<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB
             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 1999
  [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

For the Transition Period from           to

Commission File No. 0-25020
                              HERITAGE OAKS BANCORP
--------------------------------------------------------------------------------
               (Exact name of registrant as specified in charter)

                               STATE OF CALIFORNIA
--------------------------------------------------------------------------------
         (State or other jurisdiction of incorporation or organization)

                                   77-0388249
--------------------------------------------------------------------------------
                      (I.R.S. Employer Identification Code)

                     545 12th STREET, PASO ROBLES, CA 93446
--------------------------------------------------------------------------------
                         (Address of principal office)

                                 (805) 239-5200
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

          Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve (12) months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past ninety (90) days.

                             YES    X      NO
                                --------      --------

Aggregate market value of Common Stock of Heritage Oaks Bancorp at October 12,
1999: $18,715,158.

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

No par value Common Stock - 1,134,252 shares outstanding at October 12, 1999.

<PAGE>

                                    HERITAGE OAKS BANCORP
                                 CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                09/30/99             12/31/98
ASSETS                                                       (UNAUDITED)                  (1)
<S>                                                          <C>                  <C>
Cash and due from banks                                      $17,478,344          $17,239,179
Federal funds sold                                             2,200,000            7,700,000
                                                               ---------            ---------
Total cash and cash equivalents                               19,678,344           24,939,179

Interest bearing deposits other banks                            472,654              666,975

Securities Available for sale                                  7,383,695           12,863,106
Securities held to maturity (see note 2)                      12,826,315           15,758,151

Loans Held For Sale                                              538,500            1,654,765
Loans, net ( see note 3)                                      92,333,300           69,803,041

Property, premises and equipment, net                          3,289,981            2,447,385
Other real estate owned                                                0                    0
Cash surrender value life insurance                            1,290,169            1,020,576
Other assets                                                   2,001,596            2,015,320
                                                               ---------            ---------

TOTAL ASSETS                                                $139,814,554         $131,168,498
                                                            ------------         ------------
                                                            ------------         ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand, non-interest bearing                                 $42,734,554          $38,672,576
Savings, NOW, and money market deposits                       53,806,669           51,604,881
Time deposits of $100,000 or more                              7,320,986            4,673,298
Time deposits under $100,000                                  24,094,429           24,456,951
                                                              ----------           ----------
Total deposits                                               127,956,638          119,407,706

Other borrowed money                                             350,000               750000
Other liabilities                                              1,070,995            1,574,122
                                                               ---------            ---------
Total liabilities                                            129,377,633          121,731,828

Stockholders' equity
Common stock, no par value;
20,000,000 shares authorized; issued and outstanding
1,134,252 and 1,069,791 for
September 30, 1999,
and December31, 1998, respectively.                            4,581,623            4,470,170
Accumulated other comprehensive income                         (252,506)            (188,166)
Retained earnings                                              6,107,804            5,154,666
                                                               ---------            ---------
Total stockholders' equity                                    10,436,921            9,436,670
                                                              ----------            ---------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                    $139,814,554         $131,168,498
                                                            ------------         ------------
                                                            ------------         ------------
</TABLE>

(1) These numbers have been derived from the audited financial statements.
See notes to condensed financial statements


                                     PAGE 2

<PAGE>

                                    HERITAGE OAKS BANCORP
                              CONSOLIDATED STATEMENTS OF INCOME
                          FOR THE THREE MONTHS ENDED SEPTEMBER 30,

<TABLE>
<CAPTION>
                                                                    1999                 1998
                                                             (UNAUDITED)          (UNAUDITED)
<S>                                                          <C>                  <C>
Interest Income:

Interest and fees on loans                                    $2,223,295           $1,691,873
Investment securities                                            276,835              306,953
Federal funds sold and commercial paper                           46,030              115,486
Time certificates of deposit                                       3,986                4,004
                                                                   -----                -----
Total interest income                                          2,550,146            2,118,316

Interest Expense:

Now accounts                                                     175,765              180,130
MMDA accounts                                                     52,863               52,907
Savings accounts                                                  73,999               68,041
Time deposits of $100,000 or more                                 84,266               62,649
Other time deposits                                              252,949              337,923
Other borrowed funds                                               8,161                    0
                                                                   -----                    -
Total interest expense                                           648,003              701,650

Net Interest Income Before Prov. for Possible Loan             1,902,143            1,416,666
Losses
Provision for loan losses                                         42,000               58,000
                                                                  ------               ------
Net interest income after provision for loan losses            1,860,143            1,358,666

Non-interest Income:
Service charges on deposit accounts                              198,090              192,434
Investment securities gains (losses), net                              0                1,916
Other income                                                   1,444,551            1,500,315
                                                               ---------            ---------
Total Non-interest Income                                      1,642,641            1,694,665

Non-interest  Expense:
Salaries and employee benefits                                   883,232              775,386
Occupancy and equipment                                          374,704              276,424
Other expenses                                                 1,573,164            1,424,572
                                                               ---------            ---------
Total Noninterest Expenses                                     2,831,100            2,476,382
Income before provision for income taxes                         671,684              576,949
Provision for applicable income taxes                            236,589              201,718
                                                                 -------              -------
Net Income                                                      $435,095             $375,231
                                                                --------             --------
                                                                --------             --------

Earnings per share:        (See note #4)
Basic                                                              $0.39                $0.32
Fully Diluted                                                      $0.35                $0.30
</TABLE>

See notes to condensed financial statements


                                     PAGE 3

<PAGE>

                                    HERITAGE OAKS BANCORP
                              CONSOLIDATED STATEMENTS OF INCOME
                           FOR THE NINE MONTHS ENDED SEPTEMBER 30,

<TABLE>
<CAPTION>
                                                                    1999                 1998
                                                             (UNAUDITED)          (UNAUDITED)
<S>                                                          <C>                  <C>
Interest Income:

Interest and fees on loans                                    $5,957,706           $4,706,687
Investment securities                                            966,470              872,277
Federal funds sold and commercial paper                          183,801              175,893
Time certificates of deposit                                      17,715               14,025
                                                                  ------               ------
Total interest income                                          7,125,692            5,768,882

Interest Expense:

Now accounts                                                     496,257              553,945
MMDA accounts                                                    150,573              131,828
Savings accounts                                                 202,243              198,125
Time deposits of $100,000 or more                                182,936              152,379
Other time deposits                                              775,049              789,526
Other borrowed funds                                              54,513               51,048
                                                                  ------               ------
Total interest expense                                         1,861,571            1,876,851

Net Interest Income Before Prov. for Possible Loan             5,264,121            3,892,031
Losses
Provision for loan losses                                        123,500              104,000
                                                                 -------              -------
Net interest income after provision for loan losses            5,140,621            3,788,031

Non-interest Income:
Service charges on deposit accounts                              552,682              521,067
Investment securities gains (losses), net                              0               10,504
Other income                                                   3,730,866            4,388,259
                                                               ---------            ---------
Total Non-interest Income                                      4,283,548            4,919,830

Non-interest  Expense:
Salaries and employee benefits                                 2,638,208            2,178,088
Occupancy and equipment                                        1,121,958              806,451
Other expenses                                                 4,208,488            4,113,781
                                                               ---------            ---------
Total Noninterest Expenses                                     7,968,654            7,098,320
Income before provision for income taxes                       1,455,515            1,609,541
Provision for applicable income taxes                            499,487              572,944
                                                                 -------              -------
Net Income                                                      $956,028           $1,036,597
                                                                --------           ----------
                                                                --------           ----------

Earnings per share:        (See note #4)
Basic                                                              $0.86                $0.99
Fully Diluted                                                      $0.76                $0.93
</TABLE>

See notes to condensed financial statements


                                     PAGE 4
<PAGE>

                                    HERITAGE OAKS BANCORP
                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                          PERIODS ENDED SEPTEMBER 30, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                    1999                 1998
                                                             (UNAUDITED)          (UNAUDITED)
<S>                                                          <C>                  <C>
Cash flows from operating activities:
(dollars in thousands)
Net Income                                                      $956,028           $1,036,597
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                                    483,020              306,861
Provision for possible loan loss                                 123,500              104,000
Increase (decrease) in deferred loan fees                        123,220              184,301
Net loss on sales of investment securities                             -              (10,504)
Amortization of premiums (Discount accretion)
on investment securities, net                                   (118,659)             (68,763)
Loss on sale of other real estate owned                                -                    -
Gain on sale of property, premises, and equipment                      -              (9,555)
Decrease (increase) in other assets                               13,724               62,150
Increase (decrease) in other liabilities                        (503,127)            (215,460)
Net cash used in operating activities                          1,077,706            1,389,627


Cash flows from investing activities:
Purchase of investment securities                            (17,433,000)         (16,529,316)
Proceeds from sales, princ reductions and maturities
from investment securities                                    25,651,846            9,808,518
Increase in time deposits with other banks                       194,321              145,443
Net additions to real estate acquired in
settlement of loans                                                    -                7,000
Purchase of insurance policies                                  (269,593)             (37,673)
Increase in loans, net                                       (21,413,994)         (13,933,610)
Purchase of property, premises and equipment, net             (1,325,616)            (645,403)
Net cash used in investing activities                        (14,596,036)         (21,185,041)


Cash flows from financing activities:
Increase (decrease) in deposits, net                           8,548,932           24,814,539
Net (decrease) increase in other borrowings                     (400,000)             580,000
Proceeds from exercise of stock options                          111,453               20,942
Cash paid in lieu of fractional shares                            (2,890)             (519,717)
Net cash provided by (used in) financing activities            8,257,495           24,895,764


Net increase (decrease) in cash and cash equivalents          (5,260,835)           5,100,350
Cash and cash equivalents at beginning of year                24,939,179           12,991,388
Cash and cash equivalents at end of period                   $19,678,344          $18,091,738
</TABLE>

See notes to condensed financial statements


                                     PAGE 5

<PAGE>

                              HERITAGE OAKS BANCORP
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                  ACCUMULATED
                                                                                                      OTHER            TOTAL
                                                    SHARES         COMMON          RETAINED       COMPREHENSIVE    STOCKHOLDERS'
                                                  OUTSTANDING      STOCK           EARNINGS          INCOME           EQUITY
                                                  -----------      -----           --------          ------           ------
<S>                                               <C>              <C>             <C>            <C>              <C>
Balance January 1, 1999                             1,069,791      $4,470,170      5,154,666         (188,166)       9,436,670.00

Exercise of Stock Options                              21,802         111,453              0                           111,453.00

Cash dividends paid                                         0               0              0                                 0.00

Stock dividend- 4%                                     42,659                                                                0.00
Cash paid to Shareholders' in Lieu of
   fractional shares on 4% Stock Dividend                                             (2,890)                           (2,890.00)

Comprehensive Income
 Net Income                                                                          956,028                           956,028.00
 Unrealized Security Holding Gains
  '(net of $65,4031 tax )                                                                             (93,097)         (93,097.00)
   Less Reclassification Adjustment for
   Losses (net of $23,125 tax)                                                                         28,757           28,757.00
                                                                                                      -------           ---------
 Total Other Comprehensive Income
Total comprehensive Income                                                                                             891,688.00

BALANCE SEPTEMBER 30, 1999                          1,134,252      $4,581,623     $6,107,804         (252,506)      10,436,921.00

<CAPTION>
                                                                                                  ACCUMULATED
                                                                                                      OTHER            TOTAL
                                                    SHARES         COMMON          RETAINED       COMPREHENSIVE    STOCKHOLDERS'
                                                  OUTSTANDING      STOCK           EARNINGS          INCOME           EQUITY
                                                  -----------      -----           --------          ------           ------
<S>                                               <C>              <C>             <C>            <C>              <C>
JANUARY 1, 1998                                     1,036,626      $4,180,486     $4,327,921        ($381,329)       8,127,078.00

Exercise of Stock Options                               5,468          20,942              0                            20,942.00

Cash dividends paid ..$.50 per share                        0               0       (519,717)                         (519,717.00)


Comprehensive Income
 Net Income                                                                        1,036,597                         1,036,597.00
 Unrealized Security Holding Gains                                                                    118,874          118,874.00
                                                                                                                       ----------

 Total Other Comprehensive Income
Total comprehensive Income                                                                                           1,155,471.00

BALANCE SEPTEMBER 30, 1998                          1,042,094      $4,201,428     $4,844,801        ($262,455)       8,783,774.00
</TABLE>


                                     PAGE 6

<PAGE>

Note 1: CONSOLIDATED FINANCIAL STATEMENTS

In the opinion of Management, the unaudited consolidated condensed financial
statements contain all (consisting of only normal recurring adjustments)
adjustments necessary to present fairly the Company's consolidated financial
position at September 30, 1999 and December 31, 1998, and and the results of
cash flows for the nine months ended September 30, 1999 and 1998 and the results
of operations for the three and nine months ended September 30, 1999 and 1998.

