Umpqua Bank expands during recession

| Print |  Email
Articles - May 2010
Friday, April 16, 2010
img_1845
OREGON BUSINESS PHOTO

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.” 

ADRIANNE JEFFRIES
 

More Articles

Nine lives

Linda Baker
Friday, May 22, 2015
0f4f7bfBY LINDA BAKER | OB EDITOR

Roy Kaufmann always lands on his feet.


Read more...

The Good Hacker

May 2015
Friday, April 24, 2015
BY CHRIS HIGGINS

As digital security breaches skyrocket, a cybersleuth everyman takes center stage.


Read more...

Knight Cancer Challenge No Biotech Dream

May 2015
Monday, April 27, 2015
BY JOE CORTRIGHT

The Knight challenge is an important instance of philanthropy. But we should not assume it will magically transform OHSU into a business- and job-spinning engine for the local economy.


Read more...

Banking Perspective

April 2015
Thursday, March 26, 2015
BY KIM MOORE

A conversation with Craig Wanichek, president and CEO of Summit Bank.


Read more...

Beyond Bodegas

April 2015
Friday, March 27, 2015
BY JACOB PALMER

Five years in the making, the Portland Mercado — the city’s first Latino public market — will celebrate its grand opening April 11. A $3.5 million public-private partnership spearheaded by Hacienda CDC, the market will house 15 to 20 businesses in the food, retail and service sectors. It has some big-name funders, including the Paul G. Allen Family Foundation and JPMorgan Chase. The project goals are equally ambitious: to improve cross-cultural understanding, alleviate poverty and spur community economic development. 


Read more...

Can small be large?

Linda Baker
Wednesday, April 01, 2015
040115-lindablogthumbBY LINDA BAKER

Leaders in Oregon's ag sector gathered this morning in Portland’s Coopers Hall winery/taproom to discuss the role of the region as an export gateway, impediments to exporting products and solutions to containerized shipping challenges.


Read more...

Much ado about data-driven organizations, for good reason

Contributed Blogs
Monday, April 13, 2015
bigdatathumbBY GRANT KIRBY | OP-ED CONTRIBUTOR

The mega-shift from technology-driven to data-driven organizations raises questions about Oregon’s workforce preparedness.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS