Monday, June 21, 2010

June Bank Failure Pace Slows: Umpqua Buys Third Failed Bank This Year, Expands Into Nevada

Bloomberg News

June 19 (Bloomberg) -- Umpqua Holdings Corp., owner of Umpqua Bank in Oregon, bought its third failed lender this year, agreeing to acquire Nevada Security Bank.

The bank in Reno, Nevada, was seized yesterday by state regulators, according to a statement posted on the Federal Deposit Insurance Corp. website. Umpqua, based in Portland, Oregon, said it will expand into Nevada with the purchase, which boosts its number of branches to 181.

FDIC Chairman Sheila Bair said yesterday in a speech that the U.S. needs new rules for loan origination, securitization and servicing as banks continue to fail. She cited a “lack of market discipline” that resulted in more than $2.1 trillion of securities issued between 2004 and 2006 that were backed by subprime mortgages or home loans made to borrowers not required to document their income.

“The financial crisis was triggered by a reckless departure from tried and true, common-sense loan underwriting practices,” Bair said in prepared remarks at the University of Pennsylvania’s Wharton School in Philadelphia. “The FDIC is in the midst of cleaning up the damage.”

Nevada Security Bank, with five branches, had $480.3 million in assets and $479.8 million in deposits, the FDIC said. The FDIC and Umpqua will share any losses on $368.2 million of the assets. The agency said the transaction will probably drain $80.9 million from its deposit-insurance fund.

Umpqua acquired Rainier Pacific Bank of Tacoma, Washington, and Seattle-based Evergreen Bank earlier this year. In 2009, it purchased the failed Bank of Clark County in Vancouver, Washington.

Problem Lenders

The FDIC’s list of “problem” lenders is the longest in 17 years. Bair has said the confidential list rose to 775 banks with $431 billion in assets in the first quarter. That’s an increase from 702 banks with $402.8 billion in assets at the end of the fourth quarter.

Umpqua rose 21 cents, or 1.7 percent, to $12.56 yesterday in regular Nasdaq Stock Market trading. It has climbed about 50 percent in the past year, compared with the 37 percent gain of the 24-company KBW Bank Index.

To contact the reporter on this story: Dan Reichl in San Francisco at .

Find out more about Bloomberg for iPhone: