HERITAGE COMMERCE CORP, S-3, 1999-04-29

HERITAGE COMMERCE CORP
S-3, 1999-04-29
STATE COMMERCIAL BANKS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1999
COMMISSION FILE NO. 000-23877
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

HERITAGE COMMERCE CORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

<TABLE>
<S> <C> <C>
CALIFORNIA 77-0469558 6712
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER PRIMARY STANDARD INDUSTRIAL
OF IDENTIFICATION NO.) CLASSIFICATION CODE NUMBER)
INCORPORATION OR ORGANIZATION)
</TABLE>

150 ALMADEN BOULEVARD
SAN JOSE, CA 95113
(408) 947-6900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

JOHN ROSSELL
HERITAGE COMMERCE CORP
150 ALMADEN BOULEVARD
SAN JOSE, CA 95113
(408) 947-6900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registrations statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
Common Stock.................. $12,000,000 $3,336
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The actual offering price described herein has not been determined. We have
calculated the registration fee pursuant to Rule 457(o) of the Securities
Act of 1933 based on the maximum aggregate offering price.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BE EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED APRIL 29, 1999

PROSPECTUS

HERITAGE
COMMERCE CORP
UP TO SHARES OF COMMON STOCK
$ PER SHARE
(MINIMUM PURCHASE 100 SHARES)

Heritage Commerce Corp is offering to sell up to shares of its
common stock at $ per share. Heritage intends to sell the shares through its
directors and officers, who will use their best efforts to sell the shares. The
offering is not underwritten and is not subject to the sale of any minimum
number or dollar amount of shares.

The common stock is listed on the Nasdaq National Market under the symbol
"HTBK." On , 1999, the last reported sale price for the common
stock was $ per share.

INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 8.

THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS ARE NOT SAVINGS OR
DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PRICE TO PUBLIC PROCEEDS TO HERITAGE
--------------- --------------------
<S> <C> <C>
Per Share....................................... $ -- $ --
Total Maximum(1)................................ $10,000,000 $10,000,000
</TABLE>

- -------------------------
(1) We have filed a registration statement covering shares. If we
find that demand for the shares at the offering price is sufficient, we may
sell up to an additional shares. If we sold all of the
additional shares, proceeds to Heritage would increase by $2,000,000.

We plan to keep the offering open for 90 days, but we may terminate it
early or extend it for up to 45 days at our discretion. The offering will
terminate no later than , 1999. We will conduct sequential closings
on approximately a monthly basis. We intend to deliver certificates representing
shares for accepted subscriptions within 10 days after each sequential closing.

THE DATE OF THIS PROSPECTUS IS .
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 8
Use of Proceeds............................................. 12
Dilution.................................................... 13
Capitalization.............................................. 14
Determination of Offering Price............................. 14
Trading History and Dividends............................... 14
How To Subscribe............................................ 18
Business.................................................... 20
Description of Securities of the Company.................... 24
Legal Matters............................................... 26
Experts..................................................... 26
Incorporation By Reference.................................. 27
Additional Information...................................... 27
Appendix A -- Form of Subscription Application.............. A-1
</TABLE>

2
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PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding Heritage and the common stock being sold in this offering
and our financial statements and the notes to the financial statements appearing
elsewhere in this prospectus.

HERITAGE COMMERCE CORP

Heritage Commerce Corp (which this prospectus refers to as "Heritage" or
"we") is a bank holding company organized in 1998. Its headquarters are in San
Jose, California. The directors and officers of Heritage Bank of Commerce formed
Heritage for the purpose of acquiring and managing the bank. Heritage completed
this reorganization in February 1998. Heritage has two operating subsidiaries:

- Heritage Bank of Commerce, also based in San Jose, commenced banking
operations in 1994.

- Heritage Bank East Bay, based in Fremont, California, commenced banking
operations in 1998.

Our banks are engaged in the commercial banking business primarily in Santa
Clara, Alameda, Contra Costa and San Benito counties. At December 31, 1998, we
had consolidated total assets of $404,931,000, consolidated total deposits of
$350,047,000, consolidated total loans of $236,307,000, and total equity of
$30,697,000.

Our principal executive office is located at 150 Almaden Boulevard, San
Jose, California 95113. Our telephone number is (408) 947-6900. We maintain a
web site at http://www.herbank.com. Any information on our web site is not part
of this prospectus.

THE OFFERING

Shares of common stock offered........... shares(1)

Shares of common stock outstanding at
April 12, 1999......................... 5,562,056 shares

Shares of common stock to be outstanding
after the offering....................... (maximum) shares(1)

Use of proceeds.......................... We intend to use the proceeds to
capitalize a proposed new bank (if
approved) in Morgan Hill,
California, and for general
corporate purposes. See "Use of
Proceeds."

Nasdaq National Market symbol:........... HTBK

Minimum subscription..................... 100 shares

Minimum to be sold in the offering....... No minimum
- -------------------------
(1) These figures do not include any of the additional shares that
we have registered and may issue. See the footnote on the cover page of this
prospectus. These figures also do not include 1,364,809 shares issuable upon
exercise of currently
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outstanding options with a weighted average exercise price of $6.83 per share
and 209,193 shares available for the grant of options under our stock option
plan as of March 31, 1999.

SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements and notes to those
financial statements incorporated by reference in this prospectus. Financial
information for 1998 represents the consolidated financial operations and
condition of Heritage Commerce Corp. Financial information for years before 1998
represents the financial operations and condition of Heritage Bank of Commerce
alone before the formation of Heritage. The following tables are calculated from
our audited consolidated financial statements, which are incorporated by
reference in this prospectus.

- The amounts for 1994 are for the 207 day period from June 8 (inception)
to December 31, 1994.

- All share amounts are adjusted to reflect stock splits and stock
dividends.

- The Tier 1 risk-based capital ratio is computed by dividing Tier 1
capital, which is total shareholders' equity less net unrealized gains on
securities available-for-sale and intangible assets, by net risk-weighted
period-end assets. Net risk-weighted period-end assets is the gross
risk-weighted assets less the portion of the allowance for credit losses
which exceeds 1.25% of gross risk-weighted assets. The gross risk-
weighted assets is calculated by applying risk weight percentages per
regulatory guideline to on-balance sheet assets and off-balance sheet
items.

- The total risk-based capital ratio is total capital, which includes Tier
1 capital, subordinated debt, and the lesser of the allowance for credit
losses and 1.25% of the gross risk-weighted assets, divided by risk
weighted period-end assets.

- The leverage ratio is Tier 1 capital divided by average assets for the
most recent quarter (excluding intangible assets).

<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income................................ $ 1,244 $ 6,421 $10,525 $16,251 $26,904
Interest expense............................... 214 1,696 2,646 4,204 7,951
------- ------- ------- ------- -------
Net interest income before provision for loan
losses....................................... 1,030 4,725 7,879 12,047 18,953
Provision for loan losses...................... 76 496 830 1,060 1,576
------- ------- ------- ------- -------
Net interest income after provision for loan
losses....................................... 954 4,229 7,049 10,987 17,377
Non-interest income............................ 18 71 296 590 1,703
Non-interest expenses.......................... 2,976 4,098 5,724 9,168 15,605
------- ------- ------- ------- -------
Income (loss) before income taxes.............. (2,004) 202 1,621 2,409 3,475
Income taxes................................... 1 1 220 844 1,325
------- ------- ------- ------- -------
Net income (loss).............................. $(2,005) $ 201 $ 1,401 $ 1,565 $ 2,150
======= ======= ======= ======= =======
</TABLE>

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<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net income (loss) -- basic............. $ (0.55) $ 0.05 $ 0.32 $ 0.32 $ 0.41
Net income (loss) -- diluted........... (0.55) 0.05 0.31 0.30 0.37
Book value (end of period)............. 3.21 4.02 4.41 4.52 5.53
Weighted average number of shares
outstanding -- basic................. 3,660,220 3,667,368 4,368,394 4,937,533 5,242,516
Weighted average number of shares
outstanding -- diluted............... 3,660,147 3,715,393 4,550,929 5,221,857 5,844,038

BALANCE SHEET DATA:
Investment securities.................. $ 30,336 $ 51,449 $ 75,268 $ 87,697 $ 76,793
Net loans.............................. 10,455 41,950 81,513 126,485 232,482
Allowance for loan losses.............. 76 572 1,402 2,285 3,825
Non-accrual loans...................... -- -- -- -- 1,288
Total assets........................... 59,037 132,160 173,303 267,575 404,931
Total deposits......................... 47,082 118,746 146,379 242,978 368,958
Total shareholders' equity............. 11,741 12,829 20,524 22,336 30,697

SELECTED PERFORMANCE RATIOS:
Return on average assets............... n/m 0.22% 0.96% 0.74% 0.65%
Return on average equity............... n/m 1.67% 8.56% 7.38% 8.23%
Net interest margin.................... 5.13% 5.81% 5.99% 6.23% 6.33%
Average net loans as a percentage of
average deposits..................... 17.21% 37.68% 48.23% 52.98% 58.81%
Average total shareholders' equity as a
percentage of average total assets... 31.97% 13.25% 11.23% 9.98% 7.89%

SELECTED ASSET QUALITY RATIOS:
Net loan charge-offs to average
loans................................ -- -- -- 0.18% 0.02%
Allowance for loan losses to total
loans................................ 0.80% 1.53% 2.07% 2.02% 1.62%
Allowance for loan losses to
non-accrual loans.................... -- -- -- -- 296.97%

CAPITAL RATIOS(3):
Tier 1 risk-based...................... 75.9% 22.5% 21.4% 14.6% 9.2%
Total risk-based....................... 76.4% 23.6% 22.6% 15.8% 10.4%
Leverage............................... 29.6% 13.5% 13.9% 10.3% 9.0%
</TABLE>

5
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RECENT DEVELOPMENTS

The following table sets forth summary unaudited information for Heritage
as of March 31, 1999.

