WSBA Western Sierra Bancorp (MM)

Western Sierra Bancorp Reports Record Profitability; Fully Diluted Earnings Per Share Increases 20% to $.49 for the 3rd Quarter; Asset Quality at an All Time High CAMERON PARK, Calif., Oct. 15 /PRNewswire-FirstCall/ -- Western Sierra Bancorp (NASDAQ:WSBA), a multi-bank holding company, headquartered in Cameron Park, Calif., announced results for the third quarter ended September 30, 2004. Financial Highlights from the third quarter of 2004 vs. 2003: -- An increase in GAAP net income of $893,000 or 30% to $3.85 million -- An increase in Fully Diluted GAAP EPS to $0.49 from $0.41 or 20% -- GAAP ROA and ROE of 1.33% and 15.03%, as compared to 1.31% and 17.01% -- Return on Tangible Equity of 22.62% as compared to 21.54% -- Total assets increased $216 million or 22% to $1.18 billion -- Total loans increased $226 million or 32% to $926 million -- Net interest margin increased 6 basis points to 5.10% versus 5.04% -- Efficiency Ratio was reduced to 54.2% from 56.3% -- Continued superior asset quality with nonperforming assets at just 0.05% of ending assets Financial Highlights from the nine-month period ended September 30, 2004 vs. 2003: -- An increase in GAAP net income of $3.29 million or 43% to $11.0 million -- An increase in Fully Diluted GAAP EPS to $1.40 from $1.14 or 23% -- GAAP ROA and ROE of 1.32% and 14.90%, as compared to 1.33% and 16.99% -- Return on Tangible Equity of 22.91% as compared to 19.57% -- Net interest margin remained stable at 5.17% versus 5.18% -- Efficiency Ratio was reduced to 55.2% from 57.1% Management Comments Gary D. Gall, President and CEO of Western Sierra Bancorp, stated, "We had a tremendous quarter for loan growth and nonperforming assets are at an all time low. Our formula for relationship banking has resulted in strong organic growth. This growth has been further enhanced by disciplined acquisitions and strategic denovo branch investments." Record Earnings and Returns The Company reported record GAAP Earnings of $3,849,000 for the quarter or $0.49 per diluted share, an increase of $893,000 or 30% over the quarter ended September 30, 2003 in which earnings were $2,956,000 or $0.41 per diluted share. For the nine-month period ended September 30, 2004, the Company reported GAAP Earnings of $10,995,000 or $1.40 per diluted share, an increase of $3,289,000 or 43% over the same period in 2003 in which earnings were $7,706,000 or $1.14 per diluted share. For the twelve month period ended September 30, 2004 (trailing twelve months) GAAP earnings were $13,237,000 or $1.70 per diluted share, an increase of $3,369,000 or 34% over the $9,868,000 or $1.47 per diluted share reported for the trailing twelve months ended September 30, 2003. The Company reported record Cash Earnings (excludes amortization expense of intangibles of $117,000 and $87,000, respectively, on a tax-adjusted basis) of $3,966,000 for the quarter or $0.50 per diluted share, an increase of $923,000 or 30% over the quarter ended September 30, 2003 in which Cash Earnings were $3,043,000, or $0.43 per diluted share. For the nine-month period ended September 30, 2004, the Company reported Cash Earnings (excludes amortization expense of intangibles of $351,000 and $167,000, respectively, on a tax-adjusted basis) of $11,346,000 or $1.44 per diluted share, an increase of $3,473,000 or 44% over the same period in 2003 in which Cash Earnings were $7,873,000 or $1.16 per diluted share. On a GAAP basis, Return on Average Assets was 1.33% and 1.32% for the quarter and nine-month period ended September 30, 2004 as compared to 1.31% and 1.33% for the third quarter and nine-month period ended September 30, 2003. Return on Average Equity was 15.03% for the third quarter and 14.90% for the nine-month period ended September 30, 2004 as compared to 17.01% and 16.99% for the third quarter and nine-month period ended September 30, 2003. Return on Tangible Equity (excludes average Goodwill and other intangible assets from average equity) was 22.62% for the third quarter and 22.91% for the nine-month period ended September 30, 2004 as compared to 21.54% and 19.57% for the third quarter and nine-month period ended September 30, 2003. Strong Loan and Deposit Growth Total Assets ended the quarter at a record high of $1.18 billion. This represents a $216 million or 22% increase over September 30, 2003. The Company has continued its record of strong loan growth. Total gross loans grew to $926 million, an increase of $226 million or 32% over a year ago. Total Deposits grew to a record $1.01 billion; this represents a $186 million or 23% increase over September 30, 2003. The September 30, 2004 balance sheet totals include $75 million in loans, $90 million in total assets and $82 million in deposits acquired though the acquisition of Auburn Community Bank on December 12, 2003. Net Interest Income Reaches Record High Net interest