Investor Presentation
March 2007
1
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 the Company’s filings with the SEC
and this presentation. 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.
Company Overview
The Leading community bank on California’s Central
Coast
Headquartered in Paso Robles, CA with $542 million
in assets as of December 31, 2006
Covering the growing markets of San Luis Obispo and
Northern Santa Barbara Counties
Heritage is Focused on Building Core Deposit Relationships
Market Areas: 12 Branch Locations
Heritage is Centrally Located
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
Within 3 hours driving time
of approximately 20 million
people
Distinct Market Areas
Northern San Luis Obispo County – Four Branches
Paso Robles (2) , Atascadero and Templeton
San Luis Obispo City - Two Branches
City of San Luis Obispo
Coastal Area – Three Branches
Arroyo Grande, Cambria and Morro Bay
Northern Santa Barbara County- Three Branches
Santa Maria (2), Orcutt
Heritage is Capitalizing on Market Diversity and Poised for Growth
Northern SLO County
Paso Robles, Atascadero and Templeton
The local real estate market in Paso Robles and surrounding locales
is incredibly diverse and includes new homes subdivisions, vineyards,
ranches, wine country estates, horse friendly properties, and lake front
properties with views of our beautiful Lake Nacimiento and Lake San Antonio.
A Pocket of “Relatively” Affordable Housing in a Growing Market
City of San Luis Obispo
Cal Poly University-Tops in the Nation and Ca State University System
Some of the Finest and Most Underdeveloped and Accessible
Coastline Left in California
Coastal Area
Arroyo Grande, Cambria and Morro Bay
Northern Santa Barbara County
Santa Maria and Orcutt
The area’s stable economic base includes agriculture, transportation, oil, tourism,
electronic manufacturing, and the government installation at nearby Vandenberg Air
Force Base
Santa Maria is the Largest City in the Central Coast Region
Deposit Market Share (June 1999 vs. June 2006)
San Luis Obispo County
Source: SNL Securities and FDIC
Heritage has Achieved Growth in a Competitive Environment
1.4%
1.7%
2.7%
3.7%
3.8%
3.9%
4.1%
4.5%
4.6%
7.9%
8.5%
15.1%
16.4%
20.7%
Deposit
Market
Share
Union Bank of California
14
0.2%
San Luis Trust Bank
14
Citibank**
13
1.0%
Mission Community Bank
13
Mission Community Bank
12
1.2%
Westamerica Bank
12
Coast National Bank
11
2.0%
Union Bank of California
11
Los Padres Bank
10
2.7%
Coast National Bank
10
Downey Savings & Loan
9
3.7%
Santa Lucia Bank
9
San Luis Trust Bank
8
4.1%
Los Padres Bank
8
Santa Lucia Bank
7
5.7%
4.5%
Heritage Oaks Bank*
7
Pacific Capital Bank**
6
4.6%
California Federal Bank
6
Heritage Oaks Bank
5
5.5%
Wells Fargo Bank
5
Wells Fargo Bank
4
5.5%
First Bank of San Luis Obispo
4
Bank of America
3
19.3%
Bank of America
3
Washington Mutual
2
21.6%
Washington Mutual
2
Rabobank**
1
24.1%
Mid-State Bank
1
Institution
June
2006
Rank
Pro
Forma
Deposit
Market
Share
Institution
June
1999
Rank
*Heritage Oaks acquired Westamerica’s in-market branches
**Rabobank acquired Mid-State Bank; Pacific Capital Bank acquired First Bank; Citibank acquired California Federal
2006 Financial Highlights
Compared to December 2005 results
Net income Unchanged at $6.7 million
Revenues increased 6% to $32 million
Net interest margin improved 16 basis points to 5.94%
Pre-tax income decreased 3% to $10.5 million
Return on average equity was 14.1% and return on
average assets was 1.32%
Net loans increased 21% to $439 million
Non-performing loans were just 0.01% of total net loans
Non-interest, non-volatile demand deposits increased
10.7% or $10.6 million
Heritage Oaks, Earning the Respect of Our Community, Clients,
Employees and Shareholders Alike
Balance Sheet Growth ($ in millions)
Assets CAGR
20.3%
2001-2006
Loan Portfolio at December 31, 2006
Prime-Based Lending Contributes to an Asset Sensitive Balance Sheet
Gross Loans
% of
Re-Pricing
Balance
Total
< 1 Year
265,501
$
60%
1-3 Years
97,910
22%
3-5 Years
58,115
13%
> 5 Years
23,457
5%
444,983
$
100%
Non-performing Loans
55
$
% Gross Loans
0.01%
Loan Portfolio Breakout
December 31, 2006
Construction / Land
Commercial RE
Diversity in Real Estate Based Lending
Deposit Mix at December 31, 2006
Increasing Margins
1.68% Average Cost of Deposits for 2006
71% of Deposits are Low-Cost
Deposit Growth
(dollars in thousands)
Net Income
19.9%
CAGR
2000-2006
(dollars in thousands)
17.6%
CAGR
2000-2006
Diluted EPS
Efficiency Ratio
Heritage Oaks has Delivered Shareholder Value through Performance
Market Capitalization and Stock Price
(Adj. for Stock Dividend Activity)
At December 31
(dollars in thousands)
24.6%
CAGR
2000-2006
34.3%
CAGR
2000-2006
Growth in Earnings has Resulted in Shareholder Value