Mr. Brager indicated an interest in exploring a potential transaction and Heritage and CVBF entered into a mutual non-disclosure and confidentiality agreement in March 2024 to facilitate more detailed discussions of a potential business combination. Following high-level diligence and discussions, and with the authorization of the Heritage Board, following presentations from Heritage management and its financial advisor, Piper Sandler, Heritage engaged in negotiations with CVBF with respect to an all-stock transaction. The CVBF Board, following a presentation by CVBF management and a presentation by representatives of J.P. Morgan, authorized CVBF management to finalize a non-binding letter of intent with Heritage at an exchange ratio of 0.615 shares of CVBF common stock for each share of Heritage common stock. The parties reached tentative agreement for an
exchange ratio of 0.615 shares of CVBF common stock for each share of Heritage common stock, which at that time CVBF described as the maximum amount it was willing to offer. Discussions regarding a potential business transaction stalled in April 2024 due to an inability to reach agreement on certain key terms of a transaction during negotiation of a non-binding letter of intent. The Heritage Board was concerned that certain terms proposed by CVBF created an unreasonable level of closing risk due to an uncertain and potentially protracted timeline for regulatory approval based on the regulatory environment at that time as well as continued volatility in the operating environment for banks following the 2023 failures of Silicon Valley Bank and First Republic Bank.
Following the termination of discussions, the Heritage Board determined to focus on executing its stand-alone plan to generate earnings enhancements as its primary focus but also instructed Mr. Jones to continue informally meeting with executives of other financial institutions to identify potential opportunities that could further Heritage’s strategic objectives and create shareholder value and to keep the Heritage Board apprised of any such discussions.
During the remainder of 2024 and in 2025, Mr. Jones continued to periodically meet with other bank executives to remain appraised of industry developments and to identify potential opportunities but did not engage in any substantive discussions regarding exploring a potential transaction, except as described below.
In early March 2025, following initial informal discussions regarding the industry and each company’s business, the executive of a financial institution (“Party A”) expressed preliminary interest to Mr. Jones in exploring a potential transaction. Mr. Jones updated the Heritage Board who authorized Mr. Jones to have exploratory discussions with Party A, and Party A and Heritage entered into a mutual non-disclosure and confidentiality agreement to facilitate more detailed discussions of a potential business combination transaction. Over the course of the following several weeks, Party A and Heritage exchanged preliminary financial information in connection with discussion of a potential exchange ratio that Party A may be willing to offer. On March 20, 2025, Party A informed Heritage that it had concluded that, due to its valuation analysis regarding tangible book value dilution and the earn-back associated with a transaction, it would be limited to proposing a transaction without a market premium. Based on Heritage’s closing price on March 20, 2025, the merger consideration would have had an implied value of $9.57 per share. Following discussion with members of the Heritage Board, Mr. Jones indicated to Party A that Heritage would not be willing to engage in further discussions on that basis.
During spring and summer 2025, Heritage made a number of leadership additions and enhancements to the executive team led by Mr. Jones as part of a planned and orderly transition overseen by the Heritage Board. Julianne Biagini-Komas, a member of the Board of directors, also transitioned to Board Chair and Heritage added a new director.
On September 23, 2025, the Heritage Board and executive team held a strategic planning offsite that was followed by a board meeting on September 24, 2025. Prior to the strategic planning offsite, the Heritage executive team had conducted an in-depth long-term strategic planning review with the assistance of a consulting firm that provided in-depth market analysis. During these strategic planning discussions, the Heritage Board discussed the macroeconomic environment, the performance of Heritage and its peers as well as potential opportunities and risks impacting Heritage’s future performance. The Heritage Board determined that its key strategic objective was for Heritage to improve profitability to achieve top quartile performance among its peers. The Heritage management team presented and discussed with the Heritage Board a proposed three-year plan for management to execute to meet that objective, which included steps to improve productivity, increase operational efficiency and enhance core profitability. The Heritage Board reviewed the risks to the plan, which included the macroeconomic environment, concerns about the increasing importance of scale in banking and competitive dynamics in its markets and challenges in increasing its market presence and headwinds facing the business relating to infrastructure build, technology deployment and challenges in improving non-interest income and return on tangible common equity. The Heritage Board also discussed the significant increase in bank merger and acquisition activity taking place in 2025, which was due in part to increased receptivity to mergers and
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