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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________________

FORM 10-Q

_____________________________________________________________

(MARK ONE)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-23877

Heritage Commerce Corp

(Exact name of Registrant as Specified in its Charter)


California (State or Other Jurisdiction of Incorporation or Organization)			77-0469558 (I.R.S. Employer Identification No.)
224 Airport Parkway, San Jose, California (Address of Principal Executive Offices)			95110 (Zip Code)

(408) 947-6900

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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

Title of each class:

Trading Symbol:

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☒	Non-accelerated filer ☐	Smaller reporting company ☐
			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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The Registrant had 61,283,541 shares of Common Stock outstanding on October 29, 2025.

Table of Contents

HERITAGE COMMERCE CORP

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


		Page No.
Cautionary Note on Forward-Looking Statements		3
Part I.	FINANCIAL INFORMATION	5
Item 1.	Consolidated Financial Statements (unaudited)	5
	Consolidated Balance Sheets	5
	Consolidated Statements of Income	6
	Consolidated Statements of Comprehensive Income	7
	Consolidated Statements of Changes in Shareholders’ Equity	8
	Consolidated Statements of Cash Flows	10
	Notes to Unaudited Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	47
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	88
Item 4.	Controls and Procedures	88
PART II.	OTHER INFORMATION	89
Item 1.	Legal Proceedings	89
Item 1A.	Risk Factors	89
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89
Item 3.	Defaults Upon Senior Securities	90
Item 4.	Mine Safety Disclosures	90
Item 5.	Other Information	90
Item 6.	Exhibits	90
SIGNATURES		91

Table of Contents

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) of Heritage Commerce Corp (“we,” “us,” “our” or the “Company”) contains various statements that may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These forward-looking statements often can be, but are not always, identified by the use of words such as “assume,” “expect,” “intend,” “plan,” “project,” “believe,” “estimate,” “predict,” “anticipate,” “may,” “might,” “should,” “could,” “goal,” “potential” and similar expressions. We base these forward-looking statements on our current expectations and projections about future events, our assumptions regarding these events and our knowledge of facts at the time the statements are made. Forward-looking statements may include, among other things, statements relating to our projected growth, anticipated future financial performance, management’s long-term performance goals and operational strategies, the performance of our loan and investment portfolios, as well as statements relating to the anticipated effects of those conditions, events and developments on the Company’s financial condition and results of operations.

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, Part II, Item 1A. Risk Factors, on pages 73 – 95 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, and the following listed below:

◦cybersecurity risks that may affect us directly or may impact us indirectly by virtue of their effects on our clients, markets or vendors, including our ability to identify and address cybersecurity risks, including those posed by the increasing use of artificial intelligence (such as, but not limited to, ransomware, data security breaches, “denial of service” attacks, “hacking” and identity theft) affecting us, our clients, and our third-party vendors and service providers;

◦events that affect our ability to attract, recruit, and retain qualified officers and other personnel to implement our strategic plan, and that enable current and future personnel to protect and develop our relationships with clients, and to promote our business, results of operations and growth prospects;

◦media items and consumer confidence as those factors affect our clients’ confidence in the banking system generally and in our bank specifically;

◦adequacy of our risk management framework, disclosure controls and procedures and internal control over financial reporting;

◦market, geographic and sociopolitical factors that arise by virtue of the fact that we operate primarily in the general San Francisco Bay Area of Northern California;

◦risks of geographic concentration of our client base, our loans, and the collateral securing our loans, as those clients and assets may be particularly subject to natural disasters and to events and conditions that directly or indirectly affect those regions, including the particular risks of natural disasters (including earthquakes, fires, and flooding) and other events that disproportionately affect that region;

◦political events that have accompanied or that may in the future accompany or result from recent political changes, particularly including the impact of a prolonged U.S. federal government shutdown, the imposition of tariffs or retaliatory tariffs, sociopolitical events and other conditions that result from political conflicts and law enforcement activities that may adversely affect our markets or our clients;

◦our ability to estimate accurately, and to establish adequate reserves against, the risk of loss associated with our loan and lease portfolios and our factoring business;

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◦inflationary pressures and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans to clients, whether held in the portfolio or in the secondary market;

◦factors that affect the value and liquidity of our investment portfolios, particularly the values of securities available-for-sale, including any impairment or other charges in connection with declines in asset values or repositioning of securities held in our investment portfolio;

◦factors that affect our liquidity and our ability to meet client demands for withdrawals from deposit accounts and undrawn lines of credit, including our cash on hand and the availability of funds from our own lines of credit;

◦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;

◦the expense and uncertain resolution of litigation matters whether occurring in the ordinary course of business or otherwise, particularly including but not limited to the effects of recent and ongoing developments in California labor and employment laws, regulations and court decisions;

◦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; and

◦our success in managing the risks involved in the foregoing factors.

Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events. You should consider any forward-looking statements in light of this explanation, and we caution you about relying on forward-looking statements.

