Heritage Commerce Corp (HTBK, Financial) filed Quarterly Report for the period ended 2010-06-30.
Heritage Commerce Corp has a market cap of $39.8 million; its shares were traded at around $3.36 with and P/S ratio of 0.6.
charge for impairment of goodwill, a $23.7 million provision for loan losses, and a $3.7 million partial valuation allowance on the deferred tax asset. In the six months ended June 30, 2009, the net loss was $9.3 million. The net loss allocable to common shareholders was $10.5 million, or $(0.89) per common share, including a provision for loan losses of $21.1 million.
During the second quarter of 2010, there were several significant events that impacted the Company's financial condition and operations. First, the Company completed a private placement of convertible preferred stock for $75 million which significantly improved the Company's regulatory capital ratios. Second, the Company identified $31.0 million of real estate loans classified as substandard or substandard-nonaccrual that it intends to sell in the third quarter of 2010. The loans were transferred to the held-for-sale portfolio and the Company recorded a $13.9 million of related loan charge-offs in the second quarter of 2010. In addition, due to the continued depressed economic conditions and amount by which the Company's book value exceeded the market value per common share, and the Company's closing of a private placement at a conversion price of $3.75 per share, the Company determined that goodwill related to the acquisition of Diablo Valley Bank of $43.2 million was fully impaired. Also, after an analysis in the second quarter of 2010 of both the positive and negative evidence regarding the realization of the deferred tax asset, the Company recorded a $3.7 million partial valuation allowance on the Company's deferred tax asset.
The net interest margin increased 33 basis points to 3.88% for the second quarter of 2010, compared with 3.55% for the second quarter of 2009, and increased 7 basis points to 3.88% compared to 3.81% for the first quarter of 2010. The Company's net interest margin increased to 3.85% for the six months ended June 30, 2010, compared to 3.45% for the first six months of 2009. The provision for loan losses was $18.6 million for the second quarter of 2010, compared to $10.7 million for the second quarter of 2009. The provision for loan losses for the six months ended June 30, 2010 was $23.7 million, compared to $21.1 million for the same period a year ago. Noninterest income increased 17% to $1.9 million in the second quarter of 2010 from $1.6 million in the second quarter of 2009, and increased 10% to $3.6 million in the first six months of 2010 from $3.2 million in the first six months of 2009. A $43.2 million non-cash charge was recorded during the second quarter of 2010 to reflect an impairment of goodwill related to a prior acquisition. Noninterest expense, including the $43.2 million impairment of goodwill, was $54.6 million for the second quarter of 2010, compared to $12.1 million in the second quarter of 2009. In the first six months of 2010, noninterest expense including the $43.2 million impairment of goodwill was $66.8 million, compared to $23.4 million in the first six months a year ago. The income tax benefit for the quarter ended June 30, 2010 was $5.8 million, which included $3.7 million of additional income tax expense to establish a partial valuation allowance on the Company's net deferred tax asset. The income tax benefit was $4.1 million in the second quarter a year ago, and $120,000 in the first quarter of 2010. In the first six months of 2010, the income tax benefit was $5.9 million, compared to $9.2 million in the first six months a year ago. The negative effective income tax rates are due to the loss before income taxes. The difference in the effective tax rate 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, and tax credits related to investments in low income housing limited partnerships. 24
Cash and securities increased to $250.7 million at June 30, 2010, from $133.3 million at June 30, 2009, and $155.5 million at December 31, 2009. Classified assets will be reduced as a result of the planned sale of $17.1 million of real estate loans classified as substandard or substandard-nonaccrual assets. Total loans, excluding loans held-for-sale, decreased $224,000, or 19%, to $937.8 million at June 30, 2010, compared to $1.16 billion at June 30, 2009, and decreased $132.3 million, or 12%, from December 31, 2009. Land and construction loans decreased $120.6 million, or 52%, to $110.2 million at June 30, 2010, compared to $230.8 million at June 30, 2009, and decreased $72.7 million, or 40%, from $182.9 million at December 31, 2009. The allowance for loan losses at June 30, 2010 was $26.8 million, or 2.85% of total loans, and represented 44.90% of nonperforming loans, and 53.74% of nonperforming loans excluding nonaccrual loans in the loans held-for-sale portfolio. The allowance for loan losses a year ago was $31.4 million, or 2.70% of total loans and 53.51% of nonperforming loans. The allowance for loan losses at December 31, 2009, was $28.8 million, or 2.69% of total loans and 46.12% of nonperforming loans. Nonperforming assets decreased to $60.1 million, or 4.61% of total assets at June 30, 2010, which included $9.8 million of real estate loans classified as substandard or substandard-nonaccrual transferred to the loans held-for-sale portfolio. Excluding the loans held-for-sale, nonperforming assets were $50.3 million, or 3.86% of total assets at June 30, 2010. Nonperforming assets were $61.7 million, or 4.30% of total assets at June 30, 2009, and $64.6 million, or 4.74% of total assets at December 31, 2009. Net charge-offs were $18.4 million in the second quarter of 2010, of which $13.9 million related to substandard and substandard-nonaccrual real estate loans transferred to the loans held-for-sale portfolio, and $4.5 million related to the remaining loan portfolio. Net charge-offs were $3.2 million in the second quarter of 2009, and $5.9 million in the fourth quarter of 2009. Brokered deposits decreased to $163.7 million at June 30, 2010, compared to $212.8 million at June 30, 2009, and $178.0 million at December 31, 2009. The ratio of noncore funding (which consists of time deposits $100,000 and over, CDARS deposits, brokered deposits, securities under agreement to repurchase, notes payable and short-term borrowings) to total assets was 26% at June 30, 2010, compared to 31% at June 30, 2009, and 29% at December 31, 2009. The loan to deposit ratio improved to 90.39% at June 30, 2010, compared to 99.84% at June 30, 2009, and 98.24% at December 31, 2009. The $75 million of new capital raised in June 2010 increased tangible equity to $182.3 million at June 30, 2010, from $127.5 million at June 30, 2009, and $125.5 million at December 31, 2009. HCC downstreamed $40 million of the proceeds from the June 2010 private placement to the capital of HBC. On a consolidated basis, the Company's capital ratios continue to exceed regulatory well-capitalized standards with a leverage ratio of 8.65%, a Tier 1 risk-based capital ratio of 10.73%, and a total risk-based capital ratio of 18.66% at June 30, 2010. 25
The composition and cost of the Company's deposit base are important in analyzing the Company's net interest margin and balance sheet liquidity characteristics. Except for brokered time deposits, the Company's depositors are generally located in its primary market area. Depending on loan demand and other funding requirements, the Company also obtains deposits from wholesale sources including deposit brokers. The Company had $163.7 million in brokered deposits at June 30, 2010, compared to $212.8 million at June 30, 2009, and $178.0 million at December 31, 2009. The Company has a policy to monitor all deposits that may be sensitive to interest rate changes to help assure that liquidity risk does not become excessive due to concentrations. Deposits at June 30, 2010 were $1.04 billion, compared to $1.16 billion at June 30, 2009, and $1.09 billion at December 31, 2009.
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Heritage Commerce Corp has a market cap of $39.8 million; its shares were traded at around $3.36 with and P/S ratio of 0.6.
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For the three months ended June 30, 2010, the net loss was $54.1 million. The net loss allocable to common shareholders was $55.1 million, or $(4.66) per common share for the three months ended June 30, 2010, which included a $43.2 million charge for impairment of goodwill, an $18.6 million provision for loan losses, and a $3.7 million partial valuation allowance on the deferred tax asset. In the three months ended June 30, 2009, the net loss was $5.4 million. The net loss allocable to common shareholders was $6.0 million, or $(0.51) per common share, including a provision for loan losses of $10.7million.charge for impairment of goodwill, a $23.7 million provision for loan losses, and a $3.7 million partial valuation allowance on the deferred tax asset. In the six months ended June 30, 2009, the net loss was $9.3 million. The net loss allocable to common shareholders was $10.5 million, or $(0.89) per common share, including a provision for loan losses of $21.1 million.
During the second quarter of 2010, there were several significant events that impacted the Company's financial condition and operations. First, the Company completed a private placement of convertible preferred stock for $75 million which significantly improved the Company's regulatory capital ratios. Second, the Company identified $31.0 million of real estate loans classified as substandard or substandard-nonaccrual that it intends to sell in the third quarter of 2010. The loans were transferred to the held-for-sale portfolio and the Company recorded a $13.9 million of related loan charge-offs in the second quarter of 2010. In addition, due to the continued depressed economic conditions and amount by which the Company's book value exceeded the market value per common share, and the Company's closing of a private placement at a conversion price of $3.75 per share, the Company determined that goodwill related to the acquisition of Diablo Valley Bank of $43.2 million was fully impaired. Also, after an analysis in the second quarter of 2010 of both the positive and negative evidence regarding the realization of the deferred tax asset, the Company recorded a $3.7 million partial valuation allowance on the Company's deferred tax asset.
