Umpqua Holdings Reports Improved Third Quarter 2010 Results

Umpqua Holdings Corporation (NASDAQ: UMPQ), parent company of Umpqua Bank and Umpqua Investments Inc. today announced third quarter 2010 net earnings available to common shareholders of $8.2 million, or $0.07 per diluted common share, compared to a net loss available to common shareholders of $10.4 million, or $0.14 per diluted common share, for the same period in the prior year.

Operating income, defined as earnings available to common shareholders before gains or losses on junior subordinated debentures carried at fair value, net of tax, bargain purchase gains on acquisitions, net of tax, merger related expenses, net of tax, and goodwill impairment, was $9.5 million, or $0.08 per diluted common share for the third quarter of 2010, compared to an operating loss of $11.0 million, or $0.15 per diluted common share, for the same period in the prior year. Operating income or loss is considered a "non-GAAP” financial measure. More information regarding this measurement and reconciliation to the comparable GAAP measurement is provided under the heading Non-GAAP Financial Measures below.

Significant financial statement items for the third quarter of 2010 include:

• Non-covered, non-performing assets ended the quarter at 1.59% of total assets, the lowest level in more than two years;
• Provision for non-covered loan losses of $24.2 million, a 19% decrease, and total net charge-offs of $30.0 million, a 13% increase, on a sequential quarter basis. Net charge-offs exceeded the provision for non-covered loan losses during the quarter because impairment reserves established in the prior quarter were charged off in the current quarter;
• The allowance for credit losses ended the quarter at 1.91% of non-covered total loans and lease;
• Total deposits increased $743 million, or 9%, on a sequential quarter basis due to organic growth during the quarter;
• Net interest margin, on a tax equivalent basis, increased 37 basis points to 4.42%, related to covered loan payoffs ahead of expectations, with a corresponding offset to the change in FDIC indemnification asset in other non-interest income;
• The cost of interest bearing deposits for the third quarter of 2010 was 1.08%, a decrease of 2 basis points on a sequential quarter basis;
• Tangible common equity ratio decreased to 8.95%, resulting from the growth in total assets;
• Total risk-based capital of 17.52%, and Tier 1 common to risk weighted asset ratio of 13.1%.

"The results from this past quarter once again attest to the strength of the core growth strategy of Umpqua as organic deposit growth exceeded $700 million. We are also pleased to report that for the third quarter in a row, our credit professionals lowered our non-covered, non-performing assets, which are now down to 1.59% of total assets,” said Ray Davis, CEO of Umpqua Holdings Corporation. "We believe the actions management has taken over the last several quarters have positioned the Company for continued growth.”

FDIC-assisted acquisitions

In the first quarter of 2010, Umpqua Bank assumed the banking operations of EvergreenBank ("Evergreen”) and Rainier Pacific Bank ("Rainier”), both located in the greater Seattle-Tacoma area of Washington. In the second quarter of 2010, Umpqua Bank assumed the banking operations of Nevada Security Bank ("Nevada Security”), Reno, Nevada. The operations of Evergreen and Rainier (combined), and Nevada Security, have contributed operating earnings of $7.5 million and $1.2 million, respectively, since their assumptions. The operating systems of all three institutions have been converted onto Umpqua’s platform.

Asset quality – Non-covered loan portfolio

Non-performing assets were $183.6 million, or 1.59% of total assets, as of Sept. 30, 2010, compared to $205.5 million, or 1.90% of total assets as of June 30, 2010, and $156.0 million, or 1.70% of total assets as of Sept. 30, 2009. Of this amount, as of Sept. 30, 2010, $139.7 million represented non-accrual loans, $11.9 million represented loans past due greater than 90 days and still accruing interest, and $32.0 million was other real estate owned ("OREO”).

The Company has aggressively charged-down impaired assets to their disposition values, and the assets are expected to be resolved at those levels, absent further declines in market prices. As of Sept. 30, 2010, the non-performing assets of $183.6 million have been written down by 39%, or $118.8 million, from their original balance of $302.4 million.

The provision for loan losses for the third quarter of 2010 was $24.2 million, the lowest level of provision since the second quarter of 2008, due to improving credit quality of the loan portfolio. Total net charge-offs for the third quarter of 2010 were $30.0 million, reducing the allowance for credit losses to 1.91% of non-covered loans and leases at Sept. 30, 2010, as compared to 2.00% of total non-covered loans as of June 30, 2010 and 1.71% of total non-covered loans as of Sept. 30, 2009. Net charge-offs exceeded the provision for loan losses during the third quarter of 2010, related to impairment reserves established in the prior quarter being charged off in the current quarter. The annualized net charge-off rate for the third quarter of 2010 was 2.08%.

Loans past due 30 to 89 days were $80.2 million, or 1.41% of non-covered loans and leases as of Sept. 30, 2010, as compared to $40.1 million, or 0.70% as of June 30, 2010, and $46.1 million, or 0.76% as of Sept. 30, 2009.

Since 2007, the Company has been aggressively resolving problems arising from the current economic downturn. The following table recaps the Company’s credit quality trends since the second quarter of 2007 as it relates to the non-covered loan portfolio:

Credit quality trends – Non-covered loans
(Dollars in thousands)
											Allowance								Non-covered,
			Provision				Net				for credit losses								non-performing
			for				charge-offs				to non-covered				30-89 days				assets to
			loan loss				(recoveries)				loans %				past due %				total assets %
Q2 2007			$	3,413			$	31			1.17	%			0.56	%			0.59	%
Q3 2007				20,420				865			1.47	%			0.99	%			0.96	%
Q4 2007				17,814				21,188			1.42	%			0.64	%			1.18	%
Q1 2008				15,132				13,476			1.45	%			1.13	%			1.06	%
Q2 2008				25,137				37,976			1.22	%			0.31	%			1.25	%
Q3 2008				35,454				15,193			1.54	%			1.16	%			1.66	%
Q4 2008				31,955				30,072			1.58	%			0.96	%			1.88	%
Q1 2009				59,092				59,871			1.58	%			1.47	%			1.82	%
Q2 2009				29,331				26,047			1.63	%			0.80	%			1.73	%
Q3 2009				52,108				47,342			1.71	%			0.76	%			1.70	%
Q4 2009				68,593				64,072			1.81	%			0.69	%			2.38	%
Q1 2010				42,106				38,979			1.91	%			0.93	%			1.99	%
Q2 2010				29,767				26,637			2.00	%			0.70	%			1.90	%
Q3 2010				24,228				30,044			1.91	%			1.41	%			1.59	%
Total			$	454,633			$	411,703

Non-covered construction loan portfolio

Total non-covered construction loans as of Sept. 30, 2010 were $463 million, representing a decrease of 7% since June 30, 2010, and a decrease of 38% from Sept. 30, 2009. Within this portfolio, the residential development loan segment was $160 million, or 3% of the total non-covered loan portfolio. Of this amount, $30 million represented non-performing loans, and $130 million represented performing loans. The residential development loan segment has decreased $98 million, or 38%, since Sept. 30, 2009.

The remaining $303 million in non-covered construction loans as of Sep. 30, 2010 primarily represents commercial construction projects. Total non-covered, non-performing commercial construction loans were $26.4 million at Sept. 30, 2010, and $5.5 million were past due 30 to 89 days as of Sept. 30, 2010.

