Heritage Oaks Bancorp

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Heritage Oaks Bancorp Reports Fourth Quarter and Full Year 2012 Results

PASO ROBLES, Calif., Jan. 24, 2013 (GLOBE NEWSWIRE) -- Heritage Oaks Bancorp (the "Company") (Nasdaq:HEOP), a community bank holding company and parent of Heritage Oaks Bank (the "Bank"), reported net income of $3.1 million for the three months ended December 31, 2012, compared with $4.1 million for the same period a year earlier. The decline in net income is largely attributable to the reversal of a portion of our deferred tax asset valuation allowance in the fourth quarter of 2011, whereas, the fourth quarter 2012 reflected a fully normalized tax provision. Income before taxes was a record $4.8 million for the three months ended December 31, 2012, a $0.6 million or 15.0% increase, compared with $4.2 million for the same period a year ago. Net income for the twelve months ended December 31, 2012 increased $5.3 million or 68.8% to a record $13.0 million compared with $7.7 million for the year ended December 31, 2011.

Highlights

  • Improved earnings before taxes and provision for loan losses by $3.3 million, or 21.2%, to $18.9 million for the twelve months ended December 31, 2012 compared with $15.6 million for the same period a year ago;
     
  • Grew total deposits $84.7 million or 10.8% to $870.9 million at December 31, 2012 compared with $786.2 million at December 31, 2011. Non-interest bearing deposit accounts grew $56.0 million or 25.8% to $273.2 million at December 31, 2012 compared with $217.2 million at December 31, 2011;
     
  • Completed the acquisition of the Morro Bay branch of Coast National Bank, adding $27.2 million in deposits as of December 31, 2012, which expanded the Bank's presence in the markets we serve;
     
  • Increased total gross loans $43.3 million or 6.7% to $689.6 million at December 31, 2012 compared with $646.3 million at December 31, 2011. Total agriculture lending, inclusive of farmland, and residential mortgage loan portfolios each almost doubled in size from a year ago as the Company focused on expanding these product lines. Total new loan production was $196.1 million for the twelve months ended December 31, 2012 compared with $105.5 for the same period a year earlier;
     
  • Reduced classified assets as a percent of Tier I capital plus ALLL to 35.4% at December 31, 2012 compared with 44.3% at December 31, 2011; and
     
  • Increased regulatory capital ratios to 12.3% and 16.8% for Tier 1 Leverage and Total Risk-Based Capital, respectively at December 31, 2012, and maintained the allowance for loan losses as a percent of total loans at 2.6% at December 31, 2012.

"We are very pleased with our achievements in the fourth quarter and for all of 2012," said Simone Lagomarsino, President and Chief Executive Officer of Heritage Oaks Bancorp.  "We achieved record earnings for 2012, even as we made significant investments in our operations including the hiring of commercial, agri-business, and mortgage loan officers; the opening of a new loan production office in Oxnard; and the completion of the acquisition of the Morro Bay branch in December. In addition, we have made strides in improving our overall credit exposure as reflected in the improvement in the ratio of classified assets to Tier I capital plus ALLL. Today, we are operating from a position of strength and stability, which allows us to focus on our customers and to build new relationships throughout our markets."

Net Income Available to Common Shareholders

Net income available to common shareholders was $2.8 million, or $0.10 per diluted common share, for the three months ended December 31, 2012, compared with $3.9 million, or $0.15 per diluted common share, for the same three months ended a year earlier. Net income available to common shareholders for the year ended December 31, 2012 was $11.6 million, or $0.44 per diluted common share, compared with $6.4 million, or $0.24 per diluted common share for the year ended December 31, 2011. The key components of the change in net income available to common shareholders for the three and twelve month periods are discussed below.

Net Interest Income

Net interest income was $10.8 million, or 4.35% of average interest earning assets, for the three months ended December 31, 2012 compared with $10.9 million, or 4.67% of average earning assets, for the same comparable period a year earlier. For the twelve months ended December 31, 2012, net interest income was $42.5 million, or 4.46% of average interest earning assets, compared with $43.2 million, or 4.71% of average interest earning assets, for the same period a year ago. The decline in net interest margin reflects the continuing trend of margin compression that has taken place throughout 2012, as a result of the historically low interest rate environment.

We continue to anticipate net interest margin pressure due to the very low interest rate environment, a competitive environment for quality loan relationships, increased refinancing activity of existing loans at lower rates, and a change in the mix of our loan portfolio. We are working to mitigate the impact of the pressure on our net interest margin over the short term through efforts to grow the loan portfolio rather than investing in lower yielding investment securities, through reductions in non-accrual loan balances, and through modest reductions in the cost of deposits and borrowings.

Provision for Loan Losses

We recorded no provision for loan losses for the three months ended December 31, 2012 compared with $0.7 million for the same period a year earlier. The lack of a provision in the fourth quarter of 2012 was largely driven by recoveries in the fourth quarter exceeding charge-offs along with continued improvements in the credit quality of the loan portfolio. For the twelve months ended December 31, 2012, we recorded $7.7 million of provision for loan losses compared with $6.1 million for the same period a year ago. The increase in provision for loan losses in 2012 was largely driven by increased specific reserve requirements for a few large loans placed on non-accrual status in the first half of 2012 and to a lesser degree an increase in the overall loan portfolio, offset by improved historical net charge-offs. Net charge-offs declined $2.8 million, or 24% to $8.9 million for the twelve months ended December 31, 2012 compared with $11.7 million for the same period a year earlier. Net charge-offs as a percent of average loans declined to 1.32% for the twelve months ended December 31, 2012, compared with 1.75% for the same period a year earlier. The 2012 ratio of net charge-offs to average loans is the lowest annual level the Company has reported since 2008.

Non-Interest Income

Non-interest income was $3.5 million for the three months ended December 31, 2012, a $0.3 million or 10% increase, compared with $3.2 million for the same period a year earlier. For the twelve months ended December 31, 2012, non-interest income was $12.5 million, a $2.8 million or 29% increase, compared with $9.7 million for the same period a year ago. The increase in non-interest income was primarily the result of higher gain on sale of mortgage loans, investment securities, and Other Real Estate Owned ("OREO").

Non-Interest Expense

Non-interest expense was $9.5 million for the three months ended December 31, 2012 compared with $9.2 million for the same period a year earlier. For the twelve months ended December 31, 2012, non-interest expense was $36.1 million compared with $37.3 million for the same period a year earlier. Non-interest expense has been impacted by an increase in loss provisions for mortgage repurchases for mortgages sold in 2007; an increase in salaries and employee benefits due to higher commissions resulting from higher mortgage loan originations; and the re-establishment of a management incentive compensation plan in 2012. The Company's operating efficiency ratio slightly improved to 67.9% for the twelve months ended December 31, 2012 compared with 68.0% for the same period a year ago. The Company's operating efficiency ratio for 2012 was negatively impacted by one-time expense items, as well as net interest margin compression.

Income Taxes

The provision for income taxes was $1.7 million for the three months ended December 31, 2012 compared with $0.1 million for the same period a year earlier, which prior period included a $1.5 million partial reversal of our deferred tax valuation allowance. For the twelve months ended December 31, 2012, the Company recorded a benefit from income taxes of $1.8 million, which included a reversal of the remaining $5.6 million of deferred tax asset valuation allowance. The tax benefit in 2012 compared with a provision for income taxes of $1.8 million for the same period a year ago, which included the previously mentioned $1.5 million partial valuation allowance reversal. As the earnings outlook improved in late 2011 and into 2012, the Company reversed the valuation allowance based upon our change in expectation of future profitability and therefore our assessment of our ability to fully realize the deferred tax asset. Excluding the impact of the valuation allowance reversals in 2012, the Company's effective tax rate for all of 2012 was 33.9% compared with 34.8% for the same period a year ago.

Balance Sheet

Total assets increased $110.4 million, or 11.2%, to $1.1 billion at December 31, 2012 compared with $987.1 million at December 31, 2011. The increase in total assets was primarily the result of growth in total loans and investment securities. This asset growth was primarily funded by an $84.7 million, or 11%, increase in total deposits; with 66% of the deposit growth coming from non-interest bearing demand deposit accounts. Total stockholders' equity was $145.5 million at December 31, 2012, an increase of $15.9 million or 12.3%, compared with $129.6 million at December 31, 2011. The increase in stockholders' equity was primarily driven by earnings for the year.

The Company's liquidity ratio (total cash and cash equivalents plus unpledged marketable securities divided by the sum of total deposits and short-term liabilities less pledged securities) was 36.4% at December 31, 2012 compared with 35.1% at December 31, 2011.

The Company and the Bank exceeded the ratios generally required to be considered a "well capitalized" financial institution for regulatory purposes. The tier I leverage ratio for the Company and the Bank were 12.3% and 11.9%, respectively at December 31, 2012. The total risk-based Capital ratio for the Company and the Bank were 16.8% and 16.3%, respectively at December 31, 2012. The Company remains current on all obligations, including its junior subordinated debentures, and preferred stock issued under the U.S. Treasury's Capital Purchase Program and privately placed preferred stock.

Asset Quality

Classified loans decreased $2.8 million or 5.2% to $51.1 million at December 31, 2012 compared with $53.9 million at December 31, 2011. Classified assets as a percent of Tier I Capital plus the allowance for loan losses improved to 35.4% at December 31, 2012 compared with 44.3% at December 31, 2011.

Non-accrual loans increased $4.9 million to $17.3 million at December 31, 2012 compared with $12.4 million at December 31, 2011, of which $12.6 million were still paying per their contractual terms. Non-performing loans to gross loans increased to 2.5% at December 31, 2012 from 1.9% at December 31, 2011.  The Company held no OREO at December 31, 2012, a decrease of $0.9 million from December 31, 2011. Total non-performing assets, inclusive of non-accrual loans, increased $4.0 million to $17.3 million at December 31, 2012 compared with $13.3 million at December 31, 2011. The percentage of non-performing assets to total assets was 1.6% at December 31, 2012 compared with 1.4% at December 31, 2011. 

