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Heritage Commerce Corp (Nasdaq: HTBK) reported a fourth quarter 2020 net income of $11.6 million ($0.19 per diluted share), up from $5.7 million ($0.10) in Q4 2019. For the full year, net income fell to $35.3 million ($0.59) compared to $40.5 million ($0.84) in 2019. The net interest income for Q4 2020 decreased 13% year-over-year to $34.2 million, attributed to lower prime rates. However, credit quality improved with nonperforming assets down 20% year-over-year. The company maintained a strong liquidity position with $1.13 billion in cash and equivalents.
Positive
Year-over-year increase in net interest income for 2020 by 8% to $141.9 million.
Credit quality improved, with nonperforming assets declining 20% year-over-year to $7.9 million.
Strong liquidity position with $1.13 billion in cash and cash equivalents.
Negative
Net income for 2020 decreased to $35.3 million from $40.5 million in 2019.
Net interest income for Q4 2020 decreased 13% year-over-year to $34.2 million.
FTE net interest margin contracted 100 basis points to 3.15% for Q4 2020.
SAN JOSE, Calif., Jan. 28, 2021 (GLOBE NEWSWIRE) -- Heritage Commerce Corp (Nasdaq: HTBK), the holding company (the “Company”) for Heritage Bank of Commerce (the “Bank”), today announced fourth quarter 2020 net income of $11.6 million, or $0.19 per average diluted common share, compared to $5.7 million, or $0.10 per average diluted common share, for the fourth quarter of 2019, and $11.2 million, or $0.19 per average diluted common share, for the third quarter of 2020. For the year ended December 31, 2020, net income was $35.3 million, or $0.59 per average diluted common share, compared to $40.5 million, or $0.84 per average diluted common share, for the year ended December 31, 2019. All results are unaudited.
“We generated solid earnings, for the full year of 2020, fueled by a year-over-year increase in net interest income, total deposits, and gains on sales of SBA loans,” said Mr. Keith Wilton, President and Chief Executive Officer. “Our results in the midst of this challenging economic environment are a testament to our resilient bankers, our customers and our communities. Our participation in the initial rounds of the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), helped meet the financial needs of our customers who were significantly impacted by the pandemic and we are actively participating in this newest round of PPP funding.”
“Credit quality improved with nonperforming assets (“NPAs”) declining (20%) year-over-year and (23%) on a linked quarter basis, to $7.9 million at year end,” said Mr. Wilton. “In fact, we released $1.3 million of our provision for credit losses on loans largely due to recoveries of previously charged off accounts and the successful resolution of a nonperforming credit resulting in the release of specific reserves. This brings our allowance for credits losses on loans (“ACLL”) to total loans to 1.70%, and the ACLL to total loans, excluding PPP loans, to 1.91% at December 31, 2020. Further, capital and liquidity positions remain strong with a total risk-based capital ratio and leverage for the Company (consolidated) at 16.5% and 9.1% respectively, and 15.8% and 9.5% respectively, for the Bank, at December 31, 2020,” added Mr. Wilton.
“During the fourth quarter of 2020, we completed the final touches to our new San Jose corporate headquarters at 224 Airport Parkway and finalized the move of our San Mateo branch and administrative offices to newly renovated facilities,” commented Mr. Wilton. “These combined facilities represent over 50% of the Company’s office footprint and include modifications and upgrades to meet enhanced energy saving requirements, further representing our Company’s commitment to lowering our carbon footprint.”
“The past year presented many challenges to members of the communities we serve. During 2020, we were proud of our employees who volunteered their time to many local organizations that assist minority, disenfranchised and underrepresented groups in our community, and we congratulate them for their service. In addition, we are proud of our Company’s continued ability to provide grants and sponsorships to support these community groups,” said Mr. Wilton.
In response to two economic stimulus laws passed by Congress in the first half of the 2020, Heritage Bank of Commerce funded 1,105 PPP loans, with total principal balances of $333.4 million. Through 2020, PPP loan payoffs totaled $9.1 million while SBA loan forgiveness totaled $33.7 million and the Bank ended the fourth quarter of 2020 with $290.7 million in outstanding PPP loan balances. These loans generated $2.2 million in interest income and $3.9 million in net deferred fee revenue during 2020. At December 31, 2020, total loans included remaining deferred fees on PPP loans of ($6.8) million and deferred costs of $783,000.
On April 7, 2020, the U.S. banking agencies issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus. The statement describes accounting for COVID-19-related loan modifications, including clarifying the interaction between current accounting rules and the temporary relief provided by the Coronavirus Aid, Relief, and Economic Security (“CARES Act”). The Bank made accommodations for initial payment deferrals for a number of customers of up to 90 days, generally, with the potential, upon application, of an additional 90 days of payment deferral (180 days maximum). The Bank also waived all normal applicable fees. As well, most of the deferrals we originally granted have returned to regular payments. The following table shows the deferments at December 31, 2020 by category:
Underlying Collateral
NON-SBA LOANS
Business
Real
(in $000’s, unaudited)
Assets
Estate
Total
Initial Deferments(1)
$
-
$
1,573
$
1,573
2nd Deferments(2)
295
684
979
Total
$
295
$
2,257
$
2,552
(1) Initial deferments were generally for 3 months
(2) 2nd deferments were for an additional 3 months
In addition to its portfolio of SBA PPP loans, the Bank also has a portfolio of SBA 7(a) loans totaling $48.9 million as of January 15, 2021. As part of the SBA’s Coronavirus debt relief efforts, beginning in April of 2020, the SBA commenced a six-month program to cover payments of principal, interest and any associated fees for these borrowers, which largely ended with the September payment. The following table reflects the status of these SBA 7(a) loans as of January 15, 2021:
SBA 7(a) LOANS
Number
(in $000’s, unaudited)
Balance
of Loans
SBA 7(a) loans that borrowers made payments
by January 15, 2021
$
41,994
234
Payments Not Made / NSF / Returned
1,032
12
Due dates later in January
85
2
New loans / No payment due
3,267
4
CARES Payments
2,062
9
Request for Deferral
448
5
Total Portfolio
$
48,888
266
The CARES Act was recently amended to include $3.5 billion of extended debt relief payments for SBA borrowers. The program will initially provide for 3 payments of principal and interest to a maximum of $9,000 per month under various criteria and then an additional 5 payments for borrowers considered “underserved” as defined in the amended legislation.
Credit Quality and Performance
At December 31, 2020, NPAs declined by $1.9 million, or (20%), to $7.9 million, compared to $9.8 million at December 31, 2019, and decreased by $2.4 million, or (23%) from $10.3 million at September 30, 2020. Classified assets increased to $34.0 million, or 0.73% of total assets, at December 31, 2020, compared to $32.6 million, or 0.79% of total assets, at December 31, 2019, and $33.0 million, or 0.72% of total assets, at September 30, 2020.
The Company continues to monitor portfolio loans made to commercial customers with businesses in higher risk sectors due to the COVID-19 pandemic. During the fourth quarter of 2020, the percentage of loans identified as higher risk to total loans increased slightly compared to the third quarter of 2020. The following table provides a breakdown of such loans as a percentage of total loans for the periods indicated:
% of Total
% of Total
% of Total
% of Total
Loans at
Loans at
Loans at
Loans at
HIGHER RISK SECTORS (unaudited)
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
Health care and social assistance:
Offices of dentists
2.01
%
1.86
%
1.79
%
1.63
%
Offices of physicians (except mental health specialists)
0.81
%
0.74
%
0.76
%
0.70
%
Other community housing services
0.28
%
0.27
%
0.27
%
0.11
%
All others
2.15
%
2.15
%
2.21
%
1.84
%
Total health care and social assistance
5.25
%
5.02
%
5.03
%
4.28
%
Retail trade:
Gasoline stations with convenience stores
2.16
%
1.97
%
1.90
%
1.98
%
All others
2.34
%
2.44
%
2.44
%
2.18
%
Total retail trade
4.50
%
4.41
%
4.34
%
4.16
%
Accommodation and food services:
Full-service restaurants
1.30
%
1.40
%
1.38
%
0.86
%
Limited-service restaurants
0.57
%
0.74
%
0.79
%
0.63
%
Hotels (except casino hotels) and motels
0.95
%
0.92
%
0.89
%
0.94
%
All others
0.68
%
0.68
%
0.70
%
0.52
%
Total accommodation and food services
3.50
%
3.74
%
3.76
%
2.95
%
Educational services:
Elementary and secondary schools
0.58
%
0.57
%
0.65
%
0.15
%
Education support services
0.45
%
0.43
%
0.40
%
0.15
%
All others
0.19
%
0.17
%
0.24
%
0.17
%
Total educational services
1.22
%
1.17
%
1.29
%
0.47
%
Arts, entertainment, and recreation
1.34
%
1.27
%
1.26
%
1.09
%
Purchased participations in micro loan portfolio
0.60
%
0.68
%
0.80
%
0.95
%
Total higher risk sectors
16.41
%
16.29
%
16.48
%
13.90
%
The increase in higher risk sector loans in the last three quarters of 2020, compared to the first quarter of 2020, was primarily due to the addition of PPP loans during the second quarter of 2020.
Capital and Liquidity
The Company’s and the Bank’s consolidated capital ratios exceeded regulatory guidelines for a well-capitalized financial institution, and the Basel III minimum regulatory requirements at December 31, 2020.
