1
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) January 26, 2001
-----------------
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 YEAR ENDED DECEMBER 31, 2000
Heritage Commerce Corp (the "Company") (Nasdaq: HTBK) today reported operating
results for the year ended December 31, 2000. The information presented gives
effect to the merger with Western Holdings Bancorp and its subsidiary Bank of
Los Altos, which closed in October 2000 as if the Companies had been combined
for all periods presented. For the year ended December 31, 2000, consolidated
net income, net of tax, was $5,429,000, or $.49 per diluted share, up 16% from
$4,669,000, or $.43 per diluted share, for the year ended December 31, 1999. For
the year ended December 31, 2000, consolidated net income, excluding
merger-related costs of $2,026,000, net of tax, was $7,455,000, or $.67 per
diluted share. Costs associated with the acquisition of Western Holdings Bancorp
primarily include professional fees, costs of regulatory filings, payments under
certain "change of control" provisions, and systems conversion expenses.
Net interest income increased from $30,020,000 in 1999 to $42,820,000 in 2000,
an increase of $12,800,000 or 43%. The increase is attributable to an increase
in earning assets, primarily loans, and an improvement in the Company's net
interest margin, which increased to 5.95% for the year ended December 31, 2000,
compared with 5.56% for the year ended December 31, 1999.
2
Pre-tax noninterest income was $2,877,000 for the year ended December 31, 2000,
compared with $6,051,000 for the previous year. The difference is explained by a
number of non-recurring gains during 1999, including significant gains on the
sale of securities available-for-sale, servicing income from credit card
operations that were discontinued in the first quarter of 2000, gains on the
sale of shares held in a demutualized life insurance company and gains on the
sales of Internet credit cards and bankruptcy deposits.
Pre-tax noninterest expense for the year ended December 31, 2000 increased by
$7,462,000, or 28%, as compared to the year ended December 31, 1999. The
increase in noninterest expense for the year ended December 31, 2000 is
primarily related to the Company's growth in loans and deposits discussed below
and the merger and integration costs discussed above.
Return on average assets and return on average equity for the year ended
December 31, 2000, including the merger and integration costs of $2,026,000, net
of tax, for the year ended December 31, 2000 were 0.70% and 9.07%, respectively,
compared with returns of 0.79% and 9.81%, respectively, for the previous year.
Return on average assets and return on average equity, excluding the merger and
integration costs, net of tax, were 0.96% and 12.45%, respectively.
For the quarter ended December 31, 2000, the Company reported net income,
including merger- related costs, of $249,000, or $.02 per diluted share, as
compared to the quarter ended December 31, 1999, which did not have any
merger-related expenses, when the Company reported net income of $1,530,000, or
$.13 per diluted share. Excluding merger-related expenses, the Company would
have reported net income of $2,275,000, or $.20 per diluted share, for the
quarter ended December 31, 2000.
At December 31, 2000, the Company's total assets were $845,600,000, an increase
of 25% from $677,233,000 at December 31, 1999, reflecting continued strong
internal growth. Total loans grew to $610,781,000, up 52% from $401,240,000 from
December 31, 1999, and total deposits were $738,186,000 at December 31, 2000, up
23% from $601,420,000 at December 31, 1999. The Company's allowance for loan
losses was $9,651,000, or 1.58%, of total loans as of December 31, 2000, as
compared to $6,511,000, or 1.62%, of total loans at December 31, 1999. The
Company had no nonperforming assets as of December 31, 2000, as compared to
$1,402,000 as of December 31, 1999.
Shareholders' equity as of December 31, 2000 was $65,733,000, compared with
$56,544,000 as of December 31, 1999. Book value per share was $6.01 as of
December 31, 2000, compared to $5.45 as of December 31, 1999. The Company's
leverage capital ratio was 9.32% at December 31, 2000, compared to 8.48% at
December 31, 1999. The Company's capital ratios continue to be above the
well-capitalized guidelines established by the bank regulatory agencies.
