10-Q

United States Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended: June 30, 2005

o 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 of Incorporation or Organization)	(I.R.S. Employer Identification Number)

One SW Columbia Street, Suite 1200
Portland, Oregon 97258
(Address of Principal Executive Offices)(Zip Code)

(503) 727-4100
(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.

þ Yes      o No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

þ Yes      o 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: 44,476,750 shares outstanding as of July 31, 2005

UMPQUA HOLDINGS CORPORATION
FORM 10-Q
Table of Contents

PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements (unaudited)	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures about Market Risk	31
Item 4. Controls and Procedures	32
PART II. OTHER INFORMATION	33
Item 1.Legal Proceedings	33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.Defaults Upon Senior Securities	33
Item 4.Submissions of Matters to a Vote of Securities Holders	33
Item 5.Other Information	34
Item 6.Exhibits	34
SIGNATURES	35
EXHIBIT INDEX	36
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 31.3
EXHIBIT 32
EXHIBIT 99.1

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

	June 30,			December 31,
(in thousands, except shares)	2005			2004
ASSETS
Cash and due from banks	$	127,286		$	94,561
Temporary investments		73,462			23,646
Total cash and cash equivalents		200,748			118,207
Trading account assets		1,403			1,577
Investment securities available for sale, at fair value		571,895			675,984
Investment securities held to maturity, at amortized cost		11,735			11,807
Mortgage loans held for sale		20,301			20,791
Loans		3,612,004			3,467,904
Allowance for loan losses		(44,510	)		(44,229	)
Net loans		3,567,494			3,423,675
Federal Home Loan Bank stock, at cost		14,298			14,218
Premises and equipment, net		88,321			85,681
Goodwill and other intangible assets, net		407,072			408,460
Mortgage servicing rights, net		9,268			11,154
Other assets		146,080			101,481
Total assets	$	5,038,615		$	4,873,035
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest bearing	$	977,160		$	891,731
Interest bearing		2,995,760			2,907,376
Total deposits		3,972,920			3,799,107
Securities sold under agreements to repurchase and federal funds purchased		127,449			88,267
Term debt		13,296			88,451
Junior subordinated debentures		165,970			166,256
Other liabilities		44,243			43,341
Total Liabilities		4,323,878			4,185,422
COMMITMENTS AND CONTINGENCIES (NOTE 10)
SHAREHOLDERS’ EQUITY
Common stock, no par value, 100,000,000 shares authorized; issued and outstanding: 44,453,407 in 2005 and 44,211,075 in 2004		563,582			560,611
Retained earnings		153,794			128,112
Accumulated other comprehensive loss		(2,639	)		(1,110	)
Total shareholders’ equity		714,737			687,613
Total liabilities and shareholders’ equity	$	5,038,615		$	4,873,035

See accompanying notes to condensed consolidated financial statements

3

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

	Three months ended				Six months ended
	June 30,				June 30,
(in thousands, except per share amounts)	2005		2004		2005		2004
INTEREST INCOME
Interest and fees on loans	$	60,220	$	32,791	$	117,156	$	64,655
Interest and dividends on investment securities
Taxable		6,252		5,324		12,801		9,843
Exempt from federal income tax		699		396		1,412		809
Dividends		38		91		81		162
Other interest income		454		44		687		84
Total Interest Income		67,663		38,646		132,137		75,553
INTEREST EXPENSE
Interest on deposits		13,485		5,785		24,809		11,675
Interest on federal funds purchased and repurchase agreements		407		184		908		323
Interest on borrowed funds		139		467		544		708
Interest on junior subordinated debentures		2,550		1,120		4,944		2,243
Total interest expense		16,581		7,556		31,205		14,949
Net interest income		51,082		31,090		100,932		60,604
Provision for loan losses		1,400		1,100		2,400		2,175
Net interest income after provision for loan losses		49,682		29,990		98,532		58,429
NON-INTEREST INCOME
Service charges on deposit accounts		5,426		3,273		10,248		6,400
Brokerage commissions and fees		2,879		3,014		6,008		5,905
Mortgage banking revenue		228		2,399		1,578		4,048
Other income		1,993		514		3,294		1,059
Net gain on sale of investment securities		1,398		6		1,398		6
Total non-interest income		11,924		9,206		22,526		17,418
NON-INTEREST EXPENSE
Salaries and employee benefits		20,361		13,753		40,640		27,419
Net occupancy and equipment		6,109		4,153		12,242		8,268
Merger related expenses		161		549		262		765
Other expenses		9,790		6,551		18,712		12,495
Total non-interest expenses		36,421		25,006		71,856		48,947
Income before income taxes and discontinued operations		25,185		14,190		49,202		26,900
Provision for income taxes		9,179		5,180		18,177		9,643
Income from continuing operations		16,006		9,010		31,025		17,257
Income from discontinued operations, net of tax		—		121		—		272
Net income	$	16,006	$	9,131	$	31,025	$	17,529
BASIC EARNINGS PER SHARE
Continuing operations	$	0.36	$	0.32	$	0.70	$	0.61
Discontinued operations		—		—		—		0.01
Net income	$	0.36	$	0.32	$	0.70	$	0.62
DILUTED EARNINGS PER SHARE
Continuing operations	$	0.36	$	0.31	$	0.69	$	0.60
Discontinued operations		—		0.01		—		0.01
Net income	$	0.36	$	0.32	$	0.69	$	0.61

See accompanying notes to condensed consolidated financial statements

4

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)

										Accumulated
	Common Stock									Other
							Retained			Comprehensive
(in thousands, except shares)	Shares			Amount			Earnings			Loss			Total
BALANCE AT JANUARY 1, 2004		28,411,816		$	230,773		$	89,058		$	(862	)	$	318,969
Net income								47,166						47,166
Other comprehensive loss, net of tax:
Unrealized losses on securities arising during the year (1)											(248	)		(248	)
Comprehensive income													$	46,918
Deferred compensation earned during the year					226									226
Stock repurchased and retired		(321,729	)		(6,062	)								(6,062	)
Stock options exercised and related tax benefit		629,661			9,018									9,018
Stock issued in connection with acquisitions (Note 4)		15,491,327			326,656									326,656
Cash dividends								(8,112	)					(8,112	)
Balance at December 31, 2004		44,211,075		$	560,611		$	128,112		$	(1,110	)	$	687,613
BALANCE AT JANUARY 1, 2005		44,211,075		$	560,611		$	128,112		$	(1,110	)	$	687,613
Net income								31,025						31,025
Other comprehensive loss, net of tax:
Unrealized losses on securities arising during the period (2)											(1,529	)		(1,529	)
Comprehensive income													$	29,496
Deferred compensation earned during the period					519									519
Stock repurchased and retired		(52,405	)		(1,149	)								(1,149	)
Stock options exercised and related tax benefit		294,737			3,601									3,601
Cash dividends								(5,343	)					(5,343	)
Balance at June 30, 2005		44,453,407		$	563,582		$	153,794		$	(2,639	)	$	714,737

(1)	Net unrealized holding loss on securities of $237,000 (net of $101,000 tax benefit), plus reclassification adjustment for net gains included in net income of $11,000 (net of $8,000 tax expense).
(2)	Net unrealized holding loss on securities of $690,000 (net of $460,000 tax benefit), plus reclassification adjustment for net gains included in net income of $839,000 (net of $559,000 tax expense).

See accompanying notes to condensed consolidated financial statements

5

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

	Three months ended June 30,						Six months ended June 30,
(in thousands)	2005			2004			2005			2004
Net income	$	16,006		$	9,131		$	31,025		$	17,529
Unrealized gains (losses) arising during the period on investment securities available for sale		8,390			(16,944	)		(1,150	)		(12,555	)
Reclassification adjustment for gains realized in net income, net of tax (expense of $559 for the three and six months ended June 30, 2005 and $2 for the three and six months ended June 30, 2004)		(839	)		(4	)		(839	)		(4	)
Income tax expense (benefit) related to unrealized gains (losses) on investment securities, available for sale		3,356			(6,658	)		(460	)		(4,934	)
Net unrealized gains (losses) on investment securities available for sale		4,195			(10,290	)		(1,529	)		(7,625	)
Comprehensive income (loss)	$	20,201		$	(1,159	)	$	29,496		$	9,904

See accompanying notes to condensed consolidated financial statements

6

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Six months ended June 30,
(in thousands)	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash (used) provided by operating activities of continuing operations	$	(5,985	)	$	26,585
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities available-for-sale		(634	)		(133,723	)
Sales and maturities of investment securities available-for-sale		103,779			63,202
Redemption of Federal Home Loan Bank stock		41			(3,037	)
Maturities of investment securities held-to-maturity		75			711
Net loan and lease originations		(157,006	)		(149,511	)
Purchase of loans		(3,904	)		—
Disposals of furniture and equipment		40			156
Proceeds from sales of loans		15,052			—
Purchases of premises and equipment		(6,966	)		(5,888	)
Net cash used by investing activities		(49,523	)		(228,090	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit liabilities		174,242			101,076
Net increase (decrease) in Fed funds purchased		47,000			(1,000	)
Net decrease in securities sold under agreements to repurchase		(7,818	)		(4,916	)
Dividends paid on common stock		(2,672	)		(2,831	)
Proceeds from stock options exercised		3,601			2,036
Retirement of common stock		(1,149	)		(6,062	)
Term debt borrowings		—			140,000
Repayments of term debt		(75,155	)		(50,000	)
Net cash provided by financing activities		138,049			178,303
Net increase (decrease) in cash and cash equivalents		82,541			(23,202	)
Cash and cash equivalents, beginning of period		118,207			134,006
Cash and cash equivalents, end of period	$	200,748		$	110,804
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	28,170		$	14,966
Income taxes	$	12,674		$	5,360

See accompanying notes to consolidated financial statements.

7

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 – Summary of Significant Accounting Policies

The accounting and financial reporting policies of Umpqua Holdings Corporation (referred to in this report as “we”, “our” or “the Company”) conform with accounting principles generally accepted in the United States of America. The accompanying interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Umpqua Bank (“Bank”), and Strand, Atkinson, Williams & York, Inc. (“Strand”). All material inter-company balances and transactions have been eliminated. The consolidated financial statements have not been audited. A more detailed description of our accounting policies is included in the 2004 Annual Report filed on Form 10-K. There have been no significant changes to these policies.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. The results for interim periods are not necessarily indicative of results for the full year or any other interim period. Certain reclassifications of prior year amounts have been made to conform to current classifications.

Note 2 – Stock-Based Compensation

At June 30, 2005 the Company had a total of 2.1 million stock options issued under various plans (some assumed in connection with mergers) that were accounted for under the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees. Under the intrinsic value method, compensation expense is recognized only to the extent an option’s exercise price is less than the market value of the underlying stock on the date of grant. For all options originally granted by the Company, no compensation cost has been recognized in the accompanying statement of income. Compensation cost has been recognized for certain options that were assumed in connection with prior acquisitions that were unvested as of the date the acquisitions were completed.

The following table presents the effect on net income and earnings per share if the fair value based method prescribed by Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, as amended, had been applied to all outstanding and unvested awards in each period:

Stock-Based Compensation Disclosure

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands, except per share data)	2005			2004			2005			2004
NET INCOME, AS REPORTED	$	16,006		$	9,131		$	31,025		$	17,529
Add: Stock-based employee compensation expense included in reported net income, net of tax effects		9			—			19			—
Deduct: Total stock-based employee compensation determined under the fair value based method for all awards, net of tax effects		(113	)		(241	)		(215	)		(467	)
Pro forma net income	$	15,902		$	8,890		$	30,829		$	17,062
INCOME FROM CONTINUING OPERATIONS, AS REPORTED	$	16,006		$	9,010		$	31,025		$	17,257
Add: Stock-based employee compensation expense included in reported net income, net of tax effects		9			—			19			—
Deduct: Total stock-based employee compensation determined under the fair value based method for all awards, net of tax effects		(113	)		(241	)		(215	)		(467	)
Pro forma income from continuing operations	$	15,902		$	8,769		$	30,829		$	16,790
NET INCOME PER SHARE:
Basic — as reported	$	0.36		$	0.32		$	0.70		$	0.62
Basic — pro forma	$	0.36		$	0.31		$	0.69		$	0.60
Diluted — as reported	$	0.36		$	0.32		$	0.69		$	0.61
Diluted — pro forma	$	0.35		$	0.31		$	0.69		$	0.59
INCOME FROM CONTINUING OPERATIONS PER SHARE:
Basic — as reported	$	0.36		$	0.32		$	0.70		$	0.61
Basic — pro forma	$	0.36		$	0.31		$	0.69		$	0.59
Diluted — as reported	$	0.36		$	0.31		$	0.69		$	0.60
Diluted — pro forma	$	0.35		$	0.31		$	0.69		$	0.58

8

The Company’s stock compensation plan provides for granting of restricted stock awards. The restricted stock awards generally vest ratably over five years and are recognized as expense over that same period of time. For the three and six months ended June 30, 2005, compensation expense of $48,000 and $116,000, respectively, was recognized in connection with restricted stock grants as compared to $51,000 and $106,000 for the comparable periods in 2004.

Note 3 – Discontinued Operations

During the fourth quarter of 2004, the Bank sold its merchant bankcard portfolio to an unrelated third party for $5.9 million in cash. The gain on sale, after selling costs and other expenses, was $5.6 million. Except for standard representations and warranties, the Bank assumed no liability subsequent to completion of the sale.

The following table presents the contribution components from the Bank’s merchant bankcard operations for the three and six months ended June 30, 2005 and 2004:

Contribution from Merchant Bankcard

	Three months ended					Six months ended
	June 30,					June 30,
(in thousands)	2005		2004			2005		2004
Other non-interest income	$	—	$	202		$	—	$	450
Provision for income taxes		—		(81	)		—		(178	)
Income from discontinued operations, net of tax	$	—	$	121		$	—	$	272

At June 30, 2005, there was no remaining liability recorded in connection with professional fees and contract termination costs related to the sale of the merchant bankcard portfolio.

In accordance with SFAS No. 144, Impairment of Long-Lived Assets, the financial results related to the merchant bankcard operation have been reclassified as income from discontinued operations, net of tax in the statements of income.

Note 4 – Business Combinations

On July 9, 2004, the Company acquired all of the outstanding common stock of Humboldt Bancorp (“Humboldt”) of Roseville, California, the parent company of Humboldt Bank, in an acquisition accounted for under the purchase method of accounting. The results of Humboldt’s operations have been included in the consolidated financial statements since that date. This merger was consistent with the Company’s community banking expansion strategy and provided the opportunity to enter growth markets in Northern California with an established franchise of 27 stores at the time of acquisition.

The aggregate purchase price was $328 million and included common stock valued at $310 million, stock options valued at $17 million and direct merger costs of $1 million. The value of the 15.5 million common shares issued was determined based on the $19.98 average closing market price of the Company’s common stock for the two trading days before and after announcement of the merger agreement on March 15, 2004. Outstanding Humboldt stock options were converted (using the same 1:1 exchange ratio applied to the share conversion) into approximately 1.1 million Umpqua Holdings Corporation stock options, at a weighted average fair value of $15.58 per option.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:

9

Fair Value of Humboldt Assets Acquired and Liabilities Assumed

(in thousands)
Assets acquired:
Investment securities	$	219,430
Loans, net		1,042,038
Premises & equipment, net		28,252
Goodwill		238,205
Core deposit intangible asset		11,646
Other assets		122,268
Total assets acquired	$	1,661,839
Liabilities assumed:
Deposits	$	1,192,059
Term debt		47,142
Junior subordinated debentures		68,561
Other liabilities		27,211
Total liabilities assumed		1,334,973
Net assets acquired	$	326,866

Subsequent to the acquisition, certain of these assets were adjusted as part of the allocation of the purchase price. Additional adjustments may be made to the purchase price allocation, specifically related to other assets and tax adjustments. At June 30, 2005, the goodwill asset recorded in connection with the Humboldt acquisition was $237.3 million.

The following table presents unaudited pro forma results of operations for the three and six months ended June 30, 2004 as if the acquisition of Humboldt had occurred on January 1, 2004. Since Humboldt completed its merger with California Independent Bancorp (“CIB”) on January 6, 2004, the pro forma results for that transaction are presented separately in the tables. Any revenue enhancements and cost savings as a result of the Humboldt merger have not been reflected in the pro forma consolidated condensed statements of income. No assurance can be given with respect to the ultimate level of such revenue enhancements or cost savings. The pro forma results do not necessarily indicate the results that would have been obtained had the acquisitions actually occurred on January 1, 2004:

10

Pro Forma Financial Information – Unaudited

(in thousands, except per share data)	Three Months Ended June 30, 2004
							Pro Forma					Pro Forma
	Umpqua		Humboldt (d)		CIB (e)		Adjustments					Combined
Net interest income	$	31,090	$	16,304	$	83	$	368		(a	)	$	47,845
Provision for loan losses		1,100		622		—		—					1,722
Non-interest income		9,206		3,468		17		—					12,691
Non-interest expense		25,006		13,426		9		599		(b	)		39,040
Income from continuing operations, before income taxes		14,190		5,724		91		(231	)				19,774
Provision for income taxes		5,180		1,752		33		(97	)	(c	)		6,868
Income from continuing operations	$	9,010	$	3,972	$	58	$	(134	)			$	12,906
Earnings per share from continuing operations:
Basic	$	0.32										$	0.30
Diluted	$	0.31										$	0.29
Average shares outstanding:
Basic		28,339											43,572
Diluted		28,664											44,538

(a)	Includes $724,000 of net accretion related to the Humboldt acquisition, less $356,000 of accretion recognized by Humboldt in connection with the CIB merger for the period January 1 through July 9, 2004.
(b)	Includes amortization of premises and fixed asset purchase accounting adjustments of $16,000 and core deposit intangible amortization of $583,000 million.
(c)	Income tax effect of pro forma adjustments.
(d)	Excludes estimated merger related costs for the Humboldt merger with Umpqua of $1.5 million.
(e)	Excludes estimated merger related costs for the CIB merger with Humboldt of $2.64 million and estimated related tax benefit of $855,000.

(in thousands, except per share data)	Six Months Ended June 30, 2004
							Pro Forma					Pro Forma
	Umpqua		Humboldt (d)		CIB (e)		Adjustments					Combined
Net interest income	$	60,604	$	32,607	$	165	$	736		(a	)	$	94,112
Provision for loan losses		2,175		1,243		—		—					3,418
Non-interest income		17,418		6,935		34		—					24,387
Non-interest expense		48,947		26,852		18		1,198		(b	)		77,015
Income from continuing operations, before income taxes		26,900		11,447		181		(462	)				38,066
Provision for income taxes		9,643		3,503		65		(194	)	(c	)		13,017
Income from continuing operations	$	17,257	$	7,944	$	116	$	(268	)			$	25,049
Earnings per share from continuing operations:
Basic	$	0.61										$	0.57
Diluted	$	0.60										$	0.56
Average shares outstanding:
Basic		28,392											43,625
Diluted		28,735											44,609

(a)	Includes $1.45 million of net accretion related to the Humboldt acquisition, less $712,000 of accretion recognized by Humboldt in connection with the CIB merger for the period January 1 through July 9, 2004.
(b)	Includes amortization of premises and fixed asset purchase accounting adjustments of $32,000 and core deposit intangible amortization of $1.17 million.
(c)	Income tax effect of pro forma adjustments.
(d)	Excludes merger related costs for the Humboldt merger with Umpqua of $3.06 million.
(e)	Excludes merger related costs for the CIB merger with Humboldt of $5.27 million and related tax benefit of $1.71 million.

No additional merger-related expenses are expected in connection with the Humboldt or any other previous acquisitions.

11

Note 5 – Per Share Information

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in a similar manner, except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares were issued using the treasury stock method. For all periods presented, stock options and restricted shares are the only potentially dilutive instruments issued by the Company. During 2004, the Company entered into a transaction that resulted in certain financial results being reported as a discontinued operation. Accordingly, basic and diluted earnings per share from continuing operations and discontinued operations (net of tax) are presented.

