Deborah K. Reuter
About Deborah K. Reuter
Executive Vice President, Chief Risk Officer and Corporate Secretary of Heritage Commerce Corp and Heritage Bank of Commerce; age 71. She has served as CRO since April 2014, Corporate Secretary since January 2010, and joined the bank at inception in June 1994; prior roles include VP/Loan Support Services Manager and earlier service at Cupertino National Bank and other SF Bay Area community banks. Credentials: Graduate of the ABA National Compliance School; Certified Regulatory Compliance Manager . Company performance context for FY2024: net income decreased 37% to $40.5M; net interest income decreased 11% to $163.6M; total deposits grew 10%; total loans grew 4%; efficiency ratio 65.88%; nonperforming assets $7.7M (0.22% of loans) with reserves at 638% of NPAs; cumulative TSR value of initial $100 investment at $95.61 vs $132.60 for the KBW Nasdaq Bank Index as of 12/31/24 .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Heritage Commerce Corp / Heritage Bank of Commerce | EVP, Chief Risk Officer; Corporate Secretary | CRO since Apr-2014; Corporate Secretary since Jan-2010 | Oversees enterprise risk; corporate governance functions |
| Heritage Bank of Commerce | VP / Loan Support Services Manager | From Jun-1994 | Built loan support infrastructure at bank inception |
| Cupertino National Bank; other SF Bay Area community banks | Various roles | Not disclosed | Community banking operating experience |
External Roles
- No external directorships or outside roles disclosed for Ms. Reuter in the 2025 proxy’s executive officer biographies .
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Base Salary ($) | 331,007 | 345,045 | 358,063 |
| Stock Awards ($ grant-date FV) | 143,566 | 156,773 | 218,622 |
| Non-Equity Incentive (Annual Cash Bonus) ($) | 143,988 | 115,098 | 125,000 |
| All Other Compensation ($) | 28,140 | 36,559 | 34,107 |
| Total Compensation ($) | 646,701 | 700,275 | 735,792 |
All other compensation breakdown (2024):
- Economic value of death benefit from split-dollar life insurance: $5,211; 401(k) match: $3,000; Other insurance benefit: $13,597; Auto: $8,400; Cash dividends on unvested restricted stock: $3,899; Total: $34,107 .
- 2024 base salary per employment agreement set at $361,286 (effective Apr-1-2023 agreement; annual CEO/Committee review) . The Summary Compensation Table shows salary paid in 2024 of $358,063, reflecting timing/proration .
Performance Compensation
Annual Cash Incentive (Executive Officer Cash Incentive Program)
| Item | 2024 Detail |
|---|---|
| Target bonus opportunity (as % of base) | Threshold 22.5%; Target 45%; Max 67.5% |
| Company scorecard weighting | 75% quantitative; 25% qualitative differentiated goals |
| Gate | Must maintain year-end total risk-based capital ratio ≥10.5% for any payout |
| 2024 metrics and calibration | Pre-tax income (20%): Threshold $54.93M; Target $70.63M; Max $86.32M. Nonperforming assets (20%): Threshold $17.14M; Target $13.33M; Max $10.91M. Loan growth (17.5%): Threshold $2.061B; Target $2.650B; Max $3.239B. Deposit growth (17.5%): Threshold $3.263B; Target $4.195B; Max $5.128B. Qualitative goals (25%): individualized . |
| Actual bonus paid (2024) | $125,000 to Ms. Reuter (paid Q1 2025) |
Notes:
- Committee may adjust goals/awards for one-time or extraordinary items; focuses on profitability, safety/soundness, workforce development; NPA achieved maximum level in 2024 per program discussion .
