EXHIBIT 99.1
Heritage Oaks Bancorp Reports Fourth Quarter 2009 Financial Results
PASO ROBLES, Calif., Feb. 1, 2010 (GLOBE NEWSWIRE) -- Heritage Oaks Bancorp (the "Company"), (Nasdaq:HEOP), the parent company of Heritage Oaks Bank (the "Bank"), today reported a net loss of $1.6 million for the fourth quarter of 2009 or $0.25 per diluted common share. For all of 2009, the Company reported a net loss of approximately $5.2 million or $0.81 per diluted common share. The net loss for the quarter was primarily attributable to a $6.5 million provision for loan losses as well as a $0.4 million charge related to impairment losses on investment securities.
According to Lawrence P. Ward, President and Chief Executive Officer, "2009 proved to be a challenging year for the Company and the financial services industry as a whole, specifically in regard to asset quality issues. The Company was not immune to the effects of a weakened economy, as we saw an increase in the balance of non-performing loans and higher provisions for loan losses. In spite of these negative issues, the Company managed to significantly increase its deposit base and further grow the core franchise, with pre-tax, pre-provision earnings increasing over prior years." He went on to say, "Management acknowledges that these difficult times will require continued focus on asset quality issues, protecting the net interest margin, controlling expenses and exploring areas where additional value can be added."
Ward stated, "The fourth quarter was another challenging period for the Bank with respect to asset quality and operating in an economic environment that has placed added pressure on the overall credit quality of the loan portfolio. Although, the Company's market area has not been impacted to the degree that other areas of California have, recent data indicate that the unemployment rate in the Company's market area was 9.3% and 8.9% within San Luis Obispo and Santa Barbara counties, respectively, considerably higher than that in recent periods. However, this compares to the 12.4% unemployment rate for all of California." Ward went on to say, "In response to these issues, Management significantly enhanced the Bank's internal loan review and implemented an independent semi-annual loan review during 2009, which was recently completed in the third quarter. These measures have aided the Bank in identifying and addressing areas of credit weakness earlier in the collection cycle. Furthermore, during the q uarter the Bank expanded its Special Assets Department with additional seasoned personnel to enhance the efforts for speedy resolution of problem assets. These changes have allowed Management to engage delinquent borrowers sooner in an effort to mitigate losses and ultimately resolve areas of concern. Management believes the steps taken during 2009 to reinforce the oversight of the loan portfolio, specifically with respect to problem loans, has helped to strengthen the balance sheet and position the Bank for a return to profitability in future periods. Management remains committed to the timely identification of and speedy resolution of asset quality issues."
Fourth Quarter Financial Highlights:
- Revenues - total revenue was approximately $15.0 million and $55.8 million for quarter and year to date periods ended December 31, 2009, respectively. This represents an increase of $1.6 million for the quarter and decline of $0.5 million for the year when compared to the same periods ended in 2008.
- Net Interest Margin - was 4.84% for the quarter and 4.77% for the year compared to 5.04% and 5.21% for the same three and twelve month periods ended a year earlier.
- Total Deposits - were approximately $775.5 million, an increase of $21.9 million for the quarter and $171.9 million for the year. Total deposits, exclusive of brokered, totaled approximately $769.5 million, an increase of $32.9 million for the quarter and $214.6 million for the year.
- Total Gross Loans - were approximately $733.2 million, an increase of $23.4 million for the quarter and $53.1 million for the year.
- Non-Performing Assets - totaled approximately $35.6 million, a decline of $6.8 million for the quarter and an increase of $15.6 million for the year. Non-performing assets represented 3.66% of total assets as of December 31, 2009 compared to 4.30% at September 30, 2009 and 2.32% at December 31, 2008.
- Allowance for Loan Losses - was approximately $15.9 million at December 31, 2009, representing 2.17% of total gross loans.
- Provisions for Loan Losses - were approximately $6.5 million for the quarter and $21.1 million for the year.
- Charge-offs – for the fourth quarter totaled approximately $6.5 million and approximately $15.7 million for all of 2009.
- Capital - Company remains well capitalized with Tier I Capital ratio of 9.91% and Total Risk-Based Capital ratio of 11.17%.
- Loss Per Share – $0.25 per share for the fourth quarter of 2009 and $0.81 per share for all of 2009. This compares to a net loss per share of $0.16 in the fourth quarter of 2008 and net income per diluted share of $0.21 for all of 2008.
Asset Quality
The quality of the Bank's loan portfolio is impacted by numerous factors, including the economic environment in the markets it operates. The Bank monitors loans in the portfolio with the assistance of a semi-annual independent loan review to identify and mitigate any potential credit quality issues and losses in a proactive manner. Management's review in conjunction with the semi-annual independent loan review focuses on non-watch related credits within certain pools of loans that may be expected to experience stress due to economic conditions. This process allows the Bank to validate credit ratings, underwriting structure and the Bank's estimated exposure in the current economic environment and enhance communications with borrowers where necessary.
The Bank devotes considerable resources to the monitoring of credit quality and management of problem assets. The expansion of our Special Assets Department continues to contribute significantly to the oversight of credit quality and the workout of problem credits.
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 and 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.
Non-accruing loans totaled approximately $34.5 million as of December 31, 2009, a decline of approximately $4.9 million from that reported at September 30, 2009. The quarterly variance can be attributed to several factors, including pay-downs of approximately $3.7 million, charge-offs of approximately $6.5 million and additions to non-accruing status of approximately $16.4 million. Also significantly contributing to the quarterly variance was the return of one loan in the approximate amount of $10.7 million to accruing status. Following the receipt of approximately $0.8 million in previously accrued interest from the borrower, the Bank placed the loan back on accruing status. The loan was placed on non-accruing status in the third quarter, resulting from the treatment of an interest reserve. Although the loan was placed on non-accrual, the Bank never deemed the loan to be impaired.
Non-performing loans totaled approximately $34.7 million and represented 4.73% of gross loans at December 31, 2009. Non-performing loans as a percentage of the allowance for loan losses was 217.8% at year end. Net charge-offs totaled approximately $6.5 million and $15.6 million for the three and twelve months ended December 31, 2009. Net charge-offs to average loans for the fourth quarter and all of 2009 were 0.90% and 2.19%, respectively.
Contributing significantly to total charge-offs for the quarter was the write-down of one loan in the approximate amount of $2.6 million following the receipt of an updated appraisal on collateral securing the loan. This loan represents land for tract development. The Bank is currently working with the borrower to liquidate the collateral. Other charge-offs during the quarter occurred primarily in the commercial and industrial segment of the loan portfolio and related to smaller business lines of credit that migrated to non-performing status and were subsequently charged-off during the quarter. The average balance of these loans was approximately $147 thousand each.
The following provides a reconciliation of the change in non-accruing loans for the three months ended December 31, 2009:
| (dollars in thousands) | Balance September 30, 2009 | Additions to
Non-Accruing Balances | Net Paydowns | Transfers
to Foreclosed Collateral | Returns to Accrual | Charge-offs | Balance December 31, 2009 |
| Real Estate Secured | | | | | | | |
| Multi-family residential | $-- | $-- | $-- | $-- | $-- | $-- | $-- |
| Residential 1 to 4 family | 1,272 | 1,034 | (1,144) | -- | -- | (136) | 1,026 |
| Home equity line of credit | 320 | -- | -- | -- | -- | -- | 320 |
| Commercial | 5,747 | 5,680 | 92 | -- | (436) | -- | 11,083 |
| Farmland | -- | -- | -- | -- | -- | -- | -- |
| Commercial | | | | | | | |
| Commercial and industrial | 5,958 | 8,505 | (2,019) | -- | -- | (3,681) | 8,763 |
| Agriculture | 3,214 | 93 | (63) | -- | -- | (93) | 3,151 |
| Other | -- | -- | -- | -- | -- | -- | -- |
| Construction | | | | | | | |
| Single family residential | 940 | -- | -- | -- | -- | -- | 940 |
| Single family residential - Spec. | 683 | -- | -- | -- | -- | -- | 683 |
| Tract | 2,215 | -- | -- | -- | -- | -- | 2,215 |
| Multi-family | -- | -- | -- | -- | -- | -- | -- |
| Hospitality | -- | -- | -- | -- | -- | -- | -- |
| Commercial | -- | -- | -- | -- | -- | -- | -- |
| Land | 18,993 | 1,116 | (550) | -- | (10,673) | (2,588) | 6,298 |
| Installment loans to individuals | 51 | 20 | (4) | -- | -- | (20) | 47 |
| All other loans | -- | -- | -- | -- | -- | -- | -- |
| | | | | | | | |
| Totals | $39,393 | $16,448 | $(3,688) | $-- | $(11,109) | $(6,518) | $34,526 |
The following provides a reconciliation of the change in non-accruing loans for the year ended December 31, 2009:
| (dollars in thousands) | Balance December 31, 2008 | Additions to
Non-Accruing Balances | Net Paydowns | Transfers
to Foreclosed Collateral | Returns to Accrual | Charge-offs | Balance December 31, 2009 |
| Real Estate Secured | | | | | | | |
| Multi-family residential | $-- | $-- | $-- | $-- | $-- | $-- | $-- |
| Residential 1 to 4 family | 265 | 2,363 | (1,162) | -- | -- | (440) | 1,026 |
| Home equity line of credit | 320 | -- | -- | -- | -- | -- | 320 |
| Commercial | 1,961 | 10,157 | (523) | (35) | (436) | (41) | 11,083 |
| Farmland | -- | -- | -- | -- | -- | -- | -- |
| Commercial | | | | | | | |
| Commercial and industrial | 7,060 | 11,263 | (2,395) | (1,742) | (14) | (5,409) | 8,763 |
| Agriculture | -- | 5,400 | (247) | -- | -- | (2,002) | 3,151 |
| Other | -- | -- | -- | -- | -- | -- | -- |
| Construction | | | | | | | |
| Single family residential | -- | 1,465 | (380) | -- | -- | (145) | 940 |
| Single family residential - Spec. | 5,990 | 3,557 | -- | (5,541) | (1,250) | (2,073) | 683 |
| Tract | -- | 2,215 | -- | -- | -- | -- | 2,215 |
| Multi-family | -- | -- | -- | -- | -- | -- | -- |
| Hospitality | -- | -- | -- | -- | -- | -- | -- |
| Commercial | -- | -- | -- | -- | -- | -- | -- |
| Land | 2,720 | 22,832 | (924) | (2,277) | (10,673) | (5,380) | 6,298 |
| Installment loans to individuals | 11 | 292 | (10) | (83) | -- | (163) | 47 |
| All other loans | -- | -- | -- | -- | -- | -- | -- |
| | | | | | | | |
| Totals | $18,327 | $59,544 | $(5,641) | $(9,678) | $(12,373) | $(15,653) | $34,526 |
Non-Accruing Loans
Real Estate Secured – Commercial ("CRE")
The majority of balances within this category can be attributed to ten loans to eight borrowers, totaling approximately $9.4 million, representing 84.9% of non-accruing CRE balances. The following provides a break-down of these balances as of December 31, 2009:
- Approximately $1.8 million can be attributed to one loan in which the Bank is currently working with the borrower to restructure and pay-down with proceeds from the sale or refinance of other client assets.
- Approximately $1.5 million can be attributed to one loan in which the Bank is working with the borrower to bring it current. Recent data suggests that the borrower's financial condition is sound. The borrower is also working to sell other assets to pay-down the loan.
- Two loans made to two separate borrowers totaling approximately $1.8 million that the Bank has restructured. A third party has expressed interest in assuming responsibility for these notes and the Bank anticipates these notes to pay-down sometime during the first quarter of 2010.
- Two loans totaling approximately $1.7 million made to one borrower are currently paying as agreed. Based on the borrower's recent performance and financial condition, the Bank currently anticipates these loans will move back to performing status sometime during the second quarter of 2010.
- The Bank currently anticipates receiving proceeds from the sale of collateral securing two loans to one borrower totaling approximately $1.1 million during the first half of 2010.
- One loan to one borrower totaling approximately $0.9 million, secured by commercial property in the Bank's primary market area. The Bank is working with the bankruptcy trustee to liquidate the collateral and pay-down the loan.
- One loan to one borrower totaling approximately $0.7 million. The borrower is currently paying on the loan and recent financial information concerning the borrower indicates the borrower currently has the cash flow to continue to service the loan.
Commercial and Industrial ("C&I")
The majority of C&I balances can be attributed to ten loans to eight borrowers totaling approximately $6.3 million or 71.8% of total C&I non-accruing balance. The following provides a break-down of these balances as of December 31, 2009:
- One loan in the approximate amount of $0.1 million. A third party has expressed interest in assuming responsibility for the note. The Bank currently anticipates this note to pay-down sometime during the first quarter of 2010.
- One loan in the approximate amount of $0.1 million is secured by real estate in the Bank's primary market as well as various business assets. Recent financial information concerning the client indicates the borrower currently has the cash flow to continue to service the loan.
- Three loans to one borrower totaling approximately $0.9 million. The underlying collateral represents leased residential real estate. The Bank is in the process of taking possession of the collateral and its rent proceeds to liquidate and pay-down the loan.
- One loan in the approximate amount of $0.4 million. The borrower has been paying as agreed. The Bank currently anticipates the loan to move back to performing status sometime during the second quarter of 2010.
- One loan in the approximate amount of $0.2 million. The Bank is working with the borrower to restructure the loan and pay-down with proceeds from the sale or refinancing of other client assets.
- One loan in the approximate amount of $0.5 million contains an SBA guarantee. Physical collateral has been repossessed and is being liquidated.
- One loan in the approximate amount of $0.5 million is secured by real estate in the Bank's primary market area. The Bank is working with the bankruptcy trustee to liquidate collateral and pay-down the loan.
- One loan in the approximate amount of $3.6 million is secured by real estate in the Bank's primary market area. A recent appraisal indicates its value is sufficient to cover the carrying value of the loan. The Bank continues to work towards liquidation of the collateral.
Construction
Comprising a considerable majority of construction balances are twelve loans to three borrowers totaling approximately $3.5 million or 92.2% of non-accruing construction balances. Several loans totaling approximately $1.3 million have pre-approved purchase contracts in place and Management currently anticipates closings to occur during the first quarter of 2010. Several other loans are secured by finished tract, spec and single family residential construction. The Bank is in the process of obtaining possession of the collateral to liquidate and pay-down the related loans.
Land
Balances within this category can be attributed in large part to six loans to four borrowers totaling approximately $5.4 million or 85.4% of total non-accruing land balances. The following provides a break-down of these balances as of December 31, 2009:
- Three loans to two borrowers totaling approximately $2.9 million representing land for residential tract development. The Bank is currently working to take possession of and liquidate the collateral.
- Two loans to one borrower totaling approximately $1.3 million representing land within the Bank's primary market area. The Bank is currently in negotiation with the borrower to take possession of the collateral and liquidate it.
- One loan totaling approximately $1.1 million. A third party has expressed interest in assuming responsibility for the loan. The Bank currently anticipates the loan to pay-down during the first quarter of 2010.
Agriculture
Balances within this category can be attributed in large part to one borrower. The Bank is currently working with this borrower to liquidate the collateral.
Other Real Estate Owned ("OREO")
At December 31, 2009, OREO balances stood at approximately $0.9 million, approximately $1.7 million lower than that reported at September 30, 2009 and approximately $0.4 million lower than that reported at December 31, 2008. There were no new additions to OREO during the fourth quarter. The quarter over quarter variance in the balance of OREO can be attributed in large part to the disposition on one property that was transferred to OREO status in the third quarter of 2009.
The following provides a summary of the change in OREO balances for the three and twelve months ended December 31, 2009:
| | QTD | YTD |
| (dollars in thousands) | 12/31/2009 | 12/31/2009 |
| Beginning balance | $2,607 | $1,337 |
| Additions | -- | 9,595 |
| Dispositions | (1,614) | (8,521) |
| Additional write-downs | (47) | (1,465) |
| | | |
| Balance at end of period | $946 | $946 |
Capital Position
At December 31, 2009, the Company's Tier I and Total Risk-Based Capital totaled approximately $79.7 million and $89.8 million, respectively. The Tier I Capital ratio was 9.92%, while the total Risk-Based Capital ratio was 11.18% at quarter end. The Tier I and Total Risked Based totals were negatively impacted by approximately $6.3 million in disallowed deferred tax assets. As of December 31, 2009, the Company was well capitalized by regulatory standards.
Shareholders' equity was approximately $85.6 million at December 31, 2009, compared to $87.8 million reported at September 30, 2009 and $70.0 million reported at December 31, 2008. Book value per common share was $8.31 at December 31, 2009, compared to the $8.61 per share reported at September 31, 2009 and $9.03 per share reported at December 31, 2008.
Liquidity
The liquidity ratio was 20.88% at December 31, 2009, compared to 19.65% at September 30, 2009 and 6.79% at December 31, 2008. At December 31, 2009, the Bank had remaining borrowing capacity with the FHLB in the approximate amount of $63.2 million. The Bank also has the ability to purchase Fed Funds in the aggregate amount of $15.0 million as of December 31, 2009 and is currently working to collateralize a borrowing facility with the FRB.
Balance Sheet
Total deposits increased approximately $21.9 million during the quarter and approximately $171.9 million year-to-date. Exclusive of brokered deposits, total deposits increased approximately $32.9 million during the quarter and approximately $214.6 million during all of 2009. Strong core deposit growth allowed the Bank to pay down approximately $11.0 million in brokered funds during the quarter and approximately $42.6 million for the year. 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 twelve months ended December 31, 2009, the Bank's cost of funds was 1.25% and 1.27%, respectively compared to 1.60% and 1.79% for the same periods ended a year earlier. All 15 branch offices continued to experience solid deposit growth during the fourth quarter, further building on a year in which total deposits exclusive of brokered climbed 38.7%. Deposit growth for the quarter was rather broad-based among categories, with increases in savings, NOW, money market and time certificates. Although the Bank has been able to attract and retain additional core non-interest bearing DDA, the balance of non-interest bearing DDA declined slightly during the fourth quarter, resulting from lower balances of certain accounts the Bank monitors frequently and considers to be volatile.
Core deposits (non-interest bearing DDA, NOW, savings, money market, and CD's less than $100,000) totaled approximately $657.0 million at December 31, 2009, an increase of approximately $30.7 million and $157.1 million for the fourth quarter and all of 2009, respectively. At December 31, 2009, core deposits represented 84.7% of total deposits, compared to 83.1% at September 30, 2009 and 82.8% at December 31, 2008.
FHLB borrowings totaled $65.0 million as of December 31, 2009, unchanged from the prior quarter and down approximately $44.0 million from December 31, 2008. The cost of borrowings from the FHLB averaged 0.59% for the quarter and 0.76% year to date.
Loan growth continues to be modest in all of our primary markets, and we continue to 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 is very conservative with the loans we fund and we are requiring clients to commit more capital to certain projects. Gross loan balances in the fourth quarter increased approximately $23.4 million over that reported for the third quarter of 2009. Loan growth during the quarter can be attributed in large part to the funding of several loans in the categories of commercial real estate, farmland and agriculture.
The securities portfolio increased by $18.3 million during the fourth quarter to $121.2 million. For 2009, the balance of the portfolio increased approximately $70.4 million. The Bank continues to invest what its deems to be appropriate levels of excess liquidity in relatively short-term agency backed cash flow generating instruments in the absence of loan originations in an effort to maximize the yield on earning assets. Unrealized losses, net-of-tax, increased in the fourth quarter by approximately $0.5 million driven in part by a decline in value of certain municipal securities. Management periodically evaluates investments in the portfolio for other than temporary impairment and more specifically when conditions warrant such an evaluation. During the fourth quarter, Management contracted with an independent third party to perform an evaluation of certain non-agency CMO holdings in the portfolio. Based on this evaluation, Management determined that four securities were other tha n temporarily impaired as of December 31, 2009. As a result, the Bank recognized related impairment losses of approximately $372 thousand in the fourth quarter. As of December 31, 2009, the majority of unrealized losses in the investment portfolio can be attributed to holdings of certain mortgage related securities. Based on pre-purchase cash flow analyses, cash flows on these securities are within a range of Management's expectations and Management does not believe unrealized losses on these securities are other than temporary. The investment portfolio contains no collateralized debt obligations.
Net Interest Margin
For the three and twelve months ended December 31, 2009, the net interest margin was 4.84% and 4.77%, respectively, compared to 5.04% and 5.21% for the same periods ended a year earlier. When compared to that reported for the third quarter of 2009, the net interest margin increased approximately 50 basis points. This is primarily due to the recognition of approximately $0.8 million in interest income that was reversed from earnings in the third quarter related to a previously disclosed loan placed on non-accrual due to the treatment of an interest reserve. Following the borrower's payment to bring the loan current with all previously accrued interest, the Bank moved the loan back to accruing status in the fourth quarter. The net interest margin was also positively impacted during the fourth quarter of 2009 by other factors including: the deployment of excess liquidity to fund new loans and the purchase of short-term cash flow generating investments as well as a 5 basis point decline in t he overall cost of interest bearing liabilities from the previous quarter. Year over year declines in the net interest margin can be attributed to lower earning asset yields stemming from a lower rate environment for all of 2009 when compared to 2008 as well as interest reversals associated with loans placed on non-accrual during 2009. Net interest reversals for the three and twelve months ended December 31, 2009 totaled approximately $203 thousand and $696 thousand, respectively. Interest reversals negatively impacted the net interest margin by approximately 9 basis points for both the fourth quarter and all of 2009 when compared to the same periods ended in 2008.
