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MIL-OSI: Heritage Commerce Corp Reports Second Quarter and First Six Months of 2025 Financial Results

Source: GlobeNewswire (MIL-OSI)

SAN JOSE, Calif., July 24, 2025 (GLOBE NEWSWIRE) — Heritage Commerce Corp (Nasdaq: HTBK), (the “Company”), the holding company for Heritage Bank of Commerce (the “Bank”) today announced its financial results for the second quarter and six months ended June 30, 2025. All data are unaudited.

REPORTED SECOND QUARTER 2025 HIGHLIGHTS:

Net Income	Earnings Per Share	Pre-Provision Net Revenue (“PPNR”)⁽¹⁾	Fully Tax Equivalent (“FTE”) Net Interest Margin⁽¹⁾		Efficiency Ratio⁽¹⁾		Tangible Book Value Per Share⁽¹⁾

$6.4 million	$0.10	$9.4 million	3.54	%	80.23	%	$8.49

ADJUSTED SECOND QUARTER 2025 HIGHLIGHTS:⁽¹⁾


Net Income	Earnings Per Share	PPNR⁽¹⁾	FTE Net Interest Margin⁽¹⁾		Efficiency Ratio⁽¹⁾		Tangible Book Value Per Share⁽¹⁾


$13.0 million	$0.21	$18.6 million	3.54	%	61.01	%	$8.59

CEO COMMENTARY:
“We executed well in the second quarter, generating a higher level of net income and earnings per share, excluding significant charges primarily related to a legal settlement,” said Clay Jones, President and Chief Executive Officer. “We had positive trends in loan growth, an expansion in our net interest margin, and stable asset quality, while deposits declined due to seasonal outflows that we typically see in the second quarter. Our loan growth was well diversified across our portfolios. We continue to successfully add new clients by offering a superior banking experience and generate loan growth while maintaining our disciplined underwriting and pricing criteria.”

“We have a strong balance sheet with a high level of capital and liquidity and healthy asset quality, which provides a strong foundation to weather periods of economic volatility. We are well positioned to navigate the current environment and expect to see positive trends in loan growth, the net interest margin, and expense management,” said Mr. Jones.


LINKED-QUARTER BASIS	YEAR-OVER-YEAR

FINANCIAL HIGHLIGHTS:

• Total revenue of $47.8 million, an increase of 4%, or $1.7 million
• Noninterest expense of $38.3 million includes an accrual of $9.2 million for pre-tax charges primarily related to a legal settlement
• Reported net income of $6.4 million and earnings per share of $0.10, down 45% and 47%, from $11.6 million and $0.19, respectively
• Adjusted net income⁽¹⁾ of $13.0 million and adjusted earnings per share⁽¹⁾ of $0.21, both metrics up 11% from $11.6 million and $0.19, respectively

• Total revenue of $47.8 million, an increase of 15%, or $6.1 million
• Noninterest expense of $38.3 million includes an accrual of $9.2 million for pre-tax charges primarily related to a legal settlement
• Reported net income of $6.4 million and earnings per share of $0.10, down 31% and 33%, from $9.2 million and $0.15, respectively
• Adjusted net income⁽¹⁾ of $13.0 million and adjusted earnings per share⁽¹⁾ of $0.21, both metrics up 40% from $9.2 million and $0.15, respectively

FINANCIAL CONDITION:

• Loans held-for-investment (“HFI”) of $3.5 billion, up $47.4 million or 1%
• Total deposits of $4.6 billion, down $55.9 million, or 1%
• Loan to deposit ratio of 76.38%, up from 74.45%
• Total shareholders’ equity of $694.7 million, down $1.5 million

• Increase in loans HFI of $154.5 million, or 5%

• Increase in total deposits of $182.7 million, or 4%
• Loan to deposit ratio of 76.38%, up from 76.04%
• Increase in total shareholders’ equity of $15.5 million

CREDIT QUALITY:

• Nonperforming assets (“NPAs”) to total assets of 0.11% for both quarters
• NPAs to total assets of 0.11% for both quarters

• Classified assets to total assets of 0.69%, compared to 0.73%
• Classified assets to total assets of 0.69%, compared to 0.64%

KEY PERFORMANCE METRICS:

• FTE net interest margin⁽¹⁾ of 3.54%, an increase from 3.39%
• Common equity tier 1 capital ratio of 13.3%, compared to 13.6%
• Total capital ratio of 15.5%, compared to 15.9%
• Tangible common equity ratio⁽¹⁾ of 9.85%, an increase of 1% from 9.78%

• FTE net interest margin⁽¹⁾ of 3.54%, an increase from 3.26%
• Common equity tier 1 capital ratio of 13.3%, compared to 13.4%
• Total capital ratio of 15.5%, compared to 15.6%
• Tangible common equity ratio⁽¹⁾ of 9.85%, a decrease of 1% from 9.91%

^{(1)This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release. All references to “adjusted” operating metrics exclude the $9.2 million of charges primarily related to a legal settlement in the second quarter and first six months of 2025 as presented in the reconciliation of non-GAAP financial measures at the end of this press release.}

Results of Operations:

Reported net income was $6.4 million, or $0.10 per average diluted common share, for the second quarter of 2025. Adjusted net income⁽²⁾ was $13.0 million, or $0.21 per average diluted common share, for the second quarter of 2025, compared to $11.6 million, or $0.19 per average diluted common share, for the first quarter of 2025, and $9.2 million, or $0.15 per average diluted common share, for the second quarter of 2024. The annualized return on average assets was 0.47% and annualized return on average equity was 3.68% for the second quarter of 2025, compared to 0.85% and 6.81%, respectively, for the first quarter of 2025, and 0.71% and 5.50%, respectively, for the second quarter of 2024. The adjusted annualized return on average assets⁽²⁾ was 0.95% and adjusted annualized return on average tangible common equity⁽²⁾ was 9.92% for the second quarter of 2025, compared to 0.85% and 9.09%, respectively, for the first quarter ended of 2025, and 0.71% and 7.43%, respectively, for the second quarter of 2024.

Reported net income was $18.0 million, or $0.29 per average diluted common share, for the first six months of 2025. Adjusted net income⁽²⁾ was $24.6 million, or $0.40 per average diluted common share, for the first six months of 2025, compared to $19.4 million, or $0.32 per average diluted common share, for the first six months of 2024. The annualized return on average assets was 0.66% and annualized return on average equity was 5.23% for the six months ended June 30, 2025, compared to 0.75% and 5.79%, respectively, for the six months ended June 30, 2024. The adjusted annualized return on average assets⁽²⁾ was 0.90% and annualized return on average tangible common equity⁽²⁾ was 9.51% for the six months ended June 30, 2025, compared to 0.75% and 7.84%, respectively, for the six months ended June 30, 2024.

Total revenue, which is defined as net interest income before provision for credit losses on loans plus noninterest income, increased $1.7 million, or 4%, to $47.8 million for the second quarter of 2025, compared to $46.1 million for the first quarter of 2025, and increased $6.1 million, or 15%, from $41.7 million for the second quarter of 2024. Total revenue increased $9.9 million, or 12%, to $93.8 million for the first six months of 2025, compared to $83.9 million for the first six months of 2024.

For the second quarter and first six months of 2025, the Company’s reported PPNR⁽²⁾, which is defined as total revenue less adjusted noninterest expense⁽²⁾ was $9.4 million and $26.0 million, respectively. The adjusted PPNR⁽²⁾ was $18.6 million for the second quarter of 2025, compared to $16.6 million for the first quarter of 2025, and $13.5 million for the second quarter of 2024. For the six months of 2025, the Company’s adjusted PPNR⁽²⁾ was $35.2 million, compared to $28.1 million for the six months of 2024.

Net interest income totaled $44.8 million for the second quarter of 2025, an increase of $1.4 million, or 3%, compared to $43.4 million for the first quarter of 2025. The FTE net interest margin⁽²⁾ was 3.54% for the second quarter of 2025, an increase over 3.39% for the first quarter of 2025 primarily due to an increase in the average yields and average balances of loans and securities, partially offset by a decrease in the average balances of deposits resulting in a lower average balance of overnight funds.

Net interest income increased $5.9 million, or 15%, to $44.8 million, compared to $38.9 million for the second quarter of 2024. The FTE net interest margin⁽²⁾ increased from 3.23% for the second quarter of 2024 primarily due to lower rates paid on customer deposits, an increase in the average yields and average balances of loans and securities, and an increase in the average balance of deposits resulting in a higher average balance of overnight funds, partially offset by a lower average yield on overnight funds.

For the first six months of 2025, net interest income increased $9.8 million, or 12% to $88.2 million, compared to $78.4 million for the first six months of 2024. The FTE net interest margin⁽²⁾ increased 20 basis points to 3.47% for the first six months of 2025, from 3.27% for the first six months of 2024, primarily due to an increase in the average balances of average interest earning assets, and an increase in the average yields on loans and securities, partially offset by higher rates paid on client deposits and a lower yield on overnight funds.

We recorded a provision for credit losses on loans of $516,000 for the second quarter of 2025, compared to $274,000 for the first quarter of 2025, and $471,000 for the second quarter of 2024. There was a provision for credit losses on loans of $790,000 for the six months ended June 30, 2025, compared to $655,000 for the six months ended June 30, 2024. The increase in the provision for credit losses on loans for the second quarter and first six months of 2025 was primarily due to loan growth.

Total noninterest income increased to $3.0 million for the second quarter of 2025, compared to $2.7 million for the first quarter of 2025, and $2.9 million for the second quarter of 2024, primarily due to higher termination and facility fees. The increase in noninterest income in the second quarter of 2025 was partially offset by a $219,000 gain on proceeds from company-owned life insurance in the second quarter of 2024.

Total noninterest income increased 3% to $5.7 million for the first six months of 2025, compared to $5.5 million for the first six months of 2024, primarily due to higher termination and facility fees, partially offset by a $219,000 gain on proceeds from company-owned life insurance in the first six months of 2024.

⁽²⁾This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release.

Reported noninterest expense for the second quarter of 2025 and first six months of 2025 totaled $38.3 million and $67.8 million, respectively. During the second quarter of 2025, the Company recorded expenses of $9.2 million, primarily due to pre-tax charges related to the settlement of certain litigation matters, including the anticipated settlement of a previously disclosed class action and California Private Attorneys General Act (“PAGA”) lawsuit that alleged the violation of certain California wage-and-hour and related laws and regulations, and charges related to the planned closure of a Bank branch. Adjusted noninterest expense⁽³⁾ was $29.1 million, compared to $29.5 million for the first quarter of 2025, and $28.2 million for the second quarter of 2024. Adjusted noninterest expense⁽³⁾ for the first six months of 2025 was $58.6 million, compared to $55.7 million for the first six months of 2024.

Income tax expense decreased to $2.5 million for the second quarter of 2025, compared to $4.7 million for the first quarter of 2025, and $3.8 million for the second quarter of 2024, primarily due to lower pre-tax income. The effective tax rate for the second quarter of 2025 was 28.5%, compared to 28.8% for the first quarter of 2025, and 29.4% for the second quarter of 2024.

Income tax expense for the six months ended June 30, 2025 was $7.2 million, compared to $8.1 million for the six months ended June 30, 2024. The effective tax rate for six months ended June 30, 2025 was 28.7%, compared to 29.4% for the six months ended June 30, 2024.

The reported efficiency ratio⁽³⁾ for the second quarter and first six month of 2025 was 80.23% and 72.24%, respectively. The adjusted efficiency ratio⁽³⁾ improved to 61.01% for the second quarter of 2025, compared to 63.96% for the first quarter of 2025, as a result of higher total revenue. The adjusted efficiency ratio⁽³⁾ improved from 67.55% for the second quarter of 2024, primarily due to higher total revenue, partially offset by higher noninterest expense. The adjusted efficiency ratio⁽³⁾ improved to 62.45% for the first six months of 2025 from 66.44% for the first six months of 2024, primarily due to higher total revenue, partially offset by higher noninterest expense.

Full time equivalent employees were 350 at both June 30, 2025 and March 31, 2025, and 353 at June 30, 2024.

Financial Condition and Capital Management:

Total assets remained relatively flat at $5.5 billion at both June 30, 2025 and March 31, 2025. Total assets increased 4% from $5.3 billion at June 30, 2024, primarily due to an increase in deposits resulting in an increase in overnight funds, and an increase in loans.

Investment securities available-for-sale (at fair value) decreased to $307.0 million at June 30, 2025, compared to $371.0 million at March 31, 2025, primarily due to maturities and paydowns, partially offset by purchases. Investment securities available-for-sale totaled $273.0 million at June 30, 2024. The pre-tax unrealized loss on the securities available-for-sale portfolio was $448,000, or $396,000 net of taxes, which equaled less than 1% of total shareholders’ equity at June 30, 2025.

During the first six months of 2025, the Company purchased $87.2 million of agency mortgage-backed securities, $79.8 million of collateralized mortgage obligations, and $44.8 million of U.S. Treasury securities, for total purchases of $211.8 million in the available-for-sale portfolio. Securities purchased had a book yield of 4.82% and an average life of 4.55 years.

Investment securities held-to-maturity (at amortized cost, net of allowance for credit losses of ($16,000), totaled $561.2 million at June 30, 2025, compared to $576.7 million at March 31, 2025, and $621.2 million at June 30, 2024. The fair value of the securities held-to-maturity portfolio was $486.5 million at June 30, 2025. The pre-tax unrecognized loss on the securities held-to-maturity portfolio was $74.7 million, or $52.7 million net of taxes, which equaled 7.6% of total shareholders’ equity at June 30, 2025.

The unrealized and unrecognized losses in both the available-for-sale and held-to-maturity portfolios were due to higher interest rates at June 30, 2025 compared to when the securities were purchased. The issuers are of high credit quality and all principal amounts are expected to be repaid when the securities mature. The fair value is expected to recover as the securities approach their maturity date and/or market rates decline.

Loans HFI, net of deferred costs and fees, increased $47.4 million, or 1% to $3.5 billion at June 30, 2025, compared to $3.5 billion at March 31, 2025, and increased $154.5 million, or 5%, from $3.4 billion at June 30, 2024. Loans HFI, excluding residential mortgages, increased $58.3 million, or 2% to $3.1 billion at June 30, 2025, compared to $3.0 billion at March 31, 2025, and increased $184.9 million, or 6%, from $2.9 billion at June 30, 2024.

Commercial and industrial line utilization was 32% at June 30, 2025, compared to 31% at both March 31, 2025, and June 30, 2024. Commercial real estate (“CRE”) loans totaled $2.0 billion at June 30, 2025, of which 31% were owner occupied and 31% were investor CRE loans. Owner occupied CRE loans totaled 31% at March 31, 2025 and 32% at June 30, 2024. Approximately 24% of the Company’s loan portfolio consisted of floating interest rate loans at both June 30, 2025 and March 31, 2025, compared to 27% at June 30, 2024.

At June 30, 2025, paydowns and maturities of investment securities and fixed interest rate loans maturing within one year totaled $311.0 million.

^{(3)This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release.}

Total deposits decreased $55.9 million, or 1%, to $4.6 billion at June 30, 2025, compared to $4.7 billion at March 31, 2025, primarily due to season outflows. Total deposits increased $182.7 million, or 4% from $4.4 billion at June 30, 2024.

The following table shows the Company’s deposit types as a percentage of total deposits at the dates indicated:


	June 30,		March 31,		June 30,
DEPOSITS TYPE % TO TOTAL DEPOSITS	2025		2025		2024
Demand, noninterest-bearing	25	%	24	%	27	%
Demand, interest-bearing	21	%	20	%	21	%
Savings and money market	28	%	29	%	25	%
Time deposits — under $250	1	%	1	%	1	%
Time deposits — $250 and over	4	%	5	%	4	%
Insured Cash Sweep (“ICS”)/Certificate of Deposit Registry
Service (“CDARS”) – interest-bearing demand, money
market and time deposits	21	%	21	%	22	%
Total deposits	100	%	100	%	100	%

The loan to deposit ratio was 76.38% at June 30, 2025, compared to 74.45% at March 31, 2025, and 76.04% at June 30, 2024.

The Company’s total available liquidity and borrowing capacity was $3.1 billion at June 30, 2025, compared to $3.2 billion at March 31, 2025, and $3.0 billion at June 30, 2024.

Total shareholders’ equity was $694.7 million at June 30, 2025, compared to $696.2 million at March 31, 2025, and $679.2 million at June 30, 2024. The change in shareholders’ equity at June 30, 2025 is primarily a function of net income and the decrease in the total accumulated other comprehensive loss, partially offset by dividends to stockholders.

Total accumulated other comprehensive loss of $5.0 million at June 30, 2025 was comprised of $2.5 million in actuarial losses associated with split dollar insurance contracts, $2.2 million in actuarial losses associated with the supplemental executive retirement plan, unrealized losses on securities available-for-sale of $396,000, and a $42,000 unrealized gain on interest-only strip from SBA loans.

The Company’s consolidated capital ratios exceeded regulatory guidelines and the Bank’s capital ratios exceeded regulatory guidelines under the prompt corrective action (“PCA”) regulatory guidelines for a well-capitalized financial institution, and the Basel III minimum regulatory requirements at June 30, 2025.

Reported tangible book value per share⁽⁴⁾ was $8.49 at June 30, 2025. Adjusted tangible book value per share⁽⁴⁾ was $8.59 at June 30, 2025, compared to $8.48 at March 31, 2025, and $8.22 at June 30, 2024.

The Company is authorized to repurchase up to $15.0 million of the Company’s shares of its issued and outstanding common stock under its share repurchase program authorized by the Board of Directors in July 2024. During the second quarter of 2025, the Company repurchased 207,989 shares of its common stock with a weighted average price of $9.19 for a total of $1.9 million. The remaining capacity under this share repurchase program was $13.1 million at June 30, 2025. In July 2025, the Company’s Board of Directors extended the program for one year, expiring on July 31, 2026.

Credit Quality:
The provision for credit losses on loans totaled $516,000 for the second quarter of 2025, compared to a $274,000 provision for credit losses on loans for the first quarter of 2025 and a provision for credit losses on loans of $471,000 for the second quarter of 2024. Net charge-offs totaled $145,000 for the second quarter of 2025, compared to $965,000 for the first quarter of 2025, and $405,000 for the second quarter of 2024.

The provision for credit losses on loans totaled $790,000 for the first six months of 2025, compared to a $655,000 provision for credit losses on loans for the first six months of 2024. Net charge-offs totaled $1.1 million for the first six months of 2025, compared to $659,000 for the first six months of 2024.

The allowance for credit losses on loans (“ACLL”) at June 30, 2025 was $48.6 million, or 1.38% of total loans, representing 787% of total nonperforming loans. The ACLL at March 31, 2025 was $48.3 million, or 1.38% of total loans, representing 765% of total nonperforming loans. The ACLL at June 30, 2024 was $48.0 million, or 1.42% of total loans, representing 795% of total nonperforming loans. The reduction to the allowance for credit on losses on loans reflects our credit assessment and economic factors.

NPAs were $6.2 million at June 30, 2025, compared to $6.3 million at March 31, 2025, and $6.0 million at June 30, 2024. There were no foreclosed assets on the balance sheet at June 30, 2025, March 31, 2025, or June 30, 2024. There were no Shared National Credits (“SNCs”) or material purchased participations included in NPAs or total loans at June 30, 2025, March 31, 2025, or June 30, 2024.

Classified assets totaled $37.5 million, or 0.69% of total assets, at June 30, 2025, compared to $40.0 million, or 0.73% of total assets, at March 31, 2025, and $33.6 million, or 0.64% of total assets, at June 30, 2024.

^{(4)This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release.}

Heritage Commerce Corp, a bank holding company established in October 1997, is the parent company of Heritage Bank of Commerce, established in 1994 and headquartered in San Jose, CA with full-service branches in Danville, Fremont, Gilroy, Hollister, Livermore, Los Altos, Los Gatos, Morgan Hill, Oakland, Palo Alto, Pleasanton, Redwood City, San Francisco, San Jose, San Mateo, San Rafael, and Walnut Creek. Heritage Bank of Commerce is an SBA Preferred Lender. Bay View Funding, a subsidiary of Heritage Bank of Commerce, is based in San Jose, CA and provides business-essential working capital factoring financing to various industries throughout the United States. For more information, please visit www.heritagecommercecorp.com. The contents of our website are not incorporated into, and do not form a part of, this release or of our filings with the Securities and Exchange Commission.

Reclassifications

During the first quarter of 2025, we reclassified Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock dividends from interest income to noninterest income and the related average asset balances were reclassified from interest earning assets to other assets on the “Net Interest Income and Net Interest Margin” tables. The amounts for the prior periods were reclassified to conform to the current presentation. These reclassifications did not affect previously reported net income or shareholders’ equity.

Non-GAAP Financial Measures

Financial results are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and prevailing practices in the banking industry. However, certain non-GAAP performance measures and ratios are used by management to evaluate and measure the Company’s performance. These measures include “adjusted” operating metrics that have been adjusted to exclude notable expenses incurred in the second quarter as well as other performance measures and ratios adjusted for notable items. Management believes these non-GAAP financial measures enhance comparability between periods and in some instances are common in the banking industry. These non-GAAP financial measures should be supplemental to primary GAAP financial measures and should not be read in isolation or relied upon as a substitute for primary GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is presented in the tables at the end of this press release under “Reconciliation of Non-GAAP Financial Measures.”

Forward-Looking Statement Disclaimer

Certain matters discussed in this press release constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are inherently uncertain in that they reflect plans and expectations for future events. These statements may include, among other things, those relating to the Company’s future financial performance, plans and objectives regarding future events, expectations regarding changes in interest rates and market conditions, projected cash flows of our investment securities portfolio, the performance of our loan portfolio, loan growth, expenses, net interest margin, estimated net interest income resulting from a shift in interest rates, expectation of high credit quality issuers ability to repay, as well as statements relating to the anticipated effects on the Company’s financial condition and results of operations from expected developments or events. Any statements that reflect our belief about, confidence in, or expectations for future events, performance or condition should be considered forward-looking statements. Readers should not construe these statements as assurances of a given level of performance, nor as promises that we will take actions that we currently expect to take. All statements are subject to various risks and uncertainties, many of which are outside our control and some of which may fall outside our ability to predict or anticipate. Accordingly, our actual results may differ materially from our projected results, and we may take actions or experience events that we do not currently expect. 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, Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, and include: (i) 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; (ii) 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; (iii) media items and consumer confidence as those factors affect our clients’ confidence in the banking system generally and in our bank specifically; (iv) adequacy of our risk management framework, disclosure controls and procedures and internal control over financial reporting; (v) the effects of recent wildfires affecting Southern California, which have affected certain clients and certain loans secured by mortgages in Los Angeles County, and which are affecting or may, in the future, affect other clients in those and other markets throughout California; (vi) 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; (vii) 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; (viii) political events that have accompanied or that may in the future accompany or result from recent political changes, particularly including sociopolitical events and conditions that result from political conflicts and law enforcement activities that may adversely affect our markets or our clients; (ix) 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; (x) 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; (xi) factors that affect the value and liquidity of our investment portfolios, particularly the values of securities available-for-sale; (xii) 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; (xiii) 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; (xiv) 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; (xv) 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 (xvi) our success in managing the risks involved in the foregoing factors.

Member FDIC

For additional information, email:
InvestorRelations@herbank.com


	For the Quarter Ended:									Percent Change From:						For the Six Months Ended:
CONSOLIDATED INCOME STATEMENTS	June 30,			March 31,			June 30,			March 31,			June 30,			June 30,			June 30,			Percent
(in $000’s, unaudited)	2025			2025			2024			2025			2024			2025			2024			Change
Interest income	$	63,025		$	61,832		$	58,489		2		%	8		%	$	124,857		$	115,450		8		%
Interest expense		18,220			18,472			19,622		(1	)	%	(7	)	%		36,692			37,080		(1	)	%
Net interest income before provision
for credit losses on loans		44,805			43,360			38,867		3		%	15		%		88,165			78,370		12		%
Provision for credit losses on loans		516			274			471		88		%	10		%		790			655		21		%
Net interest income after provision
for credit losses on loans		44,289			43,086			38,396		3		%	15		%		87,375			77,715		12		%
Noninterest income:
Service charges and fees on deposit
accounts		929			892			891		4		%	4		%		1,821			1,768		3		%
FHLB and FRB stock dividends		584			590			588		(1	)	%	(1	)	%		1,174			1,178
Increase in cash surrender value of
life insurance		548			538			521		2		%	5		%		1,086			1,039		5		%
Termination fees		227			87			100		161		%	127		%		314			113		178		%
Gain on sales of SBA loans		87			98			76		(11	)	%	14		%		185			254		(27	)	%
Servicing income		61			82			90		(26	)	%	(32	)	%		143			180		(21	)	%
Gain on proceeds from company-owned
life insurance		—			—			219		N/A			(100	)	%		—			219		(100	)	%
Other		541			409			379		32		%	43		%		950			750		27		%
Total noninterest income		2,977			2,696			2,864		10		%	4		%		5,673			5,501		3		%
Noninterest expense:
Salaries and employee benefits		16,227			16,575			15,794		(2	)	%	3		%		32,802			31,303		5		%
Occupancy and equipment		2,525			2,534			2,689		0		%	(6	)	%		5,059			5,132		(1	)	%
Professional fees		1,819			1,580			1,072		15		%	70		%		3,399			2,399		42		%
Other		17,764			8,767			8,633		103		%	106		%		26,531			16,890		57		%
Total noninterest expense		38,335			29,456			28,188		30		%	36		%		67,791			55,724		22		%
Income before income taxes		8,931			16,326			13,072		(45	)	%	(32	)	%		25,257			27,492		(8	)	%
Income tax expense		2,542			4,700			3,838		(46	)	%	(34	)	%		7,242			8,092		(11	)	%
Net income	$	6,389		$	11,626		$	9,234		(45	)	%	(31	)	%	$	18,015		$	19,400		(7	)	%

