Heritage Commerce Corp Earns $2.4 Million in Third Quarter

SAN JOSE, Calif., Oct. 23, 2008 (GLOBE NEWSWIRE) -- Heritage Commerce Corp
(Nasdaq:HTBK), parent company of Heritage Bank of Commerce, today reported net
income of $2.4 million, or $0.21 per diluted share in the third quarter ended
September 30, 2008, compared to $3.2 million, or $0.24 per diluted share, for
the same quarter a year ago, and a net loss of $3.1 million, or ($0.26) per
diluted share for the second quarter of 2008. For the first nine months of 2008,
net income was $1.1 million, or $0.09 per diluted share, compared to $11.3
million, or $0.91 per diluted share, for the same period a year ago.

Third Quarter 2008 Financial Highlights

* Total assets were $1.51 billion, an increase of 14% from
September 30, 2007, and 2% from June 30, 2008.

* Loans increased 31% to $1.25 billion, an increase of $295 million
from the third quarter of 2007 and an increase of $41 million or
3% compared to June 30, 2008.

* Commercial loans accounted for 43% of the loan portfolio, compared
to 40% a year ago.

* The Company has no direct exposure to subprime loans or securities,
nor does it own any Fannie Mae or Freddie Mac equity securities.

* Capital ratios qualify as well capitalized by regulatory standards.
The leverage ratio was 8.27% at September 30, 2008.

* The regular quarterly cash dividend of $0.08 per share was
maintained in the quarter.
"Despite poor economic conditions and a volatile rate environment, I am happy to
report that our third quarter earnings demonstrate solid performance, primarily
due to the continued focus of our people on our customers," said Walter
Kaczmarek, President and Chief Executive Officer.

Balance Sheet and Capital Management

Heritage's assets totaled $1.51 billion at September 30, 2008, compared to $1.33
billion a year ago, and $1.49 billion at June 30, 2008. Total loans were $1.25
billion at September 30, 2008, compared to $0.95 billion at September 30, 2007,
and $1.21 billion at June 30, 2008. Deposits totaled $1.19 billion at September
30, 2008, compared to $1.10 billion at September 30, 2007, and $1.16 billion at
June 30, 2008.

The securities portfolio of $107.6 million at September 30, 2008 consisted
primarily of short term U.S. Treasury securities, U.S. government sponsored
entities' debt securities, mortgage-backed securities, collateralized mortgage
obligations, and municipal bonds.

The Company's loan portfolio at September 30, 2008 consisted of 43% commercial
loans, 32% commercial real estate mortgage loans, 20% land and construction, and
5% consumer and other loans.

The Company's deposits increased by 8% in the past year.

The Company's loan growth in the nine months ended September 30, 2008 outpaced
deposit growth, resulting in an increase in brokered deposits of $145 million
for the first nine months of 2008 and $76 million for the third quarter of 2008.
The Company's noncore funding (which consists of time deposits, $100,000 and
over, brokered deposits, securities sold under agreement to repurchase, and
other short-term borrowings) to total assets ratio was 32% at September 30,
2008, compared to 15% a year ago. The Company's loan to deposit ratio was 105%
at September 30, 2008, compared to 87% a year ago.

Shareholders' equity decreased to $144.3 million, or $8.18 tangible book value
per share, at September 30, 2008, compared to $168.4 million, or $9.18 tangible
book value per share, a year ago, and increased from $141.7 million, or $7.96
tangible book value per share, at June 30, 2008. Shareholders' equity and
regulatory capital ratios were lower at September 30, 2008, compared to the
prior year because of the buyback of 1.4 million common shares during the period
for $23.9 million. Capital ratios continue to be above the well-capitalized
guidelines established by regulatory agencies. The leverage ratio at September
30, 2008 was 8.27%, compared to 11.19% at September 30, 2007, and 8.36% at June
30, 2008.

Credit Quality

Primarily due to a softening in the real estate market, which is expected to
continue well into 2009, nonperforming assets ("NPAs") increased by $10.8
million from June 30, 2008 to September 30, 2008. Nonperforming assets totaled
$25.1 million, or 1.66% of total assets, at September 30, 2008, compared to $3.4
million, or 0.25% of total assets at September 30, 2007, and $14.3 million, or
0.96% of total assets at June 30, 2008.

Net charge-offs in the third quarter of 2008 were $129,000 or 0.04% of average
loans, compared to net recoveries of $868,000 or (0.37%) of average loans in the
third quarter of 2007. Net charge-offs in the second quarter of 2008 were
$370,000 or 0.13% of average loans.

The Company's provision for loan losses in the third quarter of 2008 was $1.6
million, which is primarily due to the $41 million in loan growth for the
quarter, and additional risk in the loan portfolio reflected in the increase in
nonperforming loans. The Company had a reverse provision of $500,000 in the
third quarter of 2007. The provision for loan losses was $7.8 million in the
second quarter of 2008. The total allowance for loan losses was $22.3 million at
September 30, 2008, compared to $11.5 million at September 30, 2007, and $20.9
million at June 30, 2008.

Operating Results

Net income during 2008 has been impacted by net interest margin compression, a
higher provision for loan losses, and lower noninterest income resulting from
the Company's strategic decision to retain, rather than sell, SBA loan
production.

Net interest income decreased to $13.0 million for the third quarter of 2008
from $13.8 million for the third quarter of 2007 and increased by $78,000 from
the second quarter of 2008. The third quarter of 2008 net interest margin was
3.83%, down 17 basis points, compared to 4.00% for the second quarter this year,
and 82 basis points from 4.65% in the third quarter a year ago. For 2008
year-to-date, the net interest margin decreased 88 basis points to 4.04% from
4.92% for the first nine months of 2007. Decreases in the net interest margin
are primarily the result of the 325 basis points decline in short-term interest
rates from September 1, 2007 through April 30, 2008. On October 8, 2008, the
Federal Reserve lowered the targeted federal funds rate by another 50 basis
points, to 1.50%.

Noninterest income was $1.7 million for the third quarter of 2008, compared to
$1.6 million for the third quarter of 2007, and $1.8 million for the prior
quarter. In the first nine months of 2008, noninterest income was $5.0 million,
compared to $6.4 million in the first nine months a year ago. Gains on sales of
SBA loans were $1.8 million in the first nine months of 2007, with no
corresponding income in 2008. Noninterest income was primarily comprised of loan
servicing income, the increase in cash surrender value of Company owned life
insurance, and service charges on deposit accounts.

Noninterest expense was $10.4 million for the third quarter of 2008, compared to
$10.5 million for the third quarter of 2007, and $11.0 million for the second
quarter of 2008. In the first nine months of 2008, noninterest expense increased
to $32.0 million from $27.3 million for the first nine months a year ago.
Operating expenses increased in 2008 due to the acquisition of Diablo Valley
Bank on June 20, 2007, the new office in Walnut Creek, the addition of
experienced banking professionals, and the write-off of leasehold improvements
in the third quarter of 2008 due to the consolidation of our two offices in Los
Altos.

Income tax expense for the quarter and nine months ended September 30, 2008 was
$309,000 and $39,000, respectively, as compared to income tax expense of $2.2
million and $6.5 million for the same periods in 2007. The effective income tax
rate for the quarter and nine months ended September 30, 2008 was 11.2% and
3.5%, respectively, as compared to an effective income tax rate of 40.0% and
36.4% for the same periods in 2007. For the quarter ended June 30, 2008, there
was an income tax benefit of $955,000, due to the pre-tax loss of $4.0 million.
The difference in the effective tax rate compared to the combined federal and
state statutory tax rate of 42% is primarily the result of the Company's
investment in life insurance policies whose earnings are not subject to taxes,
tax credits related to investments in low income housing limited partnerships
and investments in tax-free municipal securities. The effective tax rates in
2008 are lower compared to 2007 because pre-tax income decreased substantially
while benefits from tax advantaged investments did not.

The efficiency ratio was 70.56% in the third quarter of 2008, compared to 74.51%
in the second quarter of 2008, and 68.21% in the third quarter of 2007. The
efficiency ratio for the first nine months of 2008 increased to 72.48% from
61.64% a year ago. The efficiency ratio increased in 2008 primarily due to
compression of the net interest margin, a decrease in noninterest income, and an
increase in expenses, as discussed above.