Operating Results
Total net revenue, consisting of net interest income before provisions for loan losses and non-interest income, was $12.3 million in the fourth quarter, up approximately $1.5 million from the third quarter and $1.5 million from that reported a year ago. The quarter over quarter increase can be attributed to the recognition of $0.8 million in interest income that was reversed in the third quarter, as previously mentioned, as well as higher average gross loan and investment balances. The additional income earned from higher average loan and investment balances more than offset the quarter over quarter increase in interest expense, resulting from continued growth in interest checking and money market balances. Interest expense totaled approximately $2.7 million for the fourth quarter, up approximately $0.1 million from that reported for the third quarter and approximately $0.2 million lower than that reported for the same quarter to date period in 2008. The year over year decline in interes t expense can be attributed in large part to lower offering rates during 2009 and the re-pricing of floating rate deposit balances.
For all of 2009, total net revenues were approximately $45.8 million, an increase of approximately $2.0 million from that reported for 2008. The primary factor behind the year over year increase was a $2.5 million or 68 basis point decrease in the cost of interest bearing liabilities from the year ago period. Contributing significantly to the year over year decline in interest expense was a $1.3 million or 175 basis point decrease in the cost of borrowings with the FHLB. Contributing further to the year over year decline in interest expense was the re-pricing of floating rate deposit balances such as savings and money market and the pay-down of brokered funds, contributing approximately $0.9 million to the year over year decline in interest expense.
Non-interest income totaled approximately $1.4 million for the fourth quarter. This represents declines of approximately $148 thousand and $53 thousand when compared to that reported for the third quarter of 2009 and that reported for the fourth quarter of 2008. As previously mentioned, during the fourth quarter, the Bank determined several investment securities to be other than temporarily impaired and as a result recognized approximately $372 thousand in impairment charges related to these securities. Exclusive of these charges, non-interest income for the fourth quarter would have been approximately $1.8 million or approximately $0.2 million and $0.3 million higher than that reported for the third quarter of 2009 and the fourth quarter of 2008. Continued strength in the Bank's mortgage origination business contributed approximately $98 thousand and $142 thousand to the quarter over quarter and year over year increases within this category. Also helping to offset the declines in n on-interest income were gains the Bank recognized in connection with the sale of SBA loans, totaling approximately $143 thousand for the fourth quarter.
Non-interest income for all of 2009 totaled approximately $6.2 million, substantially unchanged from that reported for 2008. Exclusive of other than temporary impairment charges recognized in the fourth quarter of 2009, non-interest income would have been approximately $6.6 million or $0.4 million higher than that reported for 2008. An increase of approximately $685 thousand in mortgage origination income, higher ATM / debit card transaction income as well as gains on the sale of investment securities contributed to the year over year increase within this category, exclusive of OTTI charges. The year over year decline in service charges on deposit accounts can be attributed to lower NSF charges. Management believes the decline within this category can be attributed to better cash management by business customers in an effort to control costs in the current economic environment. Declines in other commissions and fees can be attributed to the absence of income the Bank recognized in 2 008 related to the Visa, Inc. IPO in the approximate amount $0.3 million.
Non-interest expense for the fourth quarter of 2009 totaled approximately $8.8 million or $1.4 million lower than that reported for the third quarter and $1.6 million higher than that reported for the fourth quarter of 2008. The quarter over quarter decline can be attributed in large part to the absence of a $1.3 million write-down of an OREO property the Bank recognized in the third quarter of 2009. Additionally, lower regulatory assessment costs contributed further to the quarter over quarter decline in non-interest expenses, resulting from the absence of a one-time charge of approximately $0.5 million related to the true-up of FDIC assessment costs in the third quarter. Increases in non-interest expenses for the fourth quarter when compared to that reported for the fourth quarter of 2008 can be attributed in large part to additional costs incurred related to problem assets as well as additional salaries and benefits costs related to the growth of the Bank and the further expansion of the B ank's Special Assets department. Additionally higher regulatory FDIC assessment premiums contributed to the year over year increase.
For all of 2009 non-interest expenses totaled approximately $34.5 million, approximately $5.1 million higher than that reported for 2008. The year over year increase can be attributed in large part to higher loan department costs, including a $1.3 million write-down of an OREO property, previously mentioned, and significantly higher costs incurred related to the management of problem assets. As previously mentioned, higher regulatory assessment costs also contributed significantly to the year over year increase within non-interest expense. Higher occupancy costs can be attributed in large part to the re-location of one branch as well as additional depreciation expenses associated with fixed assets purchased for this re-location. Exclusive of several one-time charges including the OREO write-down mentioned above as well as the one-time costs associated with FDIC assessments, non-interest expenses for 2009 would have totaled approximately $32.2 million or approximately $2.8 million higher than that reported for 2008.
The efficiency ratio was 70.47% in the fourth quarter of 2009 compared to 95.12% in the previous quarter and 66.43% in the fourth quarter a year ago. Net of one-time expenses, such as write-downs on and other expenses incurred associated with OREO as well as one-time charges associated with FDIC assessments previously mentioned, the efficiency ratio would have been 69.10% for the fourth quarter. For all of 2009 the efficiency ratio was 75.23% compared to 67.27% for all of 2008. Net of the one-time items mentioned above, the efficiency ratio would have been 68.27% for 2009. The efficiency ratio measures operating expenses as a percent of total net revenues and excludes gains and losses included in non-interest income.
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.
