Unassociated Document

Exhibit 99.1

Heritage Commerce Corp Earns $4 Million in Second Quarter 2007 As Diablo Valley Bank Acquistion Closes

San Jose, CA – August 7, 2007 — Heritage Commerce Corp (Nasdaq: HTBK), parent company of Heritage Bank of Commerce, today reported that second quarter net income totaled $4.0 million, or $0.33 per diluted share, compared with $4.2 million, or $0.35 per diluted share, for the same quarter a year ago. For the first half of 2007, net income was $8.0 million, or $0.68 per diluted share, compared to $8.6 million, or $0.71 per diluted share, in the first half of 2006.

The merger with Diablo Valley Bank (“DVB”) was completed on June 20, 2007. The consolidated financial statements of Heritage Commerce Corp for the three and six months ended June 30, 2007 reflect the completion of the merger including the preliminary purchase accounting adjustments to reflect the DVB assets and liabilities at their estimated fair values. The completion of the acquisition of Diablo Valley Bank contributed to a 29% increase in loans and a 30% rise in deposits year-over-year. Revenue and expenses from the operations of DVB have only been included for the 10 day period from the closing of the merger, and they were not significant for the three and six months reported.

“Our focus during the second quarter has been on completing the merger with Diablo Valley Bank and preparing for a smooth integration and conversion of their operations with ours,” said Walter Kaczmarek, President and Chief Executive Officer. “We have also brought on board a number of seasoned bankers in other financial institutions with strong reputations in our markets. The combination of the talent from Diablo and the other new people hired by Heritage this quarter should help us gain market share during the remainder of this year and into next year. In addition, we are preparing to open our first office in Walnut Creek, further expanding our presence in the affluent East Bay market.”

Second Quarter 2007 Financial Highlights:

¨	Produced an annualized return on average assets of 1.50%.

¨	Completed the acquisition of Daiblo Valley Bank, adding $257 million in deposits and $214 million in loans.

¨	Net interest margin expanded to 5.11% from 5.06% in the first quarter of 2007 and 4.98% in the second quarter a year ago.

¨	Commercial loans increased 22% in the quarter and 31% year-over-year, and now account for 38% of total loans.

¨	Received approval to open a new office in Walnut Creek, further expanding presence in Contra Costa County.

Operating Results

“Several factors contributed to a small decline in revenue for the quarter and year-to-date periods,” said Mr. Kaczmarek. “Our SBA lending team was understaffed during most of the quarter and, consequently, SBA loan originations and gains on the sale of SBA loans were both down. As we rebuild the SBA lending team, we anticipate activity will improve. In addition, the Company has also decided to change its strategy regarding its SBA loan business. Beginning in the third quarter of 2007, we will retain most of our SBA production in lieu of selling it. Thus, quarterly gains on sale will most likely be significantly lower. However, as the SBA loan portfolio increases over time, our net interest income should also increase.”

Net interest income decreased 2% to $12.4 million for the second quarter of 2007, compared to $12.6 million for the second quarter of 2006. For the first half of 2007, net interest income decreased 3% to $24.1 million from $24.8 million for the same period of 2006.

The net interest margin was 5.11% for the three months ended June 30, 2007, compared to 5.06% for the first quarter of 2007 and 4.98% for the three months ended June 30, 2006. For the first six months of 2007, net interest margin improved to 5.09% from 4.94% for the first six months of 2006.

No provision for loan losses was recognized in the second quarter of 2007, compared to a reverse provision for loan losses of $236,000 recognized in the first quarter of 2007. Reverse provisions for loan losses were $114,000 and $603,000 for the three and six months ended June 30, 2006.

Noninterest income was $2.3 million for the second quarter of 2007, compared to $2.3 million for second quarter of 2006 and $2.5 million for the first quarter of 2007. Noninterest income was primarily comprised of the gain on sale of Small Business Administration (“SBA”) and other guaranteed loans, loan servicing income, the increase in cash surrender value of life insurance, and service charges on deposit accounts. In the first six months of 2007, noninterest income was $4.8 million, compared to $5.2 million in the first six months a year ago.

Heritage’s second quarter noninterest expense was approximately the same as the second quarter a year ago at $8.5 million and up slightly from $8.3 million in the first quarter of 2007. In the first six months of 2007, noninterest expense decreased 3% to $16.8 million from $17.3 million in the first six months a year ago. Compensation expense decreased 4% from the first quarter to the second quarter but increased 1% from the second quarter a year ago.

