Ronald Farnsworth - Executive Vice President and Chief Financial Officer Raymond Davis - President and Chief Executive Officer Gregory Seibly - Senior Executive Vice President, Consumer Bank President Cort O’Haver - Senior Executive Vice President, Commercial Bank President

Steven Alexopoulos - JPMorgan Jeffrey Rulis - D.A. Davidson & Co.

Aaron Deer - Sandler O’Neill & Partners LP Joseph Morford - RBC Capital Markets LLC Jared Shaw - Wells Fargo Securities LLC Jacquelynne Chimera - Keefe Bruyette & Woods Inc. Matthew Clark - Piper Jaffray Tyler Stafford - Stephens Inc Matthew Keating - Barclays Capital

All right. Thank you, Nicky.

Good morning and thank you for joining us today on our second quarter 2015 earnings call. With me this morning are Ray Davis, the President and CEO of Umpqua Holdings Corporation; Cort O’Haver, our President of Commercial Banking; Greg Seibly, our President of Consumer Banking; and Dave Shotwell, our Chief Credit Officer.

Cort, Greg and Dave will join us as we take your questions after our prepared remarks. Yesterday afternoon, we issued an earnings release discussing our second quarter 2015 results.

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 umpquabank.com, under the Ask Us, Investor Relations section.

During today’s call, we may 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 Page 2 of our earnings conference call presentation, as well as the disclosures contained within our SEC filing.

With that, I’ll now turn the call over to Ray Davis.

Okay. Thanks, Ron.

Our second quarter performance was strong, demonstrating the strength of the brand that our unique value proposition enables us to compete for our customers’ business with more than just price, and the success we have achieved in integrating Umpqua and Sterling together. Our financial results this quarter reflect the successful implementation of these strategies, with double-digit annualized loan growth, increased top line revenues, and further realization of merger-related synergies which led to a decrease in our core operating expense run rate.

These positive trends led to an improvement in quarterly results, reporting second quarter 2015 operating earnings of $68.7 million or $0.31 per share, this is up from $0.26 per share in the first quarter and from $0.27 per share over the same period a year ago. As usual, Ron, will go through our financial results in more detail.

But let me outline the key items that impacted our second quarter financial results. First, we had a very strong quarter in loan and lease growth, continuing the positive momentum we discussed on the last quarterly call.

Before factoring in the impact of portfolio of sales, our loan and lease portfolio increased by $477 million or about 12% annualized growth. Net of loan sales, the portfolio increased $425 million or 11% annualized.

This resulted in a $2.2 million increase in net interest income. Second, we experienced a strong mortgage banking quarter with $11.8 million increase in total mortgage banking revenue.

It is important to note that due to the increase in production our variable mortgage expenses predominately, compensation, also increased by just under $5 million from the prior quarter, which is reflected in non-interest expense. Our strong mortgage banking results were driven by seasonal increase in purchase mortgage originations combined with an increase in the 10-year treasury, which led to a lower loss in the fair value of the MSR.

Total mortgage originations increased by $271 million or 23% from the prior quarter. The increase in buying was partially offset by a decline in gain on sale margin, driven by a larger mix of purchase volume, which traditionally carries a lower margin than refinance.

Of the second quarter’s total production, 59% related to purchase activity, which is up from 45% in the first quarter. Third, we continue to make good progress on the integration of Sterling and achieving the remaining expense synergy.

As of our June monthly go-forward expense run rate we have achieved 82% of the targeted $87 million in annual expense synergies. Excluding merger-related costs, non-interest expense in the second quarter decreased by $5.4 million from the prior quarter level due to additional synergies realized, offsetting the decline from synergies was the almost $5 million increase in incremental variable mortgage expense, I just mentioned, and $1.5 million in severance related expenses.

In addition, we only received about one month’s benefit of the additional synergies late in the quarter related to the core system conversions. Recent operating earnings, we experienced improvements in each of our key second quarter profitability metric.

On an operating basis, return on assets improved to 1.21% from 1.01% in the prior quarter. This is in line with the profitability guidance we provided at the time of our merger.

Similarly, return on average tangible common equity improved to 14% from 11.7% in the prior quarter. And last, the efficiency ratio fell to below 60% [ph] in line with our long-term targets.

