Heritage Oaks Bancorp (HEOP) DEF 14A Definitive proxy

HERITAGE OAKS BANCORP

545 12th Street

Paso Robles,California 93446

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held May 22, 2003

7:00 P.M.

TO THE SHAREHOLDERS OF HERITAGE OAKS BANCORP:

        NOTICE IS HEREBY GIVENthat pursuant to its Bylaws and the call of its Board of Directors, the 2003 Annual Meeting of Shareholders (the “Meeting”) of Heritage Oaks Bancorp (“Company”) will be held at the Company’s office at 545 12th Street, Paso Robles, California 93446 on Thursday, May 22, 2003 at 7:00 p.m. local time for the purpose of considering and voting on the following matters:

1. Election of Directors.To elect nine (9) persons to the Board of Directors of the Company to serve until the 2004 Annual Meeting of Shareholders and until their successors are elected and have qualified. The following persons have been nominated by the Company for election:

Dr. B. R. Bryant	Donald H. Campbell
Kenneth L Dewar	Dolores T Lacey
Merle F Miller	Michael J Morris
Ole K. Viborg	Lawrence P Ward
David Weyrich

2.  To ratify the appointment of Vavrinek, Trine, Day & Co. LLP as the Company’s independent accountants for the 2003 fiscal year.

3. Other Business.To transact such other business as may properly come before the Meeting and any adjournment or adjournments thereof.

Only those shareholders of record at the close of business on April 4, 2003 will be entitled to notice of and to vote at the Meeting.

In connection with voting Section 2.8 of the Company’s Bylaws provides:

         The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 2.11 of this Article II, subject to the provisions of Sections 702 to 704, inclusive, of the Corporations Code of California (relating to voting shares held by a fiduciary, in the name of a corporation, or in joint ownership). The shareholders' vote may be by voice or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder before the voting has begun. On any matter other than elections of directors, any shareholder may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to all shares that t he shareholder is entitled to vote. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on any matter (other than the election of directors) shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by California General Corporation Law or by the articles of incorporation.

         At a shareholders' meeting at which directors are to be elected, no shareholder shall be entitled to cumulate votes (i.e., cast for any one or more candidates a number of votes greater than the number of the shareholder's shares) unless the candidates' names have been placed in nomination prior to commencement of the voting and a shareholder has given notice prior to commencement of the voting of the shareholder's intention to cumulate votes. If any shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that shareholder's shares are entitled, or distribute the shareholder's votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of votes, up to the number of di rectors to be elected shall be elected.

         IT IS VERY IMPORTANT THAT EVERY SHAREHOLDER VOTE. WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY. IF YOU DO NOT ATTEND THE MEETING, YOU MAY REVOKE THE PROXY PRIOR TO THE TIME IT IS VOTED BY NOTIFYING THE CORPORATE SECRETARY IN WRITING TO THAT EFFECT OR BY FILING A LATER DATED PROXY.

         IN ORDER TO FACILITATE THE PROVISION OF ADEQUATE ACCOMMODATIONS, PLEASE INDICATE ON THE PROXY WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING.

Dated: April 18, 2003	By order of the Board of Directors
	By:	/s/ Gwen R. Pelfrey
		Gwen R. Pelfrey
		Secretary

Mailed to Shareholders

on or about April 18, 2003

HERITAGE OAKS BANCORP

PROXY STATEMENT

INFORMATION CONCERNING THE SOLICITATION

         This Proxy Statement is being furnished to the shareholders of Heritage Oaks Bancorp, a California corporation (the "Company"), in connection with the solicitation of proxies by the Board of Directors for use at the Annual Meeting of Shareholders to be held at 545 12th Street, Paso Robles, California on Thursday, May 22, 2003 at 7:00 p.m. local time (the "Meeting"). Only shareholders of record on April 4, 2003 (the "Record Date") will be entitled to notice of the Meeting and to vote at the Meeting. At the close of business on the Record Date, the Company had outstanding and entitled to be voted 2,785,533 shares of its no par value Common Stock (the "Common Stock").

         Shareholders are entitled to one vote for each share held, except that for the election of directors each shareholder has cumulative voting rights and is entitled to as many votes as shall equal the number of shares held by such shareholder multiplied by the number of directors to be elected. Each shareholder may cast all his or her votes for a single candidate or distribute such votes among any or all of the candidates as he or she chooses. However, no shareholder shall be entitled to cumulate votes (in other words, cast for any candidate a number of votes greater than the number of shares of stock held by such shareholder) unless such candidate's name has been placed in nomination prior to the voting and the shareholder has given notice at the Meeting prior to the voting of the shareholder's intention to cumulate his or her votes. If any shareholder has given such notice, all shareholders may cumulate their votes for candid ates in nomination. Prior to voting, an opportunity will be given for shareholders or their proxies at the Meeting to announce their intention to cumulate their votes. The proxy holders are given, under the terms of the proxy, discretionary authority to cumulate votes on shares for which they hold a proxy.

         Any person giving a proxy in the form accompanying this Proxy Statement has the power to revoke that proxy prior to its exercise. The proxy may be revoked prior to the Meeting by delivering to the Secretary of the Company either a written instrument revoking the proxy or a duly executed proxy bearing a later date. The proxy may also be revoked by the shareholder by attending and voting at the Meeting.

