WSBA Western Sierra Bancorp (MM)

CAMERON PARK, Calif., Oct. 19 /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, 2005. Financial Highlights from the third quarter of 2005 vs. 2004: -- An increase in GAAP net income of $861,000 or 22.4% to $4.71 million -- An increase in Diluted GAAP EPS to $0.59 from $0.49 or 20.4% -- ROA and ROE of 1.47% and 15.38%, as compared to 1.33% and 15.03% -- Return on Tangible Equity of 21.23% as compared to 22.62% -- Total assets increased $117 million or 10% to $1.3 billion -- Total loans increased $104 million or 11.2% to $1.03 billion -- Net interest margin increased 27 basis points to 5.37% versus 5.10% -- Efficiency Ratio increased to 55.0% from 54.2% -- Continued asset quality with nonperforming assets at just 0.07% of ending assets Financial Highlights from the nine-month period ended September 30, 2005 vs. 2004: -- An increase in GAAP net income of $1.83 million or 16.6% to $12.83 million -- An increase in GAAP net income excluding terminated merger expenses of $232,000, net of tax, to $13.06 million or 18.7% -- An increase in Diluted GAAP EPS to $1.61 from $1.40 or 15.8% -- An increase in Diluted GAAP EPS excluding terminated merger expenses to $1.64 from $1.40 or 17.1% -- ROA and ROE of 1.39% and 14.74%, as compared to 1.32% and 14.90% -- ROA and ROE excluding terminated merger expenses of 1.42% and 15.00%, as compared to 1.32% and 14.90% -- Return on Tangible Equity of 20.72% as compared to 22.91% -- Return on Tangible Equity excluding terminated merger expenses of 21.10% as compared to 22.91% -- Net interest margin increased 16 basis points to 5.33% versus 5.17% -- Efficiency Ratio increased to 56.2% from 55.2% Management Comments Gary D. Gall, President and CEO of Western Sierra Bancorp, stated, "Loan growth and asset quality have been the hallmark of our success and the third quarter was no exception. The markets in which we operate continue to provide opportunities to expand our relationship banking network." Discussion of Non-GAAP Financial Measures In order to assist investors in comparing what management believes to be the Company's core operating results from one period to another, included herein are financial measures that exclude the effect of "terminated merger expenses". In November 2004, the Company entered into a definitive agreement to acquire Gold Country Financial Services Inc. This agreement was terminated by the mutual consent of both parties in June of 2005. Included in the Company's operating results for the quarter ending June 30, 2005 and the nine month period ending September 30, 2005 are approximately $398,000 ($232,000 after tax) in legal, consulting, data processing, accounting and other merger costs were incurred and capitalized while the transaction was pending. Management does not expect a similar charge to be incurred in the foreseeable future. In management's view, net income excluding terminated merger expenses assist investors in better understanding the comparative core operating performance of the Company. Record Earnings and Returns The Company reported record GAAP net income of $4,710,000 for the quarter or $0.59 per diluted share, an increase of $861,000 or 22.4% over the quarter ended September 30, 2004. For the nine-month period ended September 30, 2005, the Company reported GAAP Net income of $12,824,000 or $1.61 per diluted share, an increase of $1,829,000 or 16.7% over the same period in 2004. Excluding terminated merger costs of $232,000 after tax, net income for the nine-month period ended September 30, 2005 was $13,056,000 or $1.67 per diluted share, an increase of $2,061,000 or 18.7% over the same period in 2004. For the twelve month period ended September 30, 2005 (trailing twelve months) GAAP net income was $16,865,000 or $2.12 per diluted share, an increase of $3,628,000 or 27% over the $13,237,000 or $1.70 per diluted share reported for the trailing twelve months ended September 30, 2004. Return on average assets ("ROA") was 1.47% and 1.39% the quarter and nine- month period ended September 30, 2005 as compared to 1.33% and 1.32% for the third quarter and nine-month period