The annualized returns on average assets (ROAA) and average equity (ROAE) for
the third quarter of 2008 were 0.65% and 6.78%, compared to 0.96% and 7.56% for
the quarter ended September 30, 2007, respectively. ROAA and ROAE for the first
nine months of 2008 were 0.10% and 0.95%, compared to 1.31% and 10.60% for the
first nine months of 2007, respectively. The annualized returns on average
tangible assets (ROATA) and average tangible equity (ROATE) for the third
quarter of 2008 were 0.67% and 10.15%, compared to 1.00% and 10.55% for the
quarter ended September 30, 2007, respectively. ROATA and ROATE for the first
nine months of 2008 were 0.10% and 1.39%, compared to 1.33% and 12.12% for the
first nine months of 2007, respectively.

Heritage Commerce Corp, a bank holding company established in February 1998, is
the parent company of Heritage Bank of Commerce, established in 1994 and
headquartered in San Jose with full-service branches in Los Gatos, Fremont,
Danville, Pleasanton, Walnut Creek, Morgan Hill, Gilroy, Mountain View, and Los
Altos. Heritage Bank of Commerce is an SBA Preferred Lender with Loan Production
Offices in Fresno, Sacramento, Oakland and Santa Rosa, California. For more
information, please visit www.heritagecommercecorp.com.

Forward Looking Statement Disclaimer

This release may contain forward-looking statements that are subject to risks
and uncertainties. Such risks and uncertainties may include, but are not
necessarily limited to, the Company's ability to sustain dividend payments,
fluctuations in interest rates and monetary policy established by the Federal
Reserve, inflation, government regulations, general economic conditions,
competition within the business areas in which the Company is conducting its
operations, including the real estate market in California, the ability to
recognize identified cost savings, and other factors beyond the Company's
control. Such risks and uncertainties could cause results for subsequent interim
periods or for the entire year to differ materially from those indicated. For a
discussion of factors which could cause results to differ, please see the
Company's reports on Forms 10-K and 10-Q as filed with the Securities and
Exchange Commission and the Company's press releases. Readers should not place
undue reliance on the forward-looking statements, which reflect management's
view only as of the date hereof. The Company undertakes no obligation to
publicly revise these forward-looking statements to reflect subsequent events or
circumstances.

Member FDIC

For the Three Percent
Months Ended: Change From:
CONSOLIDATED INCOME ---------------------------------- -------------
STATEMENTS Sept. June Sept. June Sept.
(in $000's, 30, 30, 30, 30, 30,
unaudited) 2008 2008 2007 2008 2007
------------------------------------------------------ -------------
Interest Income $ 19,197 $ 18,699 $ 22,105 3% -13%
Interest Expense 6,151 5,731 8,324 7% -26%
----------------------------------
Net Interest
Income 13,046 12,968 13,781 1% -5%
Provision for
Loan Losses 1,587 7,800 (500) -80% 417%
----------------------------------
Net Interest
Income after
Provision for
Loan Losses 11,459 5,168 14,281 122% -20%
Noninterest Income:
Gain on Sale
of SBA Loans 0 0 60 N/A -100%
Servicing Income 491 377 546 30% -10%
Increase in Cash
Surrender Value
of Life Insurance 416 418 374 0% 11%
Service Charges
and Fees on
Deposit Accounts 505 537 344 -6% 47%
Other 276 460 315 -40% -12%
----------------------------------
Total Noninterest
Income 1,688 1,792 1,639 -6% 3%
----------------------------------

Noninterest Expense:
Salaries &
Employee Benefits 5,665 5,970 5,840 -5% -3%
Occupancy &
Equipment 1,348 1,044 1,168 29% 15%
Other 3,384 3,984 3,510 -15% -4%
----------------------------------
Total Noninterest
Expense 10,397 10,998 10,518 -5% -1%
----------------------------------
Income (Loss)
Before Income
Taxes 2,750 (4,038) 5,402 168% -49%
Income Tax
Expense (Benefit) 309 (955) 2,162 132% -86%
----------------------------------
Net Income (Loss) $ 2,441 $ (3,083) $ 3,240 179% -25%
==================================

