Heritage Commerce Corp (Nasdaq: HTBK) reported second quarter 2025 highlights, including a net income of $6.4 million and earnings per share of $0.10. Adjusted highlights showed a net income of $13.0 million and earnings per share of $0.21. The company saw positive trends in loan growth and an expansion in the net interest margin.

CEO Clay Jones stated that the company executed well in the second quarter, with positive loan growth, stable asset quality, and diversification across portfolios. Despite seasonal deposit declines, Heritage Commerce Corp continues to add new clients and maintain disciplined underwriting and pricing criteria.

On a linked-quarter basis, the company experienced an increase in total revenue to $47.8 million, up 4%. Noninterest expenses included an accrual for pre-tax charges related to a legal settlement. Reported net income for the second quarter was $6.4 million, while adjusted net income was $13.0 million.

In terms of financial condition, Heritage Commerce Corp saw an increase in loans held-for-investment and total deposits. The loan to deposit ratio increased to 76.38%, and total shareholders’ equity rose to $694.7 million. The company also maintained a strong balance sheet with high capital and liquidity levels.

Credit quality remained stable, with nonperforming assets to total assets at 0.11% for both quarters. Key performance metrics showed improvements in FTE net interest margin and common equity tier 1 capital ratio. Adjusted operating metrics excluded charges related to a legal settlement, showcasing the company’s financial strength.

Reported net income for the second quarter of 2025 was $6.4 million, while adjusted net income was $13.0 million. The annualized return on average assets and equity for the second quarter improved compared to the previous quarter and the same period in 2024. For the first six months of 2025, reported net income was $18.0 million with an adjusted net income of $24.6 million. In the second quarter of 2025, Company X saw total revenue increase by $1.7 million to $47.8 million, a 4% increase from the first quarter. Net interest income also rose by $1.4 million to $44.8 million. Noninterest income increased to $3 million, while noninterest expenses totaled $38.3 million. The provision for credit losses on loans was $516,000. For the first six months of 2025, total revenue was $93.8 million, with net interest income totaling $88.2 million.

Adjusting for noninterest expenses, the Company’s reported PPNR was $9.4 million for the second quarter of 2025 and $26.0 million for the first six months. Adjusted PPNR was $18.6 million for the second quarter, and $35.2 million for the first six months of 2025. The FTE net interest margin was 3.54% for the second quarter, an increase from 3.39% for the first quarter of 2025.

Income tax expenses decreased to $2.5 million for the second quarter of 2025, with an effective tax rate of 28.5%. For the first six months of 2025, income tax expenses were $7.2 million, with an effective tax rate of 28.7%. The reported efficiency ratio for the second quarter was 80.23%, while the adjusted ratio improved to 61.01%. The adjusted efficiency ratio improved to 62.45% in the first six months of 2025, driven by higher total revenue. Total assets remained flat at $5.5 billion, with investment securities available-for-sale decreasing to $307.0 million. Loans HFI increased to $3.5 billion, and total deposits decreased to $4.6 billion due to seasonal outflows.

The Company’s deposit types varied, with savings and money market making up 28% of total deposits at June 30, 2025. The loan to deposit ratio was 76.38%, and total available liquidity was $3.1 billion. Total shareholders’ equity was $694.7 million, with a reported tangible book value per share of $8.49 at June 30, 2025.

Capital ratios exceeded regulatory guidelines, and the Company authorized a $15.0 million share repurchase program. During the second quarter of 2025, 207,989 shares were repurchased with a weighted average price of $9.19. The Company’s financials show stability and growth in key areas, positioning them well for the future. Heritage Commerce Corp’s Board of Directors extended the share repurchase program until July 31, 2026, with $13.1 million remaining. Credit quality improved with a provision for credit losses on loans of $516,000 in Q2 2025, down from $274,000 in Q1 2025. Net charge-offs decreased to $145,000 in Q2 2025. The ACLL was $48.6 million at June 30, 2025.

Nonperforming assets were at $6.2 million on June 30, 2025, with no foreclosed assets. Classified assets totaled $37.5 million, or 0.69% of total assets. Heritage Commerce Corp is the parent company of Heritage Bank of Commerce, with branches across California. Reclassifications were made for FHLB and FRB stock dividends. Non-GAAP financial measures are used for performance evaluation. Forward-looking statements were made regarding future financial performance and market conditions. The financial performance of the company may differ due to factors such as cybersecurity risks, personnel recruitment, media perception, risk management, wildfires affecting Southern California, and political events. Recent financial data shows a 45% decrease in net income for the quarter ended June 30, 2025, compared to the same period in 2024. There was also a 2% increase in interest income and a 1% decrease in interest expense. Net interest income before provision for credit losses on loans increased by 3%, while noninterest income saw a 10% increase. Noninterest expense rose by 30%. Diluted earnings per share decreased by 47%, and return on average equity decreased by 46%. The company’s book value per share remained stable at $11.31. The efficiency ratio increased by 25%. In June 2025, the consolidated balance sheet of the company showed a 1% decrease in total assets compared to March 2025, but a 4% increase from June 2024. Loans, net, increased by 1% from March 2025 and 5% from June 2024, totaling $3,485,700,000. Shareholders’ equity remained stable at $694,704,000.

For the same period, total liabilities showed a 1% decrease from March 2025, but a 4% increase from June 2024, totaling $4,772,533,000. Deposits decreased by 1% from March 2025, totaling $4,627,334,000. Shareholders’ equity remained stable at $694,704,000.

Credit quality data for June 2025 showed nonperforming loans at 0.17% of total loans, a 6% decrease from March 2025. Net charge-offs during the quarter decreased by 85% from the previous quarter. The allowance for credit losses on loans totaled $48,633,000, a 1% increase from March 2025.

The net interest income and net interest margin for the quarter ended June 30, 2025, stood at $44,805,000 and 3.53%, respectively. Compared to the same quarter in 2024, the net interest income increased by 16% and the net interest margin increased by 9 basis points. In the second quarter of 2025, net deferred loan fees accreted into loan interest income was $253,000, with prepayment fees totaling $473,000. The FTE adjustment for Federal tax-exempt income was 21%. For the six months ended June 30, 2025, net deferred loan fees accreted into loan interest income was $467,000, with prepayment fees totaling $697,000.

The Company’s net income and diluted earnings per share were adjusted to exclude $9.2 million in charges for a legal settlement in the second quarter and first six months of 2025. Adjusted net income for the quarter ended June 30, 2025, was $12,955, with an adjusted diluted earnings per share of $0.21. For the six months ended June 30, 2025, adjusted net income was $24,581, with adjusted diluted earnings per share of $0.40.

Management considers tangible book value per share as a useful measurement of the Company’s equity. The reported tangible book value per share for June 30, 2025, was $8.49, while the adjusted tangible book value per share was $8.59. The return on average tangible common equity and assets were also calculated for the quarter and six months ended June 30, 2025.

The Company’s net interest income and net interest margin on an FTE basis were analyzed for the quarter and six months ended June 30, 2025. Net interest income, FTE, for the quarter was $44,862, with a net interest margin of 3.54%. For the six months ended June 30, 2025, net interest income, FTE, was $88,280, with a net interest margin of 3.47%. Non-GAAP PPNR is viewed as a key metric for assessing the Company’s earnings power by management. In the second quarter of 2025, the company reported a pre-provision net revenue (PPNR) of $9,447, a decrease from the previous quarter. The total revenue for the quarter was $47,782, with noninterest income contributing $2,977. The efficiency ratio, a measure of cost to revenue, stood at 80.23%. For the six months ended June 30, 2025, the adjusted PPNR was $35,231.

Noninterest expense for the second quarter of 2025 was $38,335, resulting in an adjusted noninterest expense of $29,151. The efficiency ratio for the quarter was 80.23%. In the first half of 2025, the company reported an efficiency ratio of 72.24%, with adjusted noninterest expense of $58,607. The company considers the tangible common equity ratio a useful measurement, which was 9.85% as of June 30, 2025.

The bank reported a tangible common equity ratio of 10.28% as of June 30, 2025, with total assets of $5,464,618. The total common equity was $717,103, resulting in a tangible common equity of $543,940. The efficiency ratio for the bank for the second quarter of 2025 was 10.28%, showing a strong financial position.

Read more at GlobeNewswire.: Heritage Commerce Corp Reports Second Quarter and First Six