Heritage Oaks Bancorp Earns $1.1 Million, or $0.14 Per Share in First Quarter; Demand...

Heritage Oaks Bancorp Earns $1.1 Million, or $0.14 Per Share in First Quarter;
Demand Deposits Increase 11.7% and Capital Increases 30.8%

PASO ROBLES, Calif., April 20, 2009 (GLOBE NEWSWIRE) -- Heritage Oaks Bancorp
(Nasdaq:HEOP) (the "Company"), the parent company of Heritage Oaks Bank (the
"Bank"), today reported that it had net income of $1.1 million, or $0.14 per
diluted common share, for the first quarter of 2009, compared to $1.7 million,
or $0.21 per diluted share, in the first quarter a year ago. First quarter
results include a $2.1 million provision for loan losses compared to $240
thousand for the same quarter last year.

"Our underlying business performance for the quarter was solid, with significant
demand deposit growth and moderate loan growth. Total gross loans grew 8.1%
year-over-year and were up 1.7% from the prior quarter. Demand deposits were up
5.6% year-over-year, and up 11.7% over the prior quarter," stated Lawrence P.
Ward, President and CEO. "Despite the increase in our loan loss provision we
were still profitable in the first quarter and held our net interest margin
above 5% again this quarter."

1Q09 Highlights:

* Risk-Based capital increased to 13.20%, Tier 1 capital increased to
11.92%.
* Net income was $1.1 million, or $0.14 per diluted common share.
* Net interest income increased 4.9% to $9.6 million compared to 1Q08.
* Net interest margin was 5.03%.
* Mortgage origination fees doubled from year ago quarter.
* Issued $21 million in preferred stock under the U.S. Treasury
Capital Purchase Program.
* Added $2.1 million to the allowance for loan losses.
* Net loans increased 7.6% to $680 million compared to a year ago.
* Demand deposits increased 11.7% from previous quarter end.
Asset Quality

"We continue our diligent oversight of the loan portfolio and have been
extremely proactive in monitoring credit quality," said Ward. "We are performing
internal credit reviews on a quarterly basis and have concluded that an
independent loan review will be conducted semi-annually in an effort to more
quickly identify any additional problem assets and mitigate any potential loss
to the Bank."

"The housing and general economic slowdown has led to an increase in
non-performing loans during the first quarter, which makes it prudent to
write-down loans to their current fair market value and to strengthen our
reserve position at this time," said Ward. "We are not waiting for regulators to
tell us when to write-down or charge off loans. The Bank has been diligent in
recognizing deficiencies inherent in impaired loans and proactively bringing the
balances in line with current values. The collateral securing the loans
charged-off during the first quarter consists of real estate and various forms
of business assets. We are currently working with borrowers and collateral is
being actively marketed to minimize future charge-offs."

The following table recaps activity surrounding non-performing assets for the
quarter ended March 31, 2009:

Additions
to
(dollar Balance Non- Balance
amounts in Dec. 31, Accruing Net Charge- Transfers March 31,
thousands) 2008 Balances Paydowns offs to OREO 2009
----------------------------------------------------------------------
Real Estate
Secured
Multi-family
residential $ -- $ -- $ -- $ -- $ -- $ --
Residential
1 to 4
family 265 146 (19) -- -- 392
Home equity
line of
credit 320 -- -- -- -- 320
Commercial 1,961 1,138 (23) -- -- 3,076
Farmland -- -- -- -- -- --
Commercial
Commercial
and
industrial 7,060 589 (57) (283) -- 7,309
Agriculture -- -- -- -- -- --
Other -- -- -- -- -- --
Construction
Single
family
residential -- 823 -- (145) -- 678
Single
family
residential
- Spec 5,990 1,589 -- (1,261) (1,714) 4,604
Tract -- -- -- -- -- --
Multi-family -- -- -- -- -- --
Hospitality -- -- -- -- -- --
Commercial -- -- -- -- -- --
Land 2,720 1,421 (6) (310) -- 3,825
Installment
loans to
individuals 11 77 (1) -- -- 87
All other
loans -- 97 -- (97) -- --
----------------------------------------------------------------------

Totals $18,327 $ 5,880 $ (106) $(2,096) $(1,714) $20,291
======================================================================

(dollar Additions Transfers
amounts Balance to 90 Day to Non- Balance
in Dec. 31, Plus Accruing Charge- Transfers March 31,
thousands) 2008 Balances Status offs to OREO 2009
----------------------------------------------------------------------
Loans 90
days
delinquent
or more
and still
accruing $ 348 $ 442 $ (790) $ -- $ -- $ --
Changes/Updates to Non-Accruing Loans

RE Secured Commercial

The $1.1 million addition consists of two loans, the larger of which, for
approximately $929 thousand is currently in the final stages of sale and is
anticipated to close well before the end of the second quarter. This loan
carries an approximate LTV of 71%. The smaller loan is well secured with a LTV
of approximately 25% and also has interest from a buyer. There was no write-down
associated with either credit.

Two existing loans to one client with a combined balance of $910 thousand are in
process of foreclosure and have been generating third party buyer interest. In
regard to another existing loan for $483 thousand, the Bank is in process of
foreclosure and there is considerable interest in the property because of the
low LTV of approximately 56%.

Commercial C&I

The most notable addition to this category is a loan for $300 thousand whereby
the client has considerable assets and the Bank is in the process of working
with the client. One loan in the amount of $224 thousand was added and
subsequently charged off during the quarter.

Construction Single Family Residential

The new items consist of two loans to separate clients. One loan in the amount
of $380 thousand is currently in escrow and is expected to close the first of
May. It currently has a LTV, based on the pending sale price, of 88%. The second
loan has a current carrying value of $298 thousand after the $145 thousand
write-down. The Bank is working with the client who has indicated a desire to
resolve the issues surrounding this credit.

Single Family Residential- Spec

The addition of $1.6 million is one loan with a current LTV based on the current
listing price of 90%. The listing price has been recently reduced to a level
that management believes is more realistic. Two loans to one borrower were
written down by $703 thousand and $204 thousand, respectively. As these projects
have been completed, these aggressive charge-off amounts are reflective of
current values and listing prices. The remaining charge-off amount of $354
thousand is associated with a loan that has migrated to OREO. This property is
currently in escrow with a 30 day, no contingency closing. The Bank expects this
OREO to be off the books in May 2009 with no further write-down. This escrow was
also a factor in the valuation of the other two loans noted in this paragraph.
Additionally, more recent indications obtained from prospective buyers of these
distressed assets have given us a more refined picture of how the market expects
to price certain types of properties in the current environment. This provides
us with more evidence to extrapolate fair values for similar types of
collateral.

Land

The new items consist of two properties to two clients. One property in the
carrying amount of $123 thousand is well secured with a LTV of 17% and is
located on the coast within the Bank's primary market area. The other property
had an original loan amount of $1.3 million that was written down to a value for
which the Bank currently has a commitment letter for purchase.

Since March 31, 2009, the Bank was able to take possession of a property that
had a carrying value of $1.3 million and in the process of placing the property
on the market. There has been significant interest in this property that is
located in a prime coastal community.

At quarter-end, non-accruing loan balances totaled $20.3 million, compared to
$18.3 million at December 31, 2008. "In spite of the increase in non-performing
assets on a linked quarter basis, the Bank is encouraged to see sale activity
for $3 million in non-performing assets that is expected to close in early May.
There is also increased bona fide interest in properties as if reflective of the
commitment to purchase letter that we have in hand for another $1 million
property," Ward said.

Non-performing assets increased to $23.2 million, or 2.66% of total assets at
quarter end, compared to $20.0 million, or 2.48% of total assets, at the end of
the previous quarter. At March 31, 2009, the allowance for loan losses was $10.4
million, or 1.51% of total gross loans, compared to $10.4 million, or 1.53% of
total gross loans as of December 31, 2008. Net charge-offs during the quarter
were $2.1 million.

The Company recorded a $2.1 million provision for loan losses in the first
quarter of 2009, compared to a $6.0 million provision for loan losses in the
previous quarter and a $240 thousand provision for loan losses in the first
quarter a year ago.

Capital Position

On March 20, 2009, the Company completed its $21 million capital raise as a
participant in the U.S. Treasury Department's Capital Purchase Program. Under
the terms of the transaction the Company issued 21,000 shares of Series A
Fixed-Rate Cumulative Perpetual Preferred Stock, and a warrant to purchase
611,650 shares of the company's common stock at an exercise price of $5.15 per
share.

"We are pleased that we have been selected to participate in this voluntary
program, which will allow us to increase the flow of credit to deserving
borrowers and is an important recognition of the strength and financial health
of the Company," said Ward. "This additional capital will enhance our capacity
to support the communities we serve through expanded lending activities. It will
also add flexibility in considering strategic opportunities within our primary
markets."

The Company has $92.2 million in Tier I capital and $102.2 million in Total Risk
Based capital and remains "well capitalized" by regulatory standards with a
Total Risk-Based capital ratio of 13.2% and a Tier One Risk-Based capital ratio
of 11.9%. Tangible equity represented 9.04% of total assets at March 31, 2009.