3
Heritage Commerce Corp, a bank holding company, is the parent company of four
financial institutions: Heritage Bank of Commerce, a commercial bank
headquartered in the city of San Jose, with a Loan Production office in Santa
Cruz; Heritage Bank East Bay, a commercial bank headquartered in the city of
Fremont, with an office in Danville; Heritage Bank South Valley, a commercial
bank headquartered in the city of Morgan Hill; and effective October 1, 2000,
Bank of Los Altos, with two branches in Los Altos and an office in Mt. View.
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.
4
CONDENSED FINANCIAL STATEMENT
(unaudited)
At and For the Three Months Ended At and For the Year Ended
December 31, December 31, Percent December 31, December 31, Percent
(in thousands, except per share amounts) 2000 1999 Change 2000 1999 Change
Income Statement Data
Net Interest Income ............................. $ 11,981 $ 8,244 45% $ 42,820 $ 30,020 43%
Provision for Loan Losses ....................... 1,290 428 201% 3,159 2,198 44%
Noninterest Income .............................. 743 1,580 (53%) 2,877 6,051 (52%)
Noninterest Expense ............................. 11,002 7,016 57% 34,060 26,598 28%
Income Excluding Merger-Related Costs ........... 2,275 1,530 49% 7,455 4,669 60%
Merger-Related Costs, net of tax ................ 2,026 - N/A 2,026 - N/A
Net Income ...................................... 249 1,530 (84%) 5,429 4,669 16%
Per Share Data
Net Income Per Share
Basic ......................................... $ 0.02 $ 0.15 (87%) $ 0.51 $ 0.47 9%
Diluted ....................................... $ 0.02 $ 0.13 (85%) $ 0.49 $ 0.43 14%
Book Value Per Common Share ..................... $ 6.01 $ 5.45 10% $ 6.01 $ 5.45 10%
Per Share Data Excluding Merger-Related Costs
Basic ......................................... $ 0.21 $ 0.15 40% $ 0.70 $ 0.47 49%
Diluted ....................................... $ 0.20 $ 0.13 54% $ 0.67 $ 0.43 56%
Book Value Per Common Share Excluding
Merger-Related Costs, Net ................. $ 6.19 $ 5.45 14% $ 6.19 $ 5.45 14%
Weighted average shares outstanding used in
computing:
Basic earnings per share ...................... 10,887,878 10,374,316 5% 10,607,584 9,885,036 7%
Diluted earnings per share .................... 11,322,856 11,376,598 0% 11,108,329 10,922,977 2%
Shares outstanding at period end .................. 10,939,124 10,376,973 5% 10,939,124 10,376,973 5%
Balance Sheet Data
Total Assets .................................... $ 845,600 $ 677,233 25%
Securities, Available-For-Sale .................. 90,894 51,822 75%
Securities, Held-To-Maturity .................... 19,908 22,997 (13%)
Loans Held-For-Sale ............................. 35,931 22,243 62%
Loans ........................................... 610,781 401,240 52%
Allowance For Loan Losses ....................... 9,651 6,511 48%
Total Deposits .................................. 738,186 601,420 23%
Total Shareholders' Equity ...................... 65,733 56,544 16%
Unrealized Gain (loss) on Securities, Net ....... 515 (1,254) 141%
Nonperforming Loans ............................. - 1,402
Selected Financial Ratios
Net Interest Margin ............................. 5.95% 5.56%
Return on Average Assets ........................ 0.70% 0.79%
5
Return on Average Equity ........................ 9.07% 9.81%
Return on Average Assets Excluding
Merger-Related Costs, Net ................. 0.96% 0.79%
Return on Average Equity Excluding
Merger-Related Costs, Net ................. 12.45% 9.81%
Allowance for Loan Losses to Nonperforming Loans N/A 464%
Allowance for Loan Losses to Total Loans ........ 1.58% 1.62%
Leverage Ratio .................................. 9.32% 8.48%
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: January 26, 2001 HERITAGE COMMERCE CORP
By: /s/ Lawrence D. McGovern
------------------------
Lawrence D. McGovern
Chief Financial Officer / Executive Vice President