PER COMMON SHARE DATA
(unaudited)
Basic earnings per share	$	0.10		$	0.19		$	0.15		(47	)	%	(33	)	%	$	0.29		$	0.32		(9	)	%
Diluted earnings per share	$	0.10		$	0.19		$	0.15		(47	)	%	(33	)	%	$	0.29		$	0.32		(9	)	%
Weighted average shares outstanding – basic		61,508,180			61,479,579			61,279,914		0		%	0		%		61,493,880			61,233,269		0		%
Weighted average shares outstanding – diluted		61,624,600			61,708,361			61,438,088		0		%	0		%		61,664,942			61,446,484		0		%
Common shares outstanding at period-end		61,446,763			61,611,121			61,292,094		0		%	0		%		61,446,763			61,292,094		0		%
Dividend per share	$	0.13		$	0.13		$	0.13		0		%	0		%	$	0.26		$	0.26		0		%
Book value per share	$	11.31		$	11.30		$	11.08		0		%	2		%	$	11.31		$	11.08		2		%
Tangible book value per share⁽¹⁾	$	8.49		$	8.48		$	8.22		0		%	3		%	$	8.49		$	8.22		3		%

KEY PERFORMANCE METRICS
(in $000’s, unaudited)
Annualized return on average equity		3.68	%		6.81	%		5.50	%	(46	)	%	(33	)	%		5.23	%		5.79	%	(10	)	%
Annualized return on average tangible
common equity⁽¹⁾		4.89	%		9.09	%		7.43	%	(46	)	%	(34	)	%		6.97	%		7.84	%	(11	)	%
Annualized return on average assets		0.47	%		0.85	%		0.71	%	(45	)	%	(34	)	%		0.66	%		0.75	%	(12	)	%
Annualized return on average tangible assets⁽¹⁾		0.48	%		0.88	%		0.74	%	(45	)	%	(35	)	%		0.68	%		0.78	%	(13	)	%
Net interest margin (FTE)⁽¹⁾		3.54	%		3.39	%		3.23	%	4		%	10		%		3.47	%		3.27	%	6		%
Total revenue	$	47,782		$	46,056		$	41,731		4		%	15		%		93,838			83,871		12		%
Pre-provision net revenue⁽¹⁾	$	9,447		$	16,600		$	13,543		(43	)	%	(30	)	%		26,047			28,147		(7	)	%
Efficiency ratio⁽¹⁾		80.23	%		63.96	%		67.55	%	25		%	19		%		72.24	%		66.44	%	9		%

AVERAGE BALANCES
(in $000’s, unaudited)
Average assets	$	5,458,420		$	5,559,896		$	5,213,171		(2	)	%	5		%	$	5,508,878		$	5,195,903		6		%
Average tangible assets⁽¹⁾	$	5,284,972		$	5,386,001		$	5,037,673		(2	)	%	5		%	$	5,335,207		$	5,020,134		6		%
Average earning assets	$	5,087,089		$	5,188,317		$	4,840,670		(2	)	%	5		%	$	5,137,424		$	4,825,587		6		%
Average loans held-for-sale	$	2,250		$	2,290		$	1,503		(2	)	%	50		%	$	2,270		$	2,126		7		%
Average loans held-for-investment	$	3,504,518		$	3,429,014		$	3,328,358		2		%	5		%	$	3,466,975		$	3,312,799		5		%
Average deposits	$	4,618,007		$	4,717,517		$	4,394,545		(2	)	%	5		%	$	4,667,487		$	4,377,347		7		%
Average demand deposits – noninterest-bearing	$	1,146,494		$	1,167,330		$	1,127,145		(2	)	%	2		%	$	1,156,854		$	1,152,111		0		%
Average interest-bearing deposits	$	3,471,513		$	3,550,187		$	3,267,400		(2	)	%	6		%	$	3,510,633		$	3,225,236		9		%
Average interest-bearing liabilities	$	3,511,237		$	3,589,872		$	3,306,972		(2	)	%	6		%	$	3,550,338		$	3,264,788		9		%
Average equity	$	697,016		$	692,733		$	675,108		1		%	3		%	$	694,886		$	673,700		3		%
Average tangible common equity⁽¹⁾	$	523,568		$	518,838		$	499,610		1		%	5		%	$	521,215		$	497,931		5		%

^{(1)This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release.}


	For the Quarter Ended:
CONSOLIDATED INCOME STATEMENTS	June 30,			March 31,			December 31,			September 30,			June 30,
(in $000’s, unaudited)	2025			2025			2024			2024			2024
Interest income	$	63,025		$	61,832		$	64,043		$	60,852		$	58,489
Interest expense		18,220			18,472			20,448			21,523			19,622
Net interest income before provision
for credit losses on loans		44,805			43,360			43,595			39,329			38,867
Provision for credit losses on loans		516			274			1,331			153			471
Net interest income after provision
for credit losses on loans		44,289			43,086			42,264			39,176			38,396
Noninterest income:
Service charges and fees on deposit
accounts		929			892			885			908			891
FHLB and FRB stock dividends		584			590			590			586			588
Increase in cash surrender value of
life insurance		548			538			528			530			521
Termination fees		227			87			18			46			100
Gain on sales of SBA loans		87			98			125			94			76
Servicing income		61			82			77			108			90
Gain on proceeds from company-owned
life insurance		—			—			—			—			219
Other		541			409			552			554			379
Total noninterest income		2,977			2,696			2,775			2,826			2,864
Noninterest expense:
Salaries and employee benefits		16,227			16,575			16,976			15,673			15,794
Occupancy and equipment		2,525			2,534			2,495			2,599			2,689
Professional fees		1,819			1,580			1,711			1,306			1,072
Other		17,764			8,767			9,122			7,977			8,633
Total noninterest expense		38,335			29,456			30,304			27,555			28,188
Income before income taxes		8,931			16,326			14,735			14,447			13,072
Income tax expense		2,542			4,700			4,114			3,940			3,838
Net income	$	6,389		$	11,626		$	10,621		$	10,507		$	9,234

PER COMMON SHARE DATA
(unaudited)
Basic earnings per share	$	0.10		$	0.19		$	0.17		$	0.17		$	0.15
Diluted earnings per share	$	0.10		$	0.19		$	0.17		$	0.17		$	0.15
Weighted average shares outstanding – basic		61,508,180			61,479,579			61,320,505			61,295,877			61,279,914
Weighted average shares outstanding – diluted		61,624,600			61,708,361			61,679,735			61,546,157			61,438,088
Common shares outstanding at period-end		61,446,763			61,611,121			61,348,095			61,297,344			61,292,094
Dividend per share	$	0.13		$	0.13		$	0.13		$	0.13		$	0.13
Book value per share	$	11.31		$	11.30		$	11.24		$	11.18		$	11.08
Tangible book value per share⁽¹⁾	$	8.49		$	8.48		$	8.41		$	8.33		$	8.22

KEY PERFORMANCE METRICS
(in $000’s, unaudited)
Annualized return on average equity		3.68	%		6.81	%		6.16	%		6.14	%		5.50	%
Annualized return on average tangible
common equity⁽¹⁾		4.89	%		9.09	%		8.25	%		8.27	%		7.43	%
Annualized return on average assets		0.47	%		0.85	%		0.75	%		0.78	%		0.71	%
Annualized return on average tangible assets⁽¹⁾		0.48	%		0.88	%		0.78	%		0.81	%		0.74	%
Net interest margin (FTE)⁽¹⁾		3.54	%		3.39	%		3.32	%		3.15	%		3.23	%
Total revenue	$	47,782		$	46,056		$	46,370		$	42,155		$	41,731
Pre-provision net revenue⁽¹⁾	$	9,447		$	16,600		$	16,066		$	14,600		$	13,543
Efficiency ratio⁽¹⁾		80.23	%		63.96	%		65.35	%		65.37	%		67.55	%

AVERAGE BALANCES
(in $000’s, unaudited)
Average assets	$	5,458,420		$	5,559,896		$	5,607,840		$	5,352,067		$	5,213,171
Average tangible assets⁽¹⁾	$	5,284,972		$	5,386,001		$	5,433,439		$	5,177,114		$	5,037,673
Average earning assets	$	5,087,089		$	5,188,317		$	5,235,986		$	4,980,082		$	4,840,670
Average loans held-for-sale	$	2,250		$	2,290		$	2,260		$	1,493		$	1,503
Average loans held-for-investment	$	3,504,518		$	3,429,014		$	3,388,729		$	3,359,647		$	3,328,358
Average deposits	$	4,618,007		$	4,717,517		$	4,771,491		$	4,525,946		$	4,394,545
Average demand deposits – noninterest-bearing	$	1,146,494		$	1,167,330		$	1,222,393		$	1,172,304		$	1,127,145
Average interest-bearing deposits	$	3,471,513		$	3,550,187		$	3,549,098		$	3,353,642		$	3,267,400
Average interest-bearing liabilities	$	3,511,237		$	3,589,872		$	3,588,755		$	3,393,264		$	3,306,972
Average equity	$	697,016		$	692,733		$	686,263		$	680,404		$	675,108
Average tangible common equity⁽¹⁾	$	523,568		$	518,838		$	511,862		$	505,451		$	499,610

^{(1)This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release.}


	End of Period:									Percent Change From:
CONSOLIDATED BALANCE SHEETS	June 30,			March 31,			June 30,			March 31,			June 30,
(in $000’s, unaudited)	2025			2025			2024			2025			2024
ASSETS
Cash and due from banks	$	55,360		$	44,281		$	37,497		25		%	48		%
Other investments and interest-bearing deposits
in other financial institutions		666,432			700,769			610,763		(5	)	%	9		%
Securities available-for-sale, at fair value		307,035			370,976			273,043		(17	)	%	12		%
Securities held-to-maturity, at amortized cost		561,205			576,718			621,178		(3	)	%	(10	)	%
Loans – held-for-sale – SBA, including deferred costs		1,156			1,884			1,899		(39	)	%	(39	)	%
Loans – held-for-investment:
Commercial		492,231			489,241			477,929		1		%	3		%
Real estate:
CRE – owner occupied		627,810			616,825			594,504		2		%	6		%
CRE – non-owner occupied		1,390,419			1,363,275			1,283,323		2		%	8		%
Land and construction		149,460			136,106			125,374		10		%	19		%
Home equity		120,763			119,138			126,562		1		%	(5	)	%
Multifamily		285,016			284,510			268,968		0		%	6		%
Residential mortgages		454,419			465,330			484,809		(2	)	%	(6	)	%
Consumer and other		14,661			12,741			18,758		15		%	(22	)	%
Loans		3,534,779			3,487,166			3,380,227		1		%	5		%
Deferred loan fees, net		(446	)		(268	)		(434	)	66		%	3		%
Total loans – held-for-investment, net of deferred fees		3,534,333			3,486,898			3,379,793		1		%	5		%
Allowance for credit losses on loans		(48,633	)		(48,262	)		(47,954	)	1		%	1		%
Loans, net		3,485,700			3,438,636			3,331,839		1		%	5		%
Company-owned life insurance		82,296			81,749			80,153		1		%	3		%
Premises and equipment, net		9,765			9,772			10,310		0		%	(5	)	%
Goodwill		167,631			167,631			167,631		0		%	0		%
Other intangible assets		5,532			5,986			7,521		(8	)	%	(26	)	%
Accrued interest receivable and other assets		125,125			115,853			121,190		8		%	3		%
Total assets	$	5,467,237		$	5,514,255		$	5,263,024		(1	)	%	4		%

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, noninterest-bearing	$	1,151,242		$	1,128,593		$	1,187,320		2		%	(3	)	%
Demand, interest-bearing		955,504			949,068			928,246		1		%	3		%
Savings and money market		1,320,142			1,353,293			1,126,520		(2	)	%	17		%
Time deposits – under $250		35,356			37,592			39,046		(6	)	%	(9	)	%
Time deposits – $250 and over		210,818			213,357			203,886		(1	)	%	3		%
ICS/CDARS – interest-bearing demand, money market
and time deposits		954,272			1,001,365			959,592		(5	)	%	(1	)	%
Total deposits		4,627,334			4,683,268			4,444,610		(1	)	%	4		%
Subordinated debt, net of issuance costs		39,728			39,691			39,577		0		%	0		%
Accrued interest payable and other liabilities		105,471			95,106			99,638		11		%	6		%
Total liabilities		4,772,533			4,818,065			4,583,825		(1	)	%	4		%

