8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 27, 2006

HERITAGE COMMERCE CORP

(Exact name of registrant as specified in its charter)

California	000-23877		77-0469558
(State or other jurisdiction of incorporation)	(Commission File Number)		(IRS Employer Identification No.)
150 Almaden Boulevard, San Jose, California		95113
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code: (408) 947-6900
Not Applicable
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2. below):

□Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

□ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

□ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

□ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT 

On July 27, 2006, the Board of Directors of Heritage Bank of Commerce, the banking subsidiary of Heritage Commerce Corp (the “Company”), approved an employment agreement for Richard Hagarty, the Chief Credit Officer of Heritage Bank of Commerce. Under the terms of the employment agreement, dated July 27, 2006, Mr. Hagarty is entitled to receive an annual salary of $152,000. If Mr. Hagarty’s employment is terminated without cause, he will be entitled to a lump sum payment equal to nine months of his base salary, nine months of his highest annual bonus paid over the most recent three year period prior to the date of termination, and continuation of certain benefits for a nine month period. In the event, Mr. Hagarty’s employment is terminated during a period beginning 120 days prior to and ending 12 months following a Change in Control (as defined in the agreement), Mr. Hagarty shall be entitled to a lump sum payment equal to fifteen months of his base salary and the highest annual bonus paid over the most recent three year period prior to the Change in Control. A copy of Mr. Hagarty’s employment contract is filed as Exhibit 99.1 to this Form 8-K and is incorporated by reference in its entirety herein.

ITEM 2.02 RESULTS OF OPERATION AND FINANCIAL CONDITION

On July 31, 2006, Heritage Commerce Corp issued a press release announcing preliminary results for the second quarter ended June 30, 2006. A copy of the press release is attached as Exhibit 99.2 to this Form 8-K and is incorporated herein by reference.

ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS

On July 27, 2006, William J. Del Biaggio, Jr. was elected by the Company’s Board of Directors to the position of Founding Director and Executive Vice President of the Company and its banking subsidiary, Heritage Bank of Commerce.

ITEM 8.01 OTHER EVENTS

On July 27, 2006, the Company’s Board of Directors accepted the resignation of William J. Del Biaggio, Jr. as Chairman of the Board, of the Company and its banking subsidiary, Heritage Bank of Commerce. Mr. Del Biaggio was elected to the Board of Directors to the position of Founding Chairman and Executive Vice President of the Company and Heritage Bank of Commerce. Mr. Del Biaggio will continue as a member of the Board of Directors of the Company and Heritage Bank of Commerce. Mr. Del Biaggio has been a director since 1994.

Also on July 27, 2006, the Company’s Board of Directors elected Jack W. Conner as Chairman of the Board of the Company and Heritage Bank of Commerce. Mr. Conner has been a member of the Board of Directors since 2004. A copy of the press release is attached as Exhibit 99.3 to this Form 8-K and is incorporated herein by reference.

On July 27, 2006, the Company’s Board of Directors declared a $0.05 per share quarterly cash dividend. The dividend will be paid on September 1, 2006, to shareholders of record on August 10, 2006. A copy of the press release is attached as Exhibit 99.4 to this Form 8-K and is incorporated herein by reference.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(C) Exhibits

99.1   Employment Agreement between Richard Hagarty and Heritage Bank of Commerce dated July 27, 2006

99.2   Press Release, dated July 31, 2006, entitled “Heritage Commerce Corp Reports Second Quarter Profits Rise 25%”

99.3   Press Release for regarding Chairman of the Board position

99.4   Press Release, dated July 31, 2006, entitled “Heritage Commerce Corp Declares Quarterly Cash Dividend”

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 1, 2006

Heritage Commerce Corp

By: /s/ Lawrence D. McGovern

Name: Lawrence D. McGovern

Executive Vice President and Chief Financial Officer

By: /s/ Walter T. Kaczmarek

Name: Walter T. Kaczmarek

President and Chief Executive Officer

INDEX TO EXHIBITS

EXHIBIT NO.DESCRIPTION

99.1                                                        Employment Agreement between Richard Hagarty and Heritage Bank of Commerce dated July 27, 2006

99.2 Press Release, dated July 31, 2006, entitled “Heritage Commerce Corp Reports Second Quarter Profits Rise 25%”

99.3                                                    Press Release for regarding Chairman of the Board position

99.4                                                       Press Release, dated July 31, 2006, entitled “Heritage Commerce Corp Declares Quarterly Cash Dividend”

EX-99.1

Exhibit 99.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (THE “AGREEMENT”) IS ENTERED INTO AS OF JULY 27, 2006 (THE “EFFECTIVE DATE”), BY AND BETWEEN HERITAGE BANK OF COMMERCE, A CALIFORNIA BANKING CORPORATION (THE “BANK”) AND RICHARD HAGARTY, AN INDIVIDUAL (THE “EXECUTIVE”).

RECITALS

WHEREAS, THE BOARD OF DIRECTORS OF THE BANK HAS APPROVED AND AUTHORIZED THE ENTRY INTO THIS AGREEMENT WITH THE EXECUTIVE; AND

WHEREAS, THE PARTIES DESIRE TO ENTER INTO THIS AGREEMENT TO SET FORTH THE TERMS AND CONDITIONS FOR THE EMPLOYMENT RELATIONSHIP OF THE EXECUTIVE WITH THE BANK.

AGREEMENT

NOW, THEREFORE, IN CONSIDERATION OF THE PROMISES AND MUTUAL COVENANTS AND AGREEMENTS HEREIN CONTAINED AND INTENDING TO BE LEGALLY BOUND HEREBY, THE BANK AND THE EXECUTIVE HEREBY AGREE AS FOLLOWS:

1.Employment.

1.1Title. The Executive is employed as Executive Vice President/Chief Credit Officer of the Bank. In this capacity, the Executive shall have such duties and responsibilities as may be designated to him by the President of the Bank and in accordance with the objectives or policies of the Board of Directors, from time to time, in connection with the business activities of the Bank.

1.2Full-Time Employment. During the Term (as defined in Section 2), and excluding any period of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote his full attention and time during normal business hours to the business and affairs of the Bank in a manner and with such results as are consistent with his position and compensation and to use the Executive’s best efforts to perform such responsibilities. During the Term it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Bank in accordance with this Agreement.

1.3Standard. The Executive will set a high standard of professional conduct given his role with the Bank and his responsibility relative to the Bank’s presence and stature in the community. The Executive will, at all times, emulate this high professional standard of conduct in order to develop and enhance the Bank’s reputation and image. The Executive will comply with all applicable rules, policies and procedures of the Bank and any of its subsidiaries and all pertinent regulatory standards as may affect the Bank.

1.4Location. The Executive shall provide services for the Bank at its principal executive offices located in San Jose California. The Executive agrees that the Executive will be regularly present at the Bank’s principal executive offices and that the Executive may be required to travel from time to time in the course of performing the Executive’s duties for the Bank.

