htbk_Ex99


	For the Quarter Ended						For the Year Ended
MERGER-RELATED COSTS	December 31,		September 30,		December 31,		December 31,		December 31,
(in $000’s, unaudited)	2019		2019		2018		2019		2018
Salaries and employee benefits	$	6,580	$	—	$	(7)	$	6,580	$	3,569
Other		3,299		661		146		4,500		5,598
Total merger-related costs	$	9,879	$	661	$	139	$	11,080	$	9,167

The Company acquired $10.0 million of subordinated debt from the Presidio transaction, which was redeemed on December 19, 2019. As a result of the redemption of the subordinated debt, the Company paid a pre-payment penalty of $300,000 during the fourth quarter of 2019.

On October 11, 2019, the Company completed its merger with Presidio for an aggregate transaction value of $185.6 million. Shareholders of Presidio received a fixed exchange ratio at closing of 2.47 shares of the Company’s common stock for each share of Presidio common stock. Upon closing of the transaction, the Company issued 15,684,064 shares of the Company’s common stock to Presidio shareholders and holders of restricted stock units for a total value of $178.2 million based on the Company’s closing stock price of $11.36 on the closing date of October 11, 2019. In addition, the consideration for Presidio stock options exchanged for the Company’s stock options totaled $7.4 million and cash-in-lieu of fractional shares totaled $1,000 on October 11, 2019. The Company recorded goodwill of $83.7 million for the Presidio merger, which represents the excess of consideration paid for the net assets acquired marked to their market values, as follows:


GOODWILL		October 11,
(in $000’s, unaudited)		2019
Consideration paid:
Issuance of 15,684,064 shares of common stock
to Presidio shareholders and holders of restricted stock
(stock price = $11.36 on October 11, 2019)	$	178,171
Consideration for Presidio stock options exchanged for
Heritage Commerce Corp stock options		7,426
Cash paid for fractional shares		1

Total Consideration Paid	$	185,598

Net assets pre-merger	$	96,119

Fair value adjustments:
Investment securities		422
Loans receivable		(12,529)
Allowance for loan losses		7,463
Core deposit intangible		11,247
Above market lease		(100)
Time Deposits - Under $100		3
Time Deposits - $100 and Over		(2)

Total fair value adjustments		6,504
Deferred taxes on fair value adjustments		(1,378)
Other adjustments to goodwill		686

Fair value of net assets acquired		101,931

Excess of consideration paid over fair value of
net assets acquired = goodwill	$	83,667

Presidio’s results of operations have been included in the Company’s results of operations beginning October 12, 2019.

The following table indicates the ratios for the return on average tangible assets and the return on average tangible equity for the periods indicated:


	For the Quarter Ended			For the Year Ended
	December 31,	September 30,	December 31,	December 31,	December 31,
	2019	2019	2018	2019	2018
Return on average tangible assets	0.57%	1.49%	1.69%	1.25%	1.19%
Return on average tangible equity	5.96%	15.08%	20.08%	13.09%	14.41%

Net interest income, before provision for loan losses, increased 19% to $39.2 million for the fourth quarter of 2019, compared to $33.1 million for the fourth quarter of 2018, and increased 28% from $30.6 million for the third quarter of 2019. Net interest income increased 8% to $131.8 million for the year ended December 31, 2019, compared to $122.0 million for the year ended December 31, 2018. The decrease in the return on average tangible assets and average tangible equity for the fourth quarter of 2019 and the year ended 2019 was primarily due to higher merger-related costs.

The fully tax equivalent (“FTE”) net interest margin contracted 27 basis points to 4.15% for the fourth quarter of 2019, from 4.42% for the fourth quarter of 2018, primarily due to a decline in the average yield of loans, investment securities, and overnight funds, a decrease in the average balance of Bay View Funding’s factored receivables, partially offset by an increase in the average balance of loans, and an increase in the accretion of the loan discount into loan interest income from a merger during the fourth quarter of 2019. The net interest margin contracted nine basis points for the fourth quarter of 2019 from 4.24% for the third quarter of 2019, primarily due to a decline in the average yield of loans and overnight funds, partially offset by a higher average balance of loans, and an increase in the accretion of the loan discount into loan interest income from a merger during the fourth quarter of 2019.

For the year ended December 31, 2019, the net interest margin contracted three basis points to 4.28%, compared to 4.31% for the year ended December 31, 2018, primarily due to a higher cost of deposits, a decrease in the average balance of Bay View Funding’s factored receivables, partially offset by an increase in the average balance of loans and securities, and an increase in the accretion of the loan purchase discount into loan interest income from a merger during the year ended December 31, 2019.

The following tables present the average balance of loans outstanding, interest income, and the average yield for the periods indicated:


	For the Quarter Ended						For the Quarter Ended
	December 31, 2019						December 31, 2018
	Average		Interest		Average		Average		Interest		Average
(in $000’s, unaudited)	Balance		Income		Yield		Balance		Income		Yield
Loans, core bank and asset-based lending	$	2,353,871	$	30,786	5.19	%	$	1,742,614	$	23,053	5.25	%
Bay View Funding factored receivables		45,045		2,888	25.44	%		65,521		4,012	24.29	%
Residential mortgages		33,867		237	2.78	%		38,148		268	2.79	%
Purchased commercial real estate
("CRE") loans		28,407		238	3.32	%		34,121		311	3.62	%
Loan fair value mark / accretion		(15,089)		1,338	0.23	%		(6,783)		720	0.16	%
Total loans	$	2,446,101	$	35,487	5.76	%	$	1,873,621	$	28,364	6.01	%

The average yield on the total loan portfolio decreased to 5.76% for the fourth quarter of 2019, compared to 6.01% for the fourth quarter of 2018, primarily due to decreases in the prime rate on loans during the latter part of 2019, and a decrease in the average balance of Bay View Funding’s factored receivables, partially offset by an increase in the accretion of the loan purchase discount into loan interest income from the acquisitions.


	For the Quarter Ended						For the Quarter Ended
	December 31, 2019						September 30, 2019
	Average		Interest		Average		Average		Interest		Average
(in $000’s, unaudited)	Balance		Income		Yield		Balance		Income		Yield
Loans, core bank and asset-based lending	$	2,353,871	$	30,786	5.19	%	$	1,748,379	$	23,401	5.31	%
Bay View Funding factored receivables		45,045		2,888	25.44	%		47,614		2,879	23.99	%
Residential mortgages		33,867		237	2.78	%		34,639		229	2.62	%
Purchased CRE loans		28,407		238	3.32	%		30,567		284	3.69	%
Loan fair value mark / accretion		(15,089)		1,338	0.23	%		(5,359)		471	0.11	%
Total loans	$	2,446,101	$	35,487	5.76	%	$	1,855,840	$	27,264	5.83	%

The average yield on the total loan portfolio decreased to 5.76% for the fourth quarter of 2019, compared to 5.83% for the third quarter of 2019, primarily due to decreases in the prime rate on loans during the latter part of 2019, partially offset by an increase in the accretion of the loan purchase discount into loan interest income from the acquisitions.


	For the Year Ended						For the Year Ended
	December 31, 2019						December 31, 2018
	Average		Interest		Average		Average		Interest		Average
(in $000’s, unaudited)	Balance		Income		Yield		Balance		Income		Yield
Loans, core bank and asset-based lending	$	1,890,079	$	100,380	5.31	%	$	1,670,065	$	86,610	5.19	%
Bay View Funding factored receivables		46,710		11,688	25.02	%		59,220		14,698	24.82	%
Residential mortgages		35,343		951	2.69	%		40,998		1,118	2.73	%
Purchased CRE loans		30,936		1,107	3.58	%		36,080		1,257	3.48	%
Loan fair value mark / accretion		(8,151)		2,682	0.14	%		(5,348)		1,952	0.12	%
Total loans	$	1,994,917	$	116,808	5.86	%	$	1,801,015	$	105,635	5.87	%

The average yield on the total loan portfolio decreased to 5.86% for the year ended December 31, 2019, compared to 5.87% for the year ended December 31, 2018, primarily due to a decrease in the average balance of Bay View Funding’s factored receivables, partially offset by the impact of the increasing prime rate on loans over the course of 2018 (prior to the prime rate decreasing in the latter part of 2019), and an increase in the accretion of the loan purchase discount into loan interest income from the acquisitions.

The total net purchase discount on loans from the Focus Business Bank (“Focus”) loan portfolio was $5.4 million on the acquisition date of August 20, 2015, of which $418,000 remains outstanding as of December 31, 2019. The total net purchase discount on loans from the Tri-Valley loan portfolio was $2.6 million on the acquisition date of April 6, 2018, of which $1.6 million remains outstanding as of December 31, 2019. The total net purchase discount on loans from the United American loan portfolio was $4.7 million on the acquisition date of May 4, 2018, of which $2.7 million remains outstanding as of December 31, 2019. The total net purchase discount on loans from Presidio loan portfolio was $12.5 million on the Presidio merger date, of which $11.6 million remains outstanding as of December 31, 2019.

The cost of total deposits was 0.26% for the fourth quarter of 2019, compared to 0.25% for the fourth quarter of 2018 and 0.31% for the third quarter of 2019. The cost of total deposits was 0.29% for the year ended December 31, 2019, compared to 0.21% for the year ended December 31, 2018.

There was a $3.2 million provision for loan losses for the fourth quarter of 2019, compared to a $142,000 provision for loan losses for the fourth quarter of 2018, and a $576,000 credit to the provision for loan losses for the third quarter of 2019. The provision for loan losses for the fourth quarter of 2019 included $2.0 million related to certain non-impaired loans acquired at a premium from Presidio. This premium was due to higher interest rates on the loans versus market interest rates at the time of the merger. Due to the net premium on these loans, a provision for loan losses was required and it was not due to credit deterioration since the Presidio merger date. There was an $846,000 provision for loan losses for the year ended December 31, 2019, compared to a $7.4 million provision for loan losses for the year ended December 31, 2018. The higher provision for loan losses for the year ended December 31, 2018 included a $7.0 million specific reserve for a lending relationship that was placed on nonaccrual during the second quarter of 2018.

Total noninterest income was $2.4 million for the fourth quarters of 2019 and 2018. An increase in the gain on sales of Small Business Administration (“SBA”) loans, and an increase in the cash surrender value of life insurance, was offset by a loss on sale of securities for the fourth quarter of 2019. Total noninterest income for the fourth quarter of 2019 decreased from $2.6 million for the third quarter of 2019, primarily due to a loss on sale of securities, partially offset by an increase in the gain on sale of SBA loans, an increase in the cash surrender value of life insurance, and higher service charges and fees on deposits accounts.

For the year ended December 31, 2019, total noninterest income increased to $10.2 million, compared to $9.6 million for the year ended December 31, 2018. The increase in noninterest income for the year ended December 31, 2019, was primarily due to higher service charges and fees on deposit accounts, and an increase in the cash surrender value of life insurance, partially offset by an increase in the gain on sale of securities, and proceeds from a legal settlement in the year ended December 31, 2018.

The Company received $1.3 million in proceeds from a legal settlement during the second quarter of 2018, of which $377,000 was recorded in other noninterest income, and $922,000 was credited to professional fees for recaptured legal fees previously paid by the Company.

Total noninterest expense for the fourth quarter of 2019 increased to $30.6 million, compared to $16.9 million for the fourth quarter of 2018, and $17.9 million for the third quarter of 2019, primarily due to higher merger-related costs. Total noninterest expense for the fourth quarter of 2019 included total merger-related costs of $9.9 million for the Presidio merger, of which $6.6 million was included in salaries and employee benefits, and $3.3 million was included in other noninterest expense. Total

The loan portfolio remains well-diversified as reflected in the following table which summarizes the distribution of loans, excluding loans held-for-sale, and the percentage of distribution in each category for the periods indicated:


LOANS	December 31, 2019				September 30, 2019				December 31, 2018
(in $000’s, unaudited)	Balance		% to Total		Balance		% to Total		Balance		% to Total
Commercial	$	678,696	27	%	$	528,060	28	%	$	597,763	32	%
Real estate:
CRE		1,495,903	59	%		1,080,235	58	%		994,067	52	%
Land and construction		147,109	6	%		96,610	5	%		122,358	6	%
Home equity		136,259	5	%		111,610	6	%		109,112	6	%
Residential mortgages		55,128	2	%		47,276	3	%		50,979	3	%
Consumer		21,068	1	%		11,701	1	%		12,453	1	%
Total Loans		2,534,163	100	%		1,875,492	100	%		1,886,732	100	%
Deferred loan fees, net		(319)	-			(105)	—			(327)	—
Loans, net of deferred fees	$	2,533,844	100	%	$	1,875,387	100	%	$	1,886,405	100	%

Loans, excluding loans held-for-sale, increased $647.4 million or 34%, to $2.53 billion at December 31, 2019, compared to $1.89 billion at December 31, 2018, which included $669.5 million in loans from Presidio, at fair value, a decrease of $11.3 million in the Company’s legacy portfolio, a decrease of $6.5 million in purchased CRE loans, and a decrease of $4.3 million in purchased residential loans. Loans, excluding loans held-for-sale, increased $658.5 million or 35%, to $2.53 billion at December 31, 2019, compared to $1.88 billion September 30, 2019, which included $669.5 million in loans from Presidio, at fair value, a decrease of $7.1 million in the Company’s legacy portfolio, and a decrease of $3.2 million in purchased CRE loans.

Commercial and Industrial (“C&I”) line usage was 35% at December 31, 2019, compared to 36% at December 31, 2018, and 35% at September 30, 2019.

At December 31, 2019, 34% of the CRE loan portfolio was secured by owner-occupied real estate.

