When you see a name like Umpqua, you just have to check it out sooner or later. So today, we're going to take a look at Oregon's Umpqua Holdings
Let's first take a look at fourth-quarter results. Net income rose about 15%, and the company's self-defined core earnings per share increased at a 28% rate. "Core earnings" are meant to exclude items like merger expenses and unusual gains or losses, but I think it's important to look at both numbers in any given quarter.
Growth was led by interest income, which increased 10% as Umpqua Bank (Umpqua Holdings is Umpqua Bank and a retail brokerage business) saw its net interest margin rise about 10 basis points to 5.06%. Yeah, you read that right -- a 5.06% net interest margin. Non-interest income performance was not so superb, though, and fell 8% mostly on lower brokerage fees. As for expenses, non-interest expenses actually declined in the quarter, but the efficiency ratio still worsened to 52.9% from 52.3%.
Balance sheet numbers also looked quite good. Loans were up 13%, and deposits rose nearly 13%. The bank still maintained nearly one-quarter of its deposit base in non-interest-bearing accounts, and the overall cost of funds was a solid 2.59%, though much higher than the year-ago 1.66%.
Umpqua is different in a lot of ways, and it won't be possible to do complete justice to it here. First, the company has a service model more akin to a Starbucks
With a bit more than $1 billion in market cap, Umpqua is a mid-sized bank. That said, it has a sixth-place share in Oregon behind heavy-hitters like U.S. Bancorp
Analyzing the stock is a bit tough. While its return on assets is pretty good, its return on equity is not. Likewise, margins are a little below average, but growth is better than average. Though the stock doesn't look like a huge bargain at today's price, it's not really overvalued, and I do believe that better companies can often support higher-than-average valuations.
For more Foolish thoughts on banking:
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).