PASO ROBLES, Calif., April 19, 2007 (PRIME NEWSWIRE) -- Heritage Oaks Bancorp (Nasdaq:HEOP), the parent company of Heritage Oaks Bank, today reported solid loan and deposit growth, along with continued strong asset quality, contributing to first quarter profits. For the first quarter of 2007, net income was $1.5 million, or $0.23 per diluted share, compared to $1.6 million, or $0.24 per diluted share, in the first quarter of 2006.
"We began this year with a solid first quarter performance, generating strong growth in loans and deposits," said Lawrence P. Ward, President and CEO. "We continue to see demand for business loans in our markets, particularly in construction and commercial business-related loans. Although our profits are down slightly from the first quarter of 2006, we are slightly ahead of internal projections and are positioned to meet our year-end targets."
First Quarter 2007 Highlights:
* Net income was $1.5 million, or $0.23 per diluted share.
* Revenues increased 8% to $8.3 million.
* Return on average equity was 12.10% and return on average assets
was 1.10%.
* Net interest margin was 5.66%.
* Net loans increased 23% to $460 million.
* Asset quality remained strong, non-performing assets were just 0.03%
of total assets.
* Paid a $0.08 per share quarterly cash dividend on February 17.
* Deposits increased by 5.5%.
Operating Results
Total revenues, consisting of net interest income before the provision for loan losses and non-interest income, increased 8% to $8.3 million in the first quarter of 2007 compared to $7.7 million in the same quarter of 2006. In the first quarter, net interest income increased 9% to $7.0 million compared to $6.4 million in the first quarter a year ago. "Our strong net interest income is a product of our exceptional loan growth, which we see continuing," said Ward. Interest and fees on loans increased 31% to $9.8 million in the first quarter compared to $7.5 million in the first quarter last year. Non-interest income for the first quarter was $1.2 million, even with the same period a year ago.
First quarter net interest margin was 5.66% compared to 5.77% in the previous quarter and 5.98% in the first quarter a year ago. "Our margin came under pressure again this quarter as costs associated with borrowing from the FHLB increased faster than loan yields," said Ward. "However, our new deposit strategy of growing variable interest rate money market accounts is proving to be very successful as we have already increased the balances in these accounts by 16% this quarter alone, and we expect this to help our margin to turn around or at least stabilize in the second half of 2007.
"We see the consolidation of banks along the Central Coast as an excellent marketing opportunity for us to attract new customers," continued Ward. "In the first quarter we increased our marketing and advertising costs significantly to compete for this new business and we are already seeing this expense pay off with deposit increases, which we expect will help lower our funding costs as we move through the year." In the first quarter of 2007 salary and employee benefits as well as the increased advertising costs accounted for most of the increase in non-interest expenses which totaled $5.7 million compared to $5.5 million for the prior linked quarter and $5.0 million in the first quarter a year ago.
As a result of the increase in expenses, the efficiency ratio was 68.9% in the first quarter of 2007 compared to 65.0% in the first quarter of 2006 and 67.1% in the fourth quarter of 2006. The efficiency ratio measures operating expenses as a percent of revenues.
Return on average assets was 1.10% in the first quarter of 2007 compared to 1.35% in the first quarter a year ago. The Company also generated a return on average equity of 12.1% for the first quarter of 2007, compared to 14.1% in the first quarter a year ago. The decline was a result of higher capital balances as a percentage of assets for the quarter compared to the year-ago period.
Balance Sheet
The loan portfolio grew 23% to $460 million at March 31, 2007, from $373 million a year earlier. The growth was fueled by a 41% increase in commercial, financial and agricultural loans, as well as a 21% increase in commercial real estate loans.
The tables below show the diversification within the Construction/Land and Commercial Real Estate portion of the loan portfolio:
Construction / Land
---------------------------------------------------------------------
Single Family Single Family Owner
Residences Residences - Spec. Land Occupied Other
---------------------------------------------------------------------
8% 9% 23% 30% 30%
---------------------------------------------------------------------
Commercial Real Estate
---------------------------------------------------------------------
Commercial
Farmland Industrial Retail Professional Hospitality Other
---------------------------------------------------------------------
7% 14% 20% 19% 21% 19%
---------------------------------------------------------------------
Total assets continued to grow, reaching $579 million as of March 31, 2007, compared to $492 million a year earlier. Total assets were $542 million at December 31, 2006.
"While our total deposits increased only 6% over the past year, savings, NOW and money market balances increased 16% during the first quarter of 2007 compared to year-end balances," Ward added. Total deposits were $445 million at the end of March, compared to $422 million at March 31, 2006. "Our challenge continues to be with growing non-interest bearing demand deposits, however, we have implemented a new strategy of funding our loan demand through our new variable interest rate money market accounts, and we are already seeing positive results," said Ward. Non-interest bearing accounts account for 33% of total deposits and savings, money market and NOW accounts now account for 38% of total deposits.
