----

----

----

----

| x | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|---|---------------------------------------------------------------------------------------------------|

|  ̈ | TRANSITION REPORT PURSUANT TO      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|-----------------------------------------------------------------------------------------------|

| California                                                                    |   | 77-0388249                                    |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------|
| (State      or other jurisdiction of incorporation      or organization) |   | (I.R.S.      EmployerIdentification      No.) |
|                                                                          |   |                                          |
| 545      12th Street,                                                         |   |                                          |
| Paso      Robles, California                                                  |   | 93446                                         |
| (Address      of principal offices)                                           |   | (Zip      Code)                               |

----

----

----

----

|                                                                                   |   | For the three months ending, |       |
|----------------------------------------------------------------------------------------|--------|--------------------------------------------------|------------|
|                                                                                   |   |                                             |       |   | Accretion of |   |   |   |   |
|                                                                                   |   |                                             |       |   | beneficial conversion |   |   |   |   |
|                                                                                   |   | June 30, 2010                          |       |   | discount on Series B |   |   | June 30, 2010 |   |
| (dollar amounts in thousands except per share data) |   | As reported                                 |       |   | Preferred Stock |   |   | Restated |   |
| Net      loss                                                                          |   | $                                                | (5,835     | ) |   |   |   |   | $ | (5,835 | ) |
| Less:      dividends and accretion on preferred stock                                  |   |                                             | (353       | ) |   |   | (3,456 | ) |   |   | (3,809 | ) |
| Net      loss applicable to common shareholders                                   |   | $                                                | (6,188     | ) |   |   |   |   |   | $ | (9,644 | ) |
| Weighted      average shares outstanding                                               |   |                                             | 11,250,989 |   |   |   |   |   |   |   | 11,250,989 |   |
| Basic      loss per share                                                              |   | $                                                | (0.55      | ) |   |   |   |   |   | $ | (0.86 | ) |

|                                                                                   |   | For the six months ending, |      |
|----------------------------------------------------------------------------------------|--------|------------------------------------------------|-----------|
|                                                                                   |   |                                           |      |   | Accretion of |   |   |   |   |
|                                                                                   |   |                                           |      |   | beneficial conversion |   |   |   |   |
|                                                                                   |   | June 30, 2010                        |      |   | discount on Series B |   |   | June 30, 2010 |   |
| (dollar amounts in thousands except per share data) |   | As reported                               |      |   | Preferred Stock |   |   | Restated |   |
| Net      loss                                                                          |   | $                                              | (7,174    | ) |   |   |   |   | $ | (7,174 | ) |
| Less:      dividends and accretion on preferred stock                                  |   |                                           | (704      | ) |   |   | (3,456 | ) |   |   | (4,160 | ) |
| Net      loss applicable to common shareholders                                        |   | $                                              | (7,878    | ) |   |   |   |   |   | $ | (11,334 | ) |
| Weighted      average shares outstanding                                               |   |                                           | 9,492,421 |   |   |   |   |   |   |   | 9,492,421 |   |
| Basic      loss per share                                                              |   | $                                              | (0.83     | ) |   |   |   |   |   | $ | (1.19 | ) |

|                                                                                                                         |   | June 30, 2010 |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|--------|
|                                                                                                                         |   | Additional Paid    |   |   | Retained |   |
| (dollar amounts in thousands)                                                                                 |   | in Capital         |   |   | Earnings |   |
| Balance      as of June 30, 2010, as previously reported                                                                     |   | $                       | 3,430  |   |   | $ | 5,529 |   |
| Increase      in additional paid in capital / (accretion) of beneficial conversion      discount on Series B Preferred Stock |   | $                       | 3,456  |   |   | $ | (3,456 | ) |
| Balance      as of June 30, 2010, as adjusted                                                                                |   | $                       | 6,886  |   |   | $ | 2,073 |   |

----

|                                                                                                                   |   | Page           |
|------------------------------------------------------------------------------------------------------------------------|--------|----------------|
| Part      I.  Financial Information                                                                          |   |        5  |
| Item      1.  Consolidated Financial Statements (un-audited, except for      Balance Sheet as of 12/31/2009) |   |        5  |
| Consolidated      Balance Sheets                                                                                       |   |        6  |
| Consolidated      Statements of Income                                                                                 |   |        7  |
| Consolidated      Statements of Stockholders' Equity                                                                   |   |        8  |
| Consolidated      Statements of Cash Flows                                                                             |   |        9  |
|                                                                                                                   |   |           |
| Notes      to Consolidated Financial Statements                                                                        |   |        10 |
| Note      1.  Consolidated Financial Statements                                                              |   |        10 |
| Note      2.  Investment Securities                                                                          |   |        10 |
| Note      3.  Loans and the Allowance for Loan Losses                                                        |   |        14 |
| Note      4.  Other Real Estate Owned                                                                        |   |        17 |
| Note      5.  Deferred Tax Assets                                                                            |   |        17 |
| Note      6.  Earnings / (Loss) Per Share                                                                    |   |        18 |
| Note      7.  Recent Accounting Pronouncements                                                               |   |        19 |
| Note      8.  Share-Based Compensation                                                                       |   |        21 |
| Note      9.  Fair Value Disclosures                                                                         |   |        23 |
| Note      10.  Fair Value of Financial Instruments                                                           |   |        25 |
| Note      11.  Preferred Stock                                                                               |   |        27 |
| Note      12.  Regulatory Order and Written Agreement                                                        |   |        29 |
| Note      13.  Junior Subordinated Debentures                                                                |   |        31 |
| Note      14.  Reclassifications                                                                             |   |        31 |
|                                                                                                                   |   |           |
| Forward      Looking Statements                                                                                        |   |        32 |
|                                                                                                                   |   |           |
| Item      2.  Management's Discussion and Analysis of Financial Condition      and Results of Operations     |   |        33 |
| The      Company                                                                                                       |   |        33 |
| Where      You Can Find More Information                                                                               |   |        33 |
| Executive      Summary                                                                                                 |   |        34 |
| Recent      Developments                                                                                               |   |        36 |
| Dividends      and Stock Repurchases                                                                                   |   |        37 |
| Selected      Financial Data                                                                                           |   |        38 |
| Local      Economy                                                                                                     |   |        38 |
| Critical      Accounting Policies                                                                                      |   |        39 |
| Results      of Operations                                                                                             |   |        42 |
| Net      Interest Income and Margin                                                                                    |   |        42 |
| Non-Interest      Income                                                                                               |   |        47 |
| Non-Interest      Expenses                                                                                             |   |        49 |
| Provision      for Income Taxes                                                                                        |   |        50 |
| Provision      for Loan Losses                                                                                         |   |        50 |
| Financial      Condition                                                                                               |   |        52 |
| Loans                                                                                                                  |   |        52 |
| Credit      Quality                                                                                                    |   |        57 |
| Allowance      for Loan Losses                                                                                         |   |        57 |
| Non-Performing      Assets                                                                                             |   |        60 |
| Total      Cash and Cash Equivalents                                                                                   |   |        65 |
| Investment      Securities and Other Earning Assets                                                                    |   |        65 |
| Deposits      and Borrowed Funds                                                                                       |   |        67 |
| Capital                                                                                                                |   |        69 |
| Liquidity                                                                                                              |   |        72 |
| Inflation                                                                                                              |   |        73 |
| Off-Balance      Sheet Arrangements                                                                                    |   |        73 |
|                                                                                                                   |   |           |
| Item      3.  Quantative and Qualitative Disclosure About Market      Risk                                   |   |        74 |
| Item      4.  Controls and Procedures                                                                        |   |        75 |
|                                                                                                                   |   |           |
| Part      II.  Other Information                                                                             |   |        76 |
| Item      1.  Legal Proceedings                                                                              |   |        76 |
| Item      1A.  Risk Factors                                                                                  |   |        77 |
| Item      2.  Unregistered Sales of Equity Securities and Use of      Proceeds                               |   |        77 |
| Item      3.  Defaults upon Senior Securities                                                                |   |        77 |
| Item      4.  (Removed and Reserved)                                                                         |   |        77 |
| Item      5.  Other Information                                                                              |   |        77 |
| Item      6.  Exhibits                                                                                       |   |        78 |
|                                                                                                                   |   |           |
| Signatures                                                                                                             |   |        79 |

|                               |
|------------------------------------|
| Heritage      Oaks Bancorp | - 4 - |

----

|                               |
|------------------------------------|
| Heritage      Oaks Bancorp | - 5 - |

----

| Heritage Oaks Bancorp                                                                                                                                                    |   |          |      |   |              |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-----------|--------|-------------------|--------|
| and Subsidiaries                                                                                                                                                              |   |          |      |   |              |   |
| Consolidated Balance Sheets                                                                                                                                              |   |          |      |   |              |   |
|                                                                                                                                                                               |   |          |      |   | (audited)         |   |
|                                                                                                                                                                               |   | June 30, |      |   | December 31, |   |
| (dollars in thousands except per share data)                                                                                                         |   | 2010          |      |   | 2009              |   |
|                                                                                                                                                                               |   |          |      |   |              |   |
| Assets                                                                                                                                                                             |   |          |      |   |              |   |
| Cash      and due from banks                                                                                                                                                       |   | $             | 17,849    |   |              | $      | 19,342 |   |
| Interest      bearing due from banks                                                                                                                                               |   |          | 38,682    |   |              |   | 17,046 |   |
| Federal      funds sold                                                                                                                                                            |   |          | 5,500     |   |              |   | 4,350 |   |
| Total      cash and cash equivalents                                                                                                                                               |   |          | 62,031    |   |              |   | 40,738 |   |
|                                                                                                                                                                               |   |          |      |   |              |   |   |   |
| Interest      bearing deposits with other banks                                                                                                                                    |   |          | 119       |   |              |   | 119 |   |
| Securities      available for sale                                                                                                                                                 |   |          | 192,904   |   |              |   | 121,180 |   |
| Federal      Home Loan Bank stock, at cost                                                                                                                                         |   |          | 5,611     |   |              |   | 5,828 |   |
| Loans      held for sale                                                                                                                                                           |   |          | 9,429     |   |              |   | 9,487 |   |
| Loans,      net of deferred fees of $1,698 and $1,825 and allowance for loan loss of      $22,134 and $14,372 at June 30, 2010 and December 31, 2009,      respectively.           |   |          | 673,344   |   |              |   | 712,482 |   |
| Property,      premises and equipment, net                                                                                                                                         |   |          | 6,410     |   |              |   | 6,779 |   |
| Deferred      tax assets                                                                                                                                                           |   |          | 19,174    |   |              |   | 10,553 |   |
| Bank      owned life insurance                                                                                                                                                     |   |          | 12,811    |   |              |   | 12,549 |   |
| Goodwill                                                                                                                                                                           |   |          | 11,049    |   |              |   | 11,049 |   |
| Core      deposit intangible                                                                                                                                                       |   |          | 2,385     |   |              |   | 2,642 |   |
| Other      real estate owned                                                                                                                                                       |   |          | 4,953     |   |              |   | 946 |   |
| Other      assets                                                                                                                                                                  |   |          | 10,302    |   |              |   | 10,825 |   |
|                                                                                                                                                                               |   |          |      |   |              |   |   |   |
| Total      assets                                                                                                                                                                  |   | $             | 1,010,522 |   |              | $      | 945,177 |   |
|                                                                                                                                                                               |   |          |      |   |              |   |   |   |
| Liabilities                                                                                                                                                                        |   |          |      |   |              |   |   |   |
| Deposits                                                                                                                                                                           |   |          |      |   |              |   |   |   |
| Demand,      non-interest bearing                                                                                                                                                  |   | $             | 182,846   |   |              | $      | 174,635 |   |
| Savings,      NOW, and money market deposits                                                                                                                                       |   |          | 380,257   |   |              |   | 365,602 |   |
| Time      deposits of $100 or more                                                                                                                                                 |   |          | 116,372   |   |              |   | 117,420 |   |
| Time      deposits under $100                                                                                                                                                      |   |          | 116,358   |   |              |   | 117,808 |   |
| Total      deposits                                                                                                                                                                |   |          | 795,833   |   |              |   | 775,465 |   |
|                                                                                                                                                                               |   |          |      |   |              |   |   |   |
| Short      term FHLB borrowing                                                                                                                                                     |   |          | 65,000    |   |              |   | 65,000 |   |
| Junior      subordinated debentures                                                                                                                                                |   |          | 8,248     |   |              |   | 13,403 |   |
| Other      liabilities                                                                                                                                                             |   |          | 8,091     |   |              |   | 7,558 |   |
|                                                                                                                                                                               |   |          |      |   |              |   |   |   |
| Total      liabilities                                                                                                                                                             |   |          | 877,172   |   |              |   | 861,426 |   |
|                                                                                                                                                                               |   |          |      |   |              |   |   |   |
| Commitments      and contingencies                                                                                                                                                 |   |          | -         |   |              |   | - |   |
|                                                                                                                                                                               |   |          |      |   |              |   |   |   |
| Stockholders'      Equity                                                                                                                                                          |   |          |      |   |              |   |   |   |
| Series      A senior preferred stock, $1,000 per share stated value, 21,000 shares      issued and outstanding                                                                     |   |          | 19,610    |   |              |   | 19,431 |   |
| Series      C preferred stock, $3.25 per share stated value, 1,189,538 shares issued      and outstanding                                                                          |   |          | 3,608     |   |              |   | - |   |
| Common      stock, no par value; 100,000,000 shares authorized, issued and outstanding      25,062,682 and 7,771,952 as of June 30, 2010 and December 31, 2009,      respectively. |   |          | 101,197   |   |              |   | 48,747 |   |
| Additional      paid in capital                                                                                                                                                    |   |          | 6,886     |   |              |   | 3,242 |   |
| Retained      earnings                                                                                                                                                             |   |          | 2,073     |   |              |   | 13,407 |   |
| Accumulated      other comprehensive loss, net of tax benefit of $17 and $752 as of June      30, 2010 and December 31, 2009, respectively.                                        |   |          | (24       | )      |              |   | (1,076 | ) |
|                                                                                                                                                                               |   |          |      |   |              |   |   |   |
| Total      stockholders' equity                                                                                                                                                    |   |          | 133,350   |   |              |   | 83,751 |   |
|                                                                                                                                                                               |   |          |      |   |              |   |   |   |
| Total      liabilities and stockholders' equity                                                                                                                                    |   | $             | 1,010,522 |   |              | $      | 945,177 |   |

|                               |
|------------------------------------|
| Heritage      Oaks Bancorp | - 6 - |

----

| Heritage Oaks Bancorp                                                 |   |                                |    |   |                              |   |   |   |   |   |    |   |
|---------------------------------------------------------------------------------|--------|-------------------------------------|---------|--------|-----------------------------------|--------|--------|--------|--------|--------|---------|--------|
| and Subsidiaries                                                           |   |                                |    |   |                              |   |   |   |   |   |    |   |
| Consolidated Statements of Income                                |   |                                |    |   |                              |   |   |   |   |   |    |   |
|                                                                            |   | For the three months |    |   | For the six months |   |
|                                                                            |   | ended June 30,            |    |   | ended June 30,          |   |
| (dollars in thousands except per share data)      |   | 2010                                |    |   | 2009                              |   |   | 2010   |   |   | 2009    |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |
| Interest      Income                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |
| Interest      and fees on loans                                                 |   | $                                   | 11,429  |   |                              | $      | 11,416 |   |   | $      | 22,570  |   |   | $ | 22,563 |   |
| Interest      on investment securities                                          |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Mortgage      backed securities                                                 |   |                                | 1,425   |   |                              |   | 625    |   |   |   | 2,444   |   |   |   | 1,173 |   |
| Obligations      of state and political subdivisions                            |   |                                | 287     |   |                              |   | 208    |   |   |   | 544     |   |   |   | 394 |   |
| Interest      on time deposits with other banks                                 |   |                                | 1       |   |                              |   | 1      |   |   |   | 1       |   |   |   | 2 |   |
| Interest      on due from Federal Reserve Bank                                  |   |                                | 24      |   |                              |   | -      |   |   |   | 52      |   |   |   | - |   |
| Interest      on federal funds sold                                             |   |                                | 1       |   |                              |   | 10     |   |   |   | 2       |   |   |   | 17 |   |
| Interest      on other securities                                               |   |                                | 9       |   |                              |   | 9      |   |   |   | 13      |   |   |   | 16 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Total      interest income                                                      |   |                                | 13,176  |   |                              |   | 12,269 |   |   |   | 25,626  |   |   |   | 24,165 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Interest      Expense                                                           |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Interest      on savings, NOW and money market deposits                         |   |                                | 802     |   |                              |   | 839    |   |   |   | 1,884   |   |   |   | 1,656 |   |
| Interest      on time deposits in denominations of $100 or more                 |   |                                | 519     |   |                              |   | 631    |   |   |   | 1,095   |   |   |   | 1,175 |   |
| Interest      on time deposits under $100                                       |   |                                | 577     |   |                              |   | 664    |   |   |   | 1,190   |   |   |   | 1,228 |   |
| Other      borrowings                                                           |   |                                | 138     |   |                              |   | 293    |   |   |   | 370     |   |   |   | 697 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Total      interest expense                                                     |   |                                | 2,036   |   |                              |   | 2,427  |   |   |   | 4,539   |   |   |   | 4,756 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Net      interest income before provision for possible loan losses              |   |                                | 11,140  |   |                              |   | 9,842  |   |   |   | 21,087  |   |   |   | 19,409 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Provision      for possible loan losses                                         |   |                                | 16,100  |   |                              |   | 2,700  |   |   |   | 21,300  |   |   |   | 4,810 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Net      interest (loss) / income after provision for possible loan      losses |   |                                | (4,960  | )      |                              |   | 7,142  |   |   |   | (213    | )      |   |   | 14,599 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Non      Interest Income                                                        |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Fees      and service charges                                                   |   |                                | 614     |   |                              |   | 752    |   |   |   | 1,239   |   |   |   | 1,464 |   |
| (Loss)      / gain on sale of investment securities                             |   |                                | (97     | )      |                              |   | -      |   |   |   | (97     | )      |   |   | 122 |   |
| Gain      / (loss) on sale of OREO                                              |   |                                | 62      |   |                              |   | (104   | )      |   |   | 62      |   |   |   | (131 | ) |
| Gain      on sale of furniture fixtures and equipment                           |   |                                | 58      |   |                              |   | -      |   |   |   | 58      |   |   |   | - |   |
| Gain      on sale of SBA loans                                                  |   |                                | 209     |   |                              |   | -      |   |   |   | 209     |   |   |   | - |   |
| Gain      on extinguishment of debt                                             |   |                                | 1,700   |   |                              |   | -      |   |   |   | 1,700   |   |   |   | - |   |
| Other                                                                           |   |                                | 1,067   |   |                              |   | 852    |   |   |   | 2,028   |   |   |   | 1,705 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Total      non interest income                                                  |   |                                | 3,613   |   |                              |   | 1,500  |   |   |   | 5,199   |   |   |   | 3,160 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Non      Interest Expenses                                                      |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Salaries      and employee benefits                                             |   |                                | 4,351   |   |                              |   | 3,745  |   |   |   | 8,729   |   |   |   | 7,548 |   |
| Equipment                                                                       |   |                                | 370     |   |                              |   | 376    |   |   |   | 698     |   |   |   | 701 |   |
| Occupancy                                                                       |   |                                | 941     |   |                              |   | 826    |   |   |   | 1,874   |   |   |   | 1,678 |   |
| Other                                                                           |   |                                | 3,166   |   |                              |   | 3,067  |   |   |   | 6,393   |   |   |   | 5,512 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Total      non interest expenses                                                |   |                                | 8,828   |   |                              |   | 8,014  |   |   |   | 17,694  |   |   |   | 15,439 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| (Loss)      / income before provision for income taxes                          |   |                                | (10,175 | )      |                              |   | 628    |   |   |   | (12,708 | )      |   |   | 2,320 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| (Benefit)      / provision for income taxes                                     |   |                                | (4,340  | )      |                              |   | 121    |   |   |   | (5,534  | )      |   |   | 711 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Net      (loss) / income                                                        |   |                                | (5,835  | )      |                              |   | 507    |   |   |   | (7,174  | )      |   |   | 1,609 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Dividends      and accretion on preferred stock                                 |   |                                | 3,809   |   |                              |   | 250    |   |   |   | 4,160   |   |   |   | 261 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Net      (loss) / income applicable to common shareholders                      |   | $                                   | (9,644  | )      |                              | $      | 257    |   |   | $      | (11,334 | )      |   | $ | 1,348 |   |
|                                                                            |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| (Loss)      / Earnings Per Common Share                                         |   |                                |    |   |                              |   |   |   |   |   |    |   |   |   |   |   |
| Basic                                                                           |   | $                                   | (0.86   | )      |                              | $      | 0.03   |   |   | $      | (1.19   | )      |   | $ | 0.17 |   |
| Diluted                                                                         |   | $                                   | (0.86   | )      |                              | $      | 0.03   |   |   | $      | (1.19   | )      |   | $ | 0.17 |   |

|                               |
|------------------------------------|
| Heritage      Oaks Bancorp | - 7 - |

