Exhibit 2.02.01
Contacts: Lawrence P. Ward, CEO
Margaret Torres, CFO
805-239-5200
corporate investor relations
www.stockvalues.com
206.762.0993
NEWS RELEASE
HERITAGE OAKS’ QUARTERLY EARNINGS INCREASE 62% TO RECORD $1.4 MILLION
Paso Robles, CA - April 12, 2005 — Heritage Oaks Bancorp (Nasdaq: HEOP), the parent company of Heritage Oaks Bank, today reported record profits in the quarter ended March 31, 2005 due to increased loan demand, continued economic growth in the central coast region and a significant rise in its net interest margin. For the first quarter, net income increased 62% to $1.4 million, or $0.33 per diluted share, compared to $876,000, or $0.20 per diluted share, in the first quarter of 2004. Earnings per share have been retroactively adjusted for the 5% stock dividend declared on March 25, 2005 for shareholders of record on April 8, 2005 to be paid on April 22, 2005.
“Following the acquisition of Hacienda Bank in October 2003, we spent most of 2004 reshaping the balance sheet of our combined organization and integrating our systems. The results of those efforts are clearly evident with our sizable profit growth,” said Lawrence P. Ward, President and CEO. “We have also seen a nice expansion in our net interest margin as a result of the shift in our deposit mix. More than 84% of our deposits are no or low-cost and while there are no guarantees, we are hopeful we can continue to maintain our no or low-cost deposits at a reasonably high level.”
1Q05 Operating Highlights:
| | · | Net income increased 62% to $1.4 million. |
| | · | Revenues increased 22% to $6.9 million. |
| | · | Net interest margin improved 84 basis points to 5.55%. |
| | · | Pre-tax income rose 67% to $2.3 million. |
| | · | Return on tangible equity was 17.9% and return on assets was 1.24%. |
| | · | Net loans increased 15% to $337.7 million. |
| | · | Non-performing loans were just 0.14% of total loans - lowest levels in 20 years. |
| | · | Non-interest demand deposits increased 17% to $168.6 million. |
Operating Results
Heritage Oak’s net interest margin increased 15 basis points to 5.55% for the quarter ended March 31, 2005, compared to 5.40% for the prior quarter, and increased 84 basis points from 4.71% in the first quarter of 2004. “The continued growth in earning assets and the slow and steady rise in interest rates have contributed to this expansion in our net interest margin,” said Ward. “We expect continued loan growth to help us increase our net interest income in future periods.”
For the quarter, net interest income before the provision for loan losses increased 25% to $5.8 million, compared to $4.6 million in the first quarter of 2004. Interest and fees on loans increased 27% from the same quarter last year as loan demand continues to improve. Revenues, consisting of net interest income before the provision for loan losses and non-interest income, increased 22% to $6.9 million in the first quarter of 2005, compared to $5.6 million for the same quarter of 2004.
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HEOP first quarter earnings
April 12, 2005
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Non-interest income increased 9% in the first quarter to $1.1 million, compared to $1.0 million the first quarter of 2004. Non-interest expense in the first quarter increased 8% to $4.4 million, from $4.1 million in the first quarter a year ago. The efficiency ratio was 64.14% for the quarter, an 11% improvement from72.65% in the first quarter of 2004. The efficiency ratio measures non-interest expenses as a percent of revenues.
First quarter pre-tax income increased 67% to $2.3 million compared to $1.4 million in the first quarter of 2004. Income taxes increased in the first quarter, due to Heritage Oaks’ increased earnings. The provision for income taxes was $875,000 for the first quarter of 2005, compared to $497,000 in the same quarter a year ago. Heritage Oaks generated a return on average equity of 14.74% in the first quarter, a 414 basis point improvement compared to 10.60% during the same period in 2004. Return on average assets was 1.24% in the first quarter, a 42 basis point improvement compared to 0.82% in the first quarter a year ago.