Our credit quality remained strong and we continue to prudently manage capital. The ratio of non-performing assets to total assets declined 31 basis points, down from 36 basis points in the prior quarter.

Tangible book value per common share increased to $8.92 from $8.88 in the prior quarter. All of our regulatory capital ratios, which we are now showing under the Basel III rules, remain above well-capitalized levels.

During the quarter, we also paid a dividend of $0.15 per share and repurchased 360,000 shares of stock, which together represent $39 million in capital returned to shareholders. Now, regarding our business lines and integration progress, our commercial division continues to build on the positive momentum we saw during the first quarter.

Total commercial production was a little over $1 billion in the second quarter, a new quarterly high for us. And almost 50% increase from the prior quarter’s production.

This was spread across all of our lines with quarterly increases in C&I, CRE, Multifamily, SBA and our leasing operations. Our expansion plans continue by introducing our commercial loan reach into the Las Vegas market and our SBA lending operations to Utah and Arizona.

Our consumer division also experienced a strong quarter with 23% increase in mortgage originations I mentioned earlier, with a strong presence up and down the West Coast and a leading speed-to-delivery value proposition, we believe our home lending team is well-positioned to continue to gain mortgage market share as the demand remains strong throughout the footprint. We also continue to realize strong loan growth in many of our other business segments including retail, small business, private banking, wealth management and dealer banking with consumer and other loans up 11% for the quarter and 37% over the prior year.

Total deposits decreased by $77 million from the prior quarter level, which is typical in the second quarter due to seasonal tax payments. Our loan to deposit ratio ended the quarter at 93%, again in line with our expectations.

As discussed last quarter, we just completed the majority of our core system conversions in April. We are nearing the completion of integration with two smaller system integrations or conversions scheduled for the rest of this year, which will generate – and will consolidate excess back office facility to consolidate up and finish off our overall integration program.

We expect integration to be complete by year-end. Now, let me turn the call over to Ron.

Okay. Thanks, Ray.

As I go through my detailed quarterly review comments, I will be referring to certain slides from our quarter presentation deck, which we posted on the Investor Relations section of umpquabank.com yesterday afternoon for you to follow on. With that, please turn to the income statement on Slide 3 of the presentation.

We reported $0.31 per share in operating earnings for the second quarter of 2015; this is up $0.05 per share from $0.26 in the first quarter. As a reminder, operating earnings are defined as earnings available of the common shareholders before gains and losses on junior subordinated debentures carried at fair value and merger-related expenses, both net of tax.

The increase in operating earnings per share from the first quarter was driven by strong growth in loans, higher mortgage banking revenue and higher other non-interest income. Turning towards the bottom of the P&L summary on Slide 5, we have $13.1 million of merger-related expense this quarter after tax.

In line with our guidance on the last quarterly call, we expected a higher amount for the second quarter related to the recently completed core system conversion in April, and anticipate much smaller amounts trailing through year-end. Now, turning to Slide 6; net interest income increased by $2.2 million from the prior quarter level.

As Ray indicated in what is key for us, that we were able to grow our loan and lease portfolio to offset the impact from continued net interest margin pressure with the historically low interest rate environment. For the second quarter, credit discount accretion from the Sterling deal was $16.1 million, up slightly from $15.2 million in the prior quarter related to higher purchased credit impaired paid in full accretion.

The PCI accretion was $3.8 million versus $1.6 million in the first quarter and is expected to bounce around those levels as it has for the last four quarters. As you can see on the chart our total net interest margin declined by three basis points from the prior quarter.

This was driven by lower average yields on new loans relative to the existing portfolio. Excluding the credit discount accretion, our pro forma margin was 4.15%, down one basis point from Q1.

We expect continued modest pressure on this percentage over the balance of the year. On Slide 7, the provision for loan and lease losses decreased by $1.4 million from the prior quarter level.

This decrease was driven by a $4.4 million linked-quarter decline in net charge-offs, mostly offset by stronger loan growth in the quarter. On Slide 8, total non-interest income increased by $16.8 million as compared to the first quarter level.

