Heritage Commerce Corp (Nasdaq:HTBK), the holding
company (the "Company") for Heritage Bank of Commerce (the "Bank"
or "HBC"), today reported net income of $3.5 million, or $0.10 per
average diluted common share, for the third quarter of 2015,
compared to $3.4 million, or $0.11 per average diluted common share
for the third quarter of 2014, and $4.5 million, or $0.14 per
average diluted common share for the second quarter of 2015. For
the nine months ended September 30, 2015, net income increased 23%
to $12.1 million, or $0.36 per average diluted common share, from
$9.8 million, or $0.31 per average diluted common share, for the
nine months ended September 30, 2014. Our results include the
completion of the acquisition of Focus Business Bank ("Focus") on
August 20, 2015. All results are unaudited.
Focus Business Bank Merger
"Our third quarter was highlighted by the acquisition of Focus
Business Bank on August 20, 2015, which further advances our
efforts to be the leading community business bank in the San
Francisco Bay Area," said Walter Kaczmarek, President and Chief
Executive Officer. "The acquisition added numerous strong banking
professionals to our franchise along with $167.3 million in loans
(at fair value, including loans held-for-sale) and $396.5 million
in deposits. Additionally, early in the fourth quarter of 2015, we
completed the conversion of the Focus system applications and
successfully integrated them into our data processing system. We
remain on schedule for the completion of the Focus integration in
the fourth quarter of 2015."
"Despite $2.9 million in severance, retention, acquisition and
integration costs related to the Focus transaction during the
quarter, we had solid financial results in the third quarter of
2015, reporting $3.5 million in net income," Mr. Kaczmarek added.
"This was attributed to the continued focus of our relationship
managers, resulting in strong organic loan and deposit growth of
14% and 17%, respectively, at September 30, 2015, compared to
September 30, 2014." For the nine months ended September 30, 2015,
severance, retention, acquisition and integration costs related to
the Focus transaction totaled $3.4 million. The Company will incur
additional Focus related acquisition expenses in the fourth quarter
of 2015 for severance, retention, systems integration costs, lease
termination and other non-recurring expenses.
Third Quarter 2015 Highlights (as of, or for
the period ended September 30, 2015, except as noted):
- Diluted earnings per share totaled $0.10 for the third quarter
of 2015, compared to $0.11 for the third quarter of 2014, and $0.14
for the second quarter of 2015. For the first nine months of 2015,
diluted earnings per share increased to $0.36, compared to $0.31
for the first nine months of 2014.
- Net interest income increased 41% to $19.7 million for the
third quarter of 2015, compared to $14.0 million for the third
quarter of 2014, and increased 12% from $17.6 million for the
second quarter of 2015. For the first nine months of 2015, net
interest income increased 32% to $54.2 million, compared to $41.0
million for the first nine months of 2014.
- The fully tax equivalent ("FTE") net interest margin increased
46 basis points to 4.39% for the third quarter of 2015, from 3.93%
for the third quarter of 2014, primarily due to loan growth, higher
yields on securities, and revenue from the higher yielding Bay View
Funding factored receivables portfolio, partially offset by the
temporary investment of the excess liquidity from the Focus
acquisition into lower yielding Federal funds sold and deposits at
the Federal Reserve Bank. The net interest margin for the
third quarter of 2015 decreased 27 basis points from 4.66% for the
second quarter of 2015, primarily due to the temporary investment
of excess liquidity from the Focus acquisition and a special
dividend of $203,000 paid by the FHLB in second quarter of
2015. For the first nine months of 2015, net interest margin
increased 52 basis points to 4.54%, compared to 4.02% for the first
nine months of 2014, primarily due to revenue from the higher
yielding Bay View Funding factored receivables portfolio, and the
special dividend paid by the FHLB, partially offset by the
temporary investment of excess liquidity from the Focus
acquisition. At September 30, 2015, Federal funds sold and
interest-bearing deposits in other financial institutions totaled
$364.2 million. Average Federal funds sold and
interest-bearing deposits in other financial institutions were
$226.3 million for the third quarter of 2015, compared to $114.9
million for the second quarter of 2015.
- Loans (excluding loans-held-for-sale) increased $302.8 million,
or 29%, to $1.33 billion at September 30, 2015, compared to $1.03
billion at September 30, 2014. This included an increase of
$139.9 million, or 14%, in the Company's legacy loan portfolio, and
$162.9 million (at fair value) from the Focus
transaction. Loans increased $198.8 million, or 18%,
from $1.13 billion at June 30, 2015 which included an increase of
$35.9 million, or 3%, in the Company's legacy loan portfolio, and
$162.9 million (at fair value) from the Focus transaction.
- Nonperforming assets ("NPAs") were $5.9 million, or 0.26% of
total assets, at September 30, 2015, compared to $7.7 million, or
0.50% of total assets, at September 30, 2014, and $5.3 million, or
0.31% of total assets, at June 30, 2015. The increase in NPAs
at September 30, 2015 from June 30, 2015 was primarily due to the
Focus acquisition. At September 30, 2015, $5.0 million of the
NPAs were in the Company's legacy loan portfolio, and $931,000
of the NPAs were in the Focus loan portfolio.
- Classified assets, net of Small Business Administration ("SBA")
guarantees, increased to $18.0 million at September 30, 2015,
from $17.7 million at September 30, 2014, and from $11.2
million at June 30, 2015. The increase in classified assets at
September 30, 2015 from June 30, 2015 was primarily due to the
Focus acquisition. At September 30, 2015, $10.3 million of the
classified assets were in the Company's legacy loan portfolio,
and $7.7 million of the classified assets were in the Focus loan
portfolio.
- Net recoveries totaled $281,000 for the third quarter of 2015,
compared to net charge-offs of $27,000 for the third quarter of
2014, and net recoveries of $181,000 for the second quarter of
2015.
- There was a $301,000 credit provision for loan losses for the
third quarter of 2015, compared to a $24,000 credit provision for
loan losses for the third quarter of 2014, and a $22,000 provision
for loan losses for the second quarter of 2015. There was a
$339,000 credit provision for loan losses for the nine months ended
September 30, 2015, compared to a $232,000 credit provision for
loan losses for the nine months ended September 30, 2014.
- The allowance for loan losses ("ALLL") declined to 1.41% of
total loans at September 30, 2015, compared to 1.80% at September
30, 2014, and 1.65% at June 30, 2015, primarily due to the impact
of the Focus acquisition. The loans acquired from Focus are
included in total loans; however, there is no allowance for loan
losses attributed to these loans at September 30, 2015 because upon
acquisition they were marked to fair market value, and included
a fair value adjustment of $4.9 million at September 30, 2015.
- Total deposits increased $620.2 million, or 46%, to $1.96
billion at September 30, 2015, compared to $1.34 billion at
September 30, 2014, which included an increase of $223.7 million,
or 17%, in the Company's legacy deposit portfolio, and $396.5
million from the Focus transaction. Total deposits increased
$514.9 million, or 36%, from $1.45 billion at June 30, 2015, which
included an increase of $118.4 million, or 8%, in the Company's
legacy deposit portfolio, and $396.5 million from the Focus
transaction.
- As of January 1, 2015, along with other community banking
organizations, the Company and the Bank became subject to new
capital requirements, and certain provisions of the new rules will
be phased in from 2015 through 2019 under the Dodd-Frank Act and
Basel III. The Company's consolidated capital ratios and the
Bank's capital ratios exceeded the regulatory guidelines for a
well-capitalized financial institution under the Basel III
regulatory requirements at September 30, 2015.
|
Capital Ratios |
Heritage Commerce
Corp |
Heritage Bank of
Commerce |
Well-Capitalized Financial
Institution Basel III Regulatory Guidelines |
|
|
|
|
Total Risk-Based |
12.3% |
12.1% |
10.0% |
Tier 1 Risk-Based |
11.2% |
11.0% |
8.0% |
Common Equity Tier 1 Risk-based |
10.2% |
11.0% |
6.5% |
Leverage |
10.4% |
10.2% |
5.0% |
Operating Results
Primarily as a result of the Focus acquisition, organic growth
in the loan portfolio, contributions to revenue from Bay View
Funding, and increases in core deposits, net interest income
increased 41% to $19.7 million for the third quarter of 2015,
compared to $14.0 million for the third quarter of 2014, and
increased 12% from $17.6 million for the second quarter of 2015.
Net interest income increased 32% to $54.2 million for the nine
months ended September 30, 2015, compared to $41.0 million for the
nine months ended September 30, 2014. Net interest income for
the nine months ended September 30, 2015 also increased from a
special dividend of $203,000 paid by the FHLB in the second quarter
of 2015.
For the three months and nine months ended September 30, 2015,
net interest income included the accretion of $262,000 from the
loan interest rate and credit fair value adjustments in loan
interest income, and the accretion of $2,000 from the securities
fair value adjustment to securities interest income from the Focus
transaction.
The net interest margin (FTE) increased 46 basis points to 4.39%
for the third quarter of 2015, from 3.93% for the third quarter of
2014, primarily due to loan growth, higher yields on securities,
and revenue from the higher yielding Bay View Funding factored
receivables portfolio partially offset by the temporary investment
of the excess liquidity from the Focus acquisition into lower
yielding Federal funds sold and deposits at the Federal Reserve
Bank. The net interest margin for the third quarter of 2015
decreased 27 basis points from 4.66% for the second quarter of
2015, primarily due to the temporary investment of excess liquidity
from the Focus acquisition and a special dividend of $203,000 paid
by the FHLB in second quarter of 2015. For the first nine
months of 2015, net interest margin increased 52 basis points to
4.54%, compared to 4.02% for the first nine months of 2014,
primarily due to revenue from the higher yielding Bay View Funding
factored receivables portfolio, and the special dividend paid by
the FHLB, partially offset by the temporary investment of excess
liquidity from the Focus acquisition. At September 30,
2015, Federal funds sold and interest-bearing deposits in other
financial institutions totaled $364.2 million. Average Federal
funds sold and interest-bearing deposits in other financial
institutions were $226.3 million for the third quarter of 2015,
compared to $114.9 million for the second quarter of 2015.
There was a $301,000 credit provision for loan losses for the
third quarter of 2015, compared to a $24,000 credit provision for
loan losses for the third quarter of 2014, and a $22,000 provision
for loan losses for the second quarter of 2015. There was a
$339,000 credit provision for loan losses for the nine months ended
September 30, 2015, compared to a $232,000 credit provision for
loan losses for the nine months ended September 30,
2014. There was no impact to the provision for loan losses
from the Focus transaction for the three months and nine months
ended September 30, 2015.
Noninterest income was $2.1 million for the third quarter of
2015, compared to $1.9 million for the third quarter of 2014, and
$2.2 million for the second quarter of 2015. For the nine
months ended September 30, 2015 noninterest income was $6.2 million
compared to $5.9 million for the nine months ended September 30,
2014.
Total noninterest expense for the third quarter of 2015
increased to $16.4 million, from $10.1 million for the third
quarter of 2014, and increased from $12.6 million for the second
quarter of 2015. Noninterest expense for the nine months ended
September 30, 2015 increased to $41.3 million, compared to $31.8
million for the nine months ended September 30, 2014. The increase
in noninterest expense for the nine months ended September 30,
2015, was primarily due to costs related to the Focus transaction,
and the additional operating costs of Focus and Bay View
Funding. Noninterest expense included Focus pre-tax
acquisition and integration costs of $688,000 and $1.2 million for
the three months and nine months ended September 30, 2015,
respectively. In addition, salaries and employee benefits
included severance and retention expense of $2.2 million related to
the Focus acquisition, and other noninterest expense included
$88,000 of amortization expense from the Focus core deposit
intangible for the three months and nine months ended September 30,
2015. The Company will incur additional Focus related
acquisition and integration expenses in the fourth quarter of 2015
for severance and retention, systems integration costs, lease
termination and other non-recurring expenses. Professional
fees were higher in the third quarter of 2015 compared to the
second quarter of 2015 primarily due to the recovery of legal fees
on problem loans during the second quarter of 2015. Full time
equivalent employees were 270, 200, and 243 at September 30, 2015,
September 30, 2014, and June 30, 2015, respectively. Included
in the 270 full time equivalent employees at September 30, 2015
were 30 former Focus employees and 37 Bay View Funding
employees.
The efficiency ratio for the third quarter of 2015 was 75.49%,
compared to 63.92% for the third quarter of 2014, and 63.70% for
the second quarter of 2015. The efficiency ratio for the nine
months ended September 30, 2015 was 68.47%, compared to 67.75% for
the nine months ended September 30, 2014. The increase in the
efficiency ratio in the third quarter and nine months ended
September 30, 2015 compared to the same periods in 2014 was
primarily due to one-time Focus acquisition costs. Excluding
the impact of the one-time Focus acquisition and severance and
retention costs, the efficiency ratio was 62.32% for the third
quarter of 2015, and 62.76% for the nine months ended September 30,
2015.
Income tax expense for the third quarter of 2015 was $2.2
million, compared to $2.3 million for the third quarter of 2014,
and $2.7 million for the second quarter of 2015. The effective tax
rate for the third quarter of 2015 was 38.6%, compared to 40.4% for
the third quarter of 2014 and 37.5% for the second quarter of 2015.
