HTBK Heritage Commerce Corporation

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  November 1, 2014

HERITAGE COMMERCE CORP
(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:  (408) 947-6900

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2. below):

o                                    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o                                    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o                                    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o                                    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Heritage Commerce Corp (the “Company”) hereby amends its Current Report on Form 8-K dated November 1, 2014 and filed with the Securities and Exchange Commission on November 4, 2014 (the “Current Report”) to amend Item 9.01 to include required financial statements and pro forma financial information.  At the filing of the Current Report disclosing the Registrant’s bank subsidiary, Heritage Bank of Commerce (“HBC”), acquisition of BVF/CSNK Acquisition Corp., a Delaware corporation, (“BVF”), the Company indicated that it would file the necessary financial information not later than 71 days after the date on which the Current Report was required to be filed.  Item 9.01 of the Current Report is hereby amended as follows:

Item 9.01                                           Financial Statements and Exhibits.

(a)(1)                  Financial statements required by this item for BVF for the years ended December 31, 2013 and 2012.

(a)(2)                  Financial statements required by this item for BVF as of and for the six months ended June 30, 2014.

(b)(1)                  Pro forma financial information required by this item as of and for the six months ended June 30, 2014 and the year ended December 31, 2013.

(c)                                  Not applicable.

(d)                                 Exhibits.

2.1                               Stock Purchase Agreement dated October 8, 2014 (incorporated by reference from the Registrant’s Current Report on Form 8-K, previously filed with the SEC on October 9, 2014).

99.1                        BVF/CSNK Acquisition Corp. and Subsidiary Consolidated Financial Statements for the years ended December 31, 2013 and 2012 with Report of Independent Auditors.

99.2                        BVF/CSNK Acquisition Corp. and Subsidiary Unaudited Consolidated Financial Statements as of and for the six months ended June 30, 2014.

99.3                        Unaudited Pro Forma Condensed Combined Financial Information as of and for the six months ended June 30, 2014 and the year ended December 31, 2013.

2

SIGNATURES

Pursuant to 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.

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Exhibit Index

4

Exhibit 99.1

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY
Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
with
Report of Independent Auditors

1

Report of Independent Auditors

To the Stockholders’ of

BVF/CSNK Acquisition Corp. and Subsidiary:

We have audited the accompanying consolidated financial statements of BVF/CSNK Acquisition Corp. and Subsidiary, a Delaware limited liability company, which comprise the consolidated balance sheets as of December 31, 2013 and 2012, and the related consolidated statements of income, stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of BVF/CSNK Acquisition Corp. and Subsidiary as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

PO BOX 7833. SAN FRANCISCO. CA 94120-7833 TELEPHONE (415) 356-8000 FACSIMILE (415) 356-8001 http://www.novoco.com

2

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 2013 and 2012

see accompanying notes

3

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 2013 and 2012

see accompanying notes

4

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the years ended December 31, 2013 and 2012

see accompanying notes

5

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2013 and 2012

see accompanying notes

6

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013 and 2012

1.     Organization

BVF/CSNK Acquisition Corp. (the “Acquisition Corp.”) was incorporated under the laws of the State of Delaware on March 10, 2009 for the sole purpose to acquire CSNK Working Capital Finance Corp. (“CSNK”) (collectively, the “Company”). CSNK was incorporated under the laws of the State of California on August 22, 2002. In September 2007, Capital Corp of the West, a California corporation and a bank holding company (“CCOW”), acquired CSNK. CSNK operated as a wholly-owned subsidiary of CCOW. Effective in February 2009, CCOW was taken over by the Federal Deposit Insurance Corporation. On April 3, 2009, the Acquisition Corp. purchased CSNK and its factoring assets. CSNK currently conducts business under the name of CSNK Working Capital Finance Corp. dba Bay View Funding, Bay View Business Manager, and Overnite Capital.

The Company’s primary business operation is purchasing and collecting factored receivables. Factored receivables are receivables that have been transferred by the originating organization and typically have not been subject to previous collection efforts. These receivables are acquired from a variety of companies, including but not limited to service providers, transportation companies, manufacturers, distributors, wholesalers, apparel companies, advertisers, and temporary staffing companies. The Company accounts for the transfer of receivables under factoring arrangements as a purchase of a receivable.

