<PAGE>
                                       
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                  For the quarterly period ended March 31, 1999

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

For the Transition Period from __________________ to ____________________

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

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

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

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

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

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

                    YES  X     NO
                        ----       ----

Aggregate market value of Common Stock of Heritage Oaks Bancorp at April 30,
1999: $18,117,937.


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

No par value Common Stock - 1,115,950 shares outstanding at April 30, 1999.


<PAGE>

                              HERITAGE OAKS BANCORP
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                   03/31/99       12/31/98        03/31/98
                                                                  (UNAUDITED)          (1)       (UNAUDITED)
<S>                                                              <C>            <C>             <C>
ASSETS                                                            
Cash and due from banks                                          $ 12,231,831   $ 17,239,179    $ 11,455,661
Federal funds sold                                                  4,300,000      7,700,000       1,000,000
                                                                 ------------   ------------    ------------

Total cash and cash equivalents                                    16,531,831     24,939,179      12,455,661

Interest bearing deposits other banks                                 668,019        666,975         264,790

Securities Available for sale                                      11,173,298     12,863,106       7,966,912
Securities held to maturity (see note 2)                           13,225,160     15,758,151      11,284,127

Loans Held For Sale                                                   991,746      1,654,765       1,471,442
Loans, net ( see note 3)                                           75,012,009     69,803,041      59,033,959

Property, premises and equipment, net                               2,830,203      2,447,385       2,051,843
Other real estate owned                                                     0              0          62,000
Cash surrender value life insurance                                 1,258,761      1,020,576         982,411
Other assets                                                        2,325,526      2,015,320       1,872,154
                                                                 ------------   ------------    ------------

TOTAL ASSETS                                                     $124,016,553   $131,168,498     $97,445,299
                                                                 ------------   ------------    ------------
                                                                 ------------   ------------    ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand, non-interest bearing                                     $ 35,096,668   $ 38,672,576    $ 19,681,189
Savings, NOW, and money market deposits                            51,966,894     51,604,881      46,535,861
Time deposits of $100,000 or more                                   4,319,439      4,673,298       3,487,441
Time deposits under $100,000                                       21,293,074     24,456,951      17,227,176
                                                                 ------------   ------------    ------------
Total deposits                                                    112,676,075    119,407,706      86,931,667

Other borrowed money                                                  550,000         750000       1,010,000
Other liabilities                                                   1,201,281      1,574,122       1,516,773
                                                                 ------------   ------------    ------------
Total liabilities                                                 114,427,356    121,731,828      89,458,440

Stockholders' equity
Common stock, no par value;
20,000,000 shares authorized; issued and outstanding 
1,115,950; 1,112,390 and 1,039,435 for March 31, 1999,
December31, 1998 and March 31, 1998, respectively.                  4,506,694      4,470,170       4,191,245
Accumulated other comprehensive income                               (258,584)      (188,166)       (340,999)
Retained earnings                                                   5,341,087      5,154,666       4,136,613
                                                                 ------------   ------------    ------------
Total stockholders' equity                                          9,589,197      9,436,670       7,986,859
                                                                 ------------   ------------    ------------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                         $124,016,553   $131,168,498    $ 97,445,299
                                                                 ------------   ------------    ------------
                                                                 ------------   ------------    ------------
</TABLE>

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

<PAGE>

                              HERITAGE OAKS BANCORP
                        CONSOLIDATED STATEMENTS OF INCOME
                      For the three months ended March 31,

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

Interest and fees on loans                                            $1,768,205          $1,460,504
Investment securities                                                    281,253             281,793
Federal funds sold and commercial paper                                  149,193              18,234
Time certificates of deposit                                               6,609               6,614
                                                                      ----------          ----------
Total interest income                                                  2,205,260           1,767,145

Interest Expense:                                                                                   

Now accounts                                                             154,729             170,355
MMDA accounts                                                             43,738              53,556
Savings accounts                                                          62,484              64,188
Time deposits of $100,000 or more                                         46,119              24,102
Other time deposits                                                      282,191             211,366
Other borrowed funds                                                      16,643              23,304
                                                                      ----------          ----------
Total interest expense                                                   605,904             546,871

Net Interest Income Before Prov. for Possible Loan Losses              1,599,356           1,220,274
Provision for loan losses                                                 42,000              21,000
                                                                      ----------          ----------
Net interest income after provision for loan losses                    1,557,356           1,199,274

Non-interest Income:

Service charges on deposit accounts                                      173,448             146,904
Investment securities gains (losses), net                                      0              -1,841
Other income                                                           1,027,440           1,436,304
                                                                      ----------          ----------
Total Non-interest Income                                              1,200,888           1,581,367

