Net income of $10.2 million or $0.17 per diluted share

Loans past due 30-89 days decreased 72% from first quarter

Non-performing assets ended quarter at 1.25% of total assets

Net interest margin increased 17 basis points from first quarter to 4.15%

Umpqua Holdings Corporation (NASDAQ:UMPQ), parent company of Umpqua Bank and Strand, Atkinson, Williams & York, Inc., today announced second quarter 2008 net income of $10.2 million, or $0.17 per diluted share, compared to $19.9 million, or $0.32 per diluted share, for the second quarter of 2007.

Significant financial statement items for the second quarter of 2008 include:

• Non-performing assets ended the quarter at 1.25% of total assets. Non-performing loans ended the quarter at 1.61% of total loans;
• Loans past due 30-89 days decreased $49.3 million or 72% during the quarter to end at $18.9 million, or 0.31% of total loans, the lowest level since March 2007;
• Total net charge-offs for the second quarter of 2008 were $38.0 million, or 2.51% of average loans on an annualized basis. Approximately $13.8 million of the charge-offs related to resolved non-performing loans in the second quarter, with the balance of $24.2 million for accelerated charge-offs of loss estimates on remaining non-performing loans, reducing their balance to the estimated net realizable value;
• Provision for loan losses of $25.1 million, representing a reduction of $0.25 per diluted share;
• Loss on sale of other real estate owned of $2.9 million (recorded in other non-interest income), representing a reduction of $0.03 per diluted share;
• Interest income reversals on new non-accrual loans of $1.4 million reduced earnings per diluted share by $0.01 and reduced net interest margin by 8 basis points;
• Gain on fair value of junior subordinated debentures of $3.2 million (recorded in other non-interest income) based on widening spreads for new issuances, increased earnings per diluted share by $0.03;
• Mortgage banking revenue includes a $1.8 million gain in the value of the mortgage servicing right (MSR) asset, increased earnings per diluted share by $0.02;
• Cost of interest bearing deposits decreased 58 basis points during the quarter;
• Net interest margin, on a tax equivalent basis, increased 17 basis points during the quarter to 4.15%. The improvement was attributable to reductions in cost of interest bearing deposits which more than offset reductions in earning asset yields. Excluding reversals of interest on new non-accrual loans, the net interest margin would have increased 25 basis points during the quarter.

“It should be clear from this quarter’s results that management continues to take an aggressive stance to remedy all known credit issues affecting the Company. Unfortunately, the housing market downturn and other serious global economic issues continue to place negative pressure on the financial industry resulting in depressed bank earnings and stock values. Although Umpqua has not been immune to this cycle, it is important to note that, except for our unusual credit charges, all other aspects of the company are performing well,” said Ray Davis, president and CEO of Umpqua Holdings Corporation. “Umpqua Holdings is a strong and viable company with a management team committed to addressing issues quickly and efficiently as we stay focused on building a strong company for the future.”

Operating earnings exclude merger related expense, net of tax, although the Company had no merger related expense in 2008. The following is a comparison of net income to operating earnings for all periods presented:

Credit quality

Non-performing assets were $104.4 million, or 1.25% of total assets, as of June 30, 2008, compared to $88.3 million, or 1.06% of total assets as of March 31, 2008. Of this amount, $3.9 million represented loans past due greater than 90 days and still accruing interest, $94.7 million of non-accrual loans, and $5.8 million of other real estate owned.

Other real estate owned decreased 56% in the second quarter, to $5.8 million as of June 30, 2008. During the second quarter, the Company recognized a loss on sale of other real estate owned of $2.9 million, which is recognized as a reduction of other non-interest income.

Loans past due 30-89 days total $18.9 million, or 0.31% of total loans, as of June 30, 2008. This delinquent loan total decreased $49.3 million, or 72%, during the quarter from the total 30-89 day past due amount of $68.2 million, or 1.13% of total loans as of March 31, 2008. The current level of loans past due 30-89 days is the lowest since March 2007.

The Company identified $24.2 million of reserves related to non-accrual loans, which historically were specifically reserved as estimates for potential future loss. Prior to the second quarter, the Company would recognize the charge-off of the impairment reserve when the loan was resolved, sold, or foreclosed/transferred to other real estate owned. Starting in the second quarter, the Company accelerated the charge-off of the impairment reserve to the period when it arises for collateral dependent loans. Therefore, the non-accrual loans of $94.7 million as of June 30, 2008 have already been charged-off to their estimated net realizable value, and are expected to be resolved over the coming quarters with no additional material loss.

Total net charge-offs were $38.0 million in the second quarter of 2008, an increase of 182% over the first quarter of 2008. As discussed above, $24.2 million of the second quarter charge-offs were from acceleration of the impairment reserve estimate on non-accrual loans. This, in addition to $13.8 million of other charge-offs on resolved problem loans, combine for the total $38.0 million in charge-offs for the quarter.

