Umpqua Bank is a private financial holding company based in Portland, Oregon, United States. Its headquarters are located at Umpqua Bank Plaza in Portland. The bank engages in the commercial as well as retail banking. It also engages in the business of retail brokerage services.
The bank’s client services division offers financial services as well as products to individual customers. It has several holdings where it offers its customers personal checking as well as saving accounts, various insurance policies, unit investment trusts plus mutual funds. It also offers business checking as well as saving accounts. In addition the bank offers certificates of deposits as market accounts.
Umpqua Bank is a subsidiary of Umpqua Holdings Corporation which has existed since 1953 (Umpqua Bank, 2011). It was first established in Canyonville, Oregon, by a group of people who engaged in the timber-logging business whose aim was to create an institution where they could cash their payroll checks.
It was then named as South Umpqua State Bank and located at the Masonic Lodge. In 1972, the bank moved its headquarters to Roseburg, Oregon. The bank continued to expand; however, it took a major turn a major turn in 1994 when Ray Davis took over as President and CEO.
Davis launched a new strategy as well as direction for the company (Umpqua Bank, 2011). His vision was to expand the company and to it create to be more customer-oriented. He shortened the name to Umpqua Bank. By then, the company had total assets worth $150 million (Umpqua Bank, 2011).
In 1995, the company launched its first retail-oriented flagship store at its headquarters in Roseburg. A year later, the bank established four new stores in Lane County to offer unique customer experience. In 1998, Umpqua Bank went public through initial public offering and was listed at NASDAQ OMX Stock Exchange.
The following year, the bank became Umpqua Holdings Corporation and acquired Strand Atkinson Williams & York brokerage firm. In 2000, the bank company formed its first merger with Valley of the Rogue Bank.
In 2003, it opened up a store in Portland’s Pearl District and World Greatest Bank University to offer bank-related courses. In 2004, the Bank expanded into California by acquiring Humboldt Bank & Holding Company subsidiaries. In 2006, Umpqua opens a new store in Portland and also acquires Western Sierra Bancorp to become the largest community Bank in Sacramento region (Umpqua Bank, 2011).
It opened a state-of-the-art technology in Portland’s Southwest waterfront in 2007 to offer new customer experience. It also acquired Vintage Bank in Napa, CA, the same year. In 2008, the company partnered with Energy Trust Oregon to establish GreenStreet Lending to small business at low-interest rates. In 2009, its eco-banking division began ways to make the company environmentally friendly (Umpqua Bank, 2011).
In January 2009, Umpqua took over the deposits of Vancouver Bank from the Office of the Comptroller of the Currency (Kish, 2011). A year later, January 2010, the bank also took control of deposits of Seattle Evergreen Bank which had been closed by the Washington Department of Financial Institutions.
In February the same year, the bank took over the deposits of Tacoma Bank from the Federal Deposit Insurance Corporation (FDIC). Two months later, it reached an agreement with its owner, Rainier Pacific Bank, to purchase it from the FDIC (Kish, 2011).The company has three Board of Directors; Peggy Fowler, Luis Machuca and Hilliard Terry.
Umpqua Bank is headed by Ray Davis, who is the President And CEO. Under him are Duff Greg, Vice President, Ken Vogt, Vice President, Craig Fair, Vice President Finance, Beth Fox, Vice President Technical Systems, Joe Plummer, Vice President, Network Engineer and Security, Angela Machado, Vice President, Business Development Officer, Dave Nelson, Vice President, Commercial Loan Officer, Ron Piatt, Vice President and Commercial Loan Officer, Donna Huntsman, Senior Vice President-Private, Rick Calero, Executive Vice President of Community Banking, Kelly Johnson, Executive Vice President-Asset Management, Sheryl Stanley, Assistant Vice President Accounting, Ross Blanchard Assistant Vice President Systems, Ric Carey, Executive Vice President of Store experience and Sales and Rich Sauter, Director Ebanking. The next level executives are branch and division managers, system and credit analysts as well as auditors.
Umpqua Holdings Corporations has an asset value of $8,324.6 million. The bank’s total trading assets as per the second quarter of 2010-11 fiscal year remained constant at $3 million while intangible assets also remained at $696 million during the whole period.
Other assets were valued at $1179 million at the end of the second quarter having increased from $1624 million. Thus, at the close of the second quarter of the trading period, the bank’s asset value was $11460 million. Umpqua Bank’s return on assets over the last trailing twelve months was valued at 0.4% while asset turnover was 0.04% (Morningstar Equity Research, 2011).