Non-interest  Expense:                                                                               
Salaries and employee benefits                                           870,718             683,683
Occupancy and equipment                                                  342,409             270,068
Other expenses                                                         1,233,229           1,307,432
                                                                      ----------          ----------
Total Noninterest Expenses                                             2,446,356           2,261,183
Income before provision for income taxes                                 311,888             519,458
Provision for applicable income taxes                                    122,577             191,050
                                                                      ----------          ----------
Net Income                                                            $  189,311          $  328,408
                                                                      ----------          ----------
                                                                      ----------          ----------

Earnings per share: (See note #4)
Basic                                                                      $0.17               $0.29
Fully Diluted                                                              $0.15               $0.26
</TABLE>

See notes to condensed financial statements

<PAGE>

                              HERITAGE OAKS BANCORP
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      Periods ended March 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                                             1998                1998
                                                                       (UNAUDITED)         (UNAUDITED)
<S>                                                                  <C>                 <C>
Cash flows from operating activities:
(dollars in thousands)
Net Income                                                           $    189,311        $    328,408
Adjustments to reconcile net income to net cash
provided by operating activities:

Depreciation and amortization                                             132,583              95,575
Provision for possible loan loss                                           42,000              21,000
Increase (decrease) in deferred loan fees                                 (70,418)            116,801
Net loss on sales of investment securities                                      0               1,841
Amortization of premiums (Discount accretion)
on investment securities, net                                            (125,846)            (25,691)
Loss on sale of other real estate owned                                         0                   0
Gain on sale of property, premises, and equipment                               0              (4,000)
Decrease (increase) in other assets                                      (310,206)            120,644
Increase (decrease) in other liabilities                                 (372,841)           (125,913)
Net cash used in operating activities                                    (515,417)            528,665


Cash flows from investing activities:
Purchase of investment securities                                     (16,472,099)         (3,101,085)
Proceeds from sales, princ reductions and maturities
from investment securities                                             20,645,937           3,844,830
Increase in time deposits with other banks                                      0             345,329
Net additions to real estate acquired in settlement of loans                    0                   0
Purchase of insurance policies                                           (238,185)            (12,093)
Increase in loans, net                                                 (4,545,949)         (5,945,718)
Purchase of property, premises and equipment, net                        (382,818)            (78,707)
Net cash used in investing activities                                    (993,114)         (4,947,444)

Cash flows from financing activities:
Increase (decrease) in deposits, net                                   (6,732,452)          3,382,009
Net (decrease) increase in other borrowings                              (200,000)          1,010,000
Proceeds from exercise of stock options                                    36,524              10,759
Cash paid in lieu of fractional shares                                     (2,889)           (519,716)
Net cash provided by (used in) financing activities                    (6,898,817)          3,883,052

Net increase (decrease) in cash and cash equivalents                   (8,407,348)           (535,727)
Cash and cash equivalents at beginning of year                         24,939,179          12,991,388
Cash and cash equivalents at end of period                           $ 16,531,831        $ 12,455,661
</TABLE>

See notes to condensed financial statements

<PAGE>


                              HERITAGE OAKS BANCORP
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                        March 31, 1999 and March 31, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>                                                                                    ACCUMULATED
                                                                                                OTHER              TOTAL
                                                 SHARES         COMMON       RETAINED       COMPREHENSIVE       STOCKHOLDERS'
                                              OUTSTANDING       STOCK        EARNINGS          INCOME              EQUITY
<S>                                           <C>            <C>           <C>              <C>                 <C>
Balance December 31, 1998                     1,069,791      $4,470,170    $5,154,666         $(188,166)           $9,436,670

Exercise of Stock Options                         3,500          36,524             0                              $   36,524

Cash dividends paid                                   0               0             0                                      $0

Stock dividend - 4%                              42,659                                                                    $0
Cash paid to Shareholders' in Lieu of                                                                                
   fractional shares on 4% Stock Dividend                                      (2,890)                                 $2,890

Comprehensive Income                                                                                                 
  Net Income                                                                  189,311                              $  189,311
  Unrealized Security Holding Gains                                                                                  
     (net of $36,047 tax)                                                                        (87,360)             (87,360)
      Less Reclassification Adjustment for                                                                           
      Losses (net of $6,990 tax)                                                                  16,942               16,942
                                                                                                 -------              -------
   Total Other Comprehensive Income                                                                                  

Total comprehensive Income                                                                                         $  118,893

BALANCE MARCH 31, 1999                        1,115,950      $4,506,694    $5,341,087          $(258,584)          $9,589,197
</TABLE>

