SAN JOSE, Calif., July 25, 2024 (GLOBE NEWSWIRE) -- Heritage Commerce Corp ( HTBK), (the “Company”), the holding company for Heritage Bank of Commerce (the “Bank”), today announced that its second quarter 2024 net income was $9.2 million, or $0.15 per average diluted common share, compared to $10.2 million, or $0.17 per average diluted common share, for the first quarter of 2024, and $16.4 million, or $0.27 per average diluted common share, for the second quarter of 2023. For the six months ended June 30, 2024, net income was $19.4 million, or $0.32 per average diluted common share, compared to $35.3 million, or $0.58 per average diluted common share, for the six months ended June 30, 2023. All data are unaudited.
"In the first six months of 2024, we continued to invest in people and technology to achieve our Company’s growth, security and client service goals,” said Clay Jones, President and Chief Executive Officer. “Our strong credit quality metrics further improved, as nonperforming assets and classified assets were both down at the end of the second quarter of 2024 from the linked quarter. We continued to strengthen our allowance for credit losses on loans during the second quarter of 2024, which was driven by prudent credit risk management and the increase in loan balances.”
“Our loan portfolio, excluding loans held-for-sale, increased by $43.7 million at June 30, 2024, from the preceding quarter and increased by $91.0 million year-over-year,” said Mr. Jones. “Our total deposits remained steady at $4.4 billion at June 30, 2024, while average deposits increased during the second quarter of 2024 from the linked quarter.”
“On behalf of the Board of Directors, I would like to thank our dedicated bank team members for all they do to support our loyal clients, communities and dedicated shareholders, and we look forward to continued success in the second half of the year,” Mr. Jones said. “It is because of them that we remain well-positioned to execute on our growth objectives.”
Second Quarter Ended June 30, 2024
Operating Results, Liquidity Position, Financial Condition, Credit Quality, and Capital Management
(as of, or for the periods ended June 30, 2024, compared to March 31, 2024, and June 30, 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 Six Months Ended: |
| | June 30, | | March 31, | | June 30, | | June 30, | | June 30, |
| (unaudited) | | 2024 | | 2024 | | 2023 | | 2024 | | 2023 |
| Return on average equity | | 5.50 | % | | 6.08 | % | | 10.12 | % | | 5.79 | % | | 11.06 | % |
| Return on average tangible common equity(1) | | 7.43 | % | | 8.24 | % | | 13.93 | % | | 7.84 | % | | 15.29 | % |
| Return on average assets | | 0.71 | % | | 0.79 | % | | 1.25 | % | | 0.75 | % | | 1.35 | % |
| Return on average tangible assets(1) | | 0.74 | % | | 0.82 | % | | 1.29 | % | | 0.78 | % | | 1.40 | % |
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| (1) | | This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” below. |
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Net Interest Income:
- Net interest income decreased (2%) to $39.5 million for the second quarter of 2024, compared to $40.1 million for the first quarter of 2024. The non-GAAP fully tax equivalent (“FTE”) net interest margin contracted 8 basis points to 3.26% for the second quarter of 2024 from 3.34% for the first quarter of 2024, primarily due to higher rates paid on client deposits, partially offset by maturing securities invested in higher yielding overnight funds and higher average yields on loans.
- Net interest income decreased (15%) to $39.5 million for the second quarter of 2024, compared to $46.3 million for the second quarter of 2023. The non-GAAP FTE net interest margin contracted 50 basis points to 3.26% for the second quarter of 2024, from 3.76% for the second quarter of 2023, primarily due to higher rates paid on client deposits, a decrease in the average balance of noninterest-bearing demand deposits, a decrease in average interest earning assets, and a decrease in the average balance of higher yielding Bay View Funding factored receivables, partially offset by an increase in the rate on core loans and overnight funds.
- For the first six months of 2024, net interest income decreased (17%) to $79.5 million, compared to $95.6 million for the first six months of 2023. The non-GAAP FTE net interest margin decreased 62 basis points to 3.30% for the first six months of 2024, from 3.92% for the first six months of 2023, primarily due to higher rates paid on client deposits, a decrease in the average balance of noninterest-bearing demand deposits, a decrease in average interest earning assets, and a decrease in the average balances of higher yielding Bay View Funding factored receivables, partially offset by an increase in the rate on core 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 June 30, 2024:
| | Increase/(Decrease) in | |
| | Estimated Net | |
| CHANGE IN INTEREST RATES (basis points) | | Interest Income(1) | |
| (in $000's, unaudited) | | Amount | | Percent | |
| +400 | | $ | 15,815 | | | 8.5 | | % |
| +300 | | $ | 11,832 | | | 6.4 | | % |
| +200 | | $ | 7,879 | | | 4.2 | | % |
| +100 | | $ | 3,953 | | | 2.1 | | % |
| 0 | | | — | | | — | | |
| −100 | | $ | (5,545 | ) | | (3.0 | ) | % |
| −200 | | $ | (12,865 | ) | | (6.9 | ) | % |
| −300 | | $ | (22,246 | ) | | (12.0 | ) | % |
| −400 | | $ | (36,316 | ) | | (19.6 | ) | % |
| | Increase/(Decrease) in | |
| | Estimated Economic | |
| CHANGE IN INTEREST RATES (basis points) | | Value of Equity(1) | |
| (in $000's, unaudited) | | Amount | | Percent | |
| +400 | | $ | 108,119 | | | 9.1 | | % |
| +300 | | $ | 91,506 | | | 7.7 | | % |
| +200 | | $ | 68,864 | | | 5.8 | | % |
| +100 | | $ | 38,972 | | | 3.3 | | % |
| 0 | | | — | | | — | | |
| −100 | | $ | (63,527 | ) | | (5.4 | ) | % |
| −200 | | $ | (154,537 | ) | | (13.0 | ) | % |
| −300 | | $ | (272,094 | ) | | (22.9 | ) | % |
| −400 | | $ | (410,354 | ) | | (34.6 | ) | % |
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| (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. |
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- 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 5.49% for the second quarter of 2024, compared to 5.44% for the first quarter of 2024, primarily due to higher loan yields on the core bank. |
| | For the Quarter Ended | | For the Quarter Ended | |
| | June 30, 2024 | | March 31, 2024 | |
| | Average | | Interest | | Average | | Average | | Interest | | Average | |
| (in $000’s, unaudited) | | Balance | | Income | | Yield | | Balance | | Income | | Yield | |
| Loans, core bank | | $ | 2,830,260 | | | $ | 38,496 | | 5.47 | % | $ | 2,795,351 | | | $ | 37,721 | | 5.43 | % |
| Prepayment fees | | | — | | | | 54 | | 0.01 | % | | — | | | | 24 | | 0.00 | % |
| Bay View Funding factored receivables | | | 54,777 | | | | 2,914 | | 21.40 | % | | 53,511 | | | | 2,838 | | 21.33 | % |
| Purchased residential mortgages | | | 447,687 | | | | 3,739 | | 3.36 | % | | 454,240 | | | | 3,788 | | 3.35 | % |
| Loan fair value mark / accretion | | | (2,863 | ) | | | 267 | | 0.04 | % | | (3,113 | ) | | | 229 | | 0.03 | % |
| Total loans (includes loans held-for-sale) | | $ | 3,329,861 | | | $ | 45,470 | | 5.49 | % | $ | 3,299,989 | | | $ | 44,600 | | 5.44 | % |
| • | The average yield on the total loan portfolio increased to 5.49% for the second quarter of 2024, compared to 5.47% for the second quarter of 2023, primarily due to increases in the prime rate, partially offset by a lower average balance of higher yielding Bay View Funding factored receivables for the second quarter of 2024. |
| | For the Quarter Ended | | For the Quarter Ended | |
| | June 30, 2024 | | June 30, 2023 | |
| | Average | | Interest | | Average | | Average | | Interest | | Average | |
| (in $000’s, unaudited) | | Balance | | Income | | Yield | | Balance | | Income | | Yield | |
| Loans, core bank | | $ | 2,830,260 | | | $ | 38,496 | | 5.47 | % | $ | 2,688,370 | | | $ | 35,996 | | 5.37 | % |
| Prepayment fees | | | — | | | | 54 | | 0.01 | % | | — | | | | 73 | | 0.01 | % |
| Bay View Funding factored receivables | | | 54,777 | | | | 2,914 | | 21.40 | % | | 68,680 | | | | 3,847 | | 22.47 | % |
| Purchased residential mortgages | | | 447,687 | | | | 3,739 | | 3.36 | % | | 478,220 | | | | 3,829 | | 3.21 | % |
| Loan fair value mark / accretion | | | (2,863 | ) | | | 267 | | 0.04 | % | | (3,929 | ) | | | 283 | | 0.04 | % |
| Total loans (includes loans held-for-sale) | | $ | 3,329,861 | | | $ | 45,470 | | 5.49 | % | $ | 3,231,341 | | | $ | 44,028 | | 5.47 | % |
| • | The average yield on the total loan portfolio remained flat at 5.46% for both the first six months of 2024 and 2023, as a lower average balance of higher yielding Bay View Funding factored receivables, a decrease in the accretion of loan purchase discount into interest income from acquired loans, and lower prepayment fees, were offset by increases in the prime rate for the first six months of 2024. |
| | For the Six Months Ended | | For the Six Months Ended | |
| | June 30, 2024 | | June 30, 2023 | |
| | Average | | Interest | | Average | | Average | | Interest | | Average | |
| (in $000’s, unaudited) | | Balance | | Income | | Yield | | Balance | | Income | | Yield | |
| Loans, core bank | | $ | 2,812,805 | | | $ | 76,217 | | 5.45 | % | $ | 2,702,291 | | | $ | 71,590 | | 5.34 | % |
| Prepayment fees | | | — | | | | 78 | | 0.01 | % | | — | | | | 211 | | 0.02 | % |
| Bay View Funding factored receivables | | | 54,144 | | | | 5,752 | | 21.36 | % | | 73,193 | | | | 7,848 | | 21.62 | % |
| Purchased residential mortgages | | | 450,964 | | | | 7,527 | | 3.36 | % | | 482,964 | | | | 7,686 | | 3.21 | % |
| Loan fair value mark / accretion | | | (2,988 | ) | | | 496 | | 0.04 | % | | (4,143 | ) | | | 805 | | 0.06 | % |
| Total loans (includes loans held-for-sale) | | $ | 3,314,925 | | | $ | 90,070 | | 5.46 | % | $ | 3,254,305 | | | $ | 88,140 | | 5.46 | % |
| • | During the second quarter of 2024, the Asset-based Lending division was reorganized into the core bank. |
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| • | In aggregate, the unamortized net purchase discount on total loans acquired was $2.7 million at June 30, 2024. |
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- 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 | |
| | June 30, 2024 | | March 31, 2024 | |
| | Average | | Interest | | Average | | Average | | Interest | | Average | |
| (in $000’s, unaudited) | | Balance | | Expense | | Rate | | Balance | | Expense | | Rate | |
| Deposits: | | | | | | | | | | | | | | | | | |
| Demand, noninterest-bearing | | $ | 1,127,145 | | | | | | | $ | 1,177,078 | | | | | | |
| | | | | | | | | | | | | | | | | |
| Demand, interest-bearing | | | 932,100 | | $ | 1,719 | | 0.74 | % | | 920,048 | | $ | 1,554 | | 0.68 | % |
| Savings and money market | | | 1,104,589 | | | 7,867 | | 2.86 | % | | 1,067,581 | | | 6,649 | | 2.50 | % |
| Time deposits - under $100 | | | 10,980 | | | 46 | | 1.68 | % | | 10,945 | | | 42 | | 1.54 | % |
| Time deposits - $100 and over | | | 228,248 | | | 2,245 | | 3.96 | % | | 221,211 | | | 2,064 | | 3.75 | % |
| Insured Cash Sweep ("ICS")/Certificate of Deposit Registry | | | | | | | | | | | | | | | | | |
| Service ("CDARS") - interest-bearing demand, money market | | | | | | | | | | | | | | | | | |
| and time deposits | | | 991,483 | | | 7,207 | | 2.92 | % | | 963,287 | | | 6,611 | | 2.76 | % |
| Total interest-bearing deposits | | | 3,267,400 | | | 19,084 | | 2.35 | % | | 3,183,072 | | | 16,920 | | 2.14 | % |
| Total deposits | | | 4,394,545 | | | 19,084 | | 1.75 | % | | 4,360,150 | | | 16,920 | | 1.56 | % |
| | | | | | | | | | | | | | | | | |
| Short-term borrowings | | | 19 | | | — | | 0.00 | % | | 15 | | | — | | 0.00 | % |
| Subordinated debt, net of issuance costs | | | 39,553 | | | 538 | | 5.47 | % | | 39,516 | | | 538 | | 5.48 | % |
| Total interest-bearing liabilities | | | 3,306,972 | | | 19,622 | | 2.39 | % | | 3,222,603 | | | 17,458 | | 2.18 | % |
| Total interest-bearing liabilities and demand, | | | | | | | | | | | | | | | | | |
| noninterest-bearing / cost of funds | | $ | 4,434,117 | | $ | 19,622 | | 1.78 | % | $ | 4,399,681 | | $ | 17,458 | | 1.60 | % |
| • | The average cost of total deposits increased to 1.75% for the second quarter of 2024, compared to 1.56% for the first quarter of 2024. The average cost of funds increased to 1.78% for the second quarter of 2024, compared to 1.60% for the first quarter of 2024. The average cost of deposits was 0.97% and the average cost of funds was 1.07% for the second quarter of 2023. |
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| | | • | While the cost of deposits increased for the second quarter of 2024, the cost of deposits remained relatively flat during the quarter. |
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| • | The average cost of total deposits increased to 1.65% for the first six months of 2024, compared to 0.76% for the first six months of 2023. The average cost of funds increased to 1.69% for the first six months of 2024, compared to 0.85% for the first six months of 2023. |
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| • | The increase in the average cost of total deposits and the average cost of funds for the second quarter and first six months of 2024 was primarily due to clients seeking higher yields and moving noninterest-bearing deposits to the Bank’s interest-bearing ICS/CDARS deposits and interest-bearing money market accounts and increases in market rates. |
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Provision for Credit Losses on Loans:
- During the second quarter of 2024, we recorded a provision for credit losses on loans of $471,000, compared to a $184,000 provision for credit losses on loans for the first quarter of 2024, and a provision for credit losses on loans of $260,000 for the second quarter of 2023.