Total troubled debt restructurings ("TDRs") outstanding were $11.6 million at December 31, 2012 compared with $3.7 million at December 31, 2011. The increase in the level of reported TDRs in 2012 was largely the result of a single large loan relationship that was modified in the first quarter of 2012. The ALLL was $18.1 million, or 2.6% of total loans, compared with $19.3 million, or 3.0% of total loans at December 31, 2011. The decrease in the ALLL to total loans ratio is due to continued decreases in the historical loss experience of the loan portfolio. 

Conference Call

The Company will host a conference call to discuss these fourth quarter results at 8:00 a.m. PST on January 25, 2013. Media representatives, analysts and the public are invited to listen to this discussion by calling (877) 363-5052 and entering the conference ID 88232944, or via on-demand webcast. A link to the webcast will be available on Heritage Oaks Bancorp's website at www.heritageoaksbancorp.com. A replay of the call will be available on Heritage Oaks Bancorp's website later that day and will remain on its site for up to 14 calendar days. By including the foregoing website address, Heritage Oaks Bancorp does not intend to and shall not be deemed to incorporate by reference any material contained therein. By including the foregoing website address, Heritage Oaks Bancorp does not intend to and shall not be deemed to incorporate by reference any material contained therein.

Annual Report on Form 10-K

The Company intends to file with the U.S. Securities and Exchange Commission its Annual Report on Form 10-K for the year ended December 31, 2012, on or before March 18, 2013.  This report can be accessed at the U.S. Securities and Exchange Commission's website, www.sec.gov. Shortly after filing, it is also available free of charge at the Company's website, www.heritageoaksbancorp.com or by contacting the Company's Investor Relations Department. By including the foregoing website address, Heritage Oaks Bancorp does not intend to and shall not be deemed to incorporate by reference any material contained therein.

About Heritage Oaks Bancorp

With $1.1 billion in assets, Heritage Oaks Bancorp is the holding company for Heritage Oaks Bank which operates as Heritage Oaks Bank and Business First, a division of Heritage Oaks Bank. Heritage Oaks Bank has its headquarters and two branch offices in Paso Robles, two branch offices in San Luis Obispo and Santa Maria, single branch offices in Cambria, Arroyo Grande, Atascadero, Templeton, and Morro Bay, as well as a loan production office in Oxnard. Heritage Oaks Bank conducts commercial banking business in the counties of San Luis Obispo, Santa Barbara, and Ventura. The Business First division has one branch office in Santa Barbara. Visit Heritage Oaks Bancorp on the Web at www.heritageoaksbancorp.com.

The Heritage Oaks Bancorp logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7045

Forward Looking Statements

This press release contains "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward looking statements to be covered by the safe harbor provisions for forward looking statements. All statements other than statements of historical fact are "forward looking statements" for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business prospects, strategic alternatives, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, acquisition and divestiture opportunities, plans and objectives of management for future operations, and other similar forecasts and statements of expectation and statements of assumptions underlying any of the foregoing. Words such as "will likely result," "aims," "anticipates," "believes," "could," "estimates," "expects," "hopes," "intends," "may," "plans," "projects," "seeks," "should," "will," and variations of these words and similar expressions are intended to identify these forward‐looking statements.

Forward looking statements are based on the Company's current expectations and assumptions regarding its business, the regulatory environment, the economy and other future conditions. Forward looking statements are subject to a number of risks and uncertainties that could cause the Company's actual results to differ materially and adversely from those contemplated by the forward looking statements. The Company cautions you against relying on any of these forward looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward looking statements, include the following: the ongoing financial crisis in the United States, including the continuing softness in the California real estate market, and the response of federal and state government and our regulators thereto, general economic conditions in those areas in which the Company operates, competition, fluctuations in interest rates, changes in the Company's business strategy or development plans, changes in governmental regulation, changes in the credit quality of our loan portfolio, as well as economic, political and global changes arising from the war on terrorism, social unrest and other civil disturbances, the Company's ability to increase profitability, sustain growth, the Company's beliefs as to the adequacy of its existing and anticipated allowance for loan losses, beliefs and expectations about, and requirements to comply with the terms of the Memoranda of Understanding issued by regulatory authorities having oversight of the Company's and Bank's operations, and financial policies of the United States government.   

Additional information on these risks and other factors that could affect operating results and financial condition are detailed in reports filed by the Company with the U.S. Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2011, filed by the Company with the U.S. Securities and Exchange Commission on February 28, 2012. Forward looking statements speak only as of the date they are made, and the Company does not undertake to update forward looking statements to reflect circumstances or events that occur after the date the forward looking statements are made, whether as a result of new information, future developments or otherwise, and specifically disclaims any obligation to revise or update such forward looking statements for any reason, except as may be required by law.

Use of Non-GAAP Financial Information

Heritage Oaks Bancorp provides all information required in accordance with generally accepted accounting principles (GAAP), but it believes that evaluating its ongoing operating results and in particular, making comparisons to similar companies, may be enhanced by providing additional measures used by management to assess operating results. Earnings before income taxes and provision for loan losses, a non-GAAP financial measure, is presented because the Company believes adjusting its results to exclude tax and loan loss provisions provides stockholders with a useful metric for evaluating the core profitability of the Company. A schedule reconciling our GAAP net income to earnings before income taxes and provision for loan losses is provided at the end of the tables below.