Certain information and footnote disclosures normally presented in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These interim consolidated condensed financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's 1998 Annual Report to shareholders. The
results for the three and six months ended September 30, 1999 and 1998 may not
necessarily be indicative of the operating results for the full year.


Note 2: INVESTMENT SECURITIES

The Company adopted SFAS No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" on January 1, 1994, which addresses the accounting for
investments in equity securities that have readily determinable fair values and
for investments in all debt securities. Securities are classified in three
categories and accounted for as follows: debit and equity securities that the
company has the positive intent and ability to hold to maturity are classified
as held-to-maturity and are measured at amortized cost; debt and equity
securities bought and held principally for the purpose of selling in the near
term are classified as trading securities and are measured at fair value, with
unrealized gains and losses included in earnings;, debt and equity securities
not classified as either held-to-maturity or trading securities are deemed as
available-for-sale and are measured at fair value, with unrealized gains and
losses, net of applicable taxes, reported in a separate component of
stockholders' equity. Any gains and losses on sales of investments are computed
on a specific identification basis.

The amortized cost and fair values of investment securities available for sale
at September 30, 1999 and December 31, 1998 were:

<TABLE>
<CAPTION>
                                                                             GROSS              GROSS
                                                           AMORTIZED       UNREALIZED        UNREALIZED               FAIR
SEPTEMBER 30, 1999                                           COST            GAINS             LOSSES                VALUE
                                                             ----            -----             ------                -----
<S>                                                        <C>             <C>               <C>                     <C>
Obligations of U.S. government agencies and corporations    $2,420,353             $891              $71,638             2,349,606
Mortgage-backed securities                                   4,837,339            7,057              272,783             4,571,613
Commercial Paper                                                     0                0                    0                     0
Obligations of State and Political Subdivisions                497,573                0               35,097               462,476
                                                               -------                -               ------               -------
TOTAL                                                       $7,755,265           $7,948             $379,518             7,383,695
                                                            ----------           ------             --------             ---------


<CAPTION>
DECEMBER 31, 1998                                                            GROSS              GROSS
                                                           AMORTIZED       UNREALIZED        UNREALIZED               FAIR
                                                             COST            GAINS             LOSSES                VALUE
                                                             ----            -----             ------                -----
<S>                                                        <C>             <C>               <C>                     <C>
U.S. Treasury securities                                            $0               $0                   $0                  0.00
Obligations of U.S. government agencies and corporations     1,650,875          163,545                    0          1,814,420.00
Mortgage-backed securities                                   3,286,605            2,903              214,455          3,075,053.00
Commercial Paper                                             7,969,833                0                    0          7,969,833.00
Obligations of State and Political Subdivisions                      0                0                    0                  0.00
Other Securities                                                 3,800                0                    0              3,800.00
                                                                 -----                -                    -
TOTAL                                                      $12,911,113         $166,448             $214,455         12,863,106.00
                                                           -----------         --------             --------         -------------
</TABLE>


                                     PAGE 7

<PAGE>

Note 2: INVESTMENT SECURITIES  (continued)

The amortized cost and fair values of investment securities held to maturity at
September 30, 1999 and December 31, 1998 were:

<TABLE>
<CAPTION>
                                                                             GROSS              GROSS
SEPTEMBER 30, 1999                                         AMORTIZED       UNREALIZED        UNREALIZED               FAIR
                                                             COST            GAINS             LOSSES                VALUE
                                                             ----            -----             ------                -----
<S>                                                        <C>             <C>               <C>                     <C>
U.S. Treasury securities                                            $0               $0                   $0                     0
Obligations of U.S. government agencies and corporations     5,703,841            4,446              159,242             5,549,045
Mortgage-backed securities                                     650,003            3,070               12,660               640,413
Obligations of State and political subdivisions              6,133,148           13,603              218,252             5,928,499
Other securities                                               395,200                0                    0               395,200
                                                               -------                -                    -               -------
TOTAL                                                      $12,882,192          $21,119             $390,154            12,513,157
                                                           -----------          -------             --------            ----------


<CAPTION>
                                                                             GROSS              GROSS
                                                           AMORTIZED       UNREALIZED        UNREALIZED               FAIR
DECEMBER 31, 1998                                            COST            GAINS             LOSSES                VALUE
                                                             ----            -----             ------                -----
<S>                                                        <C>             <C>               <C>                     <C>
U.S. Treasury securities                                       $98,777               $0                 $777             98,000.00
Obligations of U.S. government agencies and corporations     1,235,905           25,798                  132          1,261,571.00
Mortgage-backed securities                                   8,168,695          283,004               12,759          8,438,940.00
Obligations of state and political subdivisions              6,254,774           14,059                8,337          6,260,496.00
                                                             ---------           ------                -----          ------------
TOTAL                                                      $15,758,151         $322,861              $22,005         16,059,007.00
                                                           -----------         --------              -------         -------------
</TABLE>


Note 3: Loans and Reserve for Possible Loan Losses

Major classifications of loans were:

<TABLE>
<CAPTION>
                                                                   SEPTEMBER 30,        DECEMBER 31,
                                                                       1999                 1998
                                                                       ----                 ----
<S>                                                                <C>                  <C>
Commercial, financial, and agricultural                             $39,993,406          $34,397,232
Real estate-construction                                             12,786,237            7,070,375
Real estate-mortgage                                                 34,145,916           21,508,083
Installment loans to individuals                                      6,861,873            3,605,427
All other loans (including overdrafts)                                  181,495              146,379
                                                                        -------              -------
                                                                     93,968,927           66,727,496

Less - deferred loan fees                                             (435,071)            (311,851)
Less - reserve for possible loan losses                             (1,200,556)          (1,008,413)
                                                                    -----------          -----------

Total loans                                                         $92,333,300          $65,407,232
                                                                    -----------          -----------

Loans Held For Sale                                                    $538,500           $2,935,561
</TABLE>

Concentration of Credit Risk

At September 30, 1999, approximately $46,932,153 of the Bank's loan portfolio
was collateralized by various forms of real estate. Such loans are generally
made to borrowers located in San Luis Obispo County. The Bank attempts to reduce
its concentration of credit risk by making loans which are diversified by
project type. While management believes that the collateral presently securing
this portfolio is adequate, there can be no assurances that significant
deterioration in the California real estate market would not expose the Bank to
significantly greater credit risk.