<TABLE>
<CAPTION>
AT AND FOR THE
THREE MONTHS ENDED MARCH 31,
------------------------------
1998 1999
------------- -------------
(UNAUDITED)
<S> <C> <C>
RESULTS OF OPERATIONS
Interest income................................ $ 5,120,000 $ 7,164,000
Interest expense............................... 1,342,000 2,171,000
------------- -------------
Net interest income............................ $ 3,778,000 $ 4,993,000
============= =============
Noninterest income............................. $ 131,000 $ 1,224,000
Noninterest expense............................ 3,018,000 4,587,000
Provision for loan losses...................... 160,000 643,000
------------- -------------
Net income before income taxes................. $ 731,000 $ 987,000
Income taxes................................... 278,000 360,000
------------- -------------
Net income..................................... $ 453,000 $ 627,000
============= =============
Net income per share-basic..................... $ 0.09 $ 0.11
Net income per share-diluted................... $ 0.08 $ 0.10
BALANCE SHEET
Loans, gross................................... $ 125,760,000 $ 231,274,000
Allowance for loan losses...................... $ 2,540,000 $ 4,277,000
Total assets................................... $ 328,976,000 $ 358,368,000
Total deposits................................. $ 304,164,000 $ 322,046,000
Shareholders' equity........................... $ 22,825,000 $ 30,929,000
Book value per share........................... $ 4.62 $ 5.57
</TABLE>

Net interest income for the period ended March 31, 1999 was $4,993,000, an
increase of $1,215,000 (or 32%) over the $3,778,000 reported for the same period
in 1998. The increase occurred primarily as a result of growth that occurred in
Heritage's earning assets, the yield on which was enhanced by an improvement in
the net yield on interest-earning assets during the three months ended March 31,
1999 as compared with the same period in 1998.

Noninterest income for the period ended March 31, 1999 was $1,224,000, up
$1,093,000 (or 834%) from $131,000 for the same period in 1998. This increase
was primarily the result of gains recognized on the sale of securities
available-for-sale. The provision for loan losses increased to $643,000 for the
period ended March 31, 1999, up $483,000 (or 302%) from $160,000 for the same
period in 1998. This increase was necessitated by the large growth in the total
loan portfolio. Internet credit card loans decreased to $29,000,000 for the
period ended March 31, 1999.

During the first quarter of 1999, our deposits decreased by approximately
$46,912,000 or 12.7% due to the sale of our bankruptcy deposit portfolio as well
as seasonal fluctuations in title company deposits. The costs of servicing and
of maintaining the required collateral for bankruptcy deposits of approximately
$42,000,000 had made it increasingly difficult to
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earn an adequate return on these deposits. We therefore decided to sell our
bankruptcy deposit portfolio to an unrelated third party.

On January 1, 1999, we appointed Brad Smith as Chairman of the Board of
Heritage and as President of Heritage Bank of Commerce, South Valley branch.
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RISK FACTORS

Before you invest in our common stock, you should be aware that there are
various risks, including those described below. You should carefully consider
these risk factors, together with all the other information included or
incorporated by reference in this prospectus, before you decide whether to
purchase shares of our common stock.

Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue" or similar words. You should
read statements that contain these words carefully because they (1) discuss our
future expectations; (2) contain projections of our future results of operations
or of our financial condition; or (3) state other "forward-looking" information.
We believe it is important to communicate our expectations to our investors.
However, there may be events in the future that we are not able to accurately
predict or over which we have no control. The risk factors listed in this
section, as well as any cautionary language in this prospectus, provide examples
of risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Before you invest in our common stock, you should be aware that the occurrence
of the events described in these risk factors and elsewhere in this prospectus
could have a material adverse effect on our business, results of operations and
financial condition.

RISKS RELATED TO THE OFFERING.

THE OFFERING PRICE DOES NOT NECESSARILY REPRESENT CURRENT MARKET VALUE. The
offering price does not reflect the price at which the common stock currently
trades, nor does the offering price necessarily reflect the price at which
Heritage's common stock will trade following the offering. No underwriter
assisted us in determining the offering price.

YOU WILL SUFFER IMMEDIATE DILUTION. The offering price per share exceeds
Heritage's book value per share, which is shareholders' equity divided by the
number of outstanding shares. Based upon the offering price and the book value
per share as of March 31, 1999, the sale of the common stock in the offering
will result in an immediate dilution of $ per share for new shareholders if
we sell all of the shares offered. The exercise of outstanding stock options
would result in additional dilution of $ per share to new shareholders.

WE HAVE NOT ENGAGED AN UNDERWRITER AND MAY NOT SELL ALL OF THE SHARES
OFFERED. The offering is not underwritten, so we can provide no assurance that
we will sell all or any of the shares offered. We may sell any number of shares
in the offering without any minimum. We may terminate the offering after
accepting subscriptions for any number of shares less than the maximum. Raising
less than $7,000,000 in new capital may impair our ability to charter a new
bank. Once you submit a subscription, we can hold your subscription funds in an
impound account and accept or reject your subscription for any reason or no
reason. Our directors and officers have only limited experience in conducting an
offering of common stock.

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WE FACE RISKS RELATING TO ORGANIZING A NEW BANK. With a portion of the
proceeds of the offering, we intend to organize and capitalize a new bank in
Morgan Hill, California. We are in the process of seeking the required
regulatory approvals. However, we can provide no assurance:

- that we will receive permission to organize a new bank;

- that we will be able to recruit personnel necessary to manage and operate
a new bank; or

- that a new bank, if established, will be able to operate profitably.

New banks typically operate at a loss for one or more years even if they
ultimately become profitable. Therefore opening a new bank is not likely to
increase, and may decrease, our net income shortly after the completion of the
offering. If we raise capital in the offering but are not able to increase our
asset and deposit base, through either a new bank or existing operations, our
return on average equity could decline.

RISKS RELATED TO OUR BUSINESS.

OUR BUSINESS IS DEPENDENT ON THE TECHNOLOGY INDUSTRY. The technology
industry dominates the economy of our service area, which includes Silicon
Valley. The technology industry is highly volatile. Any softness in the
technology industry could have an adverse effect on local market conditions and
on our financial condition and results of operations.

OUR LENDING BUSINESS IS GEOGRAPHICALLY CONCENTRATED. Our loan portfolio
consists almost entirely of loans to businesses located in California and in
particular Santa Clara, Alameda, Contra Costa and San Benito counties. The
collateral for many of our loans consists of real and personal property located
in the same counties. This lack of geographic diversification in the loan
portfolios could have a material adverse effect on our financial condition and
results of operation if a cyclical downturn or natural disaster affected the
local economy.

THE LENDING BUSINESS HAS INHERENT RISKS. Heritage Bank of Commerce and
Heritage Bank East Bay are engaged primarily in commercial, consumer and real
estate lending. The risk of nonpayment of loans is inherent in the lending
business. The ability of borrowers to repay their obligations can be adversely
affected by factors beyond our control, including local and general economic and
market conditions. A substantial portion of our loans are secured by real
estate. These same factors may adversely affect the value of real estate
collateral. The Company maintains an allowance for loan losses and periodically
makes additional provisions to the allowance to reflect the level of losses
determined by management to be inherent in the loan portfolio. However, the
level of the allowance and the amount of these provisions are only estimates
based on our judgment, and we can provide no assurance that actual losses
incurred will not exceed the amount of the allowance or require substantial
additional provisions to the allowance.