2.     Summary of significant accounting policies and nature of operations

Principles of consolidation

The accompanying consolidated financial statements include the assets, liabilities and financial activities of the Acquisition Corp. and CSNK. All intercompany accounts and transactions have been eliminated in the consolidation.

Basis of presentation

The Company prepares its financial statements on the accrual basis of accounting consistent with accounting principles generally accepted in the United States of America. The Company’s fiscal year end for tax and financial reporting purposes is December 31.

Use of estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents

Cash and cash equivalents include all cash balances on deposit with financial institutions and highly liquid investments with a maturity of three months or less at the date of acquisition. The carrying amount of cash approximates fair value.

7

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013 and 2012

2.     Summary of significant accounting policies and nature of operations (continued)

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of risk include cash and cash equivalents and accounts receivable. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on these financial instruments.

The Company conducts business with companies in various industries in the United States. The Company takes a security interest in its clients’ personal property assets as collateral. Factoring fees associated with the factoring of accounts receivable accounted for substantially all of the Company’s revenues for the years ended December 31, 2013 and 2012.

Allowance for credit losses

The allowance for credit losses at December 31, 2013 and 2012 is summarized as follows:

While management uses all available information to estimate the level of the allowance for credit losses, future additions to the allowance may be necessary based on changes in collateral values supporting loans, economic conditions and borrowers’ financial condition.

Revenue recognition

The Company receives fees from its factoring operations, which consist primarily of factoring fees. Other income is earned from origination, due diligence, termination, over advance and service fees, and forfeited deposits. Fee income is recognized as services are performed.

Purchased receivables represent client invoices financed by the Company. The amount of cash advanced under these financings is based on stated percentages of the client’s eligible trade receivables. The Company may choose to obtain additional collateral through client inventories, equipment and real estate. The Company may offer participation agreements to third-party investors for certain credits that it has originated. The Company receives service revenue on the participants’ portion of the credit for acting as the lead participant and managing the shared credit participations. All participation financings are subject to standard approval and servicing procedures.

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BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013 and 2012

2.     Summary of significant accounting policies and nature of operations (continued)

Fixed assets and depreciation

Fixed assets are recorded at cost. Depreciation on office equipment, computers, software, and leasehold improvements is computed using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Depreciation expense for the years ended December 31, 2013 and 2012 was $100,445 and $90,215, respectively, and is included in general and administrative expenses on the accompanying consolidated statements of income.

Intangible assets and amortization

Deferred financing costs are amortized on a straight-line basis over the life of the respective note. Amortization expense for the years ended December 31, 2013 and 2012 was $80,379 and $133,939, respectively, and is included in general and administrative expenses on the accompanying consolidated statements of income.

Goodwill

Goodwill is recorded by the Company when the purchase price of assets acquired exceeds the book value of the assets purchased. This includes assets acquired by the Company where an initial allowance for credit losses needed to be established. Goodwill is not amortized and is reviewed annually to assess recoverability when impairment indicators are present. Goodwill was not considered impaired during 2013 or 2012.

Impairment of long-lived assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flow expected to be generated and any estimated proceeds from the eventual disposition. If the long- lived assets are considered to be impaired, the impairment to be recognized is measured at the amount by which the carrying amount of the asset exceeds the fair value as determined from an appraisal, discounted cash flow analysis, or other valuation technique. There were no impairment losses recognized during 2013 or 2012.

Income taxes

Income taxes are accounted for under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Deferred income taxes are provided on temporary differences between financial reporting and tax basis income. An allowance is provided if it is more likely than not that the Company will not realize the benefits of a deferred tax asset.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the Company to report information regarding its exposure to various tax positions taken by the Company. Management has determined whether any tax positions have met the recognition threshold and have measured the Company’s exposure to those tax positions. Management believes that the Company has adequately addressed all relevant tax positions and that there are no unrecorded tax liabilities.

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BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013 and 2012

2.     Summary of significant accounting policies and nature of operations (continued)

Advertising

The Company expenses advertising costs as they are incurred. Advertising expense for the years ended December 31, 2013 and 2012 was $219,584 and $205,102, respectively, and is included in general and administrative expenses on the accompanying consolidated statements of income.

Subsequent events

Subsequent events have been evaluated through March 19, 2014, which is the date the financial statements were available to be issued, and there are no subsequent events requiring disclosure.