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Part I—FINANCIAL INFORMATION

ITEM 1—CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

HERITAGE COMMERCE CORP
CONSOLIDATED BALANCE SHEETS
(Unaudited)


	September 30,		December 31,
	2025		2024
	(Dollars in thousands)
Assets
Cash and due from banks	$	42,442	$	29,864
Other investments and interest-bearing deposits in other financial institutions		705,300		938,259
Total cash and cash equivalents		747,742		968,123
Securities available-for-sale, at fair value		408,456		256,274
Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $11
and $12, respectively (fair value of $476,834 and $497,012, respectively)		544,806		590,016
Loans held-for-sale - SBA, at lower of cost or fair value, including deferred costs		1,325		2,375
Loans held-for-investment, net of deferred fees		3,581,678		3,491,937
Allowance for credit losses on loans		(49,427)		(48,953)
Loans, net		3,532,251		3,442,984
Federal Home Loan Bank ("FHLB"), Federal Reserve Bank ("FRB") stock and other investments, at cost		32,566		32,556
Company-owned life insurance		82,861		81,211
Premises and equipment, net		9,429		10,140
Goodwill		167,631		167,631
Other intangible assets		5,078		6,439
Accrued interest receivable and other assets		91,575		87,257
Total assets	$	5,623,720	$	5,645,006

Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand, noninterest-bearing	$	1,241,603	$	1,214,192
Demand, interest-bearing		922,077		936,587
Savings and money market		1,366,905		1,325,923
Time deposits - under $250		32,462		38,988
Time deposits - $250 and over		223,496		206,755

Insured Cash Sweep ("ICS")/Certificates of Deposit Account Registry Service ("CDARS") -
interest-bearing demand, money market and time deposits		990,003		1,097,586
Total deposits		4,776,546		4,820,031


Subordinated debt, net of issuance costs		39,767		39,653
Accrued interest payable and other liabilities		107,397		95,595
Total liabilities		4,923,710		4,955,279

Shareholders' equity:
Preferred stock, no par value; 10,000,000 shares authorized; none issued and outstanding
at September 30, 2025 and December 31, 2024		—		—
Common stock, no par value; 100,000,000 shares authorized;
61,277,541, and 61,348,095 shares issued and outstanding, respectively		508,664		510,070
Retained earnings		196,526		187,762
Accumulated other comprehensive loss		(5,180)		(8,105)
Total shareholders' equity		700,010		689,727
Total liabilities and shareholders' equity	$	5,623,720	$	5,645,006

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025			2024
	(Dollars in thousands, except per share amounts)
Interest income:
Loans, including fees	$	50,130	$	45,781	$	146,110	$	135,851
Securities, taxable		6,146		4,676		18,051		16,342
Securities, exempt from Federal tax		203		223		635		674
Other investments, interest-bearing deposits
in other financial institutions and Federal funds sold		8,615		10,172		25,155		23,434
Total interest income		65,094		60,852		189,951		176,301

Interest expense:
Deposits		17,769		20,985		53,385		56,989

Subordinated debt		537		538		1,613		1,614
Total interest expense		18,306		21,523		54,998		58,603

Net interest income before provision for credit losses on loans		46,788		39,329		134,953		117,698
Provision for credit losses on loans		416		153		1,206		808
Net interest income after provision for credit losses on loans		46,372		39,176		133,747		116,890

Noninterest income:
Service charges and fees on deposit accounts		898		908		2,719		2,676
FHLB and FRB stock dividends		587		586		1,761		1,765
Increase in cash surrender value of life insurance		564		530		1,650		1,569
Servicing income		77		108		220		288
Gain on sales of SBA loans		—		94		185		348
Termination fees		—		46		314		159
Gain on proceeds from company-owned life insurance		—		—		—		219
Other		1,091		554		2,041		1,304
Total noninterest income		3,217		2,826		8,890		8,328

Noninterest expense:
Salaries and employee benefits		16,948		15,673		49,750		46,976
Occupancy and equipment		2,528		2,599		7,587		7,731
Professional fees		1,175		1,306		4,574		3,705
Other		8,375		7,977		34,906		24,867
Total noninterest expense		29,026		27,555		96,817		83,279
Income before income taxes		20,563		14,447		45,820		41,939
Income tax expense		5,865		3,940		13,107		12,032
Net income	$	14,698	$	10,507	$	32,713	$	29,907

Earnings per common share:
Basic	$	0.24	$	0.17		0.53	$	0.49
Diluted	$	0.24	$	0.17		0.53	$	0.49

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
	(Dollars in thousands)
Net income	$	14,698	$	10,507	$	32,713	$	29,907
Other comprehensive (loss) income:
Change in net unrealized holding gains (losses) on
available-for-sale securities and I/O strips		(207)		4,024		4,375		5,549
Deferred income taxes		61		(1,167)		(1,282)		(1,609)






Change in unrealized gains on securities and I/O strips,
net of deferred income taxes		(146)		2,857		3,093		3,940

Change in net pension and other benefit plan liability adjustment		(52)		(26)		(157)		(79)
Deferred income taxes		(4)		(8)		(11)		(23)
Change in pension and other benefit plan liability, net of
deferred income taxes		(56)		(34)		(168)		(102)
Other comprehensive (loss) income		(202)		2,823		2,925		3,838

Total comprehensive income	$	14,496	$	13,330	$	35,638	$	33,745

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)


						Accumulated
						Other		Total
	Common Stock			Retained		Comprehensive		Shareholders’
	Shares	Amount		Earnings		Income (Loss)		Equity
	(Dollars in thousands, except per share amounts)
































































Balance, January 1, 2024	61,146,835	$	506,539	$	179,092	$	(12,730)	$	672,901
Net income	—		—		10,166		—		10,166
Other comprehensive income, net of taxes	—		—		—		142		142
Issuance of restricted stock awards, net of forfeitures	33,908		—		—		—		—