Land and construction loans comprised 21% and 22% of our loan portfolio at
December 31, 1998 and 1997, respectively. Land and construction loans are
generally considered to involve greater risk of loss than other forms of
commercial lending. This is due to land and construction loan repayment being
determined by factors that may change over time and over the course of
construction. Changes in the interest rates or other market conditions may
create a situation that delays eventual loan repayment or creates a loss on the
loan.

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Repayment of land and construction loans is affected by factors that may
change over time and over the course of construction. Changes in the interest
rates or market demand for housing or commercial space may create a situation
that delays eventual loan repayment or results in a loan loss.

THE INTRODUCTION AND RAPID EXPANSION OF OUR INTERNET CREDIT CARD BUSINESS
IN 1998 POSES CREDIT RISKS. In 1998, we offered credit cards over the internet
to consumers outside our service area in order to earn interest income and gain
experience in the technology of internet banking. Aggregate balances grew to
$65,000,000 by the end of the year. Consumer credit card lending is not among
our traditional banking activities. We lack direct experience in the credit card
business, and we do not know how marketing over the internet might cause our
actual loss experience to vary from our expectations. Therefore we can give no
assurance that the reserves we have established for possible losses on this
portfolio will be adequate to compensate for actual losses that we might incur.

EXTERNAL FACTORS MAY AFFECT ASSET QUALITY. California is prone to
earthquakes, flooding and other natural disasters. Some of these risks may not
be insurable. Our properties and substantially all of the real and personal
property securing our loans are located in California. We face the risk that
many of our borrowers may experience uninsured property damage, sustained
interruption of their businesses, or loss of their jobs from earthquakes, floods
or other disasters. As a result, these borrowers may be unable to repay their
loans on their original terms, and the allowance for loan losses may not be
adequate to cover losses resulting from these external factors.

WE HAVE A SHORT OPERATING HISTORY. At March 31, 1999, Heritage Commerce
Corp had been incorporated for approximately one year, while Heritage Bank of
Commerce had completed just over four full years of operations. We cannot assure
you that Heritage will be able to engage in any activity other than ownership of
Heritage Bank of Commerce and Heritage Bank East Bay. We cannot assure you that
our banks will continue to increase in asset size at the rate each has grown
since their inception or that results of future operations can be predicted from
their past operating histories.

WE DO NOT CURRENTLY PAY CASH DIVIDENDS. Our ability to pay cash dividends
in the future will depend on our profitability, growth, capital needs and
compliance with regulatory capital requirements. The Board of Directors
currently intends to retain earnings, if any, to support growth and has no
intention of paying cash dividends in the foreseeable future. We cannot assure
you as to when or whether we will pay a cash dividend or the amount of the
dividend.

WE FACE STRONG COMPETITION. Competition may have an adverse effect on us.
In California generally, and in our service area specifically, major banks
dominate the commercial banking industry. The major banks have greater resources
for marketing, development of services and products and investment in technology
than we have, and they enjoy greater economies of scale.

WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION. Our operations are
subject to extensive state and federal regulation, supervision and legislation.
From time to time, legislators enact laws which have the effect of increasing
the cost of doing business, limiting or expanding permissible activities or
affecting the competitive balance between banks and other financial
institutions. These regulations are intended primarily for the protection of
depositors and consumers, rather than for the benefit of shareholders. For
several years, Congress has considered various forms of legislation to repeal
the current

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statutory restrictions on affiliations between commercial banks and securities
firms and to change other significant banking laws. Should major legislative
changes occur, we cannot predict the impact these changes might have on us.

The monetary and fiscal policies of the Board of Governors of the Federal
Reserve System (the "FRB") also influence the commercial banking business. The
FRB implements national monetary policies, such as curbing inflation and
combating recession, by its open-market operations in United States government
securities, by adjusting the required level of reserves for financial
institutions conditioned on its reserve requirements, and by varying the
interest rates applicable to borrowings by depository institutions. The actions
of the FRB in these areas influence the growth of bank loans, investments and
deposits and also affect interest rates charged on loans and paid on deposits.
Future changes in monetary policies could have an impact on our cost of funds,
the rates we charge on loans and the overall availability of credit.

The FRB has adopted a policy which requires a bank holding company to serve
as a source of financial strength to its banking subsidiaries. The FRB has
ordered bank holding companies to contribute cash to their troubled bank
subsidiaries based upon this policy. This policy could have the effect of
decreasing funds available for distributions to shareholders. In addition, the
FRB could require a bank holding company in particular circumstances to
guarantee the capital plan of an undercapitalized banking subsidiary. Neither of
our banks is currently undercapitalized, but we can provide no assurance that
they or a new bank will not be undercapitalized in the future. At December 31,
1998, Heritage Bank of Commerce was categorized as adequately capitalized, which
classification prohibits the bank from accepting brokered deposits without prior
regulatory approval.

OUR STOCK PRICE MAY FLUCTUATE SIGNIFICANTLY. In recent years the stock
market in general and the market for shares of small capitalization stocks in
particular have experienced extreme price fluctuations, which have often been
unrelated to the operating performance of affected companies. These fluctuations
could have a material adverse effect on the market price of our common stock.

An underwriter is permitted to take certain steps to limit the volatility
of a stock's market price after completion of an offering. Without an
underwriter, we will have little or no control over the volatility of the market
price for our common stock after the offering.

The average trading volume in our common stock is currently less than 5,000
shares per day according to information provided by Nasdaq and may be
substantially less. Low trading volume may increase the volatility of our stock
price.

THE YEAR 2000 PROBLEM COULD DISRUPT OUR BUSINESS. The inability of
computers, software, and other equipment utilizing microprocessors to recognize
and properly process data fields containing a two-digit year is commonly
referred to as the year 2000 compliance issue. As the year 2000 approaches,
these systems may be unable to process accurately particular date-based
information.

Our vendors have provided appropriate assurances with regard to these
issues. However, there can be no guarantee that these assurances will prove to
be accurate, or that the systems of other companies on which our systems rely
will be timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with our systems, would not have a material
adverse effect on us. We have assessed the credit risk related to our borrowers'
year 2000 compliance progress and have integrated a year 2000 compliance element
into our credit approval process.

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<PAGE> 13

The costs of, and the date on which we plan to complete the year 2000
modification and testing process, are based on management's best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of particular resources, third-party modification plans,
and other factors. However, we can provide no assurance that our actual results
will be consistent with these estimates.

USE OF PROCEEDS

If we sell all of the shares offered, gross proceeds will be $10,000,000.
We estimate expenses of the offering at approximately $120,000, leaving maximum
net proceeds of $9,880,000. If we sell less than all of the shares offered,
proceeds will be lower. The offering is not subject to the sale of any minimum
number or dollar amount of shares.

Heritage intends to use up to $7,000,000 in proceeds to capitalize a new
bank at the location of its new South Valley branch in Morgan Hill, California,
and to use the remaining amount for general corporate purposes. Heritage
believes, based on discussions with bank regulators, that the regulators will
require not less than this amount of capital as a condition to approval of a new
bank. If Heritage does not establish a new bank in Morgan Hill or elsewhere for
any reason, including failure to raise sufficient funds in the offering to
capitalize a new bank, it intends to retain any capital received in the offering
and to invest part or all of the capital in Heritage Bank of Commerce and
Heritage Bank East Bay to support growth in Santa Clara, Alameda, Contra Costa
and San Benito counties, as Heritage deems appropriate.

Proceeds retained by Heritage and not used to capitalize a new bank will
initially be invested in government securities or other permitted investments
and ultimately used in the discretion of the Board of Directors. If we sell any
of the additional shares that we have registered (see the footnote on the cover
page of this prospectus), Heritage will retain those proceeds as well. We cannot
assure you that we will succeed in selling all or any portion of the shares
being offered.

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<PAGE> 14

DILUTION

At March 31, 1999, the shareholders' equity, or net book value, of Heritage
was $30,929,000, or $5.57 per share. Net book value per share represents
Heritage's total assets less total liabilities divided by the total number of
shares of common stock outstanding, exclusive of currently exercisable options.

Net book value dilution per share represents the difference between the
amount per share paid by the purchasers of common stock in the offering and the
pro forma net book value per share of common stock immediately after the
completion of the offering. After giving effect to the sale by Heritage of the
shares of common stock offered in this document at the public
offering price of $ per share and receipt by Heritage of the net proceeds,
the pro forma net book value of Heritage at March 31, 1999, would have been a
maximum of approximately $ ($ per share). This represents an
immediate decrease in book value per share of $ per share to purchasers of
shares in the offering, as illustrated by the following:

DILUTION IN NET BOOK VALUE PER SHARE TO NEW SHAREHOLDERS

<TABLE>
<CAPTION>
ASSUMING NEW
SHARES IN THE OFFERING
----------------------
<S> <C>
Public offering price per share........................... $
Net book value per share at March 31, 1999................ 5.57
Increase per share attributable to new shareholders in the
offering................................................
Pro forma net book value per share after the offering.....
Dilution in net book value per share to new
shareholders............................................
</TABLE>

Exercise of outstanding stock options would result in additional dilution
to new shareholders of $ per share (currently exercisable options) or $
per share (all options).

