Heritage Commerce Corp Reports First Quarter 2025 Financial Results

Rhea-AI Summary

Heritage Commerce Corp (HTBK) reported solid Q1 2025 financial results with net income of $11.6 million, or $0.19 per share, representing a 9% increase from the previous quarter and 14% year-over-year growth. The company's performance was driven by improved net interest margin of 3.39%, strong expense control, and enhanced asset quality.

Key financial metrics include:

• Total revenue of $46.1 million
• Pre-Provision Net Revenue of $16.6 million
• Efficiency ratio improved to 63.96%
• Total assets of $5.5 billion
• Loans held-for-investment remained stable at $3.5 billion
• Total deposits decreased 3% to $4.7 billion

The company maintained strong capital ratios with a common equity tier 1 capital ratio of 13.6% and total capital ratio of 15.9%. Despite seasonal deposit outflows, Heritage Commerce Corp expects continued positive trends in net interest margin, loan and deposit growth, and expense management through 2025.

Positive

• Net income increased 9% quarter-over-quarter and 14% year-over-year to $11.6 million
• Net interest margin improved to 3.39% from 3.32% in previous quarter
• Efficiency ratio improved to 63.96% from 65.35%
• Strong capital position with 13.6% common equity tier 1 ratio
• Asset quality improved with NPAs to total assets decreasing to 0.11% from 0.14%

Negative

• Total deposits decreased by $136.8 million (3%) quarter-over-quarter
• Total assets declined 2% to $5.5 billion
• Commercial and industrial line utilization decreased to 31% from 34% in previous quarter
• Noninterest-bearing deposits decreased to 24% of total deposits from 25% in previous quarter

Insights

Banking Financial Analyst

Heritage Commerce reported 9% QoQ profit growth with improved margin, efficiency, and asset quality despite seasonal deposit outflows.

Heritage Commerce Corp delivered $11.6 million in net income ($0.19 EPS) for Q1 2025, representing a 9% increase from the previous quarter and a 14% improvement year-over-year. This performance demonstrates resilience amid typical first-quarter seasonal headwinds.

The bank's net interest margin expanded to 3.39%, up from 3.32% last quarter and 3.31% a year ago - a clear positive in the current rate environment. This improvement stems from lower deposit costs and higher securities yields, which successfully offset decreases in noninterest-bearing deposits.

Asset quality metrics show notable improvement with nonperforming assets declining to just 0.11% of total assets compared to 0.14% last quarter. The provision for credit losses dropped significantly to $274,000 from $1.3 million in Q4, signaling management's confidence in loan portfolio health.

The efficiency ratio improved to 63.96% from 65.35% quarter-over-quarter, reflecting enhanced expense management. Total noninterest expense decreased 3% to $29.5 million despite inflationary pressures affecting the broader banking sector.

Balance sheet dynamics reflect typical first-quarter seasonality with total deposits decreasing 3% to $4.7 billion quarter-over-quarter but growing 5% year-over-year. Loans held-for-investment remained stable at $3.5 billion with a loan-to-deposit ratio of 74.45%, indicating ample liquidity while maintaining solid earning asset levels.

The bank strategically deployed excess liquidity into new investment securities with a book yield of 4.86%, which should support future net interest income. Capital position remains strong with tangible book value per share increasing to $8.48 and regulatory capital ratios well above requirements.

Management expressed confidence in their competitive positioning, particularly noting opportunities to acquire clients displaced by recent bank failures and acquisitions in their markets - a strategy that appears to be working given the year-over-year growth in both loans and deposits.

Investment Portfolio Manager

HTBK's Q1 results show earnings momentum with improving efficiency and credit quality, positioning well for continued market share gains.

Heritage Commerce Corp's Q1 2025 results demonstrate positive earnings momentum with metrics improving across multiple fronts. The 9% sequential profit growth and 14% year-over-year increase in net income highlight the bank's operational efficiency and growing franchise value.

The expanded net interest margin of 3.39% is particularly noteworthy in the current banking environment, where many regional banks are struggling with margin compression. This improvement from both the linked quarter (3.32%) and year-ago period (3.31%) suggests the bank is successfully navigating the interest rate landscape through disciplined balance sheet management.

From a risk perspective, credit quality trends are encouraging. The significant reduction in loan loss provisions to just $274,000 from $1.3 million last quarter, coupled with the decline in nonperforming assets to 0.11% of total assets, indicates a healthy loan portfolio. This becomes even more significant considering the bank's commercial real estate exposure, with 69% of CRE loans being investor properties.

The efficiency ratio improvement to 63.96% from 65.35% quarter-over-quarter demonstrates effective expense management and suggests operational leverage as the bank grows. The reduction in noninterest expense by 3% quarter-over-quarter despite industry-wide inflationary pressures is a positive differentiator.

The bank maintains strong capital foundations with a common equity tier 1 ratio of 13.6% and total capital ratio of 15.9%, providing substantial flexibility for future growth initiatives or shareholder returns. The increase in tangible book value per share to $8.48 represents ongoing shareholder value creation.

Management's strategic focus on capitalizing on market disruption from bank failures and acquisitions has yielded tangible results, evidenced by the 5% year-over-year growth in both loans and deposits. With $3.2 billion in available liquidity, the bank is well-positioned to continue expanding market share while maintaining balance sheet strength.

SAN JOSE, Calif., April 24, 2025 (GLOBE NEWSWIRE) -- Heritage Commerce Corp (Nasdaq: HTBK), (the “Company”), the holding company for Heritage Bank of Commerce (the “Bank”) today announced its financial results for the first quarter of 2025. All data are unaudited.

QUARTERLY HIGHLIGHTS:

Net Income	Earnings Per Share		Pre-Provision Net Revenue ("PPNR")(1)	Fully Tax Equivalent ("FTE") Net Interest Margin(1)	Efficiency Ratio(1)	Tangible Book Value Per Share(1)
$11.6 million	$0.19		$16.6 million	3.39%	63.96%	$8.48

CEO COMMENTARY:
“We delivered a solid quarter of performance with a 9% increase in our level of profitability from the prior quarter,” said Clay Jones, President and Chief Executive Officer. “While our balance sheet trends reflected the seasonally low loan demand and deposit outflows in the first quarter, we generated a higher level of profitability due to improved net interest margin, strong expense control, and an improvement in our asset quality. We also redeployed some of our excess liquidity to purchase new investment securities, which we expect will have a positive impact on our net interest income and net interest margin going forward. Our longer-term trends remain positive as well, with notable improvement in many areas compared to the first quarter of last year, including a 14% increase in net income and increases in the annualized returns on average assets and average equity.”

“While economic uncertainty has increased over the past few months, we still expect to deliver solid financial performance in 2025 as we continue to capitalize on our market position to assist new clients that have been impacted by dislocation and disruption in our markets resulting from bank failures and acquisitions. We believe that we will continue to see positive trends in areas such as net interest margin, loan and deposit growth, and expense management, which should lead to strong financial performance for our shareholders as we move through the year,” said Mr. Jones.

LINKED-QUARTER BASIS	YEAR-OVER-YEAR
FINANCIAL HIGHLIGHTS:
Net income of $11.6 million and earnings per share of $0.19, up 9% and 12%, from $10.6 million and $0.17, respectively Total revenue of $46.1 million, a decrease of 1%, or $314,000, compared to a decrease in noninterest expense of 3%, or $848,000 PPNR(1) of $16.6 million, up $534,000 from $16.1 million Effective tax rate of 28.8%, compared to 27.9%	Net income of $11.6 million and earnings per share of $0.19, up 14% and 12%, from $10.2 million and $0.17, respectively Total revenue of $46.1 million, an increase of 9%, or $3.9 million, compared to an increase in noninterest expense of 7%, or $1.9 million PPNR(1) of $16.6 million, up $2.0 million from $14.6 million Effective tax rate of 28.8%, compared to 29.5%
FINANCIAL CONDITION:
Loans held-for-investment (“HFI”) remained relatively flat at $3.5 billion Total deposits of $4.7 billion, down $136.8 million, or 3% Loan to deposit ratio of 74.45%, up from 72.45% Total shareholders’ equity of $696 million, up $6.5 million	Increase in loans HFI of $150.8 million, or 5% Increase in total deposits of $238.6 million, or 5% Loan to deposit ratio of 74.45%, down from 75.06% Increase in total shareholders’ equity of $19.9 million
CREDIT QUALITY:
Nonperforming assets (“NPAs”) to total assets of 0.11%, compared to 0.14% Classified assets to total assets of 0.73%, compared to 0.74%	NPAs to total assets of 0.11%, compared to 0.15% Classified assets to total assets of 0.73%, compared to 0.67%
KEY PERFORMANCE METRICS:
FTE net interest margin(1) of 3.39%, an increase from 3.32% Return on average tangible assets(1) and on tangible common equity(1) of 0.88% and 9.09%, compared to 0.78% and 8.25%, respectively Efficiency ratio(1) of 63.96%, compared to 65.35% Common equity tier 1 capital ratio of 13.6%, compared to 13.4% Total capital ratio of 15.9%, compared to 15.6% Tangible common equity ratio(1) of 9.78%, an increase of 4% from 9.43% Tangible book value per share(1) of $8.48, compared to $8.41	FTE net interest margin(1) of 3.39%, an increase from 3.31% Return on average tangible assets(1) and on tangible common equity(1) of 0.88% and 9.09%, compared to 0.82% and 8.24%, respectively Efficiency ratio(1) of 63.96%, compared to 65.34% Common equity tier 1 capital ratio of 13.6%, compared to 13.4% Total capital ratio of 15.9%, compared to 15.6% Tangible common equity ratio(1) of 9.78%, a decrease of 1% from 9.85% Tangible book value per share(1) of $8.48, compared to $8.17