The following table summarizes the allowance for loan losses (“ALLL”) for the periods indicated:


	For the Quarter Ended									For the Year Ended
ALLOWANCE FOR LOAN LOSSES	December 31,			September 30,			December 31,			December 31,			December 31,
(in $000’s, unaudited)	2019			2019			2018			2019			2018
Balance at beginning of period	$	25,895		$	26,631		$	27,426		$	27,848		$	19,658
Charge-offs during the period		(6,003)			(318)			(166)			(6,623)			(2,026)
Recoveries during the period		170			158			446			1,214			2,795
Net recoveries (charge-offs) during the period		(5,833)			(160)			280			(5,409)			769
Provision (credit) for loan losses during the period		3,223			(576)			142			846			7,421
Balance at end of period	$	23,285		$	25,895		$	27,848		$	23,285		$	27,848

Total loans, net of deferred fees	$	2,533,844		$	1,875,387		$	1,886,405		$	2,533,844		$	1,886,405
Total nonperforming loans	$	9,828		$	14,247		$	14,887		$	9,828		$	14,887
Allowance for loan losses to total loans		0.92	%		1.38	%		1.48	%		0.92	%		1.48	%
Allowance for loan losses to total nonperforming loans		236.93	%		181.76	%		187.06	%		236.93	%		187.06	%

The ALLL was 0.92% of total loans at December 31, 2019, compared to 1.48% at December 31, 2018, and 1.38% at September 30, 2019. The ALLL to total nonperforming loans was 236.93% at December 31, 2019, compared to 187.06% at December 31, 2018, and 181.76% at September 30, 2019. The loans acquired from Presidio are included in total loans. Due to the addition of the Presidio loans at fair value with no allowance, the ALLL to total loans decreased at December 31, 2019. However, the Company provided an additional $2.0 million in provision for loan losses to increase the ALLL at December 31, 2019 for certain non-impaired loans acquired at a premium from Presidio.

Net charge-offs totaled $5.8 million for the fourth quarter of 2019, compared to net recoveries of $280,000 for the fourth quarter of 2018, and net charge-offs of $160,000 for the third quarter of 2019. Net charge-offs of $5.8 million for the fourth quarter of 2019 primarily consisted of three lending relationships totaling $5.5 million, including one large relationship which was previously disclosed and specifically reserved for during the second and third quarters of 2018. The three lending relationships totaling $5.5 million in net charge-offs had a total of $4.7 million in specific reserves.

The following is a breakout of nonperforming assets (“NPAs”) at the periods indicated:


	End of Period:
NONPERFORMING ASSETS	December 31, 2019				September 30, 2019				December 31, 2018
(in $000’s, unaudited)	Balance		% of Total		Balance		% of Total		Balance		% of Total
CRE loans	$	5,094	52	%	$	5,094	36	%	$	5,094	34	%
Commercial loans		2,657	27	%		7,390	52	%		8,062	54	%
Restructured and loans over 90 days past due and still accruing		1,153	12	%		609	4	%		1,188	8	%
SBA loans		787	8	%		1,007	7	%		326	2	%
Home equity and consumer loans		137	1	%		147	1	%		217	2	%
Total nonperforming assets	$	9,828	100	%	$	14,247	100	%	$	14,887	100	%

NPAs totaled $9.8 million, or 0.24% of total assets, at December 31, 2019, compared to $14.9 million, or 0.48% of total assets, at December 31, 2018, and $14.2 million, or 0.45% of total assets, at September 30, 2019.

There were no foreclosed assets at December 31, 2019, December 31, 2018, or September 30, 2019.

Classified assets increased to $32.6 million, or 0.79% of total assets, at December 31, 2019, compared to $23.4 million, or 0.76% of total assets, at December 31, 2018, and $20.2 million, or 0.64% of total assets, at September 30, 2019. The increase in classified assets for the fourth quarter of 2019 was primarily due to classified assets acquired from Presidio.

On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). Under the new guidance, the Company recognizes the following for all leases, at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. While the new standard impacts lessors, the Company is impacted as a lessee of the offices and real estate used for operations. The Company's lease agreements include options to renew at the Company's discretion. The extensions are not reasonably certain to be exercised, therefore they are not considered in the calculation of the ROU asset and lease liability. Total assets and total liabilities were $12.2 million on its consolidated statement of financial condition at December 31, 2019, as a result of recognizing right-of-use assets, included in other assets, and lease liabilities, included in other liabilities, related to non-cancelable operating lease agreements for office space.

The following table summarizes the distribution of deposits and the percentage of distribution in each category for the periods indicated:


DEPOSITS	December 31, 2019				September 30, 2019				December 31, 2018
(in $000’s, unaudited)	Balance		% to Total		Balance		% to Total		Balance		% to Total
Demand, noninterest-bearing	$	1,450,873	42	%	$	1,094,953	41	%	$	1,021,582	39	%
Demand, interest-bearing		798,375	23	%		666,054	25	%		702,000	27	%
Savings and money market		982,430	29	%		761,471	28	%		754,277	28	%
Time deposits — under $250		54,361	2	%		53,560	2	%		58,661	2	%
Time deposits — $250 and over		99,882	3	%		95,543	3	%		86,114	3	%
CDARS — interest-bearing demand,
money market and time deposits		28,847	1	%		17,409	1	%		14,898	1	%
Total deposits	$	3,414,768	100	%	$	2,688,990	100	%	$	2,637,532	100	%

Total deposits increased $777.2 million, or 29%, to $3.41 billion at December 31, 2019, compared to $2.64 billion at December 31, 2018, which included $723.0 million in deposits from Presidio, at fair value, and an increase of $54.2 million in the Company’s legacy deposits. Total Deposits increased $725.8 million or 27% from $2.69 billion at September 30, 2019, which included $723.0 million in deposits from Presidio, at fair value, and an increase of $2.8 million in the Company’s legacy deposits.

Deposits, excluding all time deposits and CDARS deposits, increased $753.8 million, or 30%, to $3.23 billion at December 31, 2019, compared to $2.48 billion at December 31, 2018, which included $699.4 million in deposits from Presidio, at fair value, and an increase of $54.4 million in the Company’s legacy deposits. Deposits, excluding all time deposits and CDARS deposits increased $709.2 million or 28%, compared to $2.52 billion at September 30, 2019, which included $669.4 million in deposits from Presidio, at fair value, and an increase of $9.8 million in the Company’s legacy deposits..

The Company’s consolidated capital ratios exceeded regulatory guidelines and the Bank’s capital ratios exceeded the regulatory guidelines under the Basel III prompt corrective action (“PCA”) regulatory guidelines for a well-capitalized financial institution, and the Basel III minimum regulatory requirements at December 31, 2019, as reflected in the following table:


					Well-capitalized
					Financial
					Institution		Basel III
	Heritage		Heritage		Basel III PCA		Minimum
	Commerce		Bank of		Regulatory		Regulatory
CAPITAL RATIOS (unaudited)	Corp		Commerce		Guidelines		Requirement (1)
Total Risk-Based	14.6	%	13.9	%	10.0	%	10.5	%
Tier 1 Risk-Based	12.5	%	13.1	%	8.0	%	8.5	%
Common Equity Tier 1 Risk-Based	12.5	%	13.1	%	6.5	%	7.0	%
Leverage	9.8	%	10.2	%	5.0	%	4.0	%

(1)

Basel III minimum regulatory requirements for both the Company and the Bank include a 2.5% capital conservation buffer, except the leverage ratio.

The following table reflects the components of accumulated other comprehensive loss, net of taxes, for the periods indicated:


ACCUMULATED OTHER COMPREHENSIVE LOSS	December 31,		September 30,		December 31,
(in $000’s, unaudited)	2019		2019		2018
Unrealized gain (loss) on securities available-for-sale	$	1,242	$	1,202	$	(5,412)
Remaining unamortized unrealized gain on securities
available-for-sale transferred to held-to-maturity		297		306		343
Split dollar insurance contracts liability		(4,835)		(3,794)		(3,722)
Supplemental executive retirement plan liability		(6,842)		(3,898)		(3,995)
Unrealized gain on interest-only strip from SBA loans		360		386		405
Total accumulated other comprehensive loss	$	(9,778)	$	(5,798)	$	(12,381)

The increase in the negative balance of the supplemental executive retirement plan liability at December 31, 2019 was primarily due to a decrease in interest rates.

Tangible equity increased to $388.9 million at December 31, 2019, compared to $271.7 million at December 31, 2018, and $301.2 million at September 30, 2019. Tangible book value per share was $6.55 at December 31, 2019, compared to $6.28 at December 31, 2018, and $6.92 at September 30, 2019.

Heritage Commerce Corp, a bank holding company established in February 1998, 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, Palo Alto, Pleasanton, Redwood City, San Francisco, San Jose, San Mateo, San Rafael, Sunnyvale, 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 Santa Clara, CA and provides business-essential working capital factoring financing to various industries throughout the United States. For more information, please visit www.heritagecommercecorp.com.

Forward-Looking Statement Disclaimer

These forward-looking statements are subject to various risks and uncertainties that may be outside our control and our actual results could differ materially from our projected results. 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 (“SEC”), Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and the following: (1) 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; (2) 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; (3) our ability to anticipate interest rate changes and manage interest rate risk; (4) changes in inflation, interest rates, and market liquidity which may impact interest margins and impact funding sources; (5) volatility in credit and equity markets and its effect on the global economy; (6) our ability to effectively compete with other banks and financial services companies and the effects of competition in the financial services industry on our business; (7) our ability to achieve loan growth and attract deposits; (8) risks associated with concentrations in real estate related loans; (9) the relative strength or weakness of the commercial and real estate markets where our borrowers are located, including related asset and market prices; (10) other than temporary impairment charges to our securities portfolio; (11) changes in the level of nonperforming assets and charge offs and other credit quality measures, and their impact on the adequacy of the Company’s allowance for loan losses and the Company’s provision for loan losses; (12) 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; (13) regulatory limits on Heritage Bank of Commerce’s ability to pay dividends to the Company; (14) changes in our capital management policies, including those


	For the Quarter Ended:									Percent Change From:				For the Year Ended:
CONSOLIDATED INCOME STATEMENTS	December 31,			September 30,			December 31,			September 30,		December 31,		December 31,			December 31,			Percent
(in $000’s, unaudited)	2019			2019			2018			2019		2018		2019			2018			Change
Interest income	$	42,471		$	33,250		$	35,378		28	%	20	%	$	142,659		$	129,845		10	%
Interest expense		3,242			2,625			2,318		24	%	40	%		10,847			7,822		39	%
Net interest income before provision
for loan losses		39,229			30,625			33,060		28	%	19	%		131,812			122,023		8	%
Provision (credit) for loan losses		3,223			(576)			142		660	%	2170	%		846			7,421		(89)	%
Net interest income after provision
for loan losses		36,006			31,201			32,918		15	%	9	%		130,966			114,602		14	%
Noninterest income:
Service charges and fees on deposit accounts		1,140			1,032			1,132		10	%	1	%		4,510			4,113		10	%
Increase in cash surrender value of
life insurance		405			336			229		21	%	77	%		1,404			1,045		34	%
(Loss) gain on sales of securities		(217)			330			—		(166)	%	N/A	%		661			266		148	%
Gain on sales of SBA loans		358			156			147		129	%	144	%		689			698		(1)	%
Servicing income		156			139			176		12	%	(11)	%		636			709		(10)	%
Other		551			625			709		(12)	%	(22)	%		2,344			2,743		(15)	%
Total noninterest income		2,393			2,618			2,393		(9)	%	0	%		10,244			9,574		7	%
Noninterest expense:
Salaries and employee benefits		18,819			10,467			9,699		80	%	94	%		50,754			45,001		13	%
Occupancy and equipment		2,013			1,550			1,484		30	%	36	%		6,647			5,411		23	%
Professional fees		899			789			853		14	%	(5)	%		3,259			1,969		66	%
Other		8,895			5,103			4,905		74	%	81	%		24,238			23,140		5	%
Total noninterest expense		30,626			17,909			16,941		71	%	81	%		84,898			75,521		12	%
Income before income taxes		7,773			15,910			18,370		(51)	%	(58)	%		56,312			48,655		16	%
Income tax expense		2,088			4,633			5,138		(55)	%	59	%		15,851			13,324		19	%
Net income	$	5,685		$	11,277		$	13,232		(50)	%	(57)	%	$	40,461		$	35,331		15	%

PER COMMON SHARE DATA
(unaudited)
Basic earnings per share	$	0.10		$	0.26		$	0.31		(62)	%	(68)	%	$	0.87		$	0.85		2	%
Diluted earnings per share	$	0.10		$	0.26		$	0.30		(61)	%	(67)	%	$	0.84		$	0.84		0	%
Weighted average shares outstanding - basic		57,168,605			43,258,983			43,079,470		32	%	33	%		46,684,384			41,469,211		13	%
Weighted average shares outstanding - diluted		58,361,976			43,796,904			43,691,222		33	%	34	%		47,906,229			42,182,939		14	%
Common shares outstanding at period-end		59,368,156			43,509,406			43,288,750		36	%	37	%		59,368,156			43,288,750		37	%
Dividend per share	$	0.12		$	0.12		$	0.11		0	%	9	%	$	0.48		$	0.44		9	%
Book value per share	$	9.71		$	9.09		$	8.49		7	%	14	%	$	9.71		$	8.49		14	%
Tangible book value per share	$	6.55		$	6.92		$	6.28		(5)	%	4	%	$	6.55		$	6.28		4	%

KEY FINANCIAL RATIOS
(unaudited)
Annualized return on average equity		4.04	%		11.44	%		14.68	%	(65)	%	(72)	%		9.51	%		10.79	%	(12)	%
Annualized return on average tangible equity		5.96	%		15.08	%		20.08	%	(60)	%	(70)	%		13.09	%		14.41	%	(9)	%
Annualized return on average assets		0.55	%		1.44	%		1.64	%	(62)	%	(66)	%		1.21	%		1.16	%	4	%
Annualized return on average tangible assets		0.57	%		1.49	%		1.69	%	(62)	%	(66)	%		1.25	%		1.19	%	5	%
Net interest margin (fully tax equivalent)		4.15	%		4.24	%		4.42	%	(2)	%	(6)	%		4.28	%		4.31	%	(1)	%
Efficiency ratio		73.58	%		53.87	%		47.78	%	37	%	54	%		59.76	%		57.39	%	4	%