Our liquidity position refers to our ability to maintain cash flows sufficient to fund operations, meet all of our obligations and commitments, and accommodate unexpected sudden changes in balances of loans and deposits in a timely manner. At various times the Company requires funds to meet short term cash requirements brought about by loan growth or deposit outflows, the purchase of assets, or liability repayments. An integral part of the Company’s ability to manage its liquidity position appropriately is the Company’s large base of core deposits, which are generated by offering traditional banking services in its service area and which have historically been a stable source of funds. To manage liquidity needs properly, cash inflows must be timed to coincide with anticipated outflows or sufficient liquidity resources must be available to meet varying demands. At December 31, 2020, the Company had a strong liquidity position with $1.13 billion in cash and cash equivalents, and $781.6 million in available borrowing capacity from sources including the Federal Home Loan Bank (“FHLB”), the Federal Reserve Bank of San Francisco (“FRB”), Federal funds facilities with several financial institutions, and a line of credit with a correspondent bank. The Company also had $498.5 million (at fair market value) in unpledged securities available at December 31, 2020. The loan to deposit ratio was 66.91% at December 31, 2020, compared to 74.20% at December 31, 2019, and decreased from 69.32% at September 30, 2020.
Fourth Quarter and Year Ended December 31, 2020 Operating Results, Balance Sheet Review, Capital Management, and Credit Quality (as of, or for the periods ended December 31, 2020, compared to December 31, 2019, and September 30, 2020, except as noted):
Operating Results:
Diluted earnings per share were $0.19 for the fourth quarter of 2020, compared to $0.10 for the fourth quarter of 2019, and $0.19 for the third quarter of 2020. Diluted earnings per share were $0.59 for the year ended December 31, 2020, compared to $0.84 for the year ended December 31, 2019.
The following table indicates the ratios for the return on average tangible assets and the return on average tangible equity for the periods indicated:
For the Quarter Ended
For the Year Ended
December 31,
September 30,
December 31,
December 31,
December 31,
(unaudited)
2020
2020
2019
2020
2019
Return on average tangible assets
1.02
%
1.02
%
0.57
%
0.83
%
1.25
%
Return on average tangible equity
11.75
%
11.41
%
5.96
%
9.04
%
13.09
%
Net interest income, before provision for credit losses on loans, decreased (13%) to $34.2 million for the fourth quarter of 2020, compared to $39.2 million for the fourth quarter of 2019, primarily due to decreases in the prime rate, and yield on investment securities and overnight funds. Net interest income remained flat for the fourth quarter of 2020, compared to $34.2 million for the third quarter of 2020. Net interest income increased 8% to $141.9 million for the year ended December 31, 2020, compared to $131.8 million for the year ended December 31, 2019, primarily due to an increase in the average balance of loans resulting from the Presidio Bank (“Presidio”) merger, additional interest and fee income from PPP loans, and an increase in the accretion of the loan discount into loan interest income from our merger with Presidio, partially offset by decreases in the prime rate, and decreases in the yield on investment securities and overnight funds.
The fully tax equivalent (“FTE”) net interest margin contracted 100 basis points to 3.15% for the fourth quarter of 2020, from 4.15% for the fourth quarter of 2019, primarily due to a decline in the average yield on loans, investment securities, and overnight funds, partially offset by a decline in the cost of interest-bearing liabilities. The FTE net interest margin contracted 9 basis points for the fourth quarter of 2020 from 3.24% for the third quarter of 2020, primarily due to a decline in the average yield on investment securities, and overnight funds, partially offset by an increase in the average yield on loans and a decline in the cost of interest-bearing liabilities.
For the year ended December 31, 2020, the FTE net interest margin contracted 78 basis points to 3.50%, compared to 4.28% for the year ended December 31, 2019, primarily due to a decline in the average yield on loans, investment securities, and overnight funds, partially offset by a decline in the cost of interest-bearing liabilities.
The following tables present the average balance of loans outstanding, interest income, and the average yield for the periods indicated:
The average yield on the total loan portfolio decreased to 4.93% for the fourth quarter of 2020, compared to 5.76% for the fourth quarter of 2019, primarily due to a decline in the average yield in the prime rate, new average balances of lower yielding PPP loans, and a decrease in the accretion of the loan purchase discount into loan interest income from the acquisitions.
For the Quarter Ended
For the Quarter Ended
December 31, 2020
December 31, 2019
Average
Interest
Average
Average
Interest
Average
(in $000’s, unaudited)
Balance
Income
Yield
Balance
Income
Yield
Loans, core bank and asset-based lending
$
2,256,944
$
26,348
4.64
%
$
2,353,871
$
30,786
5.19
%
SBA PPP loans
313,335
787
1.00
%
—
—
N/A
PPP fees, net
—
1,935
2.46
%
—
—
N/A
Bay View Funding factored receivables
50,720
2,856
22.40
%
45,045
2,888
25.44
%
Purchased residential mortgages
24,955
118
1.88
%
33,867
237
2.78
%
Purchased commercial real estate ("CRE") loans
20,854
176
3.36
%
28,407
238
3.32
%
Loan fair value mark / accretion
(12,017
)
687
0.12
%
(15,089
)
1,338
0.23
%
Total loans (includes loans held-for-sale)
$
2,654,791
$
32,907
4.93
%
$
2,446,101
$
35,487
5.76
%
•
The average yield on the total loan portfolio increased to 4.93% for the fourth quarter of 2020 compared to 4.86% for the third quarter of 2020, primarily due to higher fees from PPP loans and a higher average balance of Bay View Funding factored receivables, partially offset by a decrease in the accretion of the loan purchase discount into loan interest income from the acquisitions.
For the Quarter Ended
For the Quarter Ended
December 31, 2020
September 30, 2020
Average
Interest
Average
Average
Interest
Average
(in $000’s, unaudited)
Balance
Income
Yield
Balance
Income
Yield
Loans, core bank and asset-based lending
$
2,256,944
$
26,348
4.64
%
$
2,266,227
$
26,508
4.65
%
SBA PPP loans
313,335
787
1.00
%
324,518
816
1.00
%
PPP fees, net
—
1,935
2.46
%
—
1,305
1.60
%
Bay View Funding factored receivables
50,720
2,856
22.40
%
40,300
2,431
24.00
%
Purchased residential mortgages
24,955
118
1.88
%
29,399
180
2.44
%
Purchased CRE loans
20,854
176
3.36
%
22,603
195
3.43
%
Loan fair value mark / accretion
(12,017
)
687
0.12
%
(13,353
)
1,200
0.21
%
Total loans (includes loans held-for-sale)
$
2,654,791
$
32,907
4.93
%
$
2,669,694
$
32,635
4.86
%
•
The average yield on the total loan portfolio decreased to 5.06% for the year ended December 31, 2020 compared to 5.86% for the year ended December 31, 2019, primarily due to decreases in the prime rate on loans and new average balances of lower yielding PPP loans, partially offset by higher PPP loan fees and an increase in the accretion of the loan purchase discount into loan interest income from the acquisitions.
For the Year Ended
For the Year Ended
December 31, 2020
December 31, 2019
Average
Interest
Average
Average
Interest
Average
(in $000’s, unaudited)
Balance
Income
Yield
Balance
Income
Yield
Loans, core bank and asset-based lending
$
2,327,624
$
110,652
4.75
%
$
1,890,079
$
100,380
5.31
%
SBA PPP loans
218,391
2,185
1.00
%
—
—
N/A
PPP fees, net
—
3,877
1.78
%
—
—
N/A
Bay View Funding factored receivables
45,765
10,727
23.44
%
46,710
11,688
25.02
%
Purchased residential mortgages
29,648
725
2.45
%
35,343
951
2.69
%
Purchased CRE loans
24,072
831
3.45
%
30,936
1,107
3.58
%
Loan fair value mark / accretion
(14,005
)
4,172
0.18
%
(8,151
)
2,682
0.14
%
Total loans (includes loans held-for-sale)
$
2,631,495
$
133,169
5.06
%
$
1,994,917
$
116,808
5.86
%
•
In aggregate, the original total net purchase discount on loans from the Focus Business Bank, Tri-Valley Bank, United American Bank, and Presidio loan portfolio was $25.2 million. In aggregate, the remaining net purchase discount on total loans acquired was $12.1 million at December 31, 2020.
•
The average cost of total deposits was 0.14% for the fourth quarter of 2020, compared to 0.26% for the fourth quarter of 2019 and 0.16% for the third quarter of 2020. The average cost of total deposits was 0.17% for the year ended December 31, 2020, compared to 0.29% for the year ended December 31, 2019.
•
There was a credit of $1.3 million to the provision for credit losses on loans for the fourth quarter of 2020, compared to a $3.2 million provision for loan losses for the fourth quarter of 2019, and a $197,000 provision for credit losses on loans for the third quarter of 2020. There was a $13.2 million provision for credit losses on loans for the year ended December 31, 2020, compared to an $846,000 provision for loan losses for the year ended December 31, 2019.
•
The increase in the provision for credit losses on loans for the year ended December 31, 2020, compared to the year ended December 31, 2019, was driven primarily by a significantly deteriorated economic outlook resulting from the Coronavirus pandemic. The three loan classes where the largest increases in reserves were recorded under the Current Expected Credit Loss ("CECL") loss rate methodology were investor-owned CRE, land and construction, and commercial and industrial (“C&I”). Ongoing impacts of the CECL methodology will be dependent upon changes in economic conditions and forecasts, originated and acquired loan portfolio composition, portfolio duration, and other factors.