3.     Fixed assets

As of December 31, 2013 and 2012, the Company’s fixed assets consisted of:

4.     Deferred financing costs

As of December 31, 2013 and 2012, the Company’s deferred financing costs consisted of:

5.     Purchased receivables

The Company entered into factoring agreements to facilitate working capital to clients by purchasing the client’s accounts receivable. The amount of cash advanced under these financings is based on stated percentages of the client’s eligible trade receivables. The balance of the purchased receivables as of December 31, 2013 and 2012 was $20,506,855 and $20,422,511, respectively, which is net of the allowance for credit losses of $729,932 and $667,432 as of December 31, 2013 and 2012, respectively. Fee revenue and servicing fees earned for the years ended December 31, 2013 and 2012 was $8,861,416 and $9,316,865, respectively, of which $539,305 and $529,362, respectively, was receivable as of December 31, 2013 and 2012.

10

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013 and 2012

6.     Participation investments

The Company has entered into master loan servicing and participation agreements with two factoring companies. Under these agreements, the Company provides full back office factoring services, which includes purchasing an undivided participation interest in the advances of the factoring companies’ purchased accounts receivables. The Company’s participation interest varies based on individual clients. The Company also earns a service fee on gross invoices purchases.

As of December 31, 2013 and 2012, total amount participated by the Company was $10,039,023 and $7,607,089, respectively. The participation interest income and servicing fees earned for the years ended December 31, 2013 and 2012 was $2,004,298 and $1,705,748, respectively, of which $192,961 and $134,616, respectively, was receivable as of December 31, 2013 and 2012.

The Company sold up to an aggregate amount of $3,000,000 of its factored client advances associated with a $5.2 million commitment to a related party and various third parties, collectively (“Participants”), whose members include common and preferred stockholders. Interest paid to the Participants, which is included as a reduction of fee revenue on the accompanying consolidated statements of income, for the years ended December 31, 2013 and 2012 was $134,986 and $70,457, respectively, of which $12,084 and $8,782, respectively, was payable as of December 31, 2013 and 2012.

7.     Notes payable

Line of credit — related party

The Company obtained a $1,000,000 subordinated revolving line credit from a related party. The principal balance owed on this subordinated line of credit at December 31, 2013 and 2012 was $500,000 and $0, respectively. Interest expense for the years ended December 31, 2013 and 2012 was $17,167 and $0, respectively, of which $5,167 and $0, respectively, remained payable as of December 31, 2013 and 2012.

Senior debt

The Company obtained a $30,000,000 revolving bank line of credit with an interest rate equal to 3 month LIBOR plus 3%. The interest rate at December 31, 2013 and 2012 was 3.24% and 3.31%, respectively. Repayment of the line of credit is secured by all the assets of the Company and matures on April 3, 2015. The line of credit contains certain financial covenants, including requiring a minimum interest coverage ratio and a specified maximum leverage ratio. In addition, the line contains certain restrictive covenants, including restrictions on dividend distributions, restricting the Company from becoming insolvent or declaring bankruptcy, dissolving, suspending or going out of a substantial portion of its business, which if the restricted event occurs, the note shall become immediately due and payable. The line of credit requires monthly payments of interest only and principal balance is due and payable at maturity. The principal balance owed on this line of credit at December 31, 2013 and 2012 was $20,252,428 and $19,395,234, respectively. Interest expense for the years ended December 31, 2013 and 2012 was $737,900 and $802,116, respectively, of which $62,553 and $55,034, respectively, remained payable as of December 31, 2013 and 2012.

11

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013 and 2012

7.     Notes payable (continued)

Subordinated debts

During 2009, the Company entered into various subscription agreements for subordinated notes. The notes had terms up to three years and accrue interest at 14% to 18%. These subordinated notes expired on April 30, 2012. During 2012, the Company refinanced 75% of the principal on the existing subordinated notes that expired on April 30, 2012. The refinanced subordinate notes have terms of 8, 14, and 20 months and accrue interest at 10% to 12%. The Company has the right to redeem 100.5% of the principal amount of the note plus accrued and unpaid interest to the date of payment. In the event that there is a change in control of the Company, the subordinated note holders have the right to require the Company to repurchase the note for the principal amount of the note plus accrued and unpaid interest to the date of payment. All 8 month subordinated debts were paid on December 31, 2012. All 14 month subordinated debts were paid on June 30, 2013. All 20 month subordinated debts were paid on December 31, 2013. The principal balance owed on the subordinated notes as of December 31, 2013 and 2012 was $0 and $1,932,500, respectively. Interest expense for the years ended December 31, 2013 and 2012 was $164,161 and $437,367, respectively, of which $0 and $18,875, respectively, was payable as of December 31, 2013 and 2012.