 
Heritage Oaks Bancorp
 Consolidated Balance Sheets
(unaudited) 
       
(dollar amounts in thousands) 12/31/2012 9/30/2012 12/31/2011
Assets      
Cash and due from banks  $ 23,425  $ 22,917  $ 18,858
Interest bearing due from banks  10,691  21,259  16,034
Total cash and cash equivalents  34,116  44,176  34,892
       
Securities available for sale, at fair value  287,682  261,451  236,982
Federal Home Loan Bank stock, at cost  4,575  4,575  4,685
Loans held for sale  22,549  12,590  21,947
Gross loans  689,608  678,348  646,286
Net deferred loan fees  (937)  (977)  (1,111)
Allowance for loan losses  (18,118)  (17,987)  (19,314)
Net loans  670,553  659,384  625,861
Property, premises and equipment  15,956  15,238  5,528
Deferred tax assets, net  21,933  22,897  18,226
Bank owned life insurance  15,349  15,223  14,835
Goodwill  11,237  11,049  11,049
Core deposit intangible  1,744  1,424  1,682
Other real estate owned  --   615  917
Other assets  11,838  10,057  10,534
Total assets  $ 1,097,532  $ 1,058,679  $ 987,138
       
Liabilities      
Deposits      
Demand, non-interest bearing  273,242  267,199  217,245
Savings, NOW, and money market  411,274  410,147  376,252
Time deposits under $100  89,249  88,738  102,628
Time deposits of $100 or more  97,105  88,948  90,083
Total deposits  870,870  855,032  786,208
Short term FHLB borrowing  33,000  9,500  29,500
Long term FHLB borrowing  33,500  36,500  22,000
Junior subordinated debentures  8,248  8,248  8,248
Other liabilities  6,385  7,114  11,628
Total liabilities  952,003  916,394  857,584
       
Stockholders' equity      
Preferred stock, 5,000,000 shares authorized: Series A senior preferred stock; $1,000 per share stated value issued and outstanding: 21,000 shares  20,536  20,441  20,160
Series C preferred stock, $3.25 per share stated value; issued and outstanding: 1,189,538 shares   3,604  3,604  3,604
Common stock, no par value; authorized: 100,000,000 shares; issued and outstanding: 25,307,110; 25,288,430; and 25,145,717 as of December 31, 2012; September 30, 2012; and December 31, 2011, respectively  101,354  101,296  101,140
Additional paid in capital  7,337  7,240  7,006
Retained earnings / (accumulated deficit)  8,773  6,004  (2,794)
Accumulated other comprehensive income  3,925  3,700  438
Total stockholders' equity  145,529  142,285  129,554
Total liabilities and stockholders' equity  $ 1,097,532  $ 1,058,679  $ 987,138
       
Book value per common share  $ 4.78  $ 4.65  $ 4.17
       
Tangible book value per common share  $ 4.27  $ 4.16  $ 3.67
 
 
Heritage Oaks Bancorp
Consolidated Statements of Income
(unaudited)
       
   Three Months Ended
(dollar amounts in thousands except per share data) 12/31/2012 9/30/2012 12/31/2011
Interest Income      
Interest and fees on loans  $ 9,989  $ 9,716  $ 10,213
Interest on investment securities  1,585  1,783  1,779
Other interest income  75  20  20
Total interest income  11,649  11,519  12,012
Interest Expense      
Interest on savings, NOW and money market deposits  273  288  336
Interest on time deposits under $100   185  205  310
Interest on time deposits in denominations of $100 or more  215  226  314
Other borrowings  213  215  146
Total interest expense  886  934  1,106
Net interest income before provision for loan losses  10,763  10,585  10,906
Provision for loan losses  --   1,286  693
Net interest income after provision for loan losses  10,763  9,299  10,213
Non-Interest Income      
Fees and service charges  620  611  633
Mortgage gain on sale and origination fees   1,192  1,181  895
Debit/credit card fee income  460  460  421
Earnings on bank owned life insurance  150  148  152
Gain on sale of investment securities  923  329  796
Gain on sale of other real estate owned  87  102  44
Other Income  116  153  272
Total non-interest income  3,548  2,984  3,213
Non-Interest Expense      
Salaries and employee benefits  4,782  4,532  4,258
Equipment  390  395  412
Occupancy  745  728  1,003
Promotional   258  171  177
Data processing  642  551  721
OREO related costs  31  54  115
Write-downs of foreclosed assets  --   53  230
Regulatory assessment costs  358  371  527
Audit and tax advisory costs  206  146  265
Director fees  116  126  146
Outside services  821  730  490
Provision for potential mortgage repurchases  210  125  (160)
Amortization of intangible assets  84  86  89
Other general operating costs  831  727  948
Total non-interest expense  9,474  8,795  9,221
Income before provision / (benefit from) for income taxes   4,837  3,488  4,205
Provision / (benefit) for income taxes  1,710  (2,940)  75
Net income   3,127  6,428  4,130
Dividends and accretion on preferred stock  357  357  251
Net income available to common shareholders  $ 2,770  $ 6,071  $ 3,879
       
