EX-99.1 3 v22021_ex99-1.htm Unassociated Document
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.

(more)

HEOP second quarter earnings increase 38%
July 18, 2005
Page 2 of 5

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.
 
(tables follow)


 
HEOP second quarter earnings increase 38%
July 18, 2005
Page 3 of 5
 
 
  
 
  
 
          
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
  

(more)



HEOP second quarter earnings increase 38%
July 18, 2005
Page 4 of 5

           
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
  
 
 
(more)


HEOP second quarter earnings increase 38%
July 18, 2005
Page 5 of 5


               
               
               
               
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
%
                     


###

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