**SECURITIES
AND EXCHANGE COMMISSION**
 **WASHINGTON,
D.C. 20549**
 **FORM
10-KSB/A**
 **Amendment
No. 2**
 
 [X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 for the
Year ended December
31, 2004
 
 OR
 
 [  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the
transition period from ________ to
_________
 
 Commission
file number 0-25020
 
 **Heritage
Oaks Bancorp**
 (Exact
name of registrant as specified in its charter)
 State
      of California
    77-0388249(State or other jurisdiction of
    (I.R.S.
      Identification No.)employee incorporation or
      organization)545 12th Street, Paso Robles, California
      93446
    (805)
      239-5200(Address of principal executive offices) (Zip
      Code)
    Registrant’s telephonenumber, including area code
 
 Securities
registered pursuant to Section 12(b) of the Act: None
 
 Securities
registered pursuant to Section 12(g) of the Act:
   Title of each class
    Name of each exchange on which
      registeredCommon Stock, (no par value)
    Nasdaq SmallCap
  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 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 90 days. Yes [X] No [
 ]
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [X].
 
 Indicate
by check mark whether the registrant is an accelerated filer (as defined in
Exchange Act Rule 12b-2).
 Yes[ 
] No [X]
 
 Registrant's
revenue for 2004 was $28.3 million. The aggregate market value of the voting
stock held by non-affiliates of the Registrant at February 1, 2005 was $60.9
million. As of February 1, 2005, the Registrant had 3,817,943 shares of Common
Stock outstanding.
 
 
 Transitional
Small Business Disclosure Format (check one)  Yes [  ]
No[X]
 
 
  **HERITAGE
OAKS BANCORP**
 
 **AMENDMENT
NO. 2 ON FORM 10-KSB/A**
 **TO**
 **ANNUAL
REPORT ON FORM 10-KSB**
 
 **FOR
THE YEAR ENDED DECEMBER 31, 2004**
 
 **EXPLANATORY
NOTE**
 
 Heritage
Oaks Bancorp (“we”, “us”, “our”, or the “Company”) filed its Annual Report on Form 10-KSB
and subsequent Form 10-KSB/A, Amendment No. 1, for the fiscal year ended
December 31, 2004 (the “2004 10-KSB”) with the Securities and Exchange
Commission (the “Commission”) on March 23, 2005.
 
 At the
time of both the 10-KSB and 10-KSB/A, Amendment No. 1, the following documents
were incorporated by reference in Part III, Items 9 through 12 and 14 of the
Company’s definitive proxy statement for the 2005 annual meeting of
shareholders. The Company’s Form 14A, Definitive Proxy Statement was filed with
the SEC on May 6, 2005, three days past the due date to incorporate Part III,
Items 9 through 12 and 14 , by reference in the Company’s 10/KSB for December
31, 2004. We are filing this 10-KSB/A to include those items previously
incorporated by reference from our definitive proxy statement.
 
 Except
for the matters disclosed in this Form 10-KSB/A, Amendment No. 2, our 2004
10-KSB/A, Amendment No. 1 continues to speak as of March 23, 2005, which was the
date of its original filing with the Securities and Exchange Commission, and we
have not updated the disclosures contained therein to reflect events that have
occurred since the date of that original filing.
 
    
 
 
 **TABLE
OF CONTENTS**
 
 Part IIIITEM 9.
    DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
      COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACTITEM 10.
    EXECUTIVE
      COMPENSATIONITEM 11.
    SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTITEM 12.
    CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONSIITEM
      13.
    EXHIBITS
      AND REPORTS ON FORM 8-KITEM 14.
    PRINCIPAL
      ACCOUNTANT FEES AND SERVICESSignaturesExhibits
  
 
 Part
III
 
 ITEM
9.  DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
 
 The
following table sets forth certain information as of February 1, 2005 regarding
information concerning its Directors and Executive Officers. The Company knows
of no arrangements, including any pledge by any person of securities of the
Company, the operation of which may, at a subsequent date, result in a change in
control of the Company. There is no family relationship between any of the
directors or executive officers.
 
 Name
    Age
    Position/Background
 
 Dr.
      B. R. Bryant
    72
    Chairman
      of the Board of Directors of the Company and of the Bank since November
      15, 1994, and 1982,****respectively.
      Veterinarian; General Contractor dba B.R. Bryant
    Construction
 
 Donald
      H. Campbell
    63
    Vice
      Chairman of the Board of Directors of the Company and of the Bank since
      November 15, 1994, and 1983, respectively. Owner, El Pomar Vineyard
      Service.
 
 Kenneth
      L. Dewar
    46
    Director
      of the Company and of the Bank since August 27, 1998. President, J.B.
      Dewar, Inc. (wholesale petroleum distribution).
 
 Mark
      C. Fugate
    43
    Director
      of the Company and the Bank since October 31, 2003. Real Estate
      Broker/Assistant Manager, Charter Brokerage
Company.
 
 Dolores
      T. Lacey
    62
    Director
      of the Company and of the Bank since January 23, 1997. Rancher and
      businesswoman.
 
 Merle
      F. Miller
    68
    Director
      of the Company and of the Bank since November 15, 1994, and 1985,
      respectively. Rancher; Owner, Golden Hill Company (land sales and
      development).
 
 Michael
      J. Morris
    59
    Director
      of the Company and of the Bank since January 26, 2001. Attorney, Chairman
      of the Board of the law firm of Andre, Morris &
    Buttery.
 
 Daniel
      J O’Hare
    41
    Director
      of the Company and the Bank since November 19, 2004. Director and active
      tax advisor for Glenn, Burdette, Phillips and Bryson (accounting
      firm).
 
 Alexander
      Simas
    54
    Director
      of the Company and of the Bank since October 31, 2003. Attorney and
      Partner of Kirk & Simas, a law firm.
  Ole
      K. Viborg
    73
    Director
      of the Company since November 15, 1994, and former founding director of
      the Bank. Owner, Ole Viborg, Inc. (paving
contractor).
 
