8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) April 12, 2005                                                                  

Heritage Oaks Bancorp

(Exact Name of Registrant as Specified in Its Charter)

California

(State or Other Jurisdictionof Incorporation)

000-05020	77-0388249
(Commission File Number)	(IRS Employer Identification No.)

545 12th Street, Paso Robles CA	93446
(Address of Principal Executive Offices)	(Zip Code)

 (805) 239-5200

 (Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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ITEM 2.02 - RESULTS OF OPERATIONS AND FINANCIAL CONDITION 

A press release relating to Heritage Oaks Bancorp (HEOP) release of financial information for March 31, 2005 is attached as Exhibit 99.1.

ITEM 9.01 - FINANCIAL STATEMENTS AND EXHIBITS

99.1 Press Release dated April 12, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: April 12, 2005

Heritage Oaks Bancorp
By:	/s/ Lawrence Ward
Lawrence Ward
President and Chief Executive Officer
By:	/s/ Margaret Torres
Margaret Torres
Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release dated April 12, 2005

EX-99.1

Exhibit 2.02.01

Contacts: Lawrence P. Ward, CEO

Margaret Torres, CFO

805-239-5200

corporate investor relations

www.stockvalues.com

206.762.0993

NEWS RELEASE

HERITAGE OAKS’ QUARTERLY EARNINGS INCREASE 62% TO RECORD $1.4 MILLION

Paso Robles, CA - April 12, 2005 — Heritage Oaks Bancorp (Nasdaq: HEOP), the parent company of Heritage Oaks Bank, today reported record profits in the quarter ended March 31, 2005 due to increased loan demand, continued economic growth in the central coast region and a significant rise in its net interest margin. For the first quarter, net income increased 62% to $1.4 million, or $0.33 per diluted share, compared to $876,000, or $0.20 per diluted share, in the first quarter of 2004. Earnings per share have been retroactively adjusted for the 5% stock dividend declared on March 25, 2005 for shareholders of record on April 8, 2005 to be paid on April 22, 2005.

“Following the acquisition of Hacienda Bank in October 2003, we spent most of 2004 reshaping the balance sheet of our combined organization and integrating our systems. The results of those efforts are clearly evident with our sizable profit growth,” said Lawrence P. Ward, President and CEO. “We have also seen a nice expansion in our net interest margin as a result of the shift in our deposit mix. More than 84% of our deposits are no or low-cost and while there are no guarantees, we are hopeful we can continue to maintain our no or low-cost deposits at a reasonably high level.”

1Q05 Operating Highlights:

· Net income increased 62% to $1.4 million.

· Revenues increased 22% to $6.9 million.

· Net interest margin improved 84 basis points to 5.55%.

· Pre-tax income rose 67% to $2.3 million.

· Return on tangible equity was 17.9% and return on assets was 1.24%.

· Net loans increased 15% to $337.7 million.

· Non-performing loans were just 0.14% of total loans - lowest levels in 20 years.

· Non-interest demand deposits increased 17% to $168.6 million.

Operating Results

Heritage Oak’s net interest margin increased 15 basis points to 5.55% for the quarter ended March 31, 2005, compared to 5.40% for the prior quarter, and increased 84 basis points from 4.71% in the first quarter of 2004. “The continued growth in earning assets and the slow and steady rise in interest rates have contributed to this expansion in our net interest margin,” said Ward. “We expect continued loan growth to help us increase our net interest income in future periods.”

For the quarter, net interest income before the provision for loan losses increased 25% to $5.8 million, compared to $4.6 million in the first quarter of 2004. Interest and fees on loans increased 27% from the same quarter last year as loan demand continues to improve. Revenues, consisting of net interest income before the provision for loan losses and non-interest income, increased 22% to $6.9 million in the first quarter of 2005, compared to $5.6 million for the same quarter of 2004.

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HEOP first quarter earnings

April 12, 2005

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Non-interest income increased 9% in the first quarter to $1.1 million, compared to $1.0 million the first quarter of 2004. Non-interest expense in the first quarter increased 8% to $4.4 million, from $4.1 million in the first quarter a year ago. The efficiency ratio was 64.14% for the quarter, an 11% improvement from 72.65% in the first quarter of 2004. The efficiency ratio measures non-interest expenses as a percent of revenues.