Income tax expense for the nine months ended September 30,
2015 was $7.3 million, compared to $5.5 million for the nine months
ended September 30, 2014. The effective tax rate for the nine
months ended September 30, 2015 was 37.7%, compared to 36.1% for
the nine months ended September 30, 2014. The increase in the
effective tax rate for the third quarter of 2015, compared to the
second quarter of 2015, and the nine months ended September 30,
2015, compared to the nine months ended September 30, 2014, was
primarily due to the impact of non-deductible merger related
expenses. The decrease in the effective tax rate for the third
quarter of 2015, compared to the third quarter of 2014, was
primarily due to the adoption of the proportional amortization
method of accounting for its low income housing investments in the
third quarter of 2014, partially offset by the impact of
non-deductible merger related expenses. 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 $2.26 billion at September 30, 2015, compared
to $1.56 billion at September 30, 2014, and $1.68 billion at June
30, 2015. The increase in total assets at September 30, 2015
was due to the Focus acquisition, which added $168.1 million in
Federal funds sold and interest-bearing deposits in other financial
institutions, $62.0 million in investment securities (at fair
value), $167.3 million in loans (at fair value, including loans
held-for-sale), and $396.5 million in deposits, and organic loan
and deposit growth.
The investment securities available-for-sale portfolio totaled
$257.4 million at September 30, 2015, compared to $191.7 million at
September 30, 2014, and $209.1 million at June 30, 2015. At
September 30, 2015, the Company's legacy securities
available-for-sale portfolio was comprised of $152.2 million agency
mortgage-backed securities (all issued by U.S. Government sponsored
entities), $36.6 million of corporate bonds, and $15.0 million of
single entity issue trust preferred securities. Additionally,
the securities available-for-sale portfolio acquired from Focus was
comprised of $30.0 million agency mortgage-backed securities, $11.1
million of U.S. Government agency securities, $4.0 million U.S.
Treasuries, $2.7 million of taxable municipal securities, and $5.8
million of tax-exempt municipal securities at September 30, 2015.
The pre-tax unrealized gain on securities available-for-sale at
September 30, 2015 was $4.5 million, compared to a pre-tax
unrealized gain on securities available-for-sale of $3.3 million at
September 30, 2014, and a pre-tax unrealized gain on securities
available-for-sale of $2.4 million at June 30, 2015. During
the fourth quarter of 2015, the Company intends to invest some of
its excess liquidity in investment securities.
At September 30, 2015, investment securities held-to-maturity
totaled $111.0 million, compared to $94.8 million at September 30,
2014, and $100.3 million at June 30, 2015. At September 30,
2015, the Company's legacy securities held-to-maturity portfolio,
at amortized cost, was comprised of $86.0 million tax-exempt
municipal bonds and $16.3 million agency mortgage-backed
securities. Additionally, the securities held-to-maturity portfolio
acquired from Focus was comprised of $8.7 million tax-exempt
municipal bonds at September 30, 2015. During the third
quarter of 2015, the Company purchased $2.6 million of tax-exempt
municipal securities held-to-maturity.
Loans (excluding loans-held-for-sale) increased $302.8 million,
or 29%, to $1.33 billion at September 30, 2015, compared to $1.03
billion at September 30, 2014. This included an increase of
$139.9 million, or 14%, in the Company's legacy loan portfolio, and
$162.9 million (at fair value) from the Focus
transaction. Loans increased $198.8 million, or 18%,
from $1.13 billion at June 30, 2015, which included an increase of
$35.9 million, or 3%, in the Company's legacy loan portfolio, and
$162.9 million (at fair value) from the Focus transaction. At
September 30, 2015, the Focus loan portfolio totaled $162.9 million
(at fair value), which was comprised of $76.6 million of commercial
and industrial loans ("C&I"), $83.9 million of commercial and
residential real estate loans, $834,000 of land and construction
loans, $1.2 million of home equity loans, and $353,000 of consumer
loans.
The loan portfolio remains well-diversified with C&I loans
accounting for 42% of the loan portfolio at September 30, 2015,
which included $42.3 million of factored receivables at Bay View
Funding. Commercial and residential real estate loans accounted for
45% of the total loan portfolio. Consumer and home equity
loans accounted for 7% of total loans, and land and construction
loans accounted for the remaining 6% of total loans at September
30, 2015.
The yield on the loan portfolio was 5.70% for the third quarter
of 2015, compared to 4.77% for the third quarter of 2014, and 5.66%
for the second quarter of 2015. The yield on the loan portfolio was
5.69% for the nine months ended September 30, 2015, compared to
4.80% for the nine months ended September 30, 2014. The
increase in the yield on the loan portfolio for the third quarter
and nine months ended September 30, 2015, compared to the same
periods in 2014 primarily reflects the higher yielding Bay View
Funding factored receivables portfolio.
NPAs at September 30, 2015 were $5.9 million, or 0.26% of total
assets, compared to $7.7 million, or 0.50% of total assets, at
September 30, 2014, and $5.3 million, or 0.31% of total assets, at
June 30, 2015. The increase in NPAs at September 30, 2015
from June 30, 2015 was primarily due to the Focus
acquisition. At September 30, 2015, $5.0 million of the NPAs
were in the Company's legacy loan portfolio, and $931,000 of the
NPAs were in the Focus loan portfolio. At September 30, 2015,
the NPAs included no loans guaranteed by the SBA. Foreclosed
assets were $393,000 at September 30, 2015, compared to $532,000 at
September 30, 2014, and $421,000 at June 30, 2015. The
following is a breakout of NPAs at the periods indicated:
|
|
|
|
|
|
|
|
End of
Period: |
NONPERFORMING ASSETS |
September 30,
2015 |
June 30,
2015 |
September 30,
2014 |
(in $000's,
unaudited) |
Balance |
% of Total |
Balance |
% of Total |
Balance |
% of Total |
Commercial real estate loans |
$ 3,075 |
52% |
$ 3,160 |
60% |
$ 1,672 |
22% |
Commercial and industrial loans |
947 |
16% |
104 |
2% |
323 |
4% |
SBA loans |
673 |
12% |
741 |
14% |
2,875 |
37% |
Land and construction loans |
492 |
8% |
500 |
10% |
1,655 |
21% |
Foreclosed assets |
393 |
7% |
421 |
8% |
532 |
7% |
Home equity and consumer loans |
316 |
5% |
327 |
6% |
485 |
6% |
Restructured and loans over 90 days past due
and accruing |
-- |
0% |
-- |
0% |
200 |
3% |
Total nonperforming assets |
$ 5,896 |
100% |
$ 5,253 |
100% |
$ 7,742 |
100% |
Classified assets (net of SBA guarantees) increased to $18.0
million at September 30, 2015, compared to $17.7 million at
September 30, 2014, and $11.2 million at June 30, 2015. The
increase in classified assets at September 30, 2015 from June 30,
2015 was primarily due to the Focus acquisition. At September
30, 2015, $10.3 million of the classified assets were in the
Company's legacy loan portfolio, and $7.7 million of the classified
assets were in the Focus loan portfolio.