Umpqua Bank’s total deposits at the end of the second quarter were $9146 million as compared to last year’s total which was $9434 million at the close of that period (Morningstar Equity Research, 2011). Its short-term debts were $257 million at the close of the second quarter while its long-term debts stood at $184 million. At the same time, its net loans were $6397 millions.
The bank’s total liabilities were $9785 million as compared to what was registered at the end of last trading period which was $10026 millions while its total equity increased from $1643 million to $1674 million ((Morningstar Equity Research, 2011).
At the end of the second quarter, the company had acquired a net margin of 9.5% in the trailing 12 months with a financial leverage of 6.8%. Its return on equity in the trailing 12 months was 2.9% (Morningstar Equity Research, 2011).
For more than 3 years, Umpqua Bank has faced non-stop credit quality problem which resulted from the recently experienced global recession. This has created losses in the previous financial years, 2007-2009. The bank is almost overcoming the loan problems.
It had to increase its lending rates to help it reduce its loan losses. However, the major problem that the bank faces now is how to maintain its credit quality as well as how to improve its declining loans.
The bank’s Chief Executive reports that the company’s total loans decreased from $1.7 billion in 2009 to $1.6 billion in 2010 (Manning, 2011). The second quarter financial statement also show that the net loans declined from USD 6419 million in December 2010 to USD 6397 million in June 2011 (Morningstar Equity Research, 2011).
The table below presents Umpqua Bank’s credit quality trends since 2007
The increase in the number of banks applying for bankruptcy in the region presents a great opportunity for expansion to the bank in already established markets. Umpqua has remained stronger in the region in the face of the bad loans as well as losses.Adapted from Acquire Media Corporation. (2011). Umpqua Holdings reports third quarter 2011 results.
The bank’s Chief Executive, Ray Davies, reports that FDIC has approached them thrice to buy deposits of failed banks (Manning, 2011).
It has already purchased Tacoma Bank while Vancouver Bank plus Seattle Evergreen Bank still remain under its control though not yet purchased. Besides, with the introduction of Bassel III, several other banks may fail to meet the capital requirements. This will also present an opportunity to make acquisitions and to expand.
The adoption of Bassel III is likely to affect the bank’s future business. Umpqua Bank may face problems in meeting Bassel III’s capital requirements. According to the Morningstar Equity Research (2011) Bassel III is an international agreement whose aim is to standardize certain banking safety requirements throughout the world.
Bassel III will require banks to hold additional capital. It will place standards on the quality as well as quantity of capital required on banks. This means that banks will have to preserve Tier 1 common capital ratios so as to be able to absorb loan losses.
Tier 1 capital will rise from the current 6% to 10.5% (Morningstar Equity Research, 2011). Bassel III will also eliminate some items like deferred tax assets from the core capital. Again the minimum common equity will increase from the current 2% to 7% (Morningstar Equity Research, 2011).
Again, the Bassel III is yet to announce the definition of Systematically Important Financial Institution (SIFI). Companies classified as SIFI will be expected to hold additional not-yet-determined capital.
This will have a significant impact on individual financial institution’s competitive advantage as they will have to acquire additional capital. Such move is likely to have a significant impact on Umpqua Bank should it fall under the SIFIs as it may affect the bank’s competitive position in the US.
Since the banks merger with Valley of the Rogue Bank in 2000, the bank has expanded its market share to lead other financial institutions in Jackson County. By the end of June this year, the company’s deposits were measured at $456.5million which translated into 16.7% of the nation’s banking deposits (Stiles, 2011).
The bank has been able to edge out other companies which were ahead of it in the market such as Wells Fargo and JPMorgan Chase.
When Ray Davies took over in 1994 as the company’s CEO and President, the bank had only $150 million in assets (Tweel, 2008), however, it has grown over the years to reach $11.8 billion in asset value (Taylor, 2011).
In addition, Umpqua Bank has made significant expansions across Oregon, San Francisco, and Seattle among other regions. Currently, the bank boasts of 183 branches (Davis, 2010).
The following excerpt of Umpqua Holdings Corporation explains the company’s value.
Adapted from Acquire Media Corporation. (2011). Umpqua Holdings reports third quarter 2011 results.
In May this year, Umpqua Bank was ranked top by the 2011 US Retail Banking Satisfaction Study for offering the best customer services (satisfaction).
It was ranked highest in customer satisfaction, and Davis, the company’s CEO explains that this was due to Umpqua Bank’s culture that fosters service as well as innovation (J. D. Power and Associates, 2011).
Umpqua Bank’s attempts to leverage its credit quality and loan losses by increasing the lending rates have not worked well for the bank. Although it came up with the GreenStreet Lending program for small business, it did not implement other mechanisms which would encourage large businesses to acquire loans from the bank, and this has been the reason behind its falling loans.
