Seth Fonti
About Seth Fonti
Executive Vice President and Chief Financial Officer of Heritage Commerce Corp (HTBK); appointed effective July 24, 2024, with an at‑will Employment Agreement entered July 24, 2025. Age 45; previously Managing Director and Head of Strategy, Corporate Development, and Strategic Finance at MUFG Americas, with prior Director roles in Strategy, Strategic Finance, and FP&A (joined MUFG in 2012) . Under Fonti’s finance leadership in 2025, HTBK reported double‑digit EPS growth in Q3 2025 ($0.24), PPNR of $21.0M, FTE NIM of 3.60%, and an efficiency ratio of 58.05%, reflecting improved operating leverage; nine‑month net interest income was up 15% year‑over‑year . HTBK’s executive compensation and governance framework includes clawbacks, anti‑hedging/pledging, and stock ownership guidelines (CEO 3x salary; other executives 1x) designed to align pay with performance .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| MUFG Americas Holding Corporation | Managing Director; Head of Strategy, Corporate Development & Strategic Finance | 2012–2024 | Led corporate strategy, M&A, and strategic finance across a major U.S. banking group |
| MUFG Americas Holding Corporation | Director of Strategy & Strategic Finance | 2012–(prior to MD) | Built strategic finance capabilities and planning frameworks |
| MUFG Americas Holding Corporation | Director of Finance, Planning & Analysis and Strategic Finance | 2012–(prior to Strategy Director) | Led FP&A and strategic finance execution |
External Roles
No external directorships or board committee roles disclosed in HTBK filings for Fonti. (Not disclosed in 2025 proxy; appointment occurred post‑proxy) .
Fixed Compensation
| Component | Amount | Notes |
|---|---|---|
| Base Salary | $425,000 per year | Set in Employment Agreement entered July 24, 2025 |
| Target Bonus % (2025) | 50% of salary | Prorated based on start date; participation in executive bonus plans |
| Automobile Allowance | $750/month | Paid during term; insurance requirements apply |
| Relocation Expenses | Up to $100,000 | Administered as two allowances up to $50k each; repayment if voluntary termination within 12 months |
| Benefits | Standard executive plans | 401(k), group life/health/accident/disability coverage |
Performance Compensation
| Metric | Weight | Threshold | Target | Maximum | Program Notes |
|---|---|---|---|---|---|
| Pre‑Tax Income (YTD) | 20% | $54.93M | $70.63M | $86.32M | Straight‑line interpolation; applies to Executive Officer Cash Incentive Program design |
| Non‑Performing Assets | 20% | $17.14M | $13.33M | $10.91M | Lower NPAs yield higher payout; metric favors asset quality |
| Loan Growth (ex‑residential mortgages; includes factoring) | 17.5% | 70% of budget ($2.061B) | 90% ($2.650B) | 110% ($3.239B) | Budget‑linked; excludes purchased mortgages, PPP |
| Deposit Growth (ex‑brokered; includes ICS/CDARS) | 17.5% | 70% of budget ($3.263B) | 90% ($4.195B) | 110% ($5.128B) | Budget‑linked; focuses on core deposit growth |
| Qualitative (Differentiated Executive Goals) | 25% | Role‑based | Role‑based | Role‑based | Individualized strategic objectives by executive |
- Gate condition: Total risk‑based capital ratio ≥10.5% required for any payout; Committee may adjust for non‑recurring items, compliance, and credit quality .
- 2025 participation: Fonti’s target bonus set at 50% of salary (prorated), with participation in executive incentive programs; payout timing requires active employment on payment date .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Initial Restricted Stock Grant | $300,000 value; shares determined by grant‑date Fair Market Value under the 2023 Equity Incentive Plan |
| Vesting | Pro‑rata annually over three years from grant date |
| Change‑of‑Control Treatment | Restricted stock vests on a Change of Control (single‑trigger equity vesting for this grant) |
| Clawback | Company Incentive Compensation Recovery Policy applies to all compensation |
| Anti‑Hedging/Pledging | Policy prohibits hedging and pledging of Company stock by officers and directors |
| Stock Ownership Guidelines | CEO: 3× base salary; other executives: 1× base salary; retain at least 50% of vested shares until guidelines met |
| Compliance Status | Executives were in compliance as of Dec 31, 2024; Fonti joined post‑proxy—future filings to reflect his status |
Employment Terms
| Provision | Economics / Terms |
|---|---|
| Employment Status | At‑will; San Jose HQ presence; travel as required |
| Severance (No Cause; within first year) | Lump sum equal to 3 months base salary; COBRA premiums paid for 12 months (taxable) upon release |
| Severance (No Cause; after first year) | Lump sum equal to 1× (Base Salary + Average Annual Bonus over last 3 years); COBRA premiums for 12 months (taxable) upon release |
| Change‑of‑Control (Double‑Trigger) | Lump sum equal to 2× (Base Salary + Average Annual Bonus over last 3 years); COBRA premiums for 24 months (taxable) upon release |
| Single‑Trigger Limitation | Payments triggered only once for a given event sequence; no stacking across entities |
| Non‑Compete / Devotion | No competitive banking engagements during employment; full‑time devotion |
| Non‑Solicit | Post‑termination non‑solicit of employees and customers in counties where the Bank has offices |
| Confidentiality & Trade Secrets | Comprehensive confidentiality, proprietary information, and DTSA provisions |
| Indemnification | Indemnity comparable to other executives; aligned with bylaws and California Labor Code §2802 |
| Arbitration / Mediation | Mandatory mediation; binding arbitration per Company policy |
| Section 409A | Payments structured to comply; six‑month “specified employee” delay if applicable |
Performance & Track Record
- Q3 2025 highlights during Fonti’s CFO tenure: Net income $14.7M, EPS $0.24, PPNR $21.0M, FTE NIM 3.60%, efficiency ratio 58.05%, ROATCE 11.14% . Year‑to‑date net interest income up $17.3M (+15%), adjusted PPNR up 31% YoY to $56.2M; adjusted efficiency improved to 60.92% .
