How I'm Using My Bailout Cash: Umpqua Bank

There's been a great deal of debate about whether the banks receiving capital under the Treasury's TARP initiative will go out and lend the cash, or simply hoard it as protection.

To that end, I've been tracking down CEOs from different companies that have announced plans to obtain this capital to find out how they plan to deploy it.

For the first installment of this series, I spoke with Ray Davis, president and CEO of Umpqua Holdings Corp., the parent of an Oregon bank with roughly $8 billion of assets. Umpqua announced Tuesday that it had been approved for a $214 million capital injection from Treasury.

The investment would bring Umpqua's total risk-based capital ratio to about 14 percent. Even before the move, Umpqua's 11.2 percent total risk-based capital ratio was comfortably above the 10 percent regulators require for a bank to be considered "well capitalized."

How did you end up getting involved in this program? Did the regulators contact you?
"When they announced the program and said banks had until November 14 to opt in, they called us and said, 'We want you guys to get your application in early.' They are doing that for a good reason. They are reaching out to the strong institutions for them to encourage the other banks to get involved as well. They first went out to the nine largest institutions and then they have worked their way down. I would assume in the next week or so, they would be saying to all community banks—even the small institutions—'if you are going to do this, you better get your application in.'"

Looks like you didn't need the capital, so why would you participate in this?
"The question is, 'What is going to happen next to the economy?' We don't know. That's a guess. But we also know that if opportunities become available, you need to have capital to do that, so this certainly helps."

How are you going to deploy this capital? Are you going to lend it?
"Oh, absolutely. And there are opportunities. Umpqua Bank is a regional community bank. There are certain types of loans we no longer make, but there are loans—from residential to business loans—that are very attractive to us, so I think the ability to know that the liquidity is there for us is very helpful.

The overall game plan for banks is when they get this money is to leverage it up. So, what we'll do is we'll loan it—that's one way of doing it. No. 2, we will expand organically—in other words [build branches]. And No. 3 is take advantage of consolidation opportunities if they present themselves.

Will you make some acquisitions with this money?
"I'd be surprised if we didn't."

Do you expect this capital to help turn you into a bigger, stronger company a couple of years down the line?
"There is no question about it. We have obviously been identified as a survivor, and we will continue our strategy of growth. There is real opportunity for some of the regional community banks to become much bigger players, just like, for example, Wells [Fargo] was a regional bank [and] has become a more national player with the acquisition of Wachovia."