PASO ROBLES, Calif., Jan. 12, 2006 (PRIMEZONE) -- Heritage Oaks Bancorp (Nasdaq:HEOP), the parent company of Heritage Oaks Bank, today reported that an expanding net interest margin and a continued focus on operating efficiencies contributed to record fourth quarter and full year profits. Net income for the year increased 45% to $6.6 million, or $1.01 per diluted share, compared to $4.6 million, or $0.71 per diluted share a year ago. For the fourth quarter of 2005, net income increased 34% to $1.8 million, or $0.27 per diluted share, compared to $1.4 million, or $0.21 per diluted share in the fourth quarter of 2004. All per share results reflect the 3-for-2 stock split in December 2005.
"A margin boosted by solid core deposit growth and improved efficiencies contributed to the record performance generated in the fourth quarter and full-year 2005," said Lawrence P. Ward, president and CEO. "We achieved our financial targets for the year by delivering excellent service to our new and existing customer base, improving profitability and maintaining solid asset quality."
2005 Operating Highlights:
-- Net interest margin improved 68 basis points to 5.78%.
-- Net income increased 45% to $6.6 million.
-- Revenues increased 21% to $30.2 million.
-- Efficiency ratio improved substantially to 62.0%
-- Pre-tax income rose 46% to $10.7 million.
-- Return on average equity was 16.1% and return on average
assets was 1.38%.
-- Deposits increased 13% to $418 million.
-- Net loans increased 8% to $363 million.
-- Asset quality remained strong - non-performing loans were
just 0.01% of total loans.
Operating Results
Total revenues, consisting of net interest income before the provision for loan losses and non-interest income, increased 21% to $30.2 million in 2005 compared to $25.0 million a year ago. Fourth quarter revenues grew 12% to $8.0 million from $7.2 million in the same quarter of 2004. Net interest income increased 26% to $25.2 million in 2005 compared to $20.0 million in 2004. In the fourth quarter, net interest income increased 25% to $6.8 million, from $5.4 million a year ago. "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 33% from 2004 and 35% from the fourth quarter last year. The provision for loan losses increased 38% and 73%, respectively for the fourth quarter and the full year ended December 31, 2005.
Net interest margin for the year was 5.78%, a 68 basis point improvement compared to 5.10% in 2004. Fourth quarter margin was 6.06%, up 66 basis points from 5.40% in the fourth quarter a year ago. "We are asset sensitive and are well positioned to take advantage of continued rising short-term interest rates. More than 80% of our deposits are no or low-cost deposits; 39% are in non-interest bearing accounts, and an additional 41% are in money market and NOW accounts, providing us with a very efficient funding source," said Ward.
Non-interest income was flat in 2005 and down in the fourth quarter compared to the same period in 2004, primarily due to a $785,000 non-recurring gain in the fourth quarter of 2004 from the sale and leaseback of the company's annex building.
Non-interest expense in 2005 increased 9% to $18.7 million from $17.2 million in 2004. In the fourth quarter, non-interest expenses were $4.9 million, about even from the fourth quarter a year ago. As a result of a higher net interest margin and continued expense control, the efficiency ratio improved significantly to 62.0% compared to 68.9% in 2004. For the fourth quarter, the efficiency ratio improved to 60.7%, compared to 67.6% in the fourth quarter of 2004. The efficiency ratio measures non-interest expenses as a percent of revenues.
Pre-tax income increased 46% in 2005 to $10.7 million from $7.3 million in 2004. Fourth quarter pre-tax income increased 36% to $3.0 million compared to $2.2 million in the fourth quarter of 2004.
Income taxes increased in the fourth quarter and year ended December 31, 2005, reflecting the increases in earnings. The provision for income taxes was $4.1 million for 2005, compared with $2.8 million in 2004. The fourth quarter tax provision increased 40% to $1.2 million, compared to $832,000 for the fourth quarter of 2004. Heritage Oaks generated a return on average equity of 16.1% in 2005 and 16.4% in the fourth quarter, compared to 13.2% and 14.8% during the same periods of 2004. Return on average assets was 1.38% in 2005 compared to 1.02% in 2004, and was 1.47% in the fourth quarter of 2005 from 1.18% in the fourth quarter a year ago.