Shareholders’ Equity:
Common stock		509,888			511,596			508,343		0		%	0		%
Retained earnings		189,794			191,401			182,571		(1	)	%	4		%
Accumulated other comprehensive loss		(4,978	)		(6,807	)		(11,715	)	(27	)	%	(58	)	%
Total shareholders’ equity		694,704			696,190			679,199		0		%	2		%
Total liabilities and shareholders’ equity	$	5,467,237		$	5,514,255		$	5,263,024		(1	)	%	4		%


	End of Period:
CONSOLIDATED BALANCE SHEETS	June 30,			March 31,			December 31,			September 30,			June 30,
(in $000’s, unaudited)	2025			2025			2024			2024			2024
ASSETS
Cash and due from banks	$	55,360		$	44,281		$	29,864		$	49,722		$	37,497
Other investments and interest-bearing deposits
in other financial institutions		666,432			700,769			938,259			906,588			610,763
Securities available-for-sale, at fair value		307,035			370,976			256,274			237,612			273,043
Securities held-to-maturity, at amortized cost		561,205			576,718			590,016			604,193			621,178
Loans – held-for-sale – SBA, including deferred costs		1,156			1,884			2,375			1,649			1,899
Loans – held-for-investment:
Commercial		492,231			489,241			531,350			481,266			477,929
Real estate:
CRE – owner occupied		627,810			616,825			601,636			602,062			594,504
CRE – non-owner occupied		1,390,419			1,363,275			1,341,266			1,310,578			1,283,323
Land and construction		149,460			136,106			127,848			125,761			125,374
Home equity		120,763			119,138			127,963			124,090			126,562
Multifamily		285,016			284,510			275,490			273,103			268,968
Residential mortgages		454,419			465,330			471,730			479,524			484,809
Consumer and other		14,661			12,741			14,837			14,179			18,758
Loans		3,534,779			3,487,166			3,492,120			3,410,563			3,380,227
Deferred loan fees, net		(446	)		(268	)		(183	)		(327	)		(434	)
Total loans – held-for-investment, net of deferred fees		3,534,333			3,486,898			3,491,937			3,410,236			3,379,793
Allowance for credit losses on loans		(48,633	)		(48,262	)		(48,953	)		(47,819	)		(47,954	)
Loans, net		3,485,700			3,438,636			3,442,984			3,362,417			3,331,839
Company-owned life insurance		82,296			81,749			81,211			80,682			80,153
Premises and equipment, net		9,765			9,772			10,140			10,398			10,310
Goodwill		167,631			167,631			167,631			167,631			167,631
Other intangible assets		5,532			5,986			6,439			6,966			7,521
Accrued interest receivable and other assets		125,125			115,853			119,813			123,738			121,190
Total assets	$	5,467,237		$	5,514,255		$	5,645,006		$	5,551,596		$	5,263,024

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, noninterest-bearing	$	1,151,242		$	1,128,593		$	1,214,192		$	1,272,139		$	1,187,320
Demand, interest-bearing		955,504			949,068			936,587			913,910			928,246
Savings and money market		1,320,142			1,353,293			1,325,923			1,309,676			1,126,520
Time deposits – under $250		35,356			37,592			38,988			39,060			39,046
Time deposits – $250 and over		210,818			213,357			206,755			196,945			203,886
ICS/CDARS – interest-bearing demand, money market
and time deposits		954,272			1,001,365			1,097,586			997,803			959,592
Total deposits		4,627,334			4,683,268			4,820,031			4,729,533			4,444,610
Subordinated debt, net of issuance costs		39,728			39,691			39,653			39,615			39,577
Accrued interest payable and other liabilities		105,471			95,106			95,595			97,096			99,638
Total liabilities		4,772,533			4,818,065			4,955,279			4,866,244			4,583,825

Shareholders’ Equity:
Common stock		509,888			511,596			510,070			509,134			508,343
Retained earnings		189,794			191,401			187,762			185,110			182,571
Accumulated other comprehensive loss		(4,978	)		(6,807	)		(8,105	)		(8,892	)		(11,715	)
Total shareholders’ equity		694,704			696,190			689,727			685,352			679,199
Total liabilities and shareholders’ equity	$	5,467,237		$	5,514,255		$	5,645,006		$	5,551,596		$	5,263,024


	At or For the Quarter Ended:									Percent Change From:
CREDIT QUALITY DATA	June 30,			March 31,			June 30,			March 31,			June 30,
(in $000’s, unaudited)	2025			2025			2024			2025			2024
Nonaccrual loans – held-for-investment:
Land and construction loans	$	4,198		$	4,793		$	4,774		(12	)	%	(12	)	%
Home equity and other loans		728			927			108		(21	)	%	574		%
Residential mortgages		607			—			—		N/A			N/A
Commercial loans		491			324			900		52		%	(45	)	%
CRE loans		31			—			—		N/A			N/A
Total nonaccrual loans – held-for-investment:		6,055			6,044			5,782		0		%	5		%
Loans over 90 days past due
and still accruing		123			268			248		(54	)	%	(50	)	%
Total nonperforming loans		6,178			6,312			6,030		(2	)	%	2		%
Foreclosed assets		—			—			—		N/A			N/A
Total nonperforming assets	$	6,178		$	6,312		$	6,030		(2	)	%	2		%
Net charge-offs during the quarter	$	145		$	965		$	405		(85	)	%	(64	)	%
Provision for credit losses on loans during the quarter	$	516		$	274		$	471		88		%	10		%
Allowance for credit losses on loans	$	48,633		$	48,262		$	47,954		1		%	1		%
Classified assets	$	37,525		$	40,034		$	33,605		(6	)	%	12		%
Allowance for credit losses on loans to total loans		1.38	%		1.38	%		1.42	%	0		%	(3	)	%
Allowance for credit losses on loans to total nonperforming loans		787.20	%		764.61	%		795.26	%	3		%	(1	)	%
Nonperforming assets to total assets		0.11	%		0.11	%		0.11	%	0		%	0		%
Nonperforming loans to total loans		0.17	%		0.18	%		0.18	%	(6	)	%	(6	)	%
Classified assets to Heritage Commerce Corp
Tier 1 capital plus allowance for credit losses on loans		7	%		7	%		6	%	0		%	17		%
Classified assets to Heritage Bank of Commerce
Tier 1 capital plus allowance for credit losses on loans		6	%		7	%		6	%	(14	)	%	0		%

OTHER PERIOD-END STATISTICS
(in $000’s, unaudited)
Heritage Commerce Corp:
Tangible common equity ⁽¹⁾	$	521,541		$	522,573		$	504,047		0		%	3		%
Shareholders’ equity / total assets		12.71	%		12.63	%		12.91	%	1		%	(2	)	%
Tangible common equity / tangible assets ⁽¹⁾		9.85	%		9.78	%		9.91	%	1		%	(1	)	%
Loan to deposit ratio		76.38	%		74.45	%		76.04	%	3		%	0		%
Noninterest-bearing deposits / total deposits		24.88	%		24.10	%		26.71	%	3		%	(7	)	%
Total capital ratio		15.5	%		15.9	%		15.6	%	(3	)	%	(1	)	%
Tier 1 capital ratio		13.3	%		13.6	%		13.4	%	(2	)	%	(1	)	%
Common Equity Tier 1 capital ratio		13.3	%		13.6	%		13.4	%	(2	)	%	(1	)	%
Tier 1 leverage ratio		9.9	%		9.8	%		10.2	%	1		%	(3	)	%
Heritage Bank of Commerce:
Tangible common equity / tangible assets ⁽¹⁾		10.28	%		10.15	%		10.28	%	1		%	0		%
Total capital ratio		15.1	%		15.4	%		15.1	%	(2	)	%	0		%
Tier 1 capital ratio		13.8	%		14.1	%		13.9	%	(2	)	%	(1	)	%
Common Equity Tier 1 capital ratio		13.8	%		14.1	%		13.9	%	(2	)	%	(1	)	%
Tier 1 leverage ratio		10.4	%		10.2	%		10.6	%	2		%	(2	)	%

^{(1)This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release.}


	At or For the Quarter Ended:
CREDIT QUALITY DATA	June 30,			March 31,			December 31,			September 30,			June 30,
(in $000’s, unaudited)	2025			2025			2024			2024			2024
Nonaccrual loans – held-for-investment:
Land and construction loans	$	4,198		$	4,793		$	5,874		$	5,862		$	4,774
Home equity and other loans		728			927			290			84			108
Residential mortgages		607			—			—			—			—
Commercial loans		491			324			1,014			752			900
CRE loans		31			—			—			—			—
Total nonaccrual loans – held-for-investment:		6,055			6,044			7,178			6,698			5,782
Loans over 90 days past due
and still accruing		123			268			489			460			248
Total nonperforming loans		6,178			6,312			7,667			7,158			6,030
Foreclosed assets		—			—			—			—			—
Total nonperforming assets	$	6,178		$	6,312		$	7,667		$	7,158		$	6,030
Net charge-offs during the quarter	$	145		$	965		$	197		$	288		$	405
Provision for credit losses on loans during the quarter	$	516		$	274		$	1,331		$	153		$	471
Allowance for credit losses on loans	$	48,633		$	48,262		$	48,953		$	47,819		$	47,954
Classified assets	$	37,525		$	40,034		$	41,661		$	32,609		$	33,605
Allowance for credit losses on loans to total loans		1.38	%		1.38	%		1.40	%		1.40	%		1.42	%
Allowance for credit losses on loans to total nonperforming loans		787.20	%		764.61	%		638.49	%		668.05	%		795.26	%
Nonperforming assets to total assets		0.11	%		0.11	%		0.14	%		0.13	%		0.11	%
Nonperforming loans to total loans		0.17	%		0.18	%		0.22	%		0.21	%		0.18	%
Classified assets to Heritage Commerce Corp
Tier 1 capital plus allowance for credit losses on loans		7	%		7	%		7	%		6	%		6	%
Classified assets to Heritage Bank of Commerce
Tier 1 capital plus allowance for credit losses on loans		6	%		7	%		7	%		6	%		6	%

OTHER PERIOD-END STATISTICS
(in $000’s, unaudited)
Heritage Commerce Corp:
Tangible common equity ⁽¹⁾	$	521,541		$	522,573		$	515,657		$	510,755		$	504,047
Shareholders’ equity / total assets		12.71	%		12.63	%		12.22	%		12.35	%		12.91	%
Tangible common equity / tangible assets ⁽¹⁾		9.85	%		9.78	%		9.43	%		9.50	%		9.91	%
Loan to deposit ratio		76.38	%		74.45	%		72.45	%		72.11	%		76.04	%
Noninterest-bearing deposits / total deposits		24.88	%		24.10	%		25.19	%		26.90	%		26.71	%
Total capital ratio		15.5	%		15.9	%		15.6	%		15.6	%		15.6	%
Tier 1 capital ratio		13.3	%		13.6	%		13.4	%		13.4	%		13.4	%
Common Equity Tier 1 capital ratio		13.3	%		13.6	%		13.4	%		13.4	%		13.4	%
Tier 1 leverage ratio		9.9	%		9.8	%		9.6	%		10.0	%		10.2	%
Heritage Bank of Commerce:
Tangible common equity / tangible assets ⁽¹⁾		10.28	%		10.15	%		9.79	%		9.86	%		10.28	%
Total capital ratio		15.1	%		15.4	%		15.1	%		15.1	%		15.1	%
Tier 1 capital ratio		13.8	%		14.1	%		13.9	%		13.9	%		13.9	%
Common Equity Tier 1 capital ratio		13.8	%		14.1	%		13.9	%		13.9	%		13.9	%
Tier 1 leverage ratio		10.4	%		10.2	%		10.0	%		10.4	%		10.6	%

^{(1)This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial Measures” in this press release.}


