Core Insights - Boston Partners increased its stake in Heritage Commerce Corp by 2.1% in Q2, owning 1,102,707 shares valued at $10,818,000, representing 1.79% of the company [2] - Other institutional investors also increased their positions, with notable increases from MIRAE ASSET GLOBAL ETFS HOLDINGS Ltd. (4.4%), SummerHaven Investment Management LLC (1.8%), PNC Financial Services Group Inc. (143.5%), and US Bancorp DE (66.7%) [3] - 75.55% of Heritage Commerce's stock is owned by institutional investors and hedge funds [3] Financial Performance - Heritage Commerce reported earnings of $0.24 per share and revenue of $50.01 million for the latest quarter, with a net margin of 16.31% and return on equity of 7.20% [5] - The company announced a quarterly dividend of $0.13, translating to an annualized dividend of $0.52 and a dividend yield of 4.8%, with a payout ratio of 74.29% [6] Stock Performance and Analyst Ratings - Heritage Commerce's stock opened at $10.90, with a market cap of $668 million, a price-to-earnings ratio of 15.57, and a beta of 0.89 [4] - Analysts have issued various ratings, with Stephens and Piper Sandler raising their price targets to $12.00, while DA Davidson set a target of $12.50, and Zacks upgraded the stock to a "strong-buy" rating [7] - The consensus rating for Heritage Commerce is "Buy" with a target price of $11.50 [7] Company Overview - Heritage Commerce Corp operates as a bank holding company for Heritage Bank of Commerce, providing commercial and personal banking services in California, including various deposit products [9]

Financial Performance - For Q3 2025, net income was $14.7 million, or $0.24 per diluted share, up from $10.5 million, or $0.17 per diluted share in Q3 2024, reflecting a 40% increase in earnings per share [149]. - Total revenue for Q3 2025 increased by $7.9 million, or 19%, to $50.0 million compared to $42.2 million in Q3 2024 [153]. - Adjusted net income for the first nine months of 2025 was $39.3 million, or $0.64 per diluted share, excluding legal settlement impacts [152]. - Reported net income for Q3 2025 was $14,698,000, an increase of 39.5% from $10,507,000 in Q3 2024 [298]. - Adjusted net income for the nine months ended September 30, 2025, was $39,279,000, up from $29,907,000 in the same period of 2024, reflecting a 31.3% increase [298]. Revenue and Income Sources - Net interest income rose by $7.5 million, or 19%, to $46.8 million in Q3 2025, with a fully tax equivalent net interest margin of 3.60%, up from 3.15% in Q3 2024 [153]. - Total noninterest income increased by 8% to $3.2 million in Q3 2025, driven by a recovery on an acquired loan and higher facility fees [153]. - Total noninterest income for the nine months ended September 30, 2025, rose 7% to $8.9 million, compared to $8.3 million for the same period in 2024 [179]. - Net interest income for the quarter ended September 30, 2025, was $46.788 million, with a net interest margin of 3.59% [163]. - The net interest margin (FTE) for Q3 2025 was 3.60%, up from 3.15% in Q3 2024 [295]. Asset and Loan Growth - Loans held-for-investment increased by $171.4 million, or 5%, to $3.6 billion at September 30, 2025, compared to $3.4 billion at the same date in 2024 [157]. - Total deposits increased by $47.0 million, or 1%, to $4.8 billion at September 30, 2025, compared to $4.7 billion at the same date in 2024 [157]. - The average balance of loans, gross, was $3,486,688 thousand for the nine months ended September 30, 2025, up from $3,330,442 thousand in 2024 [1]. - The commercial loan portfolio grew by $41.8 million, or 9%, to $523.1 million at September 30, 2025, from $481.3 million a year prior [208]. - Total assets (GAAP) as of September 30, 2025, were $5,623,720,000, an increase from $5,551,596,000 in 2024 [299]. Efficiency and Cost Management - The efficiency ratio improved to 58.05% in Q3 2025 from 65.37% in Q3 2024, reflecting higher total revenue [154]. - Noninterest expense for Q3 2025 rose to $29.0 million, up from $27.6 million in Q3 2024, primarily due to higher salaries and employee benefits [153]. - Salaries and employee benefits increased by 8% to $16,948,000 for the third quarter of 2025, compared to $15,673,000 for the same quarter in 2024 [182]. - Total noninterest expense for the nine months ended September 30, 2025, was $96,817,000, an increase of 16% from $83,279,000 for the same period in 2024 [182]. Credit Quality and Risk Management - Nonperforming assets totaled $3.7 million, or 0.07% of total assets, at September 30, 2025, down from $7.2 million, or 0.13% at September 30, 2024 [157]. - The allowance for credit losses on loans was $49.4 million, or 1.38% of total loans, representing 1,350% of total nonperforming loans at September 30, 2025 [157]. - The provision for credit losses on loans was $1,206,000 for the nine months ended September 30, 2025, compared to $808,000 for the same period in 2024, reflecting loan growth [178]. - The total nonperforming loans decreased to $3,662,000 at September 30, 2025, from $7,667,000 at December 31, 2024 [231]. - The Company has established policies to manage credit quality risk, focusing on loan quality and underwriting standards [226]. Capital and Liquidity - The Company's total available liquidity and borrowing capacity was $3.3 billion at September 30, 2025, compared to $3.2 billion at the same date in 2024 [157]. - The total capital ratio was 15.4% at September 30, 2025, exceeding the regulatory guideline of 10.0% for well-capitalized financial institutions [158]. - As of September 30, 2025, the Company had total shareholders' equity of $700.0 million, an increase from $685.4 million at September 30, 2024 [278]. - The Company had a total available line of credit of $2,093,799 thousand as of September 30, 2025 [267]. - The Company’s Tier 1 leverage ratio was 9.9% as of September 30, 2025, down from 10.0% at September 30, 2024 [274].

