HTBK 3Q25 Earnings Release

Executive Summary

Core Business Momentum and Operating Leverage Drive Double-Digit EPS Growth in Third Quarter

Heritage Commerce Corp (the “Company”), the holding company for Heritage Bank of Commerce (the “Bank”), announced its unaudited financial results for the third quarter and first nine months of 2025.

Third Quarter 2025 Highlights

• Net Income: $14.7 Million
• Diluted Earnings Per Share (EPS): $0.24
• Pre-Provision Net Revenue (PPNR): $21.0 Million
• Fully Tax Equivalent (FTE) Net Interest Margin: 3.60%
• Efficiency Ratio: 58.05%
• Return on Average Tangible Common Equity: 11.14%

CEO Commentary

“We executed well in the third quarter, generating double-digit EPS growth and positive operating leverage,” said Clay Jones, President and Chief Executive Officer. “We had positive trends in loan and deposit growth, an expansion in our net interest margin, disciplined expense management, and an improvement in our asset quality. Loan and deposit growth was 1% and 3%, respectively, over the linked quarter, and we continue to add clients in key markets across our footprint, while maintaining our underwriting and pricing.”

“Our financial foundation is solid — marked by high capital reserves, strong liquidity, and sound asset quality. These fundamentals position us to continue to execute on our strategy, which is focused on increasing market share, growing our client franchise, and generating profitable growth, as we continue to support our community, colleagues, and shareholders. We are strengthening our platform to perform and position ourselves to deliver sustained, high-quality financial results for our shareholders.” said Mr. Jones.

Financial Highlights

Linked-Quarter Basis

• Total revenue of $50.0 million, an increase of 5%, or $2.2 million
• Cost of funds decreased to 1.54% from 1.57%
• Reported net income of $14.7 million and reported EPS of $0.24, up 130% and 140%, from $6.4 million and $0.10, respectively
• Adjusted net income of $14.7 million and adjusted EPS of $0.24, up 13% and 14%, from $13.0 million and $0.21, respectively

Year-Over-Year

• Total revenue of $50.0 million, an increase of 19%, or $7.9 million
• Cost of funds decreased to 1.54% from 1.88%
• PPNR of $21.0 million, an increase of 44% from $14.6 million
• Net income of $14.7 million and EPS of $0.24, up 40% and 41%, respectively

Balance Sheet Highlights

• Loans held-for-investment (HFI) of $3.6 billion, up $47.3 million, or 1%
• Total deposits of $4.8 billion, up $149.2 million, or 3%
• Loan to deposit ratio of 74.99%, a decrease of 2% from 76.38%
• Total shareholders’ equity of $700.0 million, up $5.3 million

Year-over-Year:

• Increase in loans HFI of $171.4 million, or 5%
• Increase in total deposits of $47.0 million, or 1%
• Loan to deposit ratio of 74.99%, an increase of 4% from 72.11%
• Total shareholders’ equity of $700.0 million, up $14.7 million

Asset Quality

• Nonperforming assets (NPAs) to total assets of 0.07%, compared to 0.11%
• Classified assets to total assets of 0.62%, compared to 0.69%

Year-over-Year:

• NPAs to total assets of 0.07%, compared to 0.13%
• Classified assets to total assets of 0.62%, compared to 0.59%

Key Performance Metrics

• FTE net interest margin of 3.60%, an increase of 6 basis points from 3.54%
• Efficiency ratio of 58.05%, a decrease of 5% from adjusted efficiency ratio of 61.01%
• Return on average assets of 1.05%, an increase of 11% over adjusted return on average assets
• Return on average tangible common equity of 11.14%, an increase of 12% over adjusted return

Year-over-Year:

• FTE net interest margin of 3.60%, an increase of 45 basis points from 3.15%
• Efficiency ratio of 58.05%, a decrease of 11% from 65.37%
• Return on average assets of 1.05%, an increase of 35%
• Return on average tangible common equity of 11.14%, an increase of 35%

Capital Management

• Common stock net repurchases of $2.2 million, compared to $1.9 million
• Total capital ratio of 15.4%, compared to 15.5%
• Common equity tier 1 capital ratio of 13.2%, compared to 13.3%
• Tangible common equity ratio of 9.67%, compared to 9.85%
• Last twelve months (LTM) common dividend of $31.9 million and dividend payout ratio of 74%
• LTM common stock net repurchases of $4.0 million