•
Total noninterest income was $2.1 million for the fourth quarter of 2020, compared to $2.4 million for the fourth quarter of 2019, primarily due to lower service charges and fees on deposit accounts. Total noninterest income decreased to $2.1 million for the fourth quarter of 2020 from $2.6 million for the third quarter of 2020, primarily due to a realized gain on warrants exercised during the third quarter of 2020.
•
For the year ended December 31, 2020, total noninterest income was $9.9 million, compared to $10.2 million for the year ended December 31, 2019, primarily due to lower service charges and fees on deposit accounts, partially offset by an increase in the cash surrender value of life insurance, a gain realized on a warrant exercised, and a gain on the disposition of foreclosed assets during the first quarter of 2020.
•
Total noninterest expense for the fourth quarter of 2020 decreased to $21.6 million, compared to $30.6 million for the fourth quarter of 2019, primarily due to lower merger-related costs. Total noninterest expense for the fourth quarter of 2020 modestly increased compared to $21.2 million for the third quarter of 2020.
•
Noninterest expense for the year ended December 31, 2020 increased to $89.5 million, compared to $84.9 million for the year ended December 31, 2019, primarily due to higher salaries and employee benefits as a result of annual salary increases, and additional employees and operating costs added as a result of the Presidio merger, partially offset by lower merger-related costs.
•
The following table reflects pre-tax merger-related costs resulting from the merger with Presidio for the periods indicated:
For the Quarter Ended
For the Year Ended
MERGER-RELATED COSTS
December 31,
September 30,
December 31,
December 31,
December 31,
(in $000’s, unaudited)
2020
2020
2019
2020
2019
Salaries and employee benefits
$
—
$
—
$
6,580
$
356
$
6,580
Other
101
17
3,299
2,245
4,500
Total merger-related costs
$
101
$
17
$
9,879
$
2,601
$
11,080
•
Full time equivalent employees were 330 at December 31, 2020, 357 at December 31, 2019, and 342 at September 30, 2020.
The efficiency ratio was 59.45% for the fourth quarter of 2020, compared to 73.58% for the fourth quarter of 2019, and 57.58% for the third quarter of 2020. The efficiency ratio for the year ended December 31, 2020 was 58.96%, compared to 59.76% for the year ended December 31, 2019.
Income tax expense was $4.4 million for the fourth quarter of 2020, compared to $2.1 million for the fourth quarter of 2019, and $4.2 million for the third quarter of 2020. The effective tax rate for the fourth quarter of 2020 was 27.6%, compared to 26.9% for the fourth quarter of 2019, and 27.3% for the third quarter of 2020. Income tax expense for the year ended December 31, 2020 was $13.8 million, compared to $15.9 million for the year ended December 31, 2019. The effective tax rate was 28.1% for the years ended December 31, 2020 and December 31, 2019.
The difference in the effective tax rate for the periods reported compared to the combined Federal and state statutory tax rate of 29.6% is primarily the result of the Company’s investment in life insurance policies whose earnings are not subject to taxes, tax credits related to investments in low income housing limited partnerships (net of low income housing investment losses), and tax-exempt interest income earned on municipal bonds.
Balance Sheet Review, Capital Management and Credit Quality:
Total assets increased 13% to $4.63 billion at December 31, 2020, compared to $4.11 billion at December 31, 2019. Total assets increased 1% from $4.61 billion at September 30, 2020.
Securities available-for-sale, at fair value, totaled $235.8 million at December 31, 2020, compared to $404.8 million at December 31, 2019, and $294.4 million at September 30, 2020. At December 31, 2020, the Company’s securities available-for-sale portfolio was comprised of $175.3 million of agency mortgage-backed securities (all issued by U.S. Government sponsored entities), and $60.5 million of U.S. Treasury securities. The pre-tax unrealized gain on securities available-for-sale at December 31, 2020 was $5.8 million, compared to a pre-tax unrealized gain on securities available-for-sale of $2.3 million at December 31, 2019, and a pre-tax unrealized gain on securities available-for-sale of $6.9 million at September 30, 2020. All other factors remaining the same, when market interest rates are decreasing, the Company will experience a higher unrealized gain (or a lower unrealized loss) on the securities portfolio.
At December 31, 2020, securities held-to-maturity, at amortized cost, totaled $297.4 million, compared to $366.6 million at December 31, 2019, and $295.6 million at September 30, 2020. At December 31, 2020, the Company’s securities held-to-maturity portfolio was comprised of $228.7 million of agency mortgage-backed securities, and $68.7 million of tax-exempt municipal bonds. During the fourth quarter of 2020, the Company purchased $30.9 million of agency mortgage-backed securities (securities held-to-maturity), with a book yield of 1.15% and an average life of 6.18 years.
With the CECL methodology implementation date of January 1, 2020, there was a $58,000 allowance for credit losses recorded on the Company’s held-to-maturity municipal investment securities portfolio. For the year ended December 31, 2020, there was a reduction of $4,000 to the allowance for credit losses on the Company’s held-to-maturity municipal investment securities portfolio, for an allowance for credit losses of $54,000 at December 31, 2020.
The loan portfolio remains well-diversified as reflected in the following table which summarizes the distribution of loans, excluding loans held-for-sale, and the percentage of distribution in each category for the periods indicated:
LOANS
December 31, 2020
September 30, 2020
December 31, 2019
(in $000’s, unaudited)
Balance
% to Total
Balance
% to Total
Balance
% to Total
Commercial
$
555,707
21
%
$
574,359
21
%
$
603,345
24
%
Paycheck Protection Program Loans
290,679
11
%
323,550
12
%
—
0
%
Real estate:
CRE - owner occupied
560,362
21
%
561,528
21
%
548,907
22
%
CRE - non-owner occupied
693,103
27
%
713,563
27
%
767,821
30
%
Land and construction
144,594
6
%
142,632
5
%
147,189
6
%
Home equity
111,885
4
%
111,468
4
%
151,775
6
%
Multifamily
166,425
6
%
169,791
6
%
180,623
7
%
Residential mortgages
85,116
3
%
91,077
3
%
100,759
4
%
Consumer and other
18,116
1
%
17,511
1
%
33,744
1
%
Total Loans
2,625,987
100
%
2,705,479
100
%
2,534,163
100
%
Deferred loan costs (fees), net
(6,726
)
—
(8,463
)
—
(319
)
—
Loans, net of deferred costs and fees
$
2,619,261
100
%
$
2,697,016
100
%
$
2,533,844
100
%
•
Loans, excluding loans held-for-sale, increased $85.4 million, or 3%, to $2.62 billion at December 31, 2020, compared to $2.53 billion at December 31, 2019, and decreased (3%) from $2.70 billion at September 30, 2020. Total loans at December 31, 2020 included $290.7 million of PPP loans.
•
C&I line usage was 28% at December 31, 2020, compared to 35% at December 31, 2019, and 28% at September 30, 2020.
•
At December 31, 2020, 45% of the CRE loan portfolio was secured by owner-occupied real estate.
The following table summarizes the allowance for credit losses on loans(1) for the periods indicated:
For the Quarter Ended
For the Year Ended
ALLOWANCE FOR CREDIT LOSSES ON LOANS
December 31,
September 30,
December 31,
December 31,
December 31,
(in $000’s, unaudited)
2020
2020
2019
2020
2019
Balance at beginning of period
$
45,422
$
45,444
$
25,895
$
23,285
$
27,848
Charge-offs during the period
(144
)
(598
)
(6,003
)
(1,880
)
(6,623
)
Recoveries during the period
470
379
170
1,192
1,214
Net recoveries (charge-offs) during the period
326
(219
)
(5,833
)
(688
)
(5,409
)
Impact of adopting Topic 326
—
—
—
8,570
—
Provision (recapture) for credit losses on loans during the period(1)
(1,348
)
197
3,223
13,233
846
Balance at end of period
$
44,400
$
45,422
$
23,285
$
44,400
$
23,285
Total loans, net of deferred fees
$
2,619,261
$
2,697,016
$
2,533,844
$
2,619,261
$
2,533,844
Total nonperforming loans
$
7,869
$
10,262
$
9,828
$
7,869
$
9,828
Allowance for credit losses on loans to total loans(2)
1.70
%
1.68
%
0.92
%
1.70
%
0.92
%
Allowance for credit losses on loans to total nonperforming loans(2)
564.24
%
442.62
%
236.93
%
564.24
%
236.93
%
(1)
Provision (recapture) for credit losses on loans for the quarters ended December 31, 2020 and September 30, 2020, and the year ended December 31, 2020,
Provision for loan losses for the quarter and the year ended December 31, 2019
(2)
ACLL at December 31, 2020 and September 30, 2020, Allowance for loan losses ("ALLL") at December 31, 2019
The ACLL was 1.70% of total loans at December 31, 2020 and the ACLL to total nonperforming loans was 564.24% at December 31, 2020. The ALLL was 0.92% of total loans and the ALLL to nonperforming loans was 236.93% at December 31, 2019. The ACLL was 1.68% of total loans at September 30, 2020 and the ACLL to total nonperforming loans was 442.62% at September 30, 2020. The ACLL was 1.91% of total loans, excluding PPP loans, at December 31, 2020, and September 30, 2020.
