UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 26, 2013
Heritage Oaks Bancorp
(Exact name of registrant as specified in its charter)
| California | |
| (State or other jurisdiction of incorporation) | |
| 000-25020 | 77-0388249 |
| (Commission File Number) | (IRS Employer Identification No.) |
| 1222 Vine Street, Paso Robles, CA | 93446 |
| (Address of principal executive offices) | (Zip Code) |
805-369-5200
(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: | ||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 2.02. Results of Operations and Financial Condition.
On July 29, 2013, Heritage Oaks Bancorp (NASDAQ:HEOP) (the "Company"), parent company of Heritage Oaks Bank, issued a press release announcing the Company's financial condition and results of operations as of and for the three months ended June 30, 2013.
A copy of the press release discussing Item 2.02 is attached to this Form 8-K as Exhibit 99.1.
Item 8.01. Other Events.
On July 29, 2013, as part of the press release issued by the Company announcing its financial condition and results of operations, the Company also announced its purchase of a branch office building in San Luis Obispo, California.
A copy of the press release discussing Item 8.01 is attached to this Form 8-K as Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No.
Description
99.1
Press Release dated July 29, 2013.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Heritage Oaks Bancorp |
||
| Date: July 29, 2013 |
By: /s/ MARK OLSON Mark Olson Chief Financial Officer |
EXHIBIT INDEX
|
Exhibit |
|
Description |
|
99.1 |
|
Press Release dated July 29, 2013. |
EXHIBIT 99.1
PASO ROBLES, Calif., July 29, 2013 (GLOBE NEWSWIRE) -- Heritage Oaks Bancorp ("Heritage Oaks" or the "Company") (Nasdaq:HEOP), a bank holding company and parent of Heritage Oaks Bank (the "Bank"), reported net income of $2.7 million for the second quarter of 2013, compared with $1.9 million for the second quarter of 2012, and $3.7 million for the first quarter of 2013. For the first six months of 2013, net income was $6.4 million compared with $3.5 million for the same period in 2012.
Highlights
"We are pleased with our strong financial performance for the first half of 2013," said Simone Lagomarsino, President and Chief Executive Officer of Heritage Oaks Bancorp. "We believe our strong performance, in particular our loan and deposit growth, is reflective of our strategic decision to restructure our organization in 2012 by reducing back office costs and redeploying a portion of these cost savings to hire additional relationship bankers. These new team members are supporting our expansion into new geographic markets in Ventura County and deepening our penetration in existing markets, as well as expanding our product lines including agribusinesses and mortgage lending."
"We are excited to announce the purchase of a branch office building in downtown San Luis Obispo," said Ms. Lagomarsino. "Heritage Oaks Bank is the largest community bank in San Luis Obispo County and has the fifth largest market share overall in the County. Acquiring this branch location provides us with an outstanding location from which to serve our customers in the City of San Luis Obispo."
"We are also pleased to have repurchased all of the Preferred Stock held by the U.S. Department of the Treasury," said Ms. Lagomarsino. "Our ability to repurchase these shares with internal resources reflects our overall financial strength and marks another major milestone in our return to financial health. The repurchase of the Preferred Stock will eliminate the dilutive effect of preferred dividends on our common shareholders."
Net Income Available to Common Shareholders
Net income available to common shareholders for the second quarter of 2013 improved to $2.4 million, or $0.09 per diluted common share, compared with $1.5 million, or $0.06 per diluted common share, for the second quarter of 2012. For the first six months of 2013, net income available to common shareholders improved to $5.7 million, or $0.22 per diluted common share, from $2.7 million, or $0.10 per diluted common share, for the same period a year earlier. The key components of the change in net income available to common shareholders for the three and six month periods are discussed below.
Net Interest Income
Net interest income was $10.1 million, or 4.04% of average interest earning assets ("net interest margin"), for the second quarter of 2013 compared with $10.4 million, or 4.41% of average earning assets, for the same period a year earlier. For the first half of 2013, net interest income was $20.4 million, or 4.09% of average interest earning assets, compared with $21.1 million, or 4.56% from the same period a year ago. The decline in net interest margins is the result of the historically low interest rate environment and a relatively flat yield curve.
Provision for Loan Losses
No provisions for loan losses were recorded for the second quarter or the first six months of 2013 compared with $3.1 million and $6.4 million recorded in the same respective periods a year earlier. The lack of provisions for loan losses during the three and six months ended June 30, 2013 was largely driven by continued improvements in the overall credit quality of the loan portfolio, continued improvement in our historical loan loss experience, and a shift in the portfolio to loan products with lower credit risks. Net charge-offs declined $4.9 million, or 104.1%, to a net recovery of $0.2 million for the second quarter of 2013 compared with net charge-offs of $4.7 million for the same period a year earlier. For the first six months of 2013, net charge-offs declined $7.4 million, or 97.6%, to $184 thousand compared with $7.6 million for the same period in 2012.