 Lawrence
      P. Ward
    53
    Director,
      President and Chief Executive Officer of the Company and of the Bank since
      November 15, 1994, and January 11, 1993, respectively. President, Chief
      Executive Officer and Director of Bank of Evergreen, Evergreen, Colorado,
      1991-92, and Mountain Valley National Bank, Conifer, Colorado,
      1986-92.
 
 
 
 None of
the Company's or the Bank's Directors is a director of any other company with a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended, or subject to the requirements of Section 15(d) of such
Act or any company registered as an investment company under the Investment
Company Act of 1940, whose common stock is registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended.
 
 The
following is a brief account of the business experience for a minimum of five
years of each non-director executive officer in addition to their current
positions.
 
 Name        Position/Background
 
 Gwen
      R. Pelfrey
    Age:
      53. Secretary of the Company and Secretary, Executive Vice President and
      Chief Administrative Officer of the Bank since November 15, 1994, and
      October 1987, respectively.
 
 Paul
      Tognazzini
    Age:
      55. Executive Vice President/Chief Lending Officer 1990 to
      present.
 
 Margaret Torres
    Age: 54. Executive Vice President and Chief Financial
      Officer of the Company and the Bank since February, 1999.
  Compliance
with Section 16(a) of the Securities Exchange Act of 1934
 
 Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s directors,
executive officers and ten percent or more stockholders of the Company’s equity
securities, to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes of ownership of the Company’s equity
securities. Officers, directors and ten percent or more stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. To the Company’s knowledge, based solely on review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, during the fiscal year ended December 31, 2004,
all Section 16(a) filings **** requirements
applicable to its executive officers, directors and beneficial owners of ten
percent or more of the Company’s equity securities appear to have been
met.
 
 Code of
Ethics
 
 We have
adopted a Code of Conduct, which applies to all employees, officers and
directors of the Company and Bank. Our Code of Conduct meets the requirements of
a “code of ethics” as defined by Item 406 of Regulation S-B and applies to our
Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer,
as well as all other employees, as indicated above. Our Code of Conduct is
posted on our website at *www.heritageoaksbancorp.com* ** under the
heading “Investor Relations - Governance Documents.” Any change to or waiver of
the code of conduct (other than technical, administrative and other
non-substantive changes) will be posted on the Company’s website or reported on
a Form 8-K filed with the Securities and Exchange Commission. While the Board
may consider a waiver for an executive officer or director, the Board does not
expect to grant such waivers.
 
 
 
 Legal
Proceedings Against Officers and/or Directors
 
 N/A
 
 Audit
Committee
 
 Among
other committees, the Company has an audit, executive, nominating/corporate
governance, and compensation and organization committees. The following
describes for the Audit Committee its current membership, the number of meetings
held during 2004, and its function.
 
 The
committee’s current membership consists of Directors Campbell (Chairman),
Bryant, Miller, Simas, Lacey, O’Hare and Dewar.
 
 This
Committee met nine (9) times in 2004. Pursuant to its charter, the Audit
Committee is a standing committee appointed annually by the Board of Directors.
The Committee assists the Board of Directors in fulfilling its responsibility to
the stockholders and depositors relating to the quality and integrity of the
Company’s accounting systems, internal controls and financial-reporting
processes, the identification and assessment of business risks and the adequacy
of overall control environment within the Company. In so doing, they will:
 
 ·
    Subject
      to shareholder ratification, appoint the Company’s independent accountants
      for the annual audit;
 
 ·
    Pre-approve
      all audit or permitted non-audit services performed by the independent
      accountants;
 
 ·
    Review
      recommendations and reports submitted by the regulatory agencies, the
      independent accountants, management, and the Internal
    Auditor;
 
 ·
    Routinely
      report to the Board, the Committee’s activities and all matters of
      significance, making recommendations for change as deemed
      advisable;
 
 ·
    Establish
      and maintain contact with the independent accountants and the Internal
      Auditor to satisfy themselves that audit coverage is adequate, appropriate
      programs are maintained, and activities are executed
    properly;
 
 ·
    Discuss
      directly with management any issues of concern or interest to the
      Committee; and
 
 ·
    Employ
      such resources in the performance of their duties, including access to
      separate legal counsel and external consultants, as the Committee deems
      necessary.
 
 The
Company is subject to the Securities and Exchange Commission and Nasdaq
requirements for an “audit committee financial expert.” Our Board has determined
that Daniel J. O’Hare is an “audit committee financial expert,” as defined by
the SEC and Nasdaq rules.
 
 ITEM
10.  EXECUTIVE
COMPENSATION
 
 Set forth
below is the summary compensation paid or accrued during 2002-2004 to Lawrence
P. Ward, Margaret Torres, Gwen R. Pelfrey and Paul Tognazzini, the only
executive officers of the Company or the Bank to receive total annual salary and
bonus of more than $100,000 during 2004.
 
 
 
 **Annual
      Compensation**
    
    **Long
      Term Compensation****(a)**
      **Name
      and Principal Position**
    
    **(b)**
      **Year**
    
    **(c)**
      **Salary**
      **($)****(1)**
    
    **(d)**
      **Bonus**
      **Compensation**
      **($)****(2)**
    
    **(e)**
      **Other**
      **Annual**
      **Compensation
      (3)**
    
    **(f)**
      **Restricted**
      **Stock**
      **Options/SARs**
      **(#)****(5)**
    
    **(g)**
      **Securities**
      **Underlying**
      **($)**
    
    **(h)**
      **LTIP**
      **Payouts**
      **($)**
    
    **(i)**
      **All
      other**
      **Compensation**
      **($)****(6)**Lawrence
      P Ward
      President
      and
      Chief
      Executive Officer
    
