NORFOLK, Va., May 3 /PRNewswire-FirstCall/ -- Heritage Bankshares,
Inc. ("Heritage"; the "Company") (Pinksheets: HBKS), the parent of
Heritage Bank (the "Bank"), today announced unaudited financial
results for the first quarter 2007. Net income, after tax, for the
quarter ended March 31, 2007 was $95,000, or $0.04 per diluted
share, compared to a loss, after tax, of $22,000, or $0.01 per
diluted share, for the first quarter of 2006. Michael S. Ives,
President and CEO of the Company and the Bank, commented: "The
growth in our noninterest-bearing deposits and total core deposits
in the first quarter of 2007 compared to the first quarter of 2006
reflects our continuing execution of our business plan. Average
noninterest-bearing deposits in the first quarter of 2007 were
$47.9 million representing an increase of $10.3 million, or 27.3%,
in these deposits over their average balance in the first quarter
last year. Average total core deposits, i.e. checking, savings and
money market accounts, were $120.9 million in the first quarter of
2007, representing growth of $17.6 million, or 17%, when compared
to the first quarter of 2006." Ives added: "Total expenses fell
slightly from the first quarter of 2006 to the first quarter of
2007. This demonstrates our belief that most of our personnel and
infrastructure expense is now stabilized, and we do not expect
these expenses to grow proportionately with anticipated increases
in our gross income from the Company's expected future growth. "Our
loan growth in the first quarter was limited as a result of a
significant level of loan prepayments totaling approximately $9.7
million in the first quarter compared to approximately $1.2 million
in the month of April 2007. We believe these prepayments in the
first quarter were in the ordinary course of business and that loan
growth will resume in the second quarter." Comparison of Operating
Results for the Three Months Ended March 31, 2007 and 2006
Overview. The Company's pretax income was $142,000 for the first
quarter of 2007, compared to a pretax loss of $41,000 in the first
quarter of 2006, an increase of $183,000. Compared to the first
quarter of 2006, net interest income increased by $178,000,
provision for loan losses decreased by $15,000, noninterest income
decreased by $68,000, and noninterest expense decreased by $58,000.
Net income, after tax, was $95,000, or $0.04 per diluted share, for
the three months ended March 31, 2007, compared to a net loss of
$22,000, or $0.01 per diluted share, for the three months ended
March 31, 2006. Net Interest Income. The Company's net interest
income before provision for loan losses increased by $178,000 in
the first quarter of 2007 compared to the first quarter of 2006.
This was attributable to an increase of $8.8 million in the average
balance of interest-earning assets, and an increase in net interest
margin from 3.56% to 3.76%. Provision for Loan Losses. Provision
for loan losses decreased by $15,000, from $17,000 in the first
quarter of 2006 to $2,000 in the first quarter of 2007. Noninterest
Income. Total noninterest income decreased by $68,000, from
$316,000 in the first quarter of 2006 to $248,000 in the first
quarter of 2007. This decrease was primarily due to declines of
$24,000 in income from annuity and mutual funds sales, $24,000 in
service charges on deposit accounts, and $18,000 in gains on sale
of mortgage loans held for sale due to decreased loan origination
volume. Noninterest Expense. Total noninterest expense decreased by
$58,000, from $2.0 million in the first quarter of 2006 to $1.95
million in the first quarter of 2007. Contract employee,
professional fee and marketing expenses declined by $96,000,
$20,000 and $19,000, respectively. These decreases in noninterest
expenses were partially offset by a $76,000 increase in
compensation expense, $32,000 of which was attributable to first
quarter 2007 stock option expense related to the Heritage 2006
Equity Incentive Plan, which was approved by the Company's
stockholders on December 28, 2006. Income Taxes. The Company's
income tax expense for the quarter ended March 31, 2007 was
$47,000, which represented an effective tax rate of 33.0%, compared
to a tax benefit of $19,000 for the first quarter of 2006.