The following table shows the results of adopting CECL for the year ended December 31, 2020:
DRIVERS OF CHANGE IN ACLL UNDER CECL
(in $000’s, unaudited)
ALLL at December 31, 2019
$
23,285
Day 1 adjustment impact of adopting Topic 326
8,570
ACLL at January 1, 2020
31,855
Net (charge-offs) during the first quarter of 2020
(422
)
Portfolio changes during the first quarter of 2020
1,216
Economic factors during the first quarter of 2020
12,054
ACLL at March 31, 2020
44,703
Net (charge-offs) during the second quarter of 2020
(373
)
Portfolio changes during the second quarter of 2020
(4,282
)
Qualitative and quantitative changes during the second
quarter of 2020 including changes in economic forecasts
5,396
ACLL at June 30, 2020
45,444
Net (charge-offs) during the third quarter of 2020
(219
)
Portfolio changes during the third quarter of 2020
488
Qualitative and quantitative changes during the third
quarter of 2020 including changes in economic forecasts
(291
)
ACLL at September 30, 2020
45,422
Net (charge-offs) during the fourth quarter of 2020
326
Portfolio changes during the fourth quarter of 2020
(1,622
)
Qualitative and quantitative changes during the fourth
quarter of 2020 including changes in economic forecasts
274
ACLL at December 31, 2020
$
44,400
Net recoveries totaled $326,000 for the fourth quarter of 2020, compared to net charge-offs of $5.8 million for the fourth quarter of 2019, and net charge-offs of $219,000 for the third quarter of 2020.
The following is a breakout of NPAs at the periods indicated:
End of Period:
NONPERFORMING ASSETS
December 31, 2020
September 30, 2020
December 31, 2019
(in $000’s, unaudited)
Balance
% of Total
Balance
% of Total
Balance
% of Total
CRE loans
$
3,706
47
%
$
4,328
42
%
$
5,094
52
%
Commercial loans
2,726
35
%
2,908
28
%
3,444
35
%
Consumer and other loans
407
5
%
1,464
14
%
—
0
%
Home equity loans
949
12
%
961
10
%
137
1
%
Restructured and loans over 90 days past due and still accruing
81
1
%
601
6
%
1,153
12
%
Total nonperforming assets
$
7,869
100
%
$
10,262
100
%
$
9,828
100
%
•
NPAs totaled $7.9 million, or 0.17% of total assets, at December 31, 2020, compared to $9.8 million, or 0.24% of total assets, at December 31, 2019, and $10.3 million, or 0.22% of total assets, at September 30, 2020.
•
There were no foreclosed assets on the balance sheet at December 31, 2020, December 31, 2019, or September 30, 2020.
•
Classified assets increased to $34.0 million, or 0.73% of total assets, at December 31, 2020, compared to $32.6 million, or 0.79% of total assets, at December 31, 2019, and increased from $33.0 million, or 0.72% of total assets, at September 30, 2020.
The following table summarizes the distribution of deposits and the percentage of distribution in each category for the periods indicated:
DEPOSITS
December 31, 2020
September 30, 2020
December 31, 2019
(in $000’s, unaudited)
Balance
% to Total
Balance
% to Total
Balance
% to Total
Demand, noninterest-bearing
$
1,661,655
42
%
$
1,698,027
44
%
$
1,450,873
42
%
Demand, interest-bearing
960,179
24
%
926,041
24
%
798,375
23
%
Savings and money market
1,119,968
29
%
1,108,252
28
%
982,430
29
%
Time deposits — under $250
45,027
1
%
46,684
1
%
54,361
2
%
Time deposits — $250 and over
103,746
3
%
92,276
2
%
99,882
3
%
CDARS — interest-bearing demand,
money market and time deposits
23,911
1
%
19,121
1
%
28,847
1
%
Total deposits
$
3,914,486
100
%
$
3,890,401
100
%
$
3,414,768
100
%
•
Total deposits increased $499.7 million, or 15%, to $3.91 billion at December 31, 2020, compared to $3.41 billion at December 31, 2019. Total deposits increased $24.1 million, or 1%, from $3.89 billion at September 30, 2020.
•
Deposits, excluding all time deposits and CDARS deposits, increased $510.1 million, or 16%, to $3.74 billion at December 31, 2020, compared to $3.23 billion at December 31, 2019. Deposits, excluding all time deposits and CDARS deposits remained relatively flat from $3.73 billion at September 30, 2020.
The Company’s consolidated capital ratios exceeded regulatory guidelines and the Bank’s capital ratios exceeded the regulatory guidelines under the Basel III prompt corrective action (“PCA”) regulatory guidelines for a well-capitalized financial institution, and the Basel III minimum regulatory requirements at December 31, 2020, as reflected in the following table:
Well-capitalized
Financial
Institution
Basel III
Heritage
Heritage
Basel III PCA
Minimum
Commerce
Bank of
Regulatory
Regulatory
CAPITAL RATIOS (unaudited)
Corp
Commerce
Guidelines
Requirement (1)
Total Risk-Based
16.5
%
15.8
%
10.0
%
10.5
%
Tier 1 Risk-Based
14.0
%
14.6
%
8.0
%
8.5
%
Common Equity Tier 1 Risk-Based
14.0
%
14.6
%
6.5
%
7.0
%
Leverage
9.1
%
9.5
%
5.0
%
4.0
%
(1)
Basel III minimum regulatory requirements for both the Company and the Bank include a 2.5% capital conservation buffer, except the leverage ratio.
The following table reflects the components of accumulated other comprehensive loss, net of taxes, for the periods indicated:
ACCUMULATED OTHER COMPREHENSIVE LOSS
December 31,
September 30,
December 31,
(in $000’s, unaudited)
2020
2020
2019
Unrealized gain on securities available-for-sale
$
3,709
$
4,495
$
1,242
Remaining unamortized unrealized gain on securities
available-for-sale transferred to held-to-maturity
261
271
297
Split dollar insurance contracts liability
(6,140
)
(4,839
)
(4,835
)
Supplemental executive retirement plan liability
(8,767
)
(6,662
)
(6,842
)
Unrealized gain on interest-only strip from SBA loans
220
351
360
Total accumulated other comprehensive loss
$
(10,717
)
$
(6,384
)
$
(9,778
)
Tangible equity was $393.6 million at December 31, 2020, compared to $388.9 million at December 31, 2019, and $392.5 million at September 30, 2020. Tangible book value per share was $6.57 at December 31, 2020, compared to $6.55 at December 31, 2019, and September 30, 2020.
D.C. Solar Litigation
•
In December 2020, Solar Eclipse Investment Fund III, et al v. Heritage Bank of Commerce, et al., was filed against Heritage, and others, in the Solano County Superior Court (“Solar Eclipse”). Also in December 2020, Solarmore Management Services, Inc. v. Jeff Carpoff et al., (“Solarmore”) filed an amended complaint in the United States District Court for the Eastern District of California against Heritage and others. Both of these cases relate to our former deposit relationships with D.C. Solar and their affiliates (collectively “D.C. Solar”) and its sponsored investment funds. These actions seek unspecified damages and are in an early phase. We believe these actions are without merit and we intend to vigorously defend them.
•
In re Double Jump, Inc. is pending in the United States Bankruptcy Court of Nevada and was filed by D.C. Solar and some of its affiliated entities. One of the chapter 7 trustees has indicated that it may bring an adversary action against Heritage related to our former deposit relationships with D.C. Solar and its sponsored investment funds. The parties have agreed to attend a pre-filing mediation.
Heritage Commerce Corp, a bank holding company established in October 1997, is the parent company of Heritage Bank of Commerce, established in 1994 and headquartered in San Jose, CA with full-service branches in Danville, Fremont, Gilroy, Hollister, Livermore, Los Altos, Los Gatos, Morgan Hill, Palo Alto, Pleasanton, Redwood City, San Francisco, San Jose, San Mateo, San Rafael, Sunnyvale, and Walnut Creek. Heritage Bank of Commerce is an SBA Preferred Lender. Bay View Funding, a subsidiary of Heritage Bank of Commerce, is based in San Jose, CA and provides business-essential working capital factoring financing to various industries throughout the United States. For more information, please visit www.heritagecommercecorp.com.
Forward-Looking Statement Disclaimer
These forward-looking statements are subject to various risks and uncertainties that may be outside our control and our actual results could differ materially from our projected results. Risks and uncertainties that could cause our financial performance to differ materially from our goals, plans, expectations and projections expressed in forward-looking statements include those set forth in our filings with the Securities and Exchange Commission (“SEC”), Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, and the following: (1) current and future economic and market conditions in the United States generally or in the communities we serve, including the effects of declines in property values and overall slowdowns in economic growth should these events occur; (2) effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Federal Open Market Committee of the Federal Reserve Board; (3) our ability to anticipate interest rate changes and manage interest rate risk; (4) changes in inflation, interest rates, and market liquidity which may impact interest margins and impact funding sources; (5) volatility in credit and equity markets and its effect on the global economy; (6) our ability to effectively compete with other banks and financial services companies and the effects of competition in the financial services industry on our business; (7) our ability to achieve loan growth and attract deposits; (8) risks associated with concentrations in real estate related loans; (9) the relative strength or weakness of the commercial and real estate markets where our borrowers are located, including related asset and market prices; (10) other than temporary impairment charges to our securities portfolio; (11) changes in the level of NPAs and charge offs and other credit quality measures, and their impact on the adequacy of the Company’s allowance for credit losses and the Company’s provision for credit losses; (12) increased capital requirements for our continual growth or as imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all; (13) regulatory limits on Heritage Bank of Commerce’s ability to pay dividends to the Company; (14) changes in our capital management policies, including those regarding business combinations, dividends, and share repurchases; (15) operational issues stemming from, and/or capital spending necessitated by, the potential need to adapt to industry changes in information technology systems, on which we are highly dependent; (16) our inability to attract, recruit, and retain qualified officers and other personnel could harm our ability to implement our strategic plan, impair our relationships with customers and adversely affect our business, results of operations and growth prospects; (17) possible adjustment of the valuation of our deferred tax assets; (18) our ability to keep pace with technological changes, including our ability to identify and address cyber-security risks such as data security breaches, “denial of service” attacks, “hacking” and identity theft; (19) inability of our framework to manage risks associated with our business, including operational risk and credit risk; (20) risks of loss of funding of SBA or SBA loan programs, or changes in those programs; (21) compliance with governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities, accounting and tax matters; (22) significant changes in applicable laws and regulations, including those concerning taxes, banking and securities; (23) effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; (24) costs and effects of legal and regulatory developments, including resolution of regulatory or other governmental inquiries, and the results of regulatory examinations or reviews; (25) the expense and uncertain resolution of litigation matters whether occurring in the ordinary course of business or otherwise; (26) availability of and competition for acquisition opportunities; (27) risks resulting from domestic terrorism; (28) risks of natural disasters (including earthquakes) and other events beyond our control; (29) the effect of the COVID-19 pandemic, and other infectious illness outbreaks that may arise in the future, on the Bank’s customers, employees, businesses, liquidity, financial results and overall condition and which has created significant uncertainties in U.S. and global markets, including our customers' ability to make timely payments on obligations, and operating expense due to alternative approaches to doing business; (30) changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, such as the SBA Paycheck Protection Program (“PPP”), the Federal Reserve Board's efforts to provide liquidity to the financial system and provide credit to private commercial and municipal borrowers, and other programs designed to address the effects of the COVID-19 pandemic; (31) the Bank's participation as a lender in the PPP and similar programs and its effect on the Bank's liquidity, financial results, businesses and customers, including the availability of program funds and the ability of customers to comply with requirements and otherwise perform with respect to loans obtained under such programs; (32) our success in managing the risks involved in the foregoing factors.
