HERITAGE COMMERCE CORP

The main office of HBC, the San Jose branch office of HBC and the Bay View Funding administrative office are located at 224 Airport Parkway in San Jose, consisting of approximately 60,278 square feet in a six story Class A type office building, which are subject to a direct lease dated June 27, 2019, as amended, which expires on July 31, 2030. The current monthly rent payment is $251,443, subject to 3% annual increases. The Company has reserved the right to extend the term of the lease for one additional period of five years.

Branch Offices

In June of 2007, as part of the acquisition of Diablo Valley Bank, the Company took ownership of an 8,285 square foot one story commercial office building, including the land, located at 387 Diablo Road in Danville, California.

In October of 2025, the Company amended its lease for approximately 4,096 square feet in a one story stand alone office building located at 300 Main Street in Pleasanton, California. The current monthly rent payment is $24,448, subject to 3% annual increases, until the lease expires on April 30, 2031. The Company has reserved the right to extend the term of the lease for one additional period of five years.

In October of 2019, as part of the acquisition of Presidio Bank, the Company assumed a lease for approximately 7,029 square feet on the first floor in a multi-tenant office building located at 1990 N. California Boulevard in Walnut Creek, California. The current monthly rent payment is $32,474, subject to annual increases of 3%, until the lease expires December 31, 2027. The Company has reserved the right to extend the lease for one additional period of five years.

In October of 2019, also as part of the acquisition of Presidio Bank, the Company assumed a lease for approximately 3,063 square feet on the first floor in a multi-tenant office building located at 400 S. Camino Real in San Mateo, California, with a lease expiration date of October 31,2024. In January 2020, The Company amended the lease expiration date to October 31, 2030, and executed a new lease for additional space on the tenth floor for approximately 5,023 square feet. The current monthly rent payment for the combined space of approximately 8,086 square feet is $67,922, subject to annual increases of 3%, until the lease expires October 31, 2030. The Company has reserved the right to extend the lease for two additional periods of five years.

In April of 2025, the Company amended and extended its lease for approximately 6,233 square feet on the twenty third floor in a multi-tenant office building located at 120 Kearny Street in San Francisco, California. The current monthly rent payment is $41,034, subject to annual increases of 3%, until the lease expires on August 31, 2031.

In May of 2021, the Company extended its lease for approximately 4,716 square feet in a one-story multi tenant office building located at 18625 Sutter Boulevard in Morgan Hill, California. The current monthly rent payment is $6,380, subject to annual increases of 2%, until the lease expires on October 31, 2026. The Company has reserved the right to extend the term of the lease for one additional period of five years.

In December of 2021, the Company entered into a new lease agreement for approximately 4,099 square feet on the sixteenth floor in a multi-tenant office building located at 1111 Broadway in Oakland, California. The current monthly rent payment is $25,754, subject to annual increases of 3%, until the lease expires on June 30, 2029. The Company has reserved the right to extend the term of the lease for one additional period of five years.

In August of 2022, the Company extended its lease for approximately 4,188 square feet on the first floor in a multi-tenant office building located at 999 5th Avenue in San Rafael, California. In May of 2023, the Company amended the lease to include an additional 916 square feet, for a total of 5,104 square feet. The current monthly rent payment for the combined space is $22,844, subject to annual increases of 3%, until the lease expires on December 31, 2027. The Company has reserved the right to extend the lease for one additional period of five years.

In January of 2023, the Company extended its lease for approximately 5,213 square feet on the first floor in a two-story multi tenant office building located at 419 S. San Antonio Road in Los Altos, California. The current monthly rent payment is $34,933, subject to annual increases of 3% until the lease expires on April 30, 2030. The Company has reserved the right to extend the term of the lease for one additional period of five years.