The following is a computation of basic and diluted earnings per share and basic and diluted earnings per share from continuing operations for the three and six months ended June 30, 2005 and 2004:

Earnings Per Share

	Three months ended				Six months ended
	June 30,				June 30,
(in thousands, except per share data)	2005		2004		2005		2004
Basic earnings per share:
Weighted average shares outstanding		44,436		28,339		44,384		28,392
Net income	$	16,006	$	9,131	$	31,025	$	17,529
Income from continuing operations	$	16,006	$	9,010	$	31,025	$	17,257
Basic earnings per share	$	0.36	$	0.32	$	0.70	$	0.62
Basic earnings per share — continuing operations	$	0.36	$	0.32	$	0.70	$	0.61
Diluted earnings per share:
Weighted average shares outstanding		44,436		28,339		44,384		28,392
Net effect of the assumed exercise of stock options, based on the treasury stock method		552		325		588		343
Total weighted average shares and common stock equivalents outstanding		44,988		28,664		44,972		28,735
Net income	$	16,006	$	9,131	$	31,025	$	17,529
Income from continuing operations	$	16,006	$	9,010	$	31,025	$	17,257
Diluted earnings per share	$	0.36	$	0.32	$	0.69	$	0.61
Diluted earnings per share — continuing operations	$	0.36	$	0.31	$	0.69	$	0.60

Note 6 – Segment Information

The Company operates three primary segments: Community Banking, Mortgage Banking and Retail Brokerage. The Community Banking segment consists of all non-mortgage related operations of Umpqua Bank (“the Bank”), which operates 93 stores located throughout Oregon, Northern California and Washington. The Community Banking segment’s principal business focus is the offering of loan and deposit products to its business and retail customers in its primary market areas.

The Mortgage Banking segment, which operates as a division of the Bank, originates, sells and services residential mortgage loans. During the third quarter of 2004, the Company completed a strategic review of the Mortgage Banking segment and decided to terminate wholesale channel origination. Although this decision resulted in a reduction in mortgage loan origination volumes, revenue and expense, the segment net income was not adversely impacted in a material manner.

The Retail Brokerage segment consists of the operations of the Company’s brokerage subsidiary, Strand, which offers a full range of retail brokerage services and products to its clients who consist primarily of individual investors. The Company accounts for intercompany fees and services between Strand and the Bank at an estimated fair value according to regulatory requirements for services provided. Intercompany items relate primarily to management services and interest on intercompany borrowings.

Summarized financial information concerning the Company’s reportable segments and the reconciliation to the consolidated financial results is shown in the following tables:

12

Segment Information

	Three Months Ended June 30, 2005
	Community		Retail		Mortgage
(in thousands, except per share data)	Banking		Brokerage		Banking			Consolidated
Interest income	$	66,213	$	20	$	1,430		$	67,663
Interest expense		15,721		—		860			16,581
Net interest income		50,492		20		570			51,082
Provision for loan losses		1,400		—		—			1,400
Non-interest income		8,697		2,953		274			11,924
Non-interest expense		31,290		2,860		2,110			36,260
Merger-related expense		161		—		—			161
Income before income taxes and discontinued operations		26,338		113		(1,266	)		25,185
Provision for income taxes		9,649		37		(507	)		9,179
Income from continuing operations		16,689		76		(759	)		16,006
Income from discontinued operations, net of tax		—		—		—			—
Net income	$	16,689	$	76	$	(759	)	$	16,006
Basic earnings per share:
Income from continuing operations	$	0.38	$	—	$	(0.02	)	$	0.36
Income from discontinued operations, net of tax	$	—	$	—	$	—			—
Net income	$	0.38	$	—	$	(0.02	)	$	0.36
Diluted earnings per share:
Income from continuing operations	$	0.38	$	—	$	(0.02	)	$	0.36
Income from discontinued operations, net of tax	$	—	$	—	$	—		$	—
Net income	$	0.38	$	—	$	(0.02	)	$	0.36

	Three Months Ended June 30, 2004
	Community		Retail		Mortgage
(in thousands, except per share data)	Banking		Brokerage		Banking		Consolidated
Interest income	$	37,780	$	15	$	851	$	38,646
Interest expense		7,093		—		463		7,556
Net interest income		30,687		15		388		31,090
Provision for loan losses		1,085		—		15		1,100
Non-interest income		3,687		3,099		2,420		9,206
Non-interest expense		19,783		2,911		1,763		24,457
Merger-related expense		549		—		—		549
Income before income taxes and discontinued operations		12,957		203		1,030		14,190
Provision for income taxes		4,715		71		394		5,180
Income from continuing operations		8,242		132		636		9,010
Income from discontinued operations, net of tax		121		—		—		121
Net income	$	8,363	$	132	$	636	$	9,131
Basic earnings per share:
Income from continuing operations	$	0.30	$	—	$	0.02	$	0.32
Income from discontinued operations, net of tax	$	—	$	—	$	—	$	—
Net income	$	0.30	$	—	$	0.02	$	0.32
Diluted earnings per share:
Income from continuing operations	$	0.29	$	—	$	0.02	$	0.31
Income from discontinued operations, net of tax	$	0.01	$	—	$	—	$	0.01
Net income	$	0.30	$	—	$	0.02	$	0.32

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	Six Months Ended June 30, 2005
	Community		Retail		Mortgage
(in thousands, except per share data)	Banking		Brokerage		Banking			Consolidated
Interest income	$	129,214	$	33	$	2,890		$	132,137
Interest expense		29,491		—		1,714			31,205
Net interest income		99,723		33		1,176			100,932
Provision for loan losses		2,400		—		—			2,400
Non-interest income		14,755		6,130		1,641			22,526
Non-interest expense		61,906		5,732		3,956			71,594
Merger-related expense		262		—		—			262
Income before income taxes and discontinued operations		49,910		431		(1,139	)		49,202
Provision for income taxes		18,478		155		(456	)		18,177
Income from continuing operations		31,432		276		(683	)		31,025
Income from discontinued operations, net of tax		—		—		—			—
Net income	$	31,432	$	276	$	(683	)	$	31,025
Basic earnings per share:
Income from continuing operations	$	0.71	$	0.01	$	(0.02	)	$	0.70
Income from discontinued operations, net of tax	$	—	$	—	$	—		$	—
Net income	$	0.71	$	0.01	$	(0.02	)	$	0.70
Diluted earnings per share:
Income from continuing operations	$	0.70	$	0.01	$	(0.02	)	$	0.69
Income from discontinued operations, net of tax	$	—	$	—	$	—		$	—
Net income	$	0.70	$	0.01	$	(0.02	)	$	0.69

	Six Months Ended June 30, 2004
	Community		Retail		Mortgage
(in thousands, except per share data)	Banking		Brokerage		Banking		Consolidated
Interest income	$	73,779	$	31	$	1,743	$	75,553
Interest expense		14,046		—		903		14,949
Net interest income		59,733		31		840		60,604
Provision for loan losses		2,143		—		32		2,175
Non-interest income		7,282		6,055		4,081		17,418
Non-interest expense		39,237		5,431		3,514		48,182
Merger-related expense		765		—		—		765
Income before income taxes and discontinued operations		24,870		655		1,375		26,900
Provision for income taxes		8,901		234		508		9,643
Income from continuing operations		15,969		421		867		17,257
Income from discontinued operations, net of tax		272		—		—		272
Net income	$	16,241	$	421	$	867	$	17,529
Basic earnings per share:
Income from continuing operations	$	0.57	$	0.01	$	0.03	$	0.61
Income from discontinued operations, net of tax	$	0.01	$	—	$	—	$	0.01
Net income	$	0.58	$	0.01	$	0.03	$	0.62
Diluted earnings per share:
Income from continuing operations	$	0.56	$	0.01	$	0.03	$	0.60
Income from discontinued operations, net of tax	$	0.01	$	—	$	—	$	0.01
Net income	$	0.57	$	0.01	$	0.03	$	0.61

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	June 30, 2005
	Community		Retail		Mortgage
(in thousands)	Banking		Brokerage		Banking		Consolidated
Total assets	$	4,931,435	$	7,324	$	99,856	$	5,038,615
Total loans	$	3,542,044	$	—	$	69,960	$	3,612,004
Total deposits	$	3,972,856	$	—	$	64	$	3,972,920

	December 31, 2004
	Community		Retail		Mortgage
(in thousands)	Banking		Brokerage		Banking		Consolidated
Total assets	$	4,789,093	$	7,288	$	76,654	$	4,873,035
Total loans	$	3,426,362	$	—	$	41,542	$	3,467,904
Total deposits	$	3,799,107	$	—	$	—	$	3,799,107

Note 7 – Recently Issued Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R, Share Based Payment, a revision to the previously issued guidance on accounting for stock options and other forms of equity-based compensation. SFAS No. 123R requires companies to recognize in the income statement the grant-date fair value of stock options and other equity-based forms of compensation issued to employees. For the Company, this standard will become effective on January 1, 2006. The Company does not expect the impact of adoption of SFAS No. 123R on earnings per share will be materially different from the current fair value pro forma disclosure.

Companies may elect one of two methods for adoption of SFAS No. 123R. Under the modified prospective method, any awards that are granted or modified after the date of adoption will be measured and accounted for under the provisions of SFAS No. 123R. The unvested portion of previously granted awards will continue to be accounted for under SFAS No. 123, Accounting for Stock-Based Compensation, except that the compensation expense associated with the unvested portions will be recognized in the statement of income. Under the modified retrospective method, all amounts previously reported are restated to reflect the amounts in the SFAS No. 123 pro forma disclosure. The Company expects to make a decision with respect to the method of adoption during the fourth quarter of 2005.

In March 2005, the SEC issued Staff Accounting Bulletin (“SAB”) No. 107 which expressed the views of the SEC regarding the interaction between SFAS No. 123R and certain SEC rules and regulations. SAB No. 107 provides guidance related to the valuation of share-based payment arrangements for public companies, including assumptions such as expected volatility and expected term. The Company is assessing the impact SAB No. 107 will have on its consolidated financial statements.

Note 8 – Allowance for Loan Losses

As of September 30, 2004, we refined the model used for determining certain components of the allowance for loan losses. The model refinement was done principally in connection with the Humboldt acquisition, and did not have a material impact on the recorded allowance for loan losses. Additionally, as of September 30, 2004, we reclassified the reserve for unfunded lending commitments from the allowance for loan losses to other liabilities. The amount reclassified as of September 30, 2004 was approximately $1.2 million, or 3 basis points of total gross loans. The reclassifications had no effect on the provision for credit losses as reported.

Note 9 — Junior Subordinated Debentures

As of June 30, 2005, the Company had ten wholly-owned trusts (“Trusts”) that were formed to issue trust preferred securities and related common securities of the Trusts. Five Trusts, representing aggregate total obligations of approximately $58.9 million (fair value of approximately $69 million as of the merger date), were assumed in connection with the Humboldt merger. Following is information about the Trusts:

15

Junior Subordinated Debentures

		Issued		Carrying					Effective
Trust Name	Issue Date	Amount		Value (1)		Rate (2)			Rate (3)			Maturity Date	Call Date
Umpqua Holdings Statutory Trust I	September 2002	$	25,774	$	25,774	Floating (4)				6.97	%	September 2032	September 2007
Umpqua Statutory Trust II	October 2002		20,619		20,619	Floating (5)				6.56	%	October 2032	October 2007
Umpqua Statutory Trust III	October 2002		30,928		30,928	Floating (6)				6.72	%	November 2032	November 2007
Umpqua Statutory Trust IV	December 2003		10,310		10,310	Floating (7)				5.99	%	January 2034	January 2009
Umpqua Statutory Trust V	December 2003		10,310		10,310	Floating (7)				6.27	%	March 2034	March 2009
HB Capital Trust I	March 2000		5,310		6,687		10.875	%		7.73	%	March 2030	March 2010
Humboldt Bancorp Statutory Trust I	February 2001		5,155		6,146		10.200	%		7.91	%	February 2031	February 2011
Humboldt Bancorp Statutory Trust II	December 2002		10,310		11,722	Floating (8)				5.70	%	December 2031	December 2006
Humboldt Bancorp Staututory Trust III	September 2003		27,836		31,974		6.75%	(9)		4.89	%	September 2033	September 2008
CIB Capital Trust	November 2002		10,310		11,500	Floating (6)				5.62	%	November 2032	November 2007
	Total	$	156,862	$	165,970

(1)	Reflects purchase accounting adjustments, net of accumulated amortization, for junior subordinated debentures
	assumed in connection with the Humboldt merger.
(2)	Contractual interest rate of junior subordinated debentures.
(3)	Effective interest rate as of June 2005, including impact of purchase accounting amortization.
(4)	Rate based on LIBOR plus 3.50%, adjusted quarterly.
(5)	Rate based on LIBOR plus 3.35%, adjusted quarterly.
(6)	Rate based on LIBOR plus 3.45%, adjusted quarterly.
(7)	Rate based on LIBOR plus 2.85%, adjusted quarterly.
(8)	Rate based on LIBOR plus 3.60%, adjusted quarterly.
(9)	Rate fixed for 5 years from issuance, then adjusted quarterly thereafter based on LIBOR plus 2.95%.

As a result of the adoption of FASB Interpretation No. 46 (“FIN 46”), Consolidation of Variable Interest Entities (revised December 2003), the Trusts have been deconsolidated. The $166.0 million of junior subordinated debentures issued to the Trusts as of June 30, 2005 ($166.3 million as of December 31, 2004) are reflected as junior subordinated debentures in the consolidated balance sheets. The common stock issued by the Trusts is recorded in other assets in the consolidated balance sheets, and totaled $4.7 million at June 30, 2005 and December 31, 2004.

All of the debentures issued to the Trusts, less the common stock of the Trusts, qualified as Tier 1 capital as of June 30, 2005, under guidance issued by the Board of Governors of the Federal Reserve System (“Federal Reserve Board”). In May 2004, the Federal Reserve Board proposed a rule that would continue to allow the inclusion of trust preferred securities in Tier 1 capital, but with stricter quantitative limits. Under the proposal, after a three-year transition period, the aggregate amount of trust preferred securities and certain other capital elements would be limited to 25% of Tier 1 capital elements, net of goodwill. The amount of trust preferred securities and certain other elements in excess of the limit could be included in Tier 2 capital, subject to restrictions. Based on the proposed rule, the Company expects to include all currently issued trust preferred securities in Tier 1 capital. However, the provisions of the final rule could significantly differ from those proposed and there can be no assurance that the Federal Reserve Board will not further limit the amount of trust preferred securities permitted to be included in Tier 1 capital for regulatory capital purposes.

Note 10 – Commitments and Contingencies

Lease Commitments — The Company leases 65 sites under non-cancelable operating leases. The leases contain various provisions for increases in rental rates, based either on changes in the published Consumer Price Index or a predetermined escalation schedule. Substantially all of the leases provide the Company with the option to extend the lease term one or more times upon expiration.
Rent expense, net of rental income, for premises and equipment rentals for the three and six months ended June 30, 2005 was $1.5 million and $3.1 million, respectively, compared to $883,000 and $1.7 million in the comparable periods in 2004.

Financial Instruments with Off-Balance Sheet Risk — The Company’s financial statements do not reflect various commitments and contingent liabilities that arise in the normal course of the Bank’s business and involve elements of credit, liquidity and interest rate risk. These commitments and contingent liabilities include commitments to extend credit, commitments to originate residential mortgage loans and standby letters of credit. The following table presents a summary of the Bank’s commitments and contingent liabilities as of June 30, 2005:

16

Contractual Amounts

	June 30,
(in thousands)	2005
Commitments to extend credit	$	908,720
Commitments to extend overdrafts	$	85,833
Commitments to originate residential loans	$	21,452
Standby letters of credit	$	25,385

The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit and financial guarantees. Those instruments involve elements of credit and interest-rate risk similar to the amounts recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of the Bank’s involvement in particular classes of financial instruments.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit, and financial guarantees written, is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. While most commercial letters of credit are not utilized, a significant portion of such utilization is on an immediate payment basis. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral varies but may include cash, accounts receivable, inventory, premises and equipment and income-producing commercial properties.

Standby letters of credit and financial guarantees written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds cash, marketable securities, or real estate as collateral supporting those commitments for which collateral is deemed necessary. The Bank has not been required to perform on any financial guarantees and did not incur any losses in connection with standby letters of credit during the three and six months ended June 30, 2005.

The Bank established a loss reserve for unfunded commitments, including loan commitments and letters of credit, during 2004 by reclassifying $1.2 million of the allowance for loan losses. At June 30, 2005, the reserve for unfunded commitments, which is included in other liabilities on the consolidated balance sheet, was approximately $1.4 million. The adequacy of the reserve for unfunded commitments is reviewed on a quarterly basis, based upon changes in the amounts of commitments, loss experience and economic conditions.

The Bank enters into forward delivery contracts to sell residential mortgage loans or mortgage-backed securities to broker/dealers at specific prices and dates in order to hedge the interest rate risk in its portfolio of mortgage loans held for sale and its residential mortgage loan commitments. Credit risk associated with forward contracts is limited to the replacement cost of those forward contracts in a gain position. There were no counterparty default losses on forward contracts in the three and six months ended June 30, 2005. Market risk with respect to forward contracts arises principally from changes in the value of contractual positions due to changes in interest rates. The Bank limits its exposure to market risk by monitoring differences between commitments to customers and forward contracts with broker/dealers. In the event the Company has forward delivery contract commitments in excess of available mortgage loans, the Company completes the transaction by either paying a fee to or receiving a fee from the broker/dealer equal to the increase or decrease in the market value of the forward contract. At June 30, 2005, the Bank had commitments to originate residential loans and forward contracts outstanding of $21.5 million and $11.2 million, respectively, with a fair value of approximately $50,000 and negative $81,000, respectively.

Mortgage loans sold to investors are generally sold with servicing rights retained, with only the standard legal representations and warranties regarding recourse to the Bank. Management believes that any liabilities that may result from such recourse provisions are not significant.

Legal Proceedings—In the ordinary course of business, various claims and lawsuits are brought by and against the Company, the Bank and Strand. In the opinion of management, there is no pending or threatened proceeding in which an adverse decision could result in a material adverse change in the Company’s consolidated financial condition or results of operations.

17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

     This Report contains certain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that expressly or implicitly predict future results, performance or events are forward-looking. In addition, the words “expect,” believe,” “anticipate” and other similar expressions identify forward-looking statements. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expected. Factors that could cause or contribute to such differences include, but are not limited to, the risk factors discussed in this and other reports filed with the SEC, including exhibit 99.1 attached hereto, and the following:

• The ability to attract new deposits and loans

• Competitive market pricing factors

• Deterioration in economic conditions that could result in increased loan losses

• Market interest rate volatility

• Changes in legal or regulatory requirements

• The ability to recruit and retain certain key management and staff

• Risks associated with merger integration

Readers of this report should not place undue reliance on forward-looking statements contained herein, which speak only as of the date of this report. Umpqua Holdings Corporation undertakes no obligation to revise any forward-looking statements to reflect subsequent events or circumstances.

Summary of Critical Accounting Policies

Our significant accounting policies are described in Note 1 in the Notes to Consolidated Financial Statements for the year ended December 31, 2004 as filed on Form 10-K. Not all of these accounting policies require management to make difficult, subjective or complex judgments or estimates. Management believes that the following policies could be considered critical under the SEC’s definition.

Allowance for Loan Losses and Reserve for Unfunded Commitments

The allowance for loan losses (“ALL”) is maintained at a level that is adequate to absorb probable incurred losses inherent in the loan portfolio. The reserve for unfunded commitments (“RUC”) is maintained at a level that is adequate to absorb probable losses associated with our commitment to lend funds, such as with a letter or line of credit. The adequacy of the ALL and RUC are monitored on a regular basis and are based on management’s evaluation of numerous factors. These factors include the quality of the current loan portfolio; the trend in the loan portfolio’s risk ratings; current economic conditions; loan concentrations; loan growth rates; past-due and non-performing trends; evaluation of specific loss estimates for all significant problem loans; historical charge-off and recovery experience; and other pertinent information. Approximately 77% of our loan portfolio is secured by real estate, and a significant decline in real estate market values may require an increase in the allowance for loan losses.

