Profile: Heritage Oaks Bancorp (HEOP.O)

Heritage Oaks Bancorp serves as a holding company for Heritage Oaks Bank (the Bank). The Bank is a California state bank headquartered in Paso Robles, California with one branch office in Paso Robles, Arroyo Grande, Atascadero, Cambria, Morro Bay, Templeton and San Miguel, two branch offices in San Luis Obispo and Santa Barbara, and three branch offices in Santa Maria. The Bank conducts a commercial banking business in the counties of San Luis Obispo and Santa Barbara, including accepting demand, savings and time deposits, and making commercial, real estate, small business administration, agricultural, credit card and consumer loans. The Bank also offers installment note collection, issues cashier’s checks and money orders, sells travelers checks, and provides bank-by-mail, night depository, safe deposit boxes, online banking and other customary banking services. The Company’s wholly owned, non-financial subsidiaries include Heritage Oaks Capital Trust II and Heritage Oaks Capital Trust III.

Lending Activities

The Bank’s lending activities include commercial and industrial loans, installment loans, construction loans, and other real estate loans or commercial loans secured by real estate. The Bank takes real estate, listed and unlisted securities, savings and time deposits, automobiles, machinery and equipment as collateral for loans. As of December 31, 2008, the Bank’s total gross loans were $680.1 million. As of December 31, 2008, approximately 44.1% of the real estate secured portfolio was owner-occupied. The Bank advances construction loans to borrowers within the Bank’s market area to finance the construction of single family dwellings, medical and professional office buildings, a hotel, and an assisted living facility.

Investment Securities

The Bank’s securities portfolio includes obligations of United States government agencies and corporations, mortgage-backed securities, obligations of state and political sub-divisions, and other securities. The majority of the Bank’s mortgage securities were issued by the Government National Mortgage Association (Ginnie Mae), Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac). These securities carry the guarantee of the issuing agencies.

Sources of Funds

The Bank’s primary source of funds for loans and investments include core deposits (demand, savings and money market, excluding brokered funds). As of December 31, 2008, core deposits represented approximately 68.8% of total deposits. As of December 31, 2008, the Bank had 32,102 deposit accounts consisting of non-interest bearing (demand), interest-bearing demand and money market accounts; 12,842 savings accounts, and 3,620 time certificate of deposit accounts, excluding brokered.