Financial Condition of the Company Total Assets. The Company's
total assets increased by $5.5 million, or 2.7%, from $206.2
million at March 31, 2006 to $211.8 million at March 31, 2007. The
increase in assets resulted primarily from a $4.3 million increase
in the ending balance of loans held for investment. Funds Sold and
Investment Securities. Total federal funds sold and investment
securities available for sale were $53.1 million at March 31, 2007,
unchanged from the combined balances at March 31, 2006. During the
first quarter of 2007, the Company changed the mix of these
investments by purchasing $35.8 million of FHLMC / FNMA balloon
mortgage-backed securities with an average remaining balloon
maturity of approximately 3.7 years. Loans. Loans held for
investment, net, at March 31, 2007 were $140.2 million, which
represents an increase of $4.3 million, or 3.1%, from the loan
balance of $135.9 million at March 31, 2006. Asset Quality. The
Company's total nonperforming assets decreased to $188,000, or
0.09% of assets, at March 31, 2007, compared to $259,000, or 0.13%
of assets, at March 31, 2006, attributable to a decrease in the
balance of nonaccrual loans. Deposits. Driven by growth in core
deposits, total deposits increased by $7.0 million, or 4.0%, from
$176.8 million at March 31, 2006 to $183.8 million at March 31,
2007. Core deposits, which are comprised of checking, savings and
money market accounts, increased by $19.7 million, or 18.4%, from
$107.2 million at March 31, 2006 to $126.9 million at March 31,
2007. This increase in core deposits was partially offset by a
$12.7 million decrease in certificate of deposit balances. Borrowed
Funds. Borrowed funds decreased by $10.1 million, from $12.1
million at March 31, 2006 to $2.0 million at March 31, 2007,
primarily due to the repayment in October 2006 of the Bank's $10.0
million FHLB advance. Capital. Stockholders' equity increased by
$8.4 million, or 53.0%, from $16.0 million at March 31, 2006 to
$24.4 million at March 31, 2007. Stockholders' equity increased
primarily as a result of $8.2 million in total net capital raised
in connection with sales of the Company's common stock in private
placements that closed in June, July and December 2006. The tables
attached to and incorporated within this release present in greater
detail certain of the unaudited financial information described
above. About Heritage Heritage is the parent company of Heritage
Bank (http://www.heritagebankva.com/). Heritage Bank has four
full-service branches in the city of Norfolk, and one full-service
branch in the city of Virginia Beach. Heritage Bank provides a full
range of banking services including business, personal and mortgage
loans. Forward Looking Statements The press release contains
statements that constitute "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements address future events,
developments or results and typically use words such as believe,
anticipate, expect, intend, plan, forecast, outlook, or estimate.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause Heritage's actual
results, performance, achievements, and business strategy to differ
materially from the anticipated results, performance, achievements
or business strategy expressed or implied by such forward-looking
statements. Factors that could cause such actual results,
performance, achievements and business strategy to differ
materially from anticipated results, performance, achievements and
business strategy include: general and local economic conditions,
competition, capital requirements of the planned expansion,
customer demand for Heritage's banking products and services, and
the risks and uncertainties described in Heritage's most recent
Form 10-KSB filed with the Securities and Exchange Commission.