income increased by $3.03 million or 30% over the third quarter of 2003. The Company's reported Net Interest Margin (on a fully tax equivalent basis) of 5.10% was up 6 basis points from the third quarter 2003. For the nine-month period ended September 30, 2004, net interest income increased $11.02 million or 41% and the Net Interest Margin (on a fully tax equivalent basis) of 5.17% was down 1 basis point from the same period in 2003. The Company's Net Interest Margin has been relatively stable given the level of rate reductions that have occurred in the market place over the last three years. The Company has benefited from stable income from fixed rate loans and investments as well as loans that have reached contractual floors during this period. In addition, loan growth has driven the increase in net interest income with the average loan-to-deposit ratio increasing from approximately 85% in the third quarter of 2003 to 90% in the third quarter of 2004. Superior Asset Quality Credit quality remains strong with $168,000 or 0.02% loan delinquencies between 30 and 90 days as of September 30, 2004 compared to no loan delinquencies as of September 30, 2003. Non-performing assets (delinquent loans over 90 days and REO) as of September 30, 2004 totaled $599,000 or 0.05% of total assets, compared to $661,000 or 0.07% of total assets at September 30, 2003. The allowance for loan and lease losses totaled $13.1 million, or 1.41% of loans outstanding at September 30, 2004, compared to $10.0 million, or 1.43%, a year ago. The Company recorded net charge-offs of $179,000 in the third quarter of 2004 as compared to $254,000 in the same period of 2003. For the nine-month period ended September 30, 2004, net charge-offs were $357,000 as compared to $257,000 for the same period of 2003. Other Income / Expense and the Efficiency Ratio The growth in net interest income of 30% for the quarter was offset by a reduction in non-interest income of 13%, which was mainly comprised of decreased mortgage premiums of $482,000 and increased investment service fee income of $122,000. Total operating expenses excluding amortization of core deposit intangibles grew at a slower rate (14% for the quarter) than net revenue resulting in an improved efficiency ratio, which was reduced from 56.3% in the third quarter of 2003 to 54.2% in the third quarter of 2004. In addition to growth in net interest income of 41% for the nine-month period ended September 30, 2004, the Company grew non-interest income by 8% primarily through increased service charges and fees of $705,000 and increased investment service fee income of $483,000, which was offset in part by a decline in mortgage premiums of $770,000. Total operating expenses excluding amortization of core deposit intangibles grew at a slower rate (29% for the nine-month period) than net revenue resulting in an improved efficiency ratio, which was reduced from 57.3% in the first nine months of 2003 to 55.2% in the same period of 2004. Other Information and Disclaimers Western Sierra Bancorp is comprised of Western Sierra National Bank, Lake Community Bank, Central California Bank and Auburn Community Bank. The Company operates twenty-nine branches and four loan production facilities in the counties of El Dorado, Placer, Sacramento, Lake, Stanislaus, San Joaquin, Calaveras, Amador, Contra Costa, Tuolumne and Butte. This press release contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risk and uncertainties. Actual results may differ materially from the results in these forward-looking statements. Factors that might cause such a difference include, among other things, fluctuations in interest rates, changes in economic conditions or governmental regulation, credit quality and other factors discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2003. Western Sierra Bancorp and Subsidiaries Consolidated Statements of Income (dollars in thousands, except per share data) Three Months Ended Nine Months Ended (Unaudited) September 30, September 30, Growth Growth 2004 2003 % 2004 2003 % Interest income: Interest and fees on loans $14,971 $11,843 26.4% $43,398 $31,641 37.2% Interest on investment securities: Taxable 485 276 1,238 1,055 Exempt from federal taxes 391 361 1,167 1,089 Interest on Federal funds sold 203 182 397 353 Total interest income 16,050 12,662 26.8% 46,200 34,138 35.3% Interest expense: Interest on deposits 2,336 2,178 6,510 6,224 Interest on borrowed funds 549 347 1,658 901 Total interest expense 2,885 2,525 14.2% 8,168 7,125 14.6% Net interest income 13,165 10,137 29.9% 38,032 27,013 40.8% Provision for loan and lease losses (LLP) 600 600 0.0% 1,910 1,655 15.4% Net interest income after LLP 12,565 9,537 31.8% 36,122 25,358 42.4% Non-interest income: Service charges and fees 1,205 1,202 3,620 2,915 Investment service fee income 140 18 517 34 Net gain on sale and packaging of residential