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Heritage Oaks Bancorp Reports Third Quarter 2013 Results

Stocks in this article: HEOP

PASO ROBLES, Calif., Oct. 24, 2013 (GLOBE NEWSWIRE) -- Heritage Oaks Bancorp ("Heritage Oaks" or the "Company") (Nasdaq:HEOP), a bank holding company and parent of Heritage Oaks Bank (the "Bank"), reported net income of $2.8 million for the third quarter of 2013, compared with $6.4 million for the third quarter of 2012, and $2.7 million for the second quarter of 2013. The year-over-year decline in net income for the third quarter was the result of the Company reversing $4.1 million of valuation allowance against its deferred tax asset in the third quarter of 2012. For the first nine months of 2013, net income was $9.2 million compared with $9.9 million for the same period in 2012.

Income before taxes grew $0.9 million, or 24.8%, to $4.4 million for the third quarter of 2013; and grew $8.5 million, or 132.7%, to $14.9 million for the first nine months of 2013 compared with the same respective periods a year ago. The improvement in income before taxes for both the third quarter and first nine months of 2013 compared with the same respective periods a year ago is primarily the result of the Company not recording any provision for loan losses in 2013 due to improved credit quality metrics for the Company's loan portfolio.

Highlights

  • Gross loans grew to $777.2 million at September 30, 2013, an increase of 14.6% compared with a year ago resulting from the strategy to hire additional relationship managers to expand the agribusiness, commercial, and residential business lines.  
  • Total deposits grew to $957.0 million at September 30, 2013, an increase of 11.9% compared with a year ago, resulting from our focus on building new and expanding existing client relationships. Non-interest bearing demand deposits grew 6.8% year-over-year, representing 29.8% of total deposits at September 30, 2013.  
  • Loan credit quality continued to improve with classified assets declining $13.2 million, or 22.6%, to $45.3 million, and non-performing assets declining $8.4 million, or 39.9%, at September 30, 2013 compared with a year earlier. Annualized net loan charge-offs for the third quarter of 2013 declined 61 basis points to 0.24% compared with annualized net loan charge-offs of 0.85% for the third quarter of 2012. The Company had no Other Real Estate Owned ("OREO") at September 30, 2013; marking the fourth consecutive quarter without any OREO holdings.  
  • Regulatory capital ratios decreased to 10.6% and 14.5% for Tier 1 Leverage and Total Risk-Based Capital at September 30, 2013, respectively from 12.2% and 16.2% a year ago resulting directly from the repurchase of the Series A Preferred Stock issued to the U.S. Department of the Treasury ("UST") as part of the Troubled Asset Relief Program—Capital Purchase Program (the "TARP CPP"), at par plus accrued dividends for $21.2 million, and the repurchase of related warrants for $1.6 million, which provided UST the opportunity to purchase 611,650 of the Company's common shares at a strike price of $5.15 per share. With the repurchase of the Preferred Stock and related warrants, the Company has fully exited the TARP CPP program with UST.  
  • The Federal Reserve Bank of San Francisco terminated its Memorandum of Understanding with the Company effective September 4, 2013, which marks the end of enhanced regulatory oversight of the Company by its banking regulators.  
  • The Bank completed the purchase of a strategically located branch office building from Union Bank, N.A. in downtown San Luis Obispo, California in an effort to better serve our customers.  
  • As previously announced, the Company entered into a definitive agreement to acquire Mission Community Bancorp for an aggregate purchase price of $56.4 million, based on the Company's stock closing price of $6.42 on October 18, 2013. The acquisition is subject to regulatory and shareholder approvals. This  acquisition will provide the opportunity to expand our product offerings to the customers of both banks, and position the combined organization for future strategic growth opportunities.

"We are pleased with our strong financial performance for the first nine months of 2013," said Simone Lagomarsino, President and Chief Executive Officer of Heritage Oaks Bancorp. "We believe our strong performance, in particular our loan and deposit growth, is reflective of our strategic decision to restructure our organization in 2012 by reducing back office costs and redeploying a portion of these cost savings to hire additional relationship bankers. These new team members are facilitating our expansion into new geographic markets in Ventura County, deepening our penetration in existing markets and supporting the expansion of our product lines including agribusiness and mortgage lending." 

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