- There was a provision for credit losses on loans of $655,000 for the six months ended June 30, 2024, compared to a $292,000 provision for credit losses on loans for the six months ended June 30, 2023.
Noninterest Income:
- Total noninterest income increased 11% to $2.3 million for the second quarter of 2024, compared to $2.0 million for the first quarter of 2024, and increased 10% from $2.1 million for the second quarter of 2023, primarily due to a higher gain on proceeds from company-owned life insurance and higher termination fees, partially offset by a lower gain on sales of SBA loans during the second quarter of 2024.
- Total noninterest income decreased (11%) to $4.3 million for the first six months of 2024, compared to $4.8 million for the first six months of 2023, primarily due to lower service charges and fees on deposit accounts, partially offset by a higher gain on proceeds from company-owned life insurance and higher termination fees for the first six months of 2024.
Noninterest Expense:
- Total noninterest expense for the second quarter of 2024 increased to $28.2 million, compared to $27.5 million for the first quarter of 2024, primarily due to higher salaries and employee benefits as a result of annual merit increases and staff additions, and higher information technology related expenses, partially offset by lower professional fees and marketing related expenses for the second quarter of 2024. Total noninterest expense for the second quarter of 2024 increased to $28.2 million, compared to $25.0 million for the second quarter of 2023, primarily due to higher salaries and employee benefits, rent expense included in occupancy and equipment, and information technology related expenses included in other noninterest expense.
- Total noninterest expense for the first six months of 2024 increased to $55.7 million, compared to $50.4 million for the first six months of 2023, primarily due to higher salaries and employee benefits, and information technology related expenses, homeowner association vendor payments, regulatory assessments, and ICS/CDARS fee expense included in other noninterest expense.
- Full time equivalent employees were 353 at June 30, 2024, compared to 351 at March 31, 2024, and 347 at June 30, 2023.
- The efficiency ratio increased to 67.55% for the second quarter of 2024, compared to 65.34% for the first quarter of 2024, and 51.67% for the second quarter of 2023. The efficiency ratio increased to 66.44% for the six months ended June 30, 2024 compared to 50.20% for the six months ended June 30, 2023. The increase in the efficiency ratio for the second quarter of 2024 and six months ended June 30, 2024 was due to both higher noninterest expense and lower net revenue. The efficiency ratio is a non-GAAP financial measure.
Income Tax Expense:
- Income tax expense was $3.8 million for the second quarter of 2024, compared to $4.3 million for the first quarter of 2024, and $6.7 million for the second quarter of 2023. The effective tax rate for the second quarter of 2024 was 29.4%, compared to 29.5% for the first quarter of 2024, and 29.0% for the second quarter of 2023.
- Income tax expense for the six months ended June 30, 2024 was $8.1 million, compared to $14.4 million for the six months ended June 30, 2023. The effective tax rate for six months ended June 30, 2024 was 29.4%, compared to 28.9% for the six months ended June 30, 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 June 30, 2024:
| LIQUIDITY AND AVAILABLE LINES OF CREDIT | | Total | | | | Remaining |
| (in $000’s, unaudited) | | Available | | Outstanding | | Available |
| Excess funds at the Federal Reserve Bank ("FRB") | | $ | 589,600 | | $ | — | | $ | 589,600 |
| FRB discount window collateralized line of credit | | | 1,404,998 | | | — | | | 1,404,998 |
| Federal Home Loan Bank collateralized borrowing capacity | | | 792,027 | | | — | | | 792,027 |
| Unpledged investment securities (at fair value) | | | 52,319 | | | — | | | 52,319 |
| Federal funds purchase arrangements | | | 90,000 | | | — | | | 90,000 |
| Holding company line of credit | | | 20,000 | | | — | | | 20,000 |
| Total | | $ | 2,948,944 | | $ | — | | $ | 2,948,944 |
| • | The Company’s total available liquidity and borrowing capacity was $3.0 billion at both June 30, 2024 and March 31, 2024, and $3.1 billion at June 30, 2023. |
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| • | The available liquidity and borrowing capacity was 66% of the Company’s total deposits and approximately 148% of the Bank’s estimated uninsured deposits at June 30, 2024. The available liquidity and borrowing capacity was 67% of the Company’s total deposits and approximately 149% of the Bank’s estimated uninsured deposits at March 31, 2024. The available liquidity and borrowing capacity was 69% of the Company’s total deposits and approximately 145% of the Bank’s estimated uninsured deposits at June 30, 2023. |
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| • | The loan to deposit ratio was 76.04% at June 30, 2024, compared to 75.06% at March 31, 2024, and 73.07% at June 30, 2023. |
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- Total assets remained flat at $5.3 billion at June 30, 2024, March 31, 2024, and June 30, 2023.
Investment Securities:
- Investment securities totaled $894.2 million at June 30, 2024, of which $273.0 million were in the securities available-for-sale portfolio (at fair value), and $621.2 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 $527.4 million at June 30, 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 | | June 30, | | March 31, | | June 30, |
| (in $000’s, unaudited) | | 2024 | | 2024 | | 2023 |
| Balance (at fair value): | | | | | | | | | |
| U.S. Treasury | | $ | 218,682 | | | $ | 347,453 | | | $ | 421,146 | |
| Agency mortgage-backed securities | | | 54,361 | | | | 57,021 | | | | 64,912 | |
| Total | | $ | 273,043 | | | $ | 404,474 | | | $ | 486,058 | |
| | | | | | | | | |
| Pre-tax unrealized (loss): | | | | | | | | | |
| U.S. Treasury | | $ | (3,578 | ) | | $ | (4,784 | ) | | $ | (10,903 | ) |
| Agency mortgage-backed securities | | | (4,815 | ) | | | (4,895 | ) | | | (5,659 | ) |
| Total | | $ | (8,393 | ) | | $ | (9,679 | ) | | $ | (16,562 | ) |
| | | | | | | | | |
| Weighted average life (years) | | | 1.39 | | | | 1.15 | | | | 1.64 | |
| • | The pre-tax unrealized loss on the securities available-for-sale portfolio was ($8.4) million, or ($6.0) million net of taxes, which equaled 1% of total shareholders’ equity at June 30, 2024. |
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| • | The reduction in the securities available-for-sale portfolios was due to maturities and not due to any securities sold since June 30, 2023. |
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- 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 | | June 30, | | March 31, | | June 30, |
| (in $000’s, unaudited) | | 2024 | | 2024 | | 2023 |
| Balance (at amortized cost): | | | | | | | | | |
| Agency mortgage-backed securities | | $ | 589,386 | | | $ | 604,458 | | | $ | 648,337 | |
| Municipals — exempt from Federal tax(1) | | | 31,804 | | | | 31,803 | | | | 33,771 | |
| Total(1) | | $ | 621,190 | | | $ | 636,261 | | | $ | 682,108 | |
| | | | | | | | | |
| Pre-tax unrecognized (loss): | | | | | | | | | |
| Agency mortgage-backed securities | | $ | (92,058 | ) | | $ | (92,332 | ) | | $ | (95,285 | ) |
| Municipals — exempt from Federal tax | | | (1,694 | ) | | | (1,071 | ) | | | (1,052 | ) |
| Total | | $ | (93,752 | ) | | $ | (93,403 | ) | | $ | (96,337 | ) |
| | | | | | | | | |
| Allowance for credit losses on municipal securities | | $ | (12 | ) | | $ | (12 | ) | | $ | (13 | ) |
| | | | | | | | | |
| Weighted average life (years) | | | 6.57 | | | | 6.59 | | | | 7.12 | |
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| (1) | | Gross of the allowance for credit losses of ($12,000) at both June 30, 2024, and March 31, 2024, and ($13,000) at June 30, 2023. |
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| • | The pre-tax unrecognized loss on the securities held-to-maturity portfolio was ($93.8) million, or ($66.0) million net of taxes, which equaled 10% of total shareholders’ equity at June 30, 2024. |
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| • | The weighted average life of the securities held-to-maturity portfolio was 6.57 years at June 30, 2024, which includes Community Reinvestment Act mortgage-backed securities with longer maturities. |
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- The unrealized and unrecognized losses in both the available-for-sale and held-to-maturity portfolios were due to higher interest rates at June 30, 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 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 | | | | backed and | | |
| PAYDOWNS & MATURITIES | | U.S. | | Municipal | | |
| (in $000’s, unaudited) | | Treasury | | Securities | | Total |
| Third quarter of 2024 | | $ | 37,500 | | $ | 21,455 | | $ | 58,955 |
| Fourth quarter of 2024 | | | 9,000 | | | 19,436 | | | 28,436 |
| First quarter of 2025 | | | 35,000 | | | 18,847 | | | 53,847 |
| Second quarter of 2025 | | | 118,000 | | | 18,379 | | | 136,379 |
| Third quarter of 2025 | | | 25,500 | | | 19,585 | | | 45,085 |
| Fourth quarter of 2025 | | | — | | | 18,039 | | | 18,039 |
| First quarter of 2026 | | | — | | | 17,341 | | | 17,341 |
| Second quarter of 2026 | | | — | | | 16,630 | | | 16,630 |
| Total | | $ | 225,000 | | $ | 149,712 | | $ | 374,712 |
| | | | | | | | | |
| • | The weighted average life of the total investment securities portfolio was 4.95 years at June 30, 2024, compared to 4.44 years at March 31, 2024, and 4.79 years at June 30, 2023. |
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| • | The increase in the weighted average life of the total investment securities portfolio at June 30, 2024 was due to short-term securities maturing. |
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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 | | June 30, 2024 | | March 31, 2024 | | June 30, 2023 | |
| (in $000’s, unaudited) | | Balance | | % to Total | | Balance | | % to Total | | Balance | | % to Total | |
| Commercial | | $ | 477,929 | | | 14 | % | $ | 452,231 | | | 14 | % | $ | 466,354 | | | 14 | % |
| Real estate: | | | | | | | | | | | | | | | | |
| CRE(1) - owner occupied | | | 594,504 | | | 18 | % | | 585,031 | | | 17 | % | | 608,031 | | | 18 | % |
| CRE(1) - non-owner occupied | | | 1,283,323 | | | 38 | % | | 1,271,184 | | | 38 | % | | 1,147,313 | | | 35 | % |
| Land and construction | | | 125,374 | | | 4 | % | | 129,712 | | | 4 | % | | 162,816 | | | 5 | % |
| Home equity | | | 126,562 | | | 4 | % | | 122,794 | | | 4 | % | | 128,009 | | | 4 | % |
| Multifamily | | | 268,968 | | | 8 | % | | 269,263 | | | 8 | % | | 244,959 | | | 7 | % |
| Residential mortgages | | | 484,809 | | | 14 | % | | 490,035 | | | 15 | % | | 514,064 | | | 16 | % |
| Consumer and other | | | 18,758 | | | < 1 | % | | 16,439 | | | < 1 | % | | 17,635 | | | 1 | % |
| Total Loans | | | 3,380,227 | | | 100 | % | | 3,336,689 | | | 100 | % | | 3,289,181 | | | 100 | % |
| Deferred loan costs (fees), net | | | (434 | ) | | — | | | (587 | ) | | — | | | (397 | ) | | — | |
| Loans, net of deferred costs and fees | | $ | 3,379,793 | | | 100 | % | $ | 3,336,102 | | | 100 | % | $ | 3,288,784 | | | 100 | % |
| (1) | | Commercial Real Estate | |
| • | Loans, excluding loans held-for-sale, increased $43.7 million, or 1%, to $3.4 billion at June 30, 2024, compared to $3.3 billion at March 31, 2024, and increased $91.0 million, or 3%, from $3.3 billion at June 30, 2023. Loans, excluding residential mortgages, increased $48.9 million, or 2%, to $2.89 billion at June 30, 2024, compared to $2.85 billion at March 31, 2024, and increased $120.3 million, or 4%, from $2.77 billion at June 30, 2023. |
| | | | |
| • | Commercial and industrial line utilization was 31% at June 30, 2024, compared to 28% at March 31, 2024, and 29% at June 30, 2023. |
| | | | |
| • | CRE loans totaled $1.9 billion at June 30, 2024, of which 32% were owner occupied and 68% were investor CRE loans. There was also 32% of the CRE loan portfolio secured by owner occupied real estate at March 31, 2024, and 35% at June 30, 2023. |
| | | | |
| | | • | During the second quarter of 2024, there were 32 new owner occupied and non-owner occupied CRE loans originated totaling $47 million with a weighted average loan-to-value (“LTV”) of 39%; the weighted average debt-service coverage ratio (“DSCR”) for the non-owner occupied portfolio was 2.61 times. |
| | | | |
| | | • | The average loan size for all CRE loans was $1.6 million, and the average loan size for office CRE loans was also $1.6 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 $403 million, including 32 loans totaling approximately $74 million in San Jose, 21 loans totaling approximately $27 million in San Francisco, and eight loans totaling approximately $16 million, in Oakland, at June 30, 2024. Non-owner occupied CRE with office exposure totaled $312 million at June 30, 2024. |
| | | | |
| | | • | At June 30, 2024, the weighted average LTV and DSCR for the entire non-owner occupied office portfolio were 41.8% and 1.78 times, respectively. |
| | | | |
| | | • | Total medical/dental office exposure in the non-owner occupied CRE portfolio consisted of 15 loans totaling $12.6 million, with a weighted average LTV and DSCR of 37.8% and 2.39 times, respectively, at June 30, 2024. |
| | | | |
| | | • | The following table presents the weighted average LTV and DSCR by collateral type for CRE loans at June 30, 2024: |
| | CRE - Non-owner Occupied | | CRE - Owner Occupied | | Total CRE |
| Collateral Type | | Outstanding | | LTV | | DSCR | | Outstanding | | LTV | | Outstanding | | LTV |
| Retail | | | 25 | % | | | 38.3 | % | | | 1.93 | | | | 16 | % | | | 46.3 | % | | | 23 | % | | | 39.8 | % |
| Industrial | | | 19 | % | | | 40.0 | % | | | 2.39 | | | | 32 | % | | | 42.7 | % | | | 23 | % | | | 41.0 | % |
| Mixed-Use, Special | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Purpose and Other | | | 18 | % | | | 41.7 | % | | | 1.91 | | | | 35 | % | | | 40.6 | % | | | 22 | % | | | 41.2 | % |
| Office | | | 20 | % | | | 41.8 | % | | | 1.78 | | | | 17 | % | | | 43.7 | % | | | 19 | % | | | 42.3 | % |
| Multifamily | | | 17 | % | | | 42.4 | % | | | 1.94 | | | | 0 | % | | | 0.0 | % | | | 13 | % | | | 42.4 | % |
| Hotel/Motel | | | 1 | % | | | 16.5 | % | | | 1.44 | | | | 0 | % | | | 0.0 | % | | | < 1 | % | | | 16.5 | % |
| Total | | | 100 | % | | | 40.5 | % | | | 1.99 | | | | 100 | % | | | 42.7 | % | | | 100 | % | | | 41.1 | % |
| • | The following table presents the weighted average LTV and DSCR by county for CRE loans at June 30, 2024: |
| | CRE - Non-owner Occupied | | CRE - Owner Occupied | | Total CRE |
| County | | Outstanding | | LTV | | DSCR | | Outstanding | | LTV | | Outstanding | | LTV |
| Santa Clara | | | 24 | % | | | 38.1 | % | | | 2.24 | | | | 34 | % | | | 40.4 | % | | | 27 | % | | | 38.9 | % |
| Alameda | | | 25 | % | | | 44.4 | % | | | 1.92 | | | | 18 | % | | | 44.0 | % | | | 23 | % | | | 44.3 | % |
| San Mateo | | | 10 | % | | | 36.9 | % | | | 2.20 | | | | 15 | % | | | 39.8 | % | | | 12 | % | | | 38.0 | % |
| Out of Area | | | 9 | % | | | 42.6 | % | | | 2.16 | | | | 9 | % | | | 50.6 | % | | | 9 | % | | | 44.9 | % |
| San Francisco | | | 9 | % | | | 37.4 | % | | | 1.44 | | | | 4 | % | | | 38.8 | % | | | 8 | % | | | 37.6 | % |
| Contra Costa | | | 7 | % | | | 42.0 | % | | | 1.73 | | | | 8 | % | | | 48.1 | % | | | 7 | % | | | 43.8 | % |
| Marin | | | 7 | % | | | 46.6 | % | | | 1.94 | | | | 2 | % | | | 53.1 | % | | | 5 | % | | | 47.1 | % |
| Sonoma | | | 2 | % | | | 41.0 | % | | | 2.22 | | | | 2 | % | | | 43.3 | % | | | 2 | % | | | 41.5 | % |
| Santa Cruz | | | 2 | % | | | 33.3 | % | | | 1.74 | | | | 1 | % | | | 45.7 | % | | | 2 | % | | | 35.2 | % |
| Monterey | | | 2 | % | | | 44.2 | % | | | 1.85 | | | | 2 | % | | | 39.9 | % | | | 2 | % | | | 42.8 | % |
| San Benito | | | 1 | % | | | 35.1 | % | | | 2.14 | | | | 3 | % | | | 39.4 | % | | | 2 | % | | | 37.3 | % |
| Solano | | | 1 | % | | | 32.2 | % | | | 1.98 | | | | 1 | % | | | 35.5 | % | | | 1 | % | | | 33.0 | % |
| Napa | | | 1 | % | | | 29.4 | % | | | 2.24 | | | | 1 | % | | | 52.3 | % | | | < 1 | % | | | 37.3 | % |
| Total | | | 100 | % | | | 40.5 | % | | | 1.99 | | | | 100 | % | | | 42.7 | % | | | 100 | % | | | 41.1 | % |
|
- The following table presents the maturity distribution of the Company’s loans, excluding loans held-for-sale, as of June 30, 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 as reflected in the Western Edition of The Wall Street Journal, 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 | | $ | 365,849 | | 40 | % | | $ | 270,487 | | 30 | % | | $ | 267,524 | | 30 | % | | $ | 903,860 |
| Loans with fixed interest rates | | | 89,027 | | 4 | % | | | 693,576 | | 28 | % | | | 1,693,764 | | 68 | % | | | 2,476,367 |
| Loans | | $ | 454,876 | | 13 | % | | $ | 964,063 | | 29 | % | | $ | 1,961,288 | | 58 | % | | $ | 3,380,227 |
| • | At June 30, 2024, approximately 27% of the Company’s loan portfolio consisted of floating interest rate loans, compared to 26% at March 31, 2024, and 29% at June 30, 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 Six Months Ended: | |
| ALLOWANCE FOR CREDIT LOSSES ON LOANS | | June 30, | | March 31, | | June 30, | | June 30, | | June 30, | |
| (in $000’s, unaudited) | | 2024 | | 2024 | | 2023 | | 2024 | | 2023 | |
| Balance at beginning of period | | $ | 47,888 | | | $ | 47,958 | | | $ | 47,273 | | | $ | 47,958 | | | $ | 47,512 | | |
| Charge-offs during the period | | | (510 | ) | | | (358 | ) | | | (24 | ) | | | (868 | ) | | | (404 | ) | |
| Recoveries during the period | | | 105 | | | | 104 | | | | 294 | | | | 209 | | | | 403 | | |
| Net (charge-offs) recoveries during the period | | | (405 | ) | | | (254 | ) | | | 270 | | | | (659 | ) | | | (1 | ) | |
| Provision for credit losses on loans during the period | | | 471 | | | | 184 | | | | 260 | | | | 655 | | | | 292 | | |
| Balance at end of period | | $ | 47,954 | | | $ | 47,888 | | | $ | 47,803 | | | $ | 47,954 | | | $ | 47,803 | | |
| | | | | | | | | | | | | | | | |
| Total loans, net of deferred fees | | $ | 3,379,793 | | | $ | 3,336,102 | | | $ | 3,288,784 | | | $ | 3,379,793 | | | $ | 3,288,784 | | |
| Total nonperforming loans | | $ | 6,030 | | | $ | 7,871 | | | $ | 5,537 | | | $ | 6,030 | | | $ | 5,537 | | |
| ACLL to total loans | | | 1.42 | | % | | 1.44 | | % | | 1.45 | | % | | 1.42 | | % | | 1.45 | | % |
| ACLL to total nonperforming loans | | | 795.26 | | % | | 608.41 | | % | | 863.34 | | % | | 795.26 | | % | | 863.34 | | % |
| • | Net charge-offs of $405,000 for the second quarter of 2024 primarily consisted of $412,000 in advances associated with past due factored receivables at Bay View Funding due from a municipality. |
| | |
| • | The following table shows the drivers of change in ACLL for the first and second 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 | |
|
- The following is a breakout of nonperforming assets (“NPAs”) at the dates indicated:
| NONPERFORMING ASSETS | | June 30, 2024 | | March 31, 2024 | | June 30, 2023 | |
| (in $000’s, unaudited) | | Balance | | % of Total | | Balance | | % of Total | | Balance | | % of Total | |
| Land and construction loans | | $ | 4,774 | | 79 | % | $ | 4,673 | | 59 | % | $ | — | | 0 | % |
| Commercial loans | | | 900 | | 15 | % | | 1,127 | | 14 | % | | 1,306 | | 23 | % |
| Loans over 90 days past due and still accruing | | | 248 | | 4 | % | | 1,951 | | 25 | % | | 2,262 | | 41 | % |
| Home equity and other loans | | | 108 | | 2 | % | | 120 | | 2 | % | | 96 | | 2 | % |
| Residential mortgages | | | — | | 0 | % | | — | | 0 | % | | 1,873 | | 34 | % |
| CRE loans | | | — | | 0 | % | | — | | 0 | % | | — | | 0 | % |
| Total nonperforming assets | | $ | 6,030 | | 100 | % | $ | 7,871 | | 100 | % | $ | 5,537 | | 100 | % |
| • | There were 10 borrowers included in NPAs totaling $6.0 million, or 0.11% of total assets, at June 30, 2024, compared to 13 borrowers totaling $7.9 million, or 0.15% of total assets at March 31, 2024, and 13 borrowers totaling $5.5 million, or 0.10% of total assets, at June 30, 2023. |
| | |
| • | There were no CRE loans included in NPAs at June 30, 2024, March 31, 2024, or June 30, 2023. |
| | |
| • | There were no foreclosed assets on the balance sheet at June 30, 2024, March 31, 2024, or June 30, 2023. |
| | |
| • | There were no Shared National Credits (“SNCs”) or material purchased participations included in NPAs or total loans at June 30, 2024, March 31, 2024, or June 30, 2023. |
| | |
- Classified assets totaled $33.6 million, or 0.64% of total assets, at June 30, 2024, compared to $35.4 million, or 0.67% of total assets, at March 31, 2024, and $30.5 million, or 0.57% of total assets, at June 30, 2023.
Deposits:
- The following table summarizes the distribution of deposits and the percentage of distribution in each category at the dates indicated:
| DEPOSITS | | June 30, 2024 | | March 31, 2024 | | June 30, 2023 | |
| (in $000’s, unaudited) | | Balance | | % to Total | | Balance | | % to Total | | Balance | | % to Total | |
| Demand, noninterest-bearing | | $ | 1,187,320 | | 27 | % | $ | 1,242,059 | | 28 | % | $ | 1,319,844 | | 29 | % |
| Demand, interest-bearing | | | 928,246 | | 21 | % | | 925,100 | | 21 | % | | 1,064,638 | | 24 | % |
| Savings and money market | | | 1,126,520 | | 25 | % | | 1,124,900 | | 25 | % | | 1,075,835 | | 24 | % |
| Time deposits — under $250 | | | 39,046 | | 1 | % | | 38,105 | | 1 | % | | 44,520 | | 1 | % |
| Time deposits — $250 and over | | | 203,886 | | 4 | % | | 200,739 | | 4 | % | | 171,852 | | 4 | % |
| ICS/CDARS — interest-bearing demand, | | | | | | | | | | | | | | | | |
| money market and time deposits | | | 959,592 | | 22 | % | | 913,757 | | 21 | % | | 824,083 | | 18 | % |
| Total deposits | | $ | 4,444,610 | | 100 | % | $ | 4,444,660 | | 100 | % | $ | 4,500,772 | | 100 | % |
| • | Total deposits remained flat at $4.4 billion at both June 30, 2024 and March 31, 2024, and decreased ($56.2) million, or (1%) from $4.5 billion at June 30, 2023. |
| | |
| • | Average deposits increased to $4.39 billion for the second quarter of 2024, compared to $4.36 billion for the first quarter of 2024, and remained relatively flat compared to $4.42 billion for the second quarter of 2023. |
| | |
| • | Migration of client deposits into interest-bearing accounts resulted in an increase in ICS/CDARS deposits to $959.6 million at June 30, 2024, compared to $913.8 million at March 31, 2024, and $824.1 million at June 30, 2023. |
| | |
| • | Noninterest-bearing demand deposits decreased ($54.7) million, or (4%), to $1.19 billion at June 30, 2024 from $1.24 billion at March 31, 2024, and decreased ($132.5) million, or (10%), from $1.32 billion at June 30, 2023, largely in response to the increasing interest rate environment. |
| | |
| • | The Company had 25,033 deposit accounts at June 30, 2024, with an average balance of $178,000. At March 31, 2024, the Company had 24,730 deposit accounts, with an average balance of $180,000. At June 30, 2023, the Company had 24,404 deposit accounts, with an average balance of $187,000. |
| | |
| • | Deposits from the Bank’s top 100 client relationships, representing 21% of the total number of accounts, totaled $2.1 billion, representing 47% of total deposits, with an average account size of $388,000 at June 30, 2024. At March 31, 2024, deposits from the Bank’s top 100 client relationships, representing 22% of the total number of accounts, totaled $2.1 billion, representing 46% of total deposits, with an average account size of $384,000. At June 30, 2023, deposits from the Bank’s top 100 client relationships, representing 22% of the total number of accounts, totaled $2.1 billion, representing 47% of total deposits, with an average account size of $401,000. |
| | |
| • | The Bank’s uninsured deposits were approximately $1.99 billion, or 45% of the Company’s total deposits, at June 30, 2024, compared to $2.02 billion, or 45% of the Company’s total deposits, at March 31, 2024, and $2.15 billion, or 48% of the Company’s total deposits, at June 30, 2023. |
| | |
Capital Management:
- 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 June 30, 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 | | 10.2 | % | | 10.6 | % | | 5.0 | % | | 4.0 | % |
| Tangible common equity / tangible assets (2) | | 9.9 | % | | 10.3 | % | | 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 | | June 30, | | March 31, | | June 30, |
| (in $000’s, unaudited) | | 2024 | | 2024 | | 2023 |
| Unrealized loss on securities available-for-sale | | $ | (6,022 | ) | | $ | (6,936 | ) | | $ | (11,822 | ) |
| Split dollar insurance contracts liability | | | (2,913 | ) | | | (2,861 | ) | | | (3,187 | ) |
| Supplemental executive retirement plan liability | | | (2,856 | ) | | | (2,874 | ) | | | (2,352 | ) |
| Unrealized gain on interest-only strip from SBA loans | | | 76 | | | | 83 | | | | 103 | |
| Total accumulated other comprehensive loss | | $ | (11,715 | ) | | $ | (12,588 | ) | | $ | (17,258 | ) |
| | | | | | | | | |
- Tangible common equity was $504.0 million at June 30, 2024, compared to $500.6 million at March 31, 2024, and $476.2 million at June 30, 2023. Tangible book value per share was $8.22 at June 30, 2024, compared to $8.17 at March 31, 2024, and $7.80 at June 30, 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 perform 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 are 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 March 31, 2024, and the following: (1) factors that affect our liquidity and our ability to meet client demands for deposit withdrawals, including our cash on hand and the availability of funds from our lines of credit; (2) media items and consumer confidence as those factors affect depositors’ confidence in the banking system generally and in our bank specifically; (3) factors that affect the value and liquidity of our investment portfolios, particularly the values of securities available-for-sale; (4) market fluctuations that affect the costs we pay for sources of funding, including the interest we pay on deposits and loans; (5) effects of and changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Federal Open Market Committee of the Federal Reserve Board and other factors that affect market interest rates generally; (6) our ability to estimate accurately, and to establish adequate reserves against, the risk of loss associated with our loan and lease portfolio; (7) events and circumstances that affect our borrowers' financial condition, results of operations and cash flows, which may, during periods of economic uncertainty or decline, adversely affect those borrowers' ability to repay our loans timely and in full, or to comply with their other obligations under our loan agreements with those clients; (8) factors that affect the relative strength or weakness of loan guarantees and the ability of the guarantors to fulfill the obligations of their guaranty agreements; (9) geopolitical and domestic political developments, including recent, current and potential future wars and international and multinational conflicts, acts of terrorism, insurrection, piracy and civil unrest, and events reflecting or resulting from social instability, any of which can increase levels of political and economic unpredictability, contribute to rising energy and commodity prices, can affect the physical security of our assets and the assets of our Clients, and which may increase the volatility of financial markets; (10) current and future economic and market conditions in the United States generally or in the communities we serve, including the effects of declines in property values and overall slowdowns in economic growth should these events occur; (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) changes in the level of nonperforming assets and charge offs and other credit quality measures, and their impact on the adequacy of our allowance for credit losses and our provision for credit losses; (13) volatility in credit and equity markets and its effect on the global economy; (14) conditions relating to the impact of recent and potential future pandemics, epidemics and other infectious illness outbreaks that may arise in the future, on our Clients, employees, businesses, liquidity, financial results and overall condition including severity and duration of the associated uncertainties in U.S. and global markets; (15) our ability to compete effectively with other banks and financial services companies and the effects of competition in the financial services industry on our business; (16) our ability to achieve loan growth and attract deposits in our market area; (17) risks associated with concentrations in real estate related loans; (18) the relative strength or weakness of the commercial and real estate markets where our borrowers are located, including related vacancy rates, and asset and market prices; (19) 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; (20) regulatory limits and practical factors that affect Heritage Bank of Commerce’s ability to pay dividends to the Company; (21) 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; (22) our inability to attract, recruit, and retain qualified officers and other personnel could harm our ability to implement our strategic plan, impair our relationships with Clients and adversely affect our business, results of operations and growth prospects; (23) possible adjustment of the valuation of our deferred tax assets or of the goodwill associated with previous acquisitions; (24) our ability to keep pace with technological changes, including our ability to identify and address cyber-security 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 or third party vendors or service providers; (25) inability of our framework to manage risks associated with our business, including operational risk and credit risk; (26) risks of loss of funding of the Small Business Administration (“SBA”) or SBA loan programs, or changes in those programs; (27) compliance with applicable laws and governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities, accounting and tax matters; (28) effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; (29) the expense and uncertain resolution of litigation matters whether occurring in the ordinary course of business or otherwise; (30) availability of and competition for acquisition opportunities; (31) 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; (32) risks of natural disasters (including earthquakes, fires, and flooding) and other events beyond our control; (33) actions taken, planned, or announced by federal, state, regional and local governments in response to the occurrence or threat of any of the foregoing; and (34) our success in managing the risks involved in the foregoing factors.