Weighted Average Shares Outstanding      
Basic  25,101,083  25,089,325  25,054,204
Diluted  26,485,728  26,430,717  26,261,179
Earnings Per Common Share      
Basic  $ 0.11  $ 0.24  $ 0.16
Diluted  $ 0.10  $ 0.23  $ 0.15
 
 
Heritage Oaks Bancorp
Consolidated Statements of Income
(unaudited)
     
  Twelve Months Ended
(dollar amounts in thousands except per share data) 12/31/2012 12/31/2011
Interest Income    
Interest and fees on loans  $ 39,278  $ 41,345
Interest on investment securities  6,896  6,794
Other interest income  147  88
Total interest income  46,321  48,227
Interest Expense    
Interest on savings, NOW and money market deposits  1,147  1,508
Interest on time deposits under $100   892  1,448
Interest on time deposits in denominations of $100 or more  949  1,526
Other borrowings  830  541
Total interest expense  3,818  5,023
Net interest income before provision for loan losses  42,503  43,204
Provision for loan losses  7,681  6,063
Net interest income after provision for loan losses  34,822  37,141
Non-Interest Income    
Fees and service charges  2,568  2,453
Mortgage gain on sale and origination fees   4,263  2,645
Debit/credit card fee income  1,782  1,632
Earnings on bank owned life insurance  602  596
Gain on sale of investment securities  2,619  1,983
Gain / (loss) on sale of other real estate owned  199  (543)
Other income  515  964
Total non-interest income  12,548  9,730
Non-Interest Expense    
Salaries and employee benefits  18,304  17,630
Equipment  1,613  1,739
Occupancy  3,287  3,771
Promotional   690  668
Data processing  2,553  2,975
OREO related costs  248  670
Write-downs of foreclosed assets  86  1,198
Regulatory assessment costs  1,596  2,360
Audit and tax advisory costs  679  779
Director fees  474  483
Outside services  2,393  1,524
Provision for potential mortgage repurchases  1,192  169
Amortization of intangible assets  342  445
Other general operating costs  2,674  2,907
Total non-interest expense  36,131  37,318
Income before (benefit from) / provision for income taxes   11,239  9,553
 (Benefit from) / provision for income taxes  (1,798)  1,828
Net income   13,037  7,725
Dividends and accretion on preferred stock  1,470  1,358
Net income available to common shareholders  $ 11,567  $ 6,367
     
Weighted Average Shares Outstanding    
Basic  25,081,462  25,048,477
Diluted  26,401,871  26,254,745
Earnings Per Common Share    
Basic  $ 0.46  $ 0.25
Diluted  $ 0.44  $ 0.24
     
     
Heritage Oaks Bancorp    
Key Ratios    
           
  Three Months Ended Twelve Months Ended
PROFITABILITY / PERFORMANCE RATIOS 12/31/2012 9/30/2012 12/31/2011 12/31/2012 12/31/2011
Net interest margin 4.35% 4.36% 4.67% 4.46% 4.71%
Return on average equity 8.59% 18.60% 12.87% 9.49% 6.19%
Return on average common equity 9.16% 21.40% 14.98% 10.26% 6.35%
Return on average tangible common equity 10.23% 24.08% 17.12% 11.55% 7.29%
Return on average assets 1.17% 2.46% 1.66% 1.27% 0.79%
Non interest income to total net revenue 24.79% 21.99% 22.76% 22.79% 18.38%
Yield on interest earning assets 4.70% 4.75% 5.15% 4.86% 5.26%
Cost of interest bearing liabilities 0.55% 0.58% 0.71% 0.60% 0.79%
Cost of funds 0.39% 0.42% 0.52% 0.43% 0.60%
Operating efficiency ratio (1) 70.36% 65.47% 66.17% 67.88% 67.98%
           
ASSET QUALITY RATIOS          
           
Non-performing loans to total gross loans 2.51% 3.02% 1.91%    
Non-performing loans to equity 11.89% 14.39% 9.55%    
Non-performing assets to total assets 1.58% 1.99% 1.35%    
Allowance for loan losses to total gross loans 2.63% 2.65% 2.99%    
Net charge-offs / (recoveries) to average loans outstanding, annualized -0.07% 0.85% 1.08% 1.32% 1.75%
Classified assets to Tier I + ALLL 35.40% 41.58% 44.31%    
30-89 Day Delinquency Rate 0.12% 0.19% 0.12%    
           
CAPITAL RATIOS          
           
Company          
Leverage ratio 12.32% 12.15% 12.06%    
Tier I Risk-Based Capital Ratio 15.55% 14.92% 14.81%    
Total Risk-Based Capital Ratio 16.81% 16.19% 16.07%    
           
Bank          
Leverage ratio 11.93% 11.75% 11.85%    
Tier I Risk-Based Capital Ratio 15.02% 14.40% 14.51%    
Total Risk-Based Capital Ratio 16.28% 15.66% 15.77%    
           
(1) The efficiency ratio is defined as total non interest expense as a percent of the combined net interest income plus non interest income, exclusive of gains and losses on securities sales, other than temporary impairment losses, gains and losses on sale of OREO and other OREO related costs and gains and losses on sale of fixed assets.
 
