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Contacts: | Lawrence P. Ward, CEO |
Margaret Torres, CFO | |
805-369-5200 |
Heritage Oaks Bancorp Reports Third Quarter 2009 Financial Results
Paso Robles, CA – October 29, 2009 – Heritage Oaks Bancorp (the “Company”), (NASDAQ: HEOP), the parent company of Heritage Oaks Bank (the “Bank”), today reported a net loss of $5.6 million for the third quarter of 2009 or $0.70 per diluted common share compared to net income of $0.5 million or $0.07 per diluted common share for the third quarter of 2008. Third quarter 2009 results reflect a provision for loan losses of $9.8 million compared to $3.2 million for the third quarter of 2008. For the first nine months of 2009, the Company reported a net loss of $4.2 million or $0.53 per diluted common share compared to net income of $2.9 million or $0.37 per diluted common share for the first nine months of 2008.
Third quarter highlights:
· | Total revenue, consisting of net interest income and non interest income, was $10.9 million and $33.4 million for the three and nine months ended September 30, 2009, respectively compared to $11.0 million and $32.9 million in the same periods for 2008. |
· | Net interest margin was 4.34% for the third quarter and 4.75% for the first nine months of 2009. |
· | Total deposits, exclusive of brokered deposits, increased $71.0 million during the third quarter and $181.6 million for the first nine months of 2009. |
· | Total gross loans increased $29.7 million year-to-date and $43.5 million from a year ago. |
· | Non-performing assets totaled $42.4 million or 4.58% of total assets. |
· | Allowance for loan losses totaled $15.9 million or 2.24% of total gross loans. |
· | Provisions for loan losses totaled $9.8 million for the quarter and $14.6 million year-to-date. |
· | OREO write-downs totaled approximately $1.4 million. |
· | The Company remained well capitalized with Tier I Capital ratio at 10.52% and Total Risk-Based Capital ratio at 11.78%. |
Commenting on the results for the quarter, Lawrence Ward, President and Chief Executive Officer, stated, “During the quarter we strengthened our loan loss reserve and realized appropriate write-downs to non-accrual loans and OREO while maintaining strong capital ratios. While we were not satisfied with reporting a loss for the quarter, we believe that our actions were prudent in the current environment. Even though the Bank has faced significant challenges with respect to asset quality, we are pleased that our core business remains solid with total revenue of $10.9 million for the third quarter compared to $11.0 million reported in the same period a year earlier. For the first nine months of 2009, total revenue totaled $33.4 million compared to $32.9 million for the same period a year earlier. Impacting total revenue was the reversal of interest for non-accrual loans of approximately $1.1 million and $1.2 million for the three and nine months ended September 30, 2009, respectively. Approximately $846 thousand of this amount has been recovered on a loan that returned to performing status subsequent to quarter end and will be reflected in the fourth quarter of 2009. This recovery and return to performing status results in non-performing assets being reduced by approximately 25%. Additionally, our franchise value in terms of core deposit relationships continues to be enhanced with quarterly growth of $57.6 million and year-to-date growth of $126.4 million in core deposits. The Company and Bank remain well-capitalized and are dedicated to prudent underwriting standards, and staying selective with respect to the types of new loans originated. The preservation of capital and commitment to our customers and the communities we serve remain of paramount importance. The strong core deposit growth realized year-to-date in 2009 demonstrates that we have capitalized on an opportunity for organic growth within our primary market area.”
Asset Quality
Ward further stated, “The Bank devotes considerable resources to the monitoring of credit quality and management of problem assets. In July 2009, the Company announced that Ron Oliveira joined the Bank as Executive Vice President and Chief Operating Officer/Chief Credit Officer. Mr. Oliveira brings over 27 years of banking experience to our institution. The expansion of our Special Assets Department has also contributed significantly to the oversight of credit quality and the workout of problem credits. We are committed to the speedy resolution of problem assets and continue to work with borrowers where possible.”
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 2
Ward went on to state, “In connection with the expansion of our credit management activities, we put in place a more vigorous internal and external loan review program. During the third quarter, an independent loan review firm completed a semi-annual loan portfolio examination to augment management’s internal loan review. As a result of feedback from this review and in connection with our own effort to identify and reserve for perceived credit risks in the portfolio, we moved approximately $34.2 million in loan balances to non-accruing status. As of September 30, 2009, non-accruing loan balances totaled approximately $39.4 million or 5.61% of total gross loans, and non-performing assets totaled approximately $42.4 million and represented 4.58% of total assets. These totals include one loan of $10.7 million that was classified as non-accrual as of September 30, 2009, but has since been returned to accrual status. The return to accrual status will result in $846 thousand in interest income charged off in the third quarter being recognized in the fourth quarter of 2009.”
Additionally, as part of the Bank’s ongoing efforts to manage credit quality, the list of credits placed on watch status expanded in an effort to identify and monitor these credits and to mitigate future credit quality issues or minimize potential losses on a proactive basis. Management utilizes the watch list, among other things, to manage credit risk and monitor loans as they migrate through the credit cycle, from performing status to watch to non-accruing status and/or potential loss. As a result of the increased number of loans on our watch list, the increase in loans moved to non-accrual status and the loan charge-offs realized during the quarter, the Bank continues to take steps to build the loan loss reserve. Provisions for loan losses for the first nine months of 2009 totaled approximately $14.6 million. As of September 30, 2009, the allowance for loan losses stood at approximately $15.9 million or 2.24% of total gross loans.
“We are dedicated to diligent oversight of the loan portfolio. Recently, the loan portfolio has undergone a semi-annual review, performed by an independent asset quality review firm,” said Ward. “The institution of a semi-annual review of the loan portfolio in addition to regular reviews performed internally has been instrumental in helping the Bank to more quickly identify and manage potential credit issues. Management continues to work with borrowers where possible and collateral is being actively marketed in an effort to mitigate potential losses to the Bank.”
Loans charged-off in the third quarter totaled approximately $5.0 million, bringing the total of charged-off loans for the year to approximately $9.1 million. The majority of these charged-off loans occurred within the segments of land, construction, and commercial and industrial loans. Net charge-offs to average gross loans were 0.70% during the quarter and 1.29% during the first nine months of 2009.