Core Insights - Five stocks have been added to the Zacks Rank 1 (Strong Buy) List, indicating strong potential for investment returns Group 1: Company Performance - Heritage Commerce Corp (HTBK) has seen a 4.9% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - HCA Healthcare (HCA), the largest non-governmental operator of acute care hospitals in the U.S., has experienced a 3.2% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Futu Holdings (FUTU), a technology company offering a digitized brokerage platform, has seen a 1.5% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Five Below (FIVE), a specialty value chain retailer, has experienced a 1% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [3] - Eagle Bancorp Montana (EBMT), a bank holding company, has seen a 0.6% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [4]

Core Insights - Heritage Commerce (HTBK) reported revenue of $50.01 million for the quarter ended September 2025, reflecting an 18.6% increase year-over-year [1] - Earnings per share (EPS) for the quarter was $0.24, up from $0.17 in the same quarter last year, exceeding the consensus estimate of $0.21 by 14.29% [1] Financial Performance - The reported revenue surpassed the Zacks Consensus Estimate of $48.61 million, resulting in a surprise of +2.86% [1] - The efficiency ratio improved to 58.1%, better than the estimated 60.6% [4] - Net interest margin was reported at 3.6%, slightly above the average estimate of 3.5% [4] - Total non-performing loans were $3.66 million, significantly lower than the estimated $7.29 million [4] - Average balances of interest-earning assets were $5.17 billion, close to the estimated $5.18 billion [4] - Total non-performing assets also stood at $3.66 million, compared to the estimated $6.59 million [4] - Net interest income reached $46.79 million, exceeding the average estimate of $46.03 million [4] - Total non-interest income was reported at $3.22 million, higher than the average estimate of $2.62 million [4] - Net interest income (FTE) was $46.84 million, above the average estimate of $46.29 million [4] Stock Performance - Shares of Heritage Commerce have returned -2% over the past month, while the Zacks S&P 500 composite increased by +0.2% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Core Viewpoint - Heritage Commerce (HTBK) reported quarterly earnings of $0.24 per share, exceeding the Zacks Consensus Estimate of $0.21 per share, and showing an increase from $0.17 per share a year ago [1][2] Financial Performance - The earnings surprise for the quarter was +14.29%, with the company previously expected to post earnings of $0.19 per share but actually delivering $0.21, resulting in a surprise of +10.53% [2] - Heritage Commerce generated revenues of $50.01 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 2.86%, compared to $42.15 million in the same quarter last year [3] - The company has exceeded consensus revenue estimates three times in the last four quarters [3] Stock Performance and Outlook - Heritage Commerce shares have increased approximately 5.4% since the beginning of the year, while the S&P 500 has gained 13.9% [4] - The future performance of the stock will largely depend on management's commentary during the earnings call and the earnings outlook [4][5] Earnings Estimates and Revisions - The current consensus EPS estimate for the upcoming quarter is $0.21 on revenues of $49.51 million, and for the current fiscal year, it is $0.81 on revenues of $191.87 million [8] - Prior to the earnings release, the estimate revisions trend for Heritage Commerce was unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [7] Industry Context - The Zacks Industry Rank for Banks - West is currently in the top 37% of over 250 Zacks industries, suggesting that the industry outlook can significantly impact stock performance [9] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [6]