The efficiency ratio was 58.00% in the second quarter of 2007, compared to 58.26% in the first quarter of 2007, and 57.06% in the second quarter of 2006. The efficiency ratio for the first six months of 2007 increased to 58.13% from 57.57% a year ago. The annualized returns on average assets and average equity for the second quarter of 2007 were 1.50% and 12.15%, compared to 1.50% and 14.35% for the second quarter ended June 30, 2006, respectively. Returns on average assets and average equity for the first six months of 2007 were 1.53% and 12.63%, compared to 1.55% and 14.93% for the first six months of 2006, respectively.

Balance Sheet, Capital Management and Credit Quality

Heritage’s assets totaled $1.35 billion at June 30, 2007, compared to $1.09 billion a year ago, and $1.07 billion at March 31, 2007. Deposits totaled $1.12 billion at June 30, 2007, compared to $0.91 billion at June 30, 2006, and $0.88 billion at March 31, 2007. The Company added a net $23 million of brokered deposits in the second quarter of 2007, compared to the first quarter of 2007. Total loans, excluding loans held for sale, were $0.94 billion at June 30, 2007, compared to $0.71 billion at June 30, 2006, and $0.70 billion at March 31, 2007.

Nonperforming assets increased to $6.3 million, or 0.47% of total assets, at the end of June, compared to $1.6 million, or 0.15% of total assets, a year ago, and $3.3 million, or 0.31% of total assets, at March 31, 2007. Approximately $3.7 million of the nonperforming assets at June 30, 2007, were acquired in the Diablo Valley Bank merger. Of the total nonperforming assets at June 30, 2007, so far $900,000 were paid off during the third quarter of 2007. Net charge-offs in the second quarter of 2007 were $35,000, or 0.02% of average loans, compared to net charge-offs of $29,000, or 0.02% of average loans, in the preceding quarter. Net charge-offs in the second quarter a year ago were $536,000, or 0.31% of average loans. The allowance for loan losses at June 30, 2007 was $11.1 million, or 1.18% of total loans, and represented 192% of nonperforming loans. The allowance for loan losses at June 30, 2006 was $9.1 million, or 1.27% of total loans, and represented 564% of nonperforming loans. The allowance for loan losses at December 31, 2006 was $9.3 million, or 1.28% of total loans, and represented 215% of nonperforming loans.

Shareholders’ equity increased 44% to $170 million at June 30, 2007, compared to $118 million a year ago, and $126 million at March 31, 2007. Capital ratios continue to be above the well-capitalized guidelines established by regulatory agencies. The Company’s leverage ratio at June 30, 2007, was 14.29%, compared to 12.70% at June 30, 2006, and 14.43% at March 31, 2007. Since the Diablo Valley Bank acquisition occurred on June 20, 2007, the transaction did not have much effect on the quarterly average assets used in the leverage ratio calculation. If period end total assets were the denominator instead of average assets, the leverage ratio would have been 11.31% at June 30, 2007.

During the second quarter of 2007, the Company repurchased 25,200 shares of its common stock with an average price of $24.00 a share under the Company’s $10 million common stock repurchase program, which was approved by the Company’s Board of Directors in February, 2006. Shares were purchased on the open market financed by available cash. The authorization for this repurchase program expired as of June 30, 2007.

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, Morgan Hill, Gilroy, Mountain View, and Los Altos. Heritage Bank of Commerce is also a SBA Preferred Lender ranked the fourth largest SBA lender in Northern California and fourteenth in the State of California, with Loan Production Offices in San Jose, Chico, Fremont, Fresno, and Sacramento, 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 Months Ended:									Percent Change From:						For the Six Months Ended:
CONSOLIDATED INCOME STATEMENTS	June 30,			March 31,			June 30,			March 31,			June 30,			June 30,			June 30,			Percent
(in $000's, unaudited)		2007			2007			2006			2007			2006			2007			2006			Change
Interest Income	$	18,317		$	17,234		$	18,392			6	%		0	%	$	35,551		$	35,652			0	%
Interest Expense		5,924			5,503			5,766			8	%		3	%		11,427			10,835			5	%
Net Interest Income		12,393			11,731			12,626			6	%		-2	%		24,124			24,817			-3	%
Provision for Loan Losses		0			(236)			(114)			100	%		-100	%		(236)			(603)			-61	%
Net Interest income after Provision for Loan Losses		12,393			11,967			12,740			4	%		-3	%		24,360			25,420			-4	%
Noninterest Income:
Gain on Sale of Loans		695			1,011			842			-31	%		-17	%		1,706			2,339			-27	%
Servicing Income		534			517			441			3	%		21	%		1,050			909			16	%
Increase in Cash Surrender Value of Life Insurance		353			344			360			3	%		-2	%		697			707			-1	%
Service Charges and Other Fees on Deposit Accounts		336			274			327			23	%		3	%		610			654			-7	%
Other		344			369			287			-7	%		20	%		713			542			32	%
Total Noninterest Income		2,262			2,515			2,257			-10	%		0	%		4,776			5,151			-7	%