The following table summarizes the allowance for loan
losses:
|
|
|
|
|
|
|
For the Quarter
Ended |
For the Nine
Months Ended |
ALLOWANCE FOR LOAN
LOSSES |
September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
(in $000's,
unaudited) |
2015 |
2015 |
2014 |
2015 |
2014 |
Balance at beginning of period |
$ 18,757 |
$ 18,554 |
$ 18,592 |
$ 18,379 |
$ 19,164 |
Provision (credit) for loan losses during the
period |
(301) |
22 |
(24) |
(339) |
(232) |
Net (charge-offs) recoveries during the
period |
281 |
181 |
(27) |
697 |
(391) |
Balance at end of period |
$ 18,737 |
$ 18,757 |
$ 18,541 |
$ 18,737 |
$ 18,541 |
|
|
|
|
|
|
Total loans |
$ 1,332,405 |
$ 1,133,603 |
$ 1,029,596 |
$ 1,332,405 |
$ 1,029,596 |
Total nonperforming loans |
$ 5,503 |
$ 4,832 |
$ 7,210 |
$ 5,503 |
$ 7,210 |
|
|
|
|
|
|
Allowance for loan losses to total loans |
1.41% |
1.65% |
1.80% |
1.41% |
1.80% |
Allowance for loan losses to total
nonperforming loans |
340.49% |
388.18% |
257.16% |
340.49% |
257.16% |
The ALLL at September 30, 2015 declined to 1.41% of total loans,
compared to 1.80% at September 30, 2014, and 1.65% at June 30,
2015, primarily due to the impact of the Focus
acquisition. The loans acquired from Focus are included in
total loans; however, there is no allowance for loan losses
attributed to these loans at September 30, 2015 because they were
marked to fair market value on acquisition, and included a fair
value adjustment of $4.9 million at September 30,
2015. Excluding the $162.9 million (at fair value) Focus loan
portfolio, the ALLL to total loans was 1.60% at September 30,
2015. The ALLL to total nonperforming loans was 340.49% at
September 30, 2015, compared to 257.16% at September 30, 2014, and
388.18% at June 30, 2015.
Deposits increased $620.2 million, or 46%, to $1.96 billion at
September 30, 2015, compared to $1.34 billion at September 30,
2014, which included an increase of $223.7 million, or 17%, in the
Company's legacy deposit portfolio, and $396.5 million from the
Focus transaction. Total deposits increased $514.9 million, or
36%, from $1.45 billion at June 30, 2015, which included an
increase of $118.4 million, or 8%, in the Company's legacy deposit
portfolio, and $396.5 million from the Focus transaction. At
September 30, 2015, total deposits from Focus were comprised of
$125.3 million of noninterest-bearing demand deposits, $191.1
million of interest-bearing demand deposits, $57.6 million of
savings and money market deposits, $10.6 million of time deposits
(under $250,000), and $11.9 million of time deposits ($250,000 and
over).
The total cost of deposits was 0.15% for the third quarter of
2015, the third quarter of 2014, and the second quarter of 2015.
The total cost of deposits decreased one basis point to 0.15% for
the nine months ended September 30, 2015, from 0.16% for the nine
months ended September 30, 2014.
The Company has a $5.0 million line of credit with a
correspondent bank, of which $1.0 million was outstanding at
September 30, 2015.
Tangible equity was $194.2 million at September 30, 2015,
compared to $181.7 million at September 30, 2014 and $171.1 million
at June 30, 2015. The increase in tangible equity at September
30, 2015 from September 30, 2014 was primarily due to the Focus
acquisition and an increase in retained earnings. Tangible
book value per common share was $5.44 at September 30, 2015,
compared to $6.15 at September 30, 2014, and $5.70 at June 30,
2015. There were 21,004 shares of Series C Preferred Stock
outstanding at September 30, 2015, September 30, 2014, and June 30,
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 $5.15 at September 30, 2015,
compared to $5.68 at September 30, 2014, and $5.31 at June 30,
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 September 30, 2015 was primarily due to an additional 5,456,713
shares of the Company's common stock issued to Focus shareholders
and the one-time acquisition and integration costs from the Focus
transaction.
Accumulated other comprehensive loss was ($2.0) million at
September 30, 2015, compared to accumulated other comprehensive
loss of ($812,000) a year ago, and accumulated other comprehensive
loss of ($3.3) million at June 30, 2015. The unrealized gain on
securities available-for-sale included in accumulated other
comprehensive loss was an unrealized gain of $2.6 million, net of
taxes, at September 30, 2015, compared to an unrealized gain of
$1.9 million, net of taxes, at September 30, 2014, and an
unrealized gain of $1.4 million, net of taxes, at June 30,
2015. The components of accumulated other comprehensive loss,
net of taxes, at September 30, 2015 include the following: an
unrealized gain on available-for-sale securities of $2.6 million;
the remaining unamortized unrealized gain on securities
available-for-sale transferred to held-to-maturity of $410,000; a
split dollar insurance contracts liability of ($2.1) million; a
supplemental executive retirement plan liability of ($3.7) million;
and an unrealized gain on interest-only strip from SBA loans of
$836,000.
The Company completed the merger of its wholly-owned bank
subsidiary HBC with Focus on August 20, 2015 for an aggregate
transaction value of $66.6 million. Shareholders of Focus
received a fixed exchange ratio at closing of 1.8235 shares of the
Company's common stock for each share of Focus common
stock. Upon closing of the transaction, the Company
issued 5,456,713 shares of the Company's common stock to Focus
shareholders for a total value of $58.3 million based on its
closing stock price of $10.68 on August 20, 2015. In addition,
the Company paid cash to the Focus holders of in-the-money stock
options on August 20, 2015 totaling $8.3 million. The Company
recorded goodwill of $31.9 million for the Focus transaction, which
represents the excess of consideration paid for the net assets
acquired marked to their fair market values, as follows:
|
|
|
August 20, 2015 |
|
(Dollars in
thousands) |
Consideration paid: |
|
Cash paid for Focus
in-the-money stock options |
$ 8,280 |
Issuance of 5,456,713 shares of
common stock to Focus shareholders at $10.68 per share |
58,277 |
Total consideration |
$ 66,557 |
|
|
Net assets
pre-acquisition |
$ 28,878 |
|
|
Fair value adjustments: |
|
Investment securities |
(48) |
Loans receivable |
(5,163) |
Allowance for loan losses |
2,679 |
SBA loan servicing rights |
386 |
Core deposit intangible |
6,285 |
Fixed maturity deposits |
(8) |
Total fair value
adjustments |
4,131 |
Deferred taxes on fair value
adjustments |
(1,694) |
Fair value of net assets
acquired |
34,703 |
|
|
Excess of consideration paid over
fair value of net assets acquired = goodwill |
$ 31,854 |
Focus's results of operations are included in the Company's
results of operations beginning August 21, 2015.
