NORFOLK, Va., July 27 /PRNewswire-FirstCall/ -- Heritage
Bankshares, Inc. ("Heritage"; the "Company") (OTC:HBKS) (BULLETIN
BOARD: HBKS) , the parent of Heritage Bank (the "Bank"), today
announced unaudited financial results for the second quarter and
first six months of 2009. On June 30, 2009 all federally insured
financial institutions were required to record a FDIC special
assessment expense based primarily on institution assets on that
date, and accordingly the Company recorded a special assessment
expense of $121,000, or $79,860 after tax, at the end of the second
quarter. Excluding this FDIC special assessment, net income, after
tax, for the quarter ended June 30, 2009 was $311,000, or $0.14 per
diluted share, compared to net income, after tax, of $180,000, or
$0.08 per diluted share, for the second quarter of 2008. Excluding
the special assessment, net income, after tax, for the first six
months of 2009 was $463,000, or $0.20 per diluted share, compared
to net income, after tax, of $210,000, or $0.09 per diluted share,
for the same period in 2008. Including the FDIC special assessment
expense, net income, after tax, for the quarter ended June 30, 2009
was $231,000, or $0.10 per diluted share, compared to net income,
after tax, of $180,000, or $0.08 per diluted share, for the second
quarter of 2008; and net income, after tax, for the first six
months of 2009 was $383,000, or $0.17 per diluted share, compared
to net income, after tax, of $210,000, or $0.09 per diluted share,
for the same period in 2008. Michael S. Ives, President and CEO of
the Company and the Bank, commented: "Excluding the impact of the
FDIC Special Assessment, our net income for the second quarter of
2009 improved substantially over our net income for the second
quarter of 2008. The primary driver of this improvement was the
increase in our net interest income of approximately $500,000
during the first six months of 2009, stemming from our asset growth
as well as an improvement in our net interest spread. Furthermore,
just as we have stated on many occasions, our noninterest expense
has remained somewhat stable as we have increased our assets. In
fact, our noninterest expense actually declined comparing the first
six months of 2009 to the first six months of 2008, excluding the
increase in FDIC assessments during 2009. Ives continued:
"Notwithstanding the ongoing recession, our asset quality continues
to be excellent with nonperforming assets constituting only 0.18%
of our total assets. Nevertheless, it is probable that there will
be some deterioration in our loan portfolio from the recession over
time. We will continue to be vigilant to minimize the adverse
impact on the Company from any such deterioration, if it were to
occur." Comparison of Operating Results for the Three Months Ended
June 30, 2009 and 2008 Overview. The Company's pretax income was
$349,000 for the second quarter of 2009, compared to a pretax
income of $283,000 for the second quarter of 2008. Compared to the
second quarter of 2008, net interest income increased by $263,000,
provision for loan losses increased by $21,000, noninterest income
increased by $2,000 and noninterest expense increased by $178,000.
Net income, after tax, was $231,000, or $0.10 per diluted share,
for the three months ended June 30, 2009, compared to net income,
after tax, of $180,000, or $0.08 per diluted share, for the three
months ended June 30, 2008. Net Interest Income. The Company's net
interest income before provision for loan losses increased by
$263,000 in the second quarter of 2009 compared to the second
quarter of 2008. This increase was primarily attributable to an
increase of $31.3 million in the average balance of
interest-earning assets, which more than offset an increase of
$21.1 million in average interest-bearing liabilities, and to an
increase in net interest spread from 3.07% to 3.31%. Net interest
margin decreased by 6 basis points, from 3.80% in the second
quarter of 2008 to 3.74% in the second quarter of 2009. Provision
for Loan Losses. Provision for loan losses for the three months
ended June 30, 2009 was $21,000 compared to no provision for the
three months ended June 30, 2008. Net charge-offs totaled $2,000 in
the second quarter of 2009 compared to net recoveries of $100,000
in the second quarter of 2008. Noninterest Income. Total
noninterest income increased by $2,000, from $215,000 in the second
quarter of 2008 to $217,000 in the second quarter of 2009. This
increase was primarily due to a Bank-owned life insurance net death
benefit of $35,000 recorded in the second quarter of 2009, largely
offset by a decrease of $10,000 in late charges and other fees on
loans and a decrease of $20,000 in gains on sales of mortgage loans
held for sale. Noninterest Expense. Total noninterest expense
increased by $178,000, from $2.0 million in the second quarter of
2008 to $2.1 million in the second quarter of 2009. This increase
in noninterest expense was driven primarily by a $176,000 increase
in FDIC insurance expense, a $22,000 increase in professional fees,
a $22,000 increase in shareholder expense and a $23,000 increase in
expenses and impairments on other real estate owned, partially
offset by a $68,000 decrease in courier expense. The $176,000
increase in FDIC insurance expense included a $121,000 charge for
the FDIC's special assessment at June 30, 2009. Income Taxes. The
Company's income tax expense for the quarter ended June 30, 2009
was $118,000, which represented an effective tax rate of 33.8%,
compared to income tax expense of $103,000 for the quarter ended
June 30, 2008, which represented an effective tax rate of 36.2%.