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 3
The following provides a reconciliation of the change in non-accruing loans for the three months ended September 30, 2009:
Balance | Additions to | Transfers | Balance | |||||||||||||||||||||||||
June 30, | Non-Accruing | Net | Returns to | to Foreclosed | September 30, | |||||||||||||||||||||||
(dollars in thousands) | 2009 | Balances | Paydowns | Charge-offs | Accrual | Collateral | 2009 | |||||||||||||||||||||
Real Estate Secured | ||||||||||||||||||||||||||||
Multi-family residential | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
Residential 1 to 4 family | 392 | 1,184 | - | (304 | ) | - | - | 1,272 | ||||||||||||||||||||
Home equity line of credit | 320 | - | - | - | - | - | 320 | |||||||||||||||||||||
Commercial | 2,776 | 3,079 | (67 | ) | (41 | ) | - | - | 5,747 | |||||||||||||||||||
Farmland | - | - | ||||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||
Commercial and industrial | 5,316 | 1,174 | (29 | ) | (503 | ) | - | - | 5,958 | |||||||||||||||||||
Agriculture | 384 | 4,922 | (183 | ) | (1,909 | ) | - | - | 3,214 | |||||||||||||||||||
Other | - | - | - | - | - | - | - | |||||||||||||||||||||
Construction | ||||||||||||||||||||||||||||
Single family residential | 678 | 642 | (380 | ) | - | - | - | 940 | ||||||||||||||||||||
Single family residential - Spec. | 1,589 | 683 | - | (397 | ) | - | (1,192 | ) | 683 | |||||||||||||||||||
Tract | - | 2,215 | - | - | - | - | 2,215 | |||||||||||||||||||||
Multi-family | - | - | - | - | - | - | - | |||||||||||||||||||||
Hospitality | - | - | - | - | - | - | - | |||||||||||||||||||||
Commercial | - | - | - | - | - | - | - | |||||||||||||||||||||
Land | 511 | 20,294 | (11 | ) | (1,801 | ) | - | - | 18,993 | |||||||||||||||||||
Installment loans to individuals | 132 | 48 | (4 | ) | (42 | ) | - | (83 | ) | 51 | ||||||||||||||||||
All other loans | - | - | - | - | - | - | - | |||||||||||||||||||||
Totals | $ | 12,098 | $ | 34,241 | $ | (674 | ) | $ | (4,997 | ) | $ | - | $ | (1,275 | ) | $ | 39,393 |
The following provides a reconciliation of the change in non-accruing loans for the nine months ended September 30, 2009:
Balance | Additions to | Transfers | Balance | |||||||||||||||||||||||||
December 31, | Non-Accruing | Net | Returns to | to Foreclosed | September 30, | |||||||||||||||||||||||
(dollars in thousands) | 2008 | Balances | Paydowns | Charge-offs | Accrual | Collateral | 2009 | |||||||||||||||||||||
Real Estate Secured | ||||||||||||||||||||||||||||
Multi-family residential | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
Residential 1 to 4 family | 265 | 1,330 | (19 | ) | (304 | ) | - | - | 1,272 | |||||||||||||||||||
Home equity line of credit | 320 | - | - | - | - | - | 320 | |||||||||||||||||||||
Commercial | 1,961 | 4,477 | (615 | ) | (41 | ) | - | (35 | ) | 5,747 | ||||||||||||||||||
Farmland | - | - | - | - | - | - | - | |||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||
Commercial and industrial | 7,060 | 2,758 | (376 | ) | (1,728 | ) | (14 | ) | (1,742 | ) | 5,958 | |||||||||||||||||
Agriculture | - | 5,307 | (184 | ) | (1,909 | ) | - | - | 3,214 | |||||||||||||||||||
Other | - | - | - | - | - | - | - | |||||||||||||||||||||
Construction | ||||||||||||||||||||||||||||
Single family residential | - | 1,465 | (380 | ) | (145 | ) | - | - | 940 | |||||||||||||||||||
Single family residential - Spec. | 5,990 | 3,557 | - | (2,073 | ) | (1,250 | ) | (5,541 | ) | 683 | ||||||||||||||||||
Tract | - | 2,215 | - | - | - | - | 2,215 | |||||||||||||||||||||
Multi-family | - | - | - | - | - | - | - | |||||||||||||||||||||
Hospitality | - | - | - | - | - | - | - | |||||||||||||||||||||
Commercial | - | - | - | - | - | - | - | |||||||||||||||||||||
Land | 2,720 | 21,715 | (373 | ) | (2,792 | ) | - | (2,277 | ) | 18,993 | ||||||||||||||||||
Installment loans to individuals | 11 | 272 | (6 | ) | (143 | ) | - | (83 | ) | 51 | ||||||||||||||||||
All other loans | - | - | - | - | - | - | - | |||||||||||||||||||||
Totals | $ | 18,327 | $ | 43,096 | $ | (1,953 | ) | $ | (9,135 | ) | $ | (1,264 | ) | $ | (9,678 | ) | $ | 39,393 |
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 4
Non-Accruing Loans
Real Estate Secured – Commercial (“CRE”)
Comprising a considerable portion of balances within this category are seven loans to four borrowers in the aggregate amount of $4.5 million. These seven loans represented 77% of total CRE balances and 17% of total non-accruing loans as of September 30, 2009. These loans are well secured and the Bank is working with the respective borrowers where possible to liquidate the collateral.
Commercial and Industrial (“C&I”)
The majority of C&I balances can be attributed to one loan with a current book balance of approximately $3.6 million, comprising 61% of total non-accruing C&I balances and 14% of total non-accruing balances as of September 30, 2009. This loan is secured by property in the Bank’s primary market area that has a current appraisal received October 13, 2009 that supports the amount carried on the balance sheet. Other significant balances within this category include two loans to two borrowers, totaling approximately $0.9 million, representing 16% of total C&I non-accruing balances.
With regard to agriculture loans, the linked quarter increase is the direct result of one particular credit that was written down to the fair value. The remaining balance is considered to be reflective of the current value of the collateral.
Construction
A significant portion of non-accruing construction balances can be attributed in large part to eight tract loans to one borrower totaling approximately $1.3 million. All eight loans have approved purchase contracts in place and have been sold under a state assisted low income housing program. Four of the loans are set to close prior to the end of October with the other four to close shortly thereafter.
Land
The largest credit within this category was the $10.7 million loan discussed above that has since returned to accrual status. The large majority of the remaining balances within this category can be attributed to five loans to three borrowers totaling approximately $7.3 million. These five loans represented 87% of total non-accruing land balances and 28% of all non-accruing balances. During the third quarter, the Bank placed seven loans within this segment of the portfolio on non-accruing status, including the five loans previously mentioned. The majority of the increase can be attributed to two loans to one borrower. Placing these loans on non-accrual status was the result of additional information obtained regarding the borrower’s financial condition and management’s evaluation of the independent review performed on these credits. As the result of receiving new appraisals, three loans to two borrowers were written-down by approximately $1.2 million during the third quarter of 2009. Management is in the process of obtaining updated appraisal information for the collateral securing the remaining loans and is working with the borrowers to bring about resolution.
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 5
Other Real Estate Owned (“OREO”)
At September 30, 2009, OREO balances stood at approximately $2.6 million or $4.1 million lower than the $6.7 million reported at June 30, 2009. During the quarter, the Bank sold five properties previously booked in the aggregate amount of $3.9 million. In connection with these sales, the Bank recognized aggregate losses of approximately $0.2 million. Contributing further to the quarter-over-quarter decline in OREO balances was the write-down of two properties in the aggregate amount of $1.4 million, based on updated appraisal information. The larger of the two properties represents land for commercial development. Additions to OREO include one residential speculative property carried at $1.2 million that is currently in escrow and anticipated to close by the middle of November 2009.
The following provides a summary of the change in OREO balances for the three and nine months ended September 30, 2009:
For the three months ended | For the nine months ended | |||||||
(dollars in thousands) | September 30, 2009 | September 30, 2009 | ||||||
Beginning Balance | $ | 6,669 | $ | 1,337 | ||||
Additions | 1,192 | 9,595 | ||||||
Dispositions | (3,877 | ) | (6,876 | ) | ||||
Write-downs | (1,377 | ) | (1,449 | ) | ||||
Balance September 30, 2009 | $ | 2,607 | $ | 2,607 |
Capital Position
At September 30, 2009, the Company’s Tier I and Total Risk-Based Capital totaled approximately $82.5 million and $92.4 million, respectively. The Tier I Capital ratio was 10.52%, while the total Risk-Based Capital ratio was 11.78% at quarter end. The Tier I and Total Risked Based totals reflect approximately $4.9 million in disallowed deferred tax assets. As of September 30, 2009, the Company was well capitalized by regulatory standards.
Shareholders’ equity was approximately $87.8 million at September 30, 2009, compared to $91.3 million reported at June 30, 2009 and $70.0 million reported at December 31, 2008. Book value per common share was $8.82 at September 30, 2009, compared to the $9.03 per share reported at December 31, 2008.
Liquidity
The liquidity ratio was 19.65% at September 30, 2009, compared to 16.36% at June 30, 2009 and 6.79% at December 31, 2008. At September 30, 2009, the Bank had remaining borrowing capacity with the FHLB in the approximate amount of $117.7 million. During the quarter, the Bank established a new credit arrangement with a correspondent Bank totaling $15.0 million. With the addition of this new credit arrangement, the Bank has the ability to purchase Fed Funds in the aggregate amount of $35.0 million as of September 30, 2009, up from the $20.0 million reported at June 30, 2009.
Balance Sheet
Total deposits increased approximately $49.5 million during the quarter and approximately $150.0 million year-to-date. Exclusive of brokered deposits, total deposits increased approximately $71.0 million during the quarter and approximately $181.6 million during the first nine months of the year. Strong core deposit growth has allowed the Bank to pay down approximately $21.5 million in brokered funds during the quarter and approximately $31.6 million year-to-date. Promotions the Bank engaged in during the year have been instrumental in bringing new relationships to the Bank, further enhancing the Bank’s core funding balances and keeping the cost of funds down. For the three and nine months ended September 30, 2009, the Bank’s cost of deposits and cost of funds were both 1.28% and 1.27%, respectively. All 15 of our branch offices have experienced significant deposit growth with the growth balanced between non interest bearing demand, interest checking, money market, and time certificates. We attribute a portion of our deposit growth in 2009 to a new customer base, as we continue to see migration from larger institutions as well as troubled institutions within our market. Total deposits were approximately $753.5 million at September 30, 2009, compared to the $704.0 million and $603.5 million reported at June 30, 2009 and December 31, 2008, respectively. Core deposits totaled approximately $626.3 million or 83.1% of total deposits at quarter end. This compares to $568.7 million and $499.9 million for June 30, 2009 and December 31, 2008, respectively.
