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TheStreet Open House

Heritage Oaks Bancorp Reports Third Quarter 2013 Results

Stocks in this article: HEOP

The Company's liquidity ratio (total cash and cash equivalents plus unpledged marketable securities divided by the sum of total deposits and short-term liabilities less pledged securities) was 27.5% at September 30, 2013 compared with 35.1% at September 30, 2012, which decline reflects the reduction in the level of securities, which were used to fund loan growth and to repay short-term FHLB borrowings.

The Company's and the Bank's regulatory capital ratios exceeded the ratios generally required to be considered a "well capitalized" financial institution for regulatory purposes. The Tier I Leverage Ratios for the Company and the Bank were 10.6% and 10.1%, respectively, at September 30, 2013 compared with the requirement of 5.0% to generally be considered a "well capitalized" financial institution for regulatory purposes. The Total Risk-Based Capital Ratios for the Company and the Bank were 14.5% and 13.9%, respectively, at September 30, 2013 compared with the requirement of 10.0% to generally be considered a "well capitalized" financial institution for regulatory purposes. The decline in the capital ratios as of September 30, 2013 at both the Bank and Company were largely the result of the repurchase of the Series A Preferred Shares and related warrants to purchase common stock previously held by UST.

Asset Quality

Classified loans decreased $12.3 million or 21.3% to $45.3 million at September 30, 2013 compared with $57.6 million at September 30, 2012. In the first week of October, the Bank's single largest classified loan relationship with an outstanding balance of just over $6.4 million was paid-off in full. The impact of this pay-off will be reflected in the fourth quarter results but represents a further material improvement in our overall classified loan position. Non-accrual loans decreased $7.8 million to $12.7 million at September 30, 2013, of which $10.2 million were paying per their contractual terms, compared with $20.5 million of non-accrual loans at September 30, 2012. Non-performing loans to gross loans decreased to 1.6% at September 30, 2013 from 3.0% at September 30, 2012. The Company held no OREO at September 30, 2013, a decrease of $0.6 million from September 30, 2012 and the fourth consecutive quarter with no OREO holdings. Total non-performing assets, inclusive of non-accrual loans, decreased $8.4 million to $12.7 million at September 30, 2013 compared with $21.1 million at September 30, 2012. The percentage of non-performing assets to total assets was 1.1% at September 30, 2013 compared with 2.0% at September 30, 2012. We believe the improvement in asset quality is primarily the result of the improvement in the economy along the central coast of California and a change in the mix of our loan portfolio to products with lower credit risk.

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