Net amortization of restricted stock awards	—		311		—		—		311
Cash dividend declared $0.13 per share	—		—		(7,952)		—		(7,952)
Restricted stock units ("RSUs") and performance-based
restricted stock units ("PRSUs") expense, net of taxes	—		198		—		—		198
Stock option expense, net of forfeitures and taxes	—		145		—		—		145
Stock options exercised	72,882		385		—		—		385
Balance, March 31, 2024	61,253,625		507,578		181,306		(12,588)		676,296
Net income	—		—		9,234		—		9,234
Other comprehensive income, net of taxes	—		—		—		873		873
Issuance (forfeitures) of restricted stock awards, net	(8,000)		—		—		—		—
Net amortization of restricted stock awards	—		165		—		—		165
Cash dividend declared $0.13 per share	—		—		(7,969)		—		(7,969)
RSUs and PRSUs expense, net of taxes	—		413		—		—		413
RSUs vested	35,837		—		—		—		—
Stock option expense, net of forfeitures and taxes	—		129		—		—		129
Stock options exercised	10,632		58		—		—		58
Balance, June 30, 2024	61,292,094		508,343		182,571		(11,715)		679,199
Net income	—		—		10,507		—		10,507
Other comprehensive income, net of taxes	—		—		—		2,823		2,823


Amortization of restricted stock awards,
net of forfeitures and taxes	—		239		—		—		239
Cash dividend declared $0.13 per share	—		—		(7,968)		—		(7,968)
RSUs and PRSUs expense, net of taxes	—		396		—		—		396
Stock option expense, net of forfeitures and taxes	—		121		—		—		121
Stock options exercised	5,250		35		—		—		35
Balance, September 30, 2024	61,297,344	$	509,134	$	185,110	$	(8,892)	$	685,352

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)


						Accumulated
						Other		Total
	Common Stock			Retained		Comprehensive		Shareholders’
	Shares	Amount		Earnings		Income (Loss)		Equity
	(Dollars in thousands, except per share amounts)
Balance, January 1, 2025	61,348,095	$	510,070	$	187,762	$	(8,105)	$	689,727
Net income	—		—		11,626		—		11,626
Other comprehensive income, net of taxes	—		—		—		1,298		1,298
Issuance of restricted stock awards, net of forfeitures	39,104		—		—		—		—

Net amortization of restricted stock awards	—		145		—		—		145
Cash dividend declared $0.13 per share	—		—		(7,987)		—		(7,987)
RSUs and PRSUs expense, net of taxes	—		278		—		—		278
RSUs vested	71,700		—		—		—		—
Stock option expense, net of forfeitures and taxes	—		117		—		—		117
Stock options exercised	152,222		986		—		—		986
Balance, March 31, 2025	61,611,121		511,596		191,401		(6,807)		696,190
Net income	—		—		6,389		—		6,389
Other comprehensive income, net of taxes	—		—		—		1,829		1,829
Issuance (forfeitures) of restricted stock awards, net	(1,682)		—		—		—		—
Net amortization of restricted stock awards	—		165		—		—		165
Cash dividend declared $0.13 per share	—		—		(7,996)		—		(7,996)
RSUs and PRSUs expense, net of taxes	—		(81)		—		—		(81)
RSUs vested	39,643		—		—		—		—
Stock option expense, net of forfeitures and taxes	—		92		—		—		92
Common stock repurchased	(207,989)		(1,912)		—		—		(1,912)
Stock options exercised	5,670		28		—		—		28
Balance, June 30, 2025	61,446,763		509,888		189,794		(4,978)		694,704
Net income	—		—		14,698		—		14,698
Other comprehensive loss, net of taxes	—		—		—		(202)		(202)
Issuance of restricted stock awards, net	41,379		—		—		—		—
Net amortization of restricted stock awards	—		157		—		—		157
Cash dividend declared $0.13 per share	—		—		(7,966)		—		(7,966)
RSUs and PRSUs expense, net of taxes	—		506		—		—		506
RSUs vested	347		—		—		—		—
Stock option expense, net of forfeitures and taxes	—		73		—		—		73
Common stock repurchased	(231,198)		(2,137)		—		—		(2,137)
Stock options exercised	20,250		177		—		—		177
Balance, September 30, 2025	61,277,541	$	508,664	$	196,526	$	(5,180)	$	700,010

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Nine months ended
	September 30,
	2025			2024
	(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	32,713	$	29,907
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of premiums and accretion of discounts on securities, net		(775)		(2,139)

Gain on sale of SBA loans		(185)		(348)
Proceeds from sale of SBA loans originated for sale		2,664		4,563
SBA loans originated for sale		(2,167)		(3,659)

Provision for credit losses on loans		1,206		808
Increase in cash surrender value of life insurance		(1,650)		(1,569)
Depreciation and amortization		970		977
Amortization of other intangible assets		1,361		1,661
Stock option expense, net		282		395
RSUs and PRSUs expense, net		703		1,007
Amortization of restricted stock awards, net		467		715
Amortization of subordinated debt issuance costs		113		113
Gain on proceeds from company-owned life insurance		—		(219)

Effect of changes in:
Accrued interest receivable and other assets		(6,100)		202
Accrued interest payable and other liabilities		12,101		(9,262)
Net cash provided by operating activities		41,703		23,152

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities available-for-sale		(348,793)		—

Maturities/paydowns/calls of securities available-for-sale		202,322		213,508
Maturities/paydowns/calls of securities held-to-maturity		44,682		45,598



Net change in loans		(89,734)		(60,805)
Changes in FHLB stock and other investments		(10)		(13)
Proceeds from redemption of company-owned life insurance		—		595
Purchase of premises and equipment		(258)		(1,518)
Net cash (used in) provided by investing activities		(191,791)		197,365

CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits		(43,485)		351,075

Exercise of stock options		1,191		478
Payment of cash dividends		(23,950)		(23,889)


Repurchase shares of the Company common stock		(4,049)		—
Net cash (used in) provided by financing activities		(70,293)		327,664
Net (decrease) increase in cash and cash equivalents		(220,381)		548,181
Cash and cash equivalents, beginning of period		968,123		408,129
Cash and cash equivalents, end of period	$	747,742	$	956,310

Supplemental disclosures of cash flow information:
Interest paid	$	54,463	$	56,140
Income taxes paid, net	$	14,078	$	12,342

Supplemental schedule of non-cash activity:
Transfer of loans held-for-sale to loan portfolio	$	738	$	—
Recording of right of use assets in exchange for lease obligations	$	—	$	3,045

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025

(Unaudited)

1) Basis of Presentation

The unaudited consolidated financial statements of Heritage Commerce Corp (the “Company” or “HCC”) and its wholly owned subsidiary, Heritage Bank of Commerce (the “Bank” or “HBC”), have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements are not included herein. The interim statements should be read in conjunction with the consolidated financial statements and notes that were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”).