Asset quality remains exceptional with non-performing assets at $145,000, or 0.03% of total assets at March 31, 2007. The allowance for loan losses was $4.3 million, or 0.94% of net loans held for investment at quarter-end compared to $4.0 million or 1.07% of net loans outstanding at March 31, 2006. The bank recovered $92,000 from a previously charged off loan and took an additional $140,000 provision in the first quarter of 2007.
Book value per share was $7.98 at March 31, 2007, compared to $7.38 per share a year earlier. Tangible book value per share was $7.06 at March 31, 2007, compared to $6.40 a year earlier. Shareholders' equity increased 10% to $51.2 million compared to $46.7 million a year ago.
Heritage Oaks Bancorp is the holding company for Heritage Oaks Bank. Heritage Oaks Bank has its headquarters plus two branch offices in Paso Robles, two branch offices in San Luis Obispo, single branch offices in Cambria, Arroyo Grande, Atascadero, Templeton 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 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, general economic conditions and California's energy crisis. 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
Consolidated Balance Sheets
(dollars in thousands except share data)
Percentage
(unaudited) (audited) (unaudited) Change vs.
------------------------------ -------------
12/31/ 3/31/
3/31/07 12/31/06 3/31/06 06 06
------------------------------ -------------
Assets
Cash and due from
banks $ 26,501 $ 19,164 $ 17,398 38.3% 52.3%
Federal funds sold 8,620 3,870 20,475 122.7% -57.9%
-------- -------- -------- -------------
Total cash and
cash equivalents 35,121 23,034 37,873 52.5% -7.3%
-------- -------- -------- -------------
Interest bearing
deposits with
other banks 318 318 318 -- --
Securities available
for sale 37,620 38,445 43,847 -2.1% -14.2%
Federal Home Loan
Bank Stock, at cost 3,085 2,350 1,907 31.3% 61.8%
Loans held for sale 5,300 1,764 2,994 200.5% 77.0%
Loans, net(a) 460,302 439,277 373,189 4.8% 23.3%
Property, premises
and equipment 14,551 14,581 13,055 -0.2% 11.5%
Cash surrender value
of life insurance 9,528 9,435 7,777 1.0% 22.5%
Deferred tax assets 3,218 2,414 2,352 33.3% 36.8%
Goodwill 4,864 4,865 4,865 0.0% 0.0%
Core deposit intangible 1,059 1,148 1,373 -7.8% -22.9%
Other assets 3,968 4,143 2,901 -4.2% 36.8%
-------- -------- -------- -------------
Total assets $578,934 $541,774 $492,451 6.9% 17.6%
======== ======== ======== =============
Liabilities
Deposits:
Non-interest
bearing demand $146,406 $153,005 $156,406 -4.3% -6.4%
Savings, NOW, and
money market 169,860 146,110 173,421 16.3% -2.1%
Time deposits of
$100K or more 32,822 30,630 17,229 7.2% 90.5%
Time deposits
under $100K 95,923 90,776 74,663 5.7% 28.5%
-------- -------- -------- -------------
Total deposits 445,011 420,521 421,719 5.8% 5.5%
-------- -------- -------- -------------
FHLB advances and
other borrowings 60,000 50,000 10,000 20.0% 500.0%
Securities sold
under agreements
to repurchase 1,387 1,364 1,954 1.7% -29.0%
Junior subordinated
debentures 16,496 16,496 8,248 -- 100.0%
Other liabilities 4,875 3,921 3,801 24.3% 28.3%
-------- -------- -------- -------------
Total liabilities 527,769 492,302 445,722 7.2% 18.4%
-------- -------- -------- -------------
Stockholders' equity
Common stock, no par
value; 20,000,000 shares
authorized; issued and
outstanding 6,410,829;
6,345,639 and 6,330,523
for March 31, 2007;
December 31, 2006 and
March 31, 2006,
respectively 29,802 29,247 29,521 1.9% 1.0%
Additional paid in
capital 428 336 -- 27.4% --
Retained earnings 20,809 19,809 17,354 5.0% 19.9%
Accumulated other
comprehensive income 126 80 (146) 57.5% --
-------- -------- -------- -------------
Total stockholders'
equity 51,165 49,472 46,729 3.4% 9.5%
-------- -------- -------- -------------
Total liabilities
and stockholders'
equity $578,934 $541,774 $492,451 6.9% 17.6%
======== ======== ======== =============
(a) Loans are net of deferred loan fees of $1,598; $1,625; $1,526
and allowance for loan losses of $4,313; $4,081; $4,005 for March
31, 2007, December 31, 2006, and March 31, 2006 respectively.