Non-covered commercial real estate loan portfolio

The total non-covered term commercial real estate loan portfolio was $3.5 billion as of Sept. 30, 2010. Of this total, $2.3 billion are non-owner occupied and $1.2 billion are owner occupied. Of the total term commercial real estate portfolio, $38.7 million, or 1.11%, are past due 30-89 days as of Sept. 30, 2010. Of the total non-covered commercial real estate portfolio, 7% matures in 2010-2011, 13% in years 2012-2013, and 21% in years 2014-2015. The remaining 59% of the portfolio matures in or after the year 2016.

The portfolio was conservatively underwritten at origination to a minimum debt service coverage ratio of 1.20, and as a result, in many cases, the loan-to-value was substantially less than our in-house maximum of 75%. This underwriting serves to protect against the low capitalization rate environment of the past several years.

During the past two years, the Company has completed several rounds of stress testing on the commercial real estate portfolio, focusing on items such as capitalization rate, interest rate and vacancy factors. The results of the stress testing showed no significant unidentified risks, unlike our experience in the residential development construction portfolio. However, given the economic climate, we expect any potential issues that may arise in this portfolio will result from individual loans within distinct geographic areas and not represent a systemic weakness. We believe we are well positioned to manage the exposure and work with our customers until the economic climate improves.

Non-covered restructured loans

Restructured loans on accrual status were $75.6 million as of Sept. 30, 2010, down 6% from $80.5 million as of June 30, 2010, and down 59% from $182.2 million as of Sept. 30, 2009. The decrease during the third quarter primarily resulted from payments received, and the decrease from the same period in the prior year primarily resulted from payments received and reclassifications of loans previously restructured to non-accrual status. The Company will consider a loan for restructuring only if it is current on payments. The Company does not enter into restructurings on loans in non-performing status, and generally requires the customer to pledge additional collateral, maintain a minimum debt service coverage ratio of 1.0, and show substantial external sources of repayment prior to the Company agreeing to restructure.

Additional information related to asset quality

Additional tables can be found at the end of this earnings release covering the following aspects of the Company's non-covered loan portfolio: residential development loan trends by region, residential development loan stratification by size and by region, non-performing asset detail by type and by region, loans past due 30 to 89 days by type and by region, loans past due 30 to 89 days trends, and restructured loans on accrual status by type and by region.

Asset quality – Covered loan portfolio

Covered non-performing assets were $54.5 million, or 0.47% of total assets, as of Sept. 30, 2010, as compared to $87.1 million, or 0.80% of total assets, as of June 30, 2010. Of the amount at Sept. 30, 2010, $24.2 million represented non-accrual loans and $30.3 million was OREO. The reduction in covered non-performing assets in the current quarter primarily resulted from the reclassification of some Evergreen and Rainier impaired loan pools into accrual status. As cash flows and other assets have been received in excess of original estimates, the carrying value of these impaired loan pools have decreased and the total expected cash flows associated with the pool have increased, resulting in accretable yield. It is important to note that at this time, the difference between the cash flows related to principal expected to be received and the carrying value of these loan pools is the only amount included in accretable yield and available to be recognized into interest income, and that the contractual interest income on the underlying loans has not been included in our estimation of expected future cash flows to be received, or considered to be accretable yield of the pool, as the loans are considered non-performing. These covered non-performing assets were written-down to their estimated fair value on their acquisition date, incorporating our estimate of future expected cash flows until the ultimate resolution of these credits. The estimated credit losses embedded in these acquired non-performing loan portfolios were based on management’s and third-party consultants’ credit reviews of the portfolios performed during the due diligence process related to the Evergreen, Rainier and Nevada Security transactions. To the extent actual or projected cash flows are less than originally estimated, additional provisions for loan losses on the covered loan portfolio will be recognized; however, these provisions would be mostly offset by a corresponding increase in the FDIC indemnification (loss sharing) asset recognized within non-interest income.

Net interest margin

The Company reported a tax equivalent net interest margin of 4.42% for the third quarter of 2010, compared to 4.05% for the second quarter of 2010, and 4.05% for the third quarter of 2009. The increase in net interest margin on a sequential quarter basis resulted primarily from an increase in average covered loans outstanding, increased yield on the covered loan portfolio as a result of payoffs ahead of expectations and declining costs of interest bearing deposits, partially offset by interest reversals of new non-accrual loans, a decline in non-covered loans outstanding, the impact of holding much higher levels of interest bearing cash, and the purchase of short-term, low-yielding investment securities during the quarter. The increase in net interest margin related to covered loan yields was offset by a corresponding decrease to the change in FDIC indemnification asset in other non-interest income. Interest reversals on new non-accrual loans during the third quarter of 2010 were $0.6 million, negatively impacting the net interest margin by 2 basis points. Excluding the reversals of interest, the net interest margin would have been 4.44% during the quarter. For the twelfth consecutive quarter, the Company has continued to reduce the cost of interest bearing deposits. As a result of these efforts, the cost of interest bearing deposits was 1.08%, 2 basis points lower than the second quarter of 2010 and 42 basis points lower than the third quarter of 2009.

Mortgage banking revenue

The Company generated a record $7.1 million in total mortgage banking revenue during the third quarter of 2010, on closed loan volume of $232 million. In the third quarter of 2010, the Company recognized a decline in the fair value of the mortgage servicing right assets of $1.1 million resulting from the historically low market for mortgage interest rates. Income from the origination and sale of mortgage loans was $7.2 million in the third quarter, representing an 82% increase on a sequential quarter basis. As of Sept. 30, 2010, the Company serviced $1.5 billion of mortgage loans for others, and the related mortgage servicing right asset was valued at $13.5 million, or 0.91% of the total serviced portfolio principal balance.

Fair value of junior subordinated debentures

The Company recognized a $0.6 million loss from the change in fair value of junior subordinated debentures during the third quarter of 2010. The Company utilizes internal models to determine the valuation of this liability. The majority of the fair value difference over par value relates to the $61.8 million of junior subordinated debentures issued in the third quarter of 2007, which carry interest rate spreads of 135 and 275 basis points during the 3 month LIBOR. As of Sept. 30, 2010, the credit risk adjusted interest spread for potential new issuances was forecasted to be significantly higher than the contractual spread. The difference between these spreads creates the gain in fair value of the Company’s junior subordinated debentures which results from their carrying amount compared to the estimated amount that would be paid to transfer the liability in an orderly transaction among market participants. Because these instruments are no longer being originated in the market, the quarterly fair value adjustments are not likely to be volatile in the future, and the cumulative fair value adjustment will continue to reverse and be recognized as a reduction in non-interest income over the remaining period to maturity of each related instrument. As of Sept. 30, 2010, the total par value of junior subordinated debentures carried at fair value was $134.0 million, and the fair value was $80.1 million.

Non-interest expense

Total non-interest expense for the third quarter of 2010 was $85.2 million, compared to $74.8 million for the second quarter of 2010 and $68.3 million for the third quarter of 2009. Included in non-interest expense are several categories which are outside of the operational control of the Company, including FDIC deposit insurance assessments, gain or loss on other real estate owned, and infrequently occurring expenses such as merger related costs and goodwill impairments. Excluding these non-controllable or infrequently occurring items, the remaining non-interest expense items totaled $79.9 million for the third quarter of 2010, compared to $70.1 million for the second quarter of 2010 and $56.4 million for the third quarter of 2009. Approximately $4.75 million of other expense in the third quarter of 2010 is considered non-recurring, relating primarily to professional fees and severance costs. The remaining increase related primarily to increases in variable expenses related to the mortgage banking division’s production in the quarter, and the assumption of Evergreen’s, Rainier’s and Nevada Security’s banking operations, higher loan collection and OREO management expense, as well as various other growth initiatives underway.