AVERAGE BALANCES
(in $000’s, unaudited)
Average assets	$	4,124,018		$	3,103,043		$	3,208,177		33	%	29	%	$	3,353,770		$	3,055,636		10	%
Average tangible assets	$	3,943,725		$	3,008,602		$	3,112,065		31	%	27	%	$	3,237,289		$	2,973,238		9	%
Average earning assets	$	3,762,239		$	2,878,590		$	2,980,207		31	%	26	%	$	3,094,589		$	2,844,350		9	%
Average loans held-for-sale	$	3,299		$	4,171		$	5,435		(21)	%	(39)	%	$	3,714		$	4,084		(9)	%
Average total loans	$	2,442,802		$	1,851,669		$	1,868,186		32	%	31	%	$	1,991,203		$	1,796,931		11	%
Average deposits	$	3,432,771		$	2,612,252		$	2,752,120		31	%	25	%	$	2,819,932		$	2,633,287		7	%
Average demand deposits - noninterest-bearing	$	1,452,893		$	1,041,712		$	1,107,813		39	%	31	%	$	1,131,098		$	1,029,860		10	%
Average interest-bearing deposits	$	1,979,878		$	1,570,540		$	1,644,307		26	%	20	%	$	1,688,834		$	1,603,427		5	%
Average interest-bearing liabilities	$	2,027,106		$	1,610,168		$	1,683,790		26	%	20	%	$	1,730,320		$	1,642,803		5	%
Average equity	$	558,478		$	391,086		$	357,505		43	%	56	%	$	425,674		$	327,557		30	%
Average tangible equity	$	378,185		$	296,645		$	261,393		27	%	45	%	$	309,193		$	245,159		26	%


	For the Quarter Ended:
CONSOLIDATED INCOME STATEMENTS	December 31,			September 30,			June 30,			March 31,			December 31,
(in $000’s, unaudited)	2019			2019			2019			2019			2018
Interest income	$	42,471		$	33,250		$	33,489		$	33,449		$	35,378
Interest expense		3,242			2,625			2,573			2,407			2,318
Net interest income before provision
for loan losses		39,229			30,625			30,916			31,042			33,060
Provision (credit) for loan losses		3,223			(576)			(740)			(1,061)			142
Net interest income after provision
for loan losses		36,006			31,201			31,656			32,103			32,918
Noninterest income:
Service charges and fees on deposit accounts		1,140			1,032			1,177			1,161			1,132
Increase in cash surrender value of
life insurance		405			336			333			330			229
(Loss) gain on sales of securities		(217)			330			548			—			—
Gain on sales of SBA loans		358			156			36			139			147
Servicing income		156			139			150			191			176
Other		551			625			521			647			709
Total noninterest income		2,393			2,618			2,765			2,468			2,393
Noninterest expense:
Salaries and employee benefits		18,819			10,467			10,698			10,770			9,699
Occupancy and equipment		2,013			1,550			1,578			1,506			1,484
Professional fees		899			789			753			818			853
Other		8,895			5,103			5,416			4,824			4,905
Total noninterest expense		30,626			17,909			18,445			17,918			16,941
Income before income taxes		7,773			15,910			15,976			16,653			18,370
Income tax expense		2,088			4,633			4,623			4,507			5,138
Net income	$	5,685		$	11,277		$	11,353		$	12,146		$	13,232

PER COMMON SHARE DATA
(unaudited)
Basic earnings per share	$	0.10		$	0.26		$	0.26		$	0.28		$	0.31
Diluted earnings per share	$	0.10		$	0.26		$	0.26		$	0.28		$	0.30
Weighted average shares outstanding - basic		57,168,605			43,258,983			43,202,562			43,108,208			43,079,470
Weighted average shares outstanding - diluted		58,361,976			43,796,904			43,721,451			43,670,341			43,691,222
Common shares outstanding at period-end		59,368,156			43,509,406			43,498,406			43,323,753			43,288,750
Dividend per share	$	0.12		$	0.12		$	0.12		$	0.12		$	0.11
Book value per share	$	9.71		$	9.09		$	8.92		$	8.74		$	8.49
Tangible book value per share	$	6.55		$	6.92		$	6.75		$	6.54		$	6.28

KEY FINANCIAL RATIOS
(unaudited)
Annualized return on average equity		4.04	%		11.44	%		11.96	%		13.28	%		14.68	%
Annualized return on average tangible equity		5.96	%		15.08	%		15.94	%		17.90	%		20.08	%
Annualized return on average assets		0.55	%		1.44	%		1.48	%		1.58	%		1.64	%
Annualized return on average tangible assets		0.57	%		1.49	%		1.53	%		1.63	%		1.69	%
Net interest margin (fully tax equivalent)		4.15	%		4.24	%		4.38	%		4.38	%		4.42	%
Efficiency ratio		73.58	%		53.87	%		54.76	%		53.47	%		47.78	%

AVERAGE BALANCES
(in $000’s, unaudited)
Average assets	$	4,124,018		$	3,103,043		$	3,070,043		$	3,109,583		$	3,208,177
Average tangible assets	$	3,943,725		$	3,008,602		$	2,975,096		$	3,014,029		$	3,112,065
Average earning assets	$	3,762,239		$	2,878,590		$	2,844,677		$	2,885,591		$	2,980,207
Average loans held-for-sale	$	3,299		$	4,171		$	4,256		$	3,125		$	5,435
Average total loans	$	2,442,802		$	1,851,669		$	1,831,218		$	1,833,965		$	1,868,186
Average deposits	$	3,432,771		$	2,612,252		$	2,590,933		$	2,637,308		$	2,752,120
Average demand deposits - noninterest-bearing	$	1,452,893		$	1,041,712		$	1,001,914		$	1,024,142		$	1,107,813
Average interest-bearing deposits	$	1,979,878		$	1,570,540		$	1,589,019		$	1,613,166		$	1,644,307
Average interest-bearing liabilities	$	2,027,106		$	1,610,168		$	1,628,554		$	1,652,658		$	1,683,790
Average equity	$	558,478		$	391,086		$	380,605		$	370,792		$	357,505
Average tangible equity	$	378,185		$	296,645		$	285,658		$	275,238		$	261,393