HBC is a commercial bank serving clients primarily located in Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara counties of California. CSNK Working Capital Finance Corp. a California corporation, dba Bay View Funding (“Bay View Funding”) is a wholly owned subsidiary of HBC, and provides business-essential working capital factoring financing to various industries throughout the United States. No client accounts for more than 10% of revenue for HBC or the Company. The Company reports its results for two segments: banking and factoring. The Company’s management uses segment results in its operating and strategic planning.

In management’s opinion, all adjustments necessary for a fair presentation of these consolidated financial statements have been included and are of a normal and recurring nature. All intercompany transactions and balances have been eliminated.

The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and expense in the financial statements. Various elements of our accounting policies, by their nature, involve the application of highly sensitive and judgmental estimates and assumptions. Some of these policies and estimates relate to matters that are highly complex and contain inherent uncertainties. Material estimates that are particularly susceptible to significant change include the determination of the allowance for credit losses and any impairment of goodwill or intangible assets. It is possible that, in some instances, different estimates and assumptions could reasonably have been made and used by management, instead of those we applied, which might have produced different results that could have had a material effect on the financial statements.

The results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results expected for any subsequent period or for the entire year ending December 31, 2025.

Reclassifications

Certain reclassifications of prior year balances have been made to conform to the current year presentation. These reclassifications had no impact on the Company’s consolidated financial position, results of operations or net change in cash and cash equivalents.

Issued But Not Yet Effective Accounting Standards

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-06 - Disclosure Improvements - Codification Amendments in Response to the Securities and Exchange Commission’s (“SEC”) Disclosure Update and Simplification Initiative. ASU 2023-06 amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (“ASC”). ASU 2023-06 was issued in response to the SEC's August 2018 final rule that updated and simplified disclosure requirements. In the final rule, the SEC identified 27 disclosure requirements that were incremental to those in the ASC and referred them to the FASB for potential incorporation into the generally accepted accounting principles. To avoid duplication, the SEC intended to eliminate those disclosure requirements from existing SEC regulations if the FASB incorporated them into the relevant ASC subtopics. The disclosure requirements are currently included in either SEC Regulation S-X or SEC Regulation S-K. ASU 2023-06 adds 14 of the 27 identified disclosure or presentation requirements to the ASC.

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For entities like HCC that are subject to the SEC's existing disclosure requirements, the effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The amendments are to be applied prospectively and, if by June 30, 2027 the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the ASC and will not become effective for any entity. Management intends to adopt the provisions of ASU 2023-06 on their respective effective dates. The adoption of the provisions of ASU 2023-06 is not expected to have a material impact on HCC's consolidated financial statements.

In December 2023, FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The updated accounting guidance requires expanded income tax disclosures, including the disaggregation of existing disclosures related to the tax rate reconciliation and income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024. Prospective application is required, with retrospective application permitted. The Company will update the related disclosures upon adoption.

In November 2024, FASB issued ASU 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 was issued in order to improve the disclosures about a public business entity's expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions. The amendments in ASU 2024-03 require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses in interim and year-end reporting periods. The amendments in this ASU apply to all public business entities and are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments are to be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements. The Company will update the related disclosures upon adoption.

2) Shareholders’ Equity and Earnings Per Share

Share Repurchase Program – At September 30, 2025, the Company was authorized to repurchase up to $15,000,000 of the Company’s shares of its issued and outstanding common stock under a share repurchase program (the “Repurchase Program”) adopted by the Board of Directors (the “Board”) in July 2024. On October 23, 2025, the Board approved an increase in the maximum total value of shares authorized for repurchase under the Company’s Repurchase Program doubling the authorization from $15,000,000 to $30,000,000. The term of the Repurchase Program was also extended by the Board to October 31, 2026. Under the Repurchase Program, the Company is authorized to purchase its common stock from time-to-time in open market transactions, made pursuant to Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The actual timing, price, value and amount of any repurchases under the Repurchase Program will depend on various factors, including the market price of the Company’s common stock, trading volume, general market conditions and other corporate and economic considerations, including the best interests of our shareholders. During the second and third quarters of 2025, the Company repurchased 439,187 shares of its common stock with a weighted average price of $9.22 per share for a total of $4,049,000. The remaining capacity under the Repurchase Program as of the filing date, after giving effect to the amendment as described above, is $25,951,000.