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<PAGE> 15

CAPITALIZATION

The following table sets forth the capitalization and capital ratios of
Heritage at March 31, 1999, and as adjusted to give pro forma effect to the
offering assuming sale of the shares offered hereby:

<TABLE>
<CAPTION>
AT MARCH 31, 1999
---------------------------
AS ADJUSTED
ACTUAL FOR THE OFFERING
------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Preferred stock, 10,000,000 shares authorized; none
outstanding............................................. -- --
Common stock, no par value, 30,000,000 shares authorized;
shares outstanding: 5,561,656 at March 31, 1999 and
as adjusted.............................. $29,455 $39,335
Retained earnings......................................... 1,249 1,249
Accumulated other comprehensive income.................... 225 225
------- -------
Total shareholders' equity................................ $30,929 $40,809
======= =======
CAPITAL RATIOS:
Tier 1 risk-based capital............................... 10.30% 13.67%
Total risk-based capital................................ 11.55% 14.92%
Leverage................................................ 8.32% 11.05%
</TABLE>

The table above assumes that Heritage will immediately pay estimated
expenses of $120,000 and invest net proceeds in U.S. Treasury securities with a
0% risk factor for regulatory capital purposes. The table above does not reflect
shares of common stock that would be issued upon exercise of outstanding stock
options. The table also does not reflect the additional shares
that we have registered and may sell as described in the footnote on the cover
page of this prospectus.

DETERMINATION OF OFFERING PRICE

The Board of Directors of Heritage determined the offering price for the
shares of common stock offered after considering several factors, including
recent trading prices of the common stock, book value per share, earnings per
share, historical results of operations, assessment of our management and
financial condition and market activity of stock for other financial
institutions. The offering price does not necessarily reflect the price at which
the common stock currently trades, nor does the offering price necessarily
reflect the price at which the common stock will trade following the offering.
Because the offering is expected to take place over a period of 90 days and as
long as 135 days, the market price for the common stock could vary during the
offering.

TRADING HISTORY AND DIVIDENDS

TRADING HISTORY

On July 30, 1998 Heritage's common stock was approved for listing on the
Nasdaq National Market under the symbol "HTBK." Before July 30, 1998, Heritage's
common stock (before February 17, 1998, the common stock of Heritage Bank of
Commerce) was listed on the Over-the-Counter Electronic Bulletin Board under the
symbol "HTBC."

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<PAGE> 16

Everen Securities, Hoefer & Arnett, Incorporated, Sutro & Co., Incorporated and
Van Kasper & Company have acted as market makers for the common stock. These
market makers have no obligation to make a market for Heritage's common stock,
and they may discontinue making a market at any time.

The information in the following table for 1999 and the third and fourth
quarters in 1998 indicates the high and low closing prices for the common stock,
based upon information provided by the Nasdaq National Market. The information
for quarters before the third quarter of 1998 is based upon information provided
by the market makers. These quotations reflect inter-dealer prices, without
retail mark-up, markdown, or commission, do not reflect actual transactions, and
do not include nominal amounts traded directly by shareholders or through other
dealers who are not market makers.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1999
Second Quarter (through , 1999)................ $ $
First Quarter............................................... 21.94 14.50

1998
Fourth Quarter.............................................. 14.67 11.33
Third Quarter............................................... 14.00 9.67
Second Quarter.............................................. 11.33 9.67
First Quarter............................................... 11.33 10.00

1997
Fourth Quarter.............................................. 13.33 10.67
Third Quarter............................................... 9.67 5.78
Second Quarter.............................................. 5.67 5.55
First Quarter............................................... 5.78 5.39
</TABLE>

Share prices above are adjusted to reflect:

- a 5 percent stock dividend which was paid on February 26, 1997 to
shareholders of record as of February 5, 1997;

- a 3-for-2 stock split on August 15, 1997 to shareholders of record as of
August 1, 1997, and

- a 3-for-2 stock split on February 19, 1999 to shareholders of record as
of February 5, 1999.

On , 1999, the last reported sale price of the common stock on
the Nasdaq National Market was $ per share. As of April , 1999, Heritage
had approximately 835 shareholders of record. This number does not include the
number of beneficial holders of Heritage common stock held in street name; we
believe this number is approximately . Effective February 17,
1998, Heritage Bank of Commerce's common stock was exchanged on a share for
share basis with the common stock of Heritage.

DIVIDEND POLICY AND HISTORY

HERITAGE. Heritage currently has no intention of paying cash dividends in
the foreseeable future. Payment of cash dividends is conditioned on earnings,
financial condition, cash needs, the discretion of the Board of Directors and
compliance with

15
<PAGE> 17

regulatory requirements. For discussion of regulatory requirements, see
"-- Limitations on Dividends" below. At present, the Board of Directors intends
to consider payment of cash dividends only when Heritage achieves positive
retained earnings and the Board determines that retention of earnings is not
necessary to support anticipated growth in assets.

THE BANKS. The primary source of funds for payment of dividends by Heritage
to its shareholders is expected to be the receipt of cash dividends from
Heritage Bank of Commerce and Heritage Bank East Bay. The banks' abilities to
pay dividends to Heritage is limited by applicable state and federal law as
discussed below.

Payment of cash dividends by the banks in the future will depend upon their
earnings and financial condition and other factors deemed relevant by
management, including compliance with regulatory requirements. Heritage Bank
East Bay has an accumulated deficit that precludes it from paying cash dividends
to Heritage without the consent of the California Commissioner of Financial
Institutions. In April 1998, Heritage Bank of Commerce received permission from
the Commissioner to pay a cash dividend of $300,000 to Heritage. Heritage used
the funds to repay its costs of organization and for general corporate purposes.

In 1995 and 1997, Heritage Bank of Commerce declared stock dividends. The
Bank accounted for the stock dividends by increasing its recorded accumulated
deficit and transferring $1,384,000 and $1,304,000, respectively, to permanent
capital.

In August 1997, Heritage Bank of Commerce declared a 3 for 2 stock split,
and in January 1999, Heritage declared a 3 for 2 stock split. In each
transaction we accounted for the transaction by restating all share information
to reflect the effect of the split.

LIMITATIONS ON DIVIDENDS

HERITAGE. A California corporation such as Heritage may make a distribution
to its shareholders if the corporation's retained earnings equal at least the
amount of the proposed distribution. In the event sufficient retained earnings
are not available for the proposed distribution, a corporation may nevertheless
make a distribution to its shareholders if, after giving effect to the
distribution, the corporation's assets equal at least 125% of its liabilities
and some other conditions are met. Since the 125% ratio is equivalent to a
capital-to-assets ratio of 20%, most bank holding companies, including Heritage,
based on its current capital ratios, are unable to meet this last test and
therefore may pay cash dividends only if they have sufficient retained earnings.

A bank holding company may not pay a cash dividend if, as a result, its
capital ratios would fall below regulatory requirements. The FRB may prohibit
payment of cash dividends if it determines that the payment might be unsafe or
unsound.

THE BANKS. California Banking Law provides that a state-licensed bank may
not make a cash distribution to its shareholders in excess of the lesser of the
following:

- the bank's retained earnings, or

- the bank's net income for its last three fiscal years, less the amount of
any distributions made by the bank to its shareholders during the three
year period.

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<PAGE> 18

However, with the prior approval of the Commissioner, a bank may make a
distribution to its shareholders of an amount not to exceed the greatest of the
following:

- a bank's retained earnings,

- its net income for its last fiscal year, or

- its net income for the current fiscal year.

The FDIC and the Commissioner have authority to prohibit a bank from
engaging in business practices which are considered to be unsafe or unsound.
Depending upon the financial condition of a bank and upon other factors, the
FDIC or Commissioner could assert that payments of dividends or other payments
by a bank might be an unsafe or unsound practice.

17
<PAGE> 19

HOW TO SUBSCRIBE

GENERAL

To invest, you must purchase at least 100 shares for a minimum investment
of $ . Once you submit a completed subscription to us, you may not
withdraw it. We reserve the right to accept individual subscriptions for fewer
than 100 shares in our discretion. The offering is not underwritten and is not
conditioned on the sale of any minimum number of shares.

