Ray Davis - President and CEO Ron Farnsworth - CFO Cort O’Haver - President, Commercial Banking Greg Seibly - President, Consumer Banking Dave Shotwell - Chief Credit Officer.

Jared Shaw - Wells Fargo Securities Steven Alexopoulos - JPMorgan Joe Morford - RBC Capital Markets Jacque Chimera - KBW Matthew Clark - Piper Jaffray Aaron Deer - Sandler O’Neill & Partners David Long - Raymond James Riley Stormont - D.A. Davidson Tyler Stafford - Stephens.

Good day, and welcome to the Umpqua Holdings Fourth Quarter Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Ron Farnsworth, Chief Financial Officer. Please go ahead, sir..

Okay, thank you, Ebony. Good morning and thank you for joining us today on our fourth quarter 2015 earnings call. With me this morning are Ray Davis, the President and CEO of Umpqua Holdings Corporation; Cort O’Haver, our President of Commercial Banking; Greg Seibly, our President of Consumer Banking; and Dave Shotwell, our Chief Credit Officer.

Cort, Greg and Dave will join us as we take your questions after our prepared remarks. Yesterday afternoon we issued an earnings release discussing our fourth quarter and full year 2015 results. We have also prepared a slide presentation, which we will refer to during our remarks this morning.

Both of these materials can be found on our website at umpquabank.com under the Ask Us, Investor Relations section. During today’s call, we may make forward-looking statements which are subject to risks and uncertainties and are intended to be covered by the Safe Harbor provisions of federal securities laws.

For a list of factors that may cause actual results to differ materially from expectations, please refer to Page 2 of our earnings conference call presentation as well as the disclosures contained within our SEC filings. I will now turn the call over to Ray Davis..

Good morning. There are seven key points that I want to highlight today in my opening remarks and then after that as we usually do, I’ll turn over to Ron to cover financial performance in more detail and then of course we will open it up for questions.

First profit for the year, Umpqua's financial metrics improved in 2015 despite challenging interest rate environment. Operating earnings per share were 6% higher, total revenues increased by 20%, our loans and deposits grew by 10% and 5%, respectively. Return on assets, return on tangible common equity and the efficiency ratio all improved in 2014.

And our core net interest margin excluding credit discount accretion for the merger remains healthy at 4.08%, one of the highest in our peer group. In addition should the Fed continue to increase interest rates we are extremely well positioned to realize incremental interest income.

Second capital, we remain focused on prudent capital management as you can imagine. In 2015 we were pleased to return more capital to our shareholders through an increase in our dividend and through quarterly share repurchases. Looking forward we expect to maintain a payout ratio over 50% on operating earnings.

Third, balance sheet growth, loan and lease production is firing on all cylinders as we head into 2016. Overall production as well as growth and balance were at record levels for 2015.

We do not see that slowing down in 2016 and fully expect to continue to deliver good loan and lease growth, while maintaining the excellent credit standards Umpqua is known for. This will be led by commercial lending, our syntax leasing subsidiary and consumer banking.

This week we announced our new commercial banking center in San Diego, consistent with our history of expanding into new metro markets to generate additional C&I production. We also expect deposit growth to continue at a healthy pace in 2016 adjusted for seasonal trends early in the year to fund our continued loan production. Fourth, integration.

The integration with Sterling is nearing completion with three system conversions remaining which will be completed during the first six months of 2016. We will be done in the first six months of 2016. We are pleased to report that our expense synergy capture on this transaction will equal or exceed our original forecast at the time of acquisition.

Going forward you will not hear us talk any more specifically about quarter-to-quarter deal specific synergy, as we are now one entity.

Now the integration conversion activities are wrapping up we will have a clear focus on overall company operating expenses and will concentrate our efforts on driving our efficiency ratio down to levels we have guided to on previous calls.

We do have companywide expense reduction initiatives underway and expect our efficiency ratio improve to 60% or lower in 2016. Fifth, credit quality. First and foremost -- first and underlying this piece, we have no energy exposure in the portfolio.