	For the Quarter Ended								For the Quarter Ended
	June 30, 2025								March 31, 2025
				Interest			Average					Interest			Average
NET INTEREST INCOME AND NET INTEREST MARGIN	Average			Income/			Yield/		Average			Income/			Yield/
(in $000’s, unaudited)	Balance			Expense			Rate		Balance			Expense			Rate
Assets:
Loans, core bank	$	3,020,534			41,738		5.54	%	$	2,945,072		$	39,758		5.47	%
Prepayment fees		—			473		0.06	%		—			224		0.03	%
Bay View Funding factored receivables		67,756			3,347		19.81	%		60,250			2,942		19.80	%
Purchased residential mortgages		420,280			3,548		3.39	%		427,963			3,597		3.41	%
Loan fair value mark / accretion		(1,802	)		172		0.02	%		(1,981	)		181		0.02	%
Loans, gross ⁽¹⁾⁽²⁾		3,506,768			49,278		5.64	%		3,431,304			46,702		5.52	%
Securities – taxable		902,642			6,346		2.82	%		876,092			5,559		2.57	%
Securities – exempt from Federal tax ⁽³⁾		30,259			272		3.61	%		30,480			275		3.66	%
Other investments and interest-bearing deposits
in other financial institutions		647,420			7,186		4.45	%		850,441			9,354		4.46	%
Total interest earning assets ⁽³⁾		5,087,089			63,082		4.97	%		5,188,317			61,890		4.84	%
Cash and due from banks		31,044								31,869
Premises and equipment, net		9,958								10,007
Goodwill and other intangible assets		173,448								173,895
Other assets		156,881								155,808
Total assets	$	5,458,420							$	5,559,896

Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing	$	1,146,494							$	1,167,330

Demand, interest-bearing		949,867			1,484		0.63	%		944,375			1,438		0.62	%
Savings and money market		1,313,054			8,205		2.51	%		1,323,038			8,073		2.47	%
Time deposits – under $100		11,456			49		1.72	%		11,383			47		1.67	%
Time deposits – $100 and over		231,644			1,995		3.45	%		234,421			2,129		3.68	%
ICS/CDARS – interest-bearing demand, money market
and time deposits		965,492			5,949		2.47	%		1,036,970			6,248		2.44	%
Total interest-bearing deposits		3,471,513			17,682		2.04	%		3,550,187			17,935		2.05	%
Total deposits		4,618,007			17,682		1.54	%		4,717,517			17,935		1.54	%

Short-term borrowings		19			—		0.00	%		18			—		0.00	%
Subordinated debt, net of issuance costs		39,705			538		5.43	%		39,667			537		5.49	%
Total interest-bearing liabilities		3,511,237			18,220		2.08	%		3,589,872			18,472		2.09	%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds		4,657,731			18,220		1.57	%		4,757,202			18,472		1.57	%
Other liabilities		103,673								109,961
Total liabilities		4,761,404								4,867,163
Shareholders’ equity		697,016								692,733
Total liabilities and shareholders’ equity	$	5,458,420							$	5,559,896

Net interest income / margin ⁽³⁾					44,862		3.54	%					43,418		3.39	%
Less tax equivalent adjustment ⁽³⁾					(57	)							(58	)
Net interest income				$	44,805		3.53	%				$	43,360		3.39	%

^{(1)Includes loans held-for-sale. Nonaccrual loans are included in average balances.}
^{(2)Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $253,000 for the second quarter of 2025, compared to $214,000 for the first quarter of 2025. Prepayment fees totaled $473,000 for the second quarter of 2025, compared to $224,000 for the first quarter of 2025.}
^{(3)Reflects the FTE adjustment for Federal tax-exempt income based on a 21% tax rate. This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial
Measures” in this press release.}


	For the Quarter Ended								For the Quarter Ended
	June 30, 2025								June 30, 2024
				Interest			Average					Interest			Average
NET INTEREST INCOME AND NET INTEREST MARGIN	Average			Income/			Yield/		Average			Income/			Yield/
(in $000’s, unaudited)	Balance			Expense			Rate		Balance			Expense			Rate
Assets:
Loans, core bank	$	3,020,534		$	41,738		5.54	%	$	2,830,260		$	38,496		5.47	%
Prepayment fees		—			473		0.06	%		—			54		0.01	%
Bay View Funding factored receivables		67,756			3,347		19.81	%		54,777			2,914		21.40	%
Purchased residential mortgages		420,280			3,548		3.39	%		447,687			3,739		3.36	%
Loan fair value mark / accretion		(1,802	)		172		0.02	%		(2,863	)		267		0.04	%
Loans, gross ⁽¹⁾⁽²⁾		3,506,768			49,278		5.64	%		3,329,861			45,470		5.49	%
Securities – taxable		902,642			6,346		2.82	%		942,532			5,483		2.34	%
Securities – exempt from Federal tax ⁽³⁾		30,259			272		3.61	%		31,803			285		3.60	%
Other investments and interest-bearing deposits
in other financial institutions		647,420			7,186		4.45	%		536,474			7,311		5.48	%
Total interest earning assets ⁽³⁾		5,087,089			63,082		4.97	%		4,840,670			58,549		4.86	%
Cash and due from banks		31,044								33,419
Premises and equipment, net		9,958								10,216
Goodwill and other intangible assets		173,448								175,498
Other assets		156,881								153,368
Total assets	$	5,458,420							$	5,213,171

Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing	$	1,146,494							$	1,127,145

Demand, interest-bearing		949,867			1,484		0.63	%		932,100			1,719		0.74	%
Savings and money market		1,313,054			8,205		2.51	%		1,104,589			7,867		2.86	%
Time deposits – under $100		11,456			49		1.72	%		10,980			46		1.68	%
Time deposits – $100 and over		231,644			1,995		3.45	%		228,248			2,245		3.96	%
ICS/CDARS – interest-bearing demand, money market
and time deposits		965,492			5,949		2.47	%		991,483			7,207		2.92	%
Total interest-bearing deposits		3,471,513			17,682		2.04	%		3,267,400			19,084		2.35	%
Total deposits		4,618,007			17,682		1.54	%		4,394,545			19,084		1.75	%

Short-term borrowings		19			—		0.00	%		19			—		0.00	%
Subordinated debt, net of issuance costs		39,705			538		5.43	%		39,553			538		5.47	%
Total interest-bearing liabilities		3,511,237			18,220		2.08	%		3,306,972			19,622		2.39	%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds		4,657,731			18,220		1.57	%		4,434,117			19,622		1.78	%
Other liabilities		103,673								103,946
Total liabilities		4,761,404								4,538,063
Shareholders’ equity		697,016								675,108
Total liabilities and shareholders’ equity	$	5,458,420							$	5,213,171

Net interest income / margin ⁽³⁾					44,862		3.54	%					38,927		3.23	%
Less tax equivalent adjustment ⁽³⁾					(57	)							(60	)
Net interest income				$	44,805		3.53	%				$	38,867		3.23	%

^{(1)Includes loans held-for-sale. Nonaccrual loans are included in average balances.}
^{(2)Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $253,000 for the second quarter of 2025, compared to $117,000 for the second quarter of 2024. Prepayment fees totaled $473,000 for the second quarter of 2025, compared to $54,000 for the second quarter of 2024.}
^{(3)Reflects the FTE adjustment for Federal tax-exempt income based on a 21% tax rate. This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial}^{Measures” in this press release.}


	For the Six Months Ended								For the Six Months Ended
	June 30, 2025								June 30, 2024
				Interest			Average					Interest			Average
NET INTEREST INCOME AND NET INTEREST MARGIN	Average			Income/			Yield/		Average			Income/			Yield/
(in $000’s, unaudited)	Balance			Expense			Rate		Balance			Expense			Rate
Assets:
Loans, core bank	$	2,983,011		$	81,496		5.51	%	$	2,812,805		$	76,217		5.45	%
Prepayment fees		—			697		0.05	%		—			78		0.01	%
Bay View Funding factored receivables		64,024			6,289		19.81	%		54,144			5,752		21.36	%
Purchased residential mortgages		424,101			7,145		3.40	%		450,964			7,527		3.36	%
Loan fair value mark / accretion		(1,891	)		353		0.02	%		(2,988	)		496		0.04	%
Loans, gross ⁽¹⁾⁽²⁾		3,469,245			95,980		5.58	%		3,314,925			90,070		5.46	%
Securities – taxable		889,440			11,905		2.70	%		992,508			11,666		2.36	%
Securities – exempt from Federal tax ⁽³⁾		30,369			547		3.63	%		31,871			571		3.60	%
Other investments, interest-bearing deposits in other
financial institutions and Federal funds sold		748,370			16,540		4.46	%		486,283			13,263		5.48	%
Total interest earning assets ⁽³⁾		5,137,424			124,972		4.91	%		4,825,587			115,570		4.82	%
Cash and due from banks		31,454								33,316
Premises and equipment, net		9,982								10,115
Goodwill and other intangible assets		173,671								175,769
Other assets		156,347								151,116
Total assets	$	5,508,878							$	5,195,903

Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing	$	1,156,854							$	1,152,111

Demand, interest-bearing		947,137			2,922		0.62	%		926,074			3,273		0.71	%
Savings and money market		1,318,018			16,278		2.49	%		1,086,085			14,516		2.69	%
Time deposits – under $100		11,420			96		1.70	%		10,962			88		1.61	%
Time deposits – $100 and over		233,025			4,124		3.57	%		224,730			4,309		3.86	%
ICS/CDARS – interest-bearing demand, money market
and time deposits		1,001,033			12,197		2.46	%		977,385			13,818		2.84	%
Total interest-bearing deposits		3,510,633			35,617		2.05	%		3,225,236			36,004		2.24	%
Total deposits		4,667,487			35,617		1.54	%		4,377,347			36,004		1.65	%

Short-term borrowings		19			—		0.00	%		17			—		0.00	%
Subordinated debt, net of issuance costs		39,686			1,075		5.46	%		39,535			1,076		5.47	%
Total interest-bearing liabilities		3,550,338			36,692		2.08	%		3,264,788			37,080		2.28	%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds		4,707,192			36,692		1.57	%		4,416,899			37,080		1.69	%
Other liabilities		106,800								105,304
Total liabilities		4,813,992								4,522,203
Shareholders’ equity		694,886								673,700
Total liabilities and shareholders’ equity	$	5,508,878							$	5,195,903

Net interest income / margin ⁽³⁾					88,280		3.47	%					78,490		3.27	%
Less tax equivalent adjustment ⁽³⁾					(115	)							(120	)
Net interest income				$	88,165		3.46	%				$	78,370		3.27	%

^{(1)Includes loans held-for-sale. Nonaccrual loans are included in average balances.}
^{(2)Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $467,000 for the first six months of 2025, compared to $277,000}^{for the six months of 2024. Prepayment fees totaled $697,000 for the first six months of 2025, compared to $78,000 for the first six months of 2024.}
^{(3)Reflects the FTE adjustment for Federal tax-exempt income based on a 21% tax rate. This is a non-GAAP financial measure as defined and discussed under “Non-GAAP Financial}
^{Measures” in this press release.}

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Management considers net income and earnings per share adjusted to exclude the $9.2 million of charges primarily related to a legal settlement in the second quarter and first six months of 2025 as a useful measurement of the Company’s profitability compared to prior periods.

The following table summarizes components of net income and diluted earnings per share for the periods indicated:


NET INCOME AND	For the Quarter Ended:
DILUTED EARNINGS PER SHARE	June 30,			March 31,		December 31,		September 30,		June 30,
(in $000’s, except per share amounts, unaudited)	2025			2025			2024	2024		2024
Reported net income (GAAP)	$	6,389		$	11,626	$	10,621	$	10,507	$	9,234
Add: pre-tax legal settlement and other charges		9,184			—		—		—		—
Less: related income taxes		(2,618	)		—		—		—		—
Adjusted net income (non-GAAP)	$	12,955		$	11,626	$	10,621	$	10,507	$	9,234

Weighted average shares outstanding – diluted		61,624,600			61,708,361		61,679,735		61,546,157		61,438,088

Reported diluted earnings per share	$	0.10		$	0.19	$	0.17	$	0.17	$	0.15

Adjusted diluted earnings per share	$	0.21		$	0.19	$	0.17	$	0.17	$	0.15


NET INCOME AND	For the Six Months Ended:
DILUTED EARNINGS PER SHARE	June 30,			June 30,
(in $000’s, except per share amounts, unaudited)	2025			2024
Reported net income (GAAP)	$	18,015		$	19,400
Add: pre-tax legal settlement and other charges		9,184			—
Less: related income taxes		(2,618	)		—
Adjusted net income (non-GAAP)	$	24,581		$	19,400

Weighted average shares outstanding – diluted		61,664,942			61,446,484

Reported diluted earnings per share	$	0.29		$	0.32

Adjusted diluted earnings per share	$	0.40		$	0.32

Management considers tangible book value per share as a useful measurement of the Company’s equity. The Company references the return on average tangible common equity and the return on average tangible assets as measurements of profitability.