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 6
FHLB borrowings totaled $65.0 million as of September 30, 2009, unchanged from the prior quarter and down approximately $44.0 million from December 31, 2008. The cost of borrowings from the FHLB averaged 0.63% for the quarter and 0.81% year to date.
Loan growth continues to remain relatively solid in all of our primary markets. However, we remain cautious with all new loan originations. The Bank is seeing a more modest level of loan growth relative to prior periods, due primarily to weak economic conditions and our more stringent underwriting criteria. The Bank continues to remain very conservative with the loans we fund and we are requiring clients to commit more capital to certain projects, specifically construction. Gross loans increased $12.0 million during the third quarter and $29.7 million year-to-date. Loan growth during the third quarter can be attributed in large part to the funding of one $9.0 million credit in the commercial real estate segment to purchase professional office space, with three national tenants. This credit was originated with a 50% loan to value ratio and a debt coverage ratio of 2.4 times.
The securities portfolio increased by $27.1 million during the third quarter to $102.9 million. The Bank sought to take advantage of increased credit spreads available on investment securities and to invest excess liquidity in cash flow generating instruments in the absence of loan originations. Unrealized losses, net-of-tax, declined in the third quarter by approximately $1.9 million. More rational pricing of mortgage related securities as well as increases in the values of certain opportunistic purchases made during the first and second quarters of 2009 contributed significantly to the rise in the fair value of the portfolio. Management periodically evaluates investments in the portfolio for other than temporary impairment and more specifically when conditions warrant such an evaluation. As of September 30, 2009, the majority of unrealized losses in the portfolio were attributable to certain holdings of mortgage related securities. Based on pre-purchase cash flow analyses, cash flows on these securities are within a range of expectations. As of September 30, 2009, management does not believe unrealized losses in the portfolio are other than temporary. The investment portfolio contains no collateralized debt obligations.
Net Interest Margin
For the three and nine months ended September 30, 2009, the net interest margin was 4.34% and 4.75%, respectively. The net interest margin for the three and nine months ended September 30, 2008 was 5.18% and 5.26%, respectively. The margin declined 57 basis points on a quarter over quarter basis, primarily as the result of approximately $1.1 million in interest reversals for non-accrual loans and also a function of elevated levels of Fed Funds sold at an average rate of 25bps. Our core deposit growth, however, continues to aid us in keeping our margin above peer levels. The year over year decline can be attributed to lower earning asset yields, reversal of non-accrual loan interest and the result of the significant decline in the prime rate over the last two years.
Operating Results
Total revenue, consisting of net interest income before the provision for loan losses and non-interest income, was $10.9 million in the third quarter, down $0.5 million from the second quarter and $0.2 million from that reported a year ago. For the first nine months of the year, total revenues consisting of net interest income and non interest income, were $33.4 million or approximately $0.5 million higher than that reported a year earlier. Net interest income was $9.3 million during the third quarter or $0.3 million and 2.7% less when compared to that reported a year earlier. Year-to-date, net interest income increased to $28.7 million, $0.4 million or 1.6% higher compared to that reported during the same period ended a year earlier. Total interest expense increased $0.2 million or 6.9% to $2.6 million in the third quarter when compared to the $2.4 million reported for the second quarter. Higher core deposit balances contributed to the quarter over quarter increase. When compared to the same quarter to date period ended a year earlier, interest expense fell approximately $0.4 million or 13.8%. For the first nine months of 2009, interest expense totaled approximately $7.4 million. When compared to the same period ended a year earlier, this represents a decline of approximately $2.3 million or 24.2%.
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 7
Non interest income totaled approximately $1.6 million for the third quarter. This represents increases of $0.1 million when compared to the same period ended a year earlier and approximately $0.1 million when compared to the second quarter of 2009. Impacting year over year results was a $0.1 million increase in mortgage origination fee income and gains on the sale of investment securities and SBA loans totaling approximately $0.2 million and $0.1 million, respectively. Offsetting these increases were losses the Bank incurred on the sale of OREO properties in the aggregate amount of $0.2 million as well as an approximate $0.1 million decline in service charge fee income.
Year-to-date non interest income totaled approximately $4.8 million, which represents an increase of approximately $45 thousand when compared to that reported in the same period ended a year earlier. A $0.5 million increase in mortgage origination fee income and gains the Bank recognized on the sale of investment securities and SBA loans, totaling approximately $0.3 million and $0.1 million, respectively, contributed to the year-over-year increase. However, the increase was offset by the absence of $0.3 million in income the Bank recognized in 2008 related to the Visa, Inc. IPO, losses the Bank incurred on the sale of OREO properties in the aggregate amount of $0.3 million and an approximate $0.3 million decline in service charge fee income.
Non interest expense totaled approximately $10.3 million for the third quarter. This represents increases of approximately $2.2 million over the second quarter and approximately $3.1 million over the same period ended a year earlier. During the quarter, the Bank wrote-down the value of one OREO property by $1.3 million, based on new appraisal information. This property represents land for commercial development. Other items impacting the year-over-year change in non interest expense were higher salaries and employee benefits, increased occupancy costs and higher regulatory assessment fees. Salaries and employee benefits increased $0.3 million during the third quarter when compared to the prior year, due in large part to additional staff added in response to year-over-year organic growth. The year-over-year $0.1 million increase in occupancy costs is due in large part to annual increases in rental expenses. Increases in regulatory assessment fees can be attributed to increases in FDIC assessment costs in general as well as a one-time charge in the approximate amount of $0.5 million to correct for the cumulative effect of an unintentional under accrual over a timeline that included ten reporting periods. After consulting with the Company’s independent audit firm, Management determined that there was no material amount in any one reporting period and that the cumulative amount was processed in the third quarter of 2009.
Non interest expense for the first nine months of the year totaled approximately $25.7 million. When compared to the same period ended a year earlier, this represents an increase of approximately $3.5 million. The majority of the increase can be attributed to the write-down of and other expenses incurred associated with OREO properties. Additionally, significantly higher regulatory assessment premiums, including the one-time FDIC special assessment, contributed further to the year over year increase within this category.
The efficiency ratio was 95.12% in the third quarter of 2009 compared to 70.02% in the previous quarter and 64.40% in the third quarter a year ago. Net of these one-time expenses, such as write-downs on and other expenses incurred associated with OREO properties, the efficiency ratio would have been 73.81% for the third quarter. For the first nine months of the year the efficiency ratio was 77.02% compared to 67.55% in the first nine months of 2008. Net of the one-time items mentioned above, the efficiency ratio would have been 67.96% for the first nine months of the year. The efficiency ratio measures operating expenses as a percent of total net revenues.
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 8
About the Company
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 plus one branch office in Paso Robles, two branch offices in San Luis Obispo, single branch offices in Cambria, Arroyo Grande, Atascadero, Templeton, San Miguel and Morro Bay and three branch offices in Santa Maria. Heritage Oaks Bank conducts commercial banking business in San Luis Obispo County and Northern Santa Barbara County. The Business First division has two branch offices in Santa Barbara. Visit Heritage Oaks Bancorp on the Web at www.heritageoaksbancorp.com.
Statements concerning future performance, developments or events, expectations for growth, income forecasts, sales activity for collateral, 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 the ongoing financial crisis in the United States, and the response of the federal and state government and our regulators thereto, increased profitability, continued growth, the Bank’s 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 Bank’s operations, interest rates and financial policies of the United States government, continued weakness in the real estate markets within which we operate and general economic conditions. Additional information on these and other factors that could affect financial results are included in Heritage Oaks Bancorp’s Securities and Exchange Commission filings. If any of these risks or uncertainties materialize or if any of the assumptions underlying such forward-looking statements proves to be incorrect, Heritage Oaks Bancorp’s results could differ materially from those expressed in, implied or projected by such forward-looking statements. Heritage Oaks Bancorp assumes no obligation to update such forward-looking statements.
