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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 16, 2000
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Heritage Commerce Corp
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(Exact name of registrant as specified in its charter)
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<S> <C> <C>
CA 00-23877 77-0469558
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(State of other jurisdiction of (Commission File (IRS Employer
incorporation) Number) Identification No.)
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150 Almaden Blvd., San Jose, CA 95113
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 947-6900
None
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(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 1, 2000, Heritage Commerce Corp completed a merger with
Western Holdings Bancorp, a California corporation and a registered bank holding
company under the Bank Holding Company Act of 1956, and of Western Holding
Bancorp's subsidiary bank, Bank of Los Altos, a California state-chartered
commercial bank which was accounted for as a pooling of interests. Western
Holdings Bancorp and Bank of Los Altos are both headquartered in Los Altos,
California. See the attached press release (exhibit 99) for further information.
Western Holdings Bancorp was previously owned by approximately 94 individual
shareholders. The consideration for merger was approximately $40.9 million.
Pursuant to the terms of the Agreement of Merger, each share of Western Holdings
Bancorp Common Stock will be exchanged for 1.2264 shares of Heritage Commerce
Corp Stock. Bank of Los Altos will continue to operate its three offices as a
separate bank subsidiary of Heritage Commerce Corp. No prior material
relationship existed between Heritage Commerce Corp and Western Holdings Bancorp
or any of their respective directors and officers or their associates.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
The audited financial statements of Western Holdings Bancorp, including
a balance sheet and income statement as of and for the years ended December 31,
1999 and 1998, are incorporated by reference from the financial statement pages
of the Company's registration statement on Form S-4, Registration No. 333-40384,
and the unaudited interim balance sheet and income statement as of and for the
six-month period ended June 30, 2000, are included in this filing as a financial
statement exhibit.
(b) Pro Forma Financial Information.
The unaudited historical and pro forma condensed combined financial
statements of Heritage Commerce Corp and Western Holdings Bancorp, including the
pro forma condensed combined income statements of the years ended December 31,
1999, 1998, and 1997, are incorporated by reference from the financial statement
pages of the Company's registration statement on Form S-4, Registration No.
333-40384, and the unaudited pro forma condensed combined balance sheet as of
June 30, 2000, and the pro forma condensed combined income statement for the
six-month period ended June 30, 2000, are included in this filing as a financial
statement exhibit.
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(c) Exhibits.
No. Description
2. Agreement and Plan of Merger and Reorganization dated as of
May 9, 2000 between Heritage Commerce Corp and Western
Holdings Bancorp (incorporated by reference from Annex A of
the registration statement on Form S-4, Registration No.
333-40384, filed with the Commission on June 29, 2000)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of PricewaterhouseCoopers LLP
99. Press release issued by Heritage Commerce Corp on October 2, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has caused this current report to be signed on its behalf by the
undersigned duly authorized person.
Date: October 16, 2000 Heritage Commerce Corp
By: /s/ Brad Smith
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Its Chairman and Chief
Executive Officer
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UNAUDITED HISTORICAL AND PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined balance sheet
at June 30, 2000, and pro forma condensed combined statements of income for the
six-month period ended June 30, 2000, combine the historical balance sheets of
Heritage Commerce Corp and Western Holdings Bancorp as if the Merger had been
effective on June 30, 2000, and the income statements of Heritage Commerce Corp
and Western Holdings Bancorp as if the Merger had been effective on the
beginning of each period presented. Under the terms of the merger agreement,
Western Holdings Bancorp shareholders will receive 1.2264 shares of Heritage
Commerce Corp common stock for each share of Western Holdings Bancorp common
stock. The merger will be accounted for as a pooling of interests. The pro forma
adjustments are based upon available information and upon certain assumptions
that management believes are reasonable under the circumstances.
These unaudited pro forma condensed combined financial statements
should be read in conjunction with the historical consolidated financial
statements and the related notes thereto of Heritage Commerce Corp and the
historical financial statements and related notes thereto of Western Holdings
Bancorp incorporated by reference in this document. The unaudited pro forma
condensed combined statements of income are not necessarily indicative of
operating results which would have been achieved had the Merger been consummated
as of the beginning of the first period presented and should not be construed as
representative of future operations.