The lower effective tax rate in the second quarter of 2009 was
primarily attributable to nontaxable Bank-owned life insurance
income recorded in the second quarter of 2009. Comparison of
Operating Results for the Six Months Ended June 30, 2009 and 2008
Overview. The Company's pretax income was $547,000 for the first
six months of 2009, compared to a pretax income of $338,000 for the
first six months of 2008, an increase of $209,000. Compared to the
first six months of 2008, net interest income increased by
$525,000, provision for loan losses increased by $76,000,
noninterest income decreased by $86,000 and noninterest expense
increased by $154,000. Net income, after tax, was $383,000, or
$0.17 per diluted share, for the six months ended June 30, 2009,
compared to after-tax net income of $210,000, or $0.09 per diluted
share, for the six months ended June 30, 2008. Net Interest Income.
The Company's net interest income before provision for loan losses
increased by $525,000 for the first six months of 2009 compared to
the first six months of 2008. This increase was primarily
attributable to an increase of $33.2 million in the average balance
of interest-earning assets, which more than offset an increase of
$22.8 million in average interest-bearing liabilities, and to an
increase in net interest spread from 2.93% to 3.25%. Net interest
margin decreased by 5 basis points, from 3.74% for the first six
months of 2008 to 3.69% for the first six months of 2009. Provision
for Loan Losses. Provision for loan losses for the six months ended
June 30, 2009 was $76,000 compared to no provision for the six
months ended June 30, 2008. There were no net recoveries in the six
months ended June 30, 2009 compared to $192,000 in net recoveries
for the six months ended June 30, 2008. Noninterest Income. Total
noninterest income decreased by $86,000, from $464,000 in the first
six months of 2008 to $378,000 in the first six months of 2009.
This decrease was primarily related to an $18,000 decrease in
service charges on deposits and a $65,000 decrease in gains on
sales of mortgage loans held for sale. Noninterest Expense. Total
noninterest expense increased by $154,000, from $4.0 million in the
first six months of 2008 to $4.2 million in the first six months of
2009. Increases of $224,000, $54,000, $24,000 and $23,000 in FDIC
insurance expense, professional fees, shareholder expense and
expenses and impairments on other real estate owned, respectively,
were partially offset by decreases of $134,000 and $30,000 in
courier expense and compensation expense, respectively. Income
Taxes. The Company's income tax expense for the six months ended
June 30, 2009 was $164,000, which represented an effective tax rate
of 30.0%, compared to income tax expense for the six months ended
June 30, 2008 of $128,000, which represented an effective tax rate
of 38.1%. The lower effective tax rate for the first six months of
2009 was primarily attributable to a $48,000 tax benefit resulting
from an increase in nonqualified stock options related to certain
of the stock options that were repriced in the first quarter of
2009 and to nontaxable life insurance income recorded in the second
quarter of 2009. The effective tax rate for the first six months of
2008 resulted from a higher percentage of net non-deductible items
relative to pre-tax income. Financial Condition of the Company
Total Assets. The Company's total assets increased by $30.8
million, or 13.0%, from $236.4 million at June 30, 2008 to $267.2
million at June 30, 2009. The increase in assets resulted primarily
from increases of $17.5 million and $11.3 million in the ending
balances of securities available for sale and loans held for
investment, respectively. Funds Sold and Investment Securities.
Total federal funds sold and investment securities available for
sale were $64.8 million at June 30, 2009, compared to a combined
balance of $46.0 million at June 30, 2008, reflecting an increase
in the combined balance of $18.8 million, or 40.8%. Loans. Loans
held for investment, net, at June 30, 2009 were $177.4 million,
which represents an increase of $11.3 million, or 6.8%, from the
June 30, 2008 loan balance of $166.1 million. Asset Quality. The
Company's total nonperforming assets increased to $487,000, or 0.18
% of assets, at June 30, 2009, compared to $36,000, or 0.02% of
assets, at June 30, 2008, attributable to an increase in the
balance of other real estate owned as well as increases in
nonaccrual and restructured loans. Deposits. Driven by continued
growth in core deposits, total deposits increased by $35.3 million,
or 18.1%, from $195.3 million at June 30, 2008 to $230.6 million at
June 30, 2009. Core deposits, which are comprised of checking,
savings and money market accounts, increased by $34.3 million, or
24.0%, from $142.7 million at June 30, 2008 to $177.0 million at
June 30, 2009. Average total deposits increased by $29.4 million,
or 15.5%, from $190.1 million for the six months ended June 30,
2008 to $219.5 million for the six months ended June 30, 2009.
