Heritage merce p(HTBK) - 2025 Q2 - Quarterly Results

Executive Summary & Second Quarter 2025 Highlights Reported and Adjusted Financial Highlights Heritage Commerce Corp reported Q2 2025 net income of $6.4 million ($0.10 EPS) and adjusted net income of $13.0 million ($0.21 EPS), excluding significant legal settlement charges. Key metrics include a 3.54% FTE Net Interest Margin and an adjusted efficiency ratio of 61.01% | Metric | Reported Q2 2025 | Adjusted Q2 2025 | | :--- | :--- | :--- | | Net Income | $6.4 million | $13.0 million | | Earnings Per Share | $0.10 | $0.21 | | Pre-Provision Net Revenue ("PPNR") | $9.4 million | $18.6 million | | Fully Tax Equivalent ("FTE") Net Interest Margin | 3.54% | 3.54% | | Efficiency Ratio | 80.23% | 61.01% | | Tangible Book Value Per Share | $8.49 | $8.59 | CEO Commentary CEO Clay Jones highlighted strong Q2 execution with higher net income (excluding charges), positive loan growth, expanded net interest margin, and stable asset quality, despite seasonal deposit declines. He emphasized a strong balance sheet, capital, and liquidity for economic volatility - Generated higher net income and earnings per share, excluding significant charges primarily related to a legal settlement[3] - Observed positive trends in loan growth, an expansion in net interest margin, and stable asset quality[3] - Maintained a strong balance sheet with high capital and liquidity, and healthy asset quality, positioning the company to navigate the current environment[3] Key Financial Trends (Linked-Quarter & Year-Over-Year) The company experienced a 4% linked-quarter and 15% year-over-year increase in total revenue to $47.8 million. Reported net income decreased significantly due to a $9.2 million legal settlement charge, while adjusted net income rose 11% QoQ and 40% YoY. Loans HFI grew 1% QoQ and 5% YoY, and the FTE net interest margin increased to 3.54% | Metric | Linked-Quarter Basis (QoQ) | Year-Over-Year (YoY) | | :--- | :--- | :--- | | Total revenue | Up 4%, or $1.7 million | Up 15%, or $6.1 million | | Noninterest expense (includes $9.2M legal settlement) | $38.3 million | $38.3 million | | Reported net income | Down 45% to $6.4 million | Down 31% to $6.4 million | | Reported EPS | Down 47% to $0.10 | Down 33% to $0.10 | | Adjusted net income | Up 11% to $13.0 million | Up 40% to $13.0 million | | Adjusted EPS | Up 11% to $0.21 | Up 40% to $0.21 | | Loans held-for-investment ("HFI") | Up $47.4 million or 1% to $3.5 billion | Up $154.5 million or 5% | | Total deposits | Down $55.9 million or 1% to $4.6 billion | Up $182.7 million or 4% | | Loan to deposit ratio | 76.38% (up from 74.45%) | 76.38% (up from 76.04%) | | Nonperforming assets ("NPAs") to total assets | 0.11% (stable) | 0.11% (stable) | | Classified assets to total assets | 0.69% (down from 0.73%) | 0.69% (up from 0.64%) | | FTE net interest margin | 3.54% (up from 3.39%) | 3.54% (up from 3.26%) | | Common equity tier 1 capital ratio | 13.3% (down from 13.6%) | 13.3% (down from 13.4%) | | Total capital ratio | 15.5% (down from 15.9%) | 15.5% (down from 15.6%) | | Tangible common equity ratio | 9.85% (up 1% from 9.78%) | 9.85% (down 1% from 9.91%) | Results of Operations Net Income and Earnings Per Share Reported net income for Q2 2025 was $6.4 million ($0.10 diluted EPS), while adjusted net income was $13.0 million ($0.21 diluted EPS), reflecting an 11% QoQ and 40% YoY increase in adjusted EPS. For the first six months, adjusted net income was $24.6 million ($0.40 diluted EPS), up from $19.4 million ($0.32 diluted EPS) in the prior year | Metric | Q2 2025 (Reported) | Q2 2025 (Adjusted) | Q1 2025 (Adjusted) | Q2 2024 (Adjusted) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $6.4 million | $13.0 million | $11.6 million | $9.2 million | | Diluted EPS | $0.10 | $0.21 | $0.19 | $0.15 | | Annualized ROAA | 0.47% | 0.95% | 0.85% | 0.71% | | Annualized ROAE | 3.68% | N/A | 6.81% | 5.50% | | Annualized ROATCE | N/A | 9.92% | 9.09% | 7.43% | | Metric | 6 Months 2025 (Reported) | 6 Months 2025 (Adjusted) | 6 Months 2024 (Adjusted) | | :--- | :--- | :--- | :--- | | Net Income | $18.0 million | $24.6 million | $19.4 million | | Diluted EPS | $0.29 | $0.40 | $0.32 | | Annualized ROAA | 0.66% | 0.90% | 0.75% | | Annualized ROAE | 5.23% | N/A | 5.79% | | Annualized ROATCE | N/A | 9.51% | 7.84% | Total Revenue Total revenue increased by $1.7 million (4%) QoQ to $47.8 million in Q2 2025 and by $6.1 million (15%) YoY. For the first six months, total revenue grew $9.9 million (12%) to $93.8 million compared to the prior year | Period | Total Revenue ($ millions) | Change QoQ | Change YoY | | :--- | :--- | :--- | :--- | | Q2 2025 | $47.8 | +$1.7 (4%) | +$6.1 (15%) | | Q1 2025 | $46.1 | N/A | N/A | | Q2 2024 | $41.7 | N/A | N/A | | 6 Months 2025 | $93.8 | N/A | +$9.9 (12%) | | 6 Months 2024 | $83.9 | N/A | N/A | Pre-Provision Net Revenue (PPNR) Reported PPNR for Q2 2025 was $9.4 million, with adjusted PPNR at $18.6 million, up from $16.6 million QoQ and $13.5 million YoY. For the first six months, adjusted PPNR was $35.2 million, an increase from $28.1 million in the prior year | Metric | Q2 2025 (Reported) | Q2 2025 (Adjusted) | Q1 2025 (Adjusted) | Q2 2024 (Adjusted) | | :--- | :--- | :--- | :--- | :--- | | PPNR | $9.4 million | $18.6 million | $16.6 million | $13.5 million | | Metric | 6 Months 2025 (Reported) | 6 Months 2025 (Adjusted) | 6 Months 2024 (Adjusted) | | :--- | :--- | :--- | :--- | | PPNR | $26.0 million | $35.2 million | $28.1 million | Net Interest Income and Margin Net interest income rose to $44.8 million in Q2 2025, a 3% QoQ increase and 15% YoY increase. The FTE net interest margin expanded to 3.54% in Q2 2025, up from 3.39% QoQ and 3.23% YoY, driven by higher loan and securities yields and lower deposit rates | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $44.8 million | $43.4 million | $38.9 million | | FTE Net Interest Margin | 3.54% | 3.39% | 3.23% | | Metric | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | | Net Interest Income | $88.2 million | $78.4 million | | FTE Net Interest Margin | 3.47% | 3.27% | - QoQ increase in FTE net interest margin primarily due to an increase in average yields and average balances of loans and securities, partially offset by a decrease in average balances of deposits[9] - YoY increase in FTE net interest margin primarily due to lower rates paid on customer deposits, increased average yields and balances of loans and securities, and an increase in average deposit balances[10] Provision for Credit Losses on Loans The provision for credit losses on loans increased to $516,000 in Q2 2025 from $274,000 QoQ and $471,000 YoY, primarily due to loan growth. For the first six months, the provision was $790,000, up from $655,000 in the prior year | Period | Provision for Credit Losses on Loans | | :--- | :--- | | Q2 2025 | $516,000 | | Q1 2025 | $274,000 | | Q2 2024 | $471,000 | | 6 Months 2025 | $790,000 | | 6 Months 2024 | $655,000 | - The increase in provision for credit losses was primarily due to loan growth[12] Noninterest Income Total noninterest income increased to $3.0 million in Q2 2025, up from $2.7 million QoQ and $2.9 million YoY, mainly due to higher termination and facility fees. For the first six months, noninterest income increased 3% to $5.7 million | Period | Total Noninterest Income | | :--- | :--- | | Q2 2025 | $3.0 million | | Q1 2025 | $2.7 million | | Q2 2024 | $2.9 million | | 6 Months 2025 | $5.7 million | | 6 Months 2024 | $5.5 million | - Increase primarily due to higher termination and facility fees, partially offset by a $219,000 gain on proceeds from company-owned life insurance in Q2 2024[13][14] Noninterest Expense Reported noninterest expense for Q2 2025 was $38.3 million, including a $9.2 million pre-tax charge for a legal settlement and branch closure. Adjusted noninterest expense was $29.1 million, a slight decrease QoQ but an increase YoY | Period | Reported Noninterest Expense | Adjusted Noninterest Expense | | :--- | :--- | :--- | | Q2 2025 | $38.3 million | $29.1 million | | Q1 2025 | N/A | $29.5 million | | Q2 2024 | N/A | $28.2 million | | 6 Months 2025 | $67.8 million | $58.6 million | | 6 Months 2024 | N/A | $55.7 million | - Q2 2025 reported noninterest expense includes $9.2 million in pre-tax charges primarily related to a legal settlement and planned branch closure[15] Income Tax Expense and Effective Tax Rate Income tax expense decreased to $2.5 million in Q2 2025 due to lower pre-tax income, resulting in an effective tax rate of 28.5%, down from 28.8% QoQ and 29.4% YoY. For the first six months, the effective tax rate was 28.7% | Period | Income Tax Expense | Effective Tax Rate | | :--- | :--- | :--- | | Q2 2025 | $2.5 million | 28.5% | | Q1 2025 | $4.7 million | 28.8% | | Q2 2024 | $3.8 million | 29.4% | | 6 Months 2025 | $7.2 million | 28.7% | | 6 Months 2024 | $8.1 million | 29.4% | Efficiency Ratio The reported efficiency ratio for Q2 2025 was 80.23%, while the adjusted efficiency ratio improved to 61.01% from 63.96% QoQ and 67.55% YoY, driven by higher total revenue. For the first six months, the adjusted efficiency ratio improved to 62.45% | Period | Reported Efficiency Ratio | Adjusted Efficiency Ratio | | :--- | :--- | :--- | | Q2 2025 | 80.23% | 61.01% | | Q1 2025 | N/A | 63.96% | | Q2 2024 | N/A | 67.55% | | 6 Months 2025 | 72.24% | 62.45% | | 6 Months 2024 | N/A | 66.44% | Employees The number of full-time equivalent employees remained stable at 350 at June 30, 2025, compared to March 31, 2025, and slightly down from 353 at June 30, 2024 - Full-time equivalent employees: 350 at June 30, 2025 (stable QoQ, down from 353 YoY)[19] Financial Condition and Capital Management Total Assets Total assets remained relatively flat at $5.5 billion QoQ but increased 4% YoY from $5.3 billion, primarily due to increases in deposits and loans | Period | Total Assets | | :--- | :--- | | June 30, 2025 | $5.5 billion | | March 31, 2025 | $5.5 billion | | June 30, 2024 | $5.3 billion | - Total assets increased 4% YoY primarily due to an increase in deposits resulting in an increase in overnight funds, and an increase in loans[20] Investment Securities Investment securities available-for-sale decreased to $307.0 million QoQ, while held-to-maturity securities decreased to $561.2 million. Unrealized and unrecognized losses in both portfolios, totaling $74.7 million pre-tax for HTM, are attributed to higher interest rates, with principal repayment expected at maturity | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Securities available-for-sale (fair value) | $307.0 million | $371.0 million | $273.0 million | | Pre-tax unrealized loss (AFS) | $448,000 | N/A | N/A | | Securities held-to-maturity (amortized cost) | $561.2 million | $576.7 million | $621.2 million | | Fair value (HTM) | $486.5 million | N/A | N/A | | Pre-tax unrecognized loss (HTM) | $74.7 million | N/A | N/A | - Unrealized and unrecognized losses in both portfolios