The following table summarizes components of the tangible book value per share at the dates indicated:


TANGIBLE BOOK VALUE PER SHARE	June 30,			March 31,			December 31,			September 30,			June 30,
(in $000’s, unaudited)	2025			2025			2025			2024			2024
Capital components:
Total equity (GAAP)	$	694,704		$	696,190		$	689,727		$	685,352		$	679,199
Less: preferred stock		—			—			—			—			—
Total common equity		694,704			696,190			689,727			685,352			679,199
Less: goodwill		(167,631	)		(167,631	)		(167,631	)		(167,631	)		(167,631	)
Less: other intangible assets		(5,532	)		(5,986	)		(6,439	)		(6,966	)		(7,521	)
Reported tangible common equity (non-GAAP)		521,541			522,573			515,657			510,755			504,047
Add: pre-tax legal settlement and other charges		9,184			—			—			—			—
Less: related income taxes		(2,618	)		—			—			—			—
Adjusted tangible common equity (non-GAAP)	$	528,107		$	522,573		$	515,657		$	510,755		$	504,047

Common shares outstanding at period-end		61,446,763			61,611,121			61,348,095			61,297,344			61,292,094

Reported tangible book value per share (non-GAAP)	$	8.49		$	8.48		$	8.41		$	8.33		$	8.22

Adjusted tangible book value per share (non-GAAP)	$	8.59		$	8.48		$	8.41		$	8.33		$	8.22

The following tables summarize components of the annualized return on average equity, annualized return on average tangible common equity and the annualized return on average assets for the periods indicated:


RETURN ON AVERAGE TANGIBLE COMMON	For the Quarter Ended:
EQUITY AND AVERAGE ASSETS	June 30,				March 31,				December 31,				September 30,				June 30,
(in $000’s, unaudited)	2025				2025					2024			2024				2024
Reported net income (GAAP)	$	6,389			$	11,626			$	10,621			$	10,507			$	9,234
Add: pre-tax legal settlement and other charges		9,184				—				—				—				—
Less: related income taxes		(2,618	)			—				—				—				—
Adjusted net income (non-GAAP)	$	12,955			$	11,626			$	10,621			$	10,507			$	9,234

Average tangible common equity components:
Average equity (GAAP)	$	697,016			$	692,733			$	686,263			$	680,404			$	675,108
Less: goodwill		(167,631	)			(167,631	)			(167,631	)			(167,631	)			(167,631	)
Less: other intangible assets		(5,817	)			(6,264	)			(6,770	)			(7,322	)			(7,867	)
Total average tangible common equity (non-GAAP)	$	523,568			$	518,838			$	511,862			$	505,451			$	499,610

Annualized return on average equity (GAAP)		3.68		%		6.81		%		6.16		%		6.14		%		5.50		%

Reported annualized return on average
tangible common equity (non-GAAP)		4.89		%		9.09		%		8.25		%		8.27		%		7.43		%

Adjusted annualized return on average
tangible common equity (non-GAAP)		9.92		%		9.09		%		8.25		%		8.27		%		7.43		%

Average assets (GAAP)	$	5,458,420			$	5,559,896			$	5,607,840			$	5,352,067			$	5,213,171

Reported annualized return on average assets (GAAP)		0.47		%		0.85		%		0.75		%		0.78		%		0.71		%

Adjusted annualized return on average assets (non-GAAP)		0.95		%		0.85		%		0.75		%		0.78		%		0.71		%


RETURN ON AVERAGE TANGIBLE COMMON	For the Six Months Ended:
EQUITY AND AVERAGE ASSETS	June 30,				June 30,
(in $000’s, unaudited)	2025				2024
Reported net income (GAAP)	$	18,015			$	19,400
Add: pre-tax legal settlement and other charges		9,184				—
Less: related income taxes		(2,618	)			—
Adjusted net income (non-GAAP)	$	24,581			$	19,400

Average tangible common equity components:
Average equity (GAAP)	$	694,886			$	673,700
Less: goodwill		(167,631	)			(167,631	)
Less: other intangible assets		(6,040	)			(8,138	)
Total average tangible common equity (non-GAAP)	$	521,215			$	497,931

Annualized return on average equity (GAAP)		5.23		%		5.79		%

Reported annualized return on average
tangible common equity (non-GAAP)		6.97		%		7.84		%

Adjusted annualized return on average
tangible common equity (non-GAAP)		9.51		%		7.84		%

Average assets (GAAP)	$	5,508,878			$	5,195,903

Reported annualized return on average assets (GAAP)		0.66		%		0.75		%

Adjusted annualized return on average assets (non-GAAP)		0.90		%		0.75		%

Management reviews yields on certain asset categories and the net interest margin of the Company on an FTE basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis using tax rates effective as of the end of the period. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. The following tables summarize components of FTE net interest income of the Company for the periods indicated:


	For the Quarter Ended:
NET INTEREST INCOME AND NET INTEREST MARGIN	June 30,			March 31,			December 31,			September 30,			June 30,
(in $000’s, unaudited)	2025			2025			2024			2024			2024
Net interest income before
credit losses on loans (GAAP)	$	44,805		$	43,360		$	43,595		$	39,329		$	38,867
Tax-equivalent adjustment on securities –
exempt from Federal tax		57			58			58			59			60
Net interest income, FTE (non-GAAP)	$	44,862		$	43,418		$	43,653		$	39,388		$	38,927

Average balance of total interest earning assets	$	5,087,089		$	5,188,317		$	5,235,986		$	4,980,082		$	4,840,670

Net interest margin (annualized net interest income divided by the
average balance of total interest earnings assets) (GAAP)		3.53	%		3.39	%		3.31	%		3.14	%		3.23	%

Net interest margin, FTE (annualized net interest income, FTE,
divided by the average balance of total
earnings assets) (non-GAAP)		3.54	%		3.39	%		3.32	%		3.15	%		3.23	%


	For the Six Months Ended:
NET INTEREST INCOME AND NET INTEREST MARGIN	June 30,			June 30,
(in $000’s, unaudited)	2025			2024
Net interest income before
credit losses on loans (GAAP)	$	88,165		$	78,370
Tax-equivalent adjustment on securities – exempt from Federal tax		115			120
Net interest income, FTE (non-GAAP)	$	88,280		$	78,490

Average balance of total interest earning assets	$	5,137,424		$	4,825,587

Net interest margin (annualized net interest income divided by the
average balance of total interest earnings assets) (GAAP)		3.46	%		3.27	%

Net interest margin, FTE (annualized net interest income, FTE, divided by the
average balance of total interest earnings assets) (non-GAAP)		3.47	%		3.27	%

Management views its non-GAAP PPNR as a key metric for assessing the Company’s earnings power. The following table summarizes the components of PPNR for the periods indicated:


	For the Quarter Ended:
PRE-PROVISION NET REVENUE	June 30,			March 31,			December 31,			September 30,			June 30,
(in $000’s, unaudited)	2025			2025			2024			2025			2024
Net interest income before credit losses on loans	$	44,805		$	43,360		$	43,595		$	39,329		$	38,867
Noninterest income		2,977			2,696			2,775			2,826			2,864
Total revenue		47,782			46,056			46,370		$	42,155		$	41,731
Less: Noninterest expense		(38,335	)		(29,456	)		(30,304	)		(27,555	)		(28,188	)
Reported PPNR (non-GAAP)		9,447			16,600			16,066		$	14,600		$	13,543
Add: pre-tax legal settlement and other charges		9,184			—			—			—			—
Adjusted PPNR (non-GAAP)	$	18,631		$	16,600		$	16,066		$	14,600		$	13,543


	For the Six Months Ended:
PRE-PROVISION NET REVENUE	June 30,			June 30,
(in $000’s, unaudited)	2025			2024
Net interest income before credit losses on loans	$	88,165		$	78,370
Noninterest income		5,673			5,501
Total revenue		93,838			83,871
Less: Noninterest expense		(67,791	)		(55,724	)
Reported PPNR (non-GAAP)		26,047			28,147
Add: pre-tax legal settlement and other charges		9,184			—
Adjusted PPNR (non-GAAP)	$	35,231		$	28,147

The efficiency ratio is a non-GAAP financial measure, which is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income), and measures how much it costs to produce one dollar of revenue. The following tables summarize components of noninterest expense and the efficiency ratio of the Company for the periods indicated:


	For the Quarter Ended:
NONINTEREST EXPENSE AND EFFICIENCY RATIO	June 30,				March 31,			December 31,			September 30,			June 30,
(in $000’s, unaudited)	2025				2025			2024			2024			2024
Reported noninterest expense (GAAP)	$	38,335			$	29,456		$	30,304		$	27,555		$	28,188
Less: pre-tax legal settlement and other charges		(9,184	)			—			—			—			—
Adjusted noninterest expense (non-GAAP)	$	29,151			$	29,456		$	30,304		$	27,555		$	28,188

Net interest income before credit losses on loans	$	44,805			$	43,360		$	43,595		$	39,329		$	38,867
Noninterest income		2,977				2,696			2,775			2,826			2,864
Total revenue	$	47,782			$	46,056		$	46,370		$	42,155		$	41,731

Reported efficiency ratio (noninterest expense divided
by total revenue) (non-GAAP)		80.23		%		63.96	%		65.35	%		65.37	%		67.55	%

Adjusted efficiency ratio (adjusted noninterest expense
divided by total revenue) (non-GAAP)		61.01		%		63.96	%		65.35	%		65.37	%		67.55	%


	For the Six Months Ended:
NONINTEREST EXPENSE AND EFFICIENCY RATIO	June 30,				June 30,
(in $000’s, unaudited)	2025				2024
Reported noninterest expense (GAAP)	$	67,791			$	55,724
Less: pre-tax legal settlement and other charges		(9,184	)			—
Adjusted noninterest expense (non-GAAP)	$	58,607			$	55,724

Net interest income before credit losses on loans	$	88,165			$	79,548
Noninterest income		5,673				4,323
Total revenue	$	93,838			$	83,871

Reported efficiency ratio (noninterest expense divided
by total revenue) (non-GAAP)		72.24		%		66.44	%

Adjusted efficiency ratio (adjusted noninterest expense
divided by total revenue) (non-GAAP)		62.46		%		66.44	%

Management considers the tangible common equity ratio as a useful measurement of the Company’s and the Bank’s equity. The following table summarizes components of the tangible common equity to tangible assets ratio of the Company at the dates indicated:


TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS	June 30,				March 31,				December 31,				September 30,				June 30,
(in $000’s, unaudited)	2025				2025				2024				2024				2024
Capital components:
Total equity (GAAP)	$	694,704			$	696,190			$	689,727			$	685,352			$	679,199
Less: preferred stock		—				—				—				—				—
Total common equity		694,704				696,190				689,727				685,352				679,199
Less: goodwill		(167,631	)			(167,631	)			(167,631	)			(167,631	)			(167,631	)
Less: other intangible assets		(5,532	)			(5,986	)			(6,439	)			(6,966	)			(7,521	)
Total tangible common equity (non-GAAP)	$	521,541			$	522,573			$	515,657			$	510,755			$	504,047

Asset components:
Total assets (GAAP)	$	5,467,237			$	5,514,255			$	5,645,006			$	5,551,596			$	5,263,024
Less: goodwill		(167,631	)			(167,631	)			(167,631	)			(167,631	)			(167,631	)
Less: other intangible assets		(5,532	)			(5,986	)			(6,439	)			(6,966	)			(7,521	)
Total tangible assets (non-GAAP)	$	5,294,074			$	5,340,638			$	5,470,936			$	5,376,999			$	5,087,872

Tangible common equity / tangible assets (non-GAAP)		9.85		%		9.78		%		9.43		%		9.50		%		9.91		%

The following table summarizes components of the tangible common equity to tangible assets ratio of the Bank at the dates indicated:


TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS	June 30,				March 31,				December 31,				September 30,				June 30,
(in $000’s, unaudited)	2025				2025				2024				2024				2024
Capital components:
Total equity (GAAP)	$	717,103			$	715,605			$	709,379			$	704,585			$	697,964
Less: preferred stock		—				—				—				—				—
Total common equity		717,103				715,605				709,379				704,585				697,964
Less: goodwill		(167,631	)			(167,631	)			(167,631	)			(167,631	)			(167,631	)
Less: other intangible assets		(5,532	)			(5,986	)			(6,439	)			(6,966	)			(7,521	)
Total tangible common equity (non-GAAP)	$	543,940			$	541,988			$	535,309			$	529,988			$	522,812

Asset components:
Total assets (GAAP)	$	5,464,618			$	5,512,160			$	5,641,646			$	5,548,576			$	5,260,500
Less: goodwill		(167,631	)			(167,631	)			(167,631	)			(167,631	)			(167,631	)
Less: other intangible assets		(5,532	)			(5,986	)			(6,439	)			(6,966	)			(7,521	)
Total tangible assets (non-GAAP)	$	5,291,455			$	5,338,543			$	5,467,576			$	5,373,979			$	5,085,348

Tangible common equity / tangible assets (non-GAAP)		10.28		%		10.15		%		9.79		%		9.86		%		10.28		%

The MIL Network –

July 25, 2025

MIL-OSI Security: Defense News in Brief: USS Thomas Hudner Returns from Deployment to 4th and 6th Fleet

Source: United States Navy

The Arleigh Burke-class guided-missile destroyer USS Thomas Hudner (DDG 116) returned to Naval Station Mayport July 23, concluding a five-month deployment across multiple geographic theaters, including the U.S. 4th and 6th Fleet areas of operations.