Mortgage Servicing Rights

Mortgage servicing rights (“MSR”) retained are measured by allocating the carrying value of the loans between the assets sold and the interest retained, based on their relative fair values at the date of the sale. The subsequent measurements are determined based on valuations provided by third parties. MSR assets are amortized over the expected life of the loan and are evaluated periodically for impairment. The expected life of the loan can vary from management’s estimates due to prepayments by borrowers, especially when rates fall. Prepayments in excess of management’s estimates would negatively impact the recorded value of the MSR. The value of the MSR is also dependent upon the discount rate used in the model. Management reviews this rate on an ongoing basis based on current market rates. A significant increase in the discount rate would reduce the value of MSR.

Goodwill and Other Intangibles

At June 30, 2005, we had approximately $407 million in goodwill and other intangible assets as a result of business combinations. Intangible assets with definite useful lives are amortized to their estimated residual values over their respective estimated useful lives, and also reviewed for impairment. Goodwill and other intangibles with indefinite lives are not amortized but instead are periodically tested for impairment. Management performs this impairment analysis on a quarterly basis, or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the asset exceeds its fair value. No impairment loss was recognized during the three and six months ended June 30, 2005.

Results of Operations—Overview

For the three months ended June 30, 2005, net income was $16.0 million, or $0.36 per diluted share, an increase of 13% on a per diluted share basis as compared to $9.1 million, or $0.32 per diluted share for the three months ended June 30, 2004. Income from

18

continuing operations for the three months ended June 30, 2005, which excludes the after-tax operating results from our merchant bankcard portfolio, was $16.0 million, or $0.36 per diluted share, as compared to $9.0 million, or $0.31 per diluted share for the three months ended June 30, 2004.

For the six months ended June 30, 2005, net income was $31.0 million, or $0.69 per diluted share, an increase of 13% on a per diluted share basis as compared to $17.5 million, or $0.61 per diluted share for the six months ended June 30, 2004. Income from continuing operations for the six months ended June 30, 2005, which excludes the after-tax operating results from our merchant bankcard portfolio, was $31.0 million, or $0.69 per diluted share, as compared to $17.3 million, or $0.60 per diluted share for the six months ended June 30, 2004. Additional information on discontinued operations is provided under the heading Discontinued Operations below.

The improvement in diluted earnings per share from continuing operations for the three and six months ended June 30, 2005 is principally attributable to improved net interest income, offset by a decrease in mortgage banking revenue and increased operating expenses. We completed the acquisition of Humboldt on July 9, 2004, and the results of the acquired operations are included in our financial results starting on July 10, 2004.

We incur significant expenses related to the completion and integration of mergers. Accordingly, we believe that our operating results are best measured on a comparative basis excluding the impact of merger-related expenses, net of tax. We define operating income as income before merger related expenses, net of tax, and we calculate operating income per diluted share by dividing operating income by the same diluted share total used in determining diluted earnings per share (see Note 5 of the Notes to Condensed Consolidated Financial Statements). Operating income and operating income per diluted share are considered “non-GAAP” financial measures. Although we believe the presentation of non-GAAP financial measures provides a better indication of our operating performance, readers of this report are urged to review the GAAP results as presented in the Condensed Consolidated Financial Statements.

The following table presents a reconciliation of operating income and operating income per share to net income and net income per share for the three and six months ended June 30, 2005 and 2004:

Reconciliation of Operating Income to Net Income

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2005		2004		2005		2004
Net income	$	16,006	$	9,131	$	31,025	$	17,529
Merger-related expenses, net of tax		97		333		157		464
Operating income	$	16,103	$	9,464	$	31,182	$	17,993
Per diluted share:
Net income	$	0.36	$	0.32	$	0.69	$	0.61
Merger-related expenses, net of tax		—		0.01		—		0.02
Operating income	$	0.36	$	0.33	$	0.69	$	0.63

The following table presents the returns on average assets, average shareholders’ equity and average tangible shareholders’ equity for the three and six months ended June 30, 2005 and 2004. It includes the calculated ratios based on reported net income and income from continuing operations, and operating income as shown in the table above. To the extent return on average shareholders’ equity is used to compare our performance with other financial institutions that do not have merger-related intangible assets, we believe it beneficial to also consider the return on average tangible shareholders’ equity. The return on average tangible shareholders’ equity is calculated by dividing net income by average shareholders’ equity less average intangible assets. The return on average tangible shareholders’ equity is considered a non-GAAP financial measure and should be viewed in conjunction with the return on average shareholders’ equity.

19

Returns on Average Assets, Shareholders’ Equity and Tangible Shareholders’ Equity

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(in thousands)	2005			2004			2005			2004
Returns on average assets:
Net income		1.29	%		1.18	%		1.27	%		1.17	%
Income from continuing operations		1.29	%		1.17	%		1.27	%		1.15	%
Operating income		1.30	%		1.23	%		1.27	%		1.20	%
Returns on average shareholders’ equity:
Net income		9.11	%		11.23	%		8.95	%		10.83	%
Income from continuing operations		9.11	%		11.08	%		8.95	%		10.66	%
Operating income		9.17	%		11.64	%		9.00	%		11.11	%
Returns on average tangible shareholders’ equity:
Net income		21.61	%		21.93	%		21.48	%		21.23	%
Income from continuing operations		21.61	%		21.64	%		21.48	%		20.90	%
Operating income		21.74	%		22.73	%		21.59	%		21.79	%
Calculation of average tangible shareholders’ equity:
Average shareholders’ equity	$	704,466		$	327,064		$	699,039		$	325,628
Less: average intangible assets		(407,364	)		(159,612	)		(407,760	)		(159,581	)
Average tangible shareholders’ equity	$	297,102		$	167,452		$	291,279		$	166,047

Discontinued Operations

During the fourth quarter of 2004, we completed a strategic review of our merchant bankcard portfolio. We concluded that shareholder value would be maximized, on a risk-adjusted basis, through a sale of the portfolio to a third party. In December 2004, the Bank sold its merchant bankcard portfolio to a third party for $5.9 million in cash, resulting in a gain on sale (after selling costs and related expenses) of $5.6 million, or $3.4 million after-tax. The operating results related to the merchant bankcard portfolio (including the gain on sale) have been reclassified as income from discontinued operations, net of tax for all periods presented. We retained no ongoing liability related to the portfolio subsequent to the sale and entered into an agreement whereby we will refer all merchant applications exclusively to the buyer for a period of seven years. In consideration for the referrals, we will receive remuneration for each accepted application and an on-going royalty based on a percentage of net revenue generated by the account as defined in the agreement. We do not expect the referral revenue will have a material impact on our non-interest income.

For the three and six months ended June 30, 2005, we recognized no income related to the merchant bankcard portfolio. In the three and six months ended June 30, 2004, we recognized $121,000 and $272,000, net of tax. As a result of the sale, we will no longer have the benefit of this revenue stream. Since, for the year ended December 31, 2004, merchant bankcard revenue comprised only about 2% of total non-interest income, we do not expect the loss of revenue will have a material impact on our results of operations in 2005.

Additional information on discontinued operations is provided in Note 3 of the Notes to Condensed Consolidated Financial Statements.

Net Interest Income

Net interest income is the largest source of our operating income. Net interest income for the three months ended June 30, 2005, was $51.1 million, an increase of $20.0 million, or 64% over the comparable period in 2004. Net interest income for the six months ended June 30, 2005, was $100.9 million, an increase of $40.3 million, or 67% over the comparable period in 2004. This increase is attributable to growth in outstanding average interest earning assets and interest-bearing liabilities over the comparable prior year period, primarily due to the Humboldt merger, which was completed on July 9, 2004. The fair value of interest-earning assets acquired on that date totaled $1.3 billion, and interest-bearing liabilities totaled $836 million.

For the three months ended June 30, 2005, the net interest margin (net interest income as a percentage of average interest earning assets) on a fully tax-equivalent basis was 4.81%, an increase of 24 basis points as compared to the same period in 2004. The net interest margin on a fully tax-equivalent basis for the six months ended June 30, 2005 was 4.82%, an increase of 22 basis points as compared to the same period in 2004. This increase is principally attributable to both the higher historical margin of Humboldt and accretion resulting from purchase accounting adjustments. The second quarter 2005 margin of 4.81% was comparable to the first quarter 2005 margin of 4.83%.

The following tables present the condensed average balance sheet information, together with interest income and yields on average

20

interest bearing assets, and interest expense and rates paid on average interest-bearing liabilities for the three and six months ended June 30, 2005 and 2004:

Average Rates and Balances (Quarterly)

		Three Months Ended										Three Months Ended
		June 30, 2005										June 30, 2004
						Interest		Average								Interest		Average
		Average				Income or		Yields				Average				Income or		Yields
(in thousands)		Balance				Expense		or Rates				Balance				Expense		or Rates
INTEREST-EARNING ASSETS:
Loans and leases (1)	$		3,570,800		$		60,220		6.76	%	$		2,154,276		$		32,791		6.12	%
Taxable securities			588,806				6,290		4.27	%			548,474				5,419		3.95	%
Non-taxable securities (2)			64,575				1,062		6.59	%			36,088				610		6.77	%
Temporary investments (3)			62,792				434		2.76	%			12,630				29		0.92	%
Total interest earning assets			4,286,973				68,006		6.36	%			2,751,468				38,849		5.68	%
Allowance for credit losses			(46,372	)									(27,159	)
Other assets			739,766										382,083
INTEREST-BEARING LIABILITIES:	$		4,980,367								$		3,106,392
INTEREST-BEARING LIABILITIES:
Interest-bearing checking and savings accounts	$		2,027,536		$		6,582		1.30	%	$		1,271,845		$		2,547		0.81	%
Time deposits			980,870				6,903		2.82	%			589,774				3,238		2.21	%
Federal funds purchased and repurchase agreements			72,142				407		2.26	%			87,382				184		0.85	%
Term debt			27,061				139		2.06	%			98,367				467		1.91	%
Notes payable on junior subordinated debentures and trust preferred securities			166,032				2,550		6.16	%			97,941				1,120		4.60	%
Total interest-bearing liabilities			3,273,641				16,581		2.03	%			2,145,309				7,556		1.42	%
Non-interest-bearing deposits			949,610										607,543
Other liabilities			52,650										26,476
Total liabilities			4,275,901										2,779,328
Shareholders’ equity			704,466										327,064
Total liabilities and shareholders’ equity	$		4,980,367								$		3,106,392
NET INTEREST INCOME (2)					$		51,425								$		31,293
NET INTEREST SPREAD									4.33	%									4.26	%
AVERAGE YIELD ON EARNING ASSETS (1), (2)									6.36	%									5.68	%
INTEREST EXPENSE TO EARNING ASSETS									1.55	%									1.11	%
NET INTEREST INCOME TO EARNING ASSETS (1), (2)									4.81	%									4.57	%

(1)	Non-accrual loans are included in average balance. Includes mortgage loans held for sale.
(2)	Tax-exempt income has been adjusted to a tax equivalent basis at a 35% tax rate. The amount of such adjustment was an addition to recorded income of $343,000 and $203,000 for the three months ended June 30, 2005 and 2004, respectively.
(3)	Temporary investments include federal funds sold and interest-bearing deposits at other banks.

21

Average Rates and Balances (Year-to-Date)

	Six Months Ended								Six Months Ended
	June 30, 2005								June 30, 2004
				Interest		Average						Interest		Average
	Average			Income or		Yields			Average			Income or		Yields
(in thousands)	Balance			Expense		or Rates			Balance			Expense		or Rates
INTEREST-EARNING ASSETS:
Loans and leases (1)	$	3,530,080		$	117,156		6.69	%	$	2,106,366		$	64,655		6.17	%
Taxable securities		606,428			12,882		4.25	%		511,606			10,014		3.91	%
Non-taxable securities (2)		65,658			2,142		6.53	%		36,921			1,243		6.69	%
Temporary investments (3)		49,485			654		2.66	%		11,515			52		0.93	%
Total interest earning assets		4,251,651			132,834		6.30	%		2,666,408			75,964		5.73	%
Allowance for credit losses		(46,006	)							(26,601	)
Other assets		738,938								384,371
INTEREST-BEARING LIABILITIES:	$	4,944,583							$	3,024,178
INTEREST-BEARING LIABILITIES:
Interest-bearing checking and savings accounts	$	1,995,279		$	12,046		1.22	%	$	1,243,965		$	5,072		0.82	%
Time deposits		973,104			12,763		2.64	%		593,644			6,603		2.24	%
Federal funds purchased and repurchase agreements		79,781			908		2.30	%		70,946			323		0.91	%
Term debt		54,690			544		2.01	%		76,683			708		1.86	%
Notes payable on junior subordinated debentures and trust preferred securities		166,123			4,944		6.00	%		97,941			2,243		4.61	%
Total interest-bearing liabilities		3,268,977			31,205		1.92	%		2,083,179			14,949		1.44	%
Non-interest-bearing deposits		922,414								589,337
Other liabilities		54,153								26,034
Total liabilities		4,245,544								2,698,550
Shareholders’ equity		699,039								325,628
Total liabilities and shareholders’ equity	$	4,944,583							$	3,024,178
NET INTEREST INCOME (2)				$	101,629							$	61,015
NET INTEREST SPREAD							4.38	%							4.29	%
AVERAGE YIELD ON EARNING ASSETS (1), (2)							6.30	%							5.73	%
INTEREST EXPENSE TO EARNING ASSETS							1.48	%							1.13	%
NET INTEREST INCOME TO EARNING ASSETS (1), (2)							4.82	%							4.60	%

(1)	Non-accrual loans are included in average balance. Includes mortgage loans held for sale.
(2)	Tax-exempt income has been adjusted to a tax equivalent basis at a 35% tax rate. The amount of such adjustment was an addition to recorded income of $697,000 and $411,000 for the three months ended June 30, 2005 and 2004, respectively.
(3)	Temporary investments include federal funds sold and interest-bearing deposits at other banks.

The following tables set forth a summary of the changes in net interest income due to changes in average asset and liability balances (volume) and changes in average rates (rate) for the three and six months ended June 30, 2005 as compared to the same period in 2004. Changes in interest income and expense, which are not attributable specifically to either volume or rate, are allocated proportionately between both variances.

22

Rate/ Volume Analysis (Quarterly)

		THREE MONTHS ENDED JUNE 30,
		2005 COMPARED TO 2004
		INCREASE (DECREASE) IN INTEREST
		INCOME AND EXPENSE DUE TO
						CHANGES IN
(in thousands)		VOLUME				RATE				TOTAL
INTEREST-EARNING ASSETS:
Loans	$		23,561		$		3,868		$		27,429
Taxable securities			414				457				871
Non-taxable securities (1)			468				(16	)			452
Temporary investments			269				136				405
Total (1)			24,712				4,445				29,157
INTEREST-BEARING LIABILITIES:
Interest-bearing checking and savings accounts			1,973				2,062				4,035
Time deposits			2,571				1,094				3,665
Repurchase agreements and federal funds			(37	)			260				223
Junior subordinated debentures			(363	)			35				(328	)
Term debt			958				472				1,430
Total			5,102				3,923				9,025
Net increase in net interest income (1)	$		19,610		$		522		$		20,132

(1) Tax exempt income has been adjusted to a tax equivalent basis at a 35% tax rate.

Rate/ Volume Analysis (Year-to-Date)

		SIX MONTHS ENDED JUNE 30,
		2005 COMPARED TO 2004
		INCREASE (DECREASE) IN INTEREST
		INCOME AND EXPENSE DUE TO
						CHANGES IN
(in thousands)		VOLUME				RATE				TOTAL
INTEREST-EARNING ASSETS:
Loans	$		46,869		$		5,632		$		52,501
Taxable securities			1,964				904				2,868
Non-taxable securities (1)			939				(40	)			899
Temporary investments			380				222				602
Total (1)			50,152				6,718				56,870
INTEREST-BEARING LIABILITIES:
Interest-bearing checking and savings accounts			3,883				3,091				6,974
Time deposits			4,812				1,348				6,160
Repurchase agreements and federal funds			46				539				585
Junior subordinated debentures			(216	)			52				(164	)
Term debt			1,888				813				2,701
Total			10,413				5,843				16,256
Net increase in net interest income (1)	$		39,739		$		875		$		40,614

(1) Tax exempt income has been adjusted to a tax equivalent basis at a 35% tax rate.

23

Provision for Loan Losses

The provision for loan losses was $1.4 million and $2.4 million for the three and six months ended June 30, 2005, respectively, compared with $1.1 million and $2.2 million for the same periods in 2004. As a percentage of average outstanding loans, the provision for loan losses recorded for the three months ended June 30, 2005 was 0.16%, a decrease of five basis points from the same period in 2004. The provision for loan losses as a percentage of average outstanding loans recorded for the six months ended June 30, 2005 was 0.14%, a decrease of seven basis points from the same period in 2004. The decrease in the provision for loan losses in the three and six months ended June 30, 2005 is principally attributable to improved asset quality trends.

The provision for loan losses is based on management’s evaluation of inherent risks in the loan portfolio and a corresponding analysis of the allowance for loan losses. Additional discussion on loan quality and the allowance for loan losses is provided under the heading Asset Quality and Non-Performing Assets below.

Non-Interest Income

Non-interest income for the three months ended June 30, 2005 was $11.9 million, an increase of $2.7 million, or 30%, over the same period in 2004. Non-interest income for the six months ended June 30, 2005 was $22.5 million, an increase of $5.1 million, or 29%, over the same period in 2004. The following table presents the key components of non-interest income for the three and six months ended June 30, 2005 and 2004:

Non-Interest Income

	Three months ended June 30,										Six months ended June 30,
					Change			Change							Change			Change
(in thousands)	2005		2004		Amount			Percent			2005		2004		Amount			Percent
Deposit service charges	$	5,426	$	3,273	$	2,153			66	%	$	10,248	$	6,400	$	3,848			60	%
Brokerage fees		2,879		3,014		(135	)		–4	%		6,008		5,905		103			2	%
Mortgage banking revenue		228		2,399		(2,171	)		–90	%		1,578		4,048		(2,470	)		–61	%
Other		1,993		514		1,479			288	%		3,294		1,059		2,235			211	%
Net gain on sale of investment securities		1,398		6		1,392			NM			1,398		6		1,392			NM
Total	$	11,924	$	9,206	$	2,718			30	%	$	22,526	$	17,418	$	5,108			29	%

    NM — Not meaningful

Deposit service charges increases are principally attributable to the Humboldt acquisition. Total brokerage fees for the three and six months ended June 30, 2005 were comparable to the three and six months ended June 30, 2004. The decrease in mortgage banking revenue in the three and six months ended June 30, 2005 relates to a $2.1 million impairment charge to the value of mortgage servicing right portfolio. This impairment resulted from a decline in mortgage interest rates. Excluding mortgage servicing right impairments, mortgage banking revenue was $2.3 million for the second quarter of 2005, compared to $1.5 million for the same quarter one year ago. Offsetting the impairment in the second quarter of 2005 were $1.4 million in gains on the sale of securities and $0.6 million in gain on the sale of our remaining credit card portfolio which is reflected in other non-interest income. The remaining increase in other non-interest income results primarily from increased revenue related to the Humboldt acquisition.

Non-Interest Expense

Non-interest expense for the three months ended June 30, 2005 was $36.4 million, an increase of $11.4 million or 46% over the same period of 2004. Non-interest expense for the six months ended June 30, 2005 was $71.9 million, an increase of $22.9 million or 47% over the six months ended June 30, 2004. The following table presents the key elements of non-interest expense for the three and six months ended June 30, 2005 and 2004.