Member FDIC
For additional information, contact:
Debbie Reuter
EVP, Corporate Secretary
Direct: (408) 494-4542
[email protected]
| | For the Quarter Ended: | | | Percent Change From: | | | For the Six Months Ended: |
| CONSOLIDATED INCOME STATEMENTS | | June 30, | | | March 31, | | | June 30, | | | March 31, | | June 30, | | | June 30, | | | June 30, | | | Percent | |
| (in $000’s, unaudited) | | 2024 | | | 2024 | | | 2023 | | | 2024 | | 2023 | | | 2024 | | | 2023 | | | Change | |
| Interest income | | $ | 59,077 | | | $ | 57,551 | | | $ | 58,341 | | | 3 | | % | 1 | | % | | $ | 116,628 | | | $ | 114,615 | | | 2 | | % |
| Interest expense | | | 19,622 | | | | 17,458 | | | | 12,048 | | | 12 | | % | 63 | | % | | | 37,080 | | | | 19,064 | | | 95 | | % |
| Net interest income before provision | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| for credit losses on loans | | | 39,455 | | | | 40,093 | | | | 46,293 | | | (2 | ) | % | (15 | ) | % | | | 79,548 | | | | 95,551 | | | (17 | ) | % |
| Provision for credit losses on loans | | | 471 | | | | 184 | | | | 260 | | | 156 | | % | 81 | | % | | | 655 | | | | 292 | | | 124 | | % |
| Net interest income after provision | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| for credit losses on loans | | | 38,984 | | | | 39,909 | | | | 46,033 | | | (2 | ) | % | (15 | ) | % | | | 78,893 | | | | 95,259 | | | (17 | ) | % |
| Noninterest income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Service charges and fees on deposit | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| accounts | | | 891 | | | | 877 | | | | 901 | | | 2 | | % | (1 | ) | % | | | 1,768 | | | | 2,644 | | | (33 | ) | % |
| Increase in cash surrender value of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| life insurance | | | 521 | | | | 518 | | | | 502 | | | 1 | | % | 4 | | % | | | 1,039 | | | | 995 | | | 4 | | % |
| Gain on proceeds from company-owned | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| life insurance | | | 219 | | | | — | | | | — | | | N/A | | | N/A | | | | | 219 | | | | — | | | N/A | | |
| Termination fees | | | 100 | | | | 13 | | | | — | | | 669 | | % | N/A | | | | | 113 | | | | 11 | | | 927 | | % |
| Servicing income | | | 90 | | | | 90 | | | | 104 | | | 0 | | % | (13 | ) | % | | | 180 | | | | 235 | | | (23 | ) | % |
| Gain on sales of SBA loans | | | 76 | | | | 178 | | | | 199 | | | N/A | | | (62 | ) | % | | | 254 | | | | 275 | | | (8 | ) | % |
| Other | | | 379 | | | | 371 | | | | 368 | | | 2 | | % | 3 | | % | | | 750 | | | | 680 | | | 10 | | % |
| Total noninterest income | | | 2,276 | | | | 2,047 | | | | 2,074 | | | 11 | | % | 10 | | % | | | 4,323 | | | | 4,840 | | | (11 | ) | % |
| Noninterest expense: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 15,794 | | | | 15,509 | | | | 13,987 | | | 2 | | % | 13 | | % | | | 31,303 | | | | 28,796 | | | 9 | | % |
| Occupancy and equipment | | | 2,689 | | | | 2,443 | | | | 2,422 | | | 10 | | % | 11 | | % | | | 5,132 | | | | 4,822 | | | 6 | | % |
| Professional fees | | | 1,072 | | | | 1,327 | | | | 1,149 | | | (19 | ) | % | (7 | ) | % | | | 2,399 | | | | 2,548 | | | (6 | ) | % |
| Other | | | 8,633 | | | | 8,257 | | | | 7,433 | | | 5 | | % | 16 | | % | | | 16,890 | | | | 14,226 | | | 19 | | % |
| Total noninterest expense | | | 28,188 | | | | 27,536 | | | | 24,991 | | | 2 | | % | 13 | | % | | | 55,724 | | | | 50,392 | | | 11 | | % |
| Income before income taxes | | | 13,072 | | | | 14,420 | | | | 23,116 | | | (9 | ) | % | (43 | ) | % | | | 27,492 | | | | 49,707 | | | (45 | ) | % |
| Income tax expense | | | 3,838 | | | | 4,254 | | | | 6,713 | | | (10 | ) | % | (43 | ) | % | | | 8,092 | | | | 14,387 | | | (44 | ) | % |
| Net income | | $ | 9,234 | | | $ | 10,166 | | | $ | 16,403 | | | (9 | ) | % | (44 | ) | % | | $ | 19,400 | | | $ | 35,320 | | | (45 | ) | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| PER COMMON SHARE DATA | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.15 | | | $ | 0.17 | | | $ | 0.27 | | | (12 | ) | % | (44 | ) | % | | $ | 0.32 | | | $ | 0.58 | | | (45 | ) | % |
| Diluted earnings per share | | $ | 0.15 | | | $ | 0.17 | | | $ | 0.27 | | | (12 | ) | % | (44 | ) | % | | $ | 0.32 | | | $ | 0.58 | | | (45 | ) | % |
| Weighted average shares outstanding - basic | | | 61,279,914 | | | | 61,186,623 | | | | 61,035,435 | | | 0 | | % | 0 | | % | | | 61,233,269 | | | | 60,971,828 | | | 0 | | % |
| Weighted average shares outstanding - diluted | | | 61,438,088 | | | | 61,470,552 | | | | 61,266,059 | | | 0 | | % | 0 | | % | | | 61,446,484 | | | | 61,242,177 | | | 0 | | % |
| Common shares outstanding at period-end | | | 61,292,094 | | | | 61,253,625 | | | | 61,091,155 | | | 0 | | % | 0 | | % | | | 61,292,094 | | | | 61,091,155 | | | 0 | | % |
| Dividend per share | | $ | 0.13 | | | $ | 0.13 | | | $ | 0.13 | | | 0 | | % | 0 | | % | | $ | 0.26 | | | $ | 0.26 | | | 0 | | % |
| Book value per share | | $ | 11.08 | | | $ | 11.04 | | | $ | 10.70 | | | 0 | | % | 4 | | % | | $ | 11.08 | | | $ | 10.70 | | | 4 | | % |
| Tangible book value per share(1) | | $ | 8.22 | | | $ | 8.17 | | | $ | 7.80 | | | 1 | | % | 5 | | % | | $ | 8.22 | | | $ | 7.80 | | | 5 | | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| KEY FINANCIAL RATIOS | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Annualized return on average equity | | | 5.50 | | % | | 6.08 | | % | | 10.12 | | % | (10 | ) | % | (46 | ) | % | | | 5.79 | | % | | 11.06 | | % | (48 | ) | % |
| Annualized return on average tangible | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| common equity(1) | | | 7.43 | | % | | 8.24 | | % | | 13.93 | | % | (10 | ) | % | (47 | ) | % | | | 7.84 | | % | | 15.29 | | % | (49 | ) | % |
| Annualized return on average assets | | | 0.71 | | % | | 0.79 | | % | | 1.25 | | % | (10 | ) | % | (43 | ) | % | | | 0.75 | | % | | 1.35 | | % | (44 | ) | % |
| Annualized return on average tangible assets(1) | | | 0.74 | | % | | 0.82 | | % | | 1.29 | | % | (10 | ) | % | (43 | ) | % | | | 0.78 | | % | | 1.40 | | % | (44 | ) | % |
| Net interest margin (FTE)(1) | | | 3.26 | | % | | 3.34 | | % | | 3.76 | | % | (2 | ) | % | (13 | ) | % | | | 3.30 | | % | | 3.92 | | % | (16 | ) | % |
| Efficiency ratio(1) | | | 67.55 | | % | | 65.34 | | % | | 51.67 | | % | 3 | | % | 31 | | % | | | 66.44 | | % | | 50.20 | | % | 32 | | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| AVERAGE BALANCES | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in $000’s, unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average assets | | $ | 5,213,171 | | | $ | 5,178,636 | | | $ | 5,278,243 | | | 1 | | % | (1 | ) | % | | $ | 5,195,903 | | | $ | 5,256,993 | | | (1 | ) | % |
| Average tangible assets(1) | | $ | 5,037,673 | | | $ | 5,002,597 | | | $ | 5,100,399 | | | 1 | | % | (1 | ) | % | | $ | 5,020,134 | | | $ | 5,078,851 | | | (1 | ) | % |
| Average earning assets | | $ | 4,872,449 | | | $ | 4,842,279 | | | $ | 4,948,397 | | | 1 | | % | (2 | ) | % | | $ | 4,857,364 | | | $ | 4,921,850 | | | (1 | ) | % |
| Average loans held-for-sale | | $ | 1,503 | | | $ | 2,749 | | | $ | 4,166 | | | (45 | ) | % | (64 | ) | % | | $ | 2,126 | | | $ | 3,764 | | | (44 | ) | % |
| Average total loans | | $ | 3,328,358 | | | $ | 3,297,240 | | | $ | 3,227,175 | | | 1 | | % | 3 | | % | | $ | 3,312,799 | | | $ | 3,250,541 | | | 2 | | % |
| Average deposits | | $ | 4,394,545 | | | $ | 4,360,150 | | | $ | 4,424,041 | | | 1 | | % | (1 | ) | % | | $ | 4,377,347 | | | $ | 4,420,019 | | | (1 | ) | % |
| Average demand deposits - noninterest-bearing | | $ | 1,127,145 | | | $ | 1,177,078 | | | $ | 1,368,373 | | | (4 | ) | % | (18 | ) | % | | $ | 1,152,111 | | | $ | 1,516,991 | | | (24 | ) | % |
| Average interest-bearing deposits | | $ | 3,267,400 | | | $ | 3,183,072 | | | $ | 3,055,668 | | | 3 | | % | 7 | | % | | $ | 3,225,236 | | | $ | 2,903,028 | | | 11 | | % |
| Average interest-bearing liabilities | | $ | 3,306,972 | | | $ | 3,222,603 | | | $ | 3,157,722 | | | 3 | | % | 5 | | % | | $ | 3,264,788 | | | $ | 2,997,119 | | | 9 | | % |
| Average equity | | $ | 675,108 | | | $ | 672,292 | | | $ | 650,240 | | | 0 | | % | 4 | | % | | $ | 673,700 | | | $ | 643,954 | | | 5 | | % |
| Average tangible common equity(1) | | $ | 499,610 | | | $ | 496,253 | | | $ | 472,396 | | | 1 | | % | 6 | | % | | $ | 497,931 | | | $ | 465,812 | | | 7 | | % |
| |
| (1) | | This is a non-GAAP financial measure. |
| | | |
| | For the Quarter Ended: | |
| CONSOLIDATED INCOME STATEMENTS | | June 30, | | March 31, | | December 31, | | September 30, | | June 30, | |
| (in $000’s, unaudited) | | 2024 | | 2024 | | 2023 | | 2023 | | 2023 | |
| Interest income | | $ | 59,077 | | $ | 57,551 | | $ | 58,892 | | $ | 60,791 | | $ | 58,341 | |
| Interest expense | | | 19,622 | | | 17,458 | | | 16,591 | | | 15,419 | | | 12,048 | |
| Net interest income before provision | | | | | | | | | | | | | | | | |
| for credit losses on loans | | | 39,455 | | | 40,093 | | | 42,301 | | | 45,372 | | | 46,293 | |
| Provision for credit losses on loans | | | 471 | | | 184 | | | 289 | | | 168 | | | 260 | |
| Net interest income after provision | | | | | | | | | | | | | | | | |
| for credit losses on loans | | | 38,984 | | | 39,909 | | | 42,012 | | | 45,204 | | | 46,033 | |
| Noninterest income: | | | | | | | | | | | | | | | | |
| Service charges and fees on deposit | | | | | | | | | | | | | | | | |
| accounts | | | 891 | | | 877 | | | 838 | | | 859 | | | 901 | |
| Increase in cash surrender value of | | | | | | | | | | | | | | | | |
| life insurance | | | 521 | | | 518 | | | 519 | | | 517 | | | 502 | |
| Gain on proceeds from company-owned | | | | | | | | | | | | | | | | |
| life insurance | | | 219 | | | — | | | 25 | | | 100 | | | — | |
| Termination fees | | | 100 | | | 13 | | | 25 | | | 118 | | | — | |
| Servicing income | | | 90 | | | 90 | | | 103 | | | 62 | | | 104 | |
| Gain on sales of SBA loans | | | 76 | | | 178 | | | — | | | 207 | | | 199 | |
| Other | | | 379 | | | 371 | | | 432 | | | 353 | | | 368 | |
| Total noninterest income | | | 2,276 | | | 2,047 | | | 1,942 | | | 2,216 | | | 2,074 | |
| Noninterest expense: | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 15,794 | | | 15,509 | | | 13,919 | | | 14,147 | | | 13,987 | |
| Occupancy and equipment | | | 2,689 | | | 2,443 | | | 2,367 | | | 2,301 | | | 2,422 | |
| Professional fees | | | 1,072 | | | 1,327 | | | 1,085 | | | 717 | | | 1,149 | |
| Other | | | 8,633 | | | 8,257 | | | 8,120 | | | 8,006 | | | 7,433 | |
| Total noninterest expense | | | 28,188 | | | 27,536 | | | 25,491 | | | 25,171 | | | 24,991 | |
| Income before income taxes | | | 13,072 | | | 14,420 | | | 18,463 | | | 22,249 | | | 23,116 | |
| Income tax expense | | | 3,838 | | | 4,254 | | | 5,135 | | | 6,454 | | | 6,713 | |
| Net income | | $ | 9,234 | | $ | 10,166 | | $ | 13,328 | | $ | 15,795 | | $ | 16,403 | |
| | | | | | | | | | | | | | | | |
| PER COMMON SHARE DATA | | | | | | | | | | | | | | | | |
| (unaudited) | | | | | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.15 | | $ | 0.17 | | $ | 0.22 | | $ | 0.26 | | $ | 0.27 | |
