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| EX-99.1 - PRESS RELEASE ANNOUNCING FOURTH QUARTER AND FULL YEAR 2017 FINANCIAL RESULTS - UMPQUA HOLDINGS CORP | umpq-20171231ex991earnings.htm |
| 8-K - 8-K - UMPQUA HOLDINGS CORP | umpqq420178-k.htm |
UMPQUA HOLDINGS CORPORATION
4th Quarter 2017 Earnings Conference Call Presentation
January 24, 2018
2
Forward-looking Statements
This presentation includes forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private
Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These statements
are necessarily subject to risk and uncertainty and actual results could differ materially due to various risk factors,
including those set forth from time to time in our filings with the SEC. You should not place undue reliance on forward-
looking statements and we undertake no obligation to update any such statements. In this presentation we make forward-
looking statements about fee revenue and operating efficiency initiatives, the credit discount accretion related to loans
acquired from Sterling, store consolidations and facilities optimization and related costs and savings, and indirect auto
wind down. Risks that could cause results to differ from forward-looking statements we make are set forth in our filings
with the SEC and include, without limitation, prolonged low interest rate environment; the effect of interest rate increases
on the cost of deposits; unanticipated weakness in loan demand or loan pricing; deterioration in the economy; lack of
strategic growth opportunities or our failure to execute on those opportunities; our inability to effectively manage problem
credits; our inability to successfully implement efficiency initiatives; our ability to successfully develop and market new
products and technology; and changes in laws or regulations.
Full Year 2017 Highlights
3
Net earnings available to common shareholders of $246.9 million, or $1.12 per diluted common share
Gross loan and lease growth of $1.6 billion, or 9%
Deposit growth of $927.3 million, or 5%
Net interest income increased by $15.3 million, driven primarily by higher average balances of loans and leases,
partially offset by lower net interest margin and a lower level of accretion of the credit discount
Provision for loan and lease losses increased by $5.6 million primarily due to loan and lease growth, along with a $2.6
million increase in net charge-offs
Non-interest income decreased by $21.1 million, driven primarily by lower residential mortgage banking revenue and
the higher net loss on junior subordinated debentures carried at fair value, partially offset by higher other income
Non-interest expense increased by $10.7 million, driven primarily by higher salaries and benefits expense
Paid dividends of $0.68 per common share, repurchased 325,000 shares of stock, and grew tangible book value(1) by
5%, or $0.48 per share
> (1) Non-GAAP financial measure. A reconciliation to the comparable GAAP measurement is provided at the end of this slide presentation.
Fourth Quarter 2017 Highlights
4
Net earnings available to common shareholders of $82.8 million, or $0.38 per diluted common share
$26.9 million net benefit to the provision for income taxes related to a revaluation of the net deferred tax liability and
amortization of tax credit investments associated with the passage of the Tax Cuts and Jobs Act (“Tax Act”), partially offset by
the non-deductibility of certain executive compensation
In light of the Tax Act, the Company took the opportunity to make additional investments, including expenses of $3.2 million
related to employee profit sharing and $2.0 million in donations to the Umpqua Bank Charitable Foundation
Gross loan and lease growth of $402.4 million, or 9% annualized, and deposit growth of $96.4 million, or 2% annualized
Net interest income was flat, as the growth in the loan and lease portfolio was offset by lower accretion of the credit discount
Provision for loan and lease losses increased by $0.9 million
Non-interest income decreased by $3.4 million, driven primarily by the $8.4 million increase in net loss on junior subordinated
debentures carried at fair value and lower gains from portfolio loan sales, partially offset by higher mortgage banking revenue
attributable to a linked quarter increase in the fair value change of the MSR asset
Non-interest expense increased by $4.4 million, reflecting the additional investments resulting from tax reform, partially offset
by lower merger-related expense
Non-performing assets to total assets increased to 0.37%, driven primarily by two larger non-performing loans
Estimated total risk-based capital ratio of 14.0% and estimated Tier 1 common to risk weighted assets ratio of 11.0%