Balance Sheet
Heritage Oaks increased its net loans 15% to $337.8 million, compared to $293.6 million a year ago. “The economy along the Central California coast remains very strong, enabling us to increase our loan totals while at the same time reducing our non-performing loans down to historically low levels. I am very happy to report that non-performing loans as a percent of total loans dropped to 0.14%, their lowest level in 20 years,” stated Ward. The allowance for loan losses was $3.4 million, or 1.01% of net loans outstanding at March 31, 2005, compared to $3.2 million or 1.09% of net loans outstanding at March 31, 2004. Net charge-offs were $32,000. Total assets increased 5% to $472.1 million as of March 31, 2005, compared to $448.6 million as of March 31, 2004.
“Deposit growth in the first quarter of 2005 was very strong with non-interest bearing demand deposits leading the way, increasing by 17% to $168.6 million,” added Ward. “We have several long-time commercial customers that greatly increased their balances with us over the past several months.” Total deposits increased 6% to $392.4 million, from $371.8 million a year ago. Shareholders’ equity increased 16% to $38.7 million, compared to $33.5 million a year ago. Book value per share increased to $10.26 at March 31, 2005, compared to $9.22 per share a year earlier. Tangible book value totaled $8.62 per share at March 31, 2005, compared to $7.40 a year earlier.
Heritage Oaks Bancorp acts as a holding company for Heritage Oaks Bank. Heritage Oaks Bank has its headquarters plus one branch office in Paso Robles, two branch offices in San Luis Obispo, single branch offices in Cambria, Arroyo Grande, Atascadero and Morro Bay and three branch offices in Santa Maria. Heritage conducts commercial banking business in San Luis Obispo County and Northern Santa Barbara County. Visit Heritage Oaks Bancorp on the Web atwww.heritageoaksbancorp.com.
Statements concerning future performance, developments or events, expectations for growth and income forecasts, and any other guidance on future periods, constitute forward-looking statements that are subject to a number of risks and uncertainties. Actual results may differ materially from stated expectations. Specific factors include, but are not limited to, increased profitability, continued growth, the Banks beliefs as to the adequacy of its existing and anticipated allowances for loan losses, beliefs and expectations regarding actions that may be taken by regulatory authorities having oversight of the Banks operations, interest rates and financial policies of the United States government, general economic conditions and California’s energy crisis. Additional information on these and other factors that could affect financial results are included in its Securities and Exchange Commission filings.
(tables follow)
HEOP first quarter earnings
April 12, 2005
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HERITAGE OAKS BANCORP
CONSOLIDATED STATEMENTS OF INCOME
| | | | | | | | |
| | | For the Three Months Ended | | | |
(in thousands except per share data) | | March 31, | | | |
| | | 2005 | | 2004 | | % Change | |
| | | (Unaudited) | | (Unaudited) | | | |
| Interest Income: | | | | | | | |
| | | | | | | | |
| Interest and fees on loans | | $ | 6,122 | | $ | 4,834 | | | 26.6 | % |
| Investment securities | | | 553 | | | 590 | | | -6.3 | % |