Total FDIC deposit insurance assessments during the third quarter of 2010 were $3.9 million. The increase over the prior period of $3.6 million is a result of the deposit growth in the third quarter and a full quarter of outstanding deposits related to the Nevada Security FDIC-assisted acquisition.

Income taxes

The Company recorded a provision for income taxes of $2.2 million in the third quarter of 2010. The change in the effective income tax rate in the quarter reflects the effects of permanent differences on our taxable income year to date.

Balance sheet

Total consolidated assets as of Sept. 30, 2010 were $11.5 billion, compared to $10.8 billion on June 30, 2010 and $9.2 billion a year ago. Total gross loans and leases (covered and non-covered), and deposits, were $6.5 billion and $9.3 billion, respectively, as of Sept. 30, 2010, compared to $6.1 billion and $7.2 billion, respectively, as of Sept. 30, 2009.

The following table presents the year-to-date 2010 organic growth rates, which excludes the effects of the Evergreen, Rainier and Nevada Security FDIC-assisted acquisitions and the related run-off of assumed brokered time deposits, which the Bank is not renewing upon maturity:

			Non-covered
(Dollars in thousands)			loans and leases			Deposits			Assets
As reported, 9/30/10			$5,698,267			$9,301,340			$11,532,971
Less: 12/31/09 balances			5,999,267			7,440,434			9,381,372
Total growth year-to-date			(301,000)			1,860,906			2,151,598
Less:
Evergreen acquisition (1)			--			272,142			355,298
Rainier Pacific acquisition (1)			--			416,430			721,174
Nevada Security acquisition (1)			--			428,329			437,595
Add back:
Run-off of assumed brokered time deposits not renewed			--			102,871			102,871
Organic growth			$(301,000)			$846,876			$740,402
Annualized organic growth rate			(6.7)%			15.2%			10.6%
(1) Excludes run-off of non-brokered deposits occurring in the quarter of acquisition.

Total loans held for investment (including covered and non-covered) decreased $58 million during the third quarter of 2010. This decrease is principally attributable to non-covered charge-offs and transfers to other real estate owned.

Total deposits increased $743 million, or 9%, during the third quarter of 2010. Total deposits have increased $1.9 billion, or 25%, since Dec. 31, 2009. The deposits acquired from the Evergreen, Rainier and Nevada Security acquisitions included $135 million of brokered time deposits as of their respective acquisition dates. The Bank is not renewing these brokered deposits as they mature. Excluding the impact of the deposits assumed in acquisitions of and the run-off of brokered time deposits that have matured, total deposits increased $846 million in 2010, representing a 15.2% annualized organic growth rate.

Due to unattractive bond market conditions since the second half of 2009, the Company has been holding larger levels of interest bearing cash rather than investing all excess liquidity into the bond market. At Sept. 30, 2010, the Company had $934 million of interest bearing cash earning 0.25%, the target Federal Funds Rate. This excess balance sheet liquidity has increased since the prior year, as investment security alternatives in the current market are unattractive given the historically low interest rate environment. However, in the third quarter of 2010 we did purchase short duration government-sponsored investment securities to match and offset the interest expense associated with the growth in deposits during the quarter. The Company plans to hold an increased interest bearing cash position relative to historical levels until the investment alternatives in the market improve from both a return and duration standpoint. Including secured off-balance sheet lines of credit, total available liquidity to the Company was $4.8 billion as of Sept. 30, 2010, representing 42% of total assets and 51% of total deposits.

Capital

As of Sept. 30, 2010, total shareholders’ equity was $1.65 billion, comprised entirely of common equity. Book value per common share was $14.42, tangible book value per common share was $8.48 and the ratio of tangible common equity to tangible assets was 8.95%.

In April 2010, the Company’s preferred stock (Common Stock Equivalent Series B) of $198.3 million converted into common stock following the Company's annual shareholder meeting at which shareholders of the Company approved, among other items, an increase in authorized total common shares from 100 million to 200 million.

The Company’s estimated total risk-based capital ratio as of Sept. 30, 2010 is 17.52%. This represents a slight decrease from June 30, 2010, as a result asset growth during the quarter. Our total risk-based capital level is well in excess of the regulatory definition of "well-capitalized” of 10.00%. The Company’s estimated Tier 1 common to risk weighted assets ratio is 13.1% as of Sept. 30, 2010. These capital ratios as of Sept. 30, 2010 are estimates pending completion and filing of the Company’s regulatory reports.

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. Umpqua believes that certain non-GAAP financial measures provide investors with information useful in understanding Umpqua’s financial performance; however, readers of this report are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.

Umpqua recognizes gains or losses on our junior subordinated debentures carried at fair value resulting from changes in interest rates and the estimated market credit risk adjusted spread that do not directly correlate with the Company’s operating performance. Also, Umpqua incurs significant expenses related to the completion and integration of mergers and acquisitions. Additionally, we may recognize goodwill impairment losses that have no direct effect on the Company’s or the Bank’s cash balances, liquidity, or regulatory capital ratios. Lastly, Umpqua may recognize one-time bargain purchase gains on certain FDIC-assisted acquisitions that are not reflective of Umpqua’s on-going earnings power. Accordingly, management believes that our operating results are best measured on a comparative basis excluding the impact of gains or losses on junior subordinated debentures measured at fair value, net of tax, merger-related expenses, net of tax, and other charges related to business combinations such as goodwill impairment charges or bargain purchase gains, net of tax. We define operating earnings (loss) as earnings available to common shareholders before gains or losses on junior subordinated debentures carried at fair value, net of tax, bargain purchase gains on acquisitions, net of tax, merger related expenses, net of tax, and goodwill impairment, and we calculate operating earnings (loss) per diluted share by dividing operating earnings by the same diluted share total used in determining diluted earnings per common share.

The following table provides the reconciliation of earnings (loss) available to common shareholders (GAAP) to operating earnings (loss) (non-GAAP), and earnings (loss) per diluted common share (GAAP) to operating earnings (loss) per diluted share (non-GAAP) for the periods presented:

												Sequential			Year over
			Quarter ended:									Quarter			Year
(Dollars in thousands, except per share data)			Sep 30, 2010			Jun 30, 2010			Sep 30, 2009			% Change			% Change
Net earnings (loss) available to common shareholders			$8,173			$3,447			$(10,376)			137%			(179)%
Adjustments:
Net loss (gain) on junior subordinated debentures carried at fair value, net of tax (1)			332			--			(589)			nm			(156)%
Merger related expenses, net of tax (1)			986			1,301			--			(24)%			nm
Operating earnings (loss)			$9,491			$4,748			$(10,965)			100%			(187)%
Earnings (loss) per diluted share:
Earnings (loss) available to common shareholders			$0.07			$0.03			$(0.14)			133%			(150)%
Operating earnings (loss)			$0.08			$0.04			$(0.15)			100%			(153)%
									Year over
			Nine Months Ended:						Year
(Dollars in thousands, except per share data)			Sep 30, 2010			Sep 30, 2009			% Change
Net earnings (loss) available to common shareholders			$9,138			$(136,338)			(107)%
Adjustments:
Net gain on junior subordinated debentures carried at fair value, net of tax (1)			(3,320)			(6,104)			(46)%
Bargain purchase gain on acquisitions, net of tax (1)			(5,074)			--			nm
Goodwill impairment			--			111,952			(100)%
Merger related expenses, net of tax (1)			3,431			164			1992%
Operating earnings (loss)			$4,175			$(30,326)			(114)%
Earnings (loss) per diluted share:
Earnings (loss) available to common shareholders			$0.09			$(2.10)			(104)%
Operating earnings (loss)			$0.04			$(0.47)			(109)%
(1) Income tax effect of pro forma operating earnings adjustments at 40%.