 
Heritage Oaks Bancorp
Average Balances
                   
  Three Months Ended
  12/31/2012 9/30/2012 12/31/2011
(dollar amounts in thousands) Balance Yield/Rate Inc/Exp Balance Yield/Rate Inc/Exp Balance Yield/Rate Inc/Exp
Interest Earning Assets                  
Investments with other banks  $ --  0.00%  $ --   $ --  0.00%  $ --   $ --  0.00%  $ -- 
Interest bearing due from banks  16,006 0.20%  8  13,042 0.15%  5  16,362 0.15%  6
Investment securities taxable  203,846 2.07%  1,061  204,291 2.45%  1,256  208,096 2.72%  1,425
Investment securities non taxable  63,538 3.28%  524  62,634 3.35%  527  36,451 3.85%  354
Other investments  6,479 4.11%  67  6,478 0.92%  15  6,588 0.84%  14
Loans (1)  695,457 5.71%  9,989  678,655 5.70%  9,716  658,397 6.15%  10,213
Total earning assets  $ 985,326 4.70%  $11,649  $ 965,100 4.75%  $ 11,519  $ 925,894 5.15%  $ 12,012
Allowance for loan losses  (18,998)      (18,207)      (20,500)    
Other assets  96,267      92,880      79,171    
Total assets  $ 1,062,595      $1,039,773      $ 984,565    
                   
Interest Bearing Liabilities                  
Interest bearing demand  $ 72,490 0.12%  $ 22  $ 70,664 0.13%  $ 23  $ 63,667 0.10%  $ 16
Savings  37,312 0.10%  9  36,454 0.10%  9  32,546 0.11%  9
Money market  298,130 0.32%  242  295,792 0.34%  256  278,739 0.44%  312
Time deposits  176,474 0.90%  400  182,138 0.94%  431  199,583 1.24%  623
Total interest bearing deposits  584,406 0.46%  673  585,048 0.49%  719  574,535 0.66%  960
 Other secured borrowing  --  0.00%  --   --  0.00%  --   11 0.00%  -- 
Federal Home Loan Bank borrowing  50,266 1.35%  171  45,527 1.48%  169  37,766 1.07%  102
Junior subordinated debentures  8,248 2.03%  42  8,248 2.22%  46  8,248 2.12%  44
Total borrowed funds  58,514 1.45%  213  53,775 1.59%  215  46,025 1.26%  146
Total interest bearing liabilities  642,920 0.55%  886  638,823 0.58%  934  620,560 0.71%  1,106
Non interest bearing demand  266,284      255,241      225,592    
Total funding  909,204 0.39%  886  894,064 0.42%  934  846,152 0.52%  1,106
Other liabilities  8,548      8,252      11,098    
Total liabilities  $ 917,752      $ 902,316      $ 857,250    
                   
Stockholders' Equity                  
Total stockholders' equity  144,843      137,457      127,315    
Total liabilities and stockholders' equity  $ 1,062,595      $1,039,773      $ 984,565    
                   
Net interest margin   4.35%     4.36%     4.67%  
                   
Interest Rate Spread   4.15%  $10,763   4.17%  $ 10,585   4.44%  $ 10,906
                   
(1) Non-accrual loans have been included in total loans.              
 
 
Heritage Oaks Bancorp
Average Balances
             
  Twelve Months Ended
  12/31/2012 12/31/2011
(dollar amounts in thousands) Balance Yield/Rate Inc/Exp Balance Yield/Rate Inc/Exp
Interest Earning Assets            
Investments with other banks  $ --  0.00%  $ --   $ 58 1.72%  $ 1
Interest bearing due from banks  15,193 0.17%  26  16,343 0.18%  30
Investment securities taxable  202,109 2.45%  4,944  187,527 2.83%  5,304
Investment securities non taxable  57,065 3.42%  1,952  36,888 4.04%  1,490
Other investments  6,519 1.86%  121  7,934 0.72%  57
Loans (1)  672,929 5.84%  39,278  667,606 6.19%  41,345
Total interest earning assets  $ 953,815 4.86%  $ 46,321  $ 916,356 5.26%  $48,227
Allowance for loan losses  (19,169)      (22,895)    
Other assets  90,315      83,527    
Total assets  $ 1,024,961      $ 976,988    
             
