8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 28, 2022

HERITAGE COMMERCE CORP

(Exact name of registrant as specified in its charter)

California	000-23877	77-0469558
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

224 Airport Parkway, San Jose, California	95110
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (408) 947-6900

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, No Par Value	HTBK	The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the

Exchange Act ☐

ITEM 2.02RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On July 28, 2022, Heritage Commerce Corp, the holding company (the “Company”) of Heritage Bank of Commerce (the “Bank”) issued a press release announcing preliminary unaudited results for the second quarter and six months ended June 30, 2022. A copy of the press release is attached as Exhibit 99.1 to this Current Report and is incorporated herein by reference.

The information in this report set forth under this Item 2.02 shall not be treated as “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933 or the Securities Act of 1934, except as expressly stated by specific reference in such filing.

ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINIPAL OFFICERS; ELECTION OF DIRECTORS;

APPOINTMENT OF PRINCIPAL OFFICERS

At their regular Company and Bank Board of Directors meetings on July 28, 2022, the Boards appointed Robertson (Clay) Jones was appointed as the President and Chief Executive Officer of the Company and the Bank. Mr. Jones will also join the Boards of the Company and the Bank. Mr. Jones will assume his new positions with the Company and the Bank and join the Boards of the Company and the Bank effective September 15, 2022. Mr. Jones is currently the President and Chief Operating Officer of the Bank. Walter T. Kaczmarek will step down as the President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank effective September 15, 2022, but he will remain on the Boards of the Company and the Bank. The Company has issued a press release dated July 28, 2022 attached to this report as Exhibit 99.2 and is incorporated herein by reference.

ITEM 8.01OTHER EVENTS

QUARTERLY DIVIDEND

On July 28, 2022, the Company announced that its Board of Directors declared a $0.13 per share quarterly cash dividend to holders of common stock. The dividend will be paid on August 25, 2022, to shareholders of record at the close of the business day on August 11, 2022. A copy of the press release is attached as Exhibit 99.3 to this Current Report and is incorporated herein by reference.

2

ITEM 9.01FINANCIAL STATEMENTS AND EXHIBITS

(D) Exhibits.

99.1	Press Release, dated July 28, 2022, entitled “Heritage Commerce Corp Earns a $14.8 Million for the Second Quarter of 2022, and $27.7 Million for the First Six Months of 2022”
99.2	Press Release, dated July 28, 2022, entitled “Robertson “Clay” Jones Named President and Chief Executive Officer of Heritage Commerce Corp”
99.3	Press Release, dated July 28, 2022, entitled “Heritage Commerce Corp Declares Regular Quarterly Cash Dividend of $0.13 Per Share”
104	Cover Page Interactive Data File (embedded within XBRL document)

3

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: July 28, 2022

Heritage Commerce Corp

By: /s/ Lawrence D. McGovern

Name: Lawrence D. McGovern

Executive Vice President and Chief Financial Officer

4

EX-99.1

Exhibit 99.1

Heritage Commerce Corp Earns $14.8 Million for the Second Quarter of 2022, and

$27.7 Million for the First Six Months of 2022

San Jose, CA — July 28, 2022 — Heritage Commerce Corp (Nasdaq: HTBK), the holding company (the “Company”) for Heritage Bank of Commerce (the “Bank”), today announced second quarter 2022 net income of $14.8 million, or $0.24 per average diluted common share, compared to $8.8 million, or $0.15 per average diluted common share, for the second quarter of 2021, and $12.9 million, or $0.21 per average diluted common share, for the first quarter of 2022. For the six months ended June 30, 2022, net income was $27.7 million, or $0.45 per average diluted common share, compared to $20.0 million, or $0.33 per average diluted common share, for the six months ended June 30, 2021. All results are unaudited.

“Our second quarter of 2022 results were stellar, generating record earnings for the quarter and for the first half of 2022,” said Walter Kaczmarek, President and Chief Executive Officer. “Year-over-year core deposit growth was solid, supporting strong organic loan growth. Loans, excluding Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans and residential mortgages, increased 12% from a year earlier. Additionally, our strong liquidity provides us with the opportunity for investment strategies that positively impact our net interest income.”

“We continue to deliver solid profitability metrics, including an annualized return on average tangible equity of 14.06% and an efficiency ratio of 52.73% for the second quarter of 2022,” said Mr. Kaczmarek. “Our excellent credit quality further improved during the second quarter of 2022 with nonperforming assets declining 56% from a year ago and down 29% from the linked quarter. Our allowance for credit losses on loans to total loans increased to 1.48%, or $45.5 million, at June 30, 2022, from 1.41%, or $42.8 million, at March 31, 2022, despite having a negative provision for credit losses on loans, due to net loan recoveries on previously charged off loans of $2.9 million during the second quarter of 2022. The net interest margin improved to 3.38% for the second quarter 2022, compared to 3.05% for the first quarter of 2022.”

“Our franchise is growing as we continue to look for opportunities to expand in the San Francisco Bay area. We recently opened a new banking office in Oakland, at 1111 Broadway, Suite 1650, offering a full range of commercial banking services to small and medium-sized businesses and their owners, managers and employees. We will continue to focus on deepening our existing customer relationships while cultivating new customer relationships,” said Mr. Kaczmarek. “Going forward, our balance sheet remains well positioned to benefit from rising interest rates. Together with our strong liquidity and capital levels, earnings capacity and dedicated employees, we are well positioned for further success as we head into the second half of the year.”

Second Quarter Ended June 30, 2022

Operating Results, Balance Sheet Review, Capital Management, and Credit Quality

(as of, or for the periods ended June 30, 2022, compared to June 30, 2021, and March 31, 2022, except as noted):

Operating Results:

♦ Diluted earnings per share were $0.24 for the second quarter of 2022, compared to $0.15 for the second quarter of 2021, and $0.21 for the first quarter of 2022. Diluted earnings per share were $0.45 for the first six months of 2022, compared to $0.33 for the first six months of 2021.

♦ 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 Six Months Ended
	June 30,	March 31,	June 30,	June 30,	June 30,
(unaudited)	2022	2022	2021	2022	2021
Return on average tangible assets	1.15%	0.99%	0.73%	1.07%	0.85%
Return on average tangible equity	14.06%	12.47%	8.84%	13.28%	10.16%

1

♦ Net interest income, before provision for credit losses on loans, increased 20% to $41.9 million for the second quarter of 2022, compared to $34.9 million for the second quarter of 2021, primarily due to higher average balances of loans and investment securities, higher average yields on investment securities and overnight funds, an increase in the accretion of the loan purchase discount into interest income from acquired loans, and a lower cost of funds, partially offset by lower interest and fees on PPP loans. Net interest income increased 10% for the second quarter of 2022, compared to $38.2 million for the first quarter of 2022, primarily due to higher average balances of loans and investment securities, higher average yields on loans, investment securities and overnight funds, an increase in the accretion of the loan purchase discount into interest income from acquired loans, partially offset by lower interest and fees on PPP loans. Net interest income increased 15% to $80.1 million for the first six months of 2022, compared to $69.8 million for the first six months of 2021, primarily due to higher average balances of loans and investment securities, higher average yields on investment securities and overnight funds, and a lower cost of funds, partially offset by lower interest and fees on PPP loans.

● The fully tax equivalent (“FTE”) net interest margin increased 33 basis points to 3.38% for the second quarter of 2022 from 3.05% for the first quarter of 2022, primarily due to a shift in the mix of earning assets as the Company invested its excess liquidity into higher yielding loans and investment securities, higher average yield on overnight funds, and an increase in the accretion of the loan purchase discount into interest income from acquired loans, partially offset by lower interest and fees on PPP loans.

● The FTE net interest margin increased 38 basis points to 3.38% for the second quarter of 2022, from 3.00% for the second quarter of 2021, primarily due to a shift in the mix of earning assets into higher yielding loans and investment securities, higher average yield on overnight funds, and an increase in the accretion of the loan purchase discount into interest income from acquired loans, and a decline in the cost of funds, partially offset by lower interest and fees on PPP loans.

● For the first six months of 2022, the FTE net interest margin increased 11 basis points to 3.21%, compared to 3.10% for the first six months of 2021, primarily due to higher average balances of loans and investment securities, higher average yields on investment securities and overnight funds, and a lower cost of funds, partially offset by lower interest and fees on PPP loans.

♦ The following table, as of June 30, 2022, sets forth the estimated changes in the Company’s annual net interest income that would result from the designated instantaneous parallel shift in interest rates from the base rate:

	Increase/(Decrease) in
	Estimated Net
	Interest Income(1)
	Amount		Percent
	(Dollars in thousands)
Change in Interest Rates (basis points)
+400	$	40,591	22.7	%
+300	$	30,388	17.0	%
+200	$	20,241	11.3	%
+100	$	10,153	5.7	%
0		—	—
−100	$	(19,568)	(11.0)	%
−200	$	(36,408)	(20.4)	%

(1) Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results. Actual rates paid on deposits may differ from the hypothetical interest rates modeled due to competitive or market factors, which could reduce any actual impact on net interest income.

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

● The average yield on the total loan portfolio increased to 4.80% for the second quarter of 2022, compared to 4.70% for the first quarter of 2022, primarily due to increases in the prime rate, an increase in the accretion of the loan purchase discount into interest income from acquired loans, partially offset by lower fees on PPP loans, and higher average balances of lower yielding purchased residential mortgage loans.