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
the impact they may have on us and our customers, and our
assessment of that impact on our estimates including, the allowance
for loan losses; (2) changes in the financial performance or
condition of the Company's customers, or changes in the performance
or creditworthiness of our customers' suppliers or other
counterparties, which could lead to decreased loan utilization
rates, delinquencies, or defaults and could negatively affect our
customers' ability to meet certain credit obligations; (3)
volatility in credit and equity markets and its effect on the
global economy; (4) changes in consumer spending, borrowings and
saving habits; (5) competition for loans and deposits and failure
to attract or retain deposits and loans; (6) our ability to
increase market share and control expenses; (7) our ability to
develop and promote customer acceptance of new products and
services in a timely manner; (8) risks associated with
concentrations in real estate related loans; (9)
other‑than‑temporary impairment charges to our securities
portfolio; (10) an oversupply of inventory and deterioration in
values of California commercial real estate; (11) a prolonged
slowdown in construction activity; (12) 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; (13) 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;
(14) changes in inflation, interest rates, and market liquidity
which may impact interest margins and impact funding sources; (15)
our ability to raise capital or incur debt on reasonable terms;
(16) regulatory limits on Heritage Bank of Commerce's ability to
pay dividends to the Company; (17) the impact of reputational risk
on such matters as business generation and retention, funding and
liquidity; (18) 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; (19) 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; (20) significant changes
in applicable laws and regulations, including those concerning
taxes, banking and securities; (21) changes in the competitive
environment among financial or bank holding companies and other
financial service providers; (22) 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; (23) 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; (24) the successful
integration of the business, employees and operations of Focus
Business Bank with the Company and our ability to achieve the
projected synergies of this acquisition; and (25) our success in
managing the risks involved in the foregoing factors.
Member FDIC
|
|
|
|
|
|
|
|
|
|
For the Quarter
Ended: |
Percent Change
From: |
For the Nine
Months Ended: |
|
CONSOLIDATED INCOME
STATEMENTS |
September 30, |
June 30, |
September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
Percent |
(in $000's,
unaudited) |
2015 |
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
Change |
Interest income |
$ 20,306 |
$ 18,175 |
$ 14,492 |
12% |
40% |
$ 55,847 |
$ 42,539 |
31% |
Interest expense |
623 |
533 |
500 |
17% |
25% |
1,664 |
1,528 |
9% |
Net interest income before
provision for loan losses |
19,683 |
17,642 |
13,992 |
12% |
41% |
54,183 |
41,011 |
32% |
Provision (credit) for loan losses |
(301) |
22 |
(24) |
-1468% |
-1154% |
(339) |
(232) |
-46% |
Net interest income after
provision for loan losses |
19,984 |
17,620 |
14,016 |
13% |
43% |
54,522 |
41,243 |
32% |
Noninterest income: |
|
|
|
|
|
|
|
|
Service charges and fees on
deposit accounts |
748 |
715 |
631 |
5% |
19% |
2,086 |
1,897 |
10% |
Increase in cash surrender
value of life insurance |
429 |
396 |
401 |
8% |
7% |
1,225 |
1,196 |
2% |
Servicing income |
214 |
299 |
316 |
-28% |
-32% |
819 |
977 |
-16% |
Gain on sales of SBA loans |
267 |
186 |
259 |
44% |
3% |
660 |
858 |
-23% |
Gain on sales of
securities |
-- |
-- |
47 |
N/A |
-100% |
-- |
97 |
-100% |
Other |
408 |
568 |
216 |
-28% |
89% |
1,366 |
909 |
50% |
Total noninterest income |
2,066 |
2,164 |
1,870 |
-5% |
10% |
6,156 |
5,934 |
4% |
|
|
|
|
|
|
|
|
|
Noninterest expense: |
|
|
|
|
|
|
|
|
Salaries and employee
benefits |
10,358 |
7,712 |
6,228 |
34% |
66% |
26,112 |
19,290 |
35% |
Occupancy and equipment |
1,072 |
1,045 |
1,055 |
3% |
2% |
3,162 |
2,987 |
6% |
Professional fees |
612 |
239 |
617 |
156% |
-1% |
946 |
1,329 |
-29% |
Other |
4,377 |
3,621 |
2,239 |
21% |
95% |
11,092 |
8,201 |
35% |
Total noninterest expense |
16,419 |
12,617 |
10,139 |
30% |
62% |
41,312 |
31,807 |
30% |
Income before income taxes |
5,631 |
7,167 |
5,747 |
-21% |
-2% |
19,366 |
15,370 |
26% |
Income tax expense |
2,172 |
2,690 |
2,322 |
-19% |
-6% |
7,292 |
5,545 |
32% |
Net income |
3,459 |
4,477 |
3,425 |
-23% |
1% |
12,074 |
9,825 |
23% |
Dividends on preferred stock |
(448) |
(448) |
(280) |
0% |
60% |
(1,344) |
(728) |
85% |
Net income available to common
shareholders |
3,011 |
4,029 |
3,145 |
-25% |
-4% |
10,730 |
9,097 |
18% |
Undistributed earnings allocated to Series C
preferred stock |
(111) |
(331) |
(320) |
-66% |
-65% |
(706) |
(992) |
-29% |
Distributed and undistributed earnings
