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

Stocks in this article: HTBK

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      For the Three Months Ended:     Percent Change From:     For the Nine Months Ended:    
CONSOLIDATED STATEMENTS OF INCOME September 30,     June 30,     September 30, June 30,     September 30, September 30,     September 30, Percent
(in $000's, unaudited)       2012     2012     2011 2012     2011 2012     2011 Change
Interest income $ 12,862 $ 13,296 $ 13,020 -3 % -1 % $ 39,607 $ 39,021 2 %
Interest expense   1,038         1,212         1,320   -14 % -21 %   3,440         4,653   -26 %
Net interest income before provision for loan losses 11,824 12,084 11,700 -2 % 1 % 36,167 34,368 5 %
Provision for loan losses   1,200         815         1,515   47 % -21 %   2,115         3,239   -35 %
Net interest income after provision for loan losses 10,624 11,269 10,185 -6 % 4 % 34,052 31,129 9 %
Noninterest income:
Gain on sales of securities 1,105 32 - 3353 % N/A 1,164 - N/A
Service charges and fees on deposit accounts 575 601 605 -4 % -5 % 1,766 1,759 0 %
Increase in cash surrender value of life insurance 434 429 426 1 % 2 % 1,292 1,270 2 %
Servicing income 429 447 434 -4 % -1 % 1,336 1,280 4 %
Gain on sales of SBA loans 221 376 268 -41 % -18 % 633 1,124 -44 %
Other   184         205         179   -10 % 3 %   570         566   1 %
Total noninterest income   2,948         2,090         1,912   41 % 54 %   6,761         5,999   13 %
 
Noninterest expense:
Salaries and employee benefits 5,336 5,377 5,000 -1 % 7 % 16,380 15,504 6 %
Occupancy and equipment 1,041 967 1,012 8 % 3 % 3,004 3,082 -3 %
Premium on redemption of subordinated debt 601 - - N/A N/A 601 - N/A
Professional fees 587 470 707 25 % -17 % 2,268 2,002 13 %
Low income housing investment losses 264 262 617 1 % -57 % 795 820 -3 %
FDIC deposit insurance premiums 248 202 167 23 % 49 % 675 1,074 -37 %
Other   2,070         2,176         2,306   -5 % -10 %   6,734         7,230   -7 %
Total noninterest expense   10,147         9,454         9,809   7 % 3 %   30,457         29,712   3 %
Income before income taxes 3,425 3,905 2,288 -12 % 50 % 10,356 7,416 40 %
Income tax expense (benefit)   939         1,226         (2,529 ) -23 % 137 %   3,116         (1,068 ) 392 %
Net income 2,486 2,679 4,817 -7 % -48 % 7,240 8,484 -15 %
Dividends and discount accretion on preferred stock   -         -         (532 ) N/A -100 %   (1,206 )       (1,732 ) -30 %
Net income available to common shareholders $ 2,486       $ 2,679       $ 4,285   -7 % -42 % $ 6,034       $ 6,752   -11 %
 
PER COMMON SHARE DATA
(unaudited)
Basic earnings per share $ 0.08 $ 0.08 $ 0.13 0 % -38 % $ 0.19 $ 0.21 -10 %
Diluted earnings per share $ 0.08 $ 0.08 $ 0.13 0 % -38 % $ 0.19 $ 0.21 -10 %
Common shares outstanding at period-end 26,320,184 26,293,277 26,295,001 0 % 0 % 26,320,184 26,295,001 0 %

Pro forma common shares outstanding at period-end, assuming Series C preferred stock was converted into common stock

31,921,184 31,894,277 31,896,001 0 % 0 % 31,921,184 31,896,001 0 %
Book value per share $ 5.68 $ 5.52 $ 5.27 3 % 8 % $ 5.68 $ 5.27 8 %
Tangible book value per share $ 5.60 $ 5.44 $ 5.17 3 % 8 % $ 5.60 $ 5.17 8 %

Pro forma tangible book value per share, assuming Series C preferred stock was converted into common stock

$ 5.23 $ 5.09 $ 4.88 3 % 7 % $ 5.23 $ 4.88 7 %
 
KEY FINANCIAL RATIOS
(unaudited)
Annualized return on average equity 5.91 % 6.61 % 10.02 % -11 % -41 % 5.59 % 6.09 % -8 %
Annualized return on average tangible equity 5.99 % 6.71 % 10.17 % -11 % -41 % 5.67 % 6.18 % -8 %
Annualized return on average assets 0.73 % 0.81 % 1.52 % -10 % -52 % 0.72 % 0.90 % -20 %
Annualized return on average tangible assets 0.73 % 0.81 % 1.52 % -10 % -52 % 0.73 % 0.90 % -19 %
Net interest margin 3.77 % 3.95 % 4.01 % -5 % -6 % 3.93 % 3.97 % -1 %
Efficiency ratio 68.69 % 66.70 % 72.06 % 3 % -5 % 70.95 % 73.60 % -4 %
 