First quarter pre-tax income increased 67% to $2.3 million compared to $1.4 million in the first quarter of 2004. Income taxes increased in the first quarter, due to Heritage Oaks’ increased earnings. The provision for income taxes was $875,000 for the first quarter of 2005, compared to $497,000 in the same quarter a year ago. Heritage Oaks generated a return on average equity of 14.74% in the first quarter, a 414 basis point improvement compared to 10.60% during the same period in 2004. Return on average assets was 1.24% in the first quarter, a 42 basis point improvement compared to 0.82% in the first quarter a year ago.

Balance Sheet

Heritage Oaks increased its net loans 15% to $337.8 million, compared to $293.6 million a year ago. “The economy along the Central California coast remains very strong, enabling us to increase our loan totals while at the same time reducing our non-performing loans down to historically low levels. I am very happy to report that non-performing loans as a percent of total loans dropped to 0.14%, their lowest level in 20 years,” stated Ward. The allowance for loan losses was $3.4 million, or 1.01% of net loans outstanding at March 31, 2005, compared to $3.2 million or 1.09% of net loans outstanding at March 31, 2004. Net charge-offs were $32,000. Total assets increased 5% to $472.1 million as of March 31, 2005, compared to $448.6 million as of March 31, 2004.

“Deposit growth in the first quarter of 2005 was very strong with non-interest bearing demand deposits leading the way, increasing by 17% to $168.6 million,” added Ward. “We have several long-time commercial customers that greatly increased their balances with us over the past several months.” Total deposits increased 6% to $392.4 million, from $371.8 million a year ago. Shareholders’ equity increased 16% to $38.7 million, compared to $33.5 million a year ago. Book value per share increased to $10.26 at March 31, 2005, compared to $9.22 per share a year earlier. Tangible book value totaled $8.62 per share at March 31, 2005, compared to $7.40 a year earlier.

Heritage Oaks Bancorp acts as a holding company for Heritage Oaks Bank. Heritage Oaks Bank has its headquarters plus one branch office in Paso Robles, two branch offices in San Luis Obispo, single branch offices in Cambria, Arroyo Grande, Atascadero and Morro Bay and three branch offices in Santa Maria. Heritage conducts commercial banking business in San Luis Obispo County and Northern Santa Barbara County. Visit Heritage Oaks Bancorp on the Web at www.heritageoaksbancorp.com.

Statements concerning future performance, developments or events, expectations for growth and income forecasts, and any other guidance on future periods, constitute forward-looking statements that are subject to a number of risks and uncertainties. Actual results may differ materially from stated expectations. Specific factors include, but are not limited to, increased profitability, continued growth, the Banks beliefs as to the adequacy of its existing and anticipated allowances for loan losses, beliefs and expectations regarding actions that may be taken by regulatory authorities having oversight of the Banks operations, interest rates and financial policies of the United States government, general economic conditions and California’s energy crisis. Additional information on these and other factors that could affect financial results are included in its Securities and Exchange Commission filings.

(tables follow)

HEOP first quarter earnings

April 12, 2005

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HERITAGE OAKS BANCORP

CONSOLIDATED STATEMENTS OF INCOME

	For the Three Months Ended
(in thousands except per share data)	March 31,
	2005		2004		% Change
	(Unaudited)		(Unaudited)
Interest Income:
Interest and fees on loans	$	6,122	$	4,834		26.6	%
Investment securities		553		590		-6.3	%
Federal funds sold and commercial paper		70		71		-1.4	%
Time certificates of deposit		3		3		0.0	%
Total interest income		6,748		5,498		22.7	%
Interest Expense:
Now accounts		21		5		320.0	%
MMDA accounts		213		122		74.6	%
Savings accounts		17		23		-26.1	%
Time deposits of $100 or more		82		61		34.4	%
Other time deposits		231		242		-4.5	%
Other borrowed funds		421		438		-3.9	%
Total interest expense		985		891		10.5	%
Net Int. Income Before Prov. Ln. Losses		5,763		4,607		25.1	%
Provision for loan losses		180		170		5.9	%
Net interest income after provision for loan losses		5,583		4,437		25.8	%
Non-interest Income:
Service charges on deposit accounts		539		510		5.7	%
Gain on Sale of SBA Loans		34		-		100.0	%
Other income		559		526		6.3	%
Total Non-interest Income		1,132		1,036		9.3	%
Non-interest Expense:
Salaries and employee benefits		2,248		2,046		9.9	%
Occupancy and equipment		612		635		-3.6	%
Other expenses		1,563		1,419		10.1	%
Total Noninterest Expenses		4,423		4,100		7.9	%
Income before provision for income taxes		2,292		1,373		66.9	%
Provision for applicable income taxes		875		497		76.1	%
Net Income	$	1,417	$	876		61.8	%
Earnings per share:
Basic	$	0.35	$	0.22		59.8	%
Fully Diluted	$	0.33	$	0.20		65.0	%