    
    2004
      2003
      2002
    
    $
      $
      $
    226,250
      184,167
      173,279
    
    $
      $
      $
    109,286
      102,500
      80,500
    
    $
    -
      -
      183,820
      (4
    )
    
    -
      -
      -
    
    
    -
      -
      -
    
    
    -
      -
      -
    
    $
      $
      $
    106,236
      94,908
      66,652Margaret
      Torres
      Executive
      Vice President and
      Chief
      Financial Officer
    
    
    2004
      2003
      2002
    
    $
      $
      $
    147,424
      124,095
      118,185
    
    $
      $
      $
    42,000
      41,000
      28,000
    
    $
      $
    49,200
      (7
      74,910
      (7
      -
    )
      )
    
    -
      -
      -
    
    
    -
      -
      -
    
    
    -
      -
      -
    
    $
      $
      $
    32,523
      36,153
      32,469Gwen
      R Pelfrey
      Executive
      Vice President and
      ChiefAdministrativeOfficer
    
    
    2004
      2003
      2002
    
    $
      $
      $
    134,073
      112,256
      105,068
    
    $
      $
      $
    38,122
      32,000
      26,000
    
    
    -
      -
      -
    
    
    -
      -
      -
    
    
    -
      -
      -
    
    
    -
      -
      -
    
    $
      $
      $
    28,451
      31,117
      28,431Paul
      Tognazzini
      Executive
      Vice President and
      Chief
      Lending Officer
    
    
    2004
      2003
      2002
    
    $
      $
      $
    114,847
      106,577
      101,278
    
    $
      $
      $
    82.939
      35,790
      42,962
    
    
    -
      -
      -
    
    
    -
      -
      -
    
    
    -
      -
      -
    
    
    -
      -
      -
    
    $
      $
      $
    37,033
      34,447
      31,310
 
 SUMMARY
COMPENSATION TABLE
 
 (1)
    
    Amounts shown include cash and non-cash compensation
      earned and received as well as amounts earned but deferred at the election
      of those officers under the 401(k) Plan.
 
 (2)
    
    Amount
      shown as bonus payments were earned in the year indicated but not paid
      until the first quarter of the next fiscal year.
 
 (3)
    
    No
      executive officer received perquisites or other personal benefits in
      excess of the lesser of $50,000****or
      10% of each such officer’s total annual salary and bonus.
 
 (4)
    
    Amounts
      shown under Other Annual Compensations for Mr. Ward reflect the difference
      between the exercise price and the fair market value of a stock option for
      26,000 shares exercised by Mr. Ward in
2002.
 
 (5)
    
    The
      Company has a 1990 Stock Option Plan (the “1990 Plan”) and a 1997 Stock
      Option Plan (the “1997 Plan”) pursuant to which options are granted to
      directors and to key, full-time salaried officers and employees of the
      Company and its subsidiary. Options granted under either the 1990 Plan or
      the 1997 Plan were either incentive options or non-qualified stock
      options. Options granted under either the 1990 Plan or the 1997 Plan
      become exercisable in accordance with a vesting schedule established at
      the time of grant. Vesting may not extend beyond ten years from the date
      of grant. Options become fully exercisable upon the sale, merger or
      consolidation of the Company in which the Company is not a survivor
      notwithstanding the vesting provisions under either the 1990 Plan or the
      1997 Plan. Options granted under the Plans are adjusted to protect against
      dilution in the event of certain changes in the Company's capitalization,
      including stock splits and stock dividends. All options granted in the
      years indicated below to the named executive officers were incentive stock
      options and have an exercise price equal to the fair market value of the
      Company's Common Stock on the date of grant. As of December 31, 2004 there
      were no shares remaining for grant in the 1990 Plan. In 1999, the Company
      amended the 1997 Plan to add 99,254 shares. This was approved by the
      Shareholders in the May 1999 Shareholder Meeting. At December 31, 2004,
      39,166 shares remained available for grant under the 1997 Plan.
 
 (6)
    
    Amounts shown for Lawrence P. Ward in the 2004 figures
      includes $91,067 in salary continuation provision, $1,463 in term life
      insurance premiums, $10,843 in excess medical insurance premiums and
      $2,863 in 401(k) matching contributions; in the 2003 figures includes
      $77,001 in salary continuation provision, $1,463 in term life insurance
      premiums, $12,944 in excess medical insurance premiums and $3,500 in
      401(k) matching contributions; and in 2002 represent $53,542 in salary
      continuation provision, $1,463 in term life insurance premiums, $8,897
      excess medical insurance premiums and $2,750 in 401(k) matching
      contributions.
 
 Amounts shown for Margaret A. Torres in 2004 includes
      $25,121 in salary continuation provision, $5,912 in excess medical
      insurance premiums and $1,490 in 401(k) matching contributions; in 2003
      includes $29,224 in salary continuation provision, $5,626 in excess
      medical insurance premiums and $1,303 in 401(k) matching contributions;
      and in 2002 represent $26,206 in salary continuation provision, $5,081 in
      excess medical insurance premiums and $1,182 in 401(k) matching
      contributions.
 
 Amounts shown for Gwen R. Pelfrey in 2004 includes
      $19,546 in salary continuation provision, $7,200 in excess medical
      insurance premiums and $1,705 in 401(k) matching contributions; in 2003
      includes $21,271 in salary continuation provision, $7,200 in excess
      medical insurance premiums and $2,646 in 401(k) matching contributions;
      and in 2002 represent $20,289 in salary continuation provision, $5,400 in
      excess medical insurance premiums, $2,742 in 401(k) matching
      contributions.
 
 Amounts shown for Paul Tognazinni in 2004 includes
      $25,833 in salary continuation provision, $7,200 in excess medical
      insurance premiums and $4,000 in 401(k) matching contributions; in 2003
      includes $23,747 in salary continuation provision, $7,200 in excess
      medical insurance premiums and $3,500 in 401(k) matching contributions;
      and in 2002 represent $23,160 in salary continuation provision, $5,400 in
      excess medical insurance premiums and $2,750 in 401(k) matching
      contributions.
 