Declared quarterly cash dividend of $0.18 per common share and Repurchased 100,000 shares of common stock for $2.1
million
Mid 50s
• Annual loan / deposit growth in the mid to upper-single digit range
• Non-recessionary environment, with net charge-offs of 25–35 bps of loans
• Loan and lease loss provisions of 30–40 bps of loans
• Financial goals above exclude fair value adjustments and exit disposal costs
• Exit disposal costs approximately $8–12MM per year
• Flat rates environment assumes no additional fed funds rate increase and 10-year treasury
yield in the mid-2% range
• Moderately increasing rate environment assumes fed funds rate increases 50 bps per year, and 10-
year treasury yield increases to mid 3% range
• Assumes effective tax rate of 25%
• Does not reflect benefit from evaluation of operational / efficiency opportunities on $300MM
back office and operations expense base with assistance of independent 3rd party
> 17.0% > 14.5%
Key
Assumptions
2020
Financial Goals
Umpqua Next Gen – Updated Financial Goals and Assumptions
5
ROATCE
Flat Rates Moderately Increasing Rates
> 1.2%
3.65 - 3.75%
> 1.4%
3.9 – 4.0%
ROAA
NIM
Efficiency Ratio Low 50s
Reflects updated guidance based on Tax Act
FY 2017 FY 2016 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016
Return on average assets 0.98% 0.97% 1.28% 0.96% 0.92% 0.75% 1.11%
Return on average tangible assets 1.06% 1.04% 1.38% 1.04% 0.99% 0.81% 1.20%
Return on average common equity 6.22% 5.97% 8.22% 6.10% 5.76% 4.74% 7.04%
Return on average tangible common equity 11.49% 11.25% 15.08% 11.23% 10.67% 8.83% 13.19%
Efficiency ratio - consolidated 65.42% 64.15% 65.63% 63.43% 64.71% 68.15% 59.65%
Net interest margin - consolidated 3.90% 4.04% 3.88% 3.94% 3.91% 3.85% 3.83%
Non-performing loans and leases to loans and leases 0.43% 0.32% 0.43% 0.39% 0.29% 0.29% 0.32%
Non-performing assets to total assets 0.37% 0.25% 0.37% 0.30% 0.23% 0.24% 0.25%
Net charge-offs to average loans and leases (annualized) 0.22% 0.22% 0.25% 0.20% 0.22% 0.22% 0.29%
Tangible common equity to tangible assets (1) 9.19% 9.10% 9.19% 9.07% 9.12% 9.15% 9.10%
Tier 1 common to risk-weighted asset ratio (2) 11.0% 11.5% 11.0% 11.1% 11.2% 11.3% 11.5%
Total risk-based capital ratio (2) 14.0% 14.7% 14.0% 14.2% 14.3% 14.5% 14.7%
Selected Ratios
6
> (1) Non-GAAP financial measure. A reconciliation to the comparable GAAP measurement is provided at the end of this slide presentation.
> (2) Capital ratio estimated for current quarter, pending completion and filing of regulatory reports.
Performance
Credit Quality
Capital
For the quarter ended For the year ended
Summary Income Statement
7
> Note: tables may not foot due to rounding.
($ in millions except per share da ta ) FY 2017 FY 2016 Q4 2017 Q3 2017 Q4 2016
Net interest income before provision 859.9$ 844.6$ 220.6$ 220.5$ 207.8$
Provision for loan and lease losses 47.3 41.7 12.9 12.0 13.2
Net interest income after provision 812.6 802.9 207.7 208.5 194.6
Non-interest income 278.8 299.9 72.0 75.4 98.6
Non-interest expense 747.9 737.2 192.8 188.4 183.5
Income be fore provision for income taxes 343.6 365.7 87.0 95.5 109.8
Provision for income taxes 96.6 132.8 4.1 34.2 40.5
Ne t income 247.0 232.9 82.8 61.3 69.3
Dividends and undistributed earnings allocated to participating securities 0.1 0.1 0.0 0.0 0.0
Ne t earnings ava ilable to common shareholders 246.9$ 232.8$ 82.8$ 61.3$ 69.2$
Earnings per share - diluted $1.12 $1.05 $0.38 $0.28 $0.31
Quarter endedYear Ended
Net Interest Income and Margin
8
$207.8 $206.7
$212.1
$220.5 $220.6
3.83% 3.85%
3.91% 3.94% 3.88%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
5.50%
6.00%
$100
$120
$140
$160
$180
$200
$220
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
Net interest income Net interest margin
(in millions)
3.65% 3.71% 3.78% 3.78%
Adjusted
NIM (1)
> (1) Net interest margin, excluding interest income related to credit discount from Sterling deal and related to 310-30 covered loan PIFs
3.79%
Provision for Loan and Lease Losses
9
$13.2
$11.7
$10.7
$12.0
$12.9
$0
$2
$4
$6
$8
$10
$12
$14
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
Provision for Loan and Lease Losses (in millions)
Non-interest Income
10
(in millions)
$14.5 $10.7 $12.4 $12.3
$4.6
$4.1
$1.8
$3.3 $8.0
$3.7
$2.1
$2.1
$2.1 $2.0
$2.0
$58.4
$26.8
$33.9
$33.4
$42.1
$4.2
$4.1
$3.9
$3.8
$4.2
$15.3
$14.7
$15.5
$15.8
$15.4
$0
$20
$40
$60
$80
$100
$120
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
T
h
o
u
s
a
n
d
s
Other (1) Gain on loan sales BOLI income Residential mortgage banking revenue, net Brokerage revenue Service charges
$98.6
$60.2
> (1) Includes other income, gains or losses on investment securities and losses on junior subordinated debentures carried at fair value.
