NORFOLK, Va., Aug. 29 /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 and second quarter, and first half,
of 2006. For the three months ended March 31 2006, the Company
recorded a net loss of $12,000 or $.01 per diluted share; for the
three months ended June 30, 2006 the Company earned $135,000 or
$.08 per diluted share; and for the six months ended June 30, 2006,
the Company earned $123,000 or $.07 per diluted share. Michael S.
Ives, President and CEO of the Company and the Bank, commented, "We
are pleased with our progress in the ongoing transformation of our
Bank. In the second quarter, we completed the restatement of our
financial statements for the years 2002 - 2004. We raised
additional capital through an offering to our Company's directors
and executive officers. We sold our retail credit card portfolio to
eliminate a significant diversion for our retail banking team from
our core strategy of serving business customers. We have continued
to restructure our balance sheet. Our transaction deposit balances
are growing as we decrease the Bank's reliance on certificates of
deposits. Total deposits grew to $186 million at July 31, 2006 with
$49 million in noninterest bearing deposits and a total of $121
million in all transaction deposits representing 65% of total
deposits. We are accomplishing this growth in our transaction
deposits without resorting to costly promotional pricing. In the
third quarter, we expect our professional expenses to decline after
the completion of our restatement in the second quarter. Our loan
pipeline has increased significantly and reflects our conservative
lending philosophy. We believe that we will experience growth in
our loan portfolio over the remainder of the year." Operating
Results for the Quarter Ended March 31, 2006 The Company recorded a
net loss, after tax, for the quarter ended March 31, 2006 of
$12,000, or $0.01 per diluted share. The pre-tax loss was $27,000
and was comprised of net interest income of $1.7 million, provision
for loan losses of $17,000, noninterest income of $335,000 and
noninterest expense of $2.0 million. Contract employee services for
the first quarter were $101,000, primarily related to expenses for
consultants and contract accounting staff utilized in the Company's
restatement process. Operating Results for the Quarter Ended June
30, 2006 Net income, after tax, for the quarter ended June 30, 2006
was $135,000, or $0.08 per diluted share. The Company's pre-tax
income was $195,000. Net interest income for the second quarter was
$1.8 million. No additional provision for loan loss was recorded
for the quarter ended June 30, 2006. Noninterest income for the
quarter was $451,000, which included gains on sale of $96,000 and
$34,000 related to the sale of the Bank's retail credit card
portfolio and equity securities held by the Company, respectively.
Noninterest expense for the quarter was $2.1 million and was
impacted by $59,000 in legal expense associated with the Company's
restatement, as well as $85,000 of contract employee services,
primarily related to expenses for consultants and contract
accounting staff utilized in the Company's restatement process. In
addition, an $8,000 loss related to the sale of equity securities
was recorded. Financial Condition of the Company For the first half
of 2006, total assets grew to $209 million at June 30, 2006, an
increase of $4 million from $205 million in assets at December 31,
2005. Net loans held for investment at June 30, 2006 increased by
$1 million to $132 million, compared to $131 million at December
31, 2005. Federal funds sold and investment securities increased by
a total of $4 million, to $60 million at June 30, 2006 from $56
million at December 31, 2005. The Bank continued its growth in
deposits during the first six months of 2006. Total deposits
increased by $4 million to $177 million at June 30, 2006, compared
to $173 million at December 31, 2005. Of particular note, total
noninterest bearing deposits increased by $8 million to $46 million
at June 30, 2006 from $38 million at the end of 2005. Furthermore,
total transaction deposits have increased in the first six months
of 2006, growing by $8 million in the period, from $102 million at
December 31, 2005 to $110 million at June 30, 2006. The Company's
total nonperforming assets at June 30, 2006 were $204,000, or 0.10%
of assets, approximately the same level as that at December 31,
2005. Capital. Stockholders' equity increased $2.1 million, or 13%,
from $16.1 million at December 31, 2005 to $18.2 million at June
30, 2006. Stockholders' equity increased primarily as a result of
$2.1 million in net proceeds received on June 30, 2006 by the
Company in connection with the first of two closings under a sale
of the Company's common stock in a private placement. In the second
closing on July 31, 2006, the Company received additional net
proceeds of $729,000. Including both the first and second closings
under the private placement, the Company sold a total of 185,584
shares and received total proceeds of approximately $2.9 million.
The tables attached to and incorporated within this release
present, in greater detail, certain of the unaudited financial
information described above. The 2006 financial information
contained in this release, including the attached tables, is
unaudited and may be adjusted upon completion of review by the
Company's independent accountants. 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. Selected
Financial Information (Dollars in thousands, except per share data)
Income Statement For the Six For the Three Months Ended Months
Ended 03/31/2006 06/30/2006 06/30/2006 Interest income $2,874
$3,092 $5,966 Interest expense 1,202 1,298 2,500 Net interest
income 1,672 1,794 3,466 Provision for loan losses 17 - 17 Net
interest income after provision for loan losses 1,655 1,794 3,449
Noninterest income: Service charges on deposit accounts 168 180 348
Gain on sale of mortgage loans, net 49 33 82 Gain on sale of
securities - 34 34 Gain on sale of credit cards - 96 96 Late
charges and other fees on loans 16 38 54 Other 102 70 172 Total
noninterest income 335 451 786 Noninterest expense: Compensation
1,034 993 2,027 Professional fees 112 178 290 Furniture and
equipment 155 144 299 Contract employee services 101 85 186 Data
processing 133 128 261 Occupancy 122 125 247 Marketing 60 64 124
Taxes and licenses 40 54 94 Loss on sale of securities - 8 8 Other
260 271 531 Total noninterest expense 2,017 2,050 4,067 Income
before provision for income taxes (27) 195 168 Provision for income
taxes (15) 60 45 Net income $(12) $135 $123 Earnings per share:
Basic $(0.01) $0.08 $0.07 Diluted $(0.01) $0.08 $0.07 Balance Sheet
at period-end At or for the Quarter Ended March 31, June 30, 2006
2006 Total assets $206,229 $209,386 Loans held for investment, net
135,921 131,779 Investment securities 8,574 23,056 Federal funds
sold 45,255 36,580 Deposits Noninterest bearing 44,084 45,804
Interest bearing 132,673 131,092 Total deposits 176,757 176,896
Securities sold under agreements to repurchase 2,070 2,741 Federal
Home Loan Bank advances 10,000 10,000 Stockholders' equity 16,002
18,216 Book value per share $9.33 $9.79 Common stock outstanding
1,714,668 1,861,173 Asset Quality: Nonaccrual loans $266 $204
Accruing loans past due 90 days or more 6 - Total nonperforming
loans 272 204 Real estate owned, net - - Total nonperforming assets
$272 $204 Nonperforming assets to total assets 0.13% 0.10%
Allowance for Loan Losses: Balance, beginning of period $1,335
$1,362 Provision for loan losses 17 - Loans charged-off (19) (64)
Recoveries 29 2 Balance, end of period $1,362 $1,300 Allowance for
loan losses to loans held for investment, net of unearned fees and
costs 0.99% .98% DATASOURCE: Heritage Bankshares, Inc. CONTACT:
Michael S. Ives of Heritage Bankshares, Inc., +1-757-523-2651 Web
site: http://www.heritagebankva.com/
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