Umpqua Holdings Corporation
Umpqua Holdings Corporation
1 SW Columbia Street, Suite 1200
Portland, Oregon 97258
Toll Free: (866) 486-7782
Fax: (936) 639-2337
Web site: http://www.umpquabank.com
Incorporated: 1953 as South Umpqua State Bank
Total Assets: $7.34 billion (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: UMPQ
NAIC: 522110 Commercial Banking; 551111 Offices of Bank Holding Corporation
There are more than 130 Umpqua Bank “stores” in Oregon, Washington, and northern California, mostly in small towns. These stores often serve as the local hot spot, hosting free movie nights, yoga classes, and book clubs. Umpqua Bank is the wholly owned subsidiary of Umpqua Holdings Corporation, which also owns brokerage firm Strand, Atkinson, Williams and York.
In 1953, with one bank and six employees, South Umpqua State Bank opened in Canyonville, Oregon. For close to 30 years, the rural institution, named after a river in Oregon, served mostly small- and medium-sized businesses of the Canyonville and Roseburg area timber industry, as well as some farmers, professionals, and other retail customers. The bank’s mission was to help farmers and other “little guys” cash checks and take out loans when bigger banks denied them service. Under the direction of some of its founders, South Umpqua State Bank eventually grew to include six locations.
In the early 1980s, as the recession, coupled with competition from the South and Canada, virtually eliminated the market for local timber, banking fell upon hard times in the Pacific Northwest. As many Oregon mills shut down, a wave of bankruptcies and business closings followed. Thirteen Oregon banks failed, and state-chartered Oregon domestic banks experienced a negative return on assets in 1982 and 1983.
A few community banks survived, South Umpqua State Bank among them. By the mid-1980s, although it still had a higher than average loan loss, the bank returned to profitability. For South Umpqua, which served a community of about 25,000, the return on assets was 0.78 percent and return on equity 11.75 percent in 1984.
Throughout the remainder of the 1980s and the first half of the 1990s, South Umpqua Bank had six branches serving Douglas County, Oregon. By November 1994, however, the bank’s market share had stagnated as major competitors, such as Wells Fargo and Bank of America, began encroaching on its territory with supermarket and pharmacy outlets. New President and CEO Raymond Davis responded to these competitive pressures by initiating a dramatic makeover of the approximately $160 million-in-assets institution.
Davis, a former CPA, had started working in banks while attending his hometown college, the University of Nevada, Reno. He became an executive officer of a small bank in Reno before moving to Atlanta, Georgia, to become president of the U.S. Banking Alliance, a consulting firm that evaluated bank performance. In this capacity, he had the opportunity to learn and record the best ideas of other financial institutions.
South Umpqua State Bank’s main concern, when Davis took charge, was to “differentiate ourselves from other banks. We realized that we could not do this with resources, i.e. cash, people, branches, computers—since the big banks ha[d] so much more than we do,” he explained in a 1999 Retail Banker International article. Thus, working with Stern Marketing Group of Berkeley, California, Davis inaugurated an image overhaul to address banking’s “bifurcation dilemma,” the situation whereby the teller line and transactions were in front of the branch and the account representatives and managers sequestered in back.
After the overhaul, all South Umpqua State Bank staff shared in one “universal job.” They were trained to provide customer service and to sell the bank’s entire product line during a six-week course that included units on manners and public speaking. They worked on commission and roamed the floor, greeting and assisting customers.
Another innovation that Davis instituted at South Umpqua was the “investment opportunities center,” with financial periodicals and a television set tuned to business programming, a self-service post office, a coffee bar, and interactive product displays. The prototype branch measured only 2,400 square feet, a 40 percent reduction in South Umpqua’s typical branch size, and had no walled teller windows or sales desks. It included a new logo, a fir tree, emphasizing the bank’s roots in the local logging community.
Matching the increased emphasis on friendly banking, South Umpqua also instituted a measurable quality service program. A computer-based program measured the level of service every store and every department of the bank provided. Each sales associate’s and store’s performance was evaluated each month based on quantifiable factors; total deposits, loan growth, and the production of new accounts were all factored into internal measures to arrive at a monthly “return on quality” for each branch.
By early 1997, product sales had increased by 40 percent, and South Umpqua’s account base was up by 21.5 percent, outstripping the business growth of its nearest competitor by 10 percent. Encouraged, the bank expanded from 6 to 11 branches and moved into nearby Lane County, Oregon, with three banks in Eugene and one in Springfield. In early 1998, with $253 million in assets, South Umpqua, which had sold stock directly to its customers for years, launched its initial public offering to fund its further expansion plans.