Annualized net loan charge-offs to total gross loans for the second quarter of 2013 declined 296 basis points to a net recovery of 0.10% compared with net charge-offs of 2.86% for the second quarter of 2012. For the first six months of 2013, annualized net loan charge-offs to total gross loans declined 226 basis points to 0.05% compared with 2.31% for the same period a year earlier.
Non-Interest Income
Non-interest income was $2.9 million for the second quarter of 2013 compared with $3.5 million for the same period a year earlier. For the first half of 2013, non-interest income was $8.6 million compared with $6.0 million for the same period a year ago. Higher non-interest income during the first half of 2013 compared with the same period a year ago is primarily the result of $3.6 million gains on the sale of $84.6 million of investment securities, which were sold in the first quarter of 2013. These securities were sold to reduce the overall duration of the investment securities portfolio to limit interest rate risk and to provide a funding source for our strong loan demand. Total duration of the investment securities portfolio declined from 3.1 years prior to the sale of investment securities to 2.4 years after the sale.
Excluding gains on sale of investment securities, non-interest income increased 19.6% and 7.2% for the second quarter and first six months of 2013, respectively, compared with the same periods a year earlier reflecting improvements in the level of gains on sale of mortgages and gains recognized on the sale of the guaranteed portion of SBA loans, a program that was reinstituted in the second quarter of 2013.
Non-Interest Expense
Non-interest expense was $8.6 million for the three months ended June 30, 2013 compared with $9.1 million for the same period a year earlier. For the first half of 2013, non-interest expense was $18.4 million compared with $17.9 million for the same period a year ago. The decline in non-interest expense for the second quarter of 2013 was largely the result of a $0.7 million reduction in provision for mortgage repurchases as no such provisions were recorded in the current quarter. The increase for the first six months of 2013 was primarily the result of increased salary and employee benefit costs due to the lack of an incentive compensation plan in 2012, the 2013 merit increases, higher mortgage commissions due to increased mortgage production in 2013 and lower salary continuation plan costs in 2012 due to the reversal of unvested benefits for terminated employees. Other non-interest expense increased $0.4 million for the first six month of 2013 as compared with the same period in 2012 primarily as a result of higher loan administration costs associated with higher loan originations.
The Company's operating efficiency ratio improved to 65.0% for the second quarter of 2013 from 69.75% for the same period a year ago. For the first six months of 2013, the operating efficiency ratio increased to 71.4% from 67.7% a year earlier. Heritage Oaks' operating efficiency ratio for the three and six months ended June 30, 2013 reflects the impacts of the changes in non-interest expense discussed above, but perhaps the most notable impact on the operating efficiency ratio has been the negative impacts caused by the net interest margin compression resulting from the continuing effects of the low interest rate environment.
Income Taxes
Income tax expense was $1.7 million for the second quarter of 2013 compared with a $0.2 million tax benefit for the same period a year earlier. For the first half of 2013, income tax expense was $4.1 million compared with a $0.6 million tax benefit for the same period a year ago. The income tax benefits for both the three and six months ended June 30, 2012 included the impact of the partial reversal of the valuation allowance held against the Company's deferred tax assets, which allowance was fully reversed by the end of the third quarter of 2012.
Excluding the impact of the valuation allowance reversal in 2012, the Company's effective tax rate for the second quarter of 2013 was 38.6% compared with 29.7% for the same period a year ago, and 38.9% for the first half of 2013 compared with 32.0% for the same period in 2012. The year-over-year increase in the effective tax rates primarily reflects the higher tax benefits from tax exempt municipal interest relative to pre-tax income in 2012 as compared with 2013, as overall earnings improved in 2013.
Balance Sheet
Total assets increased $73.1 million, or 7.1%, to $1.1 billion at June 30, 2013 compared with a year earlier. The increase in total assets was primarily the result of growth in the loan portfolio. Total stockholders' equity was $146.3 million at June 30, 2013, an increase of $11.6 million or 8.6%, compared with a year earlier.
Total gross loans increased $82.9 million, or 12.5%, to $746.6 million at June 30, 2013 from $663.7 million at June 30, 2012, resulting from strong growth in commercial, residential, and agriculture lending relationships. Total new loan production, including mortgage loans originated for sale, increased $33.9 million, or 33.7%, to $134.5 million during the three months ended June 30, 2013 compared with $100.7 million a year earlier. Total deposits grew $49.4 million, or 5.9%, to $883.3 million at June 30, 2013 from $833.9 million a year earlier with the majority of the growth coming from non-interest bearing deposits.
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 30.0% at June 30, 2013 compared with 34.6% at June 30, 2012, which reflects the reduction in the level of securities, which were used to fund loan growth and to repay short-term FHLB borrowings.
The Company's and the Bank's regulatory capital ratios exceeded the ratios generally required to be considered a "well capitalized" financial institution for regulatory purposes. The Tier I Leverage Ratios for the Company and the Bank were 12.6% and 12.3%, respectively at June 30, 2013 compared with the requirement of 5.0% to generally be considered a "well capitalized" financial institution for regulatory purposes. The Total Risk-Based Capital Ratios for the Company and the Bank were 17.0% and 16.6%, respectively, at June 30, 2013 compared with the requirement of 10.0% to generally be considered a "well capitalized" financial institution for regulatory purposes. The growth in the capital ratios at both the Bank and Company were somewhat tempered by a $3.1 million decline in accumulated other comprehensive income resulting from a decline in the fair value of the investment securities portfolio as interest rates have risen and interest rate yield curves have steepened. This decline in fair value offset the growth in equity attributable to net income generated for the quarter, which resulted in a $0.01 decline in the reported tangible book value per share at June 30, 2013.