2

	For the Quarter Ended						For the Quarter Ended
	June 30, 2022						March 31, 2022
	Average		Interest		Average		Average		Interest		Average
(in $000’s, unaudited)	Balance		Income		Yield		Balance		Income		Yield
Loans, core bank	$	2,530,836	$	27,402	4.34	%	$	2,483,708	$	26,097	4.26	%
Prepayment fees		—		549	0.09	%		—		510	0.08	%
PPP loans		21,479		53	0.99	%		60,264		146	0.98	%
PPP fees, net		—		493	9.21	%		—		1,346	9.06	%
Asset-based lending		49,667		874	7.06	%		69,617		950	5.53	%
Bay View Funding factored receivables		64,085		3,129	19.58	%		57,761		2,793	19.61	%
Purchased residential mortgages		381,988		2,711	2.85	%		355,626		2,428	2.77	%
Purchased commercial real estate ("CRE") loans		8,425		77	3.67	%		8,514		77	3.67	%
Loan fair value mark / accretion		(6,303)		1,250	0.20	%		(6,901)		754	0.12	%
Total loans (includes loans held-for-sale)	$	3,050,177	$	36,538	4.80	%	$	3,028,589	$	35,101	4.70	%

● The average yield on the total loan portfolio remained flat at 4.80% for both the second quarter of 2022 and the second quarter of 2021, as an increase in the accretion of the loan purchase discount into interest income from acquired loans and higher yields on the asset-based lending portfolio, was offset by lower interest and fees on PPP loans, higher average balances of lower yielding purchased residential mortgages, declines in the average yields of the core bank loans and Bay View Funding factored receivables.

	For the Quarter Ended						For the Quarter Ended
	June 30, 2022						June 30, 2021
	Average		Interest		Average		Average		Interest		Average
(in $000’s, unaudited)	Balance		Income		Yield		Balance		Income		Yield
Loans, core bank	$	2,530,836	$	27,402	4.34	%	$	2,246,030	$	25,036	4.47	%
Prepayment fees		—		549	0.09	%		—		504	0.09	%
PPP loans		21,479		53	0.99	%		334,604		831	1.00	%
PPP fees, net		—		493	9.21	%		—		1,876	2.25	%
Asset-based lending		49,667		874	7.06	%		35,125		464	5.30	%
Bay View Funding factored receivables		64,085		3,129	19.58	%		48,993		2,772	22.69	%
Purchased residential mortgages		381,988		2,711	2.85	%		125,710		981	3.13	%
Purchased CRE loans		8,425		77	3.67	%		14,602		110	3.02	%
Loan fair value mark / accretion		(6,303)		1,250	0.20	%		(10,643)		865	0.15	%
Total loans (includes loans held-for-sale)	$	3,050,177	$	36,538	4.80	%	$	2,794,421	$	33,439	4.80	%

● The average yield on the total loan portfolio decreased to 4.75% for the six months ended June 30, 2022, compared to 5.01% for the six months ended June 30, 2021, primarily due to an increase in the average balance of lower yielding purchased residential mortgages, and a decrease in interest and fees on PPP loans.

	For the Six Months Ended						For the Six Months Ended
	June 30, 2022						June 30, 2021
	Average		Interest		Average		Average		Interest		Average
(in $000’s, unaudited)	Balance		Income		Yield		Balance		Income		Yield
Loans, core bank	$	2,507,403	$	53,498	4.30	%	$	2,222,135	$	49,729	4.51	%
Prepayment fees		—		1,059	0.09	%		—		1,021	0.09	%
PPP loans		40,764		199	0.98	%		326,928		1,615	1.00	%
PPP fees, net		—		1,839	9.10	%		—		5,276	3.25	%
Asset-based lending		59,587		1,825	6.18	%		31,268		838	5.40	%
Bay View Funding factored receivables		60,940		5,922	19.60	%		48,546		5,422	22.52	%
Purchased residential mortgages		368,880		5,139	2.81	%		74,238		1,099	2.99	%
Purchased CRE loans		8,469		154	3.67	%		15,875		281	3.57	%
Loan fair value mark / accretion		(6,600)		2,004	0.16	%		(11,132)		1,994	0.18	%
Total loans (includes loans held-for-sale)	$	3,039,443	$	71,639	4.75	%	$	2,707,858	$	67,275	5.01	%

3

● In aggregate, the remaining net purchase discount on total loans acquired from Focus Business Bank, Tri-Valley Bank, United American Bank, and Presidio Bank was $5.3 million at June 30, 2022.

♦ The average cost of total deposits was 0.­10% for both the second and first quarters of 2022, compared to 0.11% for the second quarter of 2021. The average cost of total deposits was 0.10% for the six months ended June 30, 2022, compared to 0.12% for the six months ended June 30, 2021.

♦ During the second quarter of 2022, there was a negative provision for credit losses on loans of $181,000, compared to a $493,000 negative provision for credit losses on loans for the second quarter of 2021, and a $567,000 negative provision for credit losses on loans for the first quarter of 2022. There was a negative provision for credit losses on loans of $748,000 for the six months ended June 30, 2022, compared to a $2.0 million negative provision for credit losses on loans for the six months ended June 30, 2021.

♦ Total noninterest income remained relatively flat at $2.1 million for the second quarter of 2022, compared to $2.2 million for the second quarter of 2021, mostly due to a lower gain on proceeds from company-owned life insurance, partially offset by higher service charges and fees on deposit accounts during the second quarter of 2022. Total noninterest income decreased from $2.5 million for the first quarter of 2022, primarily due to a $637,000 gain on warrants and a higher gain on sale of SBA loans during the first quarter of 2022, partially offset by higher service charges and fees on deposit accounts during the second quarter of 2022.

● For the six months ended June 30, 2022, total noninterest income remained relatively flat at $4.6 million, compared to $4.5 million for the six months ended June 30, 2021, primarily due to a $637,000 gain on warrants and higher service charges and fees on deposit accounts during the first six months of 2022, partially offset by a lower gain on proceeds from company-owned life insurance and a lower gain on sale of SBA loans during the first six months of 2022.

♦ Total noninterest expense for the second quarter of 2022 decreased to $23.2 million, compared to $25.8 million for the second quarter of 2021, primarily due to a $4.0 million reserve for a legal settlement during the second quarter of 2021, partially offset by higher salaries and employee benefits, insurance expense and Federal Deposit Insurance Corporation (“FDIC”) assessments during the second quarter of 2022. Noninterest expense for the second quarter of 2022 remained relatively flat compared to $23.3 million for the first quarter of 2022.

● Noninterest expense for the six months ended June 30, 2022 decreased to $46.4 million, compared to $49.0 million for the six months ended June 30, 2021, primarily due to a reserve for a legal settlement during the first six months of 2021, partially offset by higher salaries and employee benefits, insurance expense and FDIC assessments during the first six months of 2022.

● Full time equivalent employees was 332 at June 30, 2022, and 330 at June 30, 2021, and 325 at March 31, 2022.

♦ The efficiency ratio was 52.73% for the second quarter of 2022, compared to 69.58% for the second quarter of 2021, and 57.16% for the first quarter of 2022. The efficiency ratio for the six months ended June 30, 2022 was 54.86%, compared to 65.97% for the six months ended June 30, 2021. Excluding the $4.0 million reserve for a legal settlement, the efficiency ratio was 58.78% for the second quarter of 2021, and 60.59% for the first six months of 2021.

♦ Income tax expense was $6.1 million for the second quarter of 2022, compared to $3.0 million for the second quarter of 2021, and $5.1 million for the first quarter of 2022. The effective tax rate for the second quarter of 2022 was 29.3%, compared to 25.1% for the second quarter of 2021, and 28.5% for the first quarter of 2021. Income tax expense for the six months ended June 30, 2022 was $11.3 million, compared to $7.3 million for the six months ended June 30, 2021. The effective tax rate for the six months ended June 30, 2022 was 28.9%, compared to 26.7% for the six months ended June 30, 2021.

● The difference in the effective tax rate for the periods reported compared to the combined Federal and state statutory tax rate of 29.6% was primarily the result of the Company’s investment in life insurance policies whose earnings are not subject to taxes, tax credits related to investments in low-income housing limited partnerships (net of low-income housing investment losses), and tax-exempt interest income earned on municipal bonds.

4

Balance Sheet Review, Capital Management and Credit Quality:

♦Total assets increased 6% to $5.357 billion at June 30, 2022, compared to $5.073 billion at June 30, 2021, and decreased (1%) from $5.427 billion at March 31, 2022.

♦ Securities available-for-sale, at fair value, totaled $332.1 million at June 30, 2022, compared to $146.0 million at June 30, 2021, and $111.2 million at March 31, 2022. At June 30, 2022, the Company’s securities available-for-sale portfolio was comprised of $250.1 million of U.S. Treasury securities and $82.0 million of agency mortgage-backed securities (all issued by U.S. Government sponsored entities).

