Heritage Commerce Corp Reports Robust Loan and Deposit Growth in 2024
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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
2023
Return 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
Available
Excess 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
2023
Balance (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
2023
Balance (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
Total
First 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 CRE
COLLATERAL TYPE
Outstanding
LTV
DSCR
Outstanding
LTV
Outstanding
LTV
Retail
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 CRE
COUNTY
Outstanding
LTV
DSCR
Outstanding
LTV
Outstanding
LTV
Alameda
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
Total
Loans 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
Regulatory
CAPITAL 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
2023
Unrealized 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.
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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