The Company's pro-forma regulatory capital ratios at June 30, 2013, after considering the July 17, 2013 repurchase of Series A Preferred Shares from the U.S. Department of the Treasury are 10.6% and 14.6% for Tier 1 Leverage and Total Risk-Based Capital, respectively. These pro-forma regulatory capital ratios are significantly higher than the 5.0% and 10.0% minimum Tier 1 Leverage and Total Risk-Based Capital ratios generally required to be classified as a well-capitalized institution for regulatory purposes.
Asset Quality
Classified loans decreased $10.5 million or 17.2% to $50.4 million at June 30, 2013 compared with $60.9 million at June 30, 2012. Non-accrual loans decreased $7.0 million to $13.9 million at June 30, 2013, of which $11.0 million were still paying per their contractual terms, compared with $20.9 million of non-accrual loans at June 30, 2012. Non-performing loans to gross loans decreased to 1.9% at June 30, 2013 from 3.15% at June 30, 2012. The Company held no Other Real Estate Owned at June 30, 2013, a decrease of $1.1 million from June 30, 2012. Total non-performing assets, inclusive of non-accrual loans, decreased $8.0 million to $14.0 million at June 30, 2013 compared with $22.0 million at June 30, 2012. The percentage of non-performing assets to total assets was 1.3% at June 30, 2013 compared with 2.1% at June 30, 2012.
Total troubled debt restructurings ("TDRs") outstanding were $9.7 million at June 30, 2013 compared with $10.8 million at June 30, 2012. The decrease in the level of reported TDRs is largely the result of payment activity on existing TDRs outpacing the level of new TDRs. The allowance for loan losses ("ALLL") was $17.9 million, or 2.4% of total loans at June 30, 2013, compared with $18.1 million, or 2.7% of total loans at June 30, 2012. The decrease in the ALLL to total loans ratio is due to continued improvement in the credit quality of the loan portfolio, the mix of loans in the portfolio, and declines in the historical loss experience of the loan portfolio.
Conference Call
The Company will host a conference call to discuss these second quarter results at 8:00 a.m. PDT on July 30, 2013. Media representatives, analysts and the public are invited to listen to this discussion by calling (877) 363-5052 and entering the conference ID 11934360, 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.
Quarterly Report on Form 10-Q
The Company intends to file with the U.S. Securities and Exchange Commission its Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, on or before August 9, 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 loan production offices in Goleta and Ventura/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. 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.
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 the availability of 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 help identify 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 uncertainty as to whether the financial crisis in the United States has fully been resolved, including the continuing relative 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 and 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 MOU issued by the FRB, 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, 2012, filed by the Company with the U.S. Securities and Exchange Commission on March 4, 2013. 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 except per share data) | 6/30/2013 | 3/31/2013 | 6/30/2012 |
| Assets | |||
| Cash and due from banks | $ 24,337 | $ 20,560 | $ 19,308 |
| Interest bearing deposits in other banks | 14,202 | 17,957 | 13,250 |
| Total cash and cash equivalents | 38,539 | 38,517 | 32,558 |
| Investment securities available for sale | 237,540 | 247,890 | 260,786 |
| Federal Home Loan Bank stock | 4,739 | 4,575 | 4,575 |
| Loans held for sale | 9,786 | 9,138 | 9,333 |
| Gross loans | 746,611 | 704,880 | 663,670 |