Management believes tangible common equity and the tangible common equity ratio are meaningful measures of capital adequacy. Tangible common equity is calculated as total shareholders' equity less preferred stock and less goodwill and other intangible assets, net (excluding MSRs). In addition, 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).

(Dollars in thousands, except per share data)			Sep 30, 2010			Jun 30, 2010			Sep 30, 2009
Total shareholders' equity			$1,651,714			$1,654,053			$1,606,150
Subtract:
Preferred stock			--			--			203,779
Goodwill and other intangible assets, net			680,893			682,249			641,759
Tangible common shareholders' equity			$970,821			$971,804			$760,612
Total assets			$11,532,971			$10,827,268			$9,204,346
Subtract:
Goodwill and other intangible assets, net			680,893			682,249			641,759
Tangible assets			$10,852,078			$10,145,019			$8,562,587
Common shares outstanding at period end			114,531,514			114,524,973			86,780,559
Tangible common equity ratio			8.95%			9.58%			8.88%
Tangible book value per common share			$8.48			$8.49			$8.76

About Umpqua Holdings Corporation

Umpqua Holdings Corporation (NASDAQ: UMPQ) is the parent company of Umpqua Bank, an Oregon-based community bank recognized for its entrepreneurial approach, innovative use of technology, and distinctive banking solutions. Umpqua Bank has 183 locations between San Francisco, Calif., and Seattle, Wash., along the Oregon and Northern California Coast, Central Oregon and Northern 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 Bank’s Private Bank Division serves high net worth individuals and non-profits providing customized financial solutions and offerings. Umpqua Holdings Corporation is headquartered in Portland, Ore. For more information, visit www.umpquaholdingscorp.com.

Umpqua Holdings Corporation will conduct a quarterly earnings conference call Thursday, Oct. 21, 2010, at 10:00 a.m. PDT (1:00 p.m. EDT) during which the company will discuss third quarter results and provide an update on recent activities. There will be a question-and-answer session following the presentation. Shareholders, analysts and other interested parties are invited to join the call by dialing 800-752-8363 a few minutes before 10:00 a.m. The conference ID is "14703182.” Information to be discussed in the teleconference will be available on the company’s website prior to the call at www.umpquaholdingscorp.com. A rebroadcast can be found approximately two hours after the conference call by dialing 800-642-1687 with the conference ID noted above, or by visiting the Company’s website.

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 our success in resolving remaining credits at the estimated disposition value of related collateral, the mitigating effect of FDIC loss sharing agreements, our expectation that any weakness in our CRE portfolio will arise from local market weakness and not a systemic weakness, valuations of junior subordinated debentures and our plans to hold a large interest bearing cash position. Specific risks that could cause results to differ from the forward-looking statements are set forth in our filings with the SEC and include, without limitation, our inability to effectively manage problem credits, unanticipated further declines in real estate values, certain loan assets become ineligible for loss sharing, unanticipated deterioration in the commercial real estate loan portfolio, and continued negative pressure on interest income associated with our large cash position.

Umpqua Holdings Corporation
Consolidated Statements of Operations
(Unaudited)
												Sequential			Year over
			Quarter Ended:									Quarter			Year
(Dollars in thousands, except per share data)			Sep 30, 2010			Jun 30, 2010			Sep 30, 2009			% Change			% Change
Interest income
Loans and leases			$112,652			$97,240			$89,474			16%			26%
Interest and dividends on investments:
Taxable			17,421			15,569			15,365			12%			13%
Exempt from federal income tax			2,221			2,247			2,020			(1)%			10%
Dividends			6			3			22			100%			(73)%
Temporary investments & interest bearing cash			646			545			207			19%			212%
Total interest income			132,946			115,604			107,088			15%			24%
Interest expense
Deposits			19,913			18,463			22,132			8%			(10)%
Repurchase agreements and fed funds purchased			136			123			163			11%			(17)%
Junior subordinated debentures			2,047			1,939			2,114			6%			(3)%
Term debt			2,533			2,779			917			(9)%			176%
Total interest expense			24,629			23,304			25,326			6%			(3)%
Net interest income			108,317			92,300			81,762			17%			32%
Provision for non-covered loan and lease losses			24,228			29,767			52,108			(19)%			(54)%
Provision for covered loan and lease losses			667			--			--			nm			nm
Non-interest income
Service charges			8,756			9,585			8,542			(9)%			3%
Brokerage fees			2,609			3,139			1,993			(17)%			31%
Mortgage banking revenue, net			7,138			3,209			4,288			122%			66%
Net gain on investment securities			2,287			--			158			nm			1347%
(Loss) gain on junior subordinated debentures carried at fair value			(554)			--			982			nm			(156)%
Change in FDIC indemnification asset			(11,948)			263			--			nm			nm
Other income			3,845			2,367			1,962			62%			96%
Total non-interest income			12,133			18,563			17,925			(35)%			(32)%
Non-interest expense
Salaries and benefits			42,964			39,604			31,583			8%			36%
Occupancy and equipment			11,448			11,472			9,937			0%			15%
Intangible amortization			1,356			1,368			1,319			(1)%			3%
FDIC assessments			3,910			3,555			3,321			10%			18%
Net (gain) loss on other real estate owned			(317)			(952)			8,641			(67)%			(104)%
Merger related expenses			1,643			2,169			--			(24)%			nm
Other			24,166			17,617			13,548			37%			78%
Total non-interest expense			85,170			74,833			68,349			14%			25%
Income (loss) before provision for (benefit from) income taxes			10,385			6,263			(20,770)			66%			(150)%
Provision for (benefit from) income taxes			2,194			2,800			(13,626)			(22)%			(116)%
Net income (loss)			8,191			3,463			(7,144)			137%			(215)%
Dividends and undistributed earnings allocated to participating securities			18			16			7			13%			157%
Preferred stock dividend			--			--			3,225			(100)%			(100)%
Net earnings (loss) available to common shareholders			$8,173			$3,447			$(10,376)			(137)%			(179)%
Weighted average shares outstanding			114,527,619			110,134,674			74,084,640			4%			55%
Weighted average diluted shares outstanding			114,760,063			114,733,357			74,084,640			0%			55%
Earnings (loss) per common share – basic			$0.07			$0.03			$(0.14)			133%			(150)%
Earnings (loss) per common share – diluted			$0.07			$0.03			$(0.14)			133%			(150)%
nm = not meaningful

