{"id":516886,"date":"2021-07-22T17:30:18","date_gmt":"2021-07-22T21:30:18","guid":{"rendered":"https:\/\/www.marketnewsdesk.com\/index.php\/heritage-commerce-corp-earns-8-8-million-for-the-second-quarter-of-2021-and-20-0-million-for-the-first-six-months-of-2021\/"},"modified":"2021-07-22T17:30:18","modified_gmt":"2021-07-22T21:30:18","slug":"heritage-commerce-corp-earns-8-8-million-for-the-second-quarter-of-2021-and-20-0-million-for-the-first-six-months-of-2021","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/heritage-commerce-corp-earns-8-8-million-for-the-second-quarter-of-2021-and-20-0-million-for-the-first-six-months-of-2021\/","title":{"rendered":"Heritage Commerce Corp Earns $8.8 Million for the Second Quarter of 2021, and $20.0 Million for the First Six Months of 2021"},"content":{"rendered":"
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SAN JOSE, Calif., July 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 second quarter 2021 net income of $8.8 million, or $0.15 per average diluted common share, compared to $10.6 million, or $0.18 per average diluted common share, for the second quarter of 2020, and $11.2 million, or $0.19 per average diluted common share, for the first quarter of 2021. For the six months ended June 30, 2021, net income was $20.0 million, or $0.33 per average diluted common share, compared to $12.5 million, or $0.21 per average diluted common share, for the six months ended June 30, 2020. Earnings for the second quarter and first six months of 2021 included a $4.0 million reserve for a legal settlement as noninterest expense, which was previously disclosed in the Company\u2019s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 7, 2021. Earnings for the first six months of 2020 were impacted by the effect of $14.4 million in pre-tax current expected credit losses (\u201cCECL\u201d) related provision for credit losses on loans, driven by forecasted effects on economic activity from the Coronavirus pandemic and $2.5 million of pre-tax merger-related costs in the first six months of 2020. All results are unaudited.<\/p>\n

\u201cReflective of an improving local economy, we delivered solid second quarter earnings, supported by higher levels of loans on both a year-over-year and linked quarter basis. Core loans, excluding Small Business Administration (\u201cSBA\u201d) Paycheck Protection Program (\u201cPPP\u201d) loans and residential mortgage loans, increased by $65.6 million, or 3%, from a year ago, and increased by $59.6 million, or 3%, from the first quarter of 2021. Total loans increased by $138.4 million, or 5%, from a year ago, and increased by $120.1 million, or 4%, from the first quarter of 2021, while total deposits were higher by $444.2 million, or 11%, year-over-year, and increased $65.4 million, or 2%, from the first quarter of 2021. Our disciplined approach to managing core operating expenses also contributed to profitability during the second quarter of 2021,\u201d said Mr. Walter Kaczmarek, President and Chief Executive Officer. \u201cIn addition, second quarter results benefitted from the recapture of ($493,000) in credit losses on loans, compared to a provision for credit losses on loans of $1.1 million taken in the second quarter of 2020.\u201d<\/p>\n

\u201cFrom the onset of the pandemic, we have been an active participant in the SBA PPP loan program,\u201d said Mr. Kaczmarek. \u201cPPP loans generated interest and fee income of $2.7 million during the second quarter of 2021, and $6.9 million for the first six months of 2021.\u201d As of June 30, 2021, the Company had a total of $286.5 million in PPP loans outstanding and $6.9 million of remaining net deferred fees outstanding.<\/p>\n

\u201cOur credit quality remained strong, as nonperforming assets (\u201cNPAs\u201d) declined ($2.9) million, or (32%), at June 30, 2021 to $6.2 million, from $9.1 million at June 30, 2020, and increased $587,000 from $5.6 million at March 31, 2021. In addition, net recoveries totaled $153,000 for the current quarter, compared to $373,000 in net charge-offs for the second quarter of 2020, and net recoveries of $1.4 million for the first quarter of 2021,\u201d said Mr. Kaczmarek. \u201cWe believe that with our healthy capital and liquidity positions, strong earnings power, conservative credit culture, and dedicated employees, we remain well positioned for growth as we head into the second half of the year.\u201d<\/p>\n

