UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
April 15, 1999
Date of Report (Date of earliest event reported)
Heritage Commerce Corp
(Exact name of registrant as specified in its charter)
CA 000-23877 77-0469558
(State of other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
150 Almaden Blvd., San Jose, CA 95113
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 947-6900
None
Former name or former address, if changed since last report.)
Item 5. Other Events.
HERITAGE COMMERCE CORP REPORTS FINANCIAL RESULTS
FOR THE FIRST QUARTER OF 1999
Heritage Commerce Corp (the "Company") (Nasdaq:
HTBK) today reported consolidated earnings of
$627,000, or $0.10 per diluted share, for the
first quarter of 1999 (per share income has been
adjusted for a 3 for 2 stock split declared by
the Company to shareholders of record as of
February 5, 1999 and paid on February 19, 1999).
This compares to $453,000 or $0.08 per diluted
share in the prior year period. Quarterly return
on average assets and return on average equity
were 0.69% and 8.20%, respectively, for the
first quarter of 1999, compared with returns of
0.69% and 8.08%, respectively, for the first
quarter of 1998.
For the quarter, earnings show an increase of
$174,000, or 38%, over those of the prior year.
For the quarter, net interest income grew by
$1,215,000, or 32%; noninterest income grew by
$1,093,000, or 834%, due primarily to gains on
sale of securities; and non-interest expense
grew by $1,569,000, or 52%, compared to the
first quarter of 1998, and reflecting start-up
expenses associated with the Company's
initiatives in the East Bay and South Valley.
The Company's net interest margin was 6.14% for
the quarter ended March 31, 1999, compared with
6.49% for the quarter ended March 31, 1998.
This decrease in net interest margin can be
primarily attributed to lower rates earned on
interest earning assets.
Total assets as of March 31, 1999 were
$358,368,000, an increase of $29,392,000, or 9%,
from March 31, 1998. Total assets at December
31,1998 were $404,931,000, with the reduction
at March 31, 1999 due to the sale of
approximately $42,000,000 in bankruptcy deposits.
At March 31, 1999, total portfolio loans were
$231,274,000 and deposits were $322,046,000.
At March 31, 1999, loans and deposits had
increased by $105,514,000, or 84%, and
$17,882,000, or 6%, respectively,since March 31,
1998. Total deposits at December 31, 1998 were
$368,958,000, with the reduction at March 31,
1999 also due to the aforementioned sale of
bankruptcy deposits.
The Company's allowance for loan losses was
$4,277,000, or 1.85%, of total loans as of March
31, 1999. This compares with an allowance for
loan losses of $3,825,000, or 1.62%, of total
loans at December 31, 1998 and $2,540,000, or
2.02%, of total loans as of March 31, 1998. The
Company's non-performing assets (NPA's)increased
from zero at March 31, 1998 to $2,269,000 as of
March 31, 1999. NPA's were $1,288,000 as of
1998 year end.
The Company's shareholders' equity at March 31,
1999 stood at $30,929,000, compared with
$30,697,000 as of December 31, 1998, a 1%
increase. Book value per share totaled $5.57
as of March 31, 1999 (book value per share data
has been adjusted for a 3 for 2 stock split
declared by the Company to shareholders of
record as of February 5, 1999 and paid on
February 19, 1999). The Company's leverage
capital ratio stood at 8.3% at March 31, 1999.
This compares with a leverage ratio of 9.0% at
December 31, 1998 and 8.4 % as of March 31, 1998.
Heritage Commmerce Corp, a bank holding company
established February 17, 1998, is the parent
company of two financial institutions: Heritage
Bank of Commerce, a commercial bank
headquartered in the city of San Jose, and
Heritage Bank East Bay, a commercial bank
headquartered in city of Fremont, with an office
in San Ramon.
In addition, Heritage Bank of Commerce has
established a branch office in the South Valley
city of Morgan Hill. The new office opened for
business the first week of March of this year.
