Hsbc Icav Gl Sk (LSE:HBKS)
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NORFOLK, Va., April 24 /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 first quarter 2008. Net income, after tax, for the quarter ended March 31, 2008 was $47,000, or $0.02 per diluted share, compared to net income, after tax, of $100,000, or $0.04 per diluted share, for the first quarter of 2007.
Michael S. Ives, President and CEO of the Company and the Bank, commented:
"Our financial results for the First Quarter continue to reflect transitional costs for the Company. The Company incurred approximately $32,000 of expense related to the opening of our Lynnhaven Banking Center and the simultaneous closing of the nearby Little Neck Banking Center.
"In addition, our courier expense rose by approximately $48,000 for the Quarter as we have undertaken major changes in our courier program. We expect to complete these changes by the end of the Third Quarter of 2008 with significant reductions in our courier expense thereafter.
"After the opening of our Hilltop Banking Center in late 2008 or early 2009, we expect that we will have completed our repositioning and transitional activities. Thereafter, we believe that net interest income from our asset growth is likely to result in direct increases in our overall profitability because there should only be limited incremental expenses associated with this growth.
"While the financial benefits of the transition of our Company will be realized in the future, other tangible benefits are being realized now. For example, as of March 31, 2008, our loans less than 90 days delinquent were only $13,000 or 0.01% of our total loan portfolio, and we did not have any net charge-offs, nonaccrual loans or real estate owned. These are remarkable statistics in a challenging economic environment. We cannot realistically expect our loan portfolio to continue to perform at these levels during a prolonged economic downturn, but the improvement in our asset quality over the past several years is obvious and a direct result of the Company's conservative lending program."
Comparison of Operating Results for the Three Months Ended March 31, 2008 and 2007
Overview. The Company's pretax income was $82,000 for the first quarter of 2008, compared to a pretax income of $150,000 for the first quarter of 2007, a decrease of $68,000. Compared to the first quarter of 2007, net interest income increased by $35,000, provision for loan losses decreased by $2,000, noninterest income decreased by $8,000, and noninterest expense increased by $97,000. Net income, after tax, was $47,000, or $0.02 per diluted share, for the three months ended March 31, 2008, compared to a net income, after tax, of $100,000, or $0.04 per diluted share, for the three months ended March 31, 2007.
Net Interest Income. The Company's net interest income before provision for loan losses increased by $35,000 in the first quarter of 2008 compared to the first quarter of 2007. This increase in net interest income was primarily attributable to a 19 basis point increase in the net interest spread, from 2.60% in the three months ended March 31, 2007 to 2.79% in the three months ended March 31, 2008. The net interest margin decreased by 8 basis points, from 3.77% to 3.69% during the comparable periods primarily as a result of the impact of a $5.5 million increase in average interest-earning assets, offset by a $7.8 million increase in average interest-bearing liabilities and a $122,000 decrease in average noninterest-bearing deposits.
Provision for Loan Losses. There was no provision for loan losses in the first quarter of 2008 compared to a $2,000 provision in the first quarter of 2007.
Noninterest Income. Total noninterest income decreased by $8,000, from $248,000 in the first quarter of 2007 to $240,000 in the first quarter of 2008.
Noninterest Expense. Total noninterest expense increased by $97,000, from $1.95 million in the first quarter of 2007 to $2.05 million in the first quarter of 2008. This increase in noninterest expense was driven by a $97,000 increase in occupancy - related expense attributable primarily to our new Downtown office and to a $20,000 charge taken upon the relocation of the Bank's Little Neck office to the new Lynnhaven office, and a $48,000 increase in courier expense. These increases were partially offset by a $40,000 decrease in compensation expense related largely to lower salary and benefit costs in the first quarter of 2008, compared to the comparable quarter in 2007.
Income Taxes. The Company's income tax expense for the quarter ended March 31, 2008 was $35,000, which represented an effective tax rate of 43.0%, compared to income tax expense of $50,000 for the first quarter of 2007, which represented an effective tax rate of 33.0%. The effective tax rate increased in the first quarter of 2008 due to 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 $24.2 million, or 11.4%, from $211.8 million at March 31, 2007 to $236.0 million at March 31, 2008. The increase in assets resulted primarily from a $19.8 million, or 14.2%, 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 $55.4 million at March 31, 2008, compared to $53.2 million at March 31, 2007.
Loans. Loans held for investment, net, at March 31, 2008 were $160.0 million, which represents an increase of $19.8 million, or 14.2%, from the loan balance of $140.2 million at March 31, 2007.
Asset Quality. The Company's total nonperforming assets decreased to $36,000, or 0.02% of assets, at March 31, 2008, compared to $188,000, or 0.09% of assets, at March 31, 2007, attributable to a decrease in the balance of nonaccrual loans. At March 31, 2008, loans delinquent less than 90 days were $13,000, or 0.01% of total gross loans held for investment, compared to $60,000, or 0.04% of total gross loans at the comparable quarter in 2007. Total loans delinquent at March 31, 2008 were $49,000, or 0.03%, of gross loans held for investment, compared to $248,000, or 0.18%, at March 31, 2007.
Deposits. Driven by growth in core deposits, total ending deposit balances increased by $17.7 million, or 9.6%, from $183.8 million at March 31, 2007 to $201.5 million at March 31, 2008. Core deposits, which are comprised of checking, savings and money market accounts, increased by $22.5 million, or 17.7%, from $126.9 million at March 31, 2007 to $149.4 million at March 31, 2008. This increase in core deposits was partially offset by a $4.8 million decrease in certificate of deposit balances.
