Western Sierra Bancorp (NASDAQ:WSBA)
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Western Sierra Bancorp Reports Record Profitability
CAMERON PARK, Calif., July 18 /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, 2005.
Financial Highlights from the second quarter of 2005 vs. 2004:
-- An increase in GAAP net income of $410,000 or 11.1% to $4.09 million
-- An increase in GAAP net income excluding terminated merger expenses of
$233,000, net of tax, to $4.32 million or 17.5%
-- An increase in Diluted GAAP EPS to $0.51 from $0.47 or 8.5%
-- An increase in Diluted GAAP EPS excluding terminated merger expenses to
$0.54 from $0.47 or 14.9%
-- ROA and ROE of 1.35% and 14.12%, as compared to 1.32% and 14.94%
-- ROA and ROE excluding terminated merger expenses of 1.42% and 14.93%,
as compared to 1.32% and 14.94%
-- Return on Tangible Equity of 19.87% as compared to 22.90%
-- Return on Tangible Equity excluding terminated merger expenses of
21.14% as compared to 22.90%
-- Total assets increased $84 million or 7% to $1.26 billion
-- Total loans increased $124 million or 14% to $997 million
-- Net interest margin increased 22 basis points to 5.33% versus 5.11%
(increase of 5 bps from Q1 2005)
-- Efficiency Ratio increased to 56.9% from 55.6%
-- Continued asset quality with nonperforming assets at just 0.13% of
ending assets
Financial Highlights from the six-month period ended June 30, 2005 vs. 2004:
-- An increase in GAAP net income of $968,000 or 13.5% to $8.11 million
-- An increase in GAAP net income excluding terminated merger expenses of
$233,000, net of tax, to $8.35 million or 16.8%
-- An increase in Diluted GAAP EPS to $1.02 from $0.91 or 12.1%
-- An increase in Diluted GAAP EPS excluding terminated merger expenses to
$1.05 from $0.91 or 15.4%
-- ROA and ROE of 1.35% and 14.38%, as compared to 1.32% and 14.84%
-- ROA and ROE excluding terminated merger expenses of 1.39% and 14.80%,
as compared to 1.32% and 14.84%
-- Return on Tangible Equity of 20.44% as compared to 23.02%
-- Return on Tangible Equity excluding terminated merger expenses of
21.10% as compared to 23.02%
-- Net interest margin increased 10 basis points to 5.31% versus 5.21%
-- Efficiency Ratio increased to 56.8 % from 55.8%
Management Comments
Gary D. Gall, President and CEO of Western Sierra Bancorp, stated, "Diluted
EPS, excluding terminated merger costs, has grown 14.9% for the quarter and
15.4% year to date. Our performance continues to be driven by solid loan
growth and excellent credit quality."
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. Approximately $400,000
($233,000 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 $4,091,000 for the quarter or
$0.51 per diluted share, an increase of $410,000 or 11.1% over the quarter
ended June 30, 2004.. Excluding terminated merger costs of $233,000 after tax,
net income for the quarter ended June 30, 2005 was $4,324,000 or $0.54 per
diluted share, an increase of $643,000 or 17.5% over the same period in 2004.
For the six-month period ended June 30, 2005, the Company reported GAAP Net
income of $8,114,000 or $1.02 per diluted share, an increase of $968,000 or
13.5% over the same period in 2004. Excluding terminated merger costs of
$233,000 after tax, net income for the six-month period ended June 30, 2005 was
$8,347,000 or $1.05 per diluted share, an increase of $1,201,000 or 16.8% over
the same period in 2004.
For the twelve month period ended June 30, 2005 (trailing twelve months) GAAP
net income was $16,004,000 or $2.01 per diluted share, an increase of
$3,660,000 or 30% over the $12,344,000 or $1.63 per diluted share reported for
the trailing twelve months ended June 30, 2004.
Return on average assets ("ROA") was 1.35% for both the quarter and six- month
period ended June 30, 2005 as compared to 1.35% and 1.32% for the second
quarter and six-month period ended June 30, 2004, respectively. Excluding
terminated merger expenses, ROA was 1.42% and 1.39% for the quarter and six-
month period ended June 30, 2005, respectively, as compared to 1.39% and 1.32%
for the second quarter and six-month period ended June 30, 2004, respectively.
The Company's return on average equity ("ROE") was 14.12% for the second
quarter and 14.38% for the six-month period ended June 30, 2005 as compared to
14.94% and 14.84% for the second quarter and six-month period ended June 30,
2004. Excluding terminated merger expenses, ROE was 14.93% for the second
quarter and 14.80% for the six-month period ended June 30, 2005 as compared to
14.94% and 14.84% for the second quarter and six-month period ended June 30,
2004.
