Sponsored by Oregon Business

Umpqua Bank expands during recession

| Print |  Email
Articles - May 2010
Friday, April 16, 2010

The economy may be turning around for some in 2010, but banks haven’t seen the end of the carnage yet. Nationally, 41 banks failed between January and April and were fed to stronger banks in a sort of FDIC-assisted survival of the fittest. But Roseburg-based Umpqua Bank seemed to be full of good news amid the first-quarter plague: it repaid in full its $214 million in Troubled Asset Relief Program funds, acquired two banks in a market it’s been coveting and launched a small- business lending program.

Umpqua did not escape the crisis unscathed. The bank had more than $800 million in residential development loans when the housing bubble burst in 2007 and wrote off $197 million in losses on loans in 2009. Its parent company, Umpqua Holdings, posted substantial losses last year. But Umpqua is relatively healthy despite short-term disappointments, and it’s positioning itself to emerge as a strong regional bank after the present malaise abates.

“They’re better capitalized than peer banks, their credit quality is superior to peer averages and they’re exhibiting behavior of the bank that’s more on the offensive than on defensive,” says Jeff Rulis, a research analyst at D.A. Davidson in Lake Oswego. “They are looking to grow versus other banks that are still worrying about their own internal issues.”

Umpqua’s been able to grow rapidly in its key markets thanks to FDIC-assisted acquisitions, which are basically mergers that occur over a weekend. Umpqua quadrupled its Washington presence a year after acquiring the failed Bank of Clark County in Vancouver by picking up two failed Puget Sound banks and their combined $1 billion in assets, and it’s poised to gobble more this year.

And after the crisis is over, customers will remember that it was Umpqua the FDIC trusted to smooth things over, Rulis says.

Umpqua surmounted its losses because it marked down bad residential development loans early and aggressively, says CEO Ray Davis. The TARP funds also helped by further cushioning Umpqua’s relatively healthy capital ratios and insuring them against any economic surprises.

Even with aggressive write-downs, Umpqua’s nonperforming assets, which comprise mostly delinquent loans, made up 2.38% of its assets in 2009. It’s hard to say what that number should be for regional banks in the current climate. Washington Trust’s NPAs were 1.06% of its assets for 2009; PremierWest Bancorp’s NPAs were 8.37% of its assets for 2009. PremierWest is one of 10 Oregon-based banks operating under federal orders to improve their financial positions.

umpquabigUmpqua’s problems were in residential development loans, Davis says. But many in the industry say lenders should be bracing for the impact of persistently high vacancy rates on developers who took out commercial development loans.

Davis isn’t worried about that. “The naysayers have been saying this for two years now: ‘The bottom’s going to fall out.’ They’ve been saying it for two years and nothing’s really happened,” he says. “We do not see systemic issues in our commercial loan portfolio… There will be issues that pop up but nothing widespread.”

Despite forecasts that more banks will continue to fail in 2010, Davis is confident that the worst is over for Umpqua. The bank opened a personal wealth management division in September, expanded its international banking division in December, and plans to build between six and eight new branches in Oregon and Washington this year.

“2009 to me was just the worst year ever. It was just terrible,” Davis says. “2010 is going to have challenges but it’s not going to be 2009.” 


More Articles

Have a baby and keep a job? It won’t be easy in Portland

The Latest
Friday, October 02, 2015
100115kimblogthumbBY KIM MOORE

Our intrepid (and expecting) research editor finds the child care search involves long waiting lists, costly fees and no certainty of securing a place before she goes back to work.


Planter's Punch

November/December 2015
Wednesday, October 28, 2015

Molly Rogers believes she has found the solution to excessively syrupy cocktail mixes. She first just needs people to understand her product isn’t foliage.


Straight shooter

Linda Baker
Thursday, October 08, 2015
100815-bradleyBY LINDA BAKER

In an era dominated by self-promotion and marketing speak, John Bradley, CEO of R&H Construction, is a breath of fresh air.


The cover story

Linda Baker
Thursday, November 12, 2015

I walked off the Vigor Industrial shipyard that day with a clear cover line in mind: the Love Boat.


5 questions for Ruby Jewel creator Lisa Herlinger

The Latest
Saturday, October 24, 2015

What's it like working with your sister and how do you compete in Portland's crowded artisan ice cream space?


Make the business case, governor

Linda Baker
Thursday, November 05, 2015
aoikatebrownthumbBY LINDA BAKER

Gov. Kate Brown delivered the keynote speech at the Associated Oregon Industries annual policy forum yesterday.  Speaking to a Republican-aligned audience of about 100 business and public policy leaders, the governor was out of her comfort zone.


The War Room

November/December 2015
Wednesday, October 28, 2015

Veteran political consultant Carol Butler plays to win.

Oregon Business magazinetitle-sponsored-links-02