	End of Period:						Percent Change From:
CONSOLIDATED BALANCE SHEETS	December 31,		September 30,		December 31,		September 30,		December 31,
(in $000’s, unaudited)	2019		2019		2018		2019		2018
ASSETS
Cash and due from banks	$	49,447	$	48,121	$	30,273	3	%	63	%
Other investments and interest-bearing deposits
in other financial institutions		407,923		367,662		134,295	11	%	204	%
Securities available-for-sale, at fair value		404,825		333,101		459,043	22	%	(12)	%
Securities held-to-maturity, at amortized cost		366,560		342,033		377,198	7	%	(3)	%
Loans held-for-sale - SBA, including deferred costs		1,052		3,571		2,649	(71)	%	(60)	%
Loans:
Commercial		678,696		528,060		597,763	29	%	14	%
Real estate:
CRE		1,495,903		1,080,235		994,067	38	%	50	%
Land and construction		147,109		96,610		122,358	52	%	20	%
Home equity		136,259		111,610		109,112	22	%	25	%
Residential mortgages		55,128		47,276		50,979	17	%	8	%
Consumer		21,068		11,701		12,453	80	%	69	%
Loans		2,534,163		1,875,492		1,886,732	35	%	34	%
Deferred loan fees, net		(319)		(105)		(327)	204	%	(2)	%
Total loans, net of deferred fees		2,533,844		1,875,387		1,886,405	35	%	34	%
Allowance for loan losses		(23,285)		(25,895)		(27,848)	(10)	%	(16)	%
Loans, net		2,510,559		1,849,492		1,858,557	36	%	35	%
Company-owned life insurance		76,027		62,858		61,859	21	%	23	%
Premises and equipment, net		8,250		6,849		7,137	20	%	16	%
Goodwill		167,420		83,753		83,753	100	%	100	%
Other intangible assets		20,415		10,346		12,007	97	%	70	%
Accrued interest receivable and other assets		96,985		74,685		69,791	30	%	39	%
Total assets	$	4,109,463	$	3,182,471	$	3,096,562	29	%	33	%

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, noninterest-bearing	$	1,450,873	$	1,094,953	$	1,021,582	33	%	42	%
Demand, interest-bearing		798,375		666,054		702,000	20	%	14	%
Savings and money market		982,430		761,471		754,277	29	%	30	%
Time deposits-under $250		54,361		53,560		58,661	1	%	(7)	%
Time deposits-$250 and over		99,882		95,543		86,114	5	%	16	%
CDARS - money market and time deposits		28,847		17,409		14,898	66	%	94	%
Total deposits		3,414,768		2,688,990		2,637,532	27	%	29	%
Subordinated debt, net of issuance costs		39,554		39,507		39,369	0	%	0	%
Other short-term borrowings		328		—		—	N/A		N/A
Accrued interest payable and other liabilities		78,105		58,628		52,195	33	%	50	%
Total liabilities		3,532,755		2,787,125		2,729,096	27	%	29	%

Shareholders’ Equity:
Common stock		489,745		302,983		300,844	62	%	63	%
Retained earnings		96,741		98,161		79,003	(1)	%	22	%
Accumulated other comprehensive loss		(9,778)		(5,798)		(12,381)	(69)	%	21	%
Total Shareholders' Equity		576,708		395,346		367,466	46	%	57	%
Total liabilities and shareholders’ equity	$	4,109,463	$	3,182,471	$	3,096,562	29	%	33	%


	End of Period:
CONSOLIDATED BALANCE SHEETS	December 31,		September 30,		June 30,		March 31,		December 31,
(in $000’s, unaudited)	2019		2019		2019		2019		2018
ASSETS
Cash and due from banks	$	49,447	$	48,121	$	36,302	$	38,699	$	30,273
Other investments and interest-bearing deposits
in other financial institutions		407,923		367,662		239,710		196,278		134,295
Securities available-for-sale, at fair value		404,825		333,101		383,156		452,521		459,043
Securities held-to-maturity, at amortized cost		366,560		342,033		351,399		367,023		377,198
Loans held-for-sale - SBA, including deferred costs		1,052		3,571		5,202		3,216		2,649
Loans:
Commercial		678,696		528,060		567,529		559,718		597,763
Real estate:
CRE		1,495,903		1,080,235		1,037,885		1,012,641		994,067
Land and construction		147,109		96,610		97,297		98,222		122,358
Home equity		136,259		111,610		116,057		118,448		109,112
Residential mortgages		55,128		47,276		48,944		49,786		50,979
Consumer		21,068		11,701		10,279		9,690		12,453
Loans		2,534,163		1,875,492		1,877,991		1,848,505		1,886,732
Deferred loan fees, net		(319)		(105)		(224)		(187)		(327)
Total loans, net of deferred fees		2,533,844		1,875,387		1,877,767		1,848,318		1,886,405
Allowance for loan losses		(23,285)		(25,895)		(26,631)		(27,318)		(27,848)
Loans, net		2,510,559		1,849,492		1,851,136		1,821,000		1,858,557
Company-owned life insurance		76,027		62,858		62,522		62,189		61,859
Premises and equipment, net		8,250		6,849		6,975		6,998		7,137
Goodwill		167,420		83,753		83,753		83,753		83,753
Other intangible assets		20,415		10,346		10,900		11,454		12,007
Accrued interest receivable and other assets		96,985		74,685		76,976		72,746		69,791
Total assets	$	4,109,463	$	3,182,471	$	3,108,031	$	3,115,877	$	3,096,562

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, noninterest-bearing	$	1,450,873	$	1,094,953	$	994,082	$	1,016,770	$	1,021,582
Demand, interest-bearing		798,375		666,054		682,114		704,996		702,000
Savings and money market		982,430		761,471		788,832		759,306		754,277
Time deposits-under $250		54,361		53,560		53,351		56,385		58,661
Time deposits-$250 and over		99,882		95,543		88,519		90,042		86,114
CDARS - money market and time deposits		28,847		17,409		15,575		12,745		14,898
Total deposits		3,414,768		2,688,990		2,622,473		2,640,244		2,637,532
Subordinated debt, net of issuance costs		39,554		39,507		39,461		39,414		39,369
Other short-term borrowings		328		—		—		—		—
Accrued interest payable and other liabilities		78,105		58,628		57,989		57,703		52,195
Total liabilities		3,532,755		2,787,125		2,719,923		2,737,361		2,729,096

Shareholders’ Equity:
Common stock		489,745		302,983		302,305		301,550		300,844
Retained earnings		96,741		98,161		92,105		85,953		79,003
Accumulated other comprehensive loss		(9,778)		(5,798)		(6,302)		(8,987)		(12,381)
Total Shareholders' Equity		576,708		395,346		388,108		378,516		367,466
Total liabilities and shareholders’ equity	$	4,109,463	$	3,182,471	$	3,108,031	$	3,115,877	$	3,096,562