Return on tangible equity (which excludes average goodwill and other intangible
assets from average equity) was 19.87% for the second quarter and 20.44% for
the six-month period ended June 30, 2005, as compared to 22.90% and 23.02% for
the second quarter and six-month period ended June 30, 2004. Excluding
terminated merger expenses, return on tangible equity was 21.14% for the second
quarter and 21.10% for the six-month period ended June 30, 2005 as compared to
22.90% and 23.02% for the second quarter and six-month period ended June 30,
2004.
Loan and Deposit Growth
Total assets ended the second quarter 2005 at a record high of $1.26 billion.
This represents an $84 million, or 7%, increase over June 30, 2004. The Company
has continued its record of strong loan growth. Total gross loans grew to $997
million, an increase of $124 million, or 14%, over a year ago. Total deposits
grew to a record $1.04 billion, which represents a $43 million, or 4%, increase
over June 30, 2004. In comparing the quarter ended June 30, 2005 to the
previous quarter ended March 31, 2005, average loans grew at an annualized rate
of 15.6%, while deposits were essentially unchanged. As a result the Company's
overnight investment in Fed Funds, which averaged $51.7 million in the first
quarter of 2005, fell to $31.7 million on average in the second quarter of
2005.
The Company has deployed a series of strategies designed to increase deposit
gathering which management expects will result in improved deposit growth in
the coming periods. The Company also 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 $1.77 million, or 14%, over the second quarter
of 2004. The Company's reported net interest margin (on a fully tax equivalent
basis) of 5.33% was up 22 basis points ("bps") from the second quarter 2004.
For the six-month period ended June 30, 2005, net interest income increased
$3.33 million, or 13%, and the net interest margin (on a fully tax equivalent
basis) of 5.31% was up 10 basis points from the same period in 2004.
Recent increases in market interest rates have reduced the balance of loans at
rate floors to approximately 19% at June 30, 2005 from a high of 46% at
December 31, 2003. Essentially all of loans currently at floors will reprice
as time elapses and are not dependent on future increases in market interest
rates. As a result, the yield on loans rose 35 bps as compared to the second
quarter of 2004 to 7.03%. During this period cost of funds rose 39 bps to
1.47%. The average loan to deposit ratio increased from 91.9% in the second
quarter of 2004 to 96.7% in the second quarter of 2005.
A portion of net interest margin expansion is due to the higher loan top
deposit ratio and the resulting effect on the mix of earning assets. Federal
funds averaged $32 million in the second quarter of 2005 as compared to $52
million and $58 million in the first quarter of 2005 and the second quarter of
2004 respectively. This decrease in overnight federal funds as a percentage of
earning assets increased the margin by approximately 10 bps in the second
quarter as compared to the second quarter of 2004 and 8 bps as compared to the
first quarter of 2005.
The net interest margin expanded in the second quarter of 2005 as compared to
the first quarter of 2005 by 5 bps as a result of a higher loan to deposit
ratio and increase in the prevailing market rates. The yield on earning assets
increased 25 bps in the second quarter as compared to the first quarter of 2005
while the cost of funds increased 20 bps to 1.47%.
Asset Quality
Credit quality remains strong with $531,000 or 0.05% loan delinquencies between
30 and 89 days as of June 30, 2005 compared to $86,000 or 0.01% loan
delinquencies as of June 30, 2004. Non-performing assets (delinquent loans 90
days and over and REO) as of June 30, 2005 totaled $1,583,000 or 0.13% of total
assets, compared to $1,272,000 or 0.11% of total assets at June 30, 2004. The
allowance for loan losses totaled $14.8 million, or 1.48% of loans outstanding
at June 30, 2005, compared to $12.7 million, or 1.45%, a year ago. The Company
recorded net recoveries of $31,000 in the second quarter of 2005 as compared to
net charge-offs of $148,000 in the same period of 2004. For the six-month
period ended June 30, 2005, the Company recorded net recoveries of $83,000 as
compared to net charge-offs of $178,000 for the same period of 2004.
Other Income / Expense and the Efficiency Ratio
The growth in net interest income of 14% for the quarter was complemented by an
increase in non-interest income of 30%, which was principally attributable to a
$291,000 gain on the sale of SBA loans, a settlement of $275,000 from a
historical contract dispute, increased investment service fee income of
$162,000 and increased service charges and fees of $112,000, which were offset
by a decrease in gains on mortgage loans of $93,000.