----

| Heritage Oaks Bancorp                                                                      |   |
|------------------------------------------------------------------------------------------------------|--------|
| and Subsidiaries                                                                                |   |
| Consolidated Statements of Stockholders' Equity                                  |   |
|                                                                                                 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |
|                                                                                                 |   |   |   |   | Common Stock |   |   | Additional |   |   |   |   |   |   |   |   | Other |   |   | Total |   |
|                                                                                                 |   | Preferred |   |   | Number of |   |   |   |   |   | Paid-In |   |   | Comprehensive |   |   | Retained |   |   | Comprehensive |   |   | Stockholders' |   |
| (dollars in thousands)                                                                     |   | Stock |   |   | Shares |   |   | Amount |   |   | Capital |   |   | Income |   |   | Earnings |   |   | Income/(loss) |   |   | Equity |   |
| Balance,      December 31, 2009                                                                      |   | $ | 19,431 |   |   |   | 7,771,952 |   |   | $ | 48,747 |   |   | $ | 3,242 |   |   |   |   |   | $ | 13,407 |   |   | $ | (1,076 | ) |   | $ | 83,751 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of 56,160 shares of Series B preferred stock                                           |   |   | 52,408 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 52,408 |   |
| Discount      on Series B preferred stock                                                            |   |   | (3,456 | ) |   |   |   |   |   |   |   |   |   |   | 3,456 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| Conversion      of Series B preferred stock to common stock                                          |   |   | (52,408 | ) |   |   | 17,279,995 |   |   |   | 52,408 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| Issuance      of 1,189,538 shares of Series C preferred stock                                        |   |   | 3,608 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 3,608 |   |
| Accretion      on Series A preferred stock                                                           |   |   | 179 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (179 | ) |   |   |   |   |   |   | - |   |
| Accretion      on Series B preferred stock                                                           |   |   | 3,456 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (3,456 | ) |   |   |   |   |   |   | - |   |
| Dividends      paid on preferred stock                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (262 | ) |   |   |   |   |   |   | (262 | ) |
| Accrued      dividends on preferred stock                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (263 | ) |   |   |   |   |   |   | (263 | ) |
| Exercise      of stock options                                                                       |   |   |   |   |   |   | 11,260 |   |   |   | 42 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 42 |   |
| Share-based      compensation expense                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 188 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 188 |   |
| Retirement      of restricted share awards                                                           |   |   |   |   |   |   | (525 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive      income:                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | (7,174 | ) |   |   | (7,174 | ) |   |   |   |   |   |   | (7,174 | ) |
| Unrealized      security holding gains (net of $695 tax)                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 995 |   |   |   |   |   |   |   | 995 |   |   |   | 995 |   |
| Realized      loss on sale of securities (net of $40 tax benefit)                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 57 |   |   |   |   |   |   |   | 57 |   |   |   | 57 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      comprehensive loss                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | (6,122 | ) |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      June 30, 2010                                                                          |   | $ | 23,218 |   |   |   | 25,062,682 |   |   | $ | 101,197 |   |   | $ | 6,886 |   |   |   |   |   |   | $ | 2,073 |   |   | $ | (24 | ) |   | $ | 133,350 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      December 31, 2008                                                                      |   | $ | - |   |   |   | 7,753,078 |   |   | $ | 48,649 |   |   | $ | 1,055 |   |   |   |   |   |   | $ | 21,420 |   |   | $ | (1,092 | ) |   | $ | 70,032 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of 21,000 shares of Series A Senior preferred stock and common stock      warrant      |   |   | 19,152 |   |   |   |   |   |   |   |   |   |   |   | 1,848 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 21,000 |   |
| Accretion      on Series A preferred stock                                                           |   |   | 101 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (101 | ) |   |   |   |   |   |   | - |   |
| Dividends      paid on preferred stock                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (160 | ) |   |   |   |   |   |   | (160 | ) |
| Exercise      of stock options (including $9 excess tax benefit from exercise of stock      options) |   |   |   |   |   |   | 10,050 |   |   |   | 46 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 46 |   |
| Share-based      compensation expense                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 184 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 184 |   |
| Retirement      of restricted share awards                                                           |   |   |   |   |   |   | (1,575 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive      income:                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 1,609 |   |   |   | 1,609 |   |   |   |   |   |   |   | 1,609 |   |
| Unrealized      security holding losses (net of $1,027 tax benefit)                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1,469 | ) |   |   |   |   |   |   | (1,469 | ) |   |   | (1,469 | ) |
| Realized      gains on sale of securities (net of $50 tax)                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 72 |   |   |   |   |   |   |   | 72 |   |   |   | 72 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      comprehensive income                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 212 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      June 30, 2009                                                                          |   | $ | 19,253 |   |   |   | 7,761,553 |   |   | $ | 48,695 |   |   | $ | 3,087 |   |   |   |   |   |   | $ | 22,768 |   |   | $ | (2,489 | ) |   | $ | 91,314 |   |

|                               |
|------------------------------------|
| Heritage      Oaks Bancorp | - 8 - |

----

| Heritage Oaks Bancorp                                                                      |   |                                          |    |   |   |   |
|------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|---------|--------|--------|--------|
| and Subsidiaries                                                                                |   |                                          |    |   |   |   |
| Consolidated Statements of Cash Flows                                            |   |                                          |    |   |   |   |
|                                                                                                 |   | For the six month periods |    |
|                                                                                                 |   | ended June 30,                      |    |
| (dollars in thousands)                                                                     |   | 2010                                          |    |   | 2009   |   |
|                                                                                                 |   |                                          |    |   |   |   |
| Cash      flows from operating activities:                                                           |   |                                          |    |   |   |   |
| Net      (loss) / income                                                                             |   | $                                             | (7,174  | )      |   | $      | 1,609 |   |
| Adjustments      to reconcile net income to net cash provided / (used) by operating      activities: |   |                                          |    |   |   |   |   |   |
| Depreciation      and amortization                                                                   |   |                                          | 638     |   |   |   | 547 |   |
| Provision      for possible loan losses                                                              |   |                                          | 21,300  |   |   |   | 4,810 |   |
| Amortization      of premiums / discounts on investment securities, net                              |   |                                          | 591     |   |   |   | 29 |   |
| Amortization      of intangible assets                                                               |   |                                          | 257     |   |   |   | 525 |   |
| Share-based      compensation expense                                                                |   |                                          | 188     |   |   |   | 184 |   |
| Loss      / (gain) on sale of available for sale securities                                          |   |                                          | 97      |   |   |   | (122 | ) |
| Gain      on extinguishment of debt                                                                  |   |                                          | (1,700  | )      |   |   | - |   |
| Decrease      / (increase) in loans held for sale                                                    |   |                                          | 58      |   |   |   | (3,753 | ) |
| Net      increase in bank owned life insurance                                                       |   |                                          | (262    | )      |   |   | (212 | ) |
| (Increase)      / decrease in deferred tax asset                                                     |   |                                          | (9,356  | )      |   |   | 12 |   |
| (Gain)      / loss on sale of other real estate owned                                                |   |                                          | (62     | )      |   |   | 73 |   |
| Write-downs      on other real estate owned                                                          |   |                                          | 205     |   |   |   | 131 |   |
| Increase      in other assets                                                                        |   |                                          | (4,464  | )      |   |   | (7,799 | ) |
| Increase      in other liabilities                                                                   |   |                                          | 270     |   |   |   | 822 |   |
| Excess      tax benefit related to share-based compensation expense                                  |   |                                          | -       |   |   |   | (9 | ) |
|                                                                                                 |   |                                          |    |   |   |   |   |   |
| NET      CASH PROVIDED / (USED) IN OPERATING ACTIVITIES                                              |   |                                          | 586     |   |   |   | (3,153 | ) |
|                                                                                                 |   |                                          |    |   |   |   |   |   |
| Cash      flows from investing activities:                                                           |   |                                          |    |   |   |   |   |   |
| Purchase      of securities, available for sale                                                      |   |                                          | (83,443 | )      |   |   | (38,553 | ) |
| Sale      of available for sale securities                                                           |   |                                          | 2,197   |   |   |   | 4,762 |   |
| Maturities      and calls of available for sale securities                                           |   |                                          | 338     |   |   |   | 1,136 |   |
| Proceeds      from principal reductions and maturities of available for sale      securities         |   |                                          | 10,283  |   |   |   | 5,410 |   |
| Purchase      of Federal Home Loan Bank stock                                                        |   |                                          | -       |   |   |   | (705 | ) |
| Redemption      of Federal Home Loan Bank stock                                                      |   |                                          | 217     |   |   |   | - |   |
| Decrease      / (increase) in loans, net                                                             |   |                                          | 16,198  |   |   |   | (21,991 | ) |
| Allowance      for loan and lease loss recoveries                                                    |   |                                          | 1,640   |   |   |   | 22 |   |
| Purchase      of property, premises and equipment, net                                               |   |                                          | (269    | )      |   |   | (578 | ) |
| Proceeds      from sale of other real estate owned                                                   |   |                                          | 837     |   |   |   | 2,863 |   |
|                                                                                                 |   |                                          |    |   |   |   |   |   |
| NET      CASH USED IN INVESTING ACTIVITIES                                                           |   |                                          | (52,002 | )      |   |   | (47,634 | ) |
|                                                                                                 |   |                                          |    |   |   |   |   |   |
| Cash      flows from financing activities:                                                           |   |                                          |    |   |   |   |   |   |
| Increase      in deposits, net                                                                       |   |                                          | 20,368  |   |   |   | 100,468 |   |
| Proceeds      from Federal Home Loan Bank borrowing                                                  |   |                                          | -       |   |   |   | 75,000 |   |
| Repayments      of Federal Home Loan Bank borrowing                                                  |   |                                          | -       |   |   |   | (119,000 | ) |
| Decrease      in repurchase agreements                                                               |   |                                          | -       |   |   |   | (2,796 | ) |
| Decrease      in junior subordinated debentures                                                      |   |                                          | (3,455  | )      |   |   | - |   |
| Excess      tax benefit related to share-based compensation expense                                  |   |                                          | -       |   |   |   | 9 |   |
| Proceeds      from exercise of stock options                                                         |   |                                          | 42      |   |   |   | 37 |   |
| Cash      dividends paid                                                                             |   |                                          | (262    | )      |   |   | (160 | ) |
| Proceeds      from issuance of preferred stock and common stock warrants,      net                   |   |                                          | 56,016  |   |   |   | 21,000 |   |
|                                                                                                 |   |                                          |    |   |   |   |   |   |
| NET      CASH PROVIDED BY FINANCING ACTIVITIES                                                       |   |                                          | 72,709  |   |   |   | 74,558 |   |
|                                                                                                 |   |                                          |    |   |   |   |   |   |
| Net      increase in cash and cash equivalents                                                       |   |                                          | 21,293  |   |   |   | 23,771 |   |
|                                                                                                 |   |                                          |    |   |   |   |   |   |
| Cash      and cash equivalents, beginning of period                                                  |   |                                          | 40,738  |   |   |   | 24,571 |   |
|                                                                                                 |   |                                          |    |   |   |   |   |   |
| Cash      and cash equivalents, end of period                                                        |   | $                                             | 62,031  |   |   | $      | 48,342 |   |
|                                                                                                 |   |                                          |    |   |   |   |   |   |
| Supplemental      Cash Flow Disclosures:                                                             |   |                                          |    |   |   |   |   |   |
|                                                                                                 |   |                                          |    |   |   |   |   |   |
| Cash      Flow information                                                                           |   |                                          |    |   |   |   |   |   |
| Interest      paid                                                                                   |   | $                                             | 4,692   |   |   | $      | 4,836 |   |
| Income      taxes paid                                                                               |   | $                                             | 3,125   |   |   | $      | 220 |   |
|                                                                                                 |   |                                          |    |   |   |   |   |   |
| Non-Cash      Flow Information                                                                       |   |                                          |    |   |   |   |   |   |
| Change      in other valuation allowance for investment securities                                   |   | $                                             | 1,787   |   |   | $      | (2,374 | ) |
| Loans      transferred to OREO or foreclosed collateral                                              |   | $                                             | 4,987   |   |   | $      | 8,403 |   |
| Preferred      stock dividends declared not paid                                                     |   | $                                             | 263     |   |   | $      | - |   |
| Accretion      of preferred stock discount                                                           |   | $                                             | 3,635   |   |   | $      | - |   |
| Conversion      of preferred stock to common stock                                                   |   | $                                             | 52,408  |   |   | $      | - |   |

|                               |
|------------------------------------|
| Heritage      Oaks Bancorp | - 9 - |

----

| Notes      to Consolidated FinancialStatements |
|------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 10 - |

----

| Notes      to Consolidated FinancialStatements |
|------------------------------------------------|

| (dollars in thousands)                              |   |      |    |   | Gross      |   |   | Gross      |   |   |   |   |
|---------------------------------------------------------------|--------|-----------|---------|--------|------------|--------|--------|------------|--------|--------|--------|--------|
|                                                          |   | Amortized |    |   | Unrealized |   |   | Unrealized |   |   | Fair   |   |
| As of June 30, 2010                       |   | Cost      |    |   | Gains      |   |   | Losses     |   |   | Value  |   |
| Obligations      of U.S. government agencies and corporations |   | $         | 104     |   |       | $      | -      |       |   | $      | (4     | )      |   | $ | 100 |   |
| Mortgage      backed securities                               |   |      |    |   |       |   |   |       |   |   |   |   |   |   |   |   |
| Agency                                                        |   |      | 146,080 |   |       |   | 1,330  |       |   |   | (444   | )      |   |   | 146,966 |   |
| Non-agency                                                    |   |      | 19,095  |   |       |   | 909    |       |   |   | (2,271 | )      |   |   | 17,733 |   |
| Obligations      of state and political subdivisions          |   |      | 27,557  |   |       |   | 576    |       |   |   | (137   | )      |   |   | 27,996 |   |
| Other      securities                                         |   |      | 109     |   |       |   | -      |       |   |   | -      |   |   |   | 109 |   |
|                                                          |   |      |    |   |       |   |   |       |   |   |   |   |   |   |   |   |
| Total                                                         |   | $         | 192,945 |   |       | $      | 2,815  |       |   | $      | (2,856 | )      |   | $ | 192,904 |   |
|                                                          |   |      |    |   |       |   |   |       |   |   |   |   |   |   |   |   |
| As      of December 31, 2009                                  |   |      |    |   |       |   |   |       |   |   |   |   |   |   |   |   |
| Obligations      of U.S. government agencies                  |   | $         | 108     |   |       | $      | -      |       |   | $      | (4     | )      |   | $ | 104 |   |
| Mortgage-backed      securities                               |   |      |    |   |       |   |   |       |   |   |   |   |   |   |   |   |
| Agency                                                        |   |      | 78,203  |   |       |   | 619    |       |   |   | (872   | )      |   |   | 77,950 |   |
| Non-agency                                                    |   |      | 21,935  |   |       |   | 1,184  |       |   |   | (2,966 | )      |   |   | 20,153 |   |
| Obligations      of state and political subdivisions          |   |      | 22,653  |   |       |   | 421    |       |   |   | (210   | )      |   |   | 22,864 |   |
| Other      securities                                         |   |      | 109     |   |       |   | -      |       |   |   | -      |   |   |   | 109 |   |
|                                                          |   |      |    |   |       |   |   |       |   |   |   |   |   |   |   |   |
| Total                                                         |   | $         | 123,008 |   |       | $      | 2,224  |       |   | $      | (4,052 | )      |   | $ | 121,180 |   |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 11 - |

----

| Notes      to Consolidated FinancialStatements |
|------------------------------------------------|

|                                                                    |   |                     |   |   | OTTI Related to |   |   |   |   |
|-------------------------------------------------------------------------|--------|--------------------------|--------|--------|---------------------------|--------|--------|--------|--------|
|                                                                    |   | OTTI Related        |   |   | All Other            |   |   | Total  |   |
| (dollar amounts in thousands)                            |   | to Credit Loss |   |   | Factors                   |   |   | OTTI   |   |
| Balance,      December 31, 2009                                         |   | $                        | 372    |   |                      | $      | 1,584  |   |   | $ | 1,956 |   |
| Charges      on securities for which OTTI was not previously recognized |   |                     | -      |   |                      |   | -      |   |   |   | - |   |
| Realized      losses for securities sold                                |   |                     | (45    | )      |                      |   | (70    | )      |   |   | (115 | ) |
|                                                                    |   |                     |   |   |                      |   |   |   |   |   |   |   |
| Balance,      June 30, 2010                                             |   | $                        | 327    |   |                      | $      | 1,514  |   |   | $ | 1,841 |   |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 12 - |

----

| Notes      to Consolidated FinancialStatements |
|------------------------------------------------|

|                                                          |   | Securities In A Loss Position |   |   |                                      |   |   |   |   |
|---------------------------------------------------------------|--------|---------------------------------------------------|--------|--------|-------------------------------------------|--------|--------|--------|--------|
|                                                          |   | For Less Than 12 Months       |   |   | For 12 Months or More |   |   | Total  |   |
| (dollars in thousands)                              |   | Fair                                              |   |   | Unrealized                                |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| As of June 30, 2010                       |   | Value                                             |   |   | Loss                                      |   |   | Value  |   |   | Loss |   |   | Value |   |   | Loss |   |
| Obligations      of U.S. government agencies and corporations |   | $                                                 | -      |   |                                      | $      | -      |   |   | $ | 100 |   |   | $ | (4 | ) |   | $ | 100 |   |   | $ | (4 | ) |
| Mortgage-backed      securities                               |   |                                              |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency                                                        |   |                                              | 60,479 |   |                                      |   | (444   | )      |   |   | 76 |   |   |   | - |   |   |   | 60,555 |   |   |   | (444 | ) |
| Non-agency                                                    |   |                                              | -      |   |                                      |   | -      |   |   |   | 10,054 |   |   |   | (2,271 | ) |   |   | 10,054 |   |   |   | (2,271 | ) |
| Obligations      of state and political subdivisions          |   |                                              | 5,902  |   |                                      |   | (124   | )      |   |   | 139 |   |   |   | (13 | ) |   |   | 6,041 |   |   |   | (137 | ) |
|                                                          |   |                                              |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                         |   | $                                                 | 66,381 |   |                                      | $      | (568   | )      |   | $ | 10,369 |   |   | $ | (2,288 | ) |   | $ | 76,750 |   |   | $ | (2,856 | ) |
|                                                          |   |                                              |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As      of December 31, 2009                                  |   |                                              |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations      of U.S. government agencies                  |   | $                                                 | -      |   |                                      | $      | -      |   |   | $ | 104 |   |   | $ | (4 | ) |   | $ | 104 |   |   | $ | (4 | ) |
| Mortgage      backed securities                               |   |                                              |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency                                                        |   |                                              | 38,625 |   |                                      |   | (870   | )      |   |   | 357 |   |   |   | (2 | ) |   |   | 38,982 |   |   |   | (872 | ) |
| Non-agency                                                    |   |                                              | -      |   |                                      |   | -      |   |   |   | 11,618 |   |   |   | (2,966 | ) |   |   | 11,618 |   |   |   | (2,966 | ) |
| Obligations      of state and political subdivisions          |   |                                              | 6,012  |   |                                      |   | (210   | )      |   |   | - |   |   |   | - |   |   |   | 6,012 |   |   |   | (210 | ) |
|                                                          |   |                                              |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                         |   | $                                                 | 44,637 |   |                                      | $      | (1,080 | )      |   | $ | 12,079 |   |   | $ | (2,972 | ) |   | $ | 56,716 |   |   | $ | (4,052 | ) |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 13 - |

----

| Notes      to Consolidated FinancialStatements |
|------------------------------------------------|

|                                        |   | June 30, |    |   | December 31, |   |
|---------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
| (dollars in thousands)            |   | 2010          |    |   | 2009              |   |
| Real      Estate Secured                    |   |          |    |   |              |   |
| Multi-family      residential               |   | $             | 18,911  |   |              | $      | 20,631 |   |
| Residential      1 to 4 family              |   |          | 29,476  |   |              |   | 25,483 |   |
| Home      equity lines of credit            |   |          | 30,541  |   |              |   | 29,780 |   |
| Commercial                                  |   |          | 351,598 |   |              |   | 337,940 |   |
| Farmland                                    |   |          | 13,032  |   |              |   | 13,079 |   |
| Commercial                                  |   |          |    |   |              |   |   |   |
| Commercial      and industrial              |   |          | 144,928 |   |              |   | 157,270 |   |
| Agriculture                                 |   |          | 16,071  |   |              |   | 17,698 |   |
| Other                                       |   |          | 246     |   |              |   | 238 |   |
| Construction                                |   |          |    |   |              |   |   |   |
| Single      family residential              |   |          | 9,501   |   |              |   | 15,538 |   |
| Single      family residential - Spec.      |   |          | 2,750   |   |              |   | 3,400 |   |
| Tract                                       |   |          | -       |   |              |   | 2,215 |   |
| Multi-family                                |   |          | 1,883   |   |              |   | 2,300 |   |
| Hospitality                                 |   |          | -       |   |              |   | 14,306 |   |
| Commercial                                  |   |          | 31,398  |   |              |   | 27,128 |   |
| Land                                        |   |          | 39,356  |   |              |   | 52,793 |   |
| Installment      loans to individuals       |   |          | 7,232   |   |              |   | 8,327 |   |
| All      other loans (including overdrafts) |   |          | 253     |   |              |   | 553 |   |
|                                        |   |          |    |   |              |   |   |   |
| Total      loans, gross                     |   |          | 697,176 |   |              |   | 728,679 |   |
|                                        |   |          |    |   |              |   |   |   |
| Deferred      loan fees                     |   |          | 1,698   |   |              |   | 1,825 |   |
| Allowance      for loan losses              |   |          | 22,134  |   |              |   | 14,372 |   |
|                                        |   |          |    |   |              |   |   |   |
| Total      loans, net                       |   | $             | 673,344 |   |              | $      | 712,482 |   |
|                                        |   |          |    |   |              |   |   |   |
| Loans      held for sale                    |   | $             | 9,429   |   |              | $      | 9,487 |   |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 14 - |

----

| Notes      to Consolidated FinancialStatements |
|------------------------------------------------|

|                                         |   | For the three months ended |   |   | For the six months ended |   |
|----------------------------------------------|--------|------------------------------------------------|--------|--------|----------------------------------------------|--------|
|                                         |   | June 30,                                  |   |   | June 30,                                |   |
| (dollar amounts in thousands) |   | 2010                                           |   |   | 2009                                         |   |   | 2010 |   |   | 2009 |   |
| Beginning      balance                       |   | $                                              | 29     |   |                                         | $      | (18 | ) |   | $ | (19 | ) |   | $ | (18 | ) |
| Additions                                    |   |                                           | 31     |   |                                         |   | - |   |   |   | 79 |   |   |   | - |   |
| Disposals                                    |   |                                           | -      |   |                                         |   | - |   |   |   | - |   |   |   | - |   |
| Amortization                                 |   |                                           | (1     | )      |                                         |   | - |   |   |   | (1 | ) |   |   | - |   |
|                                         |   |                                           |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Ending      balance                          |   | $                                              | 59     |   |                                         | $      | (18 | ) |   | $ | 59 |   |   | $ | (18 | ) |

|   | · | The      portions of a financial asset must represent a proportionate ownership      interest in an entire financialasset. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | · | From      the date of transfer, all cash flows received from the entire financial      asset must be divided proportionately among the participating interest      holders in an amount equal to their share of  ownership. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      transfer of the financial asset shall involve no recourse (other than      standard representation and warranties) to, or subordination by, any      participating interest holder. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | No      party has the right to pledge or exchange the entire financial      asset. |
|--------|--------|------------------------------------------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 15 - |

----

| Notes      to Consolidated FinancialStatements |
|------------------------------------------------|

|                                                   |   | June 30, |   |   | December 31, |   |
|--------------------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
| (dollar amounts in thousands)           |   | 2010          |   |   | 2009              |   |
| Non-accruing      loans                                |   | $             | 35,066 |   |              | $      | 38,170 |   |
| Loans      90 days or more past due and still accruing |   |          | -      |   |              |   | 151 |   |
| Troubled      debt restructurings                      |   |          | 10,731 |   |              |   | 9,703 |   |
|                                                   |   |          |   |   |              |   |   |   |
| Total      impaired loans                              |   | $             | 45,797 |   |              | $      | 48,024 |   |
|                                                   |   |          |   |   |              |   |   |   |
| Impaired      loans with a valuation allowance         |   | $             | 7,482  |   |              | $      | 6,155 |   |
| Valuation      allowance related to impaired loans     |   | $             | 2,408  |   |              | $      | 852 |   |
| Impaired      loans without a valuation allowance      |   | $             | 38,315 |   |              | $      | 41,869 |   |
|                                                   |   |          |   |   |              |   |   |   |
| Average      recorded investment in impaired loans     |   | $             | 51,450 |   |              | $      | 32,781 |   |
| Cash      receipts applied to reduce principal balance |   | $             | 9,772  |   |              | $      | 7,042 |   |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 16 - |

----

| Notes      to Consolidated FinancialStatements |
|------------------------------------------------|

|                                            |   | For the three months ended |   |   | For the six months ended |   |   | For the year ended |   |
|-------------------------------------------------|--------|------------------------------------------------|--------|--------|----------------------------------------------|--------|--------|-----------------------------------|--------|
|                                            |   | June 30,                                       |   |   | June 30,                                     |   |   | December 31,                      |   |
| (dollars in thousands)                          |   | 2010                                           |   |   | 2009                                         |   |   | 2010                              |   |   | 2009 |   |   | 2009 |   |
| Balance      at beginning of period             |   | $                                              | 18,559 |   |                                         | $      | 10,429 |                              |   | $ | 14,372 |   |   | $ | 10,412 |   |   | $ | 10,412 |   |
| Provision      expense                          |   |                                           | 16,100 |   |                                         |   | 2,700  |                              |   |   | 21,300 |   |   |   | 4,810 |   |   |   | 24,066 |   |
| Loans      charged-off                          |   |                                           |   |   |                                         |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial      real estate                     |   |                                           | 2,583  |   |                                         |   | -      |                              |   |   | 2,583 |   |   |   | - |   |   |   | 339 |   |
| Farmland                                        |   |                                           | 235    |   |                                         |   | -      |                              |   |   | 235 |   |   |   | - |   |   |   | - |   |
| Residential      1-4 family                     |   |                                           | 282    |   |                                         |   | -      |                              |   |   | 282 |   |   |   | - |   |   |   | 558 |   |
| Commercial      and industrial                  |   |                                           | 7,869  |   |                                         |   | 942    |                              |   |   | 8,818 |   |   |   | 1,225 |   |   |   | 5,816 |   |
| Agriculture                                     |   |                                           | 1,209  |   |                                         |   | -      |                              |   |   | 1,209 |   |   |   | - |   |   |   | 2,224 |   |
| Construction                                    |   |                                           | 525    |   |                                         |   | 415    |                              |   |   | 988 |   |   |   | 1,821 |   |   |   | 2,218 |   |
| Land                                            |   |                                           | 956    |   |                                         |   | 681    |                              |   |   | 956 |   |   |   | 991 |   |   |   | 8,886 |   |
| Other                                           |   |                                           | 9      |   |                                         |   | 4      |                              |   |   | 107 |   |   |   | 101 |   |   |   | 163 |   |
|                                            |   |                                           |   |   |                                         |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      charge-offs                          |   |                                           | 13,668 |   |                                         |   | 2,042  |                              |   |   | 15,178 |   |   |   | 4,138 |   |   |   | 20,204 |   |
|                                            |   |                                           |   |   |                                         |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Recoveries      of loans previously charged off |   |                                           | 1,143  |   |                                         |   | 19     |                              |   |   | 1,640 |   |   |   | 22 |   |   |   | 98 |   |
|                                            |   |                                           |   |   |                                         |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at end of period                   |   | $                                              | 22,134 |   |                                         | $      | 11,106 |                              |   | $ | 22,134 |   |   | $ | 11,106 |   |   | $ | 14,372 |   |

|                             |   | For the three months ended |   |   | For the six months ended |   |   | For the year ended |   |
|----------------------------------|--------|------------------------------------------------|--------|--------|----------------------------------------------|--------|--------|-----------------------------------|--------|
|                             |   | June 30,                                       |   |   | June 30,                                     |   |   | December 31,                      |   |
| (dollar amounts in    thousands) |   | 2010                                           |   |   | 2009                                         |   |   | 2010                              |   |   | 2009 |   |   | 2009 |   |
| Beginning      balance           |   | $                                              | 741    |   |                                         | $      | 2,893  |                              |   | $ | 946 |   |   | $ | 1,337 |   |   | $ | 1,337 |   |
| Additions                        |   |                                           | 4,987  |   |                                         |   | 6,655  |                              |   |   | 4,987 |   |   |   | 8,403 |   |   |   | 9,595 |   |
| Dispositions                     |   |                                           | (775   | )      |                                         |   | (2,879 | )                                 |   |   | (775 | ) |   |   | (2,998 | ) |   |   | (8,521 | ) |
| Write-downs                      |   |                                           | -      |   |                                         |   | -      |                              |   |   | (205 | ) |   |   | (73 | ) |   |   | (1,465 | ) |
|                             |   |                                           |   |   |                                         |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending      balance              |   | $                                              | 4,953  |   |                                         | $      | 6,669  |                              |   | $ | 4,953 |   |   | $ | 6,669 |   |   | $ | 946 |   |

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 17 - |

----

| Notes      to Consolidated FinancialStatements |
|------------------------------------------------|

|                                                            |   | For the three monthsending, |   |
|-----------------------------------------------------------------|--------|-----------------------------|--------|
|                                                            |   | June 30, 2010               |   |   | June 30, 2009 |   |
|                                                            |   | Net                         |   |   |   |   |   | Net |   |   |   |   |
| (dollar amounts in thousands except per share      data)        |   | Income                      |   |   | Shares |   |   | Income |   |   | Shares |   |
| Net      (loss) / income                                        |   | $                           | (5,835 | ) |   |   |   |   | $ | 507 |   |   |   |   |
| Dividends      and accretion on preferred stock                 |   |                        | (3,809 | ) |   |   |   |   |   | (250 | ) |   |   |   |
|                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      (loss) / income applicable to common shareholders      |   | $                           | (9,644 | ) |   |   |   |   | $ | 257 |   |   |   |   |
|                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares outstanding                        |   |                        |   |   |   |   | 11,250,989 |   |   |   |   |   |   |   | 7,696,027 |   |
|                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      (loss) / earnings per common share                   |   | $                           | (0.86  | ) |   |   |   |   |   | $ | 0.03 |   |   |   |   |   |
|                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dilutive      effect of share-based compensation awards         |   |                        |   |   |   |   | - |   |   |   |   |   |   |   | 94,681 |   |
| Dilutive      effect of common stock warrant                    |   |                        |   |   |   |   | - |   |   |   |   |   |   |   | 76,254 |   |
| Dilutive      effect of mandatorily convertible preferred stock |   |                        |   |   |   |   | - |   |   |   |   |   |   |   | - |   |
|                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average diluted shares outstanding                |   |                        |   |   |   |   | 11,250,989 |   |   |   |   |   |   |   | 7,866,962 |   |
|                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted      (loss) / earnings per common share                 |   | $                           | (0.86  | ) |   |   |   |   |   | $ | 0.03 |   |   |   |   |   |

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 18 - |

----

| Notes      to Consolidated FinancialStatements |
|------------------------------------------------|

|                                                            |   | For the six months ending, |    |
|-----------------------------------------------------------------|--------|----------------------------|---------|
|                                                            |   | June 30, 2010              |    |   | June 30, 2009 |   |
|                                                            |   | Net                        |    |   |   |   |   | Net |   |   |   |   |
| (dollar amounts in thousands except per share      data)        |   | Income                     |    |   | Shares |   |   | Income |   |   | Shares |   |
| Net      (loss) / income                                        |   | $                          | (7,174  | ) |   |   |   |   | $ | 1,609 |   |   |   |   |
| Dividends      and accretion on preferred stock                 |   |                       | (4,160  | ) |   |   |   |   |   | (261 | ) |   |   |   |
|                                                            |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |
| Net      (loss) / income applicable to common shareholders      |   | $                          | (11,334 | ) |   |   |   |   | $ | 1,348 |   |   |   |   |
|                                                            |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares outstanding                        |   |                       |    |   |   |   | 9,492,421 |   |   |   |   |   |   |   | 7,692,765 |   |
|                                                            |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      (loss) / earnings per common share                   |   | $                          | (1.19   | ) |   |   |   |   |   | $ | 0.17 |   |   |   |   |   |
|                                                            |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dilutive      effect of share-based compensation awards         |   |                       |    |   |   |   | - |   |   |   |   |   |   |   | 85,606 |   |
| Dilutive      effect of common stock warrant                    |   |                       |    |   |   |   | - |   |   |   |   |   |   |   | - |   |
| Dilutive      effect of mandatorily convertible preferred stock |   |                       |    |   |   |   | - |   |   |   |   |   |   |   | - |   |
|                                                            |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average diluted shares outstanding                |   |                       |    |   |   |   | 9,492,421 |   |   |   |   |   |   |   | 7,778,371 |   |
|                                                            |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted      (loss) / earnings per common share                 |   | $                          | (1.19   | ) |   |   |   |   |   | $ | 0.17 |   |   |   |   |   |

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 19 - |

----

| Notes      to Consolidated FinancialStatements |
|------------------------------------------------|

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 20 - |

----

| Notes      to Consolidated FinancialStatements |
|------------------------------------------------|

|                                                                 |   | For the three months ended |       |   | For the six months ended |   |
|----------------------------------------------------------------------|--------|------------------------------------------------|------------|--------|----------------------------------------------|--------|
|                                                                 |   | June 30,                                       |       |   | June 30,                                     |   |
| (dollars in thousands except share and per share      data)          |   | 2010                                           |       |   | 2009                                         |   |   | 2010 |   |   | 2009 |   |
| Share-based      compensation expense:                               |   |                                           |       |   |                                         |   |   |   |   |   |   |   |
| Stock      option expense                                            |   | $                                              | 45         |   |                                         | $      | 42 |   |   | $ | 92 |   |   | $ | 86 |   |
| Restricted      stock expense                                        |   |                                           | 44         |   |                                         |   | 52 |   |   |   | 96 |   |   |   | 98 |   |
|                                                                 |   |                                           |       |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Total      share-based compensation expense                          |   |                                           | 89         |   |                                         | $      | 94 |   |   |   | 188 |   |   | $ | 184 |   |
|                                                                 |   |                                           |       |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Total      share-based compensation expense, net of tax              |   | $                                              | 56         |   |                                         | $      | 57 |   |   | $ | 119 |   |   | $ | 113 |   |
|                                                                 |   |                                           |       |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Diluted      shares outstanding                                      |   |                                           | 11,250,989 |   |                                         |   | 7,866,962 |   |   |   | 9,492,421 |   |   |   | 7,778,371 |   |
| Impact      on diluted earnings per share                            |   | $                                              | -          |   |                                         | $      | 0.007 |   |   | $ | - |   |   | $ | 0.015 |   |
|                                                                 |   |                                           |       |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Unrecognized      compensation expense:                              |   |                                           |       |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Stock      option expense                                            |   | $                                              | 158        |   |                                         | $      | 258 |   |   |   |   |   |   |   |   |   |
| Restricted      stock expense                                        |   |                                           | 133        |   |                                         |   | 368 |   |   |   |   |   |   |   |   |   |
|                                                                 |   |                                           |       |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Total      unrecognized share-based compensation expense             |   | $                                              | 291        |   |                                         | $      | 626 |   |   |   |   |   |   |   |   |   |
|                                                                 |   |                                           |       |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Total      unrecognized share-based compensation expense, net of tax |   | $                                              | 203        |   |                                         | $      | 380 |   |   |   |   |   |   |   |   |   |

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 21 - |

----

| Notes      to Consolidated FinancialStatements |
|------------------------------------------------|

|                                      |   |           |    |   |     |   |   | Average         |   |   |            |   |
|-------------------------------------------|--------|----------------|---------|--------|----------|--------|--------|-----------------|--------|--------|-----------------|--------|
|                                 |   |           |    |   | Weighted |   |   | Remaining       |   |   | Total           |   |
|                                 |   |           |    |   | Average  |   |   | Contractual     |   |   | Intrinsic       |   |
|                                 |   | Number of |    |   | Exercise |   |   | Term            |   |   | Value           |   |
|                                 |   | Shares         |    |   | Price    |   |   | (in years) |   |   | (in 000's) |   |
|                                      |   |           |    |   |     |   |   |            |   |   |            |   |
| Options      outstanding, January 1, 2010 |   |           | 440,738 |   |     | $      | 9.15   |            |   |   |            |   |   |   |
| Granted                                   |   |           | -       |   |     |   | -      |            |   |   |            |   |   |   |
| Exercised                                 |   |           | (11,260 | )      |     |   | 3.73   |            |   |   |            |   |   |   |
| Forfeited                                 |   |           | -       |   |     |   | -      |            |   |   |            |   |   |   |
|                                      |   |           |    |   |     |   |   |            |   |   |            |   |   |   |
| Options      outstanding, June 30, 2010   |   |           | 429,478 |   |     | $      | 9.29   |            |   |   | 3.95            |   |   | $ | 980 |   |
|                                      |   |           |    |   |     |   |   |            |   |   |            |   |   |   |   |   |
| Exercisable      at June 30, 2010         |   |           | 356,290 |   |     | $      | 9.54   |            |   |   | 3.02            |   |   | $ | 980 |   |
|                                      |   |           |    |   |     |   |   |            |   |   |            |   |   |   |   |   |
| Options      outstanding, January 1, 2009 |   |           | 408,830 |   |     | $      | 9.34   |            |   |   |            |   |   |   |   |   |
| Granted                                   |   |           | 30,324  |   |     |   | 4.81   |            |   |   |            |   |   |   |   |   |
| Exercised                                 |   |           | (10,050 | )      |     |   | 3.73   |            |   |   |            |   |   |   |   |   |
| Forfeited                                 |   |           | -       |   |     |   | -      |            |   |   |            |   |   |   |   |   |
|                                      |   |           |    |   |     |   |   |            |   |   |            |   |   |   |   |   |
| Options      outstanding, June 30, 2009   |   |           | 429,104 |   |     | $      | 9.15   |            |   |   | 4.34            |   |   | $ | 288 |   |
|                                      |   |           |    |   |     |   |   |            |   |   |            |   |   |   |   |   |
| Exercisable      at June 30, 2009         |   |           | 347,172 |   |     | $      | 8.92   |            |   |   | 3.28            |   |   | $ | 245 |   |

|                                        |   | 2009   |   |
|---------------------------------------------|--------|--------|--------|
| Expected      volatility                    |   |   | 42.26  | % |
| Expected      term (years)                  |   |   | 10     |   |
| Dividend      yield                         |   |   | 0.00   | % |
| Risk      free rate                         |   |   | 2.84   | % |
|                                        |   |   |   |   |
| Weighted-average      grant date fair value |   | $      | 2.74   |   |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 22 - |

----

| Notes to Consolidated Financial      Statements |
|-------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 23 - |

----

| Notes to Consolidated      Financial Statements |
|-----------------------------------------------------------|

|                                                 |   | Fair Value Measurements Using |   |   |                   |   |
|------------------------------------------------------|--------|----------------------------------------------|--------|--------|------------------------|--------|
|                                                 |   | Quoted Prices in                   |   |   | Significant Other |   |   | Significant |   |   |   |   |
|                                                 |   | Active Markets for                 |   |   | Observable             |   |   | Unobservable |   |   |   |   |
| (dollars in thousands)                     |   | Identical Assets                        |   |   | Inputs                 |   |   | Inputs |   |   | Assets At |   |
| As of June 30, 2010              |   | (Level 1)                               |   |   | (Level 2)         |   |   | (Level 3) |   |   | Fair Value |   |
| Assets                                               |   |                                         |   |   |                   |   |   |   |   |   |   |   |
| Obligations      of U.S. government agencies         |   | $                                            | -      |   |                   | $      | 100 |   |   | $ | - |   |   | $ | 100 |   |
| Mortgage      backed securities                      |   |                                         |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Agency                                               |   |                                         | -      |   |                   |   | 146,966 |   |   |   | - |   |   |   | 146,966 |   |
| Non-agency                                           |   |                                         | -      |   |                   |   | 17,733 |   |   |   | - |   |   |   | 17,733 |   |
| Obligations      of state and political subdivisions |   |                                         | -      |   |                   |   | 27,241 |   |   |   | 755 |   |   |   | 27,996 |   |
| Other securities                                     |   |                                         | -      |   |                   |   | 109 |   |   |   | - |   |   |   | 109 |   |
|                                                 |   |                                         |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets measured on a recurring      basis      |   | $                                            | -      |   |                   | $      | 192,149 |   |   | $ | 755 |   |   | $ | 192,904 |   |
|                                                 |   |                                         |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| As of December 31, 2009                              |   |                                         |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                               |   |                                         |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations      of U.S. government agencies         |   | $                                            | -      |   |                   | $      | 104 |   |   | $ | - |   |   | $ | 104 |   |
| Mortgage      backed securities                      |   |                                         |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Agency                                               |   |                                         | -      |   |                   |   | 77,950 |   |   |   | - |   |   |   | 77,950 |   |
| Non-agency                                           |   |                                         | -      |   |                   |   | 20,153 |   |   |   | - |   |   |   | 20,153 |   |
| Obligations      of state and political subdivisions |   |                                         | -      |   |                   |   | 22,127 |   |   |   | 737 |   |   |   | 22,864 |   |
| Other securities                                     |   |                                         | -      |   |                   |   | 109 |   |   |   | - |   |   |   | 109 |   |
|                                                 |   |                                         |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets measured on a recurring      basis      |   | $                                            | -      |   |                   | $      | 120,443 |   |   | $ | 737 |   |   | $ | 121,180 |   |

|                                                 |   |                        |   |   |                               |   |   | Purchases,          |   |   |                    |   |
|------------------------------------------------------|--------|-----------------------------|--------|--------|------------------------------------|--------|--------|---------------------|--------|--------|-------------------------|--------|
|                                            |   | Balance as of     |   |   | Gains / (Losses)         |   |   | Issuances, and |   |   | Balance as of |   |
| (dollars in thousands)                     |   | December 31, 2009 |   |   | Included in OCI (1) |   |   | Settlements         |   |   | June 30, 2010 |   |
| Obligations      of state and political subdivisions |   | $                           | 737    |   |                               | $      | 18     |                |   | $      | -                       |   |   | $ | 755 |   |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 24 - |

----

| Notes to Consolidated Financial      Statements |
|-------------------------------------------------|

|                                                |   | Fair Value Measurements Using |   |   |                   |   |   |           |   |
|-----------------------------------------------------|--------|----------------------------------------------|--------|--------|------------------------|--------|--------|----------------|--------|
|                                                |   | Quoted Prices in                   |   |   | Significant Other |   |   | Significant    |   |   |   |   |   |   |   |
|                                                |   | Active Markets for                 |   |   | Observable             |   |   | Unobservable   |   |   |   |   |   |   |   |
| (dollars in thousands)                    |   | Identical Assets                        |   |   | Inputs                 |   |   | Inputs         |   |   | Assets At |   |   | Total |   |
| As of June 30, 2010             |   | (Level 1)                               |   |   | (Level 2)         |   |   | (Level 3) |   |   | Fair Value |   |   | Gains (Losses) |   |
| Assets                                              |   |                                         |   |   |                   |   |   |           |   |   |   |   |   |   |   |
| Impaired      loans                                 |   | $                                            | -      |   |                   | $      | 43,389 |           |   | $ | - |   |   | $ | 43,389 |   |   | $ | (1,547 | ) |
| Loans      held for sale                            |   |                                         | -      |   |                   |   | 9,429  |           |   |   | - |   |   |   | 9,429 |   |   |   | - |   |
| Other      real estate owned                        |   |                                         | -      |   |                   |   | 4,953  |           |   |   | - |   |   |   | 4,953 |   |   |   | (36 | ) |
| Goodwill                                            |   |                                         | -      |   |                   |   | -      |           |   |   | 11,049 |   |   |   | 11,049 |   |   |   | - |   |
|                                                |   |                                         |   |   |                   |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets measured on a non-recurring      basis |   | $                                            | -      |   |                   | $      | 57,771 |           |   | $ | 11,049 |   |   | $ | 68,820 |   |   | $ | (1,583 | ) |
|                                                |   |                                         |   |   |                   |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
| As of December 31, 2009                             |   |                                         |   |   |                   |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                              |   |                                         |   |   |                   |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired      loans                                 |   | $                                            | -      |   |                   | $      | 47,172 |           |   | $ | - |   |   | $ | 47,172 |   |   | $ | (20,204 | ) |
| Loans      held for sale                            |   |                                         | -      |   |                   |   | 9,487  |           |   |   | - |   |   |   | 9,487 |   |   |   | - |   |
| Other      real estate owned                        |   |                                         | -      |   |                   |   | 946    |           |   |   | - |   |   |   | 946 |   |   |   | (1,496 | ) |
| Goodwill                                            |   |                                         | -      |   |                   |   | -      |           |   |   | 11,049 |   |   |   | 11,049 |   |   |   | - |   |
|                                                |   |                                         |   |   |                   |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets measured on a non-recurring      basis |   | $                                            | -      |   |                   | $      | 57,605 |           |   | $ | 11,049 |   |   | $ | 68,654 |   |   | $ | (21,700 | ) |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 25 - |

----

| Notes to Consolidated Financial      Statements |
|-------------------------------------------------|

|                                                                                                |   | June 30, 2010 |    |   | December 31, 2009 |   |
|-----------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|-----------------------------|--------|
|                                                                                                |   | Carrying                |    |   |                        |   |   | Carrying |   |   |   |   |
| (dollars in thousands)                                                                    |   | Amount                  |    |   | Fair Value             |   |   | Amount |   |   | Fair Value |   |
| Assets                                                                                              |   |                    |    |   |                        |   |   |   |   |   |   |   |
| Cash      and cash equivalents                                                                      |   | $                       | 62,031  |   |                        | $      | 62,031 |   |   | $ | 40,738 |   |   | $ | 40,738 |   |
| Interest      bearing deposits                                                                      |   |                    | 119     |   |                        |   | 119 |   |   |   | 119 |   |   |   | 119 |   |
| Investments      and mortgage-backed securities                                                     |   |                    | 192,904 |   |                        |   | 192,904 |   |   |   | 121,180 |   |   |   | 121,180 |   |
| Federal      Home Loan Bank stock                                                                   |   |                    | 5,611   |   |                        |   | 5,611 |   |   |   | 5,828 |   |   |   | 5,828 |   |
| Loans      receivable, net of deferred fees and costs                                               |   |                    | 695,478 |   |                        |   | 692,214 |   |   |   | 726,854 |   |   |   | 731,045 |   |
| Loans      held for sale                                                                            |   |                    | 9,429   |   |                        |   | 9,429 |   |   |   | 9,487 |   |   |   | 9,487 |   |
| Bank      owned life insurance                                                                      |   |                    | 12,811  |   |                        |   | 12,811 |   |   |   | 12,549 |   |   |   | 12,549 |   |
| Accrued      interest receivable                                                                    |   |                    | 3,701   |   |                        |   | 3,701 |   |   |   | 3,639 |   |   |   | 3,639 |   |
|                                                                                                |   |                    |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                                                                                         |   |                    |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest      bearing deposits                                                                  |   |                    | 182,846 |   |                        |   | 182,846 |   |   |   | 174,635 |   |   |   | 174,635 |   |
| Interest      bearing deposits                                                                      |   |                    | 612,987 |   |                        |   | 613,773 |   |   |   | 600,830 |   |   |   | 596,782 |   |
| Federal      Home Loan Bank advances                                                                |   |                    | 65,000  |   |                        |   | 65,056 |   |   |   | 65,000 |   |   |   | 65,180 |   |
| Junior      subordinated debentures                                                                 |   |                    | 8,248   |   |                        |   | 7,660 |   |   |   | 13,403 |   |   |   | 12,390 |   |
| Accrued      interest payable                                                                       |   |                    | 437     |   |                        |   | 437 |   |   |   | 590 |   |   |   | 590 |   |
|                                                                                                |   |                    |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                |   | Notional                |    |   | Cost to Cede      |   |   | Notional |   |   | Cost to Cede |   |
|                                                                                                |   | Amount                  |    |   | or Assume              |   |   | Amount |   |   | or Assume |   |
| Off-balance      sheet instruments, commitments to extend credit and standby letters of      credit |   | $                       | 135,411 |   |                        | $      | 1,354 |   |   | $ | 169,578 |   |   | $ | 1,696 |   |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 26 - |