 (7)
    
    Amounts
      shown under Other Annual Compensations for Ms. Torres reflect the
      difference between the exercise price and the fair market value of a stock
      option for 3,000 shares exercised by Ms. Torres of $43,200 and $6,000 in
      Auto Allowance in 2004: and the difference between the exercise price and
      the fair market value of a stock option for 10,000 shares exercised by Ms.
      Torres of $69,010 and $5,900 in Auto Allowance in
2003.
  Aggregated
Option/SAR Grants in Last Fiscal Year
 
 Name
      (a)
    Number
      of securities
      underlying
      Options/SARs
      granted
      (#)
      (b)
    Percent
      of Total
      Options/SARs
      Granted to
      Employees
      2004
      (c)
    Exercise
      or
      Base
      Price
      ($/Sh)
    Expiration
      DateLawrence
      P. Ward
    20,000
    38%
    $17.85
    02/20/2014Margaret
      A. Torres
    10,000
    19%
    $17.85
    02/20/2014Gwen
      R. Pelfrey
    2,500
    5%
    $17.85
    02/20/2014Paul
      Tognazzini
    2,500
    5%
    $17.85
    02/20/2014
  
  Option/SAR
Grants, Exercises and Year-End Value Table
 
 The
following tables set forth certain information concerning stock option grants
and unexercised options held by Lawrence P. Ward, Margaret Torres, Gwen R.
Pelfrey and Paul Tognazzini under the 1997 Plan.
 
 Aggregated
Option/SAR Exercises in Last Fiscal Year, and Fiscal Year-End Option/SAR
Value
 
 The
following tables set forth certain information concerning stock option grants
and unexercised options held by Lawrence P. Ward, Margaret Torres, Gwen R.
Pelfrey and Paul Tognazzini under the 1997 Plan.
 
 Name
    Shares
      acquired on exercise (#)
    Value
      Realized ($)
      (1)
    Number
      of securities
      underlying
      unexercised
      options/SARs
      at 12/31/04 (#)
      Exercisable/Unexercisable
    Value
      of unexercised
      in-the-money
      options/SARs at
      12/31/03
      ($)(1)
      Exercisable/Unexercisable(a)
    (b)
    (c)
    (d)
    (e)Lawrence
      P. Ward
    -0-
    $0.00
    79,640/21,000
    $1,336,359/$79,800Margaret
      A. Torres
    3,000
    $43,200
    26,320/10,500
    $379,008/$39,900Gwen
      R. Pelfrey
    -0-
    $0.00
    17,919/2,625
    $300,680/$9,975Paul
      Tognazzini
    -0-
    $0.00
    17,919/2,625
    $300,680/$9,975
 
 (1)
    The
      aggregate value has been determined based upon the average of the bid and
      asked prices for the Company's Common Stock at exercise or year-end, minus
      the respective exercise price per share.
 
 Compensation
of Directors
 
 Beginning
in November 2003, director fees were paid by the Company. The Chairman of the
Board of Directors was paid a retainer of $750 per month and all other
non-employee directors received a retainer of $250 per month. The chairman of
the Audit Committee received $750 for each regular committee meeting attended
and all other committee members received $250 for each regular committee meeting
attended. The total amount of fees paid to directors as retainers and for
attendance at Board and committee meetings during 2004 was $31,600.
 
 Directors’
fees are paid by Heritage Oaks Bank. The Chairman of the Board of Directors was
paid a retainer of $2,500 per month and all other non-employee directors
received a retainer of $1,250 per month during 2004. The chairman of each
committee received $125 for each regular committee meeting attended during 2004.
All other non-employee directors received $100 for each regular committee
meeting attended during the year. The total amount of fees paid to directors as
retainers and for attendance at Board and committee meetings during 2004 was
$166,691.
 
 The
Directors also participate in the Company’s Stock Option Plan.
 
 
 
 Employment
Contracts and Termination of Employment and Change in Control
Arrangements
 
 There are
no employment contracts between the Company or the Bank and their executive
officers except that Heritage Oaks Bank has an employment agreement with
Lawrence P. Ward, its President and Chief Executive Officer. The agreement has a
three-year term expiring on January 31, 2007, and renews annually unless a party
gives written notice to the other within certain time periods. The agreement
establishes a base salary in 2004 of $230,000 and provides for continuation of
participation in the Bank’s bonus compensation, 401(k), and executive salary
continuation plans. The agreement also provides for payment of life insurance
policy premiums and the use of a bank leased automobile. If the agreement were
terminated without cause, Mr. Ward would receive severance pay equal to one
year’s annual base salary in effect at the date of termination plus one year of
insurance payments. In the event of termination during or after a merger or
change of control, Mr. Ward would be entitled to severance pay equal to two
year’s base salary in effect at the date of termination, plus an additional
amount sufficient to pay for insurance coverage for a period of one year from
the termination, and the auto provided by the bank to Mr. Ward would be
transferred into his name at the time of termination. In the event of a change
of control where Mr. Ward is offered subsequent employment, Mr. Ward would be
entitled to severance pay equal to two (2) years’ annual base salary if he is
terminated or resigns for good reason. Events that are considered good reason
include, but are not limited to, reduction in title, compensation, demotion, or
expanded travel.
 
