Q4 2021 Umpqua Holdings Corp Earnings Call

January 20, 2022

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At this time I would like to introduce MS. Jackie Bohlen Investor Relations director for Umpqua.

To begin the conference call. Mr. Bolan. Please go ahead.

Yes.

Thank you Ryan good morning, and good afternoon, everyone. Thank you for joining us today on our fourth quarter 2021 earnings call.

With me. This morning are Cort Ohaver, President and CEO of Umpqua Holdings Corporation, Tory Nixon President of Umpqua Bank, Ron Farnsworth, Our Chief Financial Officer, and Frank Namdar, Our Chief Credit Officer. After our prepared remarks, we will take your questions yesterday afternoon, we issued an earnings release discussing our fourth quarter 2021.

We have also prepared a slide presentation, which we will refer to during our remarks. This morning. Both of these materials can be found on our website at Umpqua Bank Dot com in the Investor Relations section during today's call. We will make forward looking statements, which are subject to risks and uncertainties and are intended to be covered by the safe Harbor provisions of federal Securities Law for a list.

Factors that may cause actual results to differ materially from expectations. Please refer to slides two and three of our earnings conference call presentation as well as the disclosures contained within our SEC filings I will now turn the call over to court alright. Thank you Jackie I'll provide a brief recap of our performance and then pass to Ron to discuss financials.

Frank will discuss credit and then we'll take your questions excuse me.

For the fourth quarter, we reported earnings available to shareholders of $88 million. This represents EPS of <unk> 41 per share compared to the 49 reported last quarter and a 68 reported in the fourth quarter of last year with this linked quarter decline due primarily to $15 million in merger related expenses.

And last quarter's sizable <unk>.

Vision recapture.

The decline from the prior year period reflects a more sustainable level of mortgage banking income in the current quarter as volume and margins normalize from the 2000 Twenty's historical high levels as well as the previously mentioned merger related expenses.

Once again, the focal point of the quarter was organic loan growth, which contributed to increased net interest income from the prior quarter when PPP related fees are removed.

Non PPP loan balances grew $930 million in the fourth quarter, representing a quarterly growth rate of four 4% and an annualized growth rate of 18%, notably the quarter's organic generation significantly offset continued declines in PPP loan balances, enabling total portfolio.

Spansion, a two 7% or 11% annualized during the fourth quarter.

Expansion during the quarter and for the year was balanced across categories and build pipelines are lower today than we spoke than when we spoke in October given the fourth quarter's heightened production and seasonal trends. We expect continued loan growth through 2022, as our multiyear initiatives which include successful.

Ongoing talent acquisition and brand momentum in our markets, enabling us to take market share and drive value for our customers.

With PPP.

The remaining balances at only $380 million or one 7% of the portfolio. The majority of our anticipated net organic growth in 2022 will result in net portfolio growth for the year and any favorable movement in line utilization, which we have not seen to date would provide additional tailwind.

Regarding capital in November we paid our shareholders a dividend of 21 per share consistent with historical payments and as we previously discussed we did not repurchase any given any shares given our pending combination with Columbia banking system, which we announced on October 12.

While our while our usual Nextgen slide has been replaced with the information and updates related to our pending combination we continue to make strides as a standalone entity I'm going to provide a quick update on a few notable items as.

As planned we consolidated 15 stores early in the fourth quarter, bringing our total rationalizations under Nextgen two <unk> to 30 for the moving moving us within our original 30% to 50 store consolidation goal.

We consolidated 99 stores under next Gen. One and next Gen <unk>, which represents the rationalization of one third of our footprint over the past four years.

During that period, the number of non CD accounts has grown by two 7% as the number of demand accounts has grown by four 1%.

Since we launched our original next Gen plans in late 2017, our deposit balances are up $6 7 billion or 34% and non CD balances are up seven 7 billion or 45% driving efficiency improvement in our core banking segment.

Our human digital initiatives remain critical to our long term strategy as our customers continue to engage with us through digital channels at an accelerated pace.

Notable achievements include a steady pace of increase in zelle transactions, which were up 7% for the quarter and up 48% for the year. Additionally, we crossed a new milestone with go to users as we pass the 100000 mark in the quarter.

