.1 million was
outstanding. The Company also had available lines of $18.4 million from
other financial institutions.
At March 31, 2000 the Company had approximately $55 million in outstanding
commitments to extend credit. The Company anticipates that a portion of
these commitments will expire or terminate without funding and that the
Company has sufficient available resources to fund these commitments in the
normal course of business.
Capital Resources
Total shareholders' equity increased $1.0 million to $37.7 million at March
31, 2000. The increase was the result of earnings of $1.3 million, offset by
dividends paid of $0.3 million. At March 31, the Company's Tier 1 and total
risk-based capital ratios were approximately 13.7% and 15.0%. The Federal
Reserve Board's minimum risk-based capital ratio guidelines for Tier 1 and
total capital are 4% and 8% respectively.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company considers interest rate, credit and operations risks as the most
significant risks impacting the Company. Other types of market risk, such as
foreign exchange risk and commodity price risk, do not impact the Company in
the normal course of operations.
The Company relies on prudent underwriting standards, loan reviews and an
adequate allowance for loan losses to mitigate credit risk. Internal controls
and periodic internal audits of business operations mitigate operations risk.
The Company uses an asset/liability model to measure and monitor interest rate
risk. The model projects net interest income for the upcoming twelve months in
various interest rate scenarios. The model the Company uses includes
assumptions regarding prepayments of assets and early withdrawals of
liabilities, the level and mix of interest earning assets and interest bearing
liabilities, the level and responsiveness of interest rates on deposit
products without stated maturities and the level of nonperforming assets.
These assumptions are based on management's judgement and future expected
pricing behavior. Actual results could vary significantly from the results
derived from the model. The Company's interest rate risk has not changed
materially since December 31, 1999. The Company also has increased its
emphasis on noninterest sources of revenue in order to further stabilize
future earnings.
14
<PAGE>
Part II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are being filed herewith and this list constitutes
the exhibit index.
Exhibit 27 Financial Data Schedule
(b) There were no current reports on Form 8-K filed by the registrant during
the quarter ended March 31, 2000
15
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UMPQUA HOLDINGS CORPORATION
(Registrant)
/s/ Raymond P. Davis
Dated: May __, 2000 --------------------------------------
Raymond P. Davis
President and Chief Executive Officer
/s/ Daniel A. Sullivan
Dated: May __, 2000 --------------------------------------
Daniel A. Sullivan
Senior Vice President and
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited condensed consolidated financial statements of Umpqua Holdings
Corporation for the three months ended March 31, 2000, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001077771
<NAME> Umpqua Holdings Corporation
<MULTIPLIER> 1
<CURRENCY> U.S.Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 27,429,974
<INT-BEARING-DEPOSITS> 15,591,303
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 653,319
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 260,809,236
<ALLOWANCE> 3,777,133
<TOTAL-ASSETS> 395,774,694
<DEPOSITS> 311,464,008
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,512,523
<LONG-TERM> 44,148,000
0
0
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<OTHER-SE> 11,871,904
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<INTEREST-LOAN> 5,741,260
<INTEREST-INVEST> 1,175,471
<INTEREST-OTHER> 126,966
<INTEREST-TOTAL> 7,043,697
<INTEREST-DEPOSIT> 2,119,091
<INTEREST-EXPENSE> 2,663,281
<INTEREST-INCOME-NET> 4,380,416
<LOAN-LOSSES> 450,000
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<EXPENSE-OTHER> 4,313,791
<INCOME-PRETAX> 2,026,857
<INCOME-PRE-EXTRAORDINARY> 2,026,857
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<NET-INCOME> 1,312,348
<EPS-BASIC> 0.17
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