----

| Notes to Consolidated Financial      Statements |
|-------------------------------------------------|

|   | ·  | The      requirement to obtain consent from the U.S. Treasury for any proposed      increases in common stock dividends prior to the third anniversary date of      the preferred equityissuance. |
|--------|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 27 - |

----

| Notes to Consolidated Financial      Statements |
|-------------------------------------------------|

|   | ·  | The      Series A Senior Preferred Stock cannot be redeemed for three years unless      the Company obtains proceeds to replace the Series A Senior Preferred      Stock through a qualified equityoffering. |
|--------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ·  | The      U.S. Treasury must consent to any buy back of our common      stock. |
|--------|--------------|-------------------------------------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 28 - |

----

| Notes to Consolidated Financial      Statements |
|------------------------------------------------------|

|  | ·  | Among      the corrective actions required are for the Bank to develop and adopt a      plan to maintain the minimum capital requirements for a “well-capitalized”      bank, and to reach and maintain a Tier 1 leverage ratio of at least 10%      and a total risked based capital ratio of 11.5% at the Bank level      beginning 90 days from the issuance of the Order.  Following the      Company’s March 2010 private placement, $48.0 million was down-streamed to      the Bank in the form of Tier I capital, bringing the Bank’s regulatory      capital ratios above the required minimums set forth in the      Order. |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Pursuant      to the Order, the Bank must retain qualified management, must notify the      FDIC and the DFI in writing when it proposes to add any individual to its      Board of Directors or to employ any new senior executive officer, and must      conduct an independent study of management and personnel structure of the      Bank. A consultant was retained to complete the required management study.      The Bank is in compliance with the Order’s timelines for completion of      such study and implementation by the Board of a plan to address the      findings of such study.  As part of the capital raise, the      Company and Bank received regulatory approval to add as a director of both      the Bank and Company one of the principals of the investor in the      transaction that owns approximately 14.4% of the outstanding voting shares      of the Company.   The addition of a director to the      Company’s Board of Directors  required an amendment to the      Company’s bylaws to increase the range of the size of the      board.  The Company’s shareholders approved such an amendment at      the June 10, 2010 Shareholder Meeting and the director was added to the      Company’s Board effective June 23, 2010. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 29 - |

----

| Notes to Consolidated      Financial Statements |
|-----------------------------------------------------------|

|  | · | Under      the Order the Bank’s Board of Directors must also increase its      participation in the affairs of the Bank, assuming full responsibility for      the approval of sound policies and objectives and for the supervision of      all the Bank’s activities. The Board of Directors believes it has always      provided appropriate oversight of the Bank, but has recently taken steps      to reevaluate such oversight and enhance where appropriate the frequency      and duration and the scope and depth of matters covered at its Board      meetings in response to the current economic environment and concerns      raised in the ROE. In direct response to the ROE, a new joint regulatory      compliance committee was formed at both the Bank and Company levels to      oversee the Bank’s and Company’s response to all regulatory matters,      including the Order and the Written Agreement, discussed      below.  Detailed tracking of the Order’s requirements, and the      Bank’s progress in responding thereto, is reviewed and reported at all      such committee meetings, with regular reports then being provided by the      committee to the full Board.  Further, and prior to the issuance      of the Order, the Board directed its Chairman, Michael Morris, to      significantly increase his direct oversight of Management and involvement      in Bank and Company affairs to ensure an appropriate response at both the      Bank and Company to the concerns raised in the recent examination of the      Bank. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | The      Order further requires the Bank to increase its Allowance for Loan Losses      (“ALLL”), as of the date of the ROE, by $3.5 million and to review and      revise its ALLL methodology.  The Bank subsequently made      provisions of approximately $19.3 million in the third and fourth quarters      of 2009 and increased the ALLL by a net $4.2 million in the first quarter      of 2010.  The Bank has revised its policy for determining the      adequacy of the ALLL to include an assessment of market conditions and      other qualitative factors. The Bank’s policy otherwise continues to      provide for a comprehensive determination of the adequacy of its ALLL      which is to be reviewed promptly and regularly at least once each calendar      quarter and be properly reported, and any deficiency in the allowance must      be remedied in the calendar quarter it is discovered, by a charge to      current operatingearnings. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·  | With      respect to classified assets as of the date of the ROE, the Order also      requires the Bank to charge-off or collect all assets classified as “Loss”      and one-half of the assets classified as “Doubtful,” and within 180 days      of the Order to reduce its level of assets classified as “Substandard” to      no more than the greater of $50.0 million or 50% of Tier 1 capital plus      the ALLL.  As of December 31, 2009, the Bank met the requirement      to charge-off or collect all assets classified as “Loss” and one-half of      the assets classified as “Doubtful” as of the date of the      ROE.  At June 30, 2010, the Bank has met the requirement to      reduce assets classified as “Substandard” as of the date of the ROE to no      more than the greater of $50.0 million or 50% of Tier 1 capital plus the      ALLL. |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | The      Order requires that the Bank develop or revise, adopt and implement a      plan, which must be approved by the FDIC and DFI, to reduce the amount of      Commercial Real Estate loans extended, particularly focusing on reducing      loans for construction and land development. At June 30, 2010, the Bank      has reduced its concentrations for Commercial Real Estate and construction      and land development to within guidelines acceptable by the Order. In      addition, the Bank is to develop a plan for reducing the number of “watch      list” credits to an acceptable level, and develop or revise its written      lending and collection policies to provide more effective guidance and      control over the Bank’s lending function.  At June 30, 2010, the      Bank has in place a plan to comply with this provision of the      Order. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | The      Order restricts the Bank from taking certain actions without the prior      written consent of the FDIC and the DFI, including paying cash dividends,      and from extending additional credit to certain types of borrowers. The      Bank has not paid cash dividends since the first quarter of 2008. In      addition, the Bank has put processes and controls in place to ensure      extensions of credit, directly or indirectly, are not granted to those who      are related to borrowers of loans charged-off or classified as “Loss”,      “Substandard” or “Doubtful” in the ROE. The Bank has also acknowledged      that neither the loan committee nor the Board of Directors will approve      any extension to a borrower classified “Substandard” or “Doubtful” in the      ROE without first collecting all past due interest in  cash. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | The      Order further requires the Bank to develop or revise, adopt and implement      a revised liquidity policy, and to adopt a contingency funding plan to      adequately address contingency funding sources and appropriately reduce      contingency funding reliance on off-balance sheet sources.  The      Bank has revised its current liquidity policy and contingency funding      plan. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | The      Order also requires that the Bank prepare and submit a revised business      plan, that is to include a comprehensive budget, and a 3 year strategic      plan, and to further revise its investment policy.  The Bank has      since prepared a comprehensive budget and revised the investment policy      and is in the process of developing a revised business plan and 3 year      strategic plan. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 30 - |

----

| Notes to Consolidated Financial      Statements |
|-------------------------------------------------|

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 31 - |

----

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 32 - |

----

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 33 - |

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|  | ·  | For      the three and six months ended June 30, 2010 interest income totaled      approximately $13.2 million and $25.6 million.  This when      compared to the same three and six month periods ended a year earlier,      represents increases of approximately $0.9 million and $1.5 million,      respectively.  Although the average balance of the loan      portfolio increased by approximately $18.0 million and $27.2 million as of      June 30, 2010 when compared to that reported for the same three and six      month periods ended a year earlier, interest reversals associated with      non-performing loans as well as the re-pricing and pay-down of certain      higher yielding credits worked to offset any increase in the level of      interest and fees earned on loans resulting from year over year growth in      the loan portfolio.  Interest and fees on loans totaled      approximately $11.4 million and $22.6 million for the three and six months      ended June 30, 2010, essentially unchanged from that reported a year      earlier.  Mitigating the impact that interest reversals had in      interest income was an approximate $0.9 million and $1.5 million increase      in interest earned on investments.  Increases within this      category can be attributed in large part to the investment of excess      liquidity stemming from significant year over year deposit growth as well      as funds received in the Company’s March 2010 private      placement. |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 34 - |

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|  | ·  | For      the three and six months ended June 30, 2010, interest expense totaled      approximately $2.0 million and $4.5 million, respectively.  This      when compared to the same three and six month periods ended a year      earlier, interest expense declined approximately $0.4 million and $0.2      million, respectively.  Management’s continued focus of bringing      down funding costs contributed significantly to the year over year      declines within this category.  The cost of interest bearing      deposits declined 40 and 27 basis points for the three and six month      periods ended June 30, 2010 when compared to that reported for the same      three and six month periods ended a year  earlier. |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·  | Net      interest income for the three and six months ended June 30, 2010 totaled      approximately $11.1 million and $21.1 million.  Net interest      income increased approximately $1.3 million and $1.7 million from that      reported during the same three and six month periods ended a year      earlier.  Year over year changes in net interest income can be      attributed in large part to the items mentioned in the preceding      paragraphs. |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·  | Non-interest      income totaled approximately $3.6 million and $5.2 million for the three      and six month periods ended June 30, 2010, representing an increase of      approximately $2.1 million and $2.0 million, respectively when compared to      the same periods ended a year earlier.  As previously mentioned,      the Company recognized a $1.7 million pre-tax gain on the extinguishment      of $5.0 million in junior subordinated debentures during the second      quarter of 2010, which was a primary driver behind the increase within      this category.  Excluding the impact of the gain from the      extinguishment of debt, non-interest income increased approximately $0.4      million and $0.3 million for the three and six month periods ended June      30, 2010.  Increases in debit card interchange income as well as      higher mortgage origination fees in conjunction with gains the Bank      recognized on the sale of OREO properties, certain fixed assets and SBA      loans helped to offset declines in service charge income.  For      more information related to non-interest income, please see “Non-Interest      Income” of this Discussion andAnalysis. |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·  | Non-interest      expense totaled approximately $8.8 million and $17.7 million for the three      and six months ended June 30, 2010, respectively.  This when      compared to that reported for the same three and six month periods ended a      year earlier represents an increase of approximately $0.8 million and $2.3      million, respectively.  As previously mentioned, the year over      year rise in non-interest expenses can be attributed to higher salaries      and employee benefits associated with the expansion of the Bank’s      management team and special assets department.  Increases within      this category can also be attributed to higher occupancy costs stemming      from annual increases in rental costs as well as a reduction in sublease      rental income associated with the relocation of one branch      office.  Higher regulatory assessment costs associated with      higher FDIC deposit insurance premiums contributed further to the year      over year rise in non-interest expenses.  Partially offsetting      these increases was an approximate $0.1 million and $0.3 million decline      in scheduled CDI amortization for the three and six month periods ended      June 30, 2010, respectively.  For more information related to      non-interest expenses, please see “Non-Interest Expenses” of this      Discussion and Analysis. |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·  | For      the three and six months ended June 30, 2010 the Company’s efficiency      ratio was 68.86% and 72.65%, respectively.  This compares to the      70.02% and 68.38% reported for the same periods ended a year earlier.      Management remains focused on cost controls in an effort to mitigate the      rise in non-interest expenses primarily resulting from asset quality      issues and the need to effectively manage them in the current      environment. |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·  | At      June 30, 2010, gross loan balances were approximately $697.2 million,      approximately $31.5 million or 4.3% lower than that reported at December      31, 2009.  Contributing to the year to date decline in loan      balances was the receipt of approximately $9.7 million in principal      payments on non-accruing loans, $5.0 million in transfers to OREO and      $15.2 million in charge-offs. The year to date decline in gross loans can      also be attributed to several large pay-downs during the first six months      of 2010 in conjunction with scheduled amortization of balances in the      absence of significant new loan originations. The lower volume of loan      originations relative to historical periods can be attributed in part to      lower demand for certain types of credit as well as the Bank becoming more      selective with respect to the types of loans it chooses to      originate.  See also “Loans” under “Financial Condition” of this      Discussion and Analysis for additional information regarding the Bank’s      loan portfolio. |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·  | At      June 30, 2010, total deposits were approximately $795.8 million,      approximately $20.4 million or 2.6% higher than that reported at December      31, 2009.  Deposits, exclusive of brokered deposits were      approximately $794.7 million or $30.5 million higher than that reported at      December 31, 2009.  Increases in core deposit balances allowed      the Bank to rely less on brokered deposits for funding.  At June      30, 2010 brokered deposit balances totaled approximately $1.1 million and      represented 0.1% of total deposits.  This compares to $11.2      million or 1.5% at December 31, 2009.  See also “Deposits and      Borrowed Funds” under “Financial Condition” of this Discussion and      Analysis for information regarding the Bank’s deposit      liabilities. |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 35 - |

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|  | ·  | At      June 30, 2010, borrowings from the FHLB were $65.0 million, unchanged from      that reported at December 31, 2009.  The average rate paid on      borrowings with the FHLB for the three and six months ended June 30, 2010      was 0.62% and 0.60%, respectively.  This compares to the 0.83%      and 0.88% reported for the same three and six month periods ended a year      earlier. |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·  | Investment      securities totaled approximately $192.9 million, approximately $71.7      million greater than that reported at December 31, 2009.  The      year to date increase in the portfolio can be attributed to purchases the      Bank made to maximize the yield on earning assets in the absence of      significant new loan originations.    For additional      information on the Bank’s investment securities portfolio, please see      “Investment Securities and Other Earning Assets” of this Discussion and      Analysis. |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·  | Federal      Funds sold and interest bearing due from balances totaled approximately      $44.2 million at June 30, 2010, representing an increase of approximately      $22.8 million over that reported at December 31,      2009.  Increased balances within this category are attributable      in large part to approximately $20.4 million in deposit growth experienced      during the first six months of 2010 as well as proceeds the Company      received related to its March 2010 private placement.  See also      “Investment Securities and Other Earning Assets” of this Discussion and      Analysis for additional information regarding Federal Funds sold and      interest bearing due frombalances. |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·  | At      June 30, 2010, the balance of non-performing loans was approximately $35.1      million or $13.9 million and $3.3 million lower than that reported at      March 31, 2010 and December 31, 2009, respectively.  As of June      30, 2010 the balance of non-performing loans as a percentage of total      gross loans was 5.03% compared to the 6.78% and 5.26% reported as of March      31, 2010 and December 31, 2009, respectively.  Contributing to      the year to date variance in non-performing loans was the approximate      $30.4 million in loans placed on non-accruing status,      the  receipt of approximately $9.7 million in principal payments      on non-accruing balances, transfers to OREO totaling $5.0 million and      charged-offs of approximately $15.2 million.  Contributing      further to the year to date variance in non-accruing loans was the return      of approximately $3.7 million in balances to accruing status following the      Bank’s efforts to bring resolution to problem credits.  Please      see “Non-Performing Assets” of this Discussion and Analysis for a more      complete discussion of the loans the Bank has placed on non-accrual      status. |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·  | At      June 30, 2010, the allowance for loan losses totaled approximately $22.1      million, representing 3.17% of total gross loans.  This compares      to the $14.4 million or 1.97% of total gross loans reported at December      31, 2009.  Provisions for loan losses during the three and six      months ended June 30, 2010 totaled approximately $16.1 million and $21.3      million, respectively.  This represents an increase of      approximately $13.4 million and $16.5 million from that reported for the      same periods ended a year earlier.  See also “Provision for Loan      Losses” of this Discussion and Analysis for a more complete discussion      regarding loan lossprovisions. |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·  | Charge-offs      during the three and six month periods ended June 30, 2010 totaled      approximately $13.7 million and $15.2 million,      respectively.  Net charge-offs during the three and six month      periods ended June 30, 2010 totaled approximately $12.5 million and $13.5      million, respectively.  Net charge-offs to average gross loans      were 1.73% and 1.86% for the three and six month periods ended June 30,      2010, respectively.  This compares to 0.29% and 0.59% reported      for the same three and six month periods ended a year earlier. Please see      “Allowance for Loan Losses” of this Discussion and Analysis for additional      information related to thecharge-offs. |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·  | OREO      balances totaled approximately $5.0 million at June 30, 2010, an increase      of approximately $4.0 million from that reported at December 31,      2009.  As previously mentioned, the Bank transferred      approximately $5.0 million to OREO in the first six months of      2010.  OREO dispositions totaled approximately $0.8 million and      write-downs of OREO totaled $0.2 million in first six months of      2010. |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 36 - |

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 37 - |

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                                                       |   | For the quarters ended, |       |
|----------------------------------------------------------------------------|--------|----------------------------------------|------------|
| (dollars in thousands except per share data) |   | 06/30/10                               |       |   | 03/31/10 |   |   | 12/31/09 |   |   | 09/30/09 |   |   | 06/30/09 |   |   | 03/31/09 |   |   | 12/31/08 |   |   | 09/30/08 |   |
|                                                                       |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return      on average assets                                              |   |                                   | -2.32      | % |   |   | -0.56 | % |   |   | -1.43 | % |   |   | -2.30 | % |   |   | 0.23 | % |   |   | 0.54 | % |   |   | -0.63 | % |   |   | 0.27 | % |
|                                                                       |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return      on average equity                                              |   |                                   | -17.35     | % |   |   | -5.70 | % |   |   | -15.27 | % |   |   | -22.54 | % |   |   | 2.20 | % |   |   | 6.04 | % |   |   | -6.93 | % |   |   | 2.94 | % |
|                                                                       |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return      on average common equity                                       |   |                                   | -55.46     | % |   |   | -10.93 | % |   |   | -22.05 | % |   |   | -31.14 | % |   |   | 1.44 | % |   |   | 6.21 | % |   |   | -6.93 | % |   |   | 2.94 | % |
|                                                                       |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average      equity to average assets                                      |   |                                   | 13.36      | % |   |   | 9.88 | % |   |   | 9.35 | % |   |   | 10.18 | % |   |   | 10.68 | % |   |   | 8.95 | % |   |   | 9.06 | % |   |   | 9.16 | % |
|                                                                       |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average      common equity to average assets                               |   |                                   | 6.91       | % |   |   | 6.57 | % |   |   | 7.14 | % |   |   | 7.87 | % |   |   | 8.26 | % |   |   | 8.61 | % |   |   | 9.06 | % |   |   | 9.16 | % |
|                                                                       |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest margin                                                   |   |                                   | 4.69       | % |   |   | 4.43 | % |   |   | 4.81 | % |   |   | 4.34 | % |   |   | 4.91 | % |   |   | 5.03 | % |   |   | 5.04 | % |   |   | 5.18 | % |
|                                                                       |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Efficiency      ratio*                                                     |   |                                   | 68.86      | % |   |   | 76.88 | % |   |   | 70.84 | % |   |   | 95.12 | % |   |   | 70.02 | % |   |   | 66.71 | % |   |   | 66.43 | % |   |   | 64.40 | % |
|                                                                       |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average      loans to average deposits                                     |   |                                   | 91.82      | % |   |   | 93.67 | % |   |   | 93.45 | % |   |   | 98.20 | % |   |   | 103.58 | % |   |   | 112.39 | % |   |   | 109.95 | % |   |   | 111.54 | % |
|                                                                       |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      (loss) / income                                                   |   | $                                      | (5,835     | ) |   | $ | (1,339 | ) |   | $ | (3,416 | ) |   | $ | (5,242 | ) |   | $ | 507 |   |   | $ | 1,102 |   |   | $ | (1,254 | ) |   | $ | 534 |   |
|                                                                       |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      (loss) / income available to common shareholders                  |   | $                                      | (9,644     | ) |   | $ | (1,690 | ) |   | $ | (3,767 | ) |   | $ | (5,594 | ) |   | $ | 257 |   |   | $ | 1,091 |   |   | $ | (1,254 | ) |   | $ | 534 |   |
|                                                                       |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss)      / Earnings Per Common Share:                                   |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                      |   | $                                      | (0.86      | ) |   | $ | (0.22 | ) |   | $ | (0.48 | ) |   | $ | (0.73 | ) |   | $ | 0.03 |   |   | $ | 0.14 |   |   | $ | (0.16 | ) |   | $ | 0.07 |   |
| Diluted                                                                    |   | $                                      | (0.86      | ) |   | $ | (0.22 | ) |   | $ | (0.48 | ) |   | $ | (0.73 | ) |   | $ | 0.03 |   |   | $ | 0.14 |   |   | $ | (0.16 | ) |   | $ | 0.07 |   |
| Outstanding      Shares:                                                   |   |                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                      |   |                                   | 11,250,989 |   |   |   | 7,717,194 |   |   |   | 7,704,060 |   |   |   | 7,699,377 |   |   |   | 7,696,027 |   |   |   | 7,689,317 |   |   |   | 7,660,342 |   |   |   | 7,709,600 |   |
| Diluted                                                                    |   |                                   | 11,250,989 |   |   |   | 7,717,194 |   |   |   | 7,704,060 |   |   |   | 7,699,377 |   |   |   | 7,866,962 |   |   |   | 7,824,377 |   |   |   | 7,660,342 |   |   |   | 7,798,321 |   |