Umpqua Holdings Corporation
Consolidated Statements of Operations
(Unaudited)
			Nine Months Ended:
(Dollars in thousands, except per share data)			Sep 30, 2010			Sep 30, 2009			% Change
Interest income
Loans and leases			$300,600			$266,587			13%
Interest and dividends on investments:
Taxable			49,065			43,625			12%
Exempt from federal income tax			6,655			5,755			16%
Dividends			9			22			(59)%
Temporary investments & interest bearing cash			1,590			258			516%
Total interest income			357,919			316,247			13%
Interest expense
Deposits			57,165			68,552			(17)%
Repurchase agreements and fed funds purchased			382			527			(28)%
Junior subordinated debentures			5,871			7,069			(17)%
Term debt			6,832			3,935			74%
Total interest expense			70,250			80,083			(12)%
Net interest income			287,669			236,164			22%
Provision for non-covered loan and lease losses			96,101			140,531			(32)%
Provision for covered loan and lease losses			667			--			nm
Non-interest income
Service charges			26,706			24,565			9%
Brokerage fees			8,387			5,117			64%
Mortgage banking revenue, net			13,825			14,617			(5)%
Net gain (loss) on investment securities			1,999			(1,077)			(286)%
Gain on junior subordinated debentures carried at fair value			5,534			10,173			(46)%
Bargain purchase gain on acquisitions			8,456			--			nm
Change in FDIC indemnification asset			(11,075)			--			nm
Other income			8,930			7,097			26%
Total non-interest income			62,762			60,492			4%
Non-interest expense
Salaries and benefits			118,808			94,697			25%
Occupancy and equipment			33,596			29,266			15%
Intangible amortization			4,032			4,043			0%
FDIC assessments			10,909			12,645			(14)%
Net loss on other real estate owned			1,042			14,110			(93)%
Goodwill impairment			--			111,952			(100)%
Merger related expenses			5,718			273			1995%
Other			55,769			39,917			40%
Total non-interest expense			229,874			306,903			(25)%
Income (loss) before provision for (benefit from) income taxes			23,789			(150,778)			(116)%
Provision for (benefit from) income taxes			2,410			(24,094)			(110)%
Net income (loss)			21,379			(126,684)			(117)%
Dividends and undistributed earnings allocated to participating securities			49			22			123%
Preferred stock dividend			12,192			9,632			27%
Net earnings (loss) available to common shareholders			$9,138			$(136,338)			(107)%
Weighted average shares outstanding			105,694,696			64,878,125			63%
Weighted average diluted shares outstanding			105,923,776			64,878,125			63%
Earnings (loss) per common share – basic			$0.09			$(2.10)			(104)%
Earnings (loss) per common share – diluted			$0.09			$(2.10)			(104)%

Umpqua Holdings Corporation
Consolidated Balance Sheets
(Unaudited)
												Sequential			Year over
												Quarter			Year
(Dollars in thousands, except per share data)			Sep 30, 2010			Jun 30, 2010			Sep 30, 2009			% Change			% Change
Assets:
Cash and due from banks, non-interest bearing			$124,633			$143,098			$108,768			(13)%			15%
Cash and due from banks, interest bearing			933.911			818,186			261,642			14%			257%
Temporary investments			5,496			9,296			575			(41)%			856%
Investment securities:
Trading			2,155			1,743			1,912			24%			13%
Available for sale			2,599,263			1,933,647			1,848,482			34%			41%
Held to maturity			5,108			5,493			6,211			(7)%			(18)%
Loans held for sale			57,407			40,114			23,614			43%			143%
Non-covered loans and leases			5,698,267			5,726,673			6,071,042			0%			(6)%
Less: Allowance for loan and lease losses			(108,098)			(113,914)			(103,136)			(5)%			5%
Loans and leases, net			5,590,169			5,612,759			5,967,906			0%			(6)%
Covered loans and leases			840,469			870,238			--			(3)%			nm
Restricted equity securities			34,665			34,855			15,211			(1)%			128%
Premises and equipment, net			133,728			128,586			101,883			4%			31%
Mortgage servicing rights, at fair value			13,454			12,895			11,552			4%			16%
Goodwill and other intangibles, net			680,893			682,249			641,759			0%			6%
Non-covered other real estate owned			32,024			25,653			26,705			25%			20%
Covered other real estate owned			30,348			28,290			--			7%			nm
FDIC indemnification asset			217,696			246,983			--			(12)%			nm
Other assets			231,552			233,183			188,126			(1)%			23%
Total assets			$11,532,971			$10,827,268			$9,204,346			7%			25%
Liabilities:
Deposits			$9,301,340			$8,558,744			$7,215,821			9%			29%
Securities sold under agreements to repurchase			55,333			44,715			50,031			24%			11%
Term debt			268,256			291,505			76,329			(8)%			251%
Junior subordinated debentures, at fair value			80,146			79,590			81,992			1%			(2)%
Junior subordinated debentures, at amortized cost			102,946			103,027			103,269			0%			0%
Other liabilities			73,236			95,634			70,754			(23)%			4%
Total liabilities			9,881,257			9,173,215			7,598,196			8%			30%
Shareholders' equity:
Preferred stock			--			--			203,779			nm			(100)%
Common stock			1,540,029			1,538,793			1,252,786			0%			23%
Retained earnings			75,502			73,062			118,204			3%			(36)%
Accumulated other comprehensive income			36,183			42,198			31,381			(14)%			15%
Total shareholders' equity			1,651,714			1,654,053			1,606,150			0%			3%
Total liabilities and shareholders' equity			$11,532,971			$10,827,268			$9,204,346			7%			25%
Common shares outstanding at period end			114,531,514			114,524,973			86,780,559			0%			32%
Book value per common share			$14.42			$14.44			$16.16			0%			(11)%
Tangible book value per common share			$8.48			$8.49			$8.76			0%			(3)%
Tangible equity - common			$970,821			$971,804			$760,612			0%			28%
Tangible common equity to tangible assets			8.95%			9.58%			8.88%
nm = not meaningful

Umpqua Holdings Corporation
Non-covered Loan & Lease Portfolio
(Unaudited)
																					Sequential			Year over
(Dollars in thousands)			Sep 30, 2010						Jun 30, 2010						Sep 30, 2009						Quarter			Year
			Amount			Mix			Amount			Mix			Amount			Mix			% Change			% Change
Non-covered loans & leases:
Commercial real estate			$3,491,819			61%			$3,496,374			61%			$3,438,923			57%			0%			2%
Residential real estate			462,515			8%			456,357			8%			441,613			7%			1%			5%
Construction			462,801			8%			495,456			9%			748,337			12%			(7)%			(38)%
Total real estate			4,417,135			78%			4,448,187			78%			4,628,873			76%			(1)%			(5)%
Commercial			1,223,012			21%			1,223,927			21%			1,381,549			23%			0%			(11)%
Leases			32,428			1%			32,375			1%			36,720			1%			0%			(12)%
Installment and other			36,624			1%			33,188			1%			34,883			1%			10%			5%
Deferred loan fees, net			(10,932)			0%			(11,004)			0%			(10,933)			0%			(1)%			0%
Total			$5,698,267			100%			$5,726,673			100%			$6,071,042			100%			0%			(6)%

Umpqua Holdings Corporation
Covered Loan & Lease Portfolio
(Unaudited)
															Sequential
(Dollars in thousands)			Sep 30, 2010						Jun 30, 2010						Quarter
			Amount			Mix			Amount			Mix			% Change
Covered loans & leases:
Commercial real estate			$589,540			70%			$591,814			68%			0%
Residential real estate			81,237			10%			84,187			10%			(4)%
Construction			57,250			7%			73,963			8%			(23)%
Total real estate			728,027			87%			749,964			86%			(3)%
Commercial			100,284			12%			107,860			12%			(7)%
Installment and other			12,158			1%			12,414			1%			(2)%
Total			$840,469			100%			$870,238			100%			(3)%

Covered loan & lease portfolio balances represent the loan portfolios acquired through the assumption of EvergreenBank on January 22, 2010, Rainier Pacific Bank on February 26, 2010, and Nevada Security Bank on June 18, 2010, from the FDIC through whole bank purchase and assumption agreements with loss sharing.

