PASO ROBLES, Calif., Oct. 11, 2005 (PRIMEZONE) -- Heritage Oaks Bancorp (Nasdaq:HEOP), the parent company of Heritage Oaks Bank, today reported record third quarter profits fueled by strong loan growth, excellent deposit growth, expanding net interest margin and solid asset quality. Net income increased 51% to $1.8 million, or $0.42 per diluted share, for the third quarter of 2005, compared to $1.2 million, or $0.28 per diluted share, in the third quarter a year ago. For the first nine months of 2005, net income increased 49% to $4.8 million, compared to $3.2 million in the first nine months of 2004.
"Over the past year we have continued to grow our balance sheet by attracting new deposits and building our loan portfolio to reflect more of a commercial loan mix. The success of these initiatives has energized the entire organization and generated double digit profit growth," said Lawrence P. Ward, President and CEO. "Our efforts in reshaping the balance sheet continue to pay off, as we have been able to decrease the volume of time deposits as a percent of total deposits. Now more than 96% of our deposits are core deposits which helped to lower our cost of funds despite the general rise in interest rates."
3Q05 Operating Highlights:
- Net income increased 51% to $1.8 million. - Revenues increased 30% to $8.0 million. - Net interest margin improved 65 basis points to 5.80%. - Non-interest demand deposits increased 32% to $207 million. - Pre-tax income rose 53% to $2.9 million. - Return on average equity was 17.0% and return on average assets was 1.44%. - Net loans increased 19% to $366 million. - Non-performing loans were just 0.13% of total loans.
Operating Results
Third quarter revenues, consisting of net-interest income before the provision for loan losses and non-interest income, increased 30% to $8.0 million, compared to $6.1 million in the third quarter of 2004. For the quarter, net interest income before the provision for loan losses increased 31% to $6.6 million, compared to $5.1 million in the third quarter of 2004. Non-interest income increased 30% in the third quarter to $1.4 million, compared to $1.1 million the third quarter of 2004.
"Our net-interest income and deposit fee revenue reflect the strong loan and deposit growth we have generated over the past year," said Ward. Interest and fees on loans increased 40% from the third quarter last year and 32% from the first nine months of last year.
For the first nine months of the year, revenues increased 25% to $22.2 million, compared to $17.8 million in the same period a year ago. Net interest income before the provision for loan losses increased 27% to $18.4 million in the first nine months of the year, compared to $14.5 million in the same period of 2004. For the first nine months of the year, non-interest income rose 15% to $3.8 million, compared to $3.3 million in the first nine months a year ago.
"Our present asset and liabilities mix is generating solid benefits from rising short-term interest rates, and as a result our net interest margin increased 65 basis points to 5.80% for the third quarter, versus a year ago quarter, and rose 12 basis points compared to the second quarter this year," said Ward. The net interest margin for the first nine months of 2005 expanded 0.69 basis points to 5.68% from 4.99% a year earlier.
Non-interest expense in the third quarter increased 18% to $4.9 million, from $4.1 million in the third quarter a year ago. Non-interest expense in the first nine months of the year increased 12% to $13.9 million, compared to $12.4 million in the same period a year ago. The efficiency ratio, which measures non-interest expenses as a percent of revenues, improved to 61.07% for the quarter from 67.36% in the third quarter of 2004.
Third quarter pre-tax income increased 53% to $2.9 million compared to $1.9 million in the third quarter of 2004. For the first nine months of the year, pre-tax income rose 51% to $7.8 million, compared to $5.2 million in the first nine months of 2004. Income taxes increased in the first nine months of 2005, reflecting increased earnings, and the tax rate was 38% of pre-tax earnings compared to 37% of pre-tax earnings a year ago. The provision for income taxes was $1.1 million for the third quarter and $2.9 million for the first nine months of 2005, compared to $730,000 and $1.9 million for the same respective periods a year ago.