- Q2 2025 context: Reported net income $6.4M; adjusted net income $13.0M after $9.2M legal settlement charges; FTE NIM 3.54%; adjusted efficiency 61.01% . Balance sheet remains well‑capitalized with CET1 13.3% and total capital 15.5% .
- Executive‑comp program received 97.2% Say‑on‑Pay approval in 2024, endorsing pay‑for‑performance and governance practices .
Compensation Structure Analysis
- Mix and leverage: Cash bonus targeted at 50% of salary (prorated), with multi‑metric scorecard (profitability, asset quality, loan/deposit growth) and qualitative objectives; equity via 3‑year RSUs and single‑trigger CoC vesting for initial grant creates retention and transaction alignment .
- Risk controls: Clawback policy, capital “gate,” anti‑pledging/hedging, ownership guidelines (1× salary for executives) support alignment and discourage excessive risk taking .
- Severance economics: 1× salary+bonus (no cause post‑year one) and 2× on CoC with extended COBRA—market‑typical for community banks; payments conditioned on release and 409A compliance .
Equity Ownership & Alignment
| Ownership Aspect | Status / Policy |
|---|---|
| Beneficial Ownership (Shares/Options) | Not disclosed for Fonti in 2025 proxy (appointed post‑proxy); future filings (e.g., Forms 3/4) expected to reflect holdings |
| Pledging/Hedging | Prohibited by policy—RED FLAG mitigated |
| Ownership Guidelines | Must achieve at least 1× salary in HTBK stock; retention of 50% of vested shares until meeting guideline |
| Vesting Pressure | Initial RSU grant vests annually over 3 years; single‑trigger CoC acceleration may introduce event‑driven equity settlement dynamics |
Employment Contracts, Severance, and CoC Economics
| Scenario | Cash Multiple | Benefits | Trigger Type |
|---|---|---|---|
| No Cause ≤1 year | 3 months base salary | COBRA 12 months (taxable) | Single |
| No Cause >1 year | 1× (Base + Avg Bonus) | COBRA 12 months (taxable) | Single |
| CoC + termination or Good Reason | 2× (Base + Avg Bonus) | COBRA 24 months (taxable) | Double |
| Equity on CoC | RSU acceleration for initial grant | — | Single (equity) |
Compensation Peer Group (Benchmarking)
Banc of California; Bank of Marin; BayCom; Central Valley Community Bancorp*; Farmers & Merchants; First Foundation; Five Star; Heritage Financial; HomeStreet; Luther Burbank*; PCB Bancorp; Sierra Bancorp; TriCo; Westamerica (asterisk = subsequently acquired), with survey data adjusted for Bay Area wage differentials and inflation .
- Pay positioning: Base salaries targeted near median, adjusted for Bay Area costs; incentives balanced across short‑ and long‑term horizons .
Investment Implications
- Alignment and safeguards: Strong governance (clawbacks, anti‑pledge/hedge), capital gate, and multi‑metric scorecard suggest incentive integrity; ownership guidelines promote “skin in the game” .
- Retention and event risk: Severance and CoC terms are moderate and standard; single‑trigger equity vesting on CoC for the initial grant could modestly increase event‑driven payout risk but also aligns with shareholder value realization in a sale .
- Near‑term performance lens: CFO tenure coincides with margin improvement and efficiency gains; watch quarterly vesting cadence for potential incremental selling flows and monitor future Form 4 filings for insider activity once disclosed .
- Say‑on‑Pay support (97.2%) indicates shareholder acceptance of pay design; continued emphasis on ROATCE‑based PRSUs supports durable value creation .