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Heritage and Western Holdings Unaudited Pro Forma Condensed
Combined Balance Sheet As of June 30, 2000
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WESTERN PRO FORMA
(DOLLARS IN THOUSANDS) HERITAGE HOLDINGS ADJUSTMENTS(1) COMBINED
--------- --------- -------------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks .............................................. $ 30,680 $ 13,941 $ (1,345) $ 43,276
Federal funds sold ................................................... 85,600 5,600 -- 91,200
--------- --------- --------- ---------
Total cash and cash equivalents ................................... 116,280 19,541 (1,345) 134,476
Securities available-for-sale, at fair value ......................... 33,087 46,342 -- 79,429
Securities held to maturity, at amortized cost ....................... 12,812 9,291 -- 22,103
Loan held for sale, at fair value .................................... 27,620 -- -- 27,620
Loans, net of deferred fees .......................................... 371,373 150,165 -- 521,538
Allowance for probable loan losses ................................... (6,000) (1,738) -- (7,738)
--------- --------- --------- ---------
Loans, net ........................................................ 365,373 148,427 -- 513,800
Premises and equipment, net .......................................... 3,420 3,087 -- 6,507
Accrued interest receivable and other assets ......................... 9,230 3,620 -- 12,850
Other investments .................................................... 13,145 3,020 -- 16,165
--------- --------- --------- ---------
Total .......................................................... $ 580,967 $ 233,328 $ (1,345) $ 812,950
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits
Demand, noninterest bearing .................................... $ 157,177 $ 47,655 $ -- $ 204,832
Demand, interest bearing ....................................... 12,461 38,081 -- 50,542
Savings and money market ....................................... 154,291 68,818 -- 223,109
Time deposits, under $100,000 .................................. 58,781 21,654 -- 80,435
Time deposits, $100,000 and over ............................... 135,765 42,562 -- 178,327
--------- --------- --------- ---------
Total deposits .................................................... 518,475 218,770 -- 737,245
Accrued interest payable and other liabilities .................... 8,449 1,325 -- 9,774
Mandatorily redeemable cumulative trust preferred securities of
Subsidiary Grantor Trust ....................................... 7,000 -- -- 7,000
--------- --------- --------- ---------
Total liabilities ................................................. 533,924 220,095 -- 754,019
--------- --------- --------- ---------
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value; .................................... -- -- -- --
Common stock, no par value; ....................................... 41,570 10,214 -- 51,784
Additional paid in capital ........................................ 146 -- -- 146
Accumulated other comprehensive loss, net of taxes ................ (167) (1,139) -- (1,306)
Retained earnings ................................................. 5,494 4,158 (1,345) 8,307
--------- --------- --------- ---------
Total shareholders' equity ........................................ 47,043 13,233 (1,345) 58,931
--------- --------- --------- ---------
Total .......................................................... $ 580,967 $ 233,328 $ (1,345) $ 812,950
========= ========= ========= =========
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Heritage and Western Holdings Unaudited Pro Forma Condensed
Combined Statements of Income Six Months Ended June 30, 2000
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<CAPTION>
WESTERN PRO FORMA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) HERITAGE HOLDINGS ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees .............................................. $ 18,390 $ 6,663 $ -- $ 25,053
Investment securities .............................................. 1,379 1,588 -- 2,967
Other interest income .............................................. 1,787 498 -- 2,285
----------- ----------- ----------- -----------
Total interest income ........................................... 21,556 8,749 -- 30,305
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Deposits ........................................................... 7,580 2,945 -- 10,525
Other .............................................................. 215 39 -- 254
----------- ----------- ----------- -----------
Total interest expense .......................................... 7,795 2,984 -- 10,779
----------- ----------- ----------- -----------
Net interest income before provision for probable loan losses ...... 13,761 5,765 -- 19,526
Provision for probable loan losses ................................. 984 230 -- 1,214
----------- ----------- ----------- -----------
Net interest income after provision for probable loan losses ....... 12,777 5,535 -- 18,312
NONINTEREST INCOME:
Service charges on deposit accounts ................................ 209 132 -- 341
Other operating income ............................................. 666 316 -- 982
----------- ----------- ----------- -----------
Total noninterest income ........................................ 875 448 -- 1,323
NONINTEREST EXPENSE:
Salaries and employee benefits ..................................... 6,677 2,317 -- 8,994
Occupancy expense .................................................. 654 403 -- 1,057
Equipment expense .................................................. 456 250 -- 706
Other operating expense ............................................ 2,978 1,281 -- 4,259
----------- ----------- ----------- -----------
Total noninterest expense ....................................... 10,765 4,251 -- 15,016
----------- ----------- ----------- -----------
Income before income tax ........................................... 2,887 1,732 -- 4,619
Provision for income taxes ......................................... 1,040 573 -- 1,613
----------- ----------- ----------- -----------
Net income ......................................................... $ 1,847 $ 1,159 $ -- $ 3,006
=========== =========== =========== ===========
EARNINGS PER SHARE:(2)
Basic .............................................................. $ 0.26 $ 0.42 $ -- $ 0.29
Diluted ............................................................ $ 0.24 $ 0.40 $ -- $ 0.27
Weighted average common shares outstanding-Basic ................... 7,088,480 2,746,214 621,743 10,456,437
Weighted average common shares outstanding-Diluted ................. 7,501,820 2,906,421 658,014 11,066,255
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) Merger Costs
The following table reflects all nonrecurring incurred and estimated
merger-related costs of Heritage and Western Holdings. Estimated merger costs
are included on the June 30, 2000 unaudited pro forma condensed combined balance
sheets as a reduction to shareholders' equity net of the related tax benefit.
Estimated merger costs will be charged to expense as incurred. These merger
costs are summarized below:
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HERITAGE WESTERN HOLDINGS TOTAL
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<S> <C> <C> <C>
Financial advisory ............ $ 50,000 $ 500,000 $ 550,000
Professional fees ............. 255,000 100,000 355,000
Printing ...................... 65,000 20,000 85,000
Other ......................... -- 1,080,000 1,080,000
---------- ---------- ----------
Subtotal ...................... $ 370,000 $1,700,000 $2,070,000
========== ==========
Estimated tax benefit ......... 725,000
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Total ......................... $1,345,000
==========
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(2) Common Stock
Heritage and Western Holdings combined earnings per share and
outstanding shares are calculated as the historical Heritage weighted average
shares plus the historical Western Holdings weighted average shares adjusted for
the assumed conversion ratio of 1.2264.
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EXHIBIT INDEX
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No. Description
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<S> <C>
23.1 Consent of Arthur Andersen LLP
23.2 Consent of PricewaterhouseCoopers LLP
99. Press release by Heritage Commerce Corp on October 2, 2000
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