The Heritage Oaks Bancorp logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7045
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 markets in which the Company operates, and the response of the federal and state government and our regulators thereto, 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 inform ation 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 |
| Consolidated Balance Sheets |
| | | | | | |
| | (unaudited) | (unaudited) | (audited) | Percentage Change Vs. |
| (dollar amounts in thousands) | 12/31/2009 | 9/30/2009 | 12/31/2008 | 9/30/2009 | 12/31/2008 |
| Assets | | | | | |
| Cash and due from banks | $19,383 | $18,155 | $17,921 | 6.8% | 8.2% |
| Federal funds sold | 21,355 | 45,740 | 6,650 | -53.3% | 221.1% |
| Total cash and cash equivalents | 40,738 | 63,895 | 24,571 | -36.2% | 65.8% |
| | | | | | |
| Interest bearing deposits with other banks | 119 | 119 | 119 | 0.0% | 0.0% |
| Securities available for sale | 121,180 | 102,871 | 50,762 | 17.8% | 138.7% |
| Federal Home Loan Bank stock, at cost | 5,828 | 5,828 | 5,123 | 0.0% | 13.8% |
| Loans held for sale | 9,487 | 7,778 | 7,939 | 22.0% | 19.5% |
| Loans, net (1) | 715,482 | 692,359 | 668,034 | 3.3% | 7.1% |
| Property, premises and equipment | 6,779 | 6,984 | 6,827 | -2.9% | -0.7% |
| Deferred tax assets | 10,861 | 12,379 | 7,708 | -12.3% | 40.9% |
| Bank owned life insurance | 12,549 | 11,432 | 10,737 | 9.8% | 16.9% |
| Goodwill | 11,049 | 11,049 | 11,049 | 0.0% | 0.0% |
| Core deposit intangible | 2,642 | 2,904 | 3,691 | -9.0% | -28.4% |
| Other real estate owned | 946 | 2,607 | 1,337 | -63.7% | -29.2% |
| Other assets | 9,321 | 6,600 | 7,691 | 41.2% | 21.2% |
| Total assets | $946,981 | $926,805 | $805,588 | 2.2% | 17.6% |
| | | | | | |
| Liabilities | | | | | |
| Deposits | | | | | |
| Non interest bearing demand | $174,635 | $181,670 | $147,044 | -3.9% | 18.8% |
| Savings, NOW, and money market | 365,602 | 329,186 | 296,488 | 11.1% | 23.3% |
| Time deposits of $100K or more | 117,420 | 125,230 | 75,111 | -6.2% | 56.3% |
| Time deposits under $100K | 117,808 | 117,443 | 84,878 | 0.3% | 38.8% |
| Total deposits | 775,465 | 753,529 | 603,521 | 2.9% | 28.5% |
| Short term FHLB borrowing | 65,000 | 65,000 | 99,000 | 0.0% | -34.3% |
| Long term FHLB borrowing | -- | -- | 10,000 | -- | -100.0% |
| Securities sold under agreement to repurchase | -- | -- | 2,796 | -- | -100.0% |
| Junior subordinated debentures | 13,403 | 13,403 | 13,403 | 0.0% | 0.0% |
| Other liabilities | 7,558 | 7,087 | 6,836 | 6.6% | 10.6% |
| Total liabilities | 861,426 | 839,019 | 735,556 | 2.7% | 17.1% |
| | | | | | |
| Stockholders' equity | | | | | |
| Senior preferred stock, no par value;$1,000 per share stated value 5,000,000 shares authorized, 21,000 issued and outstanding | 19,431 | 19,341 | -- | 0.5% | 100.0% |
| Common stock, no par value; 20,000,000 shares authorized; issued and outstanding:7,771,952; 7,760,505; and 7,753,078 as of December 31, 2009; September 30, 2009; and December 31, 2008, respectively | 48,747 | 48,695 | 48,649 | 0.1% | 0.2% |
| Additional paid in capital | 3,242 | 3,172 | 1,055 | 2.2% | 207.3% |
| Retained earnings | 15,211 | 17,174 | 21,420 | -11.4% | -29.0% |
| Accumulated other comprehensive income | (1,076) | (596) | (1,092) | -80.5% | 1.5% |
| Total stockholders' equity | 85,555 | 87,786 | 70,032 | -2.5% | 22.2% |
| Total liabilities and stockholders' equity | $946,981 | $926,805 | $805,588 | 2.2% | 17.6% |
| |
| (1) Loans are net of deferred loan fees of $1,825; $1,635; $1,701 and allowance for loan losses of $15,923; $15,873; $10,412 for December 31, 2009, September 30, 2009, and December 31, 2008, respectively. |
| 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) | 12/31/2009 | 9/30/2009 | 12/31/2008 | 9/30/2009 | 12/31/2008 |
| Interest Income | | | | | |
| Interest and fees on loans | $12,329 | $10,703 | $11,484 | 15.2% | 7.4% |
| Interest on investment securities | | | | | |
| Mortgage backed securities | 979 | 871 | 489 | 12.4% | 100.2% |
| Obligations of state and political subdivisions | 255 | 247 | 186 | 3.2% | 37.1% |
| Interest on time deposits with other banks | -- | 1 | 1 | -100.0% | -100.0% |
| Interest on federal funds sold | 32 | 21 | 10 | 52.4% | 220.0% |
| Interest on other securities | 4 | 17 | 53 | -76.5% | -92.5% |
| Total interest income | 13,599 | 11,860 | 12,223 | 14.7% | 11.3% |
| Interest Expense | | | | | |
| Interest on savings, NOW and money market deposits | 1,175 | 984 | 963 | 19.4% | 22.0% |
| Interest on time deposits in denominations of $100K or more | 635 | 695 | 611 | -8.6% | 3.9% |
| Interest on time deposits under $100K | 661 | 675 | 616 | -2.1% | 7.3% |
| Other borrowings | 227 | 241 | 681 | -5.8% | -66.7% |
| Total interest expense | 2,698 | 2,595 | 2,871 | 4.0% | -6.0% |
| Net interest income before provision for loan losses | 10,901 | 9,265 | 9,352 | 17.7% | 16.6% |
| Provision for loan losses | 6,500 | 9,756 | 6,000 | -33.4% | 8.3% |
| Net interest income after provision for loan losses | 4,401 | (491) | 3,352 | -- | 31.3% |
| Non Interest Income | | | | | |
| Service charges on deposit accounts | 751 | 750 | 797 | 0.1% | -5.8% |
| ATM/Debit and credit card transaction/interchange fees | 253 | 253 | 223 | 0.0% | 13.5% |
| Bancard | 41 | 48 | 48 | -14.6% | -14.6% |
| Mortgage origination fees | 343 | 245 | 201 | 40.0% | 70.6% |
| Earnings on bank owned life insurance | 134 | 124 | 122 | 8.1% | 9.8% |
| Other commissions and fees | 101 | 92 | 107 | 9.8% | -5.6% |
| Other than temporary impairment losses on investment securities: | | | | | |
| Total impairment loss on investment securities | (1,956) | -- | -- | 100.0% | -- |
| Non credit related losses recognized in other comprehensive income | 1,584 | -- | -- | 100.0% | -- |
| Net impairment losses on investment securities | (372) | -- | -- | 100.0% | -- |