24

Non-Interest Expense

	Three months ended June 30,										Six months ended June 30,
					Change			Change							Change			Change
(in thousands)	2005		2004		Amount			Percent			2005		2004		Amount			Percent
Salaries and employee benefits	$	20,361	$	13,753	$	6,608			48	%	$	40,640	$	27,419	$	13,221			48	%
Net occupancy and equipment		6,109		4,153		1,956			47	%		12,242		8,268		3,974			48	%
Communications		1,578		1,303		275			21	%		2,823		2,541		282			11	%
Marketing		1,310		925		385			42	%		2,067		1,662		405			24	%
Services		2,835		1,667		1,168			70	%		6,347		3,267		3,080			94	%
Supplies		710		416		294			71	%		1,237		851		386			45	%
Intangible amortization		660		86		574			667	%		1,320		173		1,147			663	%
Merger-related expenses		161		549		(388	)		–71	%		262		765		(503	)		–66	%
Other		2,697		2,154		543			25	%		4,918		4,001		917			23	%
Total	$	36,421	$	25,006	$	11,415			46	%	$	71,856	$	48,947	$	22,909			47	%

Increase in non-interest expense is primarily attributable to the inclusion of expenses from California operations as a result of the Humboldt acquisition as well as increased communication expense and marketing initiatives. We incur significant expenses in connection with the completion and integration of bank acquisitions that are not capitalizable. Substantially all merger-related expense incurred in the three and six months ended June 30, 2005 related to the Humboldt acquisition. We do not expect to incur any additional merger-related expenses in connection with the Humboldt or any other previous merger.

Income Taxes

Our consolidated effective tax rate as a percentage of pre-tax income from continuing operations for three and six months ended June 30, 2005 was 36.4% and 36.9%, compared to 36.5% and 35.8% for the three and six months ended June 30, 2004. The change in the six month effective tax rate is primarily attributable to the increased State of California tax rate on income from operations related to the Humboldt acquisition and the reduced proportion of tax exempt income to total income. The effective tax rates were below the federal statutory rate of 35% and the apportioned state rate of 5% (net of the federal tax benefit) principally because of income arising from bank owned life insurance, income on tax exempt investment securities, tax credits arising from low income housing investments and exemptions related to loans and hiring in certain designated enterprise zones.

FINANCIAL CONDITION

Investment Securities

Total investment securities as of June 30, 2005 were $583.6 million, as compared to $687.8 million at December 31, 2004. This decrease is principally attributable to the sale of $39.8 million in municipal securities in the quarter and maturities of investment securities. No securities were purchased during the three months ended June 30, 2005. A total of $634,000 in securities were purchased during the six months ended June 30, 2005.

The following table presents the investment securities portfolio by major type as of June 30, 2005 and December 31, 2004:

25

Investment Securities Composition

	Investment Securities Available for Sale
	June 30, 2005					December 31, 2004
(in thousands)	Fair Value		%			Fair Value		%
U.S. Treasury and agencies	$	200,116		35	%	$	206,629		31	%
Mortgage-backed		137,880		24	%		150,454		22	%
Collateralized mortgage obligations		173,856		30	%		215,014		32	%
Obligations of states and political subdivisions		11,408		2	%		54,936		8	%
Other		48,635		9	%		48,951		7	%
Total	$	571,895		100	%	$	675,984		100	%

	Investment Securities Held to Maturity
	June 30, 2005					December 31, 2004
	Amortized					Amortized
	Cost		%			Cost		%
Obligations of states and political subdivisions	$	11,360		97	%	$	11,432		97	%
Other		375		3	%		375		3	%
Total	$	11,735		100	%	$	11,807		100	%

The investment securities portfolio had net unrealized gains of $4.2 million for the three months ended June 30, 2005 and net unrealized losses of $1.5 million for the six months ended June 30, 2005. These losses are principally attributable to increases in market interest rates from December 31, 2004 to June 30, 2005.

The average duration for the investment securities portfolio at June 30, 2005 was approximately 2.5 years. Information on average investment securities balances and average fully tax-equivalent yields is included under the Net Interest Income section of this Report.

Loans

Total loans outstanding as of June 30, 2005 were $3.6 billion, an increase of $144.1 million, or 4% from December 31, 2004. Loan growth in the six months ended June 30, 2005 occurred in both the Oregon/Washington and California markets, which recorded growth of $61.8 million and $82.3 million, respectively. This growth is consistent with recent periods and is attributed to continued improvement of economic conditions in our markets, the quality of our loan origination staff and the fact that most loan decisions can be made locally.

The following table presents the major components of the loan portfolio at June 30, 2005 and December 31, 2004:

Loan Concentrations

(in thousands)	June 30, 2005					December 31, 2004
Type of Loan	Amount		Percentage			Amount		Percentage
Construction and development	$	512,160		14.2	%	$	481,836		13.9	%
Farmland		44,453		1.2	%		39,662		1.1	%
Home equity credit lines		129,425		3.6	%		126,264		3.6	%
Single family first lien mortgage		112,315		3.1	%		116,457		3.4	%
Single family second lien mortgage		19,520		0.5	%		20,729		0.6	%
Multifamily		172,603		4.8	%		182,526		5.3	%
Commercial real estate		1,778,039		49.2	%		1,649,797		47.6	%
Total real estate secured		2,768,515		76.6	%		2,617,271		75.5	%
Commercial and industrial		697,559		19.3	%		699,471		20.2	%
Agricultural production		39,355		1.1	%		34,405		1.0	%
Consumer		62,438		1.7	%		77,903		2.2	%
Leases		16,887		0.5	%		18,351		0.5	%
Other		27,250		0.8	%		20,503		0.6	%
Total loans	$	3,612,004		100.0	%	$	3,467,904		100.0	%

26

Information on average loan balances and average yields is included under the Net Interest Income section of this Report.

Asset Quality and Non-Performing Assets

Non-performing loans, which include non-accrual loans and accruing loans past due over 90 days totaled $20.6 million, or 0.57% of total loans, at June 30, 2005, as compared to $22.6 million, or 0.65% of total loans, at December 31, 2004. Non-performing assets, which include non-performing loans and foreclosed real estate (“other real estate owned”), totaled $20.8 million, or 0.41% of total assets as of June 30, 2005, compared with $23.6 million, or 0.48% of total assets as of December 31, 2004.

Loans are classified as non-accrual when collection of principal or interest is doubtful — generally if they are past due as to maturity or payment of principal or interest by 90 days or more — unless such loans are well-secured and in the process of collection. Additionally, all loans that are “impaired” in accordance with SFAS No. 114, Accounting by Creditors for the Impairment of a Loan, are considered for non-accrual status. These loans will typically remain on non-accrual status until all principal and interest payments are brought current and the prospects for future payments in accordance with the loan agreement appear relatively certain. Foreclosed properties held as other real estate owned are recorded at the lower of the recorded investment in the loan or market value of the property less expected selling costs. Other real estate owned at June 30, 2005 totaled $213,000 and consisted of three small commercial properties.

The following table summarizes our non-performing assets as of June 30, 2005 and December 31, 2004:

Non-Performing Assets

	June 30,			December 31,
(in thousands)	2005			2004
Loans on nonaccrual status	$	19,458		$	21,836
Loans past due 90 days or more and accruing		1,148			737
Total nonperforming loans		20,606			22,573
Other real estate owned		213			979
Total nonperforming assets	$	20,819		$	23,552
Allowance for loan losses	$	44,510		$	44,229
Reserve for unfunded commitments		1,354			1,338
Allowance for credit losses	$	45,864		$	45,567
Asset quality ratios:
Non-performing assets to total assets		0.41	%		0.48	%
Non-performing loans to total loans		0.57	%		0.65	%
Allowance for loan losses to total loans		1.23	%		1.28	%
Allowance for credit losses to total loans		1.27	%		1.31	%
Allowance for credit losses to total non-performing loans		223	%		202	%

At June 30, 2005, approximately $15.7 million of loans were classified as restructured. The restructurings were granted in response to borrower financial difficulty, and generally provide for a temporary modification of loan repayment terms. Substantially all of the restructured loans as of June 30, 2005 were classified as impaired and $14.8 million were included as non-accrual loans in the table above.

We have not identified any other potential problem loans that were not classified as non-performing but for which known information about the borrower’s financial condition caused management to have concern about the ability of the borrowers to comply with the repayment terms of the loans. A decline in the economic conditions in our general market areas or other factors could adversely impact individual borrowers or the loan portfolio in general. Accordingly, there can be no assurance that loans will not become 90 days or more past due, become impaired or placed on non-accrual, restructured or transferred to other real estate owned in the future.

Allowance for Loan Losses and Reserve for Unfunded Commitments

The process for determining the adequacy of the allowance for loan losses (“ALL”) was modified during 2004 in connection with the Humboldt acquisition. These modifications did not result in a material adjustment to the allowance for loans losses. Additional information regarding the methodology used in determining the adequacy of the allowance for loan losses is contained in Part I, Item 1

27

of our Annual Report on Form 10-K under the heading “Allowance for Loan Loss Methodology”.

The ALL totaled $44.5 million and $27.3 million at June 30, 2005 and June 30, 2004, respectively. The increase in the ALL from June 30, 2004 is principally attributable to the Humboldt acquisition.

Allowance for Loan Losses

	Six Months Ended
	June 30,
(in thousands)	2005			2004
Balance beginning of period	$	44,229		$	25,352
Provision for loan losses		2,400			2,175
Loans charged-off		(3,851	)		(862	)
Charge-off recoveries		1,732			654
Net charge-offs		(2,119	)		(208	)
Total Allowance for loan losses		44,510			27,319
Reserve for unfunded commitments		1,354			—
Allowance for credit losses	$	45,864		$	27,319
As a percentage of average loans (annualized):
Net charge-offs		0.12	%		0.02	%
Provision for loan losses		0.14	%		0.21	%
Allowance for loan losses as a percentage of:
Period end loans		1.23	%		1.27	%
Non-performing loans		216	%		221	%
Allowance for credit losses as a percentage of:
Period end loans		1.27	%		1.27	%
Non-performing loans		223	%		221	%

During the third quarter of 2004, a portion of the ALL related to unfunded credit commitments, such as letters of credit and the available portion of credit lines, was reclassified from the ALL to other liabilities on the balance sheet. Prior to July 1, 2004, our ALL adequacy model did not allocate any specific component of the ALL to loss exposure for unfunded commitments.

The following table presents a summary of activity in the reserve for unfunded commitments (“RUC”):

Summary of Reserve for Unfunded Commitments Activity

	June 30,			December 31,
(in thousands)	2005			2004
Balance beginning of quarter	$	1,368		$	1,216
Increase (decrease) charged to other expenses		(14	)		122
Charge-offs		—			—
Recoveries		—			—
Balance end of quarter	$	1,354		$	1,338

We believe that the ALL and RUC at June 30, 2005 are sufficient to absorb losses inherent in the loan portfolio and credit commitments outstanding as of that date, respectively, based on the best information available. This assessment, based in part on historical levels of net charge-offs, loan growth, and a detailed review of the quality of the loan portfolio, involves uncertainty and judgment; therefore, the adequacy of the ALL and RUC cannot be determined with precision and may be subject to change in future periods. In addition, bank regulatory authorities, as part of their periodic examination of the Bank, may require additional charges to the provision for loan losses or other expenses in future periods if the results of their review warrant such.

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Mortgage Servicing Rights (“MSR”)

The following table presents the key elements of our MSR asset as of June 30, 2005 and December 31, 2004:

MSR

Mortgage Servicing Rights

	Six months ended
	June 30,			December 31,
(in thousands)	2005			2004
Balance, beginning of period	$	11,154		$	11,391
Additions for new mortgage servicing rights capitalized		1,478			1,211
Amortization of servicing rights		(969	)		(1,097	)
Impairment recovery / (charge)		(2,395	)		(351	)
Balance, end of period	$	9,268		$	11,154
Balance of loans serviced for others		1,026,088			1,064,000
MSR as a percentage of serviced loans		0.90	%		1.05	%

As of June 30, 2005, we serviced residential mortgage loans for others with an aggregate outstanding principal balance of approximately $1.0 billion for which servicing assets have been recorded. In accordance with generally accepted accounting principles, the servicing asset recorded at the time of sale is amortized over the term of, and in proportion to, net servicing revenues. For the three months ended June 30, 2005, total mortgage loan origination volume was $97.1 million, a decrease of $28.2 million, or 22%, as compared to the three months ended June 30, 2004. For the six months ended June 30, 2005, total mortgage loan origination volume was $164.6 million, a decrease of $71.3 million, or 30%, as compared to the six months ended June 30, 2004. This decrease is principally attributable to a lower level of refinance activity (due to higher market interest rates) and the termination of wholesale channel originations during the third quarter of 2004.

The value of MSR is impacted by market rates for mortgage loans. Historically low market rates can cause prepayments to increase as a result of refinancing activity. To the extent loans are prepaid sooner than estimated at the time servicing assets are originally recorded, it is possible that certain MSR assets may become impaired to the extent that the fair value is less than carrying value (net of any previously recorded amortization or valuation reserves). Generally, the fair value of our MSR will increase as market rates for mortgage loans rise and decrease if market rates fall.

During the second quarter of 2005, we recorded a $2.1 million impairment to the value of our mortgage servicing right portfolio. This impairment resulted from higher mortgage prepayment forecasts due to a decline in mortgage interest rates, and is included as a charge in mortgage banking revenue. At June 30, 2005, we had a valuation reserve of $3.2 million based on the estimated fair value of the servicing portfolio. The valuation reserve is adjusted on a quarterly basis through adjustments to mortgage banking revenue.

Goodwill and Core Deposit Intangible Assets

At June 30, 2005, we had goodwill and core deposit intangibles of $396.3 million and $10.8 million, respectively, as compared to $396.4 million and $12.1 million, respectively, at December 31, 2004. We amortize core deposit intangible assets on an accelerated basis over an estimated ten-year life.

Substantially all of the goodwill is associated with our community banking operations. We evaluate goodwill for possible impairment on a quarterly basis. There were no impairments recorded for the three and six months ended June 30, 2005 and 2004.

Deposits

Total deposits were $4.0 billion at June 30, 2005, an increase of $173.8 million, or 5%, from December 31, 2004. This growth is attributed to our unique delivery process, service quality focus, marketing and product design, and not as the result of paying rates in excess of market. Information on average deposit balances and average rates paid is included under the Net Interest Income section of this Report.

The following table presents the deposit balances by major category as of June 30, 2005 and December 31, 2004:

29

Deposits

	June 30, 2005					December 31, 2004
(in thousands)	Amount		%			Amount		%
Non-interest bearing	$	977,160		25	%	$	891,731		23	%
Interest bearing demand		1,562,189		39	%		1,504,396		40	%
Savings and money market		445,319		11	%		452,684		12	%
Time, less than $100,000		473,463		12	%		462,951		12	%
Time, $100,000 or greater		514,789		13	%		487,345		13	%
Total	$	3,972,920		100	%	$	3,799,107		100	%

Borrowings

At June 30, 2005, the Bank had outstanding term debt of $13.3 million. Advances from the Federal Home Loan Banks of San Francisco and Seattle (“FHLB”) amounted to $12.5 million of the total and are secured by investment securities and residential mortgage loans. The FHLB advances outstanding at June 30, 2005 had fixed interest rates ranging from 2.69% to 7.44%. Approximately $10 million, or 80%, of the FHLB advances mature prior to December 31, 2005, and $11 million, or 88%, mature prior to December 31, 2007. Management expects continued use of FHLB advances as a source of short and long-term funding.

Junior Subordinated Debentures

We had junior subordinated debentures with carrying values of $166.0 million and $166.3 million, respectively, at June 30, 2005 and December 31, 2004, respectively.

At June 30, 2005, approximately $119 million, or 76% of the total issued amount, had interest rates that are adjustable on a quarterly basis based on a spread over LIBOR. Increases in short-term market interest rates during the three and six months ended June 30, 2005 have resulted in increased interest expense for junior subordinated debentures. Although any additional increases in short-term market interest rates will increase the interest expense for junior subordinated debentures, we believe that other attributes of our balance sheet will serve to mitigate the impact to net interest income on a consolidated basis.

As of June 30, 2005, $156.9 million (representing the entire issued amount) of junior subordinated debentures qualified as Tier 1 capital under regulatory capital purposes. Additional information regarding the terms of the junior subordinated debentures, including maturity/call dates and interest rates, is included in Note 9 of the Notes to Condensed Consolidated Financial Statements.

Liquidity and Cash Flow

The principal objective of our liquidity management program is to maintain the Bank’s ability to meet the day-to-day cash flow requirements of its customers who either wish to withdraw funds or to draw upon credit facilities to meet their cash needs.

We monitor the sources and uses of funds on a daily basis to maintain an acceptable liquidity position. In addition to liquidity from core deposits and the repayments and maturities of loans and investment securities, the Bank can utilize established uncommitted federal funds lines of credit, sell securities under agreements to repurchase, borrow on a secured basis from the FHLB or issue brokered certificates of deposit.

The Company is a separate entity from the Bank and must provide for its own liquidity. Substantially all of the Company’s revenues are obtained from dividends declared and paid by the Bank. There are statutory and regulatory provisions that could limit the ability of the Bank to pay dividends to the Company. We believe that such restrictions will not have an adverse impact on the ability of the Company to meet its ongoing cash obligations, which consist principally of debt service on the $156.9 million (issued amount) of outstanding junior subordinated debentures. As of June 30, 2005, the Company did not have any borrowing arrangements.

As disclosed in the Condensed Consolidated Statements of Cash Flows, net cash used by operating activities was $6.0 million during the six months ended June 30, 2005. Net cash of $49.5 million used in investing activities consisted principally of $157.0 million of net loan growth offset by sales and maturities of investment securities available for sale of $103.8 million. The $138.0 million of cash provided in financing activities primarily consisted of $174.2 million of net deposit growth, $47.0 million of Fed funds purchased, offset by $83.0 million of financing outflows related to repayment of term loans and securities sold under agreements to repurchase.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses that may require payment of a fee by the customer. Since many of the commitments will expire without being drawn upon, the total commitment amounts do not necessarily reflect future cash requirements. At June 30, 2005, commitments to extend credit and standby letters of credit were approximately

30

$908.7 million and $25.4 million, respectively.

Capital Resources

Shareholders’ equity at June 30, 2005 was $714.7 million, an increase of $27.1 million, or 4%, from December 31, 2004. The increase in shareholders’ equity during the six months ended June 30, 2005 was principally due to the retention of $25.7 million, or approximately 83%, of net income for the six month period, partially offset by an increase in accumulated other comprehensive loss as a result of unrealized loss in the investment securities portfolio.

The following table shows Umpqua Holdings’ consolidated capital adequacy ratios, as calculated under regulatory guidelines, compared to the regulatory minimum capital ratio and the regulatory minimum capital ratio needed to qualify as a “well-capitalized” institution at June 30, 2005 and December 31, 2004:

											To Be Well Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy purposes					Action Provisions
(in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of June 30, 2005:
Total Capital
(to Risk Weighted Assets)	$	505,367		11.85	%	$	341,176		8.00	%	$	426,470		10.00	%
Tier I Capital
(to Risk Weighted Assets)	$	459,503		10.78	%	$	170,502		4.00	%	$	255,753		6.00	%
Tier I Capital
(to Average Assets)	$	459,503		10.04	%	$	183,069		4.00	%	$	228,836		5.00	%
As of December 31, 2004:
Total Capital
(to Risk Weighted Assets)	$	475,480		11.58	%	$	328,484		8.00	%	$	410,605		10.00	%
Tier I Capital
(to Risk Weighted Assets)	$	431,251		10.50	%	$	164,286		4.00	%	$	246,429		6.00	%
Tier I Capital
(to Average Assets)	$	431,251		9.55	%	$	180,629		4.00	%	$	225,786		5.00	%

The following table presents cash dividends declared and dividend payout ratios (dividends declared per share divided by basic earnings per share) for the three and six months ended June 30, 2005 and 2004:

Cash Dividends and Payout Ratios

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Dividend declared per share	$	0.06		$	0.06		$	0.12		$	0.10
Dividend payout ratio		17	%		19	%		17	%		16	%

Our board of directors has approved a stock repurchase plan for up to 2.5 million shares of common stock. As of June 30, 2005, a total of 2.1 million shares remain available for repurchase under this authorization, which expires on June 30, 2007. In addition, our stock option plans provide for option holders to pay for the exercise price in part or whole by tendering previously held shares. Shares repurchased in open market transactions during the three and six months ended June 30, 2005 totaled 52,405. We expect to continue to repurchase additional shares in the future. The timing and amount of such repurchases will depend upon the market price for our common stock, securities laws restricting repurchases, asset growth, earnings and our capital plan.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in the quantitative and qualitative disclosures about market risk as of June 30, 2005 from those presented in our Annual Report on Form 10-K for the year ended December 31, 2004.