Credit quality remains excellent and we expect our credit metrics to remain near these levels through 2016. Six, mortgage banking. We forecast our production trends to continue into 2016. With the recent drop in long-term rates we expect the home lending business to remain fairly strong.

This will be accomplished through a continuation of conventional product market share gains within our current five state footprint. Revenue for mortgage loan servicing continues to grow up 20% from the fourth quarter of 2014. During 2015 we incurred $20.7 million in negative fair value adjustments related to our MSR asset.

This was largely driven by the decline in long-term interest rates and it's important to note that we will benefit once rates increase providing the company a natural hedge on profits. And last, technology innovation. We continue to make investments in technology and innovation initiatives to better position the bank for the future.

The landscape for the financial services industry is being reshaped obviously by technology and competition. We believe that the alignment of the physical and digital customer delivery channels is critical in creating an exceptional customer experience across all customer touch points.

The ability to deliver an exceptional customer experience has been and I emphasize this point and always will be paramount to Umpqua's success. This includes retaining existing customers, penetrating shared wallet and adding new businesses. With that in mind, in December we announced the creation of our new subsidiary Pivotus Ventures.

Located in the heart of Silicon Valley, Pivotus is unique, employing a collaborator business model that will allow Pivotus to leverage Umpqua's resources as well as those of other likeminded companies. We look forward to announcing more details about the company's innovative approach and direction within the next couple of months.

For now with those seven points covered, I'll turn the call back over to Ron..

Okay. Thanks, Ray. I'm going to walk through the key financial highlights from the quarter. Again we have prepared a slide presentation with our detailed fourth quarter financial information which is posted in the Investor Relations section of umpquabank.com. Staring first with the P&L.

As noted on Page 3 of the slide deck, for the fourth quarter we reported $0.30 per share in operating earnings. This is up $0.02 per share from $0.28 from the third quarter.

As a reminder, operating earnings are defined as earnings available to common shareholders before gains and losses on junior subordinated debentures carried at fair value and merger-related expenses, both net of tax. The $0.02 late quarter increase in operating earnings per share was made up of a few key items.

$0.02 of higher mortgage banking revenue, $0.01 from the lower provision for loan and lease costs and $0.01 of higher debt capital markets revenue and other noninterest income.

Those $0.04 of improvement were partially offset by $0.01 from lower gain on residential portfolio loans sales and $0.01 for higher operating expense which I'll talk about in the minute. For the full year we reported $1.15 per share on operating earnings. As Ray noted, this was up 6% from the prior year.

This improvement was driven by higher net interest income reflecting the larger balance sheet and an increase in noninterest income, primarily mortgage banking revenues and other income. As noted on Slide 6, for the quarter we had $2.2 million of merger-related expense after tax.

We expect this to remain at or below this level for the next two quarters as we wrap up our remaining conversions. Turning to NII and margin on Slide 7. Net interest income increase by $0.6 million from the prior quarter level. This increase was attributable due to 11% annualized loan growth we had in the fourth quarter.

That growth more than offset a $1.2 million decline in credit discount accretion. For the fourth quarter credit discount accretion reported net interest income of $13.1 million down from $14.3 million in the prior quarter.

Within that total, the purchased credit impaired accretion was $3.7 million versus $3.3 million in the third quarter and we forecast that they continue to bounce around in the $2 million to $3 million level on a quarterly basis during 2016. We expect to continue to see a moderate decline in total credit discount accretion over time.

Excluding the credit discount accretion, our pro-forma margin was 4.08% down 1 basis points from Q3. On Slide 8, with the strong credit quality performance that Ray mentioned, total provision for loan and lease losses decrease by $3.6 million from the prior quarter level.

Moving to non-interest income on Slide 9, we saw an increase of $8 million from the third quarter level. Gain on portfolio loan sales was lower this quarter by $3.5 million. Offsetting this was $3.6 million increase in other income reflecting higher debt capital markets revenue.

