Heritage Commerce Corp (Nasdaq:HTBK), the holding
company (the “Company”) for Heritage Bank of Commerce (the “Bank”),
today reported net income increased 48% to $6.1 million, or $0.16
per average diluted common share, for the first quarter of 2016,
compared to $4.1 million, or $0.13 per average diluted common share
for the first quarter of 2015, and increased 38% from $4.4 million,
or $0.12 per average diluted common share for the fourth quarter of
2015. All results are unaudited and include the acquisition of
Focus Business Bank (“Focus”) from August 20, 2015.
“Following one of our most profitable years in almost 10 years,
our positive earnings results continued, and we achieved record net
income in the first quarter of 2016,” said Walter Kaczmarek,
President and Chief Executive Officer. “We continue to demonstrate
strong operating performance with excellent asset quality, a strong
balance sheet and a solid net interest margin.”
“The first quarter of 2016 was our first full quarter since
closing the Focus acquisition and, therefore, does not include any
one-time closing or integration costs, all of which were recognized
in 2015. The acquisition of Focus last year, and the acquisition of
Bay View Funding in 2014, have had a favorable impact to our
earnings and to our Greater San Francisco Bay Area franchise. As a
result, our growing franchise is generating excellent results
for our customers, communities, employees and shareholders.”
First Quarter 2016 Highlights (as of, or for
the period ended March 31, 2016, except as noted):
- Diluted earnings per share totaled $0.16 for the first quarter
of 2016, compared to $0.13 for the first quarter of 2015, and $0.12
for the fourth quarter of 2015.
- Net interest income increased 32% to $22.3 million for the
first quarter of 2016, compared to $16.9 million for the first
quarter of 2015, and increased 1% from $22.1 million for the fourth
quarter of 2015.
- For the first quarter of 2016, the fully tax equivalent (“FTE”)
net interest margin contracted 36 basis points to 4.22% from 4.58%
for the first quarter of 2015, primarily due to higher average
balances of lower yielding excess funds at the Federal Reserve
Bank, interest-bearing deposits in other financial institutions,
and lower yields on securities. This was partially offset by
accretion of the loan purchase discount into loan interest income
from the Focus transaction for the first quarter of 2016. For the
first quarter of 2016, the net interest margin increased 9 basis
points from 4.13% for the fourth quarter of 2015, primarily due to
re-deploying excess liquidity into higher yielding loans and
securities.
- The accretion of the loan purchase discount in loan interest
income from the Focus transaction was $518,000 for the first
quarter of 2016, compared to $1.1 million for the fourth quarter of
2015. The total purchase discount on non-impaired loans from the
Focus loan portfolio was $4.6 million as of the acquisition date,
of which $1.9 million has been accreted to loan interest income
from August 21, 2015 through March 31, 2016.
- The yield on the loan portfolio was 5.64% for the first quarter
of 2016, compared to 5.71% for the first quarter of 2015, and 5.92%
for the fourth quarter of 2015. The decrease in the yield on the
loan portfolio for the first quarter of 2016, compared to the first
quarter of 2015, primarily reflects a decrease in the proportion of
loans in the higher yielding Bay View Funding factored receivables
portfolio relative to the addition of the Focus loans and growth in
the Company’s legacy portfolio, partially offset by the accretion
of the loan purchase discount into loan interest income from the
Focus transaction. The decrease in the yield on the loan portfolio
for the first quarter of 2016, compared to fourth quarter of 2015,
primarily reflects a lower accretion of the loan purchase discount
into loan interest income from the Focus transaction. Excluding the
accretion of the loan purchase discount and the Bay View Funding
factored receivables portfolio, the yield on the loan portfolio was
4.78% for the first quarter of 2016, compared to 4.73% for the
first quarter of 2015, and 4.79% for the fourth quarter of
2015.
- Loans (excluding loans‑held‑for‑sale) increased
$293.3 million, or 27%, to $1.40 billion at March 31,
2016, compared to $1.10 billion at March 31, 2015, which
included an increase of $162.2 million, or 15%, in the
Company’s legacy loan portfolio, and $131.1 million from the
Focus loan portfolio. Loans increased $36.5 million, or 3%, at
March 31, 2016, compared to $1.36 billion at December 31,
2015.
- Nonperforming assets (“NPAs”) decreased to $4.6 million, or
0.20% of total assets, at March 31, 2016, compared to $8.4 million,
or 0.51% of total assets, at March 31, 2015, and $6.7 million, or
0.29% of total assets, at December 31, 2015.
- Classified assets, net of Small Business Administration (“SBA”)
guarantees, were $21.1 million at March 31, 2016, compared to
$16.6 million at March 31, 2015, and from $20.5 million at December
31, 2015.
- Net recoveries totaled $131,000 for the first quarter of 2016,
compared to net recoveries of $235,000 for the first quarter of
2015, and net charge-offs of $182,000 for the fourth quarter of
2015.
- There was a $401,000 provision for loan losses for the first
quarter of 2016, compared to a $60,000 credit provision for loan
losses for the first quarter of 2015, and a $371,000 provision for
loan losses for the fourth quarter of 2015.
- The allowance for loan losses (“ALLL”) was 1.39% of total loans
at March 31, 2016, compared to 1.68% at March 31, 2015, and 1.39%
at December 31, 2015. The ALLL to total nonperforming loans was
465.06% at March 31, 2016, compared to 275.57% at March 31, 2015,
and 296.74% at December 31, 2015. The allowance for loan losses to
total loans decreased at March 31, 2016, compared to
March 31, 2015, primarily due to the Focus loan portfolio,
which was marked to fair market value on the acquisition date, and
an increase in the Company’s legacy loan balances with no default
histories, coupled with the decrease in the Company’s legacy
nonperforming assets, improving the quality of the loan portfolio
overall.
- Total deposits increased $605.1 million, or 43%, to
$2.03 billion at March 31, 2016, compared to
$1.42 billion at March 31, 2015, which included an increase of
$244.9 million, or 17%, in the Company’s legacy deposit
portfolio, and $360.2 million from the Focus deposit
portfolio. Total deposits decreased $34.0 million, or 2%, at
March 31, 2016, compared to $2.06 billion at December 31,
2015, primarily due to decreases in noninterest-bearing demand
deposits and brokered deposits.
- The Company’s consolidated capital ratios exceeded regulatory
guidelines and the Bank’s capital ratios exceeded the regulatory
guidelines for a well-capitalized financial institution under the
Basel III regulatory requirements at March 31, 2016.
