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PART I.		FINANCIAL INFORMATION


Item 1.		Financial Statements (unaudited)

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(in thousands, except shares)


	March 31,			December 31,
	2006			2005
ASSETS
Cash and due from banks	$	120,615		$	151,521
Temporary investments		1,855			10,233

Total cash and cash equivalents		122,470			161,754
Trading account assets		372			601
Investment securities available for sale, at fair value		648,487			671,868
Investment securities held to maturity, at amortized cost		7,633			8,677
Mortgage loans held for sale		11,760			9,061
Loans		4,096,194			3,921,631
Allowance for loan losses		(44,546	)		(43,885	)

Net loans		4,051,648			3,877,746

Federal Home Loan Bank stock, at cost		14,264			14,263
Premises and equipment, net		88,857			88,865
Goodwill and other intangible assets, net		408,156			408,503
Mortgage servicing rights, net		11,203			10,890
Other assets		110,994			108,411

Total assets	$	5,475,844		$	5,360,639


LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest bearing	$	990,803		$	987,714
Interest bearing		3,238,845			3,298,552

Total deposits		4,229,648			4,286,266
Securities sold under agreements to repurchase and federal funds purchased		272,990			113,865
Term debt		3,111			3,184
Junior subordinated debentures		165,643			165,725
Other liabilities		53,670			53,338

Total liabilities		4,725,062			4,622,378


COMMITMENTS AND CONTINGENCIES (NOTE 8)

SHAREHOLDERS’ EQUITY
Preferred stock, no par value, 2,000,000 shares authorized; none issued and outstanding		—			—
Common stock, no par value, 100,000,000 shares authorized; issued and outstanding: 44,721,027 in 2006 and 44,556,269 in 2005		567,369			564,579
Retained earnings		195,639			183,591
Accumulated other comprehensive loss		(12,226	)		(9,909	)

Total shareholders’ equity		750,782			738,261

Total liabilities and shareholders’ equity	$	5,475,844		$	5,360,639

See notes to condensed consolidated financial statements

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

(in thousands)


	Three months ended
	March 31,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	17,427		$	15,019
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
Federal Home Loan Bank stock dividends		(44	)		(43	)
Amortization of investment premiums, net		293			281
Origination of loans held for sale		(61,655	)		(63,856	)
Proceeds from sales of loans held for sale		58,869			72,444
Net decrease in trading account assets		229			227
Provision for loan losses		21			1,000
Gain on sales of loans		(333	)		(195	)
Increase in mortgage servicing rights		(634	)		(211	)
Depreciation and amortization		2,667			2,759
Tax benefits of stock options exercised		431			1,336
Net (increase) decrease in other assets		(2,351	)		(640	)
Net increase (decrease) in other liabilities		(96	)		1,141
Other, net		1,018			(599	)

Net cash provided by operating activities		15,842			28,663


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities available-for-sale		—			(634	)
Sales and maturities of investment securities available-for-sale		19,614			27,342
Redemption of Federal Home Loan Bank stock		43			41
Maturities of investment securities held-to-maturity		1,045			15
Net loan and lease originations		(182,915	)		(66,013	)
Purchase of loans		(136	)		(7,451	)
Disposals of furniture and equipment		28			18
Sales of real estate owned		1,054			—
Proceeds from sales of loans		9,549			9,430
Purchases of premises and equipment		(2,588	)		(3,553	)

Net cash used by investing activities		(154,306	)		(40,805	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposit liabilities		(56,610	)		155,000
Net increase (decrease) in Fed funds purchased		152,500			(28,000	)
Net increase (decrease) in securities sold under agreements to repurchase		6,625			(4,555	)
Dividends paid on common stock		(5,352	)		(2,669	)
Excess tax benefits from the exercise of stock options		751			—
Proceeds from stock options exercised		1,339			2,711
Repayment of term debt		(73	)		(25,051	)

Net cash provided by financing activities		99,180			97,436

Net increase (decrease) in cash and cash equivalents		(39,284	)		85,294
Cash and cash equivalents, beginning of period		161,754			118,207

Cash and cash equivalents, end of period	$	122,470		$	203,501


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	26,241		$	12,324
Income taxes	$	4,100		$	4,975

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 – Summary of Significant Accounting Policies

The accounting and financial reporting policies of Umpqua Holdings Corporation (referred to in this report as “we”, “our” or “the Company”) conform with accounting principles generally accepted in the United States of America. The accompanying interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Umpqua Bank (“Bank”), and Strand, Atkinson, Williams & York, Inc. (“Strand”). All material inter-company balances and transactions have been eliminated. The consolidated financial statements have not been audited. A more detailed description of our accounting policies is included in the 2005 Annual Report filed on Form 10-K. There have been no significant changes to these policies.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments include normal and recurring accruals considered necessary for a fair and accurate presentation. The results for interim periods are not necessarily indicative of results for the full year or any other interim period. Certain reclassifications of prior year amounts have been made to conform with current classifications.

Note 2 – Stock-Based Compensation

The Company adopted the 2003 Stock Incentive Plan (“2003 Plan”) in April 2003 that provides for grants of up to 2 million shares. The plan further provides that no grants may be issued if existing options and subsequent grants under the 2003 Plan exceed 10% of the Company’s outstanding shares on a diluted basis. Generally, options vest ratably over a period of five years. Under the terms of the 2003 Plan, the exercise price of each option equals the market price of the Company’s stock on the date of the grant, and the maximum term is ten years.

The Company has options outstanding under two prior plans adopted in 1995 and 2000, respectively. With the adoption of the 2003 Plan, no additional grants can be issued under the previous plans. The Company also assumed various plans in connection with mergers and acquisitions but does not make grants under those plans.

Effective January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123R, Share Based Payments, a revision to the previously issued guidance on accounting for stock options and other forms of equity-based compensation. SFAS No. 123R requires companies to recognize in the income statement the grant-date fair value of stock options and other equity-based forms of compensation issued to employees over the employees’ requisite service period (generally the vesting period). Prior to January 1, 2006, we accounted for share-based compensation to employees under the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees. Under the intrinsic value method, compensation expense is recognized only to the extent an option’s exercise price is less than the market value of the underlying stock on the date of grant. We also followed the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure. We adopted SFAS No. 123R under the modified prospective method which means that the unvested portion of previously granted awards and any awards that are granted or modified after the date of adoption will be measured and accounted for under the provisions of SFAS No. 123R. Accordingly, financial statement amounts for prior periods presented have not been restated to reflect the fair value method of recognizing compensation cost relating to stock options. The Company will continue to use straight-line recognition of expenses for awards with graded vesting.

As a result of adopting SFAS No. 123R on January 1, 2006, the Company’s income before income taxes and net income for the three months ended March 31, 2006, are $355,000 and $213,000 lower, respectively, than if it had continued to account for share-based compensation under APB No. 25. Basic and diluted earnings per share for the three months ended March 31, 2006 would have been $0.40 and $0.39, respectively, if the Company had not adopted SFAS No. 123R, compared to reported basic and diluted earnings per share of $0.39.

The compensation cost related to stock options that has been charged against income (included in salaries and employee benefits) was $367,000 for the three months ended March 31, 2006. The total income tax benefit recognized in the income statement related to stock options was $146,000 for the three months ended March 31, 2006.

The fair value of each option grant is estimated as of the grant date using the Black-Scholes option-pricing model using assumptions noted in the following table. Expected volatility is based on the historical volatility of the price of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination rates within the valuation model. The expected term of options granted is derived from the vesting period and contractual term using an allowed “short-cut method” and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

(In thousands, except per share data)


	Three months ended March 31, 2006
						Weighted-Avg
	Options			Weighted-Avg		Remaining Contractual		Aggregate
	Outstanding			Exercise Price		Term		Intrinsic Value
Balance, beginning of period		1,846		$	13.75
Granted		25		$	28.43
Exercised		(165	)	$	8.13
Forfeited/expired		(13	)	$	20.97


Balance, end of period		1,693		$	14.45		6.3	$	23,784


Options exercisable at end of period		1,093		$	10.64		5.3	$	19,525

The total intrinsic value (which is the amount by which the stock price exceeded the exercise price on the date of exercise) of options exercised during the three months ended March 31, 2006 and 2005 was $3.3 million and $4.1 million, respectively. During the three months ended March 31, 2006, the amount of cash received from the exercise of stock options was $1.3 million. As of March 31, 2006, there was $4.4 million of total unrecognized compensation cost related to non-vested stock options which is expected to be recognized over a weighted-average period of 3.3 years.

The Company grants restricted stock periodically as a part of the 2003 Plan for the benefit of employees. Restricted shares issued currently vest ratably over five years for all grants issued. Recipients of restricted stock do not pay any cash consideration to the Company for the shares, and have the right to vote all shares subject to such grant, and receive all dividends with respect to such shares, whether or not the shares have vested. Restrictions are based on continuous service.