⁽¹⁾This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” later in this press release.

Results of Operations:

Net interest income totaled $43.4 million for the first quarter of 2025, a slight decrease of $235,000, or 1%, compared to $43.6 million for the fourth quarter of 2024. The decrease was primarily due to two fewer accrual days during the quarter from the prior linked quarter, together with a lower average balance on interest earning assets, which was largely offset by a decrease in rates paid on deposits and a decrease of higher cost deposit balances. Net interest income increased $3.9 million, or 10%, compared to $39.5 million for the first quarter of 2024. The increase was primarily due to growth in average earning asset balances, partially offset by an increase in interest-bearing deposit balances.

The FTE net interest margin⁽¹⁾ was 3.39% for the first quarter of 2025, an increase over 3.32% for the fourth quarter of 2024 primarily due to lower rates paid on customer deposits, an increase in the average balances of securities and loans, and higher average yields on securities, partially offset by a decrease in the average balance of noninterest-bearing demand deposits and a lower average yield on overnight funds. The FTE net interest margin⁽¹⁾ increased from 3.31% for the first quarter of 2024 primarily due to lower rates paid on customer deposits, an increase in the average balances of loans, and higher average yields on securities and loans, and an increase in the average balance of deposits resulting in a higher average balance of overnight funds, partially offset by a lower average yield on overnight funds.

We recorded a provision for credit losses on loans of $274,000 for the first quarter of 2025, compared to a $1.3 million provision for credit losses on loans for the fourth quarter of 2024, and a $184,000 provision for credit losses on loans for the first quarter of 2024.

Total noninterest income remained relatively flat at $2.7 million for the first quarter of 2025, compared to $2.8 million for the fourth quarter of 2024, and $2.6 million for the first quarter of 2024.

Total revenue, which is defined as net interest income before provision for credit losses on loans plus noninterest income, decreased $314,000, or 1%, to $46.1 million for the first quarter of 2025, compared to $46.4 million for the fourth quarter of 2024, and increased $3.9 million, or 9%, from $42.1 million for the first quarter of 2024.

Total noninterest expense for the first quarter of 2025 decreased to $29.5 million, compared to $30.3 million for the fourth quarter of 2024, primarily due to nonrecurring personnel related expenses and legal fees of approximately $1.1 million, and higher professional fees and homeowner association vendor payments during the fourth quarter of 2024. Total noninterest expense increased compared to $27.5 million for the first quarter of 2024, primarily due to higher salaries and employee benefits, professional fees, and information technology related expenses.

Income tax expense was $4.7 million for the first quarter of 2025, compared to $4.1 million for the fourth quarter of 2024, and $4.3 million for the first quarter of 2024. The effective tax rate for the first quarter of 2025 was 28.8%, compared to 27.9% for the fourth quarter of 2024, and 29.5% for the first quarter of 2024.

Net income was $11.6 million, or $0.19 per average diluted common share, for the first quarter of 2025, compared to $10.6 million, or $0.17 per average diluted common share, for the fourth quarter of 2024, and $10.2 million, or $0.17 per average diluted common share, for the first quarter of 2024.

For the first quarter of 2025, the Company’s PPNR⁽¹⁾, which is defined as total revenue less noninterest expense, was $16.6 million, compared to $16.1 million for the fourth quarter of 2024, and $14.6 million for the first quarter of 2024.

The efficiency ratio⁽¹⁾ improved to 63.96% for the first quarter of 2025, compared to 65.35% for the fourth quarter of 2024, as a result of lower noninterest expense, partially offset by lower total revenue. The efficiency ratio⁽¹⁾ improved from 65.34% for the first quarter of 2024, primarily due to higher total revenue, partially offset by higher noninterest expense during the first quarter of 2025.

Full time equivalent employees were 350 at March 31, 2025 compared to 355 at December 31, 2024, and 351 at March 31, 2024.

⁽¹⁾This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” later in this press release.

Financial Condition and Capital Management:

Total assets decreased 2% to $5.5 billion at March 31, 2025, compared to $5.6 billion at December 31, 2024, primarily due to a decrease in deposits resulting in a decrease in overnight funds. Total assets increased 5% from $5.3 billion at March 31, 2024, primarily due to an increase in deposits resulting in an increase in overnight funds, and an increase in loans.

Investment securities available-for-sale (at fair value) totaled $371.0 million at March 31, 2025, compared to $256.3 million at December 31, 2024, and $404.5 million at March 31, 2024. The pre-tax unrealized loss on the securities available-for-sale portfolio was $3.1 million, or $2.3 million net of taxes, which equaled less than 1% of total shareholders’ equity at March 31, 2025.

During the first quarter of 2025, the Company purchased $62.3 million of agency mortgage-backed securities, $44.8 million of collateralized mortgage obligations, and $44.7 million of U.S. Treasury securities, for total purchases of $151.8 million in the available-for-sale portfolio. Securities purchased had a book yield of 4.86% and an average life of 4.34 years.

Investment securities held-to-maturity (at amortized cost, net of allowance for credit losses of $12,000), totaled $576.7 million at March 31, 2025, compared to $590.0 million at December 31, 2024, and $636.2 million at March 31, 2024. The fair value of the securities held-to-maturity portfolio was $496.3 million at March 31, 2025. The pre-tax unrecognized loss on the securities held-to-maturity portfolio was $80.5 million, or $56.7 million net of taxes, which equaled 8.1% of total shareholders’ equity at March 31, 2025.

The unrealized and unrecognized losses in both the available-for-sale and held-to-maturity portfolios were due to higher interest rates at March 31, 2025 compared to when the securities were purchased. The issuers are of high credit quality and all principal amounts are expected to be repaid when the securities mature. The fair value is expected to recover as the securities approach their maturity date and/or market rates decline.

Loans HFI, net of deferred costs and fees, remained flat at $3.5 billion at March 31, 2025 as compared to December 31, 2024, and increased $150.8 million, or 5%, from $3.3 billion at March 31, 2024. Loans HFI, excluding residential mortgages, remained flat at $3.0 billion at March 31, 2025 as compared to December 31, 2024, and increased $175.5 million, or 6%, from $2.8 billion at March 31, 2024.

Commercial and industrial line utilization was 31% at March 31, 2025, compared to 34% at December 31, 2024, and 28% at March 31, 2024. Commercial real estate (“CRE”) loans totaled $2.0 billion at March 31, 2025, of which 31% were owner occupied and 69% were investor CRE loans. Owner occupied CRE loans totaled 31% at December 31, 2024 and 32% at March 31, 2024. At March 31, 2025, approximately 24% of the Company’s loan portfolio consisted of floating interest rate loans, compared to 26% at both December 31, 2024 and March 31, 2024.

At March 31, 2025, paydowns and maturities of investment securities and fixed interest rate loans maturing within one year totaled $395.6 million.

Total deposits decreased $136.8 million, or 3%, to $4.7 billion at March 31, 2025, compared to $4.8 billion at December 31, 2024 due to deposits outflows we typically see in the first quarter, and increased $238.6 million, or 5% from $4.4 billion at March 31, 2024.

The following table shows the Company’s deposit types as a percentage of total deposits at the dates indicated:

		March 31,			December 31,			March 31,
DEPOSITS TYPE % TO TOTAL DEPOSITS		2025			2024			2024
Demand, noninterest-bearing		24	%		25	%		28	%
Demand, interest-bearing		20	%		19	%		21	%
Savings and money market		29	%		28	%		25	%
Time deposits — under $250		1	%		1	%		1	%
Time deposits — $250 and over		5	%		4	%		4	%
ICS/CDARS — interest-bearing demand,
money market and time deposits		21	%		23	%		21	%
Total deposits		100	%		100	%		100	%

The loan to deposit ratio was 74.45% at March 31, 2025, compared to 72.45% at December 31, 2024, and 75.06% at March 31, 2024.

The Company’s total available liquidity and borrowing capacity was $3.2 billion at March 31, 2025, compared to $3.3 billion at December 31, 2024, and $3.0 billion at March 31, 2024.

Total shareholders’ equity was $696.2 million at March 31, 2025, compared to $689.7 million at December 31, 2024, and $676.3 million at March 31, 2024. The increase in shareholders’ equity at March 31, 2025 is primarily a function of net income and the decrease in the total accumulated other comprehensive loss, partially offset by dividends to stockholders.

Total accumulated other comprehensive loss of $6.8 million at March 31, 2025 was comprised of unrealized losses on securities available-for-sale of $2.3 million, a split dollar insurance contracts liability of $2.4 million, a supplemental executive retirement plan liability of $2.2 million, and a $49,000 unrealized gain on interest-only strip from SBA loans.

The Company’s consolidated capital ratios exceeded regulatory guidelines and the Bank’s capital ratios exceeded regulatory guidelines under the prompt corrective action (“PCA”) regulatory guidelines for a well-capitalized financial institution, and the Basel III minimum regulatory requirements at March 31, 2025.

Tangible book value per share⁽¹⁾ was $8.48 at March 31, 2025, compared to $8.41 at December 31, 2024, and $8.17 at March 31, 2024.

In July 2024, the Company announced that its Board of Directors adopted a share repurchase program under which the Company is authorized to repurchase up to $15 million of the Company’s shares of its issued and outstanding common stock. The Company did not repurchase any of its common stock during 2024 or the first quarter of 2025.

⁽¹⁾This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” later in this press release.

Credit Quality:

The provision for credit losses on loans totaled $274,000 for the first quarter of 2025, compared to a $1.3 million provision for credit losses on loans for the fourth quarter of 2024, and a provision for credit losses on loans of $184,000 for the first quarter of 2024. Net charge-offs totaled $965,000 for the first quarter of 2025, compared to $197,000 for the fourth quarter of 2024, and $254,000 for the first quarter of 2024. More than half of the net charge-offs for the first quarter of 2025 related to one commercial contractor that was previously reserved for during the fourth quarter of 2024. The remaining charge-offs were related to five different small businesses in a variety of industries. Four loans were underwritten using a scored small business product whose underwriting guidelines have been tightened since the loans were made. 

The allowance for credit losses on loans (“ACLL”) at March 31, 2025 was $48.3 million, or 1.38% of total loans, representing 765% of total nonperforming loans. The ACLL at December 31, 2024 was $49.0 million, or 1.40% of total loans, representing 638% of total nonperforming loans. The ACLL at March 31, 2024 was $47.9 million, or 1.44% of total loans, representing 608% of total nonperforming loans. The reduction to the allowance for credit on losses on loans reflects our credit assessment and economic factors.

NPAs were $6.3 million at March 31, 2025, compared to $7.7 million at December 31, 2024, and $7.9 million at March 31, 2024. There were no CRE loans in NPAs at March 31, 2025, December 31, 2024, or March 31, 2024. There were no foreclosed assets on the balance sheet at March 31, 2025, December 31, 2024, or March 31, 2024. There were no Shared National Credits (“SNCs”) or material purchased participations included in NPAs or total loans at March 31, 2025, December 31, 2024, or March 31, 2024.

Classified assets totaled $40.0 million, or 0.73% of total assets, at March 31, 2025, compared to $41.7 million, or 0.74% of total assets, at December 31, 2024, and $35.4 million, or 0.67% of total assets, at March 31, 2024. The increase in classified assets from March 31, 2024 was primarily the result of one downgraded owner occupied CRE credit, and a number of residential related loans downgraded during the fourth quarter of 2024. The loans are well-collateralized and we do not anticipate to incur losses as a result of the downgrades of these loans.

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, Oakland, Palo Alto, Pleasanton, Redwood City, San Francisco, San Jose, San Mateo, San Rafael, 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. The contents of our website are not incorporated into, and do not form a part of, this release or of our filings with the Securities and Exchange Commission.

Reclassifications

During the first quarter of 2025, we reclassified Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock dividends from interest income to noninterest income and the related average asset balances were reclassified from interest earning assets to other assets on the “Net Interest Income and Net Interest Margin” tables. The amounts for the prior periods were reclassified to conform to the current presentation. These reclassifications did not affect previously reported net income or shareholders’ equity.

Non-GAAP Financial Measures

Financial results are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and prevailing practices in the banking industry. However, certain non-GAAP performance measures and ratios are used by management to evaluate and measure the Company’s performance. Management believes these non-GAAP financial measures are common in the banking industry, and may enhance comparability for peer comparison purposes. These non-GAAP financial measures should be supplemental to primary GAAP financial measures and should not be read in isolation or relied upon as a substitute for primary GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is presented in the tables at the end of this press release under “Reconciliation of Non-GAAP Financial Measures.”

Forward-Looking Statement Disclaimer

Certain matters discussed in this press release constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are inherently uncertain in that they reflect plans and expectations for future events. These statements may include, among other things, those relating to the Company’s future financial performance, plans and objectives regarding future events, expectations regarding changes in interest rates and market conditions, projected cash flows of our investment securities portfolio, the performance of our loan portfolio, estimated net interest income resulting from a shift in interest rates, expectation of high credit quality issuers ability to repay, as well as statements relating to the anticipated effects on the Company’s financial condition and results of operations from expected developments or events. Any statements that reflect our belief about, confidence in, or expectations for future events, performance or condition should be considered forward-looking statements. Readers should not construe these statements as assurances of a given level of performance, nor as promises that we will take actions that we currently expect to take. All statements are subject to various risks and uncertainties, many of which are outside our control and some of which may fall outside our ability to predict or anticipate. Accordingly, our actual results may differ materially from our projected results, and we may take actions or experience events that we do not currently expect. 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, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, and include: (i) risks of geographic concentration of our client base, our loans, and the collateral securing our loans, as those clients and assets may be particularly subject to natural disasters and to events and conditions that directly or indirectly affect those regions, including the particular risks of natural disasters (including earthquakes, fires, and flooding) and other events that disproportionately affect that region; (ii) cybersecurity risks that may affect us directly or may impact us indirectly by virtue of their effects on our clients, markets or vendors, including our ability to identify and address cybersecurity risks, including those posed by the increasing use of artificial intelligence, such as data security breaches, “denial of service” attacks, “hacking” and identity theft affecting us, our clients, and our third-party vendors and service providers; (iii) domestic, international and multinational political events that have accompanied or that may in the future accompany or result from recent political changes, particularly including sociopolitical events and conditions that result from political conflicts and law enforcement activities that may adversely affect our markets or our clients; (iv) media items and consumer confidence as those factors affect our clients’ confidence in the banking system generally and in our bank specifically; (v) adequacy of our risk management framework, disclosure controls and procedures and internal control over financial reporting; (vi) market, geographic and sociopolitical factors that arise by virtue of the fact that we operate primarily in the general San Francisco Bay Area of Northern California; (vii) the effects of recent wildfires affecting Southern California, which have affected certain clients and certain loans secured by mortgages in Los Angeles County, and which are affecting or may, in the future, affect other clients in those and other markets throughout California; (viii) factors that affect our liquidity and our ability to meet client demands for withdrawals from deposit accounts and undrawn lines of credit, including our cash on hand and the availability of funds from our own lines of credit; (ix) factors that affect the value and liquidity of our investment portfolios, particularly the values of securities available-for-sale; (x) our ability to estimate accurately, and to establish adequate reserves against, the risk of loss associated with our loan and lease portfolios and our factoring business; (xi) inflationary pressures and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans to clients, whether held in the portfolio or in the secondary market; (xii) 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; (xiii) 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; (xiv) events that affect our ability to attract, recruit, and retain qualified officers and other personnel to implement our strategic plan, and that enable current and future personnel to protect and develop our relationships with clients, and to promote our business, results of operations and growth prospects; (xv) the expense and uncertain resolution of litigation matters whether occurring in the ordinary course of business or otherwise, particularly including but not limited to the effects of recent and ongoing developments in California labor and employment laws, regulations and court decisions; and (xvi) our success in managing the risks involved in the foregoing factors.