Future minimum principal payments on the notes payable are due as follows:

8.     Lease commitments

The Company leases office facilities under a non-cancelable lease agreement that has been accounted for as an operating lease, which expires on May 1, 2017.

Future minimum lease payments are estimated as follows:

Rent expense for the years ended December 31, 2013 and 2012 was $225,555 and $240,964, respectively, which is included in general and administrative expenses on the accompanying consolidated statements of income.

12

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013 and 2012

9.     Stockholders’ equity

Redeemable convertible preferred stock

In 2009, the Company issued 1,403,750 shares of its Series A Preferred Stock, par value $0.0001 per share (“Preferred Stock”), at a price of $2 per share. Each share of Preferred Stock entitles the holder to receive a 7% annual non-cumulative dividend, as and when declared by the Board of Directors. No dividends may be made on the common shares until all declared dividends on preferred stock have been paid or set aside for payment to the preferred stockholders. The Preferred Stock provides its investors with a right to either convert to common stock (“Common Stock”) or to put the investment back to the Company for a minimum simple return of 20% per year, including the 7% dividend, provided the Company has sufficient liquidity to repurchase the Preferred Stock and is in compliance with the covenants of its senior credit line.

In 2013, the Company’s Board of Directors agreed by unanimous resolution that holders of Preferred Stock in the Company would be given the opportunity to convert their shares of Preferred Stock to Common Stock or if they so elect, to redeem their shares of Preferred Stock. The holders of Preferred Stock elected to convert 1,230,139 of outstanding Preferred Shares to Common Shares and 173,611 of outstanding Preferred Shares were redeemed by one preferred shareholder for the amount of $524,174, which represents a 20% simple return for each share redeemed. For the years ended December 31, 2013 and 2012, the Company paid dividends of $5,993 and $246,599, respectively, to preferred stockholders.

Common stock dividends

The Company declared and paid cash dividends per common share as follows:

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BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013 and 2012

10.  Income taxes

Provision for income taxes for the Company at December 31, 2013 and 2012 consisted of the following:

Deferred income taxes result from the tax effect of transactions that are recognized in different periods for financial and tax reporting purposes. The tax effects of temporary differences that give rise to significant portions of the deferred tax liability at December 31, 2013 and 2012 consisted of the following:

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Exhibit 99.2

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY

Unaudited Consolidated Financial Statements

As of and for the six months ended June 30, 2014

1

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

See accompanying notes

2

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

See accompanying notes

3

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes

4

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY

NOTES TO UNAUDITIED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014 and 2013

1.              Organization

BVF/CSNK Acquisition Corp. (the “Acquisition Corp.”) was incorporated under the laws of the State of Delaware on March 10, 2009 for the sole purpose to acquire CSNK Working Capital Finance Corp. (“CSNK”) (collectively, the “Company”).  CSNK was incorporated under the laws of the State of California on August 22, 2002. In September 2007, Capital Corp of the West, a California corporation and a bank holding company (“CCOW”), acquired CSNK. CSNK operated as a wholly-owned subsidiary of CCOW.  Effective in February 2009, CCOW was taken over by the Federal Deposit Insurance Corporation.  On April 3, 2009, the Acquisition Corp. purchased CSNK and its factoring assets. CSNK currently conducts business under the name of CSNK Working Capital Finance Corp. dba Bay View Funding, Bay View Business Manager, and Overnite Capital.

The Company’s primary business operation is purchasing and collecting factored receivables. Factored receivables are receivables that have been transferred by the originating organization and typically have not been subject to previous collection efforts. These receivables are acquired from a variety of companies, including but not limited to service providers, transportation companies, manufacturers, distributors, wholesalers, apparel companies, advertisers, and temporary staffing companies. The Company accounts for the transfer of receivables under factoring arrangements as a purchase of a receivable.