A year later, in 1998, the company reorganized itself as a bank holding company called Umpqua Holdings Corporation with the renamed South Umpqua Bank its wholly owned subsidiary. In April, the bank entered the Portland market with a loan origination office. By year’s end, with more than two-thirds of its branches converted to retail centers, South Umpqua had outstripped rivals US Bancorp and Wells Fargo in regional market share. One of the fastest growing banks in the western states, by 1999, South Umpqua Bank had doubled its assets to about $340 million, having averaged growth in revenues of more than 20 percent for the past few years.
Capitalizing on this growth, South Umpqua acquired an old-line Portland brokerage firm, Strand, Atkinson, Williams and York, in 1999. This firm had incorporated in 1928, and, at the time of the purchase, had about 4,000 clients and 25 employees and offices in Portland and Medford, Oregon, and Kalama, Washington. Umpqua gave its new subsidiary the capital base it needed to expand its stock and bond underwriting and in return received brokerage expertise and contacts. In 1999 Umpqua Bank also installed ATMs in nine Price Chopper stores from Albany to Grants Pass, Oregon, continuing its expansion at the ground level.
One of the buzz words in our company is empowerment. It’s empowerment at all levels of the organization from the newest associate to the most senior manager. Every store manager has decision-making ability to make the right decision for the customer.
Despite a positive reception overall by the public, the bank garnered questionable media attention in 1999 when nine environmental groups spearheaded a bank boycott to force board Chairman Allyn Ford to withdraw his own company’s plans to log federal old growth forests near Eugene. Davis insisted that the boycott was misdirected because “South Umpqua Bank and Roseburg Forest Products do not have anything to do with one another.” Although some people closed their accounts as a result of the boycott, and although a second and third boycott occurred in 2001, their actions did not have any appreciable effect on the bank.
South Umpqua renamed itself South Umpqua Bank in 2000 and stepped up its acquisition efforts. It merged with Valley of the Rogue Bank, creating the third largest Oregon-based commercial bank with more than $750 million in assets. Valley of the Rogue Bank had been founded in 1968 and had purchased five other banks before the merger, becoming southern Oregon’s largest community bank. After the merger, Davis remained president and chief executive of Umpqua Holdings, while William Haden, president and chief executive of Valley of the Rogue Bank, became president and chief executive of the newly named Umpqua Bank. All told, the new financial institution had 27 banks along the I-5 corridor and in southern Oregon and 54 ATMs scattered across the state. Also in 2000, South Umpqua Bank acquired a second Portland brokerage firm, Adams, Hess, Moore & Co.
Umpqua Holdings moved its headquarters to Portland in 2001, leaving Umpqua Bank behind in Roseburg. The downturn in the economy made it harder for many banks to stay independent, and Umpqua continued its string of acquisitions. It purchased Independent Financial Network, of Coos Bay, Oregon, a multibank holding company with 14 banks on or near the Oregon Coast with $389 million in assets and Linn-Benton community bank of Albany, Oregon, in 2001.
In 2002 Umpqua Holdings purchased Centennial Bancorp, whose subsidiary, Centennial Bank, had 15 branches in the Portland area, including two in Vancouver, Washington, and another eight in Eugene, Oregon, and along the coast. Founded in Eugene in the early 1970s, Centennial had been a leading lender to business, and the fourth largest Oregon-based bank. The move created the largest banking company based in Oregon and boosted Umpqua’s assets to $2.5 billion. It also increased Umpqua Bank’s Portland presence. Umpqua Holdings merged with Humboldt Bancorp in northern California in 2004, closing out the year with 92 stores and $4.5 billion in assets.
Umpqua took its store concept one step further with its new destination stores in 2003. These bank stores were reminiscent of an art gallery, Internet café, and luxury hotel lobby rolled into one with the teller row partitioned by lamps instead of walls, and money handed to the customer on a tray with a gold-wrapped chocolate coin. To prepare staff for its new customer service responsibilities, Umpqua negotiated with the Ritz-Carlton to provide staff training emphasizing hospitality. Umpqua University & Support Center, in Roseburg, which housed the bank’s training facility, human resources, retail support, and the consumer and business lending departments, opened in 2004 to create a central location for staff trainings.
Paving the way for and underscoring the community aspect of its new destination concept, Umpqua focused on launching several community service programs. In 2001 it began its “Wish Upon a Star” program with Douglas, Jackson, and Josephine radio stations, a monthlong holiday program that granted wishes to individuals in financial need. In 2003 it introduced Green Accounts that allowed account holders the choice of donating the interest on their account to a local nonprofit, originally one of several environmental groups, but later other nonprofits as well.
- South Umpqua State Bank opens in Canyon-ville, Oregon.
- Raymond Davis becomes company chief executive.
- The bank introduces its “store” concept.
- The company creates Umpqua Holdings Corporation with South Umpqua Bank as a wholly owned subsidiary.
- South Umpqua acquires Strand, Atkinson, Williams and York.