AVERAGE BALANCES
(in $000's, unaudited)
Average assets $ 1,359,990 $ 1,331,774 $ 1,258,084 2 % 8 % $ 1,334,676 $ 1,257,557 6 %
Average tangible assets $ 1,357,789 $ 1,329,458 $ 1,255,386 2 % 8 % $ 1,332,357 $ 1,254,729 6 %
Average earning assets $ 1,247,309 $ 1,231,311 $ 1,158,587 1 % 8 % $ 1,230,112 $ 1,157,475 6 %
Average loans held-for-sale $ 3,036 $ 4,762 $ 4,385 -36 % -31 % $ 3,051 $ 7,355 -59 %
Average total loans $ 788,549 $ 786,898 $ 784,993 0 % 0 % $ 779,935 $ 805,777 -3 %
Average deposits $ 1,125,283 $ 1,110,053 $ 1,008,904 1 % 12 % $ 1,100,886 $ 1,007,065 9 %
Average demand deposits - noninterest-bearing $ 393,204 $ 370,086 $ 340,023 6 % 16 % $ 370,278 $ 328,302 13 %
Average interest-bearing deposits $ 732,079 $ 739,967 $ 668,881 -1 % 9 % $ 730,608 $ 678,763 8 %
Average interest-bearing liabilities $ 753,436 $ 766,865 $ 692,583 -2 % 9 % $ 754,598 $ 704,653 7 %
Average equity $ 167,407 $ 162,918 $ 190,637 3 % -12 % $ 172,928 $ 186,363 -7 %
Average tangible equity $ 165,206 $ 160,602 $ 187,939 3 % -12 % $ 170,609 $ 183,535 -7 %
 
      End of Period:     Percent Change From:
CONSOLIDATED BALANCE SHEETS September 30,     June 30,     September 30, June 30,     September 30,
(in $000's, unaudited)       2012     2012     2011 2012     2011
ASSETS
Cash and due from banks $ 23,345 $ 21,885 $ 23,720 7 % -2 %

Federal funds sold and interest-bearing deposits in other financial institutions

8,165 24,476 52,058 -67 % -84 %
Securities available-for-sale, at fair value 410,756 389,820 312,125 5 % 32 %

Securities held-to-maturity, at amortized cost (fair value of $25,655 at September 30, 2012)

25,592 - - N/A N/A
Loans held-for-sale - SBA, including deferred costs 1,476 2,714 3,391 -46 % -56 %
Loans held-for-sale - other, including deferred costs - 177 421 -100 % -100 %
Loans:
Commercial 377,520 384,260 365,532 -2 % 3 %
Real estate:
Commercial and residential 336,573 333,048 310,722 1 % 8 %
Land and construction 24,068 19,822 36,357 21 % -34 %
Home equity 45,565 47,813 51,668 -5 % -12 %
Consumer   15,649         13,024         11,829   20 % 32 %
Loans 799,375 797,967 776,108 0 % 3 %
Deferred loan costs, net   18         139         576   -87 % -97 %
Total loans, including deferred costs 799,393 798,106 776,684 0 % 3 %
Allowance for loan losses   (19,124 )       (20,023 )       (21,049 ) -4 % -9 %
Loans, net 780,269 778,083 755,635 0 % 3 %
Company owned life insurance 47,929 47,496 45,202 1 % 6 %
Premises and equipment, net 7,627 7,740 8,019 -1 % -5 %
Intangible assets 2,123 2,246 2,622 -5 % -19 %
Accrued interest receivable and other assets   48,758         50,065         49,507   -3 % -2 %
Total assets $ 1,356,040       $ 1,324,702       $ 1,252,700   2 % 8 %
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand, noninterest-bearing $ 405,880 $ 367,937 $ 344,470 10 % 18 %
Demand, interest-bearing 159,361 148,777 132,987 7 % 20 %
Savings and money market 281,579 290,867 274,489 -3 % 3 %
Time deposits - under $100 26,513 28,009 30,858 -5 % -14 %
Time deposits - $100 and over 170,430 164,056 119,429 4 % 43 %
Time deposits - CDARS 5,098 5,427 10,216 -6 % -50 %
Time deposits - brokered   89,172         97,680         93,685   -9 % -5 %
Total deposits 1,138,033 1,102,753 1,006,134 3 % 13 %
Subordinated debt 9,279 23,702 23,702 -61 % -61 %
Accrued interest payable and other liabilities   39,727         33,556         25,801   18 % 54 %
Total liabilities 1,187,039 1,160,011 1,055,637 2 % 12 %
 