Earnings Per Share – Basic earnings per common share is computed by dividing net income by the weighted average common shares outstanding. Diluted earnings per share reflect potential dilution from outstanding stock options using the treasury stock method. Unvested restricted stock units are not considered participating securities and as a result are not considered outstanding under the two class method of computing basic earnings per common share. There were 1,364,621 and 1,390,055 weighted average stock options outstanding for the three and nine months ended September 30, 2025, respectively, considered to be antidilutive and excluded from the computation of diluted earnings per share. There were 1,440,168 and 1,841,601 weighted average stock options outstanding for the three months and nine months ended September 30, 2024, considered to be antidilutive and excluded from the computation of diluted earnings per share. There were no weighted average RSUs outstanding for the three months and nine months ended September 30, 2025, respectively, considered to be antidilutive and excluded from the computation of diluted earnings per shares. There were 1,467 and 493 weighted average RSUs outstanding for the three months and nine months ended September 30, 2024,

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considered to be antidilutive and excluded from the computation of diluted earnings per shares. A reconciliation of these factors used in computing basic and diluted earnings per common share is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
	(Dollars in thousands, except per share amounts)
Net income	$	14,698	$	10,507	$	32,713	$	29,907

Weighted average common shares outstanding
for basic earnings per common share		61,333,951		61,295,877		61,440,570		61,254,138
Dilutive potential common shares		282,834		250,280		247,046		243,789
Shares used in computing diluted earnings per common share		61,616,785		61,546,157		61,687,616		61,497,927

Basic earnings per share	$	0.24	$	0.17	$	0.53	$	0.49
Diluted earnings per share	$	0.24	$	0.17	$	0.53	$	0.49

3) Accumulated Other Comprehensive Income (Loss) (“AOCI”)

The following table reflects the changes in AOCI by component for the periods indicated:


	Three Months Ended September 30, 2025 and 2024
	Unrealized
	Gains (Losses)
	on Available-		Defined
	for-Sale		Benefit
	Securities		Pension
	and I/O		Plan
	Strips		Items(1)			Total
	(Dollars in thousands)
Beginning balance July 1, 2025, net of taxes	$	(354)		$	(4,624)		$	(4,978)
Other comprehensive loss before reclassification,
net of taxes		(146)			(19)			(165)
Amounts reclassified from other comprehensive income
(loss), net of taxes		—			(37)			(37)
Net current period other comprehensive loss,
net of taxes		(146)			(56)			(202)

Ending balance September 30, 2025, net of taxes	$	(500)		$	(4,680)		$	(5,180)

Beginning balance July 1, 2024, net of taxes	$	(5,946)		$	(5,769)		$	(11,715)
Other comprehensive income (loss) before reclassification,
net of taxes		2,857			(16)			2,841
Amounts reclassified from other comprehensive income
(loss), net of taxes		—			(18)			(18)
Net current period other comprehensive income (loss),
net of taxes		2,857			(34)			2,823

Ending balance September 30, 2024, net of taxes	$	(3,089)		$	(5,803)		$	(8,892)

__________________________________________________________

(1) This AOCI component is included in the computation of net periodic benefit cost (see Note 8 “Benefit Plans”) and includes split-dollar life insurance benefit plan.
__________________________________________________________

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	Nine Months Ended September 30, 2025 and 2024
	Unrealized
	Gains (Losses)
	on Available-		Defined
	for-Sale		Benefit
	Securities		Pension
	and I/O		Plan
	Strips		Items(1)			Total
	(Dollars in thousands)
Beginning balance January 1, 2025, net of taxes	$	(3,593)		$	(4,512)		$	(8,105)
Other comprehensive income (loss) before reclassification,
net of taxes		3,093			(57)			3,036
Amounts reclassified from other comprehensive income
(loss), net of taxes		—			(111)			(111)
Net current period other comprehensive income (loss),
net of taxes		3,093			(168)			2,925

Ending balance September 30, 2025, net of taxes	$	(500)		$	(4,680)		$	(5,180)

Beginning balance January 1, 2024, net of taxes	$	(7,029)		$	(5,701)		$	(12,730)
Other comprehensive income (loss) before reclassification,
net of taxes		3,940			(47)			3,893
Amounts reclassified from other comprehensive income
(loss), net of taxes		—			(55)			(55)
Net current period other comprehensive income (loss),
net of taxes		3,940			(102)			3,838
Ending balance September 30, 2024, net of taxes	$	(3,089)		$	(5,803)		$	(8,892)

_________________________________________________________


	Amounts Reclassified from
	AOCI
	Three Months Ended
	September 30,				Affected Line Item Where
Details About AOCI Components	2025		2024		Net Income is Presented
	(Dollars in thousands)










Amortization of defined benefit pension plan items (1)

Prior transition obligation and actuarial losses (2)	$	64	$	52
Prior service cost and actuarial losses (3)		(12)		(26)
		52		26	Other noninterest expense
		(15)		(8)	Income tax benefit

Total reclassification from AOCI for the period	$	37	$	18	Net of tax

_______________________________________________________

(1) This AOCI component is included in the computation of net periodic benefit cost (see Note 8 “Benefit Plans”).

(2) This is related to the split dollar life insurance benefit plan.

(3) This is related to the supplemental executive retirement plan.

__________________________________________________________

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	Amounts Reclassified from
	AOCI
	Nine Months Ended
	September 30,				Affected Line Item Where
Details About AOCI Components	2025		2024			Net Income is Presented
	(Dollars in thousands)









Amortization of defined benefit pension plan items (1)

Prior transition obligation and actuarial losses (2)	$	193	$	157
Prior service cost and actuarial losses (3)		(36)		(78)
		157		79			Other noninterest expense
		(46)		(24)			Income tax benefit

Total reclassification from AOCI for the period	$	111	$	55			Net of tax

__________________________________________________________

(1) This AOCI component is included in the computation of net periodic benefit cost (see Note 8 “Benefit Plans”).

(2) This is related to the split dollar life insurance benefit plan.

(3) This is related to the supplemental executive retirement plan.