Only the directors and officers of Heritage and its subsidiaries have the
authority to solicit subscriptions for shares. Our directors and officers intend
to solicit by means of personal and telephone contact with prospective
subscribers and by direct mailing of the prospectus. We may reimburse our
directors and officers for their reasonable expenses, if any, incurred in
connection with the selling of shares.

RESTRICTIONS

Only persons who have received a copy of this prospectus may subscribe.
Except with the express consent of Heritage, the FRB and the Commissioner, no
investor may purchase, directly or indirectly, shares which together with any
shares previously held by the investor equal or exceed 10% of the Heritage
common stock to be outstanding immediately following completion of the offering.
In addition, except with our consent, no investor may purchase in the offering,
directly or indirectly, shares which together with any shares previously held by
the investor, equal or exceed 5% of our common stock to be outstanding
immediately following completion of the offering.

APPLICATION FOR COMMON STOCK

The prospectus includes Appendix A, the Stock Subscription Application and
IRS Form W-9. You may subscribe to purchase shares by mailing or delivering to
us:

- a completed and signed application;

- a check payable to "Heritage Commerce Corp" in the amount of the purchase
price; and

- a completed IRS Form W-9.

We can accept or reject applications in whole or in part for any reason. We
will notify you in writing whether we have accepted your application within one
month after we receive it. If we reject your application in whole or in part, we
will return your unaccepted funds together with interest actually earned
thereon.

We will deposit all subscription funds in an interest-bearing impound
account at Heritage Bank of Commerce. Funds in the impound account will bear
simple interest at a rate of 3% per annum. Any funds in the impound account are
insured by the FDIC up to a maximum of $100,000 per purchaser; however, our
common stock is not insured by the FDIC or any other agency.

On approximately a monthly basis we will conduct a closing at our premises.
At each closing, at our request Heritage Bank of Commerce will release to us
funds in the impound account (including any interest earned) attributable to
accepted applications. Within 10

18
<PAGE> 20

business days after each closing, we will mail to each of you whose application
we have accepted a stock certificate, registered in your name or as directed by
you, for the shares you have purchased.

We plan to keep the offering open for 90 days, but we may terminate it
early or extend it for up to 45 days at our discretion. If for any reason we
terminate the offering without accepting any applications, we will send to each
of you who has submitted an application a written notice and a refund of the
amount you submitted plus interest actually earned on those funds while on
deposit in the impound account.

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<PAGE> 21

BUSINESS

GENERAL

Heritage was incorporated in 1997 under the California General Corporation
Law for the principal purpose of engaging in activities permitted for a bank
holding company. Heritage is the holding company for Heritage Bank of Commerce
and Heritage Bank East Bay and is a legal entity separate and distinct from the
banks. The operations of Heritage are conducted at the same location and in the
same facilities as the operations of the banks. Heritage does not expect to
engage in activities other than the operation of its subsidiary banks in the
immediate future. Heritage may also receive income from dividends paid to it by
its banks if they satisfy legal requirements for payment of dividends. However,
our banks have no formal dividend policy, and they issue dividends solely in the
discretion of their respective Boards of Directors. We cannot assure you as to
when or whether Heritage might pay dividends or what the amount of its dividends
might be. Heritage Bank East Bay currently has an accumulated deficit which
precludes it from paying cash dividends without the consent of the Commissioner.
If the offering is completed, Heritage may earn interest on investment of funds
not used to capitalize a new bank. See "Use of Proceeds."

The FRB regulates the activities of Heritage. Heritage may engage, directly
or through subsidiary corporations, in those activities closely related to
banking which are specifically permitted under the Bank Holding Company Act of
1956.

THE BANKS

Heritage Bank of Commerce, with its main office located in the city of San
Jose, California, commenced operations as a California state-chartered bank on
June 8, 1994. Heritage Bank East Bay, with its main office located in the city
of Fremont, California, commenced operations as a California state-chartered
bank on December 7, 1998. The banks' deposit accounts are insured by the FDIC,
up to the applicable limits. Neither bank is a member of the Federal Reserve
System.

Heritage Bank of Commerce and Heritage Bank East Bay offer traditional
banking services, including:

- a range of loans, primarily commercial loans, including real estate
loans, construction loans, SBA loans, inventory and accounts receivable
loans, and equipment loans;

- checking, savings, and time deposits; NOW and money market deposit
accounts;

- travelers' checks, safe deposit, and other customary non-deposit banking
services; and

- VISA and MasterCard credit cards through a correspondent.

The banks do not have a trust department.

In February 1999, Heritage Bank of Commerce opened its new South Valley
branch in Morgan Hill, California. It intends to utilize the South Valley branch
to obtain deposits and loans in southern Santa Clara County and San Benito
County. If we succeed in raising $7,000,000 or more in this offering and in
establishing a new bank in Morgan Hill at the

20
<PAGE> 22

same location, we intend to transfer the assets, liabilities and operations of
the South Valley branch to the new bank. We expect that the new bank, if
established, will have its own board of directors consisting of individuals who
live or work in or near Morgan Hill and whose community contacts will help
promote the interests of the new bank in Morgan Hill. We believe that a new bank
with management drawn from the Morgan Hill community will be better able to
attract and retain banking business in the Morgan Hill community than Heritage's
existing South Valley branch and to compete with other financial institutions
without such ties to the local community. No assurance can be given that a new
bank will attract the amount of business we anticipate or that the new bank can
operate at a profit in either the short term or long term.

BUSINESS AND MARKETING STRATEGY

Heritage benefits from its location in the downtown business district of
the City of San Jose. By virtue of its local management and decision making and
substantially local ownership, Heritage hopes to benefit from the continuing
trend in the banking industry towards merger and consolidation. Heritage's
business strategy and promotional activities emphasize service and
responsiveness to local needs. Management believes that the capital provided by
the offering can allow Heritage to implement its strategy of establishing new
banks, branches, or representative offices in contiguous geographic areas.

Our primary focus is on small to medium sized businesses, their owners,
operators and employees, operating in Santa Clara, Alameda, Contra Costa and San
Benito counties. Our marketing and sales are confined primarily to personal
contacts and referrals in the community. We focus primarily on obtaining
business from clients who require an unusual degree of personal service and
attention from their bank. Businesses served include manufacturers,
distributors, contractors, professional corporations/partnerships, and service
businesses. Between them Heritage Bank of Commerce and Heritage Bank East Bay
had approximately 3,500 deposit accounts at December 31, 1998.

In 1998, we began offering credit cards over the internet to consumers
outside our service area. By the end of 1998, aggregate credit card balances
reached $65,000,000. In 1999 we plan no further expansion of this business and
expect aggregate credit card balances to decline.

MARKET AREA

Currently, our primary market area is comprised of Santa Clara, Alameda,
Contra Costa and San Benito counties. We serve a secondary market consisting of
the South Bay portion of the San Francisco Bay Area, including portions of all
counties contiguous to its primary market area. This area is characterized by a
high degree of urbanization and several concentrations of the small industrial
companies and small-to-medium service companies that comprise our target market.

COMPETITION

The banking and financial services business in California generally, and in
our market area specifically, is highly competitive. The increasingly
competitive environment is a result primarily of changes in regulation, changes
in technology and product delivery systems, and the accelerating pace of
consolidation among financial services providers. Heritage Bank of Commerce and
Heritage Bank East Bay compete for loans, deposits and customers for

21
<PAGE> 23

financial services with other commercial banks, savings and loan associations,
securities and brokerage companies, mortgage companies, insurance companies,
finance companies, money market funds, credit unions, and other non-bank
financial service providers. Many of these competitors are much larger in total
assets and capitalization, have greater access to capital markets and offer a
broader array of financial services than our banks.

To compete with the other financial services providers, we principally rely
upon local promotional activities, personal relationships established by
officers, directors, and employees with its customers, and specialized services
tailored to meet their customers' needs. In those instances where we are unable
to accommodate a customer's needs, we seek to have those services provided in
whole or in part by our correspondents.

PREMISES

Heritage leases all of its properties. Heritage Bank of Commerce occupies
premises at 150 Almaden Boulevard and 100 Park Center Plaza in downtown San
Jose. Heritage Bank of Commerce also has a branch located in Morgan Hill,
California, which (pending regulatory approval) will eventually become Heritage
Bank South Valley. The Morgan Hill branch is located in a temporary facility at
18625 Sutter Boulevard. A permanent structure is currently being erected at the
same location. Heritage Bank East Bay has its main office at 3077 Stevenson
Boulevard in Fremont and a loan production office at 12657 Alcosta Boulevard in
San Ramon, California.

EMPLOYEES

As of December 31, 1998, we employed a total of 123 persons, primarily on a
full-time basis. None of our employees are presently represented by a union or
covered by a collective bargaining agreement. We believe that employee relations
are satisfactory.