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Item 4. Controls and Procedures

Our management, including our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, have concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us that is required to be included in our periodic SEC filings. The disclosure controls and procedures were last evaluated by management as of June 30, 2005.

There have been no significant changes in our internal controls or in other factors that are likely to materially affect our internal controls over financial reporting subsequent to the date of the evaluation.

32

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Because of the nature of our business, we are involved in legal proceedings in the regular course of business. At this time, we do not believe that there is pending litigation the unfavorable outcome of which would result in a material adverse change to our financial condition, results of operations or cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not Applicable

(b) Not Applicable

(c) The following table provides information about repurchases of common stock by the Company during the quarter ended June 30, 2005:

							Maximum Number
					Total Number of		of Remaining
					Shares		Shares that May
	Total number				Purchased as		be Purchased at
	of Shares		Average Price		Part of Publicly		Period End under
Period	Purchased (1)		Paid per Share		Announced Plan (2)		the Plan
4/1/05 - 4/30/05		16	$	22.88		—		2,139,971
5/1/05 - 5/31/05		52,405	$	21.87		52,405		2,087,566
6/1/05 - 6/30/05		—	$	—		—		2,087,566
Total for quarter		52,421	$	21.87		52,405

(1) Shares repurchased by the Company during the quarter include: (a) shares repurchased pursuant to the Company’s publicly announced corporate stock repurchase plan described in (2) below, and (b) cancellation of restricted stock to pay withholding taxes totaling 16 shares, 0 shares and 0 shares for April 2005, May 2005 and June 2005, respectively. No shares were tendered in connection with option exercises during the three months ended June 30, 2005.

(2) The repurchase plan, which was approved by the Board and announced in August 2003, originally authorized the repurchase of up to 1.0 million shares. The authorization was amended to increase the repurchase limit initially to 1.5 million shares. On June 8, 2005, the Company announced an expansion of the repurchase plan by increasing the repurchase limit to 2.5 million shares and extending the plan to expire on June 30, 2007.

Item 3. Defaults Upon Senior Securities

Not Applicable.

Item 4. Submissions of Matters to a Vote of Securities Holders

(a), (b), (c): The Company conducted its annual meeting of shareholders on May 6, 2005. On March 4, 2005, the record date, there were 44,391,059 shares of common stock outstanding. Holders of 38,316,596 shares (86.3%) were present at the meeting in person or by proxy. The following persons were elected as directors to serve the terms stated below:

Name	Term expires		Votes For		Votes Withheld
Allyn C. Ford		2008		37,633,781		684,815
Diane D. Miller		2008		37,458,137		860,459
Ronald F. Angell		2008		37,534,373		784,223
Bryan L. Timm		2008		37,524,448		794,148
Thomas W. Weborg		2007		37,617,708		700,808
Theodore S. Mason		2006		37,501,820		816,776

The following directors continue with terms of office that expire after the annual meeting: Scott Chambers (2006), Raymond P. Davis (2006), Lynn K. Herbert (2006), Diana E. Goldschmidt (2006), David B. Frohnmayer (2007), Dan Giustina (2007) and William A. Lansing (2007). Stephen M. Gambee was appointed to the Board on May 6, 2005, as reported in Form 8-K filed May 11, 2005.

33

At the annual meeting, shareholders also approved the Umpqua Holdings Corporation 2005 Performance-Based Executive Incentive Plan by the following vote:

For	Against		Abstain		Broker non-votes
26,347,773		1,647,779		464,873		9,858,171

Item 5. Other Information

(a) Not Applicable.

(b) Not Applicable.

Item 6. Exhibits

The exhibits filed as part of this Report and exhibits incorporated herein by reference to other documents are listed in the Exhibit Index to this Report.

34

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)
Dated August 9, 2005	/s/	Raymond P. Davis
		Raymond P. Davis
		President and
		Chief Executive Officer
Dated August 9, 2005	/s/	Daniel A. Sullivan
		Daniel A. Sullivan
		Executive Vice President and
		Chief Financial Officer
Dated August 9, 2005	/s/	Ronald L. Farnsworth, Jr.
		Ronald L. Farnsworth, Jr.
		Senior Vice President/Finance and
		Principal Accounting Officer

35

EXHIBIT INDEX

Exhibit

3.1(a)	Articles of Incorporation, as amended
3.2(b)	Bylaws, as amended
4.0(c)	Specimen Stock Certificate
10.1	Employment Agreement for William Fike dated May 12, 2005
10.2	2005 Executive Deferred Compensation Agreement with William Fike dated effective June 11, 2005.
10.3(d)	Umpqua Holdings Corporation 2005 Performance-Based Executive Incentive Plan
31.1	Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.3	Certification of Principal Accounting Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Risk Factors

(a)	Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-4 filed September 9, 2002.
(b)	Incorporated by reference to Exhibit 3.2 to the Form 10-Q filed May 10, 2004.
(c)	Incorporated by reference to the Registration Statement on Form S-8 (No. 333-77259) filed with the SEC on April 28, 1999.
(d)	Incorporated by reference to Appendix B to the DEF 14A filed March 31, 2005.

36

EX-10.1

                                  EXHIBIT 10.1

                           UMPQUA HOLDINGS CORPORATION

                              EMPLOYMENT AGREEMENT

                                       FOR

                                  WILLIAM FIKE

                            DATED AS OF MAY 12, 2005



                              EMPLOYMENT AGREEMENT

      This Employment Agreement (this "Agreement") is by and between Umpqua
Holdings Corporation ("Umpqua") and William Fike ("Officer"), effective as of
May 12, 2005.

1 PURPOSE AND DURATION OF AGREEMENT. The purpose of this Agreement is to set
forth the terms of Officer's employment with Umpqua and to provide Officer
benefits in certain circumstances where Officer's employment is terminated or a
Change in Control (defined below) occurs. This Agreement, including the
severance provisions governed by ERISA, shall expire five (5) years from the
date first written above.

2 EMPLOYMENT. Umpqua, either directly or through one of its wholly owned
subsidiaries, employs the Officer and Officer accepts that employment on the
terms and conditions contained in this Agreement. Officer's employment will
commence on May 12, 2005 (the "Commencement Date").

3 NO TERM OF EMPLOYMENT. Notwithstanding the term of this Agreement, Umpqua may
terminate Officer's employment at any time for any lawful reason or for no
reason at all, subject to the provisions of this Agreement.

4 DUTIES; POSITION.

            4.1 Position. Officer shall be employed as President of Umpqua Bank,
California Region, and will perform such duties as may be designated by Umpqua's
Board of Directors (the "Board") or Umpqua's President or Chief Executive
Officer to whom Officer will directly report (the "Supervisor").

            4.2 Obligations of Officer.

            (a) Officer agrees that to the best of Officer's ability and
      experience, Officer will at all times loyally and conscientiously perform
      all of the duties and obligations required of Officer pursuant to the
      express and implicit terms of this Agreement and as directed by the Board
      or the Supervisor.

            (b) Officer shall devote Officer's entire working time, attention
      and efforts to Umpqua's business and affairs, shall faithfully and
      diligently serve Umpqua's interests and shall not engage in any business
      or employment activity that is not on Umpqua's behalf (whether or not
      pursued for gain or profit) except for (a) activities approved in writing
      in advance by the Board and (b) passive investments that do not involve
      Officer providing any advice or services to the businesses in which the
      investments are made.

5 COMPENSATION.

            5.1 Base Compensation. For services performed under this Agreement,
Officer shall be entitled to $25,000 per month ($300,000 on annualized basis)
("Base Salary"), which Umpqua may increase in its sole discretion, as well as
perquisites provided to Umpqua's officers. Officer shall be entitled to
participate, under the terms of the respective plans, group health insurance,
long-term disability insurance, 401(k) plan, as well as such other compensation
or benefits as approved by the Board. Officer is entitled to four weeks vacation
per year.

            5.2 Incentive Compensation. Officer is eligible to participate in
the 2005 Executive Incentive Compensation Plan, under which Officer will have an
opportunity to earn incentive compensation targeted at 50% of Officer's base
salary. For 2005, Officer shall be guaranteed a minimum incentive payment of 50%
of his 2005 base salary. In subsequent years, Officers will be eligible to
participate in the incentive compensation plans, as approved by the Board.



            5.3 Other Perquisites. Officer's monthly dues for the Montreux
Country Club, will be reimbursed through the monthly expense report pursuant to
Umpqua's reimbursement policy. Officer will receive $600 per month as a car
allowance. Officer will also have access to a vehicle owned by Umpqua, the
gasoline expenses and maintenance expenses for which will be reimbursed by
Umpqua.

            5.4 Stock Options. Subject to the Board's approval, as of the
Commencement Date, Officer will be granted a non-qualified stock option to
purchase 50,000 shares of Umpqua's common stock, pursuant to the 2003 Stock
Incentive Plan. The option will vest 20% per year over five years. Subsequent
stock option grants will be at the Board's discretion.

            5.5 Deferred Compensation. Officer will be entitled to participate
in a deferred compensation plan, under which Officer may voluntarily defer
compensation.

            5.6 Sign-On Bonus. As a sign-on bonus, the Officer will receive a
bonus of $30,000 that will be paid within 30 days of the Commencement Date.

            5.7 Relocation Expenses.

                  (a) Umpqua will reimburse Officer for two (2) house-hunting
trips, up to three (3) days, for the purpose of finding a new residence in the
Roseville/Sacramento area. Eligible expenses for reimbursement include
economical airfare or car mileage, car rental (if needed), lodging and meals.

                  (b) Umpqua will reimburse Officer for moving expenses in an
amount not to exceed the cost estimate provided by Umpqua's relocation
contractor. Umpqua will reimburse Officer for the cost of driving two
automobiles, at the current approved mileage rate.

                  (c) Umpqua will reimburse Officer for out of pocket living
expenses incurred between the Commencement Date and June 30, 2005, as well as
for transportation expenses incurred while traveling from Danville, California
to the Roseville between the Commencement Date and June 30, 2005.

6 TERMINATION.Officer's employment may be terminated before the expiration of
this Agreement as described in this Section, in which event Officer's
compensation and benefits shall terminate except as otherwise provided in this
Agreement.

            6.1 For Cause. Upon Umpqua's termination of Officer's employment for
Cause (as defined in Section 7.1 below) ("Termination For Cause").

            6.2 Without Cause. Upon Umpqua's termination of Officer's employment
without Cause, with or without notice, at any time in Umpqua's sole discretion,
for any reason (other than for Cause, death, or Disability) or for no reason
("Termination Without Cause"). A Change in Control does not in itself constitute
Termination Without Cause.

            6.3 For Good Reason. Upon Officer's termination of the employment
for Good Reason (as defined in Section 7.2 below) ("Termination For Good
Reason").

            6.4 Death or Disability. Upon Officer's death or Disability (as
defined in Section 7.3 below).

            6.5 Resignation. Upon Officer's voluntary resignation in writing,
which shall be given to Umpqua at least 60 days prior to the effective date of
such resignation ("Resignation"); provided, Resignation shall not be permitted
if an event has occurred that would give rise to Termination for Cause.

7 DEFINITIONS.

            7.1 Cause. For the purposes of this Agreement, "Cause" for Officer's
termination will exist upon the occurrence of one or more of the following
events:



            (a) Dishonest or fraudulent conduct by Officer with respect to the
      performance of Officer's duties with Umpqua;

            (b) Conduct by Officer that materially discredits Umpqua or any of
      its subsidiaries or is materially detrimental to the reputation of Umpqua
      or any of its subsidiaries, including but not limited to conviction or a
      plea of nolo contendere of Officer of a felony or crime involving moral
      turpitude;

            (c) Officer's willful misconduct or gross negligence in performance
      of Officer's duties under this Agreement, including but not limited to
      Officer's refusal to comply in any material respect with the legal
      directives of the Board or the Supervisor, if such misconduct or
      negligence has not been remedied or is not being remedied to the Board's
      reasonable satisfaction within thirty (30) days after written notice,
      including a detailed description of the misconduct or negligence, has been
      delivered by the Board to Officer;

            (d) An order or directive from a state or federal banking regulatory
      agency requesting or requiring removal of Officer or a finding by any such
      agency that Officer's performance threatens the safety or soundness of
      Umpqua or any of its subsidiaries; or

            (e) A material breach of Officer's fiduciary duties to Umpqua if
      such breach has not been remedied or is not being remedied to the Board's
      reasonable satisfaction within thirty (30) days after written notice,
      including a detailed description of the breach, has been delivered by the
      Board to Officer.

            7.2 Good Reason. For purposes of this Agreement, "Good Reason" for
Officer's resignation of employment will exist upon the occurrence of one or
more of the following events, without Officer's consent, if Officer has informed
Umpqua in writing of the circumstances described below in this Section that
could give rise to resignation for Good Reason and Umpqua has not removed the
circumstances within thirty (30) days of the written notice:

                  (a) A material reduction of Officer's Base Salary, unless the
reduction is in connection with, and commensurate with, reductions in the
salaries of all or substantially all senior officers of Umpqua;

                  (b) A requirement for Officer to relocate to a facility or
location more than 50 miles from the location where Officer is currently
employed; or

                  (c) A material adverse change in the Officer's title or line
of reporting.

            7.3 Disability. For purposes of this Agreement, "Disability" shall
mean that (i) Officer has been unable to perform Officer's duties under this
Agreement as a result of Officer's incapacity due to physical or mental illness
for at least 90 consecutive calendar days or 150 calendar days during any
consecutive 12 month period and (ii) a physician selected by Umpqua and its
insurers and acceptable to Officer or Officer's legal representative (with such
agreement on acceptability of the physician not to be unreasonably withheld),
determines the incapacity to be (a) total and permanent and (b) prohibiting of
Officer's ability to perform the essential functions of Officer's position with
or without reasonable accommodation.

            7.4 Change in Control. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred when any of the following events take
place:

                  (a) Any person (including any individual or entity), or
persons acting in concert, become(s) the beneficial owner of voting shares
representing fifty percent (50%) or more of Umpqua;

                  (b) A majority of the Board is removed from office by a vote
of the Umpqua's shareholders over the recommendation of the Board then serving;
or



                  (c) Umpqua is a party to a plan of merger or plan of exchange
and upon consummation of such plan, the shareholders of Umpqua immediately prior
to the transaction do not own or continue to own (i) at least forty percent
(40%) of the shares of the surviving company (if the then current CEO of Umpqua
continues as CEO of the surviving organization), or (ii) at least a majority of
the shares of the surviving organization (if the then current CEO of Umpqua does
not continue as CEO of the surviving organization).

8. PAYMENT UPON TERMINATION. Upon termination of Officer's employment for any of
the reasons set forth in Section 6 above, Officer will receive payment for all
Base Salary and benefits accrued as of the date of Officer's termination
("Earned Compensation"), which shall be paid by the end of the business day
following termination or sooner if required by applicable law.

9. SEVERANCE BENEFIT.In the event of Termination Without Cause or Termination
for Good Reason, in addition to receiving Earned Compensation, Officer will
receive a severance benefit equal to the greater of (i) nine (9) months Base
Salary, based on Officer's Base Salary just prior to termination or (ii) two
weeks for every year of employment with Umpqua (the "Severance Benefit"). The
Severance Benefit shall be paid in equal installments over the number of months
of continued Base Salary, starting on the next regular payday following
termination. Receipt of the Severance Benefit is conditioned on Officer having
executed the Separation Agreement in substantially the form attached hereto as
Exhibit A and the revocation period having expired without Officer having
revoked the Separation Agreement. Receipt and continued receipt of the Severance
Benefit is further conditioned on Officer not being in violation of any material
term of this Agreement or in violation of any material term of the Separation
Agreement. Officer shall not be required to mitigate the amount of any payments
under this Section (whether by seeking new employment or otherwise) and no such
payment shall be reduced by earnings that Officer may receive from any other
source.

10. CHANGE IN CONTROL BENEFIT

            10.1 Post Change in Control Termination. After a Change in Control
and for a period continuing for one year following a Change in Control, in the
event of Termination Without Cause, Termination For Good Reason, or Resignation
within 30 days after reassignment to a position that is not substantially
equivalent, instead of receiving the Severance Benefit set forth in Section 9
above, Officer shall receive 24 months Base Salary, based on Officer's Base
Salary just prior to the termination of employment, as well as 200% of the
incentive compensation Officer received for the previous year (the
aforementioned Base Salary and incentive are collectively referred to as the
"Change in Control Benefit"). The Change in Control Benefit shall be paid in
equal installments over 24 months, starting on the next regular payday following
termination. Receipt of the Change in Control Benefit is conditioned on Officer
having executed the Separation Agreement in substantially the form attached
hereto as Exhibit A and the revocation period having expired without Officer
having revoked the Separation Agreement. Receipt and continued receipt of the
Change in Control Benefit is further conditioned on Officer not being in
violation of any material term of this Agreement or in violation of any material
term of the Separation Agreement. Officer shall not be required to mitigate the
amount of any payments under this Section (whether by seeking new employment or
otherwise) and no such payment shall be reduced by earnings that Officer may
receive from any other source.

            10.2 Pre-Change in Control Termination. In the event Officer's
employment is terminated within six (6) months prior to an announcement of a
definitive agreement that ultimately results in a Change in Control, provided
Officer was entitled to receive the Severance Benefit under Section 9, in
addition to the Severance Benefit, Officer will receive an additional 15 months
Base Salary and 200% of the incentive compensation Officer received for the
previous year (the "Supplemental Change in Control Benefit"). The Supplemental
Change in Control Benefit will be paid in equal installments over 15 months,
starting the later of the next pay period following the last payment of the
Severance Benefit or the next pay period following the Change in Control.
Receipt and continued receipt of the Supplemental Change in Control Benefit is
further conditioned on Officer not being in violation of any material term of
this Agreement or in violation of any material term of the Separation Agreement.

11. CHANGE IN CONTROL RETENTION INCENTIVE. If Officer remains employed for 12
months



following a Change in Control, Officer will receive 12 months Base Salary and
100% of the incentive compensation Officer received for the previous year (the
aforementioned Base Salary and incentive are collectively referred to as the
"Retention Incentive"). The Retention Incentive shall be paid in equal
installments over 12 months, starting on the next regular payday following the
first anniversary of the Change in Control. Receipt of the Retention Incentive
is conditioned on Officer not being in violation of any material term of this
Agreement. If Officer receives a benefit under this Section 11, such benefit
shall cease when Officer begins to receive any benefit under Section 10.

12. LIMITATION ON BENEFITS. 12.1 IRC 280G Adjustment. If the benefit payments
under this Agreement, either alone or together with other payments to which the
Officer is entitled to receive from Umpqua, would constitute an "excess
parachute payment" as defined in Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), such benefit payments shall be reduced to the
largest amount that will result in no portion of benefit payments under this
Agreement being subject to the excise tax imposed by Section 4999 of the Code.
The determination of any reduction in the benefit payments pursuant to the
foregoing provisions, shall be made by mutual agreement of Umpqua and Officer or
if no agreement is possible, by Umpqua's accountants.

            12.2 Limitation on Severance or Change in Control Benefit.
Notwithstanding any other provision in this Agreement, Umpqua shall make no
payment of any benefit provided for herein to the extent that such payment would
be prohibited by the provisions of Part 359 of the regulations of the Federal
Deposit Insurance Corporation (the "FDIC") as the same may be amended from time
to time, and if such payment is so prohibited, Umpqua shall use its best efforts
to secure the consent of the FDIC or other applicable banking agencies to make
such payments in the highest amount permissible, up to the amount provided for
in this Agreement.

13. EXECUTIVE SEVERANCE PLAN

            13.1 In General. Those provisions of this Agreement (including this
Section) related to the Severance Benefit set forth in Section 9 and Change in
Control Benefit set forth in Section 10 constitute part of the terms of the
Umpqua Holdings Corporation Executive Severance Plan (the "Executive Severance
Plan") with respect to the Officer, and such terms and the general terms of the
Executive Severance Plan established by Umpqua shall comprise the entirety of
the Executive Severance Plan as it applies to the Officer. Umpqua intends for
the Plan to be considered a welfare benefit plan within the meaning of Section
3(1) of the Employee Retirement Income Security Act ("ERISA"), and a plan which
is unfunded and maintained by the Umpqua solely for the purpose of providing
benefits for a select group of management or highly compensated employees within
the meaning of ERISA Regulation Section 2520.104-24. A copy of the Executive
Severance Plan will be furnished to the Officer upon request.