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 38 - |

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 39 - |

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 40 - |

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 41 - |

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 42 - |

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

|                                            |   | For the three months ending |      |   | For the three months ending |   |
|-------------------------------------------------|--------|-------------------------------------------------|-----------|--------|-------------------------------------------------|--------|
|                                            |   | June 30, 2010                         |      |   | June 30, 2009                         |   |
|                                            |   |                                            |      |   | Yield/                                          |   |   | Income/ |   |   |   |   |   | Yield/ |   |   | Income/ |   |
| (dollars in thousands)                |   | Balance                                         |      |   | Rate (4)                                   |   |   | Expense |   |   | Balance |   |   | Rate (4) |   |   | Expense |   |
| Interest      Earning Assets:                   |   |                                            |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investments      with other banks               |   | $                                               | 119       |   |                                            |   | 3.37 | % |   | $ | 1 |   |   | $ | 119 |   |   |   | 3.37 | % |   | $ | 1 |   |
| Interest      bearing due from banks            |   |                                            | 42,234    |   |                                            |   | 0.23 | % |   |   | 24 |   |   |   | - |   |   |   | 0.00 | % |   |   | - |   |
| Federal      funds sold                         |   |                                            | 4,203     |   |                                            |   | 0.10 | % |   |   | 1 |   |   |   | 20,816 |   |   |   | 0.19 | % |   |   | 10 |   |
| Investment      securities taxable              |   |                                            | 157,181   |   |                                            |   | 3.66 | % |   |   | 1,434 |   |   |   | 57,746 |   |   |   | 4.40 | % |   |   | 634 |   |
| Investment      securities non taxable          |   |                                            | 26,181    |   |                                            |   | 4.40 | % |   |   | 287 |   |   |   | 19,412 |   |   |   | 4.30 | % |   |   | 208 |   |
| Loans      (1) (2)                              |   |                                            | 723,800   |   |                                            |   | 6.33 | % |   |   | 11,429 |   |   |   | 705,779 |   |   |   | 6.49 | % |   |   | 11,416 |   |
| Total      interest earning assets              |   |                                            | 953,718   |   |                                            |   | 5.54 | % |   |   | 13,176 |   |   |   | 803,872 |   |   |   | 6.12 | % |   |   | 12,269 |   |
|                                            |   |                                            |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance      for possible loan losses         |   |                                            | (21,869   | )      |                                            |   |   |   |   |   |   |   |   |   | (10,121 | ) |   |   |   |   |   |   |   |   |
| Other      assets                               |   |                                            | 77,766    |   |                                            |   |   |   |   |   |   |   |   |   | 71,936 |   |   |   |   |   |   |   |   |   |
| Total      assets                               |   | $                                               | 1,009,615 |   |                                            |   |   |   |   |   |   |   |   | $ | 865,687 |   |   |   |   |   |   |   |   |   |
|                                            |   |                                            |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Bearing Liabilities:              |   |                                            |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      bearing demand                    |   | $                                               | 72,013    |   |                                            |   | 0.31 | % |   | $ | 56 |   |   | $ | 61,084 |   |   |   | 0.69 | % |   | $ | 105 |   |
| Savings                                         |   |                                            | 27,231    |   |                                            |   | 0.38 | % |   |   | 26 |   |   |   | 23,819 |   |   |   | 0.19 | % |   |   | 11 |   |
| Money      market                               |   |                                            | 275,395   |   |                                            |   | 1.05 | % |   |   | 718 |   |   |   | 177,585 |   |   |   | 1.48 | % |   |   | 656 |   |
| Time      deposits                              |   |                                            | 232,490   |   |                                            |   | 1.89 | % |   |   | 1,095 |   |   |   | 185,078 |   |   |   | 2.52 | % |   |   | 1,161 |   |
| Brokered      money market funds                |   |                                            | 1,000     |   |                                            |   | 0.80 | % |   |   | 2 |   |   |   | 32,893 |   |   |   | 0.82 | % |   |   | 67 |   |
| Brokered      time deposits                     |   |                                            | 543       |   |                                            |   | 0.74 | % |   |   | 1 |   |   |   | 36,907 |   |   |   | 1.46 | % |   |   | 134 |   |
| Total      interest bearing deposits            |   |                                            | 608,672   |   |                                            |   | 1.25 | % |   |   | 1,898 |   |   |   | 517,366 |   |   |   | 1.65 | % |   |   | 2,134 |   |
| Federal      funds purchased                    |   |                                            | -         |   |                                            |   | 0.00 | % |   |   | - |   |   |   | 109 |   |   |   | 1.10 | % |   |   | - |   |
| Other      secured borrowing                    |   |                                            | 829       |   |                                            |   | 5.32 | % |   |   | 11 |   |   |   | - |   |   |   | 0.00 | % |   |   | - |   |
| Federal      Home Loan Bank borrowing           |   |                                            | 65,000    |   |                                            |   | 0.62 | % |   |   | 101 |   |   |   | 68,956 |   |   |   | 0.83 | % |   |   | 143 |   |
| Junior      subordinated debentures             |   |                                            | 12,100    |   |                                            |   | 0.86 | % |   |   | 26 |   |   |   | 13,403 |   |   |   | 4.49 | % |   |   | 150 |   |
| Total      borrowed funds                       |   |                                            | 77,929    |   |                                            |   | 0.71 | % |   |   | 138 |   |   |   | 82,468 |   |   |   | 1.43 | % |   |   | 293 |   |
| Total      interest bearing liabilities         |   |                                            | 686,601   |   |                                            |   | 1.19 | % |   |   | 2,036 |   |   |   | 599,834 |   |   |   | 1.62 | % |   |   | 2,427 |   |
| Non      interest bearing demand                |   |                                            | 179,648   |   |                                            |   |   |   |   |   |   |   |   |   | 163,994 |   |   |   |   |   |   |   |   |   |
| Total      funding                              |   |                                            | 866,249   |   |                                            |   | 0.94 | % |   |   | 2,036 |   |   |   | 763,828 |   |   |   | 1.27 | % |   |   | 2,427 |   |
| Other      liabilities                          |   |                                            | 8,506     |   |                                            |   |   |   |   |   |   |   |   |   | 9,372 |   |   |   |   |   |   |   |   |   |
| Total      liabilities                          |   | $                                               | 874,755   |   |                                            |   |   |   |   |   |   |   |   | $ | 773,200 |   |   |   |   |   |   |   |   |   |
|                                            |   |                                            |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders'      Equity:                      |   |                                            |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      stock                            |   | $                                               | 63,672    |   |                                            |   |   |   |   |   |   |   |   | $ | 19,197 |   |   |   |   |   |   |   |   |   |
| Common      stock                               |   |                                            | 58,004    |   |                                            |   |   |   |   |   |   |   |   |   | 48,674 |   |   |   |   |   |   |   |   |   |
| Additional      paid in capital                 |   |                                            | 4,132     |   |                                            |   |   |   |   |   |   |   |   |   | 3,032 |   |   |   |   |   |   |   |   |   |
| Retained      earnings                          |   |                                            | 9,219     |   |                                            |   |   |   |   |   |   |   |   |   | 23,543 |   |   |   |   |   |   |   |   |   |
| Valuation      allowance investments            |   |                                            | (167      | )      |                                            |   |   |   |   |   |   |   |   |   | (1,959 | ) |   |   |   |   |   |   |   |   |
| Total      stockholders' equity                 |   |                                            | 134,860   |   |                                            |   |   |   |   |   |   |   |   |   | 92,487 |   |   |   |   |   |   |   |   |   |
| Total      liabilities and stockholders' equity |   | $                                               | 1,009,615 |   |                                            |   |   |   |   |   |   |   |   | $ | 865,687 |   |   |   |   |   |   |   |   |   |
|                                            |   |                                            |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest income                        |   |                                            |      |   |                                            |   |   |   |   | $ | 11,140 |   |   |   |   |   |   |   |   |   |   | $ | 9,842 |   |
| Net      interest margin (3)                    |   |                                            |      |   |                                            |   | 4.69 | % |   |   |   |   |   |   |   |   |   |   | 4.91 | % |   |   |   |   |

| (1) | Nonaccrual      loans have been included in totalloans. |
|-----|---------------------------------------------------------|

| (2) | Loan      fees of $158 and $225 for the three months ending June 30, 2010 and 2009,      respectively have been included in interest income      computation. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Net      interest margin has been calculated by dividing the net interest income by      total average earning assets. |
|-----|------------------------------------------------------------------------------------------------------------------------|

| (4) | Yield      / Rate is annualized using actual number of days in  period. |
|-----|-------------------------------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 43 - |

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

|                                               |   | For the six months ending |    |   | For the six months ending |   |
|----------------------------------------------------|--------|-----------------------------------------------|---------|--------|-----------------------------------------------|--------|
|                                               |   | June 30, 2010                       |    |   | June 30, 2009                       |   |
|                                               |   |                                          |    |   | Yield/                                        |   |   | Income/ |   |   |   |   |   | Yield/ |   |   | Income/ |   |
| (dollars in thousands)                   |   | Balance                                       |    |   | Rate (4)                                 |   |   | Expense |   |   | Balance |   |   | Rate (4) |   |   | Expense |   |
| Interest      Earning Assets:                      |   |                                          |    |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investments      with other banks                  |   | $                                             | 119     |   |                                          |   | 1.69 | % |   | $ | 1 |   |   | $ | 119 |   |   |   | 3.39 | % |   | $ | 2 |   |
| Interest      bearing due from banks               |   |                                          | 45,541  |   |                                          |   | 0.23 | % |   |   | 52 |   |   |   | - |   |   |   | 0.00 | % |   |   | - |   |
| Federal      funds sold                            |   |                                          | 3,344   |   |                                          |   | 0.12 | % |   |   | 2 |   |   |   | 16,852 |   |   |   | 0.20 | % |   |   | 17 |   |
| Investment      securities taxable                 |   |                                          | 130,496 |   |                                          |   | 3.80 | % |   |   | 2,457 |   |   |   | 51,507 |   |   |   | 4.66 | % |   |   | 1,189 |   |
| Investment      securities non taxable             |   |                                          | 24,579  |   |                                          |   | 4.46 | % |   |   | 544 |   |   |   | 18,293 |   |   |   | 4.34 | % |   |   | 394 |   |
| Loans      (1) (2)                                 |   |                                          | 728,001 |   |                                          |   | 6.25 | % |   |   | 22,570 |   |   |   | 700,804 |   |   |   | 6.49 | % |   |   | 22,563 |   |
| Total      interest earning assets                 |   |                                          | 932,080 |   |                                          |   | 5.54 | % |   |   | 25,626 |   |   |   | 787,575 |   |   |   | 6.19 | % |   |   | 24,165 |   |
|                                               |   |                                          |    |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance      for possible loan losses            |   |                                          | (19,624 | )      |                                          |   |   |   |   |   |   |   |   |   | (10,370 | ) |   |   |   |   |   |   |   |   |
| Other      assets                                  |   |                                          | 75,039  |   |                                          |   |   |   |   |   |   |   |   |   | 69,431 |   |   |   |   |   |   |   |   |   |
| Total      assets                                  |   | $                                             | 987,495 |   |                                          |   |   |   |   |   |   |   |   | $ | 846,636 |   |   |   |   |   |   |   |   |   |
|                                               |   |                                          |    |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Bearing Liabilities:                 |   |                                          |    |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      bearing demand                       |   | $                                             | 76,089  |   |                                          |   | 0.72 | % |   | $ | 270 |   |   | $ | 62,845 |   |   |   | 0.61 | % |   | $ | 189 |   |
| Savings                                            |   |                                          | 27,637  |   |                                          |   | 0.31 | % |   |   | 43 |   |   |   | 22,949 |   |   |   | 0.18 | % |   |   | 20 |   |
| Money      market                                  |   |                                          | 272,158 |   |                                          |   | 1.16 | % |   |   | 1,567 |   |   |   | 175,378 |   |   |   | 1.51 | % |   |   | 1,316 |   |
| Time      deposits                                 |   |                                          | 229,947 |   |                                          |   | 1.97 | % |   |   | 2,242 |   |   |   | 164,228 |   |   |   | 2.60 | % |   |   | 2,116 |   |
| Brokered      money market funds                   |   |                                          | 1,000   |   |                                          |   | 0.81 | % |   |   | 4 |   |   |   | 36,854 |   |   |   | 0.72 | % |   |   | 131 |   |
| Brokered      time deposits                        |   |                                          | 3,791   |   |                                          |   | 2.29 | % |   |   | 43 |   |   |   | 33,169 |   |   |   | 1.74 | % |   |   | 287 |   |
| Total      interest bearing deposits               |   |                                          | 610,622 |   |                                          |   | 1.38 | % |   |   | 4,169 |   |   |   | 495,423 |   |   |   | 1.65 | % |   |   | 4,059 |   |
| Federal      funds purchased                       |   |                                          | -       |   |                                          |   | 0.00 | % |   |   | - |   |   |   | 378 |   |   |   | 1.07 | % |   |   | 2 |   |
| Securities      sold under agreement to repurchase |   |                                          | -       |   |                                          |   | 0.00 | % |   |   | - |   |   |   | 1,312 |   |   |   | 0.31 | % |   |   | 2 |   |
| Other      secured borrowing                       |   |                                          | 897     |   |                                          |   | 4.95 | % |   |   | 22 |   |   |   | - |   |   |   | 0.00 | % |   |   | - |   |
| Federal      Home Loan Bank borrowing              |   |                                          | 65,000  |   |                                          |   | 0.60 | % |   |   | 193 |   |   |   | 89,105 |   |   |   | 0.88 | % |   |   | 388 |   |
| Junior      subordinated debentures                |   |                                          | 12,748  |   |                                          |   | 2.45 | % |   |   | 155 |   |   |   | 13,403 |   |   |   | 4.59 | % |   |   | 305 |   |
| Total      borrowed funds                          |   |                                          | 78,645  |   |                                          |   | 0.95 | % |   |   | 370 |   |   |   | 104,198 |   |   |   | 1.35 | % |   |   | 697 |   |
| Total      interest bearing liabilities            |   |                                          | 689,267 |   |                                          |   | 1.33 | % |   |   | 4,539 |   |   |   | 599,621 |   |   |   | 1.60 | % |   |   | 4,756 |   |
| Non      interest bearing demand                   |   |                                          | 174,428 |   |                                          |   |   |   |   |   |   |   |   |   | 154,971 |   |   |   |   |   |   |   |   |   |
| Total      funding                                 |   |                                          | 863,695 |   |                                          |   | 1.06 | % |   |   | 4,539 |   |   |   | 754,592 |   |   |   | 1.27 | % |   |   | 4,756 |   |
| Other      liabilities                             |   |                                          | 8,586   |   |                                          |   |   |   |   |   |   |   |   |   | 8,733 |   |   |   |   |   |   |   |   |   |
| Total      liabilities                             |   | $                                             | 872,281 |   |                                          |   |   |   |   |   |   |   |   | $ | 763,325 |   |   |   |   |   |   |   |   |   |
|                                               |   |                                          |    |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders'      Equity:                         |   |                                          |    |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      stock                               |   | $                                             | 47,494  |   |                                          |   |   |   |   |   |   |   |   | $ | 10,921 |   |   |   |   |   |   |   |   |   |
| Common      stock                                  |   |                                          | 53,405  |   |                                          |   |   |   |   |   |   |   |   |   | 48,661 |   |   |   |   |   |   |   |   |   |
| Additional      paid in capital                    |   |                                          | 3,709   |   |                                          |   |   |   |   |   |   |   |   |   | 2,190 |   |   |   |   |   |   |   |   |   |
| Retained      earnings                             |   |                                          | 10,918  |   |                                          |   |   |   |   |   |   |   |   |   | 23,162 |   |   |   |   |   |   |   |   |   |
| Valuation      allowance investments               |   |                                          | (312    | )      |                                          |   |   |   |   |   |   |   |   |   | (1,623 | ) |   |   |   |   |   |   |   |   |
| Total      stockholders' equity                    |   |                                          | 115,214 |   |                                          |   |   |   |   |   |   |   |   |   | 83,311 |   |   |   |   |   |   |   |   |   |
| Total      liabilities and stockholders' equity    |   | $                                             | 987,495 |   |                                          |   |   |   |   |   |   |   |   | $ | 846,636 |   |   |   |   |   |   |   |   |   |
|                                               |   |                                          |    |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest income                           |   |                                          |    |   |                                          |   |   |   |   | $ | 21,087 |   |   |   |   |   |   |   |   |   |   | $ | 19,409 |   |
| Net      interest margin (3)                       |   |                                          |    |   |                                          |   | 4.56 | % |   |   |   |   |   |   |   |   |   |   | 4.97 | % |   |   |   |   |

| (1) | Nonaccrual      loans have been included in totalloans. |
|-----|---------------------------------------------------------|

| (2) | Loan      fees of $358 and $483 for the six months ending June 30, 2010 and 2009,      respectively have been included in interest income      computation. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Net      interest margin has been calculated by dividing the net interest income by      total average earning assets. |
|-----|------------------------------------------------------------------------------------------------------------------------|

| (4) | Yield      / Rate is annualized using actual number of days in  period. |
|-----|-------------------------------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 44 - |

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

|                                   |   | Average Balance                            |    |   |     |   |    |          |   |   | Average Yield                              |   |   |   |   |
|----------------------------------------|--------|-------------------------------------------------|---------|--------|----------|--------|---------|---------------|--------|--------|-------------------------------------------------|--------|--------|--------|--------|
|                                   |   | for the three months ending |    |   |     |   |    |          |   |   | for the three months ending |   |   |   |   |
|                                   |   | June 30,                                   |    |   | Variance |   |    | June 30, |   |   |                                            |   |
| (dollars      in thousands)            |   | 2010                                            |    |   | 2009     |   |    | dollar        |   |   | percentage                                      |   |   | 2010   |   |   | 2009 |   |   | Variance |   |
| Investments      with other banks      |   | $                                               | 119     |   |     | $      | 119     |          |   | $      | -                                               |   |   |   | 0.00   | % |   |   | 3.37 | % |   |   | 3.37 | % |   |   | 0.00 | % |
| Interest      bearing due from banks   |   |                                            | 42,234  |   |     |   | -       |          |   |   | 42,234                                          |   |   |   | 100.00 | % |   |   | 0.23 | % |   |   | 0.00 | % |   |   | 0.23 | % |
| Federal      funds sold                |   |                                            | 4,203   |   |     |   | 20,816  |          |   |   | (16,613                                         | )      |   |   | -79.81 | % |   |   | 0.10 | % |   |   | 0.19 | % |   |   | -0.09 | % |
| Investment      securities taxable     |   |                                            | 157,181 |   |     |   | 57,746  |          |   |   | 99,435                                          |   |   |   | 172.19 | % |   |   | 3.66 | % |   |   | 4.40 | % |   |   | -0.74 | % |
| Investment      securities non taxable |   |                                            | 26,181  |   |     |   | 19,412  |          |   |   | 6,769                                           |   |   |   | 34.87  | % |   |   | 4.40 | % |   |   | 4.30 | % |   |   | 0.10 | % |
| Loans      (1) (2)                     |   |                                            | 723,800 |   |     |   | 705,779 |          |   |   | 18,021                                          |   |   |   | 2.55   | % |   |   | 6.33 | % |   |   | 6.49 | % |   |   | -0.16 | % |
|                                   |   |                                            |    |   |     |   |    |          |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      interest earning assets     |   | $                                               | 953,718 |   |     | $      | 803,872 |          |   | $      | 149,846                                         |   |   |   | 18.64  | % |   |   | 5.54 | % |   |   | 6.12 | % |   |   | -0.58 | % |

| (1) | Nonaccrual      loans have been included in totalloans. |
|-----|---------------------------------------------------------|

| (2) | Loan      fees of $158 and $225 for the three months ending June 30, 2010 and 2009,      respectively have been included in the interest income      computation. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                   |   | Average Balance                          |    |   |     |   |    |          |   |   | Average Yield                            |   |   |   |   |
|----------------------------------------|--------|-----------------------------------------------|---------|--------|----------|--------|---------|---------------|--------|--------|-----------------------------------------------|--------|--------|--------|--------|
|                                   |   | for the six months ending |    |   |     |   |    |          |   |   | for the six months ending |   |   |   |   |
|                                   |   | June 30,                                 |    |   | Variance |   |    | June 30, |   |   |                                          |   |
| (dollars      in thousands)            |   | 2010                                          |    |   | 2009     |   |    | dollar        |   |   | percentage                                    |   |   | 2010   |   |   | 2009 |   |   | Variance |   |
| Investments      with other banks      |   | $                                             | 119     |   |     | $      | 119     |          |   | $      | -                                             |   |   |   | 0.00   | % |   |   | 1.69 | % |   |   | 3.39 | % |   |   | -1.70 | % |
| Interest      bearing due from banks   |   |                                          | 45,541  |   |     |   | -       |          |   |   | 45,541                                        |   |   |   | 100.00 | % |   |   | 0.23 | % |   |   | 0.00 | % |   |   | 0.23 | % |
| Federal      funds sold                |   |                                          | 3,344   |   |     |   | 16,852  |          |   |   | (13,508                                       | )      |   |   | -80.16 | % |   |   | 0.12 | % |   |   | 0.20 | % |   |   | -0.08 | % |
| Investment      securities taxable     |   |                                          | 130,496 |   |     |   | 51,507  |          |   |   | 78,989                                        |   |   |   | 153.36 | % |   |   | 3.80 | % |   |   | 4.66 | % |   |   | -0.86 | % |
| Investment      securities non taxable |   |                                          | 24,579  |   |     |   | 18,293  |          |   |   | 6,286                                         |   |   |   | 34.36  | % |   |   | 4.46 | % |   |   | 4.34 | % |   |   | 0.12 | % |
| Loans      (1) (2)                     |   |                                          | 728,001 |   |     |   | 700,804 |          |   |   | 27,197                                        |   |   |   | 3.88   | % |   |   | 6.25 | % |   |   | 6.49 | % |   |   | -0.24 | % |
|                                   |   |                                          |    |   |     |   |    |          |   |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      interest earning assets     |   | $                                             | 932,080 |   |     | $      | 787,575 |          |   | $      | 144,505                                       |   |   |   | 18.35  | % |   |   | 5.54 | % |   |   | 6.19 | % |   |   | -0.65 | % |

| (1) | Nonaccrual      loans have been included in totalloans. |
|-----|---------------------------------------------------------|

| (2) | Loan      fees of $358 and $483 for the six months ending June 30, 2010 and 2009,      respectively have been included in the interest income      computation. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 45 - |