LITIGATION

From time to time, Heritage is involved in litigation as an incident to its
business. In the opinion of management, no pending or threatened litigation is
likely to have a material adverse effect on Heritage's financial condition,
results of operations or cash flows.

ALLOWANCE FOR LOAN LOSSES

Heritage maintains an allowance for loan losses to absorb potential credit
losses inherent in the loan portfolio. The allowance is based on ongoing,
monthly assessments of the probable estimated losses, and to a lesser extent,
unused commitments to provide financing. Loans are charged against the allowance
when management believes that the collectibility of the principal is doubtful.
The allowance is increased by a provision for loan losses, which is charged
against current period operating results and decreased by the amount of
charge-offs, net of recoveries. Heritage's methodology for assessing the
appropriateness of the allowance consists of several key elements, which include
the formula allowance, specific allowances and the unallocated allowance.

The formula allowance is calculated by applying loss factors to outstanding
loans and certain unused commitments. Loss factors are based on management's
experience and may be adjusted for significant factors that, in management's
judgment, affect the collectibility of the portfolio as of the evaluation date.
Due to Heritage's lack of historical loss

22
<PAGE> 24

experience, management utilizes their prior industry experience to determine the
loss factor for each category of loan.

Specific allowances are established in cases where management has
identified significant conditions or circumstances related to a credit that
management believes indicate the probability that a loss may be incurred in
excess of the amount determined by the application of the formula allowance. The
allowance also incorporates the results of measuring impaired loans as provided
in Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan -- Income Recognition and Disclosures." These
accounting standards prescribe the measurement methods, income recognition and
disclosures related to impaired loans. Management considers a loan to be
impaired when it is probable that Heritage will be unable to collect all amounts
due according to the contractual terms of the note agreement. When a loan is
considered to be impaired, the amount of impairment is measured based on the
present value of expected future cash flows discounted at the note's effective
interest rate, or the fair value of the collateral if the loan is secured by
real estate.

The unallocated allowance is based upon management's evaluation of various
conditions that are not directly measured in the determination of the formula
and specific allowances. The conditions evaluated in connection with the
unallocated allowance may include existing general economic and business
conditions affecting the key lending areas of Heritage, credit quality trends,
collateral values, loan volumes and concentrations, seasoning of the loan
portfolio, specific industry conditions within portfolio segments, recent loss
experience in particular segments of the portfolio, duration of the current
business cycle, and bank regulatory examination results.

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<PAGE> 25

DESCRIPTION OF SECURITIES OF THE COMPANY

GENERAL

The authorized capital stock of Heritage consists of 30,000,000 shares of
common stock, no par value, of which 5,561,656 shares were issued and
outstanding as of March 31, 1999. In addition, 1,657,346 shares have been
reserved for issuance under the Stock Option Plan, of which 1,364,809 have been
granted, 83,344 have been exercised, and 209,193 remain available for grant as
of March 31, 1999. A proposal to increase the number of shares reserved under
the Stock Option Plan will be considered at the 1999 Annual Meeting of
Shareholders on May 27, 1999. Along with the common stock, the authorized
capital of Heritage includes 10,000,000 shares of preferred stock, of which none
were issued and outstanding as of March 31, 1999. As of March 31, 1999, Heritage
had approximately 835 shareholders of record.

COMMON STOCK

Each share of common stock has the same rights, privileges, and preferences
as every other share of common stock, and there are no pre-emptive, conversion
or redemption rights or sinking fund provisions applicable thereto. The shares
outstanding are fully paid, as described below.

Voting Rights. Each holder of the common stock is entitled to one vote per
share on any issue requiring a vote at any meeting, except that in connection
with the election of directors, the shares may be voted cumulatively. Cumulative
voting entitles a shareholder the right to vote the number of shares he or she
owns, multiplied by the number of directors to be elected. This total number of
votes may be cast for one candidate or may be distributed on the same principle
among as many candidates as the shareholder may desire. Heritage's Articles of
Incorporation may be amended at any regular or special meeting of the
shareholders by the affirmative vote of the holders of a majority of the
outstanding shares.

Liquidation Rights. Upon liquidation or dissolution of Heritage, holders of
the common stock are entitled to receive pro rata the net assets remaining after
payment of all creditors of Heritage.

No Pre-emptive Rights. Holders of the common stock of Heritage have no pre-
emptive or other rights to subscribe for additional shares.

Dividend Rights. Each share of Heritage's common stock participates equally
in dividends on common stock, which are payable when, as, and if declared by the
Board of Directors out of funds legally available for that purpose. See "Trading
History and Dividends -- Dividends."

Transfer Agent. Gemisys serves as the registrar and transfer agent for
Heritage's common stock.

Acquisition of Control. Both Federal and state law prohibit a person or
company from acquiring 10% or more of the outstanding equity securities of a
bank holding company without prior notice to and approval of the FRB and
Commissioner. No corporation may acquire 25% or more of the outstanding shares
of a bank holding company without obtaining the prior approval of the FRB under
the Bank Holding Company Act.

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<PAGE> 26

PREFERRED STOCK

Heritage is authorized to issue 10,000,000 shares of preferred stock. The
Board of Directors may create one or more classes or series of preferred stock
and may determine the rights, preferences, privileges and restrictions of any
class or series without any further approval or action by the shareholders.

The effects of issuing preferred stock on the holders of common stock could
include, among other things:

- reducing the amount otherwise available for payments of dividends on
common stock if dividends are payable on the series of preferred stock;

- restricting dividends on common stock if dividends on the series of
preferred stock are in arrears;

- diluting the voting power of common stock if the series of preferred
stock has voting rights, including a possible "veto" power if the series
of preferred stock has class voting rights;

- diluting the equity interest of holders of common stock if the series of
preferred stock is convertible, and is converted, into common stock; and

- restricting the rights of holders of common stock to share in Heritage's
assets upon liquidation until satisfaction of any liquidation preference
granted to the holder of the series of preferred stock.

LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS; INDEMNIFICATION

Section 317 of the California Corporation Law expressly grants to each
California corporation, including Heritage and its subsidiary banks, the power
to indemnify its directors, officers and agents against some liabilities and
expenses incurred in the performance of their duties. Rights to indemnification
beyond those provided by Section 317 may be valid to the extent that these
rights are authorized in the corporation's articles of incorporation.
Indemnification may not be made, however, with respect to liability incurred in
connection with any of the specific acts for which the liability of directors
may not be limited as discussed in the previous section.

- for any matter with respect to which the person to be indemnified has
been held liable to the corporation, unless the indemnification is
approved by the court;

- of amounts paid in settling or otherwise disposing of a pending action
without court approval; or

25
<PAGE> 27

- of expenses incurred in defending a pending action which is settled or
otherwise disposed of without court approval.

To the extent that a director, officer or agent of a corporation has been
successful on the merits in defense of any proceeding for which indemnification
is permitted by Section 317, a corporation is obligated by Section 317 to
indemnify the person against expenses actually and reasonably incurred by him in
connection with the proceeding.

FDIC regulations prohibit the indemnification by insured banks and their
holding companies of their directors, officers and other institution-affiliated
persons for that portion of the costs sustained with regard to an administrative
or civil enforcement action commenced by any federal banking agency that results
in a final order or settlement to which a director, officer or other party is
assessed a civil money penalty, removed from office, prohibited from
participating in the affairs of an insured institution or required to cease and
desist from or to take an affirmative action under the Federal Deposit Insurance
Act. This regulation permits an institution to make an indemnification payment
to, or for the benefit of, a director, officer or other party only if the
institution's Board of Directors, in good faith, determines that the individual
acted in good faith and in a manner that he or she believed to be in the best
interests of the institution and that the payment of indemnification will not
adversely affect the institution's safety and soundness. The director, officer
or other party must agree in writing to reimburse the institution for any
indemnification payments received should the proceeding result in a final order
being instituted against the individual assessing a civil money penalty,
removing the individual from office, or requiring the individual to cease and
desist from particular institutional activity.

LEGAL MATTERS

Our counsel, McCutchen, Doyle, Brown & Enersen, LLP, San Francisco,
California, will give an opinion that the shares of common stock covered by this
prospectus are valid.

EXPERTS

The consolidated financial statements as of December 31, 1998 and 1997
incorporated in this prospectus by reference from the Company's Annual Report of
Form 10-K for the years ended December 31, 1998, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.

The financial statements of Heritage Bank of Commerce as of December 31,
1996, and for the year then ended incorporated by reference in this prospectus
have been audited by KPMG LLP, independent auditors, as stated in their report
appearing in this document and incorporated by reference in this document in
reliance upon the report of the firm given upon their authority as experts in
accounting and auditing.

