Heritage merce p(HTBK) - 2025 Q3 - Quarterly Report

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].