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Heritage Commerce Corp Reports Robust Loan and Deposit Growth in 2024

1. HTBK's Q4 2024 net income at $10.6 million, up slightly from Q3. 2. Deposits grew 2% quarter-over-quarter and 10% year-over-year, indicating solid growth. 3. Net interest margin improved to 3.34%, benefiting from reduced costs on deposits. 4. Credit quality remains strong with low nonperforming assets and modest charge-offs. 5. Total loans increased 2% in Q4 2024, reflecting positive lending activity.

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Why Bullish?

Strong deposit growth and improved net interest margin suggest positive momentum for HTBK.

How important is it?

Earnings reports heavily influence stock prices, particularly for banks, indicating solid results.

Why Short Term?

Immediate effects expected from strong earnings and credit quality but may stabilize over time.

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HTBK
SAN JOSE, Calif., Jan. 23, 2025 (GLOBE NEWSWIRE) -- Heritage Commerce Corp (Nasdaq: HTBK), (the “Company”), the holding company for Heritage Bank of Commerce (the “Bank”), today announced that its fourth quarter 2024 net income was $10.6 million, or $0.17 per average diluted common share, compared to $10.5 million, or $0.17 per average diluted common share, for the third quarter of 2024, and $13.3 million, or $0.22 per average diluted common share, for the fourth quarter of 2023. For the year ended December 31, 2024, net income was $40.5 million, or $0.66 per average diluted common share, compared to $64.4 million, or $1.05 per average diluted common share, for the year ended December 31, 2023. All data are unaudited. “Our earnings for both the fourth quarter of 2024 and the full year were fueled by excellent deposit growth and solid loan growth throughout our footprint,” said Clay Jones, President and Chief Executive Officer. “Deposit balances grew 2% over the prior quarter and 10% year-over-year, driven by our team’s success at cultivating local community commercial deposit relationships. Additionally, loan growth picked up during the fourth quarter, resulting in a 2% increase from the prior quarter and a 4% increase year-over-year.” “Our positive credit trends continued during the fourth quarter, with nonperforming assets and net charge-offs remaining low at December 31, 2024,” said Mr. Jones. “During the fourth quarter, we continued to add to our loan reserves reflecting our solid loan growth while credit costs remained modest.” “Another highlight of the fourth quarter was the expansion of our net interest margin to 3.34% for the fourth quarter of 2024, compared to 3.17% for the third quarter of 2024. The quarterly net interest margin improvement was largely due to the reduction in our cost of funds following the recent rate reductions. With our solid capital ratios and strong balance sheet, we remain well positioned to benefit from stronger economic conditions. I want to thank our team members, clients, and the community for their efforts this year and for their unwavering support,” said Mr. Jones. Fourth Quarter Ended December 31, 2024   Operating Results, Liquidity Position, Financial Condition, Credit Quality, and Capital Management (as of, or for the periods ended December 31, 2024, compared to September 30, 2024, and December 31, 2023, except as noted): Operating Results: The following table indicates the ratios for the annualized return on average equity, average tangible common equity, average assets and average tangible assets for the periods indicated:        For the Quarter Ended: For the Year Ended:     December 31,     September 30,     December 31,  December 31,     December 31, (unaudited) 2024 2024 2023 2024 2023Return on average equity 6.16% 6.14% 7.96% 5.97% 9.88%Return on average tangible common equity(1) 8.25% 8.27% 10.84% 8.05% 13.57%Return on average assets 0.75% 0.78% 1.00% 0.76% 1.22%Return on average tangible assets(1) 0.78% 0.81% 1.04% 0.78% 1.26%   (1) This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” below.   Net Interest Income: Net interest income increased 11% to $44.2 million for the fourth quarter of 2024, compared to $39.9 million for the third quarter of 2024. The fully tax equivalent (“FTE”) net interest margin increased 17 basis points to 3.34% for the fourth quarter of 2024 from 3.17% for the third quarter of 2024, primarily due to lower rates paid on customer deposits, an increase in the average balances of deposits resulting in an increase in the average balance of overnight funds, partially offset by a lower average yield on overnight funds.  Net interest income increased 4% to $44.2 million for the fourth quarter of 2024, compared to $42.3 million for the fourth quarter of 2023. The FTE net interest margin decreased (7) basis points to 3.34% for the fourth quarter of 2024, from 3.41% for the fourth quarter of 2023, primarily due to higher rates paid on customer deposits, and lower average yields on overnight funds and investment securities, partially offset by an increase in the average balances of loans and overnight funds.For the year ended December 31, 2024, the net interest income decreased (11%) to $163.6 million, compared to $183.2 million for the year ended December 31, 2023. The FTE net interest margin decreased (42) basis points to 3.28% for the year ended December 31, 2024, from 3.70% for the year ended December 31, 2023, primarily due to higher rates paid on customer deposits, a decrease in the average balance of noninterest-bearing deposits, and a lower average yield on investment securities, partially offset by an increase in the average balances of loans and overnight funds.The following tables set forth the estimated changes in the Company’s annual net interest income and economic value of equity (a non-GAAP financial measure) that would result from the designated instantaneous parallel shift in interest rates noted, and assuming a flat balance sheet with consistent product mix, as of December 31, 2024:          Increase/(Decrease) in   Estimated Net CHANGE IN INTEREST RATES (basis points) Interest Income(1) (in $000's, unaudited)    Amount    Percent +400 $27,272  14.0 %+300 $20,340  10.5 %+200 $13,451  6.9 %+100 $6,590  3.4 %0  —  —  −100 $(8,368) (4.3)%−200 $(19,659) (10.1)%−300 $(33,576) (17.3)%−400 $(54,794) (28.2)%          Increase/(Decrease) in   Estimated Economic CHANGE IN INTEREST RATES (basis points) Value of Equity(1) (in $000's, unaudited)    Amount Percent +400 $124,156  9.0 %+300 $104,693  7.6 %+200 $78,580  5.7 %+100 $44,383  3.2 %0  —  —  −100 $(71,172) (5.2)%−200 $(177,928) (13.0)%−300 $(314,451) (22.9)%−400 $(492,841) (35.9)%    (1)Computations of prospective effects of hypothetical interest rate changes are for illustrative purposes only, are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results. These projections are forward-looking and should be considered in light of the Forward-Looking Statement Disclaimer below. Actual rates paid on deposits may differ from the hypothetical interest rates modeled due to competitive or market factors, which could affect any actual impact on net interest income.      The following tables present the average balance of loans outstanding, interest income, and the average yield for the periods indicated:The average yield on the total loan portfolio increased to 5.53% for the fourth quarter of 2024, compared to 5.42% for the third quarter of 2024.                         For the Quarter Ended For the Quarter Ended   December 31, 2024 September 30, 2024   Average Interest Average  Average Interest Average  (in $000’s, unaudited) Balance Income Yield  Balance Income Yield  Loans, core bank $2,899,347  $39,852  5.47 %  $2,867,076  $39,621  5.50 %  Prepayment fees  —   35  0.00 %   —   4  0.00 %  Bay View Funding factored receivables(1)  59,153   3,084  20.74 %   55,391   2,144  15.40 %  Purchased residential mortgages  434,846   3,732  3.41 %   441,294   3,779  3.41 %  Loan fair value mark / accretion  (2,357)  429  0.06 %   (2,621)  233  0.03 %  Total loans (includes loans held-for-sale) $3,390,989  $47,132  5.53 %  $3,361,140  $45,781  5.42 %    •The average yield on the total loan portfolio increased to 5.53% for the fourth quarter of 2024, compared to 5.39% for the fourth quarter of 2023, primarily due to an increase in the yield on the core bank loan portfolio. The average yield on the total loan portfolio increased to 5.47% for the year ended December 31, 2024, compared to 5.45% for the year ended December 31, 2023, primarily due to an increase in the yield on the core bank loan portfolio.                         For the Quarter Ended For the Quarter Ended   December 31, 2024 December 31, 2023   Average Interest Average  Average Interest Average  (in $000’s, unaudited) Balance Income Yield  Balance Income Yield  Loans, core bank $2,899,347  $39,852  5.47 %  $2,773,652  $37,674  5.39 %  Prepayment fees  —   35  0.00 %   —   91  0.01 %  Bay View Funding factored receivables  59,153   3,084  20.74 %   52,861   2,803  21.04 %  Purchased residential mortgages  434,846   3,732  3.41 %   459,268   3,812  3.29 %  Loan fair value mark / accretion  (2,357)  429  0.06 %   (3,352)  255  0.04 %  Total loans (includes loans held-for-sale) $3,390,989  $47,132  5.53 %  $3,282,429  $44,635  5.39 %                           For the Year Ended  For the Year Ended    December 31, 2024 December 31, 2023   Average Interest Average  Average Interest Average  (in $000’s, unaudited) Balance Income Yield  Balance Income Yield  Loans, core bank $2,848,206  $155,690  5.47 %  $2,730,789  $147,028  5.38 %  Prepayment fees  —   117  0.00 %   —   484  0.02 %  Bay View Funding factored receivables(1)  55,717   10,980  19.71 %   62,642   13,426  21.43 %  Purchased residential mortgages  444,476   15,038  3.38 %   472,582   15,309  3.24 %  Loan fair value mark / accretion  (2,737)  1,158  0.04 %   (3,819)  1,381  0.05 %  Total loans (includes loans held-for-sale) $3,345,662  $182,983  5.47 %  $3,262,194  $177,628  5.45 %      (1)Interest income for the third quarter of 2024 and the year ended December 31, 2024 was reduced by an immaterial out-of-period adjustment of ($804,000).     •In aggregate, the unamortized net purchase discount on total loans acquired was $2.1 million at December 31, 2024.    The following table presents the average balance of deposits and interest-bearing liabilities, interest expense, and the average rate for the periods indicated:                             For the Quarter Ended For the Quarter Ended   December 31, 2024 September 30, 2024   Average Interest Average  Average Interest Average  (in $000’s, unaudited) Balance Expense Rate  Balance Expense Rate  Deposits:                         Demand, noninterest-bearing $1,222,393         $1,172,304                                 Demand, interest-bearing  906,581  $1,452  0.64 %   907,346  $1,714  0.75 %  Savings and money market  1,339,397   9,090  2.70 %   1,188,057   9,128  3.06 %  Time deposits - under $100  11,388   49  1.71 %   11,133   47  1.68 %  Time deposits - $100 and over  234,446   2,310  3.92 %   229,565   2,349  4.07 %  Insured Cash Sweep ("ICS")/Certificate of Deposit Registry                       Service ("CDARS") - interest-bearing demand, money market and time deposits  1,057,286   7,009  2.64 %   1,017,541   7,747  3.03 %  Total interest-bearing deposits  3,549,098   19,910  2.23 %   3,353,642   20,985  2.49 %      Total deposits  4,771,491   19,910  1.66 %   4,525,946   20,985  1.84 %                          Short-term borrowings  28   —  0.00 %   32   —  0.00 %  Subordinated debt, net of issuance costs  39,629   538  5.40 %   39,590   538  5.41 %  Total interest-bearing liabilities  3,588,755   20,448  2.27 %   3,393,264   21,523  2.52 %  Total interest-bearing liabilities and demand, noninterest-bearing / cost of funds $4,811,148  $20,448  1.69 %  $4,565,568  $21,523  1.88 %    •The average cost of total deposits decreased to 1.66% for the fourth quarter of 2024, compared to 1.84% for the third quarter of 2024, reflecting our success in reducing the rates on client deposits following the recent interest rate reductions. The average cost of funds decreased to 1.69% for the fourth quarter of 2024, compared to 1.88% for the third quarter of 2024. The average cost of deposits was 1.43% and the average cost of funds was 1.46% for the fourth quarter of 2023. • The average cost of total deposits increased to 1.70% for the year ended December 31, 2024, compared to 1.06% for the year ended December 31, 2023. The average cost of funds increased to 1.74% for the year ended December 31, 2024, compared to 1.13% for the year ended December 31, 2023.    Provision for Credit Losses on Loans: During the fourth quarter of 2024, we recorded a provision for credit losses on loans of $1.3 million, compared to a $153,000 provision for credit losses on loans for the third quarter of 2024, and a provision for credit losses on loans of $289,000 for the fourth quarter of 2023. The addition to the allowance for credit on losses on loans reflects our loan growth, credit assessment, and economic factors.There was a provision for credit losses on loans of $2.1 million for the year ended December 31, 2024, compared to a $749,000 provision for credit losses on loans for the year ended December 31, 2023, primarily due to the increase in the balance of total loans, and an increase in specific reserves for individually analyzed loans. Noninterest Income: Total noninterest income remained relatively flat at $2.2 million for both the fourth and third quarters of 2024. Total noninterest income increased 13% to $2.2 million for the fourth quarter of 2024, compared to $1.9 million for the fourth quarter of 2023, primarily due to a higher gain on sales of SBA loans.Total noninterest income decreased (3%) to $8.7 million for the year ended December 31, of 2024, compared to $9.0 million for the year ended December 31, 2023, primarily due to lower service charges and fees on deposit accounts, partially offset by higher income in various other noninterest income categories. Noninterest Expense: Total noninterest expense for the fourth quarter of 2024 increased to $30.3 million, compared to $27.6 million for the third quarter of 2024, primarily due to one-time personnel related expenses and legal fees of approximately $1.1 million, higher professional fees, homeowner association vendor payments, and information technology related expenses. Total noninterest expense for the fourth quarter of 2024 increased to $30.3 million, compared to $25.5 million for the fourth quarter of 2023, primarily due to one-time personnel related expenses and legal fees, professional fees, and homeowner association vendor payments.Total noninterest expense for the year ended December 31, 2024 increased to $113.6 million, compared to $101.1 million for the year ended December 31, 2023, primarily due to higher salaries and employee benefits, rent expense, professional fees, marketing related expenses, insurance expense, homeowner association vendor payments, and ICS/CDARS fee expense.   Full time equivalent employees were 355 at December 31, 2024 compared to 353 at September 30, 2024, and 349 at December 31, 2023.  The efficiency ratio was 65.35% for the fourth quarter of 2024, compared to 65.37% for the third quarter of 2024, and 57.62% for the fourth quarter of 2023. The increase in the efficiency ratio for the fourth quarter of 2024, compared to the fourth quarter of 2023 was primarily due to higher noninterest expense. The efficiency ratio increased to 65.88% for the year ended December 31, 2024 compared to 52.57% for the year ended December 31, 2023. The increase in the efficiency ratio for the year ended December 31, 2024, compared to the year ended December 31, 2023, was due to both higher noninterest expense and lower net revenue. The efficiency ratio is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” below. Income Tax Expense: Income tax expense was $4.1 million for the fourth quarter of 2024, compared to $3.9 million for the third quarter of 2024, and $5.1 million for the fourth quarter of 2023. The effective tax rate for the fourth quarter of 2024 was 27.9%, compared to 27.3% for the third quarter of 2024, and 27.8% for the fourth quarter of 2023.Income tax expense for the year ended December 31, 2024 was $16.1 million, compared to $26.0 million for the year ended December 31, 2023. The effective tax rate for the year ended December 31, 2024 was 28.5%, compared to 28.7% for the year ended December 31, 2023. Liquidity Position, Financial Condition, Credit Quality, and Capital Management: Liquidity and Available Lines of Credit: The following table shows our liquidity, available lines of credit and the amounts outstanding at December 31, 2024:              LIQUIDITY AND AVAILABLE LINES OF CREDIT Total   Remaining(in $000’s, unaudited) Available Outstanding AvailableExcess funds at the Federal Reserve Bank ("FRB") $935,400  $—  $935,400 FRB discount window collateralized line of credit  1,383,149   —   1,383,149 Federal Home Loan Bank collateralized borrowing capacity  815,760   —   815,760 Unpledged investment securities (at fair value)  94,088   —   94,088 Federal funds purchase arrangements  90,000   —   90,000 Holding company line of credit  25,000   —   25,000 Total $3,343,397  $—  $3,343,397   •The Company’s total available liquidity and borrowing capacity was $3.3 billion at December 31, 2024, compared to $3.2 billion at September 30, 2024, and $2.9 billion at December 31, 2023. •The available liquidity and borrowing capacity was 69% of the Company’s total deposits and approximately 155% of the Bank’s estimated uninsured deposits at December 31, 2024. •The loan to deposit ratio was 72.45% at December 31, 2024, compared to 72.11% at September 30, 2024, and 76.52% at December 31, 2023.    Total assets increased 2% to $5.65 billion at December 31, 2024, compared to $5.55 billion at September 30, 2024, and increased 9% from $5.19 billion at December 31, 2023, primarily related to growth in client deposits. Investment Securities: Investment securities totaled $846.3 million at December 31, 2024, of which $256.3 million were in the securities available-for-sale portfolio (at fair value), and $590.0 million were in the securities held-to-maturity portfolio (at amortized cost, net of allowance for credit losses of $12,000). The fair value of the securities held-to-maturity portfolio was $497.0 million at December 31, 2024.The following table shows the balances of securities available-for-sale, at fair value, and the related pre-tax unrealized (loss) at the dates indicated:           SECURITIES AVAILABLE-FOR-SALE  December 31,  September 30,  December 31, (in $000’s, unaudited)    2024 2024 2023Balance (at fair value):         U.S. Treasury $186,183  $184,162  $382,369 Agency mortgage-backed securities  70,091   53,450   60,267 Total $256,274  $237,612  $442,636           Pre-tax unrealized (loss):         U.S. Treasury $(912) $(1,440) $(5,621)Agency mortgage-backed securities  (4,148)  (2,923)  (4,313)Total $(5,060) $(4,363) $(9,934)          Weighted average life (years)  1.57   1.39   1.29             •The pre-tax unrealized (loss) on the securities available-for-sale portfolio was ($5.1) million, or ($3.7) million net of taxes, which equaled less than 1% of total shareholders’ equity at December 31, 2024. •During the fourth quarter of 2024, the Company purchased $20.5 million of agency mortgage-backed securities and $9.8 million of U.S. Treasury securities, for total purchases of $30.3 million in the available-for-sale portfolio. Securities purchased had a book yield of 4.79% and an average life of 4.80 years.    The following table shows the balances of securities held-to-maturity, at amortized cost, and the related pre-tax unrecognized (loss) and allowance for credit losses at the dates indicated:           SECURITIES HELD-TO-MATURITY  December 31,  September 30,  December 31, (in $000’s, unaudited)    2024 2024 2023Balance (at amortized cost):         Agency mortgage-backed securities $559,548  $573,621  $618,374 Municipals — exempt from Federal tax(1)  30,480   30,584   32,203 Total(1) $590,028  $604,205  $650,577           Pre-tax unrecognized (loss):         Agency mortgage-backed securities $(91,585) $(71,996) $(85,729)Municipals — exempt from Federal tax  (1,431)  (676)  (721)Total $(93,016) $(72,672) $(86,450)          Allowance for credit losses on municipal securities $(12) $(12) $(12)          Weighted average life (years)  6.35   5.94   6.57               (1)Gross of the allowance for credit losses of ($12,000) at December 31, 2024, and September 30, 2024, and December 31, 2023.     •The pre-tax unrecognized (loss) on the securities held-to-maturity portfolio was ($93.0) million, or ($65.5) million net of taxes, which equaled 9.5% of total shareholders’ equity at December 31, 2024. •The weighted average life of the securities held-to-maturity portfolio was 6.35 years at December 31, 2024, which includes Community Reinvestment Act mortgage-backed securities with longer maturities.    The unrealized and unrecognized losses in both the available-for-sale and held-to-maturity portfolios were due to higher interest rates at December 31, 2024 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.The following are the actual and/or projected cash flows from paydowns and maturities in the investment securities portfolio for the periods indicated based on the current interest rate environment:                    Agency          Mortgage-    PROJECTED INVESTMENT SECURITIES U.S. backed and   PAYDOWNS & MATURITIES Treasury Municipal  (in $000’s, unaudited)    (Par Value)    Securities    TotalFirst quarter of 2025 $35,000  $20,986  $55,986 Second quarter of 2025  118,000   19,666   137,666 Third quarter of 2025  25,500   20,822   46,322 Fourth quarter of 2025  —   19,228   19,228 Total $178,500  $80,702  $259,202   •The weighted average life of the total investment securities portfolio was 4.88 years at December 31, 2024, compared to 4.62 years at September 30, 2024, and 4.40 years at December 31, 2023.    Loans: The following table summarizes the distribution of loans, excluding loans held-for-sale, and the percentage of distribution in each category at the dates indicated:                     LOANS  December 31, 2024 September 30, 2024 December 31, 2023 (in $000’s, unaudited)    Balance     % to Total     Balance     % to Total     Balance     % to Total     Commercial $531,350  15 %    $481,266  14 %    $463,778  14 %    Real estate:                   CRE(1) - owner occupied  601,636  17 %     602,062  18 %     583,253  17 %    CRE(1) - non-owner occupied  1,341,266  38 %     1,310,578  38 %     1,256,590  37 %    Land and construction  127,848  4 %     125,761  4 %     140,513  4 %    Home equity  127,963  4 %     124,090  4 %     119,125  4 %    Multifamily  275,490  8 %     273,103  8 %     269,734  8 %    Residential mortgages  471,730  14 %     479,524  14 %     496,961  15 %    Consumer and other  14,837  < 1 %     14,179  < 1 %     20,919  1 %    Total Loans  3,492,120  100 %     3,410,563  100 %     3,350,873  100 %    Deferred loan costs (fees), net  (183) —   (327) —   (495) —  Loans, net of deferred costs and fees  $3,491,937  100 %    $3,410,236  100 %    $3,350,378  100 %        (1)Commercial Real Estate     •Loans, excluding loans held-for-sale, increased $81.7 million, or 2%, to $3.5 billion at December 31, 2024 from $3.4 billion at September 30, 2024, and increased $141.6 million, or 4%, from $3.4 billion at December 31, 2023.   Loans, excluding residential mortgages, increased $89.5 million, or 3%, to $3.0 billion at December 31, 2024 from $2.9 billion at September 30, 2024, and increased $166.8 million, or 6%, from $2.9 billion at December 31, 2023. •Commercial and industrial line utilization was 34% at December 31, 2024, compared to 31% at September 30, 2024, and 29% at December 31, 2023. •CRE loans totaled $1.9 billion at December 31, 2024, of which 31% were owner occupied and 69% were investor CRE loans. Owner occupied CRE loans totaled 31% at September 30, 2024 and 32% at December 31, 2023.  •During the fourth quarter of 2024, there were 39 new owner occupied and non-owner occupied CRE loans originated totaling $72 million with a weighted average loan-to-value (“LTV”) of 42%; the weighted average debt-service coverage ratio (“DSCR”) for the non-owner occupied portfolio was 2.58 times.  •The average loan size for all CRE loans was $1.6 million, and the average loan size for office CRE loans was $1.7 million.  •The Company has personal guarantees on 92% of its CRE portfolio. A substantial portion of the unguaranteed CRE loans were made to credit-worthy non-profit organizations.  •Total office exposure (excluding medical/dental offices) in the CRE portfolio was $413 million, including 34 loans totaling approximately $74 million in San Jose, 18 loans totaling approximately $25 million in San Francisco, and eight loans totaling approximately $16 million in Oakland, at December 31, 2024. Non-owner occupied CRE with office exposure totaled $322 million at December 31, 2024. At December 31, 2024, the weighted average LTV and DSCR for the entire non-owner occupied office portfolio were 41.5% and 2.16 times, respectively. Total medical/dental office exposure in the non-owner occupied CRE portfolio consisted of 15 loans totaling $12.3 million, with a weighted average LTV and DSCR of 37.1% and 3.05 times, respectively, at December 31, 2024.  •The following table presents the weighted average LTV and DSCR by collateral type for CRE loans at December 31, 2024:                                      CRE - Non-owner Occupied CRE - Owner Occupied Total CRECOLLATERAL TYPE    Outstanding    LTV    DSCR    Outstanding    LTV    Outstanding    LTVRetail  26 %    37.4 %    2.18   16 %    46.1 %    24 %    38.9 %  Industrial  18 %    38.7 %    2.98   33 %    42.9 %    22 %    40.3 %  Mixed-Use, Special Purpose and Other  19 %    41.6 %    1.99   35 %    40.6 %    22 %    41.2 %  Office  20 %    41.5 %    2.16   16 %    44.1 %    19 %    42.1 %  Multifamily  17 %    42.9 %    1.91   0 %    0.0 %    13 %    42.9 %  Hotel/Motel  < 1 %    16.3 %    1.32   0 %    0.0 %    < 1 %    16.3 %  Total  100 %    40.0 %    2.24   100 %    42.8 %    100 %    40.8 %     •The following table presents the weighted average LTV and DSCR by county for CRE loans at December 31, 2024:                                      CRE - Non-owner Occupied CRE - Owner Occupied Total CRECOUNTY    Outstanding    LTV    DSCR    Outstanding    LTV    Outstanding    LTVAlameda  25 %    43.8 %    1.92   19 %    45.3 %    23 %    44.1 %  Contra Costa  7 %    41.6 %    1.77   8 %    46.9 %    7 %    43.1 %  Marin  6 %    45.9 %    2.02   1 %    51.7 %    5 %    46.3 %  Monterey  2 %    42.8 %    1.82   2 %    40.8 %    2 %    42.1 %  Napa  < 1 %    29.1 %    2.40   1 %    51.6 %    < 1 %    36.8 %  Out of Area  9 %    42.3 %    2.04   9 %    48.9 %    9 %    44.0 %  San Benito  1 %    38.3 %    1.84   3 %    39.3 %    2 %    38.7 %  San Francisco  9 %    37.3 %    2.19   4 %    39.5 %    8 %    37.6 %  San Mateo  11 %    38.1 %    2.33   15 %    40.0 %    12 %    38.7 %  Santa Clara  24 %    36.9 %    2.80   34 %    40.7 %    27 %    38.3 %  Santa Cruz  2 %    32.2 %    1.75   1 %    49.6 %    2 %    35.5 %  Solano  1 %    32.5 %    2.91   1 %    37.5 %    1 %    33.9 %  Sonoma  3 %    38.7 %    2.58   2 %    42.8 %    2 %    39.6 %  Total  100 %    40.0 %    2.24   100 %    42.8 %    100 %    40.8 %   The following table presents the maturity distribution of the Company’s loans, excluding loans held-for-sale, as of December 31, 2024. The table shows the distribution of such loans between those loans with predetermined (fixed) interest rates and those with variable (floating) interest rates. Floating rates generally fluctuate with changes in the prime rate and contractual repricing dates.                                Due in Over One Year But            LOAN MATURITIES One Year or Less Less than Five Years Over Five Years    (in $000’s, unaudited)    Balance    % to Total    Balance    % to Total    Balance    % to Total    TotalLoans with variable interest rates $469,400  52 %   $188,849  21 %   $236,771  26 %   $895,020 Loans with fixed interest rates  163,977  6 %    815,903  31 %    1,617,220  62 %    2,597,100 Loans $633,377  18 %   $1,004,752  29 %   $1,853,991  53 %   $3,492,120                                •At December 31, 2024, approximately 26% of the Company’s loan portfolio consisted of floating interest rate loans, compared to 25% at September 30, 2024 and 27% at December 31, 2023.    Credit Quality: The following table summarizes the allowance for credit losses on loans (“ACLL”) for the periods indicated:                    At or For the Quarter Ended: At or For the Year Ended: ALLOWANCE FOR CREDIT LOSSES ON LOANS    December 31,     September 30,     December 31,  December 31,     December 31,  (in $000’s, unaudited) 2024 2024 2023 2024 2023 Balance at beginning of period $47,819  $47,954  $47,702  $47,958  $47,512  Charge-offs during the period  (262)  (474)  (160)  (1,604)  (1,011) Recoveries during the period  65   186   127   460   708  Net charge-offs during the period  (197)  (288)  (33)  (1,144)  (303) Provision for credit losses on loans during the period  1,331   153   289   2,139   749  Balance at end of period $48,953  $47,819  $47,958  $48,953  $47,958                   Total loans, net of deferred fees $3,491,937  $3,410,236  $3,350,378  $3,491,937  $3,350,378  Total nonperforming loans $7,667  $7,158  $7,707  $7,667  $7,707  ACLL to total loans  1.40 %   1.40 %   1.43 %   1.40 %   1.43 %  ACLL to total nonperforming loans  638.49 %   668.05 %   622.27 %   638.49 %   622.27 %    •The following table shows the drivers of change in ACLL for the four quarters of 2024: DRIVERS OF CHANGE IN ACLL     (in $000’s, unaudited)  ACLL at December 31, 2023 $47,958 Portfolio changes during the first quarter of 2024  (234)Qualitative and quantitative changes during the first quarter of 2024 including changes in economic forecasts  164 ACLL at March 31, 2024  47,888 Portfolio changes during the second quarter of 2024  616 Qualitative and quantitative changes during the second quarter of 2024 including changes in economic forecasts  (550)ACLL at June 30, 2024  47,954 Portfolio changes during the third quarter of 2024  599 Qualitative and quantitative changes during the third quarter of 2024 including changes in economic forecasts  (734)ACLL at September 30, 2024  47,819 Portfolio changes during the fourth quarter of 2024  1,912 Qualitative and quantitative changes during the fourth quarter of 2024 including changes in economic forecasts  (778)ACLL at December 31, 2024 $48,953  The following is a breakout of nonperforming assets (“NPAs”) at the dates indicated:                        NONPERFORMING ASSETS December 31, 2024 September 30, 2024 December 31, 2023 (in $000’s, unaudited)    Balance    % of Total     Balance    % of Total     Balance    % of Total  Land and construction loans $5,874  77 %  $5,862  82 %  $4,661  60 %  Commercial loans  1,014  13 %   752  11 %   1,236  16 %  Loans over 90 days past due and still accruing  489  6 %   460  6 %   889  12 %  Home equity and other loans  290  4 %   84  1 %   779  10 %  Residential mortgages  —  0 %   —  0 %   142  2 %  CRE loans  —  0 %   —  0 %   —  0 %  Total nonperforming assets $7,667  100 %  $7,158  100 %  $7,707  100 %   There were 9 borrowers included in NPAs totaling $7.7 million, or 0.14% of total assets, at December 31, 2024, compared to 10 borrowers totaling $7.2 million, or 0.13% of total assets at September 30, 2024, and 12 borrowers totaling $7.7 million, or 0.15% of total assets, at December 31, 2023.  •There were no CRE loans in NPAs at December 31, 2024, September 30, 2024, or December 31, 2023. •There were no foreclosed assets on the balance sheet at December 31, 2024, September 30, 2024, or December 31, 2023. •There were no Shared National Credits (“SNCs”) or material purchased participations included in NPAs or total loans at December 31, 2024, September 30, 2024, or December 31, 2023. Classified assets totaled $41.7 million, or 0.74% of total assets, at December 31, 2024, compared to $32.6 million, or 0.59% of total assets, at September 30, 2024, and $31.8 million, or 0.61% of total assets, at December 31, 2023. The increase in classified assets at December 31, 2024 was primarily the result of one downgraded owner occupied CRE credit, and a number of residential related loans. The loans are well-collateralized and we do not anticipate to incur losses as a result of the downgrades of these loans. Deposits: The following table summarizes the distribution of deposits and the percentage of distribution in each category at the dates indicated:                        DEPOSITS December 31, 2024 September 30, 2024 December 31, 2023 (in $000’s, unaudited)    Balance    % to Total   Balance    % to Total   Balance    % to Total  Demand, noninterest-bearing $1,214,192  25 %  $1,272,139  27 %  $1,292,486  30 %  Demand, interest-bearing  936,587  19 %   913,910  19 %   914,066  21 %  Savings and money market  1,325,923  28 %   1,309,676  28 %   1,087,518  25 %  Time deposits — under $250  38,988  1 %   39,060  1 %   38,055  1 %  Time deposits — $250 and over  206,755  4 %   196,945  4 %   192,228  4 %  ICS/CDARS — interest-bearing demand,                      money market and time deposits  1,097,586  23 %   997,803  21 %   854,105  19 %  Total deposits $4,820,031  100 %  $4,729,533  100 %  $4,378,458  100 %    •Total deposits increased $90.5 million, or 2%, to $4.8 billion at December 31, 2024, compared to $4.7 billion at September 30, 2024, and increased $441.6 million, or 10% from $4.4 billion at December 31, 2023. •The Company had 25,427 deposit accounts at December 31, 2024, with an average balance of $190,000. At September 30, 2024, the Company had 25,373 deposit accounts, with an average balance of $186,000. At December 31, 2023, the Company had 24,737 deposit accounts, with an average balance of $177,000. •Deposits from the Bank’s top 100 client relationships, representing 22% of the total number of accounts, totaled $2.2 billion, representing 47% of total deposits, with an average account size of $400,000 at December 31, 2024. At September 30, 2024, deposits from the Bank’s top 100 client relationships, representing 22% of the total number of accounts, totaled $2.2 billion, representing 47% of total deposits, with an average account size of $394,000. At December 31, 2023, deposits from the Bank’s top 100 client relationships, representing 22% of the total number of accounts, totaled $2.0 billion, representing 45% of total deposits, with an average account size of $368,000. •The Bank’s uninsured deposits were approximately $2.2 billion, or 45% of the Company’s total deposits, at December 31, 2024, compared to $2.2 billion, or 47% of the Company’s total deposits, at September 30, 2024, and $2.0 billion, or 46% of the Company’s total deposits, at December 31, 2023.    Capital Management: 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 the third or fourth quarters of 2024.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 December 31, 2024, as reflected in the following table:                                           Well-capitalized            Financial            Institution Basel III  Heritage Heritage PCA Minimum  Commerce Bank of Regulatory RegulatoryCAPITAL RATIOS (unaudited) Corp Commerce Guidelines Requirements (1)Total Capital 15.6 %   15.1 %   10.0 %   10.5 %Tier 1 Capital 13.4 %   13.9 %   8.0 %   8.5 %Common Equity Tier 1 Capital 13.4 %   13.9 %   6.5 %   7.0 %Tier 1 Leverage 9.6 %   10.0 %   5.0 %   4.0 %Tangible common equity / tangible assets (2) 9.4 %   9.8 %   N/A   N/A      (1)Basel III minimum regulatory requirements for both the Company and the Bank include a 2.5% capital conservation buffer, except the Tier 1 Leverage ratio.(2)This is a non-GAAP financial measure that represents shareholders’ equity minus goodwill and other intangible assets divided by total assets minus goodwill and other intangible assets.    The following table reflects the components of accumulated other comprehensive loss, net of taxes, at the dates indicated:           ACCUMULATED OTHER COMPREHENSIVE LOSS December 31,  September 30,  December 31, (in $000’s, unaudited)    2024 2024 2023Unrealized loss on securities available-for-sale $(3,656) $(3,161) $(7,116)Split dollar insurance contracts liability  (2,339)  (2,965)  (2,809)Supplemental executive retirement plan liability  (2,173)  (2,838)  (2,892)Unrealized gain on interest-only strip from SBA loans  63   72   87 Total accumulated other comprehensive loss $(8,105) $(8,892) $(12,730)           Tangible common equity was $515.7 million at December 31, 2024, compared to $510.8 million at September 30, 2024, and $496.6 million at December 31, 2023. Tangible book value per share was $8.41 at December 31, 2024, compared to $8.33 at September 30, 2024, and $8.12 at December 31, 2023. Tangible common equity and tangible book value per share are non-GAAP financial measures. 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. 