One final comment before passing to Ron I've been talking about the growth opportunities ahead for arm core for a number of quarters and our strong performance in the fourth quarter provides continued support for these remarks. The past few months production is a tremendous accomplishment in its own right, but it is all the more noteworthy as it demonstrates the intentional and successful.

The separation of our growth initiatives from our integration integration planning activities related to our pending combination with Columbia.

We have previously disclosed the integration management office was established to lead our integration and the <unk> leadership team includes the senior executive leadership for both Encore on Colombia.

<unk> enables umpqua bankers to have undisturbed focused on generating business and serving customers and I remain highly enthusiastic that the growth prospects within our markets and the momentum from our banking teams will drive continued growth in 2022 that enables us to deliver shareholder value over the long term and with that.

Ron take it away.

Thank you Cort and for those on the call I want to follow along I'll be referring to certain page numbers from our earnings presentation.

Page 12 of the slide presentation contains our summary quarterly P&L.

Our GAAP earnings per share for Q4 were 41 cents.

Excluding MSR input CVA and other fair value adjustments, along with merger expense and exit disposal costs. Our adjusted earnings were <unk> 44 per share this quarter.

For the moving parts as compared to Q3.

Net interest income decreased less than 1%, reflecting a $6 million decline in PPP fees, mostly offset by continued organic loan growth and a reduction in our cost of funds.

We had a recapture of prior provision for loan loss of less than $1 million with improving the economic forecast offsetting the provision required for new loan growth.

Down $18 million from the prior period recapture.

Noninterest.

Triste income reflected the expected seasonal decline in mortgage banking revenue ex the MSR more than offset by a lift in the MSR fair value with the increase in longer term interest rates.

And non interest expense included merger expense recognized to date for the Columbia combination.

As for the balance sheet on slide 13.

Interest bearing cash decreased to $2 5 billion this quarter driven by the asset remix into loans with the record non PPP growth this quarter.

We also added $150 million to the bond portfolio later in the quarter as longer term yields increased.

The $2 5 billion in cash along with expected future forgiveness and pay off on the remaining $380 million of PPP loans will give us significant future optionality for funding ongoing loan growth.

Our total available liquidity, including off balance sheet sources ended the year at $15 3 billion.

Representing 50% of total assets and 58% of total deposits.

Moving to page 16 of the presentation.

Our NIM decreased six basis points in total to three 5% in Q4, and we present a waterfall in the margin change on the right of the page.

The NIM, excluding the impact of PPP loans and discount accretion was flat, which is great to see the impact of continued non PPP loan growth and deposits continue to reprice lower offsetting the impact of the low rate environment.

Our cost of interest bearing deposits was 11 basis points in Q4.

The next two slides include information, which investors may find helpful. As the market is pricing and the potential for fed funds rate increases in 2022.

First on slide 17, we have expanded the detail provided on repricing and maturity characteristics of our loan portfolio.

The first table on the upper left breaks down the pricing drivers on loans, noting that.

As of year end, 33% of the portfolio is fixed.

2% is in the remaining PPP balances.

32% is in floating rate and 33% are in adjustable rates over time.

The lower left table shows the maturity schedule by category.

In the upper right table shows the loan rate floor buckets for floating and adjustable rate loans.

39% of the combined total are at their floor, meaning 61% have no floor or above it.

For the $5 7 billion in floating and adjustable rate loans at their floor.

The lower right table breaks down the balances by rate change band.

Along with the weighted average rate change required for these loans to move above their floor.

Hopefully investors and analysts will find this information useful in assessing the beneficial impact on net interest income future.

Future potential rate hikes.

Next on page 18.

On the left we have included a projected net interest income sensitivity for future rate changes in both ramp and shock scenarios over two years.

This is a simulation we ran them back to this quarterly and assumes a static balance sheet.

Ideally, we will continue to see an asset remix with cash skipping bonds and flowing them into loans, which will benefit our net interest income absent any rate change.

This is not included here.

The deposit beta as used in this simulation range from $43 to 45% on interest bearing deposits.

For sensitivity on our model results every 10% change in the beta is plus or minus one 3% on the plus 100 basis point shock results.

The table on the right shows our deposit beta from the last rising rate cycles, starting Q3 2015.