Umpqua Holdings Corporation
Deposits by Type/Core Deposits
(Unaudited)
																										Sequential				Year over
(Dollars in thousands)				Sep 30, 2010								Jun 30, 2010						Sep 30, 2009								Quarter				Year
				Amount				Mix				Amount			Mix			Amount				Mix				% Change				% Change
Deposits:
Demand, non-interest bearing				$1,578,717				17%				$1,509,222			18%			$1,337,280				19%				5%				18%
Demand, interest bearing				4,178,332				45%				3,789,122			44%			3,185,128				44%				10%				31%
Savings				348,700				4%				355,428			4%			294,482				4%				(2)%				18%
Time				3,195,591				34%				2,904,972			34%			2,398,931				33%				10%				33%
Total				$9,301,340				100%				$8,558,744			100%			$7,215,821				100%				9%				29%
Total core deposits-ending (1)				$7,055,676				76%				$6,697,773			78%			$5,834,655				81%				5%				21%
Number of open accounts:
Demand, non-interest bearing				183,018								180,499						156,659								1%				17%
Demand, interest bearing				76,202								71,537						63,483								7%				20%
Savings				87,611								96,019						74,421								(9)%				18%
Time				44,020								41,882						35,495								5%				24%
Total				390,851								389,937						330,058								0%				18%
Average balance per account:
Demand, non-interest bearing				$8.6								$8.4						$8.5
Demand, interest bearing				54.8								53.0						50.2
Savings				4								3.7						4.0
Time				72.6								69.4						67.6
Total				23.8								21.9						21.9
(1) Core deposits are defined as total deposits less time deposits greater than $100,000.

Umpqua Holdings Corporation
Credit Quality – Non-performing Assets
(Unaudited)
												Sequential			Year over
			Quarter Ended									Quarter			Year
(Dollars in thousands)			Sep 30, 2010			Jun 30, 2010			Sep 30, 2009			% Change			% Change
Non-covered, non-performing assets:
Non-covered loans on non-accrual status			$139,696			$170,636			$123,714			(18)%			13%
Non-covered loans past due 90+ days & accruing			11,882			9,213			5,614			29%			112%
Total non-performing loans			151,578			179,849			129,328			(16)%			17%
Non-covered other real estate owned			32,024			25,653			26,705			25%			20%
Total			$183,602			$205,502			$156,033			(11)%			18%
Performing restructured loans			$75,577			$80,534			$182,199			(6)%			(59)%
Past due 30-89 days			$80,186			$40,135			$46,069			100%			74%
Past due 30-89 days to total loans and leases			1.41%			0.70%			0.76%
Non-covered, non-performing loans to non-covered loans and leases			2.66%			3.14%			2.13%
Non-covered, non-performing assets to total assets			1.59%			1.90%			1.70%
Covered non-performing assets:
Covered loans on non-accrual status			$24,160			$58,814			$--			(59)%			nm
Total non-performing loans			24,160			58,814			--			(59)%			nm
Covered other real estate owned			30,348			28,290			--			7%			nm
Total			$54,508			$87,104			$--			(37)%			nm
Covered non-performing loans to covered loans and leases			2.87%			6.76%			--
Covered non-performing assets to total assets			0.47%			0.80%			--
Total non-performing assets:
Loans on non-accrual status			$163,856			$229,450			$123,714			(29)%			32%
Loans past due 90+ days & accruing			11,882			9,213			5,614			29%			112%
Total non-performing loans			175,738			238,663			129,328			(26)%			36%
Other real estate owned			62,372			53,943			26,705			16%			134%
Total			$238,110			$292,606			$156,033			(19)%			53%
Non-performing loans to loans and leases			2.69%			3.62%			2.13%
Non-performing assets to total assets			2.06%			2.70%			1.70%

Umpqua Holdings Corporation
Credit Quality – Allowance for Non-covered Credit Losses
(Unaudited)
												Sequential			Year over
			Quarter Ended									Quarter			Year
(Dollars in thousands)			Sep 30, 2010			Jun 30, 2010			Sep 30, 2009			% Change			% Change
Allowance for non-covered credit losses:
Balance beginning of period			$113,914			$110,784			$98,370
Provision for non-covered loan and lease losses			24,228			29,767			52,108			(19)%			(54)%
Charge-offs			(31,418)			(31,554)			(48,443)			0%			(35)%
Recoveries			1,374			4,917			1,101			(72)%			25%
Net charge-offs			(30,044)			(26,637)			(47,342)			13%			(37)%
Total allowance for non-covered loan and lease losses			108,098			113,914			103,136			(5)%			5%
Reserve for unfunded commitments			797			735			841
Total allowance for non-covered credit losses			$108,895			$114,649			$103,977			(5)%			5%
Net charge-offs to average non-covered loans and leases (annualized)			2.08%			1.84%			3.07%
Recoveries to gross charge-offs			4.37%			15.58%			2.27%
Allowance for credit losses to non-covered loans and leases			1.91%			2.00%			1.71%
			Nine Months Ended:
(Dollars in thousands)			Sep 30, 2010			Sep 30, 2009			% Change
Allowance for non-covered credit losses:
Balance beginning of period			$107,657			$95,865
Provision for non-covered loan and lease losses			96,101			140,531			(32)%
Charge-offs			(102,731)			(135,365)			(24)%
Recoveries			7,071			2,105			236%
Net charge-offs			(95,660)			(133,260)			(28)%
Total allowance for non-covered loan and lease losses			108,098			103,136			5%
Reserve for unfunded commitments			797			841
Total allowance for non-covered credit losses			$108,895			$103,977			5%
Net charge-offs to average non-covered loans and leases (annualized)			2.20%			2.91%
Recoveries to gross charge-offs			6.88%			1.56%

Umpqua Holdings Corporation
Selected Ratios
(Unaudited)
												Sequential			Year over
			Quarter Ended:									Quarter			Year
			Sep 30, 2010			Jun 30, 2010			Sep 30, 2009			Change			Change
Net interest spread:
Yield on non-covered loans and leases			5.77%			5.82%			5.77%			(0.05)			0.00
Yield on covered loans and leases			13.49%			7.27%			N/A			6.22			nm
Yield on taxable investments			3.51%			3.83%			4.22%			(0.32)			(0.71)
Yield on tax-exempt investments (1)			5.71%			5.75%			5.86%			(0.04)			(0.15)
Yield on temporary investments & interest bearing cash			0.26%			0.26%			0.28%			0.00			(0.02)
Total yield on earning assets (1)			5.41%			5.07%			5.29%			0.34			0.12
Cost of interest bearing deposits			1.08%			1.10%			1.50%			(0.02)			(0.42)
Cost of securities sold under agreements to repurchase and fed funds purchased			1.01%			1.02%			1.08%			(0.01)			(0.07)
Cost of term debt			3.57%			3.54%			3.68%			0.03			(0.11)
Cost of junior subordinated debentures			4.45%			4.26%			4.50%			0.19			(0.05)
Total cost of interest bearing liabilities			1.24%			1.28%			1.62%			(0.04)			(0.38)
Net interest spread (1)			4.17%			3.79%			3.67%			0.38			0.50
Net interest margin – Consolidated (1)			4.42%			4.05%			4.05%			0.37			0.37
Net interest margin – Bank (1)			4.49%			4.13%			4.15%			0.36			0.34
As reported (GAAP):
Return on average assets			0.29%			0.13%			(0.45)%			0.16			0.74
Return on average tangible assets			0.31%			0.14%			(0.49)%			0.17			0.80
Return on average common equity			1.95%			0.86%			(3.19)%			1.09			5.14
Return on average tangible common equity			3.31%			1.48%			(6.34)%			1.83			9.65
Efficiency ratio – Consolidated			70.09%			66.85%			67.91%			3.24			2.18
Efficiency ratio – Bank			67.07%			64.18%			65.21%			2.89			1.86
Operating basis (non-GAAP): (2)
Return on average assets			0.34%			0.18%			(0.48)%			0.16			0.82
Return on average tangible assets			0.36%			0.19%			(0.51)%			0.17			0.87
Return on average common equity			2.26%			1.18%			(3.37)%			1.08			5.63
Return on average tangible common equity			3.84%			2.04%			(6.70)%			1.80			10.54
Efficiency ratio – Consolidated			68.42%			64.91%			68.58%			3.51			(0.16)
Efficiency ratio – Bank			65.72%			62.22%			65.21%			3.50			0.51
(1) Tax exempt interest has been adjusted to a taxable equivalent basis using a 35% tax rate.
(2) Operating earnings is calculated as earnings available to common shareholders excluding gain (loss) on junior subordinated debentures carried at fair value, net of tax, bargain purchase gain on acquisitions, net of tax, goodwill impairment, and merger related expenses, net of tax.