1.5No Breach of Contract. The Executive hereby represents to the Bank that: (i) the execution and delivery of this Agreement by the Executive and the performance by the Executive of the Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any other agreement or policy to which the Executive is a party or by which he is otherwise bound; (ii) that the Executive has no information (including, without limitation, confidential information or trade secrets) of any other person or entity which the Executive is not legally and contractually free to disclose the Bank; and (iii) that the Executive is not bound by any confidentiality, trade secret or similar agreement (other than this Agreement) with any other person or entity.

2.Term. The Bank hereby agrees to employ and continue in its employ the Executive, and the Executive hereby accepts such employment and agrees to remain in the employ of the Bank, for the period commencing on the date of this Agreement and extending until this Agreement is terminated in accordance with the provisions of Section 6 below.

3.Compensation.

3.1Salary. Subject to the further provisions of this Agreement, the Bank shall pay the Executive a salary at an annual rate equal to $152,000 which will be paid in accordance with the Bank’s normal payroll procedures. Participation in deferred compensation, discretionary or performance bonus, retirement, stock option and other employee benefit plans and in fringe benefits shall not reduce the annual rate.

3.2Bonus. The Executive shall be eligible, for each calendar year ending during the Term of this Agreement (prorated for partial years), an annual bonus (the “Annual Bonus”) under the Heritage Commerce Corp (“HCC”) Management Incentive Plan (the “Incentive Plan”) or comparable alternate plan, subject to the terms, conditions and limitations of the Incentive Plan.

3.3Participation in Employee Benefit Plans. During the Term of this Agreement, the Executive and/or the Executive’s family, as the case may be, shall be eligible to participate in and shall receive all benefits (pension, thrift, profit sharing, life insurance, medical coverage, disability, medical, dental and vision, or other retirement or employee benefits) under employee benefit plans, practices, policies and programs provided by the Bank to the extent applicable generally to other executives in comparable positions with the Bank.

(a)401(k). HCC maintains a 401(k) plan for its eligible employees. Subject to the terms and conditions set forth in the official plan documents, the Executive will be eligible to enroll in the 401(k) plan, and shall receive a matching contribution in accordance with the terms of the 401(k) plan from HCC.

(b)Employee Stock Ownership Plan. The Executive shall have the option to participate in the HCC’s Employee Stock Ownership Plan on the same basis as other executives in comparable positions with the Bank.

(c)Other. The Executive’s eligibility and all other terms and conditions of the Executive’s participation in the Bank’s benefit, insurance and disability plans and programs will be governed by the official plan documents which may change from year-to-year. Notwithstanding the foregoing, at a minimum the Executive shall be entitled to the same benefits as all other executives in comparable positions with the Bank.

3.42004 Stock Option Plan. Any future grant of stock option to the Executive pursuant to the terms of the HCC’s 2004 Stock Option Plan (the “2004 Plan”), shall be determined by and in the sole discretion of the Board of Directors of HCC. The exercise price will be the Fair Market Value for the HCC’s Common Stock on the date of grant as defined in the 2004 Plan. The Executive’s options will vest in daily increments of 1/1460th from the date of grant until fully vested and shall expire ten years from the date of grant. All such options shall be subject to the terms and conditions of the 2004 Plan and shall be conditioned upon the Executive’s execution of an option agreement with HCC in a form specified by HCC.

3.5Supplemental Executive Retirement Plan. HCC maintains a Supplemental Executive Retirement Plan (“SERP”) for its executive officers. Subject to the terms and conditions set forth in the official plan documents, the Executive will be eligible to receive an annual benefit of up to $50,000 payable monthly commencing one month after the Executive’s sixty-second birthday. All terms and conditions of the Executive’s participation in the SERP will be governed by the official plan documents.

3.6Business Expenses. During the Term of this Agreement, the Executive shall be entitled to incur and be reimbursed for all reasonable business expenses. The Bank agrees that it will reimburse the Executive for all such expenses upon the presentation by the Executive, from time to time, of an itemized account of such expenditures setting forth the date, the purposes for which incurred, and the amounts thereof, together with such receipts showing payments in conformity with the Bank’s established policies. Reimbursement shall be made within a reasonable period after the Executive’s submission of an itemized account in accordance with the Bank’s policies.

3.7Fringe Benefits. During the Term of this Agreement, the Executive shall be entitled to receive the following fringe benefits:

(a)a monthly auto allowance of $500 per month plus gasoline;

(b)such other fringe benefits, commensurate with those available to other executives in comparable positions with the Bank in accordance with the policies of Bank as in effect from time to time.

3.8Vacations. During the Term of this Agreement, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Bank as in effect for the Executive or for other executives in comparable positions with the Bank; provided, however, that the Executive shall be entitled to earn paid vacation at the rate of not less than 22 days vacation days for each calendar year, of which at least 10 days must be taken consecutively. Vacation may be accrued up to a maximum of 30 days of earned vacation. Once this maximum is reached, the Executive shall cease to earn or accrue vacation unless and until the Executive takes vacation and the Executive’s accrued vacation has dropped below the maximum accrual level, at which time the Executive shall recommence to earn and accrue paid vacation. The date or dates of vacation shall be determined by the Executive and the President, and will be subject to the Bank's business requirements.

4.Indemnity. The Bank shall indemnify and hold the Executive harmless from any cost, expense or liability arising out of or relating to any acts or decisions made by the Executive on behalf of or in the course of performing services for the Bank to the same extent the Bank indemnifies and holds harmless other executive officers and directors of the Bank and in accordance with the Bank’s articles of incorporation, bylaws and established policies.

5.Certain Terms Defined. For purposes of this Agreement:

5.1“Accrued Obligations” means the sum of the Executive’s Base Salary and accrued vacation through the Date of Termination to the extent not theretofore paid, outstanding expense reimbursements and any compensation previously deferred by the Executive to the extent not theretofore paid.

5.2“Base Salary” means, as of any Date of Termination of employment, the highest annual salary of the Executive in any of the last three years preceding such Date of Termination.

5.3“Cause” shall mean (i) the Executive willfully breaches or habitually neglects the duties which the Executive is required to perform under this Agreement; (ii) the Executive commits an intentional act of moral turpitude that has a material detrimental effect on the reputation or business of the Bank; (iii) the Executive is convicted of a felony or commits any material and actionable act of dishonesty, fraud, or intentional material misrepresentation in the performance of the Executive’s duties under this Agreement; (iv) the Executive engages in an unauthorized disclosure or use of inside information, trade secrets or other confidential information; or (v) the Executive breaches a fiduciary duty, or willfully and materially violates any other duty, law, rule, regulation or policy of the Bank or an affiliate. If the Bank decides to terminate the Executive’s employment for Cause, the Bank will provide the Executive with notice specifying the grounds for termination, accompanied by a brief written statement stating the relevant facts supporting such grounds.

