Magazine article American Banker

Banks' Stocks Fall despite Positive Earnings

Magazine article American Banker

Banks' Stocks Fall despite Positive Earnings

Article excerpt

Byline: Kate Berry, Jackie Stewart

Umpqua Holdings' executives were scratching their heads Friday over the sudden drop in the company's stock price following what appeared to be a strong earnings report this week.

After the markets closed Wednesday, the $11.5 billion-asset company in Portland, Ore., reported a profit of $23.1 million in the second quarter, up 31% from the same period last year, thanks primarily to record mortgage banking revenue and a 6% increase in total loans. On Thursday, however, its shares fell nearly 7%, to $12.84, in extremely heavy trading and they shed another nickel Friday.

Chief Financial Officer Ronald Farnsworth was at a loss to explain the why the stock fell in light of the results. Its earnings per share 21 cents a share were in line with analysts' estimates, according to Thomson Reuters.

"It's almost like we announced and the stock sold off," said Farnsworth, adding, "we had a great quarter of loan growth."

Farnsworth noted that a handful of other regional banks that reported positive earnings late Wednesday including TCF Financial (TCB) and PacWest Bancorp (PACW) also saw their stocks slide as well. On Friday, shares of Associated Banc-Corp fell almost 5% despite the fact that it posted its highest quarterly profit in four years.

Frederick Cannon, director of research and chief equity strategist at KBW Inc.'s Keefe, Bruyette & Woods, suggested in a research note that Umpqua's shares fell "due to what we believe are unfounded concerns over some small upticks in problem credits."

Umpqua's nonperforming assets rose 2% from the first quarter, to $81. …

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