WSBA Western Sierra Bancorp (MM)

Western Sierra Bancorp Reports Record Profitability; Fully Diluted Earnings Per Share increases 26% to $.47 for the 2nd Quarter; Asset Quality Remains Strong CAMERON PARK, Calif., July 19 /PRNewswire-FirstCall/ -- Western Sierra Bancorp (NASDAQ:WSBA), a multi-bank holding company, headquartered in Cameron Park, Calif., announced results for the second quarter ended June 30, 2004. Financial Highlights from the second quarter of 2004 vs. 2003: -- An increase in GAAP net income of $1.22 million or 50% to $3.68 million -- An increase in Fully Diluted GAAP EPS to $0.47 from $0.37 or 26% -- GAAP ROA and ROE of 1.32% and 14.94%, as compared to 1.35% and 17.10% -- Return on Tangible Equity of 22.90% as compared to 18.74% -- Total assets increased $426 million or 57% to $1.17 billion -- Total loans increased $285 million or 48% to $873 million -- Net interest margin remained stable at 5.11% versus 5.18% -- Efficiency Ratio was reduced to 55.5% from 57.5% -- Continued superior asset quality with nonperforming assets at just 0.11% of ending assets Financial Highlights from the six-month period ended June 30, 2004 vs. 2003: -- An increase in GAAP net income of $2.40 million or 50% to $7.15 million -- An increase in Fully Diluted GAAP EPS to $0.91 from $0.72 or 26% -- GAAP ROA and ROE of 1.32% and 14.84%, as compared to 1.34% and 16.98% -- Return on Tangible Equity of 23.02% as compared to 18.52% -- Net interest margin remained stable at 5.21% versus 5.27% -- Efficiency Ratio was reduced to 55.8% from 57.6% Management Comments Gary D. Gall, President and CEO of Western Sierra Bancorp, stated, "We are very pleased with the second quarter results. Asset quality remains excellent and we have three denovo branches that are due to open in the next 90 days in growth markets. It is clear that the bottom of the interest rate cycle has passed and we are positioned to benefit from increasing rates." Record Earnings and Returns The Company reported record GAAP Earnings of $3,681,000 for the quarter or $0.47 per diluted share, an increase of $1,219,000 or 50% over the quarter ended June 30, 2003 in which earnings were $2,462,000 or $0.37 per diluted share. For the six-month period ended June 30, 2004, the Company reported GAAP Earnings of $7,146,000 or $0.91 per diluted share, an increase of $2,396,000 or 50% over the same period in 2003 in which earnings were $4,750,000 or $0.72 per diluted share. For the twelve month period ended June 30, 2004 (trailing twelve months) GAAP earnings were $12,344,000 or $1.63 per diluted share, an increase of $3,366,000 or 37% over the $8,978,000 or $1.37 per diluted share reported for the trailing twelve months ended June 30, 2003. The Company reported record Cash Earnings (excludes amortization expense of intangibles of $117,000 and $40,000, respectively, on a tax-adjusted basis) of $3,798,000 or $0.48 per diluted share, an increase of $1,296,000 or 52% over the quarter ended June 30, 2003 in which Cash Earnings were $2,502,000, or $0.38 per diluted share. For the six-month period ended June 30, 2004, the Company reported Cash Earnings of $7,380,000 or $0.94 per diluted share, an increase of $2,550,000 or 53% over the same period in 2003 in which earnings were $4,830,000 or $0.73 per diluted share. On a GAAP basis, Return on Average Assets was 1.32% for the quarter and six-month period ended June 30, 2004 as compared to 1.35% and 1.34% for the second quarter and six-month period ended June 30, 2003. Return on Average Equity was 14.94% for the second quarter and 14.84% for the six-month period ended June 30, 2004 as compared to 17.10% and 16.98% for the second quarter and six-month period ended June 30, 2003. Strong Loan and Deposit Growth Total Assets ended the quarter at a record high of $1.17 billion. This represents a $426 million or 57% increase over June 30, 2003. The Company has continued its record of strong loan growth. Total gross loans grew to $873 million, an increase of $285 million or 48% over a year ago. Total Deposits grew to a record $998 million; this represents an $343 million or 52% increase over June 30, 2003. The June 30, 2004 balance sheet totals include $159 million in loans, $237 million in total assets and $211 million in deposits acquired though the acquisitions of Central Sierra Bank on July 11, 2003 and Auburn Community Bank on December 12, 2003. Net Interest Income Reaches Record High Net interest income increased by $4.0 million or 47% over the second quarter of 2003. The Company's reported Net Interest Margin (on a fully tax equivalent basis) of 5.11% was down 7 basis points from the second quarter 2003. For the six-month period ended June 30, 2004, net interest income increased $8.0 million or 47% and the Net Interest Margin (on a fully tax equivalent basis) of 5.21% was down 6 basis points 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 loan-to-deposit ratio increasing from approximately 90% in the second quarter of 2003 to 92% in the second quarter of 2004. Superior Asset Quality Credit quality remains strong with $86,000 or 0.04% loan delinquencies between 30 and 90 days as of June 30, 2004 compared to no loan delinquencies as of June 30, 2003. Non-performing assets (delinquent loans over 90 days and REO) as of June 30, 2004 totaled $1.3 million or 0.11% of total assets, compared to $1.0 million or 0.14% of total assets at June 30, 2003. The allowance for loan and lease losses totaled $12.7 million, or 1.45% of loans outstanding at June 30, 2004, compared to $8.2 million, or 1.39%, a year ago. The Company recorded net charge-offs of $148,000 in the second quarter of 2004 as compared to $26,000 in the same period of 2003. For the six-month period ended June 30, 2004, net charge-offs were $178,000 as compared to $3,000 for the same period of 2003. Other Income / Expense and the Efficiency Ratio In addition to growth in net interest income of 47% for the quarter, the Company grew non-interest income by 20% primarily through increased service charges and fees of $345,000 and increased investment service fee income of $86,000. Total operating expenses excluding amortization of core deposit intangibles grew at a slower rate (37% for the quarter) resulting in an improved efficiency ratio, which was reduced from 57.5% in the first quarter of 2003 to 55.5% in the first quarter 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 32 Branches and 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 Statement of Income (dollars in thousands, except per share data) Three Months Ended Six Months Ended (Unaudited) June 30, June 30, 2004 2003 Growth% 2004 2003 Growth% Interest income: Interest and fees on loans $14,392 $10,046 43.3% $28,427 $19,798 43.6% Interest on investment securities: Taxable 386 378 755 779 Exempt from federal taxes 389 368 776 728 Interest on Fed Funds Sold 141 128 194 170 Total interest income 15,308 10,920 40.2% 30,152 21,475 40.4% Interest expense: Interest on deposits 2,170 2,047 4,174 4,046 Interest on borrowed funds 552 282 1,109 553 Total interest expense 2,722 2,329 16.9% 5,283 4,599 14.9% Net interest income 12,586 8,592 46.5% 24,869 16,876 47.4% Provision for loan and lease losses (LLP) 600 530 13.2% 1,310 1,055 24.2% Net interest income after LLP 11,986 8,061 48.7% 23,559 15,821 48.9% Non-interest income: Service charges and fees 1,220 875 2,415 1,696 Investment service fee income 86 -- 377 16 Net gain on sale and packaging of residential mortgage and government- guaranteed commercial loans 1,192 1,231 2,047 2,335 Loss on sale of investment securities (11) -- (11) -- Other income 226 154 453 268 Total non-interest income 2,713 2,260 20.1% 5,281 4,315 22.4% Other expenses: Salaries and benefits 4,881 3,434 9,768 6,851 Occupancy and equipment 1,435 1,154 2,787 2,206 Other expenses 2,414 1,789 4,723 3,434 Amortization of core deposit intangibles 180 62 360 123 Total other expenses 8,910 6,439 38.4% 17,638 12,614 39.8% Income before income tax 5,790 3,882 49.1% 11,202 7,522 48.9% Income taxes 2,109 1,421 4,056 2,772 GAAP net income $3,681 $2,461 49.5% $7,146 $4,750 50.4% Amortization