| Gain on sale of investment securities | -- | 211 | -- | -100.0% | -- |
| Gain/loss on sale of OREO property | 51 | (200) | -- | -- | 100.0% |
| Gain on sale of SBA loans | 143 | 70 | -- | 104.3% | 100.0% |
| Total non interest income | 1,445 | 1,593 | 1,498 | -9.3% | -3.5% |
| Non Interest Expense | | | | | |
| Salaries and employee benefits | 3,985 | 3,969 | 3,664 | 0.4% | 8.8% |
| Occupancy | 951 | 843 | 847 | 12.8% | 12.3% |
| Equipment | 379 | 365 | 352 | 3.8% | 7.7% |
| Promotional | 127 | 191 | 143 | -33.5% | -11.2% |
| Data processing | 694 | 687 | 706 | 1.0% | -1.7% |
| Stationary and supplies | 117 | 111 | 105 | 5.4% | 11.4% |
| Regulatory fees | 453 | 851 | 135 | -46.8% | 235.6% |
| Audit and tax costs | 148 | 182 | 122 | -18.7% | 21.3% |
| Amortization of core deposit intangible | 262 | 262 | 215 | 0.0% | 21.9% |
| Director fees | 112 | 80 | 80 | 40.0% | 40.0% |
| Communication | 76 | 76 | 85 | 0.0% | -10.6% |
| Loan department expense | 447 | 1,844 | 120 | -75.8% | 272.5% |
| Other | 1,075 | 790 | 634 | 36.1% | 69.6% |
| Total non interest expense | 8,826 | 10,251 | 7,208 | -13.9% | 22.4% |
| (Loss) before provision for income taxes | (2,980) | (9,149) | (2,358) | -67.4% | 26.4% |
| Provision for income taxes | (1,368) | (3,907) | (1,104) | -65.0% | 23.9% |
| Net (loss) | (1,612) | (5,242) | (1,254) | -69.2% | 28.5% |
| Dividends and accretion on preferred stock | 352 | 352 | -- | 0.0% | -- |
| Net (loss) available to common shareholders | $(1,964) | $(5,594) | $(1,254) | -64.9% | 56.6% |
| | | | | | |
| Shares Outstanding | | | | | |
| Basic | 7,704,060 | 7,699,377 | 7,660,342 | | |
| Diluted | 7,704,060 | 7,699,377 | 7,660,342 | | |
| (Loss) Per Common Share | | | | | |
| Basic | $(0.25) | $(0.73) | $(0.16) | | |
| Diluted | $(0.25) | $(0.73) | $(0.16) | | |
| Heritage Oaks Bancorp |
| Consolidated Statements of Income |
| |
| | (unaudited) | (audited) | |
| | For the Twelve Months Ended | Percentage Change Vs. |
| (dollar amounts in thousands except per share data) | 12/31/2009 | 12/31/2008 | 12/31/2008 |
| Interest Income | | | |
| Interest and fees on loans | $45,595 | $47,038 | -3.1% |
| Interest on investment securities | | | |
| Mortgage backed securities | 3,023 | 1,970 | 53.5% |
| Obligations of state and political subdivisions | 896 | 741 | 20.9% |
| Interest on time deposits with other banks | 3 | 8 | -62.5% |
| Interest on federal funds sold | 70 | 140 | -50.0% |
| Interest on other securities | 37 | 253 | -85.4% |
| Total interest income | 49,624 | 50,150 | -1.0% |
| Interest Expense | | | |
| Interest on savings, NOW and money market deposits | 3,815 | 4,375 | -12.8% |
| Interest on time deposits in denominations of $100K or more | 2,505 | 2,436 | 2.8% |
| Interest on time deposits under $100K | 2,564 | 2,892 | -11.3% |
| Other borrowings | 1,165 | 2,861 | -59.3% |
| Total interest expense | 10,049 | 12,564 | -20.0% |
| Net interest income before provision for loan losses | 39,575 | 37,586 | 5.3% |
| Provision for loan losses | 21,066 | 12,215 | 72.5% |
| Net interest income after provision for loan losses | 18,509 | 25,371 | -27.0% |
| Non Interest Income | | | |
| Service charges on deposit accounts | 2,965 | 3,284 | -9.7% |
| ATM/Debit Card transaction/interchange fees | 976 | 895 | 9.1% |
| Bancard | 180 | 231 | -22.1% |
| Mortgage origination fees | 1,253 | 568 | 120.6% |
| Earnings on bank owned life insurance | 504 | 474 | 6.3% |
| Other commissions and fees | 426 | 717 | -40.6% |
| Other than temporary impairment losses on investment securities: | | | |
| Total impairment loss on investment securities | (1,956) | -- | -- |
| Non credit related losses recognized in other comprehensive income | 1,584 | -- | -- |
| Net impairment losses on investment securities | (372) | -- | -- |
| Gain on sale of investment securities | 333 | 37 | 800.0% |
| Loss on sale of OREO property | (280) | -- | -- |
| Gain on sale of SBA loans | 213 | -- | -- |
| Total non interest income | 6,198 | 6,206 | -0.1% |
| Non Interest Expense | | | |
| Salaries and employee benefits | 15,502 | 15,561 | -0.4% |
| Occupancy | 3,472 | 3,138 | 10.6% |
| Equipment | 1,445 | 1,404 | 2.9% |
| Promotional | 644 | 823 | -21.7% |
| Data processing | 2,743 | 2,704 | 1.4% |
| Stationary and supplies | 431 | 428 | 0.7% |
| Regulatory fees | 1,984 | 475 | 317.7% |
| Audit and tax costs | 625 | 464 | 34.7% |
| Amortization of core deposit intangible | 1,049 | 861 | 21.8% |
| Director fees | 355 | 318 | 11.6% |
| Communication | 275 | 324 | -15.1% |
| Loan department costs | 2,803 | 258 | 986.4% |
| Other | 3,188 | 2,676 | 19.1% |
| Total non interest expenses | 34,516 | 29,434 | 17.3% |
| (Loss) / income before provision for income taxes | (9,809) | 2,143 | -557.7% |
| Provision for income taxes | (4,564) | 497 | -1018.3% |
| Net (loss) / income | (5,245) | 1,646 | -418.7% |
| Dividends and accretion on preferred stock | 964 | -- | -- |
| Net (loss) / income available to common shareholders | $(6,209) | $1,646 | -477.2% |
| | | | |
| Shares Outstanding | | | |
| Basic | 7,697,234 | 7,641,726 | |
| Diluted | 7,697,234 | 7,753,013 | |
| (Loss) / Earnings Per Common Share | | | |
| Basic | (0.81) | $0.22 | |
| Diluted | (0.81) | $0.21 | |
| | Three Months Ended |
| AVERAGE BALANCES AND RATES | 12/31/2009 | 9/30/2009 | 12/31/2008 |
| (dollars in thousands) | Balance | Yield/Rate | Balance | Yield/Rate | Balance | Yield/Rate |
| Interest Earning Assets | | | | | | |
| Investments with other banks | $119 | 1.56% | $119 | 3.33% | $119 | 3.34% |
| Federal funds sold | 56,948 | 0.22% | 33,895 | 0.25% | 5,774 | 0.69% |
| Investment securities - taxable | 89,700 | 4.35% | 75,563 | 4.66% | 40,366 | 5.34% |
| Investment securities - non taxable | 23,042 | 4.39% | 22,653 | 4.33% | 16,650 | 4.44% |
| Loans | 724,008 | 6.76% | 713,810 | 5.95% | 675,742 | 6.76% |
| Total earning assets | 893,817 | 6.04% | 846,040 | 5.56% | 738,651 | 6.58% |