Shareholders' equity was $91.6 million at March 31, 2009, compared to $71.0
million twelve months earlier. Book value per share was $11.82 at March 31,
2009, compared to $9.21 per share a year earlier and tangible book value per
share was $10.17 at March 31, 2009, compared to $7.15 a year earlier.

Liquidity

"Our liquidity has increased substantially as a result of our strong deposit
growth during the quarter," said Ward. "We continue to benefit from new core
deposits from the inflow from the larger banks in our market area." The
liquidity ratio was 11.36% at March 31, 2009, compared to 6.10% at December 31,
2008. The bank has additional borrowing lines with the Federal Home Loan Bank
(FHLB) as well as credit arrangements with correspondent banks to provide
liquidity for a variety of reasons, including the day to day demands of
depositors. At March 31, 2009, the Bank's remaining capacity to borrow against
these lines was approximately $118.2 million. Additionally, the Bank has
established borrowing capacity at the Federal Reserve Bank but has yet to
provide collateral for the use of the line. The Bank still has the ability to
purchase brokered funds from a variety of sources, providing for additional
secondary funding.

Balance Sheet

Net loans grew 1.7% over the prior quarter and 7.6% year-over-year. Net loans
totaled $680 million at March 31, 2009, compared to $668 million at the end of
the preceding quarter and $632 million a year ago. "We continue to see good loan
demand in our Santa Barbara market, especially in C&I lending," Ward said.
"While we are still making new loans, our underwriting criteria are very
conservative and it takes a borrower with a very high credit rating to get
approved for a loan. In addition, we remain very selective in the types of loans
we choose to originate."

"Our intense focus on generating new DDA accounts, combined with a 9 and 14
month CD promotion, resulted in total deposits increasing 10.2% over the prior
quarter and 12.6% year-over-year," said Ward. "Our non-interest bearing demand
deposits increased 11.7% over the prior quarter and 5.6% over the twelve month
period due to growth in both our DDA balances and the number of new DDA accounts
opened during the quarter. We are seeing solid growth in a new customer base as
customers shift their deposits away from some of the larger institutions in our
markets."

Total deposits were $665 million at March 31, 2009, compared to $604 million at
December 31, 2008, and $590 million a year ago. Core deposits now represent
78.0% of total deposits.

"We continue to actively work the liability side of the balance sheet by letting
high cost deposits leave the bank and along with strong core DDA deposit growth,
have supplemented funding with brokered deposits, specifically MM accounts at a
low cost of approximately 77bp, which helped us to reduce interest expense
during the quarter," said Ward. "In addition, we had higher cost FHLB borrowing
that matured during the first quarter of 2009 and was replaced by a combination
of lower cost DDA and brokered deposits. As a result our money market, NOW and
savings account balances remain nearly unchanged from a year ago."

The securities portfolio increased by $11.8 million during the first quarter to
$62.6 million, as Heritage Oaks sought to take advantage of increased credit
spreads available on investment securities. The investment portfolio contains no
collateralized debt obligations.

At March 31, 2009, the Bank had a total of nine whole loan CMO holdings with a
remaining principal balance of approximately $14.1 million down $4.8 million
form the previous quarter end and a net unrealized loss of approximately $1.4
million down $700 thousand from the unrealized loss at the previous quarter end.
One particular security accounts for $752 thousand of the unrealized loss at
March 31, 2009. The Bank continues to perform extensive analyses on this
security as well as all whole loan CMOs. By analyzing the tranche of the
specific security separate from the "mother" security, the Bank has determined
that there is no impairment and as such, is not taking any action to write-down
these securities. These investment securities continue to demonstrate cash flows
as expected and the credit support component of these tranches has actually
increased from the origination date. As of March 31, 2009, Management does not
believe the loss in market value of these securities is other than temporary.

Net Interest Margin

"We kept our net interest margin in the 5% range again this quarter, down only
1bp compared to the previous quarter and 30bps from the year ago quarter," said
Ward. "Our strong net interest margin is driven by floors that have been placed
on loans throughout the past several years and our ability to re-price on the
liability side of the balance sheet." The net interest margin was 5.03% for the
first quarter, compared to 5.04% during the preceding quarter and 5.33% for the
first quarter a year ago. This compares to a ratio of 4.02% for all California
Public Banks at December 31, 2008 (the most current data published).

Operating Results

Total revenue, consisting of net interest income before the provision for loan
losses and non-interest income, increased 6.3% to $11.2 million in the first
quarter, compared to $10.6 million in the first quarter of 2008. Net interest
income increased 4.9% to $9.6 million in the first quarter compared to $9.1
million in the first quarter a year ago. Interest expense decreased 37.0% for
the first quarter compared to the first quarter a year ago.