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 earnings 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 may be deemed to include, among other things, statements relating to the Company’s future financial performance, 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, and the following: (1) the effects of recent and ongoing wildfires affecting Southern California, which have affected certain customers and certain loans secured by mortgages in Los Angeles County, and which are affecting or may, in the future, affect other customers in those and other markets throughout California; (2) risks of geographic concentration of our customer base, our loans, and the collateral securing our loans, as those customers 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; (3) 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; (4) 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 customers; (5) media items and consumer confidence as those factors affect our clients’ confidence in the banking system generally and in our bank specifically; (6) adequacy of the our risk management framework, disclosure controls and procedures and internal control over financial reporting; (7) 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; (8) 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; (9) factors that affect the value and liquidity of our investment portfolios, particularly the values of securities available-for-sale; (10) 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; (11) 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; (12) increased capital requirements for our continual growth or as imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all; (13) 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; (14) 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; (15) 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 (16) 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:  For the Year Ended:CONSOLIDATED INCOME STATEMENTS December 31, September 30, December 31, September 30, December 31,  December 31, December 31, Percent (in $000’s, unaudited) 2024 2024 2023 2024  2023   2024 2023 Change Interest income $64,633  $61,438  $58,892  5 %10 % $242,699  $234,298  4 %Interest expense  20,448   21,523   16,591  (5)%23 %  79,051   51,074  55 %Net interest income before provision for credit losses on loans  44,185   39,915   42,301  11 %4 %  163,648   183,224  (11)%Provision for credit losses on loans  1,331   153   289  770 %361 %  2,139   749  186 %Net interest income after provision for credit losses on loans  42,854   39,762   42,012  8 %2 %  161,509   182,475  (11)%Noninterest income:                            Service charges and fees on deposit accounts  885   908   838  (3)%6 %  3,561   4,341  (18)%Increase in cash surrender value of life insurance  528   530   519  0 %2 %  2,097   2,031  3 %Gain on sales of SBA loans  125   94   —  33 %N/A   473   482  (2)%Servicing income  77   108   103  (29)%(25)%  365   400  (9)%Termination fees  18   46   25  (61)%(28)%  177   154  15 %Gain on proceeds from company-owned life insurance  —   —   25  N/A (100)%  219   125  75 %Other  552   554   432  0 %28 %  1,856   1,465  27 %Total noninterest income  2,185   2,240   1,942  (2)%13 %  8,748   8,998  (3)%Noninterest expense:                            Salaries and employee benefits  16,976   15,673   13,919  8 %22 %  63,952   56,862  12 %Occupancy and equipment  2,495   2,599   2,367  (4)%5 %  10,226   9,490  8 %Professional fees  1,711   1,306   1,085  31 %58 %  5,416   4,350  25 %Other  9,122   7,977   8,120  14 %12 %  33,989   30,352  12 %Total noninterest expense  30,304   27,555   25,491  10 %19 %  113,583   101,054  12 %Income before income taxes  14,735   14,447   18,463  2 %(20)%  56,674   90,419  (37)%Income tax expense  4,114   3,940   5,135  4 %(20)%  16,146   25,976  (38)%Net income $10,621  $10,507  $13,328  1 %(20)% $40,528  $64,443  (37)%                             PER COMMON SHARE DATA                            (unaudited)                            Basic earnings per share $0.17  $0.17  $0.22  0 %(23)% $0.66  $1.06  (38)%Diluted earnings per share $0.17  $0.17  $0.22  0 %(23)% $0.66  $1.05  (37)%Weighted average shares outstanding - basic  61,320,505   61,295,877   61,118,485  0 %0 %  61,270,730   61,038,857  0 %Weighted average shares outstanding - diluted  61,679,735   61,546,157   61,412,816  0 %0 %  61,527,372   61,311,318  0 %Common shares outstanding at period-end  61,348,095   61,297,344   61,146,835  0 %0 %  61,348,095   61,146,835  0 %Dividend per share $0.13  $0.13  $0.13  0 %0 % $0.52  $0.52  0 %Book value per share $11.24  $11.18  $11.00  1 %2 % $11.24  $11.00  2 %Tangible book value per share(1) $8.41  $8.33  $8.12  1 %4 % $8.41  $8.12  4 %                             KEY FINANCIAL RATIOS                            (unaudited)                            Annualized return on average equity  6.16 % 6.14 % 7.96 %0 %(23)%  5.97 % 9.88 %(40)%Annualized return on average tangible common equity(1)  8.25 % 8.27 % 10.84 %0 %(24)%  8.05 % 13.57 %(41)%Annualized return on average assets  0.75 % 0.78 % 1.00 %(4)%(25)%  0.76 % 1.22 %(38)%Annualized return on average tangible assets(1)  0.78 % 0.81 % 1.04 %(4)%(25)%  0.78 % 1.26 %(38)%Net interest margin (FTE)(1)  3.34 % 3.17 % 3.41 %5 %(2)%  3.28 % 3.70 %(11)%Efficiency ratio(1)  65.35 % 65.37 % 57.62 %0 %13 %  65.88 % 52.57 %25 %                             AVERAGE BALANCES                            (in $000’s, unaudited)                            Average assets $5,607,840  $5,352,067  $5,264,905  5 %7 % $5,338,705  $5,289,375  1 %Average tangible assets(1) $5,433,439  $5,177,114  $5,088,264  5 %7 % $5,163,485  $5,111,839  1 %Average earning assets $5,267,773  $5,011,865  $4,923,582  5 %7 % $4,999,363  $4,955,018  1 %Average loans held-for-sale $2,260  $1,493  $1,612  51 %40 % $2,001  $2,821  (29)%Average total loans $3,388,729  $3,359,647  $3,280,817  1 %3 % $3,343,661  $3,259,373  3 %Average deposits $4,771,491  $4,525,946  $4,454,750  5 %7 % $4,513,774  $4,467,489  1 %Average demand deposits - noninterest-bearing $1,222,393  $1,172,304  $1,243,222  4 %(2)% $1,174,854  $1,393,949  (16)%Average interest-bearing deposits $3,549,098  $3,353,642  $3,211,528  6 %11 % $3,338,920  $3,073,540  9 %Average interest-bearing liabilities $3,588,755  $3,393,264  $3,251,034  6 %10 % $3,378,516  $3,140,105  8 %Average equity $686,263  $680,404  $664,638  1 %3 % $678,543  $652,449  4 %Average tangible common equity(1) $511,862  $505,451  $487,997  1 %5 % $503,323  $474,913  6 %                              _________________________________     (1)   This is a non-GAAP financial measure.                         For the Quarter Ended: CONSOLIDATED INCOME STATEMENTS December 31, September 30, June 30, March 31, December 31, (in $000’s, unaudited) 2024 2024 2024 2024 2023 Interest income $64,633  $61,438  $59,077  $57,551  $58,892  Interest expense  20,448   21,523   19,622   17,458   16,591  Net interest income before provision for credit losses on loans  44,185   39,915   39,455   40,093   42,301  Provision for credit losses on loans  1,331   153   471   184   289  Net interest income after provision for credit losses on loans  42,854   39,762   38,984   39,909   42,012  Noninterest income:                     Service charges and fees on deposit accounts  885   908   891   877   838  Increase in cash surrender value of life insurance  528   530   521   518   519  Gain on sales of SBA loans  125   94   76   178   —  Servicing income  77   108   90   90   103  Termination fees  18   46   100   13   25  Gain on proceeds from company-owned life insurance  —   —   219   —   25  Other  552   554   379   371   432  Total noninterest income  2,185   2,240   2,276   2,047   1,942  Noninterest expense:                     Salaries and employee benefits  16,976   15,673   15,794   15,509   13,919  Occupancy and equipment  2,495   2,599   2,689   2,443   2,367  Professional fees  1,711   1,306   1,072   1,327   1,085  Other  9,122   7,977   8,633   8,257   8,120  Total noninterest expense  30,304   27,555   28,188   27,536   25,491  Income before income taxes  14,735   14,447   13,072   14,420   18,463  Income tax expense  4,114   3,940   3,838   4,254   5,135  Net income $10,621  $10,507  $9,234  $10,166  $13,328                        PER COMMON SHARE DATA                     (unaudited)                     Basic earnings per share $0.17  $0.17  $0.15  $0.17  $0.22  Diluted earnings per share $0.17  $0.17  $0.15  $0.17  $0.22  Weighted average shares outstanding - basic  61,320,505   61,295,877   61,279,914   61,186,623   61,118,485  Weighted average shares outstanding - diluted  61,679,735   61,546,157   61,438,088   61,470,552   61,412,816  Common shares outstanding at period-end  61,348,095   61,297,344   61,292,094   61,253,625   61,146,835  Dividend per share $0.13  $0.13  $0.13  $0.13  $0.13  Book value per share $11.24  $11.18  $11.08  $11.04  $11.00  Tangible book value per share(1) $8.41  $8.33  $8.22  $8.17  $8.12                        KEY FINANCIAL RATIOS                     (unaudited)                     Annualized return on average equity  6.16 % 6.14 % 5.50 % 6.08 % 7.96 %Annualized return on average tangible common equity(1)  8.25 % 8.27 % 7.43 % 8.24 % 10.84 %Annualized return on average assets  0.75 % 0.78 % 0.71 % 0.79 % 1.00 %Annualized return on average tangible assets(1)  0.78 % 0.81 % 0.74 % 0.82 % 1.04 %Net interest margin (FTE)(1)  3.34 % 3.17 % 3.26 % 3.34 % 3.41 %Efficiency ratio(1)  65.35 % 65.37 % 67.55 % 65.34 % 57.62 %                      AVERAGE BALANCES                     (in $000’s, unaudited)                     Average assets $5,607,840  $5,352,067  $5,213,171  $5,178,636  $5,264,905  Average tangible assets(1) $5,433,439  $5,177,114  $5,037,673  $5,002,597  $5,088,264  Average earning assets $5,267,773  $5,011,865  $4,872,449  $4,842,279  $4,923,582  Average loans held-for-sale $2,260  $1,493  $1,503  $2,749  $1,612  Average total loans $3,388,729  $3,359,647  $3,328,358  $3,297,240  $3,280,817  Average deposits $4,771,491  $4,525,946  $4,394,545  $4,360,150  $4,454,750  Average demand deposits - noninterest-bearing $1,222,393  $1,172,304  $1,127,145  $1,177,078  $1,243,222  Average interest-bearing deposits $3,549,098  $3,353,642  $3,267,400  $3,183,072  $3,211,528  Average interest-bearing liabilities $3,588,755  $3,393,264  $3,306,972  $3,222,603  $3,251,034  Average equity $686,263  $680,404  $675,108  $672,292  $664,638  Average tangible common equity(1) $511,862  $505,451  $499,610  $496,253  $487,997                         _____________________________(1)   This is a non-GAAP financial measure.                  