         Votes cast by proxy or in person at the Meeting will be counted by the Inspectors of Election for the Meeting. The Inspectors will treat abstentions and "broker non-votes" (shares held by brokers or nominees as to which instructions have not been received from the beneficial owners or persons entitled to vote and the broker or nominee does not have discretionary voting power under applicable rules of the stock exchange or other self regulatory organization of which the broker or nominee is a member) as shares that are present and entitled to vote for purposes of determining the presence of a quorum. Abstentions and "broker non-votes" will not be counted as shares voted for purposes of determining the outcome of any matter as may properly come before the Meeting.

         Unless otherwise instructed, each valid proxy returned which is not revoked will be voted in the election of directors "FOR" the nominees of the Board of Directors, “FOR” the ratification of accountants, and, at the proxy holders' discretion, on such other matters, if any, which may properly come before the Meeting (including any proposal to postpone or adjourn the Meeting).

         The Company will bear the entire cost of preparing, assembling, printing and mailing proxy materials furnished by the Board of Directors to shareholders. Copies of proxy materials will be furnished to brokerage houses, fiduciaries and custodians to be forwarded to the beneficial owners of the Common Stock. In addition to the solicitation of proxies by use of the mail, some of the officers, directors and regular employees of the Company and its subsidiary, Heritage Oaks Bank (the “Bank”), may (without additional compensation) solicit proxies by telephone or personal interview, the costs of which will be borne by the Company.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

         As of February 1, 2003, no individual known to the Company owned more than five percent (5%) of the outstanding shares of its Common Stock except as described

Name and Address1/of Beneficial Owner	Amount and Nature of Beneficial Ownership2/		Percent of Class3/
Dr. B. R. Bryant		278,627		10.00	%
Merle F. Miller		201,601		7.24	%
Ole K. Viborg		229,080		8.22	%
Lawrence P. Ward		211,107		7.58	%
David Weyrich		330,175		11.85	%

1/ Except as otherwise indicated, the address for all persons listed is c/o Heritage Oaks Bancorp, 545 12th Street, Paso Robles, California, 93446.

2/ For information concerning the amount and nature of beneficial ownership, see “Security Ownership of Management.”

3/ Including shares of Common Stock subject to stock options exercisable within 60 days of the record date.

Security Ownership of Management

         The following table sets forth information as of February 1, 2003 concerning the equity ownership of the Company's directors/nominees and the executive officers named in the Summary Compensation Table, and directors and executive officers1/ as a group. Unless otherwise indicated in the notes to the table below, each director and executive officer listed below possesses sole voting power and sole investment power for the shares of the Company's Common Stock listed below. All of the shares shown in the following table are owned both of record and beneficially except as indicated in the notes to the table. The Company has only one class of shares outstanding, Common Stock

	Amount and Nature of Beneficial Owner(3)	Percent ofClass(4)
Name and Address of  Beneficial Owner(2)
Dr. B.R. Bryant	278,627(5)	10.00%
Donald H Campbell	60,230(6)	2.16%
Kenneth L Dewar	17,325(7)	*
Dolores T Lacey	23,757(8)	*
Merle F Miller	201,601(9)	7.24%
Michael Morris	6,488(10)	*
Ole K Viborg	229,080(11)	8.22%
Lawrence P Ward	211,107(12)	7.58%
David Weyrich	330,175(13)	11.85%
Margaret Torres	28,894(14)	1.04%
Gwen R Pelfrey	36,747(15)	1.32%
Paul Tognazzini	35,489(16)	1.27%
All directors, nominees, and
executive officers of the
Company as a group of (12
persons)	1,526,705	54.81%

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* Less than 1%.

1/ As used throughout this Proxy Statement, the term “executive officer” means the President and Chief Executive Officer, the Executive Vice President and Chief Administrative Officer, Executive Vice President and Chief Lending Officer and the Executive Vice President and Chief Financial Officer. The Chairman of the Board, the Vice Chairman of the Board, the Corporate Secretary and the Company’s other officers are not treated as executive officers of the Company.

2/ The address for all persons listed is c/o Heritage Oaks Bancorp, 545 12th Street, Paso Robles, California, 93446.

3/ Except as otherwise noted, includes shares held by each person’s spouse (except where legally separated) and minor children; shares held by a family trust as to which such person is a trustee with sole voting and investment power (or shares power with a spouse); or shares held in an Individual Retirement Account as to which such person has pass-through voting rights and investment power.

4/ Includes shares of Common Stock subject to stock options exercisable within 60 days of record date.

5/ Includes shares held as Trustee of Heritage Oaks Bancorp Employee Stock Ownership Plan. Dr. Bryant and Mr. Ward are co-trustees of the Stock Ownership Plan and under applicable rules the entire number of shares owned by such Plan is attributed to each of the trustees and the effect of the attributions rules results in the number of shares being double counted. Also, includes shares of Common Stock subject to stock options exercisable within 60 days of record date.

6/ Includes shares of Common Stock subject to stock options exercisable within 60 days of record date.

7/ Includes shares of Common Stock subject to stock options exercisable within 60 days of record date.

8/ Includes shares of Common Stock subject to stock options exercisable within 60 days of record date.

9/ Includes shares of Common Stock subject to stock options exercisable within 60 days of record date.

10/ Includes shares held as a trustee of Andre, Morris and Buttery 401K and includes shares of Common Stock subject to stock options exercisable within 60 days of record date.

11/ Includes shares of Common Stock held by Mr. Viborg in Ole Viborg, Inc and includes shares of Common Stock subject to stock options exercisable within 60 days of record date.