Noninterest Expense:
Salaries & Employee Benefits		4,685			4,888			4,653			-4	%		1	%		9,573			9,762			-2	%
Occupancy & Equipment		889			875			922			2	%		-4	%		1,764			1,808			-2	%
Other		2,926			2,537			2,917			15	%		0	%		5,463			5,683			-4	%
Total Noninterest Expense		8,500			8,300			8,492			2	%		0	%		16,800			17,253			-3	%
Income Before Income Taxes		6,155			6,182			6,505			0	%		-5	%		12,336			13,318			-7	%
Provision for Income Taxes		2,140			2,149			2,316			0	%		-8	%		4,288			4,753			-10	%
Net Income	$	4,015		$	4,033		$	4,189			0	%		-4	%	$	8,048		$	8,565			-6	%

PER SHARE DATA
(unaudited)
Basic Earnings Per Share	$	0.34		$	0.35		$	0.35			-3	%		-3	%	$	0.69		$	0.72			-4	%
Diluted Earnings Per Share	$	0.33		$	0.34		$	0.35			-3	%		-6	%	$	0.68		$	0.71			-4	%
Common Shares Outstanding		13,375,163			11,636,828			11,820,563			15	%		13	%		13,375,163			11,820,563			13	%
Book Value Per Share	$	12.72		$	10.83		$	9.98			17	%		27	%	$	12.72		$	9.98			27	%
Tangible Book Value Per Share	$	9.12		$	10.83		$	9.98			-16	%		-9	%	$	9.12		$	9.98			-9	%

KEY FINANCIAL RATIOS
(unaudited)
Annualized Return on Average Equity		12.17	%		13.12	%		14.35	%		-7	%		-15	%		12.63	%		14.93	%		-15	%
Annualized Return on Average Assets		1.50	%		1.57	%		1.50	%		-4	%		0	%		1.53	%		1.55	%		-1	%
Net Interest Margin		5.11	%		5.06	%		4.98	%		1	%		3	%		5.09	%		4.94	%		3	%
Efficiency Ratio		58.00	%		58.26	%		57.06	%		0	%		2	%		58.13	%		57.57	%		1	%

AVERAGE BALANCES
(in $000's, unaudited)
Average Assets	$	1,075,271		$	1,039,975		$	1,120,108			3	%		-4	%	$	1,057,683		$	1,117,193			-5	%
Tangilble Average Assets	$	1,075,251		$	1,039,975		$	1,120,108			3	%		-4	%	$	1,055,059		$	1,117,193			-6	%
Average Earning Asset	$	972,016		$	939,604		$	1,017,290			3	%		-4	%	$	955,874		$	1,013,600			-6	%
Average Total Loans	$	730,337		$	700,647		$	702,817			4	%		4	%	$	715,562		$	702,376			2	%
Average Loans Held For Sale	$	12,823		$	18,596		$	32,494			-31	%		-61	%	$	15,693		$	35,464			-56	%
Average Deposits	$	880,079		$	846,736		$	929,00			4	%		-5	%	$	863,422		$	924,496			-7	%
Average Demand Deposits - Noninterest Bearing	$	223,415		$	218,039		$	228,891			2	%		-2	%	$	220,727		$	232,072			-5	%
Average Interest Bearing Deposits	$	656,664		$	628,697		$	700,109			4	%		-6	%	$	642,695		$	692,424			-7	%
Average Interest Bearing Liabilities	$	696,773		$	674,050		$	749,533			3	%		-7	%	$	685,412		$	745,245			-8	%
Average Equity	$	132,347		$	124,642		$	117,126			6	%		13	%	$	128,509		$	115,705			11	%
Tangible Average Equity	$	127,196		$	124,642		$	117,126			2	%		9	%	$	125,919		$	115,705			9	%