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

|                                    |   | Average Balance                            |    |   |     |   |    |          |   |   | Average Rate                               |   |   |   |    |
|-----------------------------------------|--------|-------------------------------------------------|---------|--------|----------|--------|---------|---------------|--------|--------|-------------------------------------------------|--------|--------|--------|---------|
|                                    |   | for the three months ending |    |   |     |   |    |          |   |   | for the three months ending |   |   |   |    |
|                                    |   | June 30,                                   |    |   | Variance |   |    | June 30, |   |   |                                            |   |
| (dollars in thousands)        |   | 2010                                            |    |   | 2009     |   |    | dollar        |   |   | percentage                                      |   |   | 2010   |    |   | 2009 |   |   | Variance |   |
| Interest      bearing demand            |   | $                                               | 72,013  |   |     | $      | 61,084  |          |   | $      | 10,929                                          |   |   |   | 17.89   | % |   |   | 0.31 | % |   |   | 0.69 | % |   |   | -0.38 | % |
| Savings                                 |   |                                            | 27,231  |   |     |   | 23,819  |          |   |   | 3,412                                           |   |   |   | 14.32   | % |   |   | 0.38 | % |   |   | 0.19 | % |   |   | 0.19 | % |
| Money      market                       |   |                                            | 275,395 |   |     |   | 177,585 |          |   |   | 97,810                                          |   |   |   | 55.08   | % |   |   | 1.05 | % |   |   | 1.48 | % |   |   | -0.43 | % |
| Time      deposits                      |   |                                            | 232,490 |   |     |   | 185,078 |          |   |   | 47,412                                          |   |   |   | 25.62   | % |   |   | 1.89 | % |   |   | 2.52 | % |   |   | -0.63 | % |
| Brokered      money market funds        |   |                                            | 1,000   |   |     |   | 32,893  |          |   |   | (31,893                                         | )      |   |   | -96.96  | % |   |   | 0.80 | % |   |   | 0.82 | % |   |   | -0.02 | % |
| Brokered      time deposits             |   |                                            | 543     |   |     |   | 36,907  |          |   |   | (36,364                                         | )      |   |   | -98.53  | % |   |   | 0.74 | % |   |   | 1.46 | % |   |   | -0.72 | % |
| Federal      funds purchased            |   |                                            | -       |   |     |   | 109     |          |   |   | (109                                            | )      |   |   | -100.00 | % |   |   | 0.00 | % |   |   | 1.10 | % |   |   | -1.10 | % |
| Other      secured borrowing            |   |                                            | 829     |   |     |   | -       |          |   |   | 829                                             |   |   |   | 100.00  | % |   |   | 5.32 | % |   |   | 0.00 | % |   |   | 5.32 | % |
| Federal      Home Loan Bank borrowing   |   |                                            | 65,000  |   |     |   | 68,956  |          |   |   | (3,956                                          | )      |   |   | -5.74   | % |   |   | 0.62 | % |   |   | 0.83 | % |   |   | -0.21 | % |
| Junior      subordinated debentures     |   |                                            | 12,100  |   |     |   | 13,403  |          |   |   | (1,303                                          | )      |   |   | -9.72   | % |   |   | 0.86 | % |   |   | 4.49 | % |   |   | -3.63 | % |
|                                    |   |                                            |    |   |     |   |    |          |   |   |                                            |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      interest bearing liabilities |   | $                                               | 686,601 |   |     | $      | 599,834 |          |   | $      | 86,767                                          |   |   |   | 14.47   | % |   |   | 1.19 | % |   |   | 1.62 | % |   |   | -0.43 | % |

|                                             |   | Average Balance                          |    |   |     |   |    |          |   |   | Average Rate                             |   |   |   |    |
|--------------------------------------------------|--------|-----------------------------------------------|---------|--------|----------|--------|---------|---------------|--------|--------|-----------------------------------------------|--------|--------|--------|---------|
|                                             |   | for the six months ending |    |   |     |   |    |          |   |   | for the six months ending |   |   |   |    |
|                                             |   | June 30,                                 |    |   | Variance |   |    | June 30, |   |   |                                          |   |
| (dollars in thousands)                 |   | 2010                                          |    |   | 2009     |   |    | dollar        |   |   | percentage                                    |   |   | 2010   |    |   | 2009 |   |   | Variance |   |
| Interest      bearing demand                     |   | $                                             | 76,089  |   |     | $      | 62,845  |          |   | $      | 13,244                                        |   |   |   | 21.07   | % |   |   | 0.72 | % |   |   | 0.61 | % |   |   | 0.11 | % |
| Savings                                          |   |                                          | 27,637  |   |     |   | 22,949  |          |   |   | 4,688                                         |   |   |   | 20.43   | % |   |   | 0.31 | % |   |   | 0.18 | % |   |   | 0.13 | % |
| Money      market                                |   |                                          | 272,158 |   |     |   | 175,378 |          |   |   | 96,780                                        |   |   |   | 55.18   | % |   |   | 1.16 | % |   |   | 1.51 | % |   |   | -0.35 | % |
| Time      deposits                               |   |                                          | 229,947 |   |     |   | 164,228 |          |   |   | 65,719                                        |   |   |   | 40.02   | % |   |   | 1.97 | % |   |   | 2.60 | % |   |   | -0.63 | % |
| Brokered      money market funds                 |   |                                          | 1,000   |   |     |   | 36,854  |          |   |   | (35,854                                       | )      |   |   | -97.29  | % |   |   | 0.81 | % |   |   | 0.72 | % |   |   | 0.09 | % |
| Brokered      time deposits                      |   |                                          | 3,791   |   |     |   | 33,169  |          |   |   | (29,378                                       | )      |   |   | -88.57  | % |   |   | 2.29 | % |   |   | 1.74 | % |   |   | 0.55 | % |
| Federal      funds purchased                     |   |                                          | -       |   |     |   | 378     |          |   |   | (378                                          | )      |   |   | -100.00 | % |   |   | 0.00 | % |   |   | 1.07 | % |   |   | -1.07 | % |
| Securities      sold under repurchase agreements |   |                                          | -       |   |     |   | 1,312   |          |   |   | (1,312                                        | )      |   |   | -100.00 | % |   |   | 0.00 | % |   |   | 0.31 | % |   |   | -0.31 | % |
| Other      secured borrowing                     |   |                                          | 897     |   |     |   | -       |          |   |   | -                                             |   |   |   | 100.00  | % |   |   | 4.95 | % |   |   | 0.00 | % |   |   | 4.95 | % |
| Federal      Home Loan Bank borrowing            |   |                                          | 65,000  |   |     |   | 89,105  |          |   |   | (24,105                                       | )      |   |   | -27.05  | % |   |   | 0.60 | % |   |   | 0.88 | % |   |   | -0.28 | % |
| Junior      subordinated debentures              |   |                                          | 12,748  |   |     |   | 13,403  |          |   |   | (655                                          | )      |   |   | -4.89   | % |   |   | 2.45 | % |   |   | 4.59 | % |   |   | -2.14 | % |
|                                             |   |                                          |    |   |     |   |    |          |   |   |                                          |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      interest bearing liabilities          |   | $                                             | 689,267 |   |     | $      | 599,621 |          |   | $      | 89,646                                        |   |   |   | 14.95   | % |   |   | 1.33 | % |   |   | 1.60 | % |   |   | -0.27 | % |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 46 - |

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

|                                               |   | For the three months ended |   |   | For the six months ended |   |
|----------------------------------------------------|--------|------------------------------------------------|--------|--------|----------------------------------------------|--------|
|                                               |   | June 30, 2010 over 2009    |   |   | June 30, 2010 over 2009  |   |
| (dollars in thousands)                   |   | Volume                                         |   |   | Rate                                         |   |   | Total |   |   | Volume |   |   | Rate |   |   | Total |   |
| Interest Income:                              |   |                                           |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investments      with other banks                  |   | $                                              | -      |   |                                         | $      | - |   |   | $ | - |   |   | $ | - |   |   | $ | (1 | ) |   | $ | (1 | ) |
| Interest      bearing due from Federal Reserve     |   |                                           | 24     |   |                                         |   | - |   |   |   | 24 |   |   |   | 52 |   |   |   | - |   |   |   | 52 |   |
| Federal      funds sold                            |   |                                           | (6     | )      |                                         |   | (3 | ) |   |   | (9 | ) |   |   | (10 | ) |   |   | (5 | ) |   |   | (15 | ) |
| Investment      securities taxable                 |   |                                           | 924    |   |                                         |   | (124 | ) |   |   | 800 |   |   |   | 1,523 |   |   |   | (255 | ) |   |   | 1,268 |   |
| Investment      securities non-taxable (2)         |   |                                           | 112    |   |                                         |   | - |   |   |   | 112 |   |   |   | 210 |   |   |   | - |   |   |   | 210 |   |
| Taxable      equivalent adjustment (2)             |   |                                           | (38    | )      |                                         |   | 5 |   |   |   | (33 | ) |   |   | (71 | ) |   |   | 11 |   |   |   | (60 | ) |
| Loans      (1)                                     |   |                                           | 288    |   |                                         |   | (275 | ) |   |   | 13 |   |   |   | 859 |   |   |   | (852 | ) |   |   | 7 |   |
|                                               |   |                                           |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      increase / (decrease)                     |   |                                           | 1,304  |   |                                         |   | (397 | ) |   |   | 907 |   |   |   | 2,563 |   |   |   | (1,102 | ) |   |   | 1,461 |   |
|                                               |   |                                           |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense                              |   |                                           |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings,      NOW, money market                    |   |                                           | 274    |   |                                         |   | (246 | ) |   |   | 28 |   |   |   | 598 |   |   |   | (243 | ) |   |   | 355 |   |
| Time      deposits                                 |   |                                           | 259    |   |                                         |   | (325 | ) |   |   | (66 | ) |   |   | 719 |   |   |   | (593 | ) |   |   | 126 |   |
| Brokered      funds                                |   |                                           | (149   | )      |                                         |   | (49 | ) |   |   | (198 | ) |   |   | (537 | ) |   |   | 166 |   |   |   | (371 | ) |
| Federal      funds purchased                       |   |                                           | -      |   |                                         |   | - |   |   |   | - |   |   |   | (1 | ) |   |   | (1 | ) |   |   | (2 | ) |
| Other      secured borrowings                      |   |                                           | 11     |   |                                         |   | - |   |   |   | 11 |   |   |   | 22 |   |   |   | - |   |   |   | 22 |   |
| Securities      sold under agreement to repurchase |   |                                           | -      |   |                                         |   | - |   |   |   | - |   |   |   | (1 | ) |   |   | (1 | ) |   |   | (2 | ) |
| Federal      Home Loan Bank borrowing              |   |                                           | (8     | )      |                                         |   | (34 | ) |   |   | (42 | ) |   |   | (90 | ) |   |   | (105 | ) |   |   | (195 | ) |
| Long      term debt                                |   |                                           | (14    | )      |                                         |   | (110 | ) |   |   | (124 | ) |   |   | (14 | ) |   |   | (136 | ) |   |   | (150 | ) |
|                                               |   |                                           |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      increase / (decrease)                     |   |                                           | 373    |   |                                         |   | (764 | ) |   |   | (391 | ) |   |   | 696 |   |   |   | (913 | ) |   |   | (217 | ) |
|                                               |   |                                           |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      net increase / (decrease)               |   | $                                              | 931    |   |                                         | $      | 367 |   |   | $ | 1,298 |   |   | $ | 1,867 |   |   | $ | (189 | ) |   | $ | 1,678 |   |

| (1) | Includes      loan fees of $158 and $225 for the three months ending June 30, 2010 and      2009 and $358 and $483 for the six months ending June 30, 2010 and 2009,      respectively. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Adjusted      to a fully taxable equivalent basis using a tax rate of    34%. |
|-----|-------------------------------------------------------------------------------|

|                                                        |   | For the three months ended |   |   |     |   |   |   |   |
|-------------------------------------------------------------|--------|------------------------------------------------|--------|--------|----------|--------|--------|--------|--------|
|                                                        |   | June 30,                                  |   |   | Variance |   |
| (dollars in thousands)                            |   | 2010                                           |   |   | 2009     |   |   | dollar |   |   | percentage |   |
| Service      charges on deposit accounts                    |   | $                                              | 614    |   |     | $      | 752    |   |   | $ | (138 | ) |   |   | -18.4 | % |
| ATM/Debit      and credit card transaction/interchange fees |   |                                           | 323    |   |     |   | 254    |   |   |   | 69 |   |   |   | 27.2 | % |
| Bancard                                                     |   |                                           | 48     |   |     |   | 55     |   |   |   | (7 | ) |   |   | -12.7 | % |
| Mortgage      origination fees                              |   |                                           | 461    |   |     |   | 336    |   |   |   | 125 |   |   |   | 37.2 | % |
| Earnings      on bank owned life insurance                  |   |                                           | 143    |   |     |   | 124    |   |   |   | 19 |   |   |   | 15.3 | % |
| Other      commissions and fees                             |   |                                           | 92     |   |     |   | 83     |   |   |   | 9 |   |   |   | 10.8 | % |
| Gain      on extinguishment of debt                         |   |                                           | 1,700  |   |     |   | -      |   |   |   | 1,700 |   |   |   | 100.0 | % |
| Loss      on sale of investment securities                  |   |                                           | (97    | )      |     |   | -      |   |   |   | (97 | ) |   |   | -100.0 | % |
| Gain      / (loss) on sale of OREO                          |   |                                           | 62     |   |     |   | (104   | )      |   |   | 166 |   |   |   | 159.6 | % |
| Gain      on sale of furniture fixtures and equipment       |   |                                           | 58     |   |     |   | -      |   |   |   | 58 |   |   |   | 100.0 | % |
| Gain on sale of SBA loans                                   |   |                                           | 209    |   |     |   | -      |   |   |   | 209 |   |   |   | 100.0 | % |
|                                                        |   |                                           |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Total non-interest income                                   |   | $                                              | 3,613  |   |     | $      | 1,500  |   |   | $ | 2,113 |   |   |   | 140.9 | % |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 47 - |

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

|                                                        |   | For the six months ended |   |   |     |   |   |   |   |
|-------------------------------------------------------------|--------|----------------------------------------------|--------|--------|----------|--------|--------|--------|--------|
|                                                        |   | June 30,                                |   |   | Variance |   |
| (dollars in thousands)                            |   | 2010                                         |   |   | 2009     |   |   | dollar |   |   | percentage |   |
| Service      charges on deposit accounts                    |   | $                                            | 1,239  |   |     | $      | 1,464  |   |   | $ | (225 | ) |   |   | -15.4 | % |
| ATM/Debit      and credit card transaction/interchange fees |   |                                         | 582    |   |     |   | 470    |   |   |   | 112 |   |   |   | 23.8 | % |
| Bancard                                                     |   |                                         | 84     |   |     |   | 92     |   |   |   | (8 | ) |   |   | -8.7 | % |
| Mortgage      origination fees                              |   |                                         | 801    |   |     |   | 665    |   |   |   | 136 |   |   |   | 20.5 | % |
| Earnings      on bank owned life insurance                  |   |                                         | 294    |   |     |   | 246    |   |   |   | 48 |   |   |   | 19.5 | % |
| Other      commissions and fees                             |   |                                         | 267    |   |     |   | 232    |   |   |   | 35 |   |   |   | 15.1 | % |
| Gain      on extinguishment of debt                         |   |                                         | 1,700  |   |     |   | -      |   |   |   | 1,700 |   |   |   | 100.0 | % |
| (Loss)      / gain on sale of investment securities         |   |                                         | (97    | )      |     |   | 122    |   |   |   | (219 | ) |   |   | -179.5 | % |
| Gain      / (loss) on sale of OREO                          |   |                                         | 62     |   |     |   | (131   | )      |   |   | 193 |   |   |   | 147.3 | % |
| Gain      on sale of furniture fixtures and equipment       |   |                                         | 58     |   |     |   | -      |   |   |   | 58 |   |   |   | 100.0 | % |
| Gain      on sale of SBA loans                              |   |                                         | 209    |   |     |   | -      |   |   |   | 209 |   |   |   | 100.0 | % |
|                                                        |   |                                         |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Total      non-interest income                              |   | $                                            | 5,199  |   |     | $      | 3,160  |   |   | $ | 2,039 |   |   |   | 64.5 | % |

|                             |   | For the three months ended June 30, |   |
|----------------------------------|--------|-------------------------------------------------------------------|--------|
| (dollars in thousands) |   | 2010                                                              |   |   | 2009 |   |   | Variance |   |
| Dollar      volume               |   | $                                                                 | 38,829 |   |   | $ | 46,622 |   |   |   | -16.7 | % |
| Number      of loans             |   |                                                              | 110    |   |   |   | 149 |   |   |   | -26.2 | % |
|                             |   |                                                              |   |
|                             |   | For the six months ended June 30,   |   |
| (dollars in thousands)           |   | 2010                                                              |   |   | 2009 |   |   | Variance |   |
| Dollar      volume               |   | $                                                                 | 68,515 |   |   | $ | 88,687 |   |   |   | -22.7 | % |
| Number      of loans             |   |                                                              | 199    |   |   |   | 278 |   |   |   | -28.4 | % |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 48 - |

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                         |   | For the three months ended |   |   |     |   |   |   |   |
|----------------------------------------------|--------|------------------------------------------------|--------|--------|----------|--------|--------|--------|--------|
|                                         |   | June 30,                                  |   |   | Variance |   |
| (dollars in thousands)             |   | 2010                                           |   |   | 2009     |   |   | dollar |   |   | percentage |   |
| Salaries      and employee benefits          |   | $                                              | 4,351  |   |     | $      | 3,745  |   |   | $ | 606 |   |   |   | 16.2 | % |
| Occupancy                                    |   |                                           | 941    |   |     |   | 826    |   |   |   | 115 |   |   |   | 13.9 | % |
| Equipment                                    |   |                                           | 370    |   |     |   | 376    |   |   |   | (6 | ) |   |   | -1.6 | % |
| Promotional                                  |   |                                           | 173    |   |     |   | 225    |   |   |   | (52 | ) |   |   | -23.1 | % |
| Data      processing                         |   |                                           | 680    |   |     |   | 691    |   |   |   | (11 | ) |   |   | -1.6 | % |
| Stationery      and supplies                 |   |                                           | 107    |   |     |   | 99     |   |   |   | 8 |   |   |   | 8.1 | % |
| Regulatory      fees                         |   |                                           | 690    |   |     |   | 537    |   |   |   | 153 |   |   |   | 28.5 | % |
| Audit      and tax costs                     |   |                                           | 142    |   |     |   | 147    |   |   |   | (5 | ) |   |   | -3.4 | % |
| Amortization      of core deposit intangible |   |                                           | 128    |   |     |   | 262    |   |   |   | (134 | ) |   |   | -51.1 | % |
| Director      fees                           |   |                                           | 128    |   |     |   | 80     |   |   |   | 48 |   |   |   | 60.0 | % |
| Communications                               |   |                                           | 79     |   |     |   | 61     |   |   |   | 18 |   |   |   | 29.5 | % |
| Loan      department                         |   |                                           | 308    |   |     |   | 290    |   |   |   | 18 |   |   |   | 6.2 | % |
| Other                                        |   |                                           | 731    |   |     |   | 675    |   |   |   | 56 |   |   |   | 8.3 | % |
|                                         |   |                                           |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Total      non interest expense              |   | $                                              | 8,828  |   |     | $      | 8,014  |   |   | $ | 814 |   |   |   | 10.2 | % |

|                                         |   | For the six months ended |   |   |     |   |   |   |   |
|----------------------------------------------|--------|----------------------------------------------|--------|--------|----------|--------|--------|--------|--------|
|                                         |   | June 30,                                |   |   | Variance |   |
| (dollars in thousands)             |   | 2010                                         |   |   | 2009     |   |   | dollar |   |   | percentage |   |
| Salaries      and employee benefits          |   | $                                            | 8,729  |   |     | $      | 7,548  |   |   | $ | 1,181 |   |   |   | 15.6 | % |
| Occupancy                                    |   |                                         | 1,874  |   |     |   | 1,678  |   |   |   | 196 |   |   |   | 11.7 | % |
| Equipment                                    |   |                                         | 698    |   |     |   | 701    |   |   |   | (3 | ) |   |   | -0.4 | % |
| Promotional                                  |   |                                         | 352    |   |     |   | 326    |   |   |   | 26 |   |   |   | 8.0 | % |
| Data      processing                         |   |                                         | 1,335  |   |     |   | 1,361  |   |   |   | (26 | ) |   |   | -1.9 | % |
| Stationery      and supplies                 |   |                                         | 229    |   |     |   | 203    |   |   |   | 26 |   |   |   | 12.8 | % |
| Regulatory      fees                         |   |                                         | 1,302  |   |     |   | 680    |   |   |   | 622 |   |   |   | 91.5 | % |
| Audit      and tax costs                     |   |                                         | 285    |   |     |   | 295    |   |   |   | (10 | ) |   |   | -3.4 | % |
| Amortization      of core deposit intangible |   |                                         | 257    |   |     |   | 525    |   |   |   | (268 | ) |   |   | -51.0 | % |
| Director      fees                           |   |                                         | 256    |   |     |   | 163    |   |   |   | 93 |   |   |   | 57.1 | % |
| Communications                               |   |                                         | 161    |   |     |   | 123    |   |   |   | 38 |   |   |   | 30.9 | % |
| Loan      department                         |   |                                         | 732    |   |     |   | 512    |   |   |   | 220 |   |   |   | 43.0 | % |
| Other                                        |   |                                         | 1,484  |   |     |   | 1,324  |   |   |   | 160 |   |   |   | 12.1 | % |
|                                         |   |                                         |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Total      non interest expense              |   | $                                            | 17,694 |   |     | $      | 15,439 |   |   | $ | 2,255 |   |   |   | 14.6 | % |

| Heritage      Oaks Bancorp  | - 49- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

| Heritage      Oaks Bancorp  | - 50- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

| Heritage      Oaks Bancorp  | - 51- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                        |   | June 30, |    |   | December 31, |   |    | Variance |   |
|---------------------------------------------|--------|---------------|---------|--------|-------------------|--------|---------|----------|--------|
| (dollars in thousands)            |   | 2010          |    |   | 2009              |   |    | dollar   |   |   | percentage |   |
| Real      Estate Secured                    |   |          |    |   |              |   |    |     |   |   |   |   |
| Multi-family      residential               |   | $             | 18,911  |   |              | $      | 20,631  |     |   | $ | (1,720 | ) |   |   | -8.34 | % |
| Residential      1 to 4 family              |   |          | 29,476  |   |              |   | 25,483  |     |   |   | 3,993 |   |   |   | 15.67 | % |
| Home      equity line of credit             |   |          | 30,541  |   |              |   | 29,780  |     |   |   | 761 |   |   |   | 2.56 | % |
| Commercial                                  |   |          | 351,598 |   |              |   | 337,940 |     |   |   | 13,658 |   |   |   | 4.04 | % |
| Farmland                                    |   |          | 13,032  |   |              |   | 13,079  |     |   |   | (47 | ) |   |   | -0.36 | % |
| Commercial                                  |   |          |    |   |              |   |    |     |   |   |   |   |   |   |   |   |
| Commercial      and industrial              |   |          | 144,928 |   |              |   | 157,270 |     |   |   | (12,342 | ) |   |   | -7.85 | % |
| Agriculture                                 |   |          | 16,071  |   |              |   | 17,698  |     |   |   | (1,627 | ) |   |   | -9.19 | % |
| Other                                       |   |          | 246     |   |              |   | 238     |     |   |   | 8 |   |   |   | 3.36 | % |
| Construction                                |   |          |    |   |              |   |    |     |   |   |   |   |   |   |   |   |
| Single      family residential              |   |          | 9,501   |   |              |   | 15,538  |     |   |   | (6,037 | ) |   |   | -38.85 | % |
| Single      family residential - Spec.      |   |          | 2,750   |   |              |   | 3,400   |     |   |   | (650 | ) |   |   | -19.12 | % |
| Tract                                       |   |          | -       |   |              |   | 2,215   |     |   |   | (2,215 | ) |   |   | -100.00 | % |
| Multi-family                                |   |          | 1,883   |   |              |   | 2,300   |     |   |   | (417 | ) |   |   | -18.13 | % |
| Hospitality                                 |   |          | -       |   |              |   | 14,306  |     |   |   | (14,306 | ) |   |   | -100.00 | % |
| Commercial                                  |   |          | 31,398  |   |              |   | 27,128  |     |   |   | 4,270 |   |   |   | 15.74 | % |
| Land                                        |   |          | 39,356  |   |              |   | 52,793  |     |   |   | (13,437 | ) |   |   | -25.45 | % |
| Installment      loans to individuals       |   |          | 7,232   |   |              |   | 8,327   |     |   |   | (1,095 | ) |   |   | -13.15 | % |
| All      other loans (including overdrafts) |   |          | 253     |   |              |   | 553     |     |   |   | (300 | ) |   |   | -54.25 | % |
|                                        |   |          |    |   |              |   |    |     |   |   |   |   |   |   |   |   |
| Total      loans, gross                     |   |          | 697,176 |   |              |   | 728,679 |     |   |   | (31,503 | ) |   |   | -4.32 | % |
|                                        |   |          |    |   |              |   |    |     |   |   |   |   |   |   |   |   |
| Deferred      loan fees                     |   |          | 1,698   |   |              |   | 1,825   |     |   |   | (127 | ) |   |   | -6.96 | % |
| Reserve      for possible loan losses       |   |          | 22,134  |   |              |   | 14,372  |     |   |   | 7,762 |   |   |   | 54.01 | % |
|                                        |   |          |    |   |              |   |    |     |   |   |   |   |   |   |   |   |
| Total      loans, net                       |   | $             | 673,344 |   |              | $      | 712,482 |     |   | $ | (39,138 | ) |   |   | -5.49 | % |
|                                        |   |          |    |   |              |   |    |     |   |   |   |   |   |   |   |   |
| Loans      held for sale                    |   | $             | 9,429   |   |              | $      | 9,487   |     |   | $ | (58 | ) |   |   | -0.61 | % |