Provision (recapture) for credit losses on loans(1)
(1,348
)
197
3,223
(784
)
%
(142
)
%
13,233
846
1464
%
Net interest income after provision
for credit losses on loans(1)
35,553
33,968
36,006
5
%
(1
)
%
128,657
130,966
(2
)
%
Noninterest income:
Service charges and fees on deposit accounts
608
632
1,140
(4
)
%
(47
)
%
2,859
4,510
(37
)
%
Increase in cash surrender value of
life insurance
465
464
405
0
%
15
%
1,845
1,404
31
%
Gain on sales of SBA loans
372
400
358
(7
)
%
4
%
839
689
22
%
Servicing income
98
187
156
(48
)
%
(37
)
%
673
636
6
%
Gain (loss) on sales of securities
7
—
(217
)
N/A
(103
)
%
277
661
(58
)
%
Gain on the disposition of foreclosed assets
—
—
—
N/A
N/A
791
—
N/A
Other
506
912
551
(45
)
%
(8
)
%
2,638
2,344
13
%
Total noninterest income
2,056
2,595
2,393
(21
)
%
(14
)
%
9,922
10,244
(3
)
%
Noninterest expense:
Salaries and employee benefits
12,457
11,967
18,819
4
%
(34
)
%
50,927
50,754
0
%
Occupancy and equipment
2,197
2,283
2,013
(4
)
%
9
%
8,018
6,647
21
%
Professional fees
1,396
1,352
899
3
%
55
%
5,338
3,259
64
%
Other
5,507
5,566
8,895
(1
)
%
(38
)
%
25,228
24,238
4
%
Total noninterest expense
21,557
21,168
30,626
2
%
(30
)
%
89,511
84,898
5
%
Income before income taxes
16,052
15,395
7,773
4
%
107
%
49,068
56,312
(13
)
%
Income tax expense
4,429
4,198
2,088
6
%
112
%
13,769
15,851
(13
)
%
Net income
$
11,623
$
11,197
$
5,685
4
%
104
%
$
35,299
$
40,461
(13
)
%
PER COMMON SHARE DATA
(unaudited)
Basic earnings per share
$
0.19
$
0.19
$
0.10
0
%
90
%
$
0.59
$
0.87
(32
)
%
Diluted earnings per share
$
0.19
$
0.19
$
0.10
0
%
90
%
$
0.59
$
0.84
(30
)
%
Weighted average shares outstanding - basic
59,616,951
59,589,243
57,168,605
0
%
4
%
59,478,343
46,684,384
27
%
Weighted average shares outstanding - diluted
60,247,296
60,141,412
58,361,976
0
%
3
%
60,169,139
47,906,229
26
%
Common shares outstanding at period-end
59,917,457
59,914,987
59,368,156
0
%
1
%
59,917,457
59,368,156
1
%
Dividend per share
$
0.13
$
0.13
$
0.12
0
%
8
%
$
0.52
$
0.48
8
%
Book value per share
$
9.64
$
9.64
$
9.71
0
%
(1
)
%
$
9.64
$
9.71
(1
)
%
Tangible book value per share
$
6.57
$
6.55
$
6.55
0
%
0
%
$
6.57
$
6.55
0
%
KEY FINANCIAL RATIOS
(unaudited)
Annualized return on average equity
7.99
%
7.73
%
4.04
%
3
%
98
%
6.12
%
9.51
%
(36
)
%
Annualized return on average tangible equity
11.75
%
11.41
%
5.96
%
3
%
97
%
9.04
%
13.09
%
(31
)
%
Annualized return on average assets
0.98
%
0.98
%
0.55
%
0
%
78
%
0.80
%
1.21
%
(34
)
%
Annualized return on average tangible assets
1.02
%
1.02
%
0.57
%
0
%
79
%
0.83
%
1.25
%
(34
)
%
Net interest margin (FTE)
3.15
%
3.24
%
4.15
%
(3
)
%
(24
)
%
3.50
%
4.28
%
(18
)
%
Efficiency ratio
59.45
%
57.58
%
73.58
%
3
%
(19
)
%
58.96
%
59.76
%
(1
)
%
AVERAGE BALANCES
(in $000’s, unaudited)
Average assets
$
4,703,154
$
4,562,412
$
4,124,018
3
%
14
%
$
4,434,329
$
3,353,770
32
%
Average tangible assets
$
4,518,279
$
4,376,533
$
3,943,725
3
%
15
%
$
4,248,090
$
3,237,289
31
%
Average earning assets
$
4,338,117
$
4,203,902
$
3,762,239
3
%
15
%
$
4,071,805
$
3,094,589
32
%
Average loans held-for-sale
$
2,772
$
5,169
$
3,299
(46
)
%
(16
)
%
$
3,459
$
3,714
(7
)
%
Average total loans
$
2,652,019
$
2,664,525
$
2,442,802
0
%
9
%
$
2,628,036
$
1,991,203
32
%
Average deposits
$
3,980,017
$
3,846,652
$
3,432,771
3
%
16
%
$
3,719,896
$
2,819,932
32
%
Average demand deposits - noninterest-bearing
$
1,749,837
$
1,700,972
$
1,452,893
3
%
20
%
$
1,638,055
$
1,131,098
45
%
Average interest-bearing deposits
$
2,230,180
$
2,145,680
$
1,979,878
4
%
13
%
$
2,081,841
$
1,688,834
23
%
Average interest-bearing liabilities
$
2,269,960
$
2,185,439
$
2,027,106
4
%
12
%
$
2,121,621
$
1,730,320
23
%
Average equity
$
578,560
$
576,135
$
558,478
0
%
4
%
$
576,675
$
425,674
35
%
Average tangible equity
$
393,685
$
390,256
$
378,185
1
%
4
%
$
390,436
$
309,193
26
%
(1)
Provision (recapture) for credit losses on loans for the quarters ended December 31, 2020, September 30, 2020 and the year ended December 31, 2020, Provision for loan losses for quarter and year ended December 31, 2019
For the Quarter Ended:
CONSOLIDATED INCOME STATEMENTS
December 31,
September 30,
June 30,
March 31,
December 31,
(in $000’s, unaudited)
2020
2020
2020
2020
2019
Interest income
$
36,145
$
36,252
$
37,132
$
40,942
$
42,471
Interest expense
1,940
2,087
2,192
2,362
3,242
Net interest income before provision
for credit losses on loans(1)
34,205
34,165
34,940
38,580
39,229
Provision (recapture) for credit losses on loans(1)
(1,348
)
197
1,114
13,270
3,223
Net interest income after provision
for credit losses on loans(1)
35,553
33,968
33,826
25,310
36,006
Noninterest income:
Service charges and fees on deposit accounts
608
632
650
969
1,140
Increase in cash surrender value of
life insurance
465
464
458
458
405
Gain on sales of SBA loans
372
400
—
67
358
Servicing income
98
187
205
183
156
Gain (loss) on sales of securities
7
—
170
100
(217
)
Gain on the disposition of foreclosed assets
—
—
—
791
—
Other
506
912
595
625
551
Total noninterest income
2,056
2,595
2,078
3,193
2,393
Noninterest expense:
Salaries and employee benefits
12,457
11,967
12,300
14,203
18,819
Occupancy and equipment
2,197
2,283
1,766
1,772
2,013
Professional fees
1,396
1,352
1,155
1,435
899
Other
5,507
5,566
5,791
8,364
8,895
Total noninterest expense
21,557
21,168
21,012
25,774
30,626
Income before income taxes
16,052
15,395
14,892
2,729
7,773
Income tax expense
4,429
4,198
4,274
868
2,088
Net income
$
11,623
$
11,197
$
10,618
$
1,861
$
5,685
PER COMMON SHARE DATA
(unaudited)
Basic earnings per share
$
0.19
$
0.19
$
0.18
$
0.03
$
0.10
Diluted earnings per share
$
0.19
$
0.19
$
0.18
$
0.03
$
0.10
Weighted average shares outstanding - basic
59,616,951
59,589,243
59,420,592
59,286,927
57,168,605
Weighted average shares outstanding - diluted
60,247,296
60,141,412
60,112,423
60,194,025
58,361,976
Common shares outstanding at period-end
59,917,457
59,914,987
59,856,767
59,568,219
59,368,156
Dividend per share
$
0.13
$
0.13
$
0.13
$
0.13
$
0.12
Book value per share
$
9.64
$
9.64
$
9.60
$
9.59
$
9.71
Tangible book value per share
$
6.57
$
6.55
$
6.49
$
6.46
$
6.55
KEY FINANCIAL RATIOS
(unaudited)
Annualized return on average equity
7.99
%
7.73
%
7.45
%
1.29
%
4.04
%
Annualized return on average tangible equity
11.75
%
11.41
%
11.06
%
1.91
%
5.96
%
Annualized return on average assets
0.98
%
0.98
%
0.96
%
0.19
%
0.55
%
Annualized return on average tangible assets
1.02
%
1.02
%
1.01
%
0.19
%
0.57
%
Net interest margin (FTE)
3.15
%
3.24
%
3.46
%
4.25
%
4.15
%
Efficiency ratio
59.45
%
57.58
%
56.76
%
61.70
%
73.58
%
AVERAGE BALANCES
(in $000’s, unaudited)
Average assets
$
4,703,154
$
4,562,412
$
4,434,238
$
4,033,151
$
4,124,018
Average tangible assets
$
4,518,279
$
4,376,533
$
4,247,522
$
3,845,646
$
3,943,725
Average earning assets
$
4,338,117
$
4,203,902
$
4,075,673
$
3,665,151
$
3,762,239
Average loans held-for-sale
$
2,772
$
5,169
$
3,617
$
2,265
$
3,299
Average total loans
$
2,652,019
$
2,664,525
$
2,683,476
$
2,511,460
$
2,442,802
Average deposits
$
3,980,017
$
3,846,652
$
3,720,850
$
3,327,812
$
3,432,771
Average demand deposits - noninterest-bearing
$
1,749,837
$
1,700,972
$
1,660,547
$
1,438,944
$
1,452,893
Average interest-bearing deposits
$
2,230,180
$
2,145,680
$
2,060,303
$
1,888,868
$
1,979,878
Average interest-bearing liabilities
$
2,269,960
$
2,185,439
$
2,099,982
$
1,928,770
$
2,027,106
