Sunday, August 8, 2021

Umpqua Powers Through Short-Term Mortgage Banking Pressures

 

Just when you think you have the Street figured out, it throws you for a loop. I’ve long liked Western bank Umpqua Holdings (UMPQ), and when I last wrote about the stock, I said that I saw an appealing double-digit annualized long-term potential return for shareholders. I also expected significant near-term earnings pressure from lower mortgage banking, and thought that would spook the Street when it has been obsessed with near-term banking metrics.

Turns out, at least in this case, the Street took the mortgage banking weakness in stride and stayed focused on the big picture. Although mortgage banking has been hit hard, Umpqua shares have risen about 25% since that last article, handily beating the average regional bank over that time (although the post-earnings run has fueled about half of that).

I like where Umpqua is sitting today. The mortgage banking issue is known and in the numbers, and the loan growth outlook is better, while NIM was actually higher than expected here. With a strong customer service focus and above-average growth potential, combined with a long-term potential return in the high single-digits and modest undervaluation in the short term, I still think this is a quality holding and still a borderline buy for longer-term investors.

 

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Umpqua Powers Through Short-Term Mortgage Banking Pressures

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