__________________________________________________________

4) Securities

The amortized cost and estimated fair value of securities were as follows at the dates indicated:


			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for Credit		Fair
September 30, 2025	Cost		Gains		(Losses)		Losses		Value
	(Dollars in thousands)
Securities available-for-sale:
Agency mortgage-backed securities	$	232,181	$	1,375	$	(2,667)	$	—	$	230,889
Collateralized mortgage obligations		122,281		379		(342)		—		122,318
U.S. Treasury		54,646		603		—		—		55,249
Total	$	409,108	$	2,357	$	(3,009)	$	—	$	408,456

			Gross		Gross		Estimated		Allowance
	Amortized		Unrecognized		Unrecognized		Fair		for Credit
September 30, 2025	Cost		Gains		(Losses)		Value		Losses
	(Dollars in thousands)
Securities held-to-maturity:
Agency mortgage-backed securities	$	516,918	$	235	$	(67,848)	$	449,305	$	—
Municipals - exempt from Federal tax		27,899		2		(372)		27,529		(11)
Total	$	544,817	$	237	$	(68,220)	$	476,834	$	(11)

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			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for Credit		Fair
December 31, 2024	Cost		Gains		(Losses)		Losses		Value
	(Dollars in thousands)
Securities available-for-sale:
U.S. Treasury	$	187,095	$	—	$	(912)	$	—	$	186,183
Agency mortgage-backed securities		74,239		—		(4,148)		—		70,091
Total	$	261,334	$	—	$	(5,060)	$	—	$	256,274

			Gross		Gross		Estimated		Allowance
	Amortized		Unrecognized		Unrecognized		Fair		for Credit
December 31, 2024	Cost		Gains		(Losses)		Value		Losses
	(Dollars in thousands)
Securities held-to-maturity:
Agency mortgage-backed securities	$	559,548	$	—	$	(91,585)	$	467,963	$	—
Municipals - exempt from Federal tax		30,480		—		(1,431)		29,049		(12)
Total	$	590,028	$	—	$	(93,016)	$	497,012	$	(12)

Securities with unrealized/unrecognized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized/unrecognized loss position are as follows at the dates indicated:


	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
September 30, 2025	Value		(Losses)		Value		(Losses)		Value		(Losses)
	(Dollars in thousands)
Securities available-for-sale:
Agency mortgage-backed securities	$	46,888	$	(409)	$	43,899	$	(2,258)	$	90,787	$	(2,667)

Collateralized mortgage obligations		45,964		(342)		—		—		45,964		(342)
Total	$	92,852	$	(751)	$	43,899	$	(2,258)	$	136,751	$	(3,009)

Securities held-to-maturity:
Agency mortgage-backed securities	$	—	$	—	$	438,785	$	(67,848)	$	438,785	$	(67,848)
Municipals — exempt from Federal tax		—		—		20,568		(372)		20,568		(372)
Total	$	—	$	—	$	459,353	$	(68,220)	$	459,353	$	(68,220)


	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2024	Value		(Losses)		Value		(Losses)		Value		(Losses)
	(Dollars in thousands)
Securities available-for-sale:
U.S. Treasury	$	9,778	$	(4)	$	176,405	$	(908)	$	186,183	$	(912)
Agency mortgage-backed securities		20,383		(100)		49,708		(4,048)		70,091		(4,148)
Total	$	30,161	$	(104)	$	226,113	$	(4,956)	$	256,274	$	(5,060)

Securities held-to-maturity:
Agency mortgage-backed securities	$	10,280	$	(53)	$	456,906	$	(91,532)	$	467,186	$	(91,585)
Municipals — exempt from Federal tax		4,076		(65)		23,733		(1,366)		27,809		(1,431)
Total	$	14,356	$	(118)	$	480,639	$	(92,898)	$	494,995	$	(93,016)

The Company conducts a regular assessment of its investment securities to determine whether securities are experiencing credit losses. Factors for consideration include the nature of the securities, credit ratings or financial condition of the issuer, the extent of the unrealized loss, expected cash flows, market conditions and the Company’s ability to hold the securities through the anticipated recovery period.

At the dates and during the periods covered by these financial statements, there were zero holdings of securities of any one issuer, other than the U.S. Government and its sponsored entities, in an amount greater than 10% of shareholders’

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equity. At September 30, 2025, the Company held 383 securities (130 available-for-sale and 253 held-to-maturity), of which 338 had fair value below amortized cost. The unrealized/unrecognized losses were due to higher interest rates at period end compared to when the securities were purchased. The issuers are of high credit quality and all principal amounts are expected to be paid when securities mature. The fair value is expected to recover as the securities approach their maturity date and/or market rates decline. The Company does not believe that it is more likely than not that the Company will be required to sell a security in an unrealized loss position prior to recovery in value.

The amortized cost and estimated fair values of securities as of September 30, 2025, are shown by contractual maturity below. The expected maturities will differ from contractual maturities if borrowers have the right to call or pre-pay obligations with or without call or pre-payment penalties. Securities not due at a single maturity date are shown separately.


	Available-for-sale
	Amortized		Estimated
	Cost		Fair Value
	(Dollars in thousands)


Due after one through five years	$	54,646	$	55,249


Agency mortgage-backed securities and
collateralized mortgage obligations		354,462		353,207
Total	$	409,108	$	408,456

	Held-to-maturity
	Amortized		Estimated
	Cost (1)		Fair Value
	(Dollars in thousands)

Due within one year	$	1,250	$	1,246
Due after one through five years		10,430		10,330
Due after five through ten years		16,219		15,953

Agency mortgage-backed securities		516,918		449,305
Total	$	544,817	$	476,834

__________________________________________________________

(1) Gross of the allowance for credit losses of $11 at September 30, 2025.