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Well-capitalized |
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Financial |
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Institution |
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Heritage |
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Heritage |
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Basel III |
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Commerce |
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Bank of |
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Regulatory |
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CAPITAL RATIOS |
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Corp |
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Commerce |
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Guidelines(1) |
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Total Risk-Based |
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12.4 |
% |
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12.3 |
% |
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10.625 |
% |
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Tier 1 Risk-Based |
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11.3 |
% |
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11.2 |
% |
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8.625 |
% |
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Common Equity Tier 1
Risk-Based |
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10.2 |
% |
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11.2 |
% |
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7.125 |
% |
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Leverage |
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8.8 |
% |
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8.7 |
% |
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5.000 |
% |
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(1)Includes 0.625% capital conservation buffer effective January 1,
2016. |
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Operating Results
Net interest income increased 32% to $22.3 million for the first
quarter of 2016, compared to $16.9 million for the first quarter of
2015, primarily due to loans acquired in the Focus acquisition,
organic growth in the loan portfolio, the accretion of the loan
purchase discount into loan interest income from the Focus
transaction, and an increase in the average balance of investment
securities. Net interest income increased 1% from $22.1 million for
the fourth quarter of 2015.
The net interest margin (FTE) was 4.22% for the first quarter of
2016, compared to 4.58% for the first quarter of 2015, and 4.13%
for the fourth quarter of 2015. The decline in the net interest
margin from the first quarter of 2015 was primarily due to higher
average balances of lower yielding excess funds at the Federal
Reserve Bank and interest-bearing deposits in other financial
institutions and lower yields on securities, partially offset by
accretion of the loan purchase discount into loan interest income
from the Focus transaction for the first quarter of 2016. The
increase in the net interest margin from the fourth quarter of 2015
was primarily due to re-deploying excess liquidity into higher
yielding loans and securities. The accretion of the loan purchase
discount into loan interest income from the Focus transaction was
$518,000 for the first quarter of 2016, compared to $1.1 million
for the fourth quarter of 2015. The total purchase discount on
non-impaired loans from the Focus loan portfolio was $4.6 million
as of the acquisition date, of which $1.9 million has been accreted
into loan interest income from August 21, 2015 through March 31,
2016.
There was a $401,000 provision for loan losses for the first
quarter of 2016, compared to a $60,000 credit provision for loan
losses for the first quarter of 2015, and a $371,000 provision for
loan losses for the fourth quarter of 2015.
Noninterest income increased to $2.6 million for the first
quarter of 2016, compared to $1.9 million for the first quarter of
2015, primarily due to an $180,000 gain on sales of securities, a
higher gain on sales of SBA loans, and higher service charges and
fees on deposit accounts in the first quarter of 2016. Noninterest
income for the first quarter of 2016 decreased from $2.8 million
for the fourth quarter of 2015, primarily due to a $642,000 gain on
the sales of securities in the fourth quarter of 2015, partially
offset by a higher gain on sales of SBA loans in the first quarter
of 2016.
Total noninterest expense for the first quarter of 2016 was
$14.7 million, compared to $12.3 million for the first quarter of
2015, and $17.4 million for the fourth quarter of 2015. The
increase in noninterest expense in the first quarter of 2016,
compared to the first quarter of 2015, was primarily due to
additional employees and increase in amortization of the core
deposit intangible assets from the Focus acquisition in the first
quarter of 2016, and the significant reduction of legal expenses on
two problem loans that were paid off in the first quarter of 2015.
The decrease in noninterest expense for the first quarter of 2016,
compared to the fourth quarter of 2015, was primarily due to costs
related to the acquisition and integration of Focus of $3.0 million
during the fourth quarter of 2015. Full time equivalent employees
were 260 at March 31, 2016; there were 251 at March 31, 2015, and
260 at December 31, 2015.
The efficiency ratio for the first quarter of 2016 improved to
58.93%, compared to 65.35% for the first quarter of 2015, and
69.54% for the fourth quarter of 2015, reflecting operating
efficiencies generated from our acquisitions and the strong revenue
growth during the year.
Income tax expense for the first quarter of 2016 was $3.7
million, compared to $2.4 million for the first quarter of 2015,
and $2.8 million for the fourth quarter of 2015. The effective tax
rate for the first quarter of 2016 was 37.9%, compared to 37.0% for
the first quarter of 2015 and 38.9% for the fourth quarter of 2015.
The increase in the effective tax rate for the first quarter of
2016, compared to the first quarter of 2015, was primarily due to
an increase in taxable income with a limited amount of tax
deductions. The decrease in the effective tax rate for the first
quarter of 2016, compared to the fourth quarter of 2015, was
primarily due to certain Focus acquisition costs incurred during
the fourth quarter of 2015 that were not tax deductible. The
difference in the effective tax rate for the periods reported,
compared to the combined Federal and state statutory tax rate of
42%, is primarily the result of the Company’s investment in life
insurance policies whose earnings are not subject to taxes, tax
credits related to investments in low income housing limited
partnerships (net of low income housing investment losses), and
tax-exempt interest income earned on municipal bonds.
Balance Sheet Review, Capital Management and Credit
Quality
Total assets were $2.33 billion at March 31, 2016, compared to
$1.65 billion at March 31, 2015, and $2.36 billion at December 31,
2015.
The investment securities available-for-sale portfolio totaled
$448.5 million at March 31, 2016, compared to $200.8 million at
March 31, 2015, and $385.1 million at December 31, 2015. At March
31, 2016, the Company’s securities available-for-sale portfolio was
comprised of $392.8 million agency mortgage-backed securities (all
issued by U.S. Government sponsored entities), $30.3 million of
U.S. Treasuries, $15.2 million of single entity issue trust
preferred securities, $9.2 million of U.S. Government agency
securities, and $1.0 million of corporate bonds. The pre-tax
unrealized gain on securities available-for-sale at March 31, 2016
was $5.2 million, compared to a pre-tax unrealized gain on
securities available-for-sale of $5.7 million at March 31, 2015,
and a pre-tax unrealized gain on securities available-for-sale of
$501,000 at December 31, 2015.
The Company received gross proceeds of $5.6 million on corporate
securities available-for-sale it sold during the first quarter of
2016 with a book value totaling $5.4 million, resulting in a gain
on sale of securities of $180,000. During the first quarter of
2016, the Company purchased $75.8 million of investment securities
available-for-sale, which consisted of $51.8 million of Federal
Home Loan Mortgage Corporation ("FHLMC") securities, with an
average book yield of 1.96%, and $24.0 million of Federal National
Mortgage Association ("FNMA") securities, with an average book
yield of 1.95%.
At March 31, 2016, investment securities held-to-maturity
totaled $185.2 million, compared to $94.6 million at March 31,
2015, and $109.3 million at December 31, 2015. At March 31, 2016,
the Company’s securities held-to-maturity portfolio, at amortized
cost, was comprised of $92.6 million tax-exempt municipal bonds,
and $92.6 million agency mortgage-backed securities.
During the first quarter of 2016, the Company purchased $78.7
million of Government National Mortgage Association ("GNMA")
securities held-to-maturity, with an average book yield of
1.85%.
Loans (excluding loans‑held‑for‑sale) increased
$293.3 million, or 27%, to $1.40 billion at March 31,
2016, compared to $1.10 billion at March 31, 2015, which
included an increase of $162.2 million, or 15%, in the
Company’s legacy loan portfolio, and $131.1 million from the
Focus loan portfolio. Loans increased $36.5 million, or 3%, at
March 31, 2016, compared to $1.36 billion at December 31,
2015.