2.              Significant accounting policies and nature of operations

The unaudited consolidated financial statements of the Company have been prepared pursuant to the rules and regulations for reporting of Regulation S-X. Accordingly, certain information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements are not included herein. The interim statements should be read in conjunction with the consolidated financial statements and notes that were included in the Company’s Consolidated Financial Statements for the years ended December 31, 2013 and 2012 with Report of Independent Auditors.

In management’s opinion, all adjustments necessary for a fair presentation of these consolidated financial statements have been included and are of a normal and recurring nature. All intercompany transactions and balances have been eliminated.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from these estimates.

The results for the six months ended June 30, 2014 are not necessarily indicative of the results expected for any subsequent period or for the entire year ending December 31, 2014.

Significant accounting policies and nature of operations are discussed in the Consolidated Financial Statements for the years ended December 31, 2013 and 2012 with Report of Independent Auditors. There are no changes to these policies as of June 30, 2014.

5

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY

NOTES TO UNAUDITIED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014 and 2013

3.              Purchased receivables

The Company entered into factoring agreements to facilitate working capital to clients by purchasing the client’s accounts receivable.  The amount of cash advanced under these financings is based on stated percentages of the client’s eligible trade receivables.  The balance of the purchased receivables as of June 30, 2014 was $23,919,780, which is net of the allowance for credit losses of $785,750 as of June 30, 2014.  Fee revenue and servicing fees earned for the six months ended June 30, 2014 and 2013 was $4,373,096 and $4,157,029, respectively, of which $594,751 and $645,702 respectively, was receivable as of June 30, 2014 and 2013.  The revenue share expense for the six months ended June 30, 2014 and 2013 was $63,047 and $63,038, respectively.  At June 30, 2014, there were no accounts receivable past due over 120 days.

4.              Participation investments

The Company has entered into master loan servicing and participation agreements with two factoring companies.  Under these agreements, the Company provides full back office factoring services, which includes purchasing an undivided participation interest in the advances of the factoring companies’ purchased accounts receivables. The Company’s participation interest varies based on individual clients.  The Company also earns a service fee on gross invoices purchases.

As of June 30, 2014, total amount participated by the Company was $13,384,533. The participation interest income and servicing fees earned for the six months ended June 30, 2014 and 2013 was $1,225,546 and $914,177,  respectively, of which $215,807 and $156,784, respectively, was receivable as of June 30, 2014 and 2013.

The Company sold up to an aggregate amount of $3,000,000 of its factored client advances associated with its $5.2 million commitment to a related party and various third parties, collectively (“Participants”), whose members include common and preferred stockholders. Interest paid to the Participants, which is included as a reduction of fee revenue on the accompanying consolidated statements of income, for the six months ended June 30, 2014 and 2013 was $21,832 and $72,535, respectively, of which $879 and $21,762, respectively, was payable as of June 30, 2014 and 2013.

5.              Notes payable

Line of credit- related party

The Company obtained a $1,000,000 subordinated revolving line credit from a related party. The interest rate at June 30, 2014 was 12.17%.  The line of credit matures on June 30, 2015. The principal balance owed on this subordinated line of credit at June 30, 2014 was $1,000,000.  Interest expense for the six months ended June 30, 2014 and 2013 was $44,000 and $0, respectively, of which $10,000 and $0, respectively, remained payable as of June 30, 2014 and 2013.  See Note 7 Subsequent Events.

Senior debt

The Company obtained a $32,500,000 revolving bank line of credit with an interest rate equal to 3 month LIBOR plus 3%. The interest rate at June 30, 2014 was 3.23%. Repayment of the line of credit is secured by all the assets of the Company and matures on April 3, 2015. The terms of the line of credit include a prepayment penalty of 1%, or $325,000. The line of credit contains certain financial covenants, including requiring a minimum interest coverage ratio and a specified maximum leverage ratio. In addition, the line contains certain restrictive covenants, including restrictions on dividend distributions, restricting the Company from becoming insolvent or declaring bankruptcy, dissolving, suspending or going out of a substantial portion of its business, which if the restricted event occurs, the note shall become immediately due and payable. The line of credit requires monthly payments of interest only and principal balance is due and payable at maturity. The principal balance owed on this line of credit at June 30, 2014 was $29,355,302. Interest expense for the six months ended June 30, 2014 and 2013 was $419,682 and $334,577, respectively, of which $76,965 and $65,458, respectively, remained payable as of June 30, 2014 and 2013.  See Note 7 Subsequent Events.