The largest component of our non-interest income was mortgage banking revenue, which increased by $8.4 million from the prior quarter.

Page 10, shows this was primarily driven by a lower impact from the MSR which decreased from a loss of $10.1 million in the third quarter to a loss of $0.5 million in the fourth quarter, reflecting the overall increase in long term rates during Q4.

On Page 11, you will see for sale mortgage originations declined seasonally by 6% from the prior quarter level. We saw a nominal impact during the fourth quarter related to trade and our home lending gain on sale margins remained flat at 3.19%. As Ray mentioned, we forecast 2016 to be another strong year for home loan production.

Turning to non-interest expense on Slide 12, excluding merger expense our operating expense was $181.4 million for the fourth quarter up from $177.2 million from the third quarter. First we do not view this as our quarterly run rate heading into 2016.

We had seasonal increases in marketing, professional fees, DFAS and enterprise risk related costs, much of which we do not expect to recur here in the first quarter. Absent these items our operating expense in Q1 should be closer to the Q3 level, ending fluctuations in home lending volume and seasonal increases early in the year with payroll taxes.

On the deal synergy side, this is the last quarter we will be discussing that topic specifically, meaning we have already achieved 95% of our announced target of $87 million in the run rate going forward.

Regardless we will realize our remaining deal synergies by mid-year, as we complete the last three existing conversions and as Ray said expect to exceed our initial synergy target. Again I want to emphasis these are just a piece of the overall efficiency gains we are targeting in 2016.

In summary, although operating expenses are up this quarter which is due to onetime expenses that will jump off in Q1. I am pleased with our successful capture of forecasted synergies and look to see on a long term operating expense run rate continue to decrease during the year as we land on an efficiency ratio of 60% or lower.

With that I am going to turn now to Slide 13 on the balance sheet. At year end our asset sensitivity position was neutral to slightly asset sensitive, given the current composition of our loan portfolio. This is by design and positions the company nicely to protect our margin given the near term outlook for interest rates.

Interest bearing cash was down this quarter to $496 million which was driven by the strong loan growth we experienced in the quarter. Our goal is to keep our interest bearing cash in the $0.5 billion to $1 billion range and our investments in the $2.5 billion to $2.6 billion range for the foreseeable future.

On Slide 14, you will see the mix of the loan portfolio. During the quarter we sold $27.7 million of portfolio residential mortgage loans. Grossing up for these sales our annualized growth rate was 12% for the fourth quarter.

Given our strong continued loan and lease production and goals with cash on balance sheet we expect that targeted loan sales will continue in 2016 and we look for further loan mix changes towards better rate commercial and consumer lending. On Slide 15, total deposits increased by $240 million from the prior quarter or 5% annualized.

The cost of interest bearing deposits increased by 2 basis points to 26 basis points for the fourth quarter. This was driven by customer balance mix changes and growth in higher cost markets. We haven't increased rates due to the Fed rate hike in December. Lastly on Slide 17, I want to highlight capital.

Assuming that all of our regulatory measures remain in excess of all capitalized levels, with our Tier 1 Common at 11.2% and total risk based capital at 14.2%. Our total payout ratio this quarter was strong at 55% of operating earnings.

Our excess capital is approximately $210 million down slightly from last quarter based on the strong loan growth we continue to see. As we have discussed for the last few years we plan to continue to employ excess capital in a prudent and subtle manner. And now I will turn the call back to Ray to wrap up our prepared remarks..

Let me take a moment to thank our associates for all of their hard work during 2015. I'm proud of all that we were able to accomplish, while completing integration of the largest acquisition in the company's history.

Despite the enormous effort involved in an integration of the size we ended 2015 a much stronger institution, with an expanded footprint, new products, stores and a continued investment in new technology for the future. Credit quality is outstanding and I will repeat we have no energy credit exposure, nor mining, nor oil or gas exposure.

We are well positioned for this interest rate environment and our organic growth [issuing] are firing on all cylinders. We will now take your questions..