The following table summarizes information about non-vested restricted shares as of March 31, 2006 and changes for the three months ended March 31, 2006:

(In thousands, except per share data)


	Three months ended March 31, 2006
	Restricted
	Shares			Average Grant
	Outstanding			Date Fair Value
Balance, beginning of period		47		$	20.77
Granted		82		$	28.03
Vested		—			—
Forfeited/expired		(3	)		22.13


Balance, end of period		126		$	25.48

The compensation cost related to restricted stock that has been charged against income (included in salaries and employee benefits) was $103,000 for the three months ended March 31, 2006. This compared with a restricted stock compensation cost of $65,000 for the three months ended March 31, 2005. The total income tax benefit recognized in the income statement related to restricted stock was $41,000 for the three months ended March 31, 2006. This compared with an income tax benefit related to restricted stock of $26,000 for the three months ended March 31, 2005. As of March 31, 2006, there was $3.1 million of total unrecognized compensation cost related to non-vested restricted stock which is expected to be recognized over a weighted-average period of 4.2 years.

For the three months ended March 31, 2006 and 2005, the Company received income tax benefits of $1.2 million, and $1.3 million, respectively, related to the exercise of non-qualifying employee stock options, disqualifying dispositions for the exercise of incentive stock options and the vesting of restricted shares. Prior to the adoption of SFAS No. 123R, the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Statement of Cash Flows. SFAS No. 123R requires the cash flows from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. The $751,000 excess tax benefit classified as a financing cash inflow would have been classified as an operating cash inflow if the Company had not adopted SFAS No. 123R.

Note 3 – Business Combinations

In February 2006, we announced the signing of a definitive agreement for the Company to acquire Western Sierra Bancorp and its principal operating subsidiaries, Western Sierra Bank, Central California Bank, Lake Community Bank and Auburn Community Bank. The agreement provides for Western Sierra shareholders to receive 1.61 shares of the Company’s common stock for each share of Western Sierra common stock, giving the acquisition a total value of approximately $355 million.

Upon completion of the acquisition, which is expected in the second quarter of 2006, all Western Sierra Bancorp branches will operate under the Umpqua Bank name. The acquisition will add Western Sierra’s complete network of 31 Northern California branches, including locations in the Sacramento, Auburn, Lakeport and Sonora areas, to our network of 96 Northern California, Oregon and Washington locations and result in a combined institution with assets of approximately $6.9 billion.

Note 4 – Per Share Information

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in a similar manner, except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares were issued using the treasury stock method. For all periods presented, stock options and restricted shares are the only potentially dilutive instruments issued by the Company.

The following is a computation of basic and diluted earnings per share for the three months ended March 31, 2006 and 2005:

Earnings Per Share
(in thousands, except per share data)


	Three months ended
	March 31,
	2006		2005
Basic earnings per share:
Weighted average shares outstanding		44,658		44,331
Net income	$	17,427	$	15,019
Basic earnings per share	$	0.39	$	0.34

Diluted earnings per share:
Weighted average shares outstanding		44,658		44,331
Net effect of the assumed exercise of stock options and vesting of restricted shares, based on the treasury stock method		371		632

Total weighted average shares and common stock equivalents outstanding		45,029		44,963

Net income	$	17,427	$	15,019
Diluted earnings per share	$	0.39	$	0.33

Note 5 – Segment Information

The Company operates three primary segments: Community Banking, Mortgage Banking and Retail Brokerage. The Community Banking segment’s principal business focus is the offering of loan and deposit products to its business and retail customers in its primary market areas. The Community Banking segment operates 96 stores located principally throughout Oregon, Northern California and Washington.

The Mortgage Banking segment, which operates as a division of the Bank, originates, sells and services residential mortgage loans.

The Retail Brokerage segment consists of the operations of Strand, which offers a full range of retail brokerage services and products to its clients who consist primarily of individual investors. The Company accounts for intercompany fees and services between Strand and the Bank at an estimated fair value according to regulatory requirements for services provided. Intercompany items relate primarily to management services and interest on intercompany borrowings.

Summarized financial information concerning the Company’s reportable segments and the reconciliation to the consolidated financial results is shown in the following tables:

Segment Information


	Three Months Ended March 31, 2006
(in thousands)	Community		Retail			Mortgage
	Banking		Brokerage			Banking		Consolidated

Interest income	$	79,270	$	22		$	1,454	$	80,746
Interest expense		25,396		—			1,071		26,467

Net interest income		53,874		22			383		54,279
Provision for loan losses		21		—			—		21
Non-interest income		7,950		2,477			1,775		12,202
Non-interest expense		34,170		2,576			1,983		38,729
Merger-related expense		251		—			—		251

Income before income taxes		27,382		(77	)		175		27,480
Provision for income taxes		9,981		—			72		10,053

Net income	$	17,401	$	(77	)	$	103	$	17,427


	Three Months Ended March 31, 2005
	Community		Retail		Mortgage
(in thousands)	Banking		Brokerage		Banking		Consolidated

Interest income	$	63,001	$	13	$	1,460	$	64,474
Interest expense		13,770		—		854		14,624

Net interest income		49,231		13		606		49,850
Provision for loan losses		1,000		—		—		1,000
Non-interest income		6,058		3,177		1,367		10,602
Non-interest expense		30,616		2,872		1,846		35,334
Merger-related expense		101		—		—		101

Income before income taxes		23,572		318		127		24,017
Provision for income taxes		8,829		118		51		8,998

Net income	$	14,743	$	200	$	76	$	15,019


	March 31, 2006
	Community		Retail		Mortgage
(in thousands)	Banking		Brokerage		Banking		Consolidated

Total assets	$	5,371,038	$	7,870	$	96,936	$	5,475,844
Total loans	$	4,022,868	$	—	$	73,326	$	4,096,194
Total deposits	$	4,229,589	$	—	$	59	$	4,229,648


	December 31, 2005
	Community		Retail		Mortgage
(in thousands)	Banking		Brokerage		Banking		Consolidated

Total assets	$	5,257,333	$	7,925	$	95,381	$	5,360,639
Total loans	$	3,846,507	$	—	$	75,124	$	3,921,631
Total deposits	$	4,286,227	$	—	$	39	$	4,286,266

Note 6 – Recently Issued Accounting Pronouncements

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (“SFAS No. 156”). SFAS No. 156 requires all separately recognized servicing assets and liabilities to be initially measured at fair value. In addition, entities are permitted to choose to either subsequently measure servicing rights at fair value and report changes in fair value in earnings, or amortize servicing rights in proportion to and over the estimated net servicing income or loss and assess the rights for impairment. Beginning with the fiscal year in which an entity adopts SFAS No. 156, it may elect to subsequently measure a class of servicing assets and liabilities at fair value. Post adoption, an entity may make this election as of the beginning of any fiscal year. An entity that elects to subsequently measure a class of servicing assets and liabilities at fair value should apply that election to all new and existing recognized servicing assets and liabilities within that class. The effect of remeasuring an existing class of servicing assets and liabilities at fair value is to be reported as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. SFAS No. 156 is effective as of the beginning of an entity’s first fiscal year that begins after September 15, 2006. The Company is currently evaluating the impact of the adoption of SFAS No. 156.

In March 2004, the FASB ratified the consensus reached by the Emerging Issues Task Force regarding Issue 03-1 The Meaning of

Other-Than-Temporary Impairment and Its Application to Certain Investments (“EITF 03-01”). The consensus provided guidance for determining when an investment is other-than-temporarily impaired and established disclosure requirements for investments with unrealized losses. The guidance was effective for periods beginning after June 15, 2004. On September 30, 2004, the FASB deferred the implementation of the recognition criteria of EITF 03-01. In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. This FSP nullifies certain requirements of EITF 03-1. Based on the clarification provided in FSP FAS 115-1 and FAS 124-1, the amount of any other-than-temporary impairment that needs to be recognized will continue to be dependent on market conditions, the occurrence of certain events or changes in circumstances relative to an investee and an entity’s intent and ability to hold the impaired investment at the time of the valuation. The Company adopted FSP FAS 115-1 and FAS 124-1 effective January 1, 2006. Adoption of this FSP did not have a material effect on our financial condition or results of operations.

In December 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position (“SOP”) 03-3, Accounting for Certain Loans and Debt Securities Acquired in a Transfer. SOP 03-3 addresses the accounting for acquired loans that show evidence of having deteriorated in terms of credit quality since their origination and for which a loss is deemed probable of occurring. SOP 03-3 requires acquired loans to be recorded at their fair value, defined as the present value of future cash flows including interest income, to be recognized over the life of the loan. SOP 03-3 prohibits the carryover of an allowance for loan loss on certain acquired loans within its scope considered in the future cash flow assessments. SOP 03-3 was effective for loans acquired in fiscal years beginning after December 15, 2004 and has not had a material effect on our financial condition or results of operations.