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 9
Heritage Oaks Bancorp
Consolidated Balance Sheets
(unaudited) | (unaudited) | (audited) | (unaudited) | Percentage Change Vs. | ||||||||||||||||||||||||
(dollar amounts in thousands) | 9/30/2009 | 6/30/2009 | 12/31/2008 | 9/30/2008 | 6/30/2009 | 12/31/2008 | 9/30/2008 | |||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Cash and due from banks | $ | 18,155 | $ | 15,667 | $ | 17,921 | $ | 18,914 | 15.9 | % | 1.3 | % | -4.0 | % | ||||||||||||||
Federal funds sold | 45,740 | 32,675 | 6,650 | 8,835 | 40.0 | % | 587.8 | % | 417.7 | % | ||||||||||||||||||
Total cash and cash equivalents | 63,895 | 48,342 | 24,571 | 27,749 | 32.2 | % | 160.0 | % | 130.3 | % | ||||||||||||||||||
Interest bearing deposits with other banks | 119 | 119 | 119 | 119 | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||||||||||
Securities available for sale | 102,871 | 75,726 | 50,762 | 52,634 | 35.8 | % | 102.7 | % | 95.4 | % | ||||||||||||||||||
Federal Home Loan Bank stock, at cost | 5,828 | 5,828 | 5,123 | 5,006 | 0.0 | % | 13.8 | % | 16.4 | % | ||||||||||||||||||
Loans held for sale | 7,778 | 11,692 | 7,939 | 2,955 | -33.5 | % | -2.0 | % | 163.2 | % | ||||||||||||||||||
Loans, net (1) | 692,359 | 685,193 | 668,034 | 654,403 | 1.0 | % | 3.6 | % | 5.8 | % | ||||||||||||||||||
Property, premises and equipment | 6,984 | 6,848 | 6,827 | 6,769 | 2.0 | % | 2.3 | % | 3.2 | % | ||||||||||||||||||
Deferred tax assets | 12,379 | 8,673 | 7,708 | 7,085 | 42.7 | % | 60.6 | % | 74.7 | % | ||||||||||||||||||
Bank owned life insurance | 11,432 | 10,949 | 10,737 | 10,631 | 4.4 | % | 6.5 | % | 7.5 | % | ||||||||||||||||||
Goodwill | 11,049 | 11,049 | 11,049 | 11,541 | 0.0 | % | 0.0 | % | -4.3 | % | ||||||||||||||||||
Core deposit intangible | 2,904 | 3,166 | 3,691 | 3,906 | -8.3 | % | -21.3 | % | -25.7 | % | ||||||||||||||||||
Other real estate owned | 2,607 | 6,669 | 1,337 | 197 | -60.9 | % | 95.0 | % | 1223.4 | % | ||||||||||||||||||
Other assets | 6,600 | 7,101 | 7,691 | 4,940 | -7.1 | % | -14.2 | % | 33.6 | % | ||||||||||||||||||
Total assets | $ | 926,805 | $ | 881,355 | $ | 805,588 | $ | 787,935 | 5.2 | % | 15.0 | % | 17.6 | % | ||||||||||||||
Liabilities | ||||||||||||||||||||||||||||
Deposits | ||||||||||||||||||||||||||||
Non interest bearing demand | $ | 181,670 | $ | 178,600 | $ | 147,044 | $ | 155,267 | 1.7 | % | 23.5 | % | 17.0 | % | ||||||||||||||
Savings, NOW, and money market | 329,186 | 290,178 | 296,488 | 269,744 | 13.4 | % | 11.0 | % | 22.0 | % | ||||||||||||||||||
Time deposits of $100K or more | 125,230 | 125,325 | 75,111 | 75,657 | -0.1 | % | 66.7 | % | 65.5 | % | ||||||||||||||||||
Time deposits under $100K | 117,443 | 109,886 | 84,878 | 88,583 | 6.9 | % | 38.4 | % | 32.6 | % | ||||||||||||||||||
Total deposits | 753,529 | 703,989 | 603,521 | 589,251 | 7.0 | % | 24.9 | % | 27.9 | % | ||||||||||||||||||
Short term FHLB borrowing | 65,000 | 55,000 | 99,000 | 96,500 | 18.2 | % | -34.3 | % | -32.6 | % | ||||||||||||||||||
Long term FHLB borrowing | - | 10,000 | 10,000 | 10,000 | -100.0 | % | -100.0 | % | -100.0 | % | ||||||||||||||||||
Securities sold under agreement to repurchase | - | - | 2,796 | 1,235 | 0.0 | % | -100.0 | % | -100.0 | % | ||||||||||||||||||
Junior subordinated debentures | 13,403 | 13,403 | 13,403 | 13,403 | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||||||||||
Other liabilities | 7,087 | 7,649 | 6,836 | 6,592 | -7.3 | % | 3.7 | % | 7.5 | % | ||||||||||||||||||
Total liabilities | 839,019 | 790,041 | 735,556 | 716,981 | 6.2 | % | 14.1 | % | 17.0 | % | ||||||||||||||||||
Stockholders' equity | ||||||||||||||||||||||||||||
Senior preferred stock, no par value; | ||||||||||||||||||||||||||||
$1,000 per share stated value 5,000,000 | ||||||||||||||||||||||||||||
shares authorized, 21,000 issued and outstanding | 19,341 | 19,253 | - | - | 0.5 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
Common stock, no par value; 20,000,000 shares | ||||||||||||||||||||||||||||
authorized; issued and outstanding: 7,760,505; 7,761,554; | ||||||||||||||||||||||||||||
7,753,078 and 7,709,600 as of September 30, 2009; | ||||||||||||||||||||||||||||
June 30, 2009; December 31, 2008; and | ||||||||||||||||||||||||||||
September 30, 2008, respectively. | 48,695 | 48,695 | 48,649 | 48,456 | 0.0 | % | 0.1 | % | 0.5 | % | ||||||||||||||||||
Additional paid in capital | 3,172 | 3,087 | 1,055 | 947 | 2.8 | % | 200.7 | % | 235.0 | % | ||||||||||||||||||
Retained earnings | 17,174 | 22,768 | 21,420 | 22,675 | -24.6 | % | -19.8 | % | -24.3 | % | ||||||||||||||||||
Accumulated other comprehensive income | (596 | ) | (2,489 | ) | (1,092 | ) | (1,124 | ) | 76.1 | % | 45.4 | % | 47.0 | % | ||||||||||||||
Total stockholders' equity | 87,786 | 91,314 | 70,032 | 70,954 | -3.9 | % | 25.4 | % | 23.7 | % | ||||||||||||||||||
Total liabilities and stockholders' equity | $ | 926,805 | $ | 881,355 | $ | 805,588 | $ | 787,935 | 5.2 | % | 15.0 | % | 17.6 | % |
(1) | Loans are net of deferred loan fees of $1,635; $1,555; $1,701; $1,647 and allowance for loan losses of $15,873; $11,106; $10,412; $10,350for September 30, 2009, June 30, 2009, December 31, 2008, and September 30, 2008 respectively. |
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 10
Heritage Oaks Bancorp
Consolidated Statements of Income
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||
For the Three Months Ended | Percentage Change Vs. | |||||||||||||||||||
(dollar amounts in thousands except per share data) | 9/30/2009 | 6/30/2009 | 9/30/2008 | 6/30/2009 | 9/30/2008 | |||||||||||||||
Interest Income | ||||||||||||||||||||
Interest and fees on loans | $ | 10,703 | $ | 11,416 | $ | 11,731 | -6.2 | % | -8.8 | % | ||||||||||
Interest on investment securities | ||||||||||||||||||||
Mortgage backed securities | 871 | 625 | 515 | 39.4 | % | 69.1 | % | |||||||||||||
Obligations of state and political subdivisions | 247 | 208 | 186 | 18.8 | % | 32.8 | % | |||||||||||||
Interest on time deposits with other banks | 1 | 1 | 1 | 0.0 | % | 0.0 | % | |||||||||||||
Interest on federal funds sold | 21 | 10 | 18 | 110.0 | % | 16.7 | % | |||||||||||||