| Diluted earnings per share | | $ | 0.15 | | $ | 0.17 | | $ | 0.22 | | $ | 0.26 | | $ | 0.27 | |
| Weighted average shares outstanding - basic | | | 61,279,914 | | | 61,186,623 | | | 61,118,485 | | | 61,093,289 | | | 61,035,435 | |
| Weighted average shares outstanding - diluted | | | 61,438,088 | | | 61,470,552 | | | 61,412,816 | | | 61,436,240 | | | 61,266,059 | |
| Common shares outstanding at period-end | | | 61,292,094 | | | 61,253,625 | | | 61,146,835 | | | 61,099,155 | | | 61,091,155 | |
| Dividend per share | | $ | 0.13 | | $ | 0.13 | | $ | 0.13 | | $ | 0.13 | | $ | 0.13 | |
| Book value per share | | $ | 11.08 | | $ | 11.04 | | $ | 11.00 | | $ | 10.83 | | $ | 10.70 | |
| Tangible book value per share(1) | | $ | 8.22 | | $ | 8.17 | | $ | 8.12 | | $ | 7.94 | | $ | 7.80 | |
| | | | | | | | | | | | | | | | |
| KEY FINANCIAL RATIOS | | | | | | | | | | | | | | | | |
| (unaudited) | | | | | | | | | | | | | | | | |
| Annualized return on average equity | | | 5.50 | % | | 6.08 | % | | 7.96 | % | | 9.54 | % | | 10.12 | % |
| Annualized return on average tangible | | | | | | | | | | | | | | | | |
| common equity(1) | | | 7.43 | % | | 8.24 | % | | 10.84 | % | | 13.06 | % | | 13.93 | % |
| Annualized return on average assets | | | 0.71 | % | | 0.79 | % | | 1.00 | % | | 1.16 | % | | 1.25 | % |
| Annualized return on average tangible assets(1) | | | 0.74 | % | | 0.82 | % | | 1.04 | % | | 1.20 | % | | 1.29 | % |
| Net interest margin (FTE)(1) | | | 3.26 | % | | 3.34 | % | | 3.41 | % | | 3.57 | % | | 3.76 | % |
| Efficiency ratio(1) | | | 67.55 | % | | 65.34 | % | | 57.62 | % | | 52.89 | % | | 51.67 | % |
| | | | | | | | | | | | | | | | |
| AVERAGE BALANCES | | | | | | | | | | | | | | | | |
| (in $000’s, unaudited) | | | | | | | | | | | | | | | | |
| Average assets | | $ | 5,213,171 | | $ | 5,178,636 | | $ | 5,264,905 | | $ | 5,399,930 | | $ | 5,278,243 | |
| Average tangible assets(1) | | $ | 5,037,673 | | $ | 5,002,597 | | $ | 5,088,264 | | $ | 5,222,692 | | $ | 5,100,399 | |
| Average earning assets | | $ | 4,872,449 | | $ | 4,842,279 | | $ | 4,923,582 | | $ | 5,051,710 | | $ | 4,948,397 | |
| Average loans held-for-sale | | $ | 1,503 | | $ | 2,749 | | $ | 1,612 | | $ | 2,765 | | $ | 4,166 | |
| Average total loans | | $ | 3,328,358 | | $ | 3,297,240 | | $ | 3,280,817 | | $ | 3,254,715 | | $ | 3,227,175 | |
| Average deposits | | $ | 4,394,545 | | $ | 4,360,150 | | $ | 4,454,750 | | $ | 4,573,621 | | $ | 4,424,041 | |
| Average demand deposits - noninterest-bearing | | $ | 1,127,145 | | $ | 1,177,078 | | $ | 1,243,222 | | $ | 1,302,606 | | $ | 1,368,373 | |
| Average interest-bearing deposits | | $ | 3,267,400 | | $ | 3,183,072 | | $ | 3,211,528 | | $ | 3,271,015 | | $ | 3,055,668 | |
| Average interest-bearing liabilities | | $ | 3,306,972 | | $ | 3,222,603 | | $ | 3,251,034 | | $ | 3,310,485 | | $ | 3,157,722 | |
| Average equity | | $ | 675,108 | | $ | 672,292 | | $ | 664,638 | | $ | 656,973 | | $ | 650,240 | |
| Average tangible common equity(1) | | $ | 499,610 | | $ | 496,253 | | $ | 487,997 | | $ | 479,735 | | $ | 472,396 | |
| |
| (1) | | This is a non-GAAP financial measure. |
| | | |
| | End of Period: | | Percent Change From: | |
| CONSOLIDATED BALANCE SHEETS | | June 30, | | March 31, | | June 30, | | March 31, | | June 30, | |
| (in $000’s, unaudited) | | 2024 | | 2024 | | 2023 | | 2024 | | 2023 | |
| ASSETS | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 37,497 | | | $ | 32,543 | | | $ | 42,551 | | | 15 | | % | (12 | ) | % |
| Other investments and interest-bearing deposits | | | | | | | | | | | | | | |
| in other financial institutions | | | 610,763 | | | | 508,816 | | | | 468,951 | | | 20 | | % | 30 | | % |
| Securities available-for-sale, at fair value | | | 273,043 | | | | 404,474 | | | | 486,058 | | | (32 | ) | % | (44 | ) | % |
| Securities held-to-maturity, at amortized cost | | | 621,178 | | | | 636,249 | | | | 682,095 | | | (2 | ) | % | (9 | ) | % |
| Loans held-for-sale - SBA, including deferred costs | | | 1,899 | | | | 1,946 | | | | 3,136 | | | (2 | ) | % | (39 | ) | % |
| Loans: | | | | | | | | | | | | | | |
| Commercial | | | 477,929 | | | | 452,231 | | | | 466,354 | | | 6 | | % | 2 | | % |
| Real estate: | | | | | | | | | | | | | | |
| CRE - owner occupied | | | 594,504 | | | | 585,031 | | | | 608,031 | | | 2 | | % | (2 | ) | % |
| CRE - non-owner occupied | | | 1,283,323 | | | | 1,271,184 | | | | 1,147,313 | | | 1 | | % | 12 | | % |
| Land and construction | | | 125,374 | | | | 129,712 | | | | 162,816 | | | (3 | ) | % | (23 | ) | % |
| Home equity | | | 126,562 | | | | 122,794 | | | | 128,009 | | | 3 | | % | (1 | ) | % |
| Multifamily | | | 268,968 | | | | 269,263 | | | | 244,959 | | | 0 | | % | 10 | | % |
| Residential mortgages | | | 484,809 | | | | 490,035 | | | | 514,064 | | | (1 | ) | % | (6 | ) | % |
| Consumer and other | | | 18,758 | | | | 16,439 | | | | 17,635 | | | 14 | | % | 6 | | % |
| Loans | | | 3,380,227 | | | | 3,336,689 | | | | 3,289,181 | | | 1 | | % | 3 | | % |
| Deferred loan fees, net | | | (434 | ) | | | (587 | ) | | | (397 | ) | | (26 | ) | % | 9 | | % |
| Total loans, net of deferred costs and fees | | | 3,379,793 | | | | 3,336,102 | | | | 3,288,784 | | | 1 | | % | 3 | | % |
| Allowance for credit losses on loans | | | (47,954 | ) | | | (47,888 | ) | | | (47,803 | ) | | 0 | | % | 0 | | % |
| Loans, net | | | 3,331,839 | | | | 3,288,214 | | | | 3,240,981 | | | 1 | | % | 3 | | % |
| Company-owned life insurance | | | 80,153 | | | | 80,007 | | | | 79,940 | | | 0 | | % | 0 | | % |
| Premises and equipment, net | | | 10,310 | | | | 9,986 | | | | 9,197 | | | 3 | | % | 12 | | % |
| Goodwill | | | 167,631 | | | | 167,631 | | | | 167,631 | | | 0 | | % | 0 | | % |
| Other intangible assets | | | 7,521 | | | | 8,074 | | | | 9,830 | | | (7 | ) | % | (23 | ) | % |
| Accrued interest receivable and other assets | | | 121,190 | | | | 118,134 | | | | 121,467 | | | 3 | | % | 0 | | % |
| Total assets | | $ | 5,263,024 | | | $ | 5,256,074 | | | $ | 5,311,837 | | | 0 | | % | (1 | ) | % |
| | | | | | | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | |
| Demand, noninterest-bearing | | $ | 1,187,320 | | | $ | 1,242,059 | | | $ | 1,319,844 | | | (4 | ) | % | (10 | ) | % |
| Demand, interest-bearing | | | 928,246 | | | | 925,100 | | | | 1,064,638 | | | 0 | | % | (13 | ) | % |
| Savings and money market | | | 1,126,520 | | | | 1,124,900 | | | | 1,075,835 | | | 0 | | % | 5 | | % |
| Time deposits - under $250 | | | 39,046 | | | | 38,105 | | | | 44,520 | | | 2 | | % | (12 | ) | % |
| Time deposits - $250 and over | | | 203,886 | | | | 200,739 | | | | 171,852 | | | 2 | | % | 19 | | % |
| ICS/CDARS - interest-bearing demand, money market | | | | | | | | | | | | | | |
| and time deposits | | | 959,592 | | | | 913,757 | | | | 824,083 | | | 5 | | % | 16 | | % |
| Total deposits | | | 4,444,610 | | | | 4,444,660 | | | | 4,500,772 | | | 0 | | % | (1 | ) | % |
| Subordinated debt, net of issuance costs | | | 39,577 | | | | 39,539 | | | | 39,425 | | | 0 | | % | 0 | | % |
| Accrued interest payable and other liabilities | | | 99,638 | | | | 95,579 | | | | 117,970 | | | 4 | | % | (16 | ) | % |
| Total liabilities | | | 4,583,825 | | | | 4,579,778 | | | | 4,658,167 | | | 0 | | % | (2 | ) | % |
| | | | | | | | | | | | | | |
| Shareholders’ Equity: | | | | | | | | | | | | | | |
| Common stock | | | 508,343 | | | | 507,578 | | | | 505,075 | | | 0 | | % | 1 | | % |
| Retained earnings | | | 182,571 | | | | 181,306 | | | | 165,853 | | | 1 | | % | 10 | | % |
| Accumulated other comprehensive loss | | | (11,715 | ) | | | (12,588 | ) | | | (17,258 | ) | | (7 | ) | % | (32 | ) | % |
| Total shareholders' equity | | | 679,199 | | | | 676,296 | | | | 653,670 | | | 0 | | % | 4 | | % |
| Total liabilities and shareholders’ equity | | $ | 5,263,024 | | | $ | 5,256,074 | | | $ | 5,311,837 | | | 0 | | % | (1 | ) | % |
|
| | End of Period: |
| CONSOLIDATED BALANCE SHEETS | | June 30, | | March 31, | | December 31, | | September 30, | | June 30, |
| (in $000’s, unaudited) | | 2024 | | 2024 | | 2023 | | 2023 | | 2023 |
| ASSETS | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 37,497 | | | $ | 32,543 | | | $ | 41,592 | | | $ | 40,076 | | | $ | 42,551 | |
| Other investments and interest-bearing deposits | | | | | | | | | | | | | | | |
| in other financial institutions | | | 610,763 | | | | 508,816 | | | | 366,537 | | | | 605,476 | | | | 468,951 | |
| Securities available-for-sale, at fair value | | | 273,043 | | | | 404,474 | | | | 442,636 | | | | 457,194 | | | | 486,058 | |
| Securities held-to-maturity, at amortized cost | | | 621,178 | | | | 636,249 | | | | 650,565 | | | | 664,681 | | | | 682,095 | |
| Loans held-for-sale - SBA, including deferred costs | | | 1,899 | | | | 1,946 | | | | 2,205 | | | | 841 | | | | 3,136 | |
| Loans: | | | | | | | | | | | | | | | |
| Commercial | | | 477,929 | | | | 452,231 | | | | 463,778 | | | | 430,664 | | | | 466,354 | |
| Real estate: | | | | | | | | | | | | | | | |
| CRE - owner occupied | | | 594,504 | | | | 585,031 | | | | 583,253 | | | | 589,751 | | | | 608,031 | |
| CRE - non-owner occupied | | | 1,283,323 | | | | 1,271,184 | | | | 1,256,590 | | | | 1,208,324 | | | | 1,147,313 | |
| Land and construction | | | 125,374 | | | | 129,712 | | | | 140,513 | | | | 158,138 | | | | 162,816 | |
| Home equity | | | 126,562 | | | | 122,794 | | | | 119,125 | | | | 124,477 | | | | 128,009 | |
| Multifamily | | | 268,968 | | | | 269,263 | | | | 269,734 | | | | 253,129 | | | | 244,959 | |
| Residential mortgages | | | 484,809 | | | | 490,035 | | | | 496,961 | | | | 503,006 | | | | 514,064 | |
| Consumer and other | | | 18,758 | | | | 16,439 | | | | 20,919 | | | | 18,526 | | | | 17,635 | |
| Loans | | | 3,380,227 | | | | 3,336,689 | | | | 3,350,873 | | | | 3,286,015 | | | | 3,289,181 | |
| Deferred loan fees, net | | | (434 | ) | | | (587 | ) | | | (495 | ) | | | (554 | ) | | | (397 | ) |
| Total loans, net of deferred fees | | | 3,379,793 | | | | 3,336,102 | | | | 3,350,378 | | | | 3,285,461 | | | | 3,288,784 | |
| Allowance for credit losses on loans | | | (47,954 | ) | | | (47,888 | ) | | | (47,958 | ) | | | (47,702 | ) | | | (47,803 | ) |
| Loans, net | | | 3,331,839 | | | | 3,288,214 | | | | 3,302,420 | | | | 3,237,759 | | | | 3,240,981 | |
| Company-owned life insurance | | | 80,153 | | | | 80,007 | | | | 79,489 | | | | 79,607 | | | | 79,940 | |
| Premises and equipment, net | | | 10,310 | | | | 9,986 | | | | 9,857 | | | | 9,707 | | | | 9,197 | |
| Goodwill | | | 167,631 | | | | 167,631 | | | | 167,631 | | | | 167,631 | | | | 167,631 | |
| Other intangible assets | | | 7,521 | | | | 8,074 | | | | 8,627 | | | | 9,229 | | | | 9,830 | |
| Accrued interest receivable and other assets | | | 121,190 | | | | 118,134 | | | | 122,536 | | | | 131,106 | | | | 121,467 | |
| Total assets | | $ | 5,263,024 | | | $ | 5,256,074 | | | $ | 5,194,095 | | | $ | 5,403,307 | | | $ | 5,311,837 | |
| | | | | | | | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | |
| Demand, noninterest-bearing | | $ | 1,187,320 | | | $ | 1,242,059 | | | $ | 1,292,486 | | | $ | 1,243,501 | | | $ | 1,319,844 | |
| Demand, interest-bearing | | | 928,246 | | | | 925,100 | | | | 914,066 | | | | 1,004,185 | | | | 1,064,638 | |
| Savings and money market | | | 1,126,520 | | | | 1,124,900 | | | | 1,087,518 | | | | 1,110,640 | | | | 1,075,835 | |
| Time deposits - under $250 | | | 39,046 | | | | 38,105 | | | | 38,055 | | | | 43,906 | | | | 44,520 | |
| Time deposits - $250 and over | | | 203,886 | | | | 200,739 | | | | 192,228 | | | | 252,001 | | | | 171,852 | |
| ICS/CDARS - interest-bearing demand, money market | | | | | | | | | | | | | | | |
| and time deposits | | | 959,592 | | | | 913,757 | | | | 854,105 | | | | 921,224 | | | | 824,083 | |
| Total deposits | | | 4,444,610 | | | | 4,444,660 | | | | 4,378,458 | | | | 4,575,457 | | | | 4,500,772 | |
| Other short-term borrowings | | | — | | | | — | | | | — | | | | — | | | | — | |
| Subordinated debt, net of issuance costs | | | 39,577 | | | | 39,539 | | | | 39,502 | | | | 39,463 | | | | 39,425 | |
| Accrued interest payable and other liabilities | | | 99,638 | | | | 95,579 | | | | 103,234 | | | | 126,457 | | | | 117,970 | |
| Total liabilities | | | 4,583,825 | | | | 4,579,778 | | | | 4,521,194 | | | | 4,741,377 | | | | 4,658,167 | |
| | | | | | | | | | | | | | | |
| Shareholders’ Equity: | | | | | | | | | | | | | | | |
| Common stock | | | 508,343 | | | | 507,578 | | | | 506,539 | | | | 505,692 | | | | 505,075 | |
| Retained earnings | | | 182,571 | | | | 181,306 | | | | 179,092 | | | | 173,707 | | | | 165,853 | |
| Accumulated other comprehensive loss | | | (11,715 | ) | | | (12,588 | ) | | | (12,730 | ) | | | (17,469 | ) | | | (17,258 | ) |
| Total shareholders' equity | | | 679,199 | | | | 676,296 | | | | 672,901 | | | | 661,930 | | | | 653,670 | |
| Total liabilities and shareholders’ equity | | $ | 5,263,024 | | | $ | 5,256,074 | | | $ | 5,194,095 | | | $ | 5,403,307 | | | $ | 5,311,837 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | At or For the Quarter Ended: | | Percent Change From: | |
| CREDIT QUALITY DATA | | June 30, | | | March 31, | | | June 30, | | March 31, | | June 30, | |
| (in $000’s, unaudited) | | 2024 | | | 2024 | | | 2023
| | 2024 | | 2023 | |
| Nonaccrual loans - held-for-investment | | $ | 5,782 | | | $ | 5,920 | | | $ | 3,275 | | | (2 | ) | % | 77 | | % |
| Loans over 90 days past due | | | | | | | | | | | | | | | | |
| and still accruing | | | 248 | | | | 1,951 | | | | 2,262 | | | (87 | ) | % | (89 | ) | % |
| Total nonperforming loans | | | 6,030 | | | | 7,871 | | | | 5,537 | | | (23 | ) | % | 9 | | % |
| Foreclosed assets | | | — | | | | — | | | | — | | | N/A | | | N/A | | |
| Total nonperforming assets | | $ | 6,030 | | | $ | 7,871 | | | $ | 5,537 | | | (23 | ) | % | 9 | | % |
| Net charge-offs (recoveries) during the quarter | | $ | 405 | | | $ | 254 | | | $ | (270 | ) | | 59 | | % | 250 | | % |
| Provision for credit losses on loans during the quarter | | $ | 471 | | | $ | 184 | | | $ | 260 | | | 156 | | % | 81 | | % |
| Allowance for credit losses on loans | | $ | 47,954 | | | $ | 47,888 | | | $ | 47,803 | | | 0 | | % | 0 | | % |
| Classified assets | | $ | 33,605 | | | $ | 35,392 | | | $ | 30,500 | | | (5 | ) | % | 10 | | % |
| Allowance for credit losses on loans to total loans | | | 1.42 | | % | | 1.44 | | % | | 1.45 | | % | (1 | ) | % | (2 | ) | % |
| Allowance for credit losses on loans to total nonperforming loans | | | 795.26 | | % | | 608.41 | | % | | 863.34 | | % | 31 | | % | (8 | ) | % |
| Nonperforming assets to total assets | | | 0.11 | | % | | 0.15 | | % | | 0.10 | | % | (27 | ) | % | 10 | | % |
| Nonperforming loans to total loans | | | 0.18 | | % | | 0.24 | | % | | 0.17 | | % | (25 | ) | % | 6 | | % |
| Classified assets to Heritage Commerce Corp | | | | | | | | | | | | | | | | |
| Tier 1 capital plus allowance for credit losses on loans | | | 6 | | % | | 6 | | % | | 6 | | % | 0 | | % | 0 | | % |
| Classified assets to Heritage Bank of Commerce | | | | | | | | | | | | | | | | |
| Tier 1 capital plus allowance for credit losses on loans | | | 6 | | % | | 6 | | % | | 5 | | % | 0 | | % | 20 | | % |
| | | | | | | | | | | | | | | | |
| OTHER PERIOD-END STATISTICS | | | | | | | | | | | | | | | | |
| (in $000’s, unaudited) | | | | | | | | | | | | | | | | |
| Heritage Commerce Corp: | | | | | | | | | | | | | | | | |
| Tangible common equity (1) | | $ | 504,047 | | | $ | 500,591 | | | $ | 476,209 | | | 1 | | % | 6 | | % |
| Shareholders’ equity / total assets | | | 12.91 | | % | | 12.87 | | % | | 12.31 | | % | 0 | | % | 5 | | % |
| Tangible common equity / tangible assets (2) | | | 9.91 | | % | | 9.85 | | % | | 9.27 | | % | 1 | | % | 7 | | % |
| Loan to deposit ratio | | | 76.04 | | % | | 75.06 | | % | | 73.07 | | % | 1 | | % | 4 | | % |
| Noninterest-bearing deposits / total deposits | | | 26.71 | | % | | 27.94 | | % | | 29.32 | | % | (4 | ) | % | (9 | ) | % |
| Total capital ratio | | | 15.6 | | % | | 15.6 | | % | | 15.4 | | % | 0 | | % | 1 | | % |
| Tier 1 capital ratio | | | 13.4 | | % | | 13.4 | | % | | 13.2 | | % | 0 | | % | 2 | | % |
| Common Equity Tier 1 capital ratio | | | 13.4 | | % | | 13.4 | | % | | 13.2 | | % | 0 | | % | 2 | | % |
| Tier 1 leverage ratio | | | 10.2 | | % | | 10.2 | | % | | 9.7 | | % | 0 | | % | 5 | | % |
| Heritage Bank of Commerce: | | | | | | | | | | | | | | | | |
| Tangible common equity / tangible assets (2) | | | 10.28 | | % | | 10.22 | | % | | 9.60 | | % | 1 | | % | 7 | | % |
| Total capital ratio | | | 15.1 | | % | | 15.1 | | % | | 14.8 | | % | 0 | | % | 2 | | % |
| Tier 1 capital ratio | | | 13.9 | | % | | 13.9 | | % | | 13.7 | | % | 0 | | % | 1 | | % |
| Common Equity Tier 1 capital ratio | | | 13.9 | | % | | 13.9 | | % | | 13.7 | | % | 0 | | % | 1 | | % |
| Tier 1 leverage ratio | | | 10.6 | | % | | 10.6 | | % | | 10.0 | | % | 0 | | % | 6 | | % |
| |
| (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 | | June 30, | | | March 31, | | | December 31, | | | September 30, | | | June 30, | |
| (in $000’s, unaudited) | | 2024 | | | 2024 | | | 2023 | | | 2023 | | | 2023
| |
| Nonaccrual loans - held-for-investment | | $ | 5,782 | | | $ | 5,920 | | | $ | 6,818 | | | $ | 3,518 | | | $ | 3,275 | | |
| Loans over 90 days past due | | | | | | | | | | | | | | | | | | | | |
| and still accruing | | | 248 | | | | 1,951 | | | | 889 | | | | 1,966 | | | | 2,262 | | |
| Total nonperforming loans | | | 6,030 | | | | 7,871 | | | | 7,707 | | | | 5,484 | | | | 5,537 | | |
| Foreclosed assets | | | — | | | | — | | | | — | | | | — | | | | — | | |
| Total nonperforming assets | | $ | 6,030 | | | $ | 7,871 | | | $ | 7,707 | | | $ | 5,484 | | | $ | 5,537 | | |
| Net charge-offs (recoveries) during the quarter | | $ | 405 | | | $ | 254 | | | $ | 33 | | | $ | 269 | | | $ | (270 | ) | |
| Provision for credit losses on loans during the quarter | | $ | 471 | | | $ | 184 | | | $ | 289 | | | $ | 168 | | | $ | 260 | | |
| Allowance for credit losses on loans | | $ | 47,954 | | | $ | 47,888 | | | $ | 47,958 | | | $ | 47,702 | | | $ | 47,803 | | |
| Classified assets | | $ | 33,605 | | | $ | 35,392 | | | $ | 31,763 | | | $ | 31,062 | | | $ | 30,500 | | |
| Allowance for credit losses on loans to total loans | | | 1.42 | | % | | 1.44 | | % | | 1.43 | | % | | 1.45 | | % | | 1.45 | | % |
| Allowance for credit losses on loans to total nonperforming loans | | | 795.26 | | % | | 608.41 | | % | | 622.27 | | % | | 869.84 | | % | | 863.34 | | % |
| Nonperforming assets to total assets | | | 0.11 | | % | | 0.15 | | % | | 0.15 | | % | | 0.10 | | % | | 0.10 | | % |
| Nonperforming loans to total loans | | | 0.18 | | % | | 0.24 | | % | | 0.23 | | % | | 0.17 | | % | | 0.17 | | % |
| Classified assets to Heritage Commerce Corp | | | | | | | | | | | | | | | | | | | | |
| Tier 1 capital plus allowance for credit losses on loans | | | 6 | | % | | 6 | | % | | 6 | | % | | 6 | | % | | 6 | | % |
| Classified assets to Heritage Bank of Commerce | | | | | | | | | | | | | | | | | | | | |
| Tier 1 capital plus allowance for credit losses on loans | | | 6 | | % | | 6 | | % | | 5 | | % | | 5 | | % | | 5 | | % |
| | | | | | | | | | | | | | | | | | | | |
| OTHER PERIOD-END STATISTICS | | | | | | | | | | | | | | | | | | | | |
| (in $000’s, unaudited) | | | | | | | | | | | | | | | | | | | | |
| Heritage Commerce Corp: | | | | | | | | | | | | | | | | | | | | |
| Tangible common equity (1) | | $ | 504,047 | | | $ | 500,591 | | | $ | 496,643 | | | $ | 485,070 | | | $ | 476,209 | | |
| Shareholders’ equity / total assets | | | 12.91 | | % | | 12.87 | | % | | 12.96 | | % | | 12.25 | | % | | 12.31 | | % |
| Tangible common equity / tangible assets (2) | | | 9.91 | | % | | 9.85 | | % | | 9.90 | | % | | 9.28 | | % | | 9.27 | | % |
| Loan to deposit ratio | | | 76.04 | | % | | 75.06 | | % | | 76.52 | | % | | 71.81 | | % | | 73.07 | | % |
| Noninterest-bearing deposits / total deposits | | | 26.71 | | % | | 27.94 | | % | | 29.52 | | % | | 27.18 | | % | | 29.32 | | % |
| Total capital ratio | | | 15.6 | | % | | 15.6 | | % | | 15.5 | | % | | 15.6 | | % | | 15.4 | | % |
| Tier 1 capital ratio | | | 13.4 | | % | | 13.4 | | % | | 13.3 | | % | | 13.4 | | % | | 13.2 | | % |
| Common Equity Tier 1 capital ratio | | | 13.4 | | % | | 13.4 | | % | | 13.3 | | % | | 13.4 | | % | | 13.2 | | % |
| Tier 1 leverage ratio | | | 10.2 | | % | | 10.2 | | % | | 10.0 | | % | | 9.6 | | % | | 9.7 | | % |
| Heritage Bank of Commerce: | | | | | | | | | | | | | | | | | | | | |
| Tangible common equity / tangible assets (2) | | | 10.28 | | % | | 10.22 | | % | | 10.26 | | % | | 9.62 | | % | | 9.60 | | % |
| Total capital ratio | | | 15.1 | | % | | 15.1 | | % | | 14.9 | | % | | 15.0 | | % | | 14.8 | | % |
| Tier 1 capital ratio | | | 13.9 | | % | | 13.9 | | % | | 13.8 | | % | | 13.9 | | % | | 13.7 | | % |
| Common Equity Tier 1 capital ratio | | | 13.9 | | % | | 13.9 | | % | | 13.8 | | % | | 13.9 | | % | | 13.7 | | % |
| Tier 1 leverage ratio | | | 10.6 | | % | | 10.6 | | % | | 10.4 | | % | | 10.0 | | % | | 10.0 | | % |
| |
| (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 | |
| | June 30, 2024 | | March 31, 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) | | $ | 3,329,861 | | $ | 45,470 | | | 5.49 | % | $ | 3,299,989 | | $ | 44,600 | | | 5.44 | % |
| Securities - taxable | | | 942,532 | | | 5,483 | | | 2.34 | % | | 1,042,484 | | | 6,183 | | | 2.39 | % |
| Securities - exempt from Federal tax (3) | | | 31,803 | | | 285 | | | 3.60 | % | | 31,939 | | | 286 | | | 3.60 | % |
| Other investments and interest-bearing deposits | | | | | | | | | | | | | | | | | |
| in other financial institutions | | | 568,253 | | | 7,899 | | | 5.59 | % | | 467,867 | | | 6,542 | | | 5.62 | % |
| Total interest earning assets (3) | | | 4,872,449 | | | 59,137 | | | 4.88 | % | | 4,842,279 | | | 57,611 | | | 4.79 | % |
| Cash and due from banks | | | 33,419 | | | | | | | | 33,214 | | | | | | |