Average core deposits increased by $28.2 million and average
certificates of deposit balances increased by $1.2 million between
the comparable six month periods. Borrowed Funds. Due to the
increase in deposit balances, borrowed funds decreased by $5.4
million, from $14.0 million at June 30, 2008 to $8.6 million at
June 30, 2009. Capital. Stockholders' equity increased by $936,000,
or 3.7%, from $25.3 million at June 30, 2008 to $26.2 million at
June 30, 2009. Stockholders' equity increased primarily as a result
of a $288,000 increase in retained earnings, a $227,000 increase in
additional paid-in capital and a $390,000 increase in accumulated
after-tax comprehensive income attributable to an increase in the
market value of the Company's available-for-sale investment
securities portfolio. Certain reclassifications have been made to
prior period financial statements to conform them to the current
period presentation. The unaudited financial statements and
accompanying information contained in this press release reflect
the impact of corrections to FDIC insurance expense related to
prior periods. Specifically, as a result of such corrections to
prior-period FDIC insurance expense, retained earnings at June 30,
2008 decreased by $42,397 compared to the originally-reported
amount; and retained earnings at March 31, 2009 decreased by
$77,438 compared to the originally-reported amount, after taking
into account the tax-effect of the cumulative correction. Further,
after-tax net income for the three months ended June 30, 2008
decreased by $4,000, from $184,000, originally reported, to
$180,000 (earnings were $0.08 per diluted share both before and
after the correction). After-tax net income for the six months
ended June 30, 2008 decreased by $21,000, from $231,000, or $0.10
per diluted share as originally reported, to $210,000, or $0.09 per
diluted share. The tables attached to and incorporated within this
release present in greater detail certain of the unaudited
financial information described above. Dividend On July 22, 2009,
the Company's Board of Directors declared a $0.06 per share
dividend on its common stock. The dividend will be paid on August
14, 2009 to shareholders of record on August 3, 2009. 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 two full-service
branches 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-K 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 June 30,
---------------------------- 2009 2008 ----------- -----------
(unaudited) (unaudited) ASSETS Cash and due from banks $9,287
$9,020 Federal funds sold 9,302 8,049 Securities available for
sale, at fair value 55,461 37,940 Securities held to maturity, at
cost - 575 Loans, net Held for investment, net of allowance for
loan losses 177,359 166,047 Held for sale - 417 Accrued interest
receivable 666 704 Stock in Federal Reserve Bank, at cost 324 320
Stock in Federal Home Loan Bank of Atlanta, at cost 1,476 983
Premises and equipment, net 12,112 11,090 Other real estate owned
165 - Other assets 1,028 1,216 -------- -------- Total assets
$267,180 $236,361 ======== ======== LIABILITIES AND STOCKHOLDERS'
EQUITY Liabilities Deposits Noninterest-bearing $76,392 $58,896
Interest-bearing 154,270 136,417 -------- -------- Total deposits
230,662 195,313 -------- -------- Federal Home Loan Bank Advances
5,000 13,000 Securities sold under agreements to repurchase 3,626
919 Other borrowings - 50 Accrued interest payable 194 247 Other
liabilities 1,500 1,570 -------- -------- Total liabilities 240,982
211,099 -------- -------- Stockholders' equity Common stock, $5 par
value - authorized 3,000,000 shares; issued and outstanding:
2,284,852 shares at June 30, 2009; 2,278,652 shares at June 30,
2008 11,424 11,393 Additional paid-in capital 6,474 6,247 Retained
earnings 7,548 7,260 Accumulated other comprehensive income, net
752 362 -------- -------- Total stockholders' equity 26,198 25,262
-------- -------- Total liabilities and stockholders' equity
$267,180 $236,361 ======== ======== HERITAGE BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share
data) Three Months Ended Six Months Ended June 30 June 30
----------------------- ----------------------- 2009 2008 2009 2008
----------- ----------- ----------- ----------- (unaudited)
(unaudited) (unaudited) (unaudited) Interest income Loans and fees
on loans $2,259 $2,426 $4,469 $4,943 Taxable investment securities