Loans on nonaccrual status totaled $919,888 and $934,389 at September 30, 1999
and December 31, 1998, respectively. Interest income that would have been
recognized on non-accrual loans if they had performed in accordance with the
terms of the loans was approximately $80,717, $103,164, for the period ended
September 30, 1999 and December 31, 1998, respectively.


                                     PAGE 8

<PAGE>

Note 3: Loans and Reserve for Possible Loan Losses (continued)

An analysis of the changes in the reserve for possible loan losses is as
follows:

<TABLE>
<CAPTION>
                                                       SEPTEMBER 30,        DECEMBER 31,
                                                           1999                 1998
<S>                                                    <C>                  <C>
Balance at beginning of year                              $1,069,535             $930,284
Additions charged to operating expense                       123,500              164,000
Loans charged off                                            (7,687)             (45,277)
Recoveries of loans previously charged off                   15,208               20,528
                                                             -------              ------
Balance at end of period                                  $1,200,556           $1,069,535
</TABLE>

At September 30, 1999, the Bank was contingently liable for letters of credit
accommodations made to its customers totaling $859,404 and undisbursed loan
commitments in the amount of $27,567,300. The Bank makes commitments to extend
credit in the normal course of business to meet the financing needs of its
customers. Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total outstanding commitment amount does
not necessarily represent future cash requirements. Standby letters of credit
written are conditional commitments issued by the Bank to guarantee the
performance of a customer to a third party. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan
facilities to customers. The Bank anticipates no losses as a result of such
transactions.

In accordance with Financial Accounting Standards Board (FASB) Statement No.
114, Accounting by Creditors for Impairment of a Loan." Allowance for credit
losses related to loans that are identified for evaluation in accordance with
Statement 114 is based on discounted cash flows using the loan's initial effect
interest rate or the fair value of the collateral for certain collateral
dependent loans.


Management believes that the allowance for credit losses at September 30, 1999
is prudent and warranted, based on information currently available. However, no
prediction of the ultimate level of loans charged-off in future years can be
made any certainty.


Note 4: Earnings Per Share:

Basic earnings per share are based on the weighted average number of shares
outstanding before any dilution from common stock equivalents. Diluted earnings
per share includes common stock equivalents from the effect of the exercise of
stock options. The total number of share used for calculating basic and diluted
for September 30, 1999 was 1,116,143 and 1,250,723, respectively. The total
number of shares used for calculating basic and diluted for September 30, 1998
was 1,042,094 and 1,115,035, respectively.


                                     PAGE 9

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Heritage Oaks Bancorp (the "Company") commenced operations on November 15, 1994
with the acquisition of Heritage Oaks Bank (the "Bank"). Each shareholder of the
Bank received one share of stock in the Company in exchange for each share of
Heritage Oaks Bank stock owned. The Bank became a wholly owned subsidiary of the
Company. The Bank is the only active subsidiary owned by the Company.

SUMMARY OF FINANCIAL RESULTS

As of September 30, 1999, total consolidated assets of Heritage Oaks Bancorp
were $139,814,554 compared to $131,168,498 at December 31, 1998. This reflects
an increase of 6.59%. This growth is attributable to continuing positive
economic factors along with the opening of two de novo branch offices in Santa
Maria and Atascadero on February 1, 1999 and March 15, 1999, respectively.

Total cash at September 30, 1999 was $17,478,344. The large cash balance
reflects the increased number of branch offices and cash needed to fund the
Bank's automatic teller machine ("ATM") network. As of September 30, 1999, the
Bank was operating approximately 75 ATMs.

Total net loans at September 30, 1999 were $92,333,300 compared to $69,803,041
at December 31, 1998. This increase from yearend is the result of expansion in
the number of branches and the reputation our Bank has established in our new
and existing market area. Management intends to continue its aggressive increase
in the level of loans outstanding while not compromising underwriting standards.

Securities available for sale, which are carried at market value, were
$7,383,695 at September 30, 1999 compared to $12,863,106 at December 31, 1998.
Securities held to maturity, which are carried at their amortized cost, were
$12,826,315 at September 30, 1999 compared to $15,758,151 at December 31, 1998.
Both categories have decreased through security maturity and principal cash flow
pay down to supply funds for loan demand.

Federal funds sold were $2,200,000 at September 30, 1999 and $7,700,000 at
December 31, 1998. Total deposits were $127,956,638 at September 30, 1999
compared to $119,407,706


                                    PAGE 10

<PAGE>

at December 31, 1998, which represents an increase of 7.16%. The increase in
total deposits is primarily attributable to the two new branch offices and
deposits obtained in relationships as the result of new loans.

Core deposits (time deposits less than $100,000, demand, and savings) gathered
in the local communities served by the Bank continue to be the Bank's primary
source of funds for loans and investments. Core deposits of $120,635,652
represented 94.3% of total deposits at September 30, 1999. The Company does not
purchase funds through deposit brokers.

The Company has a $2 million revolving line of credit available with Pacific
Coast Bankers Bank. At September 30, 1999, the balance of borrowed funds on this
line was $350,000 compared to $750,000 at December 31, 1998.


RESULTS OF OPERATIONS

The Company reported net income for the NINE MONTHS ended September 30, 1999 of
$956,028 compared to $1,036,597 for the same period in 1998. Per share earnings
on a diluted basis for September 30, 1999 and September 30, 1998 were $0.86 and
$0.99, respectively. Basic per share earnings for September 30, 1999 and
September 30, 1998 were $0.76 and $0.93, respectively.