The largest component of this increase was higher mortgage banking revenue, which is broken out on Slides 9 and 10. One thing to note, we have now broken out separately on the P&L the gains we received from loan sales.

Previously, this was included in other non-interest income and includes both portfolio and SBA loan sales. Turning to Slide 9, mortgage banking revenue increased by $11.8 million from the prior quarter, the biggest driver of this was a $9.3 million lower loss related to the fair value of the MSR, given the recent rise in rates on the heels of the drop in Q1, the balance of the increase is related to higher origination and servicing revenue.

As you will note on Slide 10, total mortgage originations increased by 23% from the prior quarter, this was driven by a seasonal pickup in purchase volume, accompanied by the trailing benefit of strong refinance volumes towards the beginning of the second quarter. As expected and discussed last quarter, given the higher mix of purchase volume, our gain on sale margin decreased by 27 basis points to 3.38%.

We anticipate it to fluctuate around this level for the remainder of the year. Now, please turn to Slide 11.

Excluding merger expense, our operating expense was $180.1 million for the second quarter. There were several moving parts and given our main conversions occurred in April, our expense was declining throughout the quarter.

Recall back in Q1, our expense excluding merger cost and OREO was $177 million. During Q2, we had higher variable home lending expense of just under $5 million, along with $1.5 million of severance.

Adjusting these out, our Q2 expense was $173 million, down $4 million from the first quarter. Additionally, given that expense declined throughout the quarter, if you take just the month of June and do the same adjustments, we are at $170 million for an apples-to-apples comparison to Q1.

This is down another $5 million for the quarter or $20 million annualized, which leads to our expense synergies increasing from $51 million last quarter to $71 million here at the end of Q2. And recall our target is $87 million.

So before any other changes heading into Q3, our core quarterly expense is in a range of $170 million to $175 million, noting the lower end of the range if home lending production volumes are closer to Q1 levels, and the higher end of the range if they were closer to Q2 level, regardless, our goal is to maintain the efficiency ratio below 60%. We anticipate realizing the remaining annualized expense synergies over the next several months.

Now, turning to the balance sheet on Slide 12, note our interest bearing cash decreased this quarter to $515 million resulting from the strong loan growth, a small decline in deposits and continued pay-downs on our borrowing. Since quarter end, interest bearing cash is up closer to $700 million here early in July with deposit timing.

Slide 13 covers the loan portfolio and shows the strong quarterly growth in loans and leases. During the quarter, we sold $51.7 million of portfolio residential mortgage loans.

Grossing up for loan sales, our growth rate of 12.3% annualized, one of the strongest we have experienced in a while. We expect small longer dated portfolio sales to continue for the remainder of the year.

We do realize when rates go up that will have an impact on the home lending business, which is why we are continuing to focus on growing our various loan segments to help offset any potential decline in home lending revenues. Combined with continued growth in variable rate commercial lending, this will improve our app sensitivity for potentially increasing short-term interest rates.

Now on Slide 14. Total deposits decreased by $77 million from the prior quarter due to seasonal tax payments.

The costs of interest bearing deposits remain low at 24 basis points for the second quarter. We now turn to Slide 15.

As you can see all of our credit quality ratios improved in the second quarter. The non-performing assets to total asset ratio of 31 basis points is at the lowest level in the last eight years.

Our provisions for the last two quarters have reflected strong loan growth, which we expect to continue for the remainder of the year. Now to Slide 16, which covers our capital ratios.

As we discussed last quarter, we are now reporting capital ratios under Basel III. All of our regulatory capital ratios remain in excess of well-capitalized level with our Tier 1 common at 11% and total risk-based capital of 14.4%.

A couple of comments there. We repurchased a small amount of stock this quarter representing shares issued year-to-date under various comp plans through May and expect to continue this practice going forward.

This repurchase for 6 million along with the 33 million in dividends represented a payout of 56% on operating earnings for the quarter. Our excess capital was approximately $230 million, down slightly over the past quarter.

As we have previously discussed, we will continue to employ excess capital through a combination of strong organic growth, dividends, and share repurchase. Also of note with our DFAS Disclosure last month, it’s important to note the disclosure was based on hypothetical severely adverse economic scenario combined with the impact of Basel III.

