EX-99.1 3 v071996_ex99-1.htm Unassociated Document
 
heritageoaks logo
    
     
Contacts:   Lawrence P. Ward, CEO
Margaret Torres, CFO
805-369-5200
  
thecereghino logo
 
HERITAGE OAKS BANCORP EARNS $1.5 MILLION IN FIRST QUARTER,
LOANS INCREASE 23%, DEPOSITS RISE 6%

Paso Robles, CA - April 19, 2007 - Heritage Oaks Bancorp (NASDAQ: HEOP), the parent company of Heritage Oaks Bank, today reported solid loan and deposit growth, along with continued strong asset quality, contributing to first quarter profits. For the first quarter of 2007, net income was $1.5 million, or $0.23 per diluted share, compared to $1.6 million, or $0.24 per diluted share, in the first quarter of 2006.

“We began this year with a solid first quarter performance, generating strong growth in loans and deposits,” said Lawrence P. Ward, President and CEO. “We continue to see demand for business loans in our markets, particularly in construction and commercial business-related loans. Although our profits are down slightly from the first quarter of 2006, we are slightly ahead of internal projections and are positioned to meet our year-end targets.”

First Quarter 2007 Highlights:
 
·  
Net income was $1.5 million, or $0.23 per diluted share.
   
·  
Revenues increased 8% to $8.3 million.
   
·  
Return on average equity was 12.10% and return on average assets was 1.10%.
   
·  
Net interest margin was 5.66%.
   
·  
Net loans increased 23% to $460 million.
   
·  
Asset quality remained strong, non-performing assets were just 0.03% of total assets.
   
·  
Paid a $0.08 per share quarterly cash dividend on February 17.
   
·  
Deposits increased by 5.5%

Operating Results
 
Total revenues, consisting of net interest income before the provision for loan losses and non-interest income, increased 8% to $8.3 million in the first quarter of 2007 compared to $7.7 million in the same quarter of 2006. In the first quarter, net interest income increased 9% to $7.0 million compared to $6.4 million in the first quarter a year ago. “Our strong net interest income is a product of our exceptional loan growth, which we see continuing,” said Ward. Interest and fees on loans increased 31% to $9.8 million in the first quarter compared to $7.5 million in the first quarter last year. Non-interest income for the first quarter was $1.2 million, even with the same period a year ago.

First quarter net interest margin was 5.66% compared to 5.77% in the previous quarter and 5.98% in the first quarter a year ago. “Our margin came under pressure again this quarter as costs associated with borrowing from the FHLB increased faster than loan yields,” said Ward. “However, our new deposit strategy of growing variable interest rate money market accounts is proving to be very successful as we have already increased the balances in these accounts by 16% this quarter alone, and we expect this to help our margin to turn around or at least stabilize in the second half of 2007.

“We see the consolidation of banks along the Central Coast as an excellent marketing opportunity for us to attract new customers,” continued Ward. “In the first quarter we increased our marketing and advertising costs significantly to compete for this new business and we are already seeing this expense pay off with deposit increases, which we expect will help lower our funding costs as we move through the year.” In the first quarter of 2007 salary and employee benefits as well as the increased advertising costs accounted for most of the increase in non-interest expenses which totaled $5.7 million compared to $5.5 million for the prior linked quarter and $5.0 million in the first quarter a year ago.

As a result of the increase in expenses, the efficiency ratio was 68.9% in the first quarter of 2007 compared to 65.0% in the first quarter of 2006 and 67.1% in the fourth quarter of 2006. The efficiency ratio measures operating expenses as a percent of revenues.

Return on average assets was 1.10% in the first quarter of 2007 compared to 1.35% in the first quarter a year ago. The Company also generated a return on average equity of 12.1% for the first quarter of 2007, compared to 14.1% in the first quarter a year ago. The decline was a result of higher capital balances as a percentage of assets for the quarter compared to the year-ago period.

 
HEOP 1Q07 results
April 19, 2007
Page 2
 
Balance Sheet
 
The loan portfolio grew 23% to $460 million at March 31, 2007, from $373 million a year earlier. The growth was fueled by a 41% increase in commercial, financial and agricultural loans, as well as a 21% increase in commercial real estate loans.

The tables below show the diversification within the Construction/Land and Commercial Real Estate portion of the loan portfolio:
 
Construction / Land

Single Family Residences
  
Single Family Residences - Spec.
  
