Executive Summary

Q4 2024 delivered stable EPS of $0.17, flat QoQ and down vs $0.22 in Q4 2023, with net interest margin expanding 17 bps QoQ to 3.34% as deposit costs declined following Fed rate cuts .
Net interest income rose 11% QoQ to $44.2M and 4% YoY, while noninterest expense increased on one-time personnel/legal items; non-GAAP efficiency ratio held ~65% QoQ but remained above prior-year levels .
Balance sheet growth was strong: deposits +2% QoQ/+10% YoY to $4.82B and loans +2% QoQ/+4% YoY to $3.49B; liquidity was robust at $3.34B (69% of deposits) and capital ratios remained well above “well-capitalized” levels .
Credit quality stayed solid with NPAs at $7.7M (0.14% of assets) and ACLL/loans at 1.40%; office CRE exposure is diversified with low LTVs and healthy DSCRs .
Dividend of $0.13/share was maintained (payable Feb 20, 2025); no Q4 earnings call transcript was available at time of review, limiting Q&A insights .

What Went Well and What Went Wrong

What Went Well
- Net interest margin expanded to 3.34% from 3.17% QoQ as deposit costs fell post-rate cuts; CEO highlighted “expansion of our net interest margin” as a Q4 highlight .
- Strong deposit (+2% QoQ, +10% YoY) and loan growth (+2% QoQ, +4% YoY), with management attributing momentum to cultivating local commercial relationships and healthy pipelines .
- Credit metrics remained favorable: NPAs at 0.14% of assets and no CRE loans in NPAs; ACLL/loans steady at 1.40% .
What Went Wrong
- Noninterest expense rose to $30.3M on one-time personnel/legal fees and IT/vendor costs, keeping the efficiency ratio elevated vs prior year .
- YoY margin compression (NIM 3.34% vs 3.41%) from higher deposit costs and lower yields on overnight funds and securities, despite loan/overnight balance growth .
- Annual results reflected lower net interest income (-11% YoY) and higher average deposit/funds costs for 2024 vs 2023, pressuring profitability metrics .

Financial Results

Metric	Q4 2023	Q3 2024	Q4 2024
Net Interest Income ($M)	$42.3	$39.9	$44.2
Total Revenue ($M) (NII + Noninterest Income)	$44.24	$42.16	$46.37
Diluted EPS ($)	$0.22	$0.17	$0.17
Net Interest Margin (FTE, %)	3.41%	3.17%	3.34%
Provision for Credit Losses ($M)	$0.289	$0.153	$1.331
Noninterest Income ($M)	$1.94	$2.28	$2.19
Noninterest Expense ($M)	$25.49	$27.56	$30.30
Efficiency Ratio (non-GAAP, %)	57.62%	65.37%	65.35%
Net Income ($M)	$13.33	$10.51	$10.62

Balance sheet and KPIs

Metric	Q4 2023	Q3 2024	Q4 2024
Deposits ($B)	$4.38	$4.73	$4.82
Loans ($B)	$3.35	$3.41	$3.49
Loan-to-Deposit Ratio (%)	76.52%	72.11%	72.45%
Average Cost of Deposits (%)	1.43%	1.84%	1.66%
Average Cost of Funds (%)	1.46%	1.88%	1.69%
Available Liquidity ($B)	$2.9	$3.2	$3.34
NPAs ($M)	$7.71	$7.16	$7.67
NPAs / Assets (%)	0.15%	0.13%	0.14%
ACLL / Loans (%)	1.43%	1.40%	1.40%
CET1 Ratio (Company, %)	13.4%	13.4%	13.4%
Tangible Book Value/Share ($)	$8.12	$8.33	$8.41

Deposit mix detail (period-end)

Category ($M)	Q4 2023	Q3 2024	Q4 2024
Noninterest-bearing demand	$1,292	$1,272	$1,214
Interest-bearing demand	$914	$914	$937
Savings & Money Market	$1,088	$1,310	$1,326
Time < $250K	$38	$39	$39
Time ≥ $250K	$192	$197	$207
ICS/CDARS	$854	$998	$1,098
Total Deposits	$4,378	$4,730	$4,820

CRE office exposure (Q4 2024)

Metric	Value
Total office exposure (ex-medical/dental)	$413M
Non-owner occupied office exposure	$322M
Non-owner occupied office LTV / DSCR	41.5% / 2.16x
Medical/dental office exposure	$12.3M; LTV 37.1%; DSCR 3.05x

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Quarterly Dividend	Q1 2025 payable	$0.13/share (ongoing)	$0.13/share payable Feb 20, 2025	Maintained
Share Repurchase Program	Ongoing (authorized)	Up to $15M authorized (July 2024)	No repurchases in Q3 or Q4 2024	Maintained (no activity)
NIM Sensitivity (Illustrative)	As of 12/31/24	N/A	+100 bps shock: +$6.59M NII; -100 bps: -$8.37M NII (annualized)	Informational sensitivity, not formal guidance

Note: No formal quantitative revenue/EPS margin guidance was provided in the Q4 materials; management commentary emphasized deposit cost reductions and NIM expansion .