Core Insights - Heritage Commerce Corp reported strong financial results for Q3 2025, with net income of $14.7 million and diluted EPS of $0.24, reflecting significant growth compared to previous quarters and the same period last year [2][6][7]. Financial Performance - Net income for Q3 2025 was $14.7 million, a 130% increase from $6.4 million in Q2 2025 and a 40% increase from $10.5 million in Q3 2024 [6][7][8]. - Total revenue reached $50.0 million, up 5% from $47.8 million in Q2 2025 and up 19% from $42.2 million in Q3 2024 [11][8]. - Pre-Provision Net Revenue (PPNR) was $21.0 million, a 44% increase from $14.6 million in Q3 2024 [8][18]. Balance Sheet Highlights - Total assets increased by 3% to $5.6 billion at September 30, 2025, compared to $5.5 billion at June 30, 2025 [28]. - Loans held-for-investment (HFI) rose to $3.6 billion, an increase of 1% from the previous quarter and 5% year-over-year [33]. - Total deposits increased by 3% to $4.8 billion, with a loan-to-deposit ratio of 74.99% [35]. Asset Quality - Nonperforming assets (NPAs) decreased to $3.7 million, down from $6.2 million in Q2 2025 and $7.2 million in Q3 2024 [40]. - The allowance for credit losses on loans was $49.4 million, representing 1.38% of total loans, consistent with the previous quarter [39]. Capital Management - Total shareholders' equity was $700.0 million, an increase from $694.7 million at June 30, 2025 [36]. - The Company announced an increase in its share repurchase program, doubling the authorization from $15 million to $30 million [42]. CEO Commentary - The CEO highlighted the solid financial foundation of the Company, emphasizing high capital reserves, strong liquidity, and improved asset quality, which positions the Company for continued growth and market share expansion [3].

Financial Performance - Net income for Q3 2025 was $14.7 million, or $0.24 per diluted share, representing a 130% increase from $6.4 million and a 140% increase from $0.10 in Q2 2025[2][5] - Total revenue for Q3 2025 was $50.0 million, a 5% increase from $47.8 million in Q2 2025 and a 19% increase from $42.2 million in Q3 2024[4][8] - Noninterest income for Q3 2025 increased by 8% to $3.2 million compared to $3.0 million in Q2 2025, and by 14% from $2.8 million in Q3 2024[12] - Net income for Q3 2025 reached $14,698,000, a 130% increase from Q2 2025 and a 40% increase from Q3 2024[54] - Basic earnings per share for Q3 2025 was $0.24, a 140% increase from Q2 2025 and a 41% increase from Q3 2024[54] - Total revenue for the nine months ended September 30, 2025, was $143,843,000, a 14% increase compared to the same period in 2024[54] - Reported net income (GAAP) for Q3 2025 was $14,698,000, up from $10,507,000 in Q3 2024, representing a 39.5% increase[81] - Adjusted net income (non-GAAP) for Q3 2025 was $14,698,000, compared to $10,507,000 in Q3 2024, reflecting a 39.5% year-over-year growth[81] Asset and Deposit Growth - Total assets increased by 3% to $5.6 billion at September 30, 2025, compared to $5.5 billion at June 30, 2025, driven by an increase in deposits and loans[25] - Total deposits rose by $149.2 million, or 3%, to $4.8 billion at September 30, 2025, compared to $4.6 billion at June 30, 2025[33] - Total assets as of September 30, 2025, were $5,623,720,000, compared to $5,467,237,000 in the previous quarter[58] - Total deposits increased to $4,687,294,000, with an average interest rate of 1.50%, compared to $4,618,007,000 and 1.54% in the previous quarter[67] - Total deposits reached $4.674 billion as of September 30, 2025, compared to $4.427 billion as of September 30, 2024, representing an increase of 5.6%[75] Loan and Credit Quality - Loans held-for-investment increased by $47.3 million, or 1%, to $3.6 billion in Q3 2025, while total deposits rose by $149.2 million, or 3%, to $4.8 billion[4][3] - The provision for credit losses on loans was $416,000 in Q3 2025, down from $516,000 in Q2 2025 and up from $153,000 in Q3 2024[17] - The allowance for credit losses on loans was $49.4 million, or 1.38% of total loans, at September 30, 2025, consistent with the previous quarter[38] - Nonperforming loans decreased by 41% year-over-year to $3,662,000 from $6,178,000[63] - The allowance for credit losses on loans to total loans ratio remained stable at 1.38%[64] Efficiency and Profitability Metrics - The efficiency ratio improved to 58.05%, a decrease of 5% from 61.01% in Q2 2025 and an 11% decrease from 65.37% in Q3 2024[4] - The annualized return on average tangible common equity was 11.14% for Q3 2025, an increase of 12% from the previous quarter[6][4] - The annualized return on average equity improved to 8.37%, a 127% increase from Q2 2025 and a 36% increase from Q3 2024[54] - The reported efficiency ratio (noninterest expense divided by total revenue) for the nine months ended September 30, 2025, was 67.31%, compared to 66.08% in 2024[85] - The adjusted efficiency ratio for the nine months ended September 30, 2025, was 60.92%, compared to 66.08% in 2024, showing improved operational efficiency[85] Shareholder Equity and Capital - Total shareholders' equity was $700.0 million, reflecting an increase of $5.3 million from the previous quarter[4] - Total common equity as of September 30, 2025, was $700,010,000, up from $685,352,000 as of September 30, 2024, an increase of 2.1%[79] - Tangible common equity increased by 1% to $527,301,000 from $521,541,000[64] - Total capital ratio slightly decreased to 15.4% from 15.5%[64] - The Company approved an increase in its share repurchase program from $15 million to $30 million, with a remaining capacity of $26 million as of September 30, 2025[40][42]