Land
  
Owner Occupied
  
Other
  
8%
    
9
%
  
23
%
  
30
%
  
30
%
 
Commercial Real Estate
 
Farmland
  
Commercial Industrial
  
Retail
 
Professional
 
Hospitality
 
Other
 
7%
    
14
%
  
20
%
  
19
%
  
21
%
  
19
%

Total assets continued to grow, reaching $579 million as of March 31, 2007, compared to $492 million a year earlier. Total assets were $542 million at December 31, 2006.

“While our total deposits increased only 6% over the past year, savings, NOW and money market balances increased 16% during the first quarter of 2007 compared to year-end balances,” Ward added. Total deposits were $445 million at the end of March, compared to $422 million at March 31, 2006 “Our challenge continues to be with growing non-interest bearing demand deposits, however, we have implemented a new strategy of funding our loan demand through our new variable interest rate money market accounts, and we are already seeing positive results,” said Ward. Non-interest bearing accounts account for 33% of total deposits and savings, money market and NOW accounts now account for 38% of total deposits.

Asset quality remains exceptional with non-performing assets at $145,000, or 0.03% of total assets at March 31, 2007. The allowance for loan losses was $4.3 million, or 0.94% of net loans held for investment at quarter-end compared to $4.0 million or 1.07% of net loans outstanding at March 31, 2006. The bank recovered $92,000 from a previously charged off loan and took an additional $140,000 provision in the first quarter of 2007.

Book value per share was $7.98 at March 31, 2007, compared to $7.38 per share a year earlier. Tangible book value per share was $7.06 at March 31, 2007, compared to $6.40 a year earlier. Shareholders’ equity increased 10% to $51.2 million compared to $46.7 million a year ago.

Heritage Oaks Bancorp is the holding company for Heritage Oaks Bank. Heritage Oaks Bank has its headquarters plus two branch offices in Paso Robles, two branch offices in San Luis Obispo, single branch offices in Cambria, Arroyo Grande, Atascadero, Templeton 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 Bank’s 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 Bank’s 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 Heritage Oaks Bancorp’s Securities and Exchange Commission filings. If any of these risks or uncertainties materialize or if any of the assumptions underlying such forward-looking statements proves to be incorrect, Heritage Oaks Bancorp’s results could differ materially from those expressed in, implied or projected by such forward-looking statements. Heritage Oaks Bancorp assumes no obligation to update such forward-looking statements.

(tables follow)


HEOP 1Q07 results
April 19, 2007
Page 3
 
Heritage Oaks Bancorp
Consolidated Balance Sheets
(dollars in thousands except share data)

   
(unaudited)
 
(audited)
 
(unaudited)
 
Percentage Change vs.
  
   
3/31/2007
 
12/31/2006
 
3/31/2006
 
12/31/2006
 
3/31/2006
  
Assets
                      
Cash and due from banks
  
$
26,501
  
$
19,164
  
$
17,398
    
38.3
%
  
52.3
%
Federal funds sold
    
8,620
   
3,870
   
20,475
   
122.7
%
  
-57.9
%
Total cash and cash equivalents 
    
35,121
   
23,034
   
37,873
   
52.5
%
  
-7.3
%
                                 
Interest bearing deposits with other banks
    
318
   
318
   
318
   
-
   
-
 
Securities available for sale
    
37,620
   
38,445
   
43,847
   
-2.1
%
  
-14.2
%
Federal Home Loan Bank Stock, at cost
    
3,085
   
2,350
   
1,907
   
31.3
%
  
61.8
%
Loans held for sale
    
5,300
   
1,764
   
2,994
   
200.5
%
  
77.0
%
Loans, net (1)
    
460,302
   
439,277
   
373,189
   
4.8
%
  
23.3
%
Property, premises and equipment
    
14,551
   
14,581
   
13,055
   
-0.2
%
  
11.5
%
Cash surrender value of life insurance
    
9,528
   
9,435
   
7,777
   
1.0
%
  
22.5
%
Deferred tax assets
    
3,218
   
2,414
   
2,352
   
33.3
%
  
36.8
%
Goodwill
    
4,864
   
4,865
   
4,865
   
0.0
%
  
0.0
%
Core deposit intangible
    
1,059
   
1,148
   
1,373
   
-7.8
%
  
-22.9
%
Other assets
    
3,968
   
4,143
   
2,901
   
-4.2
%
  
36.8
%
Total assets 
  
$
578,934
  
$
541,774
  
$
492,451
    
6.9
%
  
17.6
%
                                 
Liabilities
                                
Deposits:
                                