610 441 1,176 905 Nontaxable investment securities - 13 - 25
Dividends on FRB and FHLB stock 5 14 10 32 Interest on federal
funds sold - 43 1 82 Other interest income 14 1 24 3 -----------
----------- ----------- ----------- Total interest income 2,888
2,938 5,680 5,990 Interest expense Deposits 564 874 1,167 1,931
Borrowings 36 39 75 146 ----------- ----------- -----------
----------- Total interest expense 600 913 1,242 2,077 Net interest
income 2,288 2,025 4,438 3,913 Provision for loan losses 21 - 76 -
----------- ----------- ----------- ----------- Net interest income
after provision for loan losses 2,267 2,025 4,362 3,913 -----------
----------- ----------- ----------- Noninterest income Service
charges on deposit accounts 95 99 187 205 Late charges and other
fees on loans 11 21 23 33 Gains on sale of loans held for sale, net
3 23 3 68 Gain on sale of investment securities - - - 5 Income from
bank-owned life insurance 35 - 35 - Other 73 72 130 153 -----------
----------- ----------- ----------- Total noninterest income 217
215 378 464 Noninterest expense Compensation 1,003 1,012 2,054
2,084 Data processing 132 141 259 276 Occupancy 204 192 422 406
Furniture and equipment 166 140 327 288 Taxes and licenses 69 64
136 132 Professional fees 87 65 214 160 FDIC insurance 208 32 288
64 Marketing 29 40 55 77 Telephone 26 25 54 51 Stationery and
supplies 13 26 35 45 Other 198 220 349 456 ----------- -----------
----------- ----------- Total noninterest expense 2,135 1,957 4,193
4,039 Income before provision for income taxes 349 283 547 338
Provision for income taxes 118 103 164 128 ----------- -----------
----------- ----------- Net income $231 $180 $383 $210 ===========
=========== =========== =========== Earnings per common share Basic
$0.10 $0.08 $0.17 $0.09 =========== =========== ===========
=========== Diluted $0.10 $0.08 $0.17 $0.09 =========== ===========
=========== =========== Dividends per share $0.06 $0.06 $0.12 $0.12
=========== =========== =========== =========== Weighted average
shares outstanding - basic 2,283,115 2,278,652 2,281,184 2,278,652
Effect of dilutive stock options 13,199 11,898 11,820 15,116
----------- ----------- ----------- ----------- Weighted average
shares outstanding - diluted 2,296,314 2,290,550 2,293,004
2,293,768 =========== =========== =========== =========== HERITAGE
BANKSHARES, INC. OTHER SELECTED FINANCIAL INFORMATION (Unaudited)
(in thousands, except share and per share data) Three Months Ended
Six Months Ended June 30, June 30, --------------------
-------------------- 2009 2008 2009 2008 --------- ---------
--------- --------- Financial ratios Annualized return on average
assets 0.35% 0.31% 0.30% 0.19% Annualized return on average equity
3.54% 2.84% 2.96% 1.65% Average equity to average assets 9.99%
10.98% 10.02% 11.20% Equity to assets, at period-end 9.81% 10.69%
9.81% 10.69% Net interest margin 3.74% 3.80% 3.69% 3.74% Per common
share Earnings per share - basic $0.10 $0.08 $0.17 $0.09 Earnings
per share - diluted $0.10 $0.08 $0.17 $0.09 Book value per share
$11.47 $11.09 $11.47 $11.09 Dividends declared per share $0.06
$0.06 $0.12 $0.12 Common stock outstanding 2,284,852 2,278,652
2,284,852 2,278,652 Weighted average shares outstanding - basic
2,283,115 2,278,652 2,281,184 2,278,652 Weighted average shares
outstanding - diluted 2,296,314 2,290,550 2,293,004 2,293,768 Asset
quality Nonaccrual loans $111 $- $111 $- Accruing loans past due 90
days or more 8 36 8 36 --------- --------- --------- ---------
Total nonperforming loans 119 36 119 36 Restructured loans 203 -
203 - Other real estate owned, net 165 - 165 - --------- ---------
--------- --------- Total nonperforming assets $487 $36 $487 $36
========= ========= ========= ========= Nonperforming assets to
total assets 0.18% 0.02% 0.18% 0.02% Allowance for loan losses
Balance, beginning of period $1,709 $1,492 $1,652 $1,400 Provision
for loan losses 21 - 76 - Loans charged-off (22) (1) (30) (1)
Recoveries 20 101 30 193 --------- --------- --------- ---------
Balance, end of period $1,728 $1,592 $1,728 $1,592 =========
========= ========= ========= Allowance for loan losses to gross
loans held for investment, net of unearned fees and costs 0.96%
0.95% 0.96% 0.95% --------- --------- --------- ---------
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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