Earnings Call Themes & Trends

No Q4 2024 earnings call transcript was available in the catalog. Themes are inferred from company press releases.

Topic	Q-2 (Q2 2024)	Q-1 (Q3 2024)	Current (Q4 2024)	Trend
Deposit growth/mix	Deposits flat QoQ; shift to ICS/CDARS; avg cost of deposits up to 1.75%	Deposits +6% QoQ; noninterest-bearing +7%; cost of deposits 1.84%	Deposits +2% QoQ; avg cost of deposits down to 1.66%	Improving cost, continued growth
Net interest margin	3.26% (down QoQ)	3.17% (down QoQ)	3.34% (up QoQ)	Rebound on lower deposit costs
Credit quality	NPAs 0.11% of assets; no CRE NPAs	NPAs 0.13% of assets; no CRE NPAs	NPAs 0.14% of assets; no CRE NPAs	Stable/low NPAs
CRE office exposure	$403M; LTV 41.8%, DSCR 1.78x	$419M; LTV 41.8%, DSCR 1.82x	$413M; LTV 41.5%, DSCR 2.16x	Slight improvement in DSCR
Liquidity	~$3.0B available	~$3.25B available	~$3.34B available	Rising buffers
Management changes	N/A	COO appointment (Oct 2, 2024)	CFO succession announced Nov 13, 2024 (interim CFO from Nov 18)	Leadership transition underway

Management Commentary

“Our earnings for both the fourth quarter of 2024 and the full year were fueled by excellent deposit growth and solid loan growth throughout our footprint.” — Clay Jones, President & CEO .
“Another highlight of the fourth quarter was the expansion of our net interest margin to 3.34%… largely due to the reduction in our cost of funds following the recent rate reductions.” — Clay Jones .
“Our positive credit trends continued… nonperforming assets and net charge-offs remaining low… we continued to add to our loan reserves reflecting our solid loan growth while credit costs remained modest.” — Clay Jones .
“We continue to provide our shareholders a consistent cash dividend, while executing on our strategic plan.” — Clay Jones (Dividend PR) .
On CFO succession: “We are grateful to Larry for his 26 years of dedicated service… We are confident that Tom is well suited to serve as Interim CFO…” — Clay Jones .

Q&A Highlights

No Q4 2024 earnings call transcript was available in the document catalog; thus, specific Q&A themes, guidance clarifications, or tone changes cannot be assessed at this time.

Estimates Context

S&P Global consensus estimates were unavailable at time of query due to provider rate limits. We will update when accessible.

Metric	Period	Consensus	Actual	Surprise
EPS (Primary)	Q4 2024	N/A (S&P Global unavailable)	$0.17	N/A
Revenue (Total)	Q4 2024	N/A (S&P Global unavailable)	$46.37M	N/A

Key Takeaways for Investors

NIM inflected positively (3.34%) on lower deposit costs; if rates continue to ease, margin tailwinds could persist into 2025 .
Deposit and loan growth remain healthy, supporting earning asset growth; watch deposit mix as noninterest-bearing share drifted lower YoY .
Operating expenses elevated by one-time items; monitor run-rate normalization to support efficiency ratio improvement .
Credit metrics solid with low NPAs and robust ACLL coverage; CRE office exposure diversified with conservative LTVs/strong DSCRs reducing downside risk .
Liquidity and capital are strong (CET1 13.4%); dividend continuity ($0.13) and authorized buyback provide optionality, though no repurchases were made in 2H 2024 .
Securities portfolio unrealized/recognized losses remain manageable (<1% AFS impact; HTM ~9.5% of equity), with projected paydowns/maturities aiding flexibility in 2025 .
Leadership transition (interim CFO) underway; continuity emphasized by management, but investors should track execution on deposit pricing, expense discipline, and margin trajectory .

Sources: Q4 2024 8-K and Exhibits ; Q4 press releases -; Q3 2024 8-K -; Q2 2024 press release -; Dividend PR .

HERITAGE COMMERCE CORP (HTBK)·Q4 2024 Earnings Summary