Net income for the THREE MONTHS ended September 30, 1999 was $435,095, compared
to $375,231 for the same period in 1998.

Reduced year-to-date earnings are the direct result of the Bank's expansion into
Santa Maria and Atascadero. Management's 1999 budget reflected this decrease in
earnings from the same period in 1998.

The following discussion highlights changes in certain items in the consolidated
statements of income.

NET INTEREST INCOME

Net interest income, the primary component of the net earnings of a financial
institution, refers to the difference between the interest paid on deposits and
borrowings, and the interest earned on loans and investments. The net interest
margin is the amount of net interest income expressed as a percentage of average
earning


                                    PAGE 11

<PAGE>

assets. Factors considered in the analysis of net interest income are the
composition and volume of earning assets and interest-bearing liabilities, the
amount of non-interest bearing liabilities and non-accrual loans, and changes in
market interest rates.

Net interest income for the NINE MONTHS ended September 30, 1999 was $5,264,121
as compared to $3,892,031 for the same period in 1998. This represents an
improvement of $1,372,090 or 35.25%. As a percentage of average earning assets,
the net interest margin for the first nine months of 1999 increased to 6.31%
from 5.98% from the same period one year earlier. The increase in net interest
margin is primarily due to an $24,181,000 increase in average interest earning
assets and an increase of only $9,949,000 in interest bearing liabilities. This
improvement was the result of the bank=s marketing efforts to attract
non-interest bearing demand deposit accounts. The average balance of demand
deposits at September 30, 1999 was $36,413,000 compared to $18,485,000 at
September 30, 1998.

Net interest income for the THREE MONTHS ended September 30, 1999 was $1,902,143
compared to $1,416,666 for the same period in 1998. This represents an increase
of 34.3%. Interest expense for this three month period was $648,003 at September
30, 1999 compared to $701,650 at September 30, 1999.

Average interest earning assets were $110,900,000 at September 30, 1999 compared
to $86,719,000 at September 30, 1998. Average interest-bearing liabilities
increased to $83,116,000 at September 30, 1999 from $73,167,000 at September 30,
1998. Average interest rates on interest-bearing liabilities dropped from 3.43%
for the first nine months of 1998 to 3.00% for the first nine months of 1999.


                                    PAGE 12

<PAGE>

<TABLE>
<CAPTION>
                                                          AVERAGE BALANCE SHEET INFORMATION FOR SEPTEMBER 30,
(DOLLARS IN THOUSANDS)
                                                           ----------------------------------------------------
                                                                                 1999
                                                              AVERAGE       AVERAGE YIELD        AMOUNT
Interest Earning Assets:                                      BALANCE         RATE PAID         INTEREST
                                                           ----------------------------------------------------
<S>                                                           <C>           <C>                 <C>
            Time deposits with other banks                           $629              4.46%            $21
            Investment securities taxable                          16,657              5.87%            731
            Investment securities non-taxable                       6,544              4.74%            232
            Federal funds sold                                      4,952              4.97%            184
            Loans (1) (2)                                          82,118              9.70%          5,958
                                                                 --------                          --------

            Total interest earning assets                         110,900              8.59%          7,126
                                                                 --------                          --------

Allowance for possible loan losses                                 (1,128)
Non-earning assets:
            Cash and due from banks                                14,560
            Property, premises and equipment                        2,767
            Other assets                                            3,723
                                                                 --------

TOTAL ASSETS                                                     $130,822
                                                                 --------

Interest -bearing liabilities:
            Savings/NOW/money market                               54,416              2.09%            849
            Time deposits                                          27,679              4.63%            958
            Other borrowings                                        1,021              7.20%             55
                                                                 --------                          --------

            Total interest-bearing liabilities                     83,116              3.00%          1,862
                                                                 --------                          --------

Non-interest bearing liabilities:
            Demand deposits                                        36,413
            Other liabilities                                       1,296
                                                                 --------

            Total liabilities                                     120,825
                                                                 --------

Stockholders' equity
            Common stock                                            4,512
            Retained earnings                                       5,744
            Valuation Allowance Investments                          (259)
                                                                 --------

            Total stockholders' equity                              9,997
                                                                 --------

TOTAL LIABILITIES AND STOCKHOLDERS'
            EQUITY                                               $130,822
                                                                 --------

Net Interest Income                                                                                  $5,264
                                                                                                   --------
Net Interest Margin (3)                                                                6.31%


                                                            ----------------------------------------------------
                                                                                 1998
                                                              AVERAGE       AVERAGE YIELD        AMOUNT
Interest Earning Assets:                                      BALANCE         RATE PAID         INTEREST
                                                            ----------------------------------------------------
            Time deposits with other banks                           $224              6.57%            $11
            Investment securities taxable                          16,236              6.07%            737
            Investment securities non-taxable                       4,945              4.84%            179
            Federal funds sold                                      3,165              5.58%            132
            Loans (1) (2)                                          62,149             10.13%          4,707
                                                                 --------                          --------

            Total interest earning assets                          86,719              8.89%          5,766
                                                                 --------                          --------

Allowance for possible loan losses                                   (937)
Non-earning assets:
            Cash and due from banks                                10,806
            Property, premises and equipment                        2,058
            Other assets                                            2,984
                                                                 --------

TOTAL ASSETS                                                     $101,630
                                                                 --------

Interest -bearing liabilities:
            Savings/NOW/money market                               47,641              2.48%            884
            Time deposits                                          24,371              5.17%            942
            Other borrowings                                        1,155              5.90%             51
                                                                 --------                          --------

            Total interest-bearing liabilities                     73,167              3.43%          1,877
                                                                 --------                          --------

Non-interest bearing liabilities:
            Demand deposits                                        18,485
            Other liabilities                                       1,770
                                                                 --------

            Total liabilities                                      93,422
                                                                 --------

Stockholders' equity
            Common stock                                            4,190
            Retained earnings                                       4,399
            Valuation Allowance Investments                          (381)
                                                                 --------

            Total stockholders' equity                              8,208
                                                                 --------

TOTAL LIABILITIES AND STOCKHOLDERS'
            EQUITY                                               $101,630
                                                                 --------

Net Interest Income                                                                                  $3,889
                                                                                                   --------
Net Interest Margin (3)                                                                5.98%
</TABLE>

         (1) Nonaccrual loans have been included in total loans.
         (2) Loan fees of $349,500 and $215,600 for 1999 and 1998, respectively,
             have been included in the interest income computation.
         (3) Net interest income has been calculated by dividing the net
             interest income by total earning assets.


