Keefe, Bruyette & Woods
Community Bank Investor
Conference
July 2005
Heritage Oaks Bancorp
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Certain statements in this presentation, including, without limitation,
statements containing the words “believes”, “anticipates”, “intends”, and
“expects”, and words of similar import, constitute “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. Such forward looking
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following; general economic and business
conditions in those areas in which the Company operates, demographic
changes, competition, fluctuations in interest rates, changes in business
strategy or developments plans, changes in governmental regulation, credit
quality, the availability of capital to fund the expansion of the Company’s
business, and other factors referenced in this report. The Company disclaims
any obligation to update any such factors or to publicly announce the results
of any revisions to any of the forward-looking statements contained herein to
reflect future events or developments.
Heritage Oaks Bancorp
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Company Overview
The Leading community bank on California’s
Central Coast
Headquartered in Paso Robles, CA with $499
million in assets as of June 30, 2005.
Covering the markets of San Luis Obispo and
Northern Santa Barbara Counties.
Focused on building core deposit
relationships by delivering on core values.
Heritage Oaks Bancorp
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Core Values
We treat everyone with dignity and respect
We embrace diversity and change
We listen
We encourage intellectual curiosity: Everyone’s
ideas are important
We all share a personal commitment to high
performance
Heritage Oaks Bancorp
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Source: SNL Securities
Heritage Oaks Bancorp
Market Areas & Branch Locations
Heritage Oaks Bancorp
11 Branches
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Market Areas:
Heritage Oaks Bancorp
Our Growing Home Market – Three Branches
Paso Robles to Atascadero
The Progressive Village – Two Branches
San Luis Obispo
The Gold Coast – Two Branches Cambria to
Morro Bay, One Branch in Arroyo Grande
Sideways Country – Three Branches
Northern Santa Barbara County
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Market Areas: Our Growing Home Market
Heritage Oaks Bancorp
Paso Robles, Templeton and Atascadero
Small town environment with transitioning culture and
diverse industry
A pocket of “relatively” affordable housing and one of
California’s least populated Coastal Communities
Halfway between San Francisco and Los Angeles on
US101 and on the main Hwy 46 corridor to the coast
from rapidly growing Fresno and Bakersfield
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Market Areas: Our Growing Home Market
Heritage Oaks Bancorp
Paso Robles - The Next Napa
What the world’s top wine critic says about Paso Robles:
“… there is vast untapped potential in the limestone
hillsides west of California Route 101. ”
“…a stunning wine that showcases the magnificent
fruit that emerges from some of the vineyards planted on
Paso Robles’ limestone ridges”
- Robert M. Parker, Jr.
The Wine Advocate
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Market Areas: The Progressive Village
Heritage Oaks Bancorp
San Luis Obispo
California State Polytechnic University – Tops in the
Nation and the CA State University System
Booming Real Estate Market – A highly attractive mix
of Culture, Country and Coast
Dynamic environment of growth and cultural evolution
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Market Areas: The Gold Coast
Heritage Oaks Bancorp
Cambria, San Simeon, Morro Bay, Pismo
Beach and Arroyo Grande
Some of the finest and most underdeveloped and
accessible coastline left in California
At the terminus of Hwy 46 from the Central Valley,
these enclaves have attracted second home
investment by many living in growing Fresno,
Bakersfield and other Valley communities
All the ingredients intact for economic transition and
development
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Market Areas: Sideways Country
Heritage Oaks Bancorp
Northern Santa Barbara County
And Southern SLO County
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Market Areas: Sideways Country
Heritage Oaks Bancorp
Santa Maria
Combination of family communities, resort
destinations and agricultural zones
Largest developable coastal area in the region
Santa Maria is the largest city in the Central Coast
region
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Market Area: Economic Base
San Luis Obispo County
Heritage Oaks Bancorp
Unemployment Rate
SLO County
Top Three Job Sectors:
Service Industries, Government, Retail Sales
Leading Industries (by value of product) :
Agriculture (Wine), Tourism, Light Manufacturing, Service,
Finance, Real Estate, Insurance, Retail
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Heritage Oaks Bancorp
Deposit Market Share (June 1998 vs. June 2004)
San Luis Obispo County
Source: SNL Securities
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Market Area: Economic Base
Santa Barbara County
Heritage Oaks Bancorp
Top Three Job Sectors:
Service Industries, Retail Sales and Public Sector
Leading Industries :
Education, Government, Healthcare, Public
Services, Retail, Finance and Tourism
2004 Unemployment Rate: 3.7%
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2Q05 Financial Highlights
Net income increased 38% to $1.6 million.
