Heritage Commerce (HTBK) 8-K Heritage Commerce Corp Earns $4 Million in First Quarter 2007

Exhibit 99.1

Heritage Commerce Corp Earns $4 Million in First Quarter 2007

San Jose, CA - May 1, 2007 — Heritage Commerce Corp (Nasdaq: HTBK), parent company of Heritage Bank of Commerce, today reported solid first quarter profitability. For the three months ended March 31, 2007, net income was $4.0 million, or $0.34 per diluted share, compared to $4.4 million, or $0.36 per diluted share, for the three months ended March 31, 2006. In the first quarter a year ago, Heritage Commerce Corp booked a $671,000 pre-tax gain from the sale of its specialty loan portfolio, which contributed approximately $0.04 to earning per share last year. For the first quarter of 2007, annualized return on average assets was 1.57%, compared to 1.59% for the same period last year, and annualized return on average equity was 13.12%, compared to 15.53% a year ago.

First Quarter 2007 Financial Highlights:

¨   Net interest margin expanded to 5.06% from 4.90% in the first quarter of 2006.

¨   Book value per share grew 11% to $10.83 from $9.73 a year ago.

¨   Core deposits (excluding time deposits $100,000 and over) rebounded from the prior quarter to $744 million and accounted for 84% of total deposits.

“On the heels of two record breaking quarters, we posted solid profitability in the first quarter of 2007 and continued building our presence in the business banking market in Silicon Valley. We also announced an agreement for a strategic merger with Diablo Valley Bank. This merger will expand our footprint in the affluent East Bay communities of Danville and Pleasanton, which have a very strong entrepreneurial business community and a deposit market of more than $3 billion,” said Walter Kaczmarek, President and Chief Executive Officer. “We have completed the application process with the SEC and have filed the necessary applications with the banking regulators. We anticipate Diablo Valley shareholders will be able to vote and close the sale this summer.”

Operating Results

Net interest income decreased 4% to $11.7 million in the first quarter of 2007 from $12.2 million in the first quarter a year ago and 8% from $12.8 million in the fourth quarter of 2006. The net interest margin was 5.06% for the first quarter of 2007, compared with 4.90% for the first quarter of 2006 and 5.16% for the fourth quarter of 2006.

A reverse provision for loan losses of $236,000 was booked in the first quarter of 2007, compared to a reverse provision of $489,000 a year ago. In the fourth quarter of 2006, the provision for loan losses was $100,000. The reverse provision in the first quarter of 2007 was primarily due to a $1.0 million decrease in nonperforming loans and a $24.7 million decrease in total loans from the fourth quarter of 2006.

For the three months ended March 31, 2007, noninterest income was $2.5 million compared to $2.9 million for the first quarter of 2006, which had a $671,000 one-time gain on sale of the Capital Group loan portfolio. Gain on sales of SBA loans contributed $1.0 million during the first quarter of 2007, compared to $826,000 for first quarter a year ago. The Company has an ongoing program of originating SBA loans and selling the government guaranteed portion in the secondary market, while retaining the servicing of the whole loans.

First quarter noninterest expense was $8.3 million, down 5%, compared to $8.8 million in the first quarter a year ago and $8.7 million in the fourth quarter of 2006. The efficiency ratio was 58.26% in the first quarter of 2007, compared to 58.08% in the first quarter of 2006 and 57.29% in the fourth quarter of 2006.

Balance Sheet, Capital Management and Credit Quality

At March 31, 2007, total assets were $1.07 billion, compared to $1.12 billion at March 31, 2006. Total loans increased 1% to $701 million at March 31, 2007, compared to $696 million at March 31, 2006. The increase is primarily due to an increase in the commercial loan portfolio and commercial real estate mortgage loan portfolio, partially offset by a decrease in the land and construction loan portfolio.

Total deposits were $884 million at March 31, 2007, compared to $935 million at March 31, 2006 and $847 million at December 31, 2006. Total deposits for the quarter ended March 31, 2007 increased 4% from the fourth quarter 2006. Growth from December 31, 2006 in savings, money market and interest bearing demand deposits in the first quarter 2007 were largely from increases in escrow balances of $18 million.

Nonperforming assets totaled $3.3 million, or 0.31% of total assets, at March 31, 2007, compared to $2.5 million, or 0.23% of total assets, at March 31, 2006 and $4.3 million, or 0.42% of total assets, at December 31, 2006.