PER SHARE DATA
(unaudited)
Basic Earnings
(Loss) Per Share $ 0.21 $ (0.26) $ 0.24 181% -13%
Diluted Earnings
(Loss) Per Share $ 0.21 $ (0.26) $ 0.24 181% -13%
Common Shares
Outstanding at
Period End 11,820,509 11,806,167 13,123,396 0% -10%
Book Value
Per Share $ 12.21 $ 12.01 $ 12.83 2% -5%
Tangible Book
Value Per Share $ 8.18 $ 7.96 $ 9.18 3% -11%

KEY FINANCIAL RATIOS
(unaudited)
Annualized Return
on Average Equity 6.78% -8.34% 7.56% 181% -10%
Annualized Return
on Average
Tangible Equity 10.15% -12.30% 10.55% 183% -4%
Annualized Return
on Average Assets 0.65% -0.85% 0.96% 176% -32%
Annualized Return
on Average
Tangible Assets 0.67% -0.88% 1.00% 176% -33%
Net Interest Margin 3.83% 4.00% 4.65% -4% -18%
Efficiency Ratio 70.56% 74.51% 68.21% -5% 3%

AVERAGE BALANCES
(in $000's,
unaudited)
Average Assets $1,499,734 $1,456,396 $ 1,336,195 3% 12%
Average
Tangible Assets $1,452,044 $1,408,536 $ 1,287,936 3% 13%
Average
Earning Assets $1,353,730 $1,304,987 $ 1,175,396 4% 15%
Average Total Loans $1,231,931 $1,170,274 $ 933,675 5% 32%
Average Loans
Held-For-Sale $ 0 $ 0 $ 5,348 N/A -100%
Average Deposits $1,191,151 $1,169,860 $ 1,107,662 2% 8%
Average Demand
Deposits -
Noninterest
Bearing $ 261,578 $ 260,361 $ 263,465 0% -1%
Average Interest
Bearing Deposits $ 929,573 $ 909,499 $ 844,197 2% 10%
Average Interest
Bearing
Liabilities $1,066,264 $1,018,685 $ 878,799 5% 21%
Average Equity $ 143,318 $ 148,660 $ 170,136 -4% -16%
Average
Tangible Equity $ 95,628 $ 100,800 $ 121,877 -5% -22%

For the Nine Months Ended:
----------------------
CONSOLIDATED INCOME STATEMENTS Sept. 30, Sept. 30, Percent
(in $000's, unaudited) 2008 2007 Change
---------------------------------------------------------------------
Interest Income $ 57,791 $ 57,656 0%
Interest Expense 18,673 19,751 -5%
----------------------
Net Interest Income 39,118 37,905 3%
Provision for Loan Losses 11,037 (736) 1600%
----------------------
Net Interest Income after Provision
for Loan Losses 28,081 38,641 -27%
Noninterest Income:
Gain on Sale of SBA Loans 0 1,766 -100%
Servicing Income 1,347 1,596 -16%
Increase in Cash Surrender Value
of Life Insurance 1,232 1,071 15%
Service Charges and Fees
on Deposit Accounts 1,457 954 53%
Other 958 1,028 -7%
----------------------
Total Noninterest Income 4,994 6,415 -22%
----------------------

Noninterest Expense:
Salaries & Employee Benefits 17,694 15,413 15%
Occupancy & Equipment 3,511 2,933 20%
Other 10,769 8,972 20%
----------------------
Total Noninterest Expense 31,974 27,318 17%
----------------------
Income (Loss) Before Income Taxes 1,101 17,738 -94%
Income Tax Expense (Benefit) 39 6,450 -99%
----------------------
Net Income (Loss) $ 1,062 $ 11,288 -91%
======================

PER SHARE DATA
(unaudited)
Basic Earnings (Loss) Per Share $ 0.09 $ 0.92 -90%
Diluted Earnings (Loss) Per Share $ 0.09 $ 0.91 -90%
Common Shares Outstanding
at Period End 11,820,509 13,123,396 -10%
Book Value Per Share $ 12.21 $ 12.83 -5%
Tangible Book Value Per Share $ 8.18 $ 9.18 -11%

KEY FINANCIAL RATIOS
(unaudited)
Annualized Return on Average Equity 0.95% 10.60% -91%
Annualized Return on
Average Tangible Equity 1.39% 12.12% -89%
Annualized Return on Average Assets 0.10% 1.31% -92%
Annualized Return on
Average Tangible Assets 0.10% 1.33% -92%
Net Interest Margin 4.04% 4.92% -18%
Efficiency Ratio 72.48% 61.64% 18%