| Federal funds sold and commercial paper | | | 70 | | | 71 | | | -1.4 | % |
| Time certificates of deposit | | | 3 | | | 3 | | | 0.0 | % |
| Total interest income | | | 6,748 | | | 5,498 | | | 22.7 | % |
| Interest Expense: | | | | | | | | | | |
| Now accounts | | | 21 | | | 5 | | | 320.0 | % |
| MMDA accounts | | | 213 | | | 122 | | | 74.6 | % |
| Savings accounts | | | 17 | | | 23 | | | -26.1 | % |
| Time deposits of $100 or more | | | 82 | | | 61 | | | 34.4 | % |
| Other time deposits | | | 231 | | | 242 | | | -4.5 | % |
| Other borrowed funds | | | 421 | | | 438 | | | -3.9 | % |
| Total interest expense | | | 985 | | | 891 | | | 10.5 | % |
| | | | | | | | | | | |
| Net Int. Income Before Prov. Ln. Losses | | | 5,763 | | | 4,607 | | | 25.1 | % |
| Provision for loan losses | | | 180 | | | 170 | | | 5.9 | % |
| Net interest income after provision for loan losses | | | 5,583 | | | 4,437 | | | 25.8 | % |
| | | | | | | | | | | |
| Non-interest Income: | | | | | | | | | | |
| Service charges on deposit accounts | | | 539 | | | 510 | | | 5.7 | % |
| Gain on Sale of SBA Loans | | | 34 | | | - | | | 100.0 | % |
| Other income | | | 559 | | | 526 | | | 6.3 | % |
| Total Non-interest Income | | | 1,132 | | | 1,036 | | | 9.3 | % |
| | | | | | | | | | | |
| Non-interest Expense: | | | | | | | | | | |
| Salaries and employee benefits | | | 2,248 | | | 2,046 | | | 9.9 | % |
| Occupancy and equipment | | | 612 | | | 635 | | | -3.6 | % |
| Other expenses | | | 1,563 | | | 1,419 | | | 10.1 | % |
| Total Noninterest Expenses | | | 4,423 | | | 4,100 | | | 7.9 | % |
| Income before provision for income taxes | | | 2,292 | | | 1,373 | | | 66.9 | % |
| Provision for applicable income taxes | | | 875 | | | 497 | | | 76.1 | % |
| Net Income | | $ | 1,417 | | $ | 876 | | | 61.8 | % |
| | | | | | | | | | | |
| Earnings per share: | | | | | | | | | | |
| Basic | | $ | 0.35 | | $ | 0.22 | | | 59.8 | % |
| Fully Diluted | | $ | 0.33 | | $ | 0.20 | | | 65.0 | % |
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HEOP first quarter earnings
April 12, 2005
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HERITAGE OAKS BANCORP
CONSOLIDATED BALANCE SHEETS
| (in thousands) | | | | | | | |
| | | 31-Mar-05 | | 31-Mar-04 | | % Change | |
| ASSETS | | (Un-audited) | | (Un-audited) | | | |
| Cash and due from banks | | $ | 12,533 | | $ | 28,306 | | | -55.7 | % |
| Federal funds sold | | | 31,420 | | | 33,975 | | | -7.5 | % |
| Total cash and cash equivalents | | | 43,953 | | | 62,281 | | | -29.4 | % |
| | | | | | | | | | | |
| Interest bearing deposits other banks | | | 498 | | | 498 | | | 0.0 | % |
| Securities Available for sale | | | 53,097 | | | 55,458 | | | -4.3 | % |
| Federal Home Loan Bank Stock, at cost | | | 1,810 | | | 2,269 | | | -20.2 | % |
| Loans Held For Sale | | | 5,541 | | | 5,686 | | | -2.6 | % |
| Loans, net | | | 337,693 | | | 293,552 | | | 15.0 | % |
| | | | | | | | | | | |
| Property, premises and equipment, net | | | 10,412 | | | 10,163 | | | 2.5 | % |
| Cash surrender value life insurance | | | 7,491 | | | 6,928 | | | 8.1 | % |
| Deferred Tax Assets | | | 2,140 | | | 1,786 | | | 19.8 | % |
| Goodwill | | | 4,864 | | | 4,905 | | | -0.8 | % |
| Core Deposit Intangible | | | 1,878 | | | 2,337 | | | -19.6 | % |
| Other assets | | | 2,694 | | | 2,703 | | | -0.3 | % |
| | | | | | | | | | | |
| TOTAL ASSETS | | $ | 472,071 | | $ | 448,566 | | | 5.2 | % |
| | | | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | |
| LIABILITIES | | | | | | | | | | |
| Deposits: | | | | | | | | | | |
| Demand, non-interest bearing | | | 168,598 | | | 144,420 | | | 16.7 | % |
| Savings, NOW, and money market deposits | | | 162,767 | | | 153,976 | | | 5.7 | % |
| Time deposits of $100 or more | | | 15,035 | | | 22,615 | | | -33.5 | % |
| Time deposits under $100 | | | 46,041 | | | 50,781 | | | -9.3 | % |
| Total deposits | | | 392,441 | | | 371,792 | | | 5.6 | % |
| | | | | | | | | | | |
| FHLB advances and other borrowed money | | | 28,500 | | | 28,500 | | | 0.0 | % |
| Securities Sold under Agreement to Repurchase | | | 732 | | | 389 | | | 88.2 | % |
| Notes Payable | | | - | | | 3,500 | | | -100.0 | % |
| Junior subordinated debentures | | | 8,248 | | | 8,248 | | | 0.0 | % |
| Other liabilities | | | 3,451 | | | 2,633 | | | 31.1 | % |
| Total liabilities | | | 433,372 | | | 415,062 | | | 4.4 | % |
| Stockholders' equity | | | | | | | | | | |
| Common stock, no par value;20,000,000 shares authorized; issued and outstanding 4,102,987 and 3,980,382 for March 31, 2005 and March 31, 2004, respectively. | | | 28,352 | | | 23,784 | | | 19.2 | % |
| Retained earnings | | | 10,533 | | | 9,345 | | | 12.7 | % |
| Accumulated other comprehensive income | | | (186 | ) | | 375 | | | -149.6 | % |
| Total stockholders' equity | | | 38,699 | | | 33,504 | | | 15.5 | % |
| TOTAL LIABILITIES & STOCKHOLDERS' EQUITY | | $ | 472,071 | | $ | 448,566 | | | 5.2 | % |
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HEOP first quarter earnings
April 12, 2005
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| | | QTD | | QTD | | QTD | |
| | | Mar-05 | | Dec-04 | | Mar-04 | |
PROFITABILITY | | | | | | | |
| Quarterly Net Income (in thousands) | | $ | 1,417 | | $ | 1,353 | | $ | 876 | |
| Qtr EPS- Diluted | | $ | 0.33 | | $ | 0.31 | | $ | 0.20 | |
| Efficiency Ratio | | | 64.14 | % | | 67.64 | % | | 72.65 | % |
| Operating Expenses compared to Average Assets | | | 3.86 | % | | 4.24 | % | | 3.82 | % |
| ROE- Return on Average Equity | | | 14.74 | % | | 14.77 | % | | 10.60 | % |
| ROTE- Return on Average Tangible Equity | | | 17.91 | % | | 18.18 | % | | 13.54 | % |
| ROA- Return on Average Assets | | | 1.24 | % | | 1.18 | % | | 0.82 | % |
| NIM- Net Interest Margin | | | 5.55 | % | | 5.40 | % | | 4.71 | % |
| Net Interest Income compared to Average Assets | | | 5.04 | % | | 4.77 | % | | 4.29 | % |
| Non-Interest Income compared to Total Net Revenue | | | 12.34 | % | | 23.85 | % | | 18.36 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
CAPITAL | | | | | | | | | | |
| Leverage Ratio | | | 8.77 | % | | 8.34 | % | | 7.89 | % |
| Tier I Risk-Based Capital Ratio | | | 10.10 | % | | 9.78 | % | | 9.91 | % |
| Total Risk-Based Capital Ratio | | | 11.00 | % | | 10.65 | % | | 10.89 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
ASSET QUALITY | | | | | | | | | | |
| Non-performing Loans compared to Total Net Loans | | | 0.14 | % | | 0.29 | % | | 0.51 | % |
| ALLL compared to Total Net Loans | | | 1.01 | % | | 1.00 | % | | 1.09 | % |
| Non-performing Loans as % of ALLL | | | 14.99 | % | | 28.77 | % | | 46.83 | % |
| Net Loan Losses compared to Average Net Loans | | | 0.01 | % | | 0.01 | % | | 0.01 | % |
| Non-performing Loans compared to Primary Capital | | | 1.32 | % | | 2.51 | % | | 4.48 | % |
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NOTE: Transmitted on Business Wire at 5:00 a.m. PDT on April 12, 2005.