                                    PAGE 13

<PAGE>

The preceding table sets forth the average balance sheet information, interest
income and expense, average yields and rates and net interest income and margin
for the nine months ended September 30, 1999 and 1998.

NON-INTEREST INCOME

Non-interest income consists of bankcard merchant fees, automatic teller machine
("ATM") transactions, and other fees, service charges, and gains on other real
estate owned. Non-interest income for the NINE MONTHS ended September 30, 1999
was $4,283,548 compared to $4,919,830 for the same period in 1998. That
represents a decrease of $636,282 or 12.9%. Service charge income increased from
$521,067 during the first nine months of 1998 to $552,682 for the NINE MONTHS
ended September 30, 1999. This modest increase in service charges is a result of
the Bank's growth in deposit accounts. ATM transaction fees and interchange
income were $2,288,089 during the NINE MONTHS ended September 30, 1999 compared
to $3,277,600 during the same period for 1998. The Bank receives income for each
transaction. Approximately 20% of the ATMs are located at gaming sites on Native
American lands. The competition related to the installation of ATM machines has
been increasing and has reduced current income from these machines. In order for
non-financial institutions to utilize the various regional, national and
international networks, they need a financial institution to sponsor them on
these networks. The bank has entered an agreement with a few non-financial
institutions to sponsor them on these networks. The bank receives a nominal
sponsorship fee for each transaction run through the networks. The sponsorship
revenue for the nine months ended September 30, 1999 was $66,910 compared to
$92,797 for the same period during 1998.

Income from bankcard merchant fees decreased to $587,963 for the nine months
ended September 30, 1999 compared to $627,567 for the same period during 1998.
As of September 1, 1999, the Bank sold the liability of the Merchant Bancard
Program and will receive a monthly check for a percentage of the net sales
volume of the portfolio. There will be a change to the revenue flow to reflect
"net" earnings on a monthly basis. It is the Bank's intention to actively market
this product to provide greater ongoing revenue, without the risk.


                                    PAGE 14
<PAGE>

Non-interest income for the THREE MONTHS ended September 30, 1999 was $1,642,641
compared to $1,694,665 for the same period in 1998. That represents a decrease
of $52,024 or 3.07%. Service charge income was $198,090 for the THREE MONTHS
ended September 30,1999 and $192,434 for the same period in 1998. ATM
transaction fees and interchange income were $743,465 during the THREE MONTHS
ended September 30, 1999 compared to $1,018,752 during the same period for 1998.
The sponsorship revenue for the THREE MONTHS ended September 30, 1999 was
$22,794 compared to $25,555 for the same period during 1998. Income from
bankcard merchant fees increased to $229,822 for the THREE MONTHS ended
September 30, 1999 compared to $216,260 for the same period during 1998.


Other Expense

The Bank opened de novo branches in Santa Maria and Atascadero on
February 1 and March 15, 1999, respectively. Other expenses have grown as a
result of the additional branches and overall growth of the Bank. Non-interest
expense was $7,968,654 and $7,098,320 for the NINE MONTHS ended September 30,
1999 and the same period in 1998, respectively. Salaries and employee benefits
expense were $2,638,208 and $2,178,088 for the NINE MONTHS ended September 30,
1999 and 1998, respectively. Full time equivalent employees were 86 at September
30, 1999 compared to 71 at September 30, 1998. Occupancy and equipment costs
grew to $1,121,958 for the NINE MONTHS ended September 30, 1999 from $806,451
for the same period of 1998. The Bank has finalized purchases in conjunction
with Y2K compliance. (Refer to the Year 2000 section of this document) Expense
associated with the ATM network was $1,502,790 and $1,921,793 for the NINE
MONTHS ended September 30, 1999 and 1998, respectively. Expense associated with
the Merchant Bancard program was $549,742 and $608,259 for the nine months ended
September 30, 1999 and 1998, respectively. Expense associated with all other
non-interest expense categories was $2,155,956 and $1,583,729 for the NINE
MONTHS ended September 30, 1999 and 1998, respectively. The increase in other
expense reflects increases associated with the growth as a result of the two new
branches and the overall growth of the Bank.

Non-interest expense was $2,831,100 and $2,476,382 for the THREE MONTHS ended
September 30, 1999 and the same period in 1998, respectively. Salaries and
employee benefits expense


                                    PAGE 15
<PAGE>

were $883,232 and $775,386 for the THREE MONTHS ended September 30, 1999 and
1998, respectively. Occupancy and equipment costs grew to $374,704 for the THREE
MONTHS ended September 30, 1999 from $276,424 for the same period of 1998.
Expense associated with the ATM network was $537,639 and $743,075 for the THREE
MONTHS ended September 30, 1999 and 1998, respectively. Expense associated with
the Merchant Bancard program was $171,363 and $187,802 for the THREE MONTHS
ended September 30, 1999 and 1998, respectively. Expense associated with all
other non-interest expense categories was $864,792 and $513,296 for the THREE
MONTHS ended September 30, 1999 and 1998, respectively. The increase in other
expense reflects increases associated with the growth as a result of the two new
branches and the overall growth of the Bank.

LOCAL ECONOMY

According to the 1999 San Luis Obispo County Economic Outlook, prepared by the
UCSB Economic Forecast Project, the apparent slowdown of the U.S. economy has
not obviously influenced the local San Luis Obispo County economy, yet. The
healthy rate of U.S. economic growth during 1998 has been interrupted,
predominantly by events and financial problems abroad. Consumer confidence and
spending, industrial production, and employment growth have been sliding
recently.

The publication goes on to say that to date, however, the local economy has not
experienced any pronounced weakness in any particular sector. Growth in
employment, resident spending, tourism spending, and income have remained solid.
Residential building activity is currently higher than any year of the 1990s.
The home sales market is especially strong. At this point, the San Luis Obispo
County economy does not appear affected by the spreading international weakness.