- South Umpqua State Bank merges with Valley of the Rogue Bank and forms Umpqua Holdings Corporation; William Haden becomes chief executive of South Umpqua Bank; the company acquires Adams, Hess, Moore & Co.
- South Umpqua Holdings moves to Portland.
- Umpqua Holdings purchases Centennial Bancorp.
- Umpqua Holdings merges with Humboldt Bancorp; the company opens Umpqua University & Support Center.
- Umpqua purchases Western Sierra Bancorp.
In 2004 it developed its Connect Volunteer Network, a volunteer program that provided each fulltime Umpqua Bank associate with 40 hours of paid volunteer time. Nearly 800 of Umpqua Bank’s 900 eligible employees enrolled as soon as they were able. Connect extended to northern California shortly thereafter. The bank also offered the online Umpqua Read Club in partnership with Powell’s Books.
Total market share for Portland’s flagship next generation store increased sixfold between 2003 and 2004, prompting Umpqua to open other next generation stores elsewhere in its territory. It opened a second store in Bend and a first in Medford, Oregon, in 2004, both featuring this next generation design. After testing out a loan production office in Bellevue, Washington, it opened its first full-service, destination store in Seattle area in 2005.
It also began to open new “neighborhood stores,” which were smaller and faster to build. In addition to bank products, these stores offered retail space for distinctive merchandise from local businesses, and an electronic daily specials menu advertising neighborhood information, resources, and events. They also featured a Discover Wall, an interactive multiscreen display providing information on such topics as area home prices. The Discover Wall included Discover Local Music, which allowed people to download recordings by area artists onto CDs.
In 2006 Umpqua grew from close to 100 to slightly more than 125 banks when it acquired Western Sierra Bancorp and subsidiaries, Western Sierra Bank, Central California Bank, Lake Community Bank, and Auburn Community Bank. This acquisition increased its presence in the greater Sacramento and San Joaquin Valley area. The next year, it purchased North Bay Bancorp and its principal operating subsidiary, The Vintage Bank along with its Solano Bank division, adding another ten northern California banks.
As impressive as Umpqua’s growth appeared on its own, it was even more impressive viewed in light of the decline of the timber industry and then the tech bust of 2000 in the Pacific Northwest. Oregon and Washington had the highest unemployment rates in the nation. Yet Umpqua grew, from less than 1 percent of Oregon deposits in 1999, to 6.2 percent in early 2005 or 3 percent of deposits in both Oregon and Washington. By 2007 it had 134 branches with more than $7 billion in deposits, up from close to $5 billion in 2005.
Davis took into account some of the challenges that came with such substantial growth in a 2007 Bank Marketing International article: “As we have grown so rapidly—we have become the largest community bank in the Northwest—we face the challenge of remaining agile and nimble.” At a time when U.S. banks were opening branches faster than ever (1,500 from 2004 to 2005 alone) and a time when younger customers wanted to do everything online, how well the bank would continue to grow, according to Davis, was “a scary question to think about.”
Nonetheless, Umpqua called itself the “world’s greatest bank” and had been judged the best place to work among the state’s large employers by Oregon Business Magazine in 2004 as well as one of the “best ideas” of 2005 by BusinessWeek. In addition, Fortune ranked it 34th on its list of the “100 Best Companies to Work For” in 2007. Challenges aside, Umpqua clearly seemed to be doing many things right.
Strand, Atkinson, Williams & York.
Bank of America Corporation; Washington Mutual, Inc.; Wells Fargo & Company; West Coast Bancorp; Bank of the West; KeyCorp; U.S. Bancorp; Washington Federal, Inc.
“Blazing the Oregon Trail,” Bank Marketing International, March 1997, p. 9.
“Consumer Banking the Friendly Way,” Retail Banker International, July 30, 1999, p. 12.
Gilstrap, Michelle, “Banking with a Smile,” Display & Design Ideas, November 1, 2004.
Kalb, Loretta, “Oregon-Based Umpqua Banks Aims to Be Unique in Banking in Northern California,” Sacramento Bee, July 25, 2004.
Kuehner-Hebert, Katie, “‘Neighborhood Store’ Latest Branch Model from Umpqua,” American Banker, March 24, 2006, p. 3.
———, “Unorthodox Branch Style Gets More So at Umpqua,” American Banker, June 20, 2003, p. 5.
Schmermund, Kathleen, “Umpqua Promotes Musicians, Loans,” American Banker, June 29, 2005, p. 5.
Stiles, Greg, “Roseburg, Oregon–Based Umpqua Bank Named Best Place of the Year to Work in State,” Mail Tribune, March 3, 2004.
“Umpqua Bank: Leading the Way in Customer Experience,” Bank Marketing International, January 29, 2007, p. 6.