Umpqua Holdings Corporation

Assets under management: $5.2 billion

3Q ROE: 11.10

3Q ROA: 0.71

3Q Price Performance: $24.32

3Q Net Income: $19.9 million

When an 85-year-old customer came into an Umpqua branch to stop payment on a $150 check in 2005, he was too late: The check had already cleared. The payment was for a wood-chopping service in the woodsy Oregon home of Umpqua, but the wood had not been split into usable pieces nor stacked the way the customer had requested. No problem: With the help of two other employees, the branch manager went to the customer's house with axes and finished the job.

That was just one of the many true customer-service stories that are told in monthly conference calls of Umpqua managers, says Ric Carey, co-head of retail banking. The stories allow a moment of levity with the monthly calls, but they also embody the bank's emphasis on customer service, which the bank takes very, very seriously.

Customer service is one of the two main themes Carey talks about when discussing the retail team's success at Umpqua. The other theme is employee empowerment.

Every single employee has the authority to waive a fee or match any published interest rate. He adds, however, that this service is reserved for existing customers, not someone simply looking to buy a new CD.

Indeed, pleasing existing customers is of paramount importance, since the bank is particularly concerned with customer retention, says Steve May, co-head of retail banking. Umpqua was a pioneer in the new generation of branch design that highlights business stations, downplays teller windows and features coffee bars and Internet cafes, he points out.

Indeed, says Carey, everyone in the industry talks about customer service, but nobody measures it except Umpqua. The bank has a return on quality ratio, dubbed ROQ, used for mystery shoppers to gauge employees on specific criteria including, for example, how well employees cross-sell the bank's products.

The bank does very little TV marketing, preferring what May calls "handshake-marketing tactics," which require bank employees to meet the public. Carey says the bank spends most of its marketing energy on local sponsorships, especially events geared toward education and youth events, such as the Boys and Girls Club. "We don't [just] put up a banner at a park and play music," Carey says. "We own the event."

It also sponsors smaller events at branches, like Friday night movies and an after-hours sewing event, dubbed "stitch and bitch," which encourages customers to gather to chat while sewing, knitting or crocheting. The main idea is simple: Get customers more comfortable with spending time at the branch, Carey says.

Louis Feldman, a stock analyst at Hoefer & Arnett, says Umpqua's retail style has been very successful and widely copied by institutions like Washington Mutual and Bank of America. The stock has not been a stellar performer, however, partly because the company owns a brokerage that drags down the stock valuation, he says. But as far as the customer is concerned, "Umpqua is one of the best," Feldman says.

Beyond that, bank employees actually enjoy their time at work. "I've been in banking for 38 years and I'm now finally excited about my job," says Carey. - LC (c) 2006 U.S. Banker and SourceMedia, Inc. All Rights Reserved. http://www.us-banker.com http://www.sourcemedia.com

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