Balance Sheet
Total assets increased 9% to $488.5 million as of December 31, 2005, compared to $448.0 million a year earlier. Net loans grew 8% to $362.6 million during 2005, compared to $335.0 million a year ago. Total deposits grew 13% to $417.8 million compared to $370.4 million at December 31, 2004. "We emphasize deposit growth to bring new customers to Heritage Oaks Bank and to support loan growth," added Ward.
Asset quality remains strong with 0.01% non-performing loans as of December 31, 2005. The allowance for loan losses was $3.9 million, or 1.06% of net loans outstanding at year-end, compared to $3.2 million or 1.00% of net loans outstanding at the end of 2004. Net charge-offs were $75,648 in 2005.
Book value per share was $7.20 at December 31, 2005, compared to $6.19 per share a year earlier. Tangible book per share was $5.86 at December 31, 2005, compared to $5.05 a year earlier. Shareholders' equity increased 20% to $44.8 million compared to $37.3 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 data)
For the three months For the year
ended December 31, ended December 31,
2005 2004 2005 2004
------- ------- ------- -------
(Unaudited) (Unaudited)
Interest Income:
Interest and
fees on loans $ 7,605 $ 5,613 $27,399 $20,615
Investment
securities 515 599 2,101 2,385
Federal funds
sold and commercial
paper 227 74 667 302
Time certificates
of deposit 2 2 9 11
------- ------- ------- -------
Total interest
income 8,349 6,288 30,175 23,313
Interest Expense:
Now accounts 22 13 89 34
MMDA accounts 521 191 1,504 577
Savings accounts 31 20 102 88
Time deposits
of $100 or more 137 (62) 413 118
Other time
deposits 515 298 1,371 953
Other borrowed
funds 336 380 1,537 1,591
------- ------- ------- -------
Total interest
expense 1,562 840 5,017 3,361
Net interest
income before
provision for
loan losses 6,787 5,448 25,158 19,952
Provision for
loan losses 180 130 710 410
------- ------- ------- -------
Net interest
income after
provision for
loan losses 6,607 5,318 24,448 19,542
Non-interest Income:
Service charges
on deposit
accounts 605 529 2,430 2,173
Gain of Sale
of Securities -- -- 88 28
Other income 617 1,177 2,490 2,798
------- ------- ------- -------
Total
Non-interest
Income 1,222 1,706 5,009 4,999
Non-interest Expense:
Salaries and
employee
benefits 2,558 2,215 9,746 8,457
Occupancy and
equipment 638 662 2,491 2,569
Other expenses 1,661 1,962 6,481 6,172
------- ------- ------- -------
Total Noninterest
Expenses 4,857 4,839 18,717 17,198
Income before
provision for
income taxes 2,972 2,185 10,740 7,343
Provision for
applicable
income taxes 1,163 832 4,103 2,759
------- ------- ------- -------
Net Income $ 1,809 $ 1,353 $ 6,637 $ 4,584
======= ======= ======= =======
Earnings per share:
Basic $ 0.29 $ 0.22 $ 1.08 $ 0.77
Diluted $ 0.27 $ 0.21 $ 1.01 $ 0.71
HERITAGE OAKS BANCORP
CONSOLIDATED BALANCE SHEETS
(in thousands except per share data)
Assets
2005 2004
----------- ----------
(Unaudited)
Cash and due from banks $ 18,279 $ 13,092
Federal funds sold 26,280 5,775
Money market funds -- 3,000
--------- ---------
Total Cash and Cash Equivalents 44,559 21,867
Interest-bearing deposits in
other financial institutions 298 498
Investment securities,
available-for-sale 44,402 57,394