Member FDIC

For additional information, contact:
Debbie Reuter
EVP, Corporate Secretary
Direct: (408) 494-4542
Debbie.Reuter@herbank.com

		For the Quarter Ended:									Percent Change From:
CONSOLIDATED INCOME STATEMENTS		March 31,			December 31,			March 31,			December 31,			March 31,
(in $000’s, unaudited)		2025			2024			2024			2024			2024
Interest income		$	61,832		$	64,043		$	56,960		(3	)	%	9		%
Interest expense			18,472			20,448			17,458		(10	)	%	6		%
Net interest income before provision
for credit losses on loans			43,360			43,595			39,502		(1	)	%	10		%
Provision for credit losses on loans			274			1,331			184		(79	)	%	49		%
Net interest income after provision
for credit losses on loans			43,086			42,264			39,318		2		%	10		%
Noninterest income:
Service charges and fees on deposit
accounts			892			885			877		1		%	2		%
FHLB and FRB stock dividends			590			590			591		0		%	0		%
Increase in cash surrender value of
life insurance			538			528			518		2		%	4		%
Gain on sales of SBA loans			98			125			178		(22	)	%	(45	)	%
Servicing income			82			77			90		6		%	(9	)	%
Termination fees			87			18			13		383		%	569		%
Other			409			552			371		(26	)	%	10		%
Total noninterest income			2,696			2,775			2,638		(3	)	%	2		%
Noninterest expense:
Salaries and employee benefits			16,575			16,976			15,509		(2	)	%	7		%
Occupancy and equipment			2,534			2,495			2,443		2		%	4		%
Professional fees			1,580			1,711			1,327		(8	)	%	19		%
Other			8,767			9,122			8,257		(4	)	%	6		%
Total noninterest expense			29,456			30,304			27,536		(3	)	%	7		%
Income before income taxes			16,326			14,735			14,420		11		%	13		%
Income tax expense			4,700			4,114			4,254		14		%	10		%
Net income		$	11,626		$	10,621		$	10,166		9		%	14		%
PER COMMON SHARE DATA
(unaudited)
Basic earnings per share		$	0.19		$	0.17		$	0.17		12		%	12		%
Diluted earnings per share		$	0.19		$	0.17		$	0.17		12		%	12		%
Weighted average shares outstanding - basic			61,479,579			61,320,505			61,186,623		0		%	0		%
Weighted average shares outstanding - diluted			61,708,361			61,679,735			61,470,552		0		%	0		%
Common shares outstanding at period-end			61,611,121			61,348,095			61,253,625		0		%	1		%
Dividend per share		$	0.13		$	0.13		$	0.13		0		%	0		%
Book value per share		$	11.30		$	11.24		$	11.04		1		%	2		%
Tangible book value per share(1)		$	8.48		$	8.41		$	8.17		1		%	4		%
KEY PERFORMANCE METRICS
(in $000's, unaudited)
Annualized return on average equity			6.81	%		6.16	%		6.08	%	11		%	12		%
Annualized return on average tangible
common equity(1)			9.09	%		8.25	%		8.24	%	10		%	10		%
Annualized return on average assets			0.85	%		0.75	%		0.79	%	13		%	8		%
Annualized return on average tangible assets(1)			0.88	%		0.78	%		0.82	%	13		%	7		%
Net interest margin (FTE)(1)			3.39	%		3.32	%		3.31	%	2		%	2		%
Total revenue		$	46,056		$	46,370		$	42,140		(1	)	%	9		%
Pre-provision net revenue(1)		$	16,600		$	16,066		$	14,604		3		%	14		%
Efficiency ratio(1)			63.96	%		65.35	%		65.34	%	(2	)	%	(2	)	%
AVERAGE BALANCES
(in $000’s, unaudited)
Average assets		$	5,559,896		$	5,607,840		$	5,178,636		(1	)	%	7		%
Average tangible assets(1)		$	5,386,001		$	5,433,439		$	5,002,597		(1	)	%	8		%
Average earning assets		$	5,188,317		$	5,235,986		$	4,810,505		(1	)	%	8		%
Average loans held-for-sale		$	2,290		$	2,260		$	2,749		1		%	(17	)	%
Average loans held-for-investment		$	3,429,014		$	3,388,729		$	3,297,240		1		%	4		%
Average deposits		$	4,717,517		$	4,771,491		$	4,360,150		(1	)	%	8		%
Average demand deposits - noninterest-bearing		$	1,167,330		$	1,222,393		$	1,177,078		(5	)	%	(1	)	%
Average interest-bearing deposits		$	3,550,187		$	3,549,098		$	3,183,072		0		%	12		%
Average interest-bearing liabilities		$	3,589,872		$	3,588,755		$	3,222,603		0		%	11		%
Average equity		$	692,733		$	686,263		$	672,292		1		%	3		%
Average tangible common equity(1)		$	518,838		$	511,862		$	496,253		1		%	5		%

---

⁽¹⁾This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release.

		For the Quarter Ended:
CONSOLIDATED INCOME STATEMENTS		March 31,			December 31,			September 30,			June 30,			March 31,
(in $000’s, unaudited)		2025			2024			2024			2024			2024
Interest income		$	61,832		$	64,043		$	60,852		$	58,489		$	56,960
Interest expense			18,472			20,448			21,523			19,622			17,458
Net interest income before provision
for credit losses on loans			43,360			43,595			39,329			38,867			39,502
Provision for credit losses on loans			274			1,331			153			471			184
Net interest income after provision
for credit losses on loans			43,086			42,264			39,176			38,396			39,318
Noninterest income:
Service charges and fees on deposit
accounts			892			885			908			891			877
FHLB and FRB stock dividends			590			590			586			588			591
Increase in cash surrender value of
life insurance			538			528			530			521			518
Gain on sales of SBA loans			98			125			94			76			178
Servicing income			82			77			108			90			90
Termination fees			87			18			46			100			13
Gain on proceeds from company-owned
life insurance			—			—			—			219			—
Other			409			552			554			379			371
Total noninterest income			2,696			2,775			2,826			2,864			2,638
Noninterest expense:
Salaries and employee benefits			16,575			16,976			15,673			15,794			15,509
Occupancy and equipment			2,534			2,495			2,599			2,689			2,443
Professional fees			1,580			1,711			1,306			1,072			1,327
Other			8,767			9,122			7,977			8,633			8,257
Total noninterest expense			29,456			30,304			27,555			28,188			27,536
Income before income taxes			16,326			14,735			14,447			13,072			14,420
Income tax expense			4,700			4,114			3,940			3,838			4,254
Net income		$	11,626		$	10,621		$	10,507		$	9,234		$	10,166
PER COMMON SHARE DATA
(unaudited)
Basic earnings per share		$	0.19		$	0.17		$	0.17		$	0.15		$	0.17
Diluted earnings per share		$	0.19		$	0.17		$	0.17		$	0.15		$	0.17
Weighted average shares outstanding - basic			61,479,579			61,320,505			61,295,877			61,279,914			61,186,623
Weighted average shares outstanding - diluted			61,708,361			61,679,735			61,546,157			61,438,088			61,470,552
Common shares outstanding at period-end			61,611,121			61,348,095			61,297,344			61,292,094			61,253,625
Dividend per share		$	0.13		$	0.13		$	0.13		$	0.13		$	0.13
Book value per share		$	11.30		$	11.24		$	11.18		$	11.08		$	11.04
Tangible book value per share(1)		$	8.48		$	8.41		$	8.33		$	8.22		$	8.17
KEY PERFORMANCE METRICS
(in $000's, unaudited)
Annualized return on average equity			6.81	%		6.16	%		6.14	%		5.50	%		6.08	%
Annualized return on average tangible
common equity(1)			9.09	%		8.25	%		8.27	%		7.43	%		8.24	%
Annualized return on average assets			0.85	%		0.75	%		0.78	%		0.71	%		0.79	%
Annualized return on average tangible assets(1)			0.88	%		0.78	%		0.81	%		0.74	%		0.82	%
Net interest margin (FTE)(1)			3.39	%		3.32	%		3.15	%		3.23	%		3.31	%
Total revenue		$	46,056		$	46,370		$	42,155		$	41,731		$	42,140
Pre-provision net revenue(1)		$	16,600		$	16,066		$	14,600		$	13,543		$	14,604
Efficiency ratio(1)			63.96	%		65.35	%		65.37	%		67.55	%		65.34	%
AVERAGE BALANCES
(in $000’s, unaudited)
Average assets		$	5,559,896		$	5,607,840		$	5,352,067		$	5,213,171		$	5,178,636
Average tangible assets(1)		$	5,386,001		$	5,433,439		$	5,177,114		$	5,037,673		$	5,002,597
Average earning assets		$	5,188,317		$	5,235,986		$	4,980,082		$	4,840,670		$	4,810,505
Average loans held-for-sale		$	2,290		$	2,260		$	1,493		$	1,503		$	2,749
Average loans held-for-investment		$	3,429,014		$	3,388,729		$	3,359,647		$	3,328,358		$	3,297,240
Average deposits		$	4,717,517		$	4,771,491		$	4,525,946		$	4,394,545		$	4,360,150
Average demand deposits - noninterest-bearing		$	1,167,330		$	1,222,393		$	1,172,304		$	1,127,145		$	1,177,078
Average interest-bearing deposits		$	3,550,187		$	3,549,098		$	3,353,642		$	3,267,400		$	3,183,072
Average interest-bearing liabilities		$	3,589,872		$	3,588,755		$	3,393,264		$	3,306,972		$	3,222,603
Average equity		$	692,733		$	686,263		$	680,404		$	675,108		$	672,292
Average tangible common equity(1)		$	518,838		$	511,862		$	505,451		$	499,610		$	496,253