ended September 30, 2004, respectively. Excluding terminated merger expenses, ROA was 1.42% for the nine-month period ended September 30, 2005, as compared to 1.32% for the nine-month period ended September 30, 2004. The Company's return on average equity ("ROE") was 15.38% for the third quarter and 14.74% for the nine-month period ended September 30, 2005 as compared to 15.03% and 14.90% for the third quarter and nine-month period ended September 30, 2004. Excluding terminated merger expenses, ROE was 15.00% for the nine-month period ended September 30, 2005 as compared to 14.90% for the nine-month period ended September 30, 2004. Return on tangible equity (which excludes average goodwill and other intangible assets from average equity) was 21.23% for the third quarter and 20.72% for the nine-month period ended September 30, 2005, as compared to 22.62% and 22.91% for the third quarter and nine-month period ended September 30, 2004. Excluding terminated merger expenses, return on tangible equity was 21.10% for the nine-month period ended September 30, 2005 as compared to 22.91% for the nine-month period ended September 30, 2004. Loan and Deposit Growth Total assets ended the third quarter 2005 at a record high of $1.3 billion. This represents a $118 million, or 10%, increase over September 30, 2004. The Company has continued its record of strong loan growth. Total gross loans grew to $1.03 billion, an increase of $104 million, or 11%, over a year ago. Total deposits grew to a record $1.08 billion, which represents a $69 million, or 7%, increase over September 30, 2004. In comparing the quarter ended September 30, 2005 to the previous quarter ended June 30, 2005, average loans grew at an annualized rate of 12.6%, while average deposits grew at 15.1%. The Company's liquidity position improved during the quarter primarily as a result of deposits growing at a faster rate than loans. Federal Funds Sold were $55.5 million on average in the third quarter of 2005 as compared to $31.7 million in the second quarter of 2005 and $59.0 million in the third quarter of 2004. The Company currently has over $100 million available in term liquid resources primarily through the Federal Home Loan Bank. Net Interest Income Reaches Record High Net interest income increased by $2.17 million, or 17%, over the third quarter of 2004. The Company's reported net interest margin (on a fully tax equivalent basis) of 5.37% was up 27 basis points ("bps") from the third quarter 2004 and 4 basis points as compared to the second quarter of 2005. For the nine-month period ended September 30, 2005, net interest income increased $5.51 million, or 15%, and the net interest margin (on a fully tax equivalent basis) of 5.33% was up 16 bps from the same period in 2004. Substantially all of loans currently at floors will reprice as time elapses and are not dependent on future increases in market interest rates. Yield on loans rose 64 bps as compared to the third quarter of 2004 to 7.33% and 30 bps since June 30, 2005. This was largely due to increases in the prime rate which rose 200 bps since September 30, 2004 and 75 bps since June 30, 2005. The third quarter cost of funds increased 54 bps over the quarter ended September 30, 2004 and 17 bps over the quarter ended June 30, 2005 to 1.64%. The average loan to deposit ratio was 96.1% in the third quarter of 2005 as compared to 90.1% in the third quarter of 2004 and 96.7% in the second quarter of 2005. The net interest margin expanded in the third quarter of 2005 as compared to the second quarter of 2005 by 4 bps largely as a result of an increase in prevailing market rates. The yield on earning assets increased 20 bps in the third quarter to 7.00% as compared to the second quarter of 2005 while the cost of funds increased 17 bps to 1.64%. Asset Quality Credit quality remains strong with $1,413,000 or 0.14% loan delinquencies between 30 and 89 days as of September 30, 2005 compared to $168,000 or 0.02% loan delinquencies as of September 30, 2004. One loan totaling $807,000 that was included in delinquent loans at September 30, 2005 was paid off in full on October 14, 