● The pre-tax unrealized loss on U.S. Treasury securities available-for-sale at June 30, 2022 was ($1.2) million, compared to a pre-tax unrealized gain of $94,000 at June 30, 2021, and a pre-tax unrealized loss of ($94,000) at March 31, 2022. The pre-tax unrealized loss on mortgage-backed securities available-for-sale at June 30, 2022 was ($2.9) million, compared to a pre-tax unrealized gain of $4.2 million at June 30, 2021, and a pre-tax unrealized loss of ($1.4) million at March 31, 2022. The pre-tax unrealized loss on total securities available-for-sale at June 30, 2022 was ($4.1) million, compared to a pre-tax unrealized gain of $4.3 million at June 30, 2021, and a pre-tax unrealized loss of ($1.5) million at March 31, 2022. All other factors remaining the same, when market interest rates are increasing, the Company will experience a higher unrealized loss on the securities portfolio.

● During the second quarter of 2022, the Company purchased $229.3 million of U.S. Treasury securities available-for-sale, with a book yield of 2.80% and an average life of 2.58 years. During the first six months of 2022, the Company purchased $251.0 million of U.S. Treasury securities available-for-sale, with a book yield of 2.75% and an average life of 2.57 years.

♦ At June 30, 2022, securities held-to-maturity, at amortized cost, totaled $723.7 million, compared to $421.3 million at June 30, 2021, and $736.8 million at March 31, 2022. At June 30, 2022, the Company’s securities held-to-maturity portfolio was comprised of $683.7 million of agency mortgage-backed securities, and $40.0 million of tax-exempt municipal bonds.

● The pre-tax unrealized loss on mortgage-backed securities held-to-maturity at June 30, 2022 was ($72.5) million, compared to a pre-tax unrealized gain of $4.2 million at June 30, 2021, and a pre-tax unrealized loss of ($46.2) million at March 31, 2022. The pre-tax unrealized loss on municipal bonds held-to-maturity at June 30, 2022 was ($436,000), compared to a pre-tax unrealized gain of $1.2 million at June 30, 2021, and a pre-tax unrealized gain of $148,000 at March 31, 2022. The pre-tax unrealized loss on total securities held-to-maturity at June 30, 2022 was ($72.9) million, compared to a pre-tax unrealized gain of $5.4 million at June 30, 2021, and a pre-tax unrealized loss of ($46.1) million at March 31, 2021.

● During the second quarter of 2022, the Company purchased $9.8 million of agency mortgage-backed securities held-to-maturity, with a book yield of 3.26% and an average life of 6.92 years. During the first six months of 2022, the Company purchased $119.4 million of agency mortgage-backed securities held-to-maturity, with a book yield of 2.21% and an average life of 6.55 years.

♦ 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	June 30, 2022				March 31, 2022				June 30, 2021
(in $000’s, unaudited)	Balance		% to Total		Balance		% to Total		Balance		% to Total
Commercial	$	523,268	17	%	$	568,053	19	%	$	557,686	20	%
PPP Loans(1)		8,153	0	%		37,393	1	%		286,461	10	%
Real estate:
CRE - owner occupied		597,521	19	%		597,542	20	%		583,091	21	%
CRE - non-owner occupied		993,621	32	%		928,220	31	%		742,135	26	%
Land and construction		155,389	5	%		153,323	5	%		129,426	4	%
Home equity		116,641	4	%		111,609	3	%		107,873	4	%
Multifamily		221,938	7	%		221,767	7	%		198,771	7	%
Residential mortgages		448,958	15	%		391,171	13	%		205,904	7	%
Consumer and other		18,354	1	%		17,110	1	%		21,519	1	%
Total Loans		3,083,843	100	%		3,026,188	100	%		2,832,866	100	%
Deferred loan costs (fees), net		(1,391)	—			(2,124)	—			(8,070)	—
Loans, net of deferred costs and fees	$	3,082,452	100	%	$	3,024,064	100	%	$	2,824,796	100	%

(1) Less than 1% at June 30, 2022.

5

● Loans, excluding loans held-for-sale, increased $257.7 million, or 9%, to $3.082 billion at June 30, 2022, compared to $2.825 billion at June 30, 2021, and increased $58.4 million, or 2%, from $3.024 billion at March 31, 2022. Total loans at June 30, 2022 included $8.2 million of PPP loans, compared to $286.5 million at June 30, 2021 and $37.4 million at March 31, 2022. Total loans at June 30, 2022 included $449.0 million of residential mortgages, compared to $205.9 million at June 30, 2021, and $391.2 million at March 31, 2022. Loans, excluding loans held-for-sale, PPP loans and residential mortgages, increased $286.3 million, or 12%, to $2.626 billion at June 30, 2022, compared to $2.339 billion at June 30, 2021, and increased $29.3 million, or 1%, from $2.596 billion at March 31, 2022.

● Commercial and industrial (“C&I”) line utilization was 28% at June 30, 2022, compared to 27% at June 30, 2021, and 31% at March 31, 2022.

● At June 30, 2022, 38% of the CRE loan portfolio was secured by owner-occupied real estate, compared to 44% at June 30, 2021, and 39% at March 31, 2022.

● At June 30, 2022, approximately 36% of the Company’s loan portfolio consisted of floating interest rate loans, compared to 44% at June 30, 2021, and 38% at March 31, 2022.

● In response to economic stimulus laws passed by Congress in 2020 and 2021, the Bank funded two rounds of PPP loans totaling $530.8 million. At June 30, 2022, after accounting for loan payoffs and SBA loan forgiveness, “Round 1” PPP loans were $43,000 and “Round 2” PPP loans were $8.1 million. In total, the Bank had $8.2 million in outstanding PPP loan balances at June 30, 2022. The following table shows interest income, fee income and deferred origination costs generated by the PPP loans, outstanding PPP loan balances and related deferred fees and costs for the periods indicated:

	At or For the Quarter Ended:						At or For the Six Months Ended:
PPP LOANS	June 30,		March 31,		June 30,		June 30,		June 30,
(in $000’s, unaudited)	2022		2022		2021		2022		2021
Interest income	$	53	$	146	$	831	$	199	$	1,615
Fee income, net		493		1,346		1,876		1,839		5,276
Total	$	546	$	1,492	$	2,707	$	2,038	$	6,891
PPP loans outstanding at period end:
Round 1	$	43	$	1,186	$	91,849	$	43	$	91,849
Round 2		8,110		36,207		194,612		8,110		194,612
Total	$	8,153	$	37,393	$	286,461	$	8,153	$	286,461
Deferred fees outstanding at period end	$	(337)	$	(876)	$	(7,747)	$	(337)	$	(7,747)
Deferred costs outstanding at period end		24		69		869		24		869
Total	$	(313)	$	(807)	$	(6,878)	$	(313)	$	(6,878)

● During the second quarter of 2022, the Company purchased single family residential mortgage loans totaling $74.5 million, tied to homes all located in California, with average principal balances of approximately $821,000 and a weighted average yield of approximately 3.14%. During the second quarter of 2021, the Company purchased single family residential mortgage loans totaling $140.0 million, tied to homes all located in California, with average principal balances of approximately $585,000 and a weighted average yield of approximately 3.39% (excluding servicing costs, which are netted against interest income contributing to a lower overall average yield).

♦ The following table summarizes the allowance for credit losses on loans (“ACLL”) for the periods indicated:

	At or For the Quarter Ended:									For the Six Months Ended
ALLOWANCE FOR CREDIT LOSSES ON LOANS	June 30,			March 31,			June 30,			June 30,			June 30,
(in $000’s, unaudited)	2022			2022			2021			2022			2021
Balance at beginning of period	$	42,788		$	43,290		$	44,296		$	43,290		$	44,400
Charge-offs during the period		(355)			(16)			(105)			(371)			(368)
Recoveries during the period		3,238			81			258			3,319			1,929
Net recoveries (charge-offs) during the period		2,883			65			153			2,948			1,561
Provision for (recapture of) credit losses on loans during the period		(181)			(567)			(493)			(748)			(2,005)
Balance at end of period	$	45,490		$	42,788		$	43,956		$	45,490		$	43,956
Total loans, net of deferred fees	$	3,082,454		$	3,024,064		$	2,824,796		$	3,082,454		$	2,824,796
Total nonperforming loans	$	2,715		$	3,830		$	6,180		$	2,715		$	6,180
ACLL to total loans		1.48	%		1.41	%		1.56	%		1.48	%		1.56	%
ACLL to total nonperforming loans		1,675.51	%		1,117.18	%		711.26	%		1,675.51	%		711.26	%

6

● The ACLL was 1.48% of total loans at June 30, 2022 while the ACLL to total nonperforming loans was 1,675.51%. The ACLL was 1.56% of total loans and the ACLL to nonperforming loans was 711.26% at June 30, 2021. The ACLL was 1.41% of total loans and the ACLL to total nonperforming loans was 1,117.18% at March 31, 2022.

● The following table shows the drivers of change in ACLL under the current expected credit losses (“CECL”) methodology for the second quarter of 2022:

DRIVERS OF CHANGE IN ACLL UNDER CECL
(in $000’s, unaudited)
ACLL at December 31, 2021	$	43,290
Portfolio changes during the first quarter of 2022 including net recoveries		(33)
Qualitative and quantitative changes during the first
quarter of 2022 including changes in economic forecasts		(469)
ACLL at March 31, 2022		42,788
Portfolio changes during the second quarter of 2022 including net recoveries		1,383
Qualitative and quantitative changes during the second
quarter of 2022 including changes in economic forecasts		1,319
ACLL at June 30, 2022	$	45,490

♦ Net recoveries totaled $2.9 million for the second quarter of 2022, compared to net recoveries of $153,000 for the second quarter of 2021, and net recoveries of $65,000 for the first quarter of 2022. Net recoveries totaled $2.9 million during both the second quarter and the first six months of 2022, primarily due to recoveries of a couple of larger loans that were previously charged off.