We approached this as a stress test not a check-the-box exercise, and we used CCAR data as a pure comparison prior to the submission. It turns out, only a handful of the 55 [ph] DFAS banks took a similar approach and we note there is very little comparability across banks on this.

However, that has no impact on our excess capital calculations there, as that is based on the current economic outlook, not at severe recession over the next nine quarters. Now I’ll turn the call back to Ray to wrap up our prepared remarks.

Okay, thanks. Clearly, our key business drivers have continued the positive momentum experienced in the first quarter, and that’s evidenced by robust loan growth throughout the first-half of 2015, our operating efficiency ratio now under 60%, continued growth in top line revenue since a Sterling acquisition, nonperforming assets at historically low levels with another significant decline this quarter, continued refinement of our footprint focusing on expanding into strong growth markets throughout the West, integration efforts and synergy realization of proceeding according to plan with the expectation to wrap those up by year-end, and prudently managing our capital returning excess capital each quarter while maintaining flexibility for continued organic and acquisitive growth opportunities.

And lastly, before we take your questions, I want to personally congratulate Mark Wardlow, our Chief – our past Chief Credit Officer just recently retired and thank him for his incredible service to Umpqua. It’s been a joy to work with him.

And as we previously announced, we welcome Dave Shotwell who is our new Chief Credit Officer. We will now take your questions.

[Technical Difficulty] everyone.

Good morning, Steve.

Hi, Steve.

Maybe I’ll start, there seemed to be no impact in the quarter on your multifamily business. But should we think there could be a decline in volumes going forward, given the departure of Dave DePillo there?

The pipeline for multifamily remains as robust as it has been. We had a great, actually I think, we had a record of month of June.

I think, we’re going to have a great month of July into the summer and the remainder of the year. And we’ll just balance that portfolio as we see based on opportunities to sell out the backs.

We feel real strong and real good about the multifamily portfolio.

Okay, it’s helpful. And, Ron, want to follow-up on your comments around DFAS, which you said yourself you guys took that as a stress test right now to check the box exercise.

But if you look at way you came out in that right, may not be comparable versus peers, but it did come out as the common equity Tier 1 was around 6.4. Does that changes it of your thoughts about how much excess capital you have maybe you would – want to have more of a buffer here, or is it business as usual in terms of capital return?

Steve as business as usual, and as I talked about the impact of that two is partially from Basel III, but just recognized going into this, I mean, this is supposed to be stress test. And prior to DFAS bank submissions, we had CCAR bank submissions and the line in the sand there was to be above 5% on Tier I common.

So I think both the common [indiscernible] there’s no impact on our excess capital today versus again based on a nine quarters forward severely adverse recessionary environment.

Okay. Maybe just one final one.

Thanks, Ron. How many flagship stores do you guys have today in Umpqua franchise, and how many do you plan to have in the acquired sterling footprint?

We have four flagships stores right now. We have Seattle, Portland, and San Francisco store, San Jose.

And I think, Steve, the short answer is the flagship stores in the future will look a bit different than the flagship stores today likely reflecting consumer utilization trends focused more around advisory, smaller, still very good-looking. But, again, I think we’ll see smaller flagships in the future than we had today.

And I think, again, markets like the Spokane markets, markets like Southern California will be looking at over the course of the next year to two.

So you are rethinking the whole concept around the community centers, like just – is that what you’re saying?

No, I think, what I’m saying is, I think if you just look at, if you look at utilization pattern falling, if you look at what we think we need in the storage if you think it the neighborhood storage, if you think the flagships, we’re going to be looking at is just how do we position our store model most effectively in the future. And we don’t think it takes 4000 square feet to serve the customer going forward.

So more to come on that, but clearly our view is to be focused in a way that is consistent with customer needs and wants, and we think that’s more advisory based on one color.

Okay, great. Thanks for all the color.

Thank you.

Thanks. Good morning.

Good morning, Jeff.

Good morning.

I would be interested in the timing of loan production in the quarter, was it pretty sustain, I think you exited whereas you closed Q1, March was pretty heavy in terms of activity and obviously you saw pretty good carryover. How was production in the quarter?