Non-interest bearing demand
  
$
146,406
  
$
153,005
  
$
156,406
    
-4.3
%
  
-6.4
%
Savings, NOW, and money market
    
169,860
   
146,110
   
173,421
   
16.3
%
  
-2.1
%
Time deposits of $100K or more
    
32,822
   
30,630
   
17,229
   
7.2
%
  
90.5
%
Time deposits under $100K
    
95,923
   
90,776
   
74,663
   
5.7
%
  
28.5
%
Total deposits
    
445,011
   
420,521
   
421,719
   
5.8
%
  
5.5
%
FHLB advances and other borrowings
    
60,000
   
50,000
   
10,000
   
20.0
%
  
500.0
%
Securities sold under agreements to repurchase
    
1,387
   
1,364
   
1,954
   
1.7
%
  
-29.0
%
Junior subordinated debentures
    
16,496
   
16,496
   
8,248
   
-
   
100.0
%
Other liabilities
    
4,875
   
3,921
   
3,801
   
24.3
%
  
28.3
%
Total liabilities 
    
527,769
   
492,302
   
445,722
   
7.2
%
  
18.4
%
Stockholders' equity
                                
Common stock, no par value; 20,000,000 shares
                               
authorized; issued and outstanding 6,410,829; 6,345,639
                                
and 6,330,523 for March 31, 2007; December 31, 2006
                               
and March 31, 2006 respectively
    
29,802
   
29,247
   
29,521
   
1.9
%
  
1.0
%
Additional paid in capital
    
428
   
336
   
-
   
27.4
%
  
-
  
Retained earnings
    
20,809
   
19,809
   
17,354
   
5.0
%
  
19.9
%
Accumulated other comprehensive income
    
126
   
80
   
(146
)
  
57.5
%
  
-
  
Total stockholders' equity 
    
51,165
   
49,472
   
46,729
   
3.4
%
  
9.5
%
Total liabilities and stockholders' equity 
  
$
578,934
  
$
541,774
  
$
492,451
    
6.9
%
  
17.6
%

(1)
Loans are net of deferred loan fees of $1,598; $1,625; $1,526 and allowance for loan losses of $4,313; $4,081; $4,005 for March 31, 2007, December 31, 2006, and March 31, 2006 respectively.

(more)
 

HEOP 1Q07 results
April 19, 2007
Page 4
 
Heritage Oaks Bancorp
Consolidated Statements of Income
(dollars in thousands except share data)

   
(unaudited)
 
(audited)
 
(unaudited)
 
Percentage
 
Percentage
 
 
 
For the Three Months Ended
 
Change vs.
 
Change vs.
 
 
 
3/31/2007
 
12/31/2006
 
3/31/2006
 
12/31/2006
 
3/31/2006
  
Interest Income:
                      
Interest and fees on loans
  
$
9,816
  
$
9,423
  
$
7,489
    
4.2
%
  
31.1
%
Investment securities
    
448
   
426
   
489
   
5.2
%
  
-8.4
%
Federal funds sold and commercial paper
    
31
   
35
   
226
   
-11.4
%
  
-86.3
%
Time certificates of deposit
    
8
   
48
   
2
   
-83.3
%
  
300.0
%
Total interest income 
    
10,303
   
9,932
   
8,206
   
3.7
%
  
25.6
%
Interest Expense:
                                
NOW accounts
    
28
   
20
   
21
   
40.0
%
  
33.3
%
MMDA accounts
    
667
   
622
   
571
   
7.2
%
  
16.8
%
Savings accounts
    
24
   
24
   
28
   
0.0
%
  
-14.3
%
Time deposits of $100K or more
    
209
   
199
   
138
   
5.0
%
  
51.4
%
Time deposits under $100K
    
1,212
   
1,174
   
694
   
3.2
%
  
74.6
%
Other borrowed funds
    
1,129
   
942
   
307
   
19.9
%
  
267.8
%
Total interest expense 
    
3,269
   
2,981
   
1,759
   
9.7
%
  
85.8
%
Net interest income before provision for loan losses
    
7,034
   
6,951
   
6,447
   
1.2
%
  
9.1
%
Provision for loan losses
    
140
   
120
   
120
   
16.7
%
  
16.7
%
Net interest income after provision for loan losses
    
6,894
   
6,831
   
6,327
   
0.9
%
  
9.0
%
Non Interest Income:
                                
Service charges on deposit accounts
    
613
   
581
   
568
   
5.5
%
  
7.9
%
Other income
    
618
   
720
   
650
   
-14.2
%
  
-4.9
%
Total non-interest income
    
1,231
   
1,301
   
1,218
   
-5.4
%
  
1.1
%
Non-Interest Expense:
                                