Average equity
$
578,560
$
576,135
$
572,939
$
579,051
$
558,478
Average tangible equity
$
393,685
$
390,256
$
386,223
$
391,546
$
378,185
(1)
Provision (recapture) for credit losses on loans for the quarters ended December 31, 2020, September 30, June 30, 2020 and March 31, 2020, Provision for loan losses for the quarter ended December 31, 2019
End of Period:
Percent Change From:
CONSOLIDATED BALANCE SHEETS
December 31,
September 30,
December 31,
September 30,
December 31,
(in $000’s, unaudited)
2020
2020
2019
2020
2019
ASSETS
Cash and due from banks
$
30,598
$
33,353
$
49,447
(8
)
%
(38
)
%
Other investments and interest-bearing deposits
in other financial institutions
1,100,475
926,915
407,923
19
%
170
%
Securities available-for-sale, at fair value
235,774
294,438
404,825
(20
)
%
(42
)
%
Securities held-to-maturity, at amortized cost
297,389
295,609
366,560
1
%
(19
)
%
Loans held-for-sale - SBA, including deferred costs
1,699
3,565
1,052
(52
)
%
62
%
Loans:
Commercial
555,707
574,359
603,345
(3
)
%
(8
)
%
SBA PPP loans
290,679
323,550
—
(10
)
%
N/A
Real estate:
CRE - owner occupied
560,362
561,528
548,907
0
%
2
%
CRE - non-owner occupied
693,103
713,563
767,821
(3
)
%
(10
)
%
Land and construction
144,594
142,632
147,189
1
%
(2
)
%
Home equity
111,885
111,468
151,775
0
%
(26
)
%
Multifamily
166,425
169,791
180,623
(2
)
%
(8
)
%
Residential mortgages
85,116
91,077
100,759
(7
)
%
(16
)
%
Consumer and other
18,116
17,511
33,744
3
%
(46
)
%
Loans
2,625,987
2,705,479
2,534,163
(3
)
%
4
%
Deferred loan fees, net
(6,726
)
(8,463
)
(319
)
(21
)
%
2008
%
Total loans, net of deferred costs and fees
2,619,261
2,697,016
2,533,844
(3
)
%
3
%
Allowance for credit losses on loans(1)
(44,400
)
(45,422
)
(23,285
)
(2
)
%
91
%
Loans, net
2,574,861
2,651,594
2,510,559
(3
)
%
3
%
Company-owned life insurance
77,523
77,059
76,027
1
%
2
%
Premises and equipment, net
10,459
10,412
8,250
0
%
27
%
Goodwill
167,631
167,631
167,420
0
%
0
%
Other intangible assets
16,664
17,628
20,415
(5
)
%
(18
)
%
Accrued interest receivable and other assets
121,041
128,581
96,985
(6
)
%
25
%
Total assets
$
4,634,114
$
4,606,785
$
4,109,463
1
%
13
%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, noninterest-bearing
$
1,661,655
$
1,698,027
$
1,450,873
(2
)
%
15
%
Demand, interest-bearing
960,179
926,041
798,375
4
%
20
%
Savings and money market
1,119,968
1,108,252
982,430
1
%
14
%
Time deposits-under $250
45,027
46,684
54,361
(4
)
%
(17
)
%
Time deposits-$250 and over
103,746
92,276
99,882
12
%
4
%
CDARS - money market and time deposits
23,911
19,121
28,847
25
%
(17
)
%
Total deposits
3,914,486
3,890,401
3,414,768
1
%
15
%
Subordinated debt, net of issuance costs
39,740
39,693
39,554
0
%
0
%
Other short-term borrowings
—
—
328
N/A
(100
)
%
Accrued interest payable and other liabilities
101,999
98,884
78,105
3
%
31
%
Total liabilities
4,056,225
4,028,978
3,532,755
1
%
15
%
Shareholders’ Equity:
Common stock
493,707
493,126
489,745
0
%
1
%
Retained earnings
94,899
91,065
96,741
4
%
(2
)
%
Accumulated other comprehensive loss
(10,717
)
(6,384
)
(9,778
)
(68
)
%
(10
)
%
Total shareholders' equity
577,889
577,807
576,708
0
%
0
%
Total liabilities and shareholders’ equity
$
4,634,114
$
4,606,785
$
4,109,463
1
%
13
%
(1)Allowance for credit losses on loans at December 31, 2020 and September 30, 2020, Allowance for loan losses at December 31, 2019
End of Period:
CONSOLIDATED BALANCE SHEETS
December 31,
September 30,
June 30,
March 31,
December 31,
(in $000’s, unaudited)
2020
2020
2020
2020
2019
ASSETS
Cash and due from banks
$
30,598
$
33,353
$
40,108
$
36,998
$
49,447
Other investments and interest-bearing deposits
in other financial institutions
1,100,475
926,915
885,792
406,399
407,923
Securities available-for-sale, at fair value
235,774
294,438
323,565
373,570
404,825
Securities held-to-maturity, at amortized cost
297,389
295,609
322,677
348,044
366,560
Loans held-for-sale - SBA, including deferred costs
1,699
3,565
4,324
2,415
1,052
Loans:
Commercial
555,707
574,359
553,843
696,168
603,345
SBA PPP loans
290,679
323,550
324,550
—
—
Real estate:
CRE - owner occupied
560,362
561,528
553,463
539,465
548,907
CRE - non-owner occupied
693,103
713,563
725,776
748,245
767,821
Land and construction
144,594
142,632
138,284
153,321
147,189
Home equity
111,885
111,468
112,679
117,544
151,775
Multifamily
166,425
169,791
169,637
170,292
180,623
Residential mortgages
85,116
91,077
95,033
95,808
100,759
Consumer and other
18,116
17,511
22,759
33,326
33,744
Loans
2,625,987
2,705,479
2,696,024
2,554,169
2,534,163
Deferred loan fees, net
(6,726
)
(8,463
)
(9,635
)
(258
)
(319
)
Total loans, net of deferred fees
2,619,261
2,697,016
2,686,389
2,553,911
2,533,844
Allowance for credit losses on loans(1)
(44,400
)
(45,422
)
(45,444
)
(44,703
)
(23,285
)
Loans, net
2,574,861
2,651,594
2,640,945
2,509,208
2,510,559
Company-owned life insurance
77,523
77,059
76,944
76,485
76,027
Premises and equipment, net
10,459
10,412
9,500
9,025
8,250
Goodwill
167,631
167,631
167,631
167,371
167,420
Other intangible assets
16,664
17,628
18,593
19,557
20,415
Accrued interest receivable and other assets
121,041
128,581
124,322
129,090
96,985
Total assets
$
4,634,114
$
4,606,785
$
4,614,401
$
4,078,162
$
4,109,463
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, noninterest-bearing
$
1,661,655
$
1,698,027
$
1,714,058
$
1,444,534
$
1,450,873
Demand, interest-bearing
960,179
926,041
934,780
810,425
798,375
Savings and money market
1,119,968
1,108,252
1,091,740
949,076
982,430
Time deposits-under $250
45,027
46,684
49,493
51,009
54,361
Time deposits-$250 and over
103,746
92,276
93,822
96,540
99,882
CDARS - money market and time deposits
23,911
19,121
16,333
15,055
28,847
Total deposits
3,914,486
3,890,401
3,900,226
3,366,639
3,414,768
Subordinated debt, net of issuance costs
39,740
39,693
39,646
39,600
39,554
Other short-term borrowings
—
—
—
—
328
Accrued interest payable and other liabilities
101,999
98,884
99,722
100,482
78,105
Total liabilities
4,056,225
4,028,978
4,039,594
3,506,721
3,532,755
Shareholders’ Equity:
Common stock
493,707
493,126
492,333
491,347
489,745
Retained earnings
94,899
91,065
87,654
84,803
96,741
Accumulated other comprehensive loss
(10,717
)
(6,384
)
(5,180
)
(4,709
)
(9,778
)
Total shareholders' equity
577,889
577,807
574,807
571,441
576,708
Total liabilities and shareholders’ equity
$
4,634,114
$
4,606,785
$
4,614,401
$
4,078,162
$
4,109,463
(1)Allowance for credit losses on loans at September 30, 2020, June 30, 2020 and March 31, 2020, Allowance for loan losses at December 31, 2019
End of Period:
Percent Change From:
CREDIT QUALITY DATA
December 31,
September 30,
December 31,
September 30,
December 31,
(in $000’s, unaudited)
2020
2020
2019
2020
2019
Nonaccrual loans - held-for-investment
$
7,788
$
9,661
$
8,675
(19
)
%
(10
)
%
Restructured and loans over 90 days past due
and still accruing
81
601
1,153
(87
)
%
(93
)
%
Total nonperforming loans
7,869
10,262
9,828
(23
)
%
(20
)
%
Foreclosed assets
—
—
—
N/A
N/A
Total nonperforming assets
$
7,869
$
10,262
$
9,828
(23
)
%
(20
)
%
Other restructured loans still accruing
$
169
$
98
$
436
72
%
(61
)
%
Net charge-offs (recoveries) during the quarter
$
(326
)
$
219
$
5,833
(249
)
%
(106
)
%
Provision (recapture) for credit losses on loans during the quarter(1)
$
(1,348
)
$
197
$
3,223
(784
)
%
(142
)
%
Allowance for credit losses on loans(2)