End of Period: Percent Change From: CONSOLIDATED BALANCE SHEETS    December 31,     September 30,     December 31,     September 30,     December 31,  (in $000’s, unaudited) 2024  2024  2023  2024  2023  ASSETS                   Cash and due from banks $29,864  $49,722  $41,592  (40)%  (28)%Other investments and interest-bearing deposits in other financial institutions  938,259   906,588   366,537  3 %  156 %Securities available-for-sale, at fair value  256,274   237,612   442,636  8 %  (42)%Securities held-to-maturity, at amortized cost  590,016   604,193   650,565  (2)%  (9)%Loans held-for-sale - SBA, including deferred costs  2,375   1,649   2,205  44 %  8 %Loans:               Commercial  531,350   481,266   463,778  10 %  15 %Real estate:               CRE - owner occupied  601,636   602,062   583,253  0 %  3 %CRE - non-owner occupied  1,341,266   1,310,578   1,256,590  2 %  7 %Land and construction  127,848   125,761   140,513  2 %  (9)%Home equity  127,963   124,090   119,125  3 %  7 %Multifamily  275,490   273,103   269,734  1 %  2 %Residential mortgages  471,730   479,524   496,961  (2)%  (5)%Consumer and other  14,837   14,179   20,919  5 %  (29)%Loans  3,492,120   3,410,563   3,350,873  2 %  4 %Deferred loan fees, net  (183)  (327)  (495) (44)%  (63)%Total loans, net of deferred costs and fees  3,491,937   3,410,236   3,350,378  2 %  4 %Allowance for credit losses on loans  (48,953)  (47,819)  (47,958) 2 %  2 %Loans, net  3,442,984   3,362,417   3,302,420  2 %  4 %Company-owned life insurance  81,211   80,682   79,489  1 %  2 %Premises and equipment, net  10,140   10,398   9,857  (2)%  3 %Goodwill  167,631   167,631   167,631  0 %  0 %Other intangible assets  6,439   6,966   8,627  (8)%  (25)%Accrued interest receivable and other assets  119,813   123,738   122,536  (3)%  (2)%Total assets $ 5,645,006  $ 5,551,596  $ 5,194,095  2 %  9 %               LIABILITIES AND SHAREHOLDERS’ EQUITY                Liabilities:                Deposits:               Demand, noninterest-bearing $1,214,192  $1,272,139  $1,292,486  (5)%  (6)%Demand, interest-bearing  936,587   913,910   914,066  2 %  2 %Savings and money market  1,325,923   1,309,676   1,087,518  1 %  22 %Time deposits - under $250  38,988   39,060   38,055  0 %  2 %Time deposits - $250 and over  206,755   196,945   192,228  5 %  8 %ICS/CDARS - interest-bearing demand, money market and time deposits  1,097,586   997,803   854,105  10 %  29 %Total deposits  4,820,031   4,729,533   4,378,458  2 %  10 %Subordinated debt, net of issuance costs  39,653   39,615   39,502  0 %  0 %Accrued interest payable and other liabilities  95,595   97,096   103,234  (2)%  (7)%Total liabilities  4,955,279   4,866,244   4,521,194  2 %  10 %               Shareholders’ Equity:                   Common stock  510,070   509,134   506,539  0 %  1 %Retained earnings  187,762   185,110   179,092  1 %  5 %Accumulated other comprehensive loss  (8,105)  (8,892)  (12,730) (9)%  (36)%Total shareholders' equity  689,727   685,352   672,901  1 %  3 % Total liabilities and shareholders’ equity $ 5,645,006  $ 5,551,596  $ 5,194,095  2 %  9 %                                  End of Period:CONSOLIDATED BALANCE SHEETS December 31, September 30, June 30, March 31, December 31,(in $000’s, unaudited) 2024  2024  2024  2024  2023 ASSETS               Cash and due from banks $29,864  $49,722  $37,497  $32,543  $41,592 Other investments and interest-bearing deposits in other financial institutions  938,259   906,588   610,763   508,816   366,537 Securities available-for-sale, at fair value  256,274   237,612   273,043   404,474   442,636 Securities held-to-maturity, at amortized cost  590,016   604,193   621,178   636,249   650,565 Loans held-for-sale - SBA, including deferred costs  2,375   1,649   1,899   1,946   2,205 Loans:               Commercial  531,350   481,266   477,929   452,231   463,778 Real estate:               CRE - owner occupied  601,636   602,062   594,504   585,031   583,253 CRE - non-owner occupied  1,341,266   1,310,578   1,283,323   1,271,184   1,256,590 Land and construction  127,848   125,761   125,374   129,712   140,513 Home equity  127,963   124,090   126,562   122,794   119,125 Multifamily  275,490   273,103   268,968   269,263   269,734 Residential mortgages  471,730   479,524   484,809   490,035   496,961 Consumer and other  14,837   14,179   18,758   16,439   20,919 Loans  3,492,120   3,410,563   3,380,227   3,336,689   3,350,873 Deferred loan fees, net  (183)  (327)  (434)  (587)  (495)Total loans, net of deferred fees  3,491,937   3,410,236   3,379,793   3,336,102   3,350,378 Allowance for credit losses on loans  (48,953)  (47,819)  (47,954)  (47,888)  (47,958)Loans, net  3,442,984   3,362,417   3,331,839   3,288,214   3,302,420 Company-owned life insurance  81,211   80,682   80,153   80,007   79,489 Premises and equipment, net  10,140   10,398   10,310   9,986   9,857 Goodwill  167,631   167,631   167,631   167,631   167,631 Other intangible assets  6,439   6,966   7,521   8,074   8,627 Accrued interest receivable and other assets  119,813   123,738   121,190   118,134   122,536 Total assets $5,645,006  $5,551,596  $5,263,024  $5,256,074  $5,194,095                 LIABILITIES AND SHAREHOLDERS’ EQUITY               Liabilities:               Deposits:               Demand, noninterest-bearing $1,214,192  $1,272,139  $1,187,320  $1,242,059  $1,292,486 Demand, interest-bearing  936,587   913,910   928,246   925,100   914,066 Savings and money market  1,325,923   1,309,676   1,126,520   1,124,900   1,087,518 Time deposits - under $250  38,988   39,060   39,046   38,105   38,055 Time deposits - $250 and over  206,755   196,945   203,886   200,739   192,228 ICS/CDARS - interest-bearing demand, money market and time deposits  1,097,586   997,803   959,592   913,757   854,105 Total deposits  4,820,031   4,729,533   4,444,610   4,444,660   4,378,458 Other short-term borrowings  —   —   —   —   — Subordinated debt, net of issuance costs  39,653   39,615   39,577   39,539   39,502 Accrued interest payable and other liabilities  95,595   97,096   99,638   95,579   103,234 Total liabilities  4,955,279   4,866,244   4,583,825   4,579,778   4,521,194                 Shareholders’ Equity:               Common stock  510,070   509,134   508,343   507,578   506,539 Retained earnings  187,762   185,110   182,571   181,306   179,092 Accumulated other comprehensive loss  (8,105)  (8,892)  (11,715)  (12,588)  (12,730)Total shareholders' equity  689,727   685,352   679,199   676,296   672,901 Total liabilities and shareholders’ equity $5,645,006  $5,551,596  $5,263,024  $5,256,074  $5,194,095                                      At or For the Quarter Ended: Percent Change From: CREDIT QUALITY DATA December 31, September 30, December 31, September 30, December 31, (in $000’s, unaudited) 2024 2024 2023 2024  2023  Nonaccrual loans - held-for-investment $7,178  $6,698  $6,818  7 %5 %Loans over 90 days past due and still accruing  489   460   889  6 %(45)%Total nonperforming loans  7,667   7,158   7,707  7 %(1)%Foreclosed assets  —   —   —  N/A N/A Total nonperforming assets $7,667  $7,158  $7,707  7 %(1)%Net charge-offs (recoveries) during the quarter $197  $288  $33  (32)%497 %Provision for credit losses on loans during the quarter $1,331  $153  $289  770 %361 %Allowance for credit losses on loans $48,953  $47,819  $47,958  2 %2 %Classified assets $41,661  $32,609  $31,763  28 %31 %Allowance for credit losses on loans to total loans  1.40 % 1.40 % 1.43 %0 %(2)%Allowance for credit losses on loans to total nonperforming loans  638.49 % 668.05 % 622.27 %(4)%3 %Nonperforming assets to total assets  0.14 % 0.13 % 0.15 %8 %(7)%Nonperforming loans to total loans  0.22 % 0.21 % 0.23 %5 %(4)%Classified assets to Heritage Commerce Corp                 Tier 1 capital plus allowance for credit losses on loans  7 % 6 % 6 %17 %17 %Classified assets to Heritage Bank of Commerce                 Tier 1 capital plus allowance for credit losses on loans  7 % 6 % 5 %17 %40 %                  OTHER PERIOD-END STATISTICS                 (in $000’s, unaudited)                 Heritage Commerce Corp:                 Tangible common equity(1) $515,657  $510,755  $496,643  1 %4 %Shareholders’ equity / total assets  12.22 % 12.35 % 12.96 %(1)%(6)%Tangible common equity / tangible assets(2)  9.43 % 9.50 % 9.90 %(1)%(5)%Loan to deposit ratio  72.45 % 72.11 % 76.52 %0 %(5)%Noninterest-bearing deposits / total deposits  25.19 % 26.90 % 29.52 %(6)%(15)%Total capital ratio  15.6 % 15.6 % 15.5 %0 %1 %Tier 1 capital ratio  13.4 % 13.4 % 13.3 %0 %1 %Common Equity Tier 1 capital ratio  13.4 % 13.4 % 13.3 %0 %1 %Tier 1 leverage ratio  9.6 % 10.0 % 10.0 %(4)%(4)%Heritage Bank of Commerce:                 Tangible common equity / tangible assets(2)  9.79 % 9.86 % 10.26 %(1)%(5)%Total capital ratio  15.1 % 15.1 % 14.9 %0 %1 %Tier 1 capital ratio  13.9 % 13.9 % 13.8 %0 %1 %Common Equity Tier 1 capital ratio  13.9 % 13.9 % 13.8 %0 %1 %Tier 1 leverage ratio  10.0 % 10.4 % 10.4 %(4)%(4)%                   ________________(1)   This is a non-GAAP financial measure that represents shareholders' equity minus goodwill and other intangible assets. (2)   This is a non-GAAP financial measure that represents shareholders' equity minus goodwill and other intangible assets divided by total assets minus goodwill and other intangible assets.                         