12/ Includes shares held as Trustee of Heritage Oaks Bancorp Employee Stock Ownership Plan. Dr. Bryant and Mr. Ward are co-trustees of the Stock Ownership Plan and under applicable rules the entire number of shares owned by such Plan is attributed to each of the trustees. The effect of the attributions rules results in the number of shares being double counted. Also includes shares of Common Stock subject to stock options exercisable within 60 days of record date.

13/ Includes shares of common stock held in MDC Enterprises and includes shares of Common Stock subject to stock options exercisable within 60 days of record date.

14/ Includes shares of Common Stock subject to stock options exercisable within 60 days of record date.

15/ Includes shares of Common Stock subject to stock options exercisable within 60 days of record date.

16/ Includes shares of Common Stock subject to stock options exercisable within 60 days of record date.

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PROPOSAL NO. I

ELECTION OF DIRECTORS OF THE COMPANY

         The number of directors authorized for election at the Meeting is nine (9). Management has nominated the nine (9) incumbent directors to serve as the Company's directors. Each director will hold office until the next Annual Meeting of Shareholders and until his successor is elected and qualified.

         All proxies will be voted for the election of the nine (9) nominees listed below recommended by the Board of Directors unless authority to vote for the election of any directors is withheld. The nominees receiving the highest number of affirmative votes of the shares entitled to be voted for them shall be elected as directors. Abstentions and votes cast against nominees have no effect on the election of directors. If any of the nominees should unexpectedly decline or be unable to act as a director, their proxies may be voted for a substitute nominee to be designated by the Board of Directors. The Board of Directors has no reason to believe that any nominee will become unavailable and has no present intention to nominate persons in addition to or in lieu of those named below.

         The following table sets forth certain information as of February 1, 2003 regarding information concerning its Directors and Executive Officers. The Company knows of no arrangements, including any pledge by any person of securities of the Company, the operation of which may, at a subsequent date, result in a change in control of the Company. There is no family relationship between any of the directors or executive officers.

Name	Age	Position / Backround
Dr. B.R. Bryant	70	Chairman of the Board of Directors of the Company and of the Bank since November 15, 1994, and 1982, respectively. Veterinarian; General Contractor dba B.R. Bryant Construction
Donald H. Campbell	62	Vice Chairman of the Board of Directors of the Company and of the Bank since November 15, 1994, and 1983, respectively. Owner, El Pomar Vineyard Service.
Kenneth L. Dewar	44	Director of the Company and of the Bank since August 27, 1998. President, J.B. Dewar, Inc. (wholesale petroleum distribution).
Dolores T. Lacey	60	Director of the Company and of the Bank since January 23, 1997. Rancher and businesswoman.
Merle F. Miller	66	Director of the Company and of the Bank since November 15, 1994, and 1985, respectively. Rancher; Owner, Golden Hill Company (land sales and development).
Michael J. Morris	57	Director of the Company and of the Bank since January 26, 2001. Attorney, Chairman of the Board of the law firm of Andre, Morris & Buttery.
Ole K. Viborg	71	Director of the Company since November 15, 1994, and former founding director of the Bank. Owner, Ole Viborg, Inc. (paving contractor).

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Lawrence P. Ward	51	Director, President and Chief Executive Officer of the Company and of the Bank since November 15, 1994, and January 11, 1993, respectively. President, Chief Executive Officer and Director of Bank of Evergreen, Evergreen, Colorado, 1991-92, and Mountain Valley National Bank, Conifer, Colorado, 1986-92.
David Weyrich	48	Director of the Company and of the Bank since January 1, 1999. Managing Member, Martin-Weyrich Winery; CEO, Weyrich Development; CEO, North American Jet Charter Inc.; Sole Proprietor, Weyrich Family Ranch

         None of the Company's or the Bank's Directors is a director of any other company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or subject to the requirements of Section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940, whose common stock is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.

         The following is a brief account of the business experience for a minimum of five years of each non-director executive officer in addition to their current positions.

Name	Position/Background
Gwen R. Pelfrey	Age: 51. Secretary of the Company and Secretary, Executive Vice President and Chief Administrative Officer of the Bank since November 15, 1994, and October 1987, respectively.
Paul Tognazzini	Age: 53. Executive Vice President/Chief Lending Officer 1990 to 1997. Executive Vice President and Chief Lending Officer 1997 to present.
Margaret Torres	Age: 52. Executive Vice President and Chief Financial Officer of the Company and the Bank since February, 1999. Executive Vice President and Chief Financial Officer of Antelope Valley Bank, 1991-January 1999.

         Committees of the Board of Directors of the Company

         During 2002, the Company's Board of Directors held 9 meetings.

         The Audit Committee of the Board of Directors of the Company is composed of five outside directors with one outside director as an alternate, each of whom is “independent” as defined by the current NASDAQ listing standards. The members are: Director Weyrich (Chairman), Bryant, Campbell, Miller, Morris and Dewar as an alternate. The Committee held five (5) meeting during 2002. The Committee oversees the financial reporting process for Heritage Oaks Bancorp (“The Company”) on behalf of the Board of Directors. In fulfilling its oversight responsibilities, the Committee reviewed the Quarterly financial statements to be included in Form 10-QSB and the annual financial statements to be included in the Annual Report and Form 10-KSB. A copy of the Company’s Audit Committee Report year ended December 31, 2002 is attached as Exhibit A to this Proxy Statement. In addition, the Committee monitors significant acco unting policies; approves services rendered by the auditors; reviews audit and management reports; makes recommendations regarding the appointment of the independent auditor.