AVERAGE BALANCES
(in $000's, unaudited)
Average Assets $1,443,641 $1,150,486 25%
Average Tangible Assets $1,395,761 $1,132,664 23%
Average Earning Assets $1,292,758 $1,029,042 26%
Average Total Loans $1,159,535 $ 788,180 47%
Average Loans Held-For-Sale $ 0 $ 12,288 -100%
Average Deposits $1,154,705 $ 944,822 22%
Average Demand Deposits
- Noninterest Bearing $ 257,054 $ 234,943 9%
Average Interest Bearing Deposits $ 897,651 $ 709,879 26%
Average Interest Bearing Liabilities $1,008,692 $ 749,847 35%
Average Equity $ 150,110 $ 142,377 5%
Average Tangible Equity $ 102,230 $ 124,555 -18%

Percent
End of Period: Change From:
---------------------------------- ------------
CONSOLIDATED Sept. June Sept. June Sept.
BALANCE SHEETS 30, 30, 30, 30, 30,
(in $000's, unaudited) 2008 2008 2007 2008 2007
------------------------------------------------------- ------------
ASSETS
Cash and Due
from Banks $ 35,718 $ 42,642 $ 51,627 -16% -31%
Federal Funds Sold 100 150 42,600 -33% -100%
Securities
Available-for-Sale,
at Fair Value 107,565 116,594 150,116 -8% -28%
Loans:
Commercial Loans 532,367 509,887 378,777 4% 41%
Real
Estate-Mortgage 405,897 403,526 325,327 1% 25%
Real Estate-Land
and Construction 253,134 243,731 205,925 4% 23%
Home Equity 51,981 45,991 39,771 13% 31%
Consumer Loans 5,549 4,686 4,131 18% 34%
----------------------------------
Loans 1,248,928 1,207,821 953,931 3% 31%
Deferred Loan
Costs, Net 1,412 1,301 727 9% 94%
----------------------------------
Total Loans, Net
of Deferred Costs 1,250,340 1,209,122 954,658 3% 31%
Allowance
for Loan Losses (22,323) (20,865) (11,472) 7% 95%
----------------------------------
Net Loans 1,228,017 1,188,257 943,186 3% 30%
Company Owned
Life Insurance 40,236 39,819 38,270 1% 5%
Premises &
Equipment, Net 9,318 9,052 9,441 3% -1%
Goodwill 43,181 43,181 42,996 0% 0%
Intangible Assets 4,407 4,584 4,863 -4% -9%
Accrued Interest
Receivable and
Other Assets 43,339 42,708 43,320 1% 0%
----------------------------------
Total Assets $1,511,881 $1,486,987 $1,326,419 2% 14%
==================================

LIABILITIES &
SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Demand Deposits
-Noninterest
Bearing $ 257,739 $ 262,813 $ 263,244 -2% -2%
Demand Deposits
-Interest Bearing 139,377 145,151 146,410 -4% -5%
Savings and
Money Market 400,863 435,754 468,263 -8% -14%
Time Deposits,
Under $100 34,792 33,911 32,341 3% 8%
Time Deposits,
$100 and Over 168,361 173,766 138,327 -3% 22%
Brokered Deposits 185,052 108,623 52,179 70% 255%
----------------------------------
Total Deposits 1,186,184 1,160,018 1,100,764 2% 8%
Securities Sold
Under Agreement
to Repurchase 35,000 35,000 10,900 0% 221%
Other Short-term
Borrowings 95,000 98,000 0 -3% N/A
Notes Payable To
Subsidiary
Grantor Trusts 23,702 23,702 23,702 0% 0%
Accrued Interest
Payable and
Other Liabilities 27,711 28,518 22,678 -3% 22%
----------------------------------
Total Liabilities 1,367,597 1,345,238 1,158,044 2% 18%

Shareholders' Equity:
Common Stock 76,490 75,941 98,093 1% -22%
Accumulated Other
Comprehensive
Loss (512) (930) (1,258) -45% -59%
Retained Earnings 68,306 66,738 71,540 2% -5%
----------------------------------
Total
Shareholders'
Equity 144,284 141,749 168,375 2% -14%
----------------------------------
Total Liabilities
& Shareholders'
Equity $1,511,881 $1,486,987 $1,326,419 2% 14%
==================================