---

⁽¹⁾This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release.

		End of Period:												Percent Change From:
CONSOLIDATED BALANCE SHEETS		March 31,				December 31,				March 31,				December 31,			March 31,
(in $000’s, unaudited)		2025				2024				2024				2024			2024
ASSETS
Cash and due from banks		$	44,281			$	29,864			$	32,543			48		%	36		%
Other investments and interest-bearing deposits
in other financial institutions			700,769				938,259				508,816			(25	)	%	38		%
Securities available-for-sale, at fair value			370,976				256,274				404,474			45		%	(8	)	%
Securities held-to-maturity, at amortized cost			576,718				590,016				636,249			(2	)	%	(9	)	%
Loans - held-for-sale - SBA, including deferred costs			1,884				2,375				1,946			(21	)	%	(3	)	%
Loans - held-for-investment:
Commercial			489,241				531,350				452,231			(8	)	%	8		%
Real estate:
CRE - owner occupied			616,825				601,636				585,031			3		%	5		%
CRE - non-owner occupied			1,363,275				1,341,266				1,271,184			2		%	7		%
Land and construction			136,106				127,848				129,712			6		%	5		%
Home equity			119,138				127,963				122,794			(7	)	%	(3	)	%
Multifamily			284,510				275,490				269,263			3		%	6		%
Residential mortgages			465,330				471,730				490,035			(1	)	%	(5	)	%
Consumer and other			12,741				14,837				16,439			(14	)	%	(22	)	%
Loans			3,487,166				3,492,120				3,336,689			0		%	5		%
Deferred loan fees, net			(268	)			(183	)			(587	)		46		%	(54	)	%
Total loans - held-for-investment, net of deferred fees			3,486,898				3,491,937				3,336,102			0		%	5		%
Allowance for credit losses on loans			(48,262	)			(48,953	)			(47,888	)		(1	)	%	1		%
Loans, net			3,438,636				3,442,984				3,288,214			0		%	5		%
Company-owned life insurance			81,749				81,211				80,007			1		%	2		%
Premises and equipment, net			9,772				10,140				9,986			(4	)	%	(2	)	%
Goodwill			167,631				167,631				167,631			0		%	0		%
Other intangible assets			5,986				6,439				8,074			(7	)	%	(26	)	%
Accrued interest receivable and other assets			115,853				119,813				118,134			(3	)	%	(2	)	%
Total assets		$	5,514,255			$	5,645,006			$	5,256,074			(2	)	%	5		%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, noninterest-bearing		$	1,128,593			$	1,214,192			$	1,242,059			(7	)	%	(9	)	%
Demand, interest-bearing			949,068				936,587				925,100			1		%	3		%
Savings and money market			1,353,293				1,325,923				1,124,900			2		%	20		%
Time deposits - under $250			37,592				38,988				38,105			(4	)	%	(1	)	%
Time deposits - $250 and over			213,357				206,755				200,739			3		%	6		%
ICS/CDARS - interest-bearing demand, money market
and time deposits			1,001,365				1,097,586				913,757			(9	)	%	10		%
Total deposits			4,683,268				4,820,031				4,444,660			(3	)	%	5		%
Subordinated debt, net of issuance costs			39,691				39,653				39,539			0		%	0		%
Accrued interest payable and other liabilities			95,106				95,595				95,579			(1	)	%	0		%
Total liabilities			4,818,065				4,955,279				4,579,778			(3	)	%	5		%
Shareholders’ Equity:
Common stock			511,596				510,070				507,578			0		%	1		%
Retained earnings			191,401				187,762				181,306			2		%	6		%
Accumulated other comprehensive loss			(6,807	)			(8,105	)			(12,588	)		(16	)	%	(46	)	%
Total shareholders' equity			696,190				689,727				676,296			1		%	3		%
Total liabilities and shareholders’ equity		$	5,514,255			$	5,645,006			$	5,256,074			(2	)	%	5		%

		End of Period:
CONSOLIDATED BALANCE SHEETS		March 31,				December 31,				September 30,				June 30,				March 31,
(in $000’s, unaudited)		2025				2024				2024				2024				2024
ASSETS
Cash and due from banks		$	44,281			$	29,864			$	49,722			$	37,497			$	32,543
Other investments and interest-bearing deposits
in other financial institutions			700,769				938,259				906,588				610,763				508,816
Securities available-for-sale, at fair value			370,976				256,274				237,612				273,043				404,474
Securities held-to-maturity, at amortized cost			576,718				590,016				604,193				621,178				636,249
Loans - held-for-sale - SBA, including deferred costs			1,884				2,375				1,649				1,899				1,946
Loans - held-for-investment:
Commercial			489,241				531,350				481,266				477,929				452,231
Real estate:
CRE - owner occupied			616,825				601,636				602,062				594,504				585,031
CRE - non-owner occupied			1,363,275				1,341,266				1,310,578				1,283,323				1,271,184
Land and construction			136,106				127,848				125,761				125,374				129,712
Home equity			119,138				127,963				124,090				126,562				122,794
Multifamily			284,510				275,490				273,103				268,968				269,263
Residential mortgages			465,330				471,730				479,524				484,809				490,035
Consumer and other			12,741				14,837				14,179				18,758				16,439
Loans			3,487,166				3,492,120				3,410,563				3,380,227				3,336,689
Deferred loan fees, net			(268	)			(183	)			(327	)			(434	)			(587	)
Total loans - held-for-investment, net of deferred fees			3,486,898				3,491,937				3,410,236				3,379,793				3,336,102
Allowance for credit losses on loans			(48,262	)			(48,953	)			(47,819	)			(47,954	)			(47,888	)
Loans, net			3,438,636				3,442,984				3,362,417				3,331,839				3,288,214
Company-owned life insurance			81,749				81,211				80,682				80,153				80,007
Premises and equipment, net			9,772				10,140				10,398				10,310				9,986
Goodwill			167,631				167,631				167,631				167,631				167,631
Other intangible assets			5,986				6,439				6,966				7,521				8,074
Accrued interest receivable and other assets			115,853				119,813				123,738				121,190				118,134
Total assets		$	5,514,255			$	5,645,006			$	5,551,596			$	5,263,024			$	5,256,074
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, noninterest-bearing		$	1,128,593			$	1,214,192			$	1,272,139			$	1,187,320			$	1,242,059
Demand, interest-bearing			949,068				936,587				913,910				928,246				925,100
Savings and money market			1,353,293				1,325,923				1,309,676				1,126,520				1,124,900
Time deposits - under $250			37,592				38,988				39,060				39,046				38,105
Time deposits - $250 and over			213,357				206,755				196,945				203,886				200,739
ICS/CDARS - interest-bearing demand, money market
and time deposits			1,001,365				1,097,586				997,803				959,592				913,757
Total deposits			4,683,268				4,820,031				4,729,533				4,444,610				4,444,660
Other short-term borrowings			—				—				—				—				—
Subordinated debt, net of issuance costs			39,691				39,653				39,615				39,577				39,539
Accrued interest payable and other liabilities			95,106				95,595				97,096				99,638				95,579
Total liabilities			4,818,065				4,955,279				4,866,244				4,583,825				4,579,778
Shareholders’ Equity:
Common stock			511,596				510,070				509,134				508,343				507,578
Retained earnings			191,401				187,762				185,110				182,571				181,306
Accumulated other comprehensive loss			(6,807	)			(8,105	)			(8,892	)			(11,715	)			(12,588	)
Total shareholders' equity			696,190				689,727				685,352				679,199				676,296
Total liabilities and shareholders’ equity		$	5,514,255			$	5,645,006			$	5,551,596			$	5,263,024			$	5,256,074

