Heritage Commerce Corp Reports First Quarter 2025 Financial Results

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 IncomeEarnings Per SharePre-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 million3.39%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 BASISYEAR-OVER-YEARFINANCIAL 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%, respectivelyEfficiency 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%, respectivelyEfficiency 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 ReuterEVP, Corporate SecretaryDirect: (408) 494-4542Debbie.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 2024ASSETS 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 %

Heritage Commerce Corp Reports First Quarter 2025 Financial Results

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