PASO ROBLES, Calif., Feb. 2, 2015 (GLOBE NEWSWIRE) -- Heritage Oaks Bancorp ("Heritage Oaks" or the "Company") (Nasdaq:HEOP), a bank holding company and the parent of Heritage Oaks Bank (the "Bank"), reported net income available to common shareholders of $4.2 million, or $0.13 per dilutive common share, for the fourth quarter of 2014 compared to net income available to common shareholders of $1.6 million, or $0.06 per dilutive common share, for the fourth quarter of 2013, and net income available to common shareholders of $3.4 million, or $0.10 per dilutive common share for the third quarter of 2014. For the year ended December 31, 2014, net income available to common shareholders was $8.8 million, or $0.27 per dilutive common share, compared with net income available to common shareholders of $9.9 million, or $0.37 per dilutive common share for the same period in 2013. The increase in net income for the fourth quarter of 2014 as compared to the same quarter a year earlier was primarily due to the increased pre-tax net income resulting from the inclusion of the operating results of Mission Community Bancorp ("MISN") into the Company's operating results. The acquisition of MISN was completed on February 28, 2014 (the "MISN Transaction").
Fourth Quarter and Year End 2014 Highlights
- Gross loans grew 44.2% or $366.0 million to $1.2 billion at December 31, 2014, compared with $827.5 million, at December 31, 2013. Year-over-year loan growth was primarily due to $280.7 million of loans acquired through the MISN Transaction. Additionally, gross loans grew $85.2 million or 10.3% during the year, including $41.9 million or 3.6% during the three months ended December 31, 2014.
- Total deposits grew 43.2% or $420.9 million to $1.4 billion at December 31, 2014, compared with $973.9 million a year earlier, primarily as a result of the $371.5 million of deposits acquired through the MISN Transaction and $49.4 million or 5.1% of organic deposit growth. Total deposits declined 2.0% or $28.1 million during the three months ended December 31, 2014. Non-interest bearing demand deposits grew 58.1% to $461.5 million compared to the prior year, with the growth largely resulting from the additional non-interest bearing deposits of $137.6 million acquired as part of the MISN Transaction. Non-interest bearing demand deposits represent 33.1% of total deposits at December 31, 2014, compared to 33.0% of total deposits at September 30, 2014, and 30.0% at December 31, 2013.
- The allowance for loan and lease losses ("ALLL") as a percentage of gross loans declined to 1.41% at December 31, 2014 from 2.16% at December 31, 2013. The decline is due primarily to the inclusion of loans acquired from MISN in the denominator of this ratio which carry a proportionately smaller reserve than the legacy Heritage Oaks' portfolio. Loans acquired from MISN were initially acquired at their fair market value and had no allowance for loan and lease losses associated with them. As of December 31, 2014, acquired MISN loans have an allowance for loan and lease losses of $1.0 million or 0.41% of the remaining acquired MISN loan portfolio. The remaining un-accreted fair market value discount on MISN loans was $7.6 million at December 31, 2014. The combined un-accreted MISN purchase discounts and allowance for loan and lease losses, represent 2.04% of gross loans as of December 31, 2014.
- For the quarter ended December 31, 2014, the Company recorded $0.4 million in merger, restructure, and integration costs related to the MISN Transaction. Merger, restructure and integration costs for 2014 totaled $9.2 million.
- Regulatory capital ratios for the Bank at December 31, 2014 were 9.83% for Tier 1 Leverage Capital and 13.88% for Total Risk Based Capital. The Company had a tangible common equity to tangible assets ratio of 9.92% at December 31, 2014. Tangible book value per common share was $4.92 at December 31, 2014 compared to tangible book value per common share of $4.85 at September 30, 2014, and $4.34 at December 31, 2013. At December 31, 2014, the Bank maintained regulatory capital ratios at levels that would be generally considered "well capitalized" for regulatory purposes, respectively.
- The Company recorded goodwill of $13.4 million during the first quarter of 2014 and had made subsequent goodwill adjustments downward of $0.1 million through the end of the third quarter of 2014. In accordance with accounting guidelines the Company is permitted to refine its initial estimate of goodwill for a period of up to one year after the acquisition date. During the fourth quarter of 2014 the Company adjusted its goodwill upward by $0.3 million for cumulative total goodwill attributable to the MISN Transaction of $13.6 million. This adjustment was primarily a result of the impact of a downward revision of the purchase accounting adjustment related to acquired net deferred tax assets. The Company has now completed its refinement of the goodwill resulting from the MISN Transaction.
- On January 28, 2015 the board of directors declared a dividend of $0.05 per common share for shareholders of record as of February 16, 2015, which is payable to our common shareholders and to the holders of our Series C Preferred Stock on March 2, 2015. The Company also repurchased 51,732 common shares, at an average price of $7.47 per share during the fourth quarter, in conjunction with its previously announced share repurchase program.
"During the fourth quarter, our team focused on relationship banking and achieved solid loan growth for the quarter similar to the levels we had experienced in 2013, before the close of the Mission Transaction. We closed the fourth quarter with a strong pipeline as well, and expect loan growth to continue to be strong into the first quarter of 2015. We are also very pleased to announce the successful opening of our newest branch in Goleta during the quarter." stated Simone Lagomarsino, President and Chief Executive Officer of Heritage Oaks Bancorp. Ms. Lagomarsino continued, "In addition, we recently hired Rick Arredondo, a seasoned banking professional, to join our organization as the President and Chief Banking Officer for Heritage Oaks Bank. Arredondo will lead our sales and growth strategies and will be responsible for all customer-facing areas of the Bank. This addition positions us well to continue to expand our banking franchise along the Central Coast of California. I am also proud to announce that our board declared a cash dividend of $0.05 per share. This demonstrates the board's continued commitment to enhancing shareholder value. It is also a testament to the strength of our core franchise and our confidence in our financial performance going forward."
Ms. Lagomarsino continued, "We have also made significant progress in strengthening our Bank Secrecy Act and Anti-Money Laundering program, and in addressing the issues identified in the Consent Order."
Net Income Available to Common Shareholders
Net income available to common shareholders for the fourth quarter of 2014 was $4.2 million, or $0.13 per dilutive common share, compared with net income available to common shareholders of $1.6 million, or $0.06 per dilutive common share, for the fourth quarter of 2013. The net income available to common shareholders for the quarter ended September 30, 2014 was $3.4 million, or $0.10 per dilutive common share.
Year to date earnings available to common shareholders for the year ended December 31, 2014 were $8.8 million, or $0.27 per dilutive common share, as compared to $9.9 million, or $0.37 per dilutive common share, for the year ended December 31, 2013. Earnings before income taxes, gains on investments, and merger, restructure, and integration costs were $7.0 million for the quarter ended December 31, 2014, compared to the linked-quarter of $5.5 million, reflecting an increase of 28.0%. Earnings before income taxes, gains on investments, and merger, restructure, and integration costs increased to $22.3 million year to date through December 31, 2014, as compared to $15.0 million for the prior year, representing a 48.8% increase, primarily resulting from the inclusion of the earnings from the assets acquired through the MISN Transaction and the efficiencies gained from the restructure and consolidation efforts.
