Heritage Commerce (HTBK) has just wrapped up FY 2025 with fourth quarter revenue of US$53.0 million and basic EPS of US$0.25, alongside trailing twelve month revenue of US$195.6 million and EPS of US$0.78 that reflect the latest run rate. The company has seen revenue move from US$170.3 million to US$195.6 million on a trailing basis, while EPS shifted from US$0.66 to US$0.78. This sets up a picture in which firmer earnings and slightly higher net profit margins are central to how investors read this update.

With the headline numbers on the table, the next step is to measure them against the widely followed narratives around Heritage Commerce, highlighting where sentiment lines up with the data and where the story may need a rethink.

Cost discipline shows up in lower 58% cost to income ratio

• Heritage Commerce reported a cost to income ratio of 58.05% in Q3 2025 compared with 63.96% in Q1 2025 and 65.37% in Q3 2024, alongside a net interest margin of 3.6% in Q3 2025 versus 3.39% in Q1 2025 and 3.15% in Q3 2024.
• What stands out for a bullish view is that higher efficiency and a firmer margin line up with the recent improvement in net profit margin to 24.4% on a trailing basis.
  • The trailing twelve month net income of US$47.8 million on revenue of US$195.6 million, compared with US$40.5 million on US$170.3 million a year earlier, fits the idea that earnings growth of about 18% has been supported by tighter cost control.
  • At the same time, the shift from a 65.88% cost to income ratio at the end of 2024 to 58.05% in Q3 2025 suggests the bank has been keeping a closer eye on expenses while revenue has moved higher.

Credit quality improves with non performing loans at US$3.7 million

• Non performing loans were US$7.7 million in Q4 2024, then US$7.2 million in Q3 2024, US$6.3 million in Q1 2025, US$6.2 million in Q2 2025, and US$3.7 million in Q3 2025, while total loans moved from about US$3,410.6 million in Q3 2024 to US$3,582.0 million in Q3 2025.
• What is helpful for a bullish angle is that this lower level of non performing loans sits alongside earnings growth of about 18% over the past 12 months and a higher trailing net profit margin of 24.4%.
  • Investors looking at the loan book might point out that total loans rose from roughly US$3,410.6 million in Q3 2024 to US$3,582.0 million in Q3 2025 while non performing loans were lower at each later data point, which is a cleaner backdrop for the earnings trend.
  • That combination of higher loans, lower reported problem balances and a trailing EPS of about US$0.78 helps explain why earnings are forecast to grow about 13.9% per year even though revenue is forecast to grow 6.7% per year.

Investors who want to see how this credit and earnings story fits into longer term views on the stock can tap into other perspectives and narratives around Heritage Commerce, not just the latest figures.

Premium 16.5x P/E despite DCF fair value of US$18.12

• The shares trade on a P/E of 16.5x compared with 12.1x for the US Banks industry and 13.4x for peers, while the current price of US$12.89 sits about 28.9% below a DCF fair value estimate of US$18.12 and the stock offers a 4.04% dividend yield.
• Critics highlight that paying a premium multiple for slower forecast revenue growth of 6.7% per year could be a risk if the expected 13.9% earnings growth does not come through as projected.
  • The tension is that the DCF fair value of US$18.12 points to a gap versus the current price of US$12.89, yet the 16.5x P/E still exceeds both the sector and peer averages, so valuation signals do not all point in the same direction.
  • Income focused holders may look at the 4.04% dividend yield alongside a trailing net margin of 24.4%, while valuation focused investors may concentrate more on the richer P/E and the fact that revenue growth is expected to sit below the broader US market forecast of 10.6% per year.

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Heritage Commerce's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

Heritage Commerce combines a premium 16.5x P/E with slower forecast revenue growth of 6.7% per year, which leaves some investors uneasy about paying up for the shares.

If that trade off makes you cautious, use our these 866 undervalued stocks based on cash flows today to focus on companies where valuations and growth expectations feel better aligned with the risk you are taking.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.