Revenues increased 68% to $10.1 million.
Net interest margin improved 81 basis points to 5.68%.
Pre-tax income rose 36% to $2.5 million.
Return on average tangible equity was 19.1% and
return on average assets was 1.37%.
Net loans increased 23% to $362.1 million.
Non-performing loans were just 0.14% of total loans.
Non-interest demand deposits increased 19% to $192.2
million.
Compared to 2Q04 results
Heritage Oaks Bancorp
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Financial Targets
Heritage Oaks Bancorp
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2004
Q4
2005
Q1
2005
Q2
2007
Targets
Return on Average Assets
1.18%
1.24%
1.37%
1.50%
Return on Average Tangible
Equity
18.18%
17.91%
19.10%
20
.00
%
Efficiency Ratio
67.64%
64.14%
62.66%
<60
.00
%
Leverage Ratio
8.92%
Tier 1 Risk
-
Based Capital Ratio
9.83%
Total Risk
-
Based Capital Ratio
10.71%
Heritage Oaks Bancorp
Net Income
26.2%
CAGR
1999-2004
($000’s)
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Heritage Oaks Bancorp
Diluted EPS Growth
Hacienda
Acquisition
Accretive in 2Q04
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Heritage Oaks Bancorp
Balance Sheet Growth ($ in millions)
Assets CAGR
25%
1999-2004
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Heritage Oaks Bancorp
Good Margins
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Heritage Oaks Bancorp
Efficiency Ratio
A focus on growth in core deposits, a favorable net interest
margin, exceptional loan growth and improved efficiencies
has led to increased profits.
2007
Target
< 60%
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Heritage Oaks Bancorp
Loan Portfolio Composition
June 2005
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Heritage Oaks Bancorp
Attractive Deposit Mix
0.76% Average Cost of Deposits
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Heritage Oaks Bancorp
Low Charge-off Levels
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Interest Rate Risk
Heritage Oaks Bancorp
14.17%
6.90%
(6.08%)
Percent Change in NII
$3,635
$1,771
($1,558)
Net Change in NII
Up 200
Up 100
Down
100
Projected Income at
Risk:
* Balance Sheet as of June 2005, Floors on Loans are Recognized
Interest Rate Risk
1 Year Time Horizon Based on Current Balance
Sheet* (in thousands)
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Heritage Oaks Bancorp
Market Capitalization (Adj. for Stock Dividend Activity)
At December 31,
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Heritage Oaks Bancorp
Stock Price (Adjusted for Stock Dividend Activity)
26.0%
CAGR
1999-2004
At December 31,
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Heritage Oaks Bancorp
Two Year Historical Stock Performance
HEOP 2yr CAGR 35.0%
Heritage Oaks Bancorp Continues to Outperform its Peers
Heritage Oaks Bancorp (HEOP) Black
San Joaquin Bank (SJQN) Tan
Santa Lucia Bank (SLNB) Red
Central Valley Community (CVCY) Orange
Central Coast Bancorp (CCBN) Blue
Heritage Oaks Bancorp (HEOP) - Weekly Volume
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Heritage Oaks Bancorp
Summary
Build core deposits to support loan growth
Maintain high credit quality
Increase efficiencies to improve profitability ratios
Enhance shareholder value
Focus on established Core Values and from these
Build Strong and Lasting Client Relationships
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