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         The Executive Committee of the Board of Directors of the Company is composed of three directors,Messrs. Bryant, Miller and Ward. The Committee held three (3) meetings during 2002. This committee is empowered to meet and make any and all decisions on behalf of the entire board of directors of the Company between board meetings, except as restricted by law.

         The Board of Directors has not established a nominating committee. The functions of the nominating committee are performed by the full Board of Directors.

         The Disclosure Committee of the Board of Directors of the Company is composed of two directors, Messrs. Bryant, Ward and Executive Officer Torres. The committee held one (1) meeting during 2002. The committee has the responsibility for considering the materiality of information (a material fact) and determining disclosure obligations on a timely basis. The Committee has implemented disclosure controls and procedures that meet the standards established by the new SEC rules. These controls and procedures will be reviewed and adopted by the audit committee of Heritage Oaks Bancorp (the “Company”) and Heritage Oaks Bank (the “Bank”).

Committees of the Board of Directors of the Bank

         During 2002 the Bank’s Board of Directors held 14 meetings.

         The Bank has an Audit Committee, composed of five outside directors, whose members included Messrs. Weyrich (Chairman), Bryant, Campbell, Morris, and Dewar, each of whom is “Independent” as defined in the current NASDAQ listing standards. The Committee oversees Bank's independent public accountants, analyzes the results of internal and regulatory examinations and monitors the financial and accounting organization and reporting of the bank. The Bank’s Audit Committee met 8 times in 2002.

         The Bank has a Loan Committee, whose members included Messrs. Miller (Chairman), Bryant, Ward, Campbell and Ms. Lacey, with Mr. Dewar as an alternate, which has responsibility for reviewing loans made by management, establishing loan policy and approving certain size and types of loans as specified in the Bank’s loan policy. The Loan Committee met 45 times in 2002.

         The Bank has a Personnel Committee, whose members included Ms. Lacey (Chairperson) and Messrs. Bryant, Miller and Ward, which has responsibility for reviewing and establishing compensation and benefits for all officers and employees. The Personnel Committee met 3 times in 2002.

         The Bank has an Investment/Asset-Liability Committee whose members include Messrs. Campbell (Chairman), Bryant, Dewar, Morris, Ward and Weyrich. This committee reviews asset/liability information each quarter, and administers and reviews the Bank’s strategies for asset/liability management. The committee met 12 times in 2002.

         The Bank has a CRA Compliance Committee whose members include Ms. Lacey (Chairperson), Messrs. Bryant, Campbell, and Ward. The committee reviews the Bank’s CRA materials and the Bank’s CRA investments, loans and community involvement. The committee discusses community needs and develops and oversees the implementation of programs that address those needs. The committee met 3 times in 2002.

         The Bank has a Marketing Committee whose members include Mssrs. Dewar (Chairman), Bryant, Ward, Campbell and Ms. Lacey. The committee reviews the Bank’s marketing policies and strategies. The committee met 4 times in 2002.

         During 2002 all directors in the aggregate attended at least seventy-five percent (75%) of all meetings of the Company’s Board of Directors and of meetings of the Company and Bank committees on which they served.

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Corporate Governance

         On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the “SOA”). The SOA includes very specific additional disclosure requirements and new corporate governance rules, requires the Securities and Exchange Commission (the “SEC”) and securities exchanges to adopt extensive additional disclosure, corporate governance and other related rules and mandates further studies of certain issues by the SEC. The Company has taken all required actions to comply with all the currently applicable provisions of the SOA and implementing regulations. Additionally, the Company continues to monitor regulations and rules proposed by the SEC relating to these matters and to plan for their implementation.

         During 2002, the Company took a series of steps to review and improve its existing corporate governance practices. These steps included:

    l     The preparation of a draft of a revised audit committee charter which would, among other things, provide the committee with authority to (i) control directly the outside auditor, (ii) make hiring and termination decisions concerning the auditor, and (iii) approve all non-audit services. The Company expects that the revised charter will be adopted shortly after the completion of final rule making by the SEC concerning these issues and will be included as part of the proxy statement for the 2004 meeting of shareholders.

    l     The adoption of a code of conduct for the Company’s Chief Executive Officer and Chief Financial Officer as required by the SOA. This code will be included as part of the Company’s corporate code of ethics and is expected to be adopted during the third quarter 2003.

    l     The Company’s Chief Executive Officer and Chief Financial Officer have begun certifying all quarterly and annual financial reports which the Company files with the SEC.

    l     The Company completed a review of its internal controls and its disclosure controls and procedures to ensure that it provides complete and accurate disclosures in the Company’s SEC filings and other public reports. The Company established a Disclosure Controls and Procedures Officer Committee and a Disclosure Committee of the Board of Directors. The officers’ committee is made up of senior officers of the Company and the Bank knowledgeable of the Company’s affairs and of disclosure-related regulation. This committee is chaired by Chief Financial Officer. The Disclosure Committee of the Board is composed of two directors and the Chief Financial Officer. These committees implement disclosure controls and procedures, have the responsibility for considering the materiality of information and determining disclosure obligations on a timely basis as well as reviewing and approving all SEC filings.

    l     The implementation of a plan to post promptly the Company’s annual, quarterly and current reports to the SEC on its website atwww.heritageoaksbank.com. The Company has been posting some of these reports for sometime. The Company also anticipates beginning to post the ownership reports of its directors, executive officers and principal shareholders to the website, beginning in the fourth quarter of 2003.