The crew departed Feb. 18, 2025, with their mission focused on strengthening international maritime security and relations with partner nations in the U.S. Southern Command area of responsibility. Shortly after arrival on station, Thomas Hudner welcomed the Honorable Pete Hegseth, Secretary of Defense, who recognized Thomas Hudner’s high-performing Sailors during his tour of Naval Support Activity (NSA) Guantanamo Bay facilities.

Upon departing NSA Guantanamo Bay, Thomas Hudner conducted trilateral operations in the Caribbean Sea with the Ticonderoga-class guided-missile cruiser USS Normandy (CG 60), the United Kingdom Royal Navy River-class offshore patrol vessel HMS Medway (P 223) and the Royal Netherlands Navy Holland-class offshore patrol vessel HNLMS Groningen (P843), enhancing interoperability among Allied naval forces. Thomas Hudner also conducted freedom of navigation operations off the coast of Cuba, reinforcing the U.S. Navy’s commitment to unity, security, and stability in the Caribbean, Central and South American maritime regions.

“The crew of Thomas Hudner has consistently proven their unwavering commitment in safeguarding America’s national security interests and maintaining the U.S. Navy’s maritime dominance worldwide,” said Cmdr. Cameron Ingram, commanding officer of Thomas Hudner. “I could not be more proud of my team!”

Throughout their deployment in the U.S. European Command area of responsibility, Thomas Hudner’s crew trained and engaged in a variety of activities, from maritime security operations to joint exercises with Allied and partner navies in the European theater.

Thomas Hudner participated in several notable exercises, including Formidable Shield 2025, executed alongside 11 NATO Allies in the North and Norwegian Seas and North Atlantic Ocean. During Formidable Shield 2025, Thomas Hudner executed joint, live-fire Integrated Air and Missile Defense (IAMD) training utilizing NATO command and control reporting structures to enhance interoperability among Allied naval forces.

Thomas Hudner also conducted several port visits and collaborative operations with Norway, the United Kingdom, Spain and Greece, reinforcing the U.S. Navy’s commitment to unity, security and stability in the region. During the 81st anniversary of D-Day landings in Normandy, Thomas Hudner also had the honor of representing the U.S. Navy and hosting a reception with Adm. Stuart B. Munsch, commander, U.S. Naval Forces Europe-Africa, and various other distinguished government and military leaders in the European theater.

Following operations in U.S. 6th Fleet’s northern flank, Thomas Hudner was assigned to conduct national tasking in the Eastern Mediterranean supporting Operation Cobalt Shield. Through this mission, Thomas Hudner successfully conducted maritime security operations and promoted regional stability while executing ballistic missile defense operations.

Thomas Hudner served as the flagship for multiple distinguished visitors throughout her deployment, including the Honorable Pete Hegseth, U.S. Defense Secretary; Air Force Gen. Dan Caine, Chairman of the Joint Chiefs of Staff; Adm. Christopher Grady, Vice Chairman of the Joint Chiefs of Staff; Adm. Alvin Holsey, commander, U.S. Southern Command; Adm. Stuart B. Munsch, commander, U.S. Naval Forces Europe-Africa; and members of the German, French and Royal navies.

“Over the course of a five-month deployment, USS Thomas Hudner and her exceptional crew exemplified the strength of American naval power and international cooperation,” said Capt. Aaron Anderson, Commander, Naval Surface Group Southeast. “Their efforts reflect the strength of our commitment to maritime security and cooperation with our Allies.”

Thomas Hudner is a multi-mission air warfare, undersea warfare, naval surface fire support, surface warfare and ballistic missile defense surface combatant capable of supporting carrier battle groups and amphibious forces, operating independently, or operating as the flagship of a surface action group.

U.S. 2nd Fleet, reestablished in 2018 in response to the changing global security environment, develops and employs maritime ready forces to fight across multiple domains in the Atlantic and Arctic in order to ensure access, deter aggression and defend U.S., Allied, and partner interests.

For more U.S. 2nd Fleet news and photos, visit facebook.com/US2ndFleet, https://www.c2f.usff.navy.mil/, X – @US2ndFleet, and https://www.linkedin.com/company/commander-u-s-2nd-fleet.

MIL Security OSI –

July 25, 2025

MIL-OSI USA: Cline Introduces Bipartisan Fiscal Contingency Preparedness Act

Source: United States House of Representatives – Congressman Ben Cline (VA-06)

Washington, D.C. – With the national debt topping $36 trillion and interest payments now exceeding spending on Medicare and national defense, Congressman Ben Cline (VA-06) has introduced the Fiscal Contingency Preparedness Act with Reps. Jared Golden (ME-02), Jack Bergman (MI-01) and Marie Gluesenkamp Perez (WA-03). This bipartisan bill would require the federal government to assess and report its ability to respond to major national emergencies like economic downturns, energy crises, and national security threats.

The legislation directs the Secretary of the Treasury and the Director of the Office of Management and Budget (OMB) to produce an annual report measuring the government’s fiscal strength and readiness. After this report is released, the Government Accountability Office (GAO) would conduct its own independent review and publish its findings to ensure accuracy and transparency.

“With our debt piling up and interest payments skyrocketing, we cannot afford to be caught flat-footed when the next emergency hits,” said Rep Ben Cline. Just like households plan ahead for tough times, the federal government must do the same. Americans deserve a clear picture of how much room we actually have to respond to future crises. Congress must face the facts and make responsible decisions now, before an emergency strikes.”

“One of the many lessons the Marine Corps taught me was to have a plan for the worst-case scenario,” Congressman Jared Golden (ME-02) said. “This bipartisan bill would force Washington to be clear-eyed about our fiscal outlook in potential national emergencies, which is the necessary first step for responsible planning to keep America stable and secure.”

“We know that when a crisis hits, preparation makes all the difference. The Fiscal Contingency Preparedness Act is a commonsense step to ensure we’re ready to respond to whatever comes our way – whether it’s an economic downturn, a natural disaster, or a national security threat. If we’re serious about keeping our Nation strong and secure, we need to start planning ahead and making our decisions based on reality – not scrambling to prepare after the fact.” Rep. Jack Bergman added.

“As a small business owner, I know how important it is to plan for a rainy day – and hardworking families in Southwest Washington know it too,” said Rep. Gluesenkamp Perez. “Our federal government should hold itself to the same standard and be ready to weather any crisis that comes its way. Our bipartisan legislation would require annual assessments of our national fiscal strength when faced with different crises – so we can better prepare our economy to work for the American people under any circumstances.”

According to the Congressional Budget Office, interest payments on the national debt will permanently exceed defense spending. By 2050, interest costs are expected to double the size of the defense budget. Gross federal debt is projected to hit 123% of GDP by September 2025, surpassing the previous World War II-era high of 119%.

“Our national debt is not just a number. It is a real and rising threat to our way of life. It impacts our economy, our national security, and our ability to respond in times of crisis. I am proud to see Representatives Cline and Golden take up the Fiscal Contingency Preparedness Act. This is a commonsense measure. Just like American families must prepare for emergencies, so should our government.” said Former Senator Joe Manchin.

“Policymakers and the public need access to the best available analysis on how a severe economic shock may impact the federal government’s finances. While our nation’s largest banks are required to undergo regular stress tests to prepare for an unexpected shock, the federal government lacks an equivalent playbook. It is essential that the federal government be prepared for a possible fiscal emergency, and we commend Representatives Cline and Golden for introducing this bipartisan, commonsense proposal to strengthen our fiscal resilience.” said President of the Committee for a Responsible Federal Budget Maya MacGuineas.

Rep Ben Cline concluded “The best way to protect the American people is to be prepared. This legislation gives Congress the tools it needs to manage taxpayer dollars responsibly, respond to national emergencies, and chart a stable financial future for generations to come.”

Congressman Ben Cline represents the Sixth Congressional District of Virginia. He previously was an attorney in private practice and served both as an assistant prosecutor and a Member of the Virginia House of Delegates. Cline and his wife, Elizabeth, live in Botetourt County with their two children.

###

MIL OSI USA News –

July 25, 2025

MIL-Evening Report: Ultrafast fashion brand Princess Polly has been certified as ‘sustainable’. Is that an oxymoron?

Source: The Conversation (Au and NZ) – By Harriette Richards, Senior Lecturer, School of Fashion and Textiles, RMIT University

Carol Yepes/Getty Images

Last week, the ultrafast fashion brand Princess Polly received B Corp certification. This certification is designed to accredit for-profit businesses that provide social impact and environmental benefit.

Established on the Gold Coast in 2010, a 50% stake in Princess Polly was acquired by United States-based A.K.A. Brands in 2018.

Since then, it has grown its global reach as a low-cost, high-turnover online retailer.

So can ultrafast fashion ever be sustainable?

Who is Princess Polly?

Princess Polly distinguishes itself from other fast fashion retailers through a mission to “make on-trend, sustainable fashion accessible to everyone”.

As part of this mission, Princess Polly is a participant of the United Nations Global Compact, which commits them to sustainable procurement. The 2024 Baptist World Aid Ethical Fashion Report placed them in the top 20% of 460 global brands assessed.

Yet, on the sustainability rating website Good On You, Princess Polly receives a “Not Good Enough” grade, due to their lack of action on reducing plastic and textile waste or protecting biodiversity in their supply chains, and the absence of evidence that they pay their workers a living wage.

Regardless of how they make their clothes, Princess Polly produces a lot. At the time of writing, the brand has 3,920 different styles available on their website (excluding shoes and accessories).

Of those, 34% (1,355 styles) are listed as “lower impact,” which means items are made using materials such as organic cotton and linen, recycled polyester and cellulose fabrics. There are also 720 items on the website currently listed as “new”: their daily new arrivals means they are constantly adding fresh items for sale.

Overproduction, no matter what the garments are made from, is inherently wasteful. Even when clothes are purchased (and 10–40% of the clothing produced each year is not sold), the poor quality of fast fashion items means that they end up in landfill faster and stay there for longer, contributing to the ongoing environmental disaster.

Sustainability communication

In Australia, 1,096 companies are accredited with B Corp status, including 152 fashion businesses.

B Corp assesses the practices of a company as a whole, rather than focusing on one single social or environmental issue. Businesses must score at least 80 out of a possible 250+ points in the B Impact Assessment to achieve accreditation.

Organisations are assessed in five key areas – community, customers, environment, governance and workers – and must meet high standards of social and environmental performance, transparency and accountability.

Third-party accreditations such as B Corp, Fairtrade and Global Organic Textile Standard are often used by brands as a marketing tool.

These certifications can enhance consumer trust without the need for detailed explanations. For fashion brands, accreditation can help them stand out in a crowded market. They can provide legitimacy, attract ethical fashion consumers and reduce consumer scepticism.

While B Corp aims to provide assurance to consumers, activists have accused it of greenwashing. In 2022, the organisation came under fire for accrediting Nespresso, a brand owned by Nestlé, which has a reputation for poor worker rights and sourcing policies.

B Corp is now facing renewed condemnation for issuing certification to Princess Polly.

Who needs certification?

Other B Corp certified Australian fashion brands such as Clothing the Gaps and Outland Denim have built their reputations on their ethical credentials. For values-driven fashion-based social enterprises such as these, accreditations can provide valuable guarantees regarding ethical processes.

According to our research, however, there are several barriers fashion-based social enterprises face when pursuing ethical accreditation.

The cost of accreditation, both financial and in terms of time, skills and resourcing, is a significant challenge. And there is no certification that covers all aspects of environmental sustainability and ethical production. As a result, fashion-based social enterprises often require multiple accreditations to fully communicate the breadth of their ethical commitments.

Despite the costs involved, if fashion-based social enterprises don’t acquire certain certifications they risk being ineligible for government grants and tenders, such as social procurement contracts.

Differences between fashion-based social enterprises and fast fashion brands are stark. While Clothing the Gaps, Outland Denim and Princess Polly now all hold B Corp certification, the former score much more highly on the B Impact Assessment.
The value and credibility of the certification is diminished when it extends to unsustainable ultrafast fashion.

Is it possible for fast fashion to ever be sustainable?

The question of whether fast fashion can ever be sustainable has become increasingly heated since the advent of ultrafast fashion, where brands produce on demand and sell directly online.