Total operating expenses increased $2.2 million or 24.2% in the second quarter
of 2005 as compared to the same period in 2004. Included in the results of
the second quarter of 2005 was approximately $107, 000 in operating losses
incurred by the three denovo branches opened in the fourth quarter of 2004 (as
compared to $160,000 in the first quarter of 2005), a reserve for a check fraud
loss of $100,000, terminated merger expenses of $400,000 related to the
terminated Gold Country Financial Services transaction and approximately
$370,000 in compensation expense related to the retirement of the Company's
former Chief Operating Officer. As a result of these costs, total operating
expenses, excluding amortization of core deposit intangibles and terminated
merger expenses, grew at a faster rate (19.7%) in the second quarter than fully
tax equivalent net revenue (16.9%) resulting in a negative impact on the
efficiency ratio, which increased from 55.6% in the second quarter of 2004 to
56.9% in the second quarter of 2005.
In addition to growth in net interest income of 13.4% for the six-month period
ended June 30, 2005, the Company grew non-interest income by 16% primarily due
to the SBA gains, the contract settlement outlined above and increased deposit
service charges and fees of $103,000. Total operating expenses increased $3.2
million or 18.4% in the first six 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 (16.0% for
the six-month period) than fully tax equivalent net revenue (13.9%) resulting
in a negative impact on the efficiency ratio, which increased from 55.8% in the
first six months of 2004 to 56.8% 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, 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 (including but not limited to programs that have
been deployed to improve deposit growth) 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 statement sat any time.
Western Sierra Bancorp and Subsidiaries
Consolidated Statements of Income
(dollars in thousands, except per share data)
(Unaudited) Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 Growth % 2005 2004 Growth %
Interest
income:
Interest and
fees on
loans $17,225 $14,392 19.7% $33,338 $28,427 17.3%
Interest on
investment
securities:
Taxable 505 386 903 755
Exempt from
federal
taxes 418 390 827 776
Interest on
Federal funds
sold 224 141 536 194
Total
interest
income 18,372 15,308 20.0% 35,604 30,152 18.1%
Interest expense:
Interest on
deposits 3,084 2,170 5,755 4,174
Interest on
borrowed
funds 933 552 1,649 1,109
Total
interest
expense 4,017 2,721 47.6% 7,404 5,283 40.1%
Net
interest
income 14,355 12,587 14.0% 28,200 24,869 13.4%
Provision for
loan losses (LLP) 460 600 -23.3% 910 1,310 -30.5%
Net
interest
income
after
LLP 13,895 11,987 15.9% 27,290 23,559 15.8%
Non-interest
income:
Service charges
and fees 1,332 1,220 2,518 2,415
Investment
service
fee income 248 86 378 377
Net gain on
sale and
packaging of
residential
mortgage
loans 1,099 1,192 2,032 2,047
Gain on
sale of
government-
guaranteed
loans 291 -- 403 --
Loss on sale
of investment
securities -- (11) (3) (11)
Other income 561 227 812 453
Total
non-interest
income 3,531 2,713 30.2% 6,140 5,281 16.3%
Other expenses:
Salaries and
benefits 5,902 4,881 11,305 9,768
Occupancy and
equipment 1,669 1,435 3,280 2,787
Other expenses 2,915 2,414 5,536 4,723
Terminated
merger
expenses 400 -- 400 --
Amortization
of core
deposit
intangibles 180 180 360 360
Total
other
expenses 11,066 8,910 24.2% 20,881 17,638 18.4%
Income
before
income
tax 6,360 5,790 9.8% 12,549 11,202 12.0%
Income taxes 2,269 2,109 4,435 4,056
GAAP net
income $4,091 $3,681 11.1% $8,114 $7,146 13.5%
Terminated
merger
expense
after
tax 233 -- 233 --
GAAP net
income
excluding
terminated
merger
expenses $4,324 $3,681 17.5% $8,347 $7,146 16.8%
GAAP net income
Basic earnings