26
<PAGE> 28

INCORPORATION BY REFERENCE

The SEC allows us to "incorporate" into this prospectus information we file
with the SEC in other documents. This means that we can disclose important
information to you by referring to other documents that contain that
information. The information may include documents filed after the date of this
prospectus which update and supersede the information you read in this
prospectus. We incorporate by reference the documents listed below, except to
the extent information in those documents is different from the information
contained in this prospectus. We also incorporate all future documents we file
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until we terminate the offering of these shares.

The following documents of Heritage which have been filed with the SEC are
hereby incorporated by reference in this prospectus:

<TABLE>
<CAPTION>
SEC FILING PERIOD/FILING DATE
---------- ------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1998
Current Report on Form 8-K January 6, 1999
Current Report on Form 8-K January 29, 1999
</TABLE>

You may request a copy of these documents, at no cost, by writing to:
Heritage Commerce Corp, 150 Almaden Boulevard, San Jose, CA 95113, telephone
(408) 947-6900, attention: Corporate Secretary.

ADDITIONAL INFORMATION

On March 5, 1998, Heritage registered its common stock under the Exchange
Act. As required by the Exchange Act, Heritage files periodic and current
reports, proxy materials and other information with the SEC. You can obtain
copies of these statements from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices
located at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048. You may obtain information on the operation of the public reference
rooms by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available
on the SEC's web site (http://www.sec.gov). From April 1997 to March 1998, the
common stock of Heritage Bank of Commerce was registered under the Exchange Act
with the FDIC. Copies of the Bank's filings under the Exchange Act for this
period can be obtained from the FDIC at its Division of Supervision, Regulation,
Distribution and Securities Operations Unit, 550 17th Street N.W., Washington,
D.C. 20429.

Heritage has filed with the SEC a registration statement on Form S-3 under
the Securities Act of 1933 for this offering of common stock. This prospectus,
which constitutes part of the registration statement, does not contain all of
the information included or incorporated by reference in the registration
statement and its exhibits and schedules. To obtain that additional information,
including the contents of any contract filed as an exhibit and not included in
this prospectus, you should refer to the registration statement and its exhibits
and schedules. It is available at the addresses above. Statements in this
prospectus as to the contents of any contract or other document are not
necessarily complete. You should refer to the contract or other document for all
the details.

27
<PAGE> 29

APPENDIX A

STOCK SUBSCRIPTION APPLICATION

HERITAGE COMMERCE CORP

BY EXECUTING THIS STOCK SUBSCRIPTION APPLICATION,
I ACKNOWLEDGE RECEIPT OF A COPY OF THE PROSPECTUS.

I hereby subscribe for and offer to purchase the number of shares of common
stock, no par value, of Heritage Commerce Corp ("Common Stock") shown below,
upon the terms and conditions specified in the Prospectus at a purchase price of
$ per share. All subscriptions must be for a minimum of 100 shares. No
fractional shares will be issued.

I acknowledge and agree that this Application constitutes an irrevocable
offer and may not be withdrawn without the consent of Heritage Commerce Corp. If
Heritage accepts any subscription only in part, I understand that Heritage will
return any portion of funds not required for the partial subscription, together
with interest actually earned on this portion. If Heritage declines any
subscription, I understand that Heritage will return my subscription funds at
that time, with any interest actually earned on the funds.

If Heritage Commerce Corp cancels the offering in its entirety or rejects
the Application, this offer to purchase and subscribe shall become void, and
Heritage will return any payments received from me in full plus any actual
interest earned on the amount returned. I understand that Heritage will mail my
funds immediately upon termination of the offering or rejection of my
Application.

Subscriptions may be made by completing and signing this stock subscription
application in triplicate and delivering all three copies to: Heritage Commerce
Corp, 150 Almaden Boulevard, San Jose, California 95113, by 5:00 p.m., Pacific
Standard Time, within 90 days of the date of the offering, unless this date is
extended by 45 days or shortened by Heritage Commerce Corp, in its discretion.
The Stock Subscription Application must be delivered together with a completed
Form W-9 and the full amount of the purchase price for the shares subscribed, in
United States dollars, by check, bank draft, or money order, made payable to
"Heritage Commerce Corp".

Upon each closing, all funds received for subscriptions that are accepted
by Heritage Commerce Corp shall become capital of Heritage Commerce Corp
together with interest thereon. These shares of common stock being offered are
not deposits and are not insured by the FDIC.

A-1
<PAGE> 30

HERITAGE COMMERCE CORP
STOCK SUBSCRIPTION APPLICATION

Name(s) of Subscribers: ________________ Date of Subscription ________________

Number of Shares ________________ Amount of Subscription $ ________________

Social Security Number or Tax ID Number
- ------------------------------------------------------

Address of Subscriber
- ------------------------------------------------------------------------------

Telephone Number: Day: ________________ Evening: ________________

SHARE REGISTRATION: IF SHARES ARE NOT TO BE PURCHASED WITH AN IRA, SEP, KEOGH OR
UNDER THE UNIFORM GIFTS TO MINORS ACT, PLEASE CHECK AS APPROPRIATE AND WRITE OUT
THE WAY IN WHICH SHARES ARE TO BE REGISTERED:

[ ] INDIVIDUAL

[ ] JT TEN -- as joint tenants with right of survivorship and not as
tenants in common

[ ] TEN COM -- as tenants in common

[ ] OTHER ____________________

Registration Name
- --------------------------------------------------------------------------------

CHECK AS APPROPRIATE AND, IF CHECKED, COMPLETE AS INDICATED:

[ ] Uniform Gifts to Minors Act
- -------------------------------------------------------------------
(custodian)
Custodian for ____________ under Uniform Gifts to Minors Act, State
of ____________
(minor) (state)

[ ] IRA, SEP or Keogh Account #
- ---------------------------------------------------------------

Note: If the Subscription Application is on behalf of an IRA, SEP or KEOGH, the
registration name above must read exactly as does the name of the IRA, SEP or
KEOGH account.

Brokerage Firm ________________ Broker ________________

Broker's Phone No. ________________ Custodian Firm ________________

Mailing Address of Broker or Custodian
- -----------------------------------------------------------

- --------------------------------------------------------------------------------
I HAVE READ AND HEREBY AGREE TO THE TERMS OF THIS APPLICATION.
Signature of Subscriber ________________

A-2
<PAGE> 31

- ------------------------------------------------------
- ------------------------------------------------------

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES
TO WHICH IT RELATES, OR AN OFFER OF THESE SHARES TO A PERSON IN ANY STATE OR
OTHER JURISDICTION IN WHICH THE OFFER OR SOLICITATION IS UNLAWFUL. THE DELIVERY
OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION CONTAINED IN THIS
DOCUMENT IS CORRECT AS TO ANY ITEM AFTER ITS EFFECTIVE DATE.

-------------------------

For the Table of Contents, see the inside front cover.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

Up to Shares
HERITAGE
COMMERCE CORP
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 32

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

<TABLE>
<S> <C>
Registration Fees........................................... $ 3,336
Transfer Agents Fees........................................ 10,000*
Printing and Engraving...................................... 50,000
Legal....................................................... 25,000*
Accounting.................................................. 25,000*
Miscellaneous............................................... 6,664
--------
Total..................................................... $120,000
========
</TABLE>

- -------------------------
* estimated

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Articles of Incorporation provide that the liability of the
directors of the Company for monetary damages shall be eliminated to the fullest
extent permissible under California law and that the Company is authorized to
provide for the indemnification of agents (as defined in Section 317 of the
California General Corporation Law) of the corporation in excess of that
expressly permitted by such Section 317 for breach of duty to the corporation
and its shareholders to the fullest extent permissible under California law.

Section 317 of the California Corporation Law expressly grants to each
California corporation, including Heritage Commerce Corp, the power to indemnify
its directors, officers and agents against certain liabilities and expenses
incurred in the performance of their duties. Rights to indemnification beyond
those provided by Section 317 may be valid to the extent that such rights are
authorized in the corporation's articles of incorporation. Indemnification may
not be made, however, with respect to liability incurred in connection with any
of the specific acts for which the liability of directors may not be limited as
discussed in the previous section.

