Oct 22, 2026 earnings call — First full quarter after Heritage merger
Reported net earnings of $78.1 million, or $0.44 per share, for the third quarter of 2026.
Revenue $0.2B (est $0.2B) · EPS $0.44 (est $0.41)
Key quotes
"The third quarter was the first calendar quarter with the full benefit of the acquisition of Heritage Bank of Commerce as the second quarter of 2026 reflected 74 days of combined operations with Heritage."
"Loan originations continued at a strong pace in the third quarter. However, originations decreased by 15% from the second quarter of 2026 but were approximately 20% higher than the first quarter of this year."
"The $550 million decrease was the result of interest-bearing deposits and repos declining by $360 million and non-interest-bearing deposits decreasing by $190 million."
Analyst Q&A 5
investment runoff and deposit rate response
Q (Matthew Clark · Piper Sandler): He asked how much securities cash flow will roll off each quarter and what deposit rate sensitivity they assume if rates rise. He also asked how much expense savings remain and the expected run rate.
A: Management said investment principal runoff is about $160 million a quarter and those securities are rolling off in the 2% range, with the overall portfolio about 3%. They said they do not announce deposit betas and are not planning to raise deposit rates now, and expenses should be close to the run rate by the fourth quarter.
"It's roughly $160 million a quarter, I would say." — Allen Nicholson (CFO)
deposit flows, Bay Area growth, credit health
Q (David Feaster · Raymond James): He asked what deposit flows they are seeing, what clients are saying about pricing and money movement, and how they defend deposit costs while trying to grow balances. He also asked what they see in the Bay Area market and about credit quality as rates rise.
A: They said much of the deposit movement reflects aligning former Heritage accounts and structures, and the largest relationships ('top 150') have grown slightly; management said there has not been any significant deposit relationships that have left the bank. They said the Bay Area is rebounding, they have capacity and product breadth, and conversion and pipeline work has gone smoothly. On credit, they said the ACL shows the portfolio remains strong, they are proactive, and they watch areas like smaller C&I and SBA 7(a), with annual term loan reviews for every loan over $1 million every year.
"There has not been any significant deposit relationships that have left the bank." — Dave Brager (CEO)
net interest margin headwinds and ROA target
Q (Andrew Terrell · Stephens): He asked what headwinds might pressure margin into the fourth quarter or next year despite current tailwinds. He also asked whether they would refresh the ROA target after exceeding expectations post-merger.
A: They said it is hard to see many margin headwinds today and pointed to embedded improvement in net interest margin (see page 39), noting they remain modestly asset sensitive. They also said that as they get into 2027 some wholesale funding will mature and that could be an opportunity to reduce cost of funds; on ROA they said they are exceeding the prior merger expectations and have internal goals to keep improving performance.
"It is hard to see with where the interest rates are too much in the way of headwinds." — Allen Nicholson (CFO)
acquisition appetite and share buybacks
Q (Gary Tenner · D.A. Davidson): He asked whether they are open to acquisitions now that integration is underway and what their appetite is for deals. He also asked about the recent pace of share repurchases and ongoing buyback appetite.
A: They said they have a short list of banks they'd be interested in but want to finish integrating former Heritage people, processes and culture before pursuing deals; any acquisition would have to be the right opportunity at the right price. On repurchases, they said their 10b5-1 program was designed to increase repurchase volume over time, they will be more aggressive absent an acquisition, and they would likely pause buybacks if an acquisition opportunity arose.
"Look, I think as you know, and I think everybody on this call knows, we do have a short list of banks that we would be interested in." — Dave Brager (CEO)
deposit movement to wealth, loan-deposit ratio, asset mix
Q (Tim Coffey · Brean Capital): He asked if customers are moving funds from the bank to the wealth unit, whether the loan-deposit ratio will rise seasonally, and if they plan to remix earning assets to increase loans as a share.
A: They said there has not been much movement of funds to the wealth unit and that the deposit story is mainly about aligning accounts into their pricing model; they will protect true relationships but avoid hot-money pricing. They expect a seasonal rise in the loan-deposit ratio around year-end and into the first quarter but view that as temporary and said they generally operate between 80% and 75%. They also said they would consider one-off opportunities to reduce low-yield AFS and would like to increase loans as a percentage of earning assets as demand and cash flows allow.
"The simple answer is no, there hasn't been a lot." — Dave Brager (CEO)