Note 7 — Junior Subordinated Debentures

As of March 31, 2006, the Company had ten wholly-owned trusts (“Trusts”) that were formed to issue trust preferred securities and related common securities of the Trusts and are not consolidated. Five Trusts, representing aggregate total obligations of approximately $58.9 million (fair value of approximately $68.6 million as of the merger date), were assumed in connection with the Humboldt merger. Following is information about the Trusts:

Junior Subordinated Debentures
(in thousands)


		Issued		Carrying					Effective
Trust Name	Issue Date	Amount		Value (1)		Rate (2)			Rate (3)			Maturity Date	Call Date
Umpqua Holdings Statutory Trust I	September 2002	$	25,774	$	25,774	Floating (4)				8.46	%	September 2032	September 2007
Umpqua Statutory Trust II	October 2002		20,619		20,619	Floating (5)				8.01	%	October 2032	October 2007
Umpqua Statutory Trust III	October 2002		30,928		30,928	Floating (6)				8.20	%	November 2032	November 2007
Umpqua Statutory Trust IV	December 2003		10,310		10,310	Floating (7)				7.45	%	January 2034	January 2009
Umpqua Statutory Trust V	December 2003		10,310		10,310	Floating (7)				7.77	%	March 2034	March 2009
HB Capital Trust I	March 2000		5,310		6,650		10.875	%		7.73	%	March 2030	March 2010
Humboldt Bancorp Statutory Trust I	February 2001		5,155		6,120		10.200	%		7.91	%	February 2031	February 2011
Humboldt Bancorp Statutory Trust II	December 2001		10,310		11,686	Floating (8)				7.01	%	December 2031	December 2006
Humboldt Bancorp Statutory Trust III	September 2003		27,836		31,775		6.75%	(9)		4.89	%	September 2033	September 2008
CIB Capital Trust	November 2002		10,310		11,471	Floating (6)				6.94	%	November 2032	November 2007

	Total	$	156,862	$	165,643


(1)		Reflects purchase accounting adjustments, net of accumulated amortization, for junior subordinated debentures assumed in connection with the Humboldt merger.

(2)		Contractual interest rate of junior subordinated debentures.

(3)		Effective interest rate as of March 2006, including impact of purchase accounting amortization.

(4)		Rate based on LIBOR plus 3.50%, adjusted quarterly.

(5)		Rate based on LIBOR plus 3.35%, adjusted quarterly.

(6)		Rate based on LIBOR plus 3.45%, adjusted quarterly.

(7)		Rate based on LIBOR plus 2.85%, adjusted quarterly.

(8)		Rate based on LIBOR plus 3.60%, adjusted quarterly.

(9)		Rate fixed for 5 years from issuance, then adjusted quarterly thereafter based on LIBOR plus 2.95%.

The $165.6 million of junior subordinated debentures issued to the Trusts as of March 31, 2006 ($165.7 million as of December 31, 2005) are reflected as junior subordinated debentures in the consolidated balance sheets. The common stock issued by the Trusts is recorded in other assets in the consolidated balance sheets, and totaled $4.7 million at March 31, 2006 and December 31, 2005.

All of the debentures issued to the Trusts, less the common stock of the Trusts, qualified as Tier 1 capital as of December 31, 2005, under guidance issued by the Board of Governors of the Federal Reserve System (“Federal Reserve Board”). Effective April 11, 2005, the Federal Reserve Board adopted a rule that permits the inclusion of trust preferred securities in Tier 1 capital, but with stricter quantitative limits. Under the proposal, after a five-year transition period ending March 31, 2009, the aggregate amount of trust preferred securities and certain other restricted core capital elements is limited to 25% of Tier 1 capital elements, net of goodwill. The amount of trust

preferred securities and certain other elements in excess of the limit could be included in Tier 2 capital, subject to restrictions. The Company includes all currently issued trust preferred securities in Tier 1 capital. There can be no assurance that the Federal Reserve Board will not further limit the amount of trust preferred securities permitted to be included in Tier 1 capital for regulatory capital purposes.

Note 8 – Commitments and Contingencies

Lease Commitments — The Company leases 75 sites under non-cancelable operating leases. The leases contain various provisions for increases in rental rates, based either on changes in the published Consumer Price Index or a predetermined escalation schedule. Substantially all of the leases provide the Company with the option to extend the lease term one or more times upon expiration.

Rent expense for the three months ended March 31, 2006 and 2005 was $2.0 million and $1.5 million, respectively. Rent expense was offset by rent income of $55,000 and $71,000 for the three months ended March 31, 2006 and 2005, respectively.

Financial Instruments with Off-Balance Sheet Risk — The Company’s financial statements do not reflect various commitments and contingent liabilities that arise in the normal course of the Bank’s business and involve elements of credit, liquidity and interest rate risk. The following table presents a summary of the Bank’s commitments and contingent liabilities as of March 31, 2006:

(in thousands)


	As of March 31, 2006
Commitments to extend credit	$	1,064,890
Commitments to extend overdrafts	$	94,804
Commitments to originate residential loans	$	84,119
Forward sales commitments	$	17,162
Standby letters of credit	$	29,544

The Bank is a party to financial instruments with off-balance-sheet credit risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit and financial guarantees. Those instruments involve elements of credit and interest-rate risk similar to the amounts recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of the Bank’s involvement in particular classes of financial instruments.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit, and financial guarantees written, is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. While most standby letters of credit are not utilized, a significant portion of such utilization is on an immediate payment basis. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral varies but may include cash, accounts receivable, inventory, premises and equipment and income-producing commercial properties.

The Bank enters into forward delivery contracts to sell residential mortgage loans or mortgage-backed securities to broker/dealers at specific prices and dates in order to hedge the interest rate risk in its portfolio of mortgage loans held for sale and its residential mortgage loan commitments. Credit risk associated with forward contracts is limited to the replacement cost of those forward contracts in a gain position. There were no counterparty default losses on forward contracts in the three months ended March 31, 2006 and 2005. Market risk with respect to forward contracts arises principally from changes in the value of contractual positions due to changes in interest rates. The Bank limits its exposure to market risk by monitoring differences between commitments to customers and forward contracts with broker/dealers. In the event the Company has forward delivery contract commitments in excess of available mortgage loans, the Company completes the transaction by either paying or receiving a fee to or from the broker/dealer equal to the increase or decrease in the market value of the forward contract. At March 31, 2006, the Bank had commitments to originate mortgage loans totaling $84.1 million with a net fair value liability of approximately $74,000. As of that date, it also had forward sales commitments of $17.2 million with a net fair value asset of $105,000. The Bank recorded gains of $27,000 and $12,000 related to its commitments to originate mortgage loans and related forward sales commitments in the three months ended March 31, 2006 and 2005, respectively.

Standby letters of credit and financial guarantees written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds cash, marketable securities, or real estate as collateral supporting those commitments for which collateral is deemed necessary. The Bank has not been required to perform on any financial guarantees and did not incur any losses in connection with standby letters of credit during the three months ended March 31, 2006 and 2005. At March 31, 2006, approximately $19.0 million of standby letters of credit expire within one year, and $10.5 million expire thereafter. Upon issuance, the Company recognizes a liability equivalent to the amount of fees received from the customer for these standby letter of credit commitments. Fees are recognized ratably over the term of the standby letter of credit. The fair value of guarantees associated with standby letters of credit was $110,000 as of March 31, 2006.

At March 31, 2006, the reserve for unfunded commitments, which is included in other liabilities on the consolidated balance sheet, was approximately $1.6 million. The adequacy of the reserve for unfunded commitments is reviewed on a quarterly basis, based upon changes in the amounts of commitments, loss experience, and economic conditions.

Mortgage loans sold to investors are generally sold with servicing rights retained, with only the standard legal representations and warranties regarding recourse to the Bank. Management believes that any liabilities that may result from such recourse provisions are not significant.

Legal Proceedings—In the ordinary course of business, various claims and lawsuits are brought by and against the Company, the Bank and Strand. In the opinion of management, there is no pending or threatened proceeding in which an adverse decision could result in a material adverse change in the Company’s consolidated financial condition or results of operations.

Concentrations of Credit Risk — The Company grants real estate mortgage, real estate construction, commercial, agricultural and installment loans and leases to customers throughout Oregon, Washington and California. In management’s judgment, a concentration exists in real estate-related loans, which represented approximately 79% and 78% of the Company’s loan portfolio at March 31, 2006 and December 31, 2005, respectively. Commercial real estate concentrations are managed to assure wide geographic and business diversity. Although management believes such concentrations to have no more than the normal risk of collectibility, a substantial decline in the economy in general, or a decline in real estate values in the Company’s primary market areas in particular, could have an adverse impact on the collectibility of these loans. Personal and business income represent the primary source of repayment for a majority of these loans.

