Business Combinations

3 Months Ended

Mar. 31, 2013

Business Combinations [Abstract]

Business Combinations

Business Combinations 

On November 14, 2012, the Company acquired all of the assets and liabilities of Circle Bancorp (“Circle”), which has been accounted for under the acquisition method of accounting for cash consideration of $24.9 million, including the redemption of all common and preferred shares and outstanding warrants and options. The assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the acquisition dates, and are subject to change for up to one year after the closing date of the acquisition. This acquisition was consistent with the Company's overall banking expansion strategy and provided further opportunity to enter growth markets in the San Francisco Bay Area of California.Upon completion of the acquisition, all Circle Bank branches operated under the Umpqua Bank name. The acquisition added Circle Bank's network of six branches in Corte Madera, Novato, Petaluma, San Francisco, San Rafael and Santa Rosa, California to Umpqua Bank's network of locations in California, Oregon, Washington and Nevada. The application of the acquisition method of accounting resulted in the recognition of $12.5 million of goodwill. There is no tax deductible goodwill or other intangibles.

The operations of Circle are included in our operating results from November 15, 2012, and added revenue of $5.0 million, non-interest expense of $2.7 million, and net gain of $1.3 million net of tax, for the quarter ended March 31, 2013. Circle's results of operations prior to the acquisition are not included in our operating results. Merger-related expenses of $891,000 for the quarter ended March 31, 2013 have been incurred in connection with the acquisition of Circle and recognized within the merger related expenses line item on the Consolidated Statements of Income.

A summary of the net assets acquired and the estimated fair value adjustments of Circle are presented below:

(in thousands)

	Circle Bank
	November 14, 2012
Cost basis net assets	$	17,127
Cash payment paid	(24,860		)
Fair value adjustments:
Non-covered loans and leases, net	(2,622		)
Other intangible assets	830
Non-covered other real estate owned	(487		)
Deposits	(904		)
Term debt	(2,404		)
Other	775
Goodwill	$	(12,545	)

The statement of assets acquired and liabilities assumed at their fair values of Circle are presented below:

(in thousands)

	Circle Bank
	November 14, 2012
Assets Acquired:
Cash and equivalents	$	39,328
Investment securities	793
Non-covered loans and leases, net	246,665
Premises and equipment	7,713
Restricted equity securities	2,491
Goodwill	12,545
Other intangible assets	830
Non-covered other real estate owned	1,602
Other assets	5,784
Total assets acquired	$	317,751
Liabilities Assumed:
Deposits	$	250,408
Junior subordinated debentures	8,764
Term debt	55,404
Other liabilities	3,175
Total liabilities assumed	$	317,751

Non-covered loans acquired from Circle that are not subject to the requirements of FASB ASC 310-30 Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30") are presented below at acquisition:

(in thousands)

	November 14,
	2012
Contractually required principal payments	$	242,999
Purchase adjustment for credit, interest rate, and liquidity	(2,149		)
Balance of performing non-covered loans	$	240,850

Non-covered loans acquired from Circle that are subject to the requirements of ASC 310-30 are presented below at acquisition and as of March 31, 2013 and December 31, 2012: 

(in thousands)

	November 14,		December 31,		March 31,
	2012		2012		2013
Contractually required principal payments	$	12,252	$	12,231	$	11,365
Carrying balance of acquired purchase credit impaired non-covered loans	$	5,815	$	5,809	$	5,337

The acquisition of Circle is not considered significant to the Company's financial statements and therefore pro forma financial information is not included.