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) July 21, 2000
Heritage Commerce Corp
(Exact name of registrant as specified in its charter)
CA 00-23877 77-0469558
(State of other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
150 Almaden Blvd., San Jose, CA 95113
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 947-6900
None
(Former name or former address, if changed since last report.)
Item 5. Other Events.
HERITAGE COMMERCE CORP REPORTS FINANCIAL RESULTS
FOR THE SECOND QUARTER OF 2000
Heritage Commerce Corp (the "Company") (Nasdaq: HTBK) today reported
consolidated earnings of $809,000, up 20%, or $135,000, from $674,000 for the
second quarter of 1999. Income for the second quarter of 2000 was affected
by the payment of severance benefits resulting from a change in management.
Earnings for the second quarter would have been $1,439,000 if not for this
change in management. Earnings per diluted share for the second quarter of
2000 were $0.11, up 10%, or $.01, from $0.10 per diluted share for the prior
year period. Annualized year-to-date return on average assets and return on
average equity were 0.75% and 8.10%, respectively, compared with returns
of 0.72% and 8.41%, respectively, for the same period in 1999.
On May 9, 2000, the Company signed a Definitive Merger Agreement with
Western Holdings Bancorp, the holding company for Bank of Los Altos. The
Agreement provides for shareholders of Western Holdings Bancorp to receive
shares of Heritage Commerce Corp stock in a tax-free exchange. The merger is
expected to be accounted for as a pooling of interests and is expected to be
completed in the fourth quarter of 2000. The merger is subject to customary
conditions, including the approval of the shareholders of both companies and
required regulatory agencies. In connection with the merger, the parties
have granted reciprocal options to acquire 19.9% of their respective
outstanding shares in the event a party terminates the merger in favor of
another transaction. Upon completion of the merger, Bank of Los Altos will
operate as a wholly owned subsidiary of Heritage Commerce Corp.
For the second quarter of 2000, as compared with the same period of the
previous year net interest income grew by $2,399,000, or 49%; the increase
was primarily a result of change in the types of interest-earning assets and
the overall growth in earning assets and new deposits at favorable rates.
Noninterest income was $391,000, compared with $687,000 (the decrease was
primarily due to gains on sale of securities realized in 1999); noninterest
expenses, primarily salaries and benefits, (which includes payment of
severance costs related to a change in management), increased by $1,868,000,
or 45%, as a result of an increase in the number of employees to support the
growth of the Company. The Company's net interest margin remained stable at
6.04% for the quarter ended June 30, 2000, compared with 6.02% for the
quarter ended June 30, 1999.
Total assets as of June 30, 2000 were $580,967,000, an increase of
$177,752,000, or 44%, from June 30, 1999 and an increase of $104,303,000, or
22%, from total assets of $476,664,000 at December 31, 1999. Total deposits
as of June 30, 2000 were $518,475,000, an increase of $153,883,000, or 42%,
from June 30, 1999 and an increase of $99,935,000, or 24%, from total
deposits of $418,540,000 at December 31, 1999.
Total portfolio loans as of June 30, 2000 were $371,373,000, an increase
of $126,037,000, or 51%, when compared to June 30, 1999. Total portfolio
loans as of December 31, 1999 were $271,855,000. The Company's allowance for
loan losses was $6,000,000, or 1.62%, of total loans as of June 30, 2000.
This compares with an allowance for loan losses of $4,337,000, or 1.77%, and
$5,003,000, or 1.84%, of total loans at June 30, 1999 and December 31, 1999,
respectively. The Company's non-performing assets (NPA's) were $1,092,000 as
of June 30, 2000. NPA's were $1,396,000 as of December 31, 1999, and
$1,776,000 as of June 30, 1999.
Shareholders' equity as of June 30, 2000 was $47,043,000, compared with
$31,473,000 as of June 30, 1999. Book value per share was $6.55 as of June
30, 2000, compared to $5.12 as of June 30, 1999. The Company's leverage
capital ratio was 10.3% at June 30, 2000, compared to 8.6% at June 30, 1999.
Heritage Commerce Corp, a bank holding company established February 17,
1998, is the parent company of three financial institutions, Heritage Bank of
Commerce, a commercial bank headquartered in the city of San Jose, Heritage
Bank East Bay, a commercial bank headquartered in the city of Fremont, with
an office in Danville, and Heritage Bank South Valley, a commercial bank
headquartered in the city of Morgan Hill.
The Company's common stock is listed on the Nasdaq National Market under
the symbol "HTBK".
Readers should carefully review the risk factors described in other
documents the Company files from time to time with the Securities and
Exchange Commission, including the Annual Report on Form 10-K for the year
ended December 31, 1999 and the Quarterly Reports on Form 10-Q filed by the
Company in fiscal 2000.
For further information about the Company's financial performance,
contact Brad L. Smith, Chief Executive Officer, at (408) 947-6900 or visit
the Company's web site at www.heritage-bank.com.
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 fluctuations in interest rates, inflation,
government regulations and general economic conditions, and competition
within the business areas in which the Company is conducting its operations,
including the real estate market in California 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.
CONDENSED FINANCIAL STATEMENTS
(unaudited)
At and For the Three Months Ended At and For the Six Months Ended
(Dollars in thousands June 30, June 30, Percent June 30, June 30, Percent
except per share amounts) 2000 1999 Change 2000 1999 Change
Income Statement Data
Net Interest Income $ 7,313 $ 4,914 49% $ 13,761 $ 9,908 39%
Provision for Loan Losses 384 484 -21% 984 1,127 -13%
Noninterest Income 391 687 -43% 875 1,911 -54%
Noninterest Expense 6,031 4,163 45% 10,764 8,750 23%
Net Income $ 809 $ 674 20% $ 1,847 $ 1,301 42%
Per Share Data
Earnings Per Share
Basic $ 0.11 $ 0.11 0% $ 0.26 $ 0.21 24%
Diluted 0.11 0.10 10% 0.24 0.18 26%
Book Value Per Common Share 6.55 5.12 28% 6.55 5.12 28%
Weighted average shares
outstanding used in computing:
Basic earnings per share 7,088,480 6,140,539 15% 7,061,548 6,126,574 15%
Diluted earnings per share 7,501,820 7,000,520 7% 7,570,929 7,026,093 8%
Balance Sheet Data
Total Assets $ 580,967 $ 403,215 44%
Securities, Available-For-Sale 34,115 31,631 8%
Securities, Held-To-Maturity 12,812 13,856 -8%
Loans Held-For-Sale 27,620 11,675 137%
Loans 371,373 245,336 51%
Allowance For Loan Losses 6,000 4,337 38%
Total Deposits 518,475 364,592 42%
Total Shareholders' Equity 47,043 31,473 49%
Unrealized Gain (loss) on Securities, Net (167) (92) 82%
Nonperforming Loans 1,092 1,776
Selected Financial Ratios
Net Interest Margin 6.04% 6.02%
Annualized Return on Average Assets 0.75% 0.72%
Annualized Return on Average Equity 8.10% 8.41%
Allowance for Loan Losses to Nonperforming Loans 549% 244%
Allowance for Loan Losses to Total Loans 1.62% 1.77%
Leverage Ratio 10.33% 8.62%
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: July 21, 2000 HERITAGE COMMERCE CORP
By: /s/ Lawrence D. McGovern
Lawrence D. McGovern
Chief Financial Officer / Executive Vice President