Interest Bearing Liabilities            
Interest bearing demand  $ 67,986 0.11%  $ 77  $ 64,187 0.15%  $ 95
Savings  35,769 0.10%  36  32,153 0.14%  46
Money market  289,079 0.36%  1,034  275,278 0.50%  1,367
Time deposits  183,803 1.00%  1,841  214,677 1.39%  2,974
Total interest bearing deposits  $ 576,637 0.52%  $ 2,988  $ 586,295 0.76%  $ 4,482
Other secured borrowing  --  0.00%  --   3 0.00%  -- 
Federal Home Loan Bank borrowing  50,153 1.27%  638  38,527 0.97%  372
Junior subordinated debentures  8,248 2.33%  192  8,248 2.05%  169
Total borrowed funds  58,401 1.42%  830  46,778 1.16%  541
Total interest bearing liabilities  635,038 0.60%  3,818  633,073 0.79%  5,023
Non interest bearing demand  243,304      208,646    
Total funding  878,342 0.43%  3,818  841,719 0.60%  5,023
Other liabilities  9,227      10,445    
Total liabilities  $ 887,569      $ 852,164    
             
Stockholders' Equity            
Total stockholders' equity  137,392      124,824    
Total liabilities and stockholders' equity  $ 1,024,961      $ 976,988    
             
Net interest margin   4.46%     4.71%  
             
Interest Rate Spread   4.26%  $ 42,503   4.47%  $43,204
           
(1) Non-accrual loans have been included in total loans.          
 
 
Heritage Oaks Bancorp
Loans and Deposits
       
(dollar amounts in thousands)      
Loans 12/31/2012 9/30/2012 12/31/2011
Real Estate Secured      
Multi-family residential  $ 21,467  $ 16,429  $ 15,915
Residential 1 to 4 family  41,444  37,837  20,839
Home equity lines of credit  31,863  32,422  31,047
Commercial  372,592  374,799  357,499
Farmland  25,642  23,416  8,155
Total real estate secured  493,008  484,903  433,455
Commercial      
Commercial and industrial  125,340  119,496  141,065
Agriculture  21,663  17,948  15,740
Other  61  66  89
Total commercial  147,064  137,510  156,894
Construction      
Single family residential  8,074  11,267  13,039
Single family residential - Spec.  535  420  8
Multi-family  778  787  1,669
Commercial  10,329  14,401  8,015
Total construction  19,716  26,875  22,731
Land  24,664  23,633  26,454
Installment loans to individuals  4,895  5,146  6,479
All other loans (including overdrafts)  261  281  273
Total gross loans  689,608  678,348  646,286
Deferred loan fees  937  977  1,111
Allowance for loan losses  18,118  17,987  19,314
Total net loans  $ 670,553  $ 659,384  $ 625,861
Loans held for sale  $ 22,549  $ 12,590  $ 21,947
       
       
Deposits 12/31/2012 9/30/2012 12/31/2011
Demand, non-interest bearing  $ 273,242  $ 267,199  $ 217,245
Interest-bearing demand  76,728  75,187  64,298
Savings  41,021  36,940  33,740
Money market  293,525  298,020  278,214
Time deposits  186,354  177,686  192,711
Total deposits  $ 870,870  $ 855,032  $ 786,208
 
 
Heritage Oaks Bancorp
Allowance for Loan Losses, Non-Performing and Classified Assets
       
  Three Months Ended
Allowance for Loan Losses 12/31/2012 9/30/2012 12/31/2011
Balance, beginning of period   $ 17,987  $ 18,149  $ 20,409
Provision for loan losses  --   1,286  693
Loans charge-off      
Residential 1 to 4 family  11  106  30
Commercial real estate  --   --   161
Commercial and industrial  717  261  254
Agriculture  145  1,250  115
Construction  460  92  -- 
Installment loans to individuals  155  9  5
Total loan charge-offs  1,488  1,718  565
Recoveries of loans previously charged-off  1,619  270  437
Charge-offs related to loan sales      
Commercial real estate  --   --   1,268
Farmland  --   --   392
Net charge-offs related to loan sales  --   --   1,660
Balance, end of period   $ 18,118  $ 17,987  $ 19,314
       
Net charge-offs / (recoveries)  $ (131)  $ 1,448  $ 1,788
       
   
Non-Performing Assets 12/31/2012 9/30/2012 12/31/2011
Loans on non-accrual status      
Residential 1-4 family  $ 835  $ 907  $ 622
Home equity lines of credit  58  381  359
Commercial real estate  928  4,428  4,551
Farmland  1,077  1,089  -- 
Commercial and industrial  4,657  3,243  1,625
Agriculture  907  1,075  2,327
Construction  1,380  1,840  937
Land  7,182  7,300  1,886
Installment  285  206  61
Total non-accruing loans  $ 17,309  $ 20,469  $ 12,368
Total non-performing loans  17,309  20,469  12,368
Other real estate owned (OREO)  --   615  917
Other repossessed assets  --   --   42
Total non-performing assets  $ 17,309  $ 21,084  $ 13,327
       
       
Classified assets 12/31/2012 9/30/2012 12/31/2011
Loans  $ 51,130  $ 57,553  $ 53,953
Other real estate owned (OREO)  --   615  917
Other   308  342  5,166
Total classified assets  $ 51,438  $ 58,510  $ 60,036
       
Classified assets to Tier I + ALLL 35.40% 41.58% 44.31%
       
Note: Classified assets consists of substandard and non-performing loans, OREO, non-investment grade securities, other repossessed assets, loans held for sale that were substandard and substandard letters of credit.
 