| Heritage      Oaks Bancorp  | - 52- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                   |   | June 30, 2010 |    |   |        |   |   | Percent of |   |   |        |   |   | Single             |   |
|----------------------------------------|--------|-------------------------|---------|--------|-------------|--------|--------|-----------------|--------|--------|-------------|--------|--------|--------------------|--------|
|                                   |   |                    |    |   | Undisbursed |   |   | Total Bank |   |   | Percent     |   |   | Bank's Risk   |   |   | Number |   |   | Largest |   |
| (dollars in thousands)       |   | Balance                 |    |   | Commitment  |   |   | Exposure        |   |   | Composition |   |   | Based Capital |   |   | of Loans |   |   | Loan |   |
| Retail                                 |   | $                       | 44,249  |   |        | $      | 2,308  |            |   | $      | 46,557      |   |   |               | 9.9    | % |   |   | 36.6 | % |   |   | 62 |   |   | $ | 5,000 |   |
| Professional                           |   |                    | 77,053  |   |        |   | 144    |            |   |   | 77,197      |   |   |               | 16.5   | % |   |   | 63.7 | % |   |   | 96 |   |   |   | 10,000 |   |
| Hospitality                            |   |                    | 91,855  |   |        |   | 220    |            |   |   | 92,075      |   |   |               | 19.7   | % |   |   | 75.9 | % |   |   | 48 |   |   |   | 10,692 |   |
| Multi-family                           |   |                    | 18,911  |   |        |   | -      |            |   |   | 18,911      |   |   |               | 4.0    | % |   |   | 15.6 | % |   |   | 18 |   |   |   | 4,066 |   |
| Home      equity lines of credit       |   |                    | 30,541  |   |        |   | 19,643 |            |   |   | 50,184      |   |   |               | 10.7   | % |   |   | 25.2 | % |   |   | 321 |   |   |   | 1,680 |   |
| Residential      1 to 4 family         |   |                    | 29,476  |   |        |   | 690    |            |   |   | 30,166      |   |   |               | 6.4    | % |   |   | 24.4 | % |   |   | 76 |   |   |   | 2,893 |   |
| Farmland                               |   |                    | 13,032  |   |        |   | 502    |            |   |   | 13,534      |   |   |               | 2.9    | % |   |   | 10.8 | % |   |   | 25 |   |   |   | 1,937 |   |
| Healthcare      / medical              |   |                    | 18,192  |   |        |   | 59     |            |   |   | 18,251      |   |   |               | 3.9    | % |   |   | 15.0 | % |   |   | 34 |   |   |   | 2,155 |   |
| Restaurants      / food establishments |   |                    | 7,419   |   |        |   | -      |            |   |   | 7,419       |   |   |               | 1.6    | % |   |   | 6.1 | % |   |   | 14 |   |   |   | 2,541 |   |
| Commercial                             |   |                    | 98,050  |   |        |   | 715    |            |   |   | 98,765      |   |   |               | 21.2   | % |   |   | 81.0 | % |   |   | 124 |   |   |   | 5,000 |   |
| Other                                  |   |                    | 14,780  |   |        |   | 247    |            |   |   | 15,027      |   |   |               | 3.2    | % |   |   | 12.2 | % |   |   | 27 |   |   |   | 2,100 |   |
|                                   |   |                    |    |   |        |   |   |            |   |   |        |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      real estate secured         |   | $                       | 443,558 |   |        | $      | 24,528 |            |   | $      | 468,086     |   |   |               | 100.0  | % |   |   | 366.5 | % |   |   | 845 |   |   | $ | 48,064 |   |

| Heritage      Oaks Bancorp  | - 53- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                            |   | June 30, 2010 |    |   |        |   |   | Percent of |   |   |        |   |   | Single             |   |
|-------------------------------------------------|--------|-------------------------|---------|--------|-------------|--------|--------|-----------------|--------|--------|-------------|--------|--------|--------------------|--------|
|                                            |   |                    |    |   | Undisbursed |   |   | Total Bank |   |   | Percent     |   |   | Bank's Risk   |   |   | Number |   |   | Largest |   |
| (dollars in thousands)                |   | Balance                 |    |   | Commitment  |   |   | Exposure        |   |   | Composition |   |   | Based Capital |   |   | of Loans |   |   | Loan |   |
| Agriculture                                     |   | $                       | 2,439   |   |        | $      | 3,516  |            |   | $      | 5,955       |   |   |               | 2.8    | % |   |   | 2.0 | % |   |   | 30 |   |   | $ | 2,000 |   |
| Oil      / Gas and Utilities                    |   |                    | 1,595   |   |        |   | 600    |            |   |   | 2,195       |   |   |               | 1.0    | % |   |   | 1.3 | % |   |   | 9 |   |   |   | 1,200 |   |
| Construction                                    |   |                    | 22,559  |   |        |   | 15,751 |            |   |   | 38,310      |   |   |               | 18.2   | % |   |   | 18.6 | % |   |   | 163 |   |   |   | 5,438 |   |
| Manufacturing                                   |   |                    | 8,407   |   |        |   | 10,464 |            |   |   | 18,871      |   |   |               | 8.9    | % |   |   | 6.9 | % |   |   | 91 |   |   |   | 1,675 |   |
| Wholesale      and retail                       |   |                    | 13,517  |   |        |   | 5,909  |            |   |   | 19,426      |   |   |               | 9.2    | % |   |   | 11.2 | % |   |   | 114 |   |   |   | 1,250 |   |
| Transportation      and warehousing             |   |                    | 2,007   |   |        |   | 1,047  |            |   |   | 3,054       |   |   |               | 1.4    | % |   |   | 1.7 | % |   |   | 33 |   |   |   | 596 |   |
| Media      & information services           |   |                    | 7,553   |   |        |   | 1,999  |            |   |   | 9,552       |   |   |               | 4.5    | % |   |   | 6.2 | % |   |   | 22 |   |   |   | 4,500 |   |
| Financial      services                         |   |                    | 7,319   |   |        |   | 2,323  |            |   |   | 9,642       |   |   |               | 4.6    | % |   |   | 6.0 | % |   |   | 43 |   |   |   | 1,500 |   |
| Real-estate      / rental and leasing           |   |                    | 15,762  |   |        |   | 6,792  |            |   |   | 22,554      |   |   |               | 10.7   | % |   |   | 13.0 | % |   |   | 90 |   |   |   | 3,500 |   |
| Professional      services                      |   |                    | 17,412  |   |        |   | 7,026  |            |   |   | 24,438      |   |   |               | 11.6   | % |   |   | 14.4 | % |   |   | 148 |   |   |   | 1,939 |   |
| Healthcare      / medical & social services |   |                    | 17,993  |   |        |   | 7,249  |            |   |   | 25,242      |   |   |               | 11.9   | % |   |   | 14.9 | % |   |   | 114 |   |   |   | 11,355 |   |
| Restaurants      and hospitality                |   |                    | 23,573  |   |        |   | 2,086  |            |   |   | 25,659      |   |   |               | 12.1   | % |   |   | 19.5 | % |   |   | 130 |   |   |   | 6,000 |   |
| All      other                                  |   |                    | 4,792   |   |        |   | 1,823  |            |   |   | 6,615       |   |   |               | 3.1    | % |   |   | 4.0 | % |   |   | 171 |   |   |   | 1,200 |   |
|                                            |   |                    |    |   |        |   |   |            |   |   |        |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial      and industrial                  |   | $                       | 144,928 |   |        | $      | 66,585 |            |   | $      | 211,513     |   |   |               | 100.0  | % |   |   | 119.7 | % |   |   | 1,158 |   |   | $ | 42,153 |   |

| Heritage      Oaks Bancorp  | - 54- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                   |   | June 30, 2010 |   |   |        |   |   | Percent of |   |   |        |   |   | Single             |   |
|----------------------------------------|--------|-------------------------|--------|--------|-------------|--------|--------|-----------------|--------|--------|-------------|--------|--------|--------------------|--------|
|                                   |   |                    |   |   | Undisbursed |   |   | Total Bank |   |   | Percent     |   |   | Bank's Risk   |   |   | Number |   |   | Largest |   |
| (dollars in thousands)       |   | Balance                 |   |   | Commitment  |   |   | Exposure        |   |   | Composition |   |   | Based Capital |   |   | of Loans |   |   | Loan |   |
| Single      family residential         |   | $                       | 9,501  |   |        | $      | 5,159  |            |   | $      | 14,660      |   |   |               | 25.8   | % |   |   | 7.8 | % |   |   | 22 |   |   | $ | 3,325 |   |
| Single      family residential - Spec. |   |                    | 2,750  |   |        |   | 557    |            |   |   | 3,307       |   |   |               | 5.8    | % |   |   | 2.3 | % |   |   | 3 |   |   |   | 1,750 |   |
| Tract                                  |   |                    | -      |   |        |   | -      |            |   |   | -           |   |   |               | 0.0    | % |   |   | 0.0 | % |   |   | - |   |   |   | - |   |
| Multi-family                           |   |                    | 1,883  |   |        |   | -      |            |   |   | 1,883       |   |   |               | 3.3    | % |   |   | 1.6 | % |   |   | 2 |   |   |   | 1,400 |   |
| Commercial                             |   |                    | 31,398 |   |        |   | 5,549  |            |   |   | 36,947      |   |   |               | 65.1   | % |   |   | 25.9 | % |   |   | 16 |   |   |   | 6,720 |   |
| Hospitality                            |   |                    | -      |   |        |   | -      |            |   |   | -           |   |   |               | 0.0    | % |   |   | 0.0 | % |   |   | - |   |   |   | - |   |
|                                   |   |                    |   |   |        |   |   |            |   |   |        |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      construction                |   | $                       | 45,532 |   |        | $      | 11,265 |            |   | $      | 56,797      |   |   |               | 100.0  | % |   |   | 37.6 | % |   |   | 43 |   |   | $ | 13,195 |   |

|                                   |   | June 30, 2010 |   |   |        |   |   | Percent of |   |   |        |   |   | Single             |   |
|----------------------------------------|--------|-------------------------|--------|--------|-------------|--------|--------|-----------------|--------|--------|-------------|--------|--------|--------------------|--------|
|                                   |   |                    |   |   | Undisbursed |   |   | Total Bank |   |   | Percent     |   |   | Bank's Risk   |   |   | Number |   |   | Largest |   |
| (dollars in thousands)       |   | Balance                 |   |   | Commitment  |   |   | Exposure        |   |   | Composition |   |   | Based Capital |   |   | of Loans |   |   | Loan |   |
| Single      family residential         |   | $                       | 6,547  |   |        | $      | -      |            |   | $      | 6,547       |   |   |               | 16.4   | % |   |   | 5.4 | % |   |   | 29 |   |   | $ | 1,000 |   |
| Single      family residential - Spec. |   |                    | 1,447  |   |        |   | -      |            |   |   | 1,447       |   |   |               | 3.6    | % |   |   | 1.2 | % |   |   | 6 |   |   |   | 618 |   |
| Tract                                  |   |                    | 18,453 |   |        |   | -      |            |   |   | 18,453      |   |   |               | 46.1   | % |   |   | 15.2 | % |   |   | 8 |   |   |   | 5,236 |   |
| Multi-family                           |   |                    | -      |   |        |   | -      |            |   |   | -           |   |   |               | 0.0    | % |   |   | 0.0 | % |   |   | - |   |   |   | - |   |
| Commercial                             |   |                    | 10,110 |   |        |   | 650    |            |   |   | 10,760      |   |   |               | 26.9   | % |   |   | 8.4 | % |   |   | 19 |   |   |   | 1,500 |   |
| Hospitality                            |   |                    | 2,799  |   |        |   | -      |            |   |   | 2,799       |   |   |               | 7.0    | % |   |   | 2.3 | % |   |   | 3 |   |   |   | 2,340 |   |
|                                   |   |                    |   |   |        |   |   |            |   |   |        |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      land                        |   | $                       | 39,356 |   |        | $      | 650    |            |   | $      | 40,006      |   |   |               | 100.0  | % |   |   | 32.5 | % |   |   | 65 |   |   | $ | 10,694 |   |

| Heritage      Oaks Bancorp  | - 55- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

| Heritage      Oaks Bancorp  | - 56- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

| Heritage      Oaks Bancorp  | - 57- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

| Heritage      Oaks Bancorp  | - 58- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                                   |   | For the six months |    |
|--------------------------------------------------------|--------|-----------------------------------|---------|
|                                                   |   | ended June 30,          |    |
| (dollars amounts in thousands)          |   | 2010                              |    |   | 2009 |   |
|                                                   |   |                              |    |   |   |   |
| Balance,      beginning of period                      |   | $                                 | 14,372  |   |   | $ | 10,412 |   |
| Charge-offs                                            |   |                              |    |   |   |   |   |   |
| Real      Estate Secured                               |   |                              |    |   |   |   |   |   |
| Multi-family      residential                          |   |                              | -       |   |   |   | - |   |
| Residential      1 to 4 family                         |   |                              | 282     |   |   |   | - |   |
| Home      equity line of credit                        |   |                              | -       |   |   |   | - |   |
| Commercial                                             |   |                              | 2,583   |   |   |   | - |   |
| Farmland                                               |   |                              | 235     |   |   |   | - |   |
| Commercial                                             |   |                              |    |   |   |   |   |   |
| Commercial      and industrial                         |   |                              | 8,818   |   |   |   | 1,225 |   |
| Agriculture                                            |   |                              | 1,209   |   |   |   | - |   |
| Other                                                  |   |                              | -       |   |   |   | - |   |
| Construction                                           |   |                              | 988     |   |   |   | 1,821 |   |
| Land                                                   |   |                              | 956     |   |   |   | 991 |   |
| Installment      loans to individuals                  |   |                              | 49      |   |   |   | - |   |
| All      other loans                                   |   |                              | 58      |   |   |   | 101 |   |
|                                                   |   |                              |    |   |   |   |   |   |
| Total      charge-offs                                 |   |                              | 15,178  |   |   |   | 4,138 |   |
| Recoveries                                             |   |                              |    |   |   |   |   |   |
| Real      Estate Secured                               |   |                              |    |   |   |   |   |   |
| Multi-family      residential                          |   |                              | -       |   |   |   | - |   |
| Residential      1 to 4 family                         |   |                              | 75      |   |   |   | 4 |   |
| Home      equity line of credit                        |   |                              | -       |   |   |   | - |   |
| Commercial                                             |   |                              | 21      |   |   |   | - |   |
| Farmland                                               |   |                              | -       |   |   |   | - |   |
| Commercial                                             |   |                              |    |   |   |   |   |   |
| Commercial      and industrial                         |   |                              | 209     |   |   |   | 2 |   |
| Agriculture                                            |   |                              | 54      |   |   |   | - |   |
| Other                                                  |   |                              | -       |   |   |   | - |   |
| Construction                                           |   |                              | 27      |   |   |   | 16 |   |
| Land                                                   |   |                              | 1,245   |   |   |   | - |   |
| Installment      loans to individuals                  |   |                              | 6       |   |   |   | - |   |
| All      other loans                                   |   |                              | 3       |   |   |   | - |   |
|                                                   |   |                              |    |   |   |   |   |   |
| Total      recoveries                                  |   |                              | 1,640   |   |   |   | 22 |   |
|                                                   |   |                              |    |   |   |   |   |   |
| Net      charge-offs                                   |   |                              | 13,538  |   |   |   | 4,116 |   |
|                                                   |   |                              |    |   |   |   |   |   |
| Additions      to allowance charged to operations      |   |                              | 21,300  |   |   |   | 4,810 |   |
|                                                   |   |                              |    |   |   |   |   |   |
| Balance,      end of period                            |   | $                                 | 22,134  |   |   | $ | 11,106 |   |
|                                                   |   |                              |    |   |   |   |   |   |
| Gross      loans, end of period                        |   | $                                 | 697,176 |   |   | $ | 697,854 |   |
|                                                   |   |                              |    |   |   |   |   |   |
| Net      charge-offs to average loans                  |   |                              | 1.86    | % |   |   | 0.59 | % |
|                                                   |   |                              |    |   |   |   |   |   |
| Allowance      for loan losses to total gross loans    |   |                              | 3.17    | % |   |   | 1.59 | % |
|                                                   |   |                              |    |   |   |   |   |   |
| Non-performing      loans to allowance for loan losses |   |                              | 158.43  | % |   |   | 110.19 | % |

| Heritage      Oaks Bancorp  | - 59- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                          |   | June 30, |   |   | December 31, |   |
|-----------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
|                                          |   | 2010          |   |   | 2009              |   |   | 2009 |   |
|                                          |   |          |   |   | Percent           |   |   |   |   |   | Percent |   |   |   |   |   | Percent |   |
|                                          |   | Amount        |   |   | of Total     |   |   | Amount |   |   | of Total |   |   | Amount |   |   | of Total |   |
| (dollars amounts in thousands) |   | Allocated     |   |   | Loans             |   |   | Allocated |   |   | Loans |   |   | Allocated |   |   | Loans |   |
| Real      Estate Secured                      |   |          |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Multi-family      residential                 |   | $             | 140    |   |              |   | 2.7 | % |   | $ | 79 |   |   |   | 2.5 | % |   | $ | 119 |   |   |   | 2.8 | % |
| Residential      1 to 4 family                |   |          | 631    |   |              |   | 4.2 | % |   |   | 276 |   |   |   | 3.4 | % |   |   | 264 |   |   |   | 3.5 | % |
| Home      equity line of credit               |   |          | 184    |   |              |   | 4.4 | % |   |   | 139 |   |   |   | 4.1 | % |   |   | 179 |   |   |   | 4.1 | % |
| Commercial                                    |   |          | 9,509  |   |              |   | 50.4 | % |   |   | 4,402 |   |   |   | 43.4 | % |   |   | 6,081 |   |   |   | 46.5 | % |
| Farmland                                      |   |          | 804    |   |              |   | 1.9 | % |   |   | 258 |   |   |   | 1.4 | % |   |   | 208 |   |   |   | 1.8 | % |
| Commercial                                    |   |          |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial      and industrial                |   |          | 5,887  |   |              |   | 20.9 | % |   |   | 3,785 |   |   |   | 24.5 | % |   |   | 4,635 |   |   |   | 21.6 | % |
| Agriculture                                   |   |          | 586    |   |              |   | 2.3 | % |   |   | 132 |   |   |   | 2.0 | % |   |   | 178 |   |   |   | 2.4 | % |
| Other                                         |   |          | 1      |   |              |   | 0.0 | % |   |   | 4 |   |   |   | 0.1 | % |   |   | 1 |   |   |   | 0.0 | % |
| Construction                                  |   |          |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Single      family residential                |   |          | 140    |   |              |   | 1.4 | % |   |   | 290 |   |   |   | 2.1 | % |   |   | 304 |   |   |   | 2.1 | % |
| Single      family residential - Spec.        |   |          | 64     |   |              |   | 0.4 | % |   |   | 161 |   |   |   | 1.5 | % |   |   | 46 |   |   |   | 0.5 | % |
| Tract                                         |   |          | -      |   |              |   | 0.0 | % |   |   | 70 |   |   |   | 0.4 | % |   |   | 190 |   |   |   | 0.3 | % |
| Multi-family                                  |   |          | 15     |   |              |   | 0.3 | % |   |   | 577 |   |   |   | 0.8 | % |   |   | 90 |   |   |   | 0.3 | % |
| Hospitality                                   |   |          | -      |   |              |   | 0.0 | % |   |   | 76 |   |   |   | 1.8 | % |   |   | 107 |   |   |   | 2.0 | % |
| Commercial                                    |   |          | 556    |   |              |   | 4.5 | % |   |   | 136 |   |   |   | 2.5 | % |   |   | 270 |   |   |   | 3.7 | % |
| Land                                          |   |          | 3,512  |   |              |   | 5.6 | % |   |   | 682 |   |   |   | 8.2 | % |   |   | 1,644 |   |   |   | 7.2 | % |
| Installment      loans to individuals         |   |          | 91     |   |              |   | 1.0 | % |   |   | 32 |   |   |   | 1.2 | % |   |   | 40 |   |   |   | 1.1 | % |
| All      other loans (including overdrafts)   |   |          | 14     |   |              |   | 0.0 | % |   |   | 7 |   |   |   | 0.1 | % |   |   | 16 |   |   |   | 0.1 | % |
|                                          |   |          |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      allowance for loan losses          |   | $             | 22,134 |   |              |   | 100.0 | % |   | $ | 11,106 |   |   |   | 100.0 | % |   | $ | 14,372 |   |   |   | 100.0 | % |

| Heritage      Oaks Bancorp  | - 60- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