Compensation of Directors

         Directors receive no compensation from the Company.

         Directors’ fees are paid by the Bank. The Chairman of the Board of Directors was paid a retainer of $2,000 per month and all other non-employee directors received a retainer of $1,250 per month during 2002. The chairman of each committee received $125 for each committee meeting attended during 2002. All other non-employee directors received $100 for each committee meeting attended during the year. The total amount of fees paid to directors as retainers and for attendance at Board and committee meetings during 2002 was $165,520.

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         The Directors also participate in the Company’s Stock Option Plan. During 2002, One Director Mr. Morris was granted 15,000 options pursuant to the 1997 Stock Option Plan.

EXECUTIVE COMPENSATION

Summary Compensation Table

         Set forth below is the summary compensation paid or accrued during 2001-2002 to Lawrence P. Ward, Margaret Torres, Gwen R. Pelfrey and Paul Tognazzini, the only executive officers of the Company or the Bank to receive total annual salary and bonus of more than $100,000 during 2002.

SUMMARY COMPENSATION TABLE
	Annual Compensation					Long Term Compensation
(a)	(b)	(c)	(d)	(e)		(f)	(g)	(h)	(i)
Name and Principal	Year	Salary	Bonus	Other		Restricted	Securities	LTIP	All other
Position		($)(1)	Compensation	Annual		Stock	Underlying	Payouts	Compensation
			($)(2)	Compensation		Options/SARs	($)	($)	($)(6)
				(3)		(#)(5)
Lawrence P Ward	2002	$173,279	$80,500	$183,820	(4)	-	-	-	$66,652
President and	2001	$153,738	$62,750	-		-	-	-	$45,816
Chief Executive	2000	$146,417	$81,225	$7,200		-	-	-	$35,290
Officer
Margaret Torres	2002	$118,185	$28,000	$4,800		-	-	-	$32,469
Executive Vice	2001	$112,558	$21,000	$4,600		-	-	-	$21,644
President and	2000	$107,198	$25,000	$3,600		-	-	-	$18,513
Chief Financial
Officer
Gwen R Pelfrey	2002	$105,068	$26,000	-		-	-	-	$28,431
Executive Vice	2001	$100,065	$16,000	-		-	-	-	$18,977
President and	2000	$95,373	$25,289	-		-	-	-	$17,489
Chief
Administrative
Officer
Paul Tognazzini	2002	$101,278	$42,962	$3,600		-	-	-	$31,310
Executive Vice	2001	$93,985	$38,605	$3,600		-	-	-	$19,543
President and Chief	2000	$88,919	$38,870	$3,600		-	-	-	$18,017
Lending Officer

(1) Amounts shown include cash and non-cash compensation earned and received as well as amounts earned but deferred at the election of those officers under the 401(k) Plan.

(2) Amount shown as bonus payments were earned in the year indicated but not paid until the first quarter of the next fiscal year.

(3) No executive officer received perquisites or other personal benefits in excess of the lesser of $50,000 or 10% of each such officer’s total annual salary and bonus.

(4) Amounts shown under Other Annual Compensations for Mr. Ward reflects the difference between the exercise price and the fair market value of a stock option for 26,000 shares exercised by Mr. Ward.

(5) The Company has a 1990 Stock Option Plan (the “1990 Plan”) and a 1997 Stock Option Plan (the “1997 Plan”) pursuant to which options are granted to directors and to key, full-time salaried officers and employees of the Company and its subsidiary. Options granted under either the 1990 Plan or the

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1997 Plan were either incentive options or non-qualified stock options. Options granted under either the 1990 Plan or the 1997 Plan become exercisable in accordance with a vesting schedule established at the time of grant. Vesting may not extend beyond ten years from the date of grant. Options become fully exercisable upon the sale, merger or consolidation of the Company in which the Company is not a survivor notwithstanding the vesting provisions under either the 1990 Plan or the 1997 Plan. Options granted under the Plans are adjusted to protect against dilution in the event of certain changes in the Company's capitalization, including stock splits and stock dividends. All options granted in the years indicated below to the named executive officers were incentive stock options and have an exercise price equal to the fair market value of the Company's Common Stock on the date of grant. As of December 31, 2002 there were no shares remaining for grant in the 1990 Plan. In 1999, th e Company amended the 1997 Plan to add 99,254 shares. This was approved by the Shareholders in the May 1999 Shareholder Meeting. At December 31, 2002, 175,218 shares remained available for grant under the 1997 Plan.