<TABLE>
<CAPTION>                                                                                    ACCUMULATED
                                                                                                OTHER              TOTAL
                                                 SHARES         COMMON       RETAINED       COMPREHENSIVE       STOCKHOLDERS'
                                              OUTSTANDING       STOCK        EARNINGS          INCOME              EQUITY
<S>                                           <C>            <C>           <C>              <C>                 <C>
Balance December 31, 1997                     1,036,626      $4,180,486    $4,327,921         $(381,329)           $8,127,078

Exercise of Stock Options                         2,809          10,759             0                              $   10,759

Cash dividends paid ..$.50 per share                  0               0      (519,716)                             $ (519,716)

Comprehensive Income                                                                                                         
  Net Income                                                                  328,408                              $  328,408
  Unrealized Security Holding Gains                                                              40,330
                                                                                                                       40,330

   Total Other Comprehensive Income
Total comprehensive Income                                                                                         $  368,738

BALANCE MARCH 31, 1998                       1,039,435       $4,191,245    $4,136,613          $(340,999)          $7,986,859
</TABLE>

<PAGE>

NOTES TO CONSOLIDATED CONDENSED FINANACIAL STATEMENTS

Note 1: CONSOLIDATED FINANCIAL STATEMENTS

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

Certain information and footnote disclosures normally presented in financial 
statements prepared in accordance with generally accepted accounting 
principles have been omitted. These interim consolidated condensed financial 
statements should be read in conjunction with the consolidated financial 
statements and notes thereto included in the Company's 1998 Annual Report to 
shareholders. The results for the three months ended March 31, 1999 and March 
31, 1998may not necessarily be indicative of the operating results for the 
full year.

Note 2: INVESTMENT SECURITIES

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

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

<TABLE>
<CAPTION>
                                                                                   GROSS       GROSS
                                                                    AMORTIZED    UNREALIZED  UNREALIZED       FAIR
MARCH 31, 1999                                                        COST         GAINS       LOSSES         VALUE
<S>                                                                <C>           <C>         <C>          <C>
Obligations of U.S. government agencies and corporations           $ 1,999,881    $ 1,479     $      0    $ 2,001,360
Mortgage-backed securities                                           6,927,528     16,236      214,487      6,729,277
Commercial Paper                                                     1,954,604          0        5,104      1,949,500
Obligations of State and Political Subdivisions                        497,504          0        4,344        493,160
                                                                   -----------    -------     --------    -----------
TOTAL                                                              $11,379,517    $17,715     $223,935    $11,173,297
                                                                   -----------    -------     --------    -----------
                                                                   -----------    -------     --------    -----------
</TABLE>

<TABLE>
<CAPTION>
                                                                                   GROSS       GROSS
                                                                    AMORTIZED    UNREALIZED  UNREALIZED       FAIR
DECEMBER 31, 1998                                                     COST         GAINS       LOSSES         VALUE
<S>                                                                <C>           <C>         <C>          <C>
U.S. Treasury securities                                           $         0    $      0    $      0    $         0
Obligations of U.S. government agencies and corporations             1,650,875     163,545           0      1,814,420
Mortgage-backed securities                                           3,286,605       2,903     214,455      3,075,053
Commercial Paper                                                     7,969,833           0           0      7,969,833
Obligations of State and Political Subdivisions                              0           0           0              0
Other Securities                                                         3,800           0           0          3,800
                                                                   -----------    -------     --------    -----------
TOTAL                                                              $12,911,113    $166,448    $214,455    $12,863,106
                                                                   -----------    -------     --------    -----------
                                                                   -----------    -------     --------    -----------
</TABLE>


<PAGE>

Note 2: INVESTMENT SECURITIES  (continued)

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

<TABLE>
<CAPTION>
                                                                                   GROSS       GROSS
                                                                    AMORTIZED    UNREALIZED  UNREALIZED       FAIR
MARCH 31, 1999                                                        COST         GAINS       LOSSES         VALUE
<S>                                                                <C>           <C>         <C>          <C>
U.S. Treasury securities                                           $         0    $      0    $     0     $         0
Obligations of U.S. government agencies and corporations             1,250,093      20,428     25,981       1,244,540
Mortgage-backed securities                                           6,021,898      11,658     55,331       5,978,225
Obligations of State and political subdivisions                      6,172,309     134,462      2,926       6,303,845
Other securities                                                         3,800           0          0           3,800
                                                                   -----------    --------    -------     -----------
TOTAL                                                              $13,448,100    $166,548    $84,238     $13,530,410
                                                                   -----------    --------    -------     -----------
                                                                   -----------    --------    -------     -----------
</TABLE>