Thank you. [Operator Instructions] And will take our first question from Jared Shaw with Wells Fargo Securities. Please go ahead..

Hi, good afternoon.

Could you maybe spend a little time speaking about your potential expansion plans for loan production offices as we look out into 2016 is that still an area where you could see growth and driving loan growth results?.

Hi, Jared, it’s Cort. So as you probably saw on Monday we announced the opening of our CDC in San Diego, have Mark and Jonathan start with the company. We are seeing good growth in Southern California. Now we have got a new office there to support certainly California and San Diego.

We've also opened up an office mid last year in Las Vegas, which is starting to grow now. So I feel like certainly for next couple of quarters we've got some great opportunities. That market is extremely large as you know. We've just started to really get our feet wet.

Our two, our Glendale office and our Santa Anna office also $100 million in [footings] in less than two years. So I feel like there is a lot of opportunity adding San Diego and Vegas and we've got a lot of good potential. We are always looking at other markets where we think we've got a good brand that will sell through. We've got good market dynamics.

We are always looking for new markets. So I feel very good about it..

What would you need to see in terms of market penetration or growth there before it turned into more of the full fledged branch expansion opportunity?.

Well. I will let Greg follow-up. What we normally do as we open a commercial lending office with kind of the core group and it's always about the people we hire.

We take some limited deposit types of functionality, so we do we take some deposits usually and more deposit capture and will start to earn and we get to a certain size then Greg and I will start talking about the opportunity to open up a full fledged service for. Greg if you want to throw in anything about that..

Jared. It's Greg. I think Cort said it well, what we end up doing is we have deposits towards investor CDCs, so those types of CDCs in those markets can take deposits.

As we round in other parts of kind of the consumer offering, home lending and others we evaluate that all the time just like we look at our entire enterprise and we are always looking at stores where we should add and how we should kind of amend our existing footprint, what we want to do in light of customer traffic and frankly market share opportunities.

So it's dynamic and sometimes more depository around the CDCs is great and sometimes frankly the CDCs and the small deposit rates [indiscernible]. So I think it's a big, big collaboration between Cort and I and we are always talking about that..

Great, thanks.

And then sort of shifting I am looking at overall associated commercial loan growth and do you expect to see the trend of C&I outpacing CRE growth in 2016? Did you expect to see the CRE portion, can you view the relatively modest growth and if you can comment on the overall loan pipeline as we are heading into the year?.

So we expect to continue to see C&I be a greater percentage of loan production going forward. I think we ended at the end of the fourth quarter 60% of our new loans produced during the year were in commercial loans, owner occupied the other side in leasing and we will continue with that.

With the addition of the CDC in San Diego and then to an extent we probably had seen an announcement about a couple of weeks ago. Our efforts just would be on C&I middle market growth. So that will be the efforts going forward, certainly as we look to new markets.

Pipeline relatively speaking was flat to slightly down Jared but only because we had a very, very robust fourth quarter. I think we closed almost $1.2 billion in loans for the fourth quarter and so the pipeline dipped down just ever so slightly.

Not unusual for a fourth quarter anyway, but in spite of the pull through we had yet I'm very, very pleased with that pipeline..

Great, thanks very much..

And will take our next question from Steven Alexopoulos from JPMorgan. Please go ahead..

I wanted to start on expenses, with almost all of the cost savings down in the run rate, could you help us think about a reasonable growth rate off that $177 million base that Ron referenced in the third quarter in 2016?.

Steve, our target is to be very efficient and so we are not going to give a specific target on that. But historically you can look at inflation being 2% to 3%, our goal is to negate that with efficiency initiatives we have underway..

Okay. And maybe I will follow up.

Is there any need to invest in the legacy Sterling business?.

This is Ray. Steve I not sure I understand that question. There is no -- I mean there are -- when we came together as a company we -- you could have said perhaps you might remember we had talked about the best of the best which basically is when you took -- put the two companies side-by-side and I mean people, systems, facilities, everything.