were due to higher interest rates; issuers are of high credit quality, and principal amounts are expected to be repaid[24] - Purchased $211.8 million of securities in H1 2025 (agency mortgage-backed, collateralized mortgage obligations, U.S. Treasury) with a book yield of 4.82% and average life of 4.55 years[22] Loans Held-for-Investment (HFI) Loans HFI increased 1% QoQ to $3.5 billion and 5% YoY. Excluding residential mortgages, loans HFI grew 2% QoQ and 6% YoY to $3.1 billion. Commercial and industrial line utilization was 32%, and 24% of the loan portfolio consisted of floating interest rate loans | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Loans HFI, net | $3.5 billion | $3.5 billion | $3.4 billion | | Loans HFI (excl. residential mortgages) | $3.1 billion | $3.0 billion | $2.9 billion | - Commercial and industrial line utilization was 32% at June 30, 2025[26] - Commercial real estate (CRE) loans totaled $2.0 billion, with 31% owner-occupied and 31% investor CRE loans[26] - Approximately 24% of the loan portfolio consisted of floating interest rate loans[26] Deposits Total deposits decreased 1% QoQ to $4.6 billion due to seasonal outflows but increased 4% YoY. Noninterest-bearing demand deposits constituted 25% of total deposits, while savings and money market deposits were 28% | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Deposits | $4.6 billion | $4.7 billion | $4.4 billion | | Loan to Deposit Ratio | 76.38% | 74.45% | 76.04% | | Deposit Type | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Demand, noninterest-bearing | 25% | 24% | 27% | | Demand, interest-bearing | 21% | 20% | 21% | | Savings and money market | 28% | 29% | 25% | | Time deposits — under $250 | 1% | 1% | 1% | | Time deposits — $250 and over | 4% | 5% | 4% | | ICS/CDARS | 21% | 21% | 22% | | Total deposits | 100% | 100% | 100% | Liquidity and Borrowing Capacity Total available liquidity and borrowing capacity was $3.1 billion at June 30, 2025, a slight decrease from $3.2 billion QoQ but an increase from $3.0 billion YoY | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Available Liquidity and Borrowing Capacity | $3.1 billion | $3.2 billion | $3.0 billion | Shareholders' Equity and Capital Ratios Total shareholders' equity was $694.7 million, relatively stable QoQ and up 2% YoY. The company's and the Bank's capital ratios exceeded all regulatory guidelines for a well-capitalized institution, with a Common Equity Tier 1 capital ratio of 13.3% | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Shareholders' Equity | $694.7 million | $696.2 million | $679.2 million | | Common Equity Tier 1 Capital Ratio | 13.3% | 13.6% | 13.4% | | Total Capital Ratio | 15.5% | 15.9% | 15.6% | - Consolidated capital ratios and Bank's capital ratios exceeded regulatory guidelines for a well-capitalized financial institution under PCA and Basel III minimum requirements[32] Tangible Book Value Per Share Reported tangible book value per share was $8.49, and adjusted tangible book value per share was $8.59 at June 30, 2025, up from $8.48 QoQ and $8.22 YoY | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Reported Tangible Book Value Per Share | $8.49 | N/A | N/A | | Adjusted Tangible Book Value Per Share | $8.59 | $8.48 | $8.22 | Share Repurchase Program The company repurchased 207,989 shares for $1.9 million in Q2 2025, with $13.1 million remaining under the $15.0 million program, which was extended until July 31, 2026 - Repurchased 207,989 shares of common stock for $1.9 million in Q2 2025[34] - Remaining capacity under the share repurchase program was $13.1 million at June 30, 2025[34] - The share repurchase program was