Heritage Commerce Corp Issues Supplemental Disclosures on Proposed Merger with CVB Financial Corp

Key Points Investors Must Know

• Heritage Commerce Corp (HTBK) filed supplemental disclosures related to its pending merger with CVB Financial Corp (CVBF) in response to shareholder litigation and demand letters.
• These disclosures update and clarify important data in the joint proxy statement/prospectus, and may impact shareholder voting and valuation assessments.
• Supplemental information includes corrections to share counts, details on confidentiality agreements, peer group composition changes, and additional financial analyses used in the fairness opinion.
• Piper Sandler’s methodologies for determining discount rates and comparable company multiples are disclosed in detail, which may affect investor perception of deal fairness and valuation.
• Details of executive compensation in the event of the merger are provided, which may be material to shareholder decision-making.

Detailed Disclosure and Analysis

Background and Legal Context

The company received lawsuits and shareholder demand letters alleging inadequate disclosures in the original joint proxy statement/prospectus regarding the proposed merger with CVBF. To avoid legal delays, minimize litigation risks, and provide additional information to shareholders, Heritage and CVBF issued this supplemental disclosure. Both companies expressly deny any wrongdoing or legal necessity for these added disclosures.

Correction to Outstanding Share Count

The precise count of outstanding Heritage common stock as of the record date was corrected from 61,559,560 to 61,552,260 shares. This correction may affect calculations of exchange ratios and overall merger consideration for shareholders.

Confidentiality Agreements in Merger Negotiations

The company clarified that the mutual non-disclosure and confidentiality agreement between Heritage and a potential counterparty (Party A) did not contain any standstill provision. This means Party A was not contractually prohibited from making a competing bid or proposal, which is relevant for assessing the competitive dynamics of the merger process.

Peer Group Revisions in Financial Advisor Analysis

Piper Sandler, acting as Heritage’s financial advisor, amended the composition of the peer groups used in its fairness opinions. The revised tables list in detail the new sets of comparable companies for both Heritage and CVBF, as well as the metrics used for comparison, including balance sheet data, capital ratios, profitability, valuation multiples, and market capitalization.

Some notable peers in the revised Heritage group include:

• TriCo Bancshares (Chico, CA)
• Central Pacific Financial Corp. (Honolulu, HI)
• Heritage Financial Corporation (Olympia, WA)
• Sierra Bancorp (Porterville, CA)
• Community West Bancshares (Fresno, CA)
• Northrim BanCorp, Inc. (Anchorage, AK)

The CVBF peer group is similarly updated, including companies such as:

• Independent Bank Corp.
• Bank of Hawaii Corporation
• Mechanics Bancorp
• WSFS Financial Corporation
• Central Bancompany, Inc.
• Community Financial System, Inc.
• Northwest Bancshares, Inc.
• First Financial Bankshares, Inc.
• First Bancorp
• TriCo Bancshares
• Amalgamated Financial Corp.
• Tompkins Financial Corporation
• German American Bancorp, Inc.
• First Mid Bancshares, Inc.
• CVB Financial Corp. itself, for reference

Expanded Details on Comparable Company and Precedent Transaction Analyses

Piper Sandler’s methodologies for selecting multiples used in fairness analyses are now disclosed in detail. The advisor selected price to earnings and tangible book value multiples based on its review of trading multiples of selected comparable companies.

Discount rate calculations for both Heritage and CVBF are now fully disclosed:

• Risk Free Rate: 4.77% (20-year Treasury as of December 16, 2025)
• Equity Risk Premium: 5.00% (per Duff & Phelps Cost of Capital Navigator)
• Size Premium: 1.02% (per Duff & Phelps)
• 2-Year Beta: 84.4% (Heritage) and 87.7% (CVBF) vs. S&P 500
• Resulting Discount Rate: 10.01% (Heritage), 10.18% (CVBF)

These assumptions are central to the discounted cash flow (DCF) analyses used in the fairness opinion, and thus directly affect the implied value of the merger consideration.

Details on Precedent Transaction Analysis

The table of nationwide precedent transactions was updated. This data provides context for the merger valuation by benchmarking it against similar deals, including acquiror, target, deal value, pricing multiples, and seller financial metrics.

Pro Forma Merger Analysis and Accretion/Dilution Metrics

Estimated earnings per share (EPS) and tangible book value (TBV) accretion/dilution for CVBF shareholders as a result of the merger are now disclosed:

• EPS impact: (0.1)% (slight dilution)
• TBV impact: +2.7% (accretion)

These metrics are important for shareholders to evaluate the financial impact of the merger on their holdings.

Additionally, the company referenced further assumptions used in pro forma analysis, which are available in an investor presentation filed by CVBF on December 17, 2025.

Executive Compensation and “Golden Parachutes”

Disclosure of compensation and benefits for Heritage’s named executive officers in the event of the merger (“golden parachutes”) have been updated, including:

• Cash severance amounts
• Equity acceleration values
• Pension/non-qualified deferred compensation values
• Perquisites and other benefits

These details are material to shareholders as they may influence voting decisions on the merger.

Shareholder Considerations and Potential Price Sensitivity

• Corrections to the number of outstanding shares and updated financial analyses may affect merger exchange ratio calculations and perceived deal value.
• Expanded disclosure on peer groups and precedent transaction multiples may alter investor perceptions of the fairness of the merger consideration.
• Disclosure of executive compensation may raise governance concerns among some shareholders.
• EPS dilution and TBV accretion metrics are central to the financial rationale for the deal and are likely to be closely scrutinized by market participants and proxy advisory firms.
• Resolution of legal challenges and enhanced transparency may remove an overhang from the shares, potentially impacting trading dynamics as the merger moves forward.

Conclusion

This supplemental disclosure addresses key legal, financial, and governance questions regarding the proposed merger between Heritage Commerce Corp and CVB Financial Corp. Investors should carefully review these updates as they may affect the implied value of the transaction, the likelihood of its completion, and the ultimate impact on shareholder value.

Shareholders are encouraged to read the full joint proxy statement/prospectus and all supplements before casting their votes on the proposed merger.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a solicitation to buy or sell any security. Investors should conduct their own due diligence and consult with professional advisors before making investment decisions.

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