Net Interest Income
Net interest income was $15.7 million, or 3.95% of average interest earning assets ("net interest margin" or "NIM"), for the fourth quarter of 2014 compared with $10.7 million, or a 3.89% NIM, for the same period a year earlier and $15.6 million, or a 3.98% NIM, for the quarter ended September 30, 2014. Our NIM continues to be supported by our low cost deposits. The cost of interest bearing deposits was 0.38%, 0.39% and 0.44% for the quarters ended December 31, 2014, September 30, 2014 and December 31, 2013, respectively. After including the benefit to funding costs of our non-interest bearing demand deposits, our total cost of deposits was 0.25%, 0.26% and 0.31% for the quarters ended December 31, 2014, September 30, 2014 and December 31, 2013, respectively. The decline in both the cost of interest bearing deposits and total deposits, experienced over the last year, was primarily attributable to the lower cost deposits acquired through the MISN Transaction on February 28, 2014.
Net interest income increased by $0.2 million for the quarter ended December 31, 2014 as compared to the quarter ended September 30, 2014, due primarily to increased income contributed from the loan portfolio. Total loan discount accretion from the acquired MISN portfolio was essentially unchanged at $0.9 million for both the quarters ended December 31, 2014 and September 30, 2014, respectively. Loan discount accretion from the acquired MISN portfolio was $3.1 million for the year ended December 31, 2014. For the years ended December 31, 2014, and 2013, net interest income was $58.9 million and $41.5 million, respectively; representing a $17.4 million, or 41.9%, year over year increase. The majority of the year over year increase is attributable to the net interest income from the loans acquired and deposit liabilities assumed through the MISN Transaction.
Provision for Loan and Lease Losses
No provisions for loan and lease losses were recorded during the three months ended December 31, 2014 or 2013 or the linked-quarter ended September 30, 2014. We recorded net recoveries of $15,000, and $0.2 million during the three months ended December 31, 2014 and September 30, 2014, respectively. Net recoveries were $0.4 million for the three months ended December 31, 2013.
The lack of provisions for loan and lease losses over the last nine quarters was largely driven by the gradual improvements in the overall credit quality of the loan portfolio. Due to heightened concerns regarding the effects of the California drought upon our agribusiness loan customers and related businesses, the Bank has provided an allocation of reserves under its qualitative factors in the Bank's allowance for loan and lease losses to address these concerns. Management will continue to monitor the drought as it relates to our customers.
The fourth quarter 2014 provision for loan and lease losses associated with the MISN acquired portfolio was $1.0 million and was offset by provision recaptures related to the other components of our allowance for loan and lease losses; the net impact of which resulted in a $0 provision for loan and lease losses for the fourth quarter of 2014. The incremental allowance for loan and lease losses allocated for the acquired MISN loan portfolio was 0.41%, while the remaining un-accreted fair value discount available to absorb credit losses from the acquired MISN portfolio represented 3.07% of acquired MISN loans as of December 31, 2014.
Non-Interest Income
Non-interest income for the fourth quarter of 2014 was $2.4 million as compared to $1.9 million for the same period a year earlier and $3.0 million for the linked-quarter ended September 30, 2014. The increase from a year ago was primarily the result of increases in other income of $0.2 million, fees and service charges of $0.2 million, and gain on sales of investment securities of $0.1 million. Non-interest income declined $0.6 million in the fourth quarter of 2014 compared to the linked-quarter, primarily as a result of higher gain on sale of investment securities of $0.4 million and other income of $0.2 million earned during the prior quarter. Non-interest income for the years ended December 31, 2014 and 2013 was $9.6 million and $12.9 million, respectively. The primary reasons that the 2014 non-interest income was lower than the 2013 non-interest income include: lower gains on the sale of investment securities of $3.3 million and lower mortgage banking revenues of $1.3 million in 2014 compared to 2013, respectively. These negative variances were partially offset by increases in fees and service charges of $0.8 million and other income of $0.5 million in 2014 as compared to 2013.
Non-Interest Expense
Non-interest expense was $11.4 million for the quarter ended December 31, 2014 compared to $9.6 million for the quarter ended December 31, 2013, and $13.4 million for the linked-quarter ended September 30, 2014. The $1.8 million year-over-year quarterly non-interest expense increase resulted primarily from MISN operating costs and included increases in salary and benefits of $0.9 million, occupancy and equipment expense of $0.3 million, professional services of $0.4 million, and $0.3 million of other non-interest expense.
For the years ended December 31, 2014 and 2013 non-interest expense was $54.8 million and $36.6 million, respectively, an $18.2 million or 49.9% increase. The increase is primarily a result of both the addition of MISN operations to the Company's operations and MISN merger related costs including, salary and employee benefit costs of $4.5 million, $1.7 million in occupancy and equipment costs, $8.1 million of merger, restructure and integration costs, and a $2.0 million increase in other professional services.
The $2.0 million decline in non-interest expense for the fourth quarter of 2014 as compared to the third quarter of 2014 was largely the result of a decrease in salaries and employee benefits expense of $0.8 million, professional services expense of $0.6 million and merger, restructuring and integration costs of $0.3 million. Salaries and benefits expense declined as compared to the linked-quarter due to a $0.6 million decline in incentive compensation plan expense while professional services expense declined due to a $0.6 million decrease in attorney costs due to the successful resolution of certain on-going litigation.
During the fourth quarter of 2014, merger, restructure and integration costs of $0.4 million were incurred and comprised primarily of: $0.3 million of accruals for termination benefits paid to employees displaced as a result of the merger and for the retention of key employees through integration related milestone dates, and $0.1 million for the write-down of held for sale facilities.
We sold three of the four branch properties in accordance with our planned consolidation of MISN operations as of December 31, 2014. The financial impacts of merger and restructuring initiatives have been completed as of the end of 2014. We expect to gain the full benefit of the consolidation of the operations of the two organizations during the first quarter of 2015. We have already achieved one of our goals of reducing the number of FTE to below 300. As of December 31, 2014 we have reduced the number of full time equivalent employees ("FTE") from approximately 357 at the time we closed the MISN Transaction on February 28, 2014, to 294 as of December 31, 2014. We also continue to anticipate that the financial impact of these efforts will result in an approximate $9.0 million annual reduction in operating expenses as compared to the annual combined 2013 operating expenses of the two entities before the merger.