The provision for loan losses for the second quarter of 2008 was $25.1 million. At March 31, 2008, the impairment reserve for non-accrual loans was $13.3 million, which was created through charges to the provision for loan loss in previous quarters. The combined total of $38.4 million covered the net charge-offs taken in the second quarter of 2008.

The allowance for credit losses was 1.22% of total loans and leases at June 30, 2008, compared to 1.45% of total loans and leases at March 31, 2008. The reduction in the second quarter results directly from the immediate charge-off of the impairment reserve on non-accrual loans. Excluding the impairment reserve from March 31, 2008, the allowance for credit losses was unchanged during the quarter.

For the past five quarters, the Company has been aggressively resolving problems arising from the current economic downturn. The following is a recap of the credit quality trends of the Company since the start of 2007, noting the change discussed above was implemented in the second quarter of 2008:

Total construction loans at June 30, 2008 were $1.07 billion, a decrease of 4% from March 31, 2008. Within this total, the residential development loan segment is $502 million. This segment has decreased $80 million, or 14%, from March 31, 2008, and decreased $263 million, or 34%, from September 30, 2007. Oregon/Washington residential development loans total $291 million, a decrease of 16% from the first quarter. California residential development loans total $210 million, a decrease of 10% from the first quarter. The remaining $569 million in construction loans are commercial construction projects. These commercial construction loans are uniquely different than the residential development loans and are performing with no notable issues.

The following is a geographic distribution of the residential development portfolio at June 30, 2008:

Net interest margin

The Company reported a tax equivalent net interest margin of 4.15% for the second quarter of 2008, compared to 3.98% for the first quarter of 2008, and 4.34% for the second quarter of 2007. The increase in net interest margin from the first quarter of 2008 resulted primarily from a 58 basis point reduction in the cost of interest bearing deposits, more than offsetting the decline in earning asset yields from recent prime rate decreases. The $1.4 million interest reversal on non-accrual loans in the second quarter resulted in an 8 basis point decline in the tax equivalent net interest margin during the quarter.

Mortgage servicing rights

Mortgage interest rates increased in the second quarter of 2008, resulting in the Company recognizing a $1.8 million gain in the MSR asset. At June 30, 2008, the MSR asset was valued at 1.26% of the total serviced loan portfolio.

Other non-interest income

Other non-interest income was $2.6 million for the second quarter of 2008, compared to $16.4 million for the first quarter of 2008. During the second quarter of 2008, this line item included a fair value gain on junior subordinated debentures of $3.2 million, offset by a loss on sale of other real estate owned of $2.9 million. Excluding these two items, other non-interest income for the second quarter would have been $2.3 million.

As discussed in more detail later in this release, the first quarter of 2008 included a gain on mandatory redemption of Visa Inc. (Visa) shares of $12.6 million, and a fair value gain on junior subordinated debentures of $1.6 million. Excluding these two items, other non-interest income for the first quarter of 2008 would have been $2.2 million.

Non-interest expense

Total non-interest expense for the second quarter of 2008 was $51.4 million, compared to $46.9 million for the first quarter of 2008. As discussed in more detail later in this release, the first quarter of 2008 included a Visa related litigation accrual recovery of $5.2 million. Excluding this item, total non-interest expense for the first quarter of 2008 would have been $52.1 million. Salary and benefit expense decreased $576,000, or 2%, during the second quarter, based on the Company’s continued cost saving initiatives.

Balance sheet

Total consolidated assets as of June 30, 2008 were $8.3 billion, compared to $8.1 billion a year ago. Total gross loans and leases, and deposits, were $6.1 billion and $6.4 billion, respectively, as of June 30, 2008, compared to $6.0 billion and $6.4 billion, respectively, a year ago.

Total loans increased $66.5 million during the second quarter of 2008, while deposits decreased $153.3 million. The decrease in deposits during the quarter resulted from housing dependent segments of the customer base carrying lower balances given the current economic downturn. Non-interest bearing demand deposits increased to 20% of total deposits as of June 30, 2008, and service charge revenue on deposit accounts increased 5% during the quarter. The total number of deposit accounts and relationships continued to increase during the quarter, consistent with the Company’s growth strategy.

During the quarter, the Company increased term debt with $175 million in new borrowings with maturities through April 2010. The weighted average rate on the new borrowings was 3.19%.

The Company completed its acquisition of North Bay Bancorp on April 26, 2007 by issuing 5,163,573 shares in connection with this acquisition, with a total deal value of $143.2 million. This acquisition led to an increase in assets, loans and deposits of $728 million, $443 million and $463 million, respectively, in the second quarter of 2007.