| Premises and equipment, net | | | 10,216 | | | | | | | | 10,015 | | | | | | |
| Goodwill and other intangible assets | | | 175,498 | | | | | | | | 176,039 | | | | | | |
| Other assets | | | 121,589 | | | | | | | | 117,089 | | | | | | |
| Total assets | | $ | 5,213,171 | | | | | | | $ | 5,178,636 | | | | | | |
| | | | | | | | | | | | | | | | | |
| Liabilities and shareholders’ equity: | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | |
| Demand, noninterest-bearing | | $ | 1,127,145 | | | | | | | $ | 1,177,078 | | | | | | |
| | | | | | | | | | | | | | | | | |
| Demand, interest-bearing | | | 932,100 | | | 1,719 | | | 0.74 | % | | 920,048 | | | 1,554 | | | 0.68 | % |
| Savings and money market | | | 1,104,589 | | | 7,867 | | | 2.86 | % | | 1,067,581 | | | 6,649 | | | 2.50 | % |
| Time deposits - under $100 | | | 10,980 | | | 46 | | | 1.68 | % | | 10,945 | | | 42 | | | 1.54 | % |
| Time deposits - $100 and over | | | 228,248 | | | 2,245 | | | 3.96 | % | | 221,211 | | | 2,064 | | | 3.75 | % |
| ICS/CDARS - interest-bearing demand, money market | | | | | | | | | | | | | | | | | |
| and time deposits | | | 991,483 | | | 7,207 | | | 2.92 | % | | 963,287 | | | 6,611 | | | 2.76 | % |
| Total interest-bearing deposits | | | 3,267,400 | | | 19,084 | | | 2.35 | % | | 3,183,072 | | | 16,920 | | | 2.14 | % |
| Total deposits | | | 4,394,545 | | | 19,084 | | | 1.75 | % | | 4,360,150 | | | 16,920 | | | 1.56 | % |
| | | | | | | | | | | | | | | | | |
| Short-term borrowings | | | 19 | | | — | | | 0.00 | % | | 15 | | | — | | | 0.00 | % |
| Subordinated debt, net of issuance costs | | | 39,553 | | | 538 | | | 5.47 | % | | 39,516 | | | 538 | | | 5.48 | % |
| Total interest-bearing liabilities | | | 3,306,972 | | | 19,622 | | | 2.39 | % | | 3,222,603 | | | 17,458 | | | 2.18 | % |
| Total interest-bearing liabilities and demand, | | | | | | | | | | | | | | | | | |
| noninterest-bearing / cost of funds | | | 4,434,117 | | | 19,622 | | | 1.78 | % | | 4,399,681 | | | 17,458 | | | 1.60 | % |
| Other liabilities | | | 103,946 | | | | | | | | 106,663 | | | | | | |
| Total liabilities | | | 4,538,063 | | | | | | | | 4,506,344 | | | | | | |
| Shareholders’ equity | | | 675,108 | | | | | | | | 672,292 | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 5,213,171 | | | | | | | $ | 5,178,636 | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net interest income / margin (3) | | | | | | 39,515 | | | 3.26 | % | | | | | 40,153 | | | 3.34 | % |
| Less tax equivalent adjustment (3) | | | | | | (60 | ) | | | | | | | | (60 | ) | | | |
| Net interest income | | | | | $ | 39,455 | | | 3.26 | % | | | | $ | 40,093 | | | 3.33 | % |
| |
| (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 $117,000 for the second quarter of 2024, compared to $160,000 for the first quarter of 2024. Prepayment fees totaled $54,000 for the second quarter of 2024, compared to $24,000 for the first 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 | |
| | June 30, 2024 | | June 30, 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) | | $ | 3,329,861 | | $ | 45,470 | | | 5.49 | % | $ | 3,231,341 | | $ | 44,028 | | | 5.47 | % |
| Securities - taxable | | | 942,532 | | | 5,483 | | | 2.34 | % | | 1,147,375 | | | 6,982 | | | 2.44 | % |
| Securities - exempt from Federal tax (3) | | | 31,803 | | | 285 | | | 3.60 | % | | 34,070 | | | 302 | | | 3.56 | % |
| Other investments and interest-bearing deposits | | | | | | | | | | | | | | | | | |
| in other financial institutions | | | 568,253 | | | 7,899 | | | 5.59 | % | | 535,611 | | | 7,092 | | | 5.31 | % |
| Total interest earning assets (3) | | | 4,872,449 | | | 59,137 | | | 4.88 | % | | 4,948,397 | | | 58,404 | | | 4.73 | % |
| Cash and due from banks | | | 33,419 | | | | | | | | 35,159 | | | | | | |
| Premises and equipment, net | | | 10,216 | | | | | | | | 9,190 | | | | | | |
| Goodwill and other intangible assets | | | 175,498 | | | | | | | | 177,844 | | | | | | |
| Other assets | | | 121,589 | | | | | | | | 107,653 | | | | | | |
| Total assets | | $ | 5,213,171 | | | | | | | $ | 5,278,243 | | | | | | |
| | | | | | | | | | | | | | | | | |
| Liabilities and shareholders’ equity: | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | |
| Demand, noninterest-bearing | | $ | 1,127,145 | | | | | | | $ | 1,368,373 | | | | | | |
| | | | | | | | | | | | | | | | | |
| Demand, interest-bearing | | | 932,100 | | | 1,719 | | | 0.74 | % | | 1,118,200 | | | 1,788 | | | 0.64 | % |
| Savings and money market | | | 1,104,589 | | | 7,867 | | | 2.86 | % | | 1,109,347 | | | 4,638 | | | 1.68 | % |
| Time deposits - under $100 | | | 10,980 | | | 46 | | | 1.68 | % | | 11,610 | | | 20 | | | 0.69 | % |
| Time deposits - $100 and over | | | 228,248 | | | 2,245 | | | 3.96 | % | | 201,600 | | | 1,410 | | | 2.81 | % |
| ICS/CDARS - interest-bearing demand, money market | | | | | | | | | | | | | | | | | |
| and time deposits | | | 991,483 | | | 7,207 | | | 2.92 | % | | 614,911 | | | 2,867 | | | 1.87 | % |
| Total interest-bearing deposits | | | 3,267,400 | | | 19,084 | | | 2.35 | % | | 3,055,668 | | | 10,723 | | | 1.41 | % |
| Total deposits | | | 4,394,545 | | | 19,084 | | | 1.75 | % | | 4,424,041 | | | 10,723 | | | 0.97 | % |
| | | | | | | | | | | | | | | | | |
| Short-term borrowings | | | 19 | | | — | | | 0.00 | % | | 62,653 | | | 787 | | | 5.04 | % |
| Subordinated debt, net of issuance costs | | | 39,553 | | | 538 | | | 5.47 | % | | 39,401 | | | 538 | | | 5.48 | % |
| Total interest-bearing liabilities | | | 3,306,972 | | | 19,622 | | | 2.39 | % | | 3,157,722 | | | 12,048 | | | 1.53 | % |
| Total interest-bearing liabilities and demand, | | | | | | | | | | | | | | | | | |
| noninterest-bearing / cost of funds | | | 4,434,117 | | | 19,622 | | | 1.78 | % | | 4,526,095 | | | 12,048 | | | 1.07 | % |
| Other liabilities | | | 103,946 | | | | | | | | 101,908 | | | | | | |
| Total liabilities | | | 4,538,063 | | | | | | | | 4,628,003 | | | | | | |
| Shareholders’ equity | | | 675,108 | | | | | | | | 650,240 | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 5,213,171 | | | | | | | $ | 5,278,243 | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net interest income / margin (3) | | | | | | 39,515 | | | 3.26 | % | | | | | 46,356 | | | 3.76 | % |
| Less tax equivalent adjustment (3) | | | | | | (60 | ) | | | | | | | | (63 | ) | | | |
| Net interest income | | | | | $ | 39,455 | | | 3.26 | % | | | | $ | 46,293 | | | 3.75 | % |
| |
| (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 $117,000 for the second quarter of 2024, compared to $94,000 for the second quarter of 2023. Prepayment fees totaled $54,000 for the second quarter of 2024, compared to $73,000 for the second quarter of 2023. |
| (3) | | Reflects the non-GAAP FTE adjustment for Federal tax-exempt income based on a 21% tax rate. |
| | | |
| | For the Six Months Ended | | For the Six Months Ended | |
| | June 30, 2024 | | June 30, 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) | | $ | 3,314,925 | | $ | 90,070 | | | 5.46 | % | $ | 3,254,305 | | $ | 88,140 | | | 5.46 | % |
| Securities - taxable | | | 992,508 | | | 11,666 | | | 2.36 | % | | 1,154,160 | | | 14,038 | | | 2.45 | % |
| Securities - exempt from Federal tax (3) | | | 31,871 | | | 571 | | | 3.60 | % | | 35,036 | | | 615 | | | 3.54 | % |
| Other investments, interest-bearing deposits in other | | | | | | | | | | | | | | | | | |
| financial institutions and Federal funds sold | | | 518,060 | | | 14,441 | | | 5.61 | % | | 478,349 | | | 11,951 | | | 5.04 | % |
| Total interest earning assets (3) | | | 4,857,364 | | | 116,748 | | | 4.83 | % | | 4,921,850 | | | 114,744 | | | 4.70 | % |
| Cash and due from banks | | | 33,316 | | | | | | | | 36,354 | | | | | | |
| Premises and equipment, net | | | 10,115 | | | | | | | | 9,229 | | | | | | |
| Goodwill and other intangible assets | | | 175,769 | | | | | | | | 178,142 | | | | | | |
| Other assets | | | 119,339 | | | | | | | | 111,418 | | | | | | |
| Total assets | | $ | 5,195,903 | | | | | | | $ | 5,256,993 | | | | | | |
| | | | | | | | | | | | | | | | | |
| Liabilities and shareholders’ equity: | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | |
| Demand, noninterest-bearing | | $ | 1,152,111 | | | | | | | $ | 1,516,991 | | | | | | |
| | | | | | | | | | | | | | | | | |
| Demand, interest-bearing | | | 926,074 | | | 3,273 | | | 0.71 | % | | 1,167,690 | | | 3,264 | | | 0.56 | % |
| Savings and money market | | | 1,086,085 | | | 14,516 | | | 2.69 | % | | 1,196,774 | | | 8,127 | | | 1.37 | % |
| Time deposits - under $100 | | | 10,962 | | | 88 | | | 1.61 | % | | 11,943 | | | 30 | | | 0.51 | % |
| Time deposits - $100 and over | | | 224,730 | | | 4,309 | | | 3.86 | % | | 182,430 | | | 2,255 | | | 2.49 | % |
| ICS/CDARS - interest-bearing demand, money market | | | | | | | | | | | | | | | | | |
| and time deposits | | | 977,385 | | | 13,818 | | | 2.84 | % | | 344,191 | | | 2,948 | | | 1.73 | % |
| Total interest-bearing deposits | | | 3,225,236 | | | 36,004 | | | 2.24 | % | | 2,903,028 | | | 16,624 | | | 1.15 | % |
| Total deposits | | | 4,377,347 | | | 36,004 | | | 1.65 | % | | 4,420,019 | | | 16,624 | | | 0.76 | % |
| | | | | | | | | | | | | | | | | |
| Short-term borrowings | | | 17 | | | — | | | 0.00 | % | | 54,709 | | | 1,365 | | | 5.03 | % |
| Subordinated debt, net of issuance costs | | | 39,535 | | | 1,076 | | | 5.47 | % | | 39,382 | | | 1,075 | | | 5.50 | % |
| Total interest-bearing liabilities | | | 3,264,788 | | | 37,080 | | | 2.28 | % | | 2,997,119 | | | 19,064 | | | 1.28 | % |
| Total interest-bearing liabilities and demand, | | | | | | | | | | | | | | | | | |
| noninterest-bearing / cost of funds | | | 4,416,899 | | | 37,080 | | | 1.69 | % | | 4,514,110 | | | 19,064 | | | 0.85 | % |
| Other liabilities | | | 105,304 | | | | | | | | 98,929 | | | | | | |
| Total liabilities | | | 4,522,203 | | | | | | | | 4,613,039 | | | | | | |
| Shareholders’ equity | | | 673,700 | | | | | | | | 643,954 | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 5,195,903 | | | | | | | $ | 5,256,993 | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net interest income / margin (3) | | | | | | 79,668 | | | 3.30 | % | | | | | 95,680 | | | 3.92 | % |
| Less tax equivalent adjustment (3) | | | | | | (120 | ) | | | | | | | | (129 | ) | | | |
| Net interest income | | | | | $ | 79,548 | | | 3.29 | % | | | | $ | 95,551 | | | 3.91 | % |
| | | |
| (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 $277,000 for the first six months of 2024, compared to $394,000 for the first six months of 2023. Prepayment fees totaled $78,000 for the first six months of 2024, compared to $211,000 for the first six months of 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 | | June 30, | | March 31, | | December 31, | | September 30, | | June 30, |
| (in $000’s, unaudited) | | 2024 | | 2024 | | 2023 | | 2023 | | 2023 |
| Capital components: | | | | | | | | | | | | | | | |
| Total Equity (GAAP) | | $ | 679,199 | | | $ | 676,296 | | | $ | 672,901 | | | $ | 661,930 | | | $ | 653,670 | |