The Bank recognizes the credit risks inherent in dealing with other depository institutions. Accordingly, to prevent excessive exposure to any single correspondent, the Bank has established general standards for selecting correspondent banks as well as internal limits for allowable exposure to any single correspondent. In addition, the Bank has an investment policy that sets forth limitations that apply to all investments with respect to credit rating and concentrations per issuer.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Report contains certain forward-looking statements, which are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. These statements may include statements that expressly or implicitly predict future results, performance or events. In addition, the words “expect,” believe,” “anticipate” and other similar expressions identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements involve substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the control of Umpqua. Risks and uncertainties include the following:

	•		The ability to attract new deposits and loans

	•		Competitive market pricing factors

	•		Deterioration in economic conditions that could result in increased loan losses

	•		Market interest rate volatility

	•		Changes in legal or regulatory requirements

	•		The ability to recruit and retain certain key management and staff

	•		Risks associated with merger integration

There are many factors that could cause actual results to differ materially from those contemplated by these forward-looking statements. We do not intend to update these forward-looking statements. Readers should consider any forward-looking statements in light of this explanation, and we caution readers about relying on forward-looking statements.

General

Umpqua Holdings Corporation (referred to in this report as “we,” “our,” and “the Company”), an Oregon corporation, is a financial holding company with two principal operating subsidiaries, Umpqua Bank (the “Bank”) and Strand, Atkinson, Williams and York, Inc. (“Strand”).

Our headquarters is located in Portland, Oregon, and we engage primarily in the business of commercial and retail banking and the delivery of retail brokerage services. The Bank provides a wide range of banking, mortgage banking and other financial services to corporate, institutional and individual customers. Along with our subsidiaries, we are subject to the regulations of state and federal agencies and undergo periodic examinations by these regulatory agencies.

We are considered one of the most innovative community banks in the United States, combining a retail product delivery approach with an emphasis on quality-assured personal service. Beginning in 1995, we have transformed the Bank from a traditional community bank into a community-oriented financial services retailer by implementing a variety of retail marketing strategies to increase revenue and differentiate ourselves from our competition.

Strand is a registered broker-dealer and investment advisor with offices in Portland, Eugene, and Medford, Oregon, and offers a full range of investment products and services including: stocks, fixed income securities (municipal, corporate, and government bonds, CDs, money market instruments), mutual funds, annuities, options, retirement planning, money management services, life insurance, disability insurance and medical supplement policies.

Executive Summary and Highlights

Highlights for the first quarter of 2006 were as follows:

	•		On February 6, 2006, we announced the signing of a definitive agreement to acquire Western Sierra Bancorp (“Western Sierra”) and its principal operating subsidiaries, Western Sierra Bank, Central California Bank, Lake Community Bank and Auburn Community Bank. At the time of the announcement, Western Sierra had total assets of $1.3 billion and 31 branches throughout Northern California.

	•		Net income per diluted share was $0.39 for the first quarter of 2006, an increase of 18% over the $0.33 per diluted share earned in the first quarter of 2005.

	•		Total consolidated assets as of March 31, 2006 were $5.48 billion, compared to $4.98 billion a year ago, an increase of 10%.

	•		Gross loans and leases increased 16% from a year ago.

	•		Deposits increased 7% from a year ago.

	•		Credit quality continued to improve. Non-performing loans and leases were $7.8 million at March 31, 2006 or 0.19% of total loans and leases, a significant decrease compared to $23.9 million or 0.67% of total loans and leases a year ago.

	•		With net recoveries of $640,000 in the quarter and credit quality improvement, there was no substantial provision for credit losses during the quarter. This compared to a provision of $1.0 million for the same period a year ago.

	•		Net interest margin decreased to 4.69% for the quarter, compared to 4.83% for the same period a year ago, due to recent

increases in short-term market interest rates which led to an increase in deposit and borrowing costs.

•

New stores were opened in Medford and Bend, Oregon during the three months ended March 31, 2006.

Summary of Critical Accounting Policies

Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements for the year ended December 31, 2005 included in the Form 10-K filed with the Securities and Exchange Commission (‘SEC”) on March 14, 2006. Not all of these critical accounting policies require management to make difficult, subjective or complex judgments or estimates. Management believes that the following policies would be considered critical under the SEC’s definition.

Allowance for Loan Losses and Reserve for Unfunded Commitments

The Bank performs regular credit reviews of the loan portfolio to determine the credit quality of the portfolio and the adherence to underwriting standards. When loans are originated, they are assigned a risk rating that is assessed periodically during the term of the loan through the credit review process. The risk ratings are a primary factor in determining an appropriate amount for the allowance for loan losses. During 2004, the Bank formed a management Allowance for Loan Losses (“ALL”) Committee, which is responsible for, among other things, regular review of the ALL methodology, including loss factors, and ensuring that it is designed and applied in accordance with generally accepted accounting principles. The ALL Committee reviews loans that have been placed on non-accrual status and approves placing loans on impaired status. The ALL Committee also approves removing loans that are impaired from impairment and non-accrual status.

Each risk rating is assessed an inherent credit loss factor that determines the amount of the allowance for loan losses provided for that group of loans with similar risk rating. Credit loss factors may vary by region based on management’s belief that there may ultimately be different credit loss rates experienced in each region.

Regular credit reviews of the portfolio also identify loans that are considered potentially impaired. Potentially impaired loans are referred to the ALL Committee which reviews and approves designating loans as impaired. A loan is considered impaired when based on current information and events, we determine that we will probably not be able to collect all amounts due according to the loan contract, including scheduled interest payments. When we identify a loan as impaired, we measure the impairment using discounted cash flows, except when the sole remaining source of the repayment for the loan is the liquidation of the collateral. In this case, we use the current fair value of the collateral, less selling costs, instead of discounted cash flows. If we determine that the value of the impaired loan is less than the recorded investment in the loan, we recognize this impairment reserve as a specific component to be provided for in the allowance for loan losses. The combination of the risk rating-based allowance component and the impairment reserve allowance component lead to an allocated allowance for loan losses. The Bank also maintains an unallocated allowance amount to provide for other credit losses inherent in the loan portfolio that may not have been contemplated in the credit loss factors. This unallocated amount generally comprises less than 5% of the allowance. The unallocated amount is reviewed periodically based on trends in credit losses, the results of credit reviews and overall economic trends.

The reserve for unfunded commitments (“RUC”) is established to absorb inherent losses associated with our commitment to lend funds, such as with a letter or line of credit. The adequacy of the ALL and RUC are monitored on a regular basis and are based on management’s evaluation of numerous factors. These factors include the quality of the current loan portfolio; the trend in the loan portfolio’s risk ratings; current economic conditions; loan concentrations; loan growth rates; past-due and non-performing trends; evaluation of specific loss estimates for all significant problem loans; historical charge-off and recovery experience; and other pertinent information.

Mortgage Servicing Rights

Retained mortgage servicing rights are measured by allocating the carrying value of the loans between the assets sold and the interest retained, based on their relative fair values at the date of the sale. Subsequent measurements are determined using a discounted cash flow model. Mortgage servicing rights are amortized over the expected life of the loan and are evaluated periodically for impairment. The expected life of the loan can vary from management’s estimates due to prepayments by borrowers, especially when interest rates fall. Prepayments in excess of management’s estimates would negatively impact the recorded value of the mortgage servicing rights. The value of the mortgage servicing rights is also dependent upon the discount rate used in the model. Management reviews this rate on an ongoing basis based on current market rates. A significant increase in the discount rate would reduce the value of mortgage servicing rights.

Valuation of Goodwill and Intangible Assets

At March 31, 2006, we had $408.2 million in goodwill and other intangible assets as a result of business combinations. Goodwill and other intangibles with indefinite lives are not amortized but instead are periodically tested for impairment. Management performs an impairment analysis for the intangible assets with indefinite lives on a quarterly basis and determined that there was no impairment as of March 31, 2006. The valuation is based on discounted cash flows or observable market prices on a segment basis. A 10% or 20%

decrease in market price is not expected to result in an impairment. If impairment was deemed to exist, a write down of the asset would occur with a charge to earnings.

Stock-based Compensation

Effective January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123R, Share Based Payment, a revision to the previously issued guidance on accounting for stock options and other forms of equity-based compensation. Additional information is included in Note 2 of the Notes to Condensed Consolidated Financial Statements.

RESULTS OF OPERATIONS—OVERVIEW

For the three months ended March 31, 2006, net income was $17.4 million, or $0.39 per diluted share, an increase of 18% on a per diluted share basis. The improvement in diluted earnings per share for the three months ended March 31, 2006 is principally attributable to improved net interest income, partially offset by increased operating expenses.

We incur significant expenses related to the completion and integration of mergers. Accordingly, we believe that our operating results are best measured on a comparative basis excluding the impact of merger-related expenses, net of tax. We define operating income as income before merger related expenses, net of tax, and we calculate operating income per diluted share by dividing operating earnings by the same diluted share total used in determining diluted earnings per share (see Note 4 of the Notes to Condensed Consolidated Financial Statements). Operating income and operating income per diluted share are considered “non-GAAP” financial measures. Although we believe the presentation of non-GAAP financial measures provides a better indication of our operating performance, readers of this report are urged to review the GAAP results as presented in the Condensed Consolidated Financial Statements.