Operating Efficiency
The Company's operating efficiency ratio improved to 61.67% for the fourth quarter compared to 71.91% for the third quarter of 2014, and decreased as compared to the 75.33% reported for the same period a year ago. For the twelve months ended December 31, 2014 and 2013, the operating efficiency ratios were 78.92% and 71.29%, respectively. However, exclusive of merger, restructure, and integration costs, our operating efficiency ratio would have been 59.43% for the quarter ended December 31, 2014 and 67.78% for the quarter ended September 30, 2014. Our operating efficiency ratios for the three and twelve month periods ended at December 31, 2014 reflect the impact of the charges to non-interest expense discussed above. In addition to the previously mentioned one-time merger, restructure, and integration expenses, the most notable impact on the operating efficiency ratio has been the positive impact to net interest income resulting from the increased scale of the combined entity. Total non-interest expense as a percentage of average assets, another measure of the Company's efficiency, was 2.64% for the quarter ended December 31, 2014 compared to 3.23% for the quarter ended December 31, 2013, and 3.14% for the quarter ended September 30, 2014. This performance ratio, adjusted for the merger, restructure, and integration related expenses, would have been 2.54% for the fourth quarter of 2014, and 2.96% for the third quarter of 2014.
Income Taxes
Income tax expense was $2.3 million and $1.7 million for the quarter ended December 31, 2014 and September 30, 2014, respectively, and $1.3 million for the quarter ended December 31, 2013. The Company's effective tax rate for the fourth quarter of 2014 was 35.0% compared with 33.7% for the quarter ended September 30, 2014, and 44.5% for the same period a year ago.
Balance Sheet
During the fourth quarter of 2014, total assets decreased marginally by $6.1 million, or 0.4%, to $1.7 billion at December 31, 2014. Total assets at December 31, 2014 increased by $506.5 million or 42.1%, compared to $1.2 billion at December 31, 2013. The majority of the increase in the year-over-year asset levels relates to the MISN Transaction which added $280.7 million in loans, $76.2 million of investment securities, and $37.6 million in cash and equivalents, which were all acquired at fair market value, at the closing of the transaction on February 28, 2014. Total shareholders' equity was $197.9 million at December 31, 2014, an increase of $3.8 million, or 2.0%, compared to September 30, 2014 and an increase of $71.5 million, or 56.6%, compared to December 31, 2013.
The year-over-year increase in shareholders' equity was primarily due to the issuance of 7.5 million shares of common stock at $7.99 per share upon consummation of the MISN Transaction which totaled $60.3 million, and to a lesser degree, the contribution of $9.0 million of earnings, and a $4.4 million increase in accumulated other comprehensive income due to the improvement in the fair value of the investment securities portfolio, which resulted from the decline in long-term interest rates.
Total gross loans increased $41.9 million, or 3.6%, at December 31, 2014 compared to September 30, 2014, and increased $366.0 million, or 44.2%, from $827.5 million at December 31, 2013. Total new loan production for the fourth quarter of 2014 was $79.2 million and was led by organic loan production of $59.2 million, and mortgage loans originated for sale of $20.0 million. Loan production declined $5.2 million, or 6.2%, during the three months ended December 31, 2014, compared with quarterly production of $84.4 million for the same period a year earlier.
Total deposits declined $28.1 million, or 2.0%, to $1.4 billion at December 31, 2014 as compared to balances at September 30, 2014 and grew $420.9 million, or 43.2%, from $973.9 million at December 31, 2013. Acquired MISN customer deposits as of December 31, 2014 exceeded 93% of the acquired balances at the closing of the MISN Transaction on February 28, 2014.
Allowance for Loan and Lease Losses
The ALLL was $16.8 million, or 1.41%, of total loans at December 31, 2014, compared with $16.8 million, or 1.46%, of total loans at September 30, 2014, and $17.9 million, or 2.16%, at December 31, 2013. The decrease in the ALLL to total loans ratio is due to the acquisition of the MISN loan portfolio at fair market value on February 28, 2014. These loans had a fair value discount of $7.6 million at December 31, 2014, including the discount on PCI loans of $3.1 million. In accordance with applicable accounting standards, no ALLL was recorded on the MISN acquired portfolio at acquisition because such loans are carried at approximately fair value at that time.
During our fourth quarter analysis of the allowance for loan and lease losses it was determined that, for certain segments of the acquired MISN loan portfolio, the un-accreted purchase discount is now less than the total allowance for loan and lease losses required to absorb probable losses on those particular segments, such as commercial and agricultural lines of credit. These incremental allowance allocations were not driven by a decline in the credit quality of such segments, rather they were due to the relatively fast accretion of purchase discounts attributable to those segments. At December 31, 2014 the combined un-accreted MISN purchase discounts and allowance for loan and lease losses, represent 2.04% of gross loans.
Non-performing loans at December 31, 2014 totaled $10.5 million and increased by $0.3 million as compared to prior quarter end, and increased by $0.4 million from the same prior year period. Classified assets increased by $7.3 million to $52.6 million at December 31, 2014 from $45.3 million at September 30, 2014, due to two lending relationships, both of which are current in terms of their payments, however are not in full compliance with their loan covenants. The year-over-year increase in classified assets was $17.1 million, from $35.5 million at December 31, 2013. Total gross classified assets increased by $18.2 million as a result of classified assets acquired through the MISN Transaction on February 28, 2014, which is the most significant contributor to the year-over-year increase. Total loans delinquent 30 to 89 days were 0.01% of total gross loans as of December 31, 2014. PCI loans acquired from MISN had outstanding principal balances of $13.4 million, with a carrying value of $10.3 million at December 31, 2014, which approximates fair value.
Regulatory Capital
The Company's and the Bank's regulatory capital ratios exceeded the levels required to be generally considered "well capitalized" for regulatory purposes. The Tier I Leverage Ratios for the Company and the Bank were 10.22% and 9.83%, respectively, at December 31, 2014 compared with the requirement of 5.00% 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 14.38% and 13.88%, respectively, at December 31, 2014 compared with the requirement of 10.00% to generally be considered a "well capitalized" financial institution for regulatory purposes. The Company had a tangible common equity to tangible assets ratio of 9.92% at December 31, 2014.
The Company has entered into a written agreement with Castle Creek Partners IV, LP; ("Castle Creek") its fourth-largest investor, to exchange all of the issued and outstanding series C preferred shares owned by the investor for shares of the Company's common stock on a one-for-one basis, subject to regulatory approval. Castle Creek converted 840,841 shares on December 24, 2014 which resulted in a reclassification of $2.5 million of preferred equity to common equity and triggered a proportionate conversion of the series C beneficial conversion feature of $0.2 million which represented dividend accretion on the series C preferred stock. The remaining 348,697 preferred shares outstanding will be converted in the event that the Federal Reserve approves of Castle Creek's application to increase the common ownership level of the Company to over 9.9%.
Conference Call
The Company will host a conference call to discuss the fourth quarter results at 8:00 a.m. PDT on February 3, 2015. Media representatives, analysts and the public are invited to listen to this discussion by calling (877) 363-5052 and entering the conference ID 63070455, or via on-demand webcast. A link to the webcast will be available on Heritage Oaks Bancorp's website at www.heritageoaksbancorp.com. A replay of the call will be available on Heritage Oaks Bancorp's website later that day and will remain on its site for up to 14 calendar days. By including the foregoing website address, Heritage Oaks Bancorp does not intend to and shall not be deemed to incorporate by reference any material contained therein.