Non-interest income increased 10.8% for the quarter compared to the preceding
quarter and increased 15.4% compared to the first quarter a year ago, largely as
a result of the increase in mortgage origination fees. "Our lending team has
done an excellent job focusing on mortgage loan originations in our primary
markets, which have had record volumes this quarter. As a result mortgage
origination fees have doubled from the first quarter a year ago," Ward added.
"As the result of mass exits by competitors from mortgage origination,
approximately 18 months ago the Bank recognized the opportunity to expand the
mortgage origination department. The Bank hired a well seasoned mortgage manager
who has been able to expand the Bank's penetration into the origination market
both in San Luis Obispo and Santa Barbara counties. This strategy has full
traction at this point as is exhibited by the revenue generation of the
department," Ward said.

Total non-interest expense was $7.4 million for the first quarter compared to
$7.2 million in the previous quarter and $7.6 million in the first quarter a
year ago. "The increase in expense from the previous quarter was due to
regulatory fees, audits and tax costs, scheduled amortization of intangibles and
approximately $75,000 in expenses related to credit card fraud and a branch
robbery during the first quarter of 2009," said Ward. "The variance in salaries
and employee benefits is due in total to the effect of payroll tax," Ward added.

The efficiency ratio was 66.71% in the first quarter of 2009 compared to 66.43%
in the previous quarter and 72.17% in the first quarter a year ago. The
efficiency ratio measures operating expenses as a percent of total net revenues.

About the Company

Heritage Oaks Bancorp is the holding company for Heritage Oaks Bank which
operates as Heritage Oaks Bank and Business First, a division of Heritage Oaks
Bank. Heritage Oaks Bank has its headquarters plus one branch office in Paso
Robles, two branch offices in San Luis Obispo, single branch offices in Cambria,
Arroyo Grande, Atascadero, Templeton, San Miguel and Morro Bay and three branch
offices in Santa Maria. Heritage Oaks Bank conducts commercial banking business
in San Luis Obispo County and Northern Santa Barbara County. The Business First
division has two branch offices in Santa Barbara. Visit Heritage Oaks Bancorp on
the Web at www.heritageoaksbancorp.com.

Statements concerning future performance, developments or events, expectations
for growth, income forecasts, sales activity for collateral, and any other
guidance on future periods, constitute forward-looking statements that are
subject to a number of risks and uncertainties. Actual results may differ
materially from stated expectations. Specific factors include, but are not
limited to the ability to successfully integrate the operations of Business
First National Bank, increased profitability, continued growth, the Bank's
beliefs as to the adequacy of its existing and anticipated allowances for loan
losses, beliefs and expectations regarding actions that may be taken by
regulatory authorities having oversight of the Bank's operations, interest rates
and financial policies of the United States government, the ongoing financial
crisis in the United States, and the response of the federal and state
government and our regulators thereto and general economic conditions.
Additional information on these and other factors that could affect financial
results are included in Heritage Oaks Bancorp's Securities and Exchange
Commission filings. If any of these risks or uncertainties materialize or if any
of the assumptions underlying such forward-looking statements proves to be
incorrect, Heritage Oaks Bancorp's results could differ materially from those
expressed in, implied or projected by such forward-looking statements. Heritage
Oaks Bancorp assumes no obligation to update such forward-looking statements.

Heritage Oaks Bancorp
Consolidated Balance Sheets

(un- (un- Percentage Change
audited) (audited) audited) Vs.
------------------------------------------------
(dollar amounts in 3/31/ 12/31/ 3/31/ 12/31/ 3/31/
thousands) 2009 2008 2008 2008 2008
---------------------------------------------------------------------
Assets
Cash and due from
banks $ 16,553 $ 17,921 $ 22,217 -7.6% -25.5%
Federal funds sold 44,020 6,650 3,670 562.0% 1099.5%
---------------------------------------------------------------------
Total cash and cash
equivalents 60,573 24,571 25,887 146.5% 134.0%
---------------------------------------------------------------------

Interest bearing
deposits with
other banks 119 119 330 0.0% -63.9%
Securities available
for sale 62,601 50,762 54,829 23.3% 14.2%
Federal Home Loan
Bank stock, at cost 5,828 5,123 3,402 13.8% 71.3%
Loans held for sale 13,806 7,939 2,759 73.9% 400.4%
Loans, net(1) 679,657 668,034 631,722 1.7% 7.6%
Property, premises
and equipment 6,838 6,827 6,228 0.2% 9.8%
Deferred tax assets 8,115 7,708 5,159 5.3% 57.3%
Bank owned life
insurance 10,842 10,737 10,420 1.0% 4.0%
Goodwill 11,049 11,049 11,538 0.0% -4.2%
Core deposit
intangible 3,428 3,691 4,336 -7.1% -20.9%
Other real estate
owned 2,893 1,337 -- 116.4% 100.0%
Other assets 6,599 7,691 4,596 -14.2% 43.6%
---------------------------------------------------------------------
Total assets $872,348 $805,588 $761,206 8.3% 14.6%
=====================================================================