As with Heritage Bank East Bay, it is anticipated
that the branch office will be converted to an
independent community business bank once
regulatory approvals have been received.
Heritage's South Valley expansion strategy is
being spearheaded by Brad Smith, whose extensive
banking backgroud spans a period of over 25 years
(20 years in the South Valley) and includes 14
years as President & CEO of South Valley National
Bank in Gilroy. Mr. Smith was appointed Chairman
of the Board of Directors of the parent company,
Heritage Commerce Corp, in January 1999, and will
also serve as President & Chief Executive Officer
of the new South Valley bank.
The Company's common stock is listed on the
NASDAQ National Market under the symbol "HTBK".
Readers should carefully review the risk factors
described in other documents the Company files
from time to time with the Securities and
Exchange Commission, including the Annual Report
on Form 10-K for the year ended December 31, 1998
and the Quarterly Reports on Form 10-Q filed by
the Company in fiscal 1999.
For further information about the Company's
financial performance, contact John Rossell,
Chief Executive Officer, at (408) 947-6900 or
visit the Company's web site at www.heritage-
bank.com.
Forward Looking Statement Disclaimer
This release may contain forward-looking
statements that are subject to risks and
uncertainties. Such risks and uncertainties
may include but are not necessarily limited to
fluctuations in interest rates, inflation,
government regulations and general economic
condition, and competition within the business
areas in which the Company is conducting its
operations, including the real estate market in
California and other factors beyond the Company's
control. Such risks and uncertainties could
cause results for subsequent interim period or
for the entire year to differ materially from
those indicated. For a discussion of factors
which could cause results to differ, please see
the Company's reports on Form 10-K and 10-Q as
filed with the Securities and Exchange Commission
and the Company's press releases. Readers should
not place undue reliance on the forward-looking
statements, which reflect management's view only
as of the date hereof. The Company undertakes
no obligation to publicly revise these
forward-looking statements to reflect subsequent
events or circumstances.
<TABLE>
<CAPTION>
Heritage Commerce Corp
(unaudited)
At and For the
Three Months Ended
March 31 March 31
(in thousands, except per share amounts) 1999 1998 Percent Change
<S> <C> <C> <C>
Statement of Income Data
Net Interest Income $ 4,993 $ 3,778 32%
Provision for Loan Losses 643 160 302%
Noninterest Income 1,224 131 834%
Noninterest Expense 4,587 3,018 52%
Net Income 627 453 38%
Per Share Data
Earnings Per Share
Basic 0.11 0.09 22%
Diluted 0.10 0.08 25%
Book Value Per Common Share 5.57 4.62 21%
Weighted average shares used in computing:
Basic earnings per share 5,556,919 4,943,844 12%
Diluted earnings per share 6,412,398 5,498,769 17%
Balance Sheet Data
Total Assets $ 358,368 $ 328,976 9%
Securities, Available-For-Sale 52,413 69,831 -25%
Securities, Held-To-Maturity 13,867 27,757 -50%
Loans Held-For-Sale 12,306 17,228 -29%
Loans 231,274 125,760 84%
Allowance For Loan Losses 4,277 2,540 68%
Total Deposits 322,046 304,164 6%
Total Shareholders' Equity 30,929 22,825 36%
Unrealized Holding Gain on Securities, Net 225 453 -50%
Nonperforming Loans 2,269 ---
Other Real Estate Owned --- ---
Selected Financial Ratios
Net Interest Margin 6.14% 6.49%
Return on Average Assets 0.69% 0.69%
Return on Average Equity 8.20% 8.08%
Allowance for Loan Losses to
Nonperforming Loans 188.49% N/A
Allowance for Loan Losses to Total Loans 1.85% 2.02%
Leverage Ratio 8.32% 8.40%
</TABLE>
SIGNATURES
Under 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.
Date: April 20,1999 HERITAGE COMMERCE CORP
By:/s/ Lawrence D. McGovern
Lawrence D. McGovern
Chief Financial Officer (Principal
Financial and Accounting Officer)
