Heritage Commerce Corp (HTBK) SEC Filing 10-K Annual report for the fiscal year ending Sunday, December 31, 2017

Exhibit 99.1

Heritage Commerce Corp Earns $24.0 Million for the Full Year of 2017

San Jose, CA — January 25, 2018 —

On December 22, 2017, H.R.1, commonly known as the Tax Cuts and Jobs Act (the “Tax Act”), was signed into law, which among other items reduces the federal corporate tax rate to 21% from 35%, effective January 1, 2018.  U.S. generally accepted accounting principles requires companies to revalue certain tax-related assets and liabilities as of the date of enactment of the new legislation with resulting tax effects accounted for in the reporting period of enactment. While the benefits of lower tax rates in 2018 and beyond will be substantial for U.S. corporations, balance sheet adjustments for deferred tax assets and operating results for the fourth quarter of 2017 have had a material impact on financial institutions.    We have concluded that the enactment of the Tax Act caused our net deferred tax assets (“DTA”) to be revalued at the new lower tax rate. The Company performed an analysis and determined the value of the net DTA was reduced by $7.1 million, which was recognized as a one-time, non-cash, incremental income tax expense for the fourth quarter of 2017.  The impact of the Tax Act on the Company’s 2017 financial results are not necessarily indicative of the results to be achieved for any future periods.  However, the Company does anticipate that the reduced federal corporate tax rate of 21% will reduce the Company’s effective tax rate for financial reporting periods beginning in 2018.

“While the fourth quarter DTA adjustment reduced earnings by $7.1 million, we expect significant benefits in 2018 from reduced tax provisions,” said Walter Kaczmarek, President and Chief Executive Officer.    “Additionally, our pre-tax profit for the fourth quarter of 2017 and for the year ended December 31, 2017 was a record high at $14.2 million and $50.5 million, respectively, despite $671,000 of pre-tax acquisition costs related to the proposed mergers.”

“As previously announced in December 2017, we entered into a definitive agreement to acquire Tri-Valley Bank, expanding our presence in the San Francisco East Bay Area.  Three weeks later, in January 2018, we entered into another agreement to acquire United American Bank, extending our footprint into San Mateo County, which is just south of San Francisco,” added Mr. Kaczmarek.  “Both transactions will be accretive to earnings, once transaction costs have been assimilated in the first half of 2018. Going forward, we will continue with our strategic plan to deepen our presence in the Bay Area.” 

2017 Highlights (as of, or for the periods ended December  31, 2017, compared to December 31, 2016, and September 30, 2017, except as noted):