Report on Form 10-K
The Company intends to file with the U.S. Securities and Exchange Commission its Annual Report on Form 10-K for the year ended December 31, 2014, on or before March 16, 2015. This report can be accessed at the U.S. Securities and Exchange Commission's website, www.sec.gov. Shortly after filing, it is also available free of charge at the Company's website, www.heritageoaksbancorp.com or by contacting the Company's Investor Relations Department. By including the foregoing website addresses, Heritage Oaks Bancorp does not intend to and shall not be deemed to incorporate by reference any material contained therein.
About Heritage Oaks Bancorp
With $1.7 billion in assets, Heritage Oaks Bancorp is headquartered in Paso Robles, California and is the holding company for Heritage Oaks Bank. Heritage Oaks Bank operates two branch offices each in Paso Robles and San Luis Obispo; single branch offices in Atascadero, Templeton, Cambria, Morro Bay, Arroyo Grande, Santa Maria, Goleta and Santa Barbara; as well as a single loan production office in Ventura/Oxnard. Heritage Oaks Bank conducts commercial banking business in the counties of San Luis Obispo, Santa Barbara, and Ventura. Visit Heritage Oaks Bancorp on the Web at www.heritageoaksbancorp.com. By including the foregoing website address, Heritage Oaks Bancorp does not intend to, and shall not be deemed to incorporate by reference any material contained therein.
Forward Looking Statements
This press release contains "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward looking statements to be covered by the safe harbor provisions for forward looking statements. All statements other than statements of historical fact are "forward looking statements" for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial position and liquidity, business prospects, strategic alternatives, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs, plans and objectives of management for future operations, and other similar forecasts and statements of expectation and statements of assumptions underlying any of the foregoing. Words such as "will likely result," "aims," "anticipates," "believes," "could," "estimates," "expects," "hopes," "intends," "may," "plans," "projects," "seeks," "should," "will," and variations of these words and similar expressions are intended to help identify forward-looking statements. Forward looking statements are based on the Company's current expectations and assumptions regarding its business, the regulatory environment, the economy and other future conditions. Forward looking statements are subject to a number of risks and uncertainties that could cause the Company's actual results to differ materially and adversely from those contemplated by the forward looking statements. The Company cautions you against relying on any of these forward looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward looking statements, include the following: continuing relative softness in the overall economy, including the California real estate market; the effect of the current low interest rate environment or changes in interest rates on our net interest margin; changes in the Company's business strategy or development plans; our ability to attract and retain qualified employees; a failure or breach of our operational security systems or infrastructure or those of our customers, our third party vendors or other service providers, including as a result of a cyber attack; environmental conditions, including the prolonged drought in California, natural disasters such as earthquakes, landslides, and wildfires that may disrupt business, impede operations, or negatively impact the ability of certain borrowers to repay their loans and/or the values of collateral securing loans; the possibility of an unfavorable ruling in a legal matter, and the potential impact that it may have on earnings, reputation, or the Bank's operations; and the possibility that any expansionary activities will be impeded while the FDIC's and CA DBO's joint Consent Order remains outstanding, and that we will be unable to comply with the requirements set forth in the Consent Order, which could result in restrictions on our operations.
Additional information on these risks and other factors that could affect operating results and financial condition are detailed in reports filed by the Company with the U.S. Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2013, filed by the Company with the U.S. Securities and Exchange Commission on March 4, 2014.
Forward looking statements speak only as of the date they are made, and the Company does not undertake to update forward looking statements to reflect circumstances or events that occur after the date the forward looking statements are made, whether as a result of new information, future developments or otherwise, and specifically disclaims any obligation to revise or update such forward looking statements for any reason, except as may be required by law.
Use of Non-GAAP Financial Information
The Company provides all information required in accordance with generally accepted accounting principles (GAAP), but it believes that evaluating its ongoing operating results and in particular, making comparisons to similar companies, may be enhanced by providing additional non-GAAP measures used by management to assess operating results. Therefore, included at the end of the tables below are the following schedules: a schedule reconciling our GAAP net income to earnings before income taxes, provision for loan and lease losses, investment securities gains or losses, and merger, restructure, and integration related costs; a schedule reconciling book value to tangible common book value per share; a schedule adjusting non-interest expense to exclude merger, restructure and integration costs and expressing the adjusted noninterest expense as a percentage of average assets; and a schedule adjusting the efficiency ratio to exclude merger, restructure and integration costs.