CREDIT QUALITY DATA
(in $000's,
unaudited)
Nonaccrual Loans $ 23,095 $ 12,226 $ 2,862 89% 707%
Loans Over 90 Days
Past Due and
Still Accruing 1,016 1,488 18 -32% 5544%
----------------------------------
Total Nonperforming
Loans 24,111 13,714 2,880 76% 737%
Other Real
Estate Owned 970 580 487 67% 99%
----------------------------------
Total
Nonperforming
Assets $ 25,081 $ 14,294 $ 3,367 75% 645%
==================================
Net Charge-offs
(Recoveries) $ 129 $ 370 $ (868) -65% 115%
Net Charge-offs as
Percent of
Average Loans 0.04% 0.13% -0.37% -69% 111%
Allowance for Loan
Losses to
Total Loans 1.79% 1.73% 1.20% 3% 49%
Allowance for Loan
Losses to
Nonperforming Loans 92.58% 152.14% 398.33% -39% -77%
Nonperforming
Assets to
Total Assets 1.66% 0.96% 0.25% 73% 564%
Nonperforming Loans
to Total Loans 1.93% 1.13% 0.30% 71% 543%

OTHER PERIOD-END
STATISTICS
(unaudited)
Shareholders'
Equity / Total
Assets 9.54% 9.53% 12.69% 0% -25%
Loan to Deposit
Ratio 105.41% 104.23% 86.73% 1% 22%
Noninterest Bearing
Deposits / Total
Deposits 21.73% 22.66% 23.91% -4% -9%
Leverage Ratio 8.27% 8.36% 11.19% -1% -26%

For the Three Months Ended
September 30, 2008
--------------------------------
NET INTEREST INCOME AND Interest Average
NET INTEREST MARGIN Average Income/ Yield/
(in $000's, unaudited) Balance Expense Rate
----------------------------------- ---------- ---------- --------
Assets:
Loans, gross $1,231,931 $ 17,919 5.79%
Securities 119,582 1,267 4.22%
Interest bearing deposits in other
financial institutions 182 1 2.19%
Federal funds sold 2,035 10 1.95%
---------- ----------
Total interest earning assets 1,353,730 $ 19,197 5.64%
----------
Cash and due from banks 34,234
Premises and equipment, net 9,185
Goodwill and other intangible assets 47,690
Other assets 54,895
----------
Total assets $1,499,734
==========

Liabilities and shareholders' equity:
Deposits:
Demand, interest bearing $ 144,809 $ 308 0.85%
Savings and money market 415,826 1,624 1.55%
Time deposits, under $100 33,893 224 2.63%
Time deposits, $100 and over 170,045 1,138 2.66%
Brokered time deposits 165,000 1,617 3.90%
Notes payable to subsidiary
grantor trusts 23,702 527 8.85%
Securities sold under
agreement to repurchase 35,000 264 3.00%
Other short-term borrowings 77,989 449 2.29%
---------- ----------
Total interest bearing liabilities 1,066,264 $ 6,151 2.29%
----------
Demand, noninterest bearing 261,578
Other liabilities 28,574
----------
Total liabilities 1,356,416
Shareholders' equity: 143,318
----------
Total liabilities and
shareholders' equity $1,499,734
==========

Net interest income / margin $ 13,046 3.83%
==========

For the Three Months Ended
September 30, 2007
--------------------------------

NET INTEREST INCOME Interest Average
AND NET INTEREST MARGIN Average Income/ Yield/
(in $000's, unaudited) Balance Expense Rate
----------------------------------- ---------- ---------- --------
Assets:
Loans, gross $ 939,023 $ 19,282 8.15%
Securities 166,782 1,919 4.56%
Interest bearing deposits in
other financial institutions 2,908 31 4.23%
Federal funds sold 66,683 873 5.19%
---------- ----------
Total interest earning assets 1,175,396 $ 22,105 7.46%
----------
Cash and due from banks 40,334
Premises and equipment, net 9,430
Goodwill and other intangible assets 48,264
Other assets 62,771
----------
Total assets $1,336,195
==========