Taylor (2011) asserts that Umpqua Bank has adopted some unique features which other banks do not have. Taylor traces Umpqua Bank’s uniqueness to 1994 when the bank’s current President and CEO, Ray Davis, took office and launched a new strategy as well as direction for the company.
According to Taylor (2011) Davis has worked out a way of staying ahead of the transformations in markets, culture as well as technology to edge the bank’s competitors in the financial-services sector. Davis has helped build a brand that is unique and meaningful in the industry. Umpqua Bank has become more than just a bank, but rather a lifestyle brand.
Umpqua Bank branches (known as stores) have been designed to make them more appealing to customers. Taylor (2011) describes them as designed like hangout spaces, and Umpqua Bank refers to them as Next Generation stores (Umpqua Bank, 2011).
They are more like well-pointed art gallery that resemble Starbucks. During as well as after hours, Umpqua branches host banking services and community activities.
The community activities hosted at the branches include neighbourhood meetings, book clubs, business meetings as well as movie nights. It also provides what Taylor refers to “stitch and bitch” where the public can knit and gossip (Taylor, 2011).
The first Next Generation Store was opened in Portland’s Pearl District offering various community activities like Movie nights, yoga, as well as events where people could learn investing basics. The bank also has neighbourhood concept store which offers intimate as well as cozy banking walk-in traffic.
Umpqua Bank has state-of-the-art Innovation Lab. Its branch at Portland’s South Waterfront neighbourhood has high-tech gadgets which hosts video bowling leagues on a very large (114-inch) high-definition screen.
Davies says that the environment at Umpqua’ South Portland store allows customers to have fun while waiting to be served. Umpqua Bank (2011) reports that Portland’s Southwest waterfront was created to blend into customers experience by allowing them to explore new ideas as well as initiatives.
Umpqua Bank’s technology adoption for offering services to customers is special. In 2008, the company launched a unique e-SwitchKit which it integrated into its website to enable customers set up online banking, open bank accounts, as well as move billpay records effortlessly online (Umpqua Bank, 2011).
As part of the bank’s effort to promote adoption of efficient energy, it introduced GreenStreet Lending in collaboration with Energy trust Oregon in 2008 to enable homeowners as well as small businesses to adopt energy efficient as well as cost-saving energy projects (Umpqua Bank, 2011).
The “green” loan program has since extended to Roseburg, Sacramento and California regions. Initially, it was meant for energy-saving home improvements, but has since expanded to include businesses that invest in energy savings as well as solar power.
Glover (2011) reports that the GreenStreet loans that Umpqua Bank offers are in the range of $5,000-$1 million to be repaid within a period of up to 15 years. The GreenStreet Lending program offers low-interest rates financing to small businesses and homeowners without any loan origination fees as well as closing costs.
The aim of the lending project is to offer affordable loans to qualified borrowers so as to assist them in building environmentally-friendly homes as well as to make business improvements.
In 2009, the bank’s eco-banking division launched an eco-friendly project to collaborate with other large companies to explore opportunities that would allow them reduce their carbon footprint. The Oregon Sustainability Center located in Portland was approved by Portland City Council and is waiting Oregon Legislature approval.
Umpqua will partner with other companies like Capital Pacific Bank Additional Prospects, Green Building Services, Portland Streetcar, Inc., among others. Wagoner (2009) believes that even though adopting energy efficient technologies is expensive, it is the only way forward to achieve higher efficiency improvements that will create significant benefits to Umpqua Bank’s and other companies’ present systems and equipment.
The Oregon Sustainability Center project aims to enable companies cut energy costs on long-term by lowering excessive energy consumption and to reduce carbon emissions (Wagoner, 2009).
To keep customers busy while waiting to be served, Umpqua Bank branch employees offer them a cup of coffee, which is also the bank’s own blend.
The customers are also encouraged to always transact with Umpqua Bank by offering them a piece of gold-wrapped chocolate which is served on a silver plate, at the end of every transaction (Taylor, 2011). Customers are also offered opportunity to surf the internet and read the paper as they wait to be served.
Umpqua Bank’s uniqueness is diverse as it also includes its Discover Music Project in which it signs indie bands and also invites customers to download songs from its website as well as to listen to on in-branch kiosks (Taylor, 2011). The project also includes selling its compilation CD songs to customers.
Umpqua Bank (Taylor, 2011) records that Discover Local Music Project was launched in 2006 with Sacramento to Seattle CD release which featured local as well as independent musicians so as to offer customers distinctive and new experience.