A five year expansion of the California economy, the seven year expansion of the
U.S. economy, the unprecedented returns from financial and equity markets, and
the steady growth of visitor travel along the central coast of California, are
the principal reasons for the current prosperity of San Luis Obispo County. More
job opportunities, and an increase in migration to San Luis Obispo County,
resulting in higher demand for housing are also responsible for increased
economic growth this year.


                                    PAGE 16

<PAGE>

The continuing health of the San Luis Obispo County economy is confirmed by a
variety of indicators. The recent evidence is both clear and consistent.
Employment growth is quite healthy, visitor spending continues to rise, and
retail markets are recording solid gains. Because there is little new commercial
building, available office and industrial space is evaporating. The farm sector
set another record for both crop sales in 1997 and employment in 1998, and per
capita income continued to rise to historical highs. Just since 1995, the number
of jobs in Agriculture has doubled; to over 6,300 in the County and average
wages for farm workers jumped 11% in 1998.

The Banks branch locations have been located to take advantage of this growing
economy, as evidenced by the two de novo branches opened during the first
quarter of 1999. The Bank is currently negotiating a lease to establish a full
service branch office in Arroyo Grande with an anticipated opening date sometime
during the fourth quarter of 1999.

Capital

The Company's total stockholders equity was $10,436,921 at September 30, 1999
compared to $9,436,670 as of December 31, 1998. The increase in capital was from
net income of $956,028, $111,453 from stock options exercised, ($2,890) for
fractional shares from a 4% stock dividend during the first quarter and
($64,340) net change in other comprehensive income related to unrealized
security holding loss, net of tax.

Capital ratios for commercial banks in the United States are generally
calculated using nine different formulas. These calculations are referred to as
the "Leverage Ratio" and two "risk based" calculations known as: "Tier One Risk
Based Capital Ratio" and the "Total Risk Based Capital Ratio." These standards
were developed through joint efforts of banking authorities from 12 different
countries around the world. The standards essentially take into account the fact
that different types of assets have different levels of risk associated with
them. Further, they take into account the off-balance sheet exposures of banks
when assessing capital adequacy.


                                    PAGE 17
<PAGE>

The Leverage Ratio calculation simply divides common stockholders= equity
(reduced by any Goodwill a bank may have) by the total average assets of the
bank. In the Tier One Risk Based Capital Ratio, the numerator is the same as the
leverage ratio, but the denominator is the total "risk-weighted assets" of the
bank. Risk weighted assets are determined by segregating all the assets and off
balance sheet exposures into different risk categories and weighing them by a
percentage ranging from 0% (lowest risk) to 100% (highest risk). The Total Risk
Based Capital Ratio again uses "risk-weighted assets" in the denominator, but
expands the numerator to include other capital items besides equity such as a
limited amount of the loan loss reserve, long-term capital debt, preferred stock
and other instruments.

Summarized below are the bank's capital ratios at September 30, 1999:

<TABLE>
<CAPTION>
                                       Adequately Capitalized    Heritage
                                        Regulatory Standard     Oaks Bank
<S>                                    <C>                      <C>
Leverage Ratio                                 4.00%               7.29%

Tier One Risk Based Capital Ratio              4.00%               9.56%

Total Risk Based Capital Ratio                 8.00%              10.72%
</TABLE>

It is the intent of Management to continue to maintain strong capital ratios.

LIQUIDITY

The objective of liquidity management is to ensure the continuous availability
of funds to meet the demands of depositors, investors and borrowers. Asset
liquidity is primarily derived from loan payments and the maturity of other
earning assets. Liquidity from liabilities is obtained primarily from the
receipt of new deposits. The Bank's Asset Liability Committee (ALCO) is
responsible for managing the on-and off-balance sheet commitments to meet the
needs of customers while achieving the Bank's financial objectives. ALCO meets
regularly to assess the projected funding requirements by reviewing historical
funding patterns, current and forecasted economic conditions, and individual
customer funding needs. Deposits generated from Bank customers serve as the
primary source of liquidity. The Bank has credit arrangements with correspondent
banks that serve as a secondary liquidity source in the amount of


                                    PAGE 18

<PAGE>

$5,500,000 and additionally can borrow money through repurchase agreements with
two brokerage firms. The Bank borrowed from a correspondent line ($700,000) for
one day during the month of September 1999.

As of July 1999, the bank became a member of the Federal Home Loan Bank of San
Francisco. Collateral has not yet been pledged to establish a borrowing line.
The Bank renewed an agreement with The Federal Reserve Bank of San Francisco to
borrow at the FRB Window. Collateral is in the process of being pledged to allow
for approximately $3 million in borrowing capacity.

The Bank manages its liquidity by maintaining a majority of its investment
portfolio in federal funds sold and other liquid investments. At September 30,
1999, the ratio of liquid assets to deposits and other liabilities was 23.87%.
The ratio of gross loans to deposits, another key liquidity ratio, was 73.4% at
September 30, 1999.


INFLATION

The assets and liabilities of a financial institution are primarily monetary in
nature. As such, they represent obligations to pay or receive fixed and
determinable amounts of money, which are not affected by future changes in
prices. Generally, the impact of inflation on a financial institution is
reflected by fluctuations in interest rates, the ability of customers to repay
debt and upward pressure on operating expenses. In addition, inflation affects
the growth of total assets by increasing the level of loan demand, and may
potentially adversely affect the Bank's capital adequacy because loan growth in
inflationary periods may increase more rapidly than capital. The effect on
inflation during the period ended September 30, 1999 has not been significant to
the Bank's financial position or result of operations.

Year 2000 Risks and Preparedness

Many existing computer programs use only two digits to identify a year in a data
field. These programs were designed and developed without considering the impact
of the upcoming change in the century. If not corrected, many computer
applications could fail or create erroneous results by or at the Year 2000 or
possibly earlier. The Year 2000


                                    PAGE 19

<PAGE>

issue affects the Company in that the financial services business is highly
dependent on computer applications in a variety of ways, including the following
(I) the Company relies on computer systems in almost all aspects of its
business, including the processing of deposits, loans and other services and
products offered to customers, the failure of which in connection with the Year
2000 could cause systemic disruptions and failures in the products and services
offered by the Company, (ii) other banks, clearing houses and vendors whose
products and services the Company uses are at risk of systemic disruptions and
potential failures in the event that such entities have not adequately addressed
their Year 2000 issue prior to the Year 2000, (iii) the creditworthiness of
borrowers of the Company might be diminished by significant disruptions of their
business as a result of their own or others failure to address adequately the
Year 2000 issues prior to the Year 2000, and (iv) federal balancing agencies
have issued interagency guidance on the business-wide risk posed to financial
institutions by the year 2000 problem pursuant to which the federal banking
agencies may take supervisory action against financial institutions that fail to
address appropriately Year 2000 issues prior to the Year 2000, including formal
and informal enforcement actions, denial of applications to the federal banking
agencies, civil money penalties and a reduction in the management component
rating of the institutions composite rating.