<TABLE>
<CAPTION>
                                                                                   GROSS       GROSS
                                                                    AMORTIZED    UNREALIZED  UNREALIZED       FAIR
DECEMBER 31, 1998                                                     COST         GAINS       LOSSES         VALUE
<S>                                                                <C>           <C>         <C>          <C>
U.S. Treasury securities                                           $    98,777    $      0    $   777     $    98,000
Obligations of U.S. government agencies and corporations             1,235,905      25,798        132       1,261,571
Mortgage-backed securities                                           8,168,695     283,004     12,759       8,438,940
Obligations of state and political subdivisions                      6,254,774      14,059      8,337       6,260,496
                                                                   -----------    --------    -------     -----------
TOTAL                                                              $15,758,151    $322,861    $22,005     $16,059,007
                                                                   -----------    --------    -------     -----------
                                                                   -----------    --------    -------     -----------
</TABLE>

Note 3: Loans and Reserve for Possible Loan Losses

Major classifications of loans were:

<TABLE>
<CAPTION>
                                                                   MARCH 31,        DECEMBER 31,
                                                                        1999                1998
<S>                                                              <C>                 <C>
Commercial, financial, and agricultural                          $42,623,814         $38,220,932
Real estate-construction                                           8,400,392           8,357,701
Real estate-mortgage                                              22,810,241          21,672,158
Installment loans to individuals                                   2,420,957           2,611,325
All other loans (including overdrafts)                               196,445             323,493
                                                                 -----------         -----------
                                                                  76,451,849          71,185,609

Less - deferred loan fees                                           (325,956)           (313,033)
Less - reserve for possible loan losses                           (1,113,884)         (1,069,535)
                                                                 -----------         -----------

Total loans                                                      $75,012,009         $69,803,041
                                                                 -----------         -----------
                                                                 -----------         -----------

Loans Held For Sale                                              $   991,746         $ 1,654,765
</TABLE>

Concentration of Credit Risk

At March 31, 1999, approximately $31,210,633 of the Bank's loan portfolio was 
collateralized by various forms of real estate. Such loans are generally made 
to borrowers located in San Luis Obispo County. The Bank attempts to reduce 
its concentration of credit risk by making loans which are diversified by 
project type. While management believes that the collateral presently 
securing this portfolio is adequate, there can be no assurances that 
significant deterioration in the California real estate market would not 
expose the Bank to significantly greater credit risk.

Loans on nonaccrual status totaled $884,694 and $934,389 at March 31, 1999 
and December 31, 1998, respectively. Interest income that would have been 
recognized on non-accrual loans if they had performed in accordance with the 
terms of the loans was approximately $20,005, $103,164, for the period ended 
March 31, 1999 and December 31, 1998, respectively.

<PAGE>

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

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

<TABLE>
<CAPTION>
                                                MARCH 31,        DECEMBER 31,
                                                     1999                1998
<S>                                            <C>               <C>
Balance at beginning of year                   $1,069,535            $930,284
Additions charged to operating expense             42,000             164,000
Loans charged off                                  (2,828)            (45,277)
Recoveries of loans previously charged off          5,177              20,528
Balance at end of year                         $1,113,884          $1,069,535
</TABLE>

At March 31, 1999, the Bank was contingently liable for letters of credit 
accommodations made to its customers totaling $859,404 and undisbursed loan 
commitments in the amount of $27,567,300. The Bank makes commitments to 
extend credit in the normal course of business to meet the financing needs of 
its customers. Commitments to extend credit are agreements to lend to a 
customer as long as there is no violation of any condition established in the 
contract. Commitments generally have fixed expiration dates or other 
termination clauses and may require payment of a fee. Since many of the 
commitments are expected to expire without being drawn upon, the total 
outstanding commitment amount does not necessarily represent future cash 
requirements. Standby letters of credit written are conditional commitments 
issued by the Bank to guarantee the performance of a customer to a third 
party. The credit risk involved in issuing letters of credit is essentially 
the same as that involved in extending loan facilities to customers. The Bank 
anticipates no losses as a result of such transactions.

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

Management believes that the allowance for credit losses at March 31, 1999 is 
prudent and warranted, based on information currently available. However, no 
prediction of the ultimate level of loans charged-off in future years can be 
made any certainty.

Note 4: Earnings Per Share:

Basic earnings per share are based on the weighted average number of shares 
outstanding before any dilution from common stock equivalents. Diluted 
earnings per share includes common stock equivalents from the effect of the 
exercise of stock options. The total number of share used for calculating 
basic and diluted for March 31, 1999 was 1,128,224 and 1,256,979, 
respectively. The total number of shares used for calculating basic and 
diluted for March 31, 1998 was 1,082,473 and 1,151,650, respectively.