of core deposit intangible after tax 117 40 234 80 Cash net income $3,798 $2,502 51.8% $7,380 $4,830 52.8% GAAP EPS Basic earnings per share $0.49 $0.39 26.1% $0.95 $0.76 26.0% Fully diluted earnings per share $0.47 $0.37 25.9% $0.91 $0.72 26.2% Cash EPS (excluding amortization expense) Basic earnings per share $0.51 $0.40 28.1% $0.98 $0.77 28.0% Fully diluted earnings per share $0.48 $0.38 27.8% $0.94 $0.73 28.1% Shares used to compute Basic EPS 7,458 6,292 7,507 6,289 Shares used to compute Fully Diluted EPS 7,839 6,602 7,856 6,587 Average Loans $866,378 $572,440 51.3% $852,007 $565,799 50.6% Average Investments $141,545 $108,542 30.4% $124,222 $95,755 29.7% Average Earning Assets $1,007,923 $680,982 48.0% $976,229 $661,555 47.6% Average Deposits $943,206 $639,796 47.4% $911,211 $622,049 46.5% Average Non-interest Demand Deposits $241,998 $147,767 63.8% $228,424 $144,316 58.3% Average Interest- bearing Liabilities $769,487 $521,662 48.1% $750,344 $507,160 48.0% Average Assets $1,119,879 $733,518 52.7% $1,085,941 $714,020 52.1% Average Equity $99,103 $57,744 71.6% $96,843 $56,417 71.7% Return on Average Assets (GAAP) 1.32% 1.35% 1.32% 1.34% Return on Average Equity (GAAP) 14.94% 17.10% 14.84% 16.98% Return on Tangible Equity 22.90% 18.74% 23.02% 18.52% Net Interest Margin (FTE) 5.11% 5.18% 5.21% 5.27% Efficiency Ratio (FTE) 55.53% 57.45% 55.81% 57.63% Western Sierra Bancorp and Subsidiaries Consolidated Balance Sheet (dollars in thousands) (Unaudited) June 30, June 30, ASSETS: 2004 2003 Growth % Cash and due from banks $38,382 $33,724 Federal funds sold 98,245 23,520 Cash and cash equivalents 136,627 57,244 138.7% Interest-bearing deposits 4,000 1,090 Loans held for sale 1,909 5,134 Investment securities: Trading 31 21 Available for sale (amortized cost $86,076 in 2004 and $59,322 in 2003) 86,213 61,124 Held to maturity (market value of $3,839 in 2004 and $5,851 in 2003) 3,741 5,597 Total investments 89,985 66,742 34.8% Portfolio loans and leases: Real estate mortgage 548,629 334,639 Real estate construction 186,380 146,483 Commercial 119,035 86,826 Agricultural 12,702 13,565 Installment 4,197 4,264 Lease financing 1,923 2,238 Total gross loans and leases 872,866 588,015 48.4% Deferred loan and lease fees, net (2,587) (1,757) Allowance for loan and lease losses (12,661) (8,165) Net portfolio loans and leases 857,618 578,093 48.4% Premises and equipment, net 19,637 15,777 Other real estate -- -- Goodwill and other intangible assets 34,371 5,028 Other assets 30,497 19,535 Total Assets $1,174,644 $748,643 56.9% LIABILITIES AND SHAREHOLDERS' EQUITY: Non-interest bearing deposits $267,453 $163,203 63.9% Interest bearing deposits: NOW, money market and savings 363,031 194,612 Time, over $100,000 198,633 153,549 Other time 168,504 143,039 Total deposits 997,621 654,403 52.4% Borrowed funds 31,150 14,000 Subordinated debt 36,496 16,000 Other liabilities 8,700 4,821 Total liabilities 1,073,967 689,224 55.8% Shareholders' equity: Preferred stock - no par value; 15,000,000 shares authorized; none issued Common stock - no par value; 15,000,000 shares authorized; 7,584,638 shares issued in 2004 and 6,295,563 shares in 2003 67,348 31,102 Retained earnings 33,244 27,462 Unearned ESOP shares -- (325) Accumulated other comprehensive income 85 1,180 Total shareholders' equity 100,677 59,419 69.4% Total Liabilities and Shareholders' Equity $1,174,644 $748,643 56.9% Allowance for loan and lease losses to Gross Loans 1.45% 1.39% Ending Delinquent Loans $86 $-- Ending Non Performing Loans (non accrual and > 90 days) $1,272 $1,020 Total Non Performing Loans and REO - Non Performing Assets $1,272 $1,020 YTD Net Charge-offs $178 $3 YTD Net Charge-offs as a % of Avg Loans 0.04% 0.00% Non Performing Assets as a % of Total Assets 0.11% 0.14% Total Risk Based Capital To Risk Weighted Assets 12.18% 12.34% Tier 1 Capital to Risk Weighted Assets 10.68% 11.07% Tier 1 Capital to Average Assets (Leverage Ratio) 8.70% 9.38% 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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