Shareholders' Equity:
Series A preferred stock, net - - 38,912 N/A -100 %
Series C preferred stock, net 19,519 19,519 19,519 0 % 0 %
Common stock 131,615 131,443 131,015 0 % 0 %
Retained earnings 13,052 10,566 4,886 24 % 167 %
Accumulated other comprehensive income   4,815         3,163         2,731   52 % 76 %
Total shareholders' equity   169,001         164,691         197,063   3 % -14 %
Total liabilities and shareholders' equity $ 1,356,040       $ 1,324,702       $ 1,252,700   2 % 8 %
 
      End of Period:     Percent Change From:
September 30,     June 30,     September 30, June 30,     September 30,
        2012     2012     2011 2012     2011
CREDIT QUALITY DATA
(in $000's, unaudited)
Nonaccrual loans - held-for-sale $ - $ 177 $ 191 -100 % -100 %
Nonaccrual loans - held-for-investment

17,396

12,890 16,419 35 % 6 %
Restructured and loans over 90 days past due and still accruing   1,722         1,665         1,343   3 % 28 %
Total nonperforming loans

19,118

14,732 17,953 30 % 6 %
Foreclosed assets   2,889         3,098         1,229   -7 % 135 %
Total nonperforming assets $

22,007

      $ 17,830       $ 19,182   23 % 15 %
Other restructured loans still accruing $ 704 $ 416 $ 1,313 69 % -46 %
Net charge-offs during the quarter $ 2,099 $ 1,098 $ 3,633 91 % -42 %
Provision for loan losses during the quarter $ 1,200 $ 815 $ 1,515 47 % -21 %
Allowance for loan losses $ 19,124 $ 20,023 $ 21,049 -4 % -9 %
Classified assets* $ 46,002 $ 54,880 $ 72,386 -16 % -36 %
Allowance for loan losses to total loans 2.39 % 2.51 % 2.71 % -5 % -12 %
Allowance for loan losses to total nonperforming loans 100.03 % 135.92 % 117.25 % -26 % -15 %

Allowance for loan losses to total nonperforming loans, excluding nonaccrual loans - held-for-sale

100.03 % 137.57 % 118.51 % -27 % -16 %
Nonperforming assets to total assets 1.62 % 1.35 % 1.53 % 20 % 6 %

Nonperforming loans to total loans plus nonaccrual loans - held-for-sale

2.39 % 1.85 % 2.31 % 29 % 3 %

Classified assets* to Heritage Commerce Corp Tier 1 capital plus allowance for loan losses

27

% 30 % 33 %

-10

%

-18

%

Classified assets* to Heritage Bank of Commerce Tier 1 capital plus allowance for loan losses

28 % 31 % 37 % -10 % -24 %
 
OTHER PERIOD-END STATISTICS
(in $000's, unaudited)
Heritage Commerce Corp:
Tangible equity $ 166,878 $ 162,445 $ 194,441 3 % -14 %
Tangible common equity $ 147,359 $ 142,926 $ 136,010 3 % 8 %
Shareholders' equity / total assets 12.46 % 12.43 % 15.73 % 0 % -21 %
Tangible equity / tangible assets 12.33 % 12.28 % 15.55 % 0 % -21 %
Tangible common equity / tangible assets 10.88 % 10.81 % 10.88 % 1 % 0 %
Loan to deposit ratio 70.24 % 72.37 % 77.19 % -3 % -9 %
Noninterest-bearing deposits / total deposits 35.67 % 33.37 % 34.24 % 7 % 4 %
Total risk-based capital ratio 16.1 % 17.3 % 22.3 % -7 % -28 %
Tier 1 risk-based capital ratio

14.8

% 16.0 % 21.1 %

-8

%

-30

%
Leverage ratio

11.6

% 12.7 % 16.0 %

-9

%

-28

%
 
Heritage Bank of Commerce:
Total risk-based capital ratio

15.1

% 16.2 % 19.9 % -7 %

-24

%
Tier 1 risk-based capital ratio 13.8 % 14.9 % 18.7 % -7 % -26 %
Leverage ratio

10.9

% 11.9 % 14.2 %

-8

%

-23

%
 
*Net of SBA guarantees
 
      For the Three Months Ended     For the Three Months Ended
September 30, 2012 September 30, 2011
    Interest     Average     Interest     Average
NET INTEREST INCOME AND NET INTEREST MARGIN Average Income/ Yield/ Average Income/ Yield/
(in $000's, unaudited) Balance Expense Rate Balance Expense Rate
Assets:
Loans, gross* $ 791,585 $ 10,146 5.10 % $ 789,378 $ 10,530 5.29 %
Securities 409,847 2,686 2.61 % 317,908 2,457 3.07 %