With respect to all proceedings other than shareholder derivative actions,
Section 317 permits a California corporation to indemnify any of its directors,
officers or other agents only if such person acted in good faith and in a manner
such person reasonably believed to be in the best interests of the corporation
and, in the case of a criminal proceeding, had no reasonable cause to believe
the conduct of such person was unlawful. In the case of derivative actions, a
California corporation may indemnify any of its directors, officers or agents
only if such person acted in good faith and in a manner such person believed to
be in the best interests of the corporation and its shareholders. Furthermore,
in derivative actions, no indemnification is permitted (i) with respect to any
matter with respect to which the person to be indemnified has been held liable
to the corporation, unless such indemnification is approved by the court; (ii)
of amounts paid in settling or otherwise disposing of a pending action without
court approval; or (iii) of expenses incurred in defending a pending action
which is settled or otherwise disposed of without court approval. To the extent
that a director, officer or agent of a corporation has been successful on the
merits in defense of any proceeding for which indemnification is permitted by
Section 317, a corporation is obligated by Section 317 to indemnify such person
against expenses actually and reasonably incurred by him in connection with the
proceeding.

II-1
<PAGE> 33

FDIC regulations prohibit the indemnification by insured banks and their
holding companies of their directors, officers and other institution-affiliated
persons for that portion of the costs sustained with regard to an administrative
or civil enforcement action commenced by any federal banking agency that results
in a final order or settlement pursuant to which a director, officer or other
party is assessed a civil money penalty, removed from office, prohibited from
participating in the affairs of an insured institution or required to cease and
desist from or to take an affirmative action under the Federal Deposit Insurance
Act. This regulation permits an institution to make an indemnification payment
to, or for the benefit of, a director, officer or other party only if the
institution's Board of Directors, in good faith, determines that the individual
acted in good faith and in a manner that he or she believed to be in the best
interests of the institution and that the payment of indemnification will not
adversely affect the institution's safety and soundness. The director, officer
or other party must agree in writing to reimburse the institution for any
indemnification payments received should the proceeding result in a final order
being instituted against the individual assessing a civil money penalty,
removing the individual from office, or requiring the individual to cease and
desist from certain institutional activity.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
TO REPORT ON FORM
FILED ------------------------------------
HEREWITH 8-A DATED 10-K DATED EXHIBIT NO.
-------- --------- ---------- -----------
<S> <C> <C> <C> <C>
5.1 Opinion of McCutchen, Doyle, X
Brown & Enersen LLP
12.1 Statement re computation of Year ended
earnings per share [included in 12/31/98
footnote 1 to Financial
Statements incorporated by
reference in the Registration
Statement]
23.1 Consent of Deloitte & Touche X
LLP dated April 23, 1999
23.2 Consent of KPMG LLP dated April X
23, 1999
23.3 Consent of McCutchen, Doyle,
Brown & Enersen LLP [included
in their opinion filed as
Exhibit 5.1]
24.1 Power of attorney X
99.1 Stock subscription application X
[included as Appendix A in the
prospectus]
</TABLE>

II-2
<PAGE> 34

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

II-3
<PAGE> 35

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California, on April 15, 1999.

HERITAGE COMMERCE CORP.

By: /s/ JOHN E. ROSSELL
-----------------------------------
John E. Rossell
President
and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>

/s/ FRANK BISCEGLIA Director April 15, 1999
- ---------------------------------------------------
Frank Bisceglia

Director April 15, 1999
- ---------------------------------------------------
James Blair

/s/ ARTHUR CARMICHAEL, JR. Director April 15, 1999
- ---------------------------------------------------
Arthur Carmichael, Jr.

/s/ RICHARD CONNIFF Director April 15, 1999
- ---------------------------------------------------
Richard Conniff

/s/ WILLIAM DEL BIAGGIO, JR. Director April 15, 1999
- ---------------------------------------------------
William Del Biaggio, Jr.

/s/ ANNEKE DURY Director April 15, 1999
- ---------------------------------------------------
Anneke Dury

Director April 15, 1999
- ---------------------------------------------------
Tracey Enfantino

/s/ GLENN GEORGE Director April 15, 1999
- ---------------------------------------------------
Glenn George

/s/ ROBERT GIONFRIDDO Director April 15, 1999
- ---------------------------------------------------
Robert Gionfriddo

/s/ P. MICHAEL HUNT Director April 15, 1999
- ---------------------------------------------------
P. Michael Hunt
</TABLE>

II-4
<PAGE> 36

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ JOHN LARSEN Director April 15, 1999
- ---------------------------------------------------
John Larsen

/s/ LAWRENCE MCGOVERN Chief Financial Officer April 15, 1999
- --------------------------------------------------- and Principal
Lawrence McGovern Accounting Officer

/s/ LON NORMANDIN Director April 15, 1999
- ---------------------------------------------------
Louis O. (Lon) Normandin

/s/ JACK PECKHAM Director April 15, 1999
- ---------------------------------------------------
Jack Peckham

/s/ ROBERT PETERS Director April 15, 1999
- ---------------------------------------------------
Robert Peters

/s/ HUMPHREY POLANEN Director April 15, 1999
- ---------------------------------------------------
Humphrey Polanen

/s/ JOHN E. ROSSELL III Director and Principal April 15, 1999
- --------------------------------------------------- Executive Officer
John E. Rossell III

Director April 15, 1999
- ---------------------------------------------------
Kirk Rossmann

/s/ BRAD SMITH Director April 15, 1999
- ---------------------------------------------------
Brad Smith
</TABLE>

II-5
<PAGE> 37

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
TO REPORT ON FORM
8-A --------------------------
DATED 10-K DATED EXHIBIT NO.
-------- ----------- ------------
<S> <C> <C> <C>
5.1 Opinion of McCutchen, Doyle, Brown &
Enersen LLP
12.1 Statement re computation of earnings per Year ended
share [included in footnote 1 to 12/31/98
Financial Statements incorporated by
reference in the Registration Statement]
23.1 Consent of Deloitte & Touche LLP dated
April 23, 1999
23.2 Consent of KPMG LLP dated April 23, 1999
23.3 Consent of McCutchen, Doyle, Brown &
Enersen LLP [included in their opinion
filed as Exhibit 5.1]
24.1 Power of attorney
99.1 Stock subscription application [included
as Appendix A in the prospectus]
</TABLE>

<PAGE> 1
EXHIBIT 5.1

[MCCUTCHEN, DOYLE, BROWN & ENERSEN, LLP LETTERHEAD]

April 26, 1999

Heritage Commerce Corp
150 Almaden
San Jose, CA 95113

REGISTRATION STATEMENT ON FORM S-3

Ladies and Gentlemen:

We have acted as counsel for Heritage Commerce Corp, a California
corporation (the "Company"), in connection with the Registration Statement on
Form S-3 (the "Registration Statement") filed by the Company with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, relating to the registration of shares of the Company's common stock,
no par value per share, with an aggregate maximum offering price of $12,000,000.

We are of the opinion that the shares of common stock to be issued by the
Company pursuant to the Registration Statement have been duly authorized and,
when sold pursuant to the terms described in the Registration Statement, will
be duly and validly issued, fully paid and nonassessable.

We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement.

Very truly yours,

McCUTCHEN, DOYLE, BROWN & ENERSEN, LLP

By /s/ Thomas G. Reddy
----------------------------------
A Member of the Firm

<PAGE> 1

EXHIBIT 23.1

[DELOITTE & TOUCHE LETTERHEAD]

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration Statement of
Heritage Commerce Corp on Form S-3 of our report dated January 20, 1999
(February 5, 1999 as to the stock split information in Note 1, paragraph 2),
appearing in the Annual Report on Form 10-K of Heritage Commerce Corp for the
year ended December 31, 1998 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.

DELOITTE & TOUCHE LLP

San Jose, California

April 23, 1999

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
Heritage Bank of Commerce:

We consent to the use of our report dated January 10, 1997, relating to the
statements of income, retained earnings, and cash flows for the year ended
December 31, 1996, of Heritage Bank of Commerce, incorporated herein by
reference and to the reference to our firm under the heading "Experts" in the
prospectus.

/s/ KPMG LLP

Mountain View, California
April 23, 1999

<PAGE> 1

EXHIBIT 24.1

POWER OF ATTORNEY

We, the undersigned directors of Heritage Commerce Corp, do hereby
severally constitute and appoint John E. Rossell, III, and Lawrence McGovern,
and each of them singly, our true and lawful attorneys and agents, to do any and
all things and acts in our names in the capacities indicated below and to
execute any and all instruments for us and in our names in the capacities
indicated below which said John E. Rossell, III, and Lawrence McGovern, or
either of them, may deem necessary or advisable to enable Heritage Commerce Corp
to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with the offering contemplated by this Registration Statement on Form
S-3, including specifically, but not limited to, power and authority to sign for
us or any of us in our names in the capacities indicated below the Registration
Statement and any and all amendments (including post-effective amendments)
thereto; and we hereby ratify and confirm all that said John E. Rossell, III,
and Lawrence McGovern, or either of them, shall do or cause to be done by virtue
hereof.