6

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY

NOTES TO UNAUDITIED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014 and 2013

5.              Notes payable (continued)

Subordinated debts

During 2009, the Company entered into various subscription agreements for subordinated notes. The notes had terms up to three years and accrue interest at 14% to 18%. These subordinated notes expired on April 30, 2012.  During 2012, the Company refinanced 75% of the principal on the existing subordinated notes that expired on April 30, 2012. The refinanced subordinate notes have terms of 8, 14, and 20 months and accrue interest at 10% to 12%. The Company has the right to redeem 100.5% of the principal amount of the note plus accrued and unpaid interest to the date of payment.  In the event that there is a change in control of the Company, the subordinated note holders have the right to require the Company to repurchase the note for the principal amount of the note plus accrued and unpaid interest to the date of payment. All 8 month subordinated debts were paid on December 31, 2012. All 14 month subordinated debts were paid on June 30, 2013. All 20 month subordinated debts were paid on December 31, 2013. Interest expense for the six months ended June 30, 2013 was $110,205, of which $18,266 was payable as of June 30, 2013.

6.              Stockholders’ equity

Redeemable convertible preferred stock

In 2009, the Company issued 1,403,750 shares of its Series A Preferred Stock, par value $0.0001 per share (“Preferred Stock”), at a price of $2 per share. Each share of Preferred Stock entitles the holder to receive a 7% annual non-cumulative dividend, as and when declared by the Board of Directors. No dividends may be made on the common shares until all declared dividends on preferred stock have been paid or set aside for payment to the preferred stockholders. The Preferred Stock provides its investors with a right to either convert to common stock (“Common Stock”) or to put the investment back to the Company for a minimum simple return of 20% per year, including the 7% dividend, provided the Company has sufficient liquidity to repurchase the Preferred Stock and is in compliance with the covenants of its senior credit line.

In 2013, the Company’s Board of Directors agreed by unanimous resolution that holders of Preferred Stock in the Company would be given the opportunity to convert their shares of Preferred Stock to Common Stock or if they so elect, to redeem their shares of Preferred Stock. The holders of Preferred Stock elected to convert 1,230,139 of outstanding Preferred Shares to Common Shares and 173,611 of outstanding Preferred Shares were redeemed by one preferred shareholder for the amount of $524,174, which represents a 20% simple return for each share redeemed. For the six months ended June 30, 2013, the Company paid dividends of $117,500 to preferred stockholders.

Common stock dividends

The Company declared and paid cash dividends per common share as follows:

See Note 7 Subsequent Events.

7

BVF/CSNK ACQUISITION CORP. AND SUBSIDIARY

NOTES TO UNAUDITIED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2014 and 2013

7.              Subsequent events

On October 9, 2014, Heritage Commerce Corp announced that its subsidiary Heritage Bank of Commerce (“HBC”) entered into a Stock Purchase Agreement (“Purchase Agreement”) with the Company and its stockholders, pursuant to which HBC agreed to acquire all of the outstanding common stock from the stockholders of the Company for an aggregate purchase price of $22,520,000. The acquisition was completed on November 1, 2014 and the Company became a wholly-owned subsidiary of HBC. At the Closing HBC delivered as payment on account of the purchase price $20,268,000 of the total purchase price, and $2,252,000, or 10%, was deposited into an escrow account with an independent escrow agent to support the payment of indemnification claims, if any, of HBC against the Company’s stockholders pursuant to the Purchase Agreement. The escrow account will be released to the stockholders 18 months from the closing date, net of any payments made to HBC or amounts received for unresolved claims submitted by HBC.

On November 5, 2014 HBC contributed $1,000,000 to the Company as an equity investment.   Subsequently, the Company paid off the related party line of credit of $1,000,000 and accrued interest of $1,000.

On November 7, 2014, the Company obtained a subordinated loan in the amount of $2,500,000 from HBC, with an interest rate equal to the Prime Rate as published in The Wall Street Journal and a maturity date of April 30, 2015.