In order to address the Year 2000 issues facing the Company, the Company's
Management has initiated a program to prepare the Company's computer systems and
applications for the Year 2000 (the "Year 2000 Plan). The primary focus of the
Year 2000 Plan is to convert to the target systems identified and believed to be
Year 2000 compliant. The Company expects to incur internal staff costs as well
as consulting and other expenses related to infrastructure and facilities
enhancements necessary to prepare for conversion and Year 2000 system
preparations, testing and conversion of primary system applications and hardware
is expected to cost approximately $191,000 to be expended during fiscal years
1998 and 1999.

As a part of the Year 2000 Plan, the Company is not only undertaking the
infrastructure and facilities enhancement and testing necessary to ensure that
the Company is adequately prepared for the Year 2000, but the Company is also
communicating with its vendors upon whose services the


                                    PAGE 20
<PAGE>

Company relies to ensure Year 2000 compliance. Pursuant to the Year 2000 Plan,
the Company has completed testing of its mission-critical systems and the
computer-related interactive vendor Systems as of March 31, 1999. In addition,
as part of the credit review process, the Company is communicating with its
major borrowers in an effort to ensure that such borrowers have taken
appropriate steps to address their Year 2000 issues and will not be materially
affected by any Year 2000 problems. The Company is communicating with its
deposit customers as well. The Company has contingency plans to protect the
Company in the event that the Company is unable to attain Year 2000 compliance
in certain applications according to the Year 2000 Plan.

The Company has established a working committee comprised of Senior and Middle
Management to plan for and monitor the Company's compliance with Year 2000
issues. This committee has developed a comprehensive policy setting forth
priorities and a timetable for the Bank to follow in this process.

The Company has developed a contingency plan that identifies the mission
critical processes and service providers. An alternative provider or process has
been identified for each mission critical vendor. In addition, on the assumption
that the original or alternative process fails at the point of processing in the
Year 2000, contingency plans are being designed that will provide minimum levels
of service or outputs until the failed system can be repaired or replaced. Most
of these contingency plans are manual effort systems. Test results to-date
indicates that the original system for each mission critical system should meet
the demands of processing in the Year 2000. As a reasonable worst case, the
manual systems designed should provide the minimum levels of service for the
time required to repair or replace failed systems. However, in the case of
failure, the ultimate impact on financial operations is not known, nor is it
known what impact a regional or nationwide power failure or communications
breakdown would have on the financial performance of the Company.

The Company has created a budget specific to Year 2000 readiness. The budget is
comprised of the following components: (1) consulting assistance for testing,
(2) Auditing, and (3) Operating system and network upgrades. This component is
budgeted at $191,000. At September 30,


                                    PAGE 21

<PAGE>

1999, a total of $164,768 or 86% has been spent, $93,664 in 1999 and $71,104 in
1998. Senior Management reviews the budget from time to time as the Year 2000
Plan is implemented. There is no assurance that additional amounts will not be
added to the amounts already budgeted for Year 2000 expenditures. With respect
components number (1) and (2), it should be noted that Heritage Oaks Bank has
the resources in-house to audit review the effectiveness of the Year 2000 Plan
and the technological assistance necessary in preparing for and conducting the
Company's testing plan.

In addition, the Company has dedicated significant human resources to the Year
2000 Plan. This includes the salaries and benefits of personnel devoting
significant time to the plan. As of September 30, 1999, the Company had expended
over $36,020 in "man-hours" to the project. In addition, expenditures have been
made in the areas of advertising and public relations, customer and employee
awareness programs and more.

In April of 1998, the Company initiated a credit risk assessment program, with
loan officers completing a Year 2000 questionnaire for all new and renewed
credits in amounts over $150,000.00. These questionnaires were designed to
provide the Company's management with information by which it could evaluate the
borrower's awareness of and sensitivity to Year 2000 risk. Questionnaires are
reviewed and discussed at weekly Officer Loan Committee meetings and are further
reviewed by Credit Administration and Senior Lender to ascertain Year 2000 risk
associated with the credit. As a result of this review, $105,057 has been
allocated to the Company's loan loss provision. In addition, legal ~ Year 2000
issues are included in significant commitment letters and loan documentation for
certain borrowers. Finally, on loan participation's purchased, the Company
requires assurances from the lead lender that it has obtained a Year 2000
questionnaire from the borrower and also that the lead lender is satisfactorily
progressing toward Year 2000 compliance.

Although the Company believes that its Year 2000 Plan and other steps being
taken are adequate to ensure that it will not be materially affected by the Year
2000 problem, there can be no assurance that the Year 2000 Plan and the
Company's other Year 2000 remedial and contingency plans will fully protect the
Company from the risks associated with the Year 2000. The analysis of, and
preparation for,


                                    PAGE 22

<PAGE>

the Year 2000 and related problems necessarily rely on a variety of assumptions
about future events and there can be no assurance that the Company's Management
has accurately predicted such future events or that the remedial and contingency
plans of the Company will adequately address such future events. In the event
that the business of the Company, of vendors of the Company or of customers of
the Company is disrupted as a result of the Year 2000 problem, such disruption
could have a material adverse effect on the Company.



PART 2.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Bank is not aware of any legal proceeding against it that will have a
material effect on the Company's financial statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

HERITAGE OAKS BANCORP

DATE: October 22, 1999



                                              S/ Lawrence P. Ward
                                              -------------------
                                              Lawrence P. Ward
                                              President
                                              Chief Executive Officer




                                              S/ Margaret A. Torres
                                              ---------------------
                                              Margaret A. Torres
                                              Chief Financial Officer
                                              Executive Vice President


                                    PAGE 23