| Net deferred loan fees | (1,372) | (1,035) | (972) |
| Allowance for loan losses | (17,934) | (17,743) | (18,149) |
| Net loans held for investment | 727,305 | 686,102 | 644,549 |
| Premises and equipment | 17,641 | 17,598 | 15,385 |
| Deferred tax assets, net | 21,760 | 18,959 | 19,422 |
| Bank owned life insurance | 15,593 | 15,472 | 15,097 |
| Goodwill and other intangible assets | 12,781 | 12,881 | 12,560 |
| Other real estate owned | -- | -- | 1,075 |
| Other assets | 11,198 | 13,552 | 8,434 |
| Total assets | $ 1,096,882 | $ 1,064,684 | $ 1,023,774 |
| Liabilities | |||
| Deposits | |||
| Non-interest bearing deposits | $ 287,098 | $ 270,357 | $ 249,740 |
| Interest bearing deposits | 596,231 | 592,458 | 584,173 |
| Total Deposits | 883,329 | 862,815 | 833,913 |
| Short term FHLB borrowing | 3,000 | -- | 3,500 |
| Long term FHLB borrowing | 49,500 | 36,500 | 36,500 |
| Junior subordinated debentures | 8,248 | 8,248 | 8,248 |
| Other liabilities | 6,517 | 10,382 | 6,923 |
| Total liabilities | 950,594 | 917,945 | 889,084 |
| 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 | 20,726 | 20,630 | 20,347 |
| 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: 25,342,560 , 25,331,541, and 25,234,262 shares as of June 30, 2013, March 31, 2013, and June 30, 2012, respectively | 101,431 | 101,359 | 101,237 |
| Paid in capital | 7,580 | 7,471 | 7,134 |
| Retained earnings / (accumulated deficit) | 14,504 | 12,146 | (68) |
| Accumulated other comprehensive (loss) / income | (1,557) | 1,529 | 2,436 |
| Total stockholders' equity | 146,288 | 146,739 | 134,690 |
| Total liabilities and stockholders' equity | $ 1,096,882 | $ 1,064,684 | $ 1,023,774 |
| Book value per common share | $ 4.80 | $ 4.82 | $ 4.36 |
| Tangible book value per common share | $ 4.30 | $ 4.31 | $ 3.86 |
| Heritage Oaks Bancorp | |||
| Consolidated Statements of Income | |||
| (unaudited) | |||
| Three Months Ended | |||
| (dollar amounts in thousands except per share data) | 6/30/2013 | 3/31/2013 | 6/30/2012 |
| Interest Income | |||
| Loans | $ 9,787 | $ 9,597 | $ 9,646 |
| Investment securities | 1,213 | 1,433 | 1,730 |
| Other | 75 | 43 | 25 |
| Total interest income | 11,075 | 11,073 | 11,401 |
| Interest Expense | |||
| Interest on deposits | 710 | 660 | 774 |
| Other borrowings | 216 | 205 | 221 |
| Total interest expense | 926 | 865 | 995 |
| Net interest income before provision for loan losses | 10,149 | 10,208 | 10,406 |
| Provision for loan losses | -- | -- | 3,064 |
| Net interest income after provision for loan losses | 10,149 | 10,208 | 7,342 |
| Non-Interest Income | |||
| Fees and service charges | 1,120 | 1,015 | 1,106 |
| Mortgage gain on sale and origination fees | 1,089 | 774 | 1,035 |
| Gain on sale of investment securities | 5 | 3,586 | 1,064 |
| Gain on sale of other real estate owned | -- | -- | 10 |
| Other income | 698 | 286 | 279 |
| Total non-interest income | 2,912 | 5,661 | 3,494 |
| Non-Interest Expense | |||
| Salaries and employee benefits | 4,814 | 5,192 | 4,454 |
| Occupancy | 821 | 782 | 797 |
| Information technology | 640 | 627 | 694 |
| Professional services | 691 | 662 | 838 |
| Regulatory | 270 | 369 | 316 |
| Equipment | 435 | 415 | 423 |
| Sales and marketing | 147 | 121 | 124 |
| Foreclosed asset costs and write-downs | 53 | 55 | 98 |
| Provision for mortgage loan repurchases | -- | 570 | 739 |
| Amortization of intangible assets | 100 | 100 | 86 |
| Other expense | 669 | 855 | 564 |
| Total non-interest expense | 8,640 | 9,748 | 9,133 |
| Income before income tax expense / (benefit) | 4,421 | 6,121 | 1,703 |
| Income tax expense / (benefit) | 1,705 | 2,391 | (194) |
| Net income | 2,716 | 3,730 | 1,897 |
| Dividends and accretion on preferred stock | 359 | 358 | 375 |
| Net income available to common shareholders | $ 2,357 | $ 3,372 | $ 1,522 |
| Weighted Average Shares Outstanding | |||
| Basic | 25,130,299 | 25,112,004 | 25,076,226 |
| Diluted | 26,543,268 | 26,527,457 | 26,399,117 |