	End of Period:									Percent Change From:
CONSOLIDATED BALANCE SHEETS	June 30,			March 31,			June 30,			March 31,			June 30,
(in $000's, unaudited)	2007			2007			2006			2007			2006
ASSETS
Cash and Due from Banks	$	45,881		$	33,718		$	39,390			36	%		16	%
Federal Funds Sold		57,810			90,400			47,000			-36	%		23	%
Securities Available-for-Sale, at Fair Value		169,498			164,800			191,471			3	%		-11	%
Loans Held For Sale		6,095			11,351			30,325			-46	%		-80	%
Loans:
Commercial Loans		358,095			294,010			273,208			22	%		31	%
Real Estate-Mortgage		330,422			239,082			242,125			38	%		36	%
Real Estate-Land and Construction		203,457			128,663			149,168			58	%		36	%
Home Equity		42,474			36,067			46,690			18	%		-9	%
Consumer Loans		4,715			2,620			1,389			80	%		239	%
Total Loans		939,163			700,442			712,580			34	%		32	%
Deferred Loan Costs, net		504			624			1,184			-19	%		-57	%
Loans, Net of Deferred Costs		939,667			701,066			713,764			34	%		32	%
Allowance for Loan Losses		(11,104	)		(9,014	)		(9,098	)		23	%		22	%
Net Loans		928,563			692,052			704,666			34	%		32	%
Company Owned Life Insurance		37,900			36,519			35,442			4	%		7	%
Premises & Equipment, Net		9,186			2,446			2,406			276	%		282	%
Goodwill		43,172			-			-		N/		A	N/		A
Intangible Assets		5,049			-			-		N/		A	N/		A
Accrued Interest Receivable and Other Assets		43,777			39,778			43,964			10	%		0	%
Total Assets	$	1,346,931		$	1,071,064		$	1,094,664			26	%		23	%

LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Demand Deposits-Noninterest Bearing	$	266,404		$	221,206		$	221,438			20	%		20	%
Demand Deposits-Interest Bearing		162,003			141,395			144,120			15	%		12	%
Savings and Money Market		448,528			351,005			366,892			28	%		22	%
Time Deposits, Under $100		33,735			30,730			31,476			10	%		7	%
Time Deposits, $100 and Over		143,544			96,813			110,513			48	%		30	%
Brokered Deposits, $100 and Over		65,439			42,748			34,048			53	%		92	%
Total Deposits		1,119,653			883,897			908,487			27	%		23	%
Securities Sold under Agreement to Repurchase		10,900			15,100			21,800			-28	%		-50	%
Notes Payable To Subsidiary Grantor Trusts		23,702			23,702			23,702			0	%		0	%
Accrued Interest Payable and Other Liabilities		22,522			22,333			22,708			1	%		-1	%
Total Liabilities		1,176,777			945,032			976,697			25	%		20	%

Shareholders' Equity:
Common Stock		103,498			61,958			66,726			67	%		55	%
Accumulated Other Comprehensive Loss		(2,446	)		(1,712	)		(3,681	)		43	%		-34	%
Retained Earnings		69,102			65,786			54,922			5	%		26	%
Total Shareholders' Equity		170,154			126,032			117,967			35	%		44	%
Total Liabilities & Shareholders' Equity	$	1,346,931		$	1,071,064		$	1,094,664			26	%		23	%

CREDIT QUALITY DATA
(in $000's, unaudited)
Nonaccrual Loans	$	3,192		$	3,315		$	1,612			-4	%		98	%
Loans Over 90 Days Past Due and Still Accruing		2,604			0			0		N/		A	N/		A
Total Nonperforming Loans		5,796			3,315			1,612			75	%		260	%
Other Real Estate Owned		487			0			0		N/		A	N/		A
Total Nonperforming Assets	$	6,283		$	3,315		$	1,612			90	%		290	%
Net Charge-offs	$	35		$	29		$	536			-21	%		-93	%
Net Charge-offs as Percent of Average Loans		0.02	%		0.02	%		0.31	%		0	%		-94	%
Allowance for Loan Losses to Total Loans		1.18	%		1.29	%		1.27	%		-9	%		-7	%
Allowance for Loan Losses to Nonperforming Loans		191.58	%		271.92	%		564.39	%		-30	%		-66	%
Nonperforming Assets to Total Assets		0.47	%		0.31	%		0.15	%		52	%		213	%
Nonperforming Loans to Total Loans		0.62	%		0.47	%		0.23	%		32	%		170	%

OTHER PERIOD-END STATISTICS
(unaudited)
Shareholders' Equity / Total Assets		12.63	%		11.77	%		10.78	%		7	%		17	%
Loan to Deposit Ratio		83.92	%		79.32	%		78.57	%		6	%		7	%
Noninterest Bearing Deposits / Total Deposits		23.79	%		25.03	%		24.37	%		-5	%		-2	%
Leverage Ratio		14.29	%		14.43	%		12.70	%		-1	%		13	%

