NORFOLK, Va., April 18, 2013 /PRNewswire/ -- Heritage Bankshares, Inc. ("Heritage"; the "Company") (OTCQB: HBKS), the parent of Heritage Bank (the "Bank"), today announced that it will permanently close its Ocean View ("Ocean View") and Military Highway ("Military Highway") branches. Ocean View, located at 735 East Ocean View Avenue, Norfolk, Va. will close at 4:00 pm on July 31, 2013 and Military Highway, located at 841 North Military Highway, Norfolk, Va. will close at 5:00 pm on July 31, 2013. Customer accounts will be automatically transferred to nearby branches and all five remaining branches will remain open to provide customer banking services.
The Company owns both of these facilities. Based on the current city tax assessments for these facilities, the Company does not expect to incur any material overall net loss on the final closing and disposition of these facilities. However, under generally accepted accounting principles, upon making the decision to close these offices, the Company is required to charge-off the furniture, fixtures and equipment ("F,F&E") in these facilities that will not be used by the Company in the future. Furthermore, until their disposition, the Company will place these facilities in real estate owned at the net book value of the land and improvements.
Accordingly, for the quarter ending March 31, 2013, the Company will incur a pre-tax loss of $136,000 from the charge-off of the F,F&E in these facilities and will place these facilities in real estate owned at $1.1 million, their combined net book value.
Michael S. Ives, President and CEO of the Company and the Bank, commented:
"The announcement today of the closing of these two branches is an important step for the Company. There will be cost savings from these closings, but that is not the primary basis for this decision.
"We have stated many times that our core business is serving the deposit and lending needs of small businesses and professional firms. Our core business continues to grow and, as it grows, we continue to reallocate resources from other areas of the Company to our core business. These two branches do not fit our business model and require disproportionate amounts of financial and managerial resources for their operations. Closure of these two branches is a part of our ongoing process to allocate as much of our managerial and financial resources as possible to our core business.
"Certain statistics for these two branches show the stark differences between these older branches designed and located for the Company's previous business strategies and two of our newer branches designed and located for our current business strategy.
"At February 28, 2013, Ocean View had $10.8 million in deposits, of which $3.7 million were noninterest-bearing deposits, and Military Highway had $12.2 million in deposits, of which $3.0 million were noninterest-bearing deposits. Ocean View has been open fourteen years, and Military Highway has been open over thirty years. By comparison, our Hilltop Branch ("Hilltop") has been open only four years, and at February 28, 2013, had $41.4 million in deposits, of which $7.4 million were noninterest-bearing deposits. Our Lynnhaven Branch ("Lynnhaven") has been open six years and at February 28, 2013 had $67.7 million in deposits, of which $34.3 million were noninterest-bearing deposits.
"The differences among these branches are also shown quite clearly by the numbers of teller transactions that take place in these branches. Our core business clients do the vast majority of their deposit banking through online banking, remote deposit capture and other types of electronic banking. Most of these clients rarely, if ever, come into our branches for teller transactions. Teller transactions are primarily consumer transactions. During February 2013, there were 1,492 teller transactions at Ocean View and 2,085 teller transactions at Military Highway compared to 901 teller transactions at Hilltop and 1,504 teller transactions at Lynnhaven.
"These statistics clearly show that the continuing operation of Ocean View and Military Highway is inconsistent with our business plan. We have no plans or expectations to close any of our remaining branches. Also, we expect that all of our branch employees at Ocean View and Military Highway will remain with the Company to serve our clients at other branches."
Heritage is the parent company of Heritage Bank (www.heritagebankva.com). Heritage Bank currently has four full-service branches in the city of Norfolk, two full-service branches in the city of Virginia Beach, and one full service branch in the city of Chesapeake. After the closing of Ocean View and Military Highway, Heritage Bank will have two full-service branches in the city of Norfolk.
Forward Looking Statements
The press release contains statements that constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements address future events, developments or results and typically use words such as believe, anticipate, expect, intend, plan, forecast, outlook, or estimate. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Heritage's actual results, performance, achievements, and business strategy to differ materially from the anticipated results, performance, achievements or business strategy expressed or implied by such forward-looking statements. Factors that could cause such actual results, performance, achievements and business strategy to differ materially from anticipated results, performance, achievements and business strategy include: general and local economic conditions, competition, significant increases in capital requirements or other significant changes in regulatory requirements, customer demand for Heritage's banking products and services, and the risks and uncertainties described in Heritage's most recent Form 10-K filed with the Securities and Exchange Commission. Heritage disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
SOURCE Heritage Bankshares, Inc.