| Heritage Oaks Bancorp | |||
| Consolidated Balance Sheets | |||
| (unaudited) | |||
| (dollars in thousands except share and per share data) | 12/31/2014 | 9/30/2014 | 12/31/2013 |
| Assets | |||
| Cash and due from banks | $ 12,548 | $ 14,993 | $ 11,336 |
| Interest earning deposits in other banks | 23,032 | 35,834 | 14,902 |
| Total cash and cash equivalents | 35,580 | 50,827 | 26,238 |
| Investment securities available for sale, at fair value | 355,580 | 382,437 | 276,795 |
| Loans held for sale, at lower of cost or fair value | 2,586 | 5,977 | 2,386 |
| Gross loans | 1,193,483 | 1,151,576 | 827,484 |
| Net deferred loan fees | (1,445) | (1,414) | (1,281) |
| Allowance for loan and lease losses | (16,802) | (16,787) | (17,859) |
| Net loans held for investment | 1,175,236 | 1,133,375 | 808,344 |
| Premises and equipment, net | 37,820 | 36,937 | 24,220 |
| Premises and equipment held for sale | 1,978 | 2,070 | -- |
| Deferred tax assets, net | 24,920 | 27,914 | 21,624 |
| Bank owned life insurance | 24,711 | 24,549 | 15,826 |
| Federal Home Loan Bank stock | 7,853 | 7,853 | 4,739 |
| Goodwill | 24,885 | 24,536 | 11,237 |
| Other intangible assets | 5,347 | 5,644 | 1,344 |
| Other assets | 13,631 | 14,105 | 10,898 |
| Total assets | $ 1,710,127 | $ 1,716,224 | $ 1,203,651 |
| Liabilities | |||
| Deposits | |||
| Non-interest bearing deposits | $ 461,479 | $ 469,435 | $ 291,856 |
| Interest bearing deposits | 933,325 | 953,499 | 682,039 |
| Total Deposits | 1,394,804 | 1,422,934 | 973,895 |
| Short term FHLB borrowing | 25,000 | 10,000 | 29,000 |
| Long term FHLB borrowing | 70,558 | 65,562 | 59,500 |
| Junior subordinated debentures | 13,233 | 13,179 | 8,248 |
| Other liabilities | 8,592 | 10,430 | 6,581 |
| Total liabilities | 1,512,187 | 1,522,105 | 1,077,224 |
| Shareholders' equity | |||
| Preferred stock, 5,000,000 shares authorized: | |||
| Series C preferred stock, $3.25 per share stated value; issued and outstanding: 348,697 shares at December 31, 2014, 1,189,538 shares at September 30, 2014 and December 31, 2013, respectively | 1,056 | 3,604 | 3,604 |
| Common stock, no par value; authorized: 100,000,000 shares; issued and outstanding: 33,905,060, 33,082,205and 25,397,780 shares as of December 31, 2014, September 30, 2014, and December 31, 2013, respectively | 164,196 | 161,924 | 101,511 |
| Additional paid in capital | 6,984 | 6,382 | 6,020 |
| Retained earnings | 24,772 | 22,303 | 18,717 |
| Accumulated other comprehensive income / (loss) | 932 | (94) | (3,425) |
| Total shareholders' equity | 197,940 | 194,119 | 126,427 |
| Total liabilities and shareholders' equity | $ 1,710,127 | $ 1,716,224 | $ 1,203,651 |
| Book value per common share | $ 5.81 | $ 5.76 | $ 4.84 |
| Tangible book value per common share | $ 4.92 | $ 4.85 | $ 4.34 |
| Heritage Oaks Bancorp | |||
| Consolidated Statements of Income | |||
| (unaudited) | |||
| Three Months Ended | |||
| (dollars in thousands except per share data) | 12/31/2014 | 9/30/2014 | 12/31/2013 |
| Interest Income | |||
| Loans, including fees | $ 15,011 | $ 14,745 | $ 10,162 |
| Investment securities | 1,883 | 1,946 | 1,483 |
| Other interest-earning assets | 170 | 204 | 91 |
| Total interest income | 17,064 | 16,895 | 11,736 |
| Interest Expense | |||
| Deposits | 906 | 918 | 759 |
| Other borrowings | 432 | 406 | 290 |
| Total interest expense | 1,338 | 1,324 | 1,049 |
| Net interest income before provision for loan and lease losses | 15,726 | 15,571 | 10,687 |
| Provision for loan and lease losses | -- | -- | -- |
| Net interest income after provision for loan and lease losses | 15,726 | 15,571 | 10,687 |
| Non-Interest Income | |||
| Fees and service charges | 1,363 | 1,410 | 1,199 |
| Net gain on sale of mortgage loans | 363 | 411 | 333 |
| Other mortgage fee income | 67 | 64 | 72 |
| Gain (loss) on sale of investment securities | 97 | 450 | (9) |
| Other income | 464 | 647 | 284 |
| Total non-interest income | 2,354 | 2,982 | 1,879 |
| Non-Interest Expense | |||
| Salaries and employee benefits | 5,355 | 6,164 | 4,442 |
| Occupancy and equipment | 1,587 | 1,776 | 1,262 |
| Information technology | 622 | 756 | 657 |
| Professional services | 1,191 | 1,839 | 751 |
| Regulatory assessments | 302 | 351 | 156 |
| Sales and marketing | 248 | 232 | 146 |
| Foreclosed asset costs and write-downs | (3) | 55 | 51 |
| Provision for mortgage loan repurchases | 100 | 27 | -- |
| Amortization of intangible assets | 297 | 297 | 100 |
| Merger, restructure and integration | 405 | 748 | 1,049 |
| Other expense | 1,281 | 1,137 | 1,010 |
| Total non-interest expense | 11,385 | 13,382 | 9,624 |
| Income before income taxes | 6,695 | 5,171 | 2,942 |
| Income tax expense | 2,343 | 1,742 | 1,308 |
| Net income | 4,352 | 3,429 | 1,634 |
| Dividends and accretion on preferred stock | 168 | -- | -- |
| Net income available to common shareholders | $ 4,184 | $ 3,429 | $ 1,634 |
| Weighted Average Shares Outstanding | |||
| Basic | 33,301,966 | 33,992,465 | 26,382,488 |
| Diluted | 33,433,813 | 34,146,200 | 26,550,442 |
| Earnings Per Common Share | |||
| Basic | $ 0.13 | $ 0.10 | $ 0.06 |
| Diluted | $ 0.13 | $ 0.10 | $ 0.06 |
| Heritage Oaks Bancorp | ||
| Consolidated Statements of Income | ||
| (unaudited) | ||
| Twelve Months Ended | ||
| (dollars in thousands except per share data) | 12/31/2014 | 12/31/2013 |
| Interest Income | ||
| Loans, including fees | $ 56,145 | $ 39,610 |
| Investment securities | 7,238 | 5,476 |
| Other interest-earning assets | 705 | 307 |
| Total interest income | 64,088 | 45,393 |
| Interest Expense | ||
| Deposits | 3,567 | 2,860 |
| Other borrowings | 1,590 | 1,007 |
| Total interest expense | 5,157 | 3,867 |
| Net interest income before provision for loan and lease losses | 58,931 | 41,526 |