$
44,400
$
45,422
$
23,285
(2
)
%
91
%
Classified assets
$
34,028
$
33,024
$
32,579
3
%
4
%
Allowance for credit losses on loans to total loans(2)
1.70
%
1.68
%
0.92
%
1
%
85
%
Allowance for credit losses on loans to total nonperforming loans(2)
564.24
%
442.62
%
236.93
%
27
%
138
%
Nonperforming assets to total assets
0.17
%
0.22
%
0.24
%
(23
)
%
(29
)
%
Nonperforming loans to total loans
0.30
%
0.38
%
0.39
%
(21
)
%
(23
)
%
Classified assets to Heritage Commerce Corp
Tier 1 capital plus allowance for credit losses on loans(2)
7
%
7
%
8
%
0
%
(13
)
%
Classified assets to Heritage Bank of Commerce
Tier 1 capital plus allowance for credit losses on loans(2)
7
%
7
%
7
%
0
%
0
%
OTHER PERIOD-END STATISTICS
(in $000’s, unaudited)
Heritage Commerce Corp:
Tangible common equity (3)
$
393,594
$
392,548
$
388,873
0
%
1
%
Shareholders’ equity / total assets
12.47
%
12.54
%
14.03
%
(1
)
%
(11
)
%
Tangible common equity / tangible assets (4)
8.85
%
8.88
%
9.92
%
0
%
(11
)
%
Loan to deposit ratio
66.91
%
69.32
%
74.20
%
(3
)
%
(10
)
%
Noninterest-bearing deposits / total deposits
42.45
%
43.65
%
42.49
%
(3
)
%
0
%
Total risk-based capital ratio
16.5
%
16.0
%
14.6
%
3
%
13
%
Tier 1 risk-based capital ratio
14.0
%
13.5
%
12.5
%
4
%
12
%
Common Equity Tier 1 risk-based capital ratio
14.0
%
13.5
%
12.5
%
4
%
12
%
Leverage ratio
9.1
%
9.3
%
9.8
%
(2
)
%
(7
)
%
Heritage Bank of Commerce:
Total risk-based capital ratio
15.8
%
15.2
%
13.9
%
4
%
14
%
Tier 1 risk-based capital ratio
14.6
%
14.1
%
13.1
%
4
%
11
%
Common Equity Tier 1 risk-based capital ratio
14.6
%
14.1
%
13.1
%
4
%
11
%
Leverage ratio
9.5
%
9.7
%
10.2
%
(2
)
%
(7
)
%
(1)
Provision (recapture) for credit losses on loans for the quarters ended December 31, 2020 and September 30, 2020, Provision for loan losses for the quarter ended December 31, 2019
(2)
ACLL at December 31, 2020 and September 30, 2020, ALLL at December 31, 2019
(3)
Represents shareholders' equity minus goodwill and other intangible assets
(4)
Represents shareholders' equity minus goodwill and other intangible assets divided by total assets minus goodwill and other intangible assets
End of Period:
CREDIT QUALITY DATA
December 31,
September 30,
June 30,
March 31,
December 31,
(in $000’s, unaudited)
2020
2020
2020
2020
2019
Nonaccrual loans - held-for-investment
$
7,788
$
9,661
$
8,457
$
11,646
8,675
Restructured and loans over 90 days past due
and still accruing
81
601
668
442
1,153
Total nonperforming loans
7,869
10,262
9,125
12,088
9,828
Foreclosed assets
—
—
—
—
—
Total nonperforming assets
$
7,869
$
10,262
$
9,125
$
12,088
$
9,828
Other restructured loans still accruing
$
169
$
98
$
64
$
103
$
436
Net charge-offs (recoveries) during the quarter
$
(326
)
$
219
$
373
$
422
$
5,833
Provision (recapture) for credit losses on loans during the quarter(1)
$
(1,348
)
$
197
$
1,114
$
13,270
$
3,223
Adoption of Topic 326
$
—
$
—
$
—
$
8,570
$
—
Allowance for credit losses on loans(2)
$
44,400
$
45,422
$
45,444
$
44,703
$
23,285
Classified assets
$
34,028
$
33,024
$
31,452
$
39,603
$
32,579
Allowance for credit losses on loans to total loans(2)
1.70
%
1.68
%
1.69
%
1.75
%
0.92
%
Allowance for credit losses on loans to total nonperforming loans(2)
564.24
%
442.62
%
498.02
%
369.81
%
236.93
%
Nonperforming assets to total assets
0.17
%
0.22
%
0.20
%
0.30
%
0.24
%
Nonperforming loans to total loans
0.30
%
0.38
%
0.34
%
0.47
%
0.39
%
Classified assets to Heritage Commerce Corp
Tier 1 capital plus allowance for credit losses on loans(2)
7
%
7
%
7
%
9
%
8
%
Classified assets to Heritage Bank of Commerce
Tier 1 capital plus allowance for credit losses on loans(2)
7
%
7
%
7
%
9
%
7
%
OTHER PERIOD-END STATISTICS
(in $000’s, unaudited)
Heritage Commerce Corp:
Tangible common equity (3)
$
393,594
$
392,548
$
388,583
$
384,513
$
388,873
Shareholders’ equity / total assets
12.47
%
12.54
%
12.46
%
14.01
%
14.03
%
Tangible common equity / tangible assets (4)
8.85
%
8.88
%
8.78
%
9.88
%
9.92
%
Loan to deposit ratio
66.91
%
69.32
%
68.88
%
75.86
%
74.20
%
Noninterest-bearing deposits / total deposits
42.45
%
43.65
%
43.95
%
42.91
%
42.49
%
Total risk-based capital ratio
16.5
%
16.0
%
15.9
%
14.8
%
14.6
%
Tier 1 risk-based capital ratio
14.0
%
13.5
%
13.4
%
12.5
%
12.5
%
Common Equity Tier 1 risk-based capital ratio
14.0
%
13.5
%
13.4
%
12.5
%
12.5
%
Leverage ratio
9.1
%
9.3
%
9.4
%
10.3
%
9.8
%
Heritage Bank of Commerce:
Total risk-based capital ratio
15.8
%
15.2
%
15.1
%
14.1
%
13.9
%
Tier 1 risk-based capital ratio
14.6
%
14.1
%
14.0
%
13.0
%
13.1
%
Common Equity Tier 1 risk-based capital ratio
14.6
%
14.1
%
14.0
%
13.0
%
13.1
%
Leverage ratio
9.5
%
9.7
%
9.9
%
10.7
%
10.2
%
(1)
Provision (recapture) for credit losses on loans for the quarters ended December 31, 2020, September 30, 2020, June 30, 2020 and March 31, 2020, Provision for loan losses for the quarter ended December 31, 2019
(2)
ACLL at December 31, 2020, September 30, 2020, June 30, 2020 and March 31, 2020, ALLL at December 31, 2019
(3)
Represents shareholders' equity minus goodwill and other intangible assets
(4)
Represents shareholders' equity minus goodwill and other intangible assets divided by total assets minus goodwill and other intangible assets
For the Quarter Ended
For the Quarter Ended
December 31, 2020
December 31, 2019
NET INTEREST INCOME AND
Interest
Average
Interest
Average
NET INTEREST MARGIN
Average
Income/
Yield/
Average
Income/
Yield/
(in $000’s, unaudited)
Balance
Expense
Rate
Balance
Expense
Rate
Assets:
Loans, gross (1)(2)
$
2,654,791
$
32,907
4.93
%
$
2,446,101
$
35,487
5.76
%
Securities - taxable
482,951
2,053
1.69
%
653,623
3,687
2.24
%
Securities - exempt from Federal tax (3)
70,318
570
3.22
%
82,034
663
3.21
%
Other investments and interest-bearing deposits
in other financial institutions
1,130,057
735
0.26
%
580,481
2,773
1.90
%
Total interest earning assets (3)
4,338,117
36,265
3.33
%
3,762,239
42,610
4.49
%
Cash and due from banks
42,861
48,313
Premises and equipment, net
10,387
8,497
Goodwill and other intangible assets
184,875
180,293
Other assets
126,914
124,676
Total assets
$
4,703,154
$
4,124,018
Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing
$
1,749,837
$
1,452,893
Demand, interest-bearing
939,203
462
0.20
%
789,465
600
0.30
%
Savings and money market
1,121,636
674
0.24
%
1,009,880
1,283
0.50
%
Time deposits - under $100
16,748
11
0.26
%
19,613
28
0.57
%
Time deposits - $100 and over
131,740
208
0.63
%
143,095
373
1.03
%
CDARS - money market and time deposits
20,853
1
0.02
%
17,825
2
0.04
%
Total interest-bearing deposits
2,230,180
1,356
0.24
%
1,979,878
2,286
0.46
%
Total deposits
3,980,017
1,356
0.14
%
3,432,771
2,286
0.26
%
Subordinated debt, net of issuance costs
39,710
583
5.84
%
46,758
955
8.10
%
Short-term borrowings
70
1
5.68
%
470
1
0.84
%
Total interest-bearing liabilities
2,269,960
1,940
0.34
%
2,027,106
3,242
0.63
%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds
4,019,797
1,940
0.19
%
3,479,999
3,242
0.37
%
Other liabilities
104,797
85,541
Total liabilities
4,124,594
3,565,540
Shareholders’ equity
578,560
558,478
Total liabilities and shareholders’ equity
$
4,703,154
$
4,124,018
Net interest income (3) / margin
34,325
3.15
%
39,368
4.15
%
Less tax equivalent adjustment (3)
(120
)
(139
)
Net interest income
$
34,205
$
39,229
(1)
Includes loans held-for-sale. Nonaccrual loans are included in average balance.