At or For the Quarter Ended: CREDIT QUALITY DATA December 31, September 30, June 30, March 31, December 31, (in $000’s, unaudited) 2024 2024 2024 2024 2023 Nonaccrual loans - held-for-investment $7,178  $6,698  $5,782  $5,920  $6,818  Loans over 90 days past due                     and still accruing  489   460   248   1,951   889  Total nonperforming loans  7,667   7,158   6,030   7,871   7,707  Foreclosed assets  —   —   —   —   —  Total nonperforming assets $7,667  $7,158  $6,030  $7,871  $7,707  Net charge-offs (recoveries) during the quarter $197  $288  $405  $254  $33  Provision for credit losses on loans during the quarter $1,331  $153  $471  $184  $289  Allowance for credit losses on loans $48,953  $47,819  $47,954  $47,888  $47,958  Classified assets $41,661  $32,609  $33,605  $35,392  $31,763  Allowance for credit losses on loans to total loans  1.40 % 1.40 % 1.42 % 1.44 % 1.43 %Allowance for credit losses on loans to total nonperforming loans  638.49 % 668.05 % 795.26 % 608.41 % 622.27 %Nonperforming assets to total assets  0.14 % 0.13 % 0.11 % 0.15 % 0.15 %Nonperforming loans to total loans  0.22 % 0.21 % 0.18 % 0.24 % 0.23 %Classified assets to Heritage Commerce Corp                     Tier 1 capital plus allowance for credit losses on loans  7 % 6 % 6 % 6 % 6 %Classified assets to Heritage Bank of Commerce                     Tier 1 capital plus allowance for credit losses on loans  7 % 6 % 6 % 6 % 5 %                      OTHER PERIOD-END STATISTICS                     (in $000’s, unaudited)                     Heritage Commerce Corp:                     Tangible common equity(1) $515,657  $510,755  $504,047  $500,591  $496,643  Shareholders’ equity / total assets  12.22 % 12.35 % 12.91 % 12.87 % 12.96 %Tangible common equity / tangible assets(2)  9.43 % 9.50 % 9.91 % 9.85 % 9.90 %Loan to deposit ratio  72.45 % 72.11 % 76.04 % 75.06 % 76.52 %Noninterest-bearing deposits / total deposits  25.19 % 26.90 % 26.71 % 27.94 % 29.52 %Total capital ratio  15.6 % 15.6 % 15.6 % 15.6 % 15.5 %Tier 1 capital ratio  13.4 % 13.4 % 13.4 % 13.4 % 13.3 %Common Equity Tier 1 capital ratio  13.4 % 13.4 % 13.4 % 13.4 % 13.3 %Tier 1 leverage ratio  9.6 % 10.0 % 10.2 % 10.2 % 10.0 %Heritage Bank of Commerce:                     Tangible common equity / tangible assets(2)  9.79 % 9.86 % 10.28 % 10.22 % 10.26 %Total capital ratio  15.1 % 15.1 % 15.1 % 15.1 % 14.9 %Tier 1 capital ratio  13.9 % 13.9 % 13.9 % 13.9 % 13.8 %Common Equity Tier 1 capital ratio  13.9 % 13.9 % 13.9 % 13.9 % 13.8 %Tier 1 leverage ratio  10.0 % 10.4 % 10.6 % 10.6 % 10.4 % __________________(1)   This is a non-GAAP financial measure that represents shareholders' equity minus goodwill and other intangible assets. (2)   This is a non-GAAP financial measure that represents shareholders' equity minus goodwill and other intangible assets divided by total assets minus goodwill and other intangible assets.                         For the Quarter Ended For the Quarter Ended   December 31, 2024 September 30, 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, gross(1)(2) $3,390,989  $47,132  5.53 %$3,361,140  $45,781  5.42 %Securities - taxable  800,174   4,475  2.22 % 838,375   4,676  2.22 %Securities - exempt from Federal tax(3)  30,570   274  3.57 % 31,311   282  3.58 %Other investments and interest-bearing deposits in other financial institutions  1,046,040   12,810  4.87 % 781,039   10,758  5.48 %Total interest earning assets(3)  5,267,773   64,691  4.89 % 5,011,865   61,497  4.88 %Cash and due from banks  32,569         33,425        Premises and equipment, net  10,301         10,471        Goodwill and other intangible assets  174,401         174,953        Other assets  122,796         121,353        Total assets $5,607,840        $5,352,067                              Liabilities and shareholders’ equity:                     Deposits:                     Demand, noninterest-bearing $1,222,393        $1,172,304                              Demand, interest-bearing  906,581   1,452  0.64 % 907,346   1,714  0.75 %Savings and money market  1,339,397   9,090  2.70 % 1,188,057   9,128  3.06 %Time deposits - under $100  11,388   49  1.71 % 11,133   47  1.68 %Time deposits - $100 and over  234,446   2,310  3.92 % 229,565   2,349  4.07 %ICS/CDARS - interest-bearing demand, money market and time deposits  1,057,286   7,009  2.64 % 1,017,541   7,747  3.03 %Total interest-bearing deposits  3,549,098   19,910  2.23 % 3,353,642   20,985  2.49 %Total deposits  4,771,491   19,910  1.66 % 4,525,946   20,985  1.84 %                      Short-term borrowings  28   —  0.00 % 32   —  0.00 %Subordinated debt, net of issuance costs  39,629   538  5.40 % 39,590   538  5.41 %Total interest-bearing liabilities  3,588,755   20,448  2.27 % 3,393,264   21,523  2.52 %Total interest-bearing liabilities and demand, noninterest-bearing / cost of funds  4,811,148   20,448  1.69 % 4,565,568   21,523  1.88 %Other liabilities  110,429         106,095        Total liabilities  4,921,577         4,671,663        Shareholders’ equity  686,263         680,404        Total liabilities and shareholders’ equity $5,607,840        $5,352,067                              Net interest income / margin(3)      44,243  3.34 %     39,974  3.17 %Less tax equivalent adjustment(3)      (58)         (59)    Net interest income     $44,185  3.34 %    $39,915  3.17 %                       __________________(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 $167,000 for the fourth quarter of 2024, compared to $184,000 for the third quarter of 2024. Prepayment fees totaled $35,000 for the fourth quarter of 2024, compared to $4,000 for the third quarter of 2024.(3)   Reflects the non-GAAP FTE adjustment for Federal tax-exempt income based on a 21% tax rate.                         For the Quarter Ended For the Quarter Ended   December 31, 2024 December 31, 2023       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, gross(1)(2) $3,390,989  $47,132  5.53 %$3,282,429  $44,635  5.39 %Securities - taxable  800,174   4,475  2.22 % 1,074,638   6,516  2.41 %Securities - exempt from Federal tax(3)  30,570   274  3.57 % 32,244   288  3.54 %Other investments and interest-bearing deposits in other financial institutions  1,046,040   12,810  4.87 % 534,271   7,514  5.58 %Total interest earning assets(3)  5,267,773   64,691  4.89 % 4,923,582   58,953  4.75 %Cash and due from banks  32,569         35,214        Premises and equipment, net  10,301         9,843        Goodwill and other intangible assets  174,401         176,641        Other assets  122,796         119,625        Total assets $5,607,840        $5,264,905                              Liabilities and shareholders’ equity:                     Deposits:                     Demand, noninterest-bearing $1,222,393        $1,243,222                              Demand, interest-bearing  906,581   1,452  0.64 % 948,061   1,661  0.70 %Savings and money market  1,339,397   9,090  2.70 % 1,096,962   6,216  2.25 %Time deposits - under $100  11,388   49  1.71 % 11,389   37  1.29 %Time deposits - $100 and over  234,446   2,310  3.92 % 234,140   2,130  3.61 %ICS/CDARS - interest-bearing demand, money market and time deposits  1,057,286   7,009  2.64 % 920,976   6,009  2.59 %Total interest-bearing deposits  3,549,098   19,910  2.23 % 3,211,528   16,053  1.98 %Total deposits  4,771,491   19,910  1.66 % 4,454,750   16,053  1.43 %                      Short-term borrowings  28   —  0.00 % 29   —  0.00 %Subordinated debt, net of issuance costs  39,629   538  5.40 % 39,477   538  5.41 %Total interest-bearing liabilities  3,588,755   20,448  2.27 % 3,251,034   16,591  2.02 %Total interest-bearing liabilities and demand, noninterest-bearing / cost of funds  4,811,148   20,448  1.69 % 4,494,256   16,591  1.46 %Other liabilities  110,429         106,011        Total liabilities  4,921,577         4,600,267        Shareholders’ equity  686,263         664,638        Total liabilities and shareholders’ equity $5,607,840        $5,264,905                              Net interest income / margin(3)      44,243  3.34 %     42,362  3.41 %Less tax equivalent adjustment(3)      (58)         (61)    Net interest income     $44,185  3.34 %    $42,301  3.41 % _________________ (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 $167,000 for the fourth quarter of 2024, compared to $147,000 for the fourth quarter of 2023. Prepayment fees totaled $35,000 for the fourth quarter of 2024, compared to $91,000 for the fourth quarter of 2023.(3)   Reflects the non-GAAP FTE adjustment for Federal tax-exempt income based on a 21% tax rate.                         