| Allowance for loan losses | (16,613) | | (11,969) | | (10,002) | |
| Other assets | 72,672 | | 71,976 | | 66,340 | |
| Total assets | 949,876 | | 906,047 | | $ 794,989 | |
| | | | | | | |
| Interest Bearing Liabilities | | | | | | |
| Interest bearing demand | 72,967 | 1.10% | 67,825 | 0.92% | $72,038 | 0.57% |
| Savings | 27,087 | 0.32% | 25,619 | 0.28% | 22,236 | 0.30% |
| Money market | 250,421 | 1.50% | 209,634 | 1.52% | 179,009 | 1.69% |
| Time deposits | 231,501 | 2.15% | 219,253 | 2.32% | 139,753 | 2.90% |
| Brokered money market | 1,696 | 0.70% | 2,826 | 0.70% | 26,218 | 1.24% |
| Brokered time deposits | 10,763 | 1.44% | 23,426 | 1.46% | 21,908 | 3.76% |
| Total interest bearing deposits | 594,435 | 1.65% | 548,583 | 1.70% | 461,162 | 1.89% |
| Federal funds purchased | -- | 0.00% | -- | 0.00% | 1,402 | 1.42% |
| Securities sold under agreement to repurchase | -- | 0.00% | -- | 0.00% | 2,642 | 1.20% |
| Federal Home Loan Bank borrowings | 65,000 | 0.59% | 65,000 | 0.63% | 83,565 | 2.19% |
| Federal reserve bank borrowings | 54 | 0.50% | -- | 0.00% | -- | 0.00% |
| Junior subordinated debentures | 13,403 | 3.88% | 13,403 | 4.08% | 13,403 | 6.14% |
| Total borrowed funds | 78,457 | 1.15% | 78,403 | 1.22% | 101,012 | 2.68% |
| Total interest bearing liabilities | 672,892 | 1.59% | 626,986 | 1.64% | 562,174 | 2.03% |
| Non interest bearing demand | 180,270 | 0.00% | 178,293 | 0.00% | 153,432 | 0.00% |
| Total funding | 853,162 | 1.25% | 805,279 | 1.28% | 715,606 | 1.60% |
| Other liabilities | 7,916 | | 8,490 | | 7,388 | |
| Total liabilities | 861,078 | | 813,769 | | 722,994 | |
| Total shareholders' equity | 88,798 | | 92,278 | | 71,995 | |
| Total liabilities and shareholders' equity | $ 949,876 | | $ 906,047 | | $ 794,989 | |
| | | | | | | |
| Net interest margin | | 4.84% | | 4.34% | | 5.04% |
| | Twelve Months Ended |
| AVERAGE BALANCES AND RATES | 12/31/2009 | 12/31/2008 |
| (dollars in thousands) | Balance | Yield/Rate | Balance | Yield/Rate |
| Interest Earning Assets | | | | |
| Investments with other banks | $119 | 2.52% | $214 | 3.74% |
| Federal funds sold | 31,254 | 0.22% | 6,583 | 2.13% |
| Investment securities - taxable | 67,197 | 4.55% | 42,080 | 5.28% |
| Investment securities - non taxable | 20,589 | 4.35% | 17,079 | 4.34% |
| Loans | 709,931 | 6.42% | 656,105 | 7.17% |
| Total earning assets | 829,090 | 5.99% | 722,061 | 6.95% |
| Allowance for loan losses | (12,346) | | (7,845) | |
| Other assets | 70,889 | | 65,359 | |
| Total assets | $887,633 | | $779,575 | |
| | | | | |
| Interest Bearing Liabilities | | | | |
| Interest bearing demand | 66,652 | 0.82% | $74,170 | 0.60% |
| Savings | 24,665 | 0.24% | 25,678 | 0.81% |
| Money market | 202,927 | 1.51% | 186,625 | 1.95% |
| Time deposits | 195,054 | 2.39% | 142,124 | 3.30% |
| Brokered money market | 19,416 | 0.72% | 6,590 | 1.24% |
| Brokered time deposits | 25,066 | 1.64% | 17,372 | 3.66% |
| Total interest bearing deposits | 533,780 | 1.66% | 452,559 | 2.14% |
| Federal funds purchased | 188 | 1.06% | 3,406 | 2.55% |
| Securities sold under agreement to repurchase | 650 | 0.15% | 2,283 | 2.01% |
| Federal Home Loan Bank borrowings | 76,953 | 0.76% | 76,881 | 2.51% |
| Federal reserve bank borrowings | 14 | 0.49% | -- | 0.00% |
| Junior subordinated debentures | 13,403 | 4.28% | 13,403 | 5.93% |
| Total borrowed funds | 91,208 | 1.28% | 95,973 | 2.98% |
| Total interest bearing liabilities | 624,988 | 1.61% | 548,532 | 2.29% |
| Non interest bearing demand | 167,226 | | 151,529 | |
| Total funding | 792,214 | 1.27% | 700,061 | 1.79% |
| Other liabilities | 8,465 | | 7,766 | |
| Total liabilities | 800,679 | | 707,827 | |
| Total shareholders' equity | 86,954 | | 71,748 | |
| Total liabilities and shareholders' equity | $887,633 | | $779,575 | |
| | | | | |
| Net interest margin | | 4.77% | | 5.21% |
| Additional Financial Information | | | | | |
| (dollar amounts in thousands) | | Percentage Change Vs. |
| LOANS | 12/31/2009 | 9/30/2009 | 12/31/2008 | 9/30/2009 | 12/31/2008 |
| Real Estate Secured | | | | | |
| Multi-family residential | $20,631 | $17,323 | $16,206 | 19.1% | 27.3% |
| Residential 1 to 4 family | 25,601 | 24,580 | 23,910 | 4.2% | 7.1% |
| Home equity lines of credit | 29,780 | 29,189 | 26,409 | 2.0% | 12.8% |
| Commercial | 338,239 | 317,811 | 285,631 | 6.4% | 18.4% |
| Farmland | 13,079 | 9,842 | 10,723 | 32.9% | 22.0% |
| Commercial | | | | | |
| Commercial and industrial | 157,677 | 166,618 | 157,674 | -5.4% | 0.0% |
| Agriculture | 17,920 | 14,819 | 13,744 | 20.9% | 30.4% |
| Other | 238 | 368 | 620 | -35.3% | -61.6% |
| Construction | | | | | |
| Single family residential | 15,538 | 14,669 | 11,414 | 5.9% | 36.1% |
| Single family residential - Spec. | 3,400 | 5,757 | 15,395 | -40.9% | -77.9% |
| Tract | 2,215 | 2,215 | 2,431 | 0.0% | -8.9% |
| Multi-family | 2,300 | 5,575 | 5,808 | -58.7% | -60.4% |
| Hospitality | 14,306 | 14,252 | 18,630 | 0.4% | -23.2% |
| Commercial | 27,128 | 22,997 | 21,484 | 18.0% | 26.3% |
| Land | 56,300 | 54,619 | 61,681 | 3.1% | -8.7% |
| Installment loans to individuals | 8,327 | 8,863 | 7,851 | -6.0% | 6.1% |
| All other loans (including overdrafts) | 551 | 370 | 536 | 48.9% | 2.8% |
| Total gross loans | $733,230 | $709,867 | $680,147 | 3.3% | 7.8% |
| Deferred loan fees | 1,825 | 1,635 | 1,701 | 11.6% | 7.3% |
| Allowance for loan losses | 15,923 | 15,873 | 10,412 | 0.3% | 52.9% |
| Net loans | $715,482 | $692,359 | $668,034 | 3.3% | 7.1% |
| Loans held for sale | $9,487 | $7,778 | $7,939 | 22.0% | 19.5% |
| | | | | | |
| | For the Quarters Ended | Percentage Change Vs. |
| ALLOWANCE FOR LOAN LOSSES | 12/31/2009 | 9/30/2009 | 12/31/2008 | 9/30/2009 | 12/31/2008 |
| | | | | | |
| Balance, beginning of period | $15,873 | $11,106 | $10,350 | 42.9% | 53.4% |
| Provision expense | 6,500 | 9,756 | 6,000 | -33.4% | 8.3% |