Average total deposits decreased by $1.6 million, or 0.90%, from $184.1 million during the three months ended March 31, 2007 to $182.5 million during the three months ended March 31, 2008. Average core deposits increased by $9.7 million, offset by a $11.3 million decrease in average balances of certificate of deposits, between the comparable quarters.
Borrowed Funds. Borrowed funds increased by $5.1 million, from $2.0 million at March 31, 2007 to $7.1 million at March 31, 2008, primarily due to a $5.0 million FHLB intermediate term advance at a fixed rate of 2.40% in the first quarter of 2008.
Capital. Stockholders' equity increased by $1.1 million, or 4.4%, from $24.4 million at March 31, 2007 to $25.5 million at March 31, 2008. Stockholders' equity increased primarily as a result of a $320,000 increase in retained earnings, and a $617,000 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.
The tables attached to and incorporated within this release present in greater detail certain of the unaudited financial information described above.
Dividend
On April 23, 2008, Heritage's Board of Directors declared a $0.06 per share dividend on Heritage's common stock. The dividend will be paid on June 13, 2008 to shareholders of record on June 4, 2008.
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,
2008 2007
(unaudited) (unaudited)
ASSETS
Cash and due from banks $6,322 $7,253
Federal funds sold 17,255 10,564
Securities available for sale, at fair value 38,182 42,604
Securities held to maturity, at cost 576 678
Loans, net
Held for investment, net of allowance for
loan losses 160,038 140,199
Held for sale 279 287
Accrued interest receivable 725 821
Stock in Federal Reserve Bank, at cost 313 313
Stock in Federal Home Loan Bank of Atlanta,
at cost 668 401
Premises and equipment, net 10,618 7,338
Other assets 1,022 1,313
Total assets $235,998 $211,771
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest bearing $60,940 $47,401
Interest-bearing 140,531 136,401
Total deposits 201,471 183,802
Federal Home Loan Bank Advance 5,000 -
Securities sold under agreements to repurchase 2,062 1,962
Other borrowings 50 50
Accrued interest payable 304 360
Other liabilities 1,594 1,157
Total liabilities 210,481 187,331
Stockholders' equity
Common stock, $5 par value - authorized
3,000,000 shares; issued and outstanding:
2,278,652 shares at March 31, 2008;
2,278,652 shares at March 31, 2007 11,393 11,393
Additional paid-in capital 6,209 6,069
Retained earnings 7,256 6,936
Accumulated other comprehensive income, net 659 42
Total stockholders' equity 25,517 24,440
Total liabilities and stockholders' equity $235,998 $211,771
HERITAGE BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data) Three Months Ended
March 31,
2008 2007
(unaudited) (unaudited)
Interest income
Loans and fees on loans $2,517 $2,443
Taxable investment securities 463 404
Nontaxable investment securities 13 12
Dividends on FRB and FHLB stock 18 11
Interest on federal funds sold 39 289
Other interest income 2 3
Total interest income 3,052 3,162
Interest expense
Deposits 1,056 1,270
Borrowings 108 39
Total interest expense 1,164 1,309
Net interest income 1,888 1,853
Provision for loan losses - 2
Net interest income after provision for loan losses 1,888 1,851
Noninterest income
Service charges on deposit accounts 107 126
Gains on sale of loans held for sale, net 45 30
Gain on sale of investment securities - 1
Late charges and other fees on loans 11 15
Other 77 76
Total noninterest income 240 248
Noninterest expense
Compensation 1,072 1,112
Data processing 135 130
Occupancy 214 139
Furniture and equipment 149 127
Taxes and licenses 68 54
Professional fees 95 90
Marketing 37 41
Telephone 26 35
Stationery and supplies 20 32
Other 230 189
Total noninterest expense 2,046 1,949
Income (loss) before provision for income taxes 82 150
Provision for (benefit from) income taxes 35 50
Net income (loss) $47 $100
Earnings (loss) per common share
Basic $0.02 $0.04
Diluted $0.02 $0.04
Dividends per share $0.06 $0.06
Weighted average shares outstanding - basic 2,278,652 2,278,362
Effect of dilutive stock options - -
Weighted average shares outstanding - assuming
dilution 2,278,652 2,278,362
HERITAGE BANKSHARES, INC.
OTHER SELECTED FINANCIAL INFORMATION
(Unaudited)
(in thousands, except share and per share data)
Three Months Ended
March 31,
2008 2007
Financial ratios
Annualized return on average assets 0.08% 0.19%
Annualized return on average equity 0.74% 1.66%
Average equity to average assets 11.43% 11.49%
Equity to assets, at period-end 10.81% 11.54%
Net interest margin 3.69% 3.77%
Per common share
Earnings per share - basic $0.02 $0.04
Earnings per share - diluted $0.02 $0.04
Book value per share $11.20 $10.73
Dividends declared per share $0.06 $0.06
Common stock outstanding 2,278,652 2,278,652
Weighted average basic shares outstanding 2,278,652 2,278,362
Weighted average diluted shares 2,278,652 2,278,362
Asset quality
Nonaccrual loans $- $162
Accruing loans past due 90 days or more 36 26
Total nonperforming loans 36 188
Real estate owned, net - -
Total nonperforming assets $36 $188
Nonperforming assets to total assets 0.02% 0.09%
Allowance for loan losses
Balance, beginning of period $1,400 $1,373
Provision for loan losses - 2
Loans charged-off - (8)
Recoveries 92 6
Balance, end of period $1,492 $1,373
Allowance for loan losses to gross loans held
for investment, net of unearned fees and costs 0.92% 0.97%
DATASOURCE: Heritage Bankshares, Inc.
CONTACT: Michael S. Ives of Heritage Bankshares, Inc., +1-757-648-1601
Web site: http://www.heritagebankva.com/