allocated to common shareholders |
$ 2,900 |
$ 3,698 |
$ 2,825 |
-22% |
3% |
$ 10,024 |
$ 8,104 |
24% |
|
|
|
|
|
|
|
|
|
PER COMMON SHARE DATA |
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
Basic earnings per share |
$ 0.10 |
$ 0.14 |
$ 0.11 |
-29% |
-9% |
$ 0.37 |
$ 0.31 |
19% |
Diluted earnings per share |
$ 0.10 |
$ 0.14 |
$ 0.11 |
-29% |
-9% |
$ 0.36 |
$ 0.31 |
16% |
Weighted average shares outstanding -
basic |
29,075,782 |
26,573,909 |
26,371,413 |
9% |
10% |
27,386,471 |
26,367,314 |
4% |
Weighted average shares outstanding -
diluted |
29,332,452 |
26,767,255 |
26,516,863 |
10% |
11% |
27,589,464 |
26,501,960 |
4% |
Common shares outstanding at period-end |
32,076,505 |
26,596,094 |
26,374,980 |
21% |
22% |
32,076,505 |
26,374,980 |
22% |
Pro forma common shares outstanding at
period-end, assuming Series C preferred stock was converted into
common stock |
37,677,505 |
32,197,094 |
31,975,980 |
17% |
18% |
37,677,505 |
31,975,980 |
18% |
Book value per share |
$ 7.12 |
$ 6.30 |
$ 6.20 |
13% |
15% |
$ 7.12 |
$ 6.20 |
15% |
Tangible book value per share |
$ 5.44 |
$ 5.70 |
$ 6.15 |
-5% |
-12% |
$ 5.44 |
$ 6.15 |
-12% |
Pro forma tangible book value per share,
assuming Series C preferred stock was converted into common
stock |
$ 5.15 |
$ 5.31 |
$ 5.68 |
-3% |
-9% |
$ 5.15 |
$ 5.68 |
-9% |
|
|
|
|
|
|
|
|
|
KEY FINANCIAL RATIOS |
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
Annualized return on average equity |
6.41% |
9.59% |
7.46% |
-33% |
-14% |
8.25% |
7.34% |
12% |
Annualized return on average tangible
equity |
7.46% |
10.49% |
7.51% |
-29% |
-1% |
9.22% |
7.40% |
25% |
Annualized return on average assets |
0.70% |
1.08% |
0.88% |
-35% |
-20% |
0.92% |
0.88% |
5% |
Annualized return on average tangible
assets |
0.71% |
1.09% |
0.88% |
-35% |
-19% |
0.93% |
0.88% |
6% |
Annualized return before income taxes and
provision (credit) for loan losses to average assets |
1.08% |
1.73% |
1.47% |
-38% |
-27% |
1.45% |
1.36% |
7% |
Net interest margin |
4.39% |
4.66% |
3.93% |
-6% |
12% |
4.54% |
4.02% |
13% |
Efficiency ratio |
75.49% |
63.70% |
63.92% |
19% |
18% |
68.47% |
67.75% |
1% |
|
|
|
|
|
|
|
|
|
AVERAGE BALANCES |
|
|
|
|
|
|
|
|
(in $000's, unaudited) |
|
|
|
|
|
|
|
|
Average assets |
$ 1,956,047 |
$ 1,664,568 |
$ 1,543,254 |
18% |
27% |
$ 1,752,778 |
$ 1,490,714 |
18% |
Average tangible assets |
$ 1,925,912 |
$ 1,648,505 |
$ 1,542,007 |
17% |
25% |
$ 1,732,057 |
$ 1,489,349 |
16% |
Average earning assets |
$ 1,805,801 |
$ 1,542,551 |
$ 1,441,792 |
17% |
25% |
$ 1,622,605 |
$ 1,392,850 |
16% |
Average loans held-for-sale |
$ 3,197 |
$ 1,748 |
$ 1,485 |
83% |
115% |
$ 1,985 |
$ 3,073 |
-35% |
Average total loans |
$ 1,229,792 |
$ 1,106,158 |
$ 1,002,786 |
11% |
23% |
$ 1,134,223 |
$ 966,959 |
17% |
Average deposits |
$ 1,693,282 |
$ 1,428,469 |
$ 1,325,734 |
19% |
28% |
$ 1,509,210 |
$ 1,277,938 |
18% |
Average demand deposits -
noninterest-bearing |
$ 652,529 |
$ 550,869 |
$ 471,326 |
18% |
38% |
$ 578,117 |
$ 445,585 |
30% |
Average interest-bearing deposits |
$ 1,040,753 |
$ 877,600 |
$ 854,408 |
19% |
22% |
$ 931,093 |
$ 832,353 |
12% |
Average interest-bearing liabilities |
$ 1,040,919 |
$ 877,613 |
$ 854,460 |
19% |
22% |
$ 931,173 |
$ 832,909 |
12% |
Average equity |
$ 212,105 |
$ 187,179 |
$ 182,095 |
14% |
18% |
$ 195,731 |
$ 178,967 |
9% |
Average tangible equity |
$ 183,970 |
$ 171,116 |
$ 180,848 |
8% |
2% |
$ 175,010 |
$ 177,602 |
-1% |
|
|
|
|
|
|
|
End of
Period: |
Percent Change
From: |
CONSOLIDATED BALANCE
SHEETS |
September 30, |
June 30, |
September 30, |
June 30, |
September 30, |
(in $000's,
unaudited) |
2015 |
2015 |
2014 |
2015 |
2014 |
ASSETS |
|
|
|
|
|
Cash and due from banks |
$ 28,691 |
$ 36,960 |
$ 23,905 |
-22% |
20% |
Federal funds sold and interest-bearing
deposits in other financial institutions |
364,247 |
94,308 |
130,170 |
286% |
180% |
Securities available-for-sale, at fair
value |
257,410 |
209,092 |
191,680 |
23% |
34% |
Securities held-to-maturity, at amortized
cost |
111,004 |
100,321 |
94,759 |
11% |
17% |
Loans held-for-sale - SBA, including deferred
costs |
7,873 |
3,794 |
673 |
108% |
1070% |
Loans: |
|
|
|
|
|
Commercial |
554,169 |
471,651 |
436,481 |
17% |
27% |
Real estate: |
|
|
|
|
|
Commercial and residential |
606,819 |
508,497 |
464,991 |
19% |
31% |
Land and construction |
84,867 |
68,666 |
53,064 |
24% |
60% |
Home equity |
74,624 |
71,579 |
61,079 |
4% |
22% |
Consumer |
12,595 |
13,739 |
14,609 |
-8% |
-14% |
Loans |
1,333,074 |
1,134,132 |
1,030,224 |
18% |
29% |
Deferred loan fees |
(669) |
(529) |
(628) |
26% |
7% |
Total loans, net of deferred
fees |
1,332,405 |
1,133,603 |
1,029,596 |
18% |
29% |
Allowance for loan losses |
(18,737) |
(18,757) |
(18,541) |
0% |
1% |
Loans, net |
1,313,668 |
1,114,846 |
1,011,055 |
18% |
30% |
Company owned life insurance |
59,549 |
52,052 |
50,853 |
14% |
17% |
Premises and equipment, net |
7,513 |
7,249 |
7,377 |
4% |
2% |
Goodwill |
44,898 |
13,055 |
-- |
244% |
N/A |
Other intangible assets |
8,906 |
2,898 |
