Avidbank Holdings, Inc. Announces Net Income of $5.4 Million for the Third Quarter of 2023

SAN JOSE, CA / ACCESSWIRE / October 24, 2023 / Avidbank Holdings, Inc. (OTC Pink:AVBH) announced net income for the third quarter of 2023 of $5.4 million, or $0.72 per diluted share, compared to $4.7 million, or $0.63 per diluted share, for the second quarter of 2023 and $7.0 million, or $0.95 per diluted share, for the third quarter of 2022.

Third Quarter 2023 Highlights

• Loans increased $19.6 million, or 5% annualized, from June 30, 2023, and $115.7 million, or 7%, from December 31, 2022.
• Average deposits increased $53.4 million, or 13% annualized, from the second quarter of 2023.
• Return on average assets improved to 0.99% from 0.87% in the second quarter of 2023.
• Uninsured deposits represented 35% of total deposits on September 30, 2023, compared to 40% on June 30, 2023, and 85% at December 31, 2022. Net available borrowing capacity totaled approximately $1.4 billion as of September 30, 2023.
• Annualized net charge-offs to average loans totaled 0.0% for the third quarter of 2023, compared to 0.03% for the second quarter of 2023.
• Nonperforming assets to total assets was unchanged at 0.70% on September 30, 2023 compared to June 30, 2023.

"Despite the continued challenges in today's banking environment, we are pleased with our performance and outlook as we look toward 2024. Loan demand has moderated compared to historical average growth, but there remain excellent opportunities to add quality relationships. We continue to add new deposit accounts regularly after losing a very limited number of relationships since March of this year. Based on our commercial banking focus, it is not uncommon to have sizeable daily and seasonal fluctuations in our deposit balances, so we prefer to focus on growth in average balances. For the third quarter, average deposit balances increased $53.4 million compared to the second quarter. Our deposit pipeline remains robust in our venture lending and corporate banking divisions," said Mark Mordell, Chairman and Chief Executive Officer.

"Credit quality remains solid, including the potential resolution of the $14.1 million nonperforming construction loan. We foreclosed on the loan during the third quarter and are currently in contract to sell. We expect to close on the sale of the property in the fourth quarter," added Mr. Mordell.

Income Statement

Taxable equivalent net interest income⁽¹⁾ totaled $17.3 million for the third quarter of 2023, a decrease of $177,000, or 1%, from the second quarter of 2023, and a decrease of $2.3 million, or 12%, from the third quarter of 2022. The taxable equivalent net interest margin was 3.34% in the third quarter of 2023, a decrease of 5 basis points compared to the second quarter of 2023, and a decrease of 73 basis points compared to the third quarter of 2022. The decrease in taxable equivalent net interest income and net interest margin compared to the prior quarter was primarily driven by an overall increase in deposit costs. The decrease in taxable equivalent net interest margin compared to the same period one year ago was primarily driven by an increase in high-cost short-term borrowings replacing lower-cost deposits, interest bearing deposits replacing no-cost demand deposits, and an overall increase in deposit costs, partially offset by an increase in loan yields and average loan balances.

The yield on loans in the third quarter of 2023 was 7.04 %, an increase of 30 basis points from the second quarter of 2023 and an increase of 154 basis points from the third quarter of 2022. The overall increase in loan yields compared to prior periods was primarily due to increases in the Prime rate.

The cost of deposits in the third quarter of 2023 was 2.52%, an increase of 55 basis points from the second quarter of 2023 and an increase of 210 basis points from the third quarter of 2022. The cost of interest-bearing deposits in the third quarter of 2023 was 3.66% compared to 3.18% in the second quarter of 2023 and 0.77% in the third quarter of 2022.

The provision for credit losses was $120,000 in the third quarter of 2023, compared to $1.5 million in the second quarter of 2023 and $925,000 in the third quarter of 2022. The provision decreased in the current quarter primarily due to lower loan growth of $19.6 million in the third quarter of 2023, compared to $85.8 million in the second quarter of 2023. The provision for credit losses in the third quarter of 2023 included a $164,000 provision for loan losses offset by a $(44,000) provision for unfunded commitments.

Noninterest income was $1.2 million in the third quarter of 2023 compared to $1.1 million in the second quarter of 2023 and $1.1 million in the third quarter of 2022. The third quarter of 2023 included a $105,000 increase in other investment income.

Noninterest expense totaled $10.9 million for the third quarter of 2023, an increase of $484,000 compared to the second quarter of 2023. Salaries and benefits expense for the third quarter of 2023 included an increase from the hiring of the treasury management team on August 3^rd. Salaries and benefits expense for the previous quarter included a reduction in incentive compensation expense. There were 147 full-time equivalent employees on September 30, 2023, compared to 145 on June 30, 2023.

Balance Sheet

Total assets were $2.20 billion as of