extended for one year, expiring on July 31, 2026[34] Credit Quality Provision for Credit Losses and Net Charge-offs The provision for credit losses on loans was $516,000 in Q2 2025, while net charge-offs significantly decreased to $145,000 from $965,000 QoQ. For the first six months, net charge-offs totaled $1.1 million | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Provision for Credit Losses on Loans | $516,000 | $274,000 | $471,000 | | Net Charge-offs | $145,000 | $965,000 | $405,000 | | Metric | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | | Provision for Credit Losses on Loans | $790,000 | $655,000 | | Net Charge-offs | $1.1 million | $659,000 | Allowance for Credit Losses on Loans (ACLL) The ACLL stood at $48.6 million, representing 1.38% of total loans and covering 787% of total nonperforming loans at June 30, 2025, indicating strong coverage | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | ACLL | $48.6 million | $48.3 million | $48.0 million | | ACLL to Total Loans | 1.38% | 1.38% | 1.42% | | ACLL to Total Nonperforming Loans | 787% | 765% | 795% | Nonperforming Assets (NPAs) and Classified Assets Nonperforming assets remained stable at $6.2 million, representing 0.11% of total assets. Classified assets decreased to $37.5 million (0.69% of total assets) from $40.0 million QoQ | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Nonperforming Assets (NPAs) | $6.2 million | $6.3 million | $6.0 million | | NPAs to Total Assets | 0.11% | 0.11% | 0.11% | | Classified Assets | $37.5 million | $40.0 million | $33.6 million | | Classified Assets to Total Assets | 0.69% | 0.73% | 0.64% | - No foreclosed assets on the balance sheet at June 30, 2025, March 31, 2025, or June 30, 2024[38] Company Overview About Heritage Commerce Corp Heritage Commerce Corp is a bank holding company headquartered in San Jose, CA, operating Heritage Bank of Commerce with full-service branches across Northern California. Its subsidiary, Bay View Funding, provides factoring financing nationwide - Heritage Commerce Corp is a bank holding company for Heritage Bank of Commerce, headquartered in San Jose, CA[40] - Heritage Bank of Commerce operates full-service branches in various Northern California locations and is an SBA Preferred Lender[40] - Bay View Funding, a subsidiary, provides business-essential working capital factoring financing throughout the United States[40] Supplementary Information Reclassifications Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock dividends were reclassified from interest income to noninterest income, and related average asset balances from interest-earning assets to other assets, with no impact on net income or shareholders' equity - Reclassified FHLB and FRB stock dividends from interest income to noninterest income and related average asset balances from interest earning assets to other assets[42] - These reclassifications did not affect previously reported net income or shareholders' equity[42] Non-GAAP Financial Measures Management uses certain non-GAAP financial measures, such as 'adjusted' operating metrics, to evaluate performance and enhance comparability, noting these are supplemental to GAAP and not substitutes - Management uses non-GAAP financial measures, including 'adjusted' operating metrics, to evaluate and measure the Company's performance[44] - These measures enhance comparability between periods and are common in the banking industry, but should be supplemental to GAAP and not relied upon as a substitute[44] Forward-Looking Statement Disclaimer The report contains forward-looking statements subject to various risks and uncertainties, including