5.4“Change of Control” shall mean:

(a)the acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either (i) the then outstanding shares of common stock of HCC (the “Outstanding HCC Common Stock” or (ii) the combined voting power of the then outstanding voting securities of the HCC entitled to vote generally in the election of directors (the “Outstanding HCC Voting Securities”); provided, however, that for purposes of this Subsection (a), the following acquisitions shall not constitute a Change of Control; (i) any acquisition directly from the HCC, (ii) any acquisition by the HCC that reduces the number of shares issued and outstanding through a stock repurchase program or otherwise, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the HCC or any corporation controlled by the HCC or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of Subsection (c) of this Section 5.4; or

(b)a majority of the individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason other than resignation, death or disability to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the HCC’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(c)consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the HCC (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding HCC Common Stock and Outstanding HCC Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the HCC or all or substantially all of the HCC’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding HCC Common Stock and Outstanding HCC Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the HCC or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

(d)approval by the shareholders of the HCC of a complete liquidation or dissolution of the HCC.

5.5“Code” means the Internal Revenue Code of 1986, as amended and any successor provisions to such sections.

5.6“Common Stock” means shares of HCC’s common stock, no par value.

5.7“Date of Termination” means (i) if the Executive’s employment is terminated due to the Executive’s death, the Date of Termination shall be the date of death; (ii) if the Executive’s employment is terminated due to Disability, the Date of Termination is the Disability Effective Date; (iii) if the Executive’s employment is terminated by the Bank for Cause, the Date of Termination is the date on which the Bank gives notice to the Executive of such termination; (iv) if the Executive’s employment is terminated by the Bank without Cause or by the Executive, the Date of Termination shall be the date specified in the notice of termination (which date shall not be more than 30 days after the date on which such notice of termination is given); and (v) if the Executive’s employment terminates for any other reason, the Date of Termination shall be the Executive’s final date of employment.

5.8“Disability” shall mean a physical or mental condition of the Executive which occurs and persists and which, in the written opinion of a physician selected by the Bank or its insurers and acceptable to the Executive or the Executive’s legal representative, and, in the written opinion of such physician, the condition will render the Executive unable to return to his duties for an indefinite period of not less than 90 days.

6.Termination.

6.1This Agreement may be terminated for the following reasons:

(a)Death. This Agreement shall terminate automatically upon the Executive’s death.

(b)Disability. In the event of the Executive’s Disability, the Bank may give the Executive a notice of termination. In such event, the Executive’s employment with the Bank shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”) provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’ duties.

(c)Cause. The Bank may terminate the Executive for Cause.

(d)Without Cause. The Bank may terminate the Executive without Cause.

(e)Voluntary Termination By Executive. The Executive may terminate this Agreement and his employment with the Bank with or without cause.

6.2Certain Benefits upon Termination.

(a)Termination without Cause. If, during the Term, the Bank shall terminate the Executive’s employment for any reason other than Cause, death or Disability, the Bank shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:

(i)the Accrued Obligations;

(ii)the amount equal to nine (9) months of Employee’s aggregate annual compensation [including nine months of the highest Annual Bonus paid or payable, including any bonus or portion thereof which has been earned but deferred (and annualized for any year during which the Executive was employed for less than twelve full months), for the most recently completed three years during the Term, if any]; and

(iii)For nine (9) months after the Executive’s Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Bank shall continue benefits to the Executive and/or the Executive’s family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3.2 of this Agreement if the Executive’s employment had not been terminated, but not less favorable than that provided to other executives in comparable positions with the Bank; provided, however, the Bank’s obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which case the Bank may reduce the coverage of any benefits it is required to provide the Executive hereunder so long as the aggregate coverages and benefits of the combined benefit plans is no less favorable to the Executive than the coverages and benefits required to be provided hereunder.

(b)Termination and Change of Control. If, during the Term, the Bank shall terminate the Executive’s employment without Cause in connection with a Change of Control and such termination occurs within 120 days before or 12 months following a Change of Control, the Bank shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:

(i)the Accrued Obligations;

(ii)the amount equal to fifteen (15) months of Employee’s aggregate annual compensation [including fifteen (15) months of the highest Annual Bonus paid or payable, including any bonus or portion thereof which has been earned but deferred (and annualized for any year during which the Executive was employed for less than twelve full months), for the most recently completed three years during the Term, if any]; and

(iii)for fifteen (15) months after the Executive’s Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Bank shall continue benefits to the Executive and/or the Executive’s family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3.2 of this Agreement if the Executive’s employment had not been terminated, but not less favorable than that provided to other executives in comparable positions with the Bank; provided, however, the Bank’s obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which case the Bank may reduce the coverage of any benefits it is required to provide the Executive hereunder so long as the aggregate coverages and benefits of the combined benefit plans is no less favorable to the Executive than the coverages and benefits required to be provided hereunder.

(c)Death. If the Executive’s employment terminates during the Term by reason of the Executive’s death, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than for payment of Accrued Obligations and any Bonus Award for the year in which the death occurred prorated through the Date of Termination. Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination; provided, however, that payment may be deferred until the Executive’s executor or personal representative has been appointed and qualified pursuant to the laws in effect in the Executive’s jurisdiction of residence at the time of the Executive’s death. The Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Bank to the estate and beneficiaries of other executives in comparable positions with the Bank under such plans, programs, practices and policies relating to death benefits, if any as in effect on the date of the Executive’s death.

(d)Disability. If the Executive’s employment terminates during the Term by reason of the Executive’s Disability, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and any Bonus Award for the year in which the termination occurs prorated through the Date of Termination.

(e)Cause/Voluntary Termination. If the Executive’s employment terminates for Cause during the Term, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive the Accrued Obligations. If the Executive’s employment terminates due to the Executive voluntarily termination during the Term, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive the Accrued Obligations.

(f)Single Trigger Event. The provisions for payments contained in this Section 6.2 may be triggered only once during the term of this Agreement, so that, for example, should the Executive be terminated because of a Disability and should there thereafter be a Change of Control, then the Executive would be entitled to be paid only under Section 6.2(d) and not under Section 6.2(b) as well. In addition, the Executive shall not be entitled to receive severance benefits of any kind from any parent, wholly owned subsidiary or other affiliated entity of the Bank if in connection with the same event of series of events the payments provided for in this Section 6.2 have been triggered.