Federal funds sold and interest-bearing deposits in other financial institutions

  45,877   30 0.26 %   51,301   33 0.26 %
Total interest earning assets 1,247,309   12,862 4.10 % 1,158,587   13,020 4.46 %
Cash and due from banks 21,804 21,662
Premises and equipment, net 7,711 8,053
Intangible assets 2,201 2,698
Other assets   80,965   67,084
Total assets $ 1,359,990 $ 1,258,084
 
Liabilities and shareholders' equity:
Deposits:
Demand, noninterest-bearing $ 393,204 $ 340,023
 
Demand, interest-bearing 154,735 58 0.15 % 131,667 57 0.17 %
Savings and money market 291,251 143 0.20 % 282,368 195 0.27 %
Time deposits - under $100 27,463 32 0.46 % 31,270 54 0.69 %
Time deposits - $100 and over 158,898 230 0.58 % 115,617 272 0.93 %
Time deposits - CDARS 5,357 2 0.15 % 14,293 13 0.36 %
Time deposits - brokered   94,375   225 0.95 %   93,666   261 1.11 %
Total interest-bearing deposits   732,079   690 0.37 %   668,881   852 0.51 %
Total deposits 1,125,283 690 0.24 % 1,008,904 852 0.34 %
 
Subordinated debt 19,626 346 7.01 % 23,702 468 7.83 %
Short-term borrowings   1,731   2 0.46 %   -   - N/A
Total interest-bearing liabilities   753,436   1,038 0.55 %   692,583   1,320 0.76 %

Total interest-bearing liabilities and demand, noninterest-bearing / cost of funds

1,146,640 1,038 0.36 % 1,032,606 1,320 0.51 %
Other liabilities   45,943   34,841
Total liabilities 1,192,583 1,067,447
Shareholders' equity   167,407   190,637
Total liabilities and shareholders' equity $ 1,359,990 $ 1,258,084
   
Net interest income / margin $ 11,824 3.77 % $ 11,700 4.01 %
 
 
For the Nine Months Ended For the Nine Months Ended
September 30, 2012 September 30, 2011
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
 
Assets:
Loans, gross* $ 782,986 $ 30,754 5.25 % $ 813,132 $ 32,205 5.30 %
Securities 399,341 8,758 2.93 % 281,156 6,697 3.18 %

Federal funds sold and interest-bearing deposits in other financial institutions

  47,785   95 0.27 %   63,187   119 0.25 %
Total interest earning assets 1,230,112   39,607 4.30 % 1,157,475   39,021 4.51 %
Cash and due from banks 21,329 21,052
Premises and equipment, net 7,843 8,180
Intangible assets 2,319 2,828
Other assets   73,073   68,022
Total assets $ 1,334,676 $ 1,257,557
 
Liabilities and shareholders' equity:
Deposits:
Demand, noninterest-bearing $ 370,278 $ 328,302
 
Demand, interest-bearing 148,407 168 0.15 % 133,153 189 0.19 %
Savings and money market 292,661 487 0.22 % 277,049 721 0.35 %
Time deposits - under $100 27,897 105 0.50 % 32,216 186 0.77 %
Time deposits - $100 and Over 165,004 731 0.59 % 123,732 1,033 1.12 %
Time deposits - CDARS 5,839 8 0.18 % 18,998 62 0.44 %
Time deposits - brokered   90,800   645 0.95 %   93,615   1,000 1.43 %
Total interest-bearing deposits   730,608   2,144 0.39 %   678,763   3,191 0.63 %
Total deposits 1,100,886 2,144 0.26 % 1,007,065 3,191 0.42 %
 
Subordinated debt 22,334 1,293 7.73 % 23,702 1,400 7.90 %
Securities sold under agreement to repurchase - - N/A 952 24 3.37 %
Short-term borrowings   1,656   3 0.24 %   1,236   38 4.11 %
Total interest-bearing liabilities   754,598   3,440 0.61 %   704,653   4,653 0.88 %

Total interest-bearing liabilities and demand, noninterest-bearing / cost of funds

1,124,876 3,440 0.41 % 1,032,955 4,653 0.60 %
Other liabilities   36,872   38,239
Total liabilities 1,161,748 1,071,194
Shareholders' equity   172,928   186,363
Total liabilities and shareholders' equity $ 1,334,676 $ 1,257,557
   
Net interest income / margin $ 36,167 3.93 % $ 34,368 3.97 %
 
*Includes loans held-for-sale. Yield amounts earned on loans include loan fees and costs. Nonaccrual loans are included in average balance.




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