The project identifies high-quality music as well as independent musicians across the West Coats, and provides their music to consumers online and in its 183 stores.
This project is founded on the belief that most of Umpqua’s customers are passionate about music (PR Newswire Association, 2011). The project therefore offers the bank’s customers and the general public a way in which they can interact with talented musicians.
Again, Umpqua Bank has a very unique way of connecting with the surrounding community and advertising itself. In 2004, the bank launched its first truck that would distribute ice cream along the streets for free (Umpqua Bank, 2011). Umpqua Bank (2011) reports that the truck generated enthusiasm throughout the neigbourhoods.
Even though Umpqua Bank has adopted many innovative strategies which allow it attract and maintain close relationship with customers, better business strategies and ideas need to be adopted to increase its competitiveness.
The bank needs to expand to other regions across the United States and abroad through acquisitions to increases its customer base. Currently, its expansion strategy mainly focuses on making acquisitions in regions where it has already established a strong presence especially in Seattle, California and Oregon.
Its last three acquisitions have been in these areas with the last one being Seattle Evergreen Bank. This means that its strategy only focuses on defending its customer base while neglecting other markets.
Umpqua Bank should take advantage of its strong financial position and excellent customer service to expand its operations to other markets where its presence has not been felt before another bank adopts its unique strategies to establish strong customer loyalty.
The large capital required to adopt Bassel III will force banks that are already established in these regions where Umpqua has not yet entered, but have lower capital, to close down. This presents an excellent opportunity to make acquisitions that would allow the bank to expand to these areas where it has not established its stores.
Most of Umpqua Bank’s unique competitive strategies such as Discover Music Project, offering chocolate after every transaction, Innovation Lab, among others aim at attracting the younger generation especially below 35 years of age.
Umpqua Bank should set a sub department within the sales and marketing department to offer basic investment tips, financial counseling and management, and detailed financial-planning advice at every store.
The bank’s facilities for community activities offer the best opportunity for doing this so as to encourage younger customers to make mature financial decisions which make them remain with the bank.
Umpqua Bank needs to fully adopt an invest-to-win strategy that will also take care of the older generation, who are the wealthier and more financially stable class (CISCO, 2011).
Most of the banks community activities are meant to capture the young generation. This means that it has to differentiate its offerings to the older generation. It has to innovate activities and strategies that will attract the older generation.
Finally, the bank has to develop strategies that would allow it create close relationship with the wealthy consumers so as to be able to increase loyalty as well as to drive cross-selling opportunities. It has to define its High Net Worth in order to classify the segment.
For example, persons who have a minimum of $1 million in investable assets have the capacity to easily recover from financial crisis (CISCO, 2011). Umpqua Bank has to carefully engineer an approach that would blend virtual with physical interactions.
Umpqua Bank is unique in its technology adoption, culture as well as customer services, and this promotes its ability to achieve customer loyalty. Umpqua Bank has been able to achieve stability and growth in the market and still continues to expand through acquisitions.
However, it has to implement strategies which will allow it maintain its strength in the market as regards loans. For the company to continue growing, it has to make acquisitions in other areas that it currently does not have any of its stores. Finally, it has to increase differentiating its activities to attract different segments of customers.
Reference List
Acquire Media Corporation. (2011). Umpqua Holdings reports third quarter 2011 results. Web.
CISCO. (2011). Positioning for future competitiveness in retail banking: “Save to Invest” and “invest to win”. Web.
Davis, R. (2010). Umpqua notes. Web.
Glover, M. (2011). Brief: Umpqua Bank offering more “green” loans. Web.
J. D. Power and Associates. (2011). Umpqua Bank ranked highest in the Northwest for customers satisfaction. Web.
Kish, M. (2011). Umpqua profits climb, beat estimates. Portland Business Journal. Web.
Manning, J. (2011). Umpqua Bank back in the black, says problem in the past. Web.
Morningstar Equity Research. (2011). Umpqua Holdings Corporation UMPQ. Portland: Morningstar.
PR Newswire Association. (2011). Umpqua Bank launches innovative music program. Web.
Stiles, G. (2011). Umpqua Bank is again no. 1 in local deposits. Web.
Taylor, B. (2011). Find the revolution before it finds you. Web.
Tweel, C. A. (2008). Leading for growth: Assessing the growth impact of Umpqua Bank’s cultural makeover. North Carolina Banking Institute, 12: 307-419.
Umpqua Bank. (2011). Our roots: An interactive history timeline. Web.
Wagoner, B. (2009). The green line series: Making the investment with Dan Weldon (Umpqua Bank). Web.