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

NONPERFORMING ASSETS	June 30, 2022				March 31, 2022				June 30, 2021
(in $000’s, unaudited)	Balance		% of Total		Balance		% of Total		Balance		% of Total
CRE loans	$	1,094	40	%	$	2,233	58	%	$	2,923	47	%
Restructured and loans over 90 days past due and still accruing		981	36	%		527	14	%		889	14	%
Commercial loans		640	24	%		997	26	%		1,793	29	%
Home equity loans		—	—	%		73	2	%		407	7	%
Consumer and other loans		—	—	%		—	—	%		168	3	%
Total nonperforming assets	$	2,715	100	%	$	3,830	100	%	$	6,180	100	%

● NPAs totaled $2.7 million, or 0.05% of total assets, at June 30, 2022, compared to $6.2 million, or 0.12% of total assets, at June 30, 2021, $3.8 million, or 0.07% of total assets, at March 31, 2022.

● There were no foreclosed assets on the balance sheet at June 30, 2022, June 30, 2021, or March 31, 2022.

● Classified assets decreased to $28.9 million, or 0.54% of total assets, at June 30, 2022, compared to $32.4 million, or 0.64% of total assets, at June 30, 2021, and $30.6 million, or 0.56% of total assets, at March 31, 2022.

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

DEPOSITS	June 30, 2022				March 31, 2022				June 30, 2021
(in $000’s, unaudited)	Balance		% to Total		Balance		% to Total		Balance		% to Total
Demand, noninterest-bearing	$	1,846,365	40	%	$	1,811,943	38	%	$	1,840,516	42	%
Demand, interest-bearing		1,218,538	26	%		1,268,942	27	%		1,140,867	26	%
Savings and money market		1,387,003	30	%		1,447,434	31	%		1,174,587	27	%
Time deposits — under $250		36,691	1	%		38,417	1	%		42,118	1	%
Time deposits — $250 and over		98,760	2	%		93,161	2	%		110,111	3	%
CDARS — interest-bearing demand,
money market and time deposits		26,287	1	%		30,008	1	%		36,273	1	%
Total deposits	$	4,613,644	100	%	$	4,689,905	100	%	$	4,344,472	100	%

● Total deposits increased $269.2 million, or 6%, to $4.614 billion at June 30, 2022, compared to $4.344 billion at June 30, 2021, and decreased ($76.3) million, or (2%), from $4.690 billion at March 31, 2022. The decrease in total deposits at June 30, 2022, compared to March 31, 2022, was primarily due to a decline in temporary deposits from two customers. The deposits from those two customers decreased ($61.2) million to $149.3 million at June 30, 2022, compared to $210.5 million at March 31, 2022.

7

● Deposits, excluding all time deposits and CDARS deposits, increased $295.9 million, or 7%, to $4.452 billion at June 30, 2022, compared to $4.156 billion at June 30, 2021, and decreased ($76.4) million, or (2%), compared to $4.528 billion at March 31, 2022.

♦ During the second quarter of 2022, the Company completed a private placement offering of $40.0 million aggregate principal amount of its 5.00% fixed-to-floating rate subordinated notes due May 15, 2032 (“Sub Debt due 2032”). The Company used the net proceeds of the Sub Debt due 2032 for general corporate purposes, including the repayment on June 1, 2022 of the Company’s $40.0 million aggregate principal amount of 5.25% fixed-to-floating rate subordinated notes due June 1, 2027. The Sub Debt due 2032, net of unamortized issuance costs of $726,000, totaled $39,274,000 at June 30, 2022, and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Bank.

♦ The Company’s consolidated capital ratios exceeded regulatory guidelines and the Bank’s capital ratios exceeded 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 June 30, 2022, 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 Capital	14.6	%	14.1	%	10.0	%	10.5	%
Tier 1 Capital	12.5	%	13.0	%	8.0	%	8.5	%
Common Equity Tier 1 Capital	12.5	%	13.0	%	6.5	%	7.0	%
Tier 1 Leverage	8.7	%	9.0	%	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	June 30,		March 31,		June 30,
(in $000’s, unaudited)	2022		2022		2021
Unrealized (loss) gain on securities available-for-sale	$	(3,037)	$	(1,127)	$	2,674
Remaining unamortized unrealized gain on securities
available-for-sale transferred to held-to-maturity		—		—		243
Split dollar insurance contracts liability		(5,501)		(5,491)		(6,142)
Supplemental executive retirement plan liability		(7,507)		(7,588)		(8,506)
Unrealized gain on interest-only strip from SBA loans		127		152		199
Total accumulated other comprehensive loss	$	(15,918)	$	(14,054)	$	(11,532)

♦ Tangible equity was $427.2 million at June 30, 2022, compared to $400.6 million at June 30, 2021, and $420.4 million at March 31, 2022. Tangible book value per share was $7.04 at June 30, 2022, compared to $6.65 at June 30, 2021, and $6.96 at March 31, 2022.

Heritage Commerce Corp, a bank holding company established in October 1997, 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, Oakland, 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 San Jose, 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

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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, 2021, and the following: (1) geopolitical and domestic political developments

8

that can increase levels of political and economic unpredictability, contribute to rising energy prices and commodity prices, and increase the volatility of financial markets; (2) conditions related to the COVID-19 pandemic, and other infectious illness outbreaks that may arise in the future, on our customers, employees, businesses, liquidity, and financial results and overall condition including severity and duration of the associated uncertainties in U.S. and global markets; (3) 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; (4) 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; (5) inflationary pressures and changes in the interest rate environment that reduce our margin and yields, the fair value of financial instruments or our level of loan originations, or increase in the level of defaults, losses and prepayments on loans we have made and make; (6) changes in the level of nonperforming assets and charge-offs and other credit quality measures, and their impact on the adequacy of our allowance for credit losses and our provision for credit losses; (7) volatility in credit and equity markets and its effect on the global economy; (8) 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; (9) our ability to achieve loan growth and attract deposits in our market area; (10) risks associated with concentrations in real estate related loans; (11) the relative strength or weakness of the commercial and real estate markets where our borrowers are located, including related asset and market prices; (12) credit related impairment charges to our securities portfolio; (13) 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; (14) regulatory limits on Heritage Bank of Commerce’s ability to pay dividends to the Company; (15) changes in our capital management policies, including those regarding business combinations, dividends, and share repurchases; (16) operational issues stemming from, and/or capital spending necessitated by, the potential need to adapt to industry changes in information technology systems, on which we are highly dependent; (17) our inability to attract, recruit, and retain qualified officers and other personnel could harm our ability to implement our strategic plan, impair our relationships with customers and adversely affect our business, results of operations and growth prospects; (18) possible adjustment of the valuation of our deferred tax assets; (19) our ability to keep pace with technological changes, including our ability to identify and address cyber-security risks such as data security breaches, “denial of service” attacks, “hacking” and identity theft; (20) inability of our framework to manage risks associated with our business, including operational risk and credit risk; (21) risks of loss of funding of SBA or SBA loan programs, or changes in those programs; (22) compliance with applicable laws and governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities, accounting and tax matters; (23) effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; (24) the expense and uncertain resolution of litigation matters whether occurring in the ordinary course of business or otherwise; (25) availability of and competition for acquisition opportunities; (26) risks resulting from domestic terrorism; (27) risks resulting from social unrest and protests; (28) risks of natural disasters (including earthquakes and flooding) and other events beyond our control; (29) our participation as a lender in the SBA PPP and similar programs and its effect on our liquidity, financial results, businesses and customers, including the ability of customers to comply with requirements and otherwise perform with respect to loans obtained under such programs; (30) our success in managing the risks involved in the foregoing factors.