Net charge-offs in the first quarter of 2007 were $29,000, or 0.02% of average loans, compared to net recoveries of $13,000, or 0.01% of average loans, in the first quarter of 2006. Net charge-offs in the fourth quarter of 2006 were $200,000, or 0.11% of average loans. The allowance for loan losses at March 31, 2007 was $9.0 million, or 1.29% of total loans, and represented 272% of nonperforming loans. The allowance for loan losses at March 31, 2006 was $9.7 million, or 1.40% of total loans, and represented 385% of nonperforming loans. The allowance for loan losses at December 31, 2006 was $9.3 million, or 1.28% of total loans, and represented 215% of nonperforming loans.

Shareholders’ equity increased 9% to $126.0 million, or $10.83 book value per share, at March 31, 2007, compared to $115.2 million, or $9.73 per share, a year earlier. Capital ratios continue to be above the well-capitalized guidelines established by regulatory agencies. The Company’s leverage ratio at March 31, 2007 was 14.43%, compared to 12.49% at March 31, 2006.

During the first quarter of 2007, the Company repurchased 35,000 shares of its common stock at an average price of $25.49 under its $10 million common stock repurchase program, which was approved by the Board of Directors in February, 2006. Shares were purchased on the open market using available cash. The repurchase program may be modified, suspended or terminated by the Board of Directors at any time without notice. The repurchase program expires on June 30, 2007. The extent to which the company repurchases its shares and the timing of such repurchases will depend upon market conditions and other corporate considerations.

Heritage Commerce Corp, a bank holding company established in February 1998, is the parent company of Heritage Bank of Commerce, established in 1994 and headquartered in San Jose with offices in Los Gatos, Fremont, Danville, Morgan Hill, Gilroy, Mountain View, and Los Altos. Heritage Bank of Commerce is also an SBA Preferred Lender, operating from offices in San Jose, Chico, Fremont, Clovis, Jackson, Santa Cruz, Elk Grove, and Watsonville, California.

Forward Looking Statement Disclaimer

This release may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include, but are not necessarily limited to, the Company’s ability to sustain dividend payments, fluctuations in interest rates and monetary policy established by the Federal Reserve, inflation, government regulations, general economic conditions, competition within the business areas in which the Company is conducting its operations, including the real estate market in California, the ability to recognize identified cost savings, and other factors beyond the Company's control. Such risks and uncertainties could cause results for subsequent interim periods or for the entire year to differ materially from those indicated. For a discussion of factors which could cause results to differ, please see the Company's reports on Forms 10-K and 10-Q as filed with the Securities and Exchange Commission and the Company's press releases. Readers should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

Member FDIC

	For the Three Months Ended:									Percent Change From:
CONSOLIDATED INCOME STATEMENTS	March 31,			December 31,			March 31,			December 31,			March 31,
(in $000's, unaudited)		2007			2006			2006			2006			2006
Interest Income	$	17,234		$	18,737		$	17,260			-8	%		0	%
Interest Expense		5,503			5,936			5,069			-7	%		9	%
Net Interest Income		11,731			12,801			12,191			-8	%		-4	%
Provision for Loan Losses		(236)			100			(489)			-336	%		-52	%
Net Interest income after Provision for Loan Losses		11,967			12,701			12,680			-6	%		-6	%
Noninterest Income:
Gain on Sale of Loans		1,011			837			1,497			21	%		-32	%
Servicing Income		517			539			468			-4	%		10	%
Increase in Cash Surrender Value of Life Insurance		344			369			347			-7	%		-1	%
Service Charges and Other Fees on Deposit Accounts		274			327			327			-16	%		-16	%
Other		369			318			255			16	%		45	%
Total Noninterest Income		2,515			2,390			2,894			5	%		-13	%
Noninterest Expense:
Salaries & Employee Benefits		4,888			4,711			5,109			4	%		-4	%
Occupancy & Equipment		875			907			886			-4	%		-1	%
Other		2,537			3,085			2,766			-18	%		-8	%
Total Noninterest Expense		8,300			8,703			8,761			-5	%		-5	%
Income Before Income Taxes		6,182			6,388			6,813			-3	%		-9	%
Provision for Income Taxes		2,149			2,036			2,437			6	%		-12	%
Net Income	$	4,033		$	4,352		$	4,376			-7	%		-8	%
PER SHARE DATA
(unaudited)
Basic Earnings Per Share	$	0.35		$	0.37		$	0.37			-5	%		-5	%
Diluted Earnings Per Share	$	0.34		$	0.37		$	0.36			-8	%		-6	%
Common Shares Outstanding at Period End		11,636,828			11,656,943			11,834,846			0	%		-2	%
Book Value Per Share at Period End	$	10.83		$	10.54		$	9.73			3	%		11	%
Tangible Book Value Per Share at Period End	$	10.83		$	10.54		$	9.73			3	%		11	%
KEY FINANCIAL RATIOS
(unaudited)
Annualized Return on Average Equity		13.12	%		14.25	%		15.53	%		-8	%		-16	%
Annualized Return on Average Assets		1.57	%		1.59	%		1.59	%		-1	%		-1	%
Net Interest Margin		5.06	%		5.16	%		4.90	%		-2	%		3	%
Efficiency Ratio		58.26	%		57.29	%		58.08	%		2	%		0	%
AVERAGE BALANCES
(in $000's, unaudited)
Average Assets	$	1,039,975		$	1,084,440		$	1,114,248			-4	%		-7	%
Average Earning Assets	$	939,604		$	984,146		$	1,009,869			-5	%		-7	%
Average Total Loans	$	700,647		$	715,257		$	691,082			-2	%		1	%
Average Loans Held For Sale	$	18,596		$	23,115		$	49,315			-20	%		-62	%
Average Deposits	$	846,736		$	892,983		$	919,944			-5	%		-8	%
Average Demand Deposits - Noninterest Bearing	$	218,039		$	233,945		$	235,288			-7	%		-7	%
Average Interest Bearing Deposits	$	628,697		$	659,038		$	684,656			-5	%		-8	%
Average Interest Bearing Liabilities	$	674,050		$	704,540		$	740,911			-4	%		-9	%
Average Equity	$	124,642		$	121,202		$	114,268			3	%		9	%

	End of Period:							Percent Change From:
CONSOLIDATED BALANCE SHEETS	March 31,		December 31,		March 31,			December 31,			March 31,
(in $000's, unaudited)	2007		2006		2006			2006			2006
ASSETS
Cash and Due from Banks	$	33,718	$	34,285	$	40,065			-2	%		-16	%
Federal Funds Sold		90,400		15,100		94,200			499	%		-4	%
Securities Available-for-Sale, at Fair Value		164,800		172,298		186,168			-4	%		-11	%
Loans Held For Sale		11,351		17,234		30,745			-34	%		-63	%
Loans:
Commercial		294,010		300,611		262,625			-2	%		12	%
Real Estate-Mortgage		239,082		239,041		232,790			0	%		3	%
Real Estate-Land and Construction		128,663		143,834		156,468			-11	%		-18	%
Home Equity		36,067		38,976		41,429			-7	%		-13	%
Consumer		2,620		2,422		1,495			8	%		75	%
Total Loans		700,442		724,884		694,807			-3	%		1	%
Deferred Loan Costs		624		870		1,058			-28	%		-41	%
Loans, Net of Deferred Costs		701,066		725,754		695,865			-3	%		1	%
Allowance for Loan Losses		(9,014)		(9,279)		(9,748)			-3	%		-8	%
Net Loans		692,052		716,475		686,117			-3	%		1	%
Company Owned Life Insurance		36,519		36,174		35,081			1	%		4	%
Premises & Equipment, Net		2,446		2,539		2,389			-4	%		2	%
Accrued Interest Receivable and Other Assets		39,778		43,033		45,277			-8	%		-12	%
Total Assets	$	1,071,064	$	1,037,138	$	1,120,042			3	%		-4	%
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Demand Deposits-Noninterest Bearing	$	221,206	$	231,841	$	243,816			-5	%		-9	%
Demand Deposits-Interest Bearing		141,395		133,413		154,277			6	%		-8	%
Savings and Money Market		351,005		307,266		352,304			14	%		0	%
Time Deposits, Under $100		30,730		31,097		33,003			-1	%		-7	%
Time Deposits, $100 and Over		96,813		111,017		115,293			-13	%		-16	%
Brokered Deposits, $100 and Over		42,748		31,959		36,040			34	%		19	%
Total Deposits		883,897		846,593		934,733			4	%		-5	%
Securities Sold under Agreement to Repurchase		15,100		21,800		26,100			-31	%		-42	%
Notes Payable To Subsidiary Grantor Trusts		23,702		23,702		23,702			0	%		0	%
Accrued Interest Payable and Other Liabilities		22,333		22,223		20,310			0	%		10	%
Total Liabilities		945,032		914,318		1,004,845			3	%		-6	%
Shareholders' Equity:
Common Stock		61,958		62,363		67,120			-1	%		-8	%
Accumulated Other Comprehensive Loss		(1,712)		(1,995)		(3,247)			-14	%		-47	%
Retained Earnings		65,786		62,452		51,324			5	%		28	%
Total Shareholders' Equity		126,032		122,820		115,197			3	%		9	%
Total Liabilities & Shareholders' Equity	$	1,071,064	$	1,037,138	$	1,120,042			3	%		-4	%
CREDIT QUALITY DATA
(in $000's, unaudited)
Nonaccrual Loans	$	3,315	$	3,866	$	2,292			-14	%		45	%
Loans Over 90 Days Past Due and Still Accruing		-		451		238			-100	%		-100	%
Total Nonperforming Loans		3,315		4,317		2,530			-23	%		31	%
Other Real Estate Owned		-		-		-			N/	A		N/	A
Total Nonperforming Assets	$	3,315	$	4,317	$	2,530			-23	%		31	%
Net Charge-offs (Recoveries)	$	29	$	200	$	(13)			-86	%		323	%
Net Charge-offs (Recoveries) as Percent of Average Loans		0.02%		0.11%		-0.01%			-82	%		300	%
Allowance for Loan Losses to Total Loans		1.29%		1.28%		1.40%			1	%		-8	%
Allowance for Loan Losses to Nonperforming Loans		271.92%		214.94%		385.30%			27	%		-29	%
Nonperforming Assets to Total Assets		0.31%		0.42%		0.23%			-26	%		35	%
Nonperforming Loans to Total Loans		0.47%		0.60%		0.36%			-22	%		31	%
OTHER PERIOD-END STATISTICS
(unaudited)
Shareholders' Equity / Total Assets		11.77%		11.84%		10.29	%		-1	%		14	%
Loan to Deposit Ratio		79.32%		85.73%		74.45	%		-7	%		7	%
Noninterest Bearing Deposits / Total Deposits		25.03%		27.39%		26.08	%		-9	%		-4	%
Leverage Ratio		14.43%		13.57%		12.49	%		6	%		16	%