<PAGE>

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

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

SUMMARY OF FINANCIAL RESULTS

As of March 31, 1999, total consolidated assets of Heritage Oaks Bancorp were 
$124,016,553 compared to $97,445,299 as of March 31, 1998. Total consolidated 
assets at December 31, 1998 were $131,168,498. The 37.7% increase in total 
assets from March 31, 1998 to March 31, 1999 was attributable to growth from 
new branches opened during the first quarter of 1999 and steady growth during 
the final three quarters of 1998.

Total cash at March 31, 1999 was $12,231,831. The large cash balance reflects 
the cash needed to fund the Bank's automatic teller machine ("ATM") network. 
As of March 31, 1999, the Bank was operating approximately 80 ATMs.

Total net loans at March 31, 1999 were $75,012,009, which was up $5,208,968 
from the $69,803,041 at December 31, 1998. Management intends to continue its 
aggressive marketing of new loans. The total net loans outstanding are up 
$15,978,050 from March 31, 1998. This increase from a year ago is as a result 
of the expansion in the number of branches and the reputation our Bank has 
established in our market area.

Securities available for sale are carried at market value, which was 
$11,173,298 at March 31, 1999 compared to $12,863,106 at December 31, 1998. 
Securities held to maturity are carried at their amortized cost of 
$13,225,160 at March 31, 1999 compared to $15,758,151 at December 31, 1998.

Federal funds sold were $4,300,000 at March 31, 1999 and $7,700,000 at  
December 31, 1998.

Total deposits were $112,676,075 at March 31, 1999 as compared to 
$119,407,706 in deposits at December 31, 1998. The decrease is approximately 
$5 million on deposit for one particular customer as of December 31, 1998 
that remained on deposit for less than one week. The remainder of the 
difference is due to 


<PAGE>

certain accounts (title insurance) whose balances fluctuate by more than $2 
million on any given day.

Core deposits (time deposits less than $100,000, demand, and savings) 
gathered in the local communities served by the Bank continue to be the 
Bank's primary source of funds for loans and investments. Core deposits of 
$108,356,636 represented 96.2% of total deposits at March 31, 1999. The 
Company does not purchase funds through deposit brokers.

Other borrowed money was $550,000 at March 31, 1999. At December 31, 1998, 
total other borrowings were $750,000.

RESULTS OF OPERATIONS

The Company reported net income for the three months ended March 31, 1999 of 
$189,311 compared to $328,408 for the same period in 1998. Basic earnings per 
share at March 31,1999 and March 31, 1998 were $.17 and $.29, respectively. 
Diluted earnings per share at March 31, 1999 and March 31, 1998 were $.15 and 
$.26, respectively. The decrease in earnings is a direct result of 1) 
start-up costs for the new branch offices opened in Santa Maria on February 
1, 1999 and Atascadero on March 15, 1999 and 2) reduced non-interest income 
due to the loss of certain off-premise ATM activity and change in the 
Merchant Bankcard composition.

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

Net Interest Income

Net interest income, the primary component of the net earnings of a financial 
institution, refers to the difference between the interest paid on deposits 
and borrowings, and the interest earned on loans and investments. The net 
interest margin is the amount of net interest income expressed as a 
percentage of average earning assets. Factors considered in the analysis of 
net interest income are the composition and volume of earning assets and 
interest-bearing liabilities, the amount of non-interest bearing liabilities 
and non-accrual loans, and changes in market interest rates.

Net interest income for the three months ended March 31, 1999 was $1,599,356. 
This represents an improvement of $379,082 or 31.1% more than the $1,220,274 
for the same period in 1998. As a percentage of average earning assets, the 
net interest margin for 


<PAGE>


the first three months of 1999 decreased to 6.11% from 6.15% in the same 
period one year earlier. The decrease in net interest margin is primarily due 
to a decline in the yield on earning assets that outpaced the decline on 
yield in interest bearing liabilities. The average balance of demand deposits 
at March 31, 1999 has grown $15,800,000 from the previous year.

Average interest earning assets were $104,605,000 for March 31, 1999 compared 
to $79,407,000 for March 31, 1998. Average interest-bearing liabilities 
increased to $79,512,000 at March 31, 1999 from $67,259,000 at March 31, 
1998. Average interest rates on interest-bearing liabilities dropped from 
3.29% for the first three months of 1998 to 3.05% for the first three months 
of 1999.