| Less: Preferred Stock | | | — | | | | — | | | | — | | | | — | | | | — | |
| Total Common Equity | | | 679,199 | | | | 676,296 | | | | 672,901 | | | | 661,930 | | | | 653,670 | |
| Less: Goodwill | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) |
| Less: Other Intangible Assets | | | (7,521 | ) | | | (8,074 | ) | | | (8,627 | ) | | | (9,229 | ) | | | (9,830 | ) |
| Total Tangible Common Equity (non-GAAP) | | $ | 504,047 | | | $ | 500,591 | | | $ | 496,643 | | | $ | 485,070 | | | $ | 476,209 | |
| | | | | | | | | | | | | | | |
| Common shares outstanding at period-end | | | 61,292,094 | | | | 61,253,625 | | | | 61,146,835 | | | | 61,099,155 | | | | 61,091,155 | |
| | | | | | | | | | | | | | | |
| Tangible book value per share (non-GAAP) | | $ | 8.22 | | | $ | 8.17 | | | $ | 8.12 | | | $ | 7.94 | | | $ | 7.80 | |
| | | | | | | | | | | | | | | | | | | | |
- 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 | | June 30, | | March 31, | | December 31, | | September 30, | | June 30, | |
| (in $000’s, unaudited) | | 2024 | | 2024 | | | 2023 | | 2023 | | 2023 | |
| Net income | | $ | 9,234 | | | $ | 10,166 | | | $ | 13,328 | | | $ | 15,795 | | | $ | 16,403 | | |
| | | | | | | | | | | | | | | | |
| Average tangible common equity components: | | | | | | | | | | | | | | | | |
| Average Equity (GAAP) | | $ | 675,108 | | | $ | 672,292 | | | $ | 664,638 | | | $ | 656,973 | | | $ | 650,240 | | |
| Less: Goodwill | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | |
| Less: Other Intangible Assets | | | (7,867 | ) | | | (8,408 | ) | | | (9,010 | ) | | | (9,607 | ) | | | (10,213 | ) | |
| Total Average Tangible Common Equity (non-GAAP) | | $ | 499,610 | | | $ | 496,253 | | | $ | 487,997 | | | $ | 479,735 | | | $ | 472,396 | | |
| | | | | | | | | | | | | | | | |
| Annualized return on average tangible common equity (non-GAAP) | | | 7.43 | | % | | 8.24 | | % | | 10.84 | | % | | 13.06 | | % | | 13.93 | | % |
| | | | | | | | | | | | | | | | |
| Average tangible assets components: | | | | | | | | | | | | | | | | |
| Average Assets (GAAP) | | $ | 5,213,171 | | | $ | 5,178,636 | | | $ | 5,264,905 | | | $ | 5,399,930 | | | $ | 5,278,243 | | |
| Less: Goodwill | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | |
| Less: Other Intangible Assets | | | (7,867 | ) | | | (8,408 | ) | | | (9,010 | ) | | | (9,607 | ) | | | (10,213 | ) | |
| Total Average Tangible Assets (non-GAAP) | | $ | 5,037,673 | | | $ | 5,002,597 | | | $ | 5,088,264 | | | $ | 5,222,692 | | | | 5,100,399 | | |
| | | | | | | | | | | | | | | | |
| Annualized return on average tangible assets (non-GAAP) | | | 0.74 | | % | | 0.82 | | % | | 1.04 | | % | | 1.20 | | % | | 1.29 | | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| RETURN ON AVERAGE TANGIBLE COMMON | | For the Six Months Ended: | |
| EQUITY AND AVERAGE TANGIBLE COMMON ASSETS | | June 30, | | June 30, | |
| (in $000’s, unaudited) | | 2024 | | 2023 | |
| Net income | | $ | 19,400 | | | $ | 35,320 | | |
| | | | | | | |
| Average tangible common equity components: | | | | | | | |
| Average Equity (GAAP) | | $ | 673,700 | | | $ | 643,954 | | |
| Less: Goodwill | | | (167,631 | ) | | | (167,631 | ) | |
| Less: Other Intangible Assets | | | (8,138 | ) | | | (10,511 | ) | |
| Total Average Tangible Common Equity (non-GAAP) | | $ | 497,931 | | | $ | 465,812 | | |
| | | | | | | |
| Annualized return on average tangible common equity (non-GAAP) | | | 7.84 | | % | | 15.29 | | % |
| | | | | | | |
| Average tangible assets components: | | | | | | | |
| Average Assets (GAAP) | | $ | 5,195,903 | | | $ | 5,256,993 | | |
| Less: Goodwill | | | (167,631 | ) | | | (167,631 | ) | |
| Less: Other Intangible Assets | | | (8,138 | ) | | | (10,511 | ) | |
| Total Average Tangible Assets (non-GAAP) | | $ | 5,020,134 | | | | 5,078,851 | | |
| | | | | | | |
| Annualized return on average tangible assets (non-GAAP) | | | 0.78 | | % | | 1.40 | | % |
| | | | | | | | | |
- 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: | |
| | June 30, | | March 31, | | December 31, | | September 30, | | June 30, | |
| (in $000’s, unaudited) | | 2024 | | 2024 | | 2023 | | 2023 | | 2023 | |
| Net interest income before | | | | | | | | | | | | | | | | |
| credit losses on loans (GAAP) | | $ | 39,455 | | $ | 40,093 | | $ | 42,301 | | $ | 45,372 | | $ | 46,293 | |
| Tax-equivalent adjustment on securities - | | | | | | | | | | | | | | | | |
| exempt from Federal tax | | | 60 | | | 60 | | | 61 | | | 61 | | | 63 | |
| Net interest income, FTE (non-GAAP) | | $ | 39,515 | | $ | 40,153 | | $ | 42,362 | | $ | 45,433 | | $ | 46,356 | |
| | | | | | | | | | | | | | | | |
| Average balance of total interest earning assets | | $ | 4,872,449 | | $ | 4,842,279 | | $ | 4,923,582 | | $ | 5,051,710 | | $ | 4,948,397 | |
| | | | | | | | | | | | | | | | |
| Net interest margin (annualized net interest income divided by the | | | | | | | | | | | | | | | | |
| average balance of total interest earnings assets) (GAAP) | | | 3.26 | % | | 3.33 | % | | 3.41 | % | | 3.56 | % | | 3.75 | % |
| | | | | | | | | | | | | | | | |
| Net interest margin, FTE (annualized net interest income, FTE, | | | | | | | | | | | | | | | | |
| divided by the average balance of total | | | | | | | | | | | | | | | | |
| earnings assets) (non-GAAP) | | | 3.26 | % | | 3.34 | % | | 3.41 | % | | 3.57 | % | | 3.76 | % |
| | | | | | | | | | | | | | | | |
| | | | | | | |
| | For the Six Months Ended: | |
| | June 30, | | June 30, | |
| (in $000’s, unaudited) | | 2024 | | 2023 | |
| Net interest income before | | | | | | | |
| credit losses on loans (GAAP) | | $ | 79,548 | | $ | 95,551 | |
| Tax-equivalent adjustment on securities - exempt from Federal tax | | | 120 | | | 129 | |
| Net interest income, FTE (non-GAAP) | | $ | 79,668 | | $ | 95,680 | |
| | | | | | | |
| Average balance of total interest earning assets | | $ | 4,857,364 | | $ | 4,921,850 | |
| | | | | | | |
| Net interest margin (annualized net interest income divided by the | | | | | | | |
| average balance of total interest earnings assets) (GAAP) | | | 3.29 | % | | 3.91 | % |
| | | | | | | |
| Net interest margin, FTE (annualized net interest income, FTE, divided by the | | | | | | | |
| average balance of total interest earnings assets) (non-GAAP) | | | 3.30 | % | | 3.92 | % |
| | | | | | | |
- 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: | |
| | June 30, | | March 31, | | December 31, | | September 30, | | June 30, | |
| (in $000’s, unaudited) | | 2024 | | 2024 | | 2023 | | 2023 | | 2023 | |
| Noninterest expense | | $ | 28,188 | | $ | 27,536 | | $ | 25,491 | | $ | 25,171 | | $ | 24,991 | |
| | | | | | | | | | | | | | | | |
| Net interest income before credit losses on loans | | $ | 39,455 | | $ | 40,093 | | $ | 42,301 | | $ | 45,372 | | $ | 46,293 | |
| Noninterest income | | | 2,276 | | | 2,047 | | | 1,942 | | | 2,216 | | | 2,074 | |
| Total revenue | | $ | 41,731 | | $ | 42,140 | | $ | 44,243 | | $ | 47,588 | | $ | 48,367 | |
| | | | | | | | | | | | | | | | |
| Efficiency ratio (noninterest expense divided | | | | | | | | | | | | | | | | |
| by total revenue) (non-GAAP) | | | 67.55 | % | | 65.34 | % | | 57.62 | % | | 52.89 | % | | 51.67 | % |
| | | | | | | | | | | | | | | | |
| | For the Six Months Ended: | |
| | June 30, | | June 30, | |
| (in $000’s, unaudited) | | 2024 | | 2023 | |
| Noninterest expense | | $ | 55,724 | | $ | 50,392 | |
| | | | | | | |
| Net interest income before credit losses on loans | | $ | 79,548 | | $ | 95,551 | |
| Noninterest income | | | 4,323 | | | 4,840 | |
| Total revenue | | $ | 83,871 | | $ | 100,391 | |
| | | | | | | |
| Efficiency ratio (noninterest expense divided | | | | | | | |
| by total revenue) (non-GAAP) | | | 66.44 | % | | 50.20 | % |
| | | | | | | |
- 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 | | June 30, | | March 31, | | December 31, | | September 30, | | June 30, | |
| (in $000’s, unaudited) | | 2024 | | 2024 | | 2023 | | 2023 | | 2023 | |
| Capital components: | | | | | | | | | | | | | | | | |
| Total Equity (GAAP) | | $ | 679,199 | | | $ | 676,296 | | | $ | 672,901 | | | $ | 661,930 | | | $ | 653,670 | | |
| Less: Preferred Stock | | | — | | | | — | | | | — | | | | — | | | | — | | |
| Total Common Equity | | | 679,199 | | | | 676,296 | | | | 672,901 | | | | 661,930 | | | | 653,670 | | |
| Less: Goodwill | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | |
| Less: Other Intangible Assets | | | (7,521 | ) | | | (8,074 | ) | | | (8,627 | ) | | | (9,229 | ) | | | (9,830 | ) | |
| Total Tangible Common Equity (non-GAAP) | | $ | 504,047 | | | $ | 500,591 | | | $ | 496,643 | | | $ | 485,070 | | | $ | 476,209 | | |
| | | | | | | | | | | | | | | | |
| Asset components: | | | | | | | | | | | | | | | | |
| Total Assets (GAAP) | | $ | 5,263,024 | | | $ | 5,256,074 | | | $ | 5,194,095 | | | $ | 5,403,307 | | | $ | 5,311,837 | | |
| Less: Goodwill | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | |
| Less: Other Intangible Assets | | | (7,521 | ) | | | (8,074 | ) | | | (8,627 | ) | | | (9,229 | ) | | | (9,830 | ) | |
| Total Tangible Assets (non-GAAP) | | $ | 5,087,872 | | | $ | 5,080,369 | | | $ | 5,017,837 | | | $ | 5,226,447 | | | $ | 5,134,376 | | |
| | | | | | | | | | | | | | | | |
| Tangible common equity / tangible assets (non-GAAP) | | | 9.91 | | % | | 9.85 | | % | | 9.90 | | % | | 9.28 | | % | | 9.27 | | % |
| | | | | | | | | | | | | | | | | | | | | |
- 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 | | June 30, | | March 31, | | December 31, | | September 30, | | June 30, | |
| (in $000’s, unaudited) | | 2024 | | 2024 | | 2023 | | 2023 | | 2023 | |
| Capital components: | | | | | | | | | | | | | | | | |
| Total Equity (GAAP) | | $ | 697,964 | | | $ | 694,543 | | | $ | 690,918 | | | $ | 679,644 | | | $ | 670,836 | | |
| Less: Preferred Stock | | | — | | | | — | | | | — | | | | — | | | | — | | |
| Total Common Equity | | | 697,964 | | | | 694,543 | | | | 690,918 | | | | 679,644 | | | | 670,836 | | |
| Less: Goodwill | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | |
| Less: Other Intangible Assets | | | (7,521 | ) | | | (8,074 | ) | | | (8,627 | ) | | | (9,229 | ) | | | (9,830 | ) | |
| Total Tangible Common Equity (non-GAAP) | | $ | 522,812 | | | $ | 518,838 | | | $ | 514,660 | | | $ | 502,784 | | | $ | 493,375 | | |
| | | | | | | | | | | | | | | | |
| Asset components: | | | | | | | | | | | | | | | | |
| Total Assets (GAAP) | | $ | 5,260,500 | | | $ | 5,254,044 | | | $ | 5,190,829 | | | $ | 5,402,838 | | | $ | 5,314,170 | | |
| Less: Goodwill | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | | | (167,631 | ) | |
| Less: Other Intangible Assets | | | (7,521 | ) | | | (8,074 | ) | | | (8,627 | ) | | | (9,229 | ) | | | (9,830 | ) | |
| Total Tangible Assets (non-GAAP) | | $ | 5,085,348 | | | $ | 5,078,339 | | | $ | 5,014,571 | | | $ | 5,225,978 | | | $ | 5,136,709 | | |
| | | | | | | | | | | | | | | | |
| Tangible common equity / tangible assets (non-GAAP) | | | 10.28 | | % | | 10.22 | | % | | 10.26 | | % | | 9.62 | | % | | 9.60 | | % |
