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

Heritage Commerce Corp Reports Robust Loan and Deposit Growth in 2024