Long-Term Incentive Equity Program (LTIEP)
| Component | Structure | Vesting | 2024 Grant(s) to Reuter |
|---|---|---|---|
| PRSUs (50% of LTI value) | Performance-based on relative ROATCE vs peer group over 3 years (2025–2027 cycle applies to 2024 grants) | Cliff vest after 3-year performance period; interpolation between levels; below threshold = 0% | 12,766 PRSUs (3/8/2024); GDFV $108,383 |
| RSUs (50% of LTI value) | Time-based | Ratably over 3 years; accelerates on change of control, death, or disability | 12,766 RSUs (3/8/2024); GDFV $108,383 |
| Other stock awards | Small additional stock grant | As granted | 226 shares (5/2/2024); GDFV $1,855 |
PRSUs vesting schedule calibration:
- ROATCE Percentile Rank: Threshold 35th → 50% vest; Target 50th → 100% vest; Maximum 75th → 150% vest (straight-line interpolation) .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial ownership (2/28/2025) | 89,736 shares; percent of class indicated “*” (less than 1%); no exercisable options listed for Reuter |
| ESOP allocations | ESOP includes 4,078 shares for Reuter within the ESOP’s 83,319 shares allocated in total |
| Outstanding unvested equity (12/31/2024) | Unvested shares/units: 4,338; 21,128; 25,037; total market values $40,690; $198,181; $234,847, respectively; no options outstanding for Reuter |
| Ownership guidelines | CEO 3x salary; other executive officers 1x salary; retain 50% of vested shares until compliant; options and unvested performance awards excluded; all executives in compliance as of 12/31/2024 |
| Hedging/pledging | Prohibited: short selling, derivatives/hedging; pledging/margining of Company shares not allowed |
| Dividend equivalents | RSUs/PRSUs accrue dividend equivalents; paid upon vesting |
Implications:
- Regular 3-year RSU vesting and PRSU cliff at end of performance cycle indicate periodic settlement events that can create modest, calendar-based selling pressure for tax/liquidity, subject to insider trading windows .
Employment Terms
| Provision | Key terms |
|---|---|
| Employment agreement | One-year term, auto-renews annually; entered March 23, 2023, effective April 1, 2023 |
| 2024 salary under agreement | $361,286; increases determined by CEO and Personnel & Compensation Committee |
| Benefits/perquisites | 401(k) plan with Company match up to $3,000; Company-paid group life/health/accident/disability; auto allowance $700/month; Company-paid life insurance = 2x salary (cap $700,000); long-term care insurance up to $72,000 lifetime benefit |
| Cash severance (illustrative scenario values as of 12/31/2024) | Change in control (CIC): $1,012,987 cash; health premiums $65,413; accelerated unvested RSU/PRSU $473,718; total $1,552,118. Involuntary without cause (no CIC): $506,494 cash; health premiums $32,707; total $539,201. Death: life insurance $700,000; split-dollar death benefits $561,431; accelerated unvested RSU/PRSU $473,718; total $1,735,149. Disability: long-term disability $180,000 (annual), long-term care $72,000; accelerated unvested RSU/PRSU $474,718; total $725,718 |
| CIC triggers | Cash severance requires double-trigger (change in control plus involuntary or Good Reason termination); no single-trigger cash severance; equity awards accelerate on single trigger (CIC) |
| Clawback | No-fault recovery of excess incentive compensation paid in prior 3 completed fiscal years if financial restatement is required |
| Insider trading | Robust policy; blackout timing; prohibition on trading on MNPI |
| Deferred savings | 2024 401(k) elective deferral by Reuter: $30,500 (employee deferral; separate from match) |
SERP (Supplemental Executive Retirement Plan):
| Participant | Years credited service | Present value of accumulated benefit ($) |
|---|---|---|
| Deborah K. Reuter | 31 | 1,012,900 |
Notes:
- Only CEO (Mr. Jones) and Ms. Reuter remain active SERP participants after 2011 freeze of new entrants; benefits are unsecured/unfunded; acceleration rules on CIC described in plan; Company finances via life insurance contracts .
Compensation Structure Analysis
- Mix and risk: Pay program balances fixed salary with variable annual cash and LTI; at-risk components include formulaic financial metrics and relative ROATCE for PRSUs, with a capital ratio gate to limit risk-taking; clawback enhances accountability .
- Equity shift: LTI delivered 50% PRSUs and 50% RSUs in 2024 (continued from 2023), signaling increased emphasis on performance-conditioned equity vs. options; company prohibits repricing and has not repriced options historically .
- Shareholder alignment: Stock ownership/retention guidelines and prohibition on hedging/pledging strengthen alignment; all executives in compliance as of year-end 2024 .
- Peer benchmarking and shareholder support: 2024 compensation decisions informed by a regional bank peer set; Say-on-Pay support 97.2% in 2024, following shareholder outreach to refine metrics and disclosure .