Liabilities and shareholders' equity:
Deposits:
Demand, interest bearing $ 153,352 $ 863 2.23%
Savings and money market 460,596 3,981 3.43%
Time deposits, under $100 33,379 327 3.89%
Time deposits, $100 and over 137,605 1,786 5.15%
Brokered time deposits 59,265 706 4.73%
Notes payable to subsidiary
grantor trusts 23,702 585 9.79%
Securities sold under
agreement to repurchase 10,900 76 2.77%
Other short-term borrowings 0 0 N/A
---------- ----------
Total interest bearing liabilities 878,799 $ 8,324 3.76%
----------
Demand, noninterest bearing 263,465
Other liabilities 23,795
----------
Total liabilities 1,166,059
Shareholders' equity: 170,136
----------
Total liabilities
and shareholders' equity $1,336,195
==========

Net interest income / margin $ 13,781 4.65%
==========

For the Nine Months Ended
September 30, 2008
--------------------------------
NET INTEREST INCOME AND Interest Average
NET INTEREST MARGIN Average Income/ Yield/
(in $000's, unaudited) Balance Expense Rate
----------------------------------- ---------- ---------- --------
Assets:
Loans, gross $1,159,535 $ 53,524 6.17%
Securities 129,570 4,201 4.33%
Interest bearing deposits in other
financial institutions 571 10 2.34%
Federal funds sold 3,082 56 2.43%
---------- ----------
Total interest earning assets 1,292,758 $ 57,791 5.97%
----------
Cash and due from banks 36,085
Premises and equipment, net 9,200
Goodwill and other intangible assets 47,880
Other assets 57,718
----------
Total assets $1,443,641
==========

Liabilities and shareholders' equity:
Deposits:
Demand, interest bearing $ 149,451 $ 1,276 1.14%
Savings and money market 453,146 6,375 1.88%
Time deposits, under $100 34,340 815 3.17%
Time deposits, $100 and over 163,793 3,891 3.17%
Brokered time deposits 96,921 2,928 4.04%
Notes payable to subsidiary
grantor trusts 23,702 1,610 9.07%
Securities sold under agreement
to repurchase 31,033 674 2.90%
Other short-term borrowings 56,306 1,104 2.62%
---------- ----------
Total interest bearing liabilities 1,008,692 $ 18,673 2.47%
----------
Demand, noninterest bearing 257,054
Other liabilities 27,785
----------
Total liabilities 1,293,531
Shareholders' equity: 150,110
----------
Total liabilities and
shareholders' equity $1,443,641
==========

Net interest income / margin $ 39,118 4.04%
==========

For the Nine Months Ended
September 30, 2007
--------------------------------

NET INTEREST INCOME Interest Average
AND NET INTEREST MARGIN Average Income/ Yield/
(in $000's, unaudited) Balance Expense Rate
----------------------------------- ---------- ---------- --------
Assets:
Loans, gross $ 800,468 $ 49,541 8.27%
Securities 170,650 5,853 4.59%
Interest bearing deposits in
other financial institutions 2,928 104 4.75%
Federal funds sold 54,996 2,158 5.25%
----------- ----------
Total interest earning assets 1,029,042 $ 57,656 7.49%
----------
Cash and due from banks 36,299
Premises and equipment, net 5,116
Goodwill and other intangible assets 17,981
Other assets 62,048
----------
Total assets $1,150,486
==========

Liabilities and shareholders' equity:
Deposits:
Demand, interest bearing $ 143,685 $ 2,409 2.24%
Savings and money market 369,268 8,721 3.16%
Time deposits, under $100 31,873 917 3.85%
Time deposits, $100 and over 113,694 3,865 4.55%
Brokered time deposits 51,359 1,757 4.57%
Notes payable to subsidiary
grantor trusts 23,702 1,749 9.87%
Securities sold under
agreement to repurchase 16,266 333 2.74%
Other short-term borrowings 0 0 N/A
---------- ----------
Total interest bearing liabilities 749,847 $ 19,751 3.52%
----------
Demand, noninterest bearing 234,943
Other liabilities 23,319
----------
Total liabilities 1,008,109
Shareholders' equity: 142,377
----------
Total liabilities and
shareholders' equity $1,150,486
==========

Net interest income / margin $ 37,905 4.92%
==========
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CONTACT: Heritage Commerce Corp
Rebecca Levey
(408) 494-4513