Heritage disclaims any intention or obligation to update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise. HERITAGE BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS (in thousands) At March 31, 2007 2006
(unaudited) (unaudited) ASSETS Cash and due from banks $7,253
$7,347 Federal funds sold 10,564 45,255 Securities available for
sale, at fair value 42,604 7,894 Securities held to maturity, at
cost 678 681 Loans, net Held for investment, net of allowance for
loan losses 140,189 135,921 Held for sale 287 263 Accrued interest
receivable 831 615 Stock in Federal Reserve Bank, at cost 401 65
Stock in Federal Home Loan Bank of Atlanta, at cost 313 859
Premises and equipment, net 7,338 5,751 Other assets 1,305 1,578
Total assets $211,763 $206,229 LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities Deposits Noninterest bearing $47,401 $44,084
Interest-bearing 136,401 132,673 Total deposits 183,802 176,757
Federal Home Loan Bank Advance -- 10,000 Securities sold under
agreements to repurchase 1,962 2,070 Other borrowings 50 50 Accrued
interest payable 360 374 Other liabilities 1,154 1,005 Total
liabilities 187,328 190,256 Stockholders' equity Common stock, $5
par value - authorized 3,000,000 shares; issued and outstanding:
2,278,652 shares at March 31, 2007; 1,714,668 shares at March 31,
2006 11,393 8,573 Additional paid-in capital 6,069 315 Retained
earnings 6,931 7,114 Accumulated other comprehensive income (loss),
net 42 (29) Total stockholders' equity 24,435 15,973 Total
liabilities and stockholders' equity $211,763 $206,229 HERITAGE
BANKSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands,
except per share data) Three Months Ended March 31, 2007 2006
(unaudited) (unaudited) Interest income Loans and fees on loans
$2,443 $2,298 Taxable investment securities 404 62 Nontaxable
investment securities 12 12 Dividends on FRB and FHLB stock 11 11
Interest on federal funds sold 289 491 Total interest income 3,159
2,874 Interest expense Deposits 1,270 1,054 Borrowings 39 148 Total
interest expense 1,309 1,202 Net interest income 1,850 1,672
Provision for loan losses 2 17 Net interest income after provision
for loan losses 1,848 1,655 Noninterest income Service charges on
deposit accounts 126 150 Gains on sale of loans held for sale, net
30 48 Gain on sale of investment securities 1 -- Late charges and
other fees on loans 15 16 Other 76 102 Total noninterest income 248
316 Noninterest expense Compensation 1,110 1,034 Data processing
130 132 Occupancy 123 124 Furniture and equipment 137 155 Taxes and
licenses 54 40 Professional fees 92 112 Contract employee services
5 101 Marketing 41 60 Telephone 41 22 Stationery and supplies 37 44
Other 184 188 Total noninterest expense 1,954 2,012 Income (loss)
before provision for income taxes 142 (41) Provision for (benefit
from) income taxes 47 (19) Net income (loss) $95 $(22) Earnings
(loss) per common share Basic $0.04 $(0.01) Diluted $0.04 $(0.01)
Dividends per share $0.06 $0.06 Weighted average shares outstanding
- basic 2,278,362 1,714,668 Effect of dilutive stock options 28,396
37,644 Weighted average shares outstanding - assuming dilution
2,306,758 1,752,312 HERITAGE BANKSHARES, INC. OTHER SELECTED
FINANCIAL INFORMATION (Unaudited) (in thousands, except share and
per share data) Three Months Ended March 31, 2007 2006 Financial
ratios Annualized return on average assets 0.18% (0.04%) Annualized
return on average equity 1.57% (0.55%) Average equity to average
assets 11.49% 7.71% Equity to assets, at period-end 11.54% 7.75%
Net interest margin 3.76% 3.56% Per common share Earnings per share
- basic $0.04 $(0.01) Earnings per share - diluted $0.04 $(0.01)
Book value per share $10.72 $9.32 Dividends declared per share
$0.06 $0.06 Common stock outstanding 2,278,652 1,714,668 Weighted
average basic shares outstanding 2,278,362 1,714,668 Weighted
average diluted shares 2,306,758 1,752,312 Asset quality Nonaccrual
loans $162 $226 Accruing loans past due 90 days or more 26 33 Total
nonperforming loans 188 259 Real estate owned, net -- -- Total
nonperforming assets $188 $259 Nonperforming assets to total assets
0.09% 0.13% Allowance for loan losses Balance, beginning of period
$1,373 $1,335 Provision for loan losses 2 17 Loans charged-off (8)
(19) Recoveries 6 29 Balance, end of period $1,373 $1,362 Allowance
for loan losses to gross loans held for investment, net of unearned
fees and costs 0.97% 0.99% DATASOURCE: Heritage Bankshares, Inc.
CONTACT: Michael S. Ives of Heritage Bankshares, Inc.,
+1-757-648-1601 Web site: http://www.heritagebankva.com/
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