 Recognizing
the importance of building and retaining a competent executive management team,
the Board of Directors purchased life insurance policies on the lives of certain
key employees. The Bank is the sole owner and beneficiary of each policy. In
order to define the specific death, disability and post-employment/retirement
benefits to be provided, the Bank’s Board of Directors reviewed and adopted an
integrated conditional non-qualified deferred compensation plan provided to the
Bank by Clarke Consulting. The form of the plan provided has been endorsed by
the California Bankers Association, the American Bankers Association, as well as
numerous other state banking associations. Under the terms of the plan,
differing death, disability and post-employment/retirement benefits are provided
to each covered employee. Pursuant to the plan, agreements were entered into
between the Bank and each of the key employees. By defining and increasing, over
each employee’s term of employment, the amounts each employee will receive upon
the occurrence of certain specified events, including formal retirement on or
after a specified age, each employee has been given what the Board believes to
be a reasonable incentive to remain with the Bank until retirement. While
several provisions have been included which will serve to reduce the overall
amounts payable, the agreements are expected to provide a maximum annual benefit
payment of One Hundred and Fifty Thousand Dollars ($150,000) to Mr. Ward,
forty-eight thousand Dollars ($48,000) to Ms. Pelfrey, Mr. Tognazzini and Ms.
Torres. Although the annual benefit amount will typically be paid in equal
monthly installments over a fifteen (15) year period, a lesser and defined lump
sum payment may be required in the event the employee’s employment with the Bank
is terminated without cause. In the event of the executive’s death, the Bank is
obligated to pay any remaining amounts due under the agreement to the
executive’s spouse or designated beneficiary over the remaining payout period
(or in a lump sum, as the case may be). Other events which may also alter when
payment of the annual benefit is to begin, and the amount to be paid, include:
(i) disability, as defined in the agreement, in which case the employee will
begin to receive the defined benefit at the earlier of the defined retirement
age or when he is no longer entitled to receive disability benefits under his
principal disability insurance policy; and (ii) constructive termination
following a change in control, in which case the executive is entitled to all or
a portion of the annual benefit depending upon length of service prior to
termination. If, however, the executive’s employment is terminated for cause,
the Bank is released from all payment obligations to the Executive.
 
 ITEM
11.  SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
 As of
February 1, 2005, no individual known to the Company owned more than five
percent (5%) of the outstanding shares of its Common Stock except as described
below.
 Name
      and Address 1/ of
    
    
    Amount
      and Nature
    
    
    Percent
      ofBeneficial
      Owner
    
    
    of
      Beneficial Owner 2/
    
    
    Class
      3/Dr.
      B. R. Bryant
    
    
    292,955
    
    
    7.67%Merle
      F. Miller
    
    
    222,271
    
    
    5.82%Ole
      K. Viborg
    
    
    253,609
    
    
    6.64%Lawrence
      P. Ward
    
    
    231,302
    
    
    6.06%
 1/
    Except
      as otherwise indicated, the address for all persons listed is c/o Heritage
      Oaks Bancorp, 545 12th Street, Paso Robles, California,
    93446.
 2/
    For
      information concerning the amount and nature of beneficial ownership, see
      “Security Ownership of Management.”
 3/
    Including
      shares of Common Stock subject to stock options exercisable within 60 days
      of the record date.
  
 
 Security
Ownership of Management
 
 The
following table sets forth information as of February 1, 2005, concerning the
equity ownership of the Company's directors/nominees and the executive officers
named in the Summary Compensation Table, and directors and executive
officers 1/ as a
group. Unless otherwise indicated in the notes to the table below, each director
and executive officer listed below possesses sole voting power and sole
investment power for the shares of the Company's Common Stock listed below. All
of the shares shown in the following table are owned both of record and
beneficially except as indicated in the notes to the table. The Company has only
one class of shares outstanding, Common Stock.
 Name
      and Address
    
    
    Amount
      and Nature
    
    
    
    
    
    Percent
      ofof
      Beneficial Owner 2/
    
    
    of
      Beneficial Owner 3/
    
    
    
    
    
    Class
      4/Dr.
      B.R. Bryant
    
    
    292,955
    
    
    5/
    
    
    7.67%Donald
      H. Campbell
    
    
    46,421
    
    
    6/
    
    
    1.22%Kenneth
      L. Dewar
    
    
    24,400
    
    
    6/
    
    
    *Mark
      C. Fugate
    
    
    56,031
    
    
    6/
    
    
    1.47%Dolores
      T. Lacey
    
    
    26,188
    
    
    6/
    
    
    *Merle
      F. Miller
    
    
    222,271
    
    
    6/
    
    
    5.82%Michael
      J. Morris
    
    
    19,148
    
    
    7/
    
    
    *Daniel
      J. O'Hare
    
    
    1,140
    
    
    8/
    
    
    *Alexander
      F. Simas
    
    
    15,133
    
    
    6/
    
    
    *Ole
      K. Viborg
    
    
    253,609
    
    
    9/
    
    
    6.64%Lawrence
      P. Ward
    
    
    231,302
    
    
    10/
    
    
    6.06%Margaret
      Torres
    
    
    27,563
    
    
    6/
    
    
    *Gwen
      R. Pelfrey
    
    
    40,532
    
    
    6/
    
    
    1.06%Paul
      Tognazzini
    
    
    39,880
    
    
    6/
    
    
    1.04%All
      directors, nominees, and executive officers of the Companyas a
      group of (14 persons)
    
    
    1,122,180
    
    
    
    
    