And run it through Q3 2019 to catch the lag effect.

Our beta them was 42% on interest bearing deposits.

Okay now to our segment disclosures starting with the core banking segment on page 21 of the presentation.

Net interest income was flat sequentially driven by the strong non PPP loan growth and continued decline in cost of funds.

Offsetting most of the PPP fee decline.

I'll talk about seasonal in the provision of the detail in a few minutes, but you'll see here, we had in there and under $1 million recapture this quarter from improving economic forecasts.

And four rows down as the change in fair value of loans carried at fair value at a loss of $2 7 million here in Q4 as long term interest rates increased this quarter compared to fair value gains over the last two quarters.

Noninterest income of $42 8 million increased 23% from Q3.

Related primarily to higher swapped in syndication revenue as our commercial fee initiatives advance.

And then the noninterest expense section, you'll see the merger expense recognized to date on the combination.

Along with exit and disposal costs related to lease exit some recent store consolidations.

And a right of use lease asset impairment as we execute our return to work plan.

The direct non interest expense for the core banking segment increased this quarter.

Primarily related to higher loan production incentives given the record growth discussed earlier.

The efficiency ratio in the core increased to 64% reflective of the merger expense knowing this would be 57% ex the merger of extra disposal costs.

Turning now to page 22 of the presentation, we showed the mortgage banking segment five quarter trends.

To start we had $871 million in total held for sales volume this quarter down seasonally 12% as expected from Q3.

The gain on sale margin was 271% again down from Q3 as expected given the slowing mortgage market and decline and the lock pipeline.

These two items resulted in the $23 6 million of origination sale revenue noted towards the top left of the page.

Our servicing revenue was stable and for the change in MSR fair value.

Passage of time piece increased slightly while the change due to valuation inputs was a gain of $15 4 million.

Due to the increase in long term interest rates in the second half of the quarter.

Non interest expense totaled $26 6 million for the quarter again. This represents held for sale origination costs servicing costs, along with administrative and allocated costs.

<unk> expense component of this was $18 2 million as noted on the right side of the page.

Representing 2.08% of production volume up slightly in basis points from the last few quarters with the lower volume.

A couple of final items before I turn it over to Frank.

On slide 25.

We've included a new quarterly loan balance roll forward.

Our record quarterly non PPP loan growth was driven by a record $2 $3 billion in new originations offset by $1 4 billion in pay offs.

Next let me take your attention to slide 27 on seasonal and our allowance for credit loss.

As a reminder, our seasonal process incorporates a life of loan reasonable and supportable period for the economic forecast for all portfolios with the exception of C&I, which is a 12 month reasonable supportable period reverting gradually to the output mean thereafter.

Hence these forecasts incorporate economic recovery through 2022 and beyond as most economic forecasts revert to the mean within a two to three year period.

We used the consensus economic forecast this quarter updated in November .

Overall, the forecast showed improvement in several key areas as the Academy works through the latest variant.

We included a $17 million overlay for various CRE portfolios to hedge against any potential near term slowdown or negative terms with the pandemic net.

Net of this overlay.

Including providing for the strong loan growth, we recognized less than a $1 million recapture.

Provisions for loan loss.

Net charge offs for Q4 remained low at $7 million of 13 basis points of loans.

Much lower than the models from last year suggested.

And the majority of net charge offs this quarter related to the small ticket lease portfolio.

The ACL at quarter end was one 6%.

This ratio was one 8% excluding the government guaranteed PPP loans.

As these are economic forecast driving the reserve it will simply take the passage of time to see if net charge offs follow as modeled but to date <unk>.

So simply overestimated the actual net charge offs, given the lag of at least six quarters.

Our day, one seasonal level was right at 1% on the ACL, which is about $40 million lower on the ACL for non PPP loans. So we are at currently.

All else equal this excess ACL will either be charged off in future periods. If the models are eventually prove incorrect or be recaptured and we're used to providing for future loan growth if the economic forecasts continue to improve.

Time will tell.

And lastly, I want to highlight capital on page 29.

Knowing that all of our regulatory ratios remain in excess of well capitalized levels.

Our tier one common ratio of 11, 6%.

And our total risk based capital ratio was 14, 3%.