	March 31,
	2007						2006
			Interest		Average				Interest		Average
NET INTEREST INCOME AND NET INTEREST MARGIN	Average		Income /		Yield /		Average		Income /		Yield /
(Dollars in thousands, Unaudited)	Balance		Expense		Rate		Balance		Expense		Rate
Assets:
Loans, gross	$	719,243	$	14,670		8.27%	$	740,397	$	14,721		8.06%
Securities		173,320		1,953		4.57%		201,074		1,792		3.61%
Interest bearing deposits in other financial institutions		2,624		32		4.95%		2,838		18		2.57%
Federal funds sold		44,417		579		5.29%		65,560		729		4.51%
Total interest earning assets		939,604	$	17,234		7.44%		1,009,869	$	17,260		6.93%
Cash and due from banks		35,331						36,959
Premises and equipment, net		2,503						2,477
Other assets		62,537						64,943
Total assets	$	1,039,975					$	1,114,248
Liabilities and shareholders' equity:
Deposits:
Demand, interest bearing	$	136,503	$	765		2.27%	$	157,993	$	838		2.15%
Savings and money market		318,549		2,283		2.91%		348,130		2,081		2.42%
Time deposits, under $100		30,991		290		3.80%		34,210		246		2.92%
Time deposits, $100 and over		101,219		1,012		4.05%		108,273		821		3.08%
Brokered time deposits, $100 and over		41,435		435		4.26%		36,050		333		3.75%
Notes payable to subsidiary grantor trusts		23,702		581		9.94%		23,702		562		9.62%
Securities sold under agreement to repurchase		21,651		137		2.57%		32,553		188		2.34%
Total interest bearing liabilities		674,050	$	5,503		3.31%		740,911	$	5,069		2.77%
Demand, noninterest bearing		218,039						235,288
Other liabilities		23,244						23,781
Total liabilities		915,333						999,980
Shareholders' equity		124,642						114,268
Total liabilities and shareholders' equity	$	1,039,975					$	1,114,248
Net interest income / margin			$	11,731		5.06%			$	12,191		4.90%