Interest on other securities | 17 | 9 | 85 | 88.9 | % | -80.0 | % | |||||||||||||
Total interest income | 11,860 | 12,269 | 12,536 | -3.3 | % | -5.4 | % | |||||||||||||
Interest Expense | ||||||||||||||||||||
Interest on savings, NOW and money market deposits | 984 | 839 | 886 | 17.3 | % | 11.1 | % | |||||||||||||
Interest on time deposits in denominations of $100K or more | 695 | 631 | 620 | 10.1 | % | 12.1 | % | |||||||||||||
Interest on time deposits under $100K | 675 | 664 | 702 | 1.7 | % | -3.8 | % | |||||||||||||
Other borrowings | 241 | 293 | 803 | -17.7 | % | -70.0 | % | |||||||||||||
Total interest expense | 2,595 | 2,427 | 3,011 | 6.9 | % | -13.8 | % | |||||||||||||
Net interest income before provision for loan losses | 9,265 | 9,842 | 9,525 | -5.9 | % | -2.7 | % | |||||||||||||
Provision for loan losses | 9,756 | 2,700 | 3,200 | 261.3 | % | 204.9 | % | |||||||||||||
Net interest income after provision for loan losses | (491 | ) | 7,142 | 6,325 | -106.9 | % | -107.8 | % | ||||||||||||
Non Interest Income | ||||||||||||||||||||
Service charges on deposit accounts | 750 | 752 | 878 | -0.3 | % | -14.6 | % | |||||||||||||
ATM/Debit and credit card transaction/interchange fees | 253 | 254 | 220 | -0.4 | % | 15.0 | % | |||||||||||||
Bancard | 48 | 55 | 69 | -12.7 | % | -30.4 | % | |||||||||||||
Mortgage origination fees | 245 | 336 | 118 | -27.1 | % | 107.6 | % | |||||||||||||
Earnings on bank owned life insurance | 124 | 124 | 121 | 0.0 | % | 2.5 | % | |||||||||||||
Other commissions and fees | 92 | 83 | 107 | 10.8 | % | -14.0 | % | |||||||||||||
Gain on sale of investment securities | 211 | - | - | 100.0 | % | 100.0 | % | |||||||||||||
Loss on sale of OREO property | (200 | ) | (104 | ) | - | -92.3 | % | -100.0 | % | |||||||||||
Gain on sale of SBA loans | 70 | - | - | 100.0 | % | 100.0 | % | |||||||||||||
Total non interest income | 1,593 | 1,500 | 1,513 | 6.2 | % | 5.3 | % | |||||||||||||
Non Interest Expense | ||||||||||||||||||||
Salaries and employee benefits | 3,969 | 3,745 | 3,651 | 6.0 | % | 8.7 | % | |||||||||||||
Occupancy | 843 | 826 | 741 | 2.1 | % | 13.8 | % | |||||||||||||
Equipment | 365 | 376 | 336 | -2.9 | % | 8.6 | % | |||||||||||||
Promotional | 191 | 225 | 199 | -15.1 | % | -4.0 | % | |||||||||||||
Data processing | 687 | 691 | 672 | -0.6 | % | 2.2 | % | |||||||||||||
Stationary and supplies | 111 | 99 | 99 | 12.1 | % | 12.1 | % | |||||||||||||
Regulatory fees | 851 | 537 | 116 | 58.5 | % | 633.6 | % | |||||||||||||
Audit and tax costs | 182 | 147 | 114 | 23.8 | % | 59.6 | % | |||||||||||||
Amortization of core deposit intangible | 262 | 262 | 215 | 0.0 | % | 21.9 | % | |||||||||||||
Director fees | 80 | 80 | 80 | 0.0 | % | 0.0 | % | |||||||||||||
Communication | 76 | 61 | 87 | 24.6 | % | -12.6 | % | |||||||||||||
Other | 2,634 | 965 | 798 | 173.0 | % | 230.1 | % | |||||||||||||
Total non interest expense | 10,251 | 8,014 | 7,108 | 27.9 | % | 44.2 | % | |||||||||||||
(Loss) / income before provision for income taxes | (9,149 | ) | 628 | 730 | -1556.8 | % | -1353.3 | % | ||||||||||||
Provision for income taxes | (3,907 | ) | 121 | 196 | -3328.9 | % | -2093.4 | % | ||||||||||||
Net (loss) / income | (5,242 | ) | 507 | 534 | -1133.9 | % | -1081.6 | % | ||||||||||||
Dividends and accretion on preferred stock | 352 | 250 | - | 40.8 | % | 100.0 | % | |||||||||||||
Net (loss) / income available to common shareholders | $ | (5,594 | ) | $ | 257 | $ | 534 | -2276.7 | % | -1147.6 | % | |||||||||
Shares Outstanding | ||||||||||||||||||||
Basic | 7,699,377 | 7,696,027 | 7,709,600 | |||||||||||||||||
Diluted | 7,945,382 | 7,866,962 | 7,798,321 | |||||||||||||||||
(Loss) / Earnings Per Common Share | ||||||||||||||||||||
Basic | $ | (0.73 | ) | $ | 0.03 | $ | 0.07 | |||||||||||||
Diluted | $ | (0.70 | ) | $ | 0.03 | $ | 0.07 |
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 11
Heritage Oaks Bancorp
Consolidated Statements of Income
(unaudited) | (unaudited) | Percentage | ||||||||||
For the Nine Months Ended | Change Vs. | |||||||||||
(dollar amounts in thousands except per share data) | 9/30/2009 | 9/30/2008 | 9/30/2008 | |||||||||
Interest Income | ||||||||||||
Interest and fees on loans | $ | 33,266 | $ | 35,554 | -6.44 | % | ||||||
Interest on investment securities | ||||||||||||
Mortgage backed securities | 2,044 | 1,481 | 38.0 | % | ||||||||
Obligations of state and political subdivisions | 641 | 555 | 15.5 | % | ||||||||
Interest on time deposits with other banks | 3 | 7 | -57.1 | % | ||||||||
Interest on federal funds sold | 38 | 130 | -70.8 | % | ||||||||
Interest on other securities | 33 | 200 | -83.5 | % | ||||||||
Total interest income | 36,025 | 37,927 | -5.0 | % | ||||||||
Interest Expense | ||||||||||||
Interest on savings, NOW and money market deposits | 2,640 | 3,412 | -22.6 | % | ||||||||
Interest on time deposits in denominations of $100K or more | 1,870 | 1,825 | 2.5 | % | ||||||||
Interest on time deposits under $100K | 1,903 | 2,276 | -16.4 | % | ||||||||
Other borrowings | 938 | 2,180 | -57.0 | % | ||||||||
Total interest expense | 7,351 | 9,693 | -24.2 | % | ||||||||
Net interest income before provision for loan losses | 28,674 | 28,234 | 1.6 | % | ||||||||
Provision for loan losses | 14,566 | 6,215 | 134.4 | % | ||||||||
Net interest income after provision for loan losses | 14,108 | 22,019 | -35.9 | % | ||||||||
Non Interest Income | ||||||||||||
Service charges on deposit accounts | 2,214 | 2,487 | -11.0 | % | ||||||||
ATM/Debit Card transaction/interchange fees | 723 | 672 | 7.6 | % | ||||||||
Bancard | 140 | 183 | -23.5 | % | ||||||||
Mortgage origination fees | 910 | 367 | 148.0 | % | ||||||||
Earnings on bank owned life insurance | 369 | 352 | 4.8 | % | ||||||||
Other commissions and fees | 325 | 610 | -46.7 | % | ||||||||
Gain on sale of investment securities | 333 | 37 | 800.0 | % | ||||||||
Loss on sale of OREO property | (331 | ) | - | -100.0 | % | |||||||
Gain on sale of SBA loans | 70 | - | 100.0 | % | ||||||||
Total non interest income | 4,753 | 4,708 | 1.0 | % | ||||||||
Non Interest Expense | ||||||||||||
Salaries and employee benefits | 11,517 | 11,897 | -3.2 | % | ||||||||