Heritage Oaks Bancorp
Consolidated Statements of Income
(dollars in thousands except share data)
(unaudited) (audited) (unaudited) Percentage
For the Three Months Ended Change vs.
----------------------------- -----------------
3/31/07 12/31/06 3/31/06 12/31/06 3/31/06
----------------------------- -----------------
Interest Income:
Interest and fees
on loans $ 9,816 $ 9,423 $ 7,489 4.2% 31.1%
Investment
securities 448 426 489 5.2% -8.4%
Federal funds
sold and
commercial paper 31 35 226 -11.4% -86.3%
Time certificates
of deposit 8 48 2 -83.3% 300.0%
------- ------- ------- ----- -----
Total interest
income 10,303 9,932 8,206 3.7% 25.6%
------- ------- ------- ----- -----
Interest Expense:
NOW accounts 28 20 21 40.0% 33.3%
MMDA accounts 667 622 571 7.2% 16.8%
Savings accounts 24 24 28 0.0% -14.3%
Time deposits of
$100K or more 209 199 138 5.0% 51.4%
Time deposits
under $100K 1,212 1,174 694 3.2% 74.6%
Other borrowed
funds 1,129 942 307 19.9% 267.8%
------- ------- ------- ----- -----
Total interest
expense 3,269 2,981 1,759 9.7% 85.8%
------- ------- ------- ----- -----
Net interest income
before provision for
loan losses 7,034 6,951 6,447 1.2% 9.1%
Provision for
loan losses 140 120 120 16.7% 16.7%
------- ------- ------- ----- -----
Net interest income
after provision
for loan losses 6,894 6,831 6,327 0.9% 9.0%
------- ------- ------- ----- -----
Non Interest Income:
Service charges on
deposit accounts 613 581 568 5.5% 7.9%
Other income 618 720 650 -14.2% -4.9%
------- ------- ------- ----- -----
Total non-interest
income 1,231 1,301 1,218 -5.4% 1.1%
------- ------- ------- ----- -----
Non-Interest
Expense:
Salaries and
employee benefits 3,250 3,039 2,783 6.9% 16.8%
Occupancy and
equipment 715 706 622 1.3% 15.0%
Other expenses 1,729 1,794 1,579 -3.6% 9.5%
------- ------- ------- ----- -----
Total non-interest
expenses 5,694 5,539 4,984 2.8% 14.2%
------- ------- ------- ----- -----
Income before
provision for
income taxes 2,431 2,593 2,561 -6.2% -5.1%
Provision for
income taxes 921 944 955 -2.4% -3.6%
------- ------- ------- ----- -----
Net Income $ 1,510 $ 1,649 $ 1,606 -8.4% -6.0%
======= ======= ======= ===== =====
Average basic
shares
outstanding 6,384,150 6,355,466 6,283,890
Average diluted
shares
outstanding 6,605,942 6,598,355 6,643,432
Basic earnings
per share $ 0.24 $ 0.26 $ 0.26
Fully diluted
earnings per
share $ 0.23 $ 0.25 $ 0.24
Additional Financial Information
Percentage
For the Quarters Ended Change vs.
(dollars ------------------------------ ----------------
in thousands) 3/31/07 12/31/06 3/31/06 12/31/06 3/31/06
------------------------------ ----------------
LOANS (including
loans held for sale)
Commercial, financial
and agricultural $ 91,476 $ 84,976 $ 65,079 7.6% 40.6%
Real estate
- construction/land 106,542 105,712 86,533 0.8% 23.1%
Real estate - other 252,080 237,401 208,271 6.2% 21.0%
Home equity lines
of credit 9,617 10,792 13,168 -10.9% -27.0%
Installment loans
to individuals 5,705 5,598 5,418 1.9% 5.3%
All other loans
(including overdrafts) 793 504 251 57.4% 216.1%
-------- -------- -------- --------------
Total loans $466,213 $444,983 $378,720 4.8% 23.1%
======== ======== ======== ==============
ALLOWANCE FOR
LOAN LOSSES
Balance, beginning
of period $ 4,081 $ 3,881 $ 3,881 5.2% 5.2%
Provision expense 140 600 120 -76.7% 16.7%
Credit losses charged
against allowance (1) (561) -- -- --
Recoveries of loans
previously charged
off 92 161 4 -42.8% 2203.5%
-------- -------- -------- --------------
Balance, end
of period $ 4,312 $ 4,081 $ 4,005 5.7% 7.7%
======== ======== ======== ==============
Net (charge-offs)
recoveries $ 91 $ (400) $ 4 -- 2184.3%
Net charge-offs/
Average loans
outstanding 0.00% 0.09% 0.00% -99.8% -84.5%
Allowance for loan
losses/Total loans
outstanding 0.92% 0.92% 1.06% 0.9% -12.5%
NON-PERFORMING ASSETS
Loans on non-accrual
status $ 143 $ 55 $ 52 160.0% 175.0%
Loans more than
90 days delinquent,