7.Assignment. This Agreement will inure to the benefit of and be binding upon the Bank and any of its successors and assigns. In view of the personal nature of the services to be performed under this Agreement by the Executive, the Executive will not have the right to assign or transfer any of his rights, obligations or benefits under this Agreement. The Bank will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Bank to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession had taken place. As used in this Agreement, “Bank” shall mean the Bank as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

8.Confidential Information. During the Term of this Agreement and thereafter, the Executive shall not, except as may be required to perform his duties hereunder or as required by applicable law, disclose to others for use, whether directly or indirectly, any Confidential Information regarding the Bank, HCC or any subsidiary or affiliate thereof (“Bank Group”). “Confidential Information” shall mean information about the Bank Group, its respective clients and customers that is not available to the general public and that was learned by the Executive in the course of his employment by the Bank, including (without limitation) any data, formulae, information, proprietary knowledge, trade secrets and client and customer lists and all papers, resumes, records and the documents containing such Confidential Information. The Executive acknowledges that such Confidential Information is specialized, unique in nature and of great value to the Bank Group, and that such information gives the Bank Group a competitive advantage. Upon the termination of his employment, the Executive will promptly deliver to the Bank all documents (and all copies thereof) containing any Confidential Information.

8.1Noncompetition. The Executive agrees that during the Term of this Agreement, he will not, directly or indirectly, without the prior written consent of the Bank, provide consultative service with or without pay, own, manage, operate, join, control, participate in, or be connected as a stockholder, partner, or otherwise with any business, individual, partner, firm, corporation, or other entity which is then in competition with the Bank or any present affiliate of the Bank; provided, however, that the “beneficial ownership” by the Executive, either individually or as a member of a “group,” as such terms are used in Regulation 13D of the Exchange Act, of not more than 1% of the voting stock of any publicly held corporation shall not be a violation of this Agreement. It is further expressly agreed that the Bank will or would suffer irreparable injury if the Executive were to compete with the Bank or any subsidiary or affiliate of the Bank in violation of this Agreement and that the Bank would by reason of such competition be entitled to injunctive relief in a court of appropriate jurisdiction, and the Executive further consents and stipulates to the entry of such injunctive relief in such a court prohibiting the Executive from competing with the Bank or any subsidiary or affiliate of the Bank in violation of this Agreement.

8.2Right to Bank Materials. The Executive agrees that all lists, materials, books, files, reports, correspondence, records, and other documents (“Bank Materials”) used, prepared, or made available to the Executive, shall be and shall remain the property of the Bank. Upon the termination of his employment, all Bank Materials shall be returned immediately to the Bank, and the Executive shall not make or retain any copies thereof.

8.3Anti-solicitation. The Executive promises and agrees that during the Term of this Agreement, and, for a period of one (1) year thereafter, he will not influence or attempt to influence customers, franchisees, landlords, or suppliers of the Bank or any of its present or future subsidiaries or affiliates, either directly or indirectly, to divert their business to any individual, partnership, firm, corporation or other entity then in competition with the business of the Bank, or any subsidiary or affiliate of the Bank.

9.Soliciting Employees. The Executive promises and agrees that during the Term of this Agreement and for a period of one (1) year thereafter, the Executive will not, directly or indirectly, individually or as a consultant to, or as an employee, officer, stockholder, director or other owner of or participant in any business, solicit (or assist in soliciting) any person who is then, or at any time within six (6) months prior thereto was, an employee of the Bank who earned annually $25,000 or more as an employee of the Bank during the last six (6) months of his or her own employment to work for (as an employee, consultant or otherwise) any business, individual, partnership, firm, corporation, or other entity whether or not engaged in competitive business with any entity in the Bank Group.

10.American Jobs Creation Act of 2004. In the event that either party after consultation with its or his tax adviser reasonably determines that any item payable by the Bank to the Executive would be, or is reasonably likely to be, pursuant to Section 409A of the Code, as amended by the American Jobs Creation Act of 2004, P.L. 108-357 or any regulations promulgated thereunder includible in the Executive’s gross income in a taxable year before the year(s) in which the Executive actually receives the item, such party shall notify the other party in writing. Any such notice shall specify: (a) in reasonable detail the basis and reasons for such party’s determination; (b) any Internal Revenue Service notices, regulations, revenue rulings or procedures, or other authority for the party’s determination; and (c) any proposed amendment(s) to this Agreement that the notifying party believes would prevent the inclusion of such item in a tax year before the Executive’s actual year of receipt of such item of income. If such notification specifies proposed amendment(s) to this Agreement, the parties agree to negotiate in good faith the terms and conditions of an amendment to this Agreement. Provided, however, nothing in this Section 10 shall be construed or interpreted to require the Bank to increase any amounts payable to the Executive pursuant to this Agreement or to consent to any amendment that would materially and adversely change the Bank’s financial accounting or tax treatment of the payments to the Executive under this Agreement.

11.Miscellaneous.

11.1Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other addresses as either party may have furnished to the other in writing in accordance herewith, except that notice of a change of address shall be effective only upon actual receipt:

  Company:HERITAGE BANK OF COMMERCE

150 Almaden Blvd

San Jose, Ca 95113

Attn: President and Chief Executive Officer

       with a copy to:Buchalter, Nemer, Fields & Younger

601 South Figueroa Street, Suite 2400

Los Angeles, CA 90017

Attn: Mark A. Bonenfant, Esq.

Executive:        Richard Hagarty

150 Almaden Boulevard

San Jose, CA 95113

11.2Amendments or Additions. No amendment, modification or additions to this Agreement shall be binding unless in writing and signed by both parties hereto.

11.3Section Headings. The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement.

11.4Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

11.5Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but both of which together will constitute one and the same instrument.

11.6Mediation. Prior to engaging in any legal or equitable litigation or other dispute resolution process, regarding any of the terms and conditions of this Agreement between the parties, or concerning the subject matter of the Agreement between the parties, each party specifically agrees to engage in good faith, in a mediation process at the expense of the Bank, complying with the procedures provided for under California Evidence Code Sections 1115 through and including 1125, as then currently in effect. The parties further and specifically agree to use their best efforts to reach a mutually agreeable resolution of the matter. The parties understand and specifically agree that should any party to this Agreement refuse to participate in mediation for any reason, the other party will be entitled to seek a court order to enforce this provision in any court of appropriate jurisdiction requiring the dissenting party to attend, participate, and to make a good faith effort in the mediation process to reach a mutually agreeable resolution of the matter.

11.7Arbitration. To the extent not resolved through mediation as provided in Section 11.6, any controversy arising out of or relating to the Executive’s employment (whether or not before or after the expiration of the Term of employment), any termination of the Executive’s employment, this Agreement, the enforcement or interpretation of any such an agreement, or because of an alleged breach, default, or misrepresentation in connection with any of the provisions of such an agreement, including (without limitation) any state or federal statutory claims, shall be submitted to arbitration in San Jose County, California, before a sole arbitrator (the “Arbitrator”) selected from judicial arbitration mediation services (“JAMS”), or if JAMS is no longer able to supply the arbitrator, such arbitrator shall be selected from the American Arbitration Association (“AAA”), and shall be conducted in accordance with the provisions of California Code of Civil Procedure §§ 1280 et seq. as the exclusive remedy of such dispute; provided, however, that provisional injunctive relief may, but need not, be sought in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the Arbitrator. Final resolution of any dispute through arbitration may include any remedy or relief that the Arbitrator deems just and equitable, including any and all remedies provided by applicable state or federal statutes. At the conclusion of the arbitration, the Arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the Arbitrator’s award or decision is based. Any award or relief granted by the Arbitrator hereunder shall be final and binding on the parties hereto and may be enforced by any court of competent jurisdiction.