The bank level total risk based capital ratio was 12, 9%.

And with that I will now turn the call over to Frank Namdar to discuss credit.

Thank you Ron I will also be referring to certain page numbers from our earnings presentation for those who want to follow along.

Slide 28 reflects our credit quality statistics, our nonperforming assets total assets ratio held steady at <unk>, 7% and our classified loans to total loans ratio declined by 10 basis points to seven 1%.

Our annualized net charge off percentage to average loans and leases was 13 basis points in the quarter, reflecting below average net charge off activity in the impact portfolio.

<unk> portfolios ratio came in at 175%, notably below its historical 3% to three 5% range for the second consecutive quarter.

Reflective of higher levels of customer liquidity, improving economies and the favorable impact of strategic credit tightening implemented last year excluding.

Excluding <unk> annualized net charge offs were just two basis points.

Obviously, we're very pleased with our credit quality metrics, we remain confident in the quality of our loan book and we look forward to continued high quality growth.

Back to you Corp. Okay, Thanks, Frank and Ron for your comments rents, we will now take questions.

Thank you Sir at this time I would like to take any questions you might have for us today.

Again as a reminder, if you would like to ask a question over the phone pensive breasts are one on your telephone keypad.

We have our first question from the line of Jeff.

D a davidson.

Please go ahead.

Thank you good morning.

Alright Court you mentioned the pipeline down a little bit makes sense as you have.

Our strong production.

Quarter, just wanted to kind of get a sense for.

The 22 outlook and then.

A related question.

How do you view.

One officer hires.

Given the news of the pending merger do you kind of take that and say, where we're combining with it with another bank here and just the recruitment process that you would do that.

If that changes any day now.

Arrow that down expectations for 'twenty, two growth and then how your approach to hiring.

Jeff Let me I'll have Tori answer in detail me, just give you a kind of a <unk>.

Historical global answer too.

We've been as we've talked about I think you've asked me before kind of.

We have been a bank of choice by bankers over the last certainly the story's been here and all the the tracking of C&I lenders and then maybe prior to Tori when I create real estate group, we've been a great shot.

Shop for people looking to get out of bigger banks banks compete with now today as we've gotten to be over $30 billion.

I don't see that changing after our combination with Colombia in fact, I think you probably heard quite and I talk about we seem to be an employer of choice as opposed to people are going to flee from air because all my goodness gracious, we're going through a merger and I don't see that changing from historical <unk>.

Our historical perspective on the talent that we've been able to attract we had a great Q4 and ill, let Tory talk about it more in more detail.

And hats off to the lenders they did a fabulous job and we're continuing to see that pipeline grow, but let me give it over to torry too.

Answer a little greater detail, but I, just think the combined organization that being a $50 billion behemoth here in the Pacific Northwest that has not existed.

Over the last 25 30 years, its just a great opportunity for us to attract talent as opposed to be.

A place where people would flee and try to go down tier so towry sure. Thanks, Kurt Jeff. This story, so I'll start with the banker question I think.

Two courts point.

I believe I think we believe we have a very strong value proposition for bankers and we have seen talent come into this company over the last.

Several years and that will not.

We will continue to do that and we are aggressively searching for good quality bankers, we're hiring folks in Phoenix for our Arizona team, we're hiring bankers throughout our footprint, California, Oregon, Washington, and continuing to have a lot of success.

So we will we will continue to do that.

On the pipeline as mentioned is down a little bit from from where we were a quarter ago, but that's for obvious reasons. We had just an outstanding Q4.

In all lines of business and.

My my expectation is that Q1 will certainly won't be what Q4 was just because we had a we had some business that we originally thought we would be a Q1 production that ended up kind of getting pulled into into Q4, but the pipeline is still still healthy and still strong in continuing to grow. So we've got a lot of great bankers.

Theyre talking to customers talking to prospects and building the pipeline I.

I feel very confident that 2022 will be strong.

Loan growth year for us at least a mid to high single digits and excited to continue to see progress in the bank Hey, Jeff One last comment I know you guys are going to ask this so.

Yes, I think when Clinton, Iowa out in late December in December .

<unk> got.

We got asked this question quite a bit.

And I know exactly why and what we've been saying and I think as evidenced by our.

Our fourth quarter production hold us accountable for the growth I mean, if you want to see how we are retaining and attracting talent hold us accountable for the growth in the balance sheet and the growth in earnings that's the way to look at it we will lose people when we lose people and we retain the people we want to retain but ultimately its how we continue to grow with our customers and thats.

Where I think you should look for.

Our true retention efforts, our efforts to retain quality talent should come in the form of growth in the balance sheet.

Got it thank you.

Switching gears, a little bit on the expense side. It sounds like maybe nextgen updates are going to maybe slide to the.

And on the back burner, a little bit not that back off but disclosure of that so I just wanted to get a milepost to check in on perhaps.

If we are in the expense run rate of 100.

180.

Million range ex the merger exit costs.

<unk>.

Okay.

Take on cost saves for this initiative.

I think it had a tail into 'twenty three even if you could.

Detail that.

Hey, Jeff This is Ron I'd say no change to our prior guidance for 'twenty, two we're looking at $690 million to $710 million.

Expense.

It Hasnt changed and those are still are internal targets now also that incorporates.

A decline in overall mortgage held for sale volumes, which can be a wildcard from time to time, depending what happens with rates.

But with that I would say that the tail post.

The impact of the stores recently consolidated here in Q4 is going to be really more around.

Smaller amounts in the aggregate around lease consolidations back office.

Benefits from right to use lease impairments et cetera, which are incorporated in that guidance for the overall year expense okay. Okay.

And then just one quick one on <unk>.

Keeping the.

The PPP fees I think you mentioned down $5 9 million what were those in the fourth quarter specifically.

Yes in Q4 was $9 6 million there is a little over $11 million left going forward, 99% of that is going to be around round two when a couple of hundred thousand left related around one.

Great I'll step back thank you.

Yes, Thanks, Jeff.

Thank you.

Our next question is from the line of Matthew Clark with Piper Sandler.

Please go ahead.

Hi, good morning.

Hi, Matt.

Can you specifically quantify the loan pipeline coming out of the quarter just to give us a sense.

You don't Wanna.

On a comparison for comparison reasons.

Sure.

Match Tory the light at the end of <unk>.

Q3 pipeline was about about four four.

In total and today, it's about three 5% so three six somewhere in that range.

And so that's that's the mark between last quarter and this quarter.

Again, I feel that we had a lot of business that booked in Q4, we had a phenomenal Q4 in terms of loan growth I feel very good about momentum and the prospects for us to build the pipeline and to have a very strong successful 22 and loan growth.

Okay.

Then.

Sounds like there is.

A lot of opportunities to.

Higher producers.

West given all the disruption that's taking place but.

Can you give us a sense for what percentage or however, you want to measure and quantify it.

What percentage of your producers are locked up with the deal.

Unlucky.

Locked up Matt.

With the acquisition.

In terms of retaining producers.

So there.

It would.

Yes.

Percentage wise I don't know if I got a percent off the top of my head I will tell you. We obviously with key employees look at all types of retention.

Opportunities, whether it's just cash or stock or the way, we pay out incentives and yada Yada yada and we feel like I mentioned before very very good.

About our retention prospects with our current staff the ability to continue to attract I think we've shown and more tumultuous hiring years, there have been years in the <unk>.

Last four or five stories have been here and I know you've been on the calls map, where we've been able to attract a lot of talent on some of the banks some of our larger competitors because like Tory mentioned, a few minutes ago, we have a great value proposition. So.

I'm not naive to your question clearly there is disruption potentially with a merger, but once again, we are at $50 billion. There arent a lot of general its commercial banks effect. There is none in the Pacific northwest that we'll be able to do what we do and between that and then yes. We do have retention tools in our back pocket. We will use we felt very very good.

About our ability to retain and once again hold me accountable for the growth hold me accountable.

Great. Thank you and then.

Maybe Ron on the core NIM outlook, I think the expectation coming into the quarter was fairly stable, which it was.

What are your thoughts on that.

Because of the asset yield outlook.

And.

Any update.

Update on the.

The weighted average rate on new loans this quarter.

Yes, good question.

I'd say just in terms of overall asset yields looking into Q1 really it's going to be a function of continued loan growth and that cash waterfall and remixing them into loans skipping bonds, let's say on the bond side.

The sell off in longer term rates.

Prepayment speed assumptions are slowing down so there could be some lift in terms of.

Lower amortization looking forward just as those things extend slightly you would expect that to occur with higher rates.

From that on the loan yield side, our yield on loans ex PPP was up 45 bps in the month of December compared to Q4, so that bodes well looking into Q1 as well.

Thank you.

You bet.

Thank you. The next one we have the line of Brandon King with Zhu with Securities.

Your line is open.

Hey, first wanted to touch on the merger cost savings of $135 million. It seems that you remain confident in achieving that or even above that amount.

But I was wondering what.

Kind of inflationary pressures could affect that number and if that has gone into any of the potential execution of achieving those cost savings.

Good morning, Brandon Good question. So overall, the $135 million remains our target internally, we're targeting a number higher than that.

But I would say this you know inflation is not new this month this quarter as we've been dealing with inflation for the last year year and a half.

On the back end of.

The pandemic so when I look ahead into the future and I think about estimates and the accretion and the model math et cetera, one of the benefits of having that higher internal target that we're working towards that would be to help offset if we do see continued outsized inflation.

Over the balance of the year.

Okay.

And then I also wanted to touch on deposit growth I know deposits declined.

Pay to outflows.

In the first part of the question could you. Please quantify if you can the amount of deposits that were related to the ongoing investment.

And then I wanted to get a sense of where you see deposits growing from here and once you there'll be a student seasonal inflow based off both seasonal outflow.

And then.

Overall the.

The impact of the fed, particularly hiking rates and what that could do to the trend in deposits.

Kind of a loaded question, but we've taken it in parts.

Right.

The first component whether it would be it was a little under $200 million just in terms of the UI.

Balances that route I also pointed out that there is.

Any given quarter there might be timing just in terms of.

Month end or quarter, NAC H timing and then there was probably about $150 million that fell into January that in prior.

Years Might've been 12 31, so that's just more a function of the calendar when youre looking at a point to point number one.

When we look into 'twenty, two obviously still very confident about deposit growth our expectations internally our loan growth will exceed deposit growth in 'twenty two.

Build wildcard for all banks, not just umpqua is going to be.

What occurs if the fed raises rates do overall DDA mixes drop and move back into interest bearing or balances slow out I'd say the benefit we have on that front compared to.

Past potential rising rate cycles is just the larger presence larger balance of <unk>.

Core commercial deposits on our book based off of what the team has done over the last four five years. So.

Theres other fluctuations during the year just in terms of.

Tax time in Q2, or maybe public fund inflows in Q4, but.

Traditionally over a long time horizon, we've been more of a seasonal bell curve, there as well with stronger growth in Q3, Q2, Q3 little less in Q1, and Q4, mostly offset by those tax timing nuances.

Okay.

Hey, Brandon Hey, Brandon. This is Tory, let me just add one thing on the kind of the banker front, if you think about.

A lot about loans, but.

We have a lot of a lot of bankers that are in all different lines of business, whether it's retail whether it's the middle market community banking, our real estate group.

Their goals and their incentives are equally distributed between lending and deposit growth and fee income growth.

Those things are all of them are very important and it's a very balanced scorecard and it's how they are compensated and all those things are important to us. So obviously, so we've continued to monitor and push and are successful in growth in all three areas.

Not just on the lending side.

Okay, and I guess following up on that what is the ratio you internally expect when you grow.

And C&I loans.

The ratio of deposits coming with C&I.

Just to get a sense this is.

This is Troy I think that's the kind of impossible to answer.

Because it depends on the type of customer the industry that they're in what theyre borrowing for.

And.

And just help flush they are with cash so I think if you look at the different businesses. Our community banking business has about a one to one ratio of loan outstandings and deposit balances our middle market business as a little more on the lending side than it does on the deposit side, our real estate business for sure it's going to be more lending than it is deposits.

Our retail bank is is predominantly a deposit base for the company. So really just kind of depends.

But so yes.

I can't really answer probably any more detail than that at this point that we could go in and dig out some information maybe but it that'd be my off the cuff comment.

Comment.

Okay. Thanks for all the answers.

Thank you.

Again as a reminder, if you would like to ask a question over the phone simply press star one on your telephone keypad.

Our next question is from the line of Mr. Jared Shaw with Wells Fargo. Please go ahead.

Hey, good morning, everyone.

Alright.

Maybe I think you had mentioned that the growth outlook doesn't assume any type of normalization of the utilization.

Line utilization rate what happens if you do see a utilization normalization there how much of an impact could that be too to balances.

Karen This is Tory again so.

If we if I look at the utilization rate going back a couple of years.

In Q4, 2019, and our C&I business is about 35% and today at the end of Q4 is about 2026.

That that's about if we got to that back to the 35% level kind of an historical level, it's about 270 $260 million in outstandings.

More outstandings for the company.

Okay.

That's great. Thanks, and then.

On the mortgage banking side.

What the.

The gain on sale margin, obviously declined through the quarter or was that sort of at the end of the year and whats.

But certainly the expectation as we as we go into first quarter and potentially higher rates.

Again on sale margin.

Hey, Joe This is Ron Yes, I also pointed out though the real impact in Q4 was the drop in the locked pipeline at a low level, it's still far enough right around 3%. So.

Depending on market dynamics that can fluctuate during the year, but my assumption would be roughly three to.

Maybe three in a quarter at the edge.

The trajectory of that of the year would be again higher in Q2 Q3 lower in Q4 Q1, just given the fact that we've had a fair value of the effect of that locked pipeline changed.

Okay.

Alright, thats good thanks, and then.

Finally for me just as we as we look at the integration.

Timeline.

Have you or your integration.

Yes.

What are some goalposts, we should be looking for as analysts and investors, whether that whether that's events and timelines or metrics too.

Sort of indicators of successful integration.

Well first of all Gerry Court the guidance, we have given when we made the announcement, we still feel comfortable with that guidance of closing the deal I think in the second quarter late second quarter.

I mean guideline guidepost I mean, obviously the shareholder vote for both companies so middle of next week that.

That would be one and then ultimately regulatory approval.

My opening comment we're still more than comfortable with the timeline, we have given we've got great relationships with our regulators things are going great and we anticipate.

Getting a deal close by.

Mid second quarter.

And if any changes we would tell you I.

I guess I'm thinking of it thanks for that I guess I'm thinking maybe even after closing.

In terms of integrating the franchises whether it's.

Growth targets or retention targets or things like that.

Yes, I think after we close.

Would.

What we have.

Endear or some type of road show or at the first earnings call with the provide that guidance clearly other.

Milepost would be core conversion and things of that sort that are normal and mergers but that is a great question. We are working on that so we will be providing some of that clarity after we close the deal.

Okay, great. Thanks, a lot.

Yep.

Thank you.

Again as a reminder, if you would like to ask a question over the phone six of our one on your telephone keypad.

There are no further questions at this time Mr. Bolan. Please continue.

Thank you again this is Jackie bohlen than we would like to thank you for your interest in Umpqua Holdings Corporation and participation on our first quarter 2021 earnings call. Please feel free to contact me. If you would like clarification on any of the items discussed today are provided in our presentation materials.

Include our call Goodbye.

This concludes today's conference call. Thank you for participating.

You may now disconnect.

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Good morning, and welcome to the Umpqua Holdings Corporation fourth quarter 2021 earnings call.

At this time all participants are in a listen only mode.

After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone.

Please be advised that today's conference is being weak or that.

If you require any further assistance please press star zero.

At this time I would like to introduce MS. Jackie Bohlen Investor Relations director.

To begin the conference call.

Please go ahead.

Thank you Ryan good morning, and good afternoon, everyone. Thank you for joining us today on our fourth quarter 2021 earnings call with me. This.

With me. This morning are Cort Ohaver, President and CEO of Umpqua Holdings Corporation, Tory Nixon President of Umpqua Bank, Ron Farnsworth, Chief Financial Officer, and Frank Namdar, Our Chief Credit Officer. After our prepared remarks, we will take your questions yesterday afternoon, we issued an earnings release discussing our first quarter 2021.

Questions excuse me.

For the fourth quarter, we reported earnings available to shareholders of $88 million. This represents EPS of <unk> 41 per share compared to the 49 reported last quarter.