> Note: tables may not foot due to rounding.
$71.1
$75.4
$72.0
11
$250 $245 $312 $336 $266
$1,061
$755
$918 $891
$850
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
Closed mortgage volume
Portfolio For Sale
(in millions)
Mortgage Banking
3.05%
3.27%
3.53%
3.68%
3.51%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
Gain on sale margin
$1,230
$1,311
$1,000
$1,227
> Note: tables may not foot due to rounding.
$1,116
Non-interest Expense
12
(in millions)
Non-interest Expense and Efficiency Ratio Non-interest Expense Bridge
$188.4
$192.8
$183.5 $182.7 $184.0
$188.4
$192.8
59.7%
68.2%
64.7% 63.4% 65.6%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
120.0%
130.0%
$115.0
$125.0
$135.0
$145.0
$155.0
$165.0
$175.0
$185.0
$195.0
$205.0
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
T
h
o
u
s
a
n
d
s
Non-interest expense Efficiency ratio
(in millions)
$6.7
$2.3
$(5.2)
$(3.5)
$(3.2)
$(1.5)
Q4 2017 non-interest expense and efficiency ratio
reflect additional expense in response to Tax Act
Selected Balance Sheet
13
($ in millions) Q4 2017 Q3 2017 Q4 2016
Total assets 25,742.4$ 25,695.7$ 24,813.1$
Interest bearing cash and temporary investments 303.4 540.8 1,117.4
Investment securities available for sale, fair value 3,065.8 3,047.4 2,701.2
Loans and leases, gross 19,080.2 18,677.8 17,508.7
Allowance for loan and lease losses (140.6) (139.5) (134.0)
Goodwill and other intangibles, net 1,817.8 1,819.5 1,824.5
Deposits 19,948.3 19,851.9 19,021.0
Securities sold under agreements to repurchase 294.3 321.5 352.9
Term debt 802.4 852.3 852.4
Total shareholders' equity 4,015.8 3,985.3 3,916.8
Ratios:
Loan to deposit ratio 95.6% 94.1% 92.0%
Book value per common share $18.24 $18.10 $17.79
Tangible book value per common share (1) $9.98 $9.83 $9.50
Tangible common equity to tangible assets (1) 9.19% 9.07% 9.10%
> (1) Non-GAAP financial measure. A reconciliation to the comparable GAAP measurement is provided in the appendix of this slide presentation.
Loan and Deposit Growth
Loans and Leases (Gross)
$6.4 $6.5 $7.2
$7.7
$15.3
$16.9 $17.5
$19.1
(in billions)
18%
13%
16%
3% 1%
10%
6%
6%
17%
6%
4% Non-owner occupied term CRE
Owner occupied term CRE
Multifamily
Commercial construction
Residential development
Commercial term
Commercial lines of credit & other
Leases & equipment finance
Mortgage
Home equity lines & loans
Consumer & other
As of Dec 31, 2017
33%
12%
35%
7%
13% Demand, non-interest
bearing
Demand, interest bearing
Money market
Savings
Time
$9.4 $9.2 $9.4 $9.1
$16.9 $17.7
$19.0
$19.9
(in billions) Total Deposits
As of Dec 31, 2017
14
Credit Quality
0.77% 0.76% 0.75% 0.75% 0.74%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
Allowance for loan and lease losses to loans and leases
0.25% 0.24% 0.23%
0.30%
0.37%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
Non-performing assets to total assets
0.29% 0.22% 0.22% 0.20%
0.25%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
Net charge-offs to average loans and leases
(annualized)
15
Prudent Capital Management
16
> All regulatory capital ratios remained in excess of well-capitalized and internal policy limits
> Focused on prudently managing capital
• Quarterly dividend of $0.18 per share, ~3.2% current dividend yield
• Q4 total payout ratio of 50%
9.2% 9.4%
11.0% 11.0%
14.0%
Tangible Common
Equity/Tangible Assets
Tier 1 Leverage Tier 1 Common Risk Based Tier 1 Risk Based Total Risk Based
Q4 2017 Capital Ratios (1)
> (1) Regulatory capital ratios are estimates pending completion and filing of the Company’s regulatory reports.
Appendix – Non-GAAP Reconciliation
Non-GAAP Reconciliation – Tangible Book Value
18
Thank you