11.8THE BANK AND THE EXECUTIVE HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN. THE BANK AND THE EXECUTIVE REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

11.9Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

11.10Entire Agreement. This Agreement embodies the entire agreement of the parties hereto respecting the matters within its scope. This Agreement supersedes all prior and contemporaneous agreements of the parties hereto that directly or indirectly bears upon the subject matter hereof. Any prior negotiations, correspondence, agreements, proposals or understandings relating to the subject matter hereof shall be deemed to have been merged into this Agreement, and to the extent inconsistent herewith, such negotiations, correspondence, agreements, proposals, or understandings shall be deemed to be of no force or effect. There are no representations, warranties, or agreements, whether express or implied, or oral or written, with respect to the subject matter hereof, except as expressly set forth herein.

11.11Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California without regard to its conflicts of law principles.

11.12Withholding. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law.

11.13Attorney Fees. In the event of any action, suit or proceeding brought under or in connection with this Agreement, the prevailing party therein shall be entitled to recover, and the other party hereto agrees to pay, the prevailing party’s costs and expenses in connection therewith, including reasonable attorneys’ fees.

11.14Survival. The provisions of this Agreement that may be reasonably interpreted as surviving termination of this Agreement, including Sections 8.1, 8.2, 8.3, 10.6, 10.7, 10.8, 10.10, 10.11, 10.12, 11.6, 11.7 and 11.8 shall continue in effect after termination of this Agreement.

IN WITNESS WHEREOF, EACH OF THE PARTIES HERETO HAS EXECUTED THIS AGREEMENT ON THE DATE FIRST INDICATED ABOVE.

    COMPANY:

    HERITAGE BANK OF COMMERCE

     a California banking corporation

    By: ______________________

     Walter T. Kaczmarek,

     President and Chief Executive Officer

    EXECUTIVE:

                                               By: ______________________

     Richard Hagarty,

                                                               Executive Vice President / Chief Credit Officer

                                        < font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt"> 

EX-99.2

Exhibit 99.2

Heritage Commerce Corp Reports Second Quarter Profits Rise 25%

San Jose, CA - July 31, 2006 — Heritage Commerce Corp (Nasdaq: HTBK), parent company of Heritage Bank of Commerce, today reported improving efficiencies and an expanding net interest margin which produced a 25% increase in second quarter profits and 43% rise in year to date earnings, compared to the year earlier periods. For the second quarter ended June 30, 2006, net income was $4.2 million, or $0.35 per diluted share, compared to $3.3 million, or $0.27 per diluted share, for the same quarter a year ago. For the first half of 2006, net income rose to $8.6 million, or $0.71 per diluted share, compared to $6.0 million, or $0.49 per diluted share, in the first half of 2005.

Financial Highlights:

2Q06 vs. 2Q05 and 1Q06

·   Net interest margin increased to 4.98%, up 47 basis points from 2Q05 and up 8 basis points from 1Q06.

·   Net interest income increased to $12.6 million, a 9% increase from 2Q05 and up 4% from 1Q06.

·   The efficiency ratio improved to 57.06% from 62.22% in 2Q05 and 58.08% in 1Q06.

2006 Year-to-Date vs. 2005 Year-to-Date

·   Return on average assets was 1.55%, compared to 1.08% a year ago.

·   Return on average equity was 14.93%, compared to 11.81% a year ago.

·   Nonperforming assets to total assets dropped to 0.15% from 0.51% a year ago.

·   Diluted earnings per share increased 45% to $0.71, compared to $0.49 a year ago.

“Higher yields on earning assets which improved our net interest margin, sound credit quality, and improved efficiency were keys to our profitability,” said Walter T. Kaczmarek, President and Chief Executive Officer.

Operating Results

Net interest income increased 9% to $12.6 million for the second quarter of 2006, compared to $11.6 million for the second quarter of 2005. For the first half of 2006, net interest income rose 9% to $24.8 million from $22.8 million for the same period of 2005. The net interest margin was 4.98% for the three months ended June 30, 2006, compared to 4.90% for the first quarter of 2006 and 4.51% for the three months ended June 30, 2005. For the first six months of 2006, net interest margin improved to 4.94% from 4.45% for the first six months of 2005.

Noninterest income was $2.3 million for the second quarter of 2006, down 14% when compared to $2.6 million for second quarter of 2005 and down 22% when compared to $2.9 million for the first quarter of 2006. In the first quarter of 2006, gain on sale of loans was augmented by a $671,000 gain from a loan portfolio sale. In the second quarter of 2005, equipment leasing contributed a total of $351,000 in noninterest income, and the bank exited this product line in mid-2005. 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 2006, noninterest income was $5.2 million, compared to $5.0 million in the first six months a year ago.

Noninterest expense decreased 4% to $8.5 million for the second quarter of 2006, compared to $8.9 million for the second quarter of 2005, and decreased 3% compared to the first quarter of 2006. In the first six months of 2006, noninterest expense decreased 5% to $17.3 million from $18.2 million in the first six months a year ago. Compensation expense decreased 9% from the first quarter to the second quarter, and decreased 8% compared to the second quarter a year ago. The decrease in compensation expense was primarily due to no executive severance payments and lower commission expense during the second quarter of 2006. Executive severance expense was $356,000 during the second quarter of 2005. Compensation expense decreased 4% for the first six months of 2006, compared to the first six months of 2005.

The efficiency ratio improved to 57.06% in the second quarter of 2006, compared to 58.08% in the first quarter of 2006, and 62.22% in the second quarter of 2005. The efficiency ratio for the first six months of 2006 improved to 57.57% from 65.35% a year ago. The annualized returns on average assets and average equity for the second quarter of 2006 were 1.50% and 14.35%, compared to 1.19% and 12.91% for the second quarter ended June 30, 2005, respectively. Returns on average assets and average equity for the first six months of 2006 were 1.55% and 14.93%, compared to 1.08% and 11.81% for the first six months of 2005, respectively.

Balance Sheet, Capital Management and Credit Quality

At June 30, 2006, total assets were $1.09 billion, compared to $1.10 billion at June 30, 2005, and $1.12 billion at March 31, 2006. Total deposits were $908.5 million at June 30, 2006, compared to $909.4 million at June 30, 2005, and $934.7 million at March 31, 2006. Total loans, excluding loans held for sale, were $713.8 million at June 30, 2006, compared to $713.7 million at June 30, 2005, and $695.9 million at March 31, 2006.