Capital

The Company’s estimated total risk-based capital as of June 30, 2008 is 11.06%, compared to 11.15% as of March 31, 2008, and is in excess of the regulatory definition of “well capitalized” of 10.00%. The reduction during the quarter related to the loan growth noted above. The level as of June 30, 2008 is an estimate pending filing of the Company’s regulatory reports. The Company expects the total risk-based capital ratio to range from 10.80% to 11.00% for the remainder of 2008.

As of June 30, 2008, total shareholders’ equity was $1.24 billion. Book value per share was $20.71, tangible book value per share was $8.03 and tangible equity to assets was 6.36% as of June 30, 2008. These measures decreased slightly during the second quarter of 2008, and were related to an increase in market interest rates causing an unrealized loss on investment securities of $10.2 million, after tax, compared to an unrealized gain of $2.3 million, after tax, as of March 31, 2008.

There were no repurchases of common stock during 2008. The total remaining available common shares authorized for repurchase is approximately 1.54 million as of June 30, 2008.

VISA related activity

In March 2008, Visa completed its initial public offering. Umpqua Bank and certain other Visa member banks are shareholders in Visa. Following the initial public offering, the Company received $12.6 million in proceeds from the offering, as a mandatory partial redemption of 295,377 shares, reducing the Company’s holdings from 764,036 shares to 468,659 shares of Class B common stock. Using proceeds from this offering, Visa established a $3.0 billion escrow account to cover the resolution of pending litigation and related claims. The partial redemption proceeds are reflected in other non-interest income in the first quarter of 2008.

In connection with Visa’s establishment of the litigation escrow account, the Company reversed a $5.2 million reserve in the first quarter of 2008, reflected as a reduction of other non-interest expense. This reserve was created in the fourth quarter of 2007, pending completion of the Visa initial public offering, as a charge to other non-interest expense.

The remaining unredeemed shares of Visa Class B common stock are restricted and may not be transferred until the later of (i) three years from the date of the initial public offering, or (ii) the period of time necessary to resolve the covered litigation. A conversion ratio of 0.71429 was established for the conversion rate of Class B shares into Class A shares. If the funds in the escrow account are insufficient to settle all the covered litigation, Visa may sell additional Class A shares, use the proceeds to settle litigation, and further reduce the conversion ratio. If funds remain in the escrow account after all litigation is settled, the Class B conversion ratio will be increased to reflect that surplus.

As of June 30, 2008, the value of the Class A shares was $81.31 per share. The value of unredeemed Class A equivalent shares owned by the Company was $27.2 million as of June 30, 2008, and has not been reflected in the accompanying financial statements.

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. Umpqua believes that non-GAAP financial measures provide investors with information useful in understanding Umpqua’s financial performance. Umpqua provides measures based on “operating earnings,” which exclude merger-related expenses. Operating earnings per diluted share is calculated by dividing operating earnings by the same diluted share total used in determining diluted earnings per share. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent is included in the attached financial tables or where the non-GAAP measure is presented.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to various risk factors, including those set forth from time to time in our filings with the SEC. You should not place undue reliance on forward-looking statements and we undertake no obligation to update any such statements. In this press release we make forward-looking statements about the prospect of improved performance, the expected resolution of existing non-accrual loans without further loss and the expected level of total risk-based capital for the remainder of 2008. Specific risks that could cause results to differ from the forward-looking statements are set forth in our filings with the SEC and include, without limitation, our ability to realize expected recoveries of non-accrual loans, further deterioration in credit quality and our ability to resolve non-accrual loans in a satisfactory manner.

About Umpqua Holdings Corporation

Umpqua Holdings Corporation (NASDAQ: UMPQ) is the parent company of Umpqua Bank, an Oregon-based community bank recognized for its entrepreneurial approach, innovative use of technology, and distinctive banking solutions. Umpqua Bank has 147 locations between Napa, Calif., and Bellevue, Wash., along the Oregon and Northern California Coast and in Central Oregon. Umpqua Holdings also owns a retail brokerage subsidiary Strand, Atkinson, Williams & York Inc., which has locations in Umpqua Bank stores and in dedicated offices throughout Oregon and Southwest Washington. Umpqua Bank’s Private Client Services Division provides tailored financial services and products to individual customers. Umpqua Holdings Corporation is headquartered in Portland, Ore. For more information, visit www.umpquaholdingscorp.com.

Umpqua Holdings Corporation will conduct a quarterly earnings conference call Thursday, July 17, 2008, at 10:00 a.m. PT (1:00 p.m. ET) during which the Company will discuss second quarter 2008 results and provide an update on recent activities. There will be a question-and-answer session following the presentation. Shareholders, analysts and other interested parties are invited to join the call by dialing 800-752-8363 a few minutes before 10:00 a.m. The conference ID is “53849246.” Information to be discussed in the teleconference will be available on the Company’s website prior to the call at www.umpquaholdingscorp.com. A rebroadcast can be found approximately two hours after the conference call by dialing 800-642-1687 with the conference ID noted above, or by visiting the Company’s website.