		At or For the Quarter Ended:									Percent Change From:
CREDIT QUALITY DATA		March 31,			December 31,			March 31,			December 31,			March 31,
(in $000’s, unaudited)		2025			2024			2024			2024			2024
Nonaccrual loans - held-for-investment:
Land and construction loans		$	4,793		$	5,874		$	4,673		(18	)	%	3		%
Home equity and other loans			927			290			120		220		%	673		%
Commercial loans			324			1,014			1,127		(68	)	%	(71	)	%
CRE loans			—			—			—		N/A			N/A
Total nonaccrual loans - held-for-investment:			6,044			7,178			5,920		(16	)	%	2		%
Loans over 90 days past due
and still accruing			268			489			1,951		(45	)	%	(86	)	%
Total nonperforming loans			6,312			7,667			7,871		(18	)	%	(20	)	%
Foreclosed assets			—			—			—		N/A			N/A
Total nonperforming assets		$	6,312		$	7,667		$	7,871		(18	)	%	(20	)	%
Net charge-offs during the quarter		$	965		$	197		$	254		390		%	280		%
Provision for credit losses on loans during the quarter		$	274		$	1,331		$	184		(79	)	%	49		%
Allowance for credit losses on loans		$	48,262		$	48,953		$	47,888		(1	)	%	1		%
Classified assets		$	40,034		$	41,661		$	35,392		(4	)	%	13		%
Allowance for credit losses on loans to total loans			1.38	%		1.40	%		1.44	%	(1	)	%	(4	)	%
Allowance for credit losses on loans to total nonperforming loans			764.61	%		638.49	%		608.41	%	20		%	26		%
Nonperforming assets to total assets			0.11	%		0.14	%		0.15	%	(21	)	%	(27	)	%
Nonperforming loans to total loans			0.18	%		0.22	%		0.24	%	(18	)	%	(25	)	%
Classified assets to Heritage Commerce Corp
Tier 1 capital plus allowance for credit losses on loans			7	%		7	%		6	%	0		%	17		%
Classified assets to Heritage Bank of Commerce
Tier 1 capital plus allowance for credit losses on loans			7	%		7	%		6	%	0		%	17		%
OTHER PERIOD-END STATISTICS
(in $000’s, unaudited)
Heritage Commerce Corp:
Tangible common equity (1)		$	522,573		$	515,657		$	500,591		1		%	4		%
Shareholders’ equity / total assets			12.63	%		12.22	%		12.87	%	3		%	(2	)	%
Tangible common equity / tangible assets (1)			9.78	%		9.43	%		9.85	%	4		%	(1	)	%
Loan to deposit ratio			74.45	%		72.45	%		75.06	%	3		%	(1	)	%
Noninterest-bearing deposits / total deposits			24.10	%		25.19	%		27.94	%	(4	)	%	(14	)	%
Total capital ratio			15.9	%		15.6	%		15.6	%	2		%	2		%
Tier 1 capital ratio			13.6	%		13.4	%		13.4	%	1		%	1		%
Common Equity Tier 1 capital ratio			13.6	%		13.4	%		13.4	%	1		%	1		%
Tier 1 leverage ratio			9.8	%		9.6	%		10.2	%	2		%	(4	)	%
Heritage Bank of Commerce:
Tangible common equity / tangible assets (1)			10.15	%		9.79	%		10.22	%	4		%	(1	)	%
Total capital ratio			15.4	%		15.1	%		15.1	%	2		%	2		%
Tier 1 capital ratio			14.1	%		13.9	%		13.9	%	1		%	1		%
Common Equity Tier 1 capital ratio			14.1	%		13.9	%		13.9	%	1		%	1		%
Tier 1 leverage ratio			10.2	%		10.0	%		10.6	%	2		%	(4	)	%

---

⁽¹⁾This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release.

		At or For the Quarter Ended:
CREDIT QUALITY DATA		March 31,			December 31,			September 30,			June 30,			March 31,
(in $000’s, unaudited)		2025			2024			2024			2024			2024
Nonaccrual loans - held-for-investment:
Land and construction loans		$	4,793		$	5,874		$	5,862		$	4,774		$	4,673
Home equity and other loans			927			290			84			108			120
Commercial loans			324			1,014			752			900			1,127
CRE loans			—			—			—			—			—
Total nonaccrual loans - held-for-investment:			6,044			7,178			6,698			5,782			5,920
Loans over 90 days past due
and still accruing			268			489			460			248			1,951
Total nonperforming loans			6,312			7,667			7,158			6,030			7,871
Foreclosed assets			—			—			—			—			—
Total nonperforming assets		$	6,312		$	7,667		$	7,158		$	6,030		$	7,871
Net charge-offs during the quarter		$	965		$	197		$	288		$	405		$	254
Provision for credit losses on loans during the quarter		$	274		$	1,331		$	153		$	471		$	184
Allowance for credit losses on loans		$	48,262		$	48,953		$	47,819		$	47,954		$	47,888
Classified assets		$	40,034		$	41,661		$	32,609		$	33,605		$	35,392
Allowance for credit losses on loans to total loans			1.38	%		1.40	%		1.40	%		1.42	%		1.44	%
Allowance for credit losses on loans to total nonperforming loans			764.61	%		638.49	%		668.05	%		795.26	%		608.41	%
Nonperforming assets to total assets			0.11	%		0.14	%		0.13	%		0.11	%		0.15	%
Nonperforming loans to total loans			0.18	%		0.22	%		0.21	%		0.18	%		0.24	%
Classified assets to Heritage Commerce Corp
Tier 1 capital plus allowance for credit losses on loans			7	%		7	%		6	%		6	%		6	%
Classified assets to Heritage Bank of Commerce
Tier 1 capital plus allowance for credit losses on loans			7	%		7	%		6	%		6	%		6	%
OTHER PERIOD-END STATISTICS
(in $000’s, unaudited)
Heritage Commerce Corp:
Tangible common equity (1)		$	522,573		$	515,657		$	510,755		$	504,047		$	500,591
Shareholders’ equity / total assets			12.63	%		12.22	%		12.35	%		12.91	%		12.87	%
Tangible common equity / tangible assets (1)			9.78	%		9.43	%		9.50	%		9.91	%		9.85	%
Loan to deposit ratio			74.45	%		72.45	%		72.11	%		76.04	%		75.06	%
Noninterest-bearing deposits / total deposits			24.10	%		25.19	%		26.90	%		26.71	%		27.94	%
Total capital ratio			15.9	%		15.6	%		15.6	%		15.6	%		15.6	%
Tier 1 capital ratio			13.6	%		13.4	%		13.4	%		13.4	%		13.4	%
Common Equity Tier 1 capital ratio			13.6	%		13.4	%		13.4	%		13.4	%		13.4	%
Tier 1 leverage ratio			9.8	%		9.6	%		10.0	%		10.2	%		10.2	%
Heritage Bank of Commerce:
Tangible common equity / tangible assets (1)			10.15	%		9.79	%		9.86	%		10.28	%		10.22	%
Total capital ratio			15.4	%		15.1	%		15.1	%		15.1	%		15.1	%
Tier 1 capital ratio			14.1	%		13.9	%		13.9	%		13.9	%		13.9	%
Common Equity Tier 1 capital ratio			14.1	%		13.9	%		13.9	%		13.9	%		13.9	%
Tier 1 leverage ratio			10.2	%		10.0	%		10.4	%		10.6	%		10.6	%

---

⁽¹⁾This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release.