| Earnings Per Common Share | |||
| Basic | $ 0.09 | $ 0.13 | $ 0.06 |
| Diluted | $ 0.09 | $ 0.13 | $ 0.06 |
| Heritage Oaks Bancorp | ||
| Consolidated Statements of Income | ||
| (unaudited) | ||
| Six Months Ended | ||
| (dollar amounts in thousands except per share data) | 6/30/2013 | 6/30/2012 |
| Interest Income | ||
| Loans | $ 19,384 | $ 19,573 |
| Investment securities | 2,646 | 3,528 |
| Other | 118 | 52 |
| Total interest income | 22,148 | 23,153 |
| Interest Expense | ||
| Interest on deposits | 1,370 | 1,596 |
| Other borrowings | 421 | 402 |
| Total interest expense | 1,791 | 1,998 |
| Net interest income before provision for loan losses | 20,357 | 21,155 |
| Provision for loan losses | -- | 6,395 |
| Net interest income after provision for loan losses | 20,357 | 14,760 |
| Non-Interest Income | ||
| Fees and service charges | 2,135 | 2,199 |
| Mortgage gain on sale and origination fees | 1,863 | 1,890 |
| Gain on sale of investment securities | 3,591 | 1,367 |
| Gain on sale of other real estate owned | -- | 10 |
| Other income | 984 | 550 |
| Total non-interest income | 8,573 | 6,016 |
| Non-Interest Expense | ||
| Salaries and employee benefits | 10,006 | 8,990 |
| Occupancy | 1,603 | 1,814 |
| Information technology | 1,267 | 1,360 |
| Professional services | 1,353 | 1,401 |
| Regulatory | 639 | 867 |
| Equipment | 850 | 828 |
| Sales and marketing | 268 | 261 |
| Foreclosed asset costs and writedowns | 108 | 196 |
| Provision for mortgage loan repurchases | 570 | 857 |
| Amortization of intangible assets | 200 | 172 |
| Other expense | 1,524 | 1,116 |
| Total non-interest expense | 18,388 | 17,862 |
| Income before income tax expense / (benefit) | 10,542 | 2,914 |
| Income tax expense / (benefit) | 4,096 | (568) |
| Net income | 6,446 | 3,482 |
| Dividends and accretion on preferred stock | 717 | 756 |
| Net income available to common shareholders | $ 5,729 | $ 2,726 |
| Weighted Average Shares Outstanding | ||
| Basic | 25,121,151 | 25,066,945 |
| Diluted | 26,504,120 | 26,315,024 |
| Earnings Per Common Share | ||
| Basic | $ 0.23 | $ 0.11 |
| Diluted | $ 0.22 | $ 0.10 |
| Heritage Oaks Bancorp | |||||
| Key Ratios | |||||
| Three Months Ended | Six Months Ended | ||||
| PROFITABILITY / PERFORMANCE RATIOS | 6/30/2013 | 3/31/2013 | 6/30/2012 | 6/30/2013 | 6/30/2012 |
| Net interest margin | 4.04% | 4.14% | 4.41% | 4.09% | 4.56% |
| Return on average equity | 7.36% | 10.30% | 5.66% | 8.82% | 5.24% |
| Return on average common equity | 7.66% | 11.18% | 5.55% | 9.40% | 5.03% |
| Return on average tangible common equity | 8.55% | 12.51% | 6.28% | 10.51% | 5.69% |
| Return on average assets | 1.00% | 1.40% | 0.75% | 1.20% | 0.70% |
| Non interest income to total net revenue | 22.30% | 35.67% | 25.14% | 29.63% | 22.14% |
| Yield on interest earning assets | 4.41% | 4.49% | 4.84% | 4.45% | 4.99% |
| Cost of interest bearing liabilities | 0.57% | 0.54% | 0.63% | 0.55% | 0.64% |
| Cost of funds | 0.40% | 0.38% | 0.46% | 0.39% | 0.47% |
| Operating efficiency ratio (1) | 65.00% | 78.10% | 69.75% | 71.35% | 67.71% |
| Non-interest expense to average assets, annualized | 3.17% | 3.66% | 3.61% | 3.42% | 3.61% |
| ASSET QUALITY RATIOS | |||||
| Non-performing loans to total gross loans | 1.87% | 1.73% | 3.15% | ||
| Non-performing loans to equity | 9.53% | 8.33% | 15.50% | ||
| Non-performing assets to total assets | 1.27% | 1.16% | 2.14% | ||
| Allowance for loan losses to total gross loans | 2.40% | 2.52% | 2.73% | ||
| Net charge-offs / (recoveries) to average loans outstanding, annualized | -0.10% | 0.22% | 2.86% | 0.05% | 2.31% |
| Classified assets to Tier I + ALLL | 33.07% | 32.17% | 45.92% | ||
| 30-89 Day Delinquency Rate | 0.05% | 0.24% | 0.13% | ||
| CAPITAL RATIOS | |||||
| Company | |||||
| Leverage ratio | 12.60% | 12.72% | 11.88% | ||
| Tier I Risk-Based Capital Ratio | 15.77% | 16.50% | 14.50% | ||
| Total Risk-Based Capital Ratio | 17.03% | 17.76% | 15.76% | ||