                                       
                  AVERAGE BALANCE SHEET INFORMATION FOR MARCH 31,

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)

                                           -----------------------------------  ----------------------------------
                                                         1999                              1998
                                           AVERAGE  AVERAGE YIELD    AMOUNT     AVERAGE  AVERAGE YIELD    AMOUNT
                                           BALANCE    RATE PAID     INTEREST    BALANCE    RATE PAID     INTEREST
                                           -----------------------------------  ----------------------------------
<S>                                        <C>       <C>            <C>        <C>       <C>            <C>
Interest Earning Assets:
  Time deposits with other banks           $    668      4.79%       $    8     $   504      5.63%       $     7
  Investment securities taxable              17,556      6.40%          281      15,790      6.11%           238
  Investment securities non-taxable           6,399      4.63%           74       3,734      4.67%            43
  Federal funds sold                          4,533      6.47%           73       1,144      6.38%            18
  Loans (1) (2)                              75,449      9.37%        1,768      58,235     10.17%         1,461
                                           --------                  ------     -------                  -------

  Total interest earning assets             104,605      8.43%        2,205      79,407      9.02%         1,767
                                           --------                  ------     -------                  -------

Allowance for possible loan losses           (1,098)                               (830)
Non-earning assets:

  Cash and due from banks                    15,004                              11,042
  Property, premises and equipment            2,675                               1,945
  Other assets                                3,549                               2,778
                                           --------                             -------

TOTAL ASSETS                               $124,735                             $94,342
                                           --------                             -------

Interest -bearing liabilities:

  Savings/NOW/money market                   51,463      2.03%          261      46,326              2.52%             288
  Time deposits                              27,315      4.81%          328      19,206              4.96%             235
  Other borrowings                              733      9.08%           17       1,727              5.40%              23
                                           --------                  ------     -------                              -----

  Total interest-bearing liabilities         79,512      3.05%          606      67,259              3.29%             546
                                           --------                  ------     -------                              -----

Non-interest bearing liabilities:

  Demand deposits                            34,062                              18,262
  Other liabilities                           1,584                               1,436
                                           --------                             -------

  Total liabilities                         115,157                              86,957
                                           --------                             -------

Stockholders' equity

  Common stock                                4,493                               4,135
  Retained earnings                           5,296                               3,687
  Valuation Allowance Investments              (212)                               (437)
                                           --------                             -------

  Total stockholders' equity                  9,578                               7,385
                                           --------                             -------

TOTAL LIABILITIES AND STOCKHOLDERS'
  EQUITY                                   $124,735                             $94,342
                                           --------                             -------

Net Interest Income                                                  $1,599                                      $1,221
                                                                     ------                                      ------
Net Interest Margin (3)                                  6.11%                               6.15%
</TABLE>

     (1)  Nonaccrual loans have been included in total loans.

     (2)  Loan fees of $85,689 and $68,600 for 1999 and 1998, respectively, 
          have been included in the interest income computation.

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

<PAGE>

The preceding table sets forth average balance sheet information, interest 
income and expense, average yields and rates and net interest income and 
margin for the three months ended March 31, 1999 and 1998.

Non-interest Income

Non-interest income consists of bankcard merchant fees, automatic teller 
machine ("ATM") transactions, and other fees, service charges, and gains on 
other real estate owned. Non-interest income for the three months ended March 
31, 1999 was $1,200,888 compared to $1,581,367 for the comparable period in 
1998. Service charge income increased from $146,904 during the first three 
months of 1998 to $173,448 for the three months ended March 31, 1999. The 
increase in service charges is a direct result of the bank's growth in 
deposit accounts. ATM transaction fees and interchange income were $762,056 
during the three months ended March 31, 1999 compared to $1,089,685 during 
the same period for 1998. The Bank receives income for each transaction. The 
competition related to the installation of ATM machines has been increasing 
and has reduced current income from these machines. One particular high 
volume casino did not renew their contract with the Bank in November 1998. In 
addition, another casino reduced the number of Bank ATMs at their site by 
three machines during that same period. To replace this revenue, the Bank has 
added off-premise ATMs and increased the number to 80 at March 31, 1999 from 
61 for the same period in 1998. However, the revenue generated by the new 
locations is not as significant as the casino ATMs that are no longer in 
service. The Bank intends to continue to add off-premise locations to enhance 
this revenue. Income from bankcard merchant fees decreased to $176,075 for 
the three months ended March 31, 1999 compared to $190,399 for the same 
period during 1998. This decrease will continue throughout 1999, as certain 
higher risk merchants are no longer processing through the Bank.

