Q4 2023 Earnings Release

Heritage Commerce Corp Fourth Quarter 2023 Earnings Report

San Jose, CA — January 25, 2024 — Heritage Commerce Corp (Nasdaq: HTBK), the holding company for Heritage Bank of Commerce, has announced its financial results for the fourth quarter of 2023. The Company reported net income of $13.3 million, or $0.22 per diluted share, compared to $20.8 million, or $0.34 per diluted share, in the fourth quarter of 2022, and $15.8 million, or $0.26 per diluted share, in the third quarter of 2023.

For the year ending December 31, 2023, net income was $64.4 million, or $1.05 per diluted share, a slight decline from $66.6 million, or $1.09 per diluted share, in 2022. These results remain unaudited.

CEO Commentary

Clay Jones, President and CEO of Heritage Commerce Corp, stated, “In 2023, despite challenges faced by many banks, the Company maintained stable client deposits and achieved 9% year-over-year growth in tangible book value. Our strong loan growth and steady deposit base highlight resilience in an increasing interest rate environment. We anticipate stabilization in our cost of funds in 2024 following Federal Reserve guidance on potential rate reductions.”

Jones added, “We prioritize organic growth without reliance on borrowed funds or brokered deposits, ensuring a strong balance sheet with diversified loan portfolios and ample liquidity.”

Financial Highlights

• Liquidity: $2.87 billion in total liquidity as of December 31, 2023, with a loan-to-deposit ratio of 76.52%, up from 71.81% in September 2023.
• Deposits: Total deposits were $4.38 billion, relatively flat compared to $4.39 billion at the end of 2022. Non-interest-bearing deposits made up 30% of the total.
• Loans: Total loans increased by 2% year-over-year to $3.35 billion, with commercial real estate loans comprising the majority.
• Net Interest Income: Decreased by 18% to $42.3 million in Q4 2023 compared to $51.7 million in Q4 2022, primarily due to higher deposit costs.
• Credit Quality: Nonperforming assets were $7.7 million or 0.15% of total assets, indicating strong credit performance.

Forward-Looking Statements

This report contains forward-looking statements regarding future financial performance and expectations, subject to various risks. These include changes in interest rates, economic conditions, and regulatory impacts. Please refer to the full report for additional details on risks and uncertainties.