    29.39%
 *
    Less than 1%.
 1/
    As
      used throughout this Proxy Statement, the term “executive officer” means
      the President and Chief Executive Officer, the Executive Vice President
      and Chief Administrative Officer, Executive Vice President and Chief
      Lending Officer and the Executive Vice President and Chief Financial
      Officer. The Chairman of the Board, the Vice Chairman of the Board, the
      Corporate Secretary and the Company’s other officers are not treated as
      executive officers of the Company.
 2/
    The
      address for all persons listed is c/o Heritage Oaks Bancorp, 545 12th
      Street, Paso Robles, California, 93446.
 3/
    Except
      as otherwise noted, includes shares held by each person’s spouse (except
      where legally separated) and minor children; shares held by a family trust
      as to which such person is a trustee with sole voting and investment power
      (or shares power with a spouse); or shares held in an Individual
      Retirement Account as to which such person has pass-through voting rights
      and investment power.
 4/
    Includes
      shares of Common Stock subject to stock options exercisable within 60 days
      of record date.
 5/
    Includes
      88,669 shares held as Trustee of Heritage Oaks Bancorp Employee Stock
      Ownership Plan. Dr. Bryant and Mr. Ward are co-trustees of the Stock
      Ownership Plan and under applicable rules the entire number of shares
      owned by such Plan is attributed to each of the trustees and the effect of
      the attributions rules results in the number of shares being double
      counted. Also, includes shares of Common Stock subject to stock options
      exercisable within 60 days of record date.
 6/
    Includes
      shares of Common Stock subject to stock options exercisable within 60 days
      of record date.
 7/
    Includes
      shares held as a trustee of Andre, Morris and Buttery 401K and includes
      shares of Common Stock subject to stock options exercisable within 60 days
      of record date.
 8/
    Includes
      shares held as a trustee of Glenn, Burdette, Phillips and Bryson Tax and
      Business Services, Inc. 401K
 9/
    Includes
      shares of Common Stock held by Mr. Viborg in Ole Viborg, Inc and in his
      family trust, also includes shares of Common Stock subject to stock
      options exercisable within 60 days of record
date.
 10/
    Includes
      88,669 shares held as Trustee of Heritage Oaks Bancorp Employee Stock
      Ownership Plan. Dr. Bryant and Mr. Ward are co-trustees of the Stock
      Ownership Plan and under applicable rules the entire number of shares
      owned by such Plan is attributed to each of the trustees. The effect of
      the attributions rules results in the number of shares being double
      counted. Also includes shares of Common Stock subject to stock options
      exercisable within 60 days of record date.
  Equity
Compensation Plan Information
  The
following table sets forth the status of option grants under the Company’s stock
option plan as of December 31, 2004:
  Plan
      Category
    
    
    Number
      of securities to be
      issued
      upon exercise of options
    
    
    Weighted
      average exercise
      price
      of outstanding options
    
    
    Number
      of securities remaining
      available
      for future issuanceEquity
      compensation plans approved by security holders
    
    
    
    
    
    470,677
    
    
    
    
    $
    7.09
    
    
    
    
    
    39,166Equity
      compensation plans not approved by shareholders
    
    
    
    
    
    -0-
    
    
    
    
    
    
    
    
    
    
    
    -0-Total
    
    
    
    
    
    470,677
    
    
    
    
    $
    7.09
    
    
    
    
    
    39,166
 
 ITEM
12.  CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
 
 Transactions
with Management and Others
 
 Except as
set forth in the next paragraph and set forth below under “Indebtedness of
Management” there have been no transactions, or series of similar transactions,
during 2004, or any currently proposed transaction, or series of similar
transactions, to which the Company or the Bank were or is to be a party, in
which the amount involved exceeded or will exceed $60,000 and in which any
director (or nominee for director) of the Company or the Bank, executive officer
of the Company or the Bank, any shareholder owning of record or beneficially 5%
or more of the Company's Common Stock, or any member of the immediate family of
any of the foregoing persons, had, or will have, a direct or indirect material
interest.
 
 
 Heritage
Oaks Bank leases its main Santa Maria office from a group of three individuals
and the Fugate Family Limited Partnership. Each of such lessors has a 25%
ownership interest in the building. Mark C. Fugate, who is a director of the
Company and Heritage Oaks Bank, has approximately a one-third interest in the
Fugate Family Limited Partnership. Heritage Oaks Bank paid total rent of
$187,896 in 2004 for the office building. The lease extends until 2012 with a
rental of $16,344 per month for 2005 and is subject to yearly consumer price
index increases.
 
 Indebtedness
of Management
 
 The
Company, through the Bank, has had, and expects in the future to have banking
transactions in the ordinary course of its business with many of the Company's
directors and officers and their associates, including transactions with
corporations of which such persons are directors, officers or controlling
stockholders, on substantially the same terms (including interest rates and
collateral) as those prevailing for comparable transactions with others.
Management believes that in 2004 such transactions comprising loans did not
involve more than the normal risk of collectibility or present other unfavorable
features. Loans to executive officers of the Company and the Bank are subject to
limitations as to amount and purposes prescribed in part by the Federal Reserve
Act, as amended, the regulations of the Federal Deposit Insurance Corporation
and the California Financial Code.
 
 ITEM
13.  EXHIBITS
AND REPORTS ON FORM 8-K
 
 (a)
Exhibits:
 
 (2.1a)
    Branch
      Purchase and Assumption Agreement and Real Property Purchase Agreement
      entered into between Westamerica Bank and Heritage Oaks Bank, dated July
      16, 2001 filed with the SEC in the Company’s 10-QSB for the period ending
      June 30, 2001.(2.1b)
    Agreement
      to Merge and Plan of Reorganization, dated June 11, 2003, filed with the
      SEC in the Company’s 8-K of June 12, 2003.(3.1a)
    Articles
      of Incorporation incorporated by reference from Exhibit 3.1a to
      Registration Statement on Form S-4 No. 33-77504 filed with the SEC on
      April, 1994.(3.2)
    The
      Company Bylaws as amended November 16, 2000 filed with the SEC in the
      Company’s 10-KSB for the year ended December 31, 2000.(4.1)
    Specimen
      form of The Company stock certificate incorporated by reference from
      Exhibit 4.1 to Registration Statement on Form S-4 No. 33-77504 filed with
      the SEC on April 8, 1994.
  