Non-interest Expense

Salary and related expense was $870,718 for the period ending March 31, 1999 
as compared to $683,683 for the same period in 1998. This is an increase of 
$187,035 or 27.4%. Approximately $100,000 of this increase is related to the 
two new branch offices that opened in Santa Maria and Atascadero on February 
1, 1999 and March 15, 1999, respectively. Staff members for the two new 
offices were on board prior to year end 1998 in order to be 


<PAGE>

fully trained and to begin solicitation of both deposit and loan accounts. To 
achieve loan growth goals, additional lenders were added to the Bank's staff 
during the latter part of 1998. Full time equivalent employees were 68 at 
March 31, 1999 compared to 64 at March 31, 1998.

Occupancy and equipment costs grew to $342,409 for the three months ended 
March 31, 1999 from $270,068 for the comparable period of 1998. Approximately 
$30,000 of this $72,341 increase is due to the two additional full service 
branch offices opened during the first quarter of 1999. Other costs were for 
upgrades to equipment and services in conjunction with Year 2000 Compliance 
(Y2K). All mission critical systems have been successfully tested to function 
properly on and after January 1, 2000.

Other non-interest expense decreased to $1,233,229 for the three months ended 
March 31, 1999 compared to $1,307,432 for the same period in 1998. Even 
though the number of off-premise ATMs has increased, costs associated with 
providing this product has declined due to one particular high volume casino 
that opted to change their method of providing ATM service, thereby, 
eliminating our involvement. This change occurred during the fourth quarter 
of 1998. Costs associated with ATM processing was $344,747 for the three 
months ended March 31, 1999 compared to $547,014 for the same period during 
1998.

Local Economy

The California economy is expected to continue growing at a modest rate. The 
local economy in the Bank's primary service area is anticipated to show 
higher rates of growth than the state as a whole. The Bank's branch locations 
have been located to take advantage of this growing economy. During the first 
quarter, the Bank opened two new full service branches in Santa Maria and 
Atascadero. The Santa Maria location is staffed with two experienced 
commercial loan officers who had previously been with a local bank that sold 
to Mid State Bank during 1998.

Capital

The Company's total stockholders equity was $9,589,197 as of March 31, 1999 
compared to $9,436,670 as of December 31, 1998. The increase in capital was 
from net income of $189,311, a ($70,418) adjustment in accounting for other 
comprehensive income, $36,524 in options exercised and a ($2,890) fractional 


<PAGE>

share cost as a result of a 4% stock dividend issued February 26, 1999.

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

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

Summarized below are the bank's capital ratios at March 31, 1999.

<TABLE>
<CAPTION>
                                      Minimum Regulatory       Heritage
                                     Capital Requirements       Oaks Bank
<S>                                  <C>                       <C>
Leverage Ratio                              4.00%                 7.49%

Tier One Risk Based Capital Ratio           4.00%                10.55%

Total Risk Based Capital Ratio              8.00%                11.82%
</TABLE>

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


<PAGE>

Liquidity

The objective of liquidity management is to ensure the continuous 
availability of funds to meet the demands of depositors, investors and 
borrowers. Asset liquidity is primarily derived from loan payments and the 
maturity of other earning assets. Liquidity from liabilities is obtained 
primarily from the receipt of new deposits. The Bank's Asset Liability 
Committee (ALCO) is responsible for managing the on-and off-balance sheet 
commitments to meet the needs of customers while achieving the Bank's 
financial objectives. ALCO meets regularly to assess the projected funding 
requirements by reviewing historical funding patterns, current and forecasted 
economic conditions, and individual customer funding needs. Deposits 
generated from Bank customers serve as the primary source of liquidity. The 
Bank has credit arrangements with correspondent banks, which serve as a 
secondary liquidity source in the amount of $3,500,000 and additionally can 
borrow money through repurchase agreements with two brokerage firms.

The Bank manages its liquidity by maintaining a majority of its investment 
portfolio in federal funds sold and other liquid investments. At March 31, 
1999, the ratio of liquid assets to deposits and other liabilities was 
23.40%. The ratio of gross loans to deposits, another key liquidity ratio, 
was 68.36% at March 31, 1999.