 
Heritage Oaks Bancorp
Quarter to Date Non-Performing Loan Reconciliation
                   
  Balance       Transfers Returns to    Transfers Balance
  September 30,   Net   to Foreclosed Accrual Net to Held  December 31,
(dollar amounts in thousands) 2012 Additions Paydowns Advances Collateral Status Charge-offs for Sale 2012
Real Estate Secured                  
Residential 1 to 4 family  $ 907  $ 100  $ (161)  $ --   $ --   $ --   $ (11)  $ --   $ 835
Home equity line of credit  381  --   (323)  --   --   --   --   --   58
Commercial  4,428  389  (3,889)  --   --   --   --   --   928
Farmland  1,089  --   (12)  --   --   --   --   --   1,077
Commercial                  
Commercial and industrial  3,243  3,036  (905)  --   --   --   (717)  --   4,657
Agriculture  1,075  --   (23)  --   --   --   (145)  --   907
Other  --   --   --   --   --   --   --  --   -- 
Construction                  
Commercial  1,840  --   --   --   --   --   (460)  --   1,380
Land  7,300  --   (118)  --   --   --   --  --   7,182
Installment loans to individuals  206  271  (37)  --   --   --   (155)  --   285
                   
Totals  $ 20,469  $ 3,796  $ (5,468)  $ --   $ --   $ --   $ (1,488)  $ --   $ 17,309
 
Heritage Oaks Bancorp
Year to Date Non-Performing Loan Reconciliation
                   
  Balance       Transfers Returns to    Transfers Balance
  December 31,   Net   to Foreclosed Accrual Net to Held  December 31,
(dollar amounts in thousands) 2011 Additions Paydowns Advances Collateral Status Charge-offs for Sale 2012
Real Estate Secured                  
Residential 1 to 4 family  $ 527  $ 614  $ (189)  $ --   $ --   $ --   $ (117)  $ --   $ 835
Home equity line of credit  359  65  (366)  --   --   --   --   --   58
Commercial  4,551  6,981  (4,694)  --   --   (3,556)  (2,354)  --   928
Farmland  --   1,089  (12)  --   --   --   --   --   1,077
Commercial    --   --   --   --   --   --   --   
Commercial and industrial  1,625  8,272  (1,608)  --   (344)  --   (3,288)  --   4,657
Agriculture  2,327  484  (59)  --   --   --   (1,845)  --   907
Construction                  
Single family residential  937  --   (937)  --   --   --   --   --   -- 
Commercial  --   2,508  --   --   --   --   (1,128)  --   1,380
Land  1,981  9,217  (1,700)  --   (162)  --   (2,154)  --   7,182
Installment loans to individuals  61  451  (43)  --   --   --   (184)  --   285
                   
Totals  $ 12,368  $ 29,681  $ (9,608)  $ --   $ (506)  $ (3,556)  $ (11,070)  $ --   $ 17,309
 
 
Heritage Oaks Bancorp
Quarter to Date OREO Reconciliation
           
  Balance       Balance
  September 30,       December 31,
(dollar amounts in thousands) 2012 Additions Sales Writedowns 2012
Real Estate Secured          
Residential 1 to 4 family  $ 400  $ --   $ (400)  $ --   $ -- 
Commercial  215  --   (215)  --   -- 
           
Totals  $ 615  $ --   $ (615)  $ --   $ -- 
           
     
           
Heritage Oaks Bancorp
Year to Date OREO Reconciliation
           
  Balance       Balance
  December 31,       December 31,
(dollar amounts in thousands) 2011 Additions Sales Writedowns 2012
Real Estate Secured          
Residential 1 to 4 family  $ --   $ 607  $ (576)  $ (31)  $ -- 
Commercial  215  --   (215)  --   -- 
Construction          
Single family residential - Spec.  423  --   (397)  (26)  -- 
Tract  100  --   (100)  --   -- 
Land  179  162  (300)  (41)  -- 
           
Totals  $ 917  $ 769  $ (1,588)  $ (98)  $ -- 
 
 
Heritage Oaks Bancorp
Reconciliation of GAAP to Non-GAAP Financial Measure
           
  Three Months Ended  Twelve Months Ended 
(dollar amounts in thousands) 12/31/2012 9/30/2012 12/31/2011 12/31/2012 12/31/2011
GAAP Net Income   $ 3,127  $ 6,428  $ 4,130  $ 13,037  $ 7,725
Adjusted for:          
Provision / (benefit) for income taxes  1,710  (2,940)  75  (1,798)  1,828
Provision for loan losses  --   1,286  693  7,681  6,063
           
Non-GAAP earnings before income taxes and provision for loan losses   $ 4,837  $ 4,774  $ 4,898  $ 18,920  $ 15,616
CONTACT: Simone Lagomarsino, President & Chief Executive Officer
         1222 Vine Street
         Paso Robles, California 93446
         805.369.5260
         slagomarsino@heritageoaksbank.com

         Mark Olson, EVP & Chief Financial Officer
         1222 Vine Street
         Paso Robles, California 93446
         805.369.5107
         molson@heritageoaksbank.com

Source: Heritage Oaks Bancorp
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