Profitability measures strengthened as return on average assets was 1.44% in the third quarter, a 38 basis point improvement compared to 1.06% in the third quarter a year ago. Return on average equity was 17.03% in the third quarter, a 341 basis point improvement compared to 13.62% during the same period in 2004.
Balance Sheet
Heritage Oaks' assets increased 15% to $528.4 million at September 30, 2005, from $460.6 million a year earlier. Net loans increased 19% to $366.2 million at September 30, 2005, from $308.9 million a year ago. "The major components of the loan portfolio showed dramatic growth in the last year," said Ward. "We increased commercial loans 42% to $65.5 million, commercial real estate loans 11% to $224.2 million and construction loans 28% to $76.2 million in the past year."
The allowance for loan losses was $3.8 million, or 1.03% of net loans outstanding at September 30, 2005, compared to $3.1 million or 1.01% of net loans outstanding at September 30, 2004. For the first nine months of 2005, net charge-offs were $18 thousand, or 0.01% of net loans.
Total deposits grew 15% to $443.8 million compared to $384.9 million at September 30, 2004. "Deposit growth over the past year was very strong with non-interest bearing demand deposits leading the way, which increased 32% to $207.0 million," Ward continued. "Our significant emphasis on deposit growth is bringing new customers to Heritage Oaks Bank and is providing sufficient funding to support our loan growth."
Book value per share was $10.34 at September 30, 2005, compared to $8.96 per share a year earlier. Tangible book per share was $8.78 at September 30, 2005, compared to $7.21 a year earlier. Shareholders' equity increased 19% to $42.9 million compared to $35.9 million a year ago.
Heritage Oaks Bancorp is the holding company for Heritage Oaks Bank. Heritage Oaks Bank has its headquarters plus one branch office in Paso Robles, two branch offices in San Luis Obispo, single branch offices in Cambria, Arroyo Grande, Atascadero and Morro Bay and three branch offices in Santa Maria. Heritage conducts commercial banking business in San Luis Obispo County and Northern Santa Barbara County. Visit Heritage Oaks Bancorp on the Web at www.heritageoaksbancorp.com.
Statements concerning future performance, developments or events, expectations for growth and income forecasts, and any other guidance on future periods, constitute forward-looking statements that are subject to a number of risks and uncertainties. Actual results may differ materially from stated expectations. Specific factors include, but are not limited to, increased profitability, continued growth, the Banks beliefs as to the adequacy of its existing and anticipated allowances for loan losses, beliefs and expectations regarding actions that may be taken by regulatory authorities having oversight of the Banks operations, interest rates and financial policies of the United States government, general economic conditions and California's energy crisis. Additional information on these and other factors that could affect financial results are included in its Securities and Exchange Commission filings.
HERITAGE OAKS BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share date)
For the For the
Three months ended Nine months ended
September 30, September 30,
2005 2004 2005 2004
------- ------- ------- -------
(Unaudited) (Unaudited)
Interest Income:
Interest and fees on loans $ 7,179 $ 5,136 $19,794 $15,002
Investment securities 489 634 1,586 1,786
Federal funds sold and
commercial paper 270 74 440 228
Time certificates of
deposit 2 4 7 9
------- ------- ------- -------
Total interest income 7,940 5,848 21,827 17,025
Interest Expense:
Now accounts 25 10 67 21
MMDA accounts 442 137 983 386
Savings accounts 29 21 71 68
Time deposits of $100 or
more 103 61 276 180
