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HERITAGE COMMERCE CORP Heritage Commerce Corp Earns Record $ 13.7 Million for the Third Quarter of 2021 , and $ 33.7 Million for the First Nine Months of 2021 San Jose , CA - October 28 , 2021 - - Heritage Commerce Corp ( Nasdaq : HTBK ) , the holding company ( the “ Company ” ) for Heritage Bank of Commerce ( the " Bank ” ) , today announced third quarter 2021 net income of $ 13.7 million , or $ 0.23 per average diluted common share , compared to $ 11.2 million , or $ 0.19 per average diluted common share , for the third quarter of 2020 , and $ 8.8 million , or $ 0.15 per average diluted common share , for the second quarter of 2021. For the nine months ended September 30 , 2021 , net income was $ 33.7 million , or $ 0.56 per average diluted common share , compared to $ 23.7 million , or $ 0.39 per average diluted common share , for the nine months ended September 30 , 2020. Earnings for the first nine months of 2021 included a $ 4.0 million reserve for litigation as noninterest expense during the second quarter of 2021. Earnings for the first nine months of 2020 were impacted by the effect of a $ 14.6 million pre - tax related provision for potential credit losses on loans , incorporating the forecasted effects on economic activity from the Coronavirus pandemic , and $ 2.5 million of pre - tax merger - related costs . All results are unaudited . " We generated record earnings for the third quarter of 2021 , propelled by higher net interest income , solid loan growth notably in commercial and industrial ( “ C & I " ) and commercial real estate ( “ CRE ” ) , ongoing strong core deposit growth and an acceleration of Small Business Administration ( “ SBA " ) Paycheck Protection Program ( “ PPP ” ) loan fee income as a result of PPP loan forgiveness , " said Walter Kaczmarek , President and Chief Executive Officer . " Core loans , excluding PPP loans and purchased residential mortgage loans , increased by $ 170.9 million , or 7 % , from a year ago , and increased by $ 121.9 million , or 5 % , from the second quarter of 2021 . Total deposits increased $ 836.0 million , or 21 % , to $ 4.73 billion at September 30 , 2021 , compared to $ 3.89 billion at September 30 , 2020 , and increased $ 381.9 million , or 9 % , from $ 4.34 billion at June 30 , 2021. Total deposits at September 30 , 2021 included $ 336.0 million of temporary deposits from one customer ( these deposits are anticipated to leave by the end of the fourth quarter of 2021 ) . " Excluding the $ 336.0 million in temporary deposits , total deposits increased $ 500.0 million , or 13 % , from a year ago , and increased $ 45.9 million from the second quarter of 2021 . " As a result of our continued solid operating performance , and steadily improving economic conditions , credit metrics improved substantially during the third quarter of 2021 with nonperforming assets ( " NPAs " ) declining 54 % from the year ago quarter and 23 % from the immediate prior quarter , " said Mr. Kaczmarek . " We had a $ 514,000 negative provision for credit losses on loans during the third quarter of 2021 with net recoveries of $ 238,000 , compared to a provision for credit losses on loans of $ 197,000 and net charge offs of $ 219,000 for the third quarter a year ago . In the second quarter of 2021 , we had a $ 493,000 negative provision for credit losses on loans and booked net recoveries of $ 153,000 . " The allowance for credit losses on loans ( “ ACLL " ) to total loans was strong at 1.54 % , and the ACLL to total nonperforming loans was 922.88 % , at September 30 , 2021 . " With our solid capital ratios and strong balance sheet , we remain well positioned to benefit from improving economic conditions and continue to implement our growth strategy which calls for the profitable deployment of our excess liquidity into new loans and investment securities . During the third quarter of 2021 , our excess liquidity was primarily deployed into new C & I and CRE loans and overnight funds , " said Mr. Kaczmarek . " We were pleased and encouraged by the results delivered by the Company this quarter and once again , I would like to offer sincere thanks to all of our dedicated employees for their commitment and effort in supporting our clients , communities and shareholders . " Third Quarter Ended September 30 , 2021 Operating Results , Balance Sheet Review , Capital Management , and Credit Quality ( as of , or for the periods ended September 30 , 2021 , compared to September 30 , 2020 , and June 30 , 2021 , except as noted ) : Operating Results : Diluted earnings per share were $ 0.23 for the third quarter of 2021 , compared to $ 0.19 for the third quarter of 2020 , and $ 0.15 for the second quarter of 2021. Diluted earnings per share were $ 0.56 for the first nine months of 2021 , compared to $ 0.39 for the first nine months of 2020 . The following table indicates the ratios for the return on average tangible assets and the return on average tangible equity for the periods indicated : 1