per share $0.53 $0.49 8.2% $1.06 $0.95 11.6%
Diluted
earnings
per share $0.51 $0.47 8.5% $1.02 $0.91 12.1%
GAAP net income
excluding
terminated
merger expenses
Basic earnings
per share $0.56 $0.49 14.3% $1.09 $0.95 14.7%
Diluted earnings
per share $0.54 $0.47 14.9% $1.05 $0.91 15.4%
Shares used to
compute Basic
EPS 7,713 7,554 7,679 7,507
Shares used to
compute Fully
Diluted EPS 7,955 7,870 7,956 7,856
Average Loans $982,444 $866,378 13.4% $964,102 $852,007 13.2%
Average
Investments $114,798 $141,545 -18.9% $125,362 $124,222 0.9%
Average
Earning
Assets $1,097,242 $1,007,923 8.9% $1,089,464 $976,229 11.6%
Average
Deposits $1,016,229 $943,206 7.7% $1,016,839 $911,211 11.6%
Average
Non-interest
Demand
Deposits $279,283 $241,998 15.4% $273,595 $228,424 19.8%
Average
Interest-
bearing
Liabilities $816,956 $769,487 6.2% $814,389 $750,344 8.5%
Average
Assets $1,219,660 $1,119,879 8.9% $1,209,288 $1,085,941 11.4%
Average
Equity $116,187 $99,103 17.2% $113,765 $96,843 17.5%
Return on
Average
Assets (GAAP) 1.35% 1.32% 1.35% 1.32%
Return on
Average
Equity (GAAP) 14.12% 14.94% 14.38% 14.84%
Return on
Tangible
Equity 19.87% 22.90% 20.44% 23.02%
Net Interest
Margin (FTE) 5.33% 5.11% 5.31% 5.21%
Efficiency Ratio
(FTE) 56.9% 55.6% 56.8% 55.8%
Western Sierra Bancorp and Subsidiaries
Consolidated Balance Sheet
(dollars in thousands)
(Unaudited) June 30, June 30,
ASSETS: 2005 2004 Growth %
Cash and due from banks $45,146 $38,382
Federal funds sold 58,075 98,245
Cash and cash
equivalents 103,221 136,627 -24.5%
Interest-bearing deposits -- 4,000
Loans held for sale 1,551 1,909
Investment securities:
Trading 37 31
Available for sale
(amortized cost
$78,662 in 2005 and
$86,076 in 2004) 80,216 86,213
Held to maturity
(market value of
$3,065 in 2005 and
$3,839 in 2004) 2,955 3,741
Total investments 83,208 89,985 -7.5%
Portfolio loans:
Real estate mortgage 649,314 548,629
Real estate construction 216,645 186,380
Commercial 113,598 119,035
Agricultural 11,688 12,702
Other Loans 5,394 6,120
Total gross loans 996,639 872,866 14.2%
Deferred loan fees, net (2,821) (2,587)
Allowance for loan losses (14,780) (12,661)
Net portfolio loans 979,038 857,618 14.2%
Premises and equipment, net 21,366 19,637
Other real estate -- --
Goodwill and other
intangible assets 33,537 34,371
Other assets 37,189 30,497
Total Assets $1,259,110 $1,174,644 7.2%
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Non-interest bearing
deposits $289,426 $ 267,453 8.2%
Interest bearing deposits:
NOW, money market and
savings 341,836 363,031
Time, over $100,000 241,185 198,633
Other time 168,098 168,504
Total deposits 1,040,545 997,621 4.3%
Borrowed funds 57,500 31,150
Subordinated debt 37,116 36,496
Other liabilities 3,932 8,700
Total liabilities 1,139,093 1,073,967 6.1%
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 -
7,726,983 shares in 2005
and 7,584,638 shares in
2004 69,793 67,348
Retained earnings 49,223 33,244
Accumulated other
comprehensive income 1,007 85
Total shareholders'
equity 120,023 100,677 19.2%
Total Liabilities and
Shareholders'
Equity $1,259,110 $1,174,644 7.2%
Allowance for loan
losses to Gross Loans 1.48% 1.45%
Ending Delinquent Loans $531 $86
Ending Non Performing
Loans (non accrual
and > 90 days) $1,583 $1,272
Total Non Performing Loans
and REO - Non Performing
Assets $1,583 $1,272
YTD Net (Recoveries)
Charge-offs
$(83) $ 178
YTD Net (Recoveries)
Charge-offs
as a % of
Avg Loans -0.02% 0.04%
Non Performing Assets
as a % of Total Assets 0.13% 0.11%
Total Risk Based Capital
To Risk Weighted Assets 13.05% 12.18%
Tier 1 Capital to Risk
Weighted Assets 11.80% 10.68%
Tier 1 Capital to Average
Assets (Leverage Ratio) 9.82% 8.70%
DATASOURCE: Western Sierra Bancorp
CONTACT: Gary D. Gall, or Anthony J. Gould, both for Western Sierra
Bancorp, +1-530-677-5600
Web site: http://www.westernsierrabancorp.com/