            13.2 Administration of Executive Severance Plan. Umpqua's Chief
Executive Officer and Human Resources Director are each plan administrators (the
"Plan Administrator") of the Executive Severance Plan and the Plan Administrator
shall have the discretionary authority to administer and construe the terms of
the Executive Severance Plan, including the authority to decide if Officer is
entitled to the Severance Benefit or Change in Control Benefit and the authority
to determine if there is Termination For Cause or Termination For Good Reason.

            13.3 Claims Procedures. The Officer may file a claim for a payment
under the Executive Severance Plan by filing a written request for such a
payment with the Plan Administrator. If the Plan Administrator prescribes a form
for such a claim, the claim must be filed on such form. The claim should be sent
to the attention of the Plan Administrator of the Executive Severance Plan at
the address set forth for Umpqua in Section 20.

            If the Plan Administrator denies the claim, in whole or in part, the
Plan Administrator shall notify the Officer within 90 days of the Plan
Administrator's receipt of the claim, unless the Plan Administrator determines
that special circumstances require an extension of time for processing the
claim. If the Plan Administrator determines that an extension of time is
required, written notice of the extension shall be furnished to Officer prior to
the termination of the initial 90-day period. Such extension notice shall
indicate the special circumstances and the date by which the Plan Administrator
expects to issue a determination with respect to the claim. The period of the
extension will not exceed 90 days beyond the termination of the original 90-day
period. If the Plan Administrator does not provide written notice, Officer may
deem the claim denied and seek review according to the appeals



procedures set forth below.

            The notice of denial of Officer's claim shall state:

            a. the specific reasons for the denial;

            b. specific references to pertinent provisions of the Executive
            Severance Plan on which the denial was based;

            c. a description of any additional material or information needed
            for Officer to perfect his or her claim and an explanation of why
            the material or information is needed; and

            d. a statement (1) that Officer may request a review upon written
            application to the Plan Administrator, review or receive (free of
            charge) pertinent Plan documents and records, and submit issues and
            comments in writing, (2) that any appeal that Officer wishes to make
            of the adverse determination must be in writing to the Plan
            Administrator within sixty (60) days after the Officer receives
            notice of denial of benefits, and (3) that Officer may bring a civil
            action under ERISA Section 502(a) following an adverse benefit
            determination upon review.

      The notice of denial of benefits shall specify that Officer must forward
any appeal to the Plan Administrator at the address provided in such notice. The
notice may state that failure to appeal the action to the Plan Administrator in
writing within the sixty (60) day period will render the determination final,
binding and conclusive.

      If Officer appeals to the Plan Administrator, Officer may submit in
writing whatever issues and comments he or she believes to be pertinent. The
Plan Administrator shall reexamine all facts related to the appeal and make a
final determination about whether the denial of benefits is justified under the
circumstances. The Plan Administrator shall advise Officer in writing of:

            a. its decision on appeal;

            b. the specific reasons for the decision;

            c. the specific provisions of the Plan on which the decision is
based; and

            d. Officer's right to receive, upon request and free of charge,
reasonable access to, and copies of, all relevant documents and records.

      Notice of the Plan Administrator's decision shall be given within sixty
(60) days of Officer's written request for review, unless additional time is
required due to special circumstances. In no event shall the Plan Administrator
render a decision on an appeal later than one hundred twenty (120) days after
receiving a request for a review. If the Plan Administrator fails to provide a
decision with respect to Officer's appeal within the 60 (or, if applicable, 120)
day period Officer may deem his or her appeal denied and may pursue the
arbitration remedy set forth below.

      In the event that Officer fails to pursue his or her administrative
remedies as set forth above within the specified periods, he shall have no
further right to the benefits subject to his or her claim and agrees by
executing this Agreement that he or she shall have no right to pursue such claim
in arbitration or in a court of law.

      For purposes of this Claims Procedure under the Executive Severance Plan,
Officer may act through a representative authorized in writing to act on his
behalf, provided that such authorization is furnished to the Plan Administrator.

      In the event that Umpqua denies the Officer's appeal of the denial of his
or her claim, in whole or in part, Umpqua and Officer's may agree to submit the
Plan Administrator's decision to binding arbitration in lieu of Officer's right
to pursue his claim in any court of law.



14. NONCOMPETITION. This provision does not apply to California residents.

15. NON-SOLICITATION.For a period of two (2) years following termination of
employment (the "Restriction Period"), Officer shall not solicit any customer of
Umpqua or of any of its subsidiaries for services or products then provided by
Umpqua or any of its subsidiaries. For purposes of this Section, "customers" are
defined as (a) all customers serviced by Umpqua or any of Umpqua's subsidiaries
at any time within 12 months before termination of Officer's employment, (b) all
customers and potential customers whom Umpqua or any of Umpqua's subsidiaries,
with the knowledge or participation of Officer, actively solicited at any time
within 12 months before termination of Officer's employment, and (c) all
successors, owners, directors, partners and management personnel of the
customers just described in (a) and (b).

16. NONRAIDING OF EMPLOYEES. Officer recognizes that Umpqua's workforce is a
vital part of its business; therefore, Officer agrees that for the Restriction
Period, Officer will not to directly or indirectly solicit any employee to leave
his or her employment with Umpqua or any of Umpqua's subsidiaries. This includes
that Officer will not (a) disclose to any third party the names, backgrounds or
qualifications of any Umpqua or any of Umpqua subsidiary's employees as
potential candidates for employment, or (b) personally or through any other
person approach, recruit, interview or otherwise solicit employees of Umpqua or
any of Umpqua's subsidiaries to work for any other employer. For purposes of
this Section, employees include all employees working for Umpqua or any of
Umpqua's subsidiaries at the time of termination of Officer's employment.

17. CONFIDENTIAL INFORMATION. The parties acknowledge that in the course of
Officer's duties, Officer will have access to and become familiar with certain
proprietary and confidential information of Umpqua and its subsidiaries not
known by its actual or potential competitors. Officer acknowledges that such
information constitutes valuable, special, and unique assets of Umpqua's
business, even though such information may not be of a technical nature and may
not be protected under trade secret or related laws. Officer agrees to hold in a
fiduciary capacity and not use for Officer's benefit, nor reveal, communicate,
or divulge during the period of Officer's employment with Umpqua or at any time
thereafter, and in any manner whatsoever, any such data and confidential
information of any kind, nature, or description concerning any matters affecting
or relating to Umpqua's business, its customers, or its services, including
information developed by Officer, alone or with others, or entrusted to Umpqua
by its customers or others, to any person, firm, entity, or company other than
Umpqua or persons, firms, entities, or companies designated by Umpqua. Officer
agrees that all memoranda, notes, records, papers, customer files, and other
documents, and all copies thereof relating to Umpqua's operations or business,
or matters related to any of Umpqua's customers, some of which may be prepared
by Officer, and all objects associated therewith in any way obtained by Officer,
shall be Umpqua's property ("Umpqua Property"). Upon termination or at Umpqua's
request, Officer shall promptly return all the Umpqua Property to Umpqua.

18. REASONABLENESS OF RESTRICTION PERIOD; EQUITABLE RELIEF. Officer acknowledges
and agrees that the restrictive covenants in Sections 15, 16, and 17 are fair
and reasonable and are the result of negotiation between Umpqua and Officer (and
Officer's counsel, if Officer has sought the benefit of counsel). Officer
further acknowledges and agrees that the covenants and obligations in this
Agreement relate to special, unique, and extraordinary matters and that a
violation of any of the terms of the covenants and obligations will cause
irreparable injury to Umpqua, for which adequate remedies are not available at
law. Therefore, Officer agrees that Umpqua shall be entitled to an injunction,
restraining order, or such other equitable relief as a court of competent
jurisdiction may deem necessary or appropriate to restrain the Officer from
committing any violation of the covenants and obligations set forth in Sections
15, 16 and 17 of this Agreement. These injunctive remedies are cumulative and
are in addition to any other rights and remedies Umpqua may have at law or in
equity. If Umpqua institutes an action to enforce the provisions hereof, Officer
hereby waives the claim or defense that an adequate remedy at law is available,
and Officer agrees not to urge in any such action the claim or defense that an
adequate remedy at law exists.



19. DISPUTE RESOLUTION

            19.1 Arbitration. Except where such matters are deemed governed by
ERISA and are the subject to Section 13 above, the parties agree to submit any
dispute arising under this Agreement to final, binding, private arbitration in
Portland, Oregon. The disputes subject to arbitration include not only disputes
involving the meaning or performance of the Agreement, but disputes about its
negotiation, drafting, or execution. The dispute will be determined by a single
arbitrator and governed by then-existing rules of arbitration procedure in
Multnomah County Circuit Court except as set forth herein. Instead of filing of
a civil complaint in Multnomah County Circuit Court, a party will commence the
arbitration process by noticing the other party. The parties will choose an
arbitrator who specializes in employment conflicts from the arbitration list for
Multnomah County Circuit Court. If the parties are unable to agree on an
arbitrator within ten (10) days of receipt of the list of arbitrators, each
party will select one attorney from the list, and those two attorneys shall
select the arbitrator from the list (with each of the two selecting attorneys
then concluding their services and each being compensated by the party selecting
each attorney, subject to recovery of such fees under Section 19.2). The
arbitrator may charge his or her standard arbitration fees rather than the fees
prescribed in the Multnomah County Circuit Court arbitration procedures. The
arbitrator will have full authority to determine all issues, including
arbitrability, to award any remedy, including permanent injunctive relief, and
to determine any request for attorneys' fees, costs and expenses in accordance
with Section 19.2. There shall be no right of review in court. The arbitrator's
award may be reduced to final judgment or decree in Multnomah County Circuit
Court.

            19.2 Expenses/Attorneys' Fees. The prevailing party shall be awarded
all costs and expenses of the proceeding, including, but not limited to,
attorneys' fees, filing and service fees, witness fees, and arbitrators' fees.
If arbitration is commenced, the arbitrator will have full authority and
complete discretion to determine the "prevailing party" and the amount of costs
and expenses to be awarded.

            19.3 Injunctive Relief. Notwithstanding any other provision of this
Agreement, an aggrieved party may seek a temporary restraining order or
preliminary injunction in Multnomah County Circuit Court to preserve the status
quo during the arbitration proceeding, provided however, that the party seeking
relief agrees that ultimate resolution of the dispute will still be determined
through arbitration and not through court process. The filing of the court
action for injunctive relief shall not hinder or delay the arbitration process.

20. NOTICES. All notices, requests, demands, and other communications provided
for by this Agreement will be in writing and shall be deemed sufficient upon
receipt, when delivered personally or by a nationally-recognized delivery
service (such as Federal Express), or three (3) business days after being
deposited in the U.S. mail as certified mail, return receipt requested, with
postage prepaid, if such notice is properly addressed. Unless otherwise changed
in writing, notice shall be properly addressed to Officer if addressed to the
address of Officer on Umpqua's books and records at the time of mailing of such
notice, and properly addressed to Umpqua if addressed to Umpqua Holdings
Corporation, One SW Columbia, Suite 1200, Portland, Oregon 97258, Attention:
Chief Executive Officer.

21. BENEFICIARIES

            21.1 Beneficiary Designations. The Officer shall designate a
beneficiary by filing a written designation with Umpqua. The Officer may revoke
or modify the designation at any time by filing a new designation. However,
designations will only be effective if signed by the Officer and received by
Umpqua during the Officer's lifetime. The Officer's beneficiary designation
shall be deemed automatically revoked if the beneficiary predeceases the Officer
or if the Officer names a spouse as beneficiary and the marriage is subsequently
dissolved. If the Officer dies without a valid beneficiary designation, all
payments shall be made to the Officer's estate.

            21.2 Facility of Payment. If a benefit is payable to a minor, to a
person declared incompetent, or to a person incapable of handling the
disposition of his or her property, Umpqua may pay such benefit to the guardian,
legal representative or person having the care or custody of such minor,
incompetent person or incapable person. Umpqua may require proof of
incompetence, minority or guardianship as it may deem appropriate prior to
distribution of the benefit. Such distribution shall completely discharge Umpqua
from all liability with respect to such benefit.



22. GENERAL PROVISIONS

            22.1 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by federal ERISA, as it relates
to the Severance Benefit and Change in Control Benefit as discussed in Section
13 above, and otherwise by the laws of the State of Oregon.

            22.2 Saving Provision. If any part of this Agreement is held to be
unenforceable, it shall not affect any other part. If any part of this Agreement
is held to be unenforceable as written, it shall be enforced to the maximum
extent allowed by applicable law.

            22.3 Survival Provision. If any benefits provided in Sections 9, 10,
or 11 of this Agreement are still owed, or claims pursuant to Section 13 are
still pending, at the time of termination of this Agreement, this Agreement
shall continue in force, with respect to those obligations or claims, until such
benefits are paid in full or claims are resolved in full. The nonsolicitation,
non-raiding, confidential information, and dispute resolution provisions of this
Agreement shall survive after termination of this Agreement, and shall be
enforceable regardless of any claim Officer may have against Umpqua.

            22.4 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.

            22.5 Entire Agreement. This Agreement constitutes the sole agreement
of the parties regarding Officer's benefits in the event of termination or
Change in Control and together with Umpqua's employee handbook governs the terms
of Officer's employment. Where there is a conflict between the employee handbook
and this Agreement, the terms of this Agreement shall govern.

            22.6 Previous Agreements. This Agreement supersedes all prior oral
and written agreements between the Officer and Umpqua, or any affiliates or
representatives of Umpqua regarding the subject matters set forth herein.

            22.7 Waiver/Amendment. No waiver of any provision of this Agreement
shall be valid unless in writing, signed by the party against whom the waiver is
sought to be enforced. The waiver of any breach of this Agreement or failure to
enforce any provision of this Agreement shall not waive any later breach. This
Agreement may only be amended by a writing signed by the parties.

            22.8 Assignment. Officer shall not assign or transfer any of
Officer's rights pursuant to this Agreement, wholly or partially, to any other
person or to delegate the performance of its duties under the terms of this
Agreement. The rights and obligations of Umpqua under this Agreement shall inure
to the benefit of and be binding in each and every respect upon the direct and
indirect successors and assigns of Umpqua, regardless of the manner in which the
successors or assigns succeed to the interests or assets of Umpqua. This
Agreement shall not be terminated by the voluntary or involuntary dissolution of
Umpqua, by any merger, consolidation or acquisition where Umpqua is not the
surviving corporation, by any transfer of all or substantially all of Umpqua's
assets, or by any other change in Umpqua's structure or the manner in which
Umpqua's business or assets are held. Officer's employment shall not be deemed
terminated upon the occurrence of one of the foregoing events. In the event of
any merger, consolidation or transfer of assets, this Agreement shall be binding
upon and shall inure to the benefit of the surviving corporation or the
corporation to which the assets are transferred.

      23. ADVICE OF COUNSEL. OFFICER ACKNOWLEDGES THAT, IN EXECUTING THIS
AGREEMENT, OFFICER HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT
LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF
THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY
REASON OF THE DRAFTING OR PREPARATION HEREOF.




                           UMPQUA HOLDINGS CORPORATION

                                  By: /s/ Raymond P. Davis
                                      -----------------------------------------
                                      Raymond P. Davis, Chief Executive Officer

                                  OFFICER

                                      /s/ William Fike
                                      ---------------------------
                                      William Fike



                                    EXHIBIT A

              EMPLOYMENT SEPARATION AGREEMENT AND RELEASE OF CLAIMS

      This is a confidential agreement (this "Separation Agreement") between
you, William Fike, and us, Umpqua Holdings Corporation. This Separation
Agreement is dated for reference purposes _____________, 20___, which is the
date we delivered this Separation Agreement to you for your consideration. For
purposes of this Separation Agreement Umpqua Holdings Corporation together with
each of its subsidiaries or affiliates is referred to as "Umpqua."

      1. TERMINATION OF EMPLOYMENT. Your employment terminates [or was
terminated] on _______________, 20___ (the "Separation Date").

      2. PAYMENTS. In exchange for your agreeing to the release of claims and
other terms in this Separation Agreement, we will pay you the Severance Benefit
specified in Section 9 or the Change in Control Benefit in Section 10, as
appropriate, of the Agreement between you and Umpqua dated May 12, 2005 (the
"Employment Agreement") on the dates provided therein (or on such other date or
dates as may be mutually agreed upon by you and Umpqua or our successor). Such
provisions of the Employment Agreement are incorporated herein by reference. You
acknowledge that we are not obligated to make these payments to you unless you
comply with the material terms of the Employment Agreement and of this
Separation Agreement.

      3. COBRA CONTINUATION COVERAGE. Your normal employee participation in
Umpqua's group health coverage will terminate on the Separation Date.
Continuation of group health coverage thereafter will be made available to you
and your dependents pursuant to federal law (COBRA). Continuation of group
health coverage after the Separation Date is entirely at your expense, as
provided under COBRA.

      4. TERMINATION OF BENEFITS. Except as provided in Section 3 above, your
participation in all employee benefit plans and programs ended on the Separation
Date. Your rights under any pension benefit or other plans in which you may have
participated will be determined in accordance with the written plan documents
governing those plans.

      5. FULL PAYMENT. You acknowledge having received full payment of all
compensation of any kind (including wages, salary, vacation, sick leave,
commissions, bonuses and incentive compensation) that you earned as a result of
your employment by us.

      6. NO FURTHER COMPENSATION. Any and all agreements to pay you bonuses or
other incentive compensation are terminated. You understand and agree that you
have no right to receive any further payments for bonuses or other incentive
compensation. We owe no further compensation or benefits of any kind, except as
described in Section 2 above.

      7. RELEASE OF CLAIMS.

      (a) You hereby release (i) Umpqua and its subsidiaries, affiliates, and
benefit plans, (ii) each of Umpqua's past and present shareholders, officers,
directors, agents, employees, representatives, administrators, fiduciaries and
attorneys, and (iii) the predecessors, successors, transferees and assigns of
each of the persons and entities described in this sentence, from any and all
claims of any kind, known or unknown, that arose on or before the date you
signed this Separation Agreement.

      (b) The claims you are releasing include, without limitation, claims of
wrongful termination, claims of constructive discharge, claims arising out of
employment agreements, representations or policies related to your employment,
claims arising under federal, state or local laws or ordinances prohibiting
discrimination or harassment or requiring accommodation on the basis of age,
race, color, national origin, religion, sex, disability, marital status, sexual
orientation or any other status, claims of failure to accommodate a disability
or religious practice, claims for violation of public policy, claims of
retaliation, claims of failure to assist you in applying for future position
openings, claims of failure to hire you for future position openings, claims for
wages or compensation of any kind (including overtime claims), claims of
tortious interference with contract or expectancy, claims of fraud or negligent
misrepresentation,



claims of breach of privacy, defamation claims, claims of intentional or
negligent infliction of emotional distress, claims of unfair labor practices,
claims arising out of any claimed right to stock or stock options, claims for
attorneys' fees or costs, and any other claims that are based on any legal
obligations that arise out of or are related to your employment relationship
with us.

      (c) You specifically waive any rights or claims that you may have under
the California Labor Code, the Civil Rights Act of 1964 (including Title VII of
that Act), the Equal Pay Act of 1963, the Age Discrimination in Employment Act
of 1967 (ADEA), the Americans with Disabilities Act of 1990 (ADA), the Fair
Labor Standards Act of 1938 (FLSA), the Family and Medical Leave Act of 1993
(FMLA), the Worker Adjustment and Retraining Notification Act (WARN), the
Employee Retirement Income Security Act of 1974 (ERISA), the National Labor
Relations Act (NLRA), and all similar federal, state and local laws.