The loan portfolio remains well-diversified with commercial and
industrial (“C&I”) loans accounting for 42% of the loan
portfolio at March 31, 2016, which included $41.9 million of
factored receivables at Bay View Funding. Commercial and
residential real estate loans accounted for 44% of the total loan
portfolio, of which 42% were owner-occupied by businesses. Consumer
and home equity loans accounted for 7% of total loans, and land and
construction loans accounted for the remaining 7% of total loans at
March 31, 2016. C&I line usage was 44% at March 31, 2016,
compared to 37% at March 31, 2015, and 39% at December 31,
2015.
The yield on the loan portfolio was 5.64% for the first quarter
of 2016, compared to 5.71% for the first quarter of 2015, and 5.92%
for the fourth quarter of 2015. The decrease in the yield on the
loan portfolio for the first quarter of 2016, compared to first
quarter of 2015, primarily reflects a decrease in the proportion of
loans in the higher yielding Bay View Funding factored receivables
portfolio relative to the addition of the Focus loans and growth in
the Company’s legacy portfolio, partially offset by the accretion
of the loan purchase discount into loan interest income from the
Focus transaction. The decrease in the yield on the loan portfolio
for the first quarter of 2016, compared to fourth quarter of 2015,
primarily reflects a lower accretion of the loan purchase discount
into loan interest income from the Focus transaction. Excluding the
accretion of the loan purchase discount and the Bay View Funding
factored receivables portfolio, the yield on the loan portfolio was
4.78% for the first quarter of 2016, compared to 4.73% for the
first quarter of 2015, and 4.79% for the fourth quarter of
2015.
At March 31, 2016, NPAs decreased to $4.6 million, or 0.20% of
total assets, compared to $8.4 million, or 0.51% of total assets,
at March 31, 2015, and $6.7 million, or 0.29% of total assets, at
December 31, 2015. At March 31, 2016, the NPAs included no loans
guaranteed by the SBA. Foreclosed assets were $386,000 at March 31,
2016, compared to $1.7 million at March 31, 2015, and $364,000 at
December 31, 2015. The following is a breakout of NPAs at the
periods indicated:
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End of Period: |
NONPERFORMING
ASSETS |
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March 31, 2016 |
|
December 31, 2015 |
|
March 31, 2015 |
(in $000's, unaudited) |
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Balance |
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% of Total |
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Balance |
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% of Total |
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Balance |
|
% of Total |
Commercial real estate
loans |
|
$ |
2,910 |
|
|
|
64 |
% |
|
$ |
2,992 |
|
|
|
44 |
% |
|
$ |
4,151 |
|
|
|
49 |
% |
Home equity and
consumer loans |
|
|
771 |
|
|
|
17 |
% |
|
|
781 |
|
|
|
12 |
% |
|
|
342 |
|
|
|
4 |
% |
Foreclosed assets |
|
|
386 |
|
|
|
8 |
% |
|
|
364 |
|
|
|
5 |
% |
|
|
1,716 |
|
|
|
20 |
% |
Commercial and
industrial loans |
|
|
290 |
|
|
|
6 |
% |
|
|
301 |
|
|
|
5 |
% |
|
|
151 |
|
|
|
2 |
% |
Land and construction
loans |
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|
213 |
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5 |
% |
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|
219 |
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3 |
% |
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|
1,290 |
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15 |
% |
SBA loans |
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- |
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- |
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423 |
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6 |
% |
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|
799 |
|
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|
10 |
% |
Restructured and loans
over 90 days past due and still accruing |
|
|
- |
|
|
|
- |
|
|
|
1,662 |
|
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|
25 |
% |
|
|
- |
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|
- |
|
Total nonperforming assets |
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$ |
4,570 |
|
|
|
100 |
% |
|
$ |
6,742 |
|
|
|
100 |
% |
|
$ |
8,449 |
|
|
|
100 |
% |
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Classified assets (net of SBA guarantees) were $21.1 million at
March 31, 2016, compared to $16.6 million at March 31, 2015, and
$20.5 million at December 31, 2015. The increase in classified
assets at March 31, 2016 from March 31, 2015 was primarily due to
the Focus acquisition. At March 31, 2016, $12.2 million of the
classified assets were in the Company’s legacy portfolio, and $8.9
million were in the Focus loan portfolio.
The following table summarizes the allowance for loan
losses:
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For the Quarter Ended |
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ALLOWANCE FOR
LOAN LOSSES |
|
March 31, |
|
December 31, |
|
March 31, |
|
(in $000's, unaudited) |
|
|
2016 |
|
|
|
2015 |
|
|
|
2015 |
|
|
Balance at beginning of
period |
|
$ |
18,926 |
|
|
$ |
18,737 |
|
|
$ |
18,379 |
|
|
Provision (credit) for
loan losses during the period |
|
|
401 |
|
|
|
371 |
|
|
|
(60 |
) |
|
Net recoveries
(charge-offs) during the period |
|
|
131 |
|
|
|
(182 |
) |
|
|
235 |
|
|
Balance at end of period |
|
$ |
19,458 |
|
|
$ |
18,926 |
|
|
$ |
18,554 |
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
1,395,264 |
|
|
$ |
1,358,716 |
|
|
$ |
1,101,991 |
|
|
Total nonperforming
loans |
|
$ |
4,184 |
|
|
$ |
6,378 |
|
|
$ |
6,733 |
|
|
|
|
|
|
|
|
|
|
Allowance for loan
losses to total loans |
|
|
1.39 |
% |
|
|
1.39 |
% |
|
|
1.68 |
% |
|
Allowance for loan
losses to total nonperforming loans |
|
|
465.06 |
% |
|
|
296.74 |
% |
|
|
275.57 |
% |
|
|
|
|
|
|
|
|
|
The ALLL at March 31, 2016 was 1.39% of total
loans, compared to 1.68% at March 31, 2015, and 1.39% at December
31, 2015. The allowance for loan losses to total loans decreased at
March 31, 2016, compared to March 31, 2015, primarily due
to the Focus loan portfolio, which was marked to fair market value
on the acquisition date, and an increase in the Company’s legacy
loan balances with no default histories, coupled with the decrease
in the Company’s legacy nonperforming assets, improving the quality
of the loan portfolio overall. The ALLL to total nonperforming
loans was 465.06% at March 31, 2016, compared to 275.57% at March
31, 2015, and 296.74% at December 31, 2015.
Total deposits increased $605.1 million, or 43%, to
$2.03 billion at March 31, 2016, compared to
$1.42 billion at March 31, 2015, which included an increase of
$244.9 million, or 17%, in the Company’s legacy deposit
portfolio, and $360.2 million from the Focus deposit
portfolio. Total deposits decreased $34.0 million, or 2%, at
March 31, 2016, compared to $2.06 billion at December 31,
2015, primarily due to decreases in noninterest-bearing demand
deposits and brokered deposits.