1,182 |
207% |
653% |
Accrued interest receivable and other
assets |
58,448 |
45,631 |
46,660 |
28% |
25% |
Total
assets |
$ 2,262,207 |
$ 1,680,206 |
$ 1,558,314 |
35% |
45% |
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
|
|
|
Liabilities: |
|
|
|
|
|
Deposits: |
|
|
|
|
|
Demand,
noninterest-bearing |
$ 758,440 |
$ 574,210 |
$ 488,987 |
32% |
55% |
Demand, interest-bearing |
440,517 |
235,922 |
223,121 |
87% |
97% |
Savings and money market |
490,572 |
380,398 |
369,378 |
29% |
33% |
Time deposits-under $250 |
65,626 |
55,571 |
56,848 |
18% |
15% |
Time deposits-$250 and
over |
174,703 |
160,106 |
160,781 |
9% |
9% |
Time deposits - brokered |
24,150 |
26,139 |
28,099 |
-8% |
-14% |
CDARS - money market and time
deposits |
8,015 |
14,791 |
14,608 |
-46% |
-45% |
Total deposits |
1,962,023 |
1,447,137 |
1,341,822 |
36% |
46% |
Borrowings |
1,000 |
-- |
-- |
N/A |
N/A |
Accrued interest payable and other
liabilities |
51,208 |
46,030 |
33,576 |
11% |
53% |
Total liabilities |
2,014,231 |
1,493,167 |
1,375,398 |
35% |
46% |
|
|
|
|
|
|
Shareholders' Equity: |
|
|
|
|
|
Series C preferred stock,
net |
19,519 |
19,519 |
19,519 |
0% |
0% |
Common stock |
193,070 |
134,307 |
133,195 |
44% |
45% |
Retained earnings |
37,366 |
36,484 |
31,014 |
2% |
20% |
Accumulated other comprehensive
loss |
(1,979) |
(3,271) |
(812) |
39% |
-144% |
Total shareholders' equity |
247,976 |
187,039 |
182,916 |
33% |
36% |
Total liabilities and
shareholders' equity |
$ 2,262,207 |
$ 1,680,206 |
$ 1,558,314 |
35% |
45% |
|
|
|
|
|
|
|
End of
Period: |
Percent Change
From: |
|
September 30, |
June 30, |
September 30, |
June 30, |
September 30, |
|
2015 |
2015 |
2014 |
2015 |
2014 |
CREDIT QUALITY DATA |
|
|
|
|
|
(in $000's, unaudited) |
|
|
|
|
|
Nonaccrual loans - held-for-investment |
$ 5,503 |
$ 4,832 |
$ 7,010 |
14% |
-21% |
Restructured and loans over 90 days past due
and still accruing |
-- |
-- |
200 |
N/A |
-100% |
Total nonperforming loans |
5,503 |
4,832 |
7,210 |
14% |
-24% |
Foreclosed assets |
393 |
421 |
532 |
-7% |
-26% |
Total nonperforming assets |
$ 5,896 |
$ 5,253 |
$ 7,742 |
12% |
-24% |
Other restructured loans still accruing |
$ 183 |
$ 158 |
$ -- |
16% |
N/A |
Net (recoveries) charge-offs during the
quarter |
$ (281) |
$ (181) |
$ 27 |
-55% |
-1141% |
Provision (credit) for loan losses during the
quarter |
$ (301) |
$ 22 |
$ (24) |
-1468% |
-1154% |
Allowance for loan losses |
$ 18,737 |
$ 18,757 |
$ 18,541 |
0% |
1% |
Classified assets(1) |
$ 17,976 |
$ 11,168 |
$ 17,725 |
61% |
1% |
Allowance for loan losses to total loans |
1.41% |
1.65% |
1.80% |
-15% |
-22% |
Allowance for loan losses to total
nonperforming loans |
340.49% |
388.18% |
257.16% |
-12% |
32% |
Nonperforming assets to total assets |
0.26% |
0.31% |
0.50% |
-16% |
-48% |
Nonperforming loans to total loans |
0.41% |
0.43% |
0.70% |
-5% |
-41% |
Classified assets(1) to Heritage Commerce
Corp Tier 1 capital plus allowance for loan losses |
8% |
6% |
9% |
33% |
-11% |
Classified assets(1) to Heritage Bank of
Commerce Tier 1 capital plus allowance for loan losses |
8% |
6% |
10% |
33% |
-20% |
|
|
|
|
|
|
OTHER PERIOD-END
STATISTICS |
|
|
|
|
|
(in $000's, unaudited) |
|
|
|
|
|
Heritage Commerce Corp: |
|
|
|
|
|
Tangible equity |
$ 194,172 |
$ 171,086 |
$ 181,734 |
13% |
7% |
Tangible common equity |
$ 174,653 |
$ 151,567 |
$ 162,215 |
15% |
8% |
Shareholders' equity / total
assets |
10.96% |
11.13% |
11.74% |
-2% |
-7% |
Tangible equity / tangible
assets |
8.79% |
10.28% |
11.67% |
-14% |
-25% |
Tangible common equity /
tangible assets |
7.91% |
9.11% |
10.42% |
-13% |
-24% |
Loan to deposit ratio |
67.91% |
78.33% |
76.73% |
-13% |
-11% |
Noninterest-bearing deposits /
total deposits |
38.66% |
39.68% |
36.44% |
-3% |
6% |
Total risk-based capital
ratio(2) |
12.3% |
13.0% |
15.3% |
-5% |
-20% |
Tier 1 risk-based capital
ratio(2) |
11.2% |
11.8% |
14.0% |
-5% |
-20% |
Common Equity Tier 1 risk-based
capital ratio(2) |
10.2% |
10.5% |
N/A |
-3% |
N/A |
Leverage ratio(2) |
10.4% |
10.6% |
11.7% |
-2% |
-11% |
|
|
|
|
|
|
Heritage Bank of Commerce: |
|
|
|
|
|
Total risk-based capital
ratio(2) |
12.1% |
12.6% |
14.3% |
-4% |
-15% |
Tier 1 risk-based capital
ratio(2) |
11.0% |
11.3% |
13.1% |
-3% |
-16% |
Common Equity Tier 1 risk-based
capital ratio(2) |
11.0% |
11.3% |
N/A |
-3% |
N/A |
Leverage ratio(2) |
10.2% |
10.2% |
10.9% |
0% |
-6% |
|
|
|
|
|
|
(1) Net of SBA guarantees |
(2) September 30, 2015 and June
30, 2015 capital ratios are based on the Basel III regulatory
requirements; September 30, 2014 capital ratios are based on the
Basel I regulatory requirements. |
|
|
|
|
|
|
|
|
For the Quarter
Ended |
For the Quarter
Ended |
|
September 30,
2015 |
September 30,
2014 |
|
|
Interest |
Average |
|
Interest |
Average |
NET INTEREST INCOME AND NET INTEREST
MARGIN |
Average |
Income/ |
Yield/ |
Average |
Income/ |
Yield/ |
(in $000's,
unaudited) |
Balance |
Expense |
Rate |
Balance |
Expense |
Rate |
Assets: |
|
|
|
|
|
|
Loans, gross(1) |
$ 1,232,989 |
$ 17,713 |
