Q4 2022 Earnings Release

San Jose, CA — January 26, 2023 — Heritage Commerce Corp (Nasdaq: HTBK), the holding company (the “Company”) for Heritage Bank of Commerce (the “Bank”), reported a 49% increase in fourth quarter 2022 net income to $20.8 million, or $0.34 per average diluted common share. This compares to $14.0 million, or $0.23 per average diluted common share, for Q4 2021 and represents a 15% increase from $18.1 million, or $0.30 per average diluted common share, in Q3 2022. For the year ending December 31, 2022, net income increased 40% to $66.6 million, or $1.09 per average diluted common share, compared to $47.7 million, or $0.79 per average diluted common share, for the prior year. All results are unaudited.

“Our quarterly results were a strong end to what was a record year on several measures,” stated Clay Jones, President and Chief Executive Officer. “We achieved record net income for both the fourth quarter and the year ending December 31, 2022, with a 23% year-over-year increase in net interest income, supported by solid loan growth both year-over-year and from the linked quarter. Key performance metrics for Q4 2022 included a return on average tangible common equity of 18.89%, a return on average tangible assets of 1.59%, and a net interest margin of 4.10%. Additionally, our efficiency ratio improved to 44.98% for Q4 and 49.93% for the full year.”

“Total deposits declined (6%) from the linked quarter and (8%) from 2021,” Mr. Jones stated. “The year-over-year decline was
primarily related to the decrease in balances (of approximately $170 million) from two large depositors who had temporary high
balances at December 31, 2021. Additional declines in deposits were related to the decrease in balances from the distribution of
proceeds from the sale of client businesses and real estate, and to a lesser extent, clients moving funds to seek higher rates. We
continue to foster our loyal client relationships as we focus on growing our Company in the Greater San Francisco Bay Area.”

“Our credit metrics remained strong in the fourth quarter of 2022. Nonperforming assets declined ($1.3) million from the fourth
quarter a year ago, and classified assets decreased (57%) year-over-year and declined (49%) over the preceding quarter,” said Mr.
Jones. “We recorded a $508,000 provision for credit losses on loans during the current quarter to support our growing loan portfolio,
which resulted in an allowance for credit losses on loans to total loans of 1.44% at December 31, 2022. We continue to focus on
maintaining a healthy balance sheet with strong capital. I want to thank our employees for their efforts this and every year, and for
their unwavering commitment to our clients, communities and shareholders.”

Key Highlights

• Deposit Trends: Total deposits decreased by 6% from Q3 2022 and 8% from 2021 due to reductions in temporary high balances from large depositors and the distribution of proceeds from client business and real estate sales.
• Credit Metrics: Nonperforming assets declined by $1.3 million compared to Q4 2021, with classified assets down 57% year-over-year.
• Loan Portfolio: Loans grew by $211.2 million (7%) year-over-year, totaling $3.299 billion at the end of Q4 2022.

Jones added, “Our credit metrics remain strong, and our strategic focus on maintaining healthy client relationships in the San Francisco Bay Area continues to drive growth.”

Performance Metrics

Forward-Looking Statements

Heritage Commerce Corp provides forward-looking statements subject to risks and uncertainties, including changes in economic and regulatory conditions, market interest rates, geopolitical events, and competitive pressures. For full disclosures, refer to SEC filings.