Umpqua’s 1Q profit climbs 69% on surge in fee income

Umpqua Holdings in Portland, Ore., said Wednesday that its first-quarter profit increased 69% from the same period last year, to $77.7 million, as it benefited from a fair-value change to a mortgage servicing rights asset, higher swap fee income and loan growth.

Earnings per share came in at 35 cents, eight cents higher than the mean estimate of analysts polled by FactSet Research Systems.

The $25.7 billion-asset company said that first-quarter earnings included a $5.1 million gain related to the fair value change of a mortgage servicing rights asset, compared with a $7.7 million negative adjustment in the first quarter of last year. Total fee income increased 30% to $78.6 million, driven in part by a 44% increase in other noninterest income, which included higher debt capital market swap fee revenue.

Net interest income increased 8% to $223 million, and the net interest margin expanded 11 basis points to 3.96%.

Total loans and leases increased 8% year over year to $19.3 billion. Loans for residential development, commercial term loans and equipment leases and loans all increased by more than 20% and residential mortgage loans climbed 13%. Total nonperforming loans and leases increased 36% to $71.3 million and represented 0.37% of total loans and leases.

Deposits increased 5% to $20.1 billion, while noninterest expenses rose 2% to $186 million.

In a news release, President and CEO Cort O'Haver attributed the bank's financial performance to the execution of its so-called NextGen initiative, initially announced in mid-2017, that included commitments to upgrade its technology, expand fee-based businesses and beef up its offerings in corporate banking.

O’Haver has stated that the goal of that strategy is to achieve a return on tangible common equity between 13% and 15% by 2020. That figure stood at 10.67% when Umpqua announced the plan; it had improved to 14.30% at March 31.

“Umpqua’s strong financial performance in the first quarter reflects the success of key initiatives we’ve put in place over the past 12 months,” O'Haver said in a press release. “As we’ve begun activating our Umpqua Next Gen strategy, we’ve demonstrated our ability to grow in a more consistent and profitable manner, while tightly managing core expenses and building digital and technology capabilities for the future.”