Heritage Commerce (HTBK) M&A Announcement summary

Deal rationale and strategic fit

• Merger creates a leading relationship-focused business bank with expanded reach across California, especially the Bay Area, fulfilling a key strategic objective and enhancing market position.

• Both organizations share a strong culture, focus on small and medium business clients, and have a history of credit quality and low-cost deposits.

• Strategic entry into a top market with attractive demographics and significant small business concentration, improving long-term positioning and franchise value.

• Enables shareholders to participate in the future upside of a premier commercial bank and creates growth opportunities for employees.

• The deal was negotiated directly between the two companies, not through a competitive bidding process.

Financial terms and conditions

• All-stock transaction with a fixed exchange ratio of 0.6500 shares of CVBF for each Heritage share, valued at approximately $811 million or $13.00 per Heritage share.

• Pro forma ownership: 77% CVBF, 23% Heritage Commerce.

• Pricing multiples are 12.6x 2027 EPS and 1.51x tangible book value.

• Projected 13.2% EPS accretion in 2027 and internal rate of return above 20%.

• Tangible book value dilution of 7.7% with a projected earn-back of 2.5 years, fully baked with all one-time costs.

Synergies and expected cost savings

• Anticipated cost savings of approximately 35% of Heritage Commerce's 2027E operating noninterest expense (~$43 million), phased in with 75% realized in the second half of 2026.

• No revenue synergies modeled, but opportunities exist to deepen customer relationships and expand product offerings.