-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JNzIKtYyJB+naFVvaDwerX5jA5NNo3yNb2IfsTaeGsWVAuS+/XzYOkL9o0JTR59M 3zxReGUDEkYIgZAcbXGTaw== 0000896595-00-000014.txt : 20000516 0000896595-00-000014.hdr.sgml : 20000516 ACCESSION NUMBER: 0000896595-00-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UMPQUA HOLDINGS CORP CENTRAL INDEX KEY: 0001077771 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 931261319 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25597 FILM NUMBER: 630772 BUSINESS ADDRESS: STREET 1: 445 SE MAIN STREET STREET 2: P.O. BOX 1820 CITY: ROSEBURG STATE: OR ZIP: 97470 BUSINESS PHONE: 5414403963 MAIL ADDRESS: STREET 1: UMPQUA HOLDINGS CORP STREET 2: 445 SE MAIN ST P.O. BOX 1820 CITY: ROSEBURG STATE: OR ZIP: 97470 10-Q 1 FORM 10-Q FOR QUARTER ENDING MARCH 31, 2000 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 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 PART I: FINANCIAL INFORMATION UMPQUA HOLDINGS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three months ended March 31, 2000 1999 ------------- ------------------ 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
See accompanying notes to condensed consolidated financial statements 3 UMPQUA HOLDINGS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three months ended March 31, 2000 1999 ----------- ----------- 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 =========== ===========
See accompanying notes to condensed consolidated financial statements 4 UMPQUA HOLDINGS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, December 31, 2000 1999 ------------ ------------ 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 ============ ============
See accompanying notes to condensed consolidated financial statements 5 UMPQUA HOLDINGS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS (UNAUDITED)
Three months ended March 31, 2000 1999 ------------- ------------- 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 $ - $ -
See accompanying notes to condensed consolidated financial statements. 6 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 $12.00 per share were outstanding during the quarter ended March 31, 2000 but were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares during the period. (2) SEGMENT INFORMATION For purposes of measuring and reporting the financial results, the Company is divided into two business segments; Community Banking and Retail Brokerage Services. The Community Banking segment consists of the operations conducted by the Company's subsidiary South Umpqua Bank. The Bank provides a full array of credit and deposit products to meet the banking needs of its market area and targeted customers. At March 31, 2000, the Bank had 13 full service stores. The Retail Brokerage Service segment consists of the operations of the Company's subsidiary Strand, Atkinson, Williams & York, Inc. which was acquired in December 1999. Strand, Atkinson, Williams & York, Inc. provides a full range of retail brokerage services to its clients through its two principal offices in Portland and Medford, Oregon as well as sales counters at most of the 7 Bank's stores. At March 31, 2000, Strand, Atkinson, Williams & York, Inc. had 16 full time brokers. The following table presents summary income statements and a reconciliation to the Company's consolidated totals for the three months ended March 31, 2000.
($ in thousands) Community Retail Brokerage Banking Services Administration Eliminations Consolidated ------------------------------------------------------------------------------- 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 ===============================================================================
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 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 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:
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 (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% ========= =======
(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 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:
NONINTEREST EXPENSE DETAIL For the quarter ended March 31, 2000 Community Retail Brokerage Banking Services Administration Eliminations Consolidated ----------------------------------------------------------------------------------- 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 ===================================================================================
11 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:
LOAN DETAIL March 31, 2000 December 31, 1999 --------------------------------------- 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 =======================================
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 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:
ALLOWANCE ACTIVITY Three months ended March 31, 2000 ------------------- Beginning Balance $ 3,469 Provision for Loan Losses 450 Charge-offs (157) Recoveries 15 ------------------- Net charge-offs/recoveries (142) ------------------- Ending Balance $ 3,777 ===================
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 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 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 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 EX-27 2 FINANCIAL DATA SCHEDULE
9 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. 0001077771 Umpqua Holdings Corporation 1 U.S.Dollars 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 1 27,429,974 15,591,303 0 653,319 0 0 0 260,809,236 3,777,133 395,774,694 311,464,008 0 2,512,523 44,148,000 0 0 25,778,259 11,871,904 395,774,694 5,741,260 1,175,471 126,966 7,043,697 2,119,091 2,663,281 4,380,416 450,000 0 4,313,791 2,026,857 2,026,857 0 0 1,312,348 0.17 0.17 5.26 1,120,248 277,612 0 0 3,469,350 157,275 15,059 3,777,133 3,777,133 0 0
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