Member FDIC

For additional information, contact:

Debbie Reuter

EVP, Corporate Secretary

Direct: (408) 494-4542

Debbie.Reuter@herbank.com

9

	For the Quarter Ended:									Percent Change From:				For the Six Months Ended:
CONSOLIDATED INCOME STATEMENTS	June 30,			March 31,			June 30,			March 31,		June 30,		June 30,			June 30,			Percent
(in $000’s, unaudited)	2022			2022			2021			2022		2021		2022			2021			Change
Interest income	$	43,556		$	39,906		$	36,632		9	%	19	%	$	83,462		$	73,393		14	%
Interest expense		1,677			1,685			1,756		0	%	(4)	%		3,362			3,559		(6)	%
Net interest income before provision
for credit losses on loans		41,879			38,221			34,876		10	%	20	%		80,100			69,834		15	%
Provision for (recapture of) credit losses on loans		(181)			(567)			(493)		68	%	63	%		(748)			(2,005)		63	%
Net interest income after provision
for credit losses on loans		42,060			38,788			35,369		8	%	19	%		80,848			71,839		13	%
Noninterest income:
Service charges and fees on deposit accounts		867			612			659		42	%	32	%		1,479			1,260		17	%
Increase in cash surrender value of
life insurance		480			480			458		0	%	5	%		960			914		5	%
Servicing income		139			106			104		31	%	34	%		245			286		(14)	%
Termination fees		45			—			57		N/A		(21)	%		45			147		(69)	%
Gain on sales of SBA loans		27			156			83		(83)	%	(67)	%		183			633		(71)	%
Gain on proceeds from company owned
life insurance		27			—			396		N/A		(93)	%		27			462		(94)	%
Gain on warrants		—			637			—		(100)	%	N/A			637			—		N/A
Other		513			469			412		9	%	25	%		982			768		28	%
Total noninterest income		2,098			2,460			2,169		(15)	%	(3)	%		4,558			4,470		2	%
Noninterest expense:
Salaries and employee benefits		13,476			13,821			12,572		(2)	%	7	%		27,297			26,530		3	%
Occupancy and equipment		2,277			2,437			2,247		(7)	%	1	%		4,714			4,521		4	%
Professional fees		1,291			1,080			1,771		20	%	(27)	%		2,371			3,490		(32)	%
Other		6,146			5,914			9,185		4	%	(33)	%		12,060			14,478		(17)	%
Total noninterest expense		23,190			23,252			25,775		0	%	(10)	%		46,442			49,019		(5)	%
Income before income taxes		20,968			17,996			11,763		17	%	78	%		38,964			27,290		43	%
Income tax expense		6,147			5,130			2,950		20	%	108	%		11,277			7,273		55	%
Net income	$	14,821		$	12,866		$	8,813		15	%	68	%	$	27,687		$	20,017		38	%
PER COMMON SHARE DATA
(unaudited)
Basic earnings per share	$	0.24		$	0.21		$	0.15		14	%	60	%	$	0.46		$	0.33		39	%
Diluted earnings per share	$	0.24		$	0.21		$	0.15		14	%	60	%	$	0.45		$	0.33		36	%
Weighted average shares outstanding - basic		60,542,170			60,393,883			60,089,327		0	%	1	%		60,468,027			60,008,071		1	%
Weighted average shares outstanding - diluted		60,969,154			60,921,835			60,730,141		0	%	0	%		60,945,711			60,572,457		1	%
Common shares outstanding at period-end		60,666,794			60,407,846			60,202,766		0	%	1	%		60,666,794			60,202,766		1	%
Dividend per share	$	0.13		$	0.13		$	0.13		0	%	0	%	$	0.26		$	0.26		0	%
Book value per share	$	10.01		$	9.95		$	9.69		1	%	3	%	$	10.01		$	9.69		3	%
Tangible book value per share	$	7.04		$	6.96		$	6.65		1	%	6	%	$	7.04		$	6.65		6	%
KEY FINANCIAL RATIOS
(unaudited)
Annualized return on average equity		9.86	%		8.71	%		6.06	%	13	%	63	%		9.29	%		6.95	%	34	%
Annualized return on average tangible equity		14.06	%		12.47	%		8.84	%	13	%	59	%		13.28	%		10.16	%	31	%
Annualized return on average assets		1.11	%		0.96	%		0.70	%	16	%	59	%		1.04	%		0.82	%	27	%
Annualized return on average tangible assets		1.15	%		0.99	%		0.73	%	16	%	58	%		1.07	%		0.85	%	26	%
Net interest margin (FTE)		3.38	%		3.05	%		3.00	%	11	%	13	%		3.21	%		3.10	%	4	%
Efficiency ratio		52.73	%		57.16	%		69.58	%	(8)	%	(24)	%		54.86	%		65.97	%	(17)	%
AVERAGE BALANCES
(in $000’s, unaudited)
Average assets	$	5,334,636		$	5,443,240		$	5,047,097		(2)	%	6	%	$	5,388,638		$	4,911,242		10	%
Average tangible assets	$	5,154,245		$	5,262,175		$	4,863,814		(2)	%	6	%	$	5,207,912		$	4,727,594		10	%
Average earning assets	$	4,985,611		$	5,093,851		$	4,678,084		(2)	%	7	%	$	5,039,432		$	4,549,736		11	%
Average loans held-for-sale	$	1,824		$	1,478		$	4,053		23	%	(55)	%	$	1,652		$	3,757		(56)	%
Average total loans	$	3,048,353		$	3,027,111		$	2,790,368		1	%	9	%	$	3,037,791		$	2,704,101		12	%
Average deposits	$	4,579,436		$	4,697,136		$	4,307,555		(3)	%	6	%	$	4,637,960		$	4,178,968		11	%
Average demand deposits - noninterest-bearing	$	1,836,350		$	1,857,164		$	1,808,638		(1)	%	2	%	$	1,846,699		$	1,761,035		5	%
Average interest-bearing deposits	$	2,743,086		$	2,839,972		$	2,498,917		(3)	%	10	%	$	2,791,261		$	2,417,933		15	%
Average interest-bearing liabilities	$	2,791,527		$	2,879,952		$	2,538,747		(3)	%	10	%	$	2,835,495		$	2,457,749		15	%
Average equity	$	603,182		$	599,355		$	583,009		1	%	3	%	$	601,279		$	581,094		3	%
Average tangible equity	$	422,791		$	418,290		$	399,726		1	%	6	%	$	420,553		$	397,446		6	%

10

	For the Quarter Ended:
CONSOLIDATED INCOME STATEMENTS	June 30,			March 31,			December 31,			September 30,			June 30,
(in $000’s, unaudited)	2022			2022			2021			2021			2021
Interest income	$	43,556		$	39,906		$	39,956		$	39,907		$	36,632
Interest expense		1,677			1,685			1,847			1,725			1,756
Net interest income before provision
for credit losses on loans		41,879			38,221			38,109			38,182			34,876
Provision for (recapture of) credit losses on loans		(181)			(567)			(615)			(514)			(493)
Net interest income after provision
for credit losses on loans		42,060			38,788			38,724			38,696			35,369
Noninterest income:
Service charges and fees on deposit accounts		867			612			644			584			659
Increase in cash surrender value of
life insurance		480			480			454			470			458
Servicing income		139			106			138			129			104
Termination fees		45			—			618			32			57
Gain on sales of SBA loans		27			156			491			594			83
Gain on proceeds from company owned
life insurance		27			—			104			109			396
Gain on warrants		—			637			—			—			—
Other		513			469			361			490			412
Total noninterest income		2,098			2,460			2,810			2,408			2,169
Noninterest expense:
Salaries and employee benefits		13,476			13,821			12,871			12,461			12,572
Occupancy and equipment		2,277			2,437			2,366			2,151			2,247
Professional fees		1,291			1,080			1,200			1,211			1,771
Other		6,146			5,914			5,790			6,008			9,185
Total noninterest expense		23,190			23,252			22,227			21,831			25,775
Income before income taxes		20,968			17,996			19,307			19,273			11,763
Income tax expense		6,147			5,130			5,342			5,555			2,950
Net income	$	14,821		$	12,866		$	13,965		$	13,718		$	8,813
PER COMMON SHARE DATA
(unaudited)
Basic earnings per share	$	0.24		$	0.21		$	0.23		$	0.23		$	0.15
Diluted earnings per share	$	0.24		$	0.21		$	0.23		$	0.23		$	0.15
Weighted average shares outstanding - basic		60,542,170			60,393,883			60,298,424			60,220,717			60,089,327
Weighted average shares outstanding - diluted		60,969,154			60,921,835			60,844,221			60,760,189			60,730,141
Common shares outstanding at period-end		60,666,794			60,407,846			60,339,837			60,266,316			60,202,766
Dividend per share	$	0.13		$	0.13		$	0.13		$	0.13		$	0.13
Book value per share	$	10.01		$	9.95		$	9.91		$	9.79		$	9.69
Tangible book value per share	$	7.04		$	6.96		$	6.91		$	6.77		$	6.65
KEY FINANCIAL RATIOS
(unaudited)
Annualized return on average equity		9.86	%		8.71	%		9.35	%		9.29	%		6.06	%
Annualized return on average tangible equity		14.06	%		12.47	%		13.50	%		13.49	%		8.84	%
Annualized return on average assets		1.11	%		0.96	%		0.97	%		1.06	%		0.70	%
Annualized return on average tangible assets		1.15	%		0.99	%		1.00	%		1.10	%		0.73	%
Net interest margin (FTE)		3.38	%		3.05	%		2.84	%		3.18	%		3.00	%
Efficiency ratio		52.73	%		57.16	%		54.32	%		53.78	%		69.58	%
AVERAGE BALANCES
(in $000’s, unaudited)
Average assets	$	5,334,636		$	5,443,240		$	5,695,136		$	5,139,239		$	5,047,097
Average tangible assets	$	5,154,245		$	5,262,175		$	5,513,359		$	4,956,738		$	4,863,814
Average earning assets	$	4,985,611		$	5,093,851		$	5,336,129		$	4,778,574		$	4,678,084
Average loans held-for-sale	$	1,824		$	1,478		$	4,047		$	4,810		$	4,053
Average total loans	$	3,048,353		$	3,027,111		$	2,872,074		$	2,766,731		$	2,790,368
Average deposits	$	4,579,436		$	4,697,136		$	4,945,204		$	4,396,315		$	4,307,555
Average demand deposits - noninterest-bearing	$	1,836,350		$	1,857,164		$	1,979,940		$	1,835,219		$	1,808,638
Average interest-bearing deposits	$	2,743,086		$	2,839,972		$	2,965,264		$	2,561,096		$	2,498,917
Average interest-bearing liabilities	$	2,791,527		$	2,879,952		$	3,005,212		$	2,601,002		$	2,538,747
Average equity	$	603,182		$	599,355		$	592,291		$	586,012		$	583,009
Average tangible equity	$	422,791		$	418,290		$	410,514		$	403,511		$	399,726