Core Insights - First Hawaiian (FHB) is anticipated to report a year-over-year increase in earnings due to higher revenues for the quarter ended September 2025, with a consensus outlook suggesting a positive earnings picture [1][3] - The upcoming earnings report is expected to be released on October 24, and the stock price may react significantly based on whether the actual results meet or exceed expectations [2] Earnings Estimates - The consensus EPS estimate for First Hawaiian is $0.52 per share, reflecting an 8.3% increase year-over-year [3] - Expected revenues for the quarter are projected at $218.28 million, which is a 4% increase from the previous year [3] Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analyst expectations [4] - The Most Accurate Estimate for First Hawaiian matches the Zacks Consensus Estimate, resulting in an Earnings ESP of 0% [11] Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive or negative reading indicates the likely deviation of actual earnings from the consensus estimate, with a positive ESP being a strong predictor of an earnings beat [8][9] - First Hawaiian's current Zacks Rank is 3, which complicates the prediction of an earnings beat [11] Historical Performance - In the last reported quarter, First Hawaiian exceeded the expected earnings of $0.49 per share by delivering $0.58, resulting in a surprise of +18.37% [12] - Over the past four quarters, the company has consistently beaten consensus EPS estimates [13] Industry Context - In the Zacks Banks - West industry, Heritage Commerce (HTBK) is expected to report earnings of $0.21 per share for the same quarter, indicating a year-over-year change of +23.5% [17] - Heritage Commerce's revenue is projected at $48.61 million, up 15.3% from the previous year, with a recent EPS estimate revision of 1.6% [18]

Group 1 - Heritage Commerce Corp announced the appointment of Christopher J. Abate to its Board of Directors, expanding the Board from eight to nine members [1] - Julie Biagini-Komas, Chair of the Board, expressed confidence in Mr. Abate's experience in real estate and finance, highlighting his leadership skills as a valuable addition to the Board [2] - Clay Jones, President & CEO, praised Mr. Abate's extensive experience in complex markets and product innovation, indicating that his collaborative approach will benefit both the Board and shareholders [2] Group 2 - Mr. Abate has over 20 years of experience in the financial services industry, including his role as CEO of Redwood Trust, Inc. since May 2018 [2] - Prior to his current position, Mr. Abate held various roles at Redwood Trust, including President, Chief Financial Officer, and Controller, showcasing a strong background in finance and accounting [2] - Heritage Commerce Corp, established in October 1997, is the parent company of Heritage Bank of Commerce, which has full-service branches across multiple locations in California [3]

[Cautionary Note on Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20on%20Forward-Looking%20Statements) [Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section highlights forward-looking statements, subject to risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements, which are not historical facts and are based on current expectations and projections about future events[8](index=8&type=chunk) - Actual results could differ materially from projected results due to various risks and uncertainties, including cybersecurity, personnel retention, market/sociopolitical factors, and operational issues[9](index=9&type=chunk)[11](index=11&type=chunk) [Part I. FINANCIAL INFORMATION](index=6&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes on accounting policies and financial components [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Data | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | |:---|:---|:---| | **Assets** ||| | Total cash and cash equivalents | $721,792 | $968,123 | | Securities available-for-sale, at fair value | $307,035 | $256,274 | | Securities held-to-maturity, at amortized cost | $561,205 | $590,016 | | Loans, net | $3,485,700 | $3,442,984 | | Total assets | $5,467,237 | $5,645,006 | | **Liabilities** ||| | Total deposits | $4,627,334 | $4,820,031 | | Total liabilities | $4,772,533 | $4,955,279 | | **Shareholders' Equity** ||| | Total shareholders' equity | $694,704 | $689,727 | | Total liabilities and shareholders' equity | $5,467,237 | $5,645,006 | - Total assets decreased by **$177.769 million (-3.15%)** from December 31, 2024, to June 30, 2025[13](index=13&type=chunk) - Total deposits decreased by **$192.697 million (-3.99%)** from December 31, 2024, to June 30, 2025[13](index=13&type=chunk) [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Income Statement Data | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | |:---|:---|:---|:---|:---|\ | Total interest income | $63,025 | $58,489 | $124,857 | $115,450 | | Total interest expense | $18,220 | $19,622 | $36,692 | $37,080 | | Net interest income before provision for credit losses on loans | $44,805 | $38,867 | $88,165 | $78,370 | | Provision for credit losses on loans | $516 | $471 | $790 | $655 | | Total noninterest income | $2,977 | $2,864 | $5,673 | $5,501 | | Total noninterest expense | $38,335 | $28,188 | $67,791 | $55,724 | | Net income | $6,389 | $9,234 | $18,015 | $19,400 | | Basic earnings per common share | $0.10 | $0.15 | $0.29 | $0.32 | | Diluted earnings per common share | $0.10 | $0.15 | $0.29 | $0.32 | - Net income for the three months ended June 30, 2025, decreased by **$2.845 million (-30.81%)** compared to the same period in 2024[15](index=15&type=chunk) - Diluted EPS for the three months ended June 30, 2025, decreased by **$0.05 (-33.33%)** compared to the same period in 2024[15](index=15&type=chunk) [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Comprehensive Income Data | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | |:---|:---|:---|:---|:---|\ | Net income | $6,389 | $9,234 | $18,015 | $19,400 | | Change in unrealized gains on securities and I/O strips, net of deferred income taxes | $1,885 | $907 | $3,239 | $1,083 | | Change in pension and other benefit plan liability, net of deferred income taxes | $(56) | $(34) | $(112) | $(68) | | Other comprehensive income | $1,829 | $873 | $3,127 | $1,015 | | Total comprehensive income | $8,218 | $10,107 | $21,142 | $20,415 | - Total comprehensive income for the three months ended June 30, 2025, decreased by **$1.889 million (-18.69%)** compared to the same period in 2024[17](index=17&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Consolidated Shareholders' Equity Data | Metric | January 1, 2025 (Thousands) | June 30, 2025 (Thousands) | January 1, 2024 (Thousands) | June 30, 2024 (Thousands) | |:---|:---|:---|:---|:---|\ | Common Stock | $510,070 | $509,888 | $506,539 | $508,343 | | Retained Earnings | $187,762 | $189,794 | $179,092 | $182,571 | | Accumulated Other Comprehensive Income (Loss) | $(8,105) | $(4,978) | $(12,730) | $(11,715) | | Total Shareholders' Equity | $689,727 | $694,704 | $672,901 | $679,199 | - Total shareholders' equity increased by **$4.977 million (0.72%)** from January 1, 2025, to June 30, 2025[20](index=20&type=chunk) - Cash dividends declared were **$0.13 per share** for both the first and second quarters of 2025, totaling **$7.987 million** and **$7.996 million** respectively[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Cash Flow Data | Metric | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | |:---|:---|:---|\ | Net cash provided by operating activities | $22,836 | $17,847 | | Net cash (used in) provided by investing activities | $(59,589) | $171,610 | | Net cash (used in) provided by financing activities | $(209,578) | $50,674 | | Net (decrease) increase in cash and cash equivalents | $(246,331) | $240,131 | | Cash and cash equivalents, end of period | $721,792 | $648,260 | - Net cash used in investing activities significantly increased to **$(59.589) million** for the six months ended June 30, 2025, compared to **$171.610 million** provided in the same period of 2024, primarily due to purchases of available-for-sale securities[22](index=22&type=chunk) - Net cash used in financing activities was **$(209.578) million** for the six months ended June 30, 2025, a substantial change from **$50.674 million** provided in the same period of 2024, driven by a net decrease in deposits and common stock repurchases[22](index=22&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Consolidated%