Other time deposits 350 197 856 655
Other borrowed funds 398 371 1,201 1,211
------- ------- ------- -------
Total interest expense 1,347 797 3,454 2,521
Net Interest Income
Before Prov. for Possible
Loan Losses 6,593 5,051 18,373 14,504
Provision for loan losses 170 75 530 280
------- ------- ------- -------
Net interest income after
provision for loan losses 6,423 4,976 17,843 14,224
Non-interest Income:
Service charges on
deposit accounts 655 546 1,825 1,644
Gain on Sale of Securities -- -- -- 28
Other income 734 525 1,962 1,621
------- ------- ------- -------
Total Non-interest Income 1,389 1,071 3,787 3,293
Non-interest Expense:
Salaries and employee
benefits 2,532 2,068 7,188 6,242
Occupancy and equipment 600 644 1,853 1,907
Other expenses 1,743 1,412 4,820 4,210
------- ------- ------- -------
Total Noninterest Expenses 4,875 4,124 13,861 12,359
Income before provision
for income taxes 2,937 1,923 7,769 5,158
Provision for applicable
income taxes 1,132 730 2,940 1,927
Net Income 1,805 1,193 4,829 $ 3,231
======= ======= ======= =======
Earnings per share:
Basic $ 0.44 $ 0.30 $ 1.18 $ 0.81
Fully Diluted $ 0.42 $ 0.28 $ 1.11 $ 0.76
HERITAGE OAKS BANCORP
CONSOLIDATED BALANCE SHEETS
(in thousands)
30-Sep-05 30-Sep-04
--------- ---------
Unaudited Unaudited
ASSETS
Cash and due from banks $ 23,033 $ 29,418
Federal funds sold 53,035 25,020
Money market funds -- 4,000
-------- --------
Total cash and cash equivalents 76,068 58,438
Interest bearing deposits other banks 298 598
Securities Available for sale 46,462 59,846
Federal Home Loan Bank Stock, at cost 1,864 1,579
Loans Held For Sale 7,694 2,489
Loans, net 366,158 308,886
Property, premises and equipment, net 10,730 9,902
Cash surrender value life insurance 7,635 7,065
Deferred Tax Assets 2,121 1,837
Goodwill 4,865 4,905
Core Deposit Intangible 1,590 2,126
Other assets 2,884 2,923
TOTAL ASSETS $528,369 $460,594
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand, non-interest bearing $206,965 $157,283
Savings, NOW, and money market deposits 167,827 161,277
Time deposits of $100 or more 18,098 19,953
Time deposits under $100 50,879 46,360
-------- --------
Total deposits 443,769 384,873
FHLB advances and other borrowed money 28,000 28,500
Securities Sold under Agreement to Repurchase 2,057 566
Notes Payable -- --
Junior subordinated debentures 8,248 8,248
Other liabilities 3,423 2,506
-------- --------
Total liabilities 485,497 424,693
COMMITMENTS AND CONTINGENCIES -- --
Stockholders' equity
Common stock, no par value;
20,000,000 shares authorized; issued
and outstanding 4,146,936 and
4,006,769 for September 30, 2005
and September 30, 2004, respectively 28,925 23,901
Retained earnings 13,944 11,701
Accumulated other comprehensive income 3 299
-------- --------
Total stockholders' equity 42,872 35,901
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $528,369 $460,594
======== ========
HERITAGE OAKS BANCORP
QTD QTD
Sep-05 Sep-04
------ ------
PROFITABILITY
-------------
Quarterly Net Income (in thousands) $1,805 $1,193
Qtr EPS - Diluted $0.42 $0.28
Efficiency Ratio 61.07% 67.36%
Operating Expenses compared to Average Assets 3.90% 3.66%
ROE-Return on Average Equity 17.03% 13.62%
ROA-Return on Average Assets 1.44% 1.06%
NIM-Net Interest Margin 5.80% 5.15%
Net Interest Income compared to Average Assets 5.27% 4.48%
Non-Interest Income compared to Total Net Revenue 17.40% 17.49%
CAPITAL
-------
Leverage Ratio 8.78% 7.92%
Tier I Risk-Based Capital Ratio 10.09% 9.53%
Total Risk-Based Capital Ratio 10.99% 10.41%
ASSET QUALITY
-------------
Non-performing Loans compared to Total Net Loans 0.13% 0.29%
ALLL compared to Total Net Loans 1.03% 1.01%
Non-performing Loans as % of ALLL 12.69% 28.72%
Net Loan Losses compared to Average Net Loans -0.001% 0.03%
Non-performing Loans compared to Primary Capital 1.11% 2.51%