__________________________________________________________

Securities with amortized cost of $545,165,000 and $753,369,000 as of September 30, 2025 and December 31, 2024, respectively, were pledged to secure the Bank’s lines of credit and for other purposes as required or permitted by law or contract. The decrease in pledged securities at September 30, 2025 was due to securities maturities.

The allowance for credit losses on the Company’s held-to-maturity debt securities is presented as a reduction to the amortized cost basis of held-to-maturity securities on the Company’s Consolidated Balance Sheet. The table below presents a roll-forward by major security type for the first, second and third quarters of 2025 of the allowance for credit losses on debt securities held-to-maturity at period end:

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		Municipals
		(Dollars in thousands)
Beginning balance January 1, 2025	$	12
Provision for credit losses		—
Ending Balance at March 31, 2025		12
Provision for credit losses		4
Ending Balance at June 30, 2025		16
Provision for (recapture of) credit losses		(5)
Ending Balance at September 30, 2025	$	11

The bond ratings for the Company’s municipal investment securities at September 30, 2025 were consistent with the ratings at December 31, 2024.

5) Loans and Allowance for Credit Losses on Loans

The allowance for credit losses on loans was calculated by pooling loans of similar credit risk characteristics and credit monitoring procedures. The loan portfolio is classified into eight segments of loans - commercial, commercial real estate – owner occupied, commercial real estate – non-owner occupied, land and construction, home equity, multifamily, residential mortgage and consumer and other. Descriptions of the Company’s loan portfolio segments are included in Note 1 “Summary of Significant Accounting Policies” of the 2024 Form 10-K.

Loan Distribution

Loans by portfolio segment and the allowance for credit losses on loans were as follows at the dates indicated:


	September 30, 2025		December 31, 2024

	(Dollars in thousands)
Loans held-for-investment:
Commercial	$	523,110	$	531,350
Real estate:
CRE - owner occupied		629,855		601,636
CRE - non-owner occupied		1,416,987		1,341,266
Land and construction		137,170		127,848
Home equity		125,742		127,963
Multifamily		290,077		275,490
Residential mortgages		443,143		471,730
Consumer and other		15,938		14,837
Loans		3,582,022		3,492,120
Deferred loan fees, net		(344)		(183)
Loans, net of deferred fees		3,581,678		3,491,937
Allowance for credit losses on loans		(49,427)		(48,953)
Loans, net	$	3,532,251	$	3,442,984

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Changes in the allowance for credit losses on loans were as follows for the periods indicated:


	Three Months Ended September 30, 2025
			CRE		CRE
			Owner		Non-owner		Land &		Home		Multi-		Residential		Consumer
	Commercial		Occupied		Occupied		Construction		Equity		Family		Mortgages		and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	5,699	$	6,194	$	25,413	$	2,438	$	801	$	4,467	$	3,459	$	162	$	48,633
Charge-offs		(133)		—		—		—		—		—		—		(5)		(138)
Recoveries		36		36		—		—		251		—		—		193		516
Net (charge-offs) recoveries		(97)		36		—		—		251		—		—		188		378
Provision for (recapture of)
credit losses on loans		248		(157)		1,233		(448)		(235)		(113)		58		(170)		416
End of period balance	$	5,850	$	6,073	$	26,646	$	1,990	$	817	$	4,354	$	3,517	$	180	$	49,427


	Three Months Ended September 30, 2024
			CRE		CRE
			Owner		Non-owner		Land &		Home		Multi-		Residential		Consumer
	Commercial		Occupied		Occupied		Construction		Equity		Family		Mortgages		and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	5,010	$	5,344	$	26,847	$	1,523	$	814	$	4,269	$	3,960	$	187	$	47,954
Charge-offs		(174)		—		—		—		—		—		—		(300)		(474)
Recoveries		154		14		—		—		18		—		—		—		186
Net (charge-offs) recoveries		(20)		14		—		—		18		—		—		(300)		(288)
Provision for (recapture of)
credit losses on loans		(273)		62		603		(195)		(72)		86		(291)		233		153
End of period balance	$	4,717	$	5,420	$	27,450	$	1,328	$	760	$	4,355	$	3,669	$	120	$	47,819


	Nine Months Ended September 30, 2025
			CRE		CRE
			Owner		Non-owner		Land &		Home		Multi-		Residential		Consumer
	Commercial		Occupied		Occupied		Construction		Equity		Family		Mortgages		and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	6,060	$	5,225	$	26,779	$	1,400	$	798	$	4,735	$	3,618	$	338	$	48,953
Charge-offs		(1,188)		—		—		—		—		—		—		(197)		(1,385)
Recoveries		121		43		—		—		296		—		—		193		653
Net (charge-offs) recoveries		(1,067)		43		—		—		296		—		—		(4)		(732)
Provision for (recapture of)
credit losses on loans		857		805		(133)		590		(277)		(381)		(101)		(154)		1,206
End of period balance	$	5,850	$	6,073	$	26,646	$	1,990	$	817	$	4,354	$	3,517	$	180	$	49,427


	Nine Months Ended September 30, 2024
			CRE		CRE
			Owner		Non-owner		Land &		Home		Multi-		Residential		Consumer
	Commercial		Occupied		Occupied		Construction		Equity		Family		Mortgages		and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	5,853	$	5,121	$	25,323	$	2,352	$	644	$	5,053	$	3,425	$	187	$	47,958
Charge-offs		(1,042)		—		—		—		—		—		—		(300)		(1,342)
Recoveries		300		24		—		—		71		—		—		—		395
Net (charge-offs) recoveries		(742)		24		—		—		71		—		—		(300)		(947)
Provision for (recapture of)
credit losses on loans		(394)		275		2,127		(1,024)		45		(698)		244		233		808
End of period balance	$	4,717	$	5,420	$	27,450	$	1,328	$	760	$	4,355	$	3,669	$	120	$	47,819