Umpqua Holdings Corporation
Selected Ratios
(Unaudited)
			Nine Months Ended:
			Sep 30, 2010			Sep 30, 2009			Change
Net interest spread:
Yield on non-covered loans and leases			5.78%			5.79%			(0.01)
Yield on covered loans and leases			10.00%			N/A			nm
Yield on taxable investments			3.76%			4.48%			(0.72)
Yield on tax-exempt investments (1)			5.76%			5.80%			(0.04)
Yield on temporary investments & interest bearing cash			0.25%			0.27%			(0.02)
Total yield on earning assets (1)			5.19%			5.48%			(0.29)
Cost of interest bearing deposits			1.12%			1.63%			(0.51)
Cost of securities sold under agreements to repurchase and fed funds purchased			1.02%			1.13%			(0.11)
Cost of term debt			3.52%			3.56%			(0.04)
Cost of junior subordinated debentures			4.25%			4.92%			(0.67)
Total cost of interest bearing liabilities			1.28%			1.78%			(0.50)
Net interest spread (1)			3.91%			3.70%			0.21
Net interest margin – Consolidated (1)			4.18%			4.11%			0.07
Net interest margin – Bank (1)			4.26%			4.22%			0.04
As reported (GAAP):
Return on average assets			0.12%			(2.06)%			2.18
Return on average tangible assets			0.12%			(2.24)%			2.36
Return on average common equity			0.78%			(14.20)%			14.98
Return on average tangible common equity			1.36%			(32.21)%			33.57
Efficiency ratio – Consolidated			65.00%			102.51%			(37.51)
Efficiency ratio – Bank			63.35%			102.79%			(39.44)
Operating basis (non-GAAP): (2)
Return on average assets			0.05%			(0.46)%			0.51
Return on average tangible assets			0.06%			(0.50)%			0.56
Return on average common equity			0.36%			(3.16)%			3.52
Return on average tangible common equity			0.62%			(7.16)%			7.78
Efficiency ratio – Consolidated			66.00%			67.31%			(1.31)
Efficiency ratio – Bank			63.24%			64.06%			(0.82)
(1) Tax exempt interest has been adjusted to a taxable equivalent basis using a 35% tax rate.
(2) Operating earnings is calculated as earnings available to common shareholders excluding gain (loss) on junior subordinated debentures carried at fair value, net of tax, bargain purchase gain on acquisitions, net of tax, goodwill impairment, and merger related expenses, net of tax.

Umpqua Holdings Corporation
Average Balances
(Unaudited)
												Sequential			Year over
			Quarter Ended:									Quarter			Year
(Dollars in thousands)			Sep 30, 2010			Jun 30, 2010			Sep 30, 2009			% Change			% Change
Temporary investments & interest bearing cash			$993,092			$849,112			$291,214			17%			241%
Investment securities, taxable			1,984,672			1,628,195			1,458,333			22%			36%
Investment securities, tax-exempt			230,815			231,675			203,676			0%			13%
Loans held for sale			45,933			41,183			39,915			12%			15%
Non-covered loans and leases			5,718,584			5,792,010			6,111,146			(1)%			(6)%
Covered loans and leases			847,704			698,538			--			21%			nm
Total earning assets			9,820,800			9,240,714			8,104,284			6%			21%
Goodwill & other intangible assets, net			681,476			676,301			642,315			1%			6%
Total assets			11,160,521			10,467,967			9,100,407			7%			23%
Non-interest bearing demand deposits			1,565,525			1,475,852			1,325,328			6%			18%
Interest bearing deposits			7,345,073			6,735,665			5,866,098			9%			25%
Total deposits			8,891,598			8,211,517			7,191,426			9%			24%
Interest bearing liabilities			7,863,059			7,281,191			6,211,237			8%			27%
Shareholders’ equity - common			1,661,701			1,608,872			1,291,218			3%			29%
Tangible common equity (1)			980,225			932,571			648,903			5%			51%
			Nine Months Ended:
(Dollars in thousands)			Sep 30, 2010			Sep 30, 2009			% Change
Temporary investments & interest bearing cash			$841,529			$129,118			552%
Investment securities, taxable			1,742,463			1,299,791			34%
Investment securities, tax-exempt			228,000			195,492			17%
Loans held for sale			37,166			41,789			(11)%
Non-covered loans and leases			5,814,340			6,114,133			(5)%
Covered loans and leases			638,293			--			nm
Total earning assets			9,301,791			7,780,323			20%
Goodwill & other intangible assets, net			670,492			717,509			(7)%
Total assets			10,539,767			8,854,682			19%
Non-interest bearing demand deposits			1,497,110			1,294,005			16%
Interest bearing deposits			6,826,779			5,607,089			22%
Total deposits			8,323,889			6,901,094			21%
Interest bearing liabilities			7,321,076			6,009,594			22%
Shareholders’ equity - common			1,566,833			1,283,476			22%
Tangible common equity (1)			896,341			565,967			58%
(1) Average tangible common equity is a non-GAAP financial measure.  Average tangible common equity is calculated as average common shareholders’ equity less average goodwill and other intangible assets, net (excluding MSRs).

Umpqua Holdings Corporation
Mortgage Banking Activity
(unaudited)
												Sequential			Year over
			Quarter Ended:									Quarter			Year
(Dollars in thousands)			Sep 30, 2010			Jun 30, 2010			Sep 30, 2009			% Change			% Change
Mortgage Servicing Rights (MSR):
Mortgage loans serviced for others			$1,471,759			$1,400,120			$1,205,528			5%			22%
MSR Asset, at fair value			13,454			12,895			11,552			4%			16%
MSR as % of serviced portfolio			0.91%			0.92%			0.96%
Mortgage Banking Revenue:
Origination and sale			$7,188			$3,947			$4,294			82%			67%
Servicing			1,007			934			796			8%			27%
Change in fair value of MSR asset			(1,057)			(1,672)			(802)			(37)%			32%
Total			$7,138			$3,209			$4,288			122%			66%
Closed loan volume			$231,952			$145,085			$158,957			60%			46%
			Nine Months Ended:
(Dollars in thousands)			Sep 30, 2010			Sep 30, 2009			% Change
Mortgage Banking Revenue:
Origination and sale			$13,839			$15,040			(8)%
Servicing			2,844			2,188			30%
Change in fair value of MSR asset			(2,858)			(2,611)			9%
Total			$13,825			$14,617			(5)%
Closed loan volume			$504,352			$584,693			(14)%

Additional tables

The following tables present additional detail covering the following aspects of the Company's non-covered loan portfolio.