Liabilities
Deposits
Non-interest
bearing demand $164,320 $147,044 $155,621 11.7% 5.6%
Savings, NOW, and
money market 303,323 296,488 302,970 2.3% 0.1%
Time deposits of
$100K or more 100,369 75,111 47,069 33.6% 113.2%
Time deposits under
$100K 96,809 84,878 84,795 14.1% 14.2%
---------------------------------------------------------------------
Total deposits 664,821 603,521 590,455 10.2% 12.6%
---------------------------------------------------------------------
Short term FHLB
borrowing 85,000 99,000 76,505 -14.1% 11.1%
Long term FHLB
borrowing 10,000 10,000 -- 0.0% 100.0%
Securities sold
under agreements
to repurchase -- 2,796 2,217 -100.0% -100.0%
Junior subordinated
debentures 13,403 13,403 13,403 0.0% 0.0%
Other liabilities 7,491 6,835 7,658 9.6% -2.2%
---------------------------------------------------------------------
Total liabilities 780,715 735,555 690,238 6.1% 13.1%
---------------------------------------------------------------------

Stockholders' equity
Senior preferred
stock, no par
value; $1,000 per
share stated value
5,000,000 shares
authorized, 21,000
issued and
outstanding 19,163 -- -- 100.0% 100.0%
Common stock, no par
value; 20,000,000
shares authorized;
issued and
outstanding:
7,751,766;
7,753,078 and
7,703,030
March 31, 2009;
December 31, 2008;
and March 31, 2008,
respectively 48,649 48,649 48,811 0.0% -0.3%
Additional paid in
capital 2,993 1,055 785 183.7% 281.3%
Retained earnings 22,511 21,420 21,009 5.1% 7.1%
Accumulated other
comprehensive
income (1,683) (1,091) 363 -54.3% -563.6%
---------------------------------------------------------------------
Total stockholders'
equity 91,633 70,033 70,968 30.8% 29.1%
---------------------------------------------------------------------
Total liabilities
and stockholders'
equity $872,348 $805,588 $761,206 8.3% 14.6%
=====================================================================

(1) Loans are net of deferred loan fees of $1,555; $1,701; $1,833 and
allowance for loan losses of $10,429; $10,412; $6,305 for
March 31, 2009, December 31, 2008, and March 31, 2008
respectively.