  (10.1)
    1990
      Stock Option Plan incorporated by reference from Exhibit 10.2 to
      Registration Statement on Form S-4 No. 33-77504, filed with the SEC on
      April 8, 1994.(10.2)
    Form
      of Stock Option Agreement incorporated by reference from Exhibit 4.2 to
      Registration Statement on Form S-4 No. 33-77504, filed with the SEC on
      April 8, 1994.(10.3)
    Lawrence
      P. Ward Employment Letter Agreement, dated February 28, 2002, filed
      with the SEC in the Company’s 10-KSB Report for the year ended December
      31, 2001.(10.4)
    401(k)
      Pension and Profit Sharing Plan filed with the SEC in the Company’s 10K
      Report for the year ended December 31, 1994.(10.5)
    The
      Company 1995 Bonus Plan, filed with the SEC in the Company’s 10K Report
      for the year ended December 31, 1994.(10.6)
    Salary
      Continuation Agreement with Lawrence P. Ward, filed with the SEC in the
      Company’s 10-QSB Report for the quarter ended March 31,
    2001.(10.7)
    Salary
      Continuation Agreement with Gwen R. Pelfrey, filed with the SEC in the
      Company’s 10K Report for the year ended December 31,
  1994.(10.8)
    Woodland
      Shopping Center Lease, filed with the SEC in the Company’s 10K Report for
      the year ended December 31, 1994.(10.9)
    1135
      Santa Rosa Street Lease, filed with the SEC in the Company’s 10KSB Report
      for the year ended December 31, 1995.(10.10)
    Lease
      Agreement for Cambria Branch Office dated February 21, 1997 filed with the
      SEC in the Company’s 10KSB reported for the year ended December
      31,1996.(10.11)
    1997
      Stock Option Plan incorporated by reference from Exhibit 4a to
      Registration Statement on Form S-8 No.333-31105 filed with the SEC on July
      11, 1997 as amended, incorporated by reference, from Registration
      Statement on Form S-8, File No. 333-83235 filed with the SEC on July 20,
      1999.(10.12)
    Form
      of Stock Option Agreement incorporated by reference from Exhibit 4b to
      Registration Statement on Form S-8 No. 333-31105 filed with the SEC on
      July 11, 1997.(10.13)
    Madonna
      Road Lease filed with the SEC in the Company’s 10KSB for the year ended
      December 31, 1997.(10.14)
    Santa Maria lease commencing November 1, 1998
      filed with the SEC in the Company’s 10-KSB for the year ended December 31,
      1998.(10.15)
    Master
      data processing agreement with Mid West payment Systems, Inc. commencing
      October 1, 1998 filed with the SEC in the Company’s 10-KSB for the year
      ended December 31, 1998.
  
  (10.16)
    Salary Continuation Agreement with Margaret
      A. Torres, filed with the SEC in the Company’s 10KSB Report for the year
      ended December 31, 1999.(10.17)
    Salary Continuation Agreement with Paul
      Tognazzini, filed with the SEC in the Company’s 10-KSB Report for the year
      ended December 31, 2001.(10.18)
    Atascadero
      Branch Lease entered into on March 31, 1999. filed with the SEC in the
      Company’s 10-KSB reported for the year ended December
    31,1999.(10.19)
    Service
      Bureau Processing Agreement entered into between Alltel Information
      Services, Inc. and Heritage Oaks Bank, dated August 1, 1999. Filed with
      the SEC in the Company’s 10-KSB reported for the year ended December 31,
      1999.(10.20)
    ASSET
      PURCHASE AGREEMENT entered into between Travelex America, Inc. and
      Heritage Oaks Bank, dated November 21 , 2000 filed with the SEC in the
      Company’s 10-KSB reported for the year ended December 31,
      2000.(10.21)
    Change in Terms Agreement and Business Loan
      Agreement entered into between the Company and Pacific Coast Banker’s Bank
      on November 8, 2000, filed with the SEC in the Company’s 10-KSB reported
      for the year ended December 31, 2001.(10.22)
    Executive
      Salary Continuation Agreement dated February 1, 2002 between Heritage Oaks
      Bank and Margaret A. Torres, filed with the SEC in the Company’s 10-QSB
      reported for March 31, 2002.(10.23)
    Executive
      Salary Continuation Agreement dated February 1, 2002 between Heritage Oaks
      Bank and Paul Tognazzini, filed with the SEC in the Company’s 10-QSB
      reported for March 31, 2002.(10.24)
    Executive Salary Continuation Agreement dated
      February 1, 2002 between Heritage Oaks Bank and Gwen R. Pelfrey, filed
      with the SEC in the Company’s 10-QSB reported for March 31,
    2002.(10.25)
    Executive
      Salary Continuation Agreement dated February 1, 2002 between Heritage Oaks
      Bank and Gloria Brady, filed with the SEC in the Company’s 10-QSB reported
      for March 31, 2002.(10.26)
    Executive
      Salary Continuation Agreement dated February 1, 2002 between Heritage Oaks
      Bank and Joe Carnevali, filed with the SEC in the Company’s 10-QSB
      reported for March 31, 2002.(10.27)
    Executive Salary Continuation Agreement dated
      February 1, 2002 between Heritage Oaks Bank and Donna Breuer, filed with
      the SEC in the Company’s 10-QSB reported for March 31, 2002.(10.28)
    Executive Salary Continuation Agreement dated
      February 1, 2002 between Heritage Oaks Bank and Chris Sands, filed with
      the SEC in the Company’s 10-QSB reported for March 31,
    2002.
  