5.70% |
$ 1,004,271 |
$ 12,077 |
4.77% |
Securities - taxable |
244,313 |
1,670 |
2.71% |
238,748 |
1,675 |
2.78% |
Securities - tax exempt(2) |
91,127 |
874 |
3.80% |
79,926 |
779 |
3.87% |
Other investments and interest-bearing
deposits in other financial institutions |
237,372 |
355 |
0.59% |
118,847 |
234 |
0.78% |
Total interest earning
assets(2) |
1,805,801 |
20,612 |
4.53% |
1,441,792 |
14,765 |
4.06% |
Cash and due from banks |
34,921 |
|
|
26,535 |
|
|
Premises and equipment, net |
7,374 |
|
|
7,435 |
|
|
Goodwill and other intangible assets |
30,135 |
|
|
1,247 |
|
|
Other assets |
77,816 |
|
|
66,245 |
|
|
Total assets |
$ 1,956,047 |
|
|
$ 1,543,254 |
|
|
|
|
|
|
|
|
|
Liabilities and shareholders'
equity: |
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
Demand,
noninterest-bearing |
$ 652,529 |
|
|
$ 471,326 |
|
|
|
|
|
|
|
|
|
Demand, interest-bearing |
326,922 |
144 |
0.17% |
212,579 |
89 |
0.17% |
Savings and money market |
444,702 |
240 |
0.21% |
379,733 |
171 |
0.18% |
Time deposits - under $100 |
20,681 |
15 |
0.29% |
20,163 |
16 |
0.31% |
Time deposits - $100 and
over |
206,909 |
173 |
0.33% |
196,062 |
158 |
0.32% |
Time deposits - brokered |
24,861 |
50 |
0.80% |
31,116 |
63 |
0.80% |
CDARS - money market and time
deposits |
16,678 |
1 |
0.02% |
14,755 |
3 |
0.08% |
Total interest-bearing
deposits |
1,040,753 |
623 |
0.24% |
854,408 |
500 |
0.23% |
Total deposits |
1,693,282 |
623 |
0.15% |
1,325,734 |
500 |
0.15% |
|
|
|
|
|
|
|
Short-term borrowings |
166 |
-- |
0.00% |
52 |
-- |
0.00% |
Total interest-bearing
liabilities |
1,040,919 |
623 |
0.24% |
854,460 |
500 |
0.23% |
|
|
|
|
|
|
|
Total interest-bearing
liabilities and demand, noninterest-bearing / cost of funds |
1,693,448 |
623 |
0.15% |
1,325,786 |
500 |
0.15% |
Other liabilities |
48,494 |
|
|
35,373 |
|
|
Total liabilities |
1,741,942 |
|
|
1,361,159 |
|
|
Shareholders' equity |
214,105 |
|
|
182,095 |
|
|
Total liabilities and
shareholders' equity |
$ 1,956,047 |
|
|
$ 1,543,254 |
|
|
|
|
|
|
|
|
|
Net interest income(2) / margin |
|
19,989 |
4.39% |
|
14,265 |
3.93% |
Less tax equivalent adjustment(2) |
|
(306) |
|
|
(273) |
|
Net interest income |
|
$ 19,683 |
|
|
$ 13,992 |
|
|
|
|
|
|
|
|
(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. |
|
|
|
|
|
|
|
|
For the Nine Months
Ended |
For the Nine Months
Ended |
|
September 30,
2015 |
September 30,
2014 |
|
|
Interest |
Average |
|
Interest |
Average |
NET INTEREST INCOME AND NET INTEREST
MARGIN |
Average |
Income/ |
Yield/ |
Average |
Income/ |
Yield/ |
(in $000's,
unaudited) |
Balance |
Expense |
Rate |
Balance |
Expense |
Rate |
Assets: |
|
|
|
|
|
|
Loans, gross(1) |
$ 1,136,208 |
$ 48,360 |
5.69% |
$ 970,032 |
$ 34,832 |
4.80% |
Securities - taxable |
230,608 |
4,828 |
2.80% |
264,437 |
5,555 |
2.81% |
Securities - tax exempt(2) |
84,286 |
2,444 |
3.88% |
79,905 |
2,336 |
3.91% |
Other investments and interest-bearing
deposits in other financial institutions |
171,503 |
1,070 |
0.83% |
78,476 |
634 |
1.08% |
Total interest earning
assets(2) |
1,622,605 |
56,702 |
4.67% |
1,392,850 |
43,357 |
4.16% |
Cash and due from banks |
28,647 |
|
|
25,068 |
|
|
Premises and equipment, net |
7,388 |
|
|
7,295 |
|
|
Goodwill and other intangible assets |
20,721 |
|
|
1,365 |
|
|
Other assets |
73,417 |
|
|
64,136 |
|
|
Total assets |
$ 1,752,778 |
|
|
$ 1,490,714 |
|
|
|
|
|
|
|
|
|
Liabilities and shareholders'
equity: |
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
Demand,
noninterest-bearing |
$ 578,117 |
|
|
$ 445,585 |
|
|
|
|
|
|
|
|
|
Demand, interest-bearing |
265,095 |
349 |
0.18% |
203,713 |
248 |
0.16% |
Savings and money market |
403,385 |
623 |
0.21% |
357,535 |
489 |
0.18% |
Time deposits - under $100 |
19,812 |
45 |
0.30% |
20,643 |
49 |
0.32% |
Time deposits - $100 and
over |
202,512 |
485 |
0.32% |
195,122 |
473 |
0.32% |
Time deposits - brokered |
26,578 |
157 |
0.79% |
39,249 |
262 |
0.89% |
CDARS - money market and time
deposits |
13,711 |
5 |
0.05% |
16,091 |
6 |
0.05% |
Total interest-bearing
deposits |
931,093 |
1,664 |
0.24% |
832,353 |
1,527 |
0.25% |
Total deposits |
1,509,210 |
1,664 |
0.15% |
1,277,938 |
1,527 |
0.16% |
|
|
|
|
|
|
|
Short-term borrowings |
80 |
-- |
0.00% |
556 |
1 |
0.24% |
Total interest-bearing
liabilities |
931,173 |
1,664 |
|
832,909 |
1,528 |
0.25% |
Total interest-bearing
liabilities and demand, noninterest-bearing / cost of funds |
1,509,290 |
1,664 |
0.15% |
1,278,494 |
1,528 |
0.16% |
Other liabilities |
47,757 |
|
|
33,253 |
|
|
Total liabilities |
1,557,047 |
|
|
1,311,747 |
|
|
Shareholders' equity |
195,731 |
|
|
178,967 |
|
|
Total liabilities and
shareholders' equity |
$ 1,752,778 |
|
|
$ 1,490,714 |
|
|
|
|
|
|
|
|
|
Net interest income(2) / margin |
|
55,038 |
4.54% |
|
41,829 |
4.02% |
Less tax equivalent adjustment(2) |
|
(855) |
|
|
(818) |
|
Net interest income |
|
$ 54,183 |
|
|
$ 41,011 |
|
|
|
|
|
|
|
|
(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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