Heritage Oaks Bancorp
Consolidated Statements of Income

(un- (un- (un-
audited) audited) audited)
Percentage Change
(dollar amounts For the Three Months Ended Vs.
in thousands ---------------------------------------------------
except per share 12/31/ 12/31/ 3/31/
data) 3/31/2009 2008 3/31/2008 2008 2008
---------------------------------------------------------------------
Interest Income
Interest and
fees on loans $ 11,147 $ 11,484 $ 12,091 -2.9% -7.8%
Interest on
investment
securities
Obligations of
U.S. government
agencies 548 489 421 12.1% 30.2%
Obligations of
state and
political
subdivisions 186 186 183 0.0% 1.6%
Interest on time
deposits with
other banks 1 1 3 0.0% -66.7%
Interest on
federal funds
sold 7 10 67 -30.0% -89.6%
Interest on other
securities 7 53 52 -86.8% -86.5%
---------------------------------------------------------------------
Total interest
income 11,896 12,223 12,817 -2.7% -7.2%
---------------------------------------------------------------------
Interest Expense
Interest on
savings, NOW and
money market
deposits 817 963 1,506 -15.2% -45.8%
Interest on time
deposits in
denominations of
$100 or more 544 611 680 -11.0% -20.0%
Interest on time
deposits under
$100 564 616 900 -8.4% -37.3%
Other borrowings 404 681 611 -40.7% -33.9%
---------------------------------------------------------------------
Total interest
expense 2,329 2,871 3,697 -18.9% -37.0%
---------------------------------------------------------------------
Net interest
income before
provision for
loan losses 9,567 9,352 9,120 2.3% 4.9%
Provision for
loan losses 2,110 6,000 240 -64.8% 779.2%
---------------------------------------------------------------------
Net interest
income after
provision for
loan losses 7,457 3,352 8,880 122.5% -16.0%
---------------------------------------------------------------------
Non Interest
Income
Service charges
on deposit
accounts 712 797 772 -10.7% -7.8%
Mortgage
origination fees 330 201 166 64.2% 98.8%
Earnings on bank
owned life
insurance 122 122 112 0.0% 8.9%
Debit card
interchange
income 215 223 209 -3.6% 2.9%
Bancard income 37 48 43 -22.9% -14.0%
Other commissions
and fees 148 107 137 38.3% 8.0%
Gain on sale of
investments 122 -- -- -- --
Loss on sale of
OREO property (27) -- -- -- --
Gain on sale of
fixed asset 1 -- -- -- --
---------------------------------------------------------------------
Total non-interest
income 1,660 1,498 1,439 10.8% 15.4%
---------------------------------------------------------------------
Non-Interest
Expense
Salaries and
employee
benefits 3,803 3,664 4,225 3.8% -10.0%
Occupancy 852 847 772 0.6% 10.4%
Equipment 325 352 367 -7.7% -11.4%
Promotional 101 143 247 -29.4% -59.1%
Data processing 670 706 654 -5.1% 2.4%
Stationary and
supplies 105 105 119 0.0% -11.8%
Regulatory fees 143 135 108 5.9% 32.4%
Audit and tax
costs 148 122 114 21.3% 29.8%
Amortization of
core deposit
intangible 263 215 215 22.3% 22.3%
Director fees 83 80 78 3.8% 6.4%
Communication 62 85 73 -27.1% -15.1%
Other 870 754 648 15.4% 34.3%
---------------------------------------------------------------------
Total non-interest
expenses 7,425 7,208 7,620 3.0% -2.6%
---------------------------------------------------------------------
Income before
provision for
income taxes 1,692 (2,358) 2,699 171.8% -37.3%
Provision for
income taxes 590 (1,104) 1,024 153.4% -42.4%
---------------------------------------------------------------------
Net income 1,102 (1,254) 1,675 187.9% -34.2%
---------------------------------------------------------------------
Dividends and
accretion on
preferred stock 11 -- -- -- --
---------------------------------------------------------------------
Net income
available to
common
shareholders $ 1,091 $ (1,254) $ 1,675 187.0% -34.9%
=====================================================================

Average basic
shares
outstanding 7,689,317 7,724,093 7,694,546
Average diluted
shares
outstanding 7,824,377 7,785,211 7,851,831
Basic earnings per
share available
to common
shareholders $ 0.14 $ (0.16) $ 0.22
Fully diluted
earnings per
share available
to common
shareholders $ 0.14 $ (0.16) $ 0.21

Additional Financial Information
(dollar amounts in thousands)
Percentage Change
For the Quarters Ended Vs.
------------------------------------------------
3/31/ 12/31/ 3/31/ 12/31/ 3/31/
LOANS 2009 2008 2008 2008 2008
---------------------------------------------------------------------
Real Estate Secured
Multi-family
residential $ 17,569 $ 16,206 $ 12,344 8.4% 42.3%
Residential 1 to 4
family 23,063 23,910 26,214 -3.5% -12.0%
Home equity lines
of credit 28,929 26,409 17,200 9.5% 68.2%
Commercial 294,825 285,631 275,821 3.2% 6.9%
Farmland 9,426 10,723 9,671 -12.1% -2.5%
Commercial
Commercial and
industrial 167,149 157,674 133,211 6.0% 25.5%
Agriculture 13,989 13,744 12,480 1.8% 12.1%
Other 575 620 790 -7.3% -27.2%
Construction
Single family
residential 16,590 11,414 9,944 45.3% 66.8%
Single family
residential - Spec 12,850 15,395 18,200 -16.5% -29.4%
Tract 3,190 2,431 3,225 31.2% -1.1%
Multi-family 5,727 5,808 9,331 -1.4% -38.6%
Hospitality 8,292 18,630 19,371 -55.5% -57.2%
Commercial 21,056 21,484 28,922 -2.0% -27.2%
Land 60,031 61,681 54,278 -2.7% 10.6%
Installment loans to
individuals 8,038 7,851 7,733 2.4% 3.9%
All other loans
(including
overdrafts) 342 536 1,125 -36.2% -69.6%
---------------------------------------------------------------------
Total gross loans $691,641 $680,147 $639,860 1.7% 8.1%
---------------------------------------------------------------------
Deferred loan fees 1,555 1,701 1,833 -8.6% -15.2%
Allowance for loan
losses 10,429 10,412 6,305 0.2% 65.4%
---------------------------------------------------------------------
Net loans $679,657 $668,034 $631,722 1.7% 7.6%
---------------------------------------------------------------------
Loans held for sale 13,806 $ 7,939 $ 2,759 73.9% 400.4%