The total cost of deposits remained the same for the first
quarter of 2016 at 0.15%, compared to the first quarter of 2015,
and increased one basis point from 0.14% for the fourth quarter of
2015.
Tangible equity was $197.9 million at March 31, 2016, compared
to $170.6 million at March 31, 2015 and $191.3 million at December
31, 2015. The increase in tangible equity at March 31, 2016 from
March 31, 2015 was primarily due to the shares issued to the Focus
shareholders in connection with the Focus acquisition and an
increase in the Company’s retained earnings. Tangible book value
per common share was $5.54 at March 31, 2016, compared to $5.70 at
March 31, 2015, and $5.35 at December 31, 2015. There were 21,004
shares of Series C Preferred Stock outstanding at March 31, 2016,
March 31, 2015, and December 31, 2015, and the Series C Preferred
Stock is convertible into an aggregate of 5.6 million shares of
common stock at a conversion price of $3.75, upon a transfer of the
Series C Preferred Stock in a widely dispersed offering. Pro forma
tangible book value per common share, assuming the outstanding
Series C Preferred Stock was converted into common stock, was $5.24
at March 31, 2016, compared to $5.31 at March 31, 2015, and $5.07
at December 31, 2015. The decrease in tangible book value per
common share and the pro forma tangible book value per common
share, assuming the outstanding Series C Preferred Stock was
converted to common stock, at March 31, 2016 compared to March 31,
2015 was primarily due to an additional 5,456,713 shares of the
Company’s common stock issued to Focus shareholders.
The holders of the Series C Preferred Stock have applied or
intend to apply to the Federal Reserve for approval to exchange the
21,004 shares of Series C Preferred Stock for 5.6 million shares of
common stock (the as converted equivalent). The Company has
indicated to the holders that if such approval is obtained the
Company would agree to enter into an exchange agreement to effect
the exchange. One of the holders has received approval from the
Federal Reserve. There is no assurance the other holder will obtain
approval from the Federal Reserve.
Accumulated other comprehensive loss was ($3.5) million at March
31, 2016, compared to ($1.3) million at March 31, 2015, and ($6.2)
million at December 31, 2015. The unrealized gain on securities
available-for-sale, net of taxes, included in accumulated other
comprehensive loss was an unrealized gain of $3.0 million at March
31, 2016, compared to $3.3 million at March 31, 2015, and $296,000
at December 31, 2015. The components of accumulated other
comprehensive loss, net of taxes, at March 31, 2016 include the
following: an unrealized gain on available-for-sale securities of
$3.0 million; the remaining unamortized unrealized gain on
securities available-for-sale transferred to held-to-maturity of
$394,000; a split dollar insurance contracts liability of ($3.6)
million; a supplemental executive retirement plan liability of
($4.1) million; and an unrealized gain on interest-only strip from
SBA loans of $795,000.
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 full-service branches in Danville, Fremont, Gilroy, Hollister,
Los Altos, Los Gatos, Morgan Hill, Pleasanton, Sunnyvale, and
Walnut Creek. Heritage Bank of Commerce is an SBA Preferred Lender.
Bay View Funding, a subsidiary of Heritage Bank of Commerce, is
based in Santa Clara and provides business‑essential working
capital factoring financing to various industries throughout the
United States. For more information, please visit
www.heritagecommercecorp.com.
Forward Looking Statement
Disclaimer
These forward looking statements are subject to
various risks and uncertainties that may be outside our control and
our actual results could differ materially from our projected
results. In addition, our past results of operations do not
necessarily indicate our future results. The forward looking
statements could be affected by many factors, including but not
limited to: (1) local, regional, and national economic conditions
and events and their impact on us and our customers; (2) changes in
the financial performance or condition of the Company’s customers;
(3) volatility in credit and equity markets and its effect on the
global economy; (4) competition for loans and deposits and failure
to attract or retain deposits and loans; (5) our ability to
increase market share and control expenses; (6) our ability to
develop and promote customer acceptance of new products and
services in a timely manner; (7) risks associated with
concentrations in real estate related loans; (8) other than
temporary impairment charges to our securities portfolio; (9) an
oversupply of inventory and deterioration in values of California
commercial real estate; (10) a prolonged slowdown in construction
activity; (11) changes in the level of nonperforming assets and
charge offs and other credit quality measures, and their impact on
the adequacy of the Company’s allowance for loan losses and the
Company’s provision for loan losses; (12) the effects of and
changes in trade, monetary and fiscal policies and laws, including
the interest rate policies of the Federal Open Market Committee of
the Federal Reserve Board; (13) changes in inflation, interest
rates, and market liquidity which may impact interest margins and
impact funding sources; (14) our ability to raise capital or incur
debt on reasonable terms; (15) regulatory limits on Heritage Bank
of Commerce’s ability to pay dividends to the Company; (16) changes
in our capital management policies, including those regarding
business combinations, dividends, and share repurchases, among
others; (17) operational issues stemming from, and/or capital
spending necessitated by, the potential need to adapt to industry
changes in information technology systems, on which we are highly
dependent; (18) the ability to keep pace with, and implement on a
timely basis, technological changes; (19) the impact of cyber
security attacks or other disruptions to the Company’s information
systems and any resulting compromise of data or disruptions in
service; (20) changes in the competitive environment among
financial or bank holding companies and other financial service
providers; (21) the effect and uncertain impact on the Company of
the enactment of the Dodd Frank Wall Street Reform and Consumer
Protection Act of 2010 and the rules and regulations promulgated by
supervisory and oversight agencies implementing the new
legislation; (22) significant changes in applicable laws and
regulations, including those concerning taxes, banking and
securities; (23) the effect of changes in accounting policies and
practices, as may be adopted by the regulatory agencies, as well as
the Public Company Accounting Oversight Board, the Financial
Accounting Standards Board and other accounting standard setters;
(24) the costs and effects of legal and regulatory developments,
including resolution of legal proceedings or regulatory or other
governmental inquiries, and the results of regulatory examinations
or reviews; and (25) our success in managing the risks involved in
the foregoing factors.
