EXHIBIT 10.1

 UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.      
Written Agreement by and between
 
HERITAGE OAKS BANCORP
Docket No.  10-036--WA/RB-HC
 
Paso Robles, California
 
 
and
 
 
FEDERAL RESERVE BANK OF
 
SAN FRANCISCO
 
San Francisco, California
     

WHEREAS, Heritage Oaks Bancorp, Paso Robles, California (“Bancorp”), a
registered bank holding company, owns and controls Heritage Oaks Bank, Paso
Robles, California (“Bank”), a state nonmember bank, and various nonbank
subsidiaries;
 
WHEREAS, it is the common goal of Bancorp and the Federal Reserve Bank of San
Francisco (the “Reserve Bank”) to maintain the financial soundness of Bancorp so
that Bancorp may serve as a source of strength to the Bank;
 
WHEREAS, Bancorp and the Reserve Bank have mutually agreed to enter into this
Written Agreement (the “Agreement”); and
 
WHEREAS, on February 26, 2010, the board of directors of Bancorp, at a duly
constituted meeting, adopted a resolution authorizing and directing Lawrance P.
Ward   to enter into this Agreement on behalf of Bancorp, and consenting to
compliance with each and every provision of this Agreement by Bancorp and its
institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the
Federal Deposit Insurance Act, as amended (the “FDI Act”)

 
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(12 U.S.C. §§ 1813(u) and 1818(b)(3)).

NOW, THEREFORE, Bancorp and the Reserve Bank agree as follows:

Source of Strength
 

1.    The board of directors of Bancorp shall take appropriate steps to fully
utilize Bancorp’s financial and managerial resources, pursuant to Section 225.4
(a) of Regulation Y of the Board of Governors of the Federal Reserve System (the
“Board of Governors”) (12 C.F.R. § 225.4(a)), to serve as a source of strength
to the Bank, including, but not limited to, taking steps to ensure that the Bank
complies with the consent order entered into with the Federal Deposit Insurance
Corporation and the California Department of Financial Institutions on March 04,
2010 and any other supervisory action taken by the Bank’s federal or state
regulator.
 
Dividends and Distributions
 

2.
(a)
Bancorp shall not declare or pay any dividends without the prior written
approval of the Reserve Bank
 and the Director of the Division of Banking Supervision and Regulation (the
“Director”) of the Board of Governors.
 
 
(b)
Bancorp shall not directly or indirectly take dividends or any other form of
reduction in capital from the Bank

without the prior written approval of the Reserve Bank.
 
 
(c)
Bancorp and its nonbank subsidiaries shall not make any distributions of
interest, principal, or other sums on subordinated

debentures or trust preferred securities without the prior written approval of
the Reserve Bank and the Director.
 
 
(d)
All requests for prior approval shall be received by the Reserve Bank at least
30 days prior to the proposed dividend declaration

date, proposed distribution on

 
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subordinated debentures, and required notice of deferral on trust preferred
securities. All requests shall contain, at a minimum, current and projected
information on Bancorp’s capital, earnings, and cash flow; the Bank’s capital,
asset quality, earnings, and allowance for loan and lease losses; and
identification of the sources of funds for the proposed payment or distribution.
For requests to declare or pay dividends, Bancorp must also demonstrate that the
requested declaration or payment of dividends is consistent with the Board of
Governors’ Policy Statement on the Payment of Cash Dividends by State Member
Banks and Bank Holding Companies, dated November 14, 1985 (Federal Reserve
Regulatory Service, 4-877 at page 4-323).

Debt and Stock Redemption
 
 

 3.  (a)   Bancorp and its nonbank subsidiaries shall not, directly or
indirectly, incur, increase, or guarantee any debt without the prior written
approval

of the Reserve Bank. All requests for prior written approval shall contain, but
not be limited to, a statement regarding the purpose of the debt, the terms of
the debt, and the planned source(s) for debt repayment, and an analysis of the
cash flow resources available to meet such debt repayment.
 
(b) Bancorp shall not, directly or indirectly, purchase or redeem any shares of
its stock without the prior written approval of the Reserve Bank.
 