We – Jeff, of course, we had good production in April and very strong production in June. So I would like to tell you, it was balance on intra-quarter, but we had a lot of pull through come in April, post closure first quarter and then we had a good chunk hit June.

And then I would say it was every day and we always continue to add on new production. May was strong, but not as strong as June.

Got it. And then sort of dovetailing with, I think, Ron’s comments expecting strong loan growth for the remainder of the year that’s relative to Q2?

Yes, we did over a – we did $1.038 billion in new production in the second quarter and our pipeline grew $120 million at the end of the quarter. So and I feel real good about that as we pull through a substantial portion of the pipeline and we improve the pipeline in that same quarter.

Great. And then on, I’m just interested in kind of the new loan yields versus the legacy book, is pricing improving in your markets given, I guess, the core margin you still suggest maybe some still maybe some decline there, but it sounds modest in core margins down a basis point this quarter, I guess, if you could just talk on pricing and how new production versus the legacy is coming along?

Hey, Jeff, this is Ron. I think consistent with the last couple quarters, there’s really no significant change in terms of market pricing.

However, given the historically low rate environment that is slightly below the existing margin for incremental business. So and as I talked about earlier, I expect there to still be continued modest pressure on the NIM as a percentage, but then, again, our ability to offset that with loan growth, we’re starting to see, so there is no change over the last quarter.

Okay. Thanks, guys.

Thank you.

Hi, good morning, everyone.

Good morning, Aaron.

I was wondering if I can get the street numbers on, within the C&I book specifically, what were the origination levels and the pay down volumes in that book?

So the commercial lending book we generated little under $415 million. And in pay downs, I mean, I’m looking at my sheet here and specific pay downs $248 million in pay downs and then we – and that does not include loan resolutions.

Credit – our credit teams did a great job in the second quarter resolving some credits, which I think was and Dave can correct me on the $63 million to $65 million of loan resolutions in addition to that in the quarter.

I guess the reason I’m asking, and maybe my expectations are just too high, but I would have hoped to see better C&I growth over the course of this year. You guys are in great markets and with all the different verticals where you have a lot of expertise and with the FinPac folks.

It seems like we would be seeing some better gains in there. And I guess the paydowns are setting some of that back.

But what – how should we think about the growth in that book specifically, because obviously the loan growth this quarter was much improved, but so much of it was just in single family residential. And it would be nice to see more in the commercial side and specifically in that C&I bucket?

Well, our loan originations were strong by $450 million bucks in commercial. And what we’re seeing in addition to loan resolutions, which is good, it’s good for the quality of the portfolio.

We’re also having a higher percentage of companies sell than we’ve seen before, and I mean, whether it’s $1 million borrow or $20 million borrower seeing some pretty good multiples being offered, and we’re seeing companies sell out. We do try our best to offer financing on that acquisition of the company, but a lot of these companies are selling through all cash.

And I would say and I heard that from other banks, so we’re experiencing. That’s kind of something we’ve seen over the last six months, at least, the last couple of quarters.

And then utilization quite honestly is still hovering below 50%. We just have not seen a real lift in utilization, up closer to 60% to 65%, which is more normal in the strong economy.

So those are really the main reasons. We did see late in the quarter a couple of our SNCs [ph] that we’re involved in, the agent banks, larger banks, obviously dire or hungry for loan growth call and payoff, the participants in particular SNCs that kind of caused by surprise.

But our production is really strong in the middle market. And as long as we’ve got production that’s showing some gains, we’ll get the earnings as the quality of the portfolio cleans up and people start borrowing, we’ll get that lift.

Okay. And then could you give a little bit more color behind the deposit trends in the quarter?

There, too, I guess the – on the non-interest-bearing, I think, Ray, you mentioned in your opening comments that some of that might have been tied to tax payments. But is there anything – other the seasonal stuff going on there or any big customers that have been lost, and what can we expect for growth in your non-interest-bearing category over the course of the year?

Yes, Aaron, it’s Greg. Let me give you a couple of things to think about on that.

It’s typically what we would see as part of a seasonal trend. The bigger impact is around, the consumer impact is slightly smaller degree, the commercial side of the house in terms of deposits.