Member FDIC
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended: |
|
Percent Change From: |
|
|
CONSOLIDATED
INCOME STATEMENTS |
March 31, |
December 31, |
March 31, |
|
December 31, |
|
March 31, |
|
|
|
(in $000's, unaudited) |
|
2016 |
|
|
2015 |
|
|
2015 |
|
|
2015 |
|
2015 |
|
|
|
Interest income |
$ |
23,062 |
|
$ |
22,896 |
|
$ |
17,366 |
|
|
|
1 |
% |
|
33 |
% |
|
|
Interest expense |
|
758 |
|
|
758 |
|
|
508 |
|
|
|
0 |
% |
|
49 |
% |
|
|
Net interest income before
provision for loan losses |
|
22,304 |
|
|
22,138 |
|
|
16,858 |
|
|
|
1 |
% |
|
32 |
% |
|
|
Provision (credit) for
loan losses |
|
401 |
|
|
371 |
|
|
(60 |
) |
|
|
8 |
% |
|
768 |
% |
|
|
Net interest income after provision
for loan losses |
|
21,903 |
|
|
21,767 |
|
|
16,918 |
|
|
|
1 |
% |
|
29 |
% |
|
|
Noninterest
income: |
|
|
|
|
|
|
|
|
Service charges and fees on deposit
accounts |
|
767 |
|
|
717 |
|
|
623 |
|
|
|
7 |
% |
|
23 |
% |
|
|
Increase in cash surrender value of
life insurance |
|
449 |
|
|
472 |
|
|
400 |
|
|
|
-5 |
% |
|
12 |
% |
|
|
Servicing income |
|
371 |
|
|
324 |
|
|
306 |
|
|
|
15 |
% |
|
21 |
% |
|
|
Gain on sales of SBA loans |
|
305 |
|
|
183 |
|
|
207 |
|
|
|
67 |
% |
|
47 |
% |
|
|
Gain on sales of securities |
|
180 |
|
|
642 |
|
|
- |
|
|
|
-72 |
% |
|
N/A |
|
|
|
Other |
|
542 |
|
|
491 |
|
|
390 |
|
|
|
10 |
% |
|
39 |
% |
|
|
Total noninterest income |
|
2,614 |
|
|
2,829 |
|
|
1,926 |
|
|
|
-8 |
% |
|
36 |
% |
|
|
|
|
|
|
|
|
|
|
|
Noninterest
expense: |
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
8,947 |
|
|
9,034 |
|
|
8,042 |
|
|
|
-1 |
% |
|
11 |
% |
|
|
Occupancy and equipment |
|
1,085 |
|
|
1,174 |
|
|
1,045 |
|
|
|
-8 |
% |
|
4 |
% |
|
|
Professional fees |
|
825 |
|
|
882 |
|
|
95 |
|
|
|
-6 |
% |
|
768 |
% |
|
|
Other |
|
3,828 |
|
|
6,271 |
|
|
3,094 |
|
|
|
-39 |
% |
|
24 |
% |
|
|
Total noninterest expense |
|
14,685 |
|
|
17,361 |
|
|
12,276 |
|
|
|
-15 |
% |
|
20 |
% |
|
|
Income before income
taxes |
|
9,832 |
|
|
7,235 |
|
|
6,568 |
|
|
|
36 |
% |
|
50 |
% |
|
|
Income tax expense |
|
3,726 |
|
|
2,812 |
|
|
2,430 |
|
|
|
33 |
% |
|
53 |
% |
|
|
Net
income |
|
6,106 |
|
|
4,423 |
|
|
4,138 |
|
|
|
38 |
% |
|
48 |
% |
|
|
Dividends on preferred
stock |
|
(504 |
) |
|
(448 |
) |
|
(448 |
) |
|
|
13 |
% |
|
13 |
% |
|
|
Net income available to
common shareholders |
|
5,602 |
|
|
3,975 |
|
|
3,690 |
|
|
|
41 |
% |
|
52 |
% |
|
|
Undistributed earnings
allocated to Series C preferred stock |
|
(403 |
) |
|
(209 |
) |
|
(274 |
) |
|
|
93 |
% |
|
47 |
% |
|
|
Distributed and
undistributed earnings allocated to common shareholders |
$ |
5,199 |
|
$ |
3,766 |
|
$ |
3,416 |
|
|
|
38 |
% |
|
52 |
% |
|
|
|
|
|
|
|
|
|
|
|
PER COMMON
SHARE DATA |
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
Basic earnings per
share |
$ |
0.16 |
|
$ |
0.12 |
|
$ |
0.13 |
|
|
|
33 |
% |
|
23 |
% |
|
|
Diluted earnings per
share |
$ |
0.16 |
|
$ |
0.12 |
|
$ |
0.13 |
|
|
|
33 |
% |
|
23 |
% |
|
|
Weighted average shares
outstanding - basic |
|
32,125,716 |
|
|
32,109,440 |
|
|
26,509,723 |
|
|
|
0 |
% |
|
21 |
% |
|
|
Weighted average shares
outstanding - diluted |
|
32,377,493 |
|
|
32,389,213 |
|
|
26,680,253 |
|
|
|
0 |
% |
|
21 |
% |
|
|
Common shares
outstanding at period-end |
|
32,170,920 |
|
|
32,113,479 |
|
|
26,522,739 |
|
|
|
0 |
% |
|
21 |
% |
|
|
Pro forma common shares
outstanding at period-end, assuming Series C preferred stock was
converted into common stock |
|
37,771,920 |
|
|
37,714,479 |
|
|
32,123,739 |
|
|
|
0 |
% |
|
18 |
% |
|
|
Book value per
share |
$ |
7.22 |
|
$ |
7.03 |
|
$ |
6.31 |
|
|
|
3 |
% |
|
14 |
% |
|
|
Tangible book value per
share |
$ |
5.54 |
|
$ |
5.35 |
|
$ |
5.70 |
|
|
|
4 |
% |
|
-3 |
% |
|
|
Pro forma tangible book
value per share, assuming Series C preferred stock was converted
into common stock |
$ |
5.24 |
|
$ |
5.07 |
|
$ |
5.31 |
|
|
|
3 |
% |
|
-1 |
% |
|
|
|
|
|
|
|
|
|
|
|
KEY FINANCIAL
RATIOS |
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
Annualized return on
average equity |
|
9.87 |
% |
|
7.11 |
% |
|
9.04 |
% |
|
|
39 |
% |
|
9 |
% |
|
|
Annualized return on
average tangible equity |
|
12.62 |
% |
|
9.09 |
% |
|
9.89 |
% |
|
|
39 |
% |
|
28 |
% |
|
|
Annualized return on
average assets |
|
1.05 |
% |
|
0.74 |
% |
|
1.03 |
% |
|
|
42 |
% |
|
2 |
% |
|
|
Annualized return on
average tangible assets |
|
1.07 |
% |
|
0.75 |
% |
|
1.04 |
% |
|
|
43 |
% |
|
3 |
% |
|
|