11

	End of Period:						Percent Change From:
CONSOLIDATED BALANCE SHEETS	June 30,		March 31,		June 30,		March 31,		June 30,
(in $000’s, unaudited)	2022		2022		2021		2022		2021
ASSETS
Cash and due from banks	$	35,764	$	29,729	$	41,904	20	%	(15)	%
Other investments and interest-bearing deposits
in other financial institutions		840,821		1,187,436		1,286,418	(29)	%	(35)	%
Securities available-for-sale, at fair value		332,129		111,217		145,955	199	%	128	%
Securities held-to-maturity, at amortized cost		723,716		736,823		421,286	(2)	%	72	%
Loans held-for-sale - SBA, including deferred costs		2,281		831		4,344	174	%	(47)	%
Loans:
Commercial		523,268		568,053		557,686	(8)	%	(6)	%
PPP loans		8,153		37,393		286,461	(78)	%	(97)	%
Real estate:
CRE - owner occupied		597,521		597,542		583,091	0	%	2	%
CRE - non-owner occupied		993,621		928,220		742,135	7	%	34	%
Land and construction		155,389		153,323		129,426	1	%	20	%
Home equity		116,641		111,609		107,873	5	%	8	%
Multifamily		221,938		221,767		198,771	0	%	12	%
Residential mortgages		448,958		391,171		205,904	15	%	118	%
Consumer and other		18,354		17,110		21,519	7	%	(15)	%
Loans		3,083,843		3,026,188		2,832,866	2	%	9	%
Deferred loan fees, net		(1,391)		(2,124)		(8,070)	(35)	%	(83)	%
Total loans, net of deferred costs and fees		3,082,452		3,024,064		2,824,796	2	%	9	%
Allowance for credit losses on loans		(45,490)		(42,788)		(43,956)	6	%	3	%
Loans, net		3,036,962		2,981,276		2,780,840	2	%	9	%
Company-owned life insurance		77,972		78,069		77,393	0	%	1	%
Premises and equipment, net		9,593		9,580		10,040	0	%	(4)	%
Goodwill		167,631		167,631		167,631	0	%	0	%
Other intangible assets		12,351		13,009		15,177	(5)	%	(19)	%
Accrued interest receivable and other assets		117,621		111,797		121,887	5	%	(3)	%
Total assets	$	5,356,841	$	5,427,398	$	5,072,875	(1)	%	6	%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, noninterest-bearing	$	1,846,365	$	1,811,943	$	1,840,516	2	%	0	%
Demand, interest-bearing		1,218,538		1,268,942		1,140,867	(4)	%	7	%
Savings and money market		1,387,003		1,447,434		1,174,587	(4)	%	18	%
Time deposits - under $250		36,691		38,417		42,118	(4)	%	(13)	%
Time deposits - $250 and over		98,760		93,161		110,111	6	%	(10)	%
CDARS - money market and time deposits		26,287		30,008		36,273	(12)	%	(28)	%
Total deposits		4,613,644		4,689,905		4,344,472	(2)	%	6	%
Subordinated debt, net of issuance costs		39,274		39,987		39,832	(2)	%	(1)	%
Accrued interest payable and other liabilities		96,699		96,450		105,127	0	%	(8)	%
Total liabilities		4,749,617		4,826,342		4,489,431	(2)	%	6	%
Shareholders’ Equity:
Common stock		499,832		498,763		495,665	0	%	1	%
Retained earnings		123,310		116,347		99,311	6	%	24	%
Accumulated other comprehensive loss		(15,918)		(14,054)		(11,532)	(13)	%	(38)	%
Total shareholders' equity		607,224		601,056		583,444	1	%	4	%
Total liabilities and shareholders’ equity	$	5,356,841	$	5,427,398	$	5,072,875	(1)	%	6	%

12

	End of Period:
CONSOLIDATED BALANCE SHEETS	June 30,		March 31,		December 31,		September 30,		June 30,
(in $000’s, unaudited)	2022		2022		2021		2021		2021
ASSETS
Cash and due from banks	$	35,764	$	29,729	$	15,703	$	33,013	$	41,904
Other investments and interest-bearing deposits
in other financial institutions		840,821		1,187,436		1,290,513		1,588,334		1,286,418
Securities available-for-sale, at fair value		332,129		111,217		102,252		121,000		145,955
Securities held-to-maturity, at amortized cost		723,716		736,823		658,397		537,285		421,286
Loans held-for-sale - SBA, including deferred costs		2,281		831		2,367		3,678		4,344
Loans:
Commercial		523,268		568,053		594,108		578,944		557,686
PPP loans		8,153		37,393		88,726		164,506		286,461
Real estate:
CRE - owner occupied		597,521		597,542		595,934		580,624		583,091
CRE - non-owner occupied		993,621		928,220		902,326		829,022		742,135
Land and construction		155,389		153,323		147,855		141,277		129,426
Home equity		116,641		111,609		109,579		106,690		107,873
Multifamily		221,938		221,767		218,856		205,952		198,771
Residential mortgages		448,958		391,171		416,660		211,467		205,904
Consumer and other		18,354		17,110		16,744		20,106		21,519
Loans		3,083,843		3,026,188		3,090,788		2,838,588		2,832,866
Deferred loan fees, net		(1,391)		(2,124)		(3,462)		(5,729)		(8,070)
Total loans, net of deferred fees		3,082,452		3,024,064		3,087,326		2,832,859		2,824,796
Allowance for credit losses on loans		(45,490)		(42,788)		(43,290)		(43,680)		(43,956)
Loans, net		3,036,962		2,981,276		3,044,036		2,789,179		2,780,840
Company-owned life insurance		77,972		78,069		77,589		77,509		77,393
Premises and equipment, net		9,593		9,580		9,639		9,821		10,040
Goodwill		167,631		167,631		167,631		167,631		167,631
Other intangible assets		12,351		13,009		13,668		14,423		15,177
Accrued interest receivable and other assets		117,621		111,797		117,614		121,129		121,887
Total assets	$	5,356,841	$	5,427,398	$	5,499,409	$	5,463,002	$	5,072,875
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, noninterest-bearing	$	1,846,365	$	1,811,943	$	1,903,768	$	1,804,965	$	1,840,516
Demand, interest-bearing		1,218,538		1,268,942		1,308,114		1,141,944		1,140,867
Savings and money market		1,387,003		1,447,434		1,375,825		1,600,754		1,174,587
Time deposits - under $250		36,691		38,417		38,734		39,628		42,118
Time deposits - $250 and over		98,760		93,161		94,700		103,046		110,111
CDARS - money market and time deposits		26,287		30,008		38,271		36,044		36,273
Total deposits		4,613,644		4,689,905		4,759,412		4,726,381		4,344,472
Subordinated debt, net of issuance costs		39,274		39,987		39,925		39,878		39,832
Accrued interest payable and other liabilities		96,699		96,450		102,044		106,625		105,127
Total liabilities		4,749,617		4,826,342		4,901,381		4,872,884		4,489,431
Shareholders’ Equity:
Common stock		499,832		498,763		497,695		496,622		495,665
Retained earnings		123,310		116,347		111,329		105,202		99,311
Accumulated other comprehensive loss		(15,918)		(14,054)		(10,996)		(11,706)		(11,532)
Total shareholders' equity		607,224		601,056		598,028		590,118		583,444
Total liabilities and shareholders’ equity	$	5,356,841	$	5,427,398	$	5,499,409	$	5,463,002	$	5,072,875

