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Heritage Commerce Corp Earns $2.5 Million In The Third Quarter Of 2012

Operating Results

Net interest income increased 1% to $11.8 million for the third quarter of 2012, compared to $11.7 million for the third quarter a year ago, primarily due to an increase in the average balance of investment securities. Net interest income for the third quarter of 2012 decreased 2% from $12.1 million for the second quarter of 2012, primarily as a result of lower yields on loans and investment securities. For the nine months ended September 30, 2012, net interest income increased 5% to $36.2 million, compared to $34.4 million for the nine months ended September 30, 2011, primarily due to an increase in the average balance of investment securities, and a decrease in the rates paid on interest-bearing liabilities, partially offset by a decrease in the average balance of loans.

The net interest margin decreased 24 basis points to 3.77% for the third quarter of 2012, compared to 4.01% for the third quarter a year ago, and decreased 18 basis points compared to 3.95% for the second quarter of 2012, primarily as a result of lower yields on the securities and loan portfolios. For the first nine months of 2012, the net interest margin decreased to 3.93%, compared to 3.97% for the first nine months of 2011, primarily as a result of lower yields on securities and loans, partially offset by a lower cost of deposits.

The Company recognized a provision for loan losses of $1.2 million for the third quarter of 2012, compared to $1.5 million for the third quarter a year ago and $815,000 for the second quarter of 2012. The provision for loan losses was $2.1 million for the first nine months ended September 30, 2012 compared to $3.2 million for the same period a year ago.

Noninterest income was $2.9 million for the third quarter of 2012, compared to $1.9 million for the third quarter a year ago, and $2.1 million for the second quarter of 2012. The increase in noninterest income during the third quarter of 2012, compared to the other periods, was primarily due to a $1.1 million gain on sales of securities. For the first nine months of 2012, noninterest income was $6.8 million, compared to $6.0 million for the first nine months a year ago, which was primarily due to a $1.2 million gain on sales of securities, partially offset by a lower gain on sales of SBA loans.

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