(6) Amounts shown for Lawrence P. Ward in 2002 represent $53,542 in salary continuation provision, $1,463 in term life insurance premiums, $8,897 excess medical insurance premiums and $2,750 in 401(k) matching contributions; in 2001 represent $33,366 in salary continuation provision, $1,463 in term life insurance premiums, $8,362 in excess medical insurance premiums and $2,625 in 401(k) matching contributions; and the 2000 figures includes $23,716 in salary continuation provision, $1,463 in term life insurance premiums, $7,486 in excess medical insurance premiums and $2,625 in 401(k) matching contributions. Amounts shown for Margaret A. Torres in 2002 represent $26,206 in salary continuation provision, $5,081 in excess medical insurance premiums and $1,182 in 401(k) matching contributions; in 2001 represents $15,684 in salary continuation provision, $4,788 in excess medical insurance premiums and $1,172 in 401(k) matching contributions; and the figure for 2000 includes $14,476 in sa lary continuation provision, $3,499 in excess medical insurance premiums and $538 in 401(k) matching contributions. Amounts shown for Gwen R. Pelfrey in 2002 represent $20,289 in salary continuation provision, $5,400 in excess medical insurance premiums, $2,742 in 401(k) matching contributions; in 2001 represent $11,552 in salary continuation provision, $4,800 in excess medical insurance premiums, $2,625 in 401(k) matching contributions; and the figure for 2000 includes $10,664 in salary continuation provision, $4,200 in excess medical insurance premiums and $2,625 in 401(k) matching contributions. Amounts shown for Paul Tognazinni in 2002 represent $23,160 in salary continuation provision, $5,400 in excess medical insurance premiums and $2,750 in 401(k) matching contributions; in 2001 represent $12,118 in salary continuation provision, $4,800 in excess medical insurance premiums and $2,625 in 401(k) matching contributions; and the figure for 2000 includes $11,192 in salary continuation provision, $4,200 in excess medical insurance premiums and $2,625 in 401(k) matching contributions.

Aggregated Option/SAR Grants in Last Fiscal Year

        No stock options were granted during 2002 to any of the officers set forth in the preceding table.

Option/SAR Grants, Exercises and Year-End Value Table

        The following tables set forth certain information concerning stock option grants and unexercised options held by Lawrence P. Ward, Margaret Torres, Gwen R. Pelfrey and Paul Tognazzini under the 1997 Plan.

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Aggregated Option/SAR Exercises in Last Fiscal Year, and Fiscal Year-End Option/SAR Value

(a)	(b)	(c)	(d)	(e)
			Number of Securities Underlying Unexercised Options/SARs at FY-End(#)	Value of Unexercised In-the-Money Options/SARs at FY-End ($)
		Value
	Shares Acquired on	Realized	Exercisable/	Exercisable/
Name	Exercise(#)	($)1/	Unexercisable	Unexercisable 1/
Lawrence P. Ward	26,000	$183,820	72,236 / 0	$510,708 / $0
Margaret A. Torres	-0-	$0.00	36,188 / 21,712	$160,674 / $96,401
Gwen R. Pelfrey	-0-	$0.00	16,253 / 0	$114,908 / $0
Paul Tognazzini	-0-	$0.00	16,253 / 0	$114,908 / $0

(1) The aggregate value has been determined based upon the average of the bid and asked prices for the Company's Common Stock at exercise or year-end, minus the respective exercise price per share.

Employment Contracts and Termination of Employment and Change in Control Arrangements

        There are no employment contracts between the Company or the Bank and their executive officers except that the Bank has an employment agreement with Lawrence P. Ward, its President and Chief Executive Officer. In general, the agreement has a three-year term expiring on January 31, 2006, and renews annually unless a party gives written notice to the other within certain time periods. The agreement establishes a base salary in 2003 of $185,000, provides for continuation of participation in the Bank’s bonus compensation, 401-K, and executive salary continuation plans. The agreement also provides for payment of life insurance policy premiums and the use of a bank owned automobile. If the agreement were terminated without cause, Mr. Ward would receive severance pay equal to one year’s annual base salary in effect at the date of termination plus one year of insurance payments. In the event of termination during or after a merger or change of control, Mr. Ward would be entitled to severance pay equal to two year’s base salary in effect at the date of termination, plus an additional amount sufficient to pay for insurance coverage for a period of one year from the termination, and the auto provided by the bank to Mr. Ward be transferred into his name at the time of termination. In the event of a change of control where Mr. Ward is offered subsequent employment, Mr. Ward would be entitled to severance pay equal to two (2) years’ annual base salary if he is terminated or resigns for good reason. Events that are considered good reason include, but are not limited to, reduction in title, compensation, demotion, or expanded travel.

        Recognizing the importance of building and retaining a competent management team, the Board of Directors purchased life insurance policies on the lives of four key employees, Lawrence Ward, Gwen Pelfrey, Paul Tognazzini and Margaret Torres for the purpose of providing certain death, disability and post-employment/retirement benefits. The Bank is the sole owner and beneficiary of each policy. In order to define the specific death, disability and post-employment/retirement benefits to be provided, the Bank’s Board of Directors reviewed and adopted an integrated conditional non-qualified deferred compensation plan provided to the Bank by Clark/Bardes Consulting. The form of the plan provided has been endorsed by the California Bankers Association, the American Bankers Association, as well as numerous other state banking associations. Under the terms of the plan, differing death, disability and post-employment/retirement benefits are p rovided to each covered employee. Pursuant to the plan, agreements were entered into between the Bank and each of the four key employees. By defining and increasing, over each employee’s term of employment, the amounts each employee will receive upon the occurrence of certain specified events, including formal retirement on or after a specified age, each employee has been given what the Board believes to be a reasonable incentive to remain with the Bank until retirement. While several provisions have been included which will serve to reduce the overall amounts payable, the agreements are expected to provide a maximum annual benefit payment of One Hundred and Fifty Thousand Dollars ($150,000) to Mr. Ward, and forty-eight thousand Dollars ($48,000) to Ms. Pelfrey, Mr. Tognazzini and Ms. Torres. Although the annual benefit