For the Year Ended For the Year Ended   December 31, 2024 December 31, 2023       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, gross(1)(2) $3,345,662  $182,983  5.47 %$3,262,194  $177,628  5.45 %Securities - taxable  905,418   20,817  2.30 % 1,124,190   27,351  2.43 %Securities - exempt from Federal tax(3)  31,403   1,127  3.59 % 33,806   1,196  3.54 %Other investments, interest-bearing deposits in other financial institutions and Federal funds sold  716,880   38,009  5.30 % 534,828   28,374  5.31 %Total interest earning assets(3)  4,999,363   242,936  4.86 % 4,955,018   234,549  4.73 %Cash and due from banks  33,156         35,955        Premises and equipment, net  10,252         9,421        Goodwill and other intangible assets  175,220         177,536        Other assets  120,714         111,445        Total assets $5,338,705        $5,289,375                              Liabilities and shareholders’ equity:                     Deposits:                     Demand, noninterest-bearing $1,174,854        $1,393,949                              Demand, interest-bearing  916,466   6,439  0.70 % 1,074,523   6,655  0.62 %Savings and money market  1,175,391   32,734  2.78 % 1,144,032   19,857  1.74 %Time deposits - under $100  11,112   184  1.66 % 11,809   97  0.82 %Time deposits - $100 and over  228,388   8,968  3.93 % 218,131   6,874  3.15 %ICS/CDARS - interest-bearing demand, money market and time deposits  1,007,563   28,574  2.84 % 625,045   14,074  2.25 %Total interest-bearing deposits  3,338,920   76,899  2.30 % 3,073,540   47,557  1.55 %Total deposits  4,513,774   76,899  1.70 % 4,467,489   47,557  1.06 %                      Short-term borrowings  24   —  0.00 % 27,145   1,365  5.03 %Subordinated debt, net of issuance costs  39,572   2,152  5.44 % 39,420   2,152  5.46 %Total interest-bearing liabilities  3,378,516   79,051  2.34 % 3,140,105   51,074  1.63 %Total interest-bearing liabilities and demand, noninterest-bearing / cost of funds  4,553,370   79,051  1.74 % 4,534,054   51,074  1.13 %Other liabilities  106,792         102,872        Total liabilities  4,660,162         4,636,926        Shareholders’ equity  678,543         652,449        Total liabilities and shareholders’ equity $5,338,705        $5,289,375                              Net interest income / margin(3)      163,885  3.28 %     183,475  3.70 %Less tax equivalent adjustment(3)      (237)         (251)    Net interest income     $163,648  3.27 %    $183,224  3.70 % _________________(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 $628,000 for the year ended December 31, 2024, compared to $742,000 for the year ended December 31, 2023. Prepayment fees totaled $117,000 for the year ended December 31, 2024, compared to $484,000 for the year ended December 31, 2023.(3)   Reflects the non-GAAP FTE adjustment for Federal tax-exempt income based on a 21% tax rate. 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 December 31, September 30, June 30, March 31, December 31, (in $000’s, unaudited) 2024 2024 2024 2024 2023 Capital components:                Total Equity (GAAP) $689,727  $685,352  $679,199  $676,296  $672,901  Less: Preferred Stock  —   —   —   —   —  Total Common Equity  689,727   685,352   679,199   676,296   672,901  Less: Goodwill  (167,631)  (167,631)  (167,631)  (167,631)  (167,631) Less: Other Intangible Assets  (6,439)  (6,966)  (7,521)  (8,074)  (8,627) Total Tangible Common Equity (non-GAAP) $515,657  $510,755  $504,047  $500,591  $496,643                   Common shares outstanding at period-end  61,348,095   61,297,344   61,292,094   61,253,625   61,146,835                   Tangible book value per share (non-GAAP) $8.41  $8.33  $8.22  $8.17  $8.12                         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 December 31, September 30, June 30, March 31, December 31, (in $000’s, unaudited) 2024 2024 2024 2024 2023 Net income $10,621  $10,507  $9,234  $10,166  $13,328                   Average tangible common equity components:                Average Equity (GAAP) $686,263  $680,404  $675,108  $672,292  $664,638  Less: Goodwill  (167,631)  (167,631)  (167,631)  (167,631)  (167,631) Less: Other Intangible Assets  (6,770)  (7,322)  (7,867)  (8,408)  (9,010) Total Average Tangible Common Equity (non-GAAP) $511,862  $505,451  $499,610  $496,253  $487,997                   Annualized return on average tangible common equity (non-GAAP)  8.25 % 8.27 % 7.43 % 8.24 % 10.84 %                 Average tangible assets components:                Average Assets (GAAP) $5,607,840  $5,352,067  $5,213,171  $5,178,636  $5,264,905  Less: Goodwill  (167,631)  (167,631)  (167,631)  (167,631)  (167,631) Less: Other Intangible Assets  (6,770)  (7,322)  (7,867)  (8,408)  (9,010) Total Average Tangible Assets (non-GAAP) $5,433,439  $5,177,114  $5,037,673  $5,002,597  $5,088,264                   Annualized return on average tangible assets (non-GAAP)  0.78 % 0.81 % 0.74 % 0.82 % 1.04 %            RETURN ON AVERAGE TANGIBLE COMMON For the Year Ended:   EQUITY AND AVERAGE TANGIBLE COMMON ASSETS December 31, December 31,   (in $000’s, unaudited) 2024 2023   Net income $40,528  $64,443              Average tangible common equity components:         Average Equity (GAAP) $678,543  $652,449    Less: Goodwill  (167,631)  (167,631)   Less: Other Intangible Assets  (7,589)  (9,905)   Total Average Tangible Common Equity (non-GAAP) $503,323  $474,913              Annualized return on average tangible common equity (non-GAAP)  8.05 % 13.57 %            Average tangible assets components:         Average Assets (GAAP) $5,338,705  $5,289,375    Less: Goodwill  (167,631)  (167,631)   Less: Other Intangible Assets  (7,589)  (9,905)   Total Average Tangible Assets (non-GAAP) $5,163,485   5,111,839              Annualized return on average tangible assets (non-GAAP)  0.78 % 1.26 %              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:   December 31, September 30, June 30, March 31, December 31, (in $000’s, unaudited) 2024 2024 2024 2024 2023 Net interest income before credit losses on loans (GAAP) $44,185  $39,915  $39,455  $40,093  $42,301  Tax-equivalent adjustment on securities - exempt from Federal tax  58   59   60   60   61  Net interest income, FTE (non-GAAP) $44,243  $39,974  $39,515  $40,153  $42,362                        Average balance of total interest earning assets $5,267,773  $5,011,865  $4,872,449  $4,842,279  $4,923,582                        Net interest margin (annualized net interest income divided by the average balance of total interest earnings assets) (GAAP)  3.34 % 3.17 % 3.26 % 3.33 % 3.41 %                      Net interest margin, FTE (annualized net interest income, FTE, divided by the average balance of total earnings assets) (non-GAAP)  3.34 % 3.17 % 3.26 % 3.34 % 3.41 %                For the Year Ended:     December 31, December 31,   (in $000’s, unaudited) 2024 2023   Net interest income before credit losses on loans (GAAP) $163,648  $183,224    Tax-equivalent adjustment on securities - exempt from Federal tax  237   251    Net interest income, FTE (non-GAAP) $163,885  $183,475                Average balance of total interest earning assets $4,999,363  $4,955,018                Net interest margin (annualized net interest income divided by the average balance of total interest earnings assets) (GAAP)  3.27 % 3.70 %              Net interest margin, FTE (annualized net interest income, FTE, divided by the average balance of total interest earnings assets) (non-GAAP)  3.28 % 3.70 %              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:   December 31, September 30, June 30, March 31, December 31, (in $000’s, unaudited) 2024 2024 2024 2024 2023 Noninterest expense $30,304  $27,555  $28,188  $27,536  $25,491                        Net interest income before credit losses on loans $44,185  $39,915  $39,455  $40,093  $42,301  Noninterest income  2,185   2,240   2,276   2,047   1,942  Total revenue $46,370  $42,155  $41,731  $42,140  $44,243                        Efficiency ratio (noninterest expense divided by total revenue) (non-GAAP)  65.35 % 65.37 % 67.55 % 65.34 % 57.62 %                For the Year Ended:     December 31, December 31,   (in $000’s, unaudited) 2024 2023   Noninterest expense $113,583  $101,054                Net interest income before credit losses on loans $163,648  $183,224    Noninterest income  8,748   8,998    Total revenue $172,396  $192,222                Efficiency ratio (noninterest expense divided           by total revenue) (non-GAAP)  65.88 % 52.57 %              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 December 31, September 30, June 30, March 31, December 31, (in $000’s, unaudited) 2024 2024 2024 2024 2023 Capital components:                Total Equity (GAAP) $689,727  $685,352  $679,199  $676,296  $672,901  Less: Preferred Stock  —   —   —   —   —  Total Common Equity  689,727   685,352   679,199   676,296   672,901  Less: Goodwill  (167,631)  (167,631)  (167,631)  (167,631)  (167,631) Less: Other Intangible Assets  (6,439)  (6,966)  (7,521)  (8,074)  (8,627) Total Tangible Common Equity (non-GAAP) $515,657  $510,755  $504,047  $500,591  $496,643                   Asset components:                Total Assets (GAAP) $5,645,006  $5,551,596  $5,263,024  $5,256,074  $5,194,095  Less: Goodwill  (167,631)  (167,631)  (167,631)  (167,631)  (167,631) Less: Other Intangible Assets  (6,439)  (6,966)  (7,521)  (8,074)  (8,627) Total Tangible Assets (non-GAAP) $5,470,936  $5,376,999  $5,087,872  $5,080,369  $5,017,837                   Tangible common equity / tangible assets (non-GAAP)  9.43 % 9.50 % 9.91 % 9.85 % 9.90 %                       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 December 31, September 30, June 30, March 31, December 31, (in $000’s, unaudited) 2024 2024 2024 2024 2023 Capital components:                Total Equity (GAAP) $709,379  $704,585  $697,964  $694,543  $690,918  Less: Preferred Stock  —   —   —   —   —  Total Common Equity  709,379   704,585   697,964   694,543   690,918  Less: Goodwill  (167,631)  (167,631)  (167,631)  (167,631)  (167,631) Less: Other Intangible Assets  (6,439)  (6,966)  (7,521)  (8,074)  (8,627) Total Tangible Common Equity (non-GAAP) $535,309  $529,988  $522,812  $518,838  $514,660                   Asset components:                Total Assets (GAAP) $5,641,646  $5,548,576  $5,260,500  $5,254,044  $5,190,829  Less: Goodwill  (167,631)  (167,631)  (167,631)  (167,631)  (167,631) Less: Other Intangible Assets  (6,439)  (6,966)  (7,521)  (8,074)  (8,627) Total Tangible Assets (non-GAAP) $5,467,576  $5,373,979  $5,085,348  $5,078,339  $5,014,571                   Tangible common equity / tangible assets (non-GAAP)  9.79 % 9.86 % 10.28 % 10.22 % 10.26 %

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