| Heritage      Oaks Bancorp  | - 61- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                                                       |   | June 30, |   |   | December 31, |   |   | Variance |   |
|----------------------------------------------------------------------------|--------|---------------|--------|--------|-------------------|--------|--------|----------|--------|
| (dollars in thousands)                                           |   | 2010          |   |   | 2009              |   |   | Dollar   |   |   | Percent |   |
|                                                                       |   |          |   |   |              |   |   |     |   |   |   |   |
| Loans      delinquent 90 days or more and still accruing                   |   | $             | -      |   |              | $      | 151    |     |   | $ | (151 | ) |   |   | -100.00 | % |
|                                                                       |   |          |   |   |              |   |   |     |   |   |   |   |   |   |   |   |
| Non-Accruing      Loans                                                    |   |          |   |   |              |   |   |     |   |   |   |   |   |   |   |   |
| Commercial      real estate                                                |   | $             | 14,160 |   |              | $      | 11,035 |     |   | $ | 3,125 |   |   |   | 28.32 | % |
| Residential      1-4 family                                                |   |          | 1,310  |   |              |   | 1,147  |     |   |   | 163 |   |   |   | 14.21 | % |
| Home      equity lines of credit                                           |   |          | 320    |   |              |   | 320    |     |   |   | - |   |   |   | 0.00 | % |
| Farmland                                                                   |   |          | 2,936  |   |              |   | -      |     |   |   | 2,936 |   |   |   | 100.00 | % |
| Commercial      and industrial                                             |   |          | 4,610  |   |              |   | 8,429  |     |   |   | (3,819 | ) |   |   | -45.31 | % |
| Agriculture                                                                |   |          | 706    |   |              |   | 3,172  |     |   |   | (2,466 | ) |   |   | -77.74 | % |
| Construction                                                               |   |          | 2,454  |   |              |   | 3,838  |     |   |   | (1,384 | ) |   |   | -36.06 | % |
| Land                                                                       |   |          | 8,284  |   |              |   | 10,182 |     |   |   | (1,898 | ) |   |   | -18.64 | % |
| Installment                                                                |   |          | 286    |   |              |   | 47     |     |   |   | 239 |   |   |   | 508.51 | % |
|                                                                       |   |          |   |   |              |   |   |     |   |   |   |   |   |   |   |   |
| Total      non-accruing loans                                              |   | $             | 35,066 |   |              | $      | 38,170 |     |   | $ | (3,104 | ) |   |   | -8.13 | % |
|                                                                       |   |          |   |   |              |   |   |     |   |   |   |   |   |   |   |   |
| Other      real estate owned                                               |   | $             | 4,953  |   |              | $      | 946    |     |   | $ | 4,007 |   |   |   | 423.57 | % |
|                                                                       |   |          |   |   |              |   |   |     |   |   |   |   |   |   |   |   |
| Total      non-performing assets                                           |   | $             | 40,019 |   |              | $      | 39,267 |     |   | $ | 752 |   |   |   | 1.92 | % |
|                                                                       |   |          |   |   |              |   |   |     |   |   |   |   |   |   |   |   |
| Ratio      of allowance for credit losses to total gross loans             |   |          | 3.17   | %      |              |   | 1.97   | %        |   |   |   |   |   |   |   |   |
| Ratio      of allowance for credit losses to total non-performing    loans |   |          | 63.12  | %      |              |   | 37.50  | %        |   |   |   |   |   |   |   |   |
| Ratio      of non-performing loans to total gross loans                    |   |          | 5.03   | %      |              |   | 5.26   | %        |   |   |   |   |   |   |   |   |
| Ratio      of non-performing assets to total assets                        |   |          | 3.96   | %      |              |   | 4.15   | %        |   |   |   |   |   |   |   |   |

| Heritage      Oaks Bancorp  | - 62- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                   |   | Balance           |   |   | Additions to |   |   |     |   |   | Transfers          |   |   | Returns to |   |   |        |   |   | Balance       |   |
|----------------------------------------|--------|-------------------|--------|--------|-------------------|--------|--------|----------|--------|--------|--------------------|--------|--------|-----------------|--------|--------|-------------|--------|--------|---------------|--------|
|                                   |   | December 31, |   |   | Non-Accruing      |   |   | Net      |   |   | to Foreclosed |   |   | Preforming      |   |   |        |   |   | June 30, |   |
| (dollars in thousands)       |   | 2009              |   |   | Balances          |   |   | Paydowns |   |   | Collateral         |   |   | Status          |   |   | Charge-offs |   |   | 2010          |   |
| Real      Estate Secured               |   |              |   |   |              |   |   |     |   |   |               |   |   |            |   |   |        |   |   |          |   |
| Multi-family      residential          |   | $                 | -      |   |              | $      | -      |     |   | $      | -                  |   |   | $               | -      |   |        | $      | -      |          |   | $ | - |   |   | $ | - |   |
| Residential      1 to 4 family         |   |              | 1,147  |   |              |   | 458    |     |   |   | (11                | )      |   |            | -      |   |        |   | -      |          |   |   | (284 | ) |   |   | 1,310 |   |
| Home      equity line of credit        |   |              | 320    |   |              |   | -      |     |   |   | -                  |   |   |            | -      |   |        |   | -      |          |   |   | - |   |   |   | 320 |   |
| Commercial                             |   |              | 11,035 |   |              |   | 11,806 |     |   |   | (2,555             | )      |   |            | (234   | )      |        |   | (3,305 | )             |   |   | (2,587 | ) |   |   | 14,160 |   |
| Farmland                               |   |              | -      |   |              |   | 3,810  |     |   |   | (62                | )      |   |            | (577   | )      |        |   | -      |          |   |   | (235 | ) |   |   | 2,936 |   |
| Commercial                             |   |              |   |   |              |   |   |     |   |   |               |   |   |            |   |   |        |   |   |          |   |   |   |   |   |   |   |   |
| Commercial      and industrial         |   |              | 8,429  |   |              |   | 6,020  |     |   |   | (629               | )      |   |            | (10    | )      |        |   | (381   | )             |   |   | (8,819 | ) |   |   | 4,610 |   |
| Agriculture                            |   |              | 3,172  |   |              |   | 825    |     |   |   | (2,082             | )      |   |            | -      |   |        |   | -      |          |   |   | (1,209 | ) |   |   | 706 |   |
| Other                                  |   |              | -      |   |              |   | -      |     |   |   | -                  |   |   |            | -      |   |        |   | -      |          |   |   | - |   |   |   | - |   |
| Construction                           |   |              |   |   |              |   |   |     |   |   |               |   |   |            |   |   |        |   |   |          |   |   |   |   |   |   |   |   |
| Single      family residential         |   |              | 940    |   |              |   | -      |     |   |   | -                  |   |   |            | -      |   |        |   | -      |          |   |   | (219 | ) |   |   | 721 |   |
| Single      family residential - Spec. |   |              | 683    |   |              |   | 1,250  |     |   |   | -                  |   |   |            | (538   | )      |        |   | -      |          |   |   | (145 | ) |   |   | 1,250 |   |
| Tract                                  |   |              | 2,215  |   |              |   | -      |     |   |   | (1,646             | )      |   |            | (363   | )      |        |   | -      |          |   |   | (206 | ) |   |   | - |   |
| Multi-family                           |   |              | -      |   |              |   | 900    |     |   |   | -                  |   |   |            | -      |   |        |   | -      |          |   |   | (417 | ) |   |   | 483 |   |
| Hospitality                            |   |              | -      |   |              |   | -      |     |   |   | -                  |   |   |            | -      |   |        |   | -      |          |   |   | - |   |   |   | - |   |
| Commercial                             |   |              | -      |   |              |   | -      |     |   |   | -                  |   |   |            | -      |   |        |   | -      |          |   |   | - |   |   |   | - |   |
| Land                                   |   |              | 10,182 |   |              |   | 4,949  |     |   |   | (2,661             | )      |   |            | (3,226 | )      |        |   | -      |          |   |   | (960 | ) |   |   | 8,284 |   |
| Installment      loans to individuals  |   |              | 47     |   |              |   | 387    |     |   |   | (5                 | )      |   |            | (35    | )      |        |   | -      |          |   |   | (108 | ) |   |   | 286 |   |
| All      other loans                   |   |              | -      |   |              |   | -      |     |   |   | -                  |   |   |            | -      |   |        |   | -      |          |   |   | - |   |   |   | - |   |
|                                   |   |              |   |   |              |   |   |     |   |   |               |   |   |            |   |   |        |   |   |          |   |   |   |   |   |   |   |   |
| Totals                                 |   | $                 | 38,170 |   |              | $      | 30,405 |     |   | $      | (9,651             | )      |   | $               | (4,983 | )      |        | $      | (3,686 | )             |   | $ | (15,189 | ) |   | $ | 35,066 |   |

|   | · | Approximately      $1.4 million can be attributed to one loan in which the Bank is working      with the borrower to bring it current.  Recent data suggests      that the borrower’s financial condition is currently sound.  The      borrower is also working to sell other assets to pay-down the      loan. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Two      loans made to two separate borrowers totaling approximately $1.8 million      that the Bank has restructured.  A third party has expressed      interest in assuming responsibility for one of these notes.  The      Bank is pursuing judicial foreclosure on the other  loan. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | One      loan totaling approximately $0.7 million.  The Bank is currently      pursuing foreclosure on the underlying  collateral. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | One      loan totaling approximately $3.4 million.  As previously      discussed, the borrower is currently seeking alternative financing to      pay-down their outstanding obligation to the Bank.  However, the      Bank is proceeding with the foreclosureprocess. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | One      loan in the amount of $3.7 million.  The borrower is currently      paying on the note and is working with the Bank to bring about a      resolution.  A recent appraisal indicates significant value in      the underlying collateral to cover the Bank’s recorded investment in the      loan. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Two      loans to one borrower in the approximate amount of $1.0      million.  The Bank is currently pursuing foreclosure on the      underlying collateral. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | One      loan in the amount of $0.4 million.  The Bank is currently in      the process of foreclosing on the underlying collateral securing this      loan. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Heritage      Oaks Bancorp  | - 63- |
|-----------------------------------------------|

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|   | · | One      loan in the approximate amount of $0.1 million is secured by real estate      in the Bank’s primary market as well as various business      assets.  Recent financial information concerning the client      indicates the borrower currently has the cash flow to continue to service      the loan. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Three      loans to one borrower totaling approximately $0.9 million.  The      underlying collateral represents leased residential real      estate.  The Bank is in the process of taking possession of the      collateral and its rent proceeds to liquidate and pay-down the      loan. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | One      loan in the approximate amount of $0.4 million contains an SBA      guarantee.  Physical collateral has been repossessed and is in      the process of being liquidated. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | One      loan in the approximate amount of $1.3 million.  The Bank is      currently working with the borrower to bring about a      resolution. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | One      loan totaling approximately $1.1 million.  The Bank is working      with the borrower to liquidate the collateral and pay-down the      loan. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | One      loan totaling approximately $1.9 million secured by land for hospitality      construction in the Bank’s primary market area.  The Bank is      currently in the process of foreclosing on the collateral securing the      loan. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | One      loan in the amount of $4.3 million is secured by land for tract      development in the Bank’s primary market area.  Although the      borrower is currently seeking alternative financing from other financial      institutions to pay-down the loan, the Bank has begun the foreclosure      process. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Heritage      Oaks Bancorp  | - 64- |
|-----------------------------------------------|

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

|                             |   | For the six months ended |   |
|----------------------------------|--------|----------------------------------------------|--------|
| (dollars in thousands) |   | June 30, 2010                      |   |
| Balance      December 31, 2009   |   | $                                            | 946    |   |
| Additions                        |   |                                         | 4,987  |   |
| Dispositions                     |   |                                         | (775   | ) |
| Write-downs                      |   |                                         | (205   | ) |
|                             |   |                                         |   |   |
| Balance      June 30, 2010       |   | $                                            | 4,953  |   |

|                                                        |   | June 30, |    |   | December 31, |   |    | Variance |   |
|-------------------------------------------------------------|--------|---------------|---------|--------|-------------------|--------|---------|----------|--------|
| (dollars in thousands)                            |   | 2010          |    |   | 2009              |   |    | dollar   |   |   | percentage |   |
| Interest      bearing due from banks                        |   | $             | 38,682  |   |              | $      | 17,046  |     |   | $ | 21,636 |   |   |       | 126.93 | % |
| Federal      funds sold                                     |   |          | 5,500   |   |              |   | 4,350   |     |   |   | 1,150 |   |   |   | 26.44 | % |
| Interest      bearing deposits other financial institutions |   |          | 119     |   |              |   | 119     |     |   |   | - |   |   |   | 0.00 | % |
| Securities      available for sale                          |   |          | 192,904 |   |              |   | 121,180 |     |   |   | 71,724 |   |   |   | 59.19 | % |
| Federal      Home Loan Bank stock                           |   |          | 5,611   |   |              |   | 5,828   |     |   |   | (217 | ) |   |   | -3.72 | % |
|                                                        |   |          |    |   |              |   |    |     |   |   |   |   |   |   |   |   |
| Total      other earning assets                             |   | $             | 242,816 |   |              | $      | 148,523 |     |   | $ | 94,293 |   |   |   | 63.49 | % |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 65 - |

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 66 - |

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

|                             |   |          |    |   |              |   |    |     |   |   |                   |   |   | Variance Exclusive of |   |
|----------------------------------|--------|---------------|---------|--------|-------------------|--------|---------|----------|--------|--------|------------------------|--------|--------|---------------------------------|--------|
|                             |   | June 30, |    |   | December 31, |   |    | Variance |   |   | Volatile Balances |   |
| (dollars in thousands) |   | 2010          |    |   | 2009              |   |    | dollar   |   |   | percentage             |   |   | dollar                          |   |   | percentage |   |
| Non-interest      bearing demand |   | $             | 182,846 |   |              | $      | 174,635 |     |   | $      | 8,211                  |   |   |                            | 4.70   | % |   | $ | 15,300 |   |   |   | 8.76 | % |
| Interest      bearing demand     |   |          | 68,295  |   |              |   | 77,765  |     |   |   | (9,470                 | )      |   |                            | -12.18 | % |   |   | (9,735 | ) |   |   | -12.52 | % |
| Savings                          |   |          | 26,844  |   |              |   | 27,166  |     |   |   | (322                   | )      |   |                            | -1.19  | % |   |   | (322 | ) |   |   | -1.19 | % |
| Money      market                |   |          | 284,118 |   |              |   | 259,671 |     |   |   | 24,447                 |   |   |                            | 9.41   | % |   |   | 34,679 |   |   |   | 13.35 | % |
| Time      deposits               |   |          | 232,630 |   |              |   | 224,998 |     |   |   | 7,632                  |   |   |                            | 3.39   | % |   |   | 7,632 |   |   |   | 3.39 | % |
|                             |   |          |    |   |              |   |    |     |   |   |                   |   |   |                            |   |   |   |   |   |   |   |   |   |   |
| Total      retail deposits       |   |          | 794,733 |   |              |   | 764,235 |     |   |   | 30,498                 |   |   |                            | 3.99   | % |   |   | 47,554 |   |   |   | 6.22 | % |
|                             |   |          |    |   |              |   |    |     |   |   |                   |   |   |                            |   |   |   |   |   |   |   |   |   |   |
| Brokered      time deposits      |   |          | 100     |   |              |   | 10,230  |     |   |   | (10,130                | )      |   |                            | -99.02 | % |   |   | (10,130 | ) |   |   | -99.02 | % |
| Brokered      money market funds |   |          | 1,000   |   |              |   | 1,000   |     |   |   | -                      |   |   |                            |   |   |   |   | - |   |   |   | 0.00 | % |
|                             |   |          |    |   |              |   |    |     |   |   |                   |   |   |                            |   |   |   |   |   |   |   |   |   |   |
| Total      brokered deposits     |   |          | 1,100   |   |              |   | 11,230  |     |   |   | (10,130                | )      |   |                            | -90.20 | % |   |   | (10,130 | ) |   |   | -90.20 | % |
|                             |   |          |    |   |              |   |    |     |   |   |                   |   |   |                            |   |   |   |   |   |   |   |   |   |   |
| Total      deposits              |   | $             | 795,833 |   |              | $      | 775,465 |     |   | $      | 20,368                 |   |   |                            | 2.63   | % |   | $ | 37,424 |   |   |   | 4.83 | % |

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 67 - |

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

|                             |   |          |   |   | Percent of |   |   |              |   |   | Percent of |   |   |     |   |
|----------------------------------|--------|---------------|--------|--------|-----------------|--------|--------|-------------------|--------|--------|-----------------|--------|--------|----------|--------|
|                             |   | June 30, |   |   | Total           |   |   | December 31, |   |   | Total           |   |   | Dollar   |   |
| (dollars in thousands) |   | 2010          |   |   | Deposits        |   |   | 2009              |   |   | Deposits        |   |   | Variance |   |
| Non-interest      bearing demand |   | $             | 10,886 |   |            |   | 1.4    | %                 |   | $      | 17,975          |   |   |     | 2.3    | % |   | $ | (7,089 | ) |
| Interest      bearing demand     |   |          | 2,843  |   |            |   | 0.4    | %                 |   |   | 2,578           |   |   |     | 0.3    | % |   |   | 265 |   |
| Money      market                |   |          | 881    |   |            |   | 0.1    | %                 |   |   | 11,113          |   |   |     | 1.4    | % |   |   | (10,232 | ) |
|                             |   |          |   |   |            |   |   |              |   |   |            |   |   |     |   |   |   |   |   |   |
| Total      volatile deposits     |   | $             | 14,610 |   |            |   | 1.9    | %                 |   | $      | 31,666          |   |   |     | 4.0    | % |   | $ | (17,056 | ) |

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 68 - |

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

| (dollars in thousands) |   |   |
|----------------------------------|--------|--------|
|                             |   |   |   |   |   |
| Amount                           |   |   | Interest |   | Maturity |
| Borrowed                         |   |   | Rate |   | Advance Type |   | Date |
| $                                | 10,000 |   |   |   | 2.89 | % | Fixed |   | 9/16/2010 |
|                             | 35,000 |   |   |   | 0.21 | % | Adjustable |   | 1/31/2011 |
|                             | 20,000 |   |   |   | 0.27 | % | Variable |   | Open |
|                             |   |   |   |   |   |   |   |   |   |
| $                                | 65,000 |   |   |   | 0.64 | % |   |   |   |

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 69 - |

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 70 - |

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

|                                |   | Amount |   |   | Current |   | Issue |   | Scheduled |   | Call   |   |           |
|-------------------------------------|--------|--------|--------|--------|---------|--------|-------|--------|-----------|--------|--------|--------|----------------|
| (dollars in thousands)    |   | Issued |   |   | Rate    |   | Date  |   | Maturity  |   | Date   |   | Rate Type |
| Heritage      Oaks Capital Trust II |   | $      | 8,248  |   |    |   | 2.01  | %      | 27-Oct-06 |   | Aug-37 |   | Nov-11         |   | Variable      3-month LIBOR + 1.72% |

|                                     |
|------------------------------------------|
| Heritage      Oaks Bancorp | - 71 - |

----

| Management’s Discussion and      Analysis |
|-------------------------------------------------|

|                                                  |   | Regulatory Standard |   |   | June 30, 2010 |   |   | June 30, 2009 |   |
|-------------------------------------------------------|--------|--------------------------|--------|--------|-------------------------|--------|--------|-------------------------|--------|
|                                                  |   | Adequately               |   |   | Well                    |   |   | Heritage Oaks      |   |   | Heritage Oaks |   |
| Ratio                                                 |   | Capitalized              |   |   | Capitalized             |   |   | Bancorp                 |   |   | Bank |   |   | Bancorp |   |   | Bank |   |
| Leverage      ratio                                   |   |                     | 4.00   | %      |                    |   | 5.00   | %                       |   |   | 11.89 | % |   |   | 11.34 | % |   |   | 10.87 | % |   |   | 10.33 | % |
| Tier      I capital to risk weighted assets           |   |                     | 4.00   | %      |                    |   | 6.00   | %                       |   |   | 15.19 | % |   |   | 14.44 | % |   |   | 11.95 | % |   |   | 11.23 | % |
| Total      risk based capital to risk weighted assets |   |                     | 8.00   | %      |                    |   | 10.00  | %                       |   |   | 16.46 | % |   |   | 15.71 | % |   |   | 13.20 | % |   |   | 12.49 | % |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 72 - |

----

| Management’s      Discussion and Analysis |
|-------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 73 - |

----

|                           |   | Rate Shock Scenarios |   |
|--------------------------------|--------|----------------------|--------|
| (dollars in thousands)         |   | -200bp               |   |   | -100bp |   |   | Base |   |   | +100bp |   |   | +200bp |   |
|                           |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest income (NII) |   | $                    | 42,971 |   |   | $ | 43,333 |   |   | $ | 43,315 |   |   | $ | 43,259 |   |   | $ | 43,347 |   |
|                           |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $      Change from base        |   | $                    | (344   | ) |   | $ | 18 |   |   | $ | - |   |   | $ | (56 | ) |   | $ | 32 |   |
|                           |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| %      Change from base        |   |                 | -0.79  | % |   |   | 0.04 | % |   |   | 0.00 | % |   |   | -0.13 | % |   |   | 0.07 | % |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 74 - |

----

| (dollars      in thousands)    |   |    |    |   |            |   |
|--------------------------------|--------|---------|---------|--------|-----------------|--------|
|                           |   |    |    |   | Percent of |   |
| Rate Type                      |   | Balance |    |   | Total           |   |
| Variable      - daily          |   | $       | 234,498 |   |            |   | 33.6 | % |
| Variable      other than daily |   |    | 330,039 |   |            |   | 47.4 | % |
| Fixed      rate                |   |    | 132,639 |   |            |   | 19.0 | % |
|                           |   |    |    |   |            |   |   |   |
| Total      gross loans         |   | $       | 697,176 |   |            |   | 100.0 | % |

| (dollars in thousands) |   |    |    |   |            |   |
|----------------------------------|--------|---------|---------|--------|-----------------|--------|
|                             |   |    |    |   | Percent of |   |
| Re-Pricing                       |   | Balance |    |   | Total           |   |
| <      1 Year                 |   | $       | 358,265 |   |            |   | 51.4 | % |
| 1-3      Years                   |   |    | 188,865 |   |            |   | 27.1 | % |
| 3-5      Years                   |   |    | 105,904 |   |            |   | 15.2 | % |
| >      5 Years                |   |    | 44,142  |   |            |   | 6.3 | % |
|                             |   |    |    |   |            |   |   |   |
| Total      gross loans           |   | $       | 697,176 |   |            |   | 100.0 | % |

|                                    |   | Move in Prime Rate (bps) |   |
|-----------------------------------------|--------|--------------------------|--------|
| (dollars in thousands)                  |   | +200                     |   |   | +250 |   |   | +300 |   |   | +350 |   |
| Variable      daily                     |   | $                        | 850    |   |   | $ | 10,366 |   |   | $ | 56,457 |   |   | $ | 116,342 |   |
| Variable      other than daily          |   |                     | 2,440  |   |   |   | 15,656 |   |   |   | 62,903 |   |   |   | 175,816 |   |
|                                    |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative      total variable at floor |   | $                        | 3,290  |   |   | $ | 26,022 |   |   | $ | 119,360 |   |   | $ | 292,158 |   |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 75 - |

----

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 76 - |

----

|  | (a) | None. |
|--|-----|-------|

|  | (b) | In      the second quarter of 2010 the Company was required to defer dividend      payments on its Series A Senior Preferred Stock issued to the U.S.      Treasury under the CPP in order to comply with the terms of the Written      Agreement entered into between the Company and the Federal Reserve Bank of      San Francisco.  For more information concerning the Written      Agreement, please refer to Note 12. Regulatory Order and Written Agreement      of the consolidated financial statements filed on this Form      10-Q/A.  As of June 30, 2010, the Company has deferred one      dividend payment on its Series A Senior Preferred Stock totaling      approximately $0.3 million. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 77 - |

----

| Exhibit      (31.1) | Certification      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002 |
|---------------------|--------------------------------------------------------------------------------------------------------------|

| Exhibit      (32.1) | Certification      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley      Act of 2002 |
|---------------------|--------------------------------------------------------------------------------------------------------------|

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 78 - |

----

| /s/ Lawrence P. Ward                            |   |
|-------------------------------------------------|--------|
| Lawrence      P. Ward                           |
| Chief      Executive Officer                    |
| (Principal      Executive and FinancialOfficer) |

|                                |
|-------------------------------------|
| Heritage      Oaks Bancorp | - 79 - |

----