Nonperforming assets dropped to $1.6 million, or 0.15% of total assets, at June 30, 2006, compared to $5.6 million, or 0.51% of total assets, at June 30, 2005, and $2.5 million, or 0.23% of total assets, at March 31, 2006. A reverse provision for loan losses of $114,000 was recognized in the second quarter of 2006, and $489,000 in the first quarter of 2006, for a total of $603,000 year-to-date. Provision for loan losses was $394,000 and $807,000 for the three and six months ended June 30, 2005.

The allowance for loan losses was $9.1 million at June 30, 2006, representing 1.27% of total loans and 564% of nonperforming loans. The allowance for loan losses was $11.4 million at June 30, 2005, representing 1.60% of total loans and 206% of nonperforming loans. At March 31, 2006, the allowance for loan losses was $9.7 million or 1.40% of total loans and 385% of nonperforming loans. Net charge-offs in the second quarter of 2006 were $536,000, or 0.31% of average loans. Net charge-offs were $207,000, or 0.11% of average loans, in the second quarter of 2005. Net recoveries were $13,000, or 0.01% of average loans, at March 31, 2006.

Shareholders’ equity increased 13% to $118.0 million, or $9.98 book value per share, at June 30, 2006, compared to $104.2 million, or $8.87 book value per share, a year ago, and $115.2 million, or $9.73 book value per share, at March 31, 2006. Capital ratios continue to be above the well-capitalized guidelines established by regulatory agencies. The Company’s leverage ratio at June 30, 2006, was 12.70%, compared to 11.25% at June 30, 2005, and 12.49% at March 31, 2006.

During the second quarter of 2006, the Company repurchased 40,000 shares of its common stock with an average price of $23.44 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 using available cash. The repurchase program, which is financed by available cash, may be modified, suspended or terminated by the Board of Directors at any time without notice. The repurchase program expires on June 30, 2007. The extent to which the Company repurchases its shares and the timing of such repurchases will depend upon market conditions and other corporate considerations.

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 offices in Los Gatos, Fremont, Danville, Morgan Hill, Gilroy, Mountain View and Los Altos. Heritage Bank of Commerce is also an SBA Preferred Lender, operating from offices in San Jose, Fremont, Fresno, Santa Cruz, Watsonville and Pittsburg, California.

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, 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)		2006			2006			2005			2006			2005			2006			2005			Change
Interest Income	$	18,392		$	17,260		$	15,299			7	%		20	%	$	35,652		$	29,698			20	%
Interest Expense		5,766			5,069			3,668			14	%		57	%		10,835			6,864			58	%
Net Interest Income		12,626			12,191			11,631			4	%		9	%		24,817			22,834			9	%
Provision for Loan Losses		(114	)		(489	)		394			77	%		-129	%		(603	)		807			-175	%
Net Interest income after Provision for Loan Losses		12,740			12,680			11,237			0	%		13	%		25,420			22,027			15	%
Noninterest Income:
Gain on Sale of Loans		842			1,497			698			-44	%		21	%		2,339			1,458			60	%
Servicing Income		441			468			466			-6	%		-5	%		909			858			6	%
Gain on Sale of Leased Equipment		0			0			299			N/	A		-100	%		0			299			-100	%
Increase in Cash Surrender Value of Life Insurance		360			347			290			4	%		24	%		707			556			27	%
Service Charges and Other Fees on Deposit Accounts		327			327			395			0	%		-17	%		654			788			-17	%
Equipment Leasing		0			0			52			N/	A		-100	%		0			131			-100	%
Other		287			255			438			13	%		-34	%		542			905			-40	%
Total Noninterest Income		2,257			2,894			2,638			-22	%		-14	%		5,151			4,995			3	%
Noninterest Expense:
Salaries & Employee Benefits		4,653			5,109			5,044			-9	%		-8	%		9,762			10,215			-4	%
Occupancy & Equipment		922			886			1,045			4	%		-12	%		1,808			2,095			-14	%
Other		2,917			2,766			2,789			5	%		5	%		5,683			5,878			-3	%
Total Noninterest Expense		8,492			8,761			8,878			-3	%		-4	%		17,253			18,188			-5	%
Income Before Income Taxes		6,505			6,813			4,997			-5	%		30	%		13,318			8,834			51	%
Provision for Income Taxes		2,316			2,437			1,657			-5	%		40	%		4,753			2,841			67	%
Net Income	$	4,189		$	4,376		$	3,340			-4	%		25	%	$	8,565		$	5,993			43	%
PER SHARE DATA
(unaudited)
Basic Earnings Per Share	$	0.35		$	0.37		$	0.28			-5	%		25	%	$	0.72		$	0.51			41	%
Diluted Earnings Per Share	$	0.35		$	0.36		$	0.27			-3	%		30	%	$	0.71		$	0.49			45	%
Common Shares Outstanding		11,820,563			11,834,846			11,741,309			0	%		1	%		11,820,563			11,741,309			1	%
Book Value Per Share	$	9.98		$	9.73		$	8.87			3	%		13	%	$	9.98		$	8.87			13	%
Tangible Book Value Per Share	$	9.98		$	9.73		$	8.87			3	%		13	%	$	9.98		$	8.87			13	%
KEY FINANCIAL RATIOS
(unaudited)
Annualized Return on Average Equity		14.35	%		15.53	%		12.91	%		-8	%		11	%		14.93	%		11.81	%		26	%
Annualized Return on Average Assets		1.50	%		1.59	%		1.19	%		-6	%		26	%		1.55	%		1.08	%		44	%
Net Interest Margin		4.98	%		4.90	%		4.51	%		2	%		10	%		4.94	%		4.45	%		11	%
Efficiency Ratio		57.06	%		58.08	%		62.22	%		-2	%		-8	%		57.57	%		65.35	%		-12	%
AVERAGE BALANCES
(in $000's, unaudited)
Average Assets	$	1,120,108		$	1,114,248		$	1,123,575			1	%		0	%	$	1,117,193		$	1,122,321			0	%
Average Earning Assets	$	1,017,290		$	1,009,869		$	1,035,083			1	%		-2	%	$	1,013,600		$	1,034,131			-2	%
Average Total Loans	$	702,817		$	691,082		$	723,130			2	%		-3	%	$	702,376		$	726,586			-3	%
Average Loans Held For Sale	$	32,494		$	49,315		$	33,232			-34	%		-2	%	$	35,464		$	35,426			0	%
Average Deposits	$	929,000		$	919,944		$	928,959			1	%		0	%	$	924,496		$	927,485			0	%
Average Demand Deposits - Noninterest Bearing	$	228,891		$	235,288		$	257,054			-3	%		-11	%	$	232,072		$	259,251			-10	%
Average Interest Bearing Deposits	$	700,109		$	684,656		$	671,905			2	%		4	%	$	692,424		$	668,234			4	%
Average Interest Bearing Liabilities	$	749,533		$	740,911		$	742,785			1	%		1	%	$	745,245		$	740,600			1	%
Average Equity	$	117,126		$	114,268		$	103,745			3	%		13	%	$	115,705		$	102,342			13	%
OTHER FINANCIAL INFORMATION
(in $000's, unaudited)	$	15,344		$	14,721		$	13,121			4	%		17	%	$	30,065		$	25,466			18	%
Interest Income on Gross Loans (including loan fees)	$	5,033		$	4,319		$	2,883			17	%		75	%	$	9,352		$	5,293			77	%
Interest Expense on Interest Bearing Deposits