Commercial deposit were actually net positive and that delta of the $77 million of growth over 100% of that actually came out of consumer. The mix, if you look at the mix in terms of overall deposits continued move towards core increase in non-interest bearing DDA with slippage on time, which was consistent with how we’ve been positioning the overall deposit base over the course of past couple of years.

Right.

And for perspective last quarter – same third quarter of last year we grew about $390 million in deposits. Second quarter is typically fairly soft, third quarter last year was a strong quarter for us.

We think third quarter this year is going to be a strong quarter as well. We got a lot of focus on this issue, just given at 93% loan-to-deposits.

We feel comfortable in that range. We don’t necessarily want to see that get a lot top here and so deposits are big initiative both for Cort and his team on the commercial side and also for the consumer bank.

So I would expect next quarter will have some good stuff to report about deposit growth get back in the line.

That’s great. Okay, thank you very much.

Thanks. Good morning, everyone.

Morning, Joe.

I guess, first question is just kind of a follow-up to the various comments on the loan side. It sounds like with the demand being fairly broad-based, was there any other kind of seasonal factors driving activity or do you see this kind of low double-digit annualized growth momentum kind of continuing here in the back-half of the year?

Joe, this is Cort. On the commercial side, the one area that we haven’t seen the list than we normally do going back to Aaron’s question was on the ag side and we are ag lender.

We have not seen the ag lift for obvious reasons, the California specifically that we normally see in years going by. So I would say that, it’s something we pay attention to.

On the smaller side as evidenced by FinPac and then what you’re seeing in Greg’s road on the consumer side, we’re seeing record production, record volumes. I think that’s a great indication that small business is feeling its oats, and it’s borrowing money.

So in all the markets we serve, we’re seeing good activity with some unique things like ag where it’s just – we’re just going to have to work through it. And our customers will get back into business when they see fit the plan.

Joe, the only thing I’d add to that is, again, I just think that it was a great set of events in the second quarter in terms of overall home lending and mortgage. I think if you think about other rate environment, typical kind of selling season here in the Pacific Northwest that all, it was positive.

I guess, following up on that, Greg. How did the mortgage pipeline look at period end, and recognizing that the refi volume has dropped off, how do you feel about kind of overall origination levels in the third quarter?

Right, I think third quarter will be solid, particularly when compared to the same period prior year. It shouldn’t surprise anybody, if it ebbs slightly from at least on the second quarter just because refi is going to be down a bit.

We are seeing good robust applications still are running at a very good clip relative to bookings. And so my view would be, if I look at the first quarter and if I look at the second quarter, I think it wouldn’t surprise me to see production being somewhere in the middle of the range between those two, but our view is we’re very focused on continuing to execute while gaining share, making sure that we’re pricing appropriately to maintain margins going forward.

Right. Okay, and then I guess the other question was just on kind of the capital deployment.

You did mention, at least I didn’t hear it, M&A is one of the options. I was curious how you’re feeling about opportunities there at this point.

And then just in general, could we see – be more active with deploying that $230 million or so of excess capital to the back-half of this year, be it through buybacks or dividend increases, things like that?

Joe, it’s Ray. On the second part on the excess capital, I think you’ll see us continue to do what we’ve done.

We will be evaluating dividends in the near future. So I think you’ll see just more of what Umpqua has been very steady in doing, as we try to be very smart in the way we employ the excess capital.

On the M&A front, yes, we’re winding down the integration of both Sterling. We’re almost to the end of the road on that one, which is good.

I would say this, we get calls from time to time, but there has to be something very special I think for us to get pretty excited about it. As far as a bank is concerned, we really have turned as I think I mentioned in my last quarter’s call, really have started to turn our attention into the world of innovation, design and technology, trying to position our bank for the road ahead more than just a quarter or a year.

So that might be more of a little bit more attractive avenue for us to look at than traditional just regular bank marketing. You know our bank acquisitions.

We think about bank acquisitions today. I mean it’s going to be a cost deal, it’s going to be either a strong market you want to get into or it’s going to be a cost deal or you go in and you cut out 85% of the cost in what you have, more commercial real estate loans.

So we’re going to be cautious and yet we will be opportunistic if something comes our way that we really think makes good sense.