• Risks Related to Our Common Stock
• Risks Relating to the Merger
• Termination of the merger agreement could negatively affect us.
• Because the market price of CVBF common stock may fluctuate, holders of our common stock cannot be certain of the market value of the merger consideration they will receive.
• Combining us and CVBF may be more difficult, costly or time-consuming than expected, and the combined company may fail to realize the anticipated benefits of the merger.
• The combined company may be unable to retain our or CVBF’s legacy personnel successfully after the completion of the merger.
• Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on CVBF following the merger.
• The announcement of the proposed merger could disrupt our relationships with our employees, clients, suppliers, business partners and others, as well as their operating results and business generally.
• Holders of our common stock will have a reduced ownership and voting interest in CVBF after the merger and will exercise less influence over management.
• Litigation related to the merger has been filed against us, and additional litigation may be filed against us, which could prevent or delay the completion of the merger, result in the payment of damages or otherwise negatively impact our business and operations.
• Risks Relating to Our Operations
• Interruptions, cyberattacks, fraudulent activity or other security breaches may have a material adverse effect on our business.
• Our operations could be disrupted by our third-party service providers experiencing difficulty in providing their services, terminating their services or failing to comply with banking regulations.
• Commercial banking requires substantial board and management expertise, knowledge, and community and industry relationships. If we cannot retain our existing Board or leadership team or recruit experienced, well-qualified successors, our business may suffer.
• Our ability to access markets for funding and acquire and retain clients could be adversely affected by the deterioration of other financial institutions or the financial service industry’s reputation.
• Our risk management framework may not be effective in mitigating risks and/or losses to us.
• Team member misconduct could expose us to significant legal liability and reputational harm.
• We depend on the accuracy and completeness of information provided by clients and counterparties and any misrepresented information could adversely affect our business, financial condition and results of operations.
• Diverging and evolving expectations from clients, regulators, investors, and other stakeholders about environmental, social and governance practices may subject us to new or conflicting legal and regulatory requirements and stakeholder expectations, impose additional costs on us, or expose us to new or additional risks.
• Severe weather, natural disasters, pandemics, acts of war or terrorism, social unrest and other external events could significantly impact our operations.
• Risks Relating to Our Business
• Our profitability is dependent upon the geographic concentration of the markets in which we operate.
• Our ability to maintain our reputation is critical to the success of our business, and the failure to do so may materially adversely affect our business, financial condition and results of operations.
• Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes affecting real estate values and liquidity could impair the value of collateral securing our loans and result in loan and other losses.
• Our land and construction development loans are based upon estimates of costs and value associated with the completed project. These estimates may be inaccurate and we may be exposed to more losses on these projects than on other loans.
• Increased scrutiny by regulators of commercial real estate concentrations could restrict our activities and impose financial requirements or limits on the conduct of our business.
• Our use of appraisals in deciding whether to make a loan on or secured by real property does not ensure the value of the real property collateral.
• Many of our loans are to commercial borrowers, which may have a higher degree of risk than other types of borrowers.
• The small and medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our business, financial condition and results of operation.
• Risks Related to our SBA Loan Program
• Small Business Administration lending is an important part of our business. Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans.
• The recognition of gains on the sale of loans and servicing asset valuations reflect certain assumptions.
• Risks Related to our Credit Quality
• Our business depends on our ability to successfully manage credit risk.
• Our allowance for credit losses on loans may prove to be insufficient to absorb potential losses in our loan portfolio.
• Nonperforming assets adversely affect our results of operations and financial condition, and take significant time to resolve.
• We could be exposed to risk of environmental liabilities with respect to properties to which we take title.
• Risks Related to Our Growth Strategy
• We face risks related to any future acquisitions we make.
• If the goodwill that we recorded in connection with a business acquisition becomes impaired, it could require charges to earnings, which would have a negative impact on our financial condition and results of operations.
• We must effectively manage our franchise growth strategy.
• New lines of business or new products and services may subject us to additional risks.
• An actual or perceived reduction in our financial strength may cause others to reduce or cease doing business with us, which could result in a decrease in our net interest income and fee revenues.
• Changing interest rates, economic conditions and tariff policies, immigration policies, and the effects on our current and future borrowers have adversely affected, and in the future may adversely affect, our loan portfolio and may result in losses or increasing provision expense.
• Fluctuations in interest rates may reduce net interest income and otherwise negatively affect our business, financial condition and results of operations.
• Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business and stock price.
• We have significant deferred tax assets and cannot assure that they will be fully realized.
• Fluctuations in market interest rates may have a material effect on the value of the Company’s securities portfolio.
• Adverse changes to our credit ratings could limit our access to funding and increase our borrowing costs.
• Liquidity risks could affect operations and jeopardize our business, financial condition, and results of operations.
• We may be subject to more stringent capital requirements in the future.
• We are subject to extensive and complex regulations which are costly to comply with and may subject us to significant penalties for noncompliance.
• Changes in accounting standards could materially impact our financial statements.
• Significant legal claims or regulatory actions could subject us to substantial uninsured liabilities and reputational harm and have a material adverse effect on our business and results of operations.
• We make estimates from time to time regarding expected losses from litigation, and those estimates may prove inaccurate or inadequate.
• The costs and effects of litigation, investigations or similar matters, or adverse facts and developments related thereto, could materially affect our business, financial condition and results of operations.
• The failure to protect our clients' confidential information, data and privacy could adversely affect our business.
• We face strong competition from financial services companies and other companies that offer commercial banking services, which could harm our business.
• We have a continuing competitive need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology.
• Issuing additional shares of our common stock to acquire other banks and bank holding companies or future equity raises may result in dilution for existing shareholders and may adversely affect the market price of our stock.
• The trading volume in our common stock is less than that of other larger financial services companies.
• The price of our common stock may fluctuate significantly, and this may make it difficult for you to resell shares of common stock owned by you at times or at prices you find attractive.
• Our dividend policy may change without notice, and our future ability to pay dividends is subject to restrictions.
• We have limited the circumstances in which our directors will be liable for monetary damages.
• We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.
• The holders of our debt obligations will have priority over our common stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to the payment of interest and dividends.
• Provisions in our charter documents and California law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies.