Umpqua Holdings Corporation

Good morning and welcome to the UMQA Holdings Corporation second quarter 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. As a reminder, this call is being recorded. At this time, I would like to introduce Jackie Bolin, Investor Relations Director for UMQA, to begin the conference call.

Thank you, Michelle. Good morning and good afternoon, everyone. Thank you for joining us today on our second quarter 2022 earnings call. With me this morning are Court O'Haver, the President and CEO of Umpqua Holdings Corporation, Tori 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 second quarter 2022 results. We've also prepared a slide presentation, which we will refer to during our remarks this morning. Both these materials can be found on our website at umplibank.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 of factors that may cause actual results to differ materially from expectations, please refer to slides two and three of our earnings presentation, as well as the disclosures contained within our SBC filings. We will also reference non-GAAP financial measures alongside our discussion of GAAP results. We encourage you to review the GAAP to non-GAAP reconciliation provided in the earnings presentation appendix. We'll now turn the call over to Court.

Okay, thank you, Jackie. I'll provide a brief recap of our performance, then pass to Ron to discuss financials. Frank will discuss credit, and then we'll take your questions. For the second quarter, we reported earnings available to shareholders of $79 million. This represents EPS. 36 cents per share compared to the 42 cents reported last quarter and the 53 cents reported in the second quarter of last year. On an operating basis, which excludes a number of interest rate driven items and merger expenses that Ron will review, EPS of 37 cents compares to 36 cents last quarter and 55 cents in the second quarter of last year. The return of a provision for credit losses compared to 2021's recapture was the primary driver of the annual variance. Notably, rising interest rates and portfolio loan growth enabled higher net interest income to exceed lower mortgage banking revenue. Customer tax payments contributed to a 2% decline in deposits for the quarter, but we are seeing growth in the third quarter to date. Loan balances grew $1.5 billion in the second quarter, representing a quarterly growth rate of 6.3%, an annualized growth rate of 25%. The second quarter's growth reflects an anticipated pickup and activity relative to the first quarter that span business lines, portfolio classes, and geographies given favorable market conditions and the continued momentum of our associates in both new and existing markets. The loan portfolio is up 8% this year, meeting the mid to upper single-digit levels of annual expansion we have been discussing over the past few quarters. slower path activity relative to 2021, and a small increase in net advances in the second quarter favorably impacted net portfolio growth in the first half of the year. At this point, market trends in our existing pipelines indicate continued loan growth into the second half of the year, though at likely slower pace than the second quarter's significant volume. We remain acutely focused on the health of our new and existing borrowers, and our new loan production mirrors the high-quality metrics exhibited by our overall loan portfolio. In June of this year, we published our annual business barometer, which measures the mood, mindset, and strategic priorities of leaders at small and middle market companies across the United States. Inflation and rising interest rates are driving an increase in the cost for goods, talent, and capital for these businesses. Our customers managed through the pandemic and then gained knowledge over the past two years, enabling them to adjust strategies and adapt to challenges in front of them. While many business leaders reported more cautious views of the overall economy compared to the prior year, they remained confident in their resilience and ability to continue to grow their businesses to expand revenue, improve, and improve profitability. We remain focused on being the business bank of choice for these existing and prospective customers, and our bankers and support teams will continue to focus on providing a distinguishing level of service that enables us to win business with strong companies throughout our markets. Now moving on to a handful of other initiatives. Our ongoing advancements in payment technology, most recently through two commercial card solutions in collaboration with Visa, continued to produce tangible results as commercial card spend set new records during the quarter and was up 50% in June compared to the year-ago period. The pipeline is strong across all fee-based businesses, which includes treasury management, cards, merchant, and international. Our teams continue to implement enhancements to our product offerings and service capabilities, and we expect a busy second half of the year as many of the initiatives currently under development are brought live. As an industry, home lending is facing significant headwinds given the sharp increase in mortgage rates and the impact on volume and margins. As previously announced, we reduced headcount earlier in the second quarter. we implemented other strategy measures to shift production towards saleable volume which is a more profitable business sake we will continue to take necessary steps to adjust the business model in light of the current operating environment which we expect to persist for the foreseeable future and we are evaluating multiple options everything is on the table with regard to our mortgage business regarding capital Yesterday, we declared a 21 cent per share dividend payable to our shareholders of record as of August 1st. While the amount is consistent with historical payments, the timing is accelerated compared to our prior cadence as we continue to plan for our pending combination with Columbia Banking System. We currently target a close date during the third quarter, where the timing will ultimately be determined by the receipt of all regulatory approvals, which we have not received to date. As we detail on slides six and seven of the deck, we continue to make headway with our integration planning, and our scheduled Q1 of 23 core system conversion date remains achievable at this point, given our ability to separate conversion planning activities from the legal close date. As we have discussed on prior calls, the Integration Management Office, which includes senior executive leaders from both Columbia and Umpqua, enables Umpqua's bankers to have an undisturbed focus on generating business and serving customers. The separation of our integration planning from activities from our growth objectives has enabled us to successfully drive our business forward. We continue to attract and hire exceptional talent, which has enabled us to build deeper presence in existing markets and expand in new desirable areas like Colorado and Arizona. Proven local leaders who know their regions are joining Umpqua. They are embracing our expertise-driven and personalized team-based approach to customer relationships, and their success is highlighted by the growth momentum exhibited over the past several quarters. Our operating markets and top-tier banking teams support my expectations for net expansion through 22 and into 23, outside significant economic deterioration, which we have not seen yet today. And with that, Ron, take it away.