	End of Period:									Percent Change From:
CONSOLIDATED BALANCE SHEETS		June 30,			March 31,			June 30,			March 31,		June 30,
(in $000's, unaudited)		2006			2006			2005			2006		2005
ASSETS
Cash and Due from Banks	$	39,390		$	40,065			34,685			-2	%	14	%
Federal Funds Sold		47,000			94,200			26,300			-50	%	79	%
Securities Available-for-Sale, at Fair Value		191,471			186,168			226,630			3	%	-16	%
Loans Held For Sale		30,325			30,745			35,702			-1	%	-15	%
Loans:
Commercial Loans		273,208			262,625			291,774			4	%	-6	%
Real Estate-Mortgage		242,125			232,790			240,287			4	%	1	%
Real Estate-Land and Construction		149,168			156,468			129,708			-5	%	15	%
Home Equity		46,690			41,429			49,184			13	%	-5	%
Consumer Loans		1,389			1,495			1,945			-7	%	-29	%
Total Loans		712,580			694,807			712,898			3	%	0	%
Deferred Loan Costs		1,184			1,058			793			12	%	49	%
Loans, Net of Deferred Costs		713,764			695,865			713,691			3	%	0	%
Allowance for Loan Losses		(9,098	)		(9,748	)		(11,436	)		-7	%	-20	%
Net Loans		704,666			686,117			702,255			3	%	0	%
Premises & Equipment, Net		2,406			2,389			2,846			1	%	-15	%
Accrued Interest Receivable and Other Assets		79,406			80,358			69,278			-1	%	15	%
Total Assets	$	1,094,664		$	1,120,042		$	1,097,696			-2	%	0	%
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Demand Deposits-Noninterest Bearing	$	221,438		$	243,816			256,859			-9	%	-14	%
Demand Deposits-Interest Bearing		144,120			154,277			129,655			-7	%	11	%
Savings and Money Market		366,892			352,304			322,229			4	%	14	%
Time Deposits, Under $100		31,476			33,003			37,841			-5	%	-17	%
Time Deposits, $100 and Over		110,513			115,293			124,760			-4	%	-11	%
Brokered Deposits, $100 and Over		34,048			36,040			38,090			-6	%	-11	%
Total Deposits		908,487			934,733			909,434			-3	%	0	%
Securities Sold under Agreement to Repurchase		21,800			26,100			40,700			-16	%	-46	%
Notes Payable To Subsidiary Grantor Trusts		23,702			23,702			23,702			0	%	0	%
Accrued Interest Payable and Other Liabilities		22,708			20,310			19,675			12	%	15	%
Total Liabilities		976,697			1,004,845			993,511			-3	%	-2	%
Shareholders' Equity:
Common Stock		66,726			67,120			66,644			-1	%	0	%
Accumulated Other Comprehensive Loss		(3,681	)		(3,247	)		(1,545	)		13	%	138	%
Retained Earnings		54,922			51,324			39,086			7	%	41	%
Total Shareholders' Equity		117,967			115,197			104,185			2	%	13	%
Total Liabilities & Shareholders' Equity	$	1,094,664		$	1,120,042		$	1,097,696			-2	%	0	%
CREDIT QUALITY DATA
(in $000's, unaudited)
Nonaccrual Loans	$	1,612		$	2,292		$	5,016			-30	%	-68	%
Loans Over 90 Days Past Due and Still Accruing		0			238			545			-100	%	-100	%
Total Nonperforming Loans		1,612			2,530			5,561			-36	%	-71	%
Other Real Estate Owned		0			0			0			N/	A	N/	A
Total Nonperforming Assets	$	1,612		$	2,530		$	5,561			-36	%	-71	%
Net Charge-offs (Recoveries)	$	536		$	(13	)	$	207			4223	%	159	%
Net Charge-offs (Recoveries) as Percent of Average Loans		0.31	%		-0.01	%		0.11	%		3200	%	182	%
Allowance for Loan Losses to Total Loans		1.27	%		1.40	%		1.60	%		-9	%	-21	%
Allowance for Loan Losses to Nonperforming Loans		564.39	%		385.30	%		205.65	%		46	%	174	%
Nonperforming Assets to Total Assets		0.15	%		0.23	%		0.51	%		-35	%	-71	%
Nonperforming Loans to Total Loans		0.23	%		0.36	%		0.78	%		-36	%	-71	%
OTHER PERIOD-END STATISTICS
(unaudited)
Shareholders' Equity / Total Assets		10.78	%		10.29	%		9.49	%		5	%	14	%
Loan to Deposit Ratio		78.57	%		74.45	%		78.48	%		6	%	0	%
Noninterest Bearing Deposits / Total Deposits		24.37	%		26.08	%		28.24	%		-7	%	-14	%
Leverage Ratio		12.70	%		12.49	%		11.25	%		2	%	13	%

	For the Three Months Ended							For the Three Months Ended
	June 30, 2006							June 30, 2005
			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	$	735,311	$	15,344		8.37	%	$	756,362	$	13,121		6.96	%
Securities		195,743		1,977		4.05	%		230,781		1,835		3.19	%
Interest bearing deposits in other financial institutions		2,728		42		6.18	%		2,724		18		2.65	%
Federal funds sold		83,508		1,029		4.94	%		45,216		325		2.88	%
Total interest earning assets		1,017,290		18,392		7.25	%		1,035,083		15,299		5.93	%
Cash and due from banks		36,224							36,326
Premises and equipment, net		2,393							2,934
Other assets		64,201							49,232
Total assets	$	1,120,108						$	1,123,575
Liabilities and shareholders' equity:
Deposits:
Demand, interest bearing	$	148,635	$	830		2.24	%	$	133,184	$	393		1.18	%
Savings and money market		373,697		2,698		2.90	%		341,168		1,196		1.41	%
Time deposits, under $100		32,264		283		3.52	%		37,897		224		2.37	%
Time deposits, $100 and over		111,024		897		3.24	%		121,146		717		2.37	%
Brokered time deposits, $100 and over		34,489		325		3.78	%		38,510		353		3.68	%
Notes payable to subsidiary grantor trusts		23,702		575		9.73	%		23,702		525		8.88	%
Securities sold under agreement to repurchase		25,722		158		2.46	%		47,178		260		2.21	%
Total interest bearing liabilities		749,533	$	5,766		3.09	%		742,785	$	3,668		1.98	%
Demand, noninterest bearing		228,891							257,054
Other liabilities		24,558							19,991
Total liabilities		1,002,982							1,019,830
Shareholders' equity:		117,126							103,745
Total liabilities and shareholders' equity	$	1,120,108						$	1,123,575
Net interest income / margin			$	12,626		4.98	%			$	11,631		4.51	%