13

	At or For the Quarter Ended:									Percent Change From:
CREDIT QUALITY DATA	June 30,			March 31,			June 30,			March 31,		June 30,
(in $000’s, unaudited)	2022			2022			2021			2022		2021
Nonaccrual loans - held-for-investment	$	1,734		$	3,303		$	5,291		(48)	%	(67)	%
Restructured and loans over 90 days past due
and still accruing		981			527			889		86	%	10	%
Total nonperforming loans		2,715			3,830			6,180		(29)	%	(56)	%
Foreclosed assets		—			—			—		N/A		N/A
Total nonperforming assets	$	2,715		$	3,830		$	6,180		(29)	%	(56)	%
Other restructured loans still accruing	$	113		$	125		$	93		(10)	%	22	%
Net charge-offs (recoveries) during the quarter	$	(2,883)		$	(65)		$	(153)		(4,335)	%	(1,784)	%
Provision for (recapture of) credit losses on loans during the quarter	$	(181)		$	(567)		$	(493)		68	%	63	%
Allowance for credit losses on loans	$	45,490		$	42,788		$	43,956		6	%	3	%
Classified assets	$	28,929		$	30,579		$	32,402		(5)	%	(11)	%
Allowance for credit losses on loans to total loans		1.48	%		1.41	%		1.56	%	5	%	(5)	%
Allowance for credit losses on loans to total nonperforming loans		1,675.51	%		1,117.18	%		711.26	%	50	%	136	%
Nonperforming assets to total assets		0.05	%		0.07	%		0.12	%	(29)	%	(58)	%
Nonperforming loans to total loans		0.09	%		0.13	%		0.22	%	(31)	%	(59)	%
Classified assets to Heritage Commerce Corp
Tier 1 capital plus allowance for credit losses on loans		6	%		6	%		7	%	0	%	(14)	%
Classified assets to Heritage Bank of Commerce
Tier 1 capital plus allowance for credit losses on loans		6	%		6	%		7	%	0	%	(14)	%
OTHER PERIOD-END STATISTICS
(in $000’s, unaudited)
Heritage Commerce Corp:
Tangible common equity (1)	$	427,242		$	420,416		$	400,636		2	%	7	%
Shareholders’ equity / total assets		11.34	%		11.07	%		11.50	%	2	%	(1)	%
Tangible common equity / tangible assets (2)		8.25	%		8.01	%		8.19	%	3	%	1	%
Loan to deposit ratio		66.81	%		64.48	%		65.02	%	4	%	3	%
Noninterest-bearing deposits / total deposits		40.02	%		38.63	%		42.36	%	4	%	(6)	%
Total capital ratio		14.6	%		14.6	%		15.6	%	0	%	(6)	%
Tier 1 capital ratio		12.5	%		12.4	%		13.3	%	1	%	(6)	%
Common Equity Tier 1 capital ratio		12.5	%		12.4	%		13.3	%	1	%	(6)	%
Tier 1 leverage ratio		8.7	%		8.3	%		8.6	%	5	%	1	%
Heritage Bank of Commerce:
Total capital ratio		14.1	%		13.9	%		15.0	%	1	%	(6)	%
Tier 1 capital ratio		13.0	%		12.9	%		13.9	%	1	%	(6)	%
Common Equity Tier 1 capital ratio		13.0	%		12.9	%		13.9	%	1	%	(6)	%
Tier 1 leverage ratio		9.0	%		8.7	%		9.0	%	3	%	0	%

(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

14

	At or For the Quarter Ended:
CREDIT QUALITY DATA	June 30,			March 31,			December 31,			September 30,			June 30,
(in $000’s, unaudited)	2022			2022			2021			2021			2021
Nonaccrual loans - held-for-investment	$	1,734		$	3,303		$	3,460		$	4,091		$	5,291
Restructured and loans over 90 days past due
and still accruing		981			527			278			642			889
Total nonperforming loans		2,715			3,830			3,738			4,733			6,180
Foreclosed assets		—			—			—			—			—
Total nonperforming assets	$	2,715		$	3,830		$	3,738		$	4,733		$	6,180
Other restructured loans still accruing	$	113		$	125		$	125		$	90		$	93
Net charge-offs (recoveries) during the quarter	$	(2,883)		$	(65)		$	(225)		$	(238)		$	(153)
Provision for (recapture of) credit losses on loans during the quarter	$	(181)		$	(567)		$	(615)		$	(514)		$	(493)
Allowance for credit losses on loans	$	45,490		$	42,788		$	43,290		$	43,680		$	43,956
Classified assets	$	28,929		$	30,579		$	33,719		$	31,937		$	32,402
Allowance for credit losses on loans to total loans		1.48	%		1.41	%		1.40	%		1.54	%		1.56	%
Allowance for credit losses on loans to total nonperforming loans		1,675.51	%		1,117.18	%		1,158.11	%		922.88	%		711.26	%
Nonperforming assets to total assets		0.05	%		0.07	%		0.07	%		0.09	%		0.12	%
Nonperforming loans to total loans		0.09	%		0.13	%		0.12	%		0.17	%		0.22	%
Classified assets to Heritage Commerce Corp
Tier 1 capital plus allowance for credit losses on loans		6	%		6	%		7	%		7	%		7	%
Classified assets to Heritage Bank of Commerce
Tier 1 capital plus allowance for credit losses on loans		6	%		6	%		7	%		7	%		7	%
OTHER PERIOD-END STATISTICS
(in $000’s, unaudited)
Heritage Commerce Corp:
Tangible common equity (1)	$	427,242		$	420,416		$	416,729		$	408,064		$	400,636
Shareholders’ equity / total assets		11.34	%		11.07	%		10.87	%		10.80	%		11.50	%
Tangible common equity / tangible assets (2)		8.25	%		8.01	%		7.84	%		7.73	%		8.19	%
Loan to deposit ratio		66.81	%		64.48	%		64.87	%		59.94	%		65.02	%
Noninterest-bearing deposits / total deposits		40.02	%		38.63	%		40.00	%		38.19	%		42.36	%
Total capital ratio		14.6	%		14.6	%		14.4	%		15.1	%		15.6	%
Tier 1 capital ratio		12.5	%		12.4	%		12.3	%		12.9	%		13.3	%
Common Equity Tier 1 capital ratio		12.5	%		12.4	%		12.3	%		12.9	%		13.3	%
Tier 1 leverage ratio		8.7	%		8.3	%		7.9	%		8.6	%		8.6	%
Heritage Bank of Commerce:
Total capital ratio		14.1	%		13.9	%		13.8	%		14.5	%		15.0	%
Tier 1 capital ratio		13.0	%		12.9	%		12.8	%		13.5	%		13.9	%
Common Equity Tier 1 capital ratio		13.0	%		12.9	%		12.8	%		13.5	%		13.9	%
Tier 1 leverage ratio		9.0	%		8.7	%		8.2	%		9.0	%		9.0	%

(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

15

	For the Quarter Ended						For the Quarter Ended
	June 30, 2022						June 30, 2021
			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)	$	3,050,177		36,538	4.80	%	$	2,794,421	$	33,439	4.80	%
Securities - taxable		912,408		4,407	1.94	%		479,419		1,944	1.63	%
Securities - exempt from Federal tax (3)		40,447		343	3.40	%		62,257		511	3.29	%
Other investments and interest-bearing deposits
in other financial institutions		982,579		2,340	0.96	%		1,341,987		845	0.25	%
Total interest earning assets (3)		4,985,611		43,628	3.51	%		4,678,084		36,739	3.15	%
Cash and due from banks		37,172						42,449
Premises and equipment, net		9,666						10,147
Goodwill and other intangible assets		180,391						183,283
Other assets		121,796						133,134
Total assets	$	5,334,636					$	5,047,097
Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing	$	1,836,350					$	1,808,638
Demand, interest-bearing		1,249,875		468	0.15	%		1,139,090		477	0.17	%
Savings and money market		1,327,665		558	0.17	%		1,179,321		528	0.18	%
Time deposits - under $100		12,643		4	0.13	%		15,335		8	0.21	%
Time deposits - $100 and over		125,258		114	0.37	%		133,935		164	0.49	%
CDARS - money market and time deposits		27,645		2	0.03	%		31,236		2	0.03	%
Total interest-bearing deposits		2,743,086		1,146	0.17	%		2,498,917		1,179	0.19	%
Total deposits		4,579,436		1,146	0.10	%		4,307,555		1,179	0.11	%
Subordinated debt, net of issuance costs		48,425		531	4.40	%		39,802		577	5.81	%
Short-term borrowings		16		—	0.00	%		28		—	0.00	%
Total interest-bearing liabilities		2,791,527		1,677	0.24	%		2,538,747		1,756	0.28	%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds		4,627,877		1,677	0.15	%		4,347,385		1,756	0.16	%
Other liabilities		103,577						116,703
Total liabilities		4,731,454						4,464,088
Shareholders’ equity		603,182						583,009
Total liabilities and shareholders’ equity	$	5,334,636					$	5,047,097
Net interest income (3) / margin				41,951	3.38	%				34,983	3.00	%
Less tax equivalent adjustment (3)				(72)						(107)
Net interest income			$	41,879					$	34,876

(1) Includes loans held-for-sale. Nonaccrual loans are included in average balances.

(2) Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $816,000 for the second quarter of 2022 (of which $493,000 was from PPP loans), compared to $2,192,000 for the second quarter of 2021 (of which $1,876,000 was from PPP loans). Prepayment fees totaled $549,000 for the second quarter of 2022, compared to $504,000 for the second quarter of 2021.

(3) Reflects the FTE adjustment for Federal tax-exempt income based on a 21% tax rate.