Performance & Track Record
| Measure | 2024 Outcome | Context |
|---|---|---|
| Net income | $40.5M, down 37% YoY | Reflects strategic investments, CFO succession, IT/cyber spend, higher reserves, litigation resolution |
| Net interest income | $163.6M, down 11% YoY | Rate environment pressure |
| Deposit growth | +10% YoY | Strategic focus on core funding |
| Loan growth | +4% YoY | Disciplined growth |
| Efficiency ratio | 65.88% | Operating discipline |
| Asset quality | NPAs $7.7M (0.22% of loans); reserves 638% of NPAs | Strong credit metrics |
| TSR (Cumulative, $100 basis) | Company $95.61 vs KBW Bank Index $132.60 at 12/31/24 | Underperformed index over five-year span |
Relevance to CRO role:
- 2024 scorecard emphasized pre-tax income, NPAs, loan and deposit growth; company achieved maximum on NPAs and grew core funding, aligning with risk management priorities under Ms. Reuter’s remit .
Compensation Peer Group (for 2024 decisions)
Banc of California; Bank of Marin Bancorp; BayCom; Central Valley Community Bancorp; Farmers & Merchants Bancorp; First Foundation; Five Star Bancorp; Heritage Financial; HomeStreet; Luther Burbank; PCB Bancorp; Sierra Bancorp; TriCo Bancshares; Westamerica; with market data adjusted for Bay Area wage differentials (+29.5%) and a 4% salary adjustment factor .
Equity Grant and Vesting Detail (Vesting/Selling Pressure View)
| As of 12/31/2024 | Count | Notes |
|---|---|---|
| RSUs granted in 2024 | 12,766 | Vest ratably over 3 years; dividends deferred until vest |
| PRSUs granted in 2024 | 12,766 | Cliff vest after 3-year period based on relative ROATCE percentile |
| Unvested legacy RSUs/awards | 4,338; 21,128; 25,037 | Multiple tranches outstanding, supporting staggered vesting through upcoming years |
| Options | None outstanding for Reuter | No exercisable/unexercisable options shown |
Policy constraints reducing risk:
- Prohibitions on hedging/pledging; robust insider trading policy; equity awards granted on predetermined dates avoiding MNPI windows .
Employment Terms: Change-in-Control & Termination Economics
| Scenario (as of 12/31/2024) | Cash Severance | Health/Life/LTC | Equity Acceleration | Total |
|---|---|---|---|---|
| Change in Control (CIC) + qualifying termination | $1,012,987 | Health $65,413 | $473,718 | $1,552,118 |
| Involuntary Termination Without Cause (no CIC) | $506,494 | Health $32,707 | — | $539,201 |
| Death | — | Life $700,000; Split-dollar $561,431 | $473,718 | $1,735,149 |
| Disability | — | LTD $180,000; LTC $72,000 | $474,718 | $725,718 |
Trigger design:
- Cash severance is double-trigger; equity is single-trigger on CIC; no tax gross-ups; no single-trigger cash severance .
Say-on-Pay & Shareholder Feedback
- 2024 advisory vote support: 97.2% “FOR” .
- Ongoing outreach drove adoption of PRSUs (ROATCE), refined qualitative goals, and maintained ownership/retention requirements .
Investment Implications
- Alignment: Strong governance features—stock ownership requirements, anti-hedge/pledge, clawback—and a 50% PRSU LTI mix tie pay to relative profitability (ROATCE) and risk outcomes (NPAs in annual plan), aligning the CRO’s incentives with asset quality, capital, and earnings durability .
- Retention risk: Auto-renewing contract, competitive salary adjustments, meaningful SERP PV ($1.01M) and clear CIC protections reduce near-term flight risk; double-trigger cash but single-trigger equity acceleration could motivate deal-closing neutrality while ensuring value realization for the executive in M&A .
- Selling pressure: RSUs vest annually and PRSUs settle at cycle end; while hedging/pledging is barred, routine sales for tax/liquidity around vesting windows are possible, though policy and blackout periods modulate timing and magnitude .
- Performance sensitivity: With company 2024 deposit and loan growth offset by earnings pressure and TSR underperformance vs index, heavier emphasis on ROATCE for PRSUs should reward improvements in profitability and capital efficiency—a potential positive as rate conditions normalize; annual cash metric mix (pre-tax income, NPAs, growth) balances growth and credit quality under CRO oversight .