10 

amount will typically be paid in equal monthly installments over a fifteen (15) year period, a lesser and defined lump sum payment may be required in the event the employee’s employment with the Bank is terminated without cause. In the event of the executive’s death, the Bank is obligated to pay any remaining amounts due under the agreement to the executive’s spouse or designated beneficiary over the remaining payout period (or in a lump sum, as the case may be). Other events which may also alter when payment of the annual benefit is to begin, and the amount to be paid, include: (i) disability, as defined in the agreement, in which case the employee will begin to receive the defined benefit at the earlier of the defined retirement age or when he is no longer entitled to receive disability benefits under his principal disability insurance policy; and (ii) constructive termination following a change of control, in which case the executive is entitled to all or a por tion of the annual benefit depending upon length of service prior to termination. If, however, the executive’s employment is terminated for cause, the Bank is released from all payment obligations to the Employee.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

        Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors, executive officers and ten percent or more shareholders of the Company’s equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes of ownership of the Company’s equity securities. Officers, directors and ten percent or more shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended December 31, 2002, all Section 16(a) filings requirements applicable to its executive officers, directors and beneficial owners of ten percent or more of the Company’s equity securities appear to have been met.

Transactions with Management and Others

        Except as set forth below under “Indebtedness of Management” there have been no transactions, or series of similar transactions, during 2002, or any currently proposed transaction, or series of similar transactions, to which the Company or the Bank was or is to be a party, in which the amount involved exceeded or will exceed $60,000 and in which any director (or nominee for director) of the Company or the Bank, executive officer of the Company or the Bank, any shareholder owning of record or beneficially 5% or more of the Company's Common Stock, or any member of the immediate family of any of the foregoing persons, had, or will have, a direct or indirect material interest.

Indebtedness of Management

        The Company, through the Bank, has had, and expects in the future to have banking transactions in the ordinary course of its business with many of the Company's directors and officers and their associates, including transactions with corporations of which such persons are directors, officers or controlling shareholders, on substantially the same terms (including interest rates and collateral) as those prevailing for comparable transactions with others. Management believes that in 2002 such transactions comprising loans did not involve more than the normal risk of collectibility or present other unfavorable features. Loans to executive officers of the Company and the Bank are subject to limitations as to amount and purposes prescribed in part by the Federal Reserve Act, as amended, the regulations of the Federal Deposit Insurance Corporation and the California Financial Code.

11 

PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF

INDEPENDENT PUBLIC ACCOUNTANTS

        The firm of Vavrinek, Trine, Day & Co. LLP (“Vavrinek”) served the Company as independent public accountants for the 2002 fiscal year. Vavrinek has no interest, financial or otherwise, in the Company. The services rendered by Vavrinek during the 2002 fiscal year were audit services, consultation in connection with various accounting matters and preparation of corporation income tax returns. The Board of Directors of the Company approved each professional service rendered by Vavrinek during the 2002 fiscal year. Representatives of Vavrinek are expected to be present at the Meeting and will have an opportunity to make a statement if they so desire and respond to appropriate questions.

        The Board of Directors of the Company has selected Vavrinek to serve as the independent public accountants for the 2003 fiscal year and recommend that the shareholders vote "FOR" approval to ratify the selection of Vavrinek as the Company's independent public accountants for the 2003 fiscal year.

All Other Fees

        The following table presents fees for professional audit services rendered by Vavrinek for the audit of the Company’s annual consolidated financial statements for the fiscal year ended December 31, 2002, and fees billed for other services provided by Vavrinek during 2002.

Fees		$	46,000
Related Fees		$	11,200
	Audit and Audit Related Fees(1)	$	57,000
Tax Fees (2)		$	9,500
Fee’s paid in connection with
Financial Information Systems Design
Implementation Fees (3)		$	0
All Other Fee’s		$	0
	Total ees	$	9,500

(1) The aggregate fees billed to the Company by Vavrinek for professional services rendered for the audit of the Company’s annual consolidated financial statements for the most recent fiscal year and the review of Forms 10-QSB for the fiscal year 2002.

(2) The aggregate fees billed the company by Vavrinek for professional services rendered for the preparation of the Company’s income tax returns and other tax advisory services.

(3) Vavrinek did not provide, and it did not bill and it was not paid any fees for, financial information systems design and implementation services in 2002.

Less than half the total hours expended on Vavrinek’s engagement to the audit or financial statements for the 2002 fiscal year were attributed to work performed by persons other than Vavrinek’s full time permanent employees.

In the opinion of the Board of Directors, after due consideration of the question, the provision of services as described above to the Company by Vavrinek is fully compatible with maintaining the accountants’ independence.

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ANNUAL REPORT

        The Annual Report of the Company containing audited financial statements for the fiscal year ended December 31, 2002 is included in this mailing to shareholders.

FORM 10-KSB

       A COPY OF THE COMPANY’S ANNUAL REPORT ON FORM 10-KSB FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, IS AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO GWEN R. PELFREY, SECRETARY, HERITAGE OAKS BANCORP, 545 12TH STREET, PASO ROBLES, CALIFORNIA, 93446.

SHAREHOLDER'S PROPOSALS

        Next year’s Annual Meeting of Shareholders will be held on May 27, 2004. The deadline for shareholders to submit proposals for inclusion in the Proxy Statement and form of Proxy for the 2004 Annual Meeting of Shareholders is December 13, 2003. All proposals should be submitted by Certified Mail-Return Receipt Requested, to Gwen R. Pelfrey, Secretary, Heritage Oaks Bancorp, 545 12th Street, Paso Robles, California, 93446.