Net interest
margin |
|
4.22 |
% |
|
4.13 |
% |
|
4.58 |
% |
|
|
2 |
% |
|
-8 |
% |
|
|
Efficiency ratio |
|
58.93 |
% |
|
69.54 |
% |
|
65.35 |
% |
|
|
-15 |
% |
|
-10 |
% |
|
|
|
|
|
|
|
|
|
|
|
AVERAGE
BALANCES |
|
|
|
|
|
|
|
|
(in $000's,
unaudited) |
|
|
|
|
|
|
|
|
Average assets |
$ |
2,349,224 |
|
$ |
2,378,578 |
|
$ |
1,634,923 |
|
|
|
-1 |
% |
|
44 |
% |
|
|
Average tangible
assets |
$ |
2,295,181 |
|
$ |
2,324,661 |
|
$ |
1,619,006 |
|
|
|
-1 |
% |
|
42 |
% |
|
|
Average earning
assets |
$ |
2,157,463 |
|
$ |
2,159,447 |
|
$ |
1,516,284 |
|
|
|
0 |
% |
|
42 |
% |
|
|
Average loans
held-for-sale |
$ |
4,746 |
|
$ |
8,289 |
|
$ |
987 |
|
|
|
-43 |
% |
|
381 |
% |
|
|
Average total
loans |
$ |
1,363,850 |
|
$ |
1,325,872 |
|
$ |
1,064,849 |
|
|
|
3 |
% |
|
28 |
% |
|
|
Average deposits |
$ |
2,030,898 |
|
$ |
2,042,654 |
|
$ |
1,403,636 |
|
|
|
-1 |
% |
|
45 |
% |
|
|
Average demand deposits
- noninterest-bearing |
$ |
776,999 |
|
$ |
785,876 |
|
$ |
530,552 |
|
|
|
-1 |
% |
|
46 |
% |
|
|
Average
interest-bearing deposits |
$ |
1,253,899 |
|
$ |
1,256,778 |
|
$ |
873,084 |
|
|
|
0 |
% |
|
44 |
% |
|
|
Average
interest-bearing liabilities |
$ |
1,255,647 |
|
$ |
1,259,033 |
|
$ |
873,135 |
|
|
|
0 |
% |
|
44 |
% |
|
|
Average equity |
$ |
248,700 |
|
$ |
246,921 |
|
$ |
185,620 |
|
|
|
1 |
% |
|
34 |
% |
|
|
Average tangible
equity |
$ |
194,657 |
|
$ |
193,004 |
|
$ |
169,703 |
|
|
|
1 |
% |
|
15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
End of Period: |
|
Percent Change From: |
|
CONSOLIDATED
BALANCE SHEETS |
March 31, |
December 31, |
March 31, |
|
December 31, |
March 31, |
|
(in $000's, unaudited) |
|
2016 |
|
|
2015 |
|
|
2015 |
|
|
|
2015 |
|
|
2015 |
|
|
ASSETS |
|
|
|
|
|
|
|
Cash and due from
banks |
$ |
25,573 |
|
$ |
24,112 |
|
$ |
27,388 |
|
|
|
6 |
% |
|
-7 |
% |
|
Federal funds sold and
interest-bearing deposits in other financial institutions |
|
117,562 |
|
|
319,980 |
|
|
124,388 |
|
|
|
-63 |
% |
|
-5 |
% |
|
Securities
available-for-sale, at fair value |
|
448,540 |
|
|
385,079 |
|
|
200,768 |
|
|
|
16 |
% |
|
123 |
% |
|
Securities
held-to-maturity, at amortized cost |
|
185,165 |
|
|
109,311 |
|
|
94,588 |
|
|
|
69 |
% |
|
96 |
% |
|
Loans held-for-sale -
SBA, including deferred costs |
|
2,389 |
|
|
7,297 |
|
|
1,390 |
|
|
|
-67 |
% |
|
72 |
% |
|
Loans: |
|
|
|
|
|
|
|
Commercial |
|
592,128 |
|
|
556,522 |
|
|
458,498 |
|
|
|
6 |
% |
|
29 |
% |
|
Real estate: |
|
|
|
|
|
|
|
Commercial and residential |
|
616,821 |
|
|
625,665 |
|
|
487,475 |
|
|
|
-1 |
% |
|
27 |
% |
|
Land and construction |
|
95,547 |
|
|
84,428 |
|
|
74,972 |
|
|
|
13 |
% |
|
27 |
% |
|
Home equity |
|
74,993 |
|
|
76,833 |
|
|
65,243 |
|
|
|
-2 |
% |
|
15 |
% |
|
Consumer |
|
16,476 |
|
|
16,010 |
|
|
16,200 |
|
|
|
3 |
% |
|
2 |
% |
|
Loans |
|
1,395,965 |
|
|
1,359,458 |
|
|
1,102,388 |
|
|
|
3 |
% |
|
27 |
% |
|
Deferred loan fees |
|
(701 |
) |
|
(742 |
) |
|
(397 |
) |
|
|
-6 |
% |
|
-77 |
% |
|
Total loans, net of deferred
fees |
|
1,395,264 |
|
|
1,358,716 |
|
|
1,101,991 |
|
|
|
3 |
% |
|
27 |
% |
|
Allowance for loan
losses |
|
(19,458 |
) |
|
(18,926 |
) |
|
(18,554 |
) |
|
|
3 |
% |
|
5 |
% |
|
Loans, net |
|
1,375,806 |
|
|
1,339,790 |
|
|
1,083,437 |
|
|
|
3 |
% |
|
27 |
% |
|
Company owned life
insurance |
|
60,470 |
|
|
60,020 |
|
|
51,657 |
|
|
|
1 |
% |
|
17 |
% |
|
Premises and equipment,
net |
|
7,625 |
|
|
7,773 |
|
|
7,340 |
|
|
|
-2 |
% |
|
4 |
% |
|
Goodwill |
|
45,664 |
|
|
45,664 |
|
|
13,054 |
|
|
|
0 |
% |
|
250 |
% |
|
Other intangible
assets |
|
8,126 |
|
|
8,518 |
|
|
3,087 |
|
|
|
-5 |
% |
|
163 |
% |
|
Accrued interest
receivable and other assets |
|
50,413 |
|
|
54,035 |
|
|
45,790 |
|
|
|
-7 |
% |
|
10 |
% |
|
Total assets |
$ |
2,327,333 |
|
$ |
2,361,579 |
|
$ |
1,652,887 |
|
|
|
-1 |
% |
|
41 |
% |
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
Demand, noninterest-bearing |
$ |
768,525 |
|
$ |
821,405 |
|
$ |
544,339 |
|
|
|
-6 |
% |
|
41 |
% |
|
Demand, interest-bearing |
|
506,272 |
|
|
496,278 |
|
|
241,477 |
|
|
|
2 |
% |
|
110 |
% |
|
Savings and money market |
|
493,275 |
|
|
496,843 |
|
|
380,486 |
|
|
|
-1 |
% |
|
30 |
% |
|
Time deposits-under $250 |
|
61,595 |
|
|
62,026 |
|
|
54,497 |
|
|
|
-1 |
% |
|
13 |
% |
|
Time deposits-$250 and over |
|
179,048 |
|
|
160,815 |
|
|
164,316 |
|
|
|
11 |
% |
|
9 |
% |
|
Time deposits - brokered |
|
11,829 |
|
|
17,825 |
|
|
28,126 |
|
|
|
-34 |
% |
|
-58 |