The following table presents a reconciliation of operating income and operating income per share to net income and net income per share for the three months ended March 31, 2006 and 2005:

Reconciliation of Operating Income to Net Income
(in thousands, except per share data)


	Three months ended
	March 31,
	2006		2005
Net income	$	17,427	$	15,019
Merger-related expenses, net of tax		151		61

Operating income	$	17,578	$	15,080


Per diluted share:
Net income	$	0.39	$	0.33
Merger-related expenses, net of tax		—		0.01

Operating income	$	0.39	$	0.34

The following table presents the returns on average assets, average shareholders’ equity and average tangible shareholders’ equity for the three months ended March 31, 2006 and 2005. For each of the periods presented, the table includes the calculated ratios based on reported net income and operating income as shown in the Table above. Our return on average shareholders’ equity is negatively impacted as the result of capital required to support goodwill under bank regulatory guidelines. To the extent this performance metric is used to compare our performance with other financial institutions that do not have merger-related intangible assets, we believe it beneficial to also consider the return on average tangible shareholders’ equity. The return on average tangible shareholders’ equity is calculated by dividing net income by average shareholders’ equity less average intangible assets. The return on average tangible shareholders’ equity is considered a non-GAAP financial measure and should be viewed in conjunction with the return on average shareholders’ equity.

Returns on Average Assets, Shareholders’ Equity and Tangible Shareholders’ Equity
(in thousands)


	Three months ended
	March 31,
	2006			2005
Returns on average assets:
Net income		1.31	%		1.24	%
Operating income		1.32	%		1.25	%

Returns on average shareholders’ equity:
Net income		9.50	%		8.78	%
Operating income		9.58	%		8.82	%

Returns on average tangible shareholders’ equity:
Net income		21.04	%		21.34	%
Operating income		21.22	%		21.43	%

Calculation of average tangible shareholders’ equity:
Average shareholders’ equity	$	744,190		$	693,551
Less: average intangible assets		(408,212	)		(408,160	)

Average tangible shareholders’ equity	$	335,978		$	285,391

NET INTEREST INCOME

Net interest income is the largest source of our operating income. Net interest income for the three months ended March 31, 2006 was $54.3 million, an increase of $4.4 million, or 9% over the same period in 2005. This increase is attributable to growth in outstanding average interest-earning assets, primarily loans, offset by growth in interest-bearing liabilities, primarily money-market and time deposits, over the same period in 2005.

The net interest margin (net interest income as a percentage of average interest-earning assets) on a fully tax-equivalent basis was 4.69% for the three months ended March 31, 2006, a decrease of 14 basis points as compared to the same period in 2005. This decrease is primarily due to increases in short-term market rates which led to an increase in deposit and borrowing costs. The increased yield on interest-earning assets of 72 basis points was more than offset by a corresponding increase in our cost of interest-bearing liabilities which increased by 112 basis points.

Our net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, changes in volume, as well as changes in the yields earned on interest-earning assets and rates paid on deposits and borrowed funds, or rates. The following table presents condensed average balance sheet information, together with interest income and yields on average interest-earning assets, and interest expense and rates paid on average interest-bearing liabilities for the three months ended March 31, 2006 and 2005:

Average Rates and Balances
(dollars in thousands)


	Three months ended								Three months ended
	March 31, 2006								March 31, 2005
				Interest		Average						Interest		Average
	Average			Income or		Yields			Average			Income or		Yields
	Balance			Expense		or Rates			Balance			Expense		or Rates

INTEREST-EARNING ASSETS:
Loans and leases (1)	$	4,025,130		$	73,120		7.37	%	$	3,488,907		$	56,936		6.62	%
Taxable securities		608,211			6,755		4.44	%		624,299			6,592		4.22	%
Non-taxable securities (2)		76,525			1,070		5.59	%		66,699			1,080		6.47	%
Temporary investments (3)		12,038			127		4.28	%		36,030			220		2.48	%

Total interest earning assets		4,721,904			81,072		6.96	%		4,215,935			64,828		6.24	%
Allowance for credit losses		(43,842	)							(45,636	)
Other assets		733,357								738,102

Total assets	$	5,411,419							$	4,908,401


INTEREST-BEARING LIABILITIES:
Interest-bearing checking and savings accounts	$	2,108,789		$	10,829		2.08	%	$	2,032,998		$	5,464		1.09	%
Time deposits		1,134,994			10,209		3.65	%		894,916			5,860		2.66	%
Federal funds purchased and repurchase agreements		233,860			2,389		4.14	%		87,505			501		2.32	%
Term debt		3,138			28		3.62	%		82,625			405		1.99	%
Notes payable on junior subordinated debentures and trust preferred securities		165,703			3,012		7.37	%		166,214			2,394		5.84	%

Total interest-bearing liabilities		3,646,484			26,467		2.94	%		3,264,258			14,624		1.82	%
Non-interest-bearing deposits		968,506								894,916
Other liabilities		52,239								55,676

Total liabilities		4,667,229								4,214,850
Shareholders’ equity		744,190								693,551

Total liabilities and shareholders’ equity	$	5,411,419							$	4,908,401

NET INTEREST INCOME (2)				$	54,605							$	50,204

NET INTEREST SPREAD							4.02	%							4.42	%

AVERAGE YIELD ON EARNING ASSETS (1), (2)							6.96	%							6.24	%

INTEREST EXPENSE TO EARNING ASSETS							2.27	%							1.41	%

NET INTEREST INCOME TO EARNING ASSETS (1),(2)							4.69	%							4.83	%


(1)		Non-accrual loans and mortgage loans held for sale are included in the average balance.

(2)		Tax-exempt income has been adjusted to a tax equivalent basis at a 35% tax rate. The amount of such adjustment was an addition to recorded income of approximately $326,000 and $354,000 for the three months ended March 31, 2006 and 2005, respectively.

(3)		Temporary investments include federal funds sold and interest-bearing deposits at other banks.

The following table sets forth a summary of the changes in net interest income due to changes in average asset and liability balances (volume) and changes in average rates (rate) for the three months ended March 31, 2006 as compared to the same period in 2005. Changes in interest income and expense, which are not attributable specifically to either volume or rate, are allocated proportionately between both variances.

Rate/Volume Analysis
(in thousands)


	THREE MONTHS ENDED MARCH 31,
	2006 COMPARED TO 2005
	INCREASE (DECREASE) IN INTEREST
	INCOME AND EXPENSE DUE TO
	CHANGES IN
	VOLUME			RATE			TOTAL

INTEREST-EARNING ASSETS:
Loans	$	9,321		$	6,863		$	16,184
Taxable securities		(173	)		336			163
Non-taxable securities (1)		148			(158	)		(10	)
Temporary investments		(197	)		104			(93	)

Total (1)		9,099			7,145			16,244

INTEREST-BEARING LIABILITIES:
Interest-bearing checking and savings accounts		211			5,154			5,365
Time deposits		1,817			2,532			4,349
Repurchase agreements and federal funds		1,285			603			1,888
Term debt		(562	)		185			(377	)
Junior subordinated debentures		(7	)		625			618

Total		2,744			9,099			11,843


Net increase in net interest income (1)	$	6,355		$	(1,954	)	$	4,401


(1)		Tax exempt income has been adjusted to a tax equivalent basis at a 35% tax rate.

PROVISION FOR LOAN LOSSES

The provision for loan losses for the three months ended March 31, 2006 was $21,000 and primarily related to overdrafts. This compared with $1.0 million of provision for loan losses for the same period in 2005. As a percentage of average outstanding loans, the provision for loan losses recorded for the three months ended March 31, 2006 was insignificant, representing a decrease of 12 basis points from the three months ended March 31, 2005. The decrease in the provision for loan losses in the three months ended March 31, 2006 is principally attributable to improved asset quality trends and net recoveries of $640,000 in the quarter.

The provision for loan losses is based on management’s evaluation of inherent risks in the loan portfolio and a corresponding analysis of the allowance for loan losses. Additional discussion on loan quality and the allowance for loan losses is provided under the heading Asset Quality and Non-Performing Assets below.

NON-INTEREST INCOME

Non-interest income in the three months ended March 31, 2006 was $12.2 million, an increase of $1.6 million, or 15%, over the same period in 2005. The following table presents the key components of non-interest income for the three months ended March 31, 2006 and 2005:

Non-Interest Income
(in thousands)


	Three months ended
	March 31,
					Change			Change
	2006		2005		Amount			Percent
Deposit service charges	$	5,484	$	4,822	$	662			14	%
Brokerage fees		2,368		3,129		(761	)		-24	%
Mortgage banking revenue, net		1,844		1,350		494			37	%
Other		2,506		1,301		1,205			93	%

Total	$	12,202	$	10,602	$	1,600			15	%

The increase in deposit service charges in 2006 over 2005 is principally attributable to the increased volume of deposit accounts. The decrease in brokerage fees resulted from the departure of certain investment advisors. The increase in mortgage banking revenue was a result of increased volume of loans originated and sold during the quarter and a reduced valuation write down of mortgage servicing rights as compared to the same period a year ago. The increase in other income included an approximate $300,000 legal settlement and increased income from the sale of SBA loans driven by increased production in our government-guaranteed lending group.