cybersecurity, personnel retention, market conditions, credit risk, and regulatory changes, which could cause actual results to differ materially from projections - Forward-looking statements reflect plans and expectations for future events and are inherently uncertain[46] - Actual results may differ materially due to various risks and uncertainties, many outside the company's control[46] - Key risks include cybersecurity, ability to attract and retain personnel, media and consumer confidence, adequacy of risk management, geographic concentration, inflationary pressures, interest rate changes, and litigation matters[46][47] Detailed Financial Statements and Reconciliations Consolidated Income Statements Provides detailed consolidated income statements for the second quarter and first six months of 2025, alongside comparative periods, showing interest income, interest expense, net interest income, noninterest income, noninterest expense, and net income | CONSOLIDATED INCOME STATEMENTS (in $000's, unaudited) | For the Quarter Ended: June 30, 2025 | For the Quarter Ended: March 31, 2025 | For the Quarter Ended: June 30, 2024 | For the Six Months Ended: June 30, 2025 | For the Six Months Ended: June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Interest income | $63,025 | $61,832 | $58,489 | $124,857 | $115,450 | | Interest expense | $18,220 | $18,472 | $19,622 | $36,692 | $37,080 | | Net interest income before provision for credit losses on loans | $44,805 | $43,360 | $38,867 | $88,165 | $78,370 | | Provision for credit losses on loans | $516 | $274 | $471 | $790 | $655 | | Total noninterest income | $2,977 | $2,696 | $2,864 | $5,673 | $5,501 | | Total noninterest expense | $38,335 | $29,456 | $28,188 | $67,791 | $55,724 | | Income tax expense | $2,542 | $4,700 | $3,838 | $7,242 | $8,092 | | Net income | $6,389 | $11,626 | $9,234 | $18,015 | $19,400 | | Basic earnings per share | $0.10 | $0.19 | $0.15 | $0.29 | $0.32 | | Diluted earnings per share | $0.10 | $0.19 | $0.15 | $0.29 | $0.32 | Consolidated Balance Sheets Presents detailed consolidated balance sheets at June 30, 2025, and comparative periods, outlining assets (cash, securities, loans), liabilities (deposits, debt), and shareholders' equity | CONSOLIDATED BALANCE SHEETS (in $000's, unaudited) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | ASSETS: | | | | | Cash and due from banks | $55,360 | $44,281 | $37,497 | | Securities available-for-sale, at fair value | $307,035 | $370,976 | $273,043 | | Securities held-to-maturity, at amortized cost | $561,205 | $576,718 | $621,178 | | Loans - held-for-investment, net of deferred fees | $3,534,333 | $3,486,898 | $3,379,793 | | Allowance for credit losses on loans | ($48,633) | ($48,262) | ($47,954) | | Total assets | $5,467,237 | $5,514,255 | $5,263,024 | | LIABILITIES AND SHAREHOLDERS' EQUITY: | | | | | Total deposits | $4,627,334 | $4,683,268 | $4,444,610 | | Subordinated debt, net of issuance costs | $39,728 | $39,691 | $39,577 | | Total liabilities | $4,772,533 | $4,818,065 | $4,583,825 | | Total shareholders' equity | $694,704 | $696,190 | $679,199 | | Total liabilities and shareholders' equity | $5,467,237 | $5,514,255 | $5,263,024 | Credit Quality Data Includes comprehensive credit quality metrics such as nonaccrual loans, nonperforming loans and assets, net charge-offs, provision for credit losses, allowance for credit losses, and classified assets, with historical comparisons | CREDIT QUALITY DATA (in $000's, unaudited) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total nonaccrual loans - held-for-investment | $6,055 | $6,044 | $5,782 | | Loans over 90 days past due and still accruing | $123 | $268 | $248 | | Total nonperforming loans | $6,178 | $6,312 | $6,030 | | Total nonperforming assets | $6,178 | $6,312 | $6,030 | | Net charge-offs during the quarter | $145 | $965 | $405 | | Provision for credit losses on loans during the quarter | $516 | $274 | $471 | | Allowance for credit losses on loans | $48,633 | $48,262 | $47,954 | | Classified assets | $37,525 | $40,034 | $33,605 | | Allowance for credit losses on loans to total loans | 1.38% | 1.38% | 1.42% | | Allowance for credit losses on loans to total nonperforming loans | 787.20% | 764.61% | 795.26% | | Nonperforming assets to total assets | 0.11% | 0.11% | 0.11% | | Nonperforming loans to total loans | 0.17% | 0.18% | 0.18% | Net Interest Income and Net Interest Margin Details the calculation of net interest income and net interest margin on a fully tax-equivalent (FTE) basis, presenting average balances, interest income/expense, and yields/rates for various asset and liability categories | NET INTEREST INCOME AND NET INTEREST MARGIN (in $000's, unaudited) | Q2 2025 Average Balance | Q2 2025 Interest Income/Expense | Q2 2025 Average Yield/Rate | Q1 2025 Average Balance | Q1 2025 Interest Income/Expense | Q1 2025 Average Yield/Rate | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total interest earning assets | $5,087,089 | $63,082 | 4.97% | $5,188,317 | $61,890 | 4.84% | | Total interest-bearing liabilities | $3,511,237 | $18,220 | 2.08% | $3,589,872 | $18,472 | 2.09% | | Net interest income / margin (FTE) | N/A | $44,862 | 3.54% | N/A | $43,418 | 3.39% | | NET INTEREST INCOME AND NET INTEREST MARGIN (in $000's, unaudited) | Q2 2025 Average Balance | Q2 2025 Interest Income/Expense | Q2 2025 Average Yield/Rate | Q2 2024 Average Balance | Q2 2024 Interest Income/Expense | Q2 2024 Average Yield/Rate | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total interest earning assets | $5,087,089 | $63,082 | 4.97% | $4,840,670 | $58,549 | 4.86% | | Total interest-bearing liabilities | $3,511,237 | $18,220 | 2.08% | $3,306,972 | $19,622 | 2.39% | | Net interest income / margin (FTE) | N/A | $44,862 | 3.54% | N/A | $38,927 | 3.23% | | NET INTEREST INCOME AND NET INTEREST MARGIN (in $000's, unaudited) | 6 Months 2025 Average Balance | 6 Months 2025 Interest Income/Expense | 6 Months 2025 Average Yield/Rate | 6 Months 2024 Average Balance | 6 Months 2024 Interest Income/Expense | 6 Months 2024 Average Yield/Rate | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total interest earning assets | $5,137,424 | $124,972 | 4.91% | $4,825,587 | $115,570 | 4.82% | | Total interest-bearing liabilities | $3,550,338 | $36,692 | 2.08% | $3,264,788 | $37,080 | 2.28% | | Net interest income / margin (FTE) | N/A | $88,280 | 3.47% | N/A | $78,490 | 3.27% | Reconciliation of Non-GAAP Financial Measures Provides detailed reconciliations for non-GAAP financial measures, including adjusted net income, adjusted diluted earnings per share, tangible book value per share, return on average tangible common equity, return on average assets, pre-provision net revenue (PPNR), efficiency ratio, and tangible common equity to tangible assets ratio, adjusting for specific charges | NET INCOME AND DILUTED EARNINGS PER SHARE (in $000's, except per share amounts, unaudited) | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Reported net income (GAAP) | $6,389 | $11,626 | $9,234 | | Add: pre-tax legal settlement and other charges | $9,184 | — | — | | Less: related income taxes | ($2,618) | — | — | | Adjusted net income (non-GAAP) | $12,955 | $11,626 | $9,234 | | Reported diluted earnings per share | $0.10 | $0.19 | $0.15 | | Adjusted diluted earnings per share | $0.21 | $0.19 | $0.15 | | NET INCOME AND DILUTED EARNINGS PER SHARE (in $000's, except per share amounts, unaudited) | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | | Reported net income (GAAP) | $18,015 | $19,400 | | Add: pre-tax legal settlement and other charges | $9,184 | — | | Less: related income taxes | ($2,618) | — | | Adjusted net income (non-GAAP) | $24,581 | $19,400 | | Reported diluted earnings per share | $0.29 | $0.32 | | Adjusted diluted earnings per share | $0.40 | $0.32 | | TANGIBLE BOOK VALUE PER SHARE (in $000's, unaudited) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total equity (GAAP) | $694,704 | $696,190 | $679,199 | | Less: goodwill | ($167,631) | ($167,631) | ($167,631) | | Less: other intangible assets | ($5,532) | ($5,986) | ($7,521) | | Reported tangible common equity (non-GAAP) | $521,541 | $522,573 | $504,047 | | Add: pre-tax legal settlement and other charges | $9,184 | — | — | | Less: related income taxes | ($2,618) | — | — | | Adjusted tangible common equity (non-GAAP) | $528,107 | $522,573 | $504,047 | | Reported tangible book value per share (non-GAAP) | $8.49 | $8.48 | $8.22 | | Adjusted tangible book value per share (non-GAAP) | $8.59 | $8.48 | $8.22 | | PRE-PROVISION NET REVENUE (in $000's, unaudited) | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Total revenue | $47,782 | $46,056 | $41,731 | | Less: Noninterest expense | ($38,335) | ($29,456) | ($28,188) | | Reported PPNR (non-GAAP) | $9,447 | $16,600 | $13,543 | | Add: pre-tax legal settlement and other charges | $9,184 | — | — | | Adjusted PPNR (non-GAAP) | $18,631 | $16,600 | $13,543 | | PRE-PROVISION NET REVENUE (in $000's, unaudited) | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | | Total revenue | $93,838 | $83,871 | | Less: Noninterest expense | ($67,791) | ($55,724) | | Reported PPNR (non-GAAP) | $26,047 | $28,147 | | Add: pre-tax legal settlement and other charges | $9,184 | — | | Adjusted PPNR (non-GAAP) | $35,231 | $28,147 | | EFFICIENCY RATIO (in $000's, unaudited) | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Reported noninterest expense (GAAP) | $38,335 | $29,456 | $28,188 | | Less: pre-tax legal settlement and other charges | ($9,184) | — | — | | Adjusted noninterest expense (non-GAAP) | $29,151 | $29,456 | $28,188 | | Total revenue | $47,782 | $46,056 | $41,731 | | Reported efficiency ratio (non-GAAP) | 80.23% | 63.96% | 67.55% | | Adjusted efficiency ratio (non-GAAP) | 61.01% | 63.96% | 67.55% | | EFFICIENCY RATIO (in $000's, unaudited) | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | | Reported noninterest expense (GAAP) | $67,791 | $55,724 | | Less: pre-tax legal settlement and other charges | ($9,184) | — | | Adjusted noninterest expense (non-GAAP) | $58,607 | $55,724 | | Total revenue | $93,838 | $83,871 | | Reported efficiency ratio (non-GAAP) | 72.24% | 66.44% | | Adjusted efficiency ratio (non-GAAP) | 62.46% | 66.44% | | TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS (in $000's, unaudited) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total tangible common equity (non-GAAP) | $521,541 | $522,573 | $504,047 | | Total tangible assets (non-GAAP) | $5,294,074 | $5,340,638 | $5,087,872 | | Tangible common equity / tangible assets (non-GAAP) | 9.85% | 9.78% | 9.91% | | TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS (Bank, in $000's, unaudited) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total tangible common equity (non-GAAP) | $543,940 | $541,988 | $522,812 | | Total tangible assets (non-GAAP) | $5,291,455 | $5,338,543 | $5,085,348 | | Tangible common equity / tangible assets (non-GAAP) | 10.28% | 10.15% | 10.28% |