16

	For the Quarter Ended						For the Quarter Ended
	June 30, 2022						March 31, 2022
			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)	$	3,050,177	$	36,538	4.80	%	$	3,028,589	$	35,101	4.70	%
Securities - taxable		912,408		4,407	1.94	%		781,689		3,444	1.79	%
Securities - exempt from Federal tax (3)		40,447		343	3.40	%		44,871		376	3.40	%
Other investments and interest-bearing deposits
in other financial institutions		982,579		2,340	0.96	%		1,238,702		1,064	0.35	%
Total interest earning assets (3)		4,985,611		43,628	3.51	%		5,093,851		39,985	3.18	%
Cash and due from banks		37,172						37,630
Premises and equipment, net		9,666						9,605
Goodwill and other intangible assets		180,391						181,065
Other assets		121,796						121,089
Total assets	$	5,334,636					$	5,443,240
Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing	$	1,836,350					$	1,857,164
Demand, interest-bearing		1,249,875		468	0.15	%		1,279,989		459	0.15	%
Savings and money market		1,327,665		558	0.17	%		1,394,734		543	0.16	%
Time deposits - under $100		12,643		4	0.13	%		13,235		5	0.15	%
Time deposits - $100 and over		125,258		114	0.37	%		119,082		106	0.36	%
CDARS - money market and time deposits		27,645		2	0.03	%		32,932		1	0.01	%
Total interest-bearing deposits		2,743,086		1,146	0.17	%		2,839,972		1,114	0.16	%
Total deposits		4,579,436		1,146	0.10	%		4,697,136		1,114	0.10	%
Subordinated debt, net of issuance costs		48,425		531	4.40	%		39,951		571	5.80	%
Short-term borrowings		16		—	0.00	%		29		—	0.00	%
Total interest-bearing liabilities		2,791,527		1,677	0.24	%		2,879,952		1,685	0.24	%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds		4,627,877		1,677	0.15	%		4,737,116		1,685	0.14	%
Other liabilities		103,577						106,769
Total liabilities		4,731,454						4,843,885
Shareholders’ equity		603,182						599,355
Total liabilities and shareholders’ equity	$	5,334,636					$	5,443,240
Net interest income (3) / margin				41,951	3.38	%				38,300	3.05	%
Less tax equivalent adjustment (3)				(72)						(79)
Net interest income			$	41,879					$	38,221

(1) Includes loans held-for-sale. Nonaccrual loans are included in average balances.

(2) Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $816,000 for the second quarter of 2022 (of which $493,000 was from PPP loans), compared to $1,788,000 for the first quarter of 2022 (of which $1,346,000 was from PPP loans). Prepayment fees totaled $549,000 for the second quarter of 2022, compared to $510,000 for the first quarter of 2021.

(3) Reflects the FTE adjustment for Federal tax-exempt income based on a 21% tax rate.

17

	For the Six Months Ended						For the Six Months Ended
	June 30, 2022						June 30, 2021
			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)	$	3,039,443		71,639	4.75	%	$	2,707,858	$	67,275	5.01	%
Securities - taxable		847,409		7,851	1.87	%		458,256		3,672	1.62	%
Securities - exempt from Federal tax (3)		42,647		719	3.40	%		64,373		1,053	3.30	%
Other investments, interest-bearing deposits in other
financial institutions and Federal funds sold		1,109,933		3,404	0.62	%		1,319,249		1,613	0.25	%
Total interest earning assets (3)		5,039,432		83,613	3.35	%		4,549,736		73,613	3.26	%
Cash and due from banks		37,400						41,640
Premises and equipment, net		9,636						10,257
Goodwill and other intangible assets		180,726						183,648
Other assets		121,444						125,961
Total assets	$	5,388,638					$	4,911,242
Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing	$	1,846,699					$	1,761,035
Demand, interest-bearing		1,264,849		927	0.15	%		1,082,962		956	0.18	%
Savings and money market		1,361,014		1,101	0.16	%		1,158,693		1,100	0.19	%
Time deposits - under $100		12,937		9	0.14	%		15,616		17	0.22	%
Time deposits - $100 and over		122,187		220	0.36	%		132,397		335	0.51	%
CDARS - money market and time deposits		30,274		3	0.02	%		28,265		3	0.02	%
Total interest-bearing deposits		2,791,261		2,260	0.16	%		2,417,933		2,411	0.20	%
Total deposits		4,637,960		2,260	0.10	%		4,178,968		2,411	0.12	%
Subordinated debt, net of issuance costs		44,211		1,102	5.03	%		39,780		1,148	5.82	%
Short-term borrowings		23		—	0.00	%		36		—	0.00	%
Total interest-bearing liabilities		2,835,495		3,362	0.24	%		2,457,749		3,559	0.29	%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds		4,682,194		3,362	0.14	%		4,218,784		3,559	0.17	%
Other liabilities		105,165						111,364
Total liabilities		4,787,359						4,330,148
Shareholders’ equity		601,279						581,094
Total liabilities and shareholders’ equity	$	5,388,638					$	4,911,242
Net interest income (3) / margin				80,251	3.21	%				70,054	3.10	%
Less tax equivalent adjustment (3)				(151)						(220)
Net interest income			$	80,100					$	69,834

(1) Includes loans held-for-sale. Nonaccrual loans are included in average balances.

(2) Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $2,604,000 for the first six months of 2022 (of which $1,839,000 was from PPP loans), compared to $5,881,000 for the first six months of 2021 (of which $5,277,000 was from PPP loans). Prepayment fees totaled $1,059,000 for the first six months of 2022, compared to $1,021,000 for the first six months of 2021.

(3) Reflects the FTE adjustment for Federal tax-exempt income based on a 21% tax rate.

18

EX-99.2

Exhibit 99.2

Robertson “Clay” Jones Named President and Chief Executive Officer

of Heritage Commerce Corp

San Jose, California — July 28, 2022 — Heritage Commerce Corp (Nasdaq: HTBK), the holding company (the “Company’) for Heritage Bank of Commerce (the “Bank” or “HBC”), today announced that Walter T. Kaczmarek will be stepping down as President and Chief Executive Officer of the Company, effective September 15, 2022. At that time, Robertson “Clay” Jones, currently President and Chief Operating Officer of the Bank, will succeed him and become the President and Chief Executive Officer of the Company and the Bank. He will also join Boards of Directors of the Company and the Bank. Mr. Kaczmarek will remain on the Boards of both the Company and the Bank.

“On behalf of the Board of Directors, I would like to thank Walt for his unwavering commitment to the success of both the Company and the Bank,” said Jack Conner, Chairman of the Board of the Company and the Bank. “We very much appreciate his willingness to return as Chief Executive Officer in March 2021, as we developed a transition plan that would lead the Company into the future.”

Mr. Conner continued, “With more than three decades of proven experience growing community and commercial banking organizations, Clay Jones is the right person to take on that role. The Company and Bank Boards are confident he is well suited to lead the Bank forward building our franchise with strong operating and financial performance as we continue to create value for our shareholders.”

Mr. Jones joined the Bank in 2019 as Executive Vice President, President of Community Business Banking. He was named President and Chief Operating Officer in 2021 and has been a key contributor to the Bank’s growth and success. Before joining the Bank, Mr. Jones served for nearly a decade at Presidio Bank, assuming the role of President in 2018. Prior to joining Presidio Bank, he served in ever increasing corporate capacities at a number of community and commercial banks including New Resource Bank and subsidiaries of Greater Bay Bancorp and Comerica Bank.

A longstanding and committed community supporter, Mr. Jones has served in a variety of advisory and board roles across the Bay Area. Most recently, he served as an Executive Board Member of JobTrain, an educational and training institution serving low-income individuals and their families.

“As I prepare to take on the role of Chief Executive Officer, I am grateful for both the Board’s support and Walt’s mentorship over the last few years,” said Mr. Jones. “Together we have built a great team of talented bankers and I look forward to working with them to deliver continued success for our clients, our shareholders and our community.”

Heritage Commerce Corp, a bank holding company established in October 1997, 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, Oakland, 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 San Jose, CA and provides business-essential working capital factoring financing to various industries throughout the United States. For more information, please visit www.heritagecommercecorp.com.

Member FDIC

For additional information, contact:

Debbie Reuter

EVP, Corporate Secretary

Direct: (408) 494-4542

Debbie.Reuter@herbank.com

1

EX-99.3

Exhibit 99.3

Heritage Commerce Corp Declares Regular Quarterly Cash Dividend of $0.13 Per Share

San Jose, California — July 28, 2022 — Heritage Commerce Corp (Nasdaq: HTBK), the holding company for Heritage Bank of Commerce, today announced that its Board of Directors declared its regular quarterly cash dividend of $0.13 per share to holders of common stock. The dividend will be payable on August 25, 2022, to shareholders of record at the close of the business day on August 11, 2022.

“With the strength of our earnings and solid capital position, we remain committed to providing returns to our loyal shareholders,” said Walter Kaczmarek, President and Chief Executive Officer.

Heritage Commerce Corp, a bank holding company established in October 1997, 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, Oakland, 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 San Jose, CA and provides business-essential working capital factoring financing to various industries throughout the United States. For more information, please visit www.heritagecommercecorp.com.

Member FDIC

For additional information, contact:

Debbie Reuter

EVP, Corporate Secretary

Direct: (408) 494-4542

Debbie.Reuter@herbank.com

XML

Document and Entity Information	Jul. 28, 2022
Cover [Abstract]
Document Type	8-K
Document Period End Date	Jul. 28, 2022
Entity Registrant Name	HERITAGE COMMERCE CORP
Entity Central Index Key	0001053352
Entity File Number	000-23877
Entity Tax Identification Number	77-0469558
Entity Incorporation, State or Country Code	CA
Entity Address, Address Line One	224 Airport Parkway
Entity Address, City or Town	San Jose
Entity Address, Postal Zip Code	95110
Entity Address, State or Province	CA
City Area Code	408
Local Phone Number	947-6900
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, No Par Value
Trading Symbol	HTBK
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Amendment Flag	false