% |
|
CDARS - money market and time
deposits |
|
8,192 |
|
|
7,583 |
|
|
10,408 |
|
|
|
8 |
% |
|
-21 |
% |
|
Total deposits |
|
2,028,736 |
|
|
2,062,775 |
|
|
1,423,649 |
|
|
|
-2 |
% |
|
43 |
% |
|
Borrowings |
|
- |
|
|
3,000 |
|
|
- |
|
|
|
-100 |
% |
N/A |
|
Accrued interest
payable and other liabilities |
|
46,938 |
|
|
50,368 |
|
|
42,461 |
|
|
|
-7 |
% |
|
11 |
% |
|
Total liabilities |
|
2,075,674 |
|
|
2,116,143 |
|
|
1,466,110 |
|
|
|
-2 |
% |
|
42 |
% |
|
|
|
|
|
|
|
|
|
Shareholders'
Equity: |
|
|
|
|
|
|
|
Series C preferred stock, net |
|
19,519 |
|
|
19,519 |
|
|
19,519 |
|
|
|
0 |
% |
|
0 |
% |
|
Common stock |
|
194,153 |
|
|
193,364 |
|
|
133,992 |
|
|
|
0 |
% |
|
45 |
% |
|
Retained earnings |
|
41,485 |
|
|
38,773 |
|
|
34,583 |
|
|
|
7 |
% |
|
20 |
% |
|
Accumulated other comprehensive
loss |
|
(3,498 |
) |
|
(6,220 |
) |
|
(1,317 |
) |
|
|
44 |
% |
|
-166 |
% |
|
Total shareholders' equity |
|
251,659 |
|
|
245,436 |
|
|
186,777 |
|
|
|
3 |
% |
|
35 |
% |
|
Total liabilities and
shareholders' equity |
$ |
2,327,333 |
|
$ |
2,361,579 |
|
$ |
1,652,887 |
|
|
|
-1 |
% |
|
41 |
% |
|
|
|
|
|
|
|
|
|
|
End of Period: |
|
Percent Change From: |
|
|
March 31, |
December 31, |
March 31, |
|
December 31, |
March 31, |
|
|
|
2016 |
|
|
2015 |
|
|
2015 |
|
|
2015 |
|
2015 |
|
CREDIT QUALITY
DATA |
|
|
|
|
|
|
|
(in $000's,
unaudited) |
|
|
|
|
|
|
|
Nonaccrual loans -
held-for-investment |
$ |
4,184 |
|
$ |
4,716 |
|
$ |
6,733 |
|
|
|
-11 |
% |
|
-38 |
% |
|
Restructured and loans
over 90 days past due and still accruing |
|
- |
|
|
1,662 |
|
|
- |
|
|
|
-100 |
% |
|
N/A |
|
|
Total nonperforming loans |
|
4,184 |
|
|
6,378 |
|
|
6,733 |
|
|
|
-34 |
% |
|
-38 |
% |
|
Foreclosed assets |
|
386 |
|
|
364 |
|
|
1,716 |
|
|
|
6 |
% |
|
-78 |
% |
|
Total nonperforming assets |
$ |
4,570 |
|
$ |
6,742 |
|
$ |
8,449 |
|
|
|
-32 |
% |
|
-46 |
% |
|
Other restructured
loans still accruing |
$ |
145 |
|
$ |
149 |
|
$ |
163 |
|
|
|
-3 |
% |
|
-11 |
% |
|
Net (recoveries)
charge-offs during the quarter |
$ |
(131 |
) |
$ |
182 |
|
$ |
(235 |
) |
|
|
-172 |
% |
|
-44 |
% |
|
Provision (credit) for
loan losses during the quarter |
$ |
401 |
|
$ |
371 |
|
$ |
(60 |
) |
|
|
8 |
% |
|
768 |
% |
|
Allowance for loan
losses |
$ |
19,458 |
|
$ |
18,926 |
|
$ |
18,554 |
|
|
|
3 |
% |
|
5 |
% |
|
Classified
assets(1) |
$ |
21,095 |
|
$ |
20,493 |
|
$ |
16,647 |
|
|
|
3 |
% |
|
27 |
% |
|
Allowance for loan
losses to total loans |
|
1.39 |
% |
|
1.39 |
% |
|
1.68 |
% |
|
|
0 |
% |
|
-17 |
% |
|
Allowance for loan
losses to total nonperforming loans |
|
465.06 |
% |
|
296.74 |
% |
|
275.57 |
% |
|
|
57 |
% |
|
69 |
% |
|
Nonperforming assets to
total assets |
|
0.20 |
% |
|
0.29 |
% |
|
0.51 |
% |
|
|
-31 |
% |
|
-61 |
% |
|
Nonperforming loans to
total loans |
|
0.30 |
% |
|
0.47 |
% |
|
0.61 |
% |
|
|
-36 |
% |
|
-51 |
% |
|
Classified assets(1) to
Heritage Commerce Corp Tier 1 capital plus allowance for loan
losses |
|
10 |
% |
|
9 |
% |
|
9 |
% |
|
|
11 |
% |
|
11 |
% |
|
Classified assets(1) to
Heritage Bank of Commerce Tier 1 capital plus allowance for loan
losses |
|
10 |
% |
|
9 |
% |
|
9 |
% |
|
|
11 |
% |
|
11 |
% |
|
|
|
|
|
|
|
|
|
OTHER
PERIOD-END STATISTICS |
|
|
|
|
|
|
|
(in $000's,
unaudited) |
|
|
|
|
|
|
|
Heritage Commerce
Corp: |
|
|
|
|
|
|
|
Tangible equity |
$ |
197,869 |
|
$ |
191,254 |
|
$ |
170,636 |
|
|
|
3 |
% |
|
16 |
% |
|
Tangible common equity |
$ |
178,350 |
|
$ |
171,735 |
|
$ |
151,117 |
|
|
|
4 |
% |
|
18 |
% |
|
Shareholders' equity / total
assets |
|
10.81 |
% |
|
10.39 |
% |
|
11.30 |
% |
|
|
4 |
% |
|
-4 |
% |
|
Tangible equity / tangible
assets |
|
8.70 |
% |
|
8.29 |
% |
|
10.43 |
% |
|
|
5 |
% |
|
-17 |
% |
|
Tangible common equity / tangible
assets |
|
7.84 |
% |
|
7.44 |
% |
|
9.23 |
% |
|
|
5 |
% |
|
-15 |
% |
|
Loan to deposit ratio |
|
68.78 |
% |
|
65.87 |
% |
|
77.41 |
% |
|
|
4 |
% |
|
-11 |
% |
|
Noninterest-bearing deposits /
total deposits |
|
37.88 |
% |
|
39.82 |
% |
|
38.24 |
% |
|
|
-5 |
% |
|
-1 |
% |
|
Total risk-based capital ratio |
|
12.4 |
% |
|
12.5 |
% |
|
13.0 |
% |
|
|
-1 |
% |
|
-5 |
% |
|
Tier 1 risk-based capital
ratio |
|
11.3 |
% |
|
11.4 |
% |
|
11.7 |
% |
|
|
-1 |
% |
|
-3 |
% |
|
Common Equity Tier 1 risk-based
capital ratio |
|
10.2 |
% |
|
10.4 |
% |
|
10.4 |
% |
|
|
-2 |
% |
|
-2 |
% |
|
Leverage ratio |
|
8.8 |
% |
|
8.6 |
% |
|
10.5 |
% |
|
|
2 |
% |
|
-16 |
% |
|
|
|
|
|
|
|
|
|