\n SBA PPP Loan Program:<\/strong>\n <\/p>\n

In response to economic stimulus laws passed by Congress in 2020 and 2021, the Bank has now funded two rounds of PPP loans. At June 30, 2021, after accounting for loan payoffs and SBA loan forgiveness, \u201cRound 1\u201d PPP loans were $91.9 million and \u201cRound 2\u201d PPP loans were $194.6 million. In total the Bank had $286.5 million in outstanding PPP loan balances at June 30, 2021. The following table shows interest income, fee income and deferred origination costs generated by the PPP loans, and the PPP loan outstanding balances and related deferred fees and costs for the periods indicated:<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\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\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
\u00a0<\/td>\n\u00a0<\/td>\n\n At or For\u00a0the\u00a0Quarter\u00a0Ended:<\/strong>\n <\/td>\n\u00a0<\/td>\n\n At or For the Six Months Ended:<\/strong>\n <\/td>\n<\/tr>\n
\n PPP LOANS<\/strong>\n <\/td>\n\u00a0<\/td>\n\n June\u00a030,\u00a0<\/strong>\n <\/td>\n\u00a0<\/td>\n\n March\u00a031,\u00a0<\/strong>\n <\/td>\n\u00a0<\/td>\n\n June\u00a030,\u00a0<\/strong>\n <\/td>\n\u00a0<\/td>\n\n June\u00a030,\u00a0<\/strong>\n <\/td>\n\u00a0<\/td>\n\n June\u00a030,\u00a0<\/strong>\n <\/td>\n<\/tr>\n
\n (in $000\u2019s, unaudited)<\/strong>\n <\/td>\n\u00a0<\/td>\n\n 2021<\/strong>\n <\/td>\n\u00a0<\/td>\n\n 2021<\/strong>\n <\/td>\n\u00a0<\/td>\n\n 2020<\/strong>\n <\/td>\n\u00a0<\/td>\n\n 2021<\/strong>\n <\/td>\n\u00a0<\/td>\n\n 2020<\/strong>\n <\/td>\n<\/tr>\n
Interest income<\/td>\n\u00a0<\/td>\n$<\/td>\n831<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n784<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n582<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n1,615<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n582<\/td>\n\u00a0<\/td>\n<\/tr>\n
Fee income, net<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n1,876<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n3,401<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n637<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n5,276<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n637<\/td>\n\u00a0<\/td>\n<\/tr>\n
Total<\/td>\n\u00a0<\/td>\n$<\/td>\n2,707<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n4,185<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n1,219<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n6,891<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n1,219<\/td>\n\u00a0<\/td>\n<\/tr>\n
\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
Deferred origination costs (contra expense)<\/td>\n\u00a0<\/td>\n$<\/td>\n41<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n766<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n1,240<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n807<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n1,240<\/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\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
PPP loans outstanding at period end:<\/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\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
Round 1<\/td>\n\u00a0<\/td>\n$<\/td>\n91,849<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n170,391<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n324,550<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n91,849<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n324,550<\/td>\n\u00a0<\/td>\n<\/tr>\n
Round 2<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n194,612<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n179,353<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u2014<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n194,612<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u2014<\/td>\n\u00a0<\/td>\n<\/tr>\n
Total<\/td>\n\u00a0<\/td>\n$<\/td>\n286,461<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n349,744<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n324,550<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n286,461<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n324,550<\/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\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
Deferred fees outstanding at period end<\/td>\n\u00a0<\/td>\n$<\/td>\n(7,747<\/td>\n)<\/td>\n\u00a0<\/td>\n$<\/td>\n(8,757<\/td>\n)<\/td>\n\u00a0<\/td>\n$<\/td>\n(10,430<\/td>\n)<\/td>\n\u00a0<\/td>\n$<\/td>\n(7,747<\/td>\n)<\/td>\n\u00a0<\/td>\n$<\/td>\n(10,430<\/td>\n)<\/td>\n<\/tr>\n
Deferred costs outstanding at period end<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n869<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n1,099<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n1,155<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n869<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n1,155<\/td>\n\u00a0<\/td>\n<\/tr>\n
Total<\/td>\n\u00a0<\/td>\n$<\/td>\n(6,878<\/td>\n)<\/td>\n\u00a0<\/td>\n$<\/td>\n(7,658<\/td>\n)<\/td>\n\u00a0<\/td>\n$<\/td>\n(9,275<\/td>\n)<\/td>\n\u00a0<\/td>\n$<\/td>\n(6,878<\/td>\n)<\/td>\n\u00a0<\/td>\n$<\/td>\n(9,275<\/td>\n)<\/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