Federal Home Loan Bank and
Federal Reserve Bank Stock, at
cost 1,885 1,809
Loans held for sale 3,392 2,253
Loans, net of deferred fees of
$1,617 and $1,482 and allowance
for loan loss of $3,885 and
$3,247 at December 31, 2005
and 2004, respectively 362,635 334,964
Property premises and equipment,
net 11,905 10,383
Net deferred tax asset 2,358 1,918
Cash surrender value of life
insurance 7,706 7,130
Goodwill 4,865 4,865
Intangible assets 1,448 2,021
Other assets 3,048 2,910
--------- ---------
Total Assets $ 488,501 $ 448,012
========= =========
Liabilities and Stockholders' Equity
Liabilities
Deposits
Demand non-interest bearing $ 164,014 $ 143,455
Savings, NOW and money market
deposits 170,106 166,015
Time deposits of $100 or more 17,414 18,034
Time deposits under $100 66,263 42,937
--------- ---------
Total Deposits 417,797 370,441
FHLB advances and other
borrowings 10,000 28,500
Securities sold under agreement
to repurchase 3,847 766
Junior subordinated debentures 8,248 8,248
Other liabilities 3,764 2,807
--------- ---------
Total Liabilities 443,656 410,762
--------- ---------
COMMITMENTS AND CONTINGENCIES
(Notes No. 5 and No. 10) -- --
Stockholders' Equity
Common stock, no par value; 20,000,000
shares authorized; 6,231,982
and 6,013,260 shares issued and
outstanding for 2005
and 2004, respectively 29,255 24,050
Retained earnings 15,748 13,053
Accumulated other comprehensive
income (158) 147
--------- ---------
Total Stockholders' Equity 44,845 37,250
--------- ---------
Total Liabilities and
Stockholders' Equity $ 488,501 $ 448,012
========= =========
HERITAGE OAKS BANCORP
FINANCIAL HIGHLIGHTS
QTD QTD YTD YTD
Dec-05 Dec-04 Dec-05 Dec-04
------ ------ ------ ------
PROFITABILITY
Quarterly Net
Income (in thousands) $ 1,808 $ 1,353 $ 6,637 $ 4,584
Qtr EPS- Diluted $ 0.27 $ 0.21 $ 1.01 $ 0.71
Efficiency Ratio 60.65% 67.64% 62.04% 68.93%
Operating Expenses
compared to Average
Assets 3.95% 4.24% 3.90% 3.85%
ROE- Return on Average
Equity 16.38% 14.77% 16.06% 13.15%
ROTE- Return on Average
Tangible Equity 19.16% 18.18% 19.11% 16.61%
ROA- Return on Average
Assets 1.47% 1.18% 1.38% 1.02%
Net Interest Income
compared to Average
Assets 5.51% 4.77% 5.24% 4.46%
Non-Interest Income
compared to Total Net
Revenue 15.26% 23.85% 16.60% 20.04%
Avg Yield on Loans 8.09% 6.91% 7.55% 6.77%
Avg Yield on Earning
Assets 7.46% 6.23% 6.93% 5.95%
Cost of Interest
Bearing Liabilities 2.30% 1.25% 1.87% 1.26%
Cost of Funds 1.41% 0.81% 1.15% 0.82%
Cost of Interest
Bearing Deposits 1.99% 1.50% 1.50% 0.78%
Cost of Deposits 1.17% 0.48% 0.87% 0.48%
Net Interest Margin 6.06% 5.40% 5.78% 5.10%
CAPITAL
Leverage Ratio 9.48% 8.34%
Tier I Risk-Based
Capital Ratio 11.00% 9.78%
Total Risk-Based
Capital Ratio 11.95% 10.65%
ASSET QUALITY
Non-performing Loans
compared to Total Net
Loans 0.01% 0.29%
ALLL compared to Total
Net Loans 1.06% 1.00%
Non-performing Loans as
% of ALLL 1.39% 28.77%
Net Loan Losses compared
to Average Net Loans
(YTD) 0.02% 0.08%
Non-performing Loans
compared to Primary
Capital 0.12% 2.51%
Loans
-----
Commercial RE 57% 60%
Commercial 16% 15%
Construction/Land 21% 20%
Equity HELOC 4% 4%
Other 2% 1%
Deposits
--------
DDA 39% 39%
MM and Savings 29% 29%
Now 12% 16%
CD Less than 16% 11%
CD Greater than 4% 5%