      (d) You agree not to seek any personal recovery (of money damages,
injunctive relief or otherwise) for the claims you are releasing in this
Separation Agreement, either through any complaint to any governmental agency or
otherwise. You agree never to start any lawsuit or arbitration asserting any of
the claims you are releasing in this Separation Agreement. You represent and
warrant that you have not initiated any complaint, charge, lawsuit or
arbitration involving any of the claims you are releasing in this Separation
Agreement. Should you apply for future employment with Umpqua, Umpqua has no
obligation to consider you for future employment.

      (e) You represent and warrant that you have all necessary authority to
enter into this Separation Agreement (including, if you are married, on behalf
of your marital community) and that you have not transferred any interest in any
claims to your spouse or to any third party.

      (f) This Separation Agreement does not affect your rights, if any, to
receive pension plan benefits, medical plan benefits, unemployment compensation
benefits or workers' compensation benefits. This Separation Agreement also does
not affect your rights, if any, under agreements, bylaw provisions, insurance or
otherwise, to be indemnified, defended or held harmless in connection with
claims that may be asserted against you by third parties.

      (g) You understand that you are releasing potentially unknown claims, and
that you have limited knowledge with respect to some of the claims being
released. You acknowledge that there is a risk that, after signing this
Separation Agreement, you may learn information that might have affected your
decision to enter into this Separation Agreement. You assume this risk and all
other risks of any mistake in entering into this Separation Agreement. You agree
that this release is fairly and knowingly made.

      (h) You are giving up all rights and claims of any kind, known or unknown,
except for the rights specifically given to you in this Separation Agreement.

      8. NO ADMISSION OF LIABILITY. Neither this Separation Agreement nor the
payments made under this Separation Agreement are an admission of liability or
wrongdoing by Umpqua.

      9. UMPQUA MATERIALS. You represent and warrant that you have, or no later
than the Separation Date will have, returned all keys, credit cards, documents
and other materials that belong to us, including but not limited to the Umpqua
Property, as defined in Section 17 of the Employment Agreement, which definition
is incorporated herein by reference.

      10. NONDISCLOSURE AGREEMENT. You will comply with the covenant regarding
confidential information in Section 17 of the Employment Agreement, which
covenant is incorporated herein by reference.

      11. NO DISPARAGEMENT. You may not disparage Umpqua or Umpqua's business or
products, and may not encourage any third parties to sue Umpqua.

      12. COOPERATION REGARDING OTHER CLAIMS. If any claim is asserted by or
against Umpqua as to which you have relevant knowledge, you will reasonably
cooperate with us in the prosecution or defense of that claim, including by
providing truthful information and testimony as reasonably requested by us.

      13. NONSOLICITATION; NO INTERFERENCE. During the Restriction Period, as
defined in Section 15 of the



Employment Agreement, you will comply with Sections 15 and 16 of the Employment
Agreement, incorporated herein by reference and Umpqua will have the right to
enforce those provisions under the terms of Section 18 of the Employment
Agreement, incorporated herein by reference. After the Restriction Period, you
will not, apart from good faith competition, interfere with Umpqua's
relationships with customers, employees, vendors, or others.

      14. INDEPENDENT LEGAL COUNSEL. You are advised and encouraged to consult
with an attorney before signing this Separation Agreement. You acknowledge that
you have had an adequate opportunity to do so.

      15. CONSIDERATION PERIOD. You have 21 days from the date this Separation
Agreement is given to you to consider this Separation Agreement before signing
it. You may use as much or as little of this 21-day period as you wish before
signing. If you do not sign and return this Separation Agreement within this
21-day period, you will not be eligible to receive the benefits described in
this Separation Agreement.

      16. REVOCATION PERIOD AND EFFECTIVE DATE. You have 7 calendar days after
signing this Separation Agreement to revoke it. To revoke this Separation
Agreement after signing it, you must deliver a written notice of revocation to
Umpqua's Chief Executive Officer before the 7-day period expires. This
Separation Agreement shall not become effective until the 8th calendar day after
you sign it. If you revoke this Separation Agreement it will not become
effective or enforceable and you will not be entitled to the benefits described
in this Separation Agreement.

      17. GOVERNING LAW. This Separation Agreement is governed by the laws of
the State of Oregon that apply to contracts executed and to be performed
entirely within the State of Oregon.

      18. DISPUTE RESOLUTION.

            (a) Except where such matters are deemed governed by ERISA or are
the subject to Section 7 above, the parties agree to submit any dispute arising
under this Separation Agreement to final, binding, private arbitration in
Portland, Oregon. The disputes subject to arbitration include not only disputes
involving the meaning or performance of the Separation Agreement, but disputes
about its negotiation, drafting, or execution. The dispute will be determined by
a single arbitrator and governed by the then-existing rules of arbitration
procedure in Multnomah County Circuit Court except as set forth herein. Instead
of filing of a civil complaint in Multnomah County Circuit Court, a party will
commence the arbitration process by noticing the other party. The parties will
choose an arbitrator who specializes in employment conflicts from the
arbitration list for Multnomah County Circuit Court. If the parties are unable
to agree on an arbitrator within ten (10) days of receipt of the list of
arbitrators, each party will select one attorney from the list, and those two
attorneys shall select the arbitrator from the list (with each of the two
selecting attorneys then concluding their services and each being compensated by
the party selecting each attorney, subject to recovery of such fees under
subsection (b) of this Section). The arbitrator may charge his or her standard
arbitration fees rather than the fees prescribed in the Multnomah County Circuit
Court arbitration procedures. The arbitrator will have full authority to
determine all issues, including arbitrability, to award any remedy, including
permanent injunctive relief, and to determine any request for attorneys' fees,
costs and expenses in accordance with subsection (b) of this Section. There
shall be no right of review in court. The arbitrator's award may be reduced to
final judgment or decree in Multnomah County Circuit Court.

            (b) The prevailing party shall be awarded all costs and expenses of
the proceeding, including, but not limited to, attorneys' fees, filing and
service fees, witness fees, and arbitrators' fees. If arbitration is commenced,
the arbitrator will have full authority and complete discretion to determine the
"prevailing party" and the amount of costs and expenses to be awarded.

            (c) Notwithstanding any other provision of this Separation
Agreement, an aggrieved party may seek a temporary restraining order or
preliminary injunction in Multnomah County Circuit Court to preserve the status
quo during the arbitration proceeding, provided however, that the party seeking
relief agrees that ultimate resolution of the dispute will still be determined
through arbitration and not through court process. The filing of the court
action for injunctive relief shall not hinder or delay the arbitration process.

      19. SAVING PROVISION. If any part of this Separation Agreement is held to
be unenforceable, it shall not affect any other part. If any part of this
Separation Agreement is held to be unenforceable as written, it shall be
enforced to the maximum extent allowed by applicable law.



      20. FINAL AND COMPLETE AGREEMENT. Except for the Employment Agreement to
the extent it is expressly incorporated herein by reference, this Separation
Agreement is the final and complete expression of all agreements between us on
all subjects and supersedes and replaces all prior discussions, representations,
agreements, policies and practices. You acknowledge you are not signing this
Separation Agreement relying on anything not set out herein.

UMPQUA HOLDINGS CORPORATION

By: ____________________________________

Title: _________________________________

I, THE UNDERSIGNED, HAVING BEEN ADVISED TO CONSULT WITH AN ATTORNEY, HEREBY
AGREE TO BE BOUND BY THIS SEPARATION AGREEMENT AND CONFIRM THAT I HAVE READ AND
UNDERSTOOD EACH PART OF IT.

_________________________________________
William Fike

_________________________________________
Date



                             BENEFICIARY DESIGNATION

                                       FOR
                           UMPQUA HOLDINGS CORPORATION
                              EMPLOYMENT AGREEMENT

I designate the following as beneficiary of any payment or other benefits under
my Employment Agreement payable following my death:

Primary: ____________________________________________________________

Contingent:
____________________________________________________________

NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE(S)
AND THE EXACT NAME AND DATE OF THE TRUST AGREEMENT.

      I understand that I may change these beneficiary designations by filing a
      new written designation with Umpqua. I further understand that the
      designations will be automatically revoked if the beneficiary predeceases
      me, or, if I have named my spouse as beneficiary and our marriage is
      subsequently dissolved.

Signature: __________________________

            ___________________________

Date: _____________________________

Received by Umpqua this _________ day of ___________________, ______________.

By: _______________________________
Name: _____________________________
Title: ____________________________

EX-10.2

                                  EXHIBIT 10.2

                 2005 EXECUTIVE DEFERRED COMPENSATION AGREEMENT

      THIS AGREEMENT by and between Umpqua Holdings Corporation, an Oregon
corporation ("Umpqua") and William Fike (the "Executive") is effective 30 days
from May 12, 2005 (the "Effective Date").

INTRODUCTION

      To encourage the Executive to remain an employee of Umpqua, Umpqua is
      willing to provide the Executive an opportunity to voluntarily defer
      compensation. Umpqua will pay the Executive's benefits from Umpqua's
      general assets. This Agreement will govern any deferral of compensation by
      the Executive after the Effective and until the Executive and Umpqua enter
      into a new deferred compensation agreement governing deferrals in Plan
      Years subsequent thereto.

                                    AGREEMENT

            The Executive and Umpqua agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

            Whenever used in this Agreement, the following words and phrases
shall have the meanings specified:

      1.1 "Compensation" means both salary and incentive compensation that would
be paid to the Executive during a Plan Year.

      1.2 "Deferral Account" means Umpqua's accounting of the Executive's
accumulated Deferrals plus accrued interest.

      1.3 "Deferrals" means the amount of the Executive's Compensation that the
Executive elects to defer according to this Agreement.

      1.4 "Disability" means the Executive (i) is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, or (ii) is, by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, receiving income replacement benefits for a period
of not less than 3 months under an accident and health plan covering employees
of Umpqua.

      1.5 "Election Form" means the Form attached as Exhibit 1.

      1.6 "Normal Retirement Age" means the Executive's 62nd birthday (or such
later date as mutually agreed between Umpqua and Executive prior to Executive's
62nd birthday).

      1.10 "Plan Year" means the calendar year.

      1.11 "Termination for Cause" means the definition of termination for cause
specified in any employment agreement existing on the date hereof or hereafter
entered into between the Executive and Umpqua or Umpqua Bank. If the Executive
is not a party to an employment agreement containing a definition of termination
for cause, Termination for Cause means Umpqua has terminated the Executive's
employment for any of the following reasons:

                  (a) Gross negligence or gross neglect of duties;

                  (b) Commission of a felony or commission of a misdemeanor
involving moral turpitude; or

                  (c) Fraud, disloyalty or willful violation of any law or
significant Umpqua policy committed in connection with the Executive's
employment and resulting in an adverse effect on Umpqua.

      1.12 "Termination of Employment" means that the Executive ceases to be
employed by Umpqua for any reason, voluntary or involuntary, other than by
reason of a leave of absence approved by Umpqua.

      1.13 "Unforeseeable Emergency" means severe financial hardship resulting
from an illness or accident of the Executive, the Executive's spouse or a
dependent (as defined in Section 152(a) of the Code), loss of the Executive's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the Executive.



                                    ARTICLE 2

                                DEFERRAL ELECTION

      2.1 Initial Election. The Executive shall make an initial deferral
election under this Agreement by filing with Umpqua a signed Election Form
within 30 days after the Effective Date of this Agreement. The Election Form
shall set forth the amount of Compensation to be deferred and shall be effective
to defer only Compensation earned after the date the Election Form is received
by Umpqua. In no event can the Executive's Deferrals for any Plan Year exceed
50% of the Executive's Base Compensation for that Plan Year and may include all
or any portion of Executive's Cash Incentive Compensation.

      2.2 Deferral Election Changes. Upon Umpqua's approval, the Executive may
modify the amount of Compensation to be deferred annually by filing a new
Election Form with Umpqua prior to the beginning of the Plan Year in which the
Compensation is to be deferred. The modified deferral election shall not be
effective until the calendar year following the year in which the subsequent
Election Form is received and approved by Umpqua.

      2.3 Change in Time and Form of Distribution. The timing of a distribution
of the Deferral Account may not be accelerated, except as set forth in Section
4.4. Any change which delays the timing of distributions or changes the form of
distributions may only be made by a written agreement signed by Umpqua and the
Executive and only if the following requirements are met:

            2.3.1 Any election to change the time and form of distribution may
not take effect until at least 12 months after the date on which the election is
made;

            2.3.2 Other than in the event of death, Disability or Unforeseeable
Emergency, the first payment with respect to such election must be deferred for
a period of at least 5 years from the date such payment otherwise would have
been made; and

            2.3.3 Any election related to a payment to be made at a specified
time may not be made less than 12 months prior to the date of the first
scheduled payment.

                                    ARTICLE 3
                                DEFERRAL ACCOUNT

      3.1 Establishing and Crediting. Umpqua shall establish a Deferral Account
on its books for the Executive and shall credit to the Deferral Account the
following amounts:

                  3.1.1 Deferrals. The portion of the Compensation deferred by
the Executive as of the time the Compensation would have otherwise been paid to
the Executive.

                  3.1.2 Interest. At the end of each Plan Year under this
Agreement, Umpqua shall credit interest on the Deferral Account balance at an
annual rate, compounded quarterly, equal to the 5-year Treasury Constant
Maturity rate published. The interest credited each Plan Year shall be
determined by reference to the 5-year Treasury Constant Maturity rate as of the
last business day of the preceding Plan Year. If the Executive elects payment of
the benefits other than in lump sum, interest will accrue during the installment
payment period on the unpaid balance of the Deferral Account.

      3.2 Statement of Accounts. Within 120 days after the end of each Plan
Year, Umpqua shall provide to the Executive a statement setting forth the
Deferral Account balance.

      3.3 Accounting Device Only. The Deferral Account is solely a device for
measuring amounts to be paid under this Agreement. The Deferral Account is not a
trust fund of any kind. The Executive is a general unsecured creditor of Umpqua
for the payment of benefits. The benefits represent the mere promise of Umpqua
to pay such benefits. The Executive's rights are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by the Executive's creditors.

                                    ARTICLE 4
                            BENEFITS DURING LIFETIME

      4.1 Normal Retirement Benefit. Upon Termination of Employment following
Normal Retirement Age, Umpqua shall pay to the Executive the benefit described
in this Section 4.1 in lieu of any other benefit under this Agreement.

                  4.1.1 Amount of Benefit. The benefit under this Section 4.1 is
the Deferral Account balance at the date of the Executive's Termination of
Employment.

                  4.1.2 Payment of Benefit. Umpqua shall pay the benefit to the
Executive in the form elected by the



Executive in the Election Form commencing six months following the date of
Termination of Employment.

      4.2 Early Retirement Benefit. Upon Termination of Employment prior to the
Normal Retirement Age for reasons other than death, or Disability, Umpqua shall
pay to the Executive the benefit described in this Section 4.2 in lieu of any
other benefit under this Agreement.

                  4.2.1 Amount of Benefit. The benefit under this Section 4.2 is
the Deferral Account balance at the Executive's Termination of Employment.

                  4.2.2 Payment of Benefit. Umpqua shall pay the benefit to the
Executive in the form elected by the Executive in the Election Form commencing
at the later of (i) the month following the last cash payment paid to the
Executive pursuant to Section 9, 10, or 11 of the Employment Agreement between
the Executive and Umpqua dated May 12, 2005 or (ii) six months following
Executive's Termination of Employment.

      4.3 Disability Benefit. In the event of Disability, Umpqua shall pay to
the Executive the benefit described in this Section 4.3 in lieu of any other
benefit under this Agreement.

                  4.3.1 Amount of Benefit. The benefit under this Section 4.3 is
the Deferral Account balance at the Disability.

                  4.3.2 Payment of Benefit. Umpqua shall pay the benefit to the
Executive in the form elected by the Executive in the Election Form commencing
with the month following the Disability.

      4.4 Hardship Distribution. Upon the Board of Director's determination
(following petition by the Executive) that the Executive has suffered an
Unforeseeable Emergency, Umpqua shall distribute to the Executive all or a
portion of the Deferral Account balance as determined by Umpqua. The amount
distributed may not exceed the amount necessary to satisfy the financial
hardship plus amounts necessary to pay taxes reasonably anticipated as a result
of the distribution, after taking into account the extent to which such hardship
is or may be relieved through reimbursement or compensation by insurance or
otherwise or by liquidation of the Executive's assets (to the extent the
liquidation of such assets would not itself cause severe financial hardship).

                                    ARTICLE 5

                                 DEATH BENEFITS

      5.1 Death During Active Service. If the Executive dies while in the
employment of Umpqua, Umpqua shall pay to the Executive's beneficiary the Early
Retirement Benefit described in Section 4.2.1 commencing the month after the
Executive's death, in lieu of any other benefit under this Agreement.

      5.2 Death During Payment of a Benefit. If the Executive dies after any
benefit payments have commenced under this Agreement but before receiving all
such payments, Umpqua shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the same amounts they would have been paid
to the Executive had the Executive survived.

      5.3 Death After Termination of Employment But Before Benefit Payments
Commence. If the Executive is entitled to benefit payments under this Agreement,
but dies prior to the commencement of said benefit payments, Umpqua shall pay
the same benefit payments to the Executive's beneficiary that the Executive was
entitled to prior to death except that the benefit payments shall commence on
the first day of the month following the date of the Executive's death.

                                    ARTICLE 6

                                  BENEFICIARIES

      6.1 Beneficiary Designations. The Executive shall designate a beneficiary
by filing a written designation with Umpqua. The Executive may revoke or modify
the designation at any time by filing a new designation. However, designations
will only be effective if signed by the Executive and received by Umpqua during
the Executive's lifetime. The Executive's beneficiary designation shall be
deemed automatically revoked if the beneficiary predeceases the Executive or if
the Executive names a spouse as beneficiary and the marriage is subsequently
dissolved. If the Executive dies without a valid beneficiary designation, all
payments shall be made to the Executive's estate.

      6.2 Facility of Payment. If a benefit is payable to a minor, to a person
declared incompetent, or to a person incapable of handling the disposition of
his or her property, Umpqua may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent
person or incapable person. Umpqua may require proof of incompetence, minority
or guardianship as it may deem appropriate prior to distribution of the benefit.
Such distribution shall completely discharge Umpqua



from all liability with respect to such benefit.

                                   ARTICLE 7
                              GENERAL LIMITATIONS

      7.1 Termination for Cause. Notwithstanding any provision of this Agreement
to the contrary, Umpqua shall not pay any benefit under this Agreement that is
in excess of the Executive's Deferrals (i.e. no interest is paid) if Termination
of Employment is due to the Executive's actions resulting in Termination for
Cause. The Executive's Deferrals shall be paid to the Executive in a lump sum
payment within 30 days of termination and all applicable taxes will be withheld.

                                    ARTICLE 8
                          CLAIMS AND REVIEW PROCEDURES

      8.1 Claims Procedure. A participant or beneficiary ("claimant") who has
not received benefits under the Agreement that he or she believes should be paid
shall make a claim for such benefits as follows:

                  8.1.1 Initiation - Written Claim. The claimant initiates a
claim by submitting to Umpqua a written claim for the benefits.

                  8.1.2 Timing of Umpqua Response. Umpqua shall respond to such
claimant within 90 days after receiving the claim. If Umpqua determines that
special circumstances require additional time for processing the claim, Umpqua
can extend the response period by an additional 90 days by notifying the
claimant in writing, prior to the end of the initial 90-day period, that an
additional period is required. The notice of extension must set forth the
special circumstances and the date by which Umpqua expects to render its
decision.

                  8.1.3 Notice of Decision. If Umpqua denies part or all of the
claim, Umpqua shall notify the claimant in writing of such denial. Umpqua shall
write the notification in a manner calculated to be understood by the claimant.
The notification shall set forth:

                        (a) The specific reasons for the denial,

                        (b) A reference to the specific provisions of the
Agreement on which the denial is based,

                        (c) A description of any additional information or
material necessary for the claimant to perfect the claim and an explanation of
why it is needed,

                        (d) An explanation of the Agreement's review procedures
and the time limits applicable to such procedures, and

                        (e) A statement of the claimant's right to bring a civil
action under ERISA (Employee Retirement Income Security Act of 1974, 29 U.S.C.
Section 1001, et. seq.) Section 502(a) following an adverse benefit
determination on review.