(2)
Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $2,120,000 for the fourth quarter of 2020 (of which $1,935,000 was from PPP loans), compared to $90,000 for the fourth quarter of 2019.
(3)
Reflects the FTE adjustment for Federal tax-exempt income based on a 21%.
For the Quarter Ended
For the Quarter Ended
December 31, 2020
September 30, 2020
NET INTEREST INCOME AND
Interest
Average
Interest
Average
NET INTEREST MARGIN
Average
Income/
Yield/
Average
Income/
Yield/
(in $000’s, unaudited)
Balance
Expense
Rate
Balance
Expense
Rate
Assets:
Loans, gross (1)(2)
$
2,654,791
$
32,907
4.93
%
$
2,669,694
$
32,635
4.86
%
Securities - taxable
482,951
2,053
1.69
%
550,423
2,481
1.79
%
Securities - exempt from Federal tax (3)
70,318
570
3.22
%
72,625
586
3.21
%
Other investments and interest-bearing deposits
in other financial institutions
1,130,057
735
0.26
%
911,160
673
0.29
%
Total interest earning assets (3)
4,338,117
36,265
3.33
%
4,203,902
36,375
3.44
%
Cash and due from banks
42,861
36,505
Premises and equipment, net
10,387
9,884
Goodwill and other intangible assets
184,875
185,879
Other assets
126,914
126,242
Total assets
$
4,703,154
$
4,562,412
Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing
$
1,749,837
$
1,700,972
Demand, interest-bearing
939,203
462
0.20
%
934,892
506
0.22
%
Savings and money market
1,121,636
674
0.24
%
1,052,800
762
0.29
%
Time deposits - under $100
16,748
11
0.26
%
17,298
16
0.37
%
Time deposits - $100 and over
131,740
208
0.63
%
121,949
219
0.71
%
CDARS - money market and time deposits
20,853
1
0.02
%
18,741
1
0.02
%
Total interest-bearing deposits
2,230,180
1,356
0.24
%
2,145,680
1,504
0.28
%
Total deposits
3,980,017
1,356
0.14
%
3,846,652
1,504
0.16
%
Subordinated debt, net of issuance costs
39,710
583
5.84
%
39,663
583
5.85
%
Short-term borrowings
70
1
5.68
%
96
—
0.00
%
Total interest-bearing liabilities
2,269,960
1,940
0.34
%
2,185,439
2,087
0.38
%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds
4,019,797
1,940
0.19
%
3,886,411
2,087
0.21
%
Other liabilities
104,797
99,866
Total liabilities
4,124,594
3,986,277
Shareholders’ equity
578,560
576,135
Total liabilities and shareholders’ equity
$
4,703,154
$
4,562,412
Net interest income (3) / margin
34,325
3.15
%
34,288
3.24
%
Less tax equivalent adjustment (3)
(120
)
(123
)
Net interest income
$
34,205
$
34,165
(1)
Includes loans held-for-sale. Nonaccrual loans are included in average balance.
(2)
Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $2,120,000 for the fourth quarter of 2020 (of which $1,935,000 was from PPP loans), compared to $1,441,000 for the third quarter of 2020 (of which $1,305,000 was from PPP loans).
(3)
Reflects the FTE adjustment for Federal tax-exempt income based on a 21%.
For the Year Ended
For the Year Ended
December 31, 2020
December 31, 2019
NET INTEREST INCOME AND
Interest
Average
Interest
Average
NET INTEREST MARGIN
Average
Income/
Yield/
Average
Income/
Yield/
(in $000’s, unaudited)
Balance
Expense
Rate
Balance
Expense
Rate
Assets:
Loans, gross (1)(2)
$
2,631,495
$
133,169
5.06
%
$
1,994,917
$
116,808
5.86
%
Securities - taxable
578,506
11,637
2.01
%
682,602
15,836
2.32
%
Securities - exempt from Federal tax (3)
74,849
2,415
3.23
%
84,165
2,720
3.23
%
Other investments, interest-bearing deposits in other
financial institutions and Federal funds sold
786,955
3,757
0.48
%
332,905
7,867
2.36
%
Total interest earning assets (3)
4,071,805
150,978
3.71
%
3,094,589
143,231
4.63
%
Cash and due from banks
40,401
40,070
Premises and equipment, net
9,497
7,395
Goodwill and other intangible assets
186,239
116,481
Other assets
126,387
95,235
Total assets
$
4,434,329
$
3,353,770
Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing
$
1,638,055
$
1,131,098
Demand, interest-bearing
891,513
2,035
0.23
%
712,186
2,401
0.34
%
Savings and money market
1,026,319
3,144
0.31
%
811,266
4,298
0.53
%
Time deposits - under $100
17,659
67
0.38
%
19,448
94
0.48
%
Time deposits - $100 and over
128,461
1,009
0.79
%
130,856
1,359
1.04
%
CDARS - money market and time deposits
17,889
5
0.03
%
15,078
7
0.05
%
Total interest-bearing deposits
2,081,841
6,260
0.30
%
1,688,834
8,159
0.48
%
Total deposits
3,719,896
6,260
0.17
%
2,819,932
8,159
0.29
%
Subordinated debt, net of issuance costs
39,641
2,320
5.85
%
41,278
2,686
6.51
%
Short-term borrowings
139
1
0.72
%
208
2
0.96
%
Total interest-bearing liabilities
2,121,621
8,581
0.40
%
1,730,320
10,847
0.63
%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds
3,759,676
8,581
0.23
%
2,861,418
10,847
0.38
%
Other liabilities
97,978
66,678
Total liabilities
3,857,654
2,928,096
Shareholders’ equity
576,675
425,674
Total liabilities and shareholders’ equity
$
4,434,329
$
3,353,770
Net interest income (3) / margin
142,397
3.50
%
132,384
4.28
%
Less tax equivalent adjustment (3)
(507
)
(572
)
Net interest income
$
141,890
$
131,812
(1)
Includes loans held-for-sale. Nonaccrual loans are included in average balance.
(2)
Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $4,473,000 for the year ended December 31, 2020 (of which $3,877,000 was from PPP loans), compared to $580,000 for the year ended December 31, 2019.
(3)
Reflects the FTE adjustment for Federal tax-exempt income based on a 21%.
FAQ
What are the Q4 2020 earnings for Heritage Commerce Corp (HTBK)?
Heritage Commerce Corp reported a net income of $11.6 million or $0.19 per diluted share for Q4 2020.
How did Heritage Commerce Corp's net income change in 2020?
Net income for 2020 decreased to $35.3 million from $40.5 million in 2019.
What is the status of Heritage Commerce Corp's nonperforming assets?
Nonperforming assets declined 20% year-over-year to $7.9 million as of December 31, 2020.
What was the impact of the Paycheck Protection Program on Heritage Commerce Corp?
Heritage Bank funded 1,105 PPP loans totaling $333.4 million, generating $2.2 million in interest income for 2020.
What liquidity position does Heritage Commerce Corp maintain?
Heritage Commerce Corp maintains a strong liquidity position with $1.13 billion in cash and cash equivalents as of December 31, 2020.