Fast fashion took seasonal trends from high fashion runways and made them available to consumers at low costs within weeks. Ultrafast fashion takes trends from social media and reproduces them extremely cheaply for mass consumption within days.

Both fast and ultrafast fashion’s low-cost, high-volume models encourage consumers to value quantity over quality. Using permanent sales and discounts, these brands incentivise multiple purchases of items that may never actually be worn. Online “micro trends” and “haul” videos further spur this overconsumption.

The overconsumption of fast fashion means lots of it ends up in landfill.
Dipanjan Pal/Unsplash

Princess Polly may be using more sustainable textiles and engaging in more ethical forms of production than some of its ultrafast fashion counterparts. But this is not enough when the business model itself is unsustainable. Accreditations such as B Corp are unable to account for this nuance.

Princess Polly claims to make sustainable fashion, yet it is also proudly trend driven. As an ultrafast fashion brand, it relies on overproduction and overconsumption. The idea that this can ever be “sustainable” is simply an oxymoron.

The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

– ref. Ultrafast fashion brand Princess Polly has been certified as ‘sustainable’. Is that an oxymoron? – https://theconversation.com/ultrafast-fashion-brand-princess-polly-has-been-certified-as-sustainable-is-that-an-oxymoron-261561

MIL OSI Analysis – EveningReport.nz –

July 25, 2025

MIL-Evening Report: Butter wars: ‘nothing cures high prices like high prices’ – but will market forces be enough?

Source: The Conversation (Au and NZ) – By Alan Renwick, Professor of Agricultural Economics, Lincoln University, New Zealand

RobynRoper/Getty Images

The alarming rise of butter prices has become a real source of frustration for New Zealand consumers, as well as a topic of political recrimination. The issue has become so serious that Miles Hurrell, chief executive of dairy co-operative Fonterra, was summoned to meetings with the government and opposition parties this week.

After meeting Hurrell, Finance Minister Nicola Willis appeared to place some of the blame for the high price of butter on supermarkets rather than on the dairy giant.

According to Stats NZ, butter prices rose by 46.5% in the year to June and are now 120% higher than a decade ago. The average price for a 500g block is NZ$8.60, with some local brands costing over $10.

But solving the problem is not a matter of waving a magic economic wand. Several factors influence butter prices, few of which can be altered directly by government policy.

And the question remains – would we want to? Proposals such as reducing exports to boost domestic supply, or cutting goods and services tax (GST) on dairy products, all carry consequences.

A key factor driving butter prices in New Zealand is that 95% of the country’s dairy production is exported.

Limited domestic supply and strong global demand have pushed up prices for a range of commodities – not just milk, but beef as well. These increases are reflected in local retail prices.

Another contributing factor is rising costs along the supply chain. At the farm level, producers are receiving record prices for dairy. But this comes at a time when input costs have also increased significantly. It is not all profit.

Weighing the options

Before changing rules around dairy exports, the government must weigh the broader consequences.

On the one hand, high milk prices benefit “NZ Inc”. The dairy sector accounts for 25% of exports and employs 55,000 New Zealanders. When farmers do well, the wider rural economy benefits – with flow-on effects for the country as a whole.

On the other hand, there is the ongoing challenge of domestic food security. Many people cannot afford basic groceries and foodbank use is rising.

So how can New Zealand maintain a food system that benefits from exports while also supporting struggling domestic consumers?

One option is to remove GST from food. Other countries exempt dairy products from such taxes in an effort to make staples more affordable.

This idea has been repeatedly reviewed and rejected – including by the 2018 Tax Working Group. In 2024, it was estimated that removing GST could cost the government between $3.3bn and $3.9bn, with only modest benefits for the average household.

Fonterra or supermarkets?

Another route would be to examine Fonterra’s dominance in the supply chain. There are advantages to having a strong global player. And it is not in the national interest for the company to incur losses on domestic sales.

Still, the structure of the market may warrant scrutiny. For a long time there were just two main suppliers of processed dairy products – Fonterra and Goodman Fielder – and two main retailers – Foodstuffs and Woolworths. This set up reduced the need to compete on prices.

While there is arguably more competition in manufacturing sector now, supermarkets are still under scrutiny and have long faced criticism for a lack of competition.

The opaque nature of the profit margins across the supply chain also fuels suspicion. Consumers know what they pay at the checkout and what farmers receive. But the rest is less clear. This lack of transparency invites speculation about who benefits from soaring prices.

In the end, though, the government may not need to act at all.

As economists like to say: “Nothing cures high prices like high prices.” While demand for butter is relatively inelastic, there comes a point at which consumers reduce their purchases or seek alternatives. International buyers will also push back – and falling global demand may redirect more supply to domestic markets.

High prices also act as a signal to producers across the globe to increase production, which could happen relatively quickly if there are favourable climatic and other conditions.

We only need to look back to 2014, when the price of dairy dropped by 48% over the course of 12 months due to reduced demand and increased supply, to see how quickly the situation can change.

Alan Renwick does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

– ref. Butter wars: ‘nothing cures high prices like high prices’ – but will market forces be enough? – https://theconversation.com/butter-wars-nothing-cures-high-prices-like-high-prices-but-will-market-forces-be-enough-261750

MIL OSI Analysis – EveningReport.nz –

July 25, 2025

MIL-Evening Report: Waiting too long for public dental care? Here’s why the system is struggling – and how to fix it

Source: The Conversation (Au and NZ) – By Santosh Tadakamadla, Professor and Head of Dentistry and Oral Health, La Trobe University

Just over one-third of Australians are eligible for public dental services, which provide free or low cost dental treatment.

Yet demand for these services continues to exceed supply. As a result, many Australian adults face long waits for access, which can be up to three years in some states.

So what’s going wrong with public dental care in Australia? And how can it be fixed?

Who funds public dental care?

Both the federal government and state and territory governments fund public dental services. These are primarily targeted at low-income Australians, including children, and hard-to-reach populations, known as priority groups.

Individuals and families bear a majority of the costs for dental services. They paid around 81% (A$10.1 billion) of the cost for dental services in 2022–23, either directly through out-of-pocket expenses, or through private health insurance premiums.

The Commonwealth contributed 11% to the cost of dental care, while the states and territories paid the remaining 8% in 2022–23.

Who is eligible for public dental care?

Just under half of Australian children are eligible for the means-tested Child Dental Benefits Schedule. This gives them access to $1,132 of dental benefits over two years.

While children from low-income families tend to benefit from this scheme, critics have raised concerns about the low uptake. Only one-third use the dental program in any given year.

Some children access free or low-cost dental care from state and territory based services, such as the Victorian Smile Squad school dental program or the NSW Health Primary School Mobile Dental Program.

Others use their private health insurance to pay for some of the costs of private dental care.

What if you’re low-income but aren’t eligible?

Some Australians aren’t eligible for public dental services but can’t afford private dental care. In 2022–23, around one in six people (18%) delayed or didn’t see a dental professional when they needed to because of the cost.

Some Australians are accessing their superannuation funds under compassionate grounds for dental treatment. The amount people have accessed has grown eight-fold from 2018–19 to 2023–24, from $66.4 million to $526.4 million.

However, concerns have been raised about the exploitation of this provision. Some people have accessed their super for dental treatment costing more than $20,000. This more than what would typically be required for urgent dental care, impacting their future financial security.

Why are the waits so long in the public dental care system?

The long waits are due to a combination of factors, alongside high levels need:

systemic under-funding by Australian governments. This is exacerbated by federal government funding for public dental services remaining fixed rather than being indexed annually
workforce shortages in rural and remote areas, with dental practitioners concentrated in wealthy, metro areas
poor incentives for the oral health workforce in public dental services
too few public clinics, in part because the initial outlay and ongoing equipment costs are so great.

What is the government planning in the long term?

The federal government is taking action to improve the affordability of dental services through long-term funding reforms only targeting priority populations to bring some dental services into Medicare.

An initial focus is for older Australians and First Nations people.

Cost estimates for a universal dental scheme vary significantly, depending on the population coverage and the number of dental benefits individuals are eligible for, and whether services are capped (as in the case of the Child Dental Benefits Schedule) or uncapped.

The Grattan Institute estimates a capped scheme would cost $5.6 billion annually.

The Australian Parliamentary Budget Office estimates it would cost $45 billion over three years.

When increasing government funding for public dental service, it’s important policymakers ensure the services included are evidence-based and represent value for money.

What needs to be done in the meantime

Meaningful long-term funding reform towards a universal dental scheme requires some foundational policy work.

First, there should be an agreed understanding of what dental services should be government subsidised and provide annual limits for reimbursement to prevent overtreatment. This would avoid some people getting a lot of dental treatment they don’t need, while others could miss out.

Many dental services are routinely offered without any clinical benefit. This includes six-monthly oral health check-ups and cleans for low-risk patients.

Second, resource allocation is best done when we focus on prevention and governments fund cost-effective dental services. Priority-setting is best done using economic evaluation tools.

Third, the federal government should extend its existing decision-making frameworks to include dental services. This would bring dental care in line with medicine and service listings on the Pharmaceutical Benefits Scheme (PBS) and the Medicare Benefits Schedule (MBS), ensuring that safety, effectiveness and cost-effectiveness inform public funding decisions.

Fourth, the government needs to reform the workforce. This should include funding to support recruitment and training of students from regional, rural and remote areas. These students are more likely to return to their communities to work, balancing the unequal distribution of the workforce.

We also urgently need to attract and retain more people to work in public dental services.

Finally, we need a coordinated national approach to oral health policy and funding. The federal government has an opportunity to do this now as consultations continue through 2025 to develop and implement the National Oral Health Plan 2025–2034.

Santosh Tadakamadla received National Health and Medical Research Council Early Career Fellowship (APP1161659) from 2019-2023. He is Head of Dentistry and Oral Health at La Trobe Rural Health School in Bendigo.

Tan Nguyen receives funding from National Health and Medical Research Council (Postgraduate Scholarship Scheme APP1189802). He is affiliated with Deakin University, Monash University, Oral Health Victoria, Public Association of Australia, National Oral Health Alliance and Dental Board of Australia.

– ref. Waiting too long for public dental care? Here’s why the system is struggling – and how to fix it – https://theconversation.com/waiting-too-long-for-public-dental-care-heres-why-the-system-is-struggling-and-how-to-fix-it-261661

MIL OSI Analysis – EveningReport.nz –

July 25, 2025

MIL-Evening Report: Waiting too long for public dental care? Here’s why the system is struggling – and how to fix it

Source: The Conversation (Au and NZ) – By Santosh Tadakamadla, Professor and Head of Dentistry and Oral Health, La Trobe University

Just over one-third of Australians are eligible for public dental services, which provide free or low cost dental treatment.

Yet demand for these services continues to exceed supply. As a result, many Australian adults face long waits for access, which can be up to three years in some states.

So what’s going wrong with public dental care in Australia? And how can it be fixed?

Who funds public dental care?

Both the federal government and state and territory governments fund public dental services. These are primarily targeted at low-income Australians, including children, and hard-to-reach populations, known as priority groups.

Individuals and families bear a majority of the costs for dental services. They paid around 81% (A$10.1 billion) of the cost for dental services in 2022–23, either directly through out-of-pocket expenses, or through private health insurance premiums.

The Commonwealth contributed 11% to the cost of dental care, while the states and territories paid the remaining 8% in 2022–23.

Who is eligible for public dental care?

Just under half of Australian children are eligible for the means-tested Child Dental Benefits Schedule. This gives them access to $1,132 of dental benefits over two years.

While children from low-income families tend to benefit from this scheme, critics have raised concerns about the low uptake. Only one-third use the dental program in any given year.

Some children access free or low-cost dental care from state and territory based services, such as the Victorian Smile Squad school dental program or the NSW Health Primary School Mobile Dental Program.

Others use their private health insurance to pay for some of the costs of private dental care.

What if you’re low-income but aren’t eligible?

Some Australians aren’t eligible for public dental services but can’t afford private dental care. In 2022–23, around one in six people (18%) delayed or didn’t see a dental professional when they needed to because of the cost.

Some Australians are accessing their superannuation funds under compassionate grounds for dental treatment. The amount people have accessed has grown eight-fold from 2018–19 to 2023–24, from $66.4 million to $526.4 million.

However, concerns have been raised about the exploitation of this provision. Some people have accessed their super for dental treatment costing more than $20,000. This more than what would typically be required for urgent dental care, impacting their future financial security.

Why are the waits so long in the public dental care system?

The long waits are due to a combination of factors, alongside high levels need:

systemic under-funding by Australian governments. This is exacerbated by federal government funding for public dental services remaining fixed rather than being indexed annually
workforce shortages in rural and remote areas, with dental practitioners concentrated in wealthy, metro areas
poor incentives for the oral health workforce in public dental services
too few public clinics, in part because the initial outlay and ongoing equipment costs are so great.