Occupancy | 2,521 | 2,291 | 10.0 | % | ||||||||
Equipment | 1,066 | 1,053 | 1.2 | % | ||||||||
Promotional | 517 | 681 | -24.1 | % | ||||||||
Data processing | 2,049 | 1,998 | 2.6 | % | ||||||||
Stationary and supplies | 314 | 323 | -2.8 | % | ||||||||
Regulatory fees | 1,531 | 340 | 350.3 | % | ||||||||
Audit and tax costs | 477 | 342 | 39.5 | % | ||||||||
Amortization of core deposit intangible | 787 | 646 | 21.8 | % | ||||||||
Director fees | 243 | 238 | 2.1 | % | ||||||||
Communication | 199 | 239 | -16.7 | % | ||||||||
Other | 4,469 | 2,178 | 105.2 | % | ||||||||
Total non interest expenses | 25,690 | 22,226 | 15.6 | % | ||||||||
(Loss) / income before provision for income taxes | (6,829 | ) | 4,501 | -251.7 | % | |||||||
Provision for income taxes | (3,196 | ) | 1,601 | -299.6 | % | |||||||
Net (loss) / income | (3,633 | ) | 2,900 | -225.3 | % | |||||||
Dividends and accretion on preferred stock | 613 | - | 100.0 | % | ||||||||
Net (loss) / income available to common shareholders | $ | (4,246 | ) | $ | 2,900 | -246.4 | % | |||||
Shares Outstanding | ||||||||||||
Basic | 7,694,969 | 7,703,107 | ||||||||||
Diluted | 7,839,014 | 7,832,815 | ||||||||||
(Loss) / Earnings Per Common Share | ||||||||||||
Basic | $ | (0.56 | ) | $ | 0.38 | |||||||
Diluted | $ | (0.53 | ) | $ | 0.37 |
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 12
Three Months Ended | ||||||||||||||||||||||||
AVERAGE BALANCES AND RATES | 9/30/2009 | 12/31/2008 | 9/30/2008 | |||||||||||||||||||||
(dollars in thousands) | Balance | Yield/Rate | Balance | Yield/Rate | Balance | Yield/Rate | ||||||||||||||||||
Interest Earning Assets | ||||||||||||||||||||||||
Investments with other banks | $ | 119 | 3.33 | % | $ | 119 | 3.34 | % | $ | 128 | 3.11 | % | ||||||||||||
Federal funds sold | 33,895 | 0.25 | % | 5,774 | 0.69 | % | 3,342 | 2.14 | % | |||||||||||||||
Investment securities - taxable | 75,563 | 4.66 | % | 40,366 | 5.34 | % | 43,221 | 5.52 | % | |||||||||||||||
Investment securities - non taxable | 22,653 | 4.33 | % | 16,650 | 4.44 | % | 17,125 | 4.32 | % | |||||||||||||||
Loans | 713,810 | 5.95 | % | 675,742 | 6.76 | % | 667,441 | 6.99 | % | |||||||||||||||
Total earning assets | 846,040 | 5.56 | % | 738,651 | 6.58 | % | 731,257 | 6.82 | % | |||||||||||||||
Allowance for loan losses | (11,969 | ) | (10,002 | ) | (8,664 | ) | ||||||||||||||||||
Other assets | 71,976 | 66,340 | 65,230 | |||||||||||||||||||||
Total assets | 906,047 | $ | 794,989 | $ | 787,823 | |||||||||||||||||||
Interest Bearing Liabilities | ||||||||||||||||||||||||
Interest bearing demand | 67,825 | 0.92 | % | $ | 72,038 | 0.57 | % | $ | 74,042 | 0.47 | % | |||||||||||||
Savings | 25,619 | 0.28 | % | 22,236 | 0.30 | % | 23,272 | 0.43 | % | |||||||||||||||
Money market | 209,634 | 1.52 | % | 179,009 | 1.69 | % | 175,968 | 1.75 | % | |||||||||||||||
Time deposits | 219,253 | 2.32 | % | 139,753 | 2.90 | % | 144,490 | 3.06 | % | |||||||||||||||
Brokered money market | 2,826 | 0.70 | % | 26,218 | 1.24 | % | - | 0.00 | % | |||||||||||||||
Brokered time deposits | 23,426 | 1.46 | % | 21,908 | 3.76 | % | 25,027 | 3.35 | % | |||||||||||||||
Total interest bearing deposits | 548,583 | 1.70 | % | 461,162 | 1.89 | % | 442,799 | 1.98 | % | |||||||||||||||
Federal funds purchased | - | 0.00 | % | 1,402 | 1.42 | % | 4,583 | 2.26 | % | |||||||||||||||
Securities sold under agreement to repurchase | - | 0.00 | % | 2,642 | 1.20 | % | 2,327 | 1.88 | % | |||||||||||||||
Federal Home Loan Bank borrowings | 65,000 | 0.63 | % | 83,565 | 2.19 | % | 89,408 | 2.59 | % | |||||||||||||||
Junior subordinated debentures | 13,403 | 4.08 | % | 13,403 | 6.14 | % | 13,403 | 5.46 | % | |||||||||||||||
Total borrowed funds | 78,403 | 1.22 | % | 101,012 | 2.68 | % | 109,721 | 2.91 | % | |||||||||||||||
Total interest bearing liabilities | 626,986 | 1.64 | % | 562,174 | 2.03 | % | 552,520 | 2.17 | % | |||||||||||||||
Non interest bearing demand | 178,293 | 0.00 | % | 153,432 | 0.00 | % | 155,582 | 0.00 | % | |||||||||||||||
Total funding | 805,279 | 1.28 | % | 715,606 | 1.60 | % | 708,102 | 1.69 | % | |||||||||||||||
Other liabilities | 8,490 | 7,388 | 7,585 | |||||||||||||||||||||
Total liabilities | 813,769 | 722,994 | 715,687 | |||||||||||||||||||||
Total shareholders' equity | 92,278 | 71,995 | 72,136 | |||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 906,047 | $ | 794,989 | $ | 787,823 | ||||||||||||||||||
Net interest margin | 4.34 | % | 5.04 | % | 5.18 | % |
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 13
Nine Months Ended | ||||||||||||||||
AVERAGE BALANCES AND RATES | 9/30/2009 | 9/30/2008 | ||||||||||||||
(dollars in thousands) | Balance | Yield/Rate | Balance | Yield/Rate | ||||||||||||
Interest Earning Assets | ||||||||||||||||
Investments with other banks | $ | 119 | 3.37 | % | $ | 246 | 3.80 | % | ||||||||
Federal funds sold | 22,596 | 0.22 | % | 6,855 | 2.53 | % | ||||||||||
Investment securities - taxable | 59,614 | 4.66 | % | 42,656 | 5.26 | % | ||||||||||
Investment securities - non taxable | 19,763 | 4.34 | % | 17,223 | 4.30 | % | ||||||||||
Loans | 705,187 | 6.31 | % | 649,511 | 7.31 | % | ||||||||||
Total earning assets | 807,279 | 5.97 | % | 716,491 | 7.07 | % | ||||||||||
Allowance for loan losses | (10,909 | ) | (7,120 | ) | ||||||||||||
Other assets | 70,288 | 65,028 | ||||||||||||||
Total assets | $ | 866,658 | $ | 774,399 | ||||||||||||
Interest Bearing Liabilities | ||||||||||||||||
Interest bearing demand | 64,524 | 0.72 | % | $ | 74,886 | 0.61 | % | |||||||||
Savings | 23,849 | 0.21 | % | 26,834 | 0.95 | % | ||||||||||
Money market | 186,921 | 1.51 | % | 189,181 | 2.03 | % | ||||||||||
Time deposits | 182,771 | 2.49 | % | 142,919 | 3.43 | % | ||||||||||
Brokered money market | 25,387 | 0.72 | % | - | 0.00 | % | ||||||||||
Brokered time deposits | 29,886 | 1.67 | % | 15,849 | 3.62 | % | ||||||||||
Total interest bearing deposits | 513,338 | 1.67 | % | 449,669 | 2.23 | % | ||||||||||
Federal funds purchased | 251 | 1.07 | % | 4,079 | 2.69 | % | ||||||||||
Securities sold under agreement to repurchase | 870 | 0.15 | % | 2,163 | 2.35 | % | ||||||||||