NON-INTEREST EXPENSE

Non-interest expense for the three months ended March 31, 2006 was $39.0 million, an increase of $3.5 million or 10% compared to the three months ended March 31, 2005. The following table presents the key elements of non-interest expense for the three months ended March 31, 2006 and 2005.

Non-Interest Expense
(in thousands)


	Three months ended
	March 31,
					Change			Change
	2006		2005		Amount			Percent
Salaries and employee benefits	$	21,801	$	20,279	$	1,522			8	%
Net occupancy and equipment		7,168		6,133		1,035			17	%
Communications		1,465		1,245		220			18	%
Marketing		1,325		757		568			75	%
Services		3,403		3,512		(109	)		-3	%
Supplies		629		527		102			19	%
Intangible amortization		547		660		(113	)		-17	%
Merger-related expenses		251		101		150			149	%
Other		2,391		2,221		170			8	%

Total	$	38,980	$	35,435	$	3,545			10	%

Salaries and employee benefits have continued to increase due to increased incentives, benefit costs, and additional staff. Net occupancy and equipment also continues to increase reflecting increased lease costs and continued infrastructure development to support the Company’s growth and expansion. We also incur significant expenses in connection with the completion and integration of bank acquisitions that are not capitalizable. Classification of expenses as merger-related is done in accordance with the provisions of a Board-approved policy.

INCOME TAXES

Our consolidated effective tax rate as a percentage of pre-tax income for the three months ended March 31, 2006 was 36.6%, compared to 37.5% for the same period in 2005. The effective tax rates were below the federal statutory rate of 35% and the apportioned state rate of 5% (net of the federal tax benefit) principally because of non-taxable income arising from bank-owned life insurance, income on tax-exempt investment securities, tax credits arising from low income housing investments and exemptions related to loans and hiring in certain designated enterprise zones.

Loan Concentrations
(in thousands)


	March 31, 2006					December 31, 2005
Type of Loan	Amount		Percentage			Amount		Percentage
Construction and development	$	684,149		16.7	%	$	638,555		16.3	%
Farmland		55,426		1.4	%		54,039		1.4	%
Home equity credit lines		122,018		3.0	%		125,508		3.2	%
Single family first lien mortgage		122,962		3.0	%		121,955		3.1	%
Single family second lien mortgage		21,831		0.5	%		18,570		0.5	%
Multifamily		162,705		4.0	%		161,844		4.1	%
Commercial real estate		2,066,101		50.4	%		1,954,516		49.8	%

Total real estate secured		3,235,192		79.0	%		3,074,987		78.4	%
Commercial and industrial		730,905		17.8	%		711,913		18.2	%
Agricultural production		40,742		1.0	%		41,218		1.1	%
Consumer		47,811		1.2	%		51,702		1.3	%
Leases		16,959		0.4	%		17,385		0.4	%
Other		24,585		0.6	%		24,426		0.6	%

Total loans	$	4,096,194		100.0	%	$	3,921,631		100.0	%

ASSET QUALITY AND NON-PERFORMING ASSETS

Non-performing loans, which include non-accrual loans and accruing loans past due over 90 days, totaled $7.8 million, or 0.19% of total loans, at March 31, 2006, as compared to $6.4 million, or 0.16% of total loans, at December 31, 2005. Non-performing assets, which include non-performing loans and foreclosed real estate (“other real estate owned”), totaled $7.9 million, or 0.14% of total assets as of March 31, 2006, compared with $7.6 million, or 0.14% of total assets as of December 31, 2005.

Loans are classified as non-accrual when collection of principal or interest is doubtful—generally if they are past due as to maturity or payment of principal or interest by 90 days or more—unless such loans are well-secured and in the process of collection. Additionally, all loans that are “impaired” in accordance with SFAS No. 114, Accounting by Creditors for the Impairment of a Loan, are considered for non-accrual status. These loans will typically remain on non-accrual status until all principal and interest payments are brought current and the prospects for future payments in accordance with the loan agreement appear relatively certain. Foreclosed properties held as other real estate owned are recorded at the lower of the recorded investment in the loan or market value of the property less expected selling costs. Other real estate owned at March 31, 2006 totaled $69,000 and consisted of two commercial properties.

The following table summarizes our non-performing assets as of March 31, 2006 and December 31, 2005.

Non-Performing Assets
(dollars in thousands)


	March 31,			December 31,
	2006			2005
Loans on nonaccrual status	$	6,113		$	5,953
Loans past due 90 days or more and accruing		1,683			487

Total nonperforming loans		7,796			6,440
Other real estate owned		69			1,123

Total nonperforming assets	$	7,865		$	7,563


Allowance for loan losses	$	44,546		$	43,885
Reserve for unfunded commitments		1,642			1,601

Allowance for credit losses	$	46,188		$	45,486


Asset quality ratios:
Non-performing assets to total assets		0.14	%		0.14	%
Non-performing loans to total loans		0.19	%		0.16	%
Allowance for loan losses to total loans		1.09	%		1.12	%
Allowance for credit losses to total loans		1.13	%		1.16	%
Allowance for credit losses to total non-performing loans		592	%		706	%

At March 31, 2006, approximately $8.8 million of loans were classified as restructured as compared to $4.0 million at December 31, 2005. The restructurings were granted in response to borrower financial difficulty, and generally provide for a temporary modification of loan repayment terms. Substantially all of the restructured loans as of March 31, 2006 and December 31, 2005 were classified as impaired and $715,000 and $935,000, respectively, were included as non-accrual loans in the table above.

We have not identified any other potential problem loans that were not classified as non-performing but for which known information about the borrowers’ financial condition caused management to have concern about the ability of the borrower to comply with the repayment terms of their loans. A decline in the economic conditions in our general market areas or other factors could adversely impact individual borrowers or the loan portfolio in general. Accordingly, there can be no assurance that loans will not become 90 days or more past due, become impaired or placed on non-accrual status, restructured or transferred to other real estate owned in the future.

ALLOWANCE FOR LOAN LOSSES AND RESERVE FOR UNFUNDED COMMITMENTS

The allowance for loan losses (“ALL”) totaled $44.5 million at March 31, 2006 down from the $45.4 million at March 31, 2005.

Allowance for Loan Losses
(in thousands)


	Three months ended
	March 31,
	2006			2005
Balance, beginning of period	$	43,885		$	44,229
Provision for loan losses		21			1,000

Loans charged-off		(613	)		(612	)
Charge-off recoveries		1,253			743

Net recoveries		640			131


Total allowance for loan losses		44,546			45,360
Reserve for unfunded commitments		1,642			1,368

Allowance for credit losses	$	46,188		$	46,728


As a percentage of average loans (annualized):
Net recoveries		0.06	%		0.02	%
Provision for loan losses		0.00	%		0.12	%

The level of actual losses, as indicated by the ratio of net recoveries to average loans, declined during the three months ended March 31, 2006 as compared to the same period in 2005. These factors combined with improving trends in non-performing assets resulted in a decreased ratio of provision to average loans as compared to the same period in 2005.

The following table presents a summary of activity in the reserve for unfunded commitments (“RUC”):

Summary of Reserve for Unfunded Commitments Activity
(in thousands)


	Three months ended
	March 31,
	2006		2005
Balance, beginning of period	$	1,601	$	1,338
Net increase charged to other expenses		41		30

Balance, end of period	$	1,642	$	1,368

We believe that the ALL and RUC at March 31, 2006 are sufficient to absorb losses inherent in the loan portfolio and credit commitments outstanding as of that date, respectively, based on the best information available. This assessment, based in part on historical levels of net charge-offs, loan growth, and a detailed review of the quality of the loan portfolio, involves uncertainty and judgment. Therefore, the adequacy of the ALL and RUC cannot be determined with precision and may be subject to change in future periods. In addition, bank regulatory authorities, as part of their periodic examination of the Bank, may require additional charges to the provision for loan losses in future periods if the results of their review warrant such.

MORTGAGE SERVICING RIGHTS

The following table presents the key elements of our mortgage servicing rights asset as of March 31, 2006 and December 31, 2005:

Summary of Mortgage Servicing Rights
(in thousands)


	Three months ended
	March 31,
	2006			2005
Balance, beginning of period	$	10,890		$	11,154
Additions for new mortgage servicing rights capitalized		667			671
Amortization of servicing rights		(321	)		(460	)
Impairment charge		(33	)		(284	)

Balance, end of period	$	11,203		$	11,081


Balance of loans serviced for others		1,014,680			1,052,910
MSR as a percentage of serviced loans		1.10	%		1.05	%

As of March 31, 2006, we serviced residential mortgage loans for others with an aggregate outstanding principal balance of approximately $1.0 billion for which servicing assets have been recorded. In accordance with generally accepted accounting principles, the servicing asset recorded at the time of sale is amortized over the term of, and in proportion to, net servicing revenues. For the three months ended March 31, 2006, total mortgage loan origination volume was $81.6 million, an increase of $13.6 million, or 20%, from the same period in 2005.