HBC invested an additional $40,000,000 in the Company to pay off the outstanding balance on the $32,500,000 revolving bank line of credit and to provide working capital for future growth as follows: (1) on December 16, 2014, HBC contributed to the Company $16,000,000 as an equity investment, which was used to pay down the $32,500,000 revolving bank line of credit; and (2) on December 17, 2014, the Company obtained a $24,000,000 revolving line of credit from HBC, with an interest rate equal to the Prime Rate as published in The Wall Street Journal and a maturity date of December 16, 2015.  Subsequently, the Company closed out the $32,500,000 revolving bank line of credit, paying off the remaining unpaid principal outstanding of $14,002,000.  HBC paid the prepayment penalty of $325,000 on the BVF $32,500,000 revolving bank line of credit.  The Company also paid off the $2,500,000 subordinated loan from HBC.

8

Exhibit 99.3

HERITITAGE COMMERCE CORP AND BVF/CSNK ACQUISITION CORP.

Unaudited Pro Forma Condensed Combined Financial Information

As of and for the six months ended June 30, 2014 and the year ended December 31, 2013

1

On October 9, 2014, Heritage Commerce Corp (“the Company”) announced that the Registrant’s bank subsidiary, Heritage Bank of Commerce (“HBC”), entered into a Stock Purchase Agreement (“Purchase Agreement”) with BVF/CSNK Acquisition Corp., a Delaware corporation (“Bay View Funding” or “BVF”) and its stockholders, pursuant to which HBC agreed to acquire all of the outstanding common stock from the stockholders of BVF for an aggregate purchase price of $22,520,000. The acquisition was completed on November 1, 2014 and BVF became a wholly-owned subsidiary of HBC. At the Closing HBC delivered as payment on account of the purchase price $20,268,000 of the total purchase price, and $2,252,000, or 10%, was deposited into an escrow account with an independent escrow agent to support the payment of indemnification claims, if any, of HBC against BVF stockholders pursuant to the Purchase Agreement. The escrow account will be released to the stockholders 18 months from the closing date, net of any payments made to HBC or amounts received for unresolved claims submitted by HBC. Based in Santa Clara, California, BVF is the parent company of CSNK Working Capital Finance Corp. dba Bay View Funding, which provides business-essential working capital factoring financing to various industries throughout the United States.

On November 5, 2014 HBC contributed $1,000,000 to BVF as an equity investment.  Subsequently, BVF paid off its related party line of credit of $1,000,000 and accrued interest of $1,000.

On November 7, 2014, BVF obtained a subordinated loan in the amount of $2,500,000 from HBC, with an interest rate equal to the Prime Rate as published in The Wall Street Journal and a maturity date of April 30, 2015.

HBC invested an additional $40,000,000 in the Company to pay off the outstanding balance on the $32,500,000 revolving bank line of credit and to provide working capital for future growth as follows: (1) on December 16, 2014, HBC contributed to BVF $16,000,000 as an equity investment, which was used to pay down the $32,500,000 revolving bank line of credit; and (2) on December 17, 2014, BVF obtained a $24,000,000 revolving line of credit from HBC, with an interest rate equal to the Prime Rate as published in The Wall Street Journal and a maturity date of December 16, 2015.  Subsequently, BVF closed out its $32,500,000 revolving bank line of credit, paying off the remaining unpaid principal outstanding of $14,002,000.  HBC paid the prepayment penalty of $325,000 on the BVF $32,500,000 revolving bank line of credit.  BVF also paid off the $2,500,000 subordinated loan from HBC.

In April 2013, BVF’s wholly-owned subsidiary CSNK Working Capital Finance Corp. leased approximately 7,440 square feet of a two-story multi-tenant office building located at 2933 Bunker Hill Lane, Santa Clara, CA 95054.  The current monthly rent payment is $16,476 and is subject to annual increases of 3% until the lease expires in April 2017.  On November 1, 2014, the lease was estimated to be $109,000 below fair market value, which is being amortized over three years.

Customer relationship and brokered relationship intangible assets of $1,900,000 resulted from the Bay View Funding acquisition.  The assets are initially measured at fair value and then are amortized on the straight-line method over their estimated useful lives.  The customer relationship and brokered relationship intangible assets from the Bay View Funding acquisition are being amortized over 10 years.

