Heritage Commerce Corp Reports $64.4 Million Full Year Net Income for 2023
Net Income: $13.3 million for Q4 2023, down from $20.8 million in Q4 2022.
Earnings Per Share: $0.22 for Q4 2023, compared to $0.34 in Q4 2022.
Annual Net Income: $64.4 million for 2023, slightly lower than $66.6 million in 2022.
Tangible Book Value: Increased by 9% year-over-year.
Loan Growth: 2% increase year-over-year and from the previous quarter.
Liquidity Position: Strong with $2.87 billion in available funds and credit lines.
Interest Rate Impact: Net interest income affected but stabilization expected following Fed guidance.
On January 25, 2024, Heritage Commerce Corp (NASDAQ:HTBK) released its 8-K filing, detailing the financial results for the fourth quarter and full year ended December 31, 2023. The company, a bank holding entity operating through its subsidiary Heritage Bank of Commerce, provides commercial banking services primarily to small and medium-sized businesses. The bank operates in two segments: Banking and Factoring, with the majority of its revenue stemming from the Banking segment.
Heritage Commerce Corp reported a net income of $13.3 million, or $0.22 per average diluted common share, for the fourth quarter of 2023. This represents a decrease from the $20.8 million, or $0.34 per average diluted common share, reported in the fourth quarter of 2022, and a slight drop from the $15.8 million, or $0.26 per average diluted common share, in the third quarter of 2023. For the full year 2023, the net income totaled $64.4 million, or $1.05 per average diluted common share, compared to $66.6 million, or $1.09 per average diluted common share, for the previous year.
Performance Highlights and Challenges
Despite a challenging banking environment, Heritage Commerce Corp achieved a 9% growth in tangible book value over the year and reported its second-best year in net income, only surpassed by the record profits of 2022. President and CEO Clay Jones highlighted the company's resilience amidst rising interest rates, noting solid loan growth and stable client deposits as key factors in their performance. However, the company did face headwinds with net interest income being impacted by the volatile rate environment.
In 2023, despite challenges faced by many banks, the Company had a successful year with stable client deposits and 9% growth in year-over-year tangible book value. The fourth quarter showed solid performance, contributing to our second-best year in net income, surpassed only by the record profits of 2022," said Clay Jones, President and Chief Executive Officer.
Financial Condition and Liquidity
Heritage Commerce Corp's liquidity remains robust, with excess funds at the Federal Reserve Bank and available lines of credit totaling approximately $2.87 billion. The company's balance sheet reflects a 1% increase in total assets to $5.19 billion at the end of 2023, compared to the previous year. The bank's capital management strategy and credit quality have been effective, with a disciplined approach to growth and a focus on avoiding borrowed funds and brokered deposits.
Looking ahead, Heritage Commerce Corp expects stabilization in its cost of funds following recent guidance from the Federal Reserve indicating potential rate reductions in 2024. The bank's strong balance sheet, characterized by robust capital, ample liquidity, and a diversified loan portfolio, positions it well to navigate the changing interest rate landscape and continue serving its community and clients effectively.
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Explore the complete 8-K earnings release (here) from Heritage Commerce Corp for further details.
This article first appeared on GuruFocus.