2005. Non-performing assets (delinquent loans 90 days and over and REO) as of September 30, 2005 totaled $890,000 or 0.07% of total assets, compared to $599,000 or 0.05% of total assets at September 30, 2004. The allowance for loan losses totaled $15.3 million, or 1.48% of loans outstanding at September 30, 2005, compared to $13.1 million, or 1.41%, a year ago. The Company recorded net charge-offs of $68,000 in the third quarter of 2005 as compared to $179,000 in the same period of 2004. For the nine-month period ended September 30, 2005, the Company recorded net recoveries of $15,000 as compared to net charge-offs of $357,000 for the same period of 2004. Other Income / Expense and the Efficiency Ratio The growth in net interest income of 17% for the quarter was complemented by an increase in non-interest income of 35%, which was principally attributable to increased deposit service charges and fees of $326,000, an increase in premiums on the sale of mortgage loans of $174,000 and a $152,000 gain on the sale of SBA loans. Total operating expenses increased $1.9 million or 21% in the third quarter of 2005 as compared to the same period in 2004. Total operating expenses, excluding amortization of core deposit intangibles and the expense associated with the investment in housing tax credits, grew at a faster rate (21.3%) in the third quarter than fully tax equivalent net revenue (19.5%) resulting in a negative impact on the efficiency ratio, which increased from 54.2% in the third quarter of 2004 to 55.0% in the third quarter of 2005. In addition to growth in net interest income of 15% for the nine-month period ended September 30, 2005, the Company grew non-interest income by 22% primarily due to $555,000 in SBA gains, increased deposit service charges and fees of $429,000 and a $275,000 contract settlement that was recognized in the second quarter. Total operating expenses increased $5.14 million or 19% in the first nine months of 2005 as compared to the same period of 2004. Total operating expenses, excluding amortization of core deposit intangibles and terminated merger expenses, grew at a faster rate (17.7% for the nine-month period) than fully tax equivalent net revenue (15.8%) resulting in a negative impact on the efficiency ratio, which increased from 55.2% in the first nine months of 2004 to 56.2% in the same period of 2005. 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 and Tuolumne. 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, 2004. The Company is not obligated to update these forward looking statements at any time. 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 2005 2004 % 2005 2004 % Interest income: Interest and fees on loans $18,715 $14,971 25.0% $52,053 $43,398 19.9% Interest on investment securities: Taxable 443 485 1,346 1,238 Exempt from federal taxes 429 391 1,256 1,167 Interest on Federal funds sold 481 203 1,017 397 Total interest income 20,068 16,050 25.0% 55,672 46,200 20.5% Interest expense: Interest on deposits 3,613 2,336 9,368 6,510 Interest on borrowed funds 1,116 549 2,765 1,658 Total interest expense 4,729 2,885 63.9% 12,133 8,168 48.5% Net interest income 15,339 13,165 16.5% 43,539 38,032 14.5% Provision for loan losses (LLP) 540 600 -10.0% 1,450 1,910 -24.1% Net interest income after LLP 14,799 12,565 17.8% 42,089 36,122 16.5% Non-interest income: Service charges and fees 1,531 1,205 4,049 3,620 Investment service fee income 254 140 632 517 Net gain on sale and packaging of residential mortgage loans 1,160 986 3,192 3,033 Gain on sale of government- guaranteed loans 152 -- 555 -- Gain (Loss) on sale of investment securities 1 (1) (2) (12) Other income 332 216 1,144 671 Total non-interest income 3,430 2,546 34.7% 9,570 7,829 22.2% Other expenses: Salaries and benefits 5,972 4,892 17,277 14,660 Occupancy and equipment 1,757 1,505 5,037 4,292 Other expenses 2,904 2,338 8,442 7,061 Terminated merger expenses -- -- 398 -- Amortization of core deposit intangibles 180 180 540 540 Total other expenses 10,813 8,915 21.3% 31,694 26,553 19.4% Income before income tax 7,416 6,196 19.7% 19,965 17,398 14.8% Income taxes 2,706 2,347 