Inflation

The assets and liabilities of a financial institution are primarily monetary 
in nature. As such, they represent obligations to pay or receive fixed and 
determinable amounts of money which are not affected by future changes in 
prices. Generally, the impact of inflation on a financial institution is 
reflected by fluctuations in interest rates, the ability of customers to 
repay debt and upward pressure on operating expenses. In addition, inflation 
affects the growth of total assets by increasing the level of loan demand, 
and may potentially adversely affect the Bank's capital adequacy because loan 
growth in inflationary periods may increase more rapidly than capital. The 
effect on inflation during the period ended March 31, 1999 has not been 
significant to the Bank's financial position or result of operations. Year 
2000 Risks and Preparedness

Many existing computer programs use only two digits to identify a year in a 
data field. These programs were designed and developed 


<PAGE>


without considering the impact of the upcoming change in the century. If not 
corrected, many computer applications could fail or create erroneous results 
by or at the Year 2000 or possibly earlier. The Year 2000 issue affects the 
Company in that the financial services business is highly dependent on 
computer applications in a variety of ways, including the following (I) the 
Company relies on computer systems in almost all aspects of its business, 
including the processing of deposits, loans and other services and products 
offered to customers, the failure of which in connection with the Year 2000 
could cause systemic disruptions and failures in the products and services 
offered by the Company, (ii) other banks, clearing houses and vendors whose 
products and services the Company uses are at risk of systemic disruptions 
and potential failures in the event that such entities have not adequately 
addressed their Year 2000 issue prior to the Year 2000, (iii) the 
creditworthiness of borrowers of the Company might be diminished by 
significant disruptions of their business as a result of their own or others 
failure to address adequately the Year 2000 issues prior to the Year 2000, 
and (iv) federal balancing agencies have issued interagency guidance on the 
business-wide risk posed to financial institutions by the year 2000 problem 
pursuant to which the federal banking agencies may take supervisory action 
against financial institutions that fail to address appropriately Year 2000 
issues prior to the Year 2000, including formal and informal enforcement 
actions, denial of applications to the federal banking agencies, civil money 
penalties and a reduction in the management component rating of the 
institutions composite rating.

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

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


<PAGE>


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

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

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

The Company has created a budget specific to Year 2000 readiness. The budget 
is comprised of the following components: (1) consulting assistance for 
testing, (2) Auditing, and (3) Operating system and network upgrades. This 
component is budgeted at $191,000. As of March 31, 1999, a total of $117,954 
or 47% has been spent, $46,850 in 1999 and $71,104 in 1998. Senior Management 
reviews the budget from time to time as the Year 2000 Plan is implemented. 
There is no assurance that additional amounts will not be added to the 
amounts already budgeted for Year 2000 expenditures. With respect components 
number (1) and 

<PAGE>

(2), it should be noted that Heritage Oaks Bank has the resources in-house to 
audit review of the effectiveness of the Year 2000 Plan and the technological 
assistance necessary in preparing for and conducting the Company's testing 
plan.

In addition, the Company has dedicated significant human resources to the 
Year 2000 Plan. This includes the salaries and benefits of personnel devoting 
significant time to the plan. As of March 31, 1999, the Company had expended 
over $22,000 in "man-hours" to the project. In addition, expenditures have 
been made in the areas of advertising and public relations, customer and 
employee awareness programs and more.

In April of 1998, the Company initiated a credit risk assessment program, 
with loan officers completing a Year 2000 questionnaire for all new and 
renewed credits in amounts over $150,000.00. These questionnaires were 
designed to provide the Company's management with information by which it 
could evaluate the borrower's awareness of and sensitivity to Year 2000 risk. 
Questionnaires are reviewed and discussed at weekly Officer Loan Committee 
meetings and are further reviewed by Credit Administration and Senior Lender 
to ascertain Year 2000 risk associated with the credit. As a result of this 
review, $89,410 has been allocated to the Company's loan loss provision. In 
addition, legal ~ Year 2000 issues are included in significant commitment 
letters and loan documentation for certain borrowers. Finally, on loan 
participation's purchased, the Company requires assurances from the lead 
lender that it has obtained a Year 2000 questionnaire from the borrower and 
also that the lead lender is satisfactorily progressing toward Year 2000 
compliance.

Although the Company believes that its Year 2000 Plan and other steps being 
taken are adequate to ensure that it will not be materially affected by the 
Year 2000 problem, there can be no assurance that the Year 2000 Plan and the 
Company's other Year 2000 remedial and contingency plans will fully protect 
the Company from the risks associated with the Year 2000. The analysis of, 
and preparation for, the Year 2000 and related problems necessarily rely on a 
variety of assumptions about future events and there can be no assurance that 
the Company's Management has accurately predicted such future events or that 
the remedial and contingency plans of the Company will adequately address 
such future events. In the event that the business of the Company, of vendors 
of the Company or of customers of the Company is disrupted as a result of the 
Year 2000 problem, such disruption could have a material adverse effect on 
the Company.


<PAGE>

PART 2.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

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

SIGNATURES

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

HERITAGE OAKS BANCORP

DATE: May 5, 1999


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


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