OTHER MATTERS

        The Board of Directors knows of no other matters that will be brought before the Meeting, but if such matters are properly presented to the Meeting, proxies solicited hereby will be voted in accordance with the discretion of the persons holding such proxies. All shares represented by duly executed proxies will be voted at the Meeting in accordance with the terms of such proxies.

	HERITAGE OAKS BANCORP
Paso Robles, California
April 18, 2003	By:	/s/ Gwen R. Pelfrey
		Gwen R. Pelfrey
		Secretary

13 

EXHIBIT A

Heritage Oaks Bancorp

Report of the Audit Committee

The Audit Committee (“Committee”) of the Board of Directors is composed of five independent directors with one independent director as an alternate. The members are: Director Weyrich (Chairman), Bryant, Campbell, Miller, Morris and Dewar (alternate). The Committee held five (5) meetings during 2002.

The Committee oversees the financial reporting process for Heritage Oaks Bancorp (“The Company”) on behalf of the Board of Directors. In fulfilling its oversight responsibilities, the Committee reviewed the annual financial statements to be included in the Annual Report and Form 10-KSB.

In accordance with Statements on Accounting Standards (SAS) No. 61, discussions were held with management and the independent auditors regarding the acceptability and the quality of the accounting principals used in the reports. These discussions include the clarity of the disclosures made therein, the underlying estimates and assumptions used in the financial reporting, and the reasonableness of the significant judgments and management discussions made in developing the financial statements. In addition, the Committee has discussed with the independent auditors their independence from Heritage Oaks Bancorp and its management, including the matters in the written disclosures required by the Independence Standards Board Standard No. 1.

The Committee has also met and discussed with management and its independent auditors, issues related to the overall scope and objectives of the audits conducted, the internal controls used by Heritage Oaks Bancorp, and the selection of Heritage Oaks Bancorp’s independent auditors.

Pursuant to the review and discussions described above, the Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Reports on Form 10-KSB for the fiscal year ended December 31, 2002.

Signed and adopted by the Audit Committee this a 3rd day of March, 2003.

/s/ David Weyrich

Committee Chairman

/s/ Dr. B.R. Bryant

Director/Committee Member

/s/ Donald Campbell

Director/Committee Member

/s/ Merle Miller

Director/Committee Member

/s/ Michael Morris

Director/Committee Member

/s/ Kenneth Dewar

Director/Committee Member (alternate)

14 

REVOCABLE PROXY

HERITAGE OAKS BANCORP

ANNUAL MEETING OF SHAREHOLDERS

PLEASE INDICATE YOUR PROPOSALSELECTION BY FIRMLY PLACING AN“X”INTHE APPROPRIATE BOX WITH BLUE ORBLACK INK ONLY

PROPOSAL 1

1.   ELECTION OFDIRECTORS

THE DIRECTORS RECOMMEND: A VOTE FOR ELECTION OFTHE FOLLOWING NOMINEE’S:

01-DR. B.R. BRYANT	02-DONALD H CAMPBELL
03-KENNETH L DEWAR	04-DOLORES T LACEY
05-MERLE F MILLER	06– MICHAEL MORRIS
07-OLE K VIBORG	08-LAWRENCE P WARD
09-DAVID WEYRICH

  FOR ALL   WITHHOLD ALL

  Withhold authority to vote for any individual nominee,write number (s) of nominee (s) below

Use number (s) only ______________________

PROPOSAL 2

2.   RATIFICATION OF APPOINTMENT OFINDEPENDENTPUBLICACCOUNTANTS.

TO RATIFY THE APPONTMENT OF VAVRINEK, TRINE,DAY AND CO. AS THE COMPANY’S IMDEPENDENTACCOUTNANTS FOR THE 2003 FISCAL YEAR.

  FOR   AGAINST   ABSTAIN

*NOTE* Such other business as mayproperly come before the meeting orany adjourment thereof.

  PLACE “X” HERE IF YOU PLAN TO ATTENDTHE ANNUAL MEETING

  Mark box if an address change has been notedon the reverse side of this card

_______________________________

Shareholder sign above

_______________________________

Co-owner sign above

____________________

Date:

HERITAGE OAKS BANCORP

REVOCABLE PROXY FOR ANNUAL MEETING OF

SHAREHOLDERS,MAY 22, 2003

The undersigned shareholder (s) of Heritage Oaks Bancorp (the “Company”) hereby appoints, constitutes and nominates Donald H.  Campbell, Michael Morris and Merle F.  Miller, and each of them, the attorney, agent and proxy of the undersigned, with full power of substitution, to vote all shares of the Company which the undersigned is entitled to vote at the Annual Meeting of Shareholders to be held at 545 12th Street, Paso Robles, California on Thursday, May 22, 2003 at 7:00 p.m.  local time, and any and all adjournments thereof, as fully and with the same force and effect as the undersigned might or could do if personally present thereat, as follows: The Board of Directors unanimously recommends a vote FOR proposals 1 and 2.

In their discretion, the Proxies are authorized to vote on such other matters as may properly come before the meeting.  This Proxy is solicited on behalf of the Board of Directors and, when properly executed, will be voted as instructed herein.  If no instruction are given, this proxy will be voted FOR Proposals 1 and 2.  Discretionary authority to cumulate votes is granted hereby.

PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED EVELOPE.

Please sign exactly as your name (s) appear (s) on the books of the Company.  Joint owners should each sign personally.  Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign.  If a corporation, this signature should be that of an authorized officer who should state his or her full title. 

<Name and address of shareholder>

<Number of shares>

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