And the 68 reported in the fourth quarter of last year with this linked quarter decline due primarily to $15 million in merger related expenses and last quarter's sizable provision recapture.

Once again, the focal point of the quarter was organic loan growth, which contributed to increased net interest income from the prior quarter when PPP related fees are removed.

Spansion, a two 7% or 11% annualized during the fourth quarter.

Ongoing talent acquisition and brand momentum in our markets, enabling us to take market share and drive value for our customers.

With PPP.

The remaining balances that only $380 million or one 7% of the portfolio. The majority of our anticipated net organic growth in 2022 will result in net portfolio growth for the year and any favorable movement in line utilization, which we have not seen to date would provide additional tailwind.

While our while our usual Nextgen slide has been replaced with the information and updates related to our pending combination we continue to make strides as a standalone entity and I'm going to provide a quick update on a few notable items as.

We consolidated 99 stores under next Gen. One and next Gen <unk>, which represents the rationalization of one third of our footprint over the past four years.

During that period, the number of non CD accounts has grown by two 7% as the number of demand accounts has grown by four 1%.

Our human digital initiatives remain critical to our long term strategy as our customers continue to engage with us through digital channels at an accelerated pace.

Notable achievements here include a steady pace of increase in zelle transactions, which were up 7% for the quarter and up 48% for the year. Additionally, we crossed a new milestone with go to users as we passed the 100000 mark in the quarter.

One final comment before passing to Ron I've been talking about the growth opportunities ahead for <unk> for a number of quarters and our strong performance in the fourth quarter provides continued support for these remarks.

The past few months production is a tremendous accomplishment in its own right, but it is all the more noteworthy as it demonstrates the intentional and successful separation of our growth initiatives from our integration integration planning activities related to our pending combination with Columbia.

We have previously disclosed the integration management office was established to lead our integration and the <unk> leadership team includes senior executive leadership for both Encore and Columbia.

<unk> enables umpqua bankers to have undisturbed focused on generating business and serving customers.

We remain highly enthusiastic that the growth prospects within our markets and the momentum from our banking teams will drive continued growth in 2022 that enables us to deliver shareholder value over the long term and with that Ron take it away.

Thank you Cort and for those on the call I want to follow along I'll be referring to certain page numbers from our earnings presentation.

Page 12 of the slide presentation contains our summary quarterly P&L.

Our GAAP earnings per share for Q4 were 41.

Excluding MSR input CVA and other fair value adjustments, along with merger expense and exit disposal costs. Our adjusted earnings were <unk> 44 per share this quarter.

For the moving parts as compared to Q3.

Net interest income decreased less than 1%, reflecting a $6 million decline in PPP fees, mostly offset by continued organic loan growth and a reduction in our cost of funds.

We had a recapture of prior provision for loan loss of less than $1 million with improving the economic forecast offsetting the provision required for new loan growth.

Down $18 million from the prior period recapture.

Noninterest income reflected the expected seasonal decline in mortgage banking revenue ex the MSR more than offset by a lift in the MSR fair value with the increase in longer term interest rates.

And non interest expense included merger expense recognized to date for the Columbia combination.

As for the balance sheet on slide 13.

Interest bearing cash decreased to $2 5 billion this quarter driven by the asset remix into loans with the record non PPP growth this quarter.

We also added $150 million of the bond portfolio later in the quarter as longer term yields increased.

The $2 5 billion in cash along with expected future forgiveness and pay off on the remaining $380 million of PPP loans will give us significant future optionality for funding ongoing loan growth.

Our total available liquidity, including off balance sheet sources ended the year at $15 3 billion.

Representing 50% of total assets and 58% of total deposits.

Moving to page 16 of the presentation.

Our NIM decreased six basis points in total to three 5% in Q4.

And we present a waterfall in the margin change on the right of the page.

Our cost of interest bearing deposits was 11 basis points in Q4.

The next two slides include information, which investors may find helpful. As the market is pricing and the potential for fed funds rate increases in 2022.

First on slide 17, we have expanded the details provided on repricing and maturity characteristics of our loan portfolio.

The first table on the upper left breaks down the pricing drivers on loans during this year and 33% of the portfolio is fixed.