Federal Home Loan Bank borrowings | 80,982 | 0.81 | % | 74,637 | 2.64 | % | ||||||||||
Junior subordinated debentures | 13,403 | 4.42 | % | 13,403 | 5.85 | % | ||||||||||
Total borrowed funds | 95,506 | 1.31 | % | 94,282 | 3.09 | % | ||||||||||
Total interest bearing liabilities | 608,844 | 1.61 | % | 543,951 | 2.38 | % | ||||||||||
Non interest bearing demand | 162,830 | 0.00 | % | 150,890 | 0.00 | % | ||||||||||
Total funding | 771,674 | 1.27 | % | 694,841 | 1.86 | % | ||||||||||
Other liabilities | 8,650 | 7,894 | ||||||||||||||
Total liabilities | 780,324 | 702,735 | ||||||||||||||
Total shareholders' equity | 86,334 | 71,664 | ||||||||||||||
Total liabilities and shareholders' equity | $ | 866,658 | $ | 774,399 | ||||||||||||
Net interest margin | 4.75 | % | 5.26 | % |
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 14
Additional Financial Information | ||||||||||||||||||||||||||||
(dollar amounts in thousands) | For the Quarters Ended | Percentage Change Vs. | ||||||||||||||||||||||||||
LOANS | 9/30/2009 | 6/30/2009 | 12/31/2008 | 9/30/2008 | 6/30/2009 | 12/31/2008 | 9/30/2008 | |||||||||||||||||||||
Real Estate Secured | ||||||||||||||||||||||||||||
Multi-family residential | $ | 17,323 | $ | 17,414 | $ | 16,206 | $ | 13,997 | -0.5 | % | 6.9 | % | 23.8 | % | ||||||||||||||
Residential 1 to 4 family | 24,580 | 23,626 | 23,910 | 29,031 | 4.0 | % | 2.8 | % | -15.3 | % | ||||||||||||||||||
Home equity lines of credit | 29,189 | 29,049 | 26,409 | 22,247 | 0.5 | % | 10.5 | % | 31.2 | % | ||||||||||||||||||
Commercial | 317,811 | 302,735 | 285,631 | 281,269 | 5.0 | % | 11.3 | % | 13.0 | % | ||||||||||||||||||
Farmland | 9,842 | 9,639 | 10,723 | 10,630 | 2.1 | % | -8.2 | % | -7.4 | % | ||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||
Commercial and industrial | 166,618 | 171,208 | 157,674 | 151,323 | -2.7 | % | 5.7 | % | 10.1 | % | ||||||||||||||||||
Agriculture | 14,819 | 14,231 | 13,744 | 13,059 | 4.1 | % | 7.8 | % | 13.5 | % | ||||||||||||||||||
Other | 368 | 491 | 620 | 662 | -25.0 | % | -40.6 | % | -44.3 | % | ||||||||||||||||||
Construction | ||||||||||||||||||||||||||||
Single family residential | 14,669 | 14,710 | 11,414 | 12,897 | -0.3 | % | 28.5 | % | 13.7 | % | ||||||||||||||||||
Single family residential - Spec. | 5,757 | 10,338 | 15,395 | 17,469 | -44.3 | % | -62.6 | % | -67.0 | % | ||||||||||||||||||
Tract | 2,215 | 3,202 | 2,431 | 1,999 | -30.8 | % | -8.9 | % | 10.8 | % | ||||||||||||||||||
Multi-family | 5,575 | 5,648 | 5,808 | 7,803 | -1.3 | % | -4.0 | % | -28.6 | % | ||||||||||||||||||
Hospitality | 14,252 | 12,388 | 18,630 | 14,177 | 15.0 | % | -23.5 | % | 0.5 | % | ||||||||||||||||||
Commercial | 22,997 | 17,215 | 21,484 | 25,624 | 33.6 | % | 7.0 | % | -10.3 | % | ||||||||||||||||||
Land | 54,619 | 57,149 | 61,681 | 55,704 | -4.4 | % | -11.4 | % | -1.9 | % | ||||||||||||||||||
Installment loans to individuals | 8,863 | 8,428 | 7,851 | 7,889 | 5.2 | % | 12.9 | % | 12.3 | % | ||||||||||||||||||
All other loans (including overdrafts) | 370 | 383 | 536 | 620 | -3.5 | % | -31.0 | % | -40.4 | % | ||||||||||||||||||
Total gross loans | $ | 709,867 | $ | 697,854 | $ | 680,147 | $ | 666,400 | 1.7 | % | 4.4 | % | 6.5 | % | ||||||||||||||
Deferred loan fees | 1,635 | 1,555 | 1,701 | 1,647 | 5.2 | % | -3.9 | % | -0.7 | % | ||||||||||||||||||
Allowance for loan losses | 15,873 | 11,106 | 10,412 | 10,350 | 42.9 | % | 52.4 | % | 53.4 | % | ||||||||||||||||||
Net loans | $ | 692,359 | $ | 685,193 | $ | 668,034 | $ | 654,403 | 1.0 | % | 3.6 | % | 5.8 | % | ||||||||||||||
Loans held for sale | 7,778 | $ | 11,692 | $ | 7,939 | $ | 2,955 | -33.5 | % | -2.0 | % | 163.2 | % |
For the Quarters Ended | Percentage Change Vs. | |||||||||||||||||||||||||||
ALLOWANCE FOR LOAN LOSSES | 9/30/2009 | 6/30/2009 | 12/31/2008 | 9/30/2008 | 6/30/2009 | 12/31/2008 | 6/30/2008 | |||||||||||||||||||||
Balance, beginning of period | $ | 11,106 | $ | 10,429 | $ | 10,350 | $ | 8,128 | 6.5 | % | 7.3 | % | 36.6 | % | ||||||||||||||
Provision expense | 9,756 | 2,700 | 6,000 | 3,200 | 261.3 | % | 62.6 | % | 204.9 | % | ||||||||||||||||||
Loans charged off | ||||||||||||||||||||||||||||
Commercial real estate | 41 | - | 35 | - | 100.0 | % | 17.1 | % | 100.0 | % | ||||||||||||||||||
Residential 1 to 4 family | 304 | - | 555 | - | - | -45.2 | % | - | ||||||||||||||||||||
Commercial and industrial | 503 | 942 | 2,998 | 282 | -46.6 | % | -83.2 | % | 78.4 | % | ||||||||||||||||||
Agriculture | 1,909 | - | - | - | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
Construction | 397 | 415 | 914 | 717 | -4.3 | % | -56.6 | % | -44.6 | % | ||||||||||||||||||
Land | 1,801 | 681 | 1,434 | - | 164.5 | % | 25.6 | % | - | |||||||||||||||||||
Other | 42 | 4 | 5 | 34 | 950.0 | % | 740.0 | % | 23.5 | % | ||||||||||||||||||
Total charge offs | 4,997 | 2,042 | 5,941 | 1,033 | 144.7 | % | -15.9 | % | 383.7 | % | ||||||||||||||||||
Recoveries of loans previously charged off | 8 | 19 | 3 | 55 | -57.9 | % | 166.7 | % | -85.5 | % | ||||||||||||||||||
Balance, end of period | $ | 15,873 | $ | 11,106 | $ | 10,412 | $ | 10,350 | 42.9 | % | 52.4 | % | 53.4 | % | ||||||||||||||
Net charge-offs | $ | 4,989 | $ | 2,023 | $ | 5,938 | $ | 978 | 146.6 | % | -16.0 | % | 410.1 | % |
For the Quarters Ended | Percentage Change Vs. | |||||||||||||||||||||||||||
NON-PERFORMING ASSETS | 9/30/2009 | 6/30/2009 | 12/31/2008 | 9/30/2008 | 6/30/2009 | 12/31/2008 | 6/30/2008 | |||||||||||||||||||||
Loans on non-accrual status | ||||||||||||||||||||||||||||
Commercial real estate | $ | 5,747 | $ | 2,776 | $ | 1,961 | $ | 1,814 | 107.0 | % | 193.1 | % | 216.8 | % | ||||||||||||||
Residential 1-4 family | 1,272 | 392 | 265 | 709 | 224.5 | % | 380.0 | % | 79.4 | % | ||||||||||||||||||
Home equity lines of credit | 320 | 320 | 320 | - | 0.0 | % | 0.0 | % | 100.0 | % | ||||||||||||||||||
Commercial | 5,958 | 5,316 | 7,060 | 7,954 | 12.1 | % | -15.6 | % | -25.1 | % | ||||||||||||||||||
Agriculture | 3,214 | 384 | - | - | 737.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
Construction | 3,838 | 2,267 | 5,990 | 11,311 | 69.3 | % | -35.9 | % | -66.1 | % | ||||||||||||||||||