| Provision for loan and lease losses | -- | -- |
| Net interest income after provision for loan and lease losses | 58,931 | 41,526 |
| Non-Interest Income | ||
| Fees and service charges | 5,312 | 4,529 |
| Net gain on mortgage banking activities | 1,330 | 2,282 |
| Other mortgage fee income | 290 | 642 |
| Gain on sale of investment securities | 646 | 3,926 |
| Other income | 1,997 | 1,496 |
| Total non-interest income | 9,575 | 12,875 |
| Non-Interest Expense | ||
| Salaries and employee benefits | 23,476 | 18,977 |
| Occupancy and equipment | 6,576 | 4,891 |
| Information technology | 3,025 | 2,582 |
| Professional services | 4,801 | 2,833 |
| Regulatory assessments | 1,164 | 1,007 |
| Sales and marketing | 843 | 584 |
| Foreclosed asset costs and writedowns | 179 | 180 |
| Provision for mortgage loan repurchases | 127 | 570 |
| Amortization of intangible assets | 1,057 | 400 |
| Merger, restructure and integration | 9,190 | 1,051 |
| Other expense | 4,354 | 3,488 |
| Total non-interest expense | 54,792 | 36,563 |
| Income before income taxes | 13,714 | 17,838 |
| Income tax expense | 4,749 | 6,997 |
| Net income | 8,965 | 10,841 |
| Dividends and accretion on preferred stock | 168 | 898 |
| Net income available to common shareholders | $ 8,797 | $ 9,943 |
| Weighted Average Shares Outstanding | ||
| Basic | 32,567,137 | 26,341,592 |
| Diluted | 32,712,983 | 26,542,689 |
| Earnings Per Common Share | ||
| Basic | $ 0.27 | $ 0.38 |
| Diluted | $ 0.27 | $ 0.37 |
| Heritage Oaks Bancorp | |||||
| Key Ratios | |||||
| Three Months Ended | Twelve Months Ended | ||||
| PROFITABILITY / PERFORMANCE RATIOS | 12/31/2014 | 9/30/2014 | 12/31/2013 | 12/31/2014 | 12/31/2013 |
| Net interest margin | 3.95% | 3.98% | 3.89% | 3.97% | 4.03% |
| Return on average equity | 8.80% | 7.05% | 5.10% | 4.92% | 7.87% |
| Return on average common equity | 8.61% | 7.18% | 5.25% | 4.92% | 8.10% |
| Return on average tangible common equity | 10.20% | 8.55% | 5.85% | 5.84% | 9.04% |
| Return on average assets | 1.01% | 0.80% | 0.55% | 0.56% | 0.97% |
| Non-interest income to total net revenue | 13.02% | 16.07% | 14.95% | 13.98% | 23.67% |
| Yield on interest earning assets | 4.29% | 4.32% | 4.28% | 4.32% | 4.40% |
| Cost of interest bearing liabilities | 0.52% | 0.52% | 0.56% | 0.52% | 0.56% |
| Cost of funds | 0.35% | 0.35% | 0.40% | 0.36% | 0.40% |
| Operating efficiency ratio (1) | 61.67% | 71.91% | 75.33% | 78.92% | 71.29% |
| Non-interest expense to average assets, annualized | 2.64% | 3.14% | 3.23% | 3.40% | 3.27% |
| ASSET QUALITY RATIOS | |||||
| Non-performing loans to total gross loans | 0.88% | 0.89% | 1.22% | ||
| Non-performing loans to equity | 5.32% | 5.29% | 8.00% | ||
| Non-performing assets to total assets | 0.62% | 0.60% | 0.84% | ||
| Allowance for loan and lease losses to total gross loans | 1.41% | 1.46% | 2.16% | ||
| Net (recoveries) charge-offs to average loans outstanding, annualized | -0.01% | -0.06% | -0.20% | 0.10% | 0.03% |
| Classified assets to Tier I + ALLL | 28.03% | 24.91% | 25.95% | ||
| 30-89 Day Delinquency Rate | 0.01% | 0.00% | 0.01% | ||
| CAPITAL RATIOS | |||||
| Company | |||||
| Leverage ratio | 10.22% | 10.00% | 10.20% | ||
| Tier I Risk-Based Capital Ratio | 13.13% | 12.87% | 12.91% | ||
| Total Risk-Based Capital Ratio | 14.38% | 14.12% | 14.17% | ||
| Bank | |||||
| Leverage ratio | 9.83% | 9.77% | 9.82% | ||
| Tier I Risk-Based Capital Ratio | 12.63% | 12.58% | 12.42% | ||
| Total Risk-Based Capital Ratio | 13.88% | 13.83% | 13.68% | ||
| (1) The efficiency ratio is defined as total non interest expense as a percent of the combined net interest income plus non interest income, exclusive of gains and losses on securities sales, other than temporary impairment losses, gains and losses on sale of OREO and other OREO related costs, gains and losses on sale of fixed assets, and the amortization of core deposit intangible assets. | |||||
| Heritage Oaks Bancorp | |||||||||
| Average Balances | |||||||||
| For The Three Months Ended | |||||||||
| 12/31/2014 | 9/30/2014 | 12/31/2013 | |||||||
| Yield / | Income / | Yield / | Income / | Yield / | Income / | ||||
| (dollars in thousands) | Balance | Rate | Expense | Balance | Rate | Expense | Balance | Rate | Expense |
| Interest Earning Assets | |||||||||
| Interest earning deposits in other banks | $ 34,891 | 0.14% | $ 12 | $ 72,348 | 0.20% | $ 36 | $ 16,826 | 0.19% | $ 8 |
| Investment securities | 369,379 | 2.02% | 1,883 | 374,359 | 2.06% | 1,946 | 280,432 | 2.10% | 1,483 |
| Other investments | 9,839 | 6.37% | 158 | 9,839 | 6.77% | 168 | 6,642 | 4.96% | 83 |
| Loans (1) | 1,163,454 | 5.12% | 15,011 | 1,096,002 | 5.34% | 14,745 | 784,841 | 5.14% | 10,162 |
| Total earning assets | 1,577,563 | 4.29% | 17,064 | 1,552,548 | 4.32% | 16,895 | 1,088,741 | 4.28% | 11,736 |
| Allowance for loan and lease losses | (16,827) | (16,696) | (17,791) | ||||||
| Other assets | 151,869 | 155,656 | 109,986 | ||||||
| Total assets | $ 1,712,605 | $ 1,691,508 | $ 1,180,936 | ||||||
| Interest Bearing Liabilities | |||||||||
| Interest bearing demand | $ 110,024 | 0.11% | $ 31 | $ 106,382 | 0.11% | $ 30 | $ 86,666 | 0.10% | $ 22 |
| Savings | 98,280 | 0.10% | 25 | 104,757 | 0.10% | 26 | 41,219 | 0.10% | 10 |
| Money market | 452,495 | 0.28% | 316 | 438,824 | 0.29% | 317 | 329,334 | 0.33% | 278 |
| Time deposits | 282,388 | 0.75% | 534 | 289,886 | 0.75% | 545 | 220,269 | 0.81% | 449 |
| Total interest bearing deposits | 943,187 | 0.38% | 906 | 939,849 | 0.39% | 918 | 677,488 | 0.44% | 759 |
| Federal funds purchased | 33 | 0.76% | -- | -- | 0.00% | -- | -- | 0.00% | -- |
| Federal Home Loan Bank borrowing | 73,386 | 1.57% | 290 | 65,824 | 1.59% | 264 | 62,617 | 1.57% | 248 |
| Junior subordinated debentures | 13,200 | 4.27% | 142 | 13,145 | 4.29% | 142 | 8,248 | 2.02% | 42 |
| Total borrowed funds | 86,619 | 1.98% | 432 | 78,969 | 2.04% | 406 | 70,865 | 1.62% | 290 |
