Heritage Commerce Corp Q1 2024 Financial Results

Heritage Commerce Corp released its financial results for the first quarter of 2024, showcasing a mix of successes and challenges. Net income for the quarter was $10.2 million, a slight decrease from the $64.4 million reported for the full fiscal year 2023. The net interest margin improved by 13 basis points to 3.70% for the year ended December 31, 2023, compared to 3.57% for the year ended December 31, 2022.

Total assets were reported at $5.2 billion at year-end 2023 and increased to $5.3 billion by March 31, 2024. Total client deposits experienced growth, increasing over $66 million at March 31, 2024 from the prior quarter, while the loan portfolio also exhibited growth, increasing over $74 million or 2% year-over-year.

In terms of credit quality, nonperforming loans were reported at $7.7 million, or 0.23% of total loans, with the allowance for credit losses on loans to total loans at 1.43% at year-end 2023. At the end of the first quarter of 2024, the allowance for credit losses on loans was reported at $47.9 million, representing 1.44% of total loans.

The company's deposit base was reported as stable, with total deposits remaining at $4.4 billion at both March 31, 2024, and March 31, 2023. However, there was a notable migration of client deposits to insured accounts, resulting in an increase in insured cash sweep (ICS)/Certificate of Deposits Account Registry Service (CDARS) deposits to $914 million at March 31, 2024, compared to $304 million at March 31, 2023.

Heritage Commerce Corp's investment securities totaled $1.0 billion at quarter-end, with an unrealized loss of $9.7 million on the available-for-sale portfolio and an unrecognized loss of $65.8 million on the held-to-maturity portfolio, both attributed to higher interest rates since security acquisition.

Additionally, the company's loan growth performance showed positive organic and acquisition-driven compound annual growth rates. Excluding residential mortgage principal paydowns, loans increased by $112.8 million, or 4% from a year ago. Commercial and industrial line utilization was reported at 28%, compared to 31% a year ago.

The market has reacted to these announcements by moving the company's shares 0.0% to a price of $8.15. For more information, read the company's full 8-K submission here.

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