Construction, mortgage lending boost Umpqua's 3Q profits

Umpqua Holdings in Portland, Ore., reported double-digit earnings gains in the third quarter highlighted by strong loan growth, particularly in construction lending, and lower expenses.

Net income for the $26.6 billion-asset Umpqua totaled $91 million in the third quarter, up 42% from the same quarter last year. Earnings per share were 41 cents and beat the median estimate of analysts polled by FactSet Research Systems by 5 cents.

Umpqua had a number of one-time items affecting its third-quarter results, including a $7 million increase in interest income related to an accounting change on residential mortgage backed securities and $3.5 million in restructuring charges.

But the company also saw strong loan growth at a time when many other regional banks are seeing little to no gains in their loan books.

Total loans increased 7% to $19.8 billion. Construction loans increased 24% to $646.7 million, and mortgage lending increased 12% to $3.5 billion. Commercial and industrial lending was also strong, with commercial term loans increasing 18% to $2.2 billion and equipment finance growing 13% to $1.3 billion.

Net interest income increased 8% to $241.4 million, and the net interest margin widened 9 basis points to 4.09%.

That more than offset a 6% decline in noninterest income, which totaled $72.4 million, the result of losses on some investment securities and a 6% decline in mortgage banking revenue, which totaled $31.5 million.

Umpqua also continued to trim expenses in the third quarter and it noninterest expenses fell 5% to $179.3 million from last year’s third quarter.

Its efficiency ratio improved to 57.06% from 62.58% last year.

In a press release, President and CEO Cort O’Haver touted the company’s progress on its profitability plan, Umpqua Next Gen, which includes a mix of tech upgrades and investments in corporate banking.

“Our financial performance improved significantly during the third quarter, driven by stronger net interest income and lower core expenses,” he said. “As we continue to build on the foundation of Umpqua Next Gen, our focus remains on completing the operational excellence initiatives ... which will drive enhanced profitability and long-term shareholder value.”