Okay. That’s helpful.

Thanks, Ray.

Hi, good afternoon.

Good morning.

As you have more time under your belt with the Sterling deal, do you think that $87 million is still the best expectation for total synergies to come out of the combined platform and if – or do you think that there’s better opportunity for maybe higher operating leverage going forward?

Again, this is Ray, we have said in – when we first announced the deal, right after we announced the transaction that $87 million was our targeted and yet we expect it to go over that. And I don’t think we report anything different than that in the past.

So leverage is – seeking leverage is constant here. So I would not be surprised to see us go over that number.

Okay, okay. Thanks.

And then, shifting little bit, looking at the allowance for loan losses continue to trickle down here a little bit, where ultimately given the quality of the loan book and the mix, where ultimately would you see – could you see that going down to as a low?

Jared, I think when you’re talking about trickling down, you’re talking about the pro-forma including the credit discount accretion.

That’s right, that’s right, exactly.

So another way to think of it is, on the face of the balance sheet we’re at 0.8% in terms of the formal allowance moving its way up. And as we’ve discussed last couple of quarters with that pro-forma disclosure, there is going to be no massive up or downturn in the economy.

We’d expect that to settle out somewhere in the little 1% range over time.

Okay. All right, great.

Thank you very much.

Yes.

Hi, good morning, everyone. I’m wondering if you could give us a little bit of color on the increase in occupancy and equipment in the quarter.

Got it. This is Ron.

Part of it was a reallocation post-conversion in terms of services or other operating expense versus capitalized items which flow through occupancy and equipment. So really I’d say, it’s more of a reclassification, but overall synergies is measured of the bottom line.

So, did the increase on all else equal come out of the other buckets?

I’m sorry, the decrease in what?

Looking at the linked quarter, the increase – so if you hadn’t made that change, would the other bucket have been higher, the other expense bucket?

Yes. The occupancy in equipment bucket didn’t increase, because it was in a re-class in terms of the post conversion categorization it would have been in the other line, correct.

Okay, that’s helpful. Thank you.

Yes.

And then it looks like in – just in the other income line item, we’ve had some steady increases over the last few items. Can you give a little bit of color on what’s driving that, maybe just an update on debt capital markets, swap income, things like that?

So you hit it right on the head. It was a stronger quarter for debt capital markets and swap income and that generally tends to go in line with stronger production.

So I feel really good about that.

And how do you think about those in future quarters?

I feel good about production continued at strong levels and with that would come debt capital markets activity.

Okay, great. And then a question on the purchase versus refi.

I noticed it was 59% purchase in the quarter. Is that on the total, or is that on the loans generated for sale?

It’s on the total, and we expect that might be a bit higher in the third just given Q2 and Q3 are traditionally higher purchase.

What was there – do you have the movement throughout the quarter from purchase? Did it steadily increase from April until June?

Yes, it’s June. Yes.

Okay. Okay, thank you.

I’ll step back.

Okay. Thanks.

Hey, good morning.

Good morning.

Just on the single family mortgage that you guys portfolioed during the quarter, can you talk about what you guys are putting on balance sheet, what types of things?

Yes, we – a good chunk of it is jumbo, intermediate duration ARMs. Some of it relates to – some of it has gone into the private bank, some of it goes into home lending.

But that was a primary driver in the second quarter.

5/1, 7/1 type stuff?

Yes.

Okay. And then on the pipeline, can you just quantify the size of the pipeline and what percentage is C&I?

I recall it being two-thirds or even three-quarters C&I, but just curious how that looks today?

So this is Cort. The occurred pipe at the end of the second quarter was 2.58 of which 52% or about a $1.4 billion was C&I.

Okay, thank you. And then on the mortgage, can you give us the pre-tax income contribution from mortgage this quarter?

Yes. Pre-tax income contribution was $39 million approximately and it was up a 11 from the prior quarter again driven by the increase in MSR and a little bit higher production.

Great. And then just staying with mortgage into the third quarter, I think I heard you all say, maybe look for production to be somewhere between the first and second quarter.

But obviously refi is going to be down. I assume gain on sale margins will be down a little bit, too.

I wouldn’t assume that, it’s going to be a good quarter.

