{"id":480936,"date":"2021-04-22T17:29:15","date_gmt":"2021-04-22T21:29:15","guid":{"rendered":"https:\/\/www.marketnewsdesk.com\/index.php\/heritage-commerce-corp-earns-11-2-million-for-the-first-quarter-of-2021\/"},"modified":"2021-04-22T17:29:15","modified_gmt":"2021-04-22T21:29:15","slug":"heritage-commerce-corp-earns-11-2-million-for-the-first-quarter-of-2021","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/heritage-commerce-corp-earns-11-2-million-for-the-first-quarter-of-2021\/","title":{"rendered":"Heritage Commerce Corp Earns $11.2 Million for the First Quarter of 2021"},"content":{"rendered":"
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SAN JOSE, Calif., April 22, 2021 (GLOBE NEWSWIRE) — Heritage Commerce Corp (Nasdaq: HTBK)<\/strong>, the holding company (the \u201cCompany\u201d) for Heritage Bank of Commerce (the \u201cBank\u201d), today announced first quarter 2021 net income of $11.2 million, or $0.19 per average diluted common share, compared to $1.9 million, or $0.03 per average diluted common share, for the first quarter of 2020, and $11.6 million, or $0.19 per average diluted common share, for the fourth quarter of 2020. First quarter 2021 results included the recapture of $1.5 million of provision for credit losses on loans, compared to a provision for credit losses on loans of $13.3 million for the first quarter of 2020. All results are unaudited.<\/p>\n

\u201cWhile facing prolonged challenges posed by the COVID-19 crisis, and the related economic uncertainty, the Company has continued to generate solid financial results, and the first quarter 2021 earnings were no exception,\u201d said Walter Kaczmarek, President and Chief Executive Officer. \u201cTotal deposits grew by 27%, year-over-year, fueled by successful deposit gathering efforts that attracted over $900 million. Gross loans also increased 6%, year-over-year, and by 3% on a linked quarter basis. Our return on assets improved to 0.99% in the first quarter compared to 0.19% a year ago. Our year-over-year improvement in first quarter results benefited from our higher than usual provision for credit losses in the first quarter of 2020 taken in light of a downturn in the economy caused by the COVID-19 pandemic, and from our decision to adopt the Current Expected Credit Loss (\u201cCECL\u201d) rate methodology early in 2020,\u201d said Mr. Kaczmarek.<\/p>\n

Mr. Kaczmarek continued, \u201cOur positive credit trends continue with nonperforming assets (\u201cNPAs\u201d) decreasing (54%) to $5.6 million at March 31, 2021, versus $12.1 million a year earlier, and declining (29%) from $7.9 million on a linked quarter basis. We had net loan recoveries of $1.4 million from previously charged-off accounts, compared to net charge-offs of $422,000 for the first quarter a year ago.\u201d The allowance for credit losses on loans (\u201cACLL\u201d) to total loans declined slightly to 1.64%, and the ratio of ACLL to total loans, excluding PPP loans, was 1.88%, at March 31, 2021, compared to 1.70% and 1.91%, respectively, at December 31, 2020.<\/p>\n

\u201cOur local markets and customers have been negatively impacted by government actions necessary to contain the health crisis, and we are closely tracking our loan portfolio and responding to the needs of our customers,\u201d said Mr. Kaczmarek. \u201cIn the meantime, our capital, ACLL, and excess liquidity positions all remain strong. The total capital ratio was 16.5% and leverage ratio was 9.1% for the Company, and 15.8% and 9.5%, respectively, for the Bank, at March 31, 2021. Notably, despite the adverse impact to the economy brought on by the pandemic, the Company\u2019s total assets increased 23% from a year ago and surpassed the milestone of $5 billion at quarter-end. With a solid earnings performance, a large core deposit base, and excellent credit quality, we believe we have a solid foundation on which to grow as the economy recovers from the COVID-19 pandemic.\u201d<\/p>\n

In response to economic stimulus laws passed by Congress in 2020 and 2021, Heritage Bank of Commerce has now funded two rounds of Small Business Administration (\u201cSBA\u201d) Payment Protection Program (\u201cPPP\u201d) loans. At March 31, 2021, after accounting for loan payoffs and SBA loan forgiveness, Round 1 PPP loans were $170.4 million and Round 2 PPP loans were $179.3 million. In total the Bank had $349.7 million in outstanding PPP loan balances at quarter-end. These loans generated $784,000 in interest income, $3.4 million in net deferred fee revenue ($2.4 million from loans forgiven or paid off and $969,000 from net deferred fees), and $766,000 in deferred origination costs on Round 2 PPP loans during the first quarter of 2021. At March 31, 2021, the PPP loan portfolio had remaining deferred fees of ($8.8) million and deferred costs of $1.1 million.<\/p>\n

On April 7, 2020, the U.S. banking agencies issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus. The statement describes accounting for COVID-19-related loan modifications, including clarifying the interaction between current accounting rules and the temporary relief provided by the Coronavirus Aid, Relief, and Economic Security Act (\u201cCARES Act\u201d). The Bank made accommodations for initial payment deferrals for a number of customers with a window of up to 90 days, with the potential of an additional 90 days of payment deferral (180 days maximum) upon application. The Bank also waived all customary applicable fees. Of the loans for which deferrals were originally granted, nearly all have returned to regular payment status.<\/p>\n

The following table shows the remaining deferments at March 31, 2021 by category:<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\n Underlying Collateral<\/strong>\n <\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
\n NON-SBA LOANS<\/strong>\n <\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\n Business<\/strong>\n <\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\n Real <\/strong>\n <\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
\n (in $000\u2019s, unaudited)<\/strong>\n <\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\n Assets<\/strong>\n <\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\n Estate<\/strong>\n <\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\n Total<\/strong>\n <\/td>\n<\/tr>\n
\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
Initial Deferments(1)<\/sup><\/td>\n\u00a0<\/td>\n$<\/td>\n–<\/td>\n\u00a0<\/td>\n$<\/td>\n4,102<\/td>\n\u00a0<\/td>\n$<\/td>\n4,102<\/td>\n<\/tr>\n
2nd Deferments(2)<\/sup><\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n3,146<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n724<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n3,870<\/td>\n<\/tr>\n
Total<\/td>\n\u00a0<\/td>\n$<\/td>\n3,146<\/td>\n\u00a0<\/td>\n$<\/td>\n4,826<\/td>\n\u00a0<\/td>\n$<\/td>\n7,972<\/td>\n<\/tr>\n
\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
\n (1) <\/sup>Initial deferments were generally for 3 months<\/td>\n<\/tr>\n
\n (2)<\/sup> 2nd deferments were for an additional 3 months<\/td>\n<\/tr>\n<\/table>\n

On December 27, 2020, the President signed into law the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the \u201cAct\u201d) which revised rules regarding PPP loans, provided supplemental PPP loan funding for new and existing borrowers and expanded the types of business expenses that are forgivable under the PPP program. On January 6, 2021, Treasury issued new Interim Final Rules (\u201cIFRs\u201d) to address the Act\u2019s creation of PPP Second Draw Loans as well as other changes to the PPP program requirements. The IFRs codified aspects of the PPP program not specifically addressed in the Act:<\/p>\n