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) July 19, 2005                                                                   

Heritage Oaks Bancorp

(Exact Name of Registrant as Specified in Its Charter)

California

(State or Other Jurisdiction of 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 June 30, 2005 is attached as Exhibit 99.1.

ITEM 9.01 - FINANCIAL STATEMENTS AND EXHIBITS

99.1 Press Release dated July 18, 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: July 19, 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 July 18, 2005

Section 2: EX-99.1 (EXHIBIT 99.1)

EX-99.1

Exhibit 2.02.01

Contacts:	Lawrence P. Ward, CEO	CORPORATE INVESTOR RELATIONS
	Margaret Torres, CFO	www.stockvalues.com
	805-239-5200	206.762.0993

NEWS RELEASE

HERITAGE OAKS BANCORP SECOND QUARTER EARNINGS INCREASE 38% TO A RECORD $1.6 MILLION

Paso Robles, CA - July 18, 2005 — Heritage Oaks Bancorp (Nasdaq: HEOP), the parent company of Heritage Oaks Bank, today reported record second quarter profits due to increased loan demand and a significant rise in its net interest margin. For the second quarter ended June 30, 2005, net income increased 38% to $1.6 million, or $0.37 per diluted share, compared to $1.2 million, or $0.27 per diluted share, in the second quarter a year ago. For the first six months of 2005, net income increased 48% to $3.0 million, compared to $2.0 million in the first half of 2004.

“We continue to see top and bottom line improvements, with revenues increasing 21%, loans expanding 23% and net income improving 38% from levels a year ago,” said Lawrence P. Ward, President and CEO. “Our efforts in reshaping the balance sheet continue to pay off, as we have been able to decrease the volume of time deposits as a percent of total deposits. Now more than 85% of our deposits are no or low-cost.”

2Q05 Operating Highlights:

·   Net income increased 38% to $1.6 million.

·   Revenues increased 21% to $7.3 million.

·   Net interest margin improved 81 basis points to 5.68%.

·   Non-interest demand deposits increased 19% to $192.2 million.

·   Pre-tax income rose 36% to $2.5 million.

·   Return on average tangible equity was 19.1%, return on average equity was 15.9% and return on average assets was 1.37%.

·   Net loans increased 23% to $362.1 million.

·   Non-performing loans were just 0.14% of total loans.

Operating Results

Second quarter revenues, consisting of net interest income before the provision for loan losses and non-interest income, increased 21% to $7.3 million, compared to $6.0 million in the second quarter of 2004. For the first half of the year, revenues increased 21% to $14.2 million, compared to $11.7 million in the same period a year ago. For the quarter, net interest income before the provision for loan losses increased 24% to $6.0 million, compared to $4.8 million in the second quarter of 2004. For the first half of the year, net interest income before the provision for loan losses increased 25% to $11.8 million, compared to $9.5 million in the same period of 2004. Interest and fees on loans increased 29% from the second quarter last year and 28% from the first six months of last year as loan demand continues improving.

“We have managed Heritage Oak’s assets and liabilities to take advantage of rising short-term interest rates, and as a result our net interest margin increased 81 basis points to 5.68% for the second quarter, from 4.87% in the second quarter last year,” said Ward. Heritage Oak’s net interest margin was 5.55% in the first quarter this year. The net interest margin for the first six months of 2005 expanded 70 basis points to 5.61% from 4.91% a year earlier.

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HEOP second quarter earnings increase 38%

July 18, 2005

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Non-interest income increased 7% in the second quarter to $1.3 million, compared to $1.2 million the second quarter of 2004. For the first half of the year, non-interest income rose 8% to $2.4 million, compared to $2.2 million in the first half a year ago. Non-interest expense in the second quarter increased 10% to $4.6 million, from $4.1 million in the second quarter a year ago. Non-interest expense in the first half of the year increased 9% to $9.0 million, compared to $8.2 million in the same period a year ago. The efficiency ratio, which measures non-interest expenses as a percent of revenues, was 62.66% for the quarter, a 9% improvement from 68.55% in the second quarter of 2004.

Second quarter pre-tax income increased 36% to $2.5 million compared to $1.9 million in the second quarter of 2004. For the first six months of the year, pre-tax income rose 49% to $4.8 million, compared to $3.2 million in the first six months of 2004. Income taxes increased in the first half of 2005, due to Heritage Oaks’ increased earnings. The provision for income taxes was $933,000 for the second quarter and $1.8 million for the first half of 2005, compared to $700,000 and $1.2 million for the same respective periods a year ago.

Heritage Oaks generated a return on average equity of 15.94% in the second quarter, a 232 basis point improvement compared to 13.62% during the same period in 2004. Return on average assets was 1.37% in the second quarter, a 35 basis point improvement compared to 1.02% in the second quarter a year ago.

Balance Sheet

“We have seen excellent loan growth in San Luis Obispo and North Santa Barbara Counties as the Central California coast economy remains strong,” said Ward. “In addition, our non-performing loans continue to remain at historically low levels.” The allowance for loan losses was $3.6 million, or 0.99% of net loans outstanding at June 30, 2005, compared to $3.1 million or 1.07% of net loans outstanding at June 30, 2004. For the first six months of 2005, net charge-offs were $22 thousand, or .01% of net loans.

Total assets increased 7% to $498.6 million at June 30, 2005, compared to $464.5 million a year earlier. Total deposits grew 8% to $417.9 million, compared to $387.5 million at June 30, 2004. “Deposit growth in the second quarter of 2005 was very strong with non-interest bearing demand deposits leading the way, which increased 19% to $192.2 million,” added Ward. Shareholders’ equity increased 21% to $41.0 million, compared to $34.0 million a year ago. Book value per share increased to $9.98 at June 30, 2005, from $8.51 per share a year earlier. Tangible book value totaled $8.43 per share at June 30, 2005, compared to $6.73 a year earlier.