What was the better of the two? And we have always done that on all of our acquisitions and there were some things that Sterling did we probably were better than what Umpqua Classic was doing if you will and they are now Umpqua. So we don’t really have a Sterling anymore. We have an Umpqua and it's a consolidated company operating as one..

Great. I guess [indiscernible] if you look at Sterling leading up to your acquisition it's looks like there was not significant investment going on there.

So when you look at Umpqua, you look at their branches, are there needs to be changes there? So what I am trying to get at is, if we see any incremental costs based out of that do they hit the bottom line or do you need to reinvest them?.

I think, [indiscernible] because he brought up for example the branches are stores and there is no -- as Greg just adequately commented on it. Well this is a perpetual process now and for Umpqua my guess is it's for all banks, it better be. We are looking at our footprint of stores and it's pretty expansive.

As you know we got over 300 stores in five different states. And we are looking at all of those stores not just Sterling, we look at Umpqua again best of the best. We have some markets or we have multiple stores maybe some on Sterling, maybe some on Umpqua.

But we are looking to do an evaluation of all of those stores to determine, is it based on what's happening in technology, based on what's happening with people moving to their smartphones to conduct their business, can we conduct further consolidations of the store network which will defiantly add to the bottom line.

So I think we should look forward to that..

Okay that’s helpful.

Maybe shifting gears of expenses Ron, can you help us think about what you are seeing with the margin pressure seems to have abated at least this quarter, if you are expecting margins to drop lower here in coming quarters?.

That is absolutely the case for almost every bank out there and what you saw this past quarter again was very strong loan growth. Small decline in our average interest bearing cash position but that margin mix grew, assuming credit discount accretion be in the [low 4s].

Keeping in mind too underneath this we had $50 million, $60 million of continual quarterly growth within our leasing portfolio and that is all high single digit, that’s a real nice headwind sorry tailwind looking out to help buffer that impact..

Okay. And then maybe one final one Ray, just given where you are now with Sterling I know it's one company but let's say Sterling. Are you back in the market for M&A deals at this point? Thanks..

That’s a good question, it's a lovely question, that’s a good one. Steve I appreciate it. I think the honest answer is no. Right now, no..

I appreciate the color. Thanks guys..

[Operator instruction]. And we will take our next question from Mr. Joe Morford from RBC Capital Markets. Please go ahead..

I guess first just on expenses following up on Steve's question. Where you alluded to some expense reduction initiatives in your opening remarks.

I just wondered, if you could talk a bit more about what that encompasses and perhaps even quantify some of the savings opportunity you are look at there?.

Joe, I am not going to quantify it. First of all I complement you and Steve, both of your questions I love them. You guys I have known you for a long time and I do -- I am so glad you are on these calls and I am so glad you ask questions, I want you to know that. But I’ll say that there are going to be cost saves.

Like I said we got a 330 I think it is store network in the five states. We are looking at -- I think when we originally did the deal and Greg you correct me, I think we consolidated 32 stores last year. I don’t think that normal -- that number is out of line as we go forward.

As Greg has talked to within our organization and to anybody who asks, that review is going to be a continual review. I mean there especially is a request going on in technology, we think that our investment in our Pivotus subsidiaries certainly going to help.

But bottom line, Joe, and to cut to the chase is we have got 60% written on our foreheads, tattooed on our foreheads. And that's where we are going and that’s what we are going to get come how, how long..

Okay understood. The other question I guess is on provisioning in all -- the charge-off declined just modestly but the provision was lower by almost half this quarter despite the stronger loan growth.

Just what was the thinking there and what should we be thinking going forward about future observing in 2016?.

Hey Joe, and we talked about this a bit during the comments. But just actually credit core here an offset, improvements in underlying core credit holdings was offset, new provisioning related to the loan portfolio and this is mostly a calculation rate that comes out. So provisioning next year we expect obviously will continue.

Credit quality is really good. We don’t see any change in that but might it closer to the match just for loan growth next year..

Okay, sounds good. Thanks..