| Bank | |||||
| Leverage ratio | 12.26% | 12.36% | 11.46% | ||
| Tier I Risk-Based Capital Ratio | 15.31% | 15.99% | 13.94% | ||
| Total Risk-Based Capital Ratio | 16.57% | 17.26% | 15.21% | ||
| (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 | |||||||||
| For The Three Months Ended | |||||||||
| 6/30/2013 | 3/31/2013 | 6/30/2012 | |||||||
| (dollar amounts in thousands) | Balance | Yield/Rate | Inc/Exp | Balance | Yield/Rate | Inc/Exp | Balance | Yield/Rate | Inc/Exp |
| Interest Earning Assets | |||||||||
| Interest bearing deposits in other banks | $ 11,176 | 0.22% | $ 6 | $ 22,232 | 0.20% | $ 11 | $ 15,032 | 0.13% | $ 5 |
| Investment securities taxable | 214,229 | 1.76% | 940 | 207,656 | 1.91% | 978 | 206,391 | 2.42% | 1,241 |
| Investment securities non taxable | 34,530 | 3.17% | 273 | 58,102 | 3.18% | 455 | 57,480 | 3.42% | 489 |
| Other investments | 6,588 | 4.20% | 69 | 6,478 | 2.00% | 32 | 6,531 | 1.23% | 20 |
| Loans (1) | 741,150 | 5.30% | 9,787 | 705,604 | 5.52% | 9,597 | 662,661 | 5.85% | 9,646 |
| Total earning assets | 1,007,673 | 4.41% | 11,075 | 1,000,072 | 4.49% | 11,073 | 948,095 | 4.84% | 11,401 |
| Allowance for loan losses | (17,856) | (18,046) | (20,068) | ||||||
| Other assets | 101,929 | 97,589 | 89,003 | ||||||
| Total assets | $ 1,091,746 | $1,079,615 | $ 1,017,030 | ||||||
| Interest Bearing Liabilities | |||||||||
| Interest bearing demand | $ 73,071 | 0.10% | $ 19 | $ 71,769 | 0.11% | $ 19 | $ 64,570 | 0.11% | $ 17 |
| Savings | 40,080 | 0.10% | 10 | 39,297 | 0.10% | 10 | 35,293 | 0.10% | 9 |
| Money market | 288,004 | 0.33% | 240 | 290,374 | 0.31% | 225 | 285,105 | 0.37% | 265 |
| Time deposits | 195,356 | 0.91% | 441 | 183,278 | 0.90% | 406 | 188,737 | 1.03% | 483 |
| Total interest bearing deposits | 596,511 | 0.48% | 710 | 584,718 | 0.46% | 660 | 573,705 | 0.54% | 774 |
| Federal Home Loan Bank borrowing | 52,137 | 1.34% | 174 | 58,823 | 1.13% | 164 | 54,995 | 1.21% | 166 |
| Junior subordinated debentures | 8,248 | 2.04% | 42 | 8,248 | 2.02% | 41 | 8,248 | 2.68% | 55 |
| Total borrowed funds | 60,385 | 1.43% | 216 | 67,071 | 1.24% | 205 | 63,243 | 1.41% | 221 |
| Total interest bearing liabilities | 656,896 | 0.57% | 926 | 651,789 | 0.54% | 865 | 636,948 | 0.63% | 995 |
| Non interest bearing demand | 277,713 | 263,127 | 236,421 | ||||||
| Total funding | 934,609 | 0.40% | 926 | 914,916 | 0.38% | 865 | 873,369 | 0.46% | 995 |
| Other liabilities | 9,114 | 17,797 | 8,873 | ||||||
| Total liabilities | 943,723 | 932,713 | 882,242 | ||||||
| Stockholders' Equity | |||||||||
| Total stockholders' equity | 148,023 | 146,902 | 134,788 | ||||||
| Total liabilities and stockholders' equity | $ 1,091,746 | $1,079,615 | $ 1,017,030 | ||||||
| Net interest margin | 4.04% | 4.14% | 4.41% | ||||||
| Interest Rate Spread | 3.84% | $10,149 | 3.95% | $ 10,208 | 4.21% | $ 10,406 | |||
| (1) Non-accrual loans have been included in total loans. | |||||||||
| Heritage Oaks Bancorp | ||||||
| Average Balances | ||||||
| For The Six Months Ended | ||||||
| 6/30/2013 | 6/30/2012 | |||||
| (dollar amounts in thousands) | Balance | Yield/Rate | Inc/Exp | Balance | Yield/Rate | Inc/Exp |
| Interest Earning Assets | ||||||
| Interest bearing deposits in other banks | $ 16,674 | 0.21% | $ 17 | $ 15,869 | 0.16% | $ 13 |
| Investment securities taxable | 210,962 | 1.83% | 1,918 | 196,499 | 2.69% | 2,627 |
| Investment securities non taxable | 46,250 | 3.17% | 728 | 54,607 | 3.32% | 901 |
| Other investments | 6,533 | 3.12% | 101 | 6,559 | 1.20% | 39 |
| Loans (1) | 723,475 | 5.40% | 19,384 | 658,647 | 5.98% | 19,573 |
| Total earning assets | 1,003,894 | 4.45% | 22,148 | 932,181 | 4.99% | 23,153 |
| Allowance for loan losses | (17,951) | (19,742) | ||||
| Other assets | 99,771 | 86,003 | ||||
| Total assets | $ 1,085,714 | $ 998,442 | ||||
| Interest Bearing Liabilities | ||||||
| Interest bearing demand | $ 72,423 | 0.11% | $ 38 | $ 64,356 | 0.10% | $ 32 |