The net interest margin increased 33 basis points to 3.88% for the second quarter of 2010, compared with 3.55% for the second quarter of 2009, and increased 7 basis points to 3.88% compared to 3.81% for the first quarter of 2010. The Company's net interest margin increased to 3.85% for the six months ended June 30, 2010, compared to 3.45% for the first six months of 2009. The provision for loan losses was $18.6 million for the second quarter of 2010, compared to $10.7 million for the second quarter of 2009. The provision for loan losses for the six months ended June 30, 2010 was $23.7 million, compared to $21.1 million for the same period a year ago. Noninterest income increased 17% to $1.9 million in the second quarter of 2010 from $1.6 million in the second quarter of 2009, and increased 10% to $3.6 million in the first six months of 2010 from $3.2 million in the first six months of 2009. A $43.2 million non-cash charge was recorded during the second quarter of 2010 to reflect an impairment of goodwill related to a prior acquisition. Noninterest expense, including the $43.2 million impairment of goodwill, was $54.6 million for the second quarter of 2010, compared to $12.1 million in the second quarter of 2009. In the first six months of 2010, noninterest expense including the $43.2 million impairment of goodwill was $66.8 million, compared to $23.4 million in the first six months a year ago. The income tax benefit for the quarter ended June 30, 2010 was $5.8 million, which included $3.7 million of additional income tax expense to establish a partial valuation allowance on the Company's net deferred tax asset. The income tax benefit was $4.1 million in the second quarter a year ago, and $120,000 in the first quarter of 2010. In the first six months of 2010, the income tax benefit was $5.9 million, compared to $9.2 million in the first six months a year ago. The negative effective income tax rates are due to the loss before income taxes. The difference in the effective tax rate 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, and tax credits related to investments in low income housing limited partnerships. 24
Cash and securities increased to $250.7 million at June 30, 2010, from $133.3 million at June 30, 2009, and $155.5 million at December 31, 2009. Classified assets will be reduced as a result of the planned sale of $17.1 million of real estate loans classified as substandard or substandard-nonaccrual assets. Total loans, excluding loans held-for-sale, decreased $224,000, or 19%, to $937.8 million at June 30, 2010, compared to $1.16 billion at June 30, 2009, and decreased $132.3 million, or 12%, from December 31, 2009. Land and construction loans decreased $120.6 million, or 52%, to $110.2 million at June 30, 2010, compared to $230.8 million at June 30, 2009, and decreased $72.7 million, or 40%, from $182.9 million at December 31, 2009. The allowance for loan losses at June 30, 2010 was $26.8 million, or 2.85% of total loans, and represented 44.90% of nonperforming loans, and 53.74% of nonperforming loans excluding nonaccrual loans in the loans held-for-sale portfolio. The allowance for loan losses a year ago was $31.4 million, or 2.70% of total loans and 53.51% of nonperforming loans. The allowance for loan losses at December 31, 2009, was $28.8 million, or 2.69% of total loans and 46.12% of nonperforming loans. Nonperforming assets decreased to $60.1 million, or 4.61% of total assets at June 30, 2010, which included $9.8 million of real estate loans classified as substandard or substandard-nonaccrual transferred to the loans held-for-sale portfolio. Excluding the loans held-for-sale, nonperforming assets were $50.3 million, or 3.86% of total assets at June 30, 2010. Nonperforming assets were $61.7 million, or 4.30% of total assets at June 30, 2009, and $64.6 million, or 4.74% of total assets at December 31, 2009. Net charge-offs were $18.4 million in the second quarter of 2010, of which $13.9 million related to substandard and substandard-nonaccrual real estate loans transferred to the loans held-for-sale portfolio, and $4.5 million related to the remaining loan portfolio. Net charge-offs were $3.2 million in the second quarter of 2009, and $5.9 million in the fourth quarter of 2009. Brokered deposits decreased to $163.7 million at June 30, 2010, compared to $212.8 million at June 30, 2009, and $178.0 million at December 31, 2009. The ratio of noncore funding (which consists of time deposits $100,000 and over, CDARS deposits, brokered deposits, securities under agreement to repurchase, notes payable and short-term borrowings) to total assets was 26% at June 30, 2010, compared to 31% at June 30, 2009, and 29% at December 31, 2009. The loan to deposit ratio improved to 90.39% at June 30, 2010, compared to 99.84% at June 30, 2009, and 98.24% at December 31, 2009. The $75 million of new capital raised in June 2010 increased tangible equity to $182.3 million at June 30, 2010, from $127.5 million at June 30, 2009, and $125.5 million at December 31, 2009. HCC downstreamed $40 million of the proceeds from the June 2010 private placement to the capital of HBC. On a consolidated basis, the Company's capital ratios continue to exceed regulatory well-capitalized standards with a leverage ratio of 8.65%, a Tier 1 risk-based capital ratio of 10.73%, and a total risk-based capital ratio of 18.66% at June 30, 2010. 25
The composition and cost of the Company's deposit base are important in analyzing the Company's net interest margin and balance sheet liquidity characteristics. Except for brokered time deposits, the Company's depositors are generally located in its primary market area. Depending on loan demand and other funding requirements, the Company also obtains deposits from wholesale sources including deposit brokers. The Company had $163.7 million in brokered deposits at June 30, 2010, compared to $212.8 million at June 30, 2009, and $178.0 million at December 31, 2009. The Company has a policy to monitor all deposits that may be sensitive to interest rate changes to help assure that liquidity risk does not become excessive due to concentrations. Deposits at June 30, 2010 were $1.04 billion, compared to $1.16 billion at June 30, 2009, and $1.09 billion at December 31, 2009.
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