The value of mortgage servicing rights is impacted by market rates for mortgage loans. Historically low market rates can cause prepayments to increase as a result of refinancing activity. To the extent loans are prepaid sooner than estimated at the time servicing assets are originally recorded, it is possible that certain mortgage servicing rights assets may become impaired to the extent that the fair value is less than carrying value (net of any previously recorded amortization or valuation reserves). Generally, the fair value of our mortgage servicing rights will increase as market rates for mortgage loans rise and decrease if market rates fall.

At March 31, 2006, we had a valuation reserve of $2.4 million based on the estimated fair value of the servicing portfolio. The valuation reserve is adjusted on a quarterly basis through adjustments to mortgage banking revenue. For the three months ended March 31, 2006, impairment charge was $33,000 as compared to $284,000 for the same period in 2005.

GOODWILL AND CORE DEPOSIT INTANGIBLE ASSETS

At March 31, 2006, we had goodwill and core deposit intangibles of $399.1 million and $9.1 million, respectively, as compared to $398.8 million and $9.7 million, respectively, at year-end 2005. This increase in goodwill is primarily attributed to tax adjustments related to the Humboldt acquisition. The goodwill recorded in connection with the Humboldt acquisition represented the excess of the purchase price over the estimated fair value of the net assets acquired. A portion of the purchase price was allocated to the value of Humboldt’s core deposits, which included all deposits except certificates of deposit. The value of the core deposits was determined by a third party based on an analysis of the cost differential between the core deposits and alternative funding sources. We amortize core deposit intangible assets on an accelerated basis over an estimated ten-year life.

Substantially all of the goodwill is associated with our community banking operations. We evaluate goodwill for possible impairment on a quarterly basis and there were no impairments recorded for the three months ended March 31, 2006 and 2005.

DEPOSITS

Total deposits were $4.2 billion at March 31, 2006, a decrease of $56.6 million, or 1%, from the prior year-end due to seasonal deposit swings. Information on average deposit balances and average rates paid is included under the Net Interest Income section of this report.

The following table presents the deposit balances by major category as of March 31, 2006 and December 31, 2005:

Deposits
(in thousands)


	March 31, 2006					December 31, 2005
	Amount		Percentage			Amount		Percentage
Non-interest bearing	$	990,803		23	%	$	987,714		23	%
Interest bearing demand		588,871		14	%		576,037		13	%
Savings and money market		1,534,756		37	%		1,597,311		38	%
Time, $100,000 or greater		590,042		14	%		601,616		14	%
Time, less than $100,000		525,176		12	%		523,588		12	%

Total	$	4,229,648		100	%	$	4,286,266		100	%

BORROWINGS

At March 31, 2006, the Bank had outstanding term debt of $3.1 million. Advances from the Federal Home Loan Bank of San Francisco (“FHLB”) amounted to $2.4 million of the total and are secured by investment securities and residential mortgage loans. The FHLB advances outstanding at March 31, 2006 had fixed interest rates ranging from 6.08% to 7.44%. Approximately $1.0 million, or 42%, of the FHLB advances mature prior to December 31, 2007. Management expects continued use of FHLB advances as a source of short and long-term funding.

JUNIOR SUBORDINATED DEBENTURES

We had junior subordinated debentures with carrying values of $165.6 million and $165.7 million, respectively, at March 31, 2006 and December 31, 2005.

At March 31, 2006, approximately $121.1 million, or 73% of the total issued amount, had interest rates that are adjustable on a quarterly basis based on a spread over LIBOR. Increases in short-term market interest rates during 2005 and first quarter of 2006 have resulted in increased interest expense for junior subordinated debentures. Although any additional increases in short-term market interest rates will increase the interest expense for junior subordinated debentures, we believe that other attributes of our balance sheet will serve to mitigate the impact to net interest income on a consolidated basis.

As of March 31, 2006, $156.9 million (representing the entire issued amount) of junior subordinated debentures qualified as Tier 1 capital under regulatory capital purposes. Additional information regarding the terms of the junior subordinated debentures, including maturity/call dates and interest rates, is included in Note 7 of the Notes to Condensed Consolidated Financial Statements.

LIQUIDITY AND CASH FLOW

The principal objective of our liquidity management program is to maintain the Bank’s ability to meet the day-to-day cash flow requirements of our customers who either wish to withdraw funds or to draw upon credit facilities to meet their cash needs.

We monitor the sources and uses of funds on a daily basis to maintain an acceptable liquidity position. In addition to liquidity from core deposits and the repayments and maturities of loans and investment securities, the Bank can utilize established uncommitted federal funds lines of credit, sell securities under agreements to repurchase, borrow on a secured basis from the FHLB or issue brokered certificates of deposit.

The Company is a separate entity from the Bank and must provide for its own liquidity. Substantially all of the Company’s revenues are obtained from dividends declared and paid by the Bank. In the three months ended March 31, 2006, the Bank paid the Company $6.0 million in dividends. There are statutory and regulatory provisions that could limit the ability of the Bank to pay dividends to the Company. We believe that such restrictions will not have an adverse impact on the ability of the Company to meet its ongoing cash obligations, which consist principally of debt service on the $156.9 million (issued amount) of outstanding junior subordinated debentures. As of March 31, 2006, the Company did not have any borrowing arrangements of its own.

As disclosed in the Consolidated Statements of Cash Flows, net cash provided by operating activities was $15.8 million during the three months ended March 31, 2006. The principal source of cash provided by operating activities was net income. Net cash of $154.3 million used in investing activities consisted principally of $173.5 million of net loan growth, offset by maturities of investment securities available for sale of $19.6 million. The $99.2 million of cash provided by financing activities primarily consisted of $159.1 million increase in federal funds purchased and securities sold under agreements to repurchase, partly offset by $56.6 million of net deposit growth, and $5.4 million payment of dividends.

Although we expect the Bank’s and the Company’s liquidity positions to remain satisfactory during 2006, increases in market interest rates have resulted in increased competition for bank deposits. It is possible that our deposit growth for 2006 may not be maintained at previous levels due to increased pricing pressure or, in order to generate deposit growth, our pricing may need to be adjusted in a manner that results in increased interest expense on deposits.

OFF-BALANCE SHEET ARRANGEMENTS

Information regarding Off-Balance Sheet Arrangements is included in Note 8 of the Notes to Condensed Consolidated Financial Statements.

CONCENTRATIONS OF CREDIT RISK

Information regarding Concentrations of Credit Risk is included in Note 8 of the Notes to Condensed Consolidated Financial Statements.

CAPITAL RESOURCES

Shareholders’ equity at March 31, 2006 was $750.8 million, an increase of $12.5 million, or 2%, from December 31, 2005. The increase in shareholders’ equity during the three months ended March 31, 2006 was principally due to the retention of $12.0 million, or approximately 69%, of net income for the period.

The following table shows Umpqua Holdings’ consolidated and Umpqua Bank capital adequacy ratios, as calculated under regulatory guidelines, compared to the regulatory minimum capital ratio and the regulatory minimum capital ratio needed to qualify as a “well-capitalized” institution at March 31, 2006 and December 31, 2005:


						For Capital					To be Well
	Actual					Adequacy purposes					Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of March 31, 2006:
Total Capital
(to Risk Weighted Assets)
Consolidated	$	549,369		11.61	%	$	378,549		8.00	%	$	473,186		10.00	%
Umpqua Bank	$	530,299		11.26	%	$	376,767		8.00	%	$	470,958		10.00	%
Tier I Capital
(to Risk Weighted Assets)
Consolidated	$	503,182		10.63	%	$	189,344		4.00	%	$	284,016		6.00	%
Umpqua Bank	$	484,112		10.28	%	$	188,370		4.00	%	$	282,556		6.00	%
Tier I Capital
(to Average Assets)
Consolidated	$	503,182		10.05	%	$	200,471		4.00	%	$	250,589		5.00	%
Umpqua Bank	$	484,112		9.71	%	$	199,428		4.00	%	$	249,285		5.00	%

As of December 31, 2005:
Total Capital
(to Risk Weighted Assets)
Consolidated	$	533,890		11.58	%	$	368,836		8.00	%	$	461,045		10.00	%
Umpqua Bank	$	515,040		11.23	%	$	366,903		8.00	%	$	458,629		10.00	%
Tier I Capital
(to Risk Weighted Assets)
Consolidated	$	488,404		10.59	%	$	184,477		4.00	%	$	276,716		6.00	%
Umpqua Bank	$	469,554		10.24	%	$	183,420		4.00	%	$	275,129		6.00	%
Tier I Capital
(to Average Assets)
Consolidated	$	488,404		10.09	%	$	193,619		4.00	%	$	242,024		5.00	%
Umpqua Bank	$	469,554		9.78	%	$	192,047		4.00	%	$	240,058		5.00	%

The following table presents cash dividends declared and dividend payout ratios (dividends declared per share divided by basic earnings per share) for the three months ended March 31, 2006 and 2005:

Cash Dividends and Payout Ratios


	Three months ended
	March 31,
	2006			2005
Dividend declared per share	$	0.12		$	0.06
Dividend payout ratio		31	%		18	%

Our Board of Directors has approved a stock repurchase plan for up to 2.5 million shares of common stock. As of March 31, 2006, a total of 2.1 million shares remain available for repurchase under this authorization, which expires on June 30, 2007. In addition, our stock option plans provide for option holders to pay for the exercise price in part or whole by tendering previously held shares. Although no shares were repurchased in open market transactions during the first quarter of 2006, we expect to continue to repurchase additional shares in the future. The timing and amount of such repurchases will depend upon the market price for our common stock, securities laws restricting repurchases, asset growth, earnings and our capital plan. We will not repurchase any shares during the proxy

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Because of the nature of our business, we are involved in legal proceedings in the regular course of business. At this time, we do not believe that there is pending litigation the unfavorable outcome of which would result in a material adverse change to our financial condition, results of operations or cash flows.