| Savings | 39,691 | 0.10% | 20 | 34,643 | 0.10% | 18 |
| Money market | 289,183 | 0.32% | 465 | 281,110 | 0.38% | 536 |
| Time deposits | 189,350 | 0.90% | 847 | 188,350 | 1.08% | 1,010 |
| Total interest bearing deposits | 590,647 | 0.47% | 1,370 | 568,459 | 0.56% | 1,596 |
| Federal Home Loan Bank borrowing | 55,461 | 1.23% | 338 | 52,434 | 1.15% | 299 |
| Junior subordinated debentures | 8,248 | 2.03% | 83 | 8,248 | 2.51% | 103 |
| Total borrowed funds | 63,709 | 1.33% | 421 | 60,682 | 1.33% | 402 |
| Total interest bearing liabilities | 654,356 | 0.55% | 1,791 | 629,141 | 0.64% | 1,998 |
| Non interest bearing demand | 270,461 | 225,653 | ||||
| Total funding | 924,817 | 0.39% | 1,791 | 854,794 | 0.47% | 1,998 |
| Other liabilities | 13,431 | 10,062 | ||||
| Total liabilities | 938,248 | 864,856 | ||||
| Stockholders' Equity | ||||||
| Total stockholders' equity | 147,466 | 133,586 | ||||
| Total liabilities and stockholders' equity | $ 1,085,714 | $ 998,442 | ||||
| Net interest margin | 4.09% | 4.56% | ||||
| Interest Rate Spread | 3.90% | $ 20,357 | 4.35% | $21,155 | ||
| (1) Non-accrual loans have been included in total loans. | ||||||
| Heritage Oaks Bancorp | |||
| Loans and Deposits | |||
| (dollar amounts in thousands) | |||
| Loans | 6/30/2013 | 3/31/2013 | 6/30/2012 |
| Real Estate Secured | |||
| Multi-family residential | $ 20,632 | $ 19,747 | $ 17,168 |
| Residential 1 to 4 family | 50,271 | 46,894 | 33,859 |
| Home equity lines of credit | 33,596 | 32,852 | 31,290 |
| Commercial | 417,924 | 391,159 | 366,100 |
| Farmland | 48,620 | 25,936 | 10,559 |
| Total real estate secured | 571,043 | 516,588 | 458,976 |
| Commercial | |||
| Commercial and industrial | 112,115 | 120,988 | 130,916 |
| Agriculture | 24,957 | 27,820 | 19,022 |
| Other | 50 | 55 | 72 |
| Total commercial | 137,122 | 148,863 | 150,010 |
| Construction | |||
| Single family residential | 4,878 | 8,803 | 9,810 |
| Single family residential - Spec. | 723 | 847 | 349 |
| Multi-family | 757 | 767 | 1,574 |
| Commercial | 4,204 | 477 | 12,261 |
| Total construction | 10,562 | 10,894 | 23,994 |
| Land | 23,575 | 23,816 | 25,002 |
| Installment loans to individuals | 4,144 | 4,527 | 5,477 |
| All other loans (including overdrafts) | 165 | 192 | 211 |
| Total gross loans | 746,611 | 704,880 | 663,670 |
| Deferred loan fees | 1,372 | 1,035 | 972 |
| Allowance for loan losses | 17,934 | 17,743 | 18,149 |
| Total net loans | $ 727,305 | $ 686,102 | $ 644,549 |
| Loans held for sale | $ 9,786 | $ 9,138 | $ 9,333 |
| Deposits | 6/30/2013 | 3/31/2013 | 6/30/2012 |
| Non-interest bearing deposits | $ 287,098 | $ 270,357 | $ 249,740 |
| Interest bearing deposits: | |||
| NOW accounts | 69,478 | 69,952 | 71,779 |
| Other savings deposits | 40,429 | 40,262 | 36,529 |
| Money market deposit accounts | 288,645 | 293,409 | 290,641 |
| Time deposits | 197,679 | 188,835 | 185,224 |
| Total deposits | $ 883,329 | $ 862,815 | $ 833,913 |
| Heritage Oaks Bancorp | |||
| Allowance for Loan Losses, Non-Performing and Classified Assets | |||
| Three Months Ended | |||
| Allowance for Loan Losses | 6/30/2013 | 3/31/2013 | 6/30/2012 |
| Balance, beginning of period | $ 17,743 | $ 18,118 | $ 19,801 |
| Provision for loan losses | -- | -- | 3,064 |
| Loans charge-off | |||
| Residential 1 to 4 family | 23 | -- | -- |
| Commercial real estate | 67 | -- | 2,354 |
| Commercial and industrial | 62 | 339 | 619 |
| Construction | -- | 169 | 576 |
| Land | -- | 34 | 1,383 |
| Installment loans to individuals | 55 | 118 | 9 |
| Total charge-offs | 207 | 660 | 4,941 |
| Recoveries of loans previously charged-off | 398 | 285 | 225 |
| Balance, end of period | $ 17,934 | $ 17,743 | $ 18,149 |
| Net charge-offs / (recoveries) | $ (191) | $ 375 | $ 4,716 |
| Non-Performing Assets | 6/30/2013 | 3/31/2013 | 6/30/2012 |
| Loans on non-accrual status | |||
| Residential 1-4 family | $ 753 | $ 240 | $ 511 |