	End of Period:									Percent Change From:
CREDIT QUALITY DATA	December 31,			September 30,			December 31,			September 30,		December 31,
(in $000’s, unaudited)	2019			2019			2018			2019		2018
Nonaccrual loans - held-for-investment	$	8,675		$	13,638		$	13,699		(36)	%	(37)	%
Restructured and loans over 90 days past due
and still accruing		1,153			609			1,188		89	%	(3)	%
Total nonperforming loans		9,828			14,247			14,887		(31)	%	(34)	%
Foreclosed assets		—			—			—		N/A		N/A
Total nonperforming assets	$	9,828		$	14,247		$	14,887		(31)	%	(34)	%
Other restructured loans still accruing	$	436		$	247		$	253		77	%	72	%
Net charge-offs (recoveries) during the quarter	$	5,833		$	160		$	(280)		3546	%	2183	%
Provision (credit) for loan losses during the quarter	$	3,223		$	(576)		$	142		660	%	2170	%
Allowance for loan losses	$	23,285		$	25,895		$	27,848		(10)	%	(16)	%
Classified assets	$	32,579		$	20,225		$	23,409		61	%	39	%
Allowance for loan losses to total loans		0.92	%		1.38	%		1.48	%	(33)	%	(38)	%
Allowance for loan losses to total nonperforming loans		236.93	%		181.76	%		187.06	%	30	%	27	%
Nonperforming assets to total assets		0.24	%		0.45	%		0.48	%	(47)	%	(50)	%
Nonperforming loans to total loans		0.39	%		0.76	%		0.79	%	(49)	%	(51)	%
Classified assets to Heritage Commerce Corp
Tier 1 capital plus allowance for loan losses		8	%		6	%		8	%	33	%	0	%
Classified assets to Heritage Bank of Commerce
Tier 1capital plus allowance for loan losses		7	%		6	%		7	%	17	%	0	%

OTHER PERIOD-END STATISTICS
(in $000’s, unaudited)
Heritage Commerce Corp:
Tangible common equity (1)	$	388,873		$	301,247		$	271,706		29	%	43	%
Shareholders’ equity / total assets		14.03	%		12.42	%		11.87	%	13	%	18	%
Tangible common equity / tangible assets (2)		9.92	%		9.75	%		9.05	%	2	%	10	%
Loan to deposit ratio		74.20	%		69.74	%		71.52	%	6	%	4	%
Noninterest-bearing deposits / total deposits		42.49	%		40.72	%		38.73	%	4	%	10	%
Total risk-based capital ratio		14.6	%		16.2	%		15.0	%	(10)	%	(3)	%
Tier 1 risk-based capital ratio		12.5	%		13.3	%		12.0	%	(6)	%	4	%
Common Equity Tier 1 risk-based capital ratio		12.5	%		13.3	%		12.0	%	(6)	%	4	%
Leverage ratio		9.8	%		10.0	%		8.9	%	(2)	%	10	%
Heritage Bank of Commerce:
Total risk-based capital ratio		13.9	%		15.2	%		14.0	%	(9)	%	(1)	%
Tier 1 risk-based capital ratio		13.1	%		14.1	%		12.8	%	(7)	%	2	%
Common Equity Tier 1 risk-based capital ratio		13.1	%		14.1	%		12.8	%	(7)	%	2	%
Leverage ratio		10.2	%		10.6	%		9.4	%	(4)	%	9	%

(1)

Represents shareholders’ equity minus goodwill and other intangible assets

(2)

Represents shareholders’ equity minus goodwill and other intangible assets divided by total assets minus goodwill and other intangible assets


	End of Period:
CREDIT QUALITY DATA	December 31,			September 30,			June 30,			March 31,			December 31,
(in $000’s, unaudited)	2019			2019			2019			2019			2018
Nonaccrual loans - held-for-investment	$	8,675		$	13,638		$	15,695		$	15,958		$	13,699
Restructured and loans over 90 days past due
and still accruing		1,153			609			1,323			1,357			1,188
Total nonperforming loans		9,828			14,247			17,018			17,315			14,887
Foreclosed assets		—			—			—			—			—
Total nonperforming assets	$	9,828		$	14,247		$	17,018		$	17,315		$	14,887
Other restructured loans still accruing	$	436		$	247		$	175		$	201		$	253
Net charge-offs (recoveries) during the quarter	$	5,833		$	160		$	(53)		$	(531)		$	(280)
Provision (credit) for loan losses during the quarter	$	3,223		$	(576)		$	(740)		$	(1,061)		$	142
Allowance for loan losses	$	23,285		$	25,895		$	26,631		$	27,318		$	27,848
Classified assets	$	32,579		$	20,225		$	31,176		$	25,176		$	23,409
Allowance for loan losses to total loans		0.92	%		1.38	%		1.42	%		1.48	%		1.48	%
Allowance for loan losses to total nonperforming loans		236.93	%		181.76	%		156.49	%		157.77	%		187.06	%
Nonperforming assets to total assets		0.24	%		0.45	%		0.55	%		0.56	%		0.48	%
Nonperforming loans to total loans		0.39	%		0.76	%		0.91	%		0.94	%		0.79	%
Classified assets to Heritage Commerce Corp
Tier 1 capital plus allowance for loan losses		8	%		6	%		10	%		8	%		8	%
Classified assets to Heritage Bank of Commerce
Tier 1capital plus allowance for loan losses		7	%		6	%		9	%		8	%		7	%

OTHER PERIOD-END STATISTICS
(in $000’s, unaudited)
Heritage Commerce Corp:
Tangible common equity (1)	$	388,873		$	301,247		$	293,455		$	283,309		$	271,706
Shareholders’ equity / total assets		14.03	%		12.42	%		12.49	%		12.15	%		11.87	%
Tangible common equity / tangible assets (2)		9.92	%		9.75	%		9.74	%		9.38	%		9.05	%
Loan to deposit ratio		74.20	%		69.74	%		71.60	%		70.01	%		71.52	%
Noninterest-bearing deposits / total deposits		42.49	%		40.72	%		37.91	%		38.51	%		38.73	%
Total risk-based capital ratio		14.6	%		16.2	%		15.9	%		15.6	%		15.0	%
Tier 1 risk-based capital ratio		12.5	%		13.3	%		13.0	%		12.6	%		12.0	%
Common Equity Tier 1 risk-based capital ratio		12.5	%		13.3	%		13.0	%		12.6	%		12.0	%
Leverage ratio		9.8	%		10.0	%		9.9	%		9.5	%		8.9	%
Heritage Bank of Commerce:
Total risk-based capital ratio		13.9	%		15.2	%		14.9	%		14.6	%		14.0	%
Tier 1 risk-based capital ratio		13.1	%		14.1	%		13.7	%		13.4	%		12.8	%
Common Equity Tier 1 risk-based capital ratio		13.1	%		14.1	%		13.7	%		13.4	%		12.8	%
Leverage ratio		10.2	%		10.6	%		10.5	%		10.1	%		9.4	%

(1) Represents shareholders’ equity minus goodwill and other intangible assets

(2)

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
	December 31, 2019						December 31, 2018
			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)	$	2,446,101		35,487	5.76	%	$	1,873,621	$	28,364	6.01	%
Securities - taxable		653,623		3,687	2.24	%		692,903		4,099	2.35	%
Securities - exempt from Federal tax (3)		82,034		663	3.21	%		86,597		697	3.19	%
Other investments and interest-bearing deposits
in other financial institutions		580,481		2,773	1.90	%		327,086		2,365	2.87	%
Total interest earning assets (3)		3,762,239		42,610	4.49	%		2,980,207		35,525	4.73	%
Cash and due from banks		48,313						40,963
Premises and equipment, net		8,497						7,201
Goodwill and other intangible assets		180,293						96,112
Other assets		124,676						83,694
Total assets	$	4,124,018					$	3,208,177

Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing	$	1,452,893					$	1,107,813

Demand, interest-bearing		789,465		600	0.30	%		678,983		566	0.33	%
Savings and money market		1,009,880		1,283	0.50	%		802,384		878	0.43	%
Time deposits - under $100		19,613		28	0.57	%		21,787		22	0.40	%
Time deposits - $100 and over		143,095		373	1.03	%		127,911		266	0.83	%
CDARS - money market and time deposits		17,825		2	0.04	%		13,242		2	0.06	%
Total interest-bearing deposits		1,979,878		2,286	0.46	%		1,644,307		1,734	0.42	%
Total deposits		3,432,771		2,286	0.26	%		2,752,120		1,734	0.25	%

Subordinated debt, net of issuance costs		46,758		955	8.10	%		39,341		583	5.88	%
Short-term borrowings		470		1	0.84	%		142		1	2.79	%
Total interest-bearing liabilities		2,027,106		3,242	0.63	%		1,683,790		2,318	0.55	%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds		3,479,999		3,242	0.37	%		2,791,603		2,318	0.33	%
Other liabilities		85,541						59,069
Total liabilities		3,565,540						2,850,672
Shareholders’ equity		558,478						357,505
Total liabilities and shareholders’ equity	$	4,124,018					$	3,208,177

Net interest income (3) / margin				39,368	4.15	%				33,207	4.42	%
Less tax equivalent adjustment (3)				(139)						(147)
Net interest income			$	39,229					$	33,060

(1)

Includes loans held-for-sale. Nonaccrual loans are included in average balance.

(2)

Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $90,000 for the fourth quarter of 2019, compared to $53,000 for the fourth quarter of 2018.

(3)

Reflects the fully tax equivalent adjustment for Federal tax-exempt income based on a 21%.


	For the Quarter Ended						For the Quarter Ended
	December 31, 2019						September 30, 2019
			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)	$	2,446,101	$	35,487	5.76	%	$	1,855,840		27,264	5.83	%
Securities - taxable		653,623		3,687	2.24	%		629,339		3,504	2.21	%
Securities - exempt from Federal tax (3)		82,034		663	3.21	%		83,403		671	3.19	%
Other investments and interest-bearing deposits
in other financial institutions		580,481		2,773	1.90	%		310,008		1,952	2.50	%
Total interest earning assets (3)		3,762,239		42,610	4.49	%		2,878,590		33,391	4.60	%
Cash and due from banks		48,313						37,615
Premises and equipment, net		8,497						6,933
Goodwill and other intangible assets		180,293						94,441
Other assets		124,676						85,464
Total assets	$	4,124,018					$	3,103,043

Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing	$	1,452,893					$	1,041,712

Demand, interest-bearing		789,465		600	0.30	%		670,203		571	0.34	%
Savings and money market		1,009,880		1,283	0.50	%		737,484		1,073	0.58	%
Time deposits - under $100		19,613		28	0.57	%		18,549		23	0.49	%
Time deposits - $100 and over		143,095		373	1.03	%		127,314		373	1.16	%
CDARS - money market and time deposits		17,825		2	0.04	%		16,990		2	0.05	%
Total interest-bearing deposits		1,979,878		2,286	0.46	%		1,570,540		2,042	0.52	%
Total deposits		3,432,771		2,286	0.26	%		2,612,252		2,042	0.31	%

Subordinated debt, net of issuance costs		46,758		955	8.10	%		39,477		583	5.86	%
Short-term borrowings		470		1	0.84	%		151		—	0.00	%
Total interest-bearing liabilities		2,027,106		3,242	0.63	%		1,610,168		2,625	0.65	%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds		3,479,999		3,242	0.37	%		2,651,880		2,625	0.39	%
Other liabilities		85,541						60,077
Total liabilities		3,565,540						2,711,957
Shareholders’ equity		558,478						391,086
Total liabilities and shareholders’ equity	$	4,124,018					$	3,103,043

Net interest income (3) / margin				39,368	4.15	%				30,766	4.24	%
Less tax equivalent adjustment (3)				(139)						(141)
Net interest income			$	39,229					$	30,625

(1)

Includes loans held-for-sale. Nonaccrual loans are included in average balance.

(2)

Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $90,000 for the fourth quarter of 2019, compared to $189,000 for the third quarter of 2019.

(3)

Reflects the fully tax equivalent adjustment for Federal tax-exempt income based on a 21%.


	For the Year Ended						For the Year Ended
	December 31, 2019						December 31, 2018
			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)	$	1,994,917	$	116,808	5.86	%	$	1,801,015	$	105,635	5.87	%
Securities - taxable		682,602		15,836	2.32	%		669,994		15,211	2.27	%
Securities - exempt from Federal tax (3)		84,165		2,720	3.23	%		87,639		2,817	3.21	%
Other investments, interest-bearing deposits in other
financial institutions and Federal funds sold		332,905		7,867	2.36	%		285,702		6,774	2.37	%
Total interest earning assets (3)		3,094,589		143,231	4.63	%		2,844,350		130,437	4.59	%
Cash and due from banks		40,070						38,665
Premises and equipment, net		7,395						7,298
Goodwill and other intangible assets		116,481						82,398
Other assets		95,235						82,925
Total assets	$	3,353,770					$	3,055,636

Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing	$	1,131,098					$	1,029,860

Demand, interest-bearing		712,186		2,401	0.34	%		658,386		1,885	0.29	%
Savings and money market		811,266		4,298	0.53	%		777,749		2,701	0.35	%
Time deposits - under $100		19,448		94	0.48	%		21,375		80	0.37	%
Time deposits - $100 and over		130,856		1,359	1.04	%		130,548		830	0.64	%
CDARS - money market and time deposits		15,078		7	0.05	%		15,369		10	0.07	%
Total interest-bearing deposits		1,688,834		8,159	0.48	%		1,603,427		5,506	0.34	%
Total deposits		2,819,932		8,159	0.29	%		2,633,287		5,506	0.21	%

Subordinated debt, net of issuance costs		41,278		2,686	6.51	%		39,270		2,314	5.89	%
Short-term borrowings		208		2	0.96	%		106		2	1.89	%
Total interest-bearing liabilities		1,730,320		10,847	0.63	%		1,642,803		7,822	0.48	%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds		2,861,418		10,847	0.38	%		2,672,663		7,822	0.29	%
Other liabilities		66,678						55,416
Total liabilities		2,928,096						2,728,079
Shareholders’ equity		425,674						327,557
Total liabilities and shareholders’ equity	$	3,353,770					$	3,055,636

Net interest income (3) / margin				132,384	4.28	%				122,615	4.31	%
Less tax equivalent adjustment (3)				(572)						(592)
Net interest income			$	131,812					$	122,023

(1)

Includes loans held-for-sale. Nonaccrual loans are included in average balance.

(2)

Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $580,000 for the year ended December 31, 2019, compared to $375,000 for the year ended December 31, 2018.

(3)

Reflects the fully tax equivalent adjustment for Federal tax-exempt income based on a 21%.