Item 1A.Risk Factors

There have been no material changes to the risk factors as of March 31, 2006 from those presented in our Annual Report on Form 10-K for the year ended December 31, 2005.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)		Not Applicable

(b)		Not Applicable

(c)		There were no repurchases of common stock by the Company during the quarter ended March 31, 2006.

Item 3. Defaults Upon Senior Securities

Not Applicable.

Item 4. Submissions of Matters to a Vote of Securities Holders

	(a)		Not Applicable.

	(b)		Not Applicable.

	(c)		Not Applicable.

Item 5. Other Information

	(a)		On January 18, 2006, we entered into a Nonqualified Stock Option Agreement with President and Chief Executive Officer Raymond P. Davis. The agreement grants to Mr. Davis the option to purchase 25,000 shares of Umpqua common stock at an exercise price of $28.425 per share (the closing price of Umpqua common stock on January 18, 2006), subject to the following vesting schedule: options to purchase 7,500 shares vest on January 18, 2007, options to purchase 7,500 shares vest on January 18, 2008, options to purchase 5,000 shares vest on January 18, 2009 and options to purchase 5,000 shares vest on January 18, 2010. All options will vest upon occurrence of a change in control transaction. The options expire January 17, 2016. The agreement is attached as Exhibit 10.1 to this report.

	(b)		Not Applicable.

Item 6. Exhibits

The exhibits filed as part of this Report and exhibits incorporated herein by reference to other documents are listed in the Exhibit Index to this Report.

EXHIBIT INDEX


Exhibit
1.1		(a) Agreement and Plan of Reorganization dated February 7, 2006 between Umpqua Holdings Corporation, Umpqua Bank, Western Sierra Bancorp, Western Sierra Bank, Auburn Community Bank, Lake Community Bank and Central California Bank and related Plan of Merger

3.1		(b) Articles of Incorporation, as amended

3.2		(c) Bylaws

4.0		(d) Specimen Stock Certificate

10.1		Nonqualified Stock Option Agreement dated January 18, 2006 between the Company and Raymond P. Davis

10.2		(e)Restated Supplemental Executive Retirement Plan effective January 1, 2006 between the Company and Raymond P. Davis

10.3		(f)Amendment to Employment Agreement for William Fike dated effective March 10, 2006

10.4		(g)Employment Agreements (3) dated effective March 10, 2006 with Named Executive Officers Brad Copeland, David Edson and Barbara Baker

31.1		Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002

31.3		Certification of Principal Accounting Officer under Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification of Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(a)		Incorporated by reference to Appendix A and Appendix B to the Joint Proxy Statement/Prospectus included in the Registration Statement on Form S-4A filed April 13, 2006 (File No. 333-132453)

(b)		Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-4 filed September 9, 2002 (File No. 333-99301)

(c)		Incorporated by reference to Exhibit 3.2 to Form 10-Q filed May 10, 2004

(d)		Incorporated by reference to the Registration Statement on Form S-8 (No. 333-77259) filed April 28, 1999

(e)		Incorporated by reference to Exhibit 10.1 to Form 10-K filed March 14, 2006

(f)		Incorporated by reference to Exhibit 10.1 to Form 8-K filed March 21, 2006

(g)		Incorporated by reference to Exhibits 10.2 through 10.4 to Form 8-K filed March 21, 2006


OREGON		93-1261319

(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)


										Accumulated
	Common Stock									Other
							Retained			Comprehensive
	Shares			Amount			Earnings			Loss			Total

BALANCE AT JANUARY 1, 2005		44,211,075		$	560,611		$	128,112		$	(1,110	)	$	687,613
Net income								69,735						69,735
Other comprehensive loss, net of tax:
Unrealized losses on securities arising during the year (1)											(8,799	)		(8,799	)

Comprehensive income													$	60,936

Deferred compensation earned during the period					693									693
Stock repurchased and retired		(84,185	)		(1,904	)								(1,904	)
Issuances of common stock under stock plans and related tax benefit		429,379			5,179									5,179
Cash dividends ($0.32 per share)								(14,256	)					(14,256	)

Balance at December 31, 2005		44,556,269		$	564,579		$	183,591		$	(9,909	)	$	738,261


BALANCE AT JANUARY 1, 2006		44,556,269		$	564,579		$	183,591		$	(9,909	)	$	738,261
Net income								17,427						17,427
Other comprehensive loss, net of tax:
Unrealized losses on securities arising during the year (2)											(2,317	)		(2,317	)

Comprehensive income													$	15,110

Deferred compensation earned during the period					470									470
Issuances of common stock under stock plans and related tax benefit		164,758			2,320									2,320
Cash dividends ($0.12 per share)								(5,379	)					(5,379	)

Balance at March 31, 2006		44,721,027		$	567,369		$	195,639		$	(12,226	)	$	750,782


	Three months ended
	March 31,
	2006			2005
Net income	$	17,427		$	15,019


Unrealized losses arising during the period on investment securities available for sale		(3,603	)		(9,495	)

Less: Income tax benefit related to unrealized losses on investment securities, available for sale		(1,286	)		(3,771	)


Net unrealized losses on investment securities available for sale		(2,317	)		(5,724	)

Comprehensive income	$	15,110		$	9,295


	Three months ended
	March 31, 2006
Dividend yield		2.68	%
Expected life (years)		6.4
Expected volatility		35	%
Risk-free rate		4.30	%
Weighted average grant date fair value of options granted	$	9.18


	Three months ended
	March 31, 2005
NET INCOME, AS REPORTED	$	15,019
Deduct: Additional stock-based employee compensation determined under the fair value based method for all awards, net of tax effects		(102	)

Pro forma net income	$	14,917


NET INCOME PER SHARE:
Basic — as reported	$	0.34
Basic — pro forma	$	0.34
Diluted — as reported	$	0.33
Diluted — pro forma	$	0.33

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þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4.	Controls and Procedures	29
PART II.	OTHER INFORMATION	30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Submissions of Matters to a Vote of Securities Holders	30
Item 5.	Other Information	30
Item 6.	Exhibits	30
SIGNATURES		31
EXHIBIT INDEX		32
EXHIBIT 10.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 31.3
EXHIBIT 32


(1)		Net unrealized holding loss on securities of $7.9 million (net of $5.3 million tax benefit), plus reclassification adjustment for net gains included in net income of $863,000 (net of $576,000 tax expense).

(2)		Net unrealized holding loss on securities of $2.3 million (net of $1.3 million tax benefit).


Dividend yield		1.66	%
Expected life (years)		7.5
Expected volatility		38	%
Risk-free rate		4.24	%
Weighted average grant date fair value of options granted	$	9.61


	Investment Securities Available for Sale
	March 31, 2006					December 31, 2005
	Fair Value		%			Fair Value		%

U.S. Treasury and agencies	$	193,388		30	%	$	196,538		29	%
Mortgage-backed securities and collateralized mortgage obligations		340,143		53	%		359,583		54	%
Obligations of states and political subdivisions		67,462		10	%		67,836		10	%
Other investment securities		47,494		7	%		47,911		7	%

Total	$	648,487		100	%	$	671,868		100	%


	Investment Securities Held to Maturity
	March 31, 2006					December 31, 2005
	Amortized					Amortized
	Cost		%			Cost		%

Obligations of states and political subdivisions	$	7,258		95	%	$	8,302		96	%
Other investment securities		375		5	%		375		4	%

Total	$	7,633		100	%	$	8,677		100	%


		UMPQUA HOLDINGS CORPORATION
		(Registrant)

Dated May 9, 2006		/s/ Raymond P. Davis

		Raymond P. Davis
		President and
		Chief Executive Officer

Dated May 9, 2006		/s/ Daniel A. Sullivan

		Daniel A. Sullivan
		Executive Vice President and
		Chief Financial Officer

Dated May 9, 2006		/s/ Ronald L. Farnsworth

		Ronald L. Farnsworth
		Senior Vice President/Finance and
		Principal Accounting Officer