still accruing 2 -- -- -- --
-------- -------- -------- --------------
Total non-
performing loans 145 55 52 163.6% 178.8%
-------- -------- -------- --------------
Other real estate
owned (OREO)/
Repossessed assets -- -- -- -- --
-------- -------- -------- --------------
Total non-
performing assets $ 145 $ 55 $ 52 163.6% 178.8%
======== ======== ======== ==============
Total non-performing
assets to total
assets 0.03% 0.01% 0.01% 150.5% 150.5%
DEPOSITS
Non-interest bearing
demand $146,406 $153,005 $156,406 -4.3% -6.4%
-------- -------- -------- --------------
Interest-bearing
demand 51,304 45,164 54,701 13.6% -6.2%
Regular savings
accounts 23,829 23,406 26,758 1.8% -10.9%
Money market accounts 94,727 77,540 91,962 22.2% 3.0%
-------- -------- -------- --------------
Total interest-
bearing trans-
action and savings
accounts 169,860 146,110 173,421 16.3% -2.1%
-------- -------- -------- --------------
Time deposits
under $100 thousand 95,923 90,776 74,663 5.7% 28.5%
Time deposits of
$100 thousand or
more 32,822 30,630 17,229 7.2% 90.5%
-------- -------- -------- --------------
Total time
deposits 128,745 121,406 91,892 6.0% 40.1%
-------- -------- -------- --------------
Total deposits $445,011 $420,521 $421,719 5.8% 5.5%
======== ======== ======== ==============
For the Three Months Ended
------------------------------
3/31/07 12/31/06 3/31/06
------------------------------
PROFITABILITY / PERFORMANCE RATIOS
Operating efficiency 68.89% 67.12% 65.02%
Operating expenses to average assets 4.14% 4.17% 4.20%
Return on average equity 12.10% 13.64% 14.12%
Return on average tangible equity 13.71% 15.58% 16.33%
Return on average assets 1.10% 1.24% 1.35%
Other operating income to average assets 0.89% 0.98% 1.03%
Other operating expense to average assets 4.14% 4.17% 4.20%
Net interest income to average assets 5.11% 5.24% 5.43%
Non-interest income to total net revenue 14.89% 15.77% 15.89%
ASSET QUALITY AND CAPITAL RATIOS
Non-performing loans to total loans, net 0.03% 0.01% 0.01%
ALLL to total loans, net 0.94% 0.93% 1.07%
Non-performing loans as a % of ALLL 3.36% 1.35% 1.30%
Net charge-offs to average loans -0.02% 0.10% 0.00%
Non-performing loans to primary capital 0.28% 0.11% 0.11%
Leverage ratio 10.87% 11.00% 10.23%
Tier I Risk-Based Capital Ratio 11.42% 11.51% 11.20%
Total Risk-Based Capital Ratio 12.28% 12.36% 12.16%
For the Three Months Ended
------------------------------
3/31/07 12/31/06 3/31/06
------------------------------
AVERAGE BALANCES AND RATES
(dollars in thousands)
Average Investments $ 41,186 $ 41,981 $ 46,212
Average Fed funds sold 2,411 2,534 20,640
Average loans 460,825 437,623 370,083
-------- -------- --------
Average earning assets 504,422 482,138 436,935
-------- -------- --------
Average non-earning assets 57,629 52,629 48,802
Allowance for loan losses (4,180) (3,938) (3,948)
-------- -------- --------
Average assets 557,871 530,829 481,789
======== ======== ========
Average non-interest bearing
demand deposits 141,073 142,582 148,020
Average interest bearing deposits 284,718 274,081 262,516
Average borrowings 76,865 60,638 20,918
Average non-interest
bearing liabilities 4,612 5,186 4,201
-------- -------- --------
Average liabilities 507,268 482,487 435,655
-------- -------- --------
Average equity 50,603 48,342 46,134
-------- -------- --------
Average liabilities and equity $557,871 $530,829 $481,789
======== ======== ========
Interest rate yield on loans 8.64% 8.61% 8.21%
Interest rate yield on investments 4.49% 4.52% 4.31%
Interest rate yield on federal
funds sold 5.21% 5.52% 4.39%
Interest rate yield on interest-
earning assets 8.28% 8.24% 7.62%
Interest rate expense on deposits 2.04% 1.96% 1.43%
Interest rate expense on other
borrowings 5.96% 6.22% 5.95%
Interest rate expense on interest-bearing
liabilities 3.67% 3.56% 2.52%
Average equity to average assets 9.07% 9.11% 9.58%
Net interest margin 5.66% 5.77% 5.98%