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HEOP first quarter earnings

April 12, 2005

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HERITAGE OAKS BANCORP

CONSOLIDATED BALANCE SHEETS

(in thousands)
	31-Mar-05			31-Mar-04		% Change
ASSETS	(Un-audited)			(Un-audited)
Cash and due from banks	$	12,533		$	28,306		-55.7	%
Federal funds sold		31,420			33,975		-7.5	%
Total cash and cash equivalents		43,953			62,281		-29.4	%
Interest bearing deposits other banks		498			498		0.0	%
Securities Available for sale		53,097			55,458		-4.3	%
Federal Home Loan Bank Stock, at cost		1,810			2,269		-20.2	%
Loans Held For Sale		5,541			5,686		-2.6	%
Loans, net		337,693			293,552		15.0	%
Property, premises and equipment, net		10,412			10,163		2.5	%
Cash surrender value life insurance		7,491			6,928		8.1	%
Deferred Tax Assets		2,140			1,786		19.8	%
Goodwill		4,864			4,905		-0.8	%
Core Deposit Intangible		1,878			2,337		-19.6	%
Other assets		2,694			2,703		-0.3	%
TOTAL ASSETS	$	472,071		$	448,566		5.2	%
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand, non-interest bearing		168,598			144,420		16.7	%
Savings, NOW, and money market deposits		162,767			153,976		5.7	%
Time deposits of $100 or more		15,035			22,615		-33.5	%
Time deposits under $100		46,041			50,781		-9.3	%
Total deposits		392,441			371,792		5.6	%
FHLB advances and other borrowed money		28,500			28,500		0.0	%
Securities Sold under Agreement to Repurchase		732			389		88.2	%
Notes Payable		-			3,500		-100.0	%
Junior subordinated debentures		8,248			8,248		0.0	%
Other liabilities		3,451			2,633		31.1	%
Total liabilities		433,372			415,062		4.4	%
Stockholders' equity
Common stock, no par value;20,000,000 shares authorized; issued and outstanding 4,102,987 and 3,980,382 for March 31, 2005 and March 31, 2004, respectively.		28,352			23,784		19.2	%
Retained earnings		10,533			9,345		12.7	%
Accumulated other comprehensive income		(186	)		375		-149.6	%
Total stockholders' equity		38,699			33,504		15.5	%
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	472,071		$	448,566		5.2	%

(more)

HEOP first quarter earnings

April 12, 2005

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HERITAGE OAKS BANCORP

	QTD			QTD			QTD
	Mar-05			Dec-04			Mar-04
PROFITABILITY
Quarterly Net Income (in thousands)	$	1,417		$	1,353		$	876
Qtr EPS- Diluted	$	0.33		$	0.31		$	0.20
Efficiency Ratio		64.14	%		67.64	%		72.65	%
Operating Expenses compared to Average Assets		3.86	%		4.24	%		3.82	%
ROE- Return on Average Equity		14.74	%		14.77	%		10.60	%
ROTE- Return on Average Tangible Equity		17.91	%		18.18	%		13.54	%
ROA- Return on Average Assets		1.24	%		1.18	%		0.82	%
NIM- Net Interest Margin		5.55	%		5.40	%		4.71	%
Net Interest Income compared to Average Assets		5.04	%		4.77	%		4.29	%
Non-Interest Income compared to Total Net Revenue		12.34	%		23.85	%		18.36	%
CAPITAL
Leverage Ratio		8.77	%		8.34	%		7.89	%
Tier I Risk-Based Capital Ratio		10.10	%		9.78	%		9.91	%
Total Risk-Based Capital Ratio		11.00	%		10.65	%		10.89	%
ASSET QUALITY
Non-performing Loans compared to Total Net Loans		0.14	%		0.29	%		0.51	%
ALLL compared to Total Net Loans		1.01	%		1.00	%		1.09	%
Non-performing Loans as % of ALLL		14.99	%		28.77	%		46.83	%
Net Loan Losses compared to Average Net Loans		0.01	%		0.01	%		0.01	%
Non-performing Loans compared to Primary Capital		1.32	%		2.51	%		4.48	%

###

NOTE: Transmitted on Business Wire at 5:00 a.m. PDT on April 12, 2005.