| Home equity lines of credit | 56 | 57 | 384 |
| Commercial real estate | 299 | 703 | 4,884 |
| Commercial and industrial | 4,030 | 3,655 | 2,401 |
| Agriculture | 1,316 | 831 | 2,332 |
| Construction | -- | -- | 1,932 |
| Land | 7,460 | 6,640 | 8,352 |
| Installment | 29 | 101 | 82 |
| Total non-accruing loans | $ 13,943 | $ 12,227 | $ 20,878 |
| Other real estate owned (OREO) | -- | -- | 1,075 |
| Other repossessed assets | 13 | 88 | -- |
| Total non-performing assets | $ 13,956 | $ 12,315 | $ 21,953 |
| Classified assets | 6/30/2013 | 3/31/2013 | 6/30/2012 |
| Loans | $ 50,431 | $ 48,734 | $ 60,937 |
| Other real estate owned (OREO) | -- | -- | 1,075 |
| Other | 13 | 88 | 310 |
| Total classified assets | $ 50,444 | $ 48,822 | $ 62,322 |
| Classified assets to Tier I + ALLL | 33.07% | 32.17% | 45.92% |
|
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 | |||||||
| (dollar amounts in thousands) |
Balance March 31, 2013 |
Additions |
Net Paydowns |
Transfers to Foreclosed Collateral |
Returns to Accrual Status |
Net Charge-offs |
Balance June 30, 2013 |
| Real Estate Secured | |||||||
| Residential 1 to 4 family | $ 240 | $ 659 | $ (5) | $ -- | $ (118) | $ (23) | $ 753 |
| Home equity line of credit | 57 | -- | (1) | -- | -- | -- | 56 |
| Commercial | 703 | -- | (182) | (222) | -- | -- | 299 |
| Commercial | |||||||
| Commercial and industrial | 3,972 | 986 | (179) | -- | (687) | (62) | 4,030 |
| Agriculture | 831 | 487 | (2) | -- | -- | -- | 1,316 |
| Land | 6,323 | 1,254 | (117) | -- | -- | -- | 7,460 |
| Installment loans to individuals | 101 | 59 | (3) | (13) | (73) | (42) | 29 |
| Totals | $ 12,227 | $ 3,445 | $ (489) | $ (235) | $ (878) | $ (127) | $ 13,943 |
| Heritage Oaks Bancorp | |||||||
| Year to Date Non-Performing Loan Reconciliation | |||||||
| (dollar amounts in thousands) |
Balance December 31, 2012 |
Additions |
Net Paydowns |
Transfers to Foreclosed Collateral |
Returns to Accrual Status |
Net Charge-offs |
Balance June 30, 2013 |
| Real Estate Secured | |||||||
| Residential 1 to 4 family | $ 835 | $ 659 | $ (236) | $ -- | $ (482) | $ (23) | $ 753 |
| Home equity line of credit | 58 | -- | (2) | -- | -- | -- | 56 |
| Commercial | 928 | -- | (215) | (222) | (192) | -- | 299 |
| Farmland | 1,077 | -- | (1,077) | -- | -- | -- | -- |
| Commercial | |||||||
| Commercial and industrial | 4,657 | 1,342 | (643) | -- | (925) | (401) | 4,030 |
| Agriculture | 907 | 487 | (67) | -- | (11) | -- | 1,316 |
| Construction | |||||||
| Commercial | 1,380 | -- | -- | (1,211) | -- | (169) | -- |
| Land | 7,182 | 1,303 | (237) | -- | (754) | (34) | 7,460 |
| Installment loans to individuals | 285 | 129 | (7) | (101) | (117) | (160) | 29 |
| Totals | $ 17,309 | $ 3,920 | $ (2,484) | $ (1,534) | $ (2,481) | $ (787) | $ 13,943 |
| Heritage Oaks Bancorp | |||||
| Quarter to Date OREO Reconciliation | |||||
| (dollar amounts in thousands) |
Balance March 31, 2013 |
Additions |
Sales |
Writedowns |
Balance June 30, 2013 |
| Real Estate Secured | |||||
| Commercial | $ -- | $ 163 | $ (163) | $ -- | $ -- |
| Totals | $ -- | $ 163 | $ (163) | $ -- | $ -- |
| Heritage Oaks Bancorp | |||||
| Year to Date OREO Reconciliation | |||||
| (dollar amounts in thousands) |
Balance December 31, 2012 |
Additions |
Sales |
Writedowns |
Balance June 30, 2013 |
| Real Estate Secured | |||||
| Commercial | $ -- | $ 1,374 | $ (1,374) | $ -- | $ -- |
| Totals | $ -- | $ 1,374 | $ (1,374) | $ -- | $ -- |
| Heritage Oaks Bancorp | |||
| Reconciliation of GAAP to Non-GAAP Financial Measure | |||
| Three Months Ended | |||
| (dollar amounts in thousands) | 6/30/2013 | 3/31/2013 | 6/30/2012 |
| GAAP net income | $ 2,716 | $ 3,730 | $ 1,897 |
| Adjusted for: | ` | ||
| Income tax expense / (benefit) | 1,705 | 2,391 | (194) |
| Provision for loan losses | -- | -- | 3,064 |
| Non-GAAP earnings before income taxes and provision for loan losses | $ 4,421 | $ 6,121 | $ 4,767 |
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