Heritage Oaks Bancorp Reports Fourth Quarter and Full Year 2013 Results - 1/23/2014

PASO ROBLES, Calif., Jan. 23, 2014 (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 $1.6 million, or $0.06 per dilutive common share, for the fourth quarter of 2013 compared with $3.1 million, or $0.10 per dilutive common share, for the fourth quarter of 2012. The decline in net income for the fourth quarter of 2013 as compared to the same quarter a year ago was primarily due to a $1.7 million reduction of gain on sale of investment securities and mortgages and $1.1 million in merger and integration costs related to the pending merger with Mission Community Bancorp.

Net income for the year ended December 31, 2013 was $10.8 million, or $0.37 per dilutive common share, compared with $13.0 million, or $0.44 per dilutive common share, for the same period in 2012. The decline in net income for the year ended December 31, 2013 compared with the prior year was primarily due to an $8.8 million increase in income tax expense resulting from the reversal of the deferred tax asset valuation allowance during 2012.

Income before taxes grew $6.6 million, or 58.7%, to a record level at $17.8 million for the year ended December 31, 2013 as compared to the prior year despite the additional $1.1 million in merger and integration costs recorded in 2013. The improvement in income before taxes for the year ended December 31, 2013 is primarily attributable to a decline in the provision for loan losses in 2013 driven by improved credit quality performance in the Company's loan portfolio and higher gains on sale of investment securities.

Full Year 2013 Highlights

  • Gross loans grew 20.0% to $827.5 million at December 31, 2013 compared with the prior year as we continue to expand agribusiness, commercial, and residential lending activities.
  • Total deposits grew 11.8% to $973.9 million at December 31, 2013 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% to $291.9 million from the prior year and represent 30.0% of total deposits at December 31, 2013.
  • Loan credit quality continued to improve with classified assets declining $15.9 million, or 31.0%, to $35.5 million, and non-performing assets declining $7.2 million, or 41.6% to $10.1 million at December 31, 2013 compared with a year earlier, both metrics at the lowest levels since 2007. Net charge-offs to average loans declined to 0.03% for the year ended December 31, 2013 compared with 1.32% a year earlier. The Company had no Other Real Estate Owned ("OREO") at December 31, 2013.
  • Regulatory capital ratios at the end of the year remained strong at 10.2% for Tier 1 Leverage Capital and 14.2% for Total Risk Based Capital. During 2013, the Company repurchased its Series A Preferred Stock and related warrants issued to the U.S. Department of the Treasury ("UST") as part of the Troubled Asset Relief Program—Capital Purchase Program (the "TARP CPP"). With the repurchase of the Preferred Stock and related warrants, the Company has fully exited the TARP CPP program with the UST.
  • The Company is continuing its efforts to complete the merger of Mission Community Bancorp, which was announced in the fourth quarter of 2013. The transaction is subject to regulatory and shareholder approvals.

"2013 has definitely been an exciting and rewarding year for the Company's customers, shareholders and employees," stated Simone Lagomarsino, President and Chief Executive Officer of Heritage Oaks Bancorp. "We are pleased to have accomplished many of our goals for 2013 including; achieving strong growth in customer relationships, a significant improvement in the credit quality of our loan portfolio, and decreasing the effective duration of our securities portfolio. We also resolved many of the issues which were a result of the financial crisis. This included terminating the Memoranda of Understanding with the Company's regulatory agencies, repurchasing the TARP CPP preferred stock and related warrants, and returning the Company to a position of strong financial performance. The year culminated with our announcement of the pending merger with Mission Community Bancorp, which would allow our combined resources to provide enhanced products and services to the communities we serve along the Central Coast of California."

"As we look forward to 2014 our focus will be to complete the merger and integration of Mission Community Bancorp and to continue to grow our business both organically and through other strategic opportunities," said Ms. Lagomarsino. "Given the lower interest rate environment, all banks continue to face net interest margin compression. We believe the merger with Mission Community Bancorp would provide us with the opportunity to leverage our operating platform over a larger asset base," said Ms. Lagomarsino. "We will continue to look for opportunities to increase efficiencies in our operations during 2014."

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