Heritage Oaks Bancorp Announces Results for the Third Quarter 2012 - 10/25/12

Company Release - 10/25/2012 16:30

  • Third quarter net income was $6.4 million, $4.5 million more than the second quarter of 2012 and $4.3 million higher than the third quarter of 2011. Included in third quarter earnings is the reversal of the Company's remaining deferred tax asset valuation reserve of $4.1 million.
  • Total deposits grew $21.1 million from the second quarter, of which $17.5 million was growth in non-interest bearing demand deposits. Total deposits grew $68.8 million or 11.6% from the fourth quarter of 2011.
  • Gross loans increased $14.7 million from the second quarter, marking the second consecutive quarter of loan growth for the Company.
  • Provision for loan losses was $1.3 million in the third quarter, down $1.8 million from the second quarter. The allowance for loan losses was 2.65% of total loans at September 30, 2012.
  • On September 27, 2012, the Company announced it entered into a definitive agreement to acquire the Morro Bay branch of Coast National Bank and approximately $30 million of related branch deposits. This transaction is expected to close by year-end 2012, pending regulatory approval.
  • In early October, a $5.0 million pay-off was received against a loan that was included in classified and non-accrual loans as of September 30, 2012. This transaction will be reflected as a $3.9 million reduction in classified and non-accrual loans and a $1.1 million recovery to the allowance for loan losses in the fourth quarter of 2012.

PASO ROBLES, Calif., Oct. 25, 2012 (GLOBE NEWSWIRE) -- Heritage Oaks Bancorp (the "Company") (Nasdaq:HEOP), the holding company of Heritage Oaks Bank (the "Bank"), today reported net income of $6.4 million for the third quarter 2012, $4.5 million higher than reported in the second quarter and $4.3 million higher than that reported in the third quarter 2011. The increase in net income from the prior quarter was primarily attributable to a $2.7 million increase in the tax benefit largely due to the reversal of the Company's remaining deferred tax asset (DTA) valuation allowance of $4.1 million as compared to a $0.7 million partial reversal in the second quarter, a $1.8 million reduction in the provision for loan losses, a $0.3 million reduction in non-interest expenses and a $0.2 million increase in net interest income. After incorporating accrued dividends and accretion on preferred stock of $0.4 million, net income available to common shareholders for the third quarter was $6.1 million. Net income per basic common share was $0.24 and net income per diluted common share was $0.23 in the third quarter, $0.18 and $0.17 higher than the basic and diluted income per share, respectively, reported in the second quarter of 2012.

Pre-income tax earnings for the third quarter were $3.5 million, $1.8 million higher than the prior quarter. The third quarter earnings before income taxes and the provision for loan loss expense were $4.8 million, substantially unchanged from the second quarter of 2012 and $0.4 million higher than the third quarter of 2011.

"I am delighted by the progress we are making in achieving the strategic goals we outlined at the start of this year, which included: continuing to improve credit quality; increasing efficiency; providing outstanding service and value to our customers; and growing our earning asset base, which is mitigating the impacts of rate compression and should ultimately lead to top line growth," said Simone Lagomarsino, CEO and President of Heritage Oaks Bancorp. "This is the second consecutive quarter of loan portfolio growth for the Company, the fourth consecutive quarter of core deposit growth and our classified assets to tier 1 capital plus allowance for loan loss ratio declined to 41.6%, marking the lowest level the Bank has achieved in the last two years. Further, our efficiency ratio improved to 65.5% as compared to 66.5% a year ago and efforts to improve upon this are continuing," said Ms. Lagomarsino.

"From a business growth perspective, last quarter we announced several front line sales and account relationship officer hires who are already making a difference and contributing to the growing commercial, agri-business and consumer mortgage loan pipelines. In the third quarter, we opened our Ventura County loan production office (LPO) and we expect to open our next loan production office in the city of Goleta in Santa Barbara County by year-end 2012. Both of these LPOs will provide additional fuel for growth and have the potential to be converted to full service branches in the future. Further, we recently announced that we have entered into a definitive agreement to acquire Coast National Bank's Morro Bay branch. The addition of the $30 million in deposits acquired in this transaction with our existing customer deposits in Morro Bay will place us in second position in terms of market share in Morro Bay and enable us to efficiently serve these customers. In addition, the branch location and amenities are far superior to our previous branch location, which will allow us to better serve our customers in Morro Bay," said Ms. Lagomarsino.

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