7,141 6,403 GAAP net income $4,710 $3,849 22.4% $12,824 $10,995 16.6% Merger expense after tax -- -- 232 -- GAAP net income excluding terminated merger expenses $4,710 $3,849 22.3% $13,056 $10,995 18.7% GAAP net income Basic earnings per share $0.61 $0.51 19.6% $1.67 $1.46 14.4% Diluted earnings per share $0.59 $0.49 20.4% $1.61 $1.40 15.0% GAAP net income excluding terminated merger expenses Basic earnings per share $0.61 $0.51 19.6% $1.70 $1.46 16.4% Diluted earnings per share $0.59 $0.49 20.4% $1.64 $1.40 17.1% Shares used to compute basic EPS 7,729 7,595 7,696 7,535 Shares used to compute fully diluted EPS 7,972 7,911 7,961 7,873 Average Loans $1,013,338 $890,047 13.9% $980,694 $864,779 13.4% Average Investments $137,374 $154,191 -10.9% $129,411 $134,285 -3.6% Average Earning Assets $1,150,712 $1,044,238 10.2% $1,110,105 $999,064 11.1% Average Deposits $1,054,531 $987,872 6.7% $1,029,541 $936,951 9.9% Average Non-interest Demand Deposits $295,793 $257,783 14.7% $281,076 $238,281 18.0% Average Interest- bearing Liabilities $847,729 $785,444 7.9% $825,624 $762,129 8.3% Average Assets $1,272,387 $1,155,547 10.1% $1,230,552 $1,109,727 10.9% Average Equity $121,463 $101,893 19.2% $116,359 $98,538 18.1% Return on Average Assets (GAAP) 1.47% 1.33% 1.39% 1.32% Return on Average Equity (GAAP) 15.38% 15.03% 14.74% 14.90% Return on Tangible Equity 21.23% 22.62% 20.72% 22.91% Return on Tangible Equity excluding terminated merger expense 21.22% 22.62% 21.10% 22.91% Net Interest Margin (FTE) 5.37% 5.10% 5.33% 5.17% Efficiency Ratio (FTE) 55.0% 54.2% 56.2% 55.2% Western Sierra Bancorp and Subsidiaries Consolidated Balance Sheet (dollars in thousands) (Unaudited) September 30, September 30, Growth ASSETS: 2005 2004 % Cash and due from banks $41,824 $37,579 Federal funds sold 65,400 52,235 Cash and cash equivalents 107,224 89,814 19.4% Interest-bearing deposits -- 4,000 Loans held for sale 2,242 811 Investment securities: Trading 42 35 Available for sale (amortized cost $79,982 in 2005 and $86,081 in 2004) 80,759 87,599 Held to maturity (market value of $3,005 in 2005 and $3,824 in 2004) 2,918 3,675 Total investments 83,719 91,309 -8.3% Portfolio loans: Real estate mortgage 667,532 583,500 Real estate construction 226,535 208,828 Commercial 109,048 113,374 Agricultural 17,841 13,935 Other loans 8,540 6,158 Total gross loans 1,029,496 925,795 11.2% Deferred loan fees, net (3,506) (2,806) Allowance for loan losses (15,251) (13,082) Net portfolio loans 1,010,739 909,907 11.1% Premises and equipment, net 21,084 20,054 Other real estate -- -- Goodwill and other intangible assets 33,357 34,093 Other assets 39,110 30,593 Total Assets $1,297,475 $1,180,581 10.0% LIABILITIES AND SHAREHOLDERS' EQUITY: Non-interest bearing deposits $317,092 $ 263,582 20.3% Interest bearing deposits: NOW, money market and savings 375,499 395,393 Time, over $100,000 225,951 181,230 Other time 157,530 166,406 Total deposits 1,076,072 1,006,611 6.9% Borrowed funds 52,000 21,500 Subordinated debt 37,116 37,116 Other liabilities 7,958 9,694 Total liabilities 1,173,146 1,074,921 9.2% Shareholders' equity: Preferred stock- no par value; 15,000,000 shares authorized; none issued -- -- Common stock- no par value; 15,000,000 shares authorized; issued - 7,732,216 shares in 2005 and 7,620,866 shares in 2004 69,895 67,586 Retained earnings 53,934 37,092 Accumulated other comprehensive income 500 982 Total shareholders' equity 124,329 105,660 17.7% Total Liabilities and Shareholders' Equity $1,297,475 $1,180,581 10.0% Allowance for loan losses to Gross Loans 1.48% 1.41% Ending Delinquent Loans $1,413 $168 Ending Non Performing Loans (non accrual and > 90 days) $890 $599 Total Non Performing Loans and REO - Non Performing Assets $890 $599 YTD Net (Recoveries) Charge-offs $(15) $357 YTD Net Charge-offs as a % of Avg Loans 0.00% 0.06% Non Performing Assets as a % of Total Assets 0.07% 0.05% Total Risk Based Capital To Risk Weighted Assets 12.98% 12.18% Tier 1 Capital to Risk Weighted Assets 11.73% 10.82% Tier 1 Capital to Average Assets (Leverage Ratio) 9.91% 9.14% 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/

Copyright