Salaries and employee benefits
    
3,250
   
3,039
   
2,783
   
6.9
%
  
16.8
%
Occupancy and equipment
   
715
   
706
   
622
   
1.3
%
  
15.0
%
Other expenses
    
1,729
   
1,794
   
1,579
   
-3.6
%
  
9.5
%
Total non-interest expenses
    
5,694
   
5,539
   
4,984
   
2.8
%
  
14.2
%
Income before provision for income taxes
    
2,431
   
2,593
   
2,561
   
-6.2
%
  
-5.1
%
Provision for income taxes
    
921
   
944
   
955
   
-2.4
%
  
-3.6
%
Net Income
  
$
1,510
  
$
1,649
  
$
1,606
    
-8.4
%
  
-6.0
%
                                 
Average basic shares outstanding
    
6,384,150
   
6,355,466
   
6,283,890
             
Average diluted shares outstanding
    
6,605,942
   
6,598,355
   
6,643,432
             
Basic earnings per share
  
$
0.24
  
$
0.26
  
$
0.26
              
Fully diluted earnings per share
  
$
0.23
  
$
0.25
  
$
0.24
              

(more)
 

HEOP 1Q07 results
April 19, 2007
Page 5

 
For the Quarters Ended
 
Percentage Change vs.
  
Additional Financial Information
  
3/31/2007
  
12/31/2006
  
3/31/2006
  
12/31/2006
  
3/31/2006
  
(dollars in thousands)
                      
LOANS (including loans held for sale)
                      
Commercial, financial and agricultural
  
$
91,476
  
$
84,976
  
$
65,079
    
7.6
%
  
40.6
%
Real estate - construction/land
    
106,542
   
105,712
   
86,533
   
0.8
%
  
23.1
%
Real estate - other
    
252,080
   
237,401
   
208,271
   
6.2
%
  
21.0
%
Home equity lines of credit
    
9,617
   
10,792
   
13,168
   
-10.9
%
  
-27.0
%
Installment loans to individuals
    
5,705
   
5,598
   
5,418
   
1.9
%
  
5.3
%
All other loans (including overdrafts)
    
793
   
504
   
251
   
57.4
%
  
216.1
%
Total loans
  
$
466,213
  
$
444,983
  
$
378,720
    
4.8
%
  
23.1
%
                                 
ALLOWANCE FOR LOAN LOSSES
                                
Balance, beginning of period
 
$
4,081
  
$
3,881
  
$
3,881
    
5.2
%
  
5.2
%
Provision expense
    
140
   
600
   
120
   
-76.7
%
  
16.7
%
Credit losses charged against allowance
    
(1
)
  
(561
)
  
-
   
-
    
-
  
Recoveries of loans previously charged off
    
92
   
161
   
4
   
-42.8
%
  
2203.5
%
Balance, end of period
 
$
4,312
  
$
4,081
  
$
4,005
    
5.7
%
  
7.7
%
                                 
Net ( charge-offs ) recoveries
  
$
91
  
$
(400
)
$
4
    
-
    
2184.3
%
Net charge-offs / Average loans outstanding
    
0.00
%
  
0.09
%
  
0.00
%
  
-99.8
%
  
-84.5
%
Allowance for loan losses / Total loans outstanding
    
0.92
%
  
0.92
%
  
1.06
%
  
0.9
%
  
-12.5
%
                                 
NON-PERFORMING ASSETS
                                
Loans on non-accrual status
  
$
143
  
$
55
  
$
52
    
160.0
%
  
175.0
%
Loans more than 90 days delinquent, still accruing
    
2
   
-
   
-
   
-
    
-
  
Total non-performing loans
    
145
   
55
   
52
   
163.6
%
  
178.8
%
Other real estate owned (OREO) / Repossessed assets
    
-
   
-
   
-
   
-
    
-
  
Total non-performing assets
  
$
145
  
$
55
  
$
52
    
163.6
%
  
178.8
%
                                 
Total non-performing assets to total assets
    
0.03
%
  
0.01
%
  
0.01
%
  
150.5
%
  
150.5
%
                                 
DEPOSITS
                                
Non-interest bearing demand
  
$
146,406
  
$
153,005
  
$
156,406
    
-4.3
%
  
-6.4
%
                                 
Interest-bearing demand
    
51,304
   
45,164
   
54,701
   
13.6
%
  
-6.2
%
Regular savings accounts
    
23,829
   
23,406
   
26,758
   
1.8
%
  
-10.9
%
Money market accounts
    
94,727
   
77,540
   
91,962
   
22.2
%
  
3.0
%
Total interest-bearing transaction and savings accounts
   
169,860
   
146,110
   
173,421
   
16.3
%
  
-2.1
%
                                 
Time deposits under $100 thousand
    
95,923
   
90,776
   
74,663
   
5.7
%
  
28.5
%
Time deposits of $100 thousand or more
    
32,822
   
30,630
   
17,229
   
7.2
%
  
90.5
%
Total time deposits
    
128,745
   
121,406
   
91,892
   
6.0
%
  
40.1
%
                                 
Total deposits
  
$
445,011
  
$
420,521
  
$
421,719
    
5.8
%
  
5.5
%
 
(more)
 