• Table 1 – Non-covered residential development loan trends by region
• Table 2 – Non-covered residential development loan stratification by size and by region
• Table 3 – Non-covered, non-performing asset detail by type and by region
• Table 4 – Non-covered loans past due 30-89 days by type and by region
• Table 5 – Non-covered loans past due 30-89 days trends
• Table 6 – Non-covered restructured loans on accrual status by type and by region

The following is a geographic distribution of the non-covered residential development portfolio as of Sept. 30, 2010, June 30, 2010 and Sept. 30, 2009:

Table 1- Non-covered residential development loan trends by region
(Dollars in thousands)															Non-
												% change			performing			Performing
			Balance			Balance			Balance			from			loans			Loans
			9/30/09			6/30/10			9/30/10			9/30/09			9/30/10			9/30/10
Northwest Oregon			$93,745			$75,373			$69,129			(26)%			$8,353			$60,776
Central Oregon			13,753			4,107			4,079			(70)%			109			3,970
Southern Oregon			21,852			13,440			8,774			(60)%			2,840			5,934
Washington			17,690			7,723			7,570			(57)%			1,260			6,310
Greater Sacramento			80,107			54,710			52,761			(34)%			13,063			39,698
Northern California			31,336			20,653			18,072			(42)%			4,453			13,619
Total			$258,483			$176,006			$160,385			(38)%			$30,078			$130,307
% of total non-covered loan portfolio			4%			3%			3%									2%
Quarter change $			$(42,807)			$(25,792)			$(15,621)
Quarter change %			(14)%			(13)%			(9)%

The following is a stratification by size and region of the remaining non-covered performing residential development loans as of Sept. 30, 2010:

Table 2 – Non-covered residential development loan stratification by size and by region
(Dollars in thousands)
						$250k			$1 million			$3 million			$5 million			$10 million
			$250k			to			to			to			to			and
			and less			$1 million			$3 million			$5 million			$10 million			Greater			Total
Northwest Oregon			$2,189			$8,569			$10,141			$10,277			$15,049			$14,551			$60,776
Central Oregon			500			1,037			2,433			--			--			--			3,970
Southern Oregon			1,187			3,647			1,100			--			--			--			5,934
Washington			487			352			5,471			--			--			--			6,310
Greater Sacramento			3,649			4,175			1,894			4,817			11,455			13,708			39,698
Northern California			1,329			2,413			9,877			--			--			--			13,619
Total			$9,341			$20,193			$30,916			$15,094			$26,504			$28,259			$130,307
% of Total			7%			15%			24%			12%			20%			22%			100%

The following is a distribution of non-covered, non-performing assets by type and by region as of Sept. 30, 2010:

Table 3 - Non-covered, non-performing asset detail by type and by region
(Dollars in thousands)
			Northwest			Central			Southern						Greater			Northern
			Oregon			Oregon			Oregon			Washington			Sacramento			California			Total
Non-accrual loans:
Residential development			$8,353			$109			$1,809			$1,260			$13,063			$4,453			$29,047
Commercial construction			12,926			--			--			2,115			11,238			109			26,388
Commercial real estate			24,629			3,373			1,938			--			6,539			9,125			45,604
Commercial			8,721			3,178			992			7,835			9,619			8,312			38,657
Other			--			--			--			--			--			--			--
Total			$54,629			$6,660			$4,739			$11,210			$40,459			$21,999			$139,696
Loans 90 days past due:
Residential development			$--			$--			$1,031			$--			$--			$--			$1,031
Commercial construction			--			--			--			--			--			--			--
Commercial real estate			--			--			--			--			2,753			--			2,753
Commercial			1,284			--			--			--			--			67			1,351
Other			5,717			--			--			100			930			--			6,747
Total			$7,001			$--			$1,031			$100			$3,683			$67			$11,882
Total non-performing loans			$61,630			$6,660			$5,770			$11,310			$44,142			$22,066			$151,578
Other real estate owned:
Residential development			$888			$3,049			$968			$1,074			$1,648			$1,325			$8,952
Commercial construction			3,442			586			--			426			4,592			--			9,046
Commercial real estate			5,647			--			635			--			2,988			1,675			10,945
Commercial			--			758			--			--			--			50			808
Other			2,273			--			--			--			--			--			2,273
Total			$12,250			$4,393			$1,603			$1,500			$9,228			$3,050			$32,024
Total non-performing assets			$73,880			$11,053			$7,373			$12,810			$53,370			$25,116			$183,602
% of total			40%			6%			4%			7%			29%			14%			100%

The Company has aggressively charged-down impaired assets to their disposition values. As of Sept. 30, 2010, the non-performing assets of $183.6 million have been written down by 39%, or $118.8 million, from their original balance of $302.4 million.

The following is a distribution of non-covered loans past due 30 to 89 days by loan type by region as of Sept. 30, 2010:

Table 4 – Non-covered loans past due 30-89 days by type and by region
(Dollars in thousands)
			Northwest			Central			Southern						Greater			Northern
			Oregon			Oregon			Oregon			Washington			Sacramento			California			Total
Loans 30-89 days past due:
Residential development			$9,176			$--			$1,178			$--			$282			$2,858			$13,494
Commercial construction			2,608			--			789			--			2,094			--			5,491
Commercial real estate			14,874			2,514			--			2,074			10,011			9,275			38,748
Commercial			1,654			--			298			6,104			5,040			3,369			16,465
Other			5,323			--			--			204			461			--			5,988
Total			$33,635			$2,514			$2,265			$8,382			$17,888			$15,502			$80,186

Table 5 – Non-covered loans past due 30-89 days trends
(Dollars in thousands)
												Sequential			Year
												Quarter			Over Year
			Sep 30, 2010			Jun 30, 2010			Sep 30, 2009			% Change			% Change
Loans 30-89 days past due:
Residential development			$13,494			$763			$8,766			1669%			54%
Commercial construction			5,491			903			9,361			508%			(41)%
Commercial real estate			38,748			22,923			14,405			69%			169%
Commercial			16,465			9,173			10,294			79%			60%
Other			5,988			6,373			3,243			(6)%			85%
Total			$80,186			$40,135			$46,069			100%			74%

The following is a distribution of non-covered restructured loans by loan type by region as of Sept. 30, 2010:

Table 6 – Non-covered restructured loans on accrual status by type and by region
(Dollars in thousands)
			Northwest			Central			Southern						Greater			Northern
			Oregon			Oregon			Oregon			Washington			Sacramento			California			Total
Restructured loans, accrual basis:
Residential development			$19,026			$--			$--			$5,471			$25,343			$--			$49,840
Commercial construction			--			--			--			--			--			--			--
Commercial real estate			--			--			3,899			--			12,448			3,686			20,033
Commercial			--			--			--			--			--			1,215			1,215
Other			4,454			--			--			--			35			--			4,489
Total			$23,480			$--			$3,899			$5,471			$37,826			$4,901			$75,577