	For the Six Months Ended							For the Six Months Ended
	June 30, 2006							June 30, 2005
			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	$	737,840	$	30,065		8.22	%	$	762,012	$	25,466		6.74	%
Securities		198,394		3,769		3.83	%		232,611		3,699		3.21	%
Interest bearing deposits in other financial institutions		2,783		60		4.35	%		2,639		31		2.37	%
Federal funds sold		74,583		1,758		4.75	%		36,869		502		2.75	%
Total interest earning assets		1,013,600		35,652		7.09	%		1,034,131		29,698		5.79	%
Cash and due from banks		36,588							37,407
Premises and equipment, net		2,435							3,031
Other assets		64,570							47,752
Total assets	$	1,117,193						$	1,122,321
Liabilities and shareholders' equity:
Deposits:
Demand, interest bearing	$	153,288	$	1,668		2.19	%	$	130,113	$	686		1.06	%
Savings and money market		360,983		4,779		2.67	%		350,659		2,319		1.33	%
Time deposits, under $100		33,232		557		3.38	%		37,879		408		2.17	%
Time deposits, $100 and over		109,656		1,690		3.11	%		115,429		1,266		2.21	%
Brokered time deposits, $100 and over		35,265		658		3.76	%		34,154		614		3.63	%
Notes payable to subsidiary grantor trusts		23,702		1,137		9.67	%		23,702		1,037		8.82	%
Securities sold under agreement to repurchase		29,119		346		2.40	%		48,664		534		2.21	%
Total interest bearing liabilities		745,245	$	10,835		2.93	%		740,600	$	6,864		1.87	%
Demand, noninterest bearing		232,072							259,251
Other liabilities		24,171							20,128
Total liabilities		1,001,488							1,019,979
Shareholders' equity:		115,705							102,342
Total liabilities and shareholders' equity	$	1,117,193						$	1,122,321
Net interest income / margin			$	24,817		4.94	%			$	22,834		4.45	%

EX-99.3

Exhibit 99.3

Jack W. Conner Named Chairman of Heritage Commerce Corp Board of Directors

William Del Biaggio Remains Director, EVP and Founding Chairman

San Jose, CA - July 31, 2006 — Heritage Commerce Corp (Nasdaq: HTBK), parent company of Heritage Bank of Commerce, today announced its Board of Directors has elected Jack W. Conner Chairman of the Board, succeeding William Del Biaggio, Jr., who will remain on the Board of Directors as Founding Chairman and will continue serving the Bank as an Executive Vice President.

Formerly Chairman and CEO of Comerica California, Conner has more than 30 years of banking experience in the San Jose marketplace. Del Biaggio was one of the founders of Heritage Bank of Commerce and has been an integral part of the management group for more than twelve years and will continue to serve the bank on the Board and as a member of the senior management team.

“During the time he has served on our Board, Jack’s experience has been invaluable. His broad range of financial skills and extensive network of contacts in our market provide expertise that adds to our ability to compete in our market,” said Del Biaggio.

“As a founder of this bank and the guiding influence over the past twelve years, Bill has set a high standard for leadership and performance. I am looking forward to working with him, the Heritage Board, Walt Kaczmarek and his management team to take this organization to the next level of achievement,” said Conner.

As a founder and President of Plaza Bank of Commerce, Conner was instrumental in generating a high level of profitability and building the bank to more than $450 million in assets over 13 years. Under his leadership as Chairman and CEO, Plaza Bank was the first California bank to be acquired by an out-of-state bank when it merged into Comerica Inc. in January 1991. Subsequently, he served as Chairman and CEO of Comerica California until his retirement in 1998. He continued to serve on the board until 2002 when Comerica merged all its banking units into one charter. During this 11-year period, Conner spearheaded several other California bank acquisitions, including Pacific Western Bancshares, Inc., Metrobank and University Bank and Trust Co. Conner started his banking career with Union Bank.

A San Jose resident for more than 30 years, Conner is a graduate of San Jose State University. His community involvement over the past five decades included membership in the San Jose Rotary, San Jose Museum of Art and the Silicon Valley Leadership Group. Born in Wyoming and raised in Bakersfield, California, he is married and the father of three grown children and five grandchildren.

Del Biaggio has served as the Chairman of the Board for seven of the past twelve years: from 1994 to 1999 and from 2004 to 2006. He also served as Vice Chairman from 2002 to 2003. He will be an Executive Vice President and Director and will continue to work to broaden the presence of Heritage Commerce in the greater San Jose market.

Over the past 43 years, Bill and his wife Helen have been involved in many fund raising efforts for local charities, including the Bellarmine Scholarship Endowment Fund, Santa Clara County Council - Boy Scouts of America, Catholic Charities, Holy Spirit School, Sacred Heart Ignatian School, and the O’Connor Hospital Foundation. Bill served on the Bellarmine Alumni Council for 12 years and was its chairman from 1986 through 1989, and is currently serving on its Planned Giving Council.

He also serves on the Board of Directors of many community organizations, including Via Services of Santa Clara Valley, Friends of the Guadalupe River Park and Gardens Corporation and Kelley Park Community Resources Center. Bill is currently a Trustee at Presentation High School, as well as the Metro A Fund of the Silicon Valley Chamber of Commerce. He currently serves as Vice-Chair of the O’Connor Hospital Board of Directors. This year, Del Biaggio was named a “Father of the Year” by the Silicon Valley Father’s Day Council. He is the father of two grown children and five grandchildren.

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 offices in Los Gatos, Fremont, Danville, Morgan Hill, Gilroy, Mountain View, and Los Altos. Heritage Bank of Commerce is also an SBA Preferred Lender, operating from offices in San Jose, Fresno, Santa Cruz, Watsonville, Pittsburg and Fremont, California.

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, 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

EX-99.4

Exhibit 99.4

Heritage Commerce Corp Declares Quarterly Cash Dividend

San Jose, California - July 31, 2006 - Heritage Commerce Corp (Nasdaq: HTBK), today announced its Board of Directors declared a $0.05 per share quarterly cash dividend. The dividend will be paid on September 1, 2006, to shareholders of record on August 10, 2006.

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 offices in Los Gatos, Fremont, Danville, Morgan Hill, Gilroy, Mountain View and Los Altos. Heritage Bank of Commerce is also an 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, Fremont, Fresno, Santa Cruz, Watsonville and Pittsburg, California.

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