HEOP 1Q07 results
April 19, 2007
Page 6

 
For the Three Months Ended
 
 
 
3/31/2007
 
12/31/2006
 
3/31/2006
  
 PROFITABILITY / PERFORMANCE RATIOS              
               
Operating efficiency
    
68.89
%
  
67.12
%
  
65.02
%
                     
Operating expenses to average assets
    
4.14
%
  
4.17
%
  
4.20
%
                     
Return on average equity
    
12.10
%
  
13.64
%
  
14.12
%
                     
Return on average tangible equity
    
13.71
%
  
15.58
%
  
16.33
%
                     
Return on average assets
    
1.10
%
  
1.24
%
  
1.35
%
                     
Other operating income to average assets
    
0.89
%
  
0.98
%
  
1.03
%
                     
Other operating expense to average assets
    
4.14
%
  
4.17
%
  
4.20
%
                     
Net interest income to average assets
    
5.11
%
  
5.24
%
  
5.43
%
                     
Non-interest income to total net revenue
    
14.89
%
  
15.77
%
  
15.89
%
                     
ASSET QUALITY AND CAPITAL RATIOS
                    
                     
Non-performing loans to total loans, net
    
0.03
%
  
0.01
%
  
0.01
%
                     
ALLL to total loans, net
    
0.94
%
  
0.93
%
  
1.07
%
                     
Non-performing loans as a % of ALLL
    
3.36
%
  
1.35
%
  
1.30
%
                     
Net charge-offs to average loans
    
-0.02
%
  
0.10
%
  
0.00
%
                     
Non-performing loans to primary capital
    
0.28
%
  
0.11
%
  
0.11
%
                     
Leverage ratio
    
10.87
%
  
11.00
%
  
10.23
%
                     
Tier I Risk-Based Capital Ratio
    
11.42
%
  
11.51
%
  
11.20
%
                     
Total Risk-Based Capital Ratio
    
12.28
%
  
12.36
%
  
12.16
%
 
 
For the Three Months Ended
  
AVERAGE BALANCES AND RATES
  
3/31/2007
 
12/31/2006
 
3/31/2006
  
(dollars in thousands)
              
Average Investments
  
$
41,186
  
$
41,981
  
$
46,212
  
Average Fed funds sold
    
2,411
   
2,534
   
20,640
 
Average loans
    
460,825
   
437,623
   
370,083
 
Average earning assets
    
504,422
   
482,138
   
436,935
 
Average non-earning assets
    
57,629
   
52,629
   
48,802
 
Allowance for loan losses
    
(4,180
)
  
(3,938
)
  
(3,948
)
Average assets
    
557,871
   
530,829
   
481,789
 
Average non-interest bearing demand deposits
    
141,073
   
142,582
   
148,020
 
Average interest bearing deposits
    
284,718
   
274,081
   
262,516
 
Average borrowings
    
76,865
   
60,638
   
20,918
 
Average non-interest bearing liabilities
    
4,612
   
5,186
   
4,201
 
Average liabilities
    
507,268
   
482,487
   
435,655
 
Average equity
    
50,603
   
48,342
   
46,134
 
Average liabilities and equity
  
$
557,871
  
$
530,829
  
$
481,789
  
Interest rate yield on loans
    
8.64
%
  
8.61
%
  
8.21
%
Interest rate yield on investments
    
4.49
%
  
4.52
%
  
4.31
%
Interest rate yield on federal funds sold
    
5.21
%
  
5.52
%
  
4.39
%
Interest rate yield on interest-earning assets
    
8.28
%
  
8.24
%
  
7.62
%
Interest rate expense on deposits
    
2.04
%
  
1.96
%
  
1.43
%
Interest rate expense on other borrowings
    
5.96
%
  
6.22
%
  
5.95
%
Interest rate expense on interest-bearing liabilities
    
3.67
%
  
3.56
%
  
2.52
%
Average equity to average assets
    
9.07
%
  
9.11
%
  
9.58
%
Net interest margin
    
5.66
%
  
5.77
%
  
5.98
%
 
NOTE: Transmitted on Prime Newswire on April 19, 2007 at 3:30 AM PST