Yes, it would be a good quarter. I think the issue is pipelines are good, rates are going to determine a lot of how things play out, so good demand.

Okay, that’s it. Thanks.

Thank you.

Hey, good morning, guys.

Good morning.

Just a question on the mortgage-related expenses. Clearly some strong mortgage production in the last two quarters.

I know you called out the $4.9 million of increased variable comp this quarter, but you also called out a similar $5 million expense in 1Q. So can you help us out on what the total dollar amount of variable mortgage comp is in 2Q to, I guess, can help us bifurcate a little bit better the amount that could potentially fall out?

Yes, you bet. And you are correct.

It did also increase in Q1, and that’s because volumes were up from Q4 levels. Total direct variable expense in the mortgage group this quarter was right around $33 million, that was up $5 million from the $28 million last quarter.

Okay. And then any commentary on new hires this quarter?

I think last call you guys talked about potentially getting into a new vertical within FinPac. Any commentary there, and then on new hires?

Yes. This is Cort.

So great memory, so in the – in May we hired a gentleman by the name of Allen Snelling, and he is going to build out our vendor channel within FinPac. So in the leasing space there is really three major areas, you have third-party which we do very well, a more organic traditional bank leasing and then the vendor channel.

So we’ve now got the right gentleman to run that and look forward more on that later to come in this year, and clearly in the 2016 and 2017. We feel very, very good about that.

We also opened up as Ray mentioned in his opening comments, a CBC in Las Vegas. So we have somebody we put in there in last two weeks and we’ll be staffing that up as soon as we find a permanent location.

And we also added a couple of people to our international group down in Southern California, so we do trade finance in FX now that our Southern California commercial banking teams are up and running strong. We’ve got additional products for them to have available for the customers.

And I don’t know if we mentioned on the last call, we also have SBA teams in Phoenix and Salt Lake City. It’s just a person for the time being and we’re testing those 7A markets with an eye towards potential expansion there with CBC and traditional consumer banking.

Okay, thanks. And then last question for me, and apologize if I missed this in your prepared remarks.

But as you pointed out, you guys are at the end of the road on the cost saves. So I wanted to get your current thoughts about hitting your original core ROA guidance of 120 to 130, once all the Sterling cost saves are baked in.

You bet. This is Ron.

And yes, that was the guidance that came out with the deal. Now recognize too looking back, there was probably supposed to be within those estimates, at least, with analyst estimates about a 75 basis point to 100 basis point increase in Fed funds rate over the last year, which hasn’t occurred.

But we do feel comfortable with that 120 to 130 ROA guidance that did exclude credit discount accretion, but also recognize coming on top of that will be the additional cost save, so still feel good about it.

Okay. That’s it for me, guys.

Thanks.

Thank you.

Thanks. You actually just hit on my question in terms of the original sort of post-integration return targets that had basically encompassed like this kind of accretion running off.

And so secondly, you look at kind of the cost save plans and there is around $16 million or so kind of remaining on an annualized basis versus that level. So to kind of get to the – and obviously you had $15 million discount accretion this quarter.

So as that runs off over time, is the plan to find more cost savings, or is it really just as the rate environment improves, you think you’ll get to those targets? Thanks.

Obviously the rate environment will improve, but I think if you were to take the math for Q2, factor in the 170 to 175 on the costs, not the 180 that we had along with additional cost saves, you get pretty close to offsetting the credit discount accretion, and we’re in that range.

Gotcha. Okay.

And then just given the heightened focus people have around NIM trends in the back-half of the year. When you say the adjusted NIM will be down modestly, that’s sort of like the low-single digit kind of range, not the mid-single digits?

Is that a fair way to characterize?

I think if anyone had specific visibility into whether or not it’s one, two, three, two that would be pretty difficult to have at this time. I think if you just look like the last several quarters, you’ve just seen this gradual progression.

The nice part is, with the growth this past quarter, we will able to help offset in terms of net interest income which is the key.

All right. Thank you.

Thanks.

Okay, Nikki, appreciate it. All right.

Well, I’m going to thank everyone in their interest in Umpqua Holdings and the attendance on our call today. This will conclude the call.

Goodbye.