		For the Quarter Ended										For the Quarter Ended
		March 31, 2025										December 31, 2024
						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, core bank		$	2,945,072				39,758			5.47	%	$	2,899,347			$	39,852			5.47	%
Prepayment fees			—				224			0.03	%		—				35			0.00	%
Bay View Funding factored receivables			60,250				2,942			19.80	%		59,153				3,084			20.74	%
Purchased residential mortgages			427,963				3,597			3.41	%		434,846				3,732			3.41	%
Loan fair value mark / accretion			(1,981	)			181			0.02	%		(2,357	)			429			0.06	%
Loans, gross (1)(2)			3,431,304				46,702			5.52	%		3,390,989				47,132			5.53	%
Securities - taxable			876,092				5,559			2.57	%		800,174				4,475			2.22	%
Securities - exempt from Federal tax (3)			30,480				275			3.66	%		30,570				274			3.57	%
Other investments and interest-bearing deposits
in other financial institutions			850,441				9,354			4.46	%		1,014,253				12,220			4.79	%
Total interest earning assets (3)			5,188,317				61,890			4.84	%		5,235,986				64,101			4.87	%
Cash and due from banks			31,869										32,569
Premises and equipment, net			10,007										10,301
Goodwill and other intangible assets			173,895										174,401
Other assets			155,808										154,583
Total assets		$	5,559,896									$	5,607,840
Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing		$	1,167,330									$	1,222,393
Demand, interest-bearing			944,375				1,438			0.62	%		906,581				1,452			0.64	%
Savings and money market			1,323,038				8,073			2.47	%		1,339,397				9,090			2.70	%
Time deposits - under $100			11,383				47			1.67	%		11,388				49			1.71	%
Time deposits - $100 and over			234,421				2,129			3.68	%		234,446				2,310			3.92	%
ICS/CDARS - interest-bearing demand, money market
and time deposits			1,036,970				6,248			2.44	%		1,057,286				7,009			2.64	%
Total interest-bearing deposits			3,550,187				17,935			2.05	%		3,549,098				19,910			2.23	%
Total deposits			4,717,517				17,935			1.54	%		4,771,491				19,910			1.66	%
Short-term borrowings			18				—			0.00	%		28				—			0.00	%
Subordinated debt, net of issuance costs			39,667				537			5.49	%		39,629				538			5.40	%
Total interest-bearing liabilities			3,589,872				18,472			2.09	%		3,588,755				20,448			2.27	%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds			4,757,202				18,472			1.57	%		4,811,148				20,448			1.69	%
Other liabilities			109,961										110,429
Total liabilities			4,867,163										4,921,577
Shareholders’ equity			692,733										686,263
Total liabilities and shareholders’ equity		$	5,559,896									$	5,607,840
Net interest income / margin (3)							43,418			3.39	%						43,653			3.32	%
Less tax equivalent adjustment (3)							(58	)									(58	)
Net interest income						$	43,360			3.39	%					$	43,595			3.31	%

---

⁽¹⁾Includes loans held-for-sale. Nonaccrual loans are included in average balances.
⁽²⁾Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $214,000 for the first quarter of 2025, compared to $167,000 for the fourth quarter of 2024. Prepayment fees totaled $224,000 for the first quarter of 2025, compared to $35,000 for the fourth quarter of 2024.
⁽³⁾Reflects the FTE adjustment for Federal tax-exempt income based on a 21% tax rate. This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release.

		For the Quarter Ended										For the Quarter Ended
		March 31, 2025										March 31, 2024
						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, core bank		$	2,945,072			$	39,758			5.47	%	$	2,795,351			$	37,721			5.43	%
Prepayment fees			—				224			0.03	%		—				24			0.00	%
Bay View Funding factored receivables			60,250				2,942			19.80	%		53,511				2,838			21.33	%
Purchased residential mortgages			427,963				3,597			3.41	%		454,240				3,788			3.35	%
Loan fair value mark / accretion			(1,981	)			181			0.02	%		(3,113	)			229			0.03	%
Loans, gross (1)(2)			3,431,304				46,702			5.52	%		3,299,989				44,600			5.44	%
Securities - taxable			876,092				5,559			2.57	%		1,042,484				6,183			2.39	%
Securities - exempt from Federal tax (3)			30,480				275			3.66	%		31,939				286			3.60	%
Other investments and interest-bearing deposits
in other financial institutions			850,441				9,354			4.46	%		436,093				5,951			5.49	%
Total interest earning assets (3)			5,188,317				61,890			4.84	%		4,810,505				57,020			4.77	%
Cash and due from banks			31,869										33,214
Premises and equipment, net			10,007										10,015
Goodwill and other intangible assets			173,895										176,039
Other assets			155,808										148,863
Total assets		$	5,559,896									$	5,178,636
Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing		$	1,167,330									$	1,177,078
Demand, interest-bearing			944,375				1,438			0.62	%		920,048				1,554			0.68	%
Savings and money market			1,323,038				8,073			2.47	%		1,067,581				6,649			2.50	%
Time deposits - under $100			11,383				47			1.67	%		10,945				42			1.54	%
Time deposits - $100 and over			234,421				2,129			3.68	%		221,211				2,064			3.75	%
ICS/CDARS - interest-bearing demand, money market
and time deposits			1,036,970				6,248			2.44	%		963,287				6,611			2.76	%
Total interest-bearing deposits			3,550,187				17,935			2.05	%		3,183,072				16,920			2.14	%
Total deposits			4,717,517				17,935			1.54	%		4,360,150				16,920			1.56	%
Short-term borrowings			18				—			0.00	%		15				—			0.00	%
Subordinated debt, net of issuance costs			39,667				537			5.49	%		39,516				538			5.48	%
Total interest-bearing liabilities			3,589,872				18,472			2.09	%		3,222,603				17,458			2.18	%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds			4,757,202				18,472			1.57	%		4,399,681				17,458			1.60	%
Other liabilities			109,961										106,663
Total liabilities			4,867,163										4,506,344
Shareholders’ equity			692,733										672,292
Total liabilities and shareholders’ equity		$	5,559,896									$	5,178,636
Net interest income / margin (3)							43,418			3.39	%						39,562			3.31	%
Less tax equivalent adjustment (3)							(58	)									(60	)
Net interest income						$	43,360			3.39	%					$	39,502			3.30	%

---

⁽¹⁾Includes loans held-for-sale. Nonaccrual loans are included in average balances.
⁽²⁾Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $214,000 for the first quarter of 2025, compared to $160,000 for the first quarter of 2024. Prepayment fees totaled $224,000 for the first quarter of 2025, compared to $24,000 for the first quarter of 2024.
⁽³⁾Reflects the FTE adjustment for Federal tax-exempt income based on a 21% tax rate. This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Management considers tangible book value per share as a useful measurement of the Company’s equity. The Company references the return on average tangible common equity and the return on average tangible assets as measurements of profitability.

The following table summarizes components of the tangible book value per share at the dates indicated:

TANGIBLE BOOK VALUE PER SHARE		March 31,				December 31,				September 30,				June 30,				March 31,
(in $000’s, unaudited)		2025				2024				2024				2024				2024
Capital components:
Total Equity (GAAP)		$	696,190			$	689,727			$	685,352			$	679,199			$	676,296
Less: Preferred Stock			—				—				—				—				—
Total Common Equity			696,190				689,727				685,352				679,199				676,296
Less: Goodwill			(167,631	)			(167,631	)			(167,631	)			(167,631	)			(167,631	)
Less: Other Intangible Assets			(5,986	)			(6,439	)			(6,966	)			(7,521	)			(8,074	)
Total Tangible Common Equity (non-GAAP)		$	522,573			$	515,657			$	510,755			$	504,047			$	500,591
Common shares outstanding at period-end			61,611,121				61,348,095				61,297,344				61,292,094				61,253,625
Tangible book value per share (non-GAAP)		$	8.48			$	8.41			$	8.33			$	8.22			$	8.17

The following tables summarize components of the annualized return on average tangible common equity and the annualized return on average tangible assets for the periods indicated:

RETURN ON AVERAGE TANGIBLE COMMON		For the Quarter Ended:
EQUITY AND AVERAGE TANGIBLE COMMON ASSETS		March 31,				December 31,				September 30,				June 30,				March 31,
(in $000’s, unaudited)		2025				2024					2024			2024				2024
Net income		$	11,626			$	10,621			$	10,507			$	9,234			$	10,166
Average tangible common equity components:
Average Equity (GAAP)		$	692,733			$	686,263			$	680,404			$	675,108			$	672,292
Less: Goodwill			(167,631	)			(167,631	)			(167,631	)			(167,631	)			(167,631	)
Less: Other Intangible Assets			(6,264	)			(6,770	)			(7,322	)			(7,867	)			(8,408	)
Total Average Tangible Common Equity (non-GAAP)		$	518,838			$	511,862			$	505,451			$	499,610			$	496,253
Annualized return on average tangible common equity (non-GAAP)			9.09		%		8.25		%		8.27		%		7.43		%		8.24		%
Average tangible assets components:
Average Assets (GAAP)		$	5,559,896			$	5,607,840			$	5,352,067			$	5,213,171			$	5,178,636
Less: Goodwill			(167,631	)			(167,631	)			(167,631	)			(167,631	)			(167,631	)
Less: Other Intangible Assets			(6,264	)			(6,770	)			(7,322	)			(7,867	)			(8,408	)
Total Average Tangible Assets (non-GAAP)		$	5,386,001			$	5,433,439			$	5,177,114			$	5,037,673			$	5,002,597
Annualized return on average tangible assets (non-GAAP)			0.88		%		0.78		%		0.81		%		0.74		%		0.82		%

Management reviews yields on certain asset categories and the net interest margin of the Company on an FTE basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis using tax rates effective as of the end of the period. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. The following tables summarize components of FTE net interest income of the Company for the periods indicated:

		For the Quarter Ended:
		March 31,			December 31,			September 30,			June 30,			March 31,
(in $000’s, unaudited)		2025			2024			2024			2024			2024
Net interest income before
credit losses on loans (GAAP)		$	43,360		$	43,595		$	39,329		$	38,867		$	39,502
Tax-equivalent adjustment on securities -
exempt from Federal tax			58			58			59			60			60
Net interest income, FTE (non-GAAP)		$	43,418		$	43,653		$	39,388		$	38,927		$	39,562
Average balance of total interest earning assets		$	5,188,317		$	5,235,986		$	4,980,082		$	4,840,670		$	4,810,505
Net interest margin (annualized net interest income divided by the
average balance of total interest earnings assets) (GAAP)			3.39	%		3.31	%		3.14	%		3.23	%		3.30	%
Net interest margin, FTE (annualized net interest income, FTE,
divided by the average balance of total
earnings assets) (non-GAAP)			3.39	%		3.32	%		3.15	%		3.23	%		3.31	%

Management views its non-GAAP PPNR as a key metric for assessing the Company’s earnings power. The following table summarizes the components of PPNR for the periods indicated:

		For the Quarter Ended:
		March 31,				December 31,				September 30,				June 30,				March 31,
(in $000’s, unaudited)		2025				2024				2024				2024				2024
Net interest income before credit losses on loans		$	43,360			$	43,595			$	39,329			$	38,867			$	39,502
Noninterest income			2,696				2,775				2,826				2,864				2,638
Total revenue			46,056				46,370			$	42,155			$	41,731			$	42,140
Less: Noninterest expense			(29,456	)			(30,304	)			(27,555	)			(28,188	)			(27,536	)
PPNR (non-GAAP)		$	16,600			$	16,066			$	14,600			$	13,543			$	14,604

The efficiency ratio is a non-GAAP financial measure, which is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income), and measures how much it costs to produce one dollar of revenue. The following tables summarize components of the efficiency ratio of the Company for the periods indicated:

		For the Quarter Ended:
		March 31,			December 31,			September 30,			June 30,			March 31,
(in $000’s, unaudited)		2025			2024			2024			2024			2024
Noninterest expense		$	29,456		$	30,304		$	27,555		$	28,188		$	27,536
Net interest income before credit losses on loans		$	43,360		$	43,595		$	39,329		$	38,867		$	39,502
Noninterest income			2,696			2,775			2,826			2,864			2,638
Total revenue		$	46,056		$	46,370		$	42,155		$	41,731		$	42,140
Efficiency ratio (noninterest expense divided
by total revenue) (non-GAAP)			63.96	%		65.35	%		65.37	%		67.55	%		65.34	%

Management considers the tangible common equity ratio as a useful measurement of the Company’s and the Bank’s equity. The following table summarizes components of the tangible common equity to tangible assets ratio of the Company at the dates indicated:

TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS		March 31,				December 31,				September 30,				June 30,				March 31,
(in $000’s, unaudited)		2025				2024				2024				2024				2024
Capital components:
Total Equity (GAAP)		$	696,190			$	689,727			$	685,352			$	679,199			$	676,296
Less: Preferred Stock			—				—				—				—				—
Total Common Equity			696,190				689,727				685,352				679,199				676,296
Less: Goodwill			(167,631	)			(167,631	)			(167,631	)			(167,631	)			(167,631	)
Less: Other Intangible Assets			(5,986	)			(6,439	)			(6,966	)			(7,521	)			(8,074	)
Total Tangible Common Equity (non-GAAP)		$	522,573			$	515,657			$	510,755			$	504,047			$	500,591
Asset components:
Total Assets (GAAP)		$	5,514,255			$	5,645,006			$	5,551,596			$	5,263,024			$	5,256,074
Less: Goodwill			(167,631	)			(167,631	)			(167,631	)			(167,631	)			(167,631	)
Less: Other Intangible Assets			(5,986	)			(6,439	)			(6,966	)			(7,521	)			(8,074	)
Total Tangible Assets (non-GAAP)		$	5,340,638			$	5,470,936			$	5,376,999			$	5,087,872			$	5,080,369
Tangible common equity / tangible assets (non-GAAP)			9.78		%		9.43		%		9.50		%		9.91		%		9.85		%

The following table summarizes components of the tangible common equity to tangible assets ratio of the Bank at the dates indicated:

TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS		March 31,				December 31,				September 30,				June 30,				March 31,
(in $000’s, unaudited)		2025				2024				2024				2024				2024
Capital components:
Total Equity (GAAP)		$	715,605			$	709,379			$	704,585			$	697,964			$	694,543
Less: Preferred Stock			—				—				—				—				—
Total Common Equity			715,605				709,379				704,585				697,964				694,543
Less: Goodwill			(167,631	)			(167,631	)			(167,631	)			(167,631	)			(167,631	)
Less: Other Intangible Assets			(5,986	)			(6,439	)			(6,966	)			(7,521	)			(8,074	)
Total Tangible Common Equity (non-GAAP)		$	541,988			$	535,309			$	529,988			$	522,812			$	518,838
Asset components:
Total Assets (GAAP)		$	5,512,160			$	5,641,646			$	5,548,576			$	5,260,500			$	5,254,044
Less: Goodwill			(167,631	)			(167,631	)			(167,631	)			(167,631	)			(167,631	)
Less: Other Intangible Assets			(5,986	)			(6,439	)			(6,966	)			(7,521	)			(8,074	)
Total Tangible Assets (non-GAAP)		$	5,338,543			$	5,467,576			$	5,373,979			$	5,085,348			$	5,078,339
Tangible common equity / tangible assets (non-GAAP)			10.15		%		9.79		%		9.86		%		10.28		%		10.22		%

FAQ

What was Heritage Commerce Corp's (HTBK) earnings per share in Q1 2025?

HTBK reported earnings per share of $0.19 in Q1 2025, up from $0.17 in both Q4 2024 and Q1 2024.

How much did HTBK's net income increase in Q1 2025 compared to the previous quarter?

HTBK's net income increased by 9%, from $10.6 million in Q4 2024 to $11.6 million in Q1 2025.

What is Heritage Commerce Corp's (HTBK) current loan-to-deposit ratio?

HTBK's loan-to-deposit ratio was 74.45% as of March 31, 2025, up from 72.45% at December 31, 2024.

How did HTBK's deposits perform in Q1 2025?

Total deposits decreased by $136.8 million (3%) to $4.7 billion in Q1 2025 due to typical seasonal outflows.

What is Heritage Commerce Corp's (HTBK) net interest margin for Q1 2025?

HTBK's net interest margin was 3.39% in Q1 2025, an increase from 3.32% in Q4 2024.