And we will take our next question from Jacque Chimera from KBW. Please go ahead..

Hi. Good morning everyone. A question for you Greg. We spend a lot of time talking about commercial growth but the consumer portfolio though obviously much smaller has also had some good growth over the last several quarters.

I wondered, if you could just provide an update on kind of what kind of loan growth you are seeing within that bucket and what your outlook is going forward and any new initiatives you might have in there?.

Yes. Jacque a great question. I think 2015 was a terrific growth for SFR. I think as we look at that portfolio part of the issue is we continued to see a strong demand in 2015, I think you will see less of that portfolio certainly going forward for lots of reasons around PRE concentration already previously alluded to.

The other buckets in terms of small business, consumer loans, private bank, et cetera, are all pushing up those are areas where we want to continue to see that push to balance out the overall portfolio and every single one of those businesses had 20% plus growth year-over-year in terms of origination.

So we feel real good about it and I think as you know on the consumer side we are also incredibly focused on the deposit side. So with every one of those and new lending relationships we are also incredibly focused on bringing in deposits as well. So I feel good about 2015 our position..

Okay.

So do you feel that you could achieve that kind of growth again assuming that the economy, stays as it is?.

Yes. I think what you will see is if you look at consumer, I would expect again Ray and Ron also touched on it. We will see probably a little bit of a rotation away from some of the portfolio lending on SFR being picked up in other areas this quarter, obviously like C&I. So I think you will see a mix and a rebalancing but we feel good overall.

And frankly if we originate those loans in our portfolio we can always try and obviously deal with that from a different earning stream..

Yes. And I was looking primarily to the consumer end of the bucket I understand the point of that so far. Looking to loan sales seen in the SFR, loan sales on the quarter.

I wondered if we could -- just I know you touched on this in your prepared remarks to that Ron, but if you can just give a little bit of color on what other loans may or may not have been sold in the quarter and kind of the outlook? I know in past calls we talked about jumble sales, if any of that is then taking place kind of expectations for next year and FDA as well?.

Yes. We definitely expect that to continue into 2016 and that's going to be between CRE most likely in the multifamily space and along with the jumbled residential..

Did you have any multifamily sales in the quarter or was it all jumbled?.

No we did not..

Okay, thank you very much..

And will take our next question from Mr. Matthew Clark from Piper Jaffray. Please go ahead..

Good morning. Just first one on just curious what the weighted average rate was on new productions this quarter? New money yields..

New money yields on the loan side?.

Yes..

Yes. So you are seeing these in the high 3s to low 4s. C&I again the low 3s and again I touched on mortgage and so if at any given day off the Street and I touched on leasing [as in A paper] growth through the financial specifically we have seen that is all high single digits in that 8% to 9% range..

Any sense there that the blended number would ever grade overall?.

Blended number overall would be probably in the mid to high 3s..

Okay, great.

And then can you -- what of your variable mortgage compensation expense in the quarter, this quarter and then also in 3Q?.

Sure. It was approximately $30 million in Q4, it was $30.5 million in Q3..

So is that overall mortgage expense or is that the variable fee?.

Overall mortgage expense, the majority of that off course is variable compensation..

Okay, thank you. And then just on the deposit costs it's in that's just partly a function of the Fed hike December.

Can you give us a sense for whether or not we might see some policy out here in the first quarter on the deposit cost or that's?.

Yes. And I specifically say that was not the result of the Fed rate hike. We have not increased our deposit rates related to the Fed hike, but that was a result of, there was growth in higher cost markets and customer -- existing customer balance mix changes. I also point out that our cost of total deposits remained flat at 17 [days]..

Got it, okay. That will do for me. Thank you..

And will take our next question from Aaron Deer from Sandler O’Neill and Partners. Please go ahead..

Hi, good morning everyone. Ray I thought it's was going to be impossible to pin you down on the expenses. But your comment about the 60% come how or how what I will take that..

I'm going to hear that probably most of the time..