| Total interest bearing liabilities | 1,029,806 | 0.52% | 1,338 | 1,018,818 | 0.52% | 1,324 | 748,353 | 0.56% | 1,049 |
| Non interest bearing demand | 475,745 | 467,868 | 298,561 | ||||||
| Total funding | 1,505,551 | 0.35% | 1,338 | 1,486,686 | 0.35% | 1,324 | 1,046,914 | 0.40% | 1,049 |
| Other liabilities | 10,816 | 11,761 | 6,935 | ||||||
| Total liabilities | $ 1,516,367 | $ 1,498,447 | $ 1,053,849 | ||||||
| Shareholders' Equity | |||||||||
| Total shareholders' equity | 196,238 | 193,061 | 127,087 | ||||||
| Total liabilities and shareholders' equity | $ 1,712,605 | $ 1,691,508 | $ 1,180,936 | ||||||
| Net interest margin | 3.95% | 3.98% | 3.89% | ||||||
| Interest rate spread | 3.77% | $ 15,726 | 3.80% | $ 15,571 | 3.72% | $ 10,687 | |||
| Cost of deposits | 0.25% | 0.26% | 0.31% | ||||||
| (1) Non-accrual loans have been included in total loans. | |||||||||
| Heritage Oaks Bancorp | ||||||
| Average Balances | ||||||
| For the Year Ended | ||||||
| 12/31/2014 | 12/31/2013 | |||||
| Yield / | Income / | Yield / | Income / | |||
| (dollars in thousands) | Balance | Rate | Expense | Balance | Rate | Expense |
| Interest Earning Assets | ||||||
| Interest earning deposits in other banks | $ 52,039 | 0.17% | $ 89 | $ 15,466 | 0.21% | $ 33 |
| Investment securities | 350,069 | 2.07% | 7,238 | 262,504 | 2.09% | 5,476 |
| Other investments | 9,152 | 6.73% | 616 | 6,590 | 4.16% | 274 |
| Loans (1) | 1,072,133 | 5.24% | 56,145 | 747,018 | 5.30% | 39,610 |
| Total earning assets | 1,483,393 | 4.32% | 64,088 | 1,031,578 | 4.40% | 45,393 |
| Allowance for loan and lease losses | (17,375) | (17,937) | ||||
| Other assets | 143,687 | 105,693 | ||||
| Total assets | $ 1,609,705 | $ 1,119,334 | ||||
| Interest Bearing Liabilities | ||||||
| Interest bearing demand | $ 103,781 | 0.11% | $ 114 | $ 78,055 | 0.10% | $ 81 |
| Savings | 93,593 | 0.10% | 91 | 40,548 | 0.10% | 40 |
| Money market | 418,532 | 0.30% | 1,247 | 302,998 | 0.33% | 1,000 |
| Time deposits | 278,292 | 0.76% | 2,115 | 200,249 | 0.87% | 1,739 |
| Total interest bearing deposits | 894,198 | 0.40% | 3,567 | 621,850 | 0.46% | 2,860 |
| Federal funds purchased | 8 | 0.76% | -- | -- | 0.00% | -- |
| Federal Home Loan Bank borrowing | 76,499 | 1.43% | 1,091 | 59,063 | 1.42% | 840 |
| Junior subordinated debentures | 12,348 | 4.04% | 499 | 8,248 | 2.02% | 167 |
| Total borrowed funds | 88,855 | 1.79% | 1,590 | 67,311 | 1.50% | 1,007 |
| Total interest bearing liabilities | 983,053 | 0.52% | 5,157 | 689,161 | 0.56% | 3,867 |
| Non interest bearing demand | 434,012 | 282,060 | ||||
| Total funding | 1,417,065 | 0.36% | 5,157 | 971,221 | 0.40% | 3,867 |
| Other liabilities | 10,454 | 10,306 | ||||
| Total liabilities | 1,427,519 | 981,527 | ||||
| Shareholders' Equity | ||||||
| Total stockholders' equity | 182,186 | 137,807 | ||||
| Total liabilities and shareholders' equity | $ 1,609,705 | $ 1,119,334 | ||||
| Net interest margin | 3.97% | 4.03% | ||||
| Interest rate spread | 3.80% | $ 58,931 | 3.84% | $ 41,526 | ||
| Cost of deposits | 0.27% | 0.32% | ||||
| (1) Non-accrual loans have been included in total loans. | ||||||
| Heritage Oaks Bancorp | |||
| Loans and Deposits | |||
| (dollars in thousands) | |||
| Loans | 12/31/2014 | 9/30/2014 | 12/31/2013 |
| Real Estate Secured | |||
| Multi-family residential | $ 78,645 | $ 76,821 | $ 31,140 |
| Residential 1 to 4 family | 127,201 | 121,061 | 88,904 |
| Home equity lines of credit | 38,252 | 37,967 | 31,178 |
| Commercial | 588,472 | 582,600 | 432,203 |
| Farmland | 98,373 | 93,965 | 50,414 |
| Land | 20,167 | 24,634 | 24,523 |
| Construction | 24,493 | 17,845 | 13,699 |
| Total real estate secured | 975,603 | 954,893 | 672,061 |
| Commercial | |||
| Commercial and industrial | 154,787 | 143,861 | 119,121 |
| Agriculture | 55,101 | 44,204 | 32,686 |
| Other | 14 | 20 | 38 |
| Total commercial | 209,902 | 188,085 | 151,845 |
| Installment | 7,723 | 8,198 | 3,246 |
| Overdrafts | 255 | 400 | 332 |
| Total gross loans | 1,193,483 | 1,151,576 | 827,484 |
| Deferred loan fees | (1,445) | (1,414) | (1,281) |
| Allowance for loan and lease losses | (16,802) | (16,787) | (17,859) |
| Total net loans | $ 1,175,236 | $ 1,133,375 | $ 808,344 |
| Loans held for sale | 2,586 | $ 5,977 | $ 2,386 |
| Deposits | 12/31/2014 | 9/30/2014 | 12/31/2013 |
| Non-interest bearing deposits | $ 461,479 | $ 469,435 | $ 291,856 |
| Interest bearing deposits: | |||
| NOW accounts | 108,757 | 108,186 | 87,298 |
| Other savings deposits | 95,619 | 106,211 | 42,648 |
| Money market deposit accounts | 449,110 | 455,045 | 332,272 |
| Time deposits | 279,839 | 284,057 | 219,821 |
| Total deposits | $ 1,394,804 | $ 1,422,934 | $ 973,895 |
| Heritage Oaks Bancorp | |||
| Allowance for Loan Losses, Non-Performing and Classified Assets | |||
| (dollars in thousands) | |||
| Three Months Ended | |||
| Allowance for Loan Losses | 12/31/2014 | 9/30/2014 | 12/31/2013 |
| Balance, beginning of period | $ 16,787 | $ 16,635 | $ 17,468 |
| Provision for loan and lease losses | -- | -- | -- |
| Loans charge-off: | |||
| Commercial real estate | -- | 10 | -- |
| Commercial and industrial | 107 | 2 | 126 |
| Agriculture | 1 | -- | 18 |
| Land | 30 | -- | -- |
| Installment | -- | -- | 31 |
| Total charge-offs | 138 | 12 | 175 |
| Recoveries of loans previously charged-off | 153 | 164 | 566 |
| Balance, end of period | $ 16,802 | $ 16,787 | $ 17,859 |
| Net (recoveries) | $ (15) | $ (152) | $ (391) |
| Non-Performing Assets | 12/31/2014 | 9/30/2014 | 12/31/2013 |
| Loans on non-accrual status | |||
| Residential 1-4 family | $ 124 | $ 97 | $ 449 |
| Home equity lines of credit | 258 | 100 | -- |
| Commercial real estate | 2,085 | 1,938 | 672 |
| Land | 5,237 | 5,226 | 5,910 |
| Commercial and industrial | 2,102 | 2,182 | 2,180 |
| Agriculture | 686 | 685 | 789 |
| Installment | 43 | 46 | 117 |
| Total non-accruing loans | 10,535 | 10,274 | 10,117 |
| Loans more than 90 days delinquent, still accruing | -- | -- | -- |
| Total non-performing assets | $ 10,535 | $ 10,274 | $ 10,117 |
| Note: Non-performing assets consisted solely of non-accruing loans as of the period ends presented above. | |||
| Classified assets | 12/31/2014 | 9/30/2014 | 12/31/2013 |
| Loans | $ 52,625 | $ 45,268 | $ 35,491 |
| Other real estate owned (OREO) | -- | -- | -- |
| Non-investment grade securities | -- | -- | -- |
| Total classified assets | $ 52,625 | $ 45,268 | $ 35,491 |
| Classified assets to Tier I + ALLL | 28.03% | 24.91% | 25.95% |
| Note: Classified assets consists of substandard and non-performing loans, OREO, non-investment grade securities, other repossessed assets, loans held for sale that were substandard and substandard letters of credit at the period ends presented above. | |||
| Heritage Oaks Bancorp | |||||
| Quarter to Date Non-Performing Loan Reconciliation | |||||
| Balance | Balance | ||||
| September 30, | Net | December 31, | |||
| (dollar amounts in thousands) | 2014 | Additions | Paydowns | Charge-offs | 2014 |
| Real Estate Secured | |||||
| Residential 1 to 4 family | $ 97 | $ 39 | $ (12) | $ -- | $ 124 |
| Home equity line of credit | 100 | 158 | -- | -- | 258 |
| Commercial | 1,938 | 176 | (29) | -- | 2,085 |
| Land | 5,226 | 156 | (116) | (29) | 5,237 |
| Commercial | |||||
| Commercial and industrial | 2,182 | 248 | (221) | (107) | 2,102 |
| Agriculture | 685 | 1 | -- | -- | 686 |
| Installment loans to individuals | 46 | -- | (3) | -- | 43 |
| Totals | $ 10,274 | $ 778 | $ (381) | $ (136) | $ 10,535 |
| Heritage Oaks Bancorp | ||||||||
| Year to Date Non-Performing Loan Reconciliation | ||||||||
| Balance | Transfers | Returns to | Balance | |||||
| December 31, | Additions | Net | to Foreclosed | Accrual | December 31, | |||
| (dollar amounts in thousands) | 2013 | Additions | due to merger | Paydowns | Collateral | Status | Charge-offs | 2014 |
| Real Estate Secured | ||||||||
| Residential 1 to 4 family | $ 449 | $ 39 | $ -- | $ (24) | $ (248) | $ -- | $ (92) | $ 124 |
| Home equity line of credit | -- | 258 | -- | -- | -- | -- | -- | 258 |
| Commercial | 672 | 4,564 | 137 | (900) | (137) | (1,225) | (1,026) | 2,085 |
| Land | 5,910 | 452 | -- | (1,096) | -- | -- | (29) | 5,237 |
| Commercial | ||||||||
| Commercial and industrial | 2,180 | 1,531 | 568 | (1,233) | -- | (837) | (107) | 2,102 |
| Agriculture | 789 | 1 | -- | (67) | -- | (37) | -- | 686 |
| Installment loans to individuals | 117 | 31 | -- | (103) | -- | -- | (2) | 43 |
| Totals | $ 10,117 | $ 6,876 | $ 705 | $ (3,423) | $ (385) | $ (2,099) | $ (1,256) | $ 10,535 |
| Heritage Oaks Bancorp | |||||
| Quarter to Date OREO Reconciliation | |||||
| Balance | Balance | ||||
| September 30, | December 31, | ||||
| (dollar amounts in thousands) | 2014 | Additions | Sales | Writedowns | 2014 |
| Totals | $ -- | $ -- | $ -- | $ -- | $ -- |
| Heritage Oaks Bancorp | |||||
| Year to Date OREO Reconciliation | |||||
| Balance | Balance | ||||
| December 31, | December 31, | ||||
| (dollar amounts in thousands) | 2013 | Additions | Sales | Writedowns | 2014 |
| Real Estate Secured | |||||
| Residential 1 to 4 family | $ -- | $ 248 | $ (248) | $ -- | $ -- |
| Commercial | -- | 1,316 | (1,316) | -- | -- |
| Land | -- | 65 | (65) | -- | -- |
| Totals | $ -- | $ 1,629 | $ (1,629) | $ -- | $ -- |
| Heritage Oaks Bancorp | |||||
| Reconciliation of GAAP to Non-GAAP Financial Measure | |||||
| Three Months Ended | Twelve Months Ended | ||||
| (dollars in thousands) | 12/31/2014 | 9/30/2014 | 12/31/2013 | 12/31/2014 | 12/31/2013 |
| GAAP net income | $ 4,352 | $ 3,429 | $ 1,634 | $ 8,965 | $ 10,841 |
| Adjusted for: | |||||
| Income tax expense | 2,343 | 1,742 | 1,308 | 4,749 | 6,997 |
| (Gain) loss on sale of investment securities | (97) | (450) | 9 | (646) | (3,926) |
| Merger, restructure and integration | 405 | 748 | 1,049 | 9,190 | 1,051 |
| Non-GAAP earnings before income taxes, gains on investments, and merger, restructure and integration costs | $ 7,003 | $ 5,469 | $ 4,000 | $ 22,258 | $ 14,963 |
| (dollars in thousands) | 12/31/2014 | 9/30/2014 | 12/31/2013 | 12/31/2014 | 12/31/2013 |
| Non-interest expense | $ 11,385 | $ 13,382 | $ 9,624 | $ 54,792 | $ 36,563 |
| Less: Merger, restructure and integration | (405) | (748) | (1,049) | (9,190) | (1,051) |
| Adjusted non-interest expense | 10,980 | 12,634 | 8,575 | 45,602 | 35,512 |
| Total average assets | 1,712,605 | 1,691,508 | 1,180,936 | 1,609,705 | 1,119,334 |
| Non-interest expense to average assets less merger, restructure and integration costs | 2.54% | 2.96% | 2.88% | 2.83% | 3.17% |
| (dollars in thousands) | 12/31/2014 | 9/30/2014 | 12/31/2013 | 12/31/2014 | 12/31/2013 |
| Non-interest expense | $ 11,385 | $ 13,382 | $ 9,624 | $ 54,792 | $ 36,563 |
| Less: OREO related costs and writedowns | 3 | (55) | (51) | (179) | (180) |
| Less: Amortization of CDI | (297) | (297) | (100) | (1,057) | (400) |
| Less: Merger, restructure and integration | (405) | (748) | (1,049) | (9,190) | (1,051) |
| Adjusted non-interest expense | 10,686 | 12,282 | 8,424 | 44,366 | 34,932 |
| Net Interest Income | 15,726 | 15,571 | 10,687 | 58,931 | 41,526 |
| Non-interest income | 2,354 | 2,982 | 1,879 | 9,575 | 12,875 |
| Less: net (gains) losses | (97) | (432) | 9 | (645) | (3,926) |
| Operating efficiency less merger, restructure and integration costs | 59.42% | 67.78% | 66.99% | 65.38% | 69.21% |
| (dollars in thousands) | 12/31/2014 | 9/30/2014 | 12/31/2013 | ||
| Total shareholders' equity | $ 197,940 | $ 194,119 | $ 126,427 | ||
| Less: Series C Preferred Stock | (1,056) | (3,604) | (3,604) | ||
| Less: Intangibles | (30,232) | (30,180) | (12,581) | ||
| Tangible common equity | $ 166,652 | $ 160,335 | $ 110,242 | ||
| Tangible common book value per share | $ 4.92 | $ 4.85 | $ 4.34 | ||