  (10.29)
    Money
      Access Services Processing Agreement for ATM processing, signed on October
      3, 2002, filed with the SEC in the Company’s 10QSB reported for September
      30, 2002.(10.30)
    The
      Company Employee Stock Ownership Plan, Summary Plan Description, filed
      with the SEC in the Company’s 10-KSB reported for December 31,
      2002.(10.31)
    The
      Company Employee Stock Ownership Plan, Summary of Material Modifications
      to the Summary Plan Description dated July 2002, filed with the SEC in the
      Company’s 10-KSB reported for December 31, 2002.(10.32)
    A
      Construction Agreement dated February 12, 2003 between Heritage Oaks Bank
      and HBE financial Facilities, a Division of HBE Corporation, filed with
      the SEC in the Company’s 10-QSB for March 31,
  2003.(10.33)
    Executive
      Salary Continuation Agreement dated July 1, 2003 between Heritage Oaks
      Bank and Mark Stasinis, filed with the SEC in the Company’s 10-QSB
      reported for June 30, 2003.(10.34)
    Executive
      Salary Continuation Agreement dated July 1, 2003 between Heritage Oaks
      Bank and Kelley Stolz, filed with the SEC in the Company’s 10-QSB reported
      for June 30, 2003.(10.35)
    Executive
      Salary Continuation Agreement dated July 1, 2003 between Heritage Oaks
      Bank and Paul Deline, filed with the SEC in the Company’s 10-QSB reported
      for June 30, 2003.(10.36)
    Executive
      Salary Continuation Agreement dated July 1, 2003 between Heritage Oaks
      Bank and Mitch Massey, filed with the SEC in the Company’s 10-QSB reported
      for June 30, 2003.(10.37)
    Employment
      Agreement with David Duarte, President and Chief Operating Officer of
      Hacienda Bank, dated September 5, 2003 and filed with the SEC in the
      Company’s 10-QSB reported for September 30, 2003.(10.38)
    Promissory
      Note executed on October 3, 2003 for $3.5 million with Pacific Coast
      Bankers Bank, filed with the SEC in the Company’s 10-QSB reported for
      September 30, 2003.(10.39)
    Employment
      Agreement with Lawrence P. Ward, President and Chief Executive Officer of
      Heritage Oaks Bank, dated February 1, 2004 and filed with the SEC in the
      Company’s 10-KSB reported for December 31, 2003.(10.40)
    Executive
      Salary Continuation Agreement dated November 1, 2003 between Hacienda Bank
      and David Duarte, filed with the SEC in the Company’s 10-KSB reported for
      December 31, 2003.(10.41)
    Fifth
      Amendment to Service Bureau Processing Agreement dated June 19, 2004
      between Fidelity Information Services, Inc. and Heritage Oaks Bank, filed
      with the SEC in the Company’s 10QSB for June 30,
    2004.(14)
    Code
      of Ethics, filed with the SEC in the Company’s 10-KSB for the year ended
      December 31, 2003.
  
  (21)
    Subsidiaries of the Company. Heritage Oaks
      Bank is the only financial subsidiaries of the Company.(23)
    Consent of Independent Registered Accounting
      Firm(31.1)
    Certification of Chief Executive Officer
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002(31.2)
    Certification of Chief Financial Officer
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002(32.1)
    Certification of Chief Executive Officer
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002(32.2)
    Certification of Chief Financial Officer
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002
  ITEM
14.  PRINCIPAL
ACCOUNTANT FEES AND SERVICES
  During
the fiscal years ended December 31, 2004 and 2003, fees paid to the Company’s
independent auditor, Vavrinek, consisted of the following:
 
 Audit
Fees. Aggregate audit fees billed to the Company by Vavrinek during the 2003 and 2004
fiscal year for review of annual financial statements and those financial
statements included in quarterly reports on Form 10-QSB totaled $85,840 and
$74,540, respectively.
 
 Audit-Related
Fees. There
were no audit-related fees billed to the Company by Vavrinek during the 2003 or
2004 fiscal year.
 
 Tax
Fees. The
aggregate fees billed to the Company by Vavrinek during the 2003 or 2004 fiscal
year for tax compliance, tax advice, or tax planning totaled $14,000 and
$10,910, respectively. Such fees related to Vavrinek’s preparation of the
Company’s Federal and State tax returns and calculation of related estimated tax
payments.
 
 All
Other Fees. Aggregate other fees billed to the Company by Vavrinek during the 2004 fiscal
year including Hacienda Bank merger related services totaled $4,950.
 
 For the
fiscal year 2004 the Audit committee considered and deemed the services provided
by Vavrinek compatible with maintaining the principle accountant’s independence.
The Charter for the Audit Committee of the Board contains policies and
procedures for pre-approval of audit and non-audit services from the Company’s
independent public accountant.
 
 Less than
half the total hours expended on Vavrinek’s engagement to audit our financial
statements for the 2004 fiscal year were attributed to work performed by persons
other than Vavrinek’s full-time permanent employees.
 
 
 
 SIGNATURES
 
 Pursuant
to the requirements of Section 13 of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
 THE
COMPANY
 
 By: /s/ Lawrence P. Ward
    By: /s/ Margaret A. TorresLAWRENCE
      P. WARD
    MARGARET A. TORRESPresident and Chief Executive
      Officer
    Executive Vice Pres and Chief Financial
      OfficerDated:May
      19, 2005
    Dated:May
      19, 2005
  Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
 
 /s/ B. R. Bryant
    Chairman of theBoard
    May 19, 2005B.R. BRYANT/s/ Donald H. Campbell
    Vice Chairmanof
      the Board of Directors
    May 19, 2005DONALD H. CAMPBELL/s/ Kenneth Dewar
    Director
    May 19, 2005KENNETH DEWAR/s/ Mark C. Fugate
    Director
    May 19, 2005MARK C. FUGATE/s/ Dolores T. Lacey
    Director
    May 19, 2005DOLORES T. LACEY/s/ Merle F. Miller
    Director
    May 19, 2005MERLE F. MILLER/s/ Michael Morris
    Director
    May 19, 2005MICHAEL MORRIS/s/ Daniel J. O’Hare
    Director
    May 19, 2005DANIEL J. O’HARE/s/ Alex Simas
    Director
    May 19, 2005ALEX SIMAS/s/ Ole K. Viborg
    Director
    May 19, 2005OLE K. VIBORG/s/ Lawrence P. Ward
    Director
    May 19, 2005LAWRENCE P. WARD
  
 
 EXHIBIT
INDEX
  Exhibit
      Sequential
      Number
    Description23
    Consent
      of Independent Accountants31.1
    Certification of Chief Executive Officer
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200231.2
    Certification of Chief Financial Officer
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200232.1
    Certification of Chief Executive Officer
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  200232.2
    Certification of Chief Financial Officer
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002