The Chief Executive Officer of BVF entered into a three-year non-compete agreement with HBC.  On November 1, 2014 the estimated fair value of the non-compete agreement was $250,000, which is being amortized over three years.

Estimated goodwill of $13,347,000 on November 1, 2014 resulted from the acquisition Bay View Funding, which represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets.

2

Goodwill is assessed at least annually for impairment and any such impairment is recognized in the period identified.

HBC expects to incur pre-tax acquisition and integration costs of approximately $1,000,000, as reflected in the following table:

There are minimal expected cost savings from the transaction, other than funding costs, fees related to the Senior Debt revolving bank line of credit, and elimination of BVF Directors’ expense.  BVF incurred funding costs of $919,000 for the year ended December 31, 2013. BVF incurred fees related to the Senior Debt revolving bank line of credit of $59,000 for the year ended December 31, 2013.  BVF incurred $355,000 of Directors’ expense for the year ended December 31, 2013.

The following unaudited pro forma combined consolidated financial information and accompanying notes showing the impact on the historical financial conditions and results of operations of the Company, and HBC’s, acquisition of BVF on November 1, 2014, have been prepared to illustrate the effects of the acquisition under the acquisition method of accounting.  Under the acquisition method of accounting, the Company records the assets acquired and liabilities assumed from BVF at their fair values. The fair values assigned to the respective assets and liabilities are preliminary and subject to change. The following methodologies were used to estimate the fair value of the following assets and liabilities:

·                Premises and Equipment, net.  With the exception of BVF’s operating lease for office space, the book value of such assets approximates fair value.  A discounted cash flow model was used to compare actual lease payments to market rates for similar properties and terms to determine the fair value adjustment for the operating lease.

·                 Factoring receivables.  The fair value of factoring receivables is based on estimated rates of return expected by market participants discounted over the expected duration of the portfolio which is less than 60 days.  BVF’s allowance for loan losses is eliminated under the acquisition method because the fair value of factoring receivables already includes a component for credit losses.

·                 Other borrowings.  The carrying value of other borrowings approximates its fair value based on the current pricing of the borrowings in relation to market rates and terms for similar arrangements.

·                Customer relationship intangibles - clients and brokers.  The fair value of these intangibles is based on a discounted cash flow model that considers the retention rate of business from existing customers and the amount and duration of such cash flows.

·                 Non-compete agreement intangible.  The fair value of this intangible is based on a discounted cash flow model that is based on the amounts to be paid over the period of the agreement.

In addition to these fair value adjustments, the Company has estimated the need for a reserve for income taxes of $250,000 for uncertain tax positions of BVF and for a reserve of $50,000 for certain expenses.

The unaudited pro forma combined consolidated balance sheet as of June 30, 2014 is presented as if the HBC acquisition of BVF had occurred on June 30, 2014. The unaudited pro forma condensed combined income statement for the six months ended June 30, 2014 is presented as if the acquisition had occurred on January 1, 2014.  The unaudited pro forma condensed combined income statement for the year ended December 31, 2013 is presented as if the acquisition had occurred on January 1, 2013.  The historical consolidated financial information has been adjusted to reflect supportable items that are directly attributable to the acquisition and, with respect to the income statement only, expected to have a continuing impact on consolidated results of operations, as such, one-time acquisition costs are not included. The unaudited pro forma condensed combined financial statements are provided for informational purposes only. The unaudited pro forma condensed combined financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the acquisition been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma combined consolidated financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma condensed combined consolidated financial statements should be read together with:

·                  the accompanying notes to the unaudited pro forma condensed combined consolidated financial statements;

·                  the Company’s audited consolidated financial statements and accompanying notes as of and for the years ended December 31, 2013 and 2012, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013;

·                  BVF’s audited consolidated financial statements and accompanying notes as of and for the years ended December 31, 2013 and 2012, included elsewhere in this Current Report on Form 8-K/A;

3

·                  BVF’s unaudited consolidated financial statements and accompanying notes as of June 30, 2014 and for the six months ended June 30, 2014 and 2013, included elsewhere in this Current Report on Form 8-K/A; and

·                other information pertaining to the Company, HBC and BVF incorporated by reference into, or included in, this Current Report on Form 8-K/A.

4

HERITAGE COMMERCE CORP AND BVF/CSNK ACQUISITION CORP.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of June 30, 2014