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The following tables present the amortized cost basis of nonaccrual loans and loans past due over 90 days and still accruing at the dates indicated:


	September 30, 2025
					Restructured
	Nonaccrual		Nonaccrual		Loans
	with no Specific		with Specific		over 90 Days
	Allowance for		Allowance for		Past Due
	Credit		Credit		and Still
	Losses		Losses		Accruing		Total
	(Dollars in thousands)
Commercial	$	83	$	384	$	194	$	661
Real estate:
CRE - Owner Occupied		—		—		—		—
CRE - Non-Owner Occupied		—		—		—		—
Land and construction		2,346		—		—		2,346
Home equity		655		—		—		655



Total	$	3,084	$	384	$	194	$	3,662


	December 31, 2024
	Nonaccrual		Nonaccrual		Loans
	with no Specific		with no Specific		over 90 Days
	Allowance for		Allowance for		Past Due
	Credit		Credit		and Still
	Losses		Losses		Accruing		Total
	(Dollars in thousands)
Commercial	$	313	$	701	$	489	$	1,503
Real estate:
CRE - Owner Occupied		—		—		—		—
CRE - Non-Owner Occupied		—		—		—		—
Land and construction		5,874		—		—		5,874
Home equity		77		—		—		77


Consumer and other		—		213		—		213
Total	$	6,264	$	914	$	489	$	7,667

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The following tables present the aging of past due loans by class at the dates indicated:


	September 30, 2025
	30 - 59		60 - 89		90 Days or
	Days		Days		Greater		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(Dollars in thousands)
Commercial	$	7,887	$	1,705	$	581	$	10,173	$	512,937	$	523,110
Real estate:
CRE - Owner Occupied		—		—		—		—		629,855		629,855
CRE - Non-Owner Occupied		—		—		—		—		1,416,987		1,416,987
Land and construction		—		—		2,346		2,346		134,824		137,170
Home equity		—		—		655		655		125,087		125,742
Multifamily		—		—		—		—		290,077		290,077
Residential mortgages		—		—		—		—		443,143		443,143
Consumer and other		—		—		—		—		15,938		15,938
Total	$	7,887	$	1,705	$	3,582	$	13,174	$	3,568,848	$	3,582,022


	December 31, 2024
	30 - 59		60 - 89		90 Days or
	Days		Days		Greater		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(Dollars in thousands)
Commercial	$	7,364	$	2,295	$	1,393	$	11,052	$	520,298	$	531,350
Real estate:
CRE - Owner Occupied		1,879		—		—		1,879		599,757		601,636
CRE - Non-Owner Occupied		4,479		—		—		4,479		1,336,787		1,341,266
Land and construction		4,290		2,323		5,874		12,487		115,361		127,848
Home equity		78		750		—		828		127,135		127,963
Multifamily		—		—		—		—		275,490		275,490
Residential mortgages		850		—		—		850		470,880		471,730
Consumer and other		—		117		213		330		14,507		14,837
Total	$	18,940	$	5,485	$	7,480	$	31,905	$	3,460,215	$	3,492,120

The following table presents the past due loans on nonaccrual and current loans on nonaccrual at the dates indicated:


	September 30, 2025		December 31, 2024
	(Dollars in thousands)
Past due nonaccrual loans	$	3,388	$	7,068
Current nonaccrual loans		80		110
Total nonaccrual loans	$	3,468	$	7,178

Management’s classification of a loan as “nonaccrual” is an indication that there is reasonable doubt as to the full recovery of principal or interest on the loan. At that point, the Company stops accruing interest income, and reverses any uncollected interest that had been accrued as income. The Company resumes recognizing interest income only as cash interest payments are received and it has been determined the collection of all outstanding principal is not in doubt.

Credit Quality Indicators

Credit quality indicators, specifically the Company's internal risk rating systems, reflect how the Company monitors credit losses and represents factors used by the Company when measuring the allowance for credit losses. Descriptions of the Company’s credit quality indicators by financial asset are included in Note 4 “Loans and Allowance for Credit Losses on Loans” of the 2024 Form 10-K.

Table of Contents

The following tables present term loans amortized cost by vintage and loan grade classification, and revolving loans amortized cost by loan grade classification at September 30, 2025 and December 31, 2024. The loan grade classifications are based on the Bank’s internal loan grading methodology. Loan grade categories for doubtful and loss rated loans are not included on the tables below as there are no loans with those grades at September 30, 2025 and December 31, 2024. The vintage year represents the period the loan was originated or in the case of renewed loans, the period last renewed. The amortized balance is the loan balance less any purchase discounts, plus any loan purchase premiums. The loan categories are based on the loan segmentation in the Company's CECL reserve methodology based on loan purpose and type.

Table of Contents


														Revolving
														Loans
		Term Loans Amortized Cost Basis by Originated Period as of September 30, 2025												Amortized
	9/30/2025		2024		2023		2022		2021		Prior Periods			Cost Basis		Total
	(Dollars in thousands)
Commercial:
Pass	$	98,940	$	26,670	$	20,050	$	12,275	$	13,476	$	28,944	$	310,578	$	510,933
Special Mention		1,985		981		565		257		185		362		3,001		7,336
Substandard		—		—		—		40		258		4,107		—		4,405
Substandard-Nonaccrual		11		—		270		—		—		155		—		436
Total		100,936		27,651		20,885		12,572

HERITAGE COMMERCE CORP 10-Q