Heritage Oaks Bancorp is the 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.

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HEOP second quarter earnings increase 38%

July 18, 2005

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HERITAGE OAKS BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share date)
	For the three months				For the six months
	ended June 30,				ended June 30,
	2005		2004		2005		2004
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Interest Income:
Interest and fees on loans	$	6,493	$	5,031	$	12,616	$	9,866
Investment securities		544		562		1,097		1,152
Federal funds sold and commercial paper		99		83		169		154
Time certificates of deposit		3		2		5		5
Total interest income		7,139		5,678		13,887		11,177
Interest Expense:
Now accounts		22		6		42		11
MMDA accounts		329		127		542		249
Savings accounts		25		24		42		47
Time deposits of $100 or more		91		58		173		119
Other time deposits		275		216		506		458
Other borrowed funds		382		402		803		840
Total interest expense		1,124		833		2,108		1,724
Net Interest Income Before Prov. for Possible Loan Losses		6,015		4,845		11,779		9,453
Provision for loan losses		180		35		360		205
Net interest income after provision for loan losses		5,835		4,810		11,419		9,248
Non-interest Income:
Service charges on deposit accounts		632		589		1,171		1,098
Gain of Sale of Securities		-		28		-		28
Other income		635		570		1,228		1,096
Total Non-interest Income		1,267		1,187		2,399		2,222
Non-interest Expense:
Salaries and employee benefits		2,408		2,129		4,656		4,174
Occupancy and equipment		640		628		1,252		1,263
Other expenses		1,515		1,378		3,078		2,798
Total Noninterest Expenses		4,563		4,135		8,986		8,235
Income before provision for income taxes		2,539		1,862		4,832		3,235
Provision for applicable income taxes		933		700		1,808		1,197
Net Income	$	1,606	$	1,162	$	3,024	$	2,038
Earnings per share:
Basic	$	0.39	$	0.29	$	0.74	$	0.51
Fully Diluted	$	0.37	$	0.27	$	0.70	$	0.48

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HEOP second quarter earnings increase 38%

July 18, 2005

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HERITAGE OAKS BANCORP
CONSOLIDATED BALANCE SHEETS
(in thousands)
	30-Jun-05		30-Jun-04
ASSETS	Un-audited		Un-audited
Cash and due from banks	$	16,460	$	32,500
Federal funds sold		30,845		40,340
Money market funds		-		-
Total cash and cash equivalents		47,305		72,840
Interest bearing deposits other banks		298		498
Securities Available for sale		50,060		63,096
Federal Home Loan Bank Stock, at cost		1,844		1,828
Loans Held For Sale		7,444		3,454
Loans, net		362,103		293,810
Property, premises and equipment, net		10,797		10,020
Cash surrender value life insurance		7,559		6,998
Deferred Tax Assets		1,898		2,268
Goodwill		4,864		4,905
Core Deposit Intangible		1,734		2,232
Other assets		2,650		2,559
TOTAL ASSETS	$	498,556	$	464,508
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand, non-interest bearing	$	192,209	$	162,252
Savings, NOW, and money market deposits		164,331		155,340
Time deposits of $100 or more		16,570		21,865
Time deposits under $100		44,757		48,043
Total deposits		417,867		387,500
FHLB advances and other borrowed money		28,000		28,500
Securities Sold under Agreement to Repurchase		799		863
Notes Payable		-		3,500
Junior subordinated debentures		8,248		8,248
Other liabilities		2,599		1,921
Total liabilities		457,513		430,532
COMMITMENTS AND CONTINGENCIES		-
Stockholders' equity
Common stock, no par value;
20,000,000 shares authorized; issued and outstanding
4,114,458 and 3,990,401 for June 30, 2005
and June 30, 2004, respectively.		28,728		23,817
Retained earnings		12,139		10,506
Accumulated other comprehensive income		176		(347	)
Total stockholders' equity		41,043		33,976
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	498,556	$	464,508

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HEOP second quarter earnings increase 38%

July 18, 2005

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HERITAGE OAKS BANCORP
HERITAGE OAKS BANCORP		QTD			QTD
		Jun-05			Jun-04
PROFITABILITY
Quarterly Net Income (in thousands)		$	$ 1,606		$	1,162
Qtr EPS- Diluted		$	$ 0.37		$	0.27
Efficiency Ratio	%		62.66	%		68.55	%
Operating Expenses compared to Average Assets	%		3.90	%		3.62	%
ROE- Return on Average Equity	%		15.94	%		13.62	%
ROTE- Return on Average Tangible Equity	%		19.10	%		17.25	%
ROA- Return on Average Assets	%		1.37	%		1.02	%
NIM- Net Interest Margin	%		5.68	%		4.87	%
Net Interest Income compared to Average Assets	%		5.14	%		4.25	%
Non-Interest Income compared to Total Net Revenue	%		17.39	%		19.68	%
CAPITAL
Leverage Ratio	%		8.92	%		7.71	%
Tier I Risk-Based Capital Ratio	%		9.83	%		10.15	%
Total Risk-Based Capital Ratio	%		10.71	%		11.09	%
ASSET QUALITY
Non-performing Loans compared to Total Net Loans	%		0.14	%		0.34	%
ALLL compared to Total Net Loans	%		0.99	%		1.07	%
Non-performing Loans as % of ALLL	%		13.78	%		31.80	%
Net Loan Losses compared to Average Net Loans	%		-0.003	%		0.03	%
Non-performing Loans compared to Primary Capital	%		1.20	%		2.94	%

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NOTE: Transmitted on Business Wire at 1:00 p.m. PDT on July 18, 2005.