| Loans charged off | | | | | |
| Commercial real estate | -- | 41 | 35 | -100.0% | -100.0% |
| Residential 1 to 4 family | 136 | 304 | 555 | -55.3% | -75.5% |
| Commercial and industrial | 3,681 | 503 | 2,998 | 631.8% | 22.8% |
| Agriculture | 93 | 1,909 | -- | -95.1% | 100.0% |
| Construction | -- | 397 | 914 | -100.0% | -100.0% |
| Land | 2,588 | 1,801 | 1,434 | 43.7% | 80.5% |
| Other | 20 | 42 | 5 | -52.4% | 300.0% |
| Total charge offs | 6,518 | 4,997 | 5,941 | 30.4% | 9.7% |
| Recoveries of loans previously charged off | 68 | 8 | 3 | 750.0% | 2166.7% |
| Balance, end of period | $15,923 | $15,873 | $10,412 | 0.3% | 52.9% |
| | | | | | |
| Net charge-offs | $6,450 | $4,989 | $5,938 | 29.3% | 8.6% |
| | | | | | |
| | | Percentage Change Vs. |
| NON-PERFORMING ASSETS | 12/31/2009 | 9/30/2009 | 12/31/2008 | 9/30/2009 | 12/31/2008 |
| | | | | | |
| Loans on non-accrual status | | | | | |
| Commercial real estate | $11,083 | $5,747 | $1,961 | 92.8% | 465.2% |
| Residential 1-4 family | 1,026 | 1,272 | 265 | -19.3% | 287.2% |
| Home equity lines of credit | 320 | 320 | 320 | 0.0% | 0.0% |
| Commercial and industrial | 8,763 | 5,958 | 7,060 | 47.1% | 24.1% |
| Agriculture | 3,151 | 3,214 | -- | -2.0% | 100.0% |
| Construction | 3,838 | 3,838 | 5,990 | 0.0% | -35.9% |
| Land | 6,298 | 18,993 | 2,720 | -66.8% | 131.5% |
| Other | 47 | 51 | 11 | -7.8% | 327.3% |
| Total non-accruing loans | $34,526 | $39,393 | $18,327 | -12.4% | 88.4% |
| Loans more than 90 days delinquent, still accruing | 151 | 445 | 348 | -66.1% | -56.6% |
| Total non-performing loans | 34,677 | 39,838 | 18,675 | -13.0% | 85.7% |
| Other real estate owned (OREO) | 946 | 2,607 | 1,337 | -63.7% | -29.2% |
| Total non-performing assets | $35,623 | $42,445 | $20,012 | -16.1% | 78.0% |
| | | | | | |
| | | Percentage Change Vs. |
| DEPOSITS | 12/31/2009 | 9/30/2009 | 12/31/2008 | 9/30/2009 | 12/31/2008 |
| | | | | | |
| Non-interest bearing demand | $174,635 | $181,670 | $147,044 | -3.9% | 18.8% |
| Interest-bearing demand | 77,765 | 70,092 | 72,952 | 10.9% | 6.6% |
| Regular savings accounts | 27,166 | 26,088 | 21,835 | 4.1% | 24.4% |
| Money market accounts | 259,671 | 231,005 | 173,199 | 12.4% | 49.9% |
| Brokered money market funds | 1,000 | 2,001 | 28,502 | -50.0% | -96.5% |
| Total interest-bearing transaction & savings accounts | 365,602 | 329,186 | 296,488 | 11.1% | 23.3% |
| Time deposits | 230,228 | 227,670 | 139,872 | 1.1% | 64.6% |
| Brokered time deposits | 5,000 | 15,003 | 20,117 | -66.7% | -75.1% |
| Total deposits | $775,465 | $753,529 | $603,521 | 2.9% | 28.5% |
| | | | | | |
| | Three Months Ended | Twelve Months Ended |
| PROFITABILITY / PERFORMANCE RATIOS | 12/31/2009 | 9/30/2009 | 12/31/2008 | 12/31/2009 | 12/31/2008 |
| Operating efficiency (1) | 70.47% | 95.12% | 66.43% | 75.23% | 67.27% |
| Operating efficiency (2) | 69.10% | 73.81% | 66.03% | 68.27% | 67.27% |
| Return on average equity | -7.20% | -22.54% | -6.93% | -6.03% | 2.29% |
| Return on average common equity | -11.22% | -30.41% | -6.93% | -8.65% | 2.29% |
| Return on average tangible equity | -8.44% | -25.93% | -8.65% | -7.06% | 2.91% |
| Return on average tangible common equity | -13.82% | -36.44% | -8.65% | -10.51% | 2.91% |
| Return on average assets | -0.67% | -2.30% | -0.63% | -0.59% | 0.21% |
| Non interest income to average assets | 0.60% | 0.70% | 0.75% | 0.70% | 0.80% |
| Non interest expense to average assets | 3.69% | 4.49% | 3.61% | 3.89% | 3.78% |
| Net interest income to average assets | 4.55% | 4.06% | 4.68% | 4.46% | 4.82% |
| Non interest income to total net revenue | 10.48% | 12.79% | 13.81% | 11.93% | 14.17% |
| Interest rate yield on interest earnings assets | 6.04% | 5.56% | 6.58% | 5.99% | 6.95% |
| Cost of interest bearing liabilities | 1.65% | 1.70% | 2.03% | 1.66% | 2.29% |
| Cost of funds | 1.25% | 1.28% | 1.60% | 1.27% | 1.79% |
| Net interest margin | 4.84% | 4.34% | 5.04% | 4.77% | 5.21% |
| | | | | | |
| ASSET QUALITY RATIOS | | | | | |
| | | | | | |
| Non-performing loans to total gross loans | 4.73% | 5.61% | 2.75% | | |
| Non-performing loans as a % of ALLL | 217.78% | 250.98% | 179.36% | | |
| Non-performing loans as a % of total assets | 3.66% | 4.30% | 2.32% | | |
| Non-performing loans to primary capital | 40.53% | 45.38% | 26.67% | | |
| Non-performing assets to total assets | 3.76% | 4.58% | 2.48% | | |
| Allowance for loan losses to total gross loans | 2.17% | 2.24% | 1.53% | | |
| Net charge-offs to average loans outstanding | 0.89% | 0.70% | 0.88% | 2.19% | 1.21% |
| | | | | | |
| CAPITAL RATIOS | | | | | |
| | | | | | |
| Company | | | | | |
| Leverage ratio | 8.56% | 9.30% | 8.90% | | |
| Tier I Risk-Based Capital Ratio | 9.91% | 10.52% | 9.37% | | |
| Total Risk-Based Capital Ratio | 11.17% | 11.78% | 10.62% | | |
| | | | | | |
| Bank | | | | | |
| Leverage ratio | 8.06% | 8.76% | 8.66% | | |
| Tier I Risk-Based Capital Ratio | 9.30% | 9.86% | 9.10% | | |
| Total Risk-Based Capital Ratio | 10.56% | 11.12% | 10.36% | | |
| | | | | | |
| (1) The efficiency ratio is defined as total non interest expense as a percent of the combined net interest income plus non interest income, exclusive of gains and losses on the sale of investment securities, sale of other real estate owned, sale of SBA loans and impairment loss on OTTI. |
| | | | | | |
| (2) Ratio does not include the following one time items; OREO related expense of $175 and $2,211 for the three and twelve month periods ending December 31, 2009, $1,702 for the three months ending September 30, 2009 and $44 for the three and twelve month periods ending December 31, 2008 and one-time FDIC assessment costs of $0 and $982 for the three and twelve month periods ending December 31, 2009 and $594 for the three month period ending September 30, 2009. |
CONTACT: Heritage Oaks Bancorp
Lawrence P. Ward, CEO
Margaret Torres, CFO
805-369-5200