So I want to get on to a different track there on the excess capital. You mentioned $210 million obviously we have got some good organic growth plans, but doesn’t sound like acquisitions are on the cards.

So I'm wondering, can you talk a little bit about what other thoughts for that in particular given where the stock price has gone, might you get more aggressive with share buyback, share early in the year?.

I don’t think so on share buybacks, we've announced that. I don’t think we will be more aggressive. I think we will be fairly consistent with what we've done. And I think the intangible with capital right now, and you guys have is, your crystal ball is as clear as mine.

What's going to happen to the economy, what's going to happen with interest rates, I think Umpqua has a -- well I don’t think I know. Umpqua's had a history of healthy capital in good times and in bad times, so that strategy has always paid off very well for us.

I don’t think the amount of excess capital we have is out of line, I don’t think it's excessive. I think we have the history of employing capital at the right time. And I think that as you look at our -- how we will employ our capital in the future, I think you should rely in a calculating way -- rely on how well we have done it in the past.

I think we are in very, very good shape. And I’ll tell you with the $210 million of excess capital we have got I like where we are right now..

And then on the mortgages, I am pretty optimistic in terms of volumes heading into '16 and the gain on sale premiums look to be pretty consistent over the past couple of quarters.

So it seems you guys have been selling into the market this year, have those premiums been holding steady or might we see them drift back up or is there a rest of down side yet?.

Obviously what's happening over the last few weeks, we now see the 10 year at 2%, we expect a little bit of a pickup in refi volume here in Q1 which is great. We do expect 2016 to be a strong year. We are well positioned in these markets along the West Coast and I would expect our gain on sale margins as we talked about would stay relatively steady..

Okay good stuff. Thanks for taking my questions..

And we will take our next question from David Long from Raymond James. Please go ahead..

The last question that I have here is on looking at credit quality obviously very good at this point but any loan types or geographies that you can point to where you may see some incremental concerns since last quarter?.

Dave Shotwell here. No actually David nothing of concern. We have got a real dispersed portfolio geographically and by product type. No major concentrations in high risk segments. Biggest portfolio we have in the bank is multifamily which is performing exceptionally well and as well as single family also doing very, very well.

So at this point no concerns about any segment at all..

Okay, that’s all I have. Thanks guys..

[Operator instruction]. We will take our next question from Jeff Rulis from D.A. Davidson..

Hey good morning guys. This is actually Riley on for Jeff. Just looking for a bit of color on the mortgage banking side. I know that the [MVAs] forecast calls for a 7% decline in originations for 2016.

I know you touched on it briefly in your prepared remarks, but do you sort of expect to book that trend or is that sort of in line with what you looking at?.

No, I think we had a strong year in 2015. I think in the comments you heard we expect another strong year in 2016. I think part of it is good investments underway across the footprint over the course of last year. And if you look at kind of linked year growth it was up almost 40% in '15 relative to '14.

So frankly just keep our nose above the water line and kind of stay relatively flat we think we can accomplish -- is an accomplishment we can achieve even with the MVA forecast being down.

And frankly if the 10 year stays where it is in the first quarter we feel good but that’s a little bit of a tailwind and it's part of the year that would typically be a little seasonally softer..

All right great. Everything I wanted to ask has been answered so thank you..

And we have our final question from Tyler Stafford with Stephens. Go ahead..

Not to beat the expense horse to death here, but just a clarity question on expense outlook for 1Q to be similar to 3Q '15 levels.

Does that still hold true considering the variable mortgage compensation? It's typically much lower in the first quarter of the year than the typically higher third quarter or does that comment exclude the mortgage business?.

It includes the mortgage business with the concept that we would just expect the business to have good production in the Q1. Of course if that number is lower on the production side there is variable cost in mortgage then the overall number would be lower too..

Okay. Thanks for the clarification. Everything else has been asked. Thanks..

And there are no further questions at this time..

Okay. I want to thank everyone for their interest in Umpqua Holdings and their attendance on the call today. This will conclude the call. Good bye..

And that does conclude today's conference. We thank you all for your participation..