DA Davidson Starts Heritage Commerce (HTBK) at Neutral; Improved Outlook Post-Written Agreement with Strong Capital Base

DA Davidson initiates coverage on Heritage Commerce (NASDAQ: HTBK) with a Neutral. PT $4.50.

DA analyst says, "While HTBK’s ROE outlook is a modest 5.3% in 2012 (although 7.6% in 4Q12) we think the company’s strong capital base should provide ample dry powder for expansion opportunities and help it maintain a valuation approaching 1x pro forma TBV."

"Our initial EPS estimates for HTBK are $0.20 and $0.28 for 2011 and 2012, respectively. Our model assumes that loan run-off remains in the second half of 2011 with modest growth in 2012, a stable NIM near current levels, and a provision expense of $3.3 million in 2011 and $4.3 million in 2012. Upside could be driven by stronger loan growth, which would require either a strong economic outlook or success in hiring lending teams or relationship managers."

For more ratings news on Heritage Commerce click here and for the rating history of Heritage Commerce click here.

Shares of Heritage Commerce closed at $3.91 yesterday.

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