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Heritage Commerce: Over 6% Dividend Yield But Risks Are Also Elevated (NASDAQ:HTBK)

Earnings of Heritage Commerce Corp (NASDAQ:HTBK) will most probably continue on an uptrend this year thanks to decent loan growth. I’m expecting the company to report earnings of $1.25 per share for 2023, up 14.8% year-over-year. Compared to my last report

Financial Position FY18 FY19 FY20 FY21 FY22 FY23E
Net Loans 1,859 2,511 2,575 3,044 3,251 3,361
Growth of Net Loans 18.9% 35.1% 2.6% 18.2% 6.8% 3.4%
Other Earning Assets 973 1,180 1,635 2,054 1,486 1,949
Deposits 2,638 3,415 3,914 4,759 4,390 4,613
Borrowings and Sub-Debt 39 40 40 40 39 352
Common equity 367 577 578 598 632 681
Book Value Per Share ($) 8.7 12.0 9.6 9.9 10.4 11.1
Tangible BVPS ($) 6.4 8.1 6.5 6.9 7.4 8.2
Source: SEC Filings, Earnings Releases, Author’s Estimates (In USD million unless otherwise specified)

Income Statement FY18 FY19 FY20 FY21 FY22 FY23E
Net interest income 122 132 142 146 180 206
Provision for loan losses 7 1 13 (3) 1 3
Non-interest income 10 10 10 10 10 11
Non-interest expense 76 85 90 93 95 107
Net income – Common Sh. 35 40 35 48 67 77
EPS – Diluted ($) 0.84 0.84 0.59 0.79 1.09 1.25
Source: SEC Filings, Earnings Releases, Author’s Estimates(In USD million unless otherwise specified)

HTBK FMBH PGC NFBK CCBG Peer Average
P/E (“ttm”) 7.51 7.16 7.00 8.95 11.94 8.76
P/E (“fwd”) 7.58 8.75 7.86 12.17 9.19 9.49
P/B (“ttm”) 0.79 0.79 0.95 0.75 1.32 0.95
P/TB (“ttm”) 1.10 1.06 1.04 0.80 1.70 1.15
Source: Seeking Alpha

P/TB Multiple 0.95x 1.05x 1.15x 1.25x 1.35x
TBVPS – Dec 2023 ($) 8.2 8.2 8.2 8.2 8.2
Target Price ($) 7.8 8.6 9.4 10.3 11.1
Market Price ($) 8.4 8.4 8.4 8.4 8.4
Upside/(Downside) (7.5)% 2.2% 12.0% 21.7% 31.5%
Source: Author’s Estimates

P/E Multiple 6.8x 7.8x 8.8x 9.8x 10.8x
EPS – 2023 ($) 1.25 1.25 1.25 1.25 1.25
Target Price ($) 8.5 9.7 11.0 12.2 13.5
Market Price ($) 8.4 8.4 8.4 8.4 8.4
Upside/(Downside) 0.3% 15.1% 30.0% 44.8% 59.6%
Source: Author’s Estimates

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