	For the Three Months Ended							For the Three Months Ended
	June 30, 2007							June 30, 2006
			Interest		Average					Interest		Average
NET INTEREST INCOME AND NET INTEREST MARGIN	Average		Income/		Yield/			Average		Income/		Yield/
(in $000's unaudited)	Balance		Expense		Rate			Balance		Expense		Rate
Assets:
Loans, gross	$	743,160	$	15,589		8.41	%	$	735,311	$	15,344		8.37	%
Securities		171,896		1,982		4.62	%		195,743		1,977		4.05	%
Interest bearing deposits in other financial institutions		3,243		40		4.95	%		2,728		42		6.18	%
Federal funds sold		53,717		706		5.27	%		83,508		1,029		4.94	%
Total interest earning assets		972,016	$	18,317		7.56	%	$	1,017,290	$	18,392		7.25	%
Cash and due from banks		33,305							36,224
Premises and equipment, net		3,111							2,393
Other assets		66,839							64,201
Total assets	$	1,075,271						$	1,120,108

Liabilities and shareholders' equity:
Deposits:
Demand, interest bearing	$	141,230	$	780		2.22	%	$	148,635	$	830		2.24	%
Savings and money market		328,580		2,456		3.00	%		373,697		2,698		2.90	%
Time deposits, under $100		30,872		301		3.91	%		32,264		251		3.12	%
Time deposits, $100 and over		102,284		1,067		4.18	%		11,024		929		3.36	%
Brokered time deposits, $100 and over		53,698		617		4.61	%		34,489		325		3.78	%
Notes payable to subsidiary grantor trusts		23,702		583		9.87	%		23,702		575		9.73	%
Securities sold under agreement to repurchase		16,407		120		2.93	%		25,722		158		2.46	%
Total interest bearing liabilities		696,773	$	5,924		3.41	%		749,533	$	5,766		3.09	%
Demand, noninterest bearing		223,415							228,891
Other liabilities		22,736							24,558
Total liabilities		942,924							1,002,982
Shareholders' equity:		132,347							117,126
Total liabilities and shareholders' equity	$	1,075,271						$	1,120,108

Net interest income / margin			$	12,393		5.11	%			$	12,626		4.98	%

	For the Six Months Ended							For the Six Months Ended
	June 30, 2007							June 30, 2006
			Interest		Average					Interest		Average
NET INTEREST INCOME AND NET INTEREST MARGIN	Average		Income/		Yield/			Average		Income/		Yield/
(in $000's unaudited)	Balance		Expense		Rate			Balance		Expense		Rate
Assets:
Loans, gross	$	731,255	$	30,259		8.34	%	$	737,840	$	30,065		8.22	%
Securities		172,603		3,934		4.60	%		198,394		3,769		3.83	%
Interest bearing deposits in other financial institutions		2,936		73		5.01	%		2,783		60		4.35	%
Federal funds sold		49,080		1,285		5.28	%		74,583		1,758		4.75	%
Total interest earning assets		955,874	$	35,551		7.50	%	$	1,013,600	$	35,652		7.09	%
Cash and due from banks		34,311							36,588
Premises and equipment, net		2,807							2,435
Other assets		64,691							64,570
Total assets	$	1,057,683						$	1,117,193

Liabilities and shareholders' equity:
Deposits:
Demand, interest bearing	$	138,876	$	1,545		2.24	%	$	153,288	$	1,668		2.19	%
Savings and money market		323,549		4,740		2.95	%		360,983		4,779		2.67	%
Time deposits, under $100		30,929		590		3.85	%		33,232		497		3.02	%
Time deposits, $100 and over		101,741		2,079		4.12	%		109,656		1,750		3.22	%
Brokered time deposits, $100 and over		47,600		1,052		4.46	%		35,265		658		3.76	%
Notes payable to subsidiary grantor trusts		23,702		1,164		9.90	%		23,702		1,137		9.67	%
Securities sold under agreement to repurchase		19,015		257		2.73	%		29,119		346		2.40	%
Total interest bearing liabilities		685,412	$	11,427		3.36	%		745,245	$	10,835		2.93	%
Demand, noninterest bearing		220,727							232,072
Other liabilities		23,035							24,171
Total liabilities		929,174							1,001,488
Shareholders' equity:		128,509							115,705
Total liabilities and shareholders' equity	$	1,057,683						$	1,117,193

Net interest income / margin			$	24,124		5.09	%			$	24,817		4.94	%