Land | 18,993 | 511 | 2,720 | 590 | 3616.8 | % | 598.3 | % | 3119.2 | % | ||||||||||||||||||
Installment | 51 | 132 | 11 | 12 | -61.4 | % | 363.6 | % | 325.0 | % | ||||||||||||||||||
Total non-accruing loans | $ | 39,393 | $ | 12,098 | $ | 18,327 | $ | 22,390 | 225.6 | % | 114.9 | % | 75.9 | % | ||||||||||||||
Loans more than 90 days delinquent, still accruing | 445 | 140 | 348 | - | 217.9 | % | 27.9 | % | 100.0 | % | ||||||||||||||||||
Total non-performing loans | 39,838 | 12,238 | 18,675 | 22,390 | 225.5 | % | 113.3 | % | 77.9 | % | ||||||||||||||||||
Other real estate owned (OREO) | 2,607 | 6,669 | 1,337 | 197 | -60.9 | % | 95.0 | % | 1223.4 | % | ||||||||||||||||||
Total non-performing assets | $ | 42,445 | $ | 18,907 | $ | 20,012 | $ | 22,587 | 124.5 | % | 112.1 | % | 87.9 | % |
For the Quarters Ended | Percentage Change Vs. | |||||||||||||||||||||||||||
DEPOSITS | 9/30/2009 | 6/30/2009 | 12/31/2008 | 9/30/2008 | 6/30/2009 | 12/31/2008 | 6/30/2008 | |||||||||||||||||||||
Non-interest bearing demand | $ | 181,670 | $ | 178,600 | $ | 147,044 | $ | 155,267 | 1.7 | % | 23.5 | % | 17.0 | % | ||||||||||||||
Interest-bearing demand | 70,092 | 64,723 | 72,952 | 71,601 | 8.3 | % | -3.9 | % | -2.1 | % | ||||||||||||||||||
Regular savings accounts | 26,088 | 24,792 | 21,835 | 22,484 | 5.2 | % | 19.5 | % | 16.0 | % | ||||||||||||||||||
Money market accounts | 231,005 | 190,661 | 173,199 | 175,659 | 21.2 | % | 33.4 | % | 31.5 | % | ||||||||||||||||||
Brokered money market funds | 2,001 | 10,002 | 28,502 | - | -80.0 | % | -93.0 | % | 100.0 | % | ||||||||||||||||||
Total interest-bearing transaction & savings accounts | 329,186 | 290,178 | 296,488 | 269,744 | 13.4 | % | 11.0 | % | 22.0 | % | ||||||||||||||||||
Time deposits | 227,670 | 206,708 | 139,872 | 144,011 | 10.1 | % | 62.8 | % | 58.1 | % | ||||||||||||||||||
Brokered time deposits | 15,003 | 28,503 | 20,117 | 20,229 | -47.4 | % | -25.4 | % | -25.8 | % | ||||||||||||||||||
Total deposits | $ | 753,529 | $ | 703,989 | $ | 603,521 | $ | 589,251 | 7.0 | % | 24.9 | % | 27.9 | % |
Heritage Oaks Bancorp 3Q09 Results
October 29, 2009
Page 15
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
PROFITABILITY / PERFORMANCE RATIOS | 9/30/2009 | 6/30/2009 | 12/31/2008 | 9/30/2008 | 9/30/2009 | 9/30/2008 | ||||||||||||||||||
Operating efficiency | 95.12 | % | 70.02 | % | 66.43 | % | 64.40 | % | 77.02 | % | 67.55 | % | ||||||||||||
Operating efficiency (1) | 73.81 | % | 64.94 | % | 66.03 | % | 64.40 | % | 67.96 | % | 67.55 | % | ||||||||||||
Return on average equity | -22.54 | % | 2.20 | % | -6.93 | % | 2.94 | % | -5.63 | % | 5.41 | % | ||||||||||||
Return on average common equity | -30.41 | % | 1.41 | % | -6.93 | % | 2.94 | % | -7.82 | % | 5.41 | % | ||||||||||||
Return on average tangible equity | -25.93 | % | 2.54 | % | -8.65 | % | 3.71 | % | -6.59 | % | 6.90 | % | ||||||||||||
Return on average tangible common equity | -36.44 | % | 1.69 | % | -8.65 | % | 3.71 | % | -9.46 | % | 6.90 | % | ||||||||||||
Return on average assets | -2.30 | % | 0.23 | % | -0.63 | % | 0.27 | % | -0.56 | % | 0.50 | % | ||||||||||||
Non interest income to average assets | 0.70 | % | 0.69 | % | 0.75 | % | 0.76 | % | 0.73 | % | 0.81 | % | ||||||||||||
Non interest expense to average assets | 4.49 | % | 3.71 | % | 3.61 | % | 3.59 | % | 3.96 | % | 3.83 | % | ||||||||||||
Net interest income to average assets | 4.06 | % | 4.56 | % | 4.68 | % | 4.81 | % | 4.42 | % | 4.87 | % | ||||||||||||
Non interest income to total net revenue | 12.79 | % | 13.23 | % | 13.81 | % | 13.71 | % | 12.45 | % | 14.29 | % | ||||||||||||
Interest rate yield on interest earnings assets | 5.56 | % | 6.12 | % | 6.58 | % | 6.82 | % | 5.97 | % | 7.07 | % | ||||||||||||
Cost of interest bearing liabilities | 1.70 | % | 1.65 | % | 2.03 | % | 2.17 | % | 1.67 | % | 2.38 | % | ||||||||||||
Cost of funds | 1.28 | % | 1.27 | % | 1.60 | % | 1.69 | % | 1.27 | % | 1.86 | % | ||||||||||||
Net interest margin | 4.34 | % | 4.91 | % | 5.04 | % | 5.18 | % | 4.75 | % | 5.26 | % | ||||||||||||
ASSET QUALITY RATIOS | ||||||||||||||||||||||||
Non-performing loans to total gross loans | 5.61 | % | 1.75 | % | 2.75 | % | 3.36 | % | ||||||||||||||||
Non-performing loans as a % of ALLL | 250.98 | % | 110.19 | % | 179.36 | % | 216.33 | % | ||||||||||||||||
Non-performing loans as a % of total assets | 4.30 | % | 1.39 | % | 2.32 | % | 2.84 | % | ||||||||||||||||
Non-performing loans to primary capital | 45.38 | % | 13.40 | % | 26.67 | % | 31.56 | % | ||||||||||||||||
Non-performing assets to total assets | 4.58 | % | 2.15 | % | 2.48 | % | 2.87 | % | ||||||||||||||||
Allowance for loan losses to total gross loans | 2.24 | % | 1.59 | % | 1.53 | % | 1.55 | % | ||||||||||||||||
Net charge-offs to average loans outstanding | 0.70 | % | 0.29 | % | 0.88 | % | 0.15 | % | ||||||||||||||||
CAPITAL RATIOS | ||||||||||||||||||||||||
Company | ||||||||||||||||||||||||
Leverage ratio | 9.30 | % | 10.87 | % | 8.90 | % | 9.01 | % | ||||||||||||||||
Tier I Risk-Based Capital Ratio | 10.52 | % | 11.95 | % | 9.37 | % | 9.67 | % | ||||||||||||||||
Total Risk-Based Capital Ratio | 11.78 | % | 13.20 | % | 10.62 | % | 10.92 | % | ||||||||||||||||
Bank | ||||||||||||||||||||||||
Leverage ratio | 8.76 | % | 10.33 | % | 8.66 | % | 8.78 | % | ||||||||||||||||
Tier I Risk-Based Capital Ratio | 9.86 | % | 11.23 | % | 9.10 | % | 9.41 | % | ||||||||||||||||
Total Risk-Based Capital Ratio | 11.12 | % | 12.49 | % | 10.36 | % | 10.66 | % |
(1) Ratio does not include the following one time items; OREO related expenses of $1,702 and $2,039 for the three and nine month periods ending September 30, 2009, $193 for the three months ending June 30, 2009 and $44 for the three months ending December 31, 2008, loss on sale of OREO properties of $200 and $331 for the three and nine month periods ending September 30, 2009, $104 for the three months ending June 30, 2009 and FDIC special assessment fee of $594 and $982 for the three and nine month periods ending September 30, 2009 and $388 for the three months ending June 30, 2009.
NOTE: Transmitted on GlobeNewswire on October 29, 2009 at 1:35 p.m. PDT