mortgage and government- guaranteed commercial loans 986 1,468 3,033 3,803 (Loss) gain on sale of investment securities (1) 19 (12) 19 Other income 216 229 671 480 Total non- interest income 2,546 2,936 -13.3% 7,829 7,251 8.0% Other expenses: Salaries and benefits 4,892 4,291 14,660 11,142 Occupancy and equipment 1,505 1,259 4,292 3,464 Other expenses 2,338 2,018 7,061 5,453 Merger expenses -- 86 -- 86 Amortization of core deposit intangibles 180 134 540 257 Total other expenses 8,915 7,788 14.5% 26,553 20,402 30.1% Income before income tax 6,196 4,685 32.3% 17,398 12,207 42.5% Income taxes 2,347 1,729 6,403 4,501 GAAP net income $3,849 $2,956 30.2% $10,995 $7,706 42.7% Amortization of core deposit intangibles after tax 117 87 351 167 Cash net income $3,966 $3,043 30.3% $11,346 $7,873 44.1% GAAP EPS Basic earnings per share $0.51 $0.43 18.6% $1.46 $1.19 22.7% Fully diluted earnings per share $0.49 $0.41 19.5% $1.40 $1.14 22.8% Cash EPS (excluding amortization expense) Basic earnings per share $0.52 $0.45 15.6% $1.51 $1.22 23.8% Fully diluted earnings per share $0.50 $0.43 16.3% $1.44 $1.16 24.1% Shares used to compute Basic EPS 7,595 6,820 7,535 6,466 Shares used to compute Fully Diluted EPS 7,911 7,152 7,873 6,770 Average Loans $890,047 $664,456 34.0% $864,779 $599,046 44.4% Average Investments $154,191 $149,430 3.2% $134,285 $113,844 18.0% Average Earning Assets $1,044,238 $813,886 28.3% $999,064 $712,890 40.1% Average Deposits $987,872 $780,848 26.5% $936,951 $675,563 38.7% Average Non-interest Demand Deposits $257,783 $187,827 37.2% $238,281 $158,979 49.9% Average Interest- bearing Liabilities $785,444 $633,740 23.9% $762,129 $549,810 38.6% Average Assets $1,155,547 $896,777 28.9% $1,109,727 $775,609 43.1% Average Equity $101,893 $68,959 47.8% $98,538 $60,644 62.5% Return on Average Assets (GAAP) 1.33% 1.31% 1.32% 1.33% Return on Average Equity (GAAP) 15.03% 17.01% 14.90% 16.99% Return on Tangible Equity 22.62% 21.54% 22.91% 19.57% Net Interest Margin (FTE) 5.10% 5.04% 5.17% 5.18% Efficiency Ratio (FTE) 54.2% 56.3% 55.2% 57.1% Western Sierra Bancorp and Subsidiaries Consolidated Balance Sheet (dollars in thousands) (Unaudited) September 30, September 30, ASSETS: 2004 2003 Growth % Cash and due from banks $37,579 $39,285 Federal funds sold 52,235 77,965 Cash and cash equivalents 89,814 117,250 -23.4% Interest-bearing deposits 4,000 793 Loans held for sale 811 1,847 Investment securities: Trading 35 26 Available for sale (amortized cost $86,081 in 2004 and $88,822 in 2003) 87,599 90,082 Held to maturity (market value of $3,824 in 2004 and $4,383 in 2003) 3,675 4,197 Total investments 91,309 94,305 -3.2% Portfolio loans and leases: Real estate mortgage 583,500 413,540 Real estate construction 208,828 170,094 Commercial 113,374 94,662 Agricultural 13,935 14,528 Installment 4,331 4,728 Lease financing 1,828 2,143 Total gross loans and leases 925,795 699,695 32.3% Deferred loan and lease fees, net (2,806) (2,524) Allowance for loan and lease losses (13,082) (10,032) Net portfolio loans and leases 909,907 687,138 32.4% Premises and equipment, net 20,054 19,037 Other real estate -- -- Goodwill and other intangible assets 34,093 18,304 Other assets 29,973 24,970 Total assets $1,179,961 $963,644 22.4% LIABILITIES AND SHAREHOLDERS' EQUITY: Non-interest bearing deposits $263,582 $205,461 28.3% Interest bearing deposits: NOW, money market and savings 395,393 289,226 Time, over $100,000 182,285 151,349 Other time 165,351 174,979 Total deposits 1,006,611 821,015 22.6% Borrowed funds 21,500 21,650 Subordinated debt 36,496 36,496 Other liabilities 9,694 9,677 Total liabilities 1,074,301 888,838 20.9% Shareholders' equity: Preferred stock - no par value; 15,000,000 shares authorized; none issued -- -- Common stock - no par value; 15,000,000 shares authorized; 7,620,866 shares issued in 2004 and 6,911,364 shares in 2003 67,586 50,451 Retained earnings 37,092 23,855 Unearned ESOP shares -- (325) Accumulated other comprehensive income 982 825 Total shareholders' equity 105,660 74,806 41.2% Total liabilities and shareholders' equity $1,179,961 $963,644 22.4% Allowance for Loan and Lease Losses Gross Loans 1.41% 1.43% Ending Delinquent Loans $168 $-- Ending Non Performing Loans (non accrual and > 90 days) $599 $661 Total Non Performing Loans and REO - Non Performing Assets $599 $661 YTD Net Charge-offs $357 $257 YTD Net Charge-offs (recoveries) as a % of Avg Loans 0.06% 0.06% Non Performing Assets as a % of Total Assets 0.05% 0.07% Total Risk Based Capital To Risk Weighted Assets 12.18% 11.49% Tier 1 Capital to Risk Weighted Assets 10.82% 10.24% Tier 1 Capital to Average Assets (Leverage Ratio) 9.14% 8.45% DATASOURCE: Western Sierra Bancorp CONTACT: Gary D. Gall or Anthony J. Gould, both of Western Sierra Bancorp, +1-530-677-5600 Web site: http://www.westernsierrabancorp.com/

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