Heritage Bank of
Commerce: |
|
|
|
|
|
|
|
Total risk-based capital ratio |
|
12.3 |
% |
|
12.6 |
% |
|
12.3 |
% |
|
|
-2 |
% |
|
0 |
% |
|
Tier 1 risk-based capital
ratio |
|
11.2 |
% |
|
11.4 |
% |
|
11.0 |
% |
|
|
-2 |
% |
|
2 |
% |
|
Common Equity Tier 1 risk-based
capital ratio |
|
11.2 |
% |
|
11.4 |
% |
|
11.0 |
% |
|
|
-2 |
% |
|
2 |
% |
|
Leverage ratio |
|
8.7 |
% |
|
8.6 |
% |
|
10.0 |
% |
|
|
1 |
% |
|
-13 |
% |
|
|
|
|
|
|
|
|
|
(1)Net of SBA
guarantees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter
Ended |
|
For the Quarter
Ended |
|
|
|
March 31, 2016 |
|
March 31, 2015 |
|
NET INTEREST INCOME AND NET INTEREST MARGIN |
|
Average |
|
Interest Income/ |
|
Average Yield/ |
|
Average |
|
Interest Income/ |
|
Average Yield/ |
|
(in $000's, unaudited) |
|
Balance |
|
Expense |
|
Rate |
|
Balance |
|
Expense |
|
Rate |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, gross(1) |
|
$ |
1,368,596 |
|
|
|
19,188 |
|
|
|
5.64 |
% |
|
$ |
1,065,836 |
|
|
$ |
15,004 |
|
|
|
5.71 |
% |
|
Securities -
taxable |
|
|
480,515 |
|
|
|
2,774 |
|
|
|
2.32 |
% |
|
|
219,853 |
|
|
|
1,604 |
|
|
|
2.96 |
% |
|
Securities - tax
exempt(2) |
|
|
93,121 |
|
|
|
891 |
|
|
|
3.85 |
% |
|
|
79,872 |
|
|
|
779 |
|
|
|
3.96 |
% |
|
Other investments and
interest-bearing deposits in other financial institutions |
|
|
215,231 |
|
|
|
521 |
|
|
|
0.97 |
% |
|
|
150,723 |
|
|
|
252 |
|
|
|
0.68 |
% |
|
Total interest earning
assets(2) |
|
|
2,157,463 |
|
|
|
23,374 |
|
|
|
4.36 |
% |
|
|
1,516,284 |
|
|
|
17,639 |
|
|
|
4.72 |
% |
|
Cash and due from
banks |
|
|
32,949 |
|
|
|
|
|
|
|
27,338 |
|
|
|
|
|
|
Premises and equipment,
net |
|
|
7,754 |
|
|
|
|
|
|
|
7,403 |
|
|
|
|
|
|
Goodwill and other
intangible assets |
|
|
54,043 |
|
|
|
|
|
|
|
15,917 |
|
|
|
|
|
|
Other assets |
|
|
97,015 |
|
|
|
|
|
|
|
67,981 |
|
|
|
|
|
|
Total assets |
|
$ |
2,349,224 |
|
|
|
|
|
|
$ |
1,634,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand, noninterest-bearing |
|
$ |
776,999 |
|
|
|
|
|
|
$ |
530,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand, interest-bearing |
|
|
501,952 |
|
|
|
236 |
|
|
|
0.19 |
% |
|
|
231,453 |
|
|
|
100 |
|
|
|
0.18 |
% |
|
Savings and money market |
|
|
498,622 |
|
|
|
272 |
|
|
|
0.22 |
% |
|
|
382,015 |
|
|
|
185 |
|
|
|
0.20 |
% |
|
Time deposits - under $100 |
|
|
23,287 |
|
|
|
17 |
|
|
|
0.29 |
% |
|
|
19,680 |
|
|
|
15 |
|
|
|
0.31 |
% |
|
Time deposits - $100 and over |
|
|
207,113 |
|
|
|
190 |
|
|
|
0.37 |
% |
|
|
200,947 |
|
|
|
151 |
|
|
|
0.30 |
% |
|
Time deposits - brokered |
|
|
14,825 |
|
|
|
30 |
|
|
|
0.81 |
% |
|
|
28,117 |
|
|
|
55 |
|
|
|
0.79 |
% |
|
CDARS - money market and time
deposits |
|
|
8,100 |
|
|
|
2 |
|
|
|
0.10 |
% |
|
|
10,872 |
|
|
|
2 |
|
|
|
0.07 |
% |
|
Total interest-bearing
deposits |
|
|
1,253,899 |
|
|
|
747 |
|
|
|
0.24 |
% |
|
|
873,084 |
|
|
|
508 |
|
|
|
0.24 |
% |
|
Total deposits |
|
|
2,030,898 |
|
|
|
747 |
|
|
|
0.15 |
% |
|
|
1,403,636 |
|
|
|
508 |
|
|
|
0.15 |
% |
|
Short-term borrowings |
|
|
1,748 |
|
|
|
11 |
|
|
|
2.53 |
% |
|
|
51 |
|
|
|
- |
|
|
|
0.00 |
% |
|
Total interest-bearing
liabilities |
|
|
1,255,647 |
|
|
|
758 |
|
|
|
0.24 |
% |
|
|
873,135 |
|
|
|
508 |
|
|
|
0.24 |
% |
|
Total interest-bearing liabilities
and demand, noninterest-bearing / cost of funds |
|
|
2,032,646 |
|
|
|
758 |
|
|
|
0.15 |
% |
|
|
1,403,687 |
|
|
|
508 |
|
|
|
0.15 |
% |
|
Other liabilities |
|
|
67,878 |
|
|
|
|
|
|
|
45,616 |
|
|
|
|
|
|
Total liabilities |
|
|
2,100,524 |
|
|
|
|
|
|
|
1,449,303 |
|
|
|
|
|
|
Shareholders'
equity |
|
|
248,700 |
|
|
|
|
|
|
|
185,620 |
|
|
|
|
|
|
Total liabilities and shareholders'
equity |
|
$ |
2,349,224 |
|
|
|
|
|
|
$ |
1,634,923 |
|
|
|
|
|
|
Net interest income(2)
/ margin |
|
|
|
|
22,616 |
|
|
|
4.22 |
% |
|
|
|
|
17,131 |
|
|
|
4.58 |
% |
|
Less tax equivalent
adjustment(2) |
|
|
|
|
(312 |
) |
|
|
|
|
|
|
(273 |
) |
|
|
|
Net interest income |
|
|
|
$ |
22,304 |
|
|
|
|
|
|
$ |
16,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Includes loans held-for-sale. Yield amounts earned on
loans include loan fees and costs. Nonaccrual loans are
included in average balance. |
|
|
|
|
|
(2)Reflects
tax equivalent adjustment for tax exempt income based on a 35% tax
rate. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT:
Heritage Commerce Corp
Debbie Reuter, EVP, Corporate Secretary
(408) 494-4542
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