Capital Plan

4.     Within 60 days of this Agreement, Bancorp shall submit to the Reserve
Bank an acceptable written plan to maintain sufficient capital at Bancorp on a
consolidated basis. The plan shall, at a minimum, address, consider, and
include:
 
(a)      The consolidated organization’s and the Bank’s current and future
capital requirements, including compliance with the Capital Adequacy Guidelines
for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure,
Appendices A and D of

 

 
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Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D) and
the applicable capital adequacy guidelines for the Bank issued by the Bank’s
federal regulator;
 
(b)    the adequacy of the Bank’s capital, taking into account the volume of
classified credits, concentrations of credit, allowance for loan and lease
losses,
current and projected asset growth, and projected retained earnings;

(c)    the source and timing of additional funds necessary to fulfill the
consolidated organization’s and the Bank’s future capital requirements;

(d)    supervisory requests for additional capital at the Bank or the
requirements of any supervisory action imposed on the Bank by its federal or
state regulator; and

(e)    the requirements of section 225.4(a) of Regulation Y of the Board of
Governors (12 C.F.R. § 225.4(a)) that Bancorp serve as a source of strength to
the Bank.

5.  Bancorp shall notify the Reserve Bank, in writing, no more than 30 days
after the end of any quarter in which any of Bancorp’s capital ratios fall below
the approved plan’s minimum ratios. Together with the notification, Bancorp
shall submit an acceptable written plan that details the steps that Bancorp will
take to increase Bancorp’s capital ratios to or above the approved plan's
minimums.
 
Cash Flow Projections

6.  Within 60 days of this Agreement, Bancorp shall submit to the Reserve Bank a
written statement of Bancorp’s planned sources and uses of cash for debt
service, operating expenses, and other purposes (“Cash Flow Projection”) for
2010. Bancorp shall submit to the Reserve Bank a Cash Flow Projection for each
calendar year subsequent to 2010 at least one month prior to the beginning of
that calendar year.

 

 
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Compliance with Laws and Regulations
 
 

 7.    (a)   In appointing any new director or senior executive officer, or
changing the responsibilities of any senior executive officer so that the
officer would assume a

different senior executive officer position, Bancorp shall comply with the
notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831(i) and Subpart
H of Regulation Y of the Board of Governors (12 C.F.R. §§ 225.71 et seq.).
Bancorp shall not appoint any individual to its board of directors or employ or
change the responsibilities of any individual as a senior executive officer if
the Reserve Bank notifies Bancorp of its disapproval within the time limits
prescribed by Subpart H of Regulation Y.
 

    (b)  Bancorp shall comply with the restrictions on indemnification and
severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and
Part 359 of the

Federal Deposit Insurance Corporation’s regulations (12 C.F.R. Part 359).
 
Progress Reports

8.     Within 30 days after the end of each calendar quarter following the date
of this Agreement, the board of directors shall submit to the Reserve Bank
written progress reports detailing the form and manner of all actions taken to
secure compliance with the provisions of this Agreement and the results thereof,
and a parent company only balance sheet, income statement, and, as applicable,
report of changes in stockholders’ equity.

 

 
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Communications

9.  
All communications regarding this Agreement shall be sent to:

(a)  
Mr. Kevin Zerbe Vice President

Banking Supervision & Regulation
Federal Reserve Bank of San Francisco
101 Market Street, Mail Stop 920
San Francisco, CA 94105

(b)  
Mr. Lawrence Ward

President and Chief Executive Officer Heritage Oaks Bancorp
P.O. Box 7012
Paso Robles, California 93447

10.      Notwithstanding any provision of this Agreement, the Reserve Bank may,
in its sole discretion, grant written extensions of time to Bancorp to comply
with any provision of this Agreement.
 
11.      The provisions of this Agreement shall be binding upon Bancorp and its
institution-affiliated parties, in their capacities as such, and their
successors and assigns.
 
12.      Each provision of this Agreement shall remain effective and enforceable
until stayed, modified, terminated, or suspended in writing by the Reserve Bank.
 
13.      The provisions of this Agreement shall not bar, estop, or otherwise
prevent the Board of Governors, the Reserve Bank, or any other federal or state
agency from taking any other action affecting Bancorp, the Bank, any nonbank
subsidiary of Bancorp, or any of their current or former institution-affiliated
parties and their successors and assigns.

 

 
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14.      Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this
Agreement is enforceable by the Board of Governors under section 8 of the FDI
Act (12 U.S.C. § 1818).

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the ____day of __________________, 2010.

 
 

HERITAGE OAKS BANCORP 
 FEDERAL RESERVE BANK OF
     SAN FRANCISCO

 
 
 
 
 
 By:  /s/ Lawrence P Ward          By: __________________________
 
 
 
 
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