      8.2 Review Procedure. If Umpqua denies part or all of the claim, the
claimant shall have the opportunity for a full and fair review by Umpqua of the
denial, as follows:

                  8.2.1 Initiation -- Written Request. To initiate the review,
the claimant, within 60 days after receiving Umpqua's notice of denial, must
file with Umpqua a written request for review.

                  8.2.2 Additional Submissions -- Information Access. The
claimant shall then have the opportunity to submit written comments, documents,
records and other information relating to the claim. Umpqua shall also provide
the claimant, upon request and free of charge, reasonable access to, and copies
of, all documents, records and other information relevant (as defined in
applicable ERISA regulations) to the claimant's claim for benefits.

                  8.2.3 Considerations on Review. In considering the review,
Umpqua shall take into account all materials and information the claimant
submits relating to the claim, without regard to whether such information was
submitted or considered in the initial benefit determination.

                  8.2.4 Timing of Umpqua Response. Umpqua shall respond in
writing to such claimant within 60 days after receiving the request for review.
If Umpqua determines that special circumstances require additional time for
processing the claim, Umpqua can extend the response period by an additional 60
days by notifying the claimant in writing, prior to the end of the initial
60-day period, that an additional period is required. The notice of extension
must set forth the special circumstances and the date by



which Umpqua expects to render its decision.

                  8.2.5 Notice of Decision. Umpqua shall notify the claimant in
writing of its decision on review. Umpqua shall write the notification in a
manner calculated to be understood by the claimant. The notification shall set
forth:

                        (a) The specific reasons for the denial,

                        (b) A reference to the specific provisions of the
Agreement on which the denial is based,

                        (c) A statement that the claimant is entitled to
receive, upon request and free of charge, reasonable access to, and copies of,
all documents, records and other information relevant (as defined in applicable
ERISA regulations) to the claimant's claim for benefits, and

                        (d) A statement of the claimant's right to bring a civil
action under ERISA Section 502(a).

                                    ARTICLE 9

                           AMENDMENTS AND TERMINATION

      This Agreement may be amended or terminated only by a written agreement
signed by Umpqua and the Executive. Notwithstanding the foregoing, Umpqua may
amend or terminate this Agreement at any time if, pursuant to legislative,
judicial or regulatory action, continuation of the Agreement would (i) cause
benefits to be taxable to the Executive prior to actual receipt, or (ii) result
in significant financial penalties or other significantly detrimental
ramifications to Umpqua (other than the financial impact of paying the
benefits). In no event shall this Agreement be terminated under this section
without payment to the Executive of the Deferral Account balance attributable to
the Executive's Deferrals and interest credited on such amounts.

ARTICLE 10

                                  Miscellaneous

      10.1 Binding Effect. This Agreement shall bind the Executive and Umpqua
and their beneficiaries, survivors, executors, administrators and transferees.

      10.2 No Guarantee of Employment. This Agreement is not a contract for
employment. It does not give the Executive the right to remain an employee of
Umpqua, nor does it interfere with Umpqua's right to discharge the Executive. It
also does not require the Executive to remain an employee nor interfere with the
Executive's right to terminate employment at any time.

      10.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.

      10.4 Tax Withholding. Umpqua shall withhold any taxes that are required to
be withheld from the benefits provided under this Agreement.

      10.5 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of Oregon, except to the extent the laws of the United
States of America otherwise require.

      10.6 Unfunded Arrangement. The Executive and the Executive's beneficiary
are general unsecured creditors of Umpqua for the payment of benefits under this
Agreement. The benefits represent the mere promise by Umpqua to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive's life is a general
asset of Umpqua to which the Executive and the Executive's beneficiary have no
preferred or secured claim.

      10.7 Reorganization. Umpqua and Umpqua Bank shall not merge or consolidate
into or with another bank, or reorganize, or sell substantially all of its
assets to another company, bank, firm, or person unless such succeeding or
continuing company, bank, firm, or person agrees to assume and discharge the
obligations of Umpqua under this Agreement. Upon the occurrence of such event,
the term "Umpqua" as used in this Agreement shall be deemed to refer to the
successor.

      10.8 Entire Agreement. This Agreement constitutes the entire agreement
between Umpqua and the Executive as to the subject matter hereof. No rights are
granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.

      10.9 Administration. Umpqua shall have powers which are necessary to
administer this Agreement, including but not limited to:



                        (a) Interpreting the provisions of the Agreement;

                        (b) Establishing and revising the method of accounting
for the Agreement;

                        (c) Maintaining a record of benefit payments; and

                        (d) Establishing rules and prescribing any forms
necessary or desirable to administer the Agreement.

      10.10 Named Fiduciary. For purposes of the Employee Retirement Income
Security Act of 1974, if applicable, Umpqua shall be the named fiduciary and
plan administrator under this Agreement. The named fiduciary may delegate to
others certain aspects of the management and operation responsibilities of the
plan including the employment of advisors and the delegation of ministerial
duties to qualified individuals.

      IN WITNESS WHEREOF, the Executive and a duly authorized officer of Umpqua
have signed this Agreement.

EXECUTIVE:                                UMPQUA:
                                          UMPQUA HOLDINGS CORPORATION

/s/ William Fike                          By: /s/ Raymond P. Davis
- --------------------------                    -----------------------------
WILLIAM FIKE                                  RAYMOND P. DAVIS, CEO



                                    EXHIBIT 1
                                       TO
                           UMPQUA HOLDINGS CORPORATION
                 2005 EXECUTIVE DEFERRED COMPENSATION AGREEMENT

                                DEFERRAL ELECTION

I elect to defer my Compensation pursuant to this Agreement with Umpqua, as
follows:



                 AMOUNT OF DEFERRAL                                       DURATION
- ------------------------------------------------------    ----------------------------------------
                                                       
[INITIAL AND COMPLETE ONE]                                [INITIAL ONE]
____ I elect to defer ____% or $______ (select one) of    ____ One Year only
my Base Compensation annually.                            ____ For _____ [INSERT NUMBER] Years
____ I elect to defer ____% or $ ______  (select one)     ____ Until Termination of Employment
of my Incentive Compensation annually.                    ____ Until ______________, ______ (Date)
____ I elect not to defer any of my Compensation.


I understand that I may change the amount of my deferrals by filing a new
election form with Umpqua; provided, however, that any subsequent election will
not be effective until the calendar year following the year in which the new
election is received and accepted by Umpqua.

      24. FORM OF DISTRIBUTION

I elect to have the benefits under the Agreement distributed to me in the
following form:

[Initial One]

___ Lump Sum

___ Equal monthly installments for One Hundred Twenty (120) months

I understand that I may not change the form and timing of distribution elected
without written approval of the Board of Directors of Umpqua and that any change
in the time and form of distribution must be in compliance with Section 2.3 of
the Agreement.

Signature: __________________________         Date:______________________
            __________________________

Received by Umpqua this _________ day of ___________________, ______________.

By: _______________________________

Title: ______________________________



                             BENEFICIARY DESIGNATION

                                       FOR
                           UMPQUA HOLDINGS CORPORATION
                 2005 EXECUTIVE DEFERRED COMPENSATION AGREEMENT

I designate the following as beneficiary of benefits under this Agreement
payable following my death:

Primary: _____________________________________________________________________

Contingent:
__________________________________________________________________________

NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE(S)
AND THE EXACT NAME AND DATE OF THE TRUST AGREEMENT.

      I understand that I may change these beneficiary designations by filing a
      new written designation with Umpqua. I further understand that the
      designations will be automatically revoked if the beneficiary predeceases
      me, or, if I have named my spouse as beneficiary and our marriage is
      subsequently dissolved.

Signature: __________________________
            ___________________________

Date: _____________________________

Received by Umpqua this _________ day of ___________________, ______________.

By: ________________________________
Name: ______________________________
Title: _____________________________

EX-31.1

                                  EXHIBIT 31.1
                                  Certification
                                       of
   Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002

I, Raymond P. Davis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Umpqua Holdings
Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15e and 15d-15(e)) and internal controls over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the
registrant and have:

      a) Designed such disclosure controls and procedures, or caused such
      disclosure controls and procedures to be designed under our supervision,
      to ensure that material information relating to the registrant, including
      its consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this quarterly report is
      being prepared;

      b) Designed such internal control over financial reporting, or caused such
      internal control over financial reporting to be designed under our
      supervision, to provide reasonable assurance regarding the reliability of
      financial reporting and the preparation of financial statements for
      external purposes in accordance with generally accepted accounting
      principles;

      c) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures and presented in this report our conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of
      the period covered by this report based on such evaluation; and

      d) Disclosed in this report any change in the registrant's internal
      control over financial reporting that occurred during the registrant's
      most recent fiscal quarter that has materially affected, or is reasonably
      likely to materially affect, the registrant's internal control over
      financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's independent registered public accounting firm and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

      a) All significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant's ability to record,
      process, summarize and report financial information; and

      b) Any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal control
      over financial reporting.

Date: August 9, 2005

                                           /s/ Raymond P. Davis
                                           -------------------------------------
                                           Raymond P. Davis
                                           President and Chief Executive Officer

EX-31.2

                                  EXHIBIT 31.2
                                  Certification
                                       of
   Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002

I, Daniel A. Sullivan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Umpqua Holdings
Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15e and 15d-15(e)) and internal controls over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the
registrant and have:

      a) Designed such disclosure controls and procedures, or caused such
      disclosure controls and procedures to be designed under our supervision,
      to ensure that material information relating to the registrant, including
      its consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this quarterly report is
      being prepared;

      b) Designed such internal control over financial reporting, or caused such
      internal control over financial reporting to be designed under our
      supervision, to provide reasonable assurance regarding the reliability of
      financial reporting and the preparation of financial statements for
      external purposes in accordance with generally accepted accounting
      principles;

      c) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures and presented in this report our conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of
      the period covered by this report based on such evaluation; and

      d) Disclosed in this report any change in the registrant's internal
      control over financial reporting that occurred during the registrant's
      most recent fiscal quarter that has materially affected, or is reasonably
      likely to materially affect, the registrant's internal control over
      financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's independent registered public accounting firm and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

      a) All significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant's ability to record,
      process, summarize and report financial information; and

      b) Any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal control
      over financial reporting.

Date: August 9, 2005

                                                    /s/ Daniel A. Sullivan
                                                    ----------------------------
                                                    Daniel A. Sullivan
                                                    Executive Vice President and
                                                    Chief Financial Officer

EX-31.3

                                  EXHIBIT 31.3
                                  Certification
                                       of
    Principal Accounting Officer under Section 302 of the Sarbanes-Oxley Act
                                     of 2002

I, Ronald L. Farnsworth, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Umpqua Holdings
Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15e and 15d-15(e)) and internal controls over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the
registrant and have:

      a) Designed such disclosure controls and procedures, or caused such
      disclosure controls and procedures to be designed under our supervision,
      to ensure that material information relating to the registrant, including
      its consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this quarterly report is
      being prepared;

      b) Designed such internal control over financial reporting, or caused such
      internal control over financial reporting to be designed under our
      supervision, to provide reasonable assurance regarding the reliability of
      financial reporting and the preparation of financial statements for
      external purposes in accordance with generally accepted accounting
      principles;

      c) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures and presented in this report our conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of
      the period covered by this report based on such evaluation; and

      d) Disclosed in this report any change in the registrant's internal
      control over financial reporting that occurred during the registrant's
      most recent fiscal quarter that has materially affected, or is reasonably
      likely to materially affect, the registrant's internal control over
      financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's independent registered public accounting firm and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

      a) All significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant's ability to record,
      process, summarize and report financial information; and

      b) Any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal control
      over financial reporting.

Date: August 9, 2005

                                               /s/ Ronald L. Farnsworth, Jr.
                                               ---------------------------------
                                               Ronald L. Farnsworth, Jr.
                                               Senior Vice President/Finance and
                                               Principal Accounting Officer

EX-32

                                   EXHIBIT 32

                                CERTIFICATION OF

    CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING
           OFFICER UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

This certification is given by the undersigned Chief Executive Officer, Chief
Financial Officer and Principal Accounting Officer of Umpqua Holdings
Corporation (the "registrant") pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. Each of the undersigned hereby certifies, with respect to the
registrant's quarterly report on Form 10-Q for the period ended June 30, 2005 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), that:

      (1) The Report fully complies with the requirements of section 13(a) or
      15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all
      material respects, the financial condition and result of operations of the
      registrant

/s/ Raymond P. Davis
- -------------------------------------
Raymond P. Davis
President and Chief Executive Officer
Umpqua Holdings Corporation

/s/ Daniel A. Sullivan
- ----------------------------
Daniel A. Sullivan
Executive Vice President and
Chief Financial Officer
Umpqua Holdings Corporation

/s/ Ronald L. Farnsworth, Jr.
- -----------------------------
Ronald L. Farnsworth, Jr.
Senior Vice President/Finance and
Principal Accounting Officer

August 9, 2005

EX-99.1

                                  EXHIBIT 99.1

RISK FACTORS

      The following summarizes certain risks that management believes are
specific to our business. This should not be viewed as including all risks.

WE ARE PURSUING AN AGGRESSIVE GROWTH STRATEGY THAT MAY INCLUDE MERGERS AND
ACQUISITIONS, WHICH COULD PLACE HEAVY DEMANDS ON OUR MANAGEMENT RESOURCES.

      Umpqua is a dynamic organization that is among the fastest-growing
community financial services organizations in the United States. Since 2000, we
have completed the acquisition and integration of five other financial
institutions. Although all of these acquisitions were integrated in a successful
manner, there is no assurance that future acquisitions will be integrated in a
manner as successful as those previously completed. We have announced our intent
to open new stores in Oregon, Washington and California, and to continue our
growth strategy. If we pursue our growth strategy too aggressively, or if
factors beyond management's control divert attention away from our integration
plans, we might not be able to realize some or all of the anticipated benefits.
Moreover, we are dependent on the efforts of key personnel to achieve the
synergies associated with our acquisitions. The loss of one or more of our key
persons could have a material adverse effect upon our ability to achieve the
anticipated benefits.

THE REMODELING OF OUR STORES MAY NOT BE COMPLETED SMOOTHLY OR WITHIN BUDGET,
WHICH COULD RESULT IN REDUCED EARNINGS.

      The Bank has, over the past several years, been transformed from a
traditional community bank into a community-oriented financial services
retailer. In pursuing this strategy, we have remodeled many bank branches to
resemble retail stores that include distinct physical areas or boutiques such as
a "serious about service center," an "investment opportunity center" and a
"computer cafe." Remodeling involves significant expense, disrupts banking
activities during the remodeling period, and presents a new look and feel to the
banking services and products being offered. There are risks that remodeling
costs will exceed forecasted budgets and that there may be delays in completing
the remodels, which could cause confusion and disruption in the business of
those stores.

INVOLVEMENT IN NON-BANK BUSINESS INVOLVES UNIQUE RISKS

      Strand's retail brokerage operations present special risks not borne by
community banks. For example, the brokerage industry is subject to fluctuations
in the stock market that may have a significant adverse impact on transaction
fees, customer activity and investment portfolio gains and losses. Likewise,
additional or modified regulations may adversely affect Strand's operations. A
significant decline in fees and commissions or trading losses suffered in the
investment portfolio could adversely affect Strand's income and potentially
require the contribution of additional capital to support its operations. Strand
is subject to claim arbitration risk arising from customers who claim their
investments were not suitable or that their portfolios were too actively traded.
These risks increase when the market, as a whole, declines. The risks associated
with retail brokerage may not be supported by the income generated by those
operations.

THE MAJORITY OF OUR ASSETS ARE LOANS, WHICH IF NOT PAID WOULD RESULT IN LOSSES
TO THE BANK IN EXCESS OF LOSS ALLOWANCES.

      The Bank, like other lenders, is subject to credit risk, which is the risk
of losing principal or interest due to borrowers' failure to repay loans in
accordance with their terms. Although we have established underwriting and
documentation criteria and most loans are secured by collateral, a downturn in
the economy or the real estate market in our market areas or a rapid increase in
interest rates could have a negative effect on collateral values and borrowers'
ability to repay. To the extent loans are not paid timely by borrowers, the
loans are placed on non-accrual, thereby reducing interest income. To the extent
loan charge-offs exceed expectations, additional amounts may be charged to the
provision for loan losses, which reduces income. Although management believes
that the allowance for loan losses and reserve for unfunded commitments at the
end of the reported period are adequate, no assurance can be given that an
additional provision for loan losses or unfunded commitments will not be
required.

A RAPID CHANGE IN INTEREST RATES COULD MAKE IT DIFFICULT TO MAINTAIN OUR CURRENT
INTEREST INCOME SPREAD AND COULD RESULT IN REDUCED EARNINGS.

      Our earnings are largely derived from net interest income, which is
interest income and fees earned on loans and investments, less interest paid on
deposits and other borrowings. Interest rates are highly sensitive to many
factors that are beyond the control of our management, including general
economic conditions and the policies of various governmental and regulatory
authorities. As interest rates change, net interest income is affected. With
fixed rate assets (such as fixed rate loans) and liabilities (such as
certificates of deposit), the effect on net interest income depends on the
maturity of the asset or liability. Although we strive to manage interest rate
risk through asset/liability management policies, from time to time maturities
are not balanced. Any rapid increase in interest rates in the future could
result in interest expense increasing faster than interest income because of
fixed rate loans and longer-term



investments. Further, substantially higher interest rates generally reduce loan
demand and may result in slower loan growth than previously experienced. An
unanticipated rapid decrease or increase in interest rates could have an adverse
effect on the spreads between the interest rates earned on assets and the rates
of interest paid on liabilities, and therefore on the level of net interest
income.

THE VOLATILITY OF OUR MORTGAGE BANKING BUSINESS CAN ADVERSELY AFFECT EARNINGS.

      Changes in interest rates greatly affect the mortgage banking business.
One of the principal risks in this area is prepayment of mortgages and their
effect on the value of mortgage servicing rights ("MSR"). We can mitigate this
risk by purchasing financial instruments, such as fixed rate investment
securities and interest rate contracts, which tend to increase in value when
long-term interest rates decline. The success of this strategy, however, depends
on management's judgments regarding the amount, type and mix of MSR risk
management instruments that we believe are appropriate to manage the changes in
the fair value of our MSR asset. If these decisions and strategies are not
successful, our net income could be adversely affected.

OUR BANKING AND BROKERAGE OPERATIONS ARE SUBJECT TO EXTENSIVE GOVERNMENT
REGULATIONS THAT ARE EXPECTED TO BECOME MORE BURDENSOME, INCREASING OUR COSTS
AND/OR MAKING US LESS COMPETITIVE.

      We and our subsidiaries are subject to extensive regulation under federal
and state laws. These laws and regulations are primarily intended to protect
customers, depositors and the deposit insurance fund, rather than shareholders.
The Bank is an Oregon state-chartered commercial bank whose primary regulator is
the Oregon Division of Finance and Corporate Securities. The Bank is also
subject to the supervision by and the regulations of the Washington Department
of Financial Institutions, the California Department of Financial Institutions
and the Federal Deposit Insurance Corporation ("FDIC"), which insures bank
deposits. Strand is subject to extensive regulation by the Securities and
Exchange Commission and the National Association of Securities Dealers, Inc.
Umpqua is subject to regulation and supervision by the Board of Governors of the
Federal Reserve System, the SEC and NASDAQ. Federal and state regulations may
place banks at a competitive disadvantage compared to less regulated competitors
such as finance companies, credit unions, mortgage banking companies and leasing
companies. Although we have been able to compete effectively in our market area
in the past, there can be no assurance that we will be able to continue to do
so. Further, future changes in federal and state banking and brokerage
regulations could adversely affect our operating results and ability to continue
to compete effectively.

THE FINANCIAL SERVICES INDUSTRY IS HIGHLY COMPETITIVE.

      We face significant competition in attracting and retaining deposits and
making loans as well as in providing other financial services throughout our
market area. We face pricing competition for loans and deposits. We also face
competition with respect to customer convenience, product lines, accessibility
of service and service capabilities. Our most direct competition comes from
other banks, brokerages, mortgage companies and savings institutions. We also
face competition from credit unions, government-sponsored enterprises, mutual
fund companies, insurance companies and other non-bank businesses.