Percentage Change
For the Quarters Ended Vs.
------------------------------------------------
ALLOWANCE FOR LOAN 3/31/ 12/31/ 3/31/ 12/31/ 3/31/
LOSSES 2009 2008 2008 2008 2008
---------------------------------------------------------------------

Balance, beginning
of period $ 10,412 $ 10,350 $ 6,143 0.6% 69.5%
Provision expense 2,110 6,000 240 -64.8% 779.2%
Loans charged-off
Commercial and
industrial 351 2,998 77 -88.3% 355.8%
Construction 1,406 914 -- 53.8% --
Land 310 1,434 -- -78.4% --
1-4 family
residential -- 555 -- -100.0% --
Commercial real
estate -- 35 -- -100.0% --
Other 30 5 1 500.0% 2900.0%
---------------------------------------------------------------------
Total charge-offs 2,097 5,941 78 -64.7% 2588.5%
---------------------------------------------------------------------
Recoveries of loans
previously charged
off 4 3 -- 33.3% --
---------------------------------------------------------------------
Balance, end of
period $ 10,429 $ 10,412 $ 6,305 0.2% 65.4%
---------------------------------------------------------------------

Net charge-offs $ 2,093 $ 5,938 $ 78 -64.8% 2583.3%

Percentage Change
Vs.
------------------------------------------------
3/31/ 12/31/ 3/31/ 12/31/ 3/31/
NON-PERFORMING ASSETS 2009 2008 2008 2008 2008
---------------------------------------------------------------------

Loans on non-accrual
status
Commercial real-
estate $ 3,076 $ 1,961 $ 419 56.9% 634.1%
Residential 1-4
family 392 265 -- 47.9% --
Home equity lines
of credit 320 320 -- 0.0% --
Commercial 7,309 7,060 1,060 3.5% 589.5%
Construction 5,282 5,990 -- -11.8% --
Land 3,825 2,720 -- 40.6% --
Installment 87 11 65 690.9% 33.8%
---------------------------------------------------------------------
Total non-accruing
loans $ 20,291 $ 18,327 $ 1,544 10.7% 1214.2%
---------------------------------------------------------------------
Loans more than 90
days delinquent,
still accruing -- 348 -- -100.0% --
---------------------------------------------------------------------
Total non-performing
loans 20,291 18,675 1,544 8.7% 1214.2%
---------------------------------------------------------------------
Other real estate
owned (OREO) 2,893 1,337 -- 116.4% --
---------------------------------------------------------------------
Total non-performing
assets $ 23,184 $ 20,012 $ 1,544 15.9% 1401.6%
---------------------------------------------------------------------

Percentage Change
Vs.
------------------
3/31/ 12/31/ 3/31/ 12/31/ 3/31/
DEPOSITS 2009 2008 2008 2008 2008
---------------------------------------------------------------------

Non-interest bearing
demand $164,320 $147,044 $155,621 11.7% 5.6%
---------------------------------------------------------------------
Interest-bearing
demand 64,289 72,952 79,248 -11.9% -18.9%
Regular savings
accounts 23,056 21,835 23,840 5.6% -3.3%
Money market
accounts 169,975 173,199 199,882 -1.9% -15.0%
Brokered money
market funds 46,002 28,502 -- 61.4% --
---------------------------------------------------------------------
Total interest-
bearing transaction
& savings accounts 303,322 296,488 302,970 2.3% 0.1%
---------------------------------------------------------------------
Time deposits 158,679 139,872 131,864 13.4% 20.3%
Brokered time
deposits 38,500 20,117 -- 91.4% --
---------------------------------------------------------------------
Total deposits $664,821 $603,521 $590,455 10.2% 12.6%
---------------------------------------------------------------------

Three Months Ended
--------------------------------
PROFITABILITY / PERFORMANCE RATIOS 3/31/2009 12/31/2008 3/31/2008
---------------------------------------------------------------------
Operating efficiency 66.71% 66.43% 72.17%
Return on average equity 6.04% -6.93% 9.55%
Return on average common equity 6.19% -6.93% 9.55%
Return on average tangible equity 7.36% -8.65% 12.32%
Return on average tangible common
equity 7.61% -8.65% 12.32%
Return on average assets 0.54% -0.63% 0.91%
Non-interest income to average
assets 0.81% 0.75% 0.78%
Non-interest expense to average
assets 3.64% 3.61% 4.12%
Net interest income to average assets 4.69% 4.68% 4.93%
Non-interest income to total net
revenue 14.79% 13.81% 13.63%
Interest rate yield on interest
earnings assets 6.26% 6.58% 7.50%
Cost of interest bearing liabilities 1.65% 2.03% 2.85%
Cost of funds 1.27% 1.60% 2.23%
Net interest margin 5.03% 5.04% 5.33%

ASSET QUALITY RATIOS

Non-performing loans to total gross
loans 2.93% 2.75% 0.24%
Non-performing loans as a % of ALLL 194.56% 179.36% 24.49%
Non-performing loans as a % of total
assets 2.33% 2.32% 0.20%
Non-performing loans to primary
capital 22.14% 26.67% 2.18%
Non-performing assets to total assets 2.66% 2.48% 0.20%
Allowance for loan losses to total
gross loans 1.51% 1.53% 0.99%
Net charge-offs to average loans
outstanding 0.30% 0.88% 0.01%

CAPITAL RATIOS

Company
Leverage ratio 11.35% 8.90% 9.30%
Tier I Risk-Based Capital Ratio 11.92% 9.37% 9.82%
Total Risk-Based Capital Ratio 13.20% 10.62% 10.76%

Bank
Leverage ratio 9.75% 8.66% 8.82%
Tier I Risk-Based Capital Ratio 10.23% 9.10% 9.28%
Total Risk-Based Capital Ratio 11.52% 10.36% 10.22%

AVERAGE Three Months Ended
BALANCES AND ----------------------------------------------------
RATES 3/31/2009 12/31/2008 3/31/2008
---------------- ---------------- ----------------
(dollars in Yield/ Yield/ Yield/
thousands) Balance Rate Balance Rate Balance Rate
--------------------------------------------------------------------
Interest
Earning
Assets:
Investments
with other
banks $ 119 3.41% $ 119 3.34% $ 330 3.66%
Federal funds
sold 12,844 0.22% 5,774 0.69% 8,013 3.36%
Investment
securities -
taxable 45,201 4.98% 40,366 5.34% 38,144 4.99%
Investment
securities -
non taxable 17,163 4.40% 16,650 4.44% 17,122 4.30%
Loans 695,774 6.50% 675,742 6.76% 623,981 7.79%
--------------------------------------------------------------------
Total earning
assets 771,101 6.26% 738,651 6.58% 687,590 7.50%
--------------------------------------------------------------------
Allowance for
loan losses (10,623) (10,002) (6,204)
Non-earning
assets 66,896 66,340 62,769
------------------------------------------------------------
Total assets $827,374 $794,989 $744,155
------------------------------------------------------------

Interest
Bearing
Liabilities:

Interest
bearing
demand $ 64,627 0.53% $ 72,038 0.57% $ 66,873 0.56%
Savings 22,069 0.17% 22,236 0.30% 32,926 1.60%
Money market 173,145 1.55% 179,009 1.69% 204,104 2.53%
Time deposits 143,145 2.71% 139,753 2.90% 147,541 4.07%
Brokered
money market 40,860 0.64% 26,218 1.24% -- 0.00%
Brokered time
deposits 29,390 2.11% 21,908 3.76% 6,499 5.38%
--------------------------------------------------------------------
Total interest
bearing
deposits 473,236 1.65% 461,162 1.89% 457,943 2.71%
--------------------------------------------------------------------
Federal funds
purchased 650 1.25% 1,402 1.42% 4,209 3.44%
Securities
sold under
agreement to
repurchase 2,638 0.15% 2,642 1.20% 2,065 3.12%
Federal Home
Loan Bank
borrowings 109,478 0.91% 83,565 2.19% 43,610 3.10%
Junior
subordinated
debentures 13,403 4.69% 13,403 6.14% 13,403 6.69%
--------------------------------------------------------------------
Total borrowed
funds 126,169 1.30% 101,012 2.68% 63,287 3.88%
--------------------------------------------------------------------
Total interest
bearing
liabilities 599,405 1.58% 562,174 2.03% 521,230 2.85%
--------------------------------------------------------------------
Non-interest
bearing
demand 145,849 0.00% 153,432 0.00% 144,108 0.00%
--------------------------------------------------------------------
Total funding 745,254 1.27% 715,606 1.60% 665,338 2.23%
--------------------------------------------------------------------
Other
liabilities 8,086 7,388 8,247
------------------------------------------------------------
Total
liabilities 753,340 722,994 673,585
------------------------------------------------------------
Total
shareholders'
equity 74,034 71,995 70,570
------------------------------------------------------------
Total
liabilities
and
shareholders'
equity $827,374 $794,989 $744,155
------------------------------------------------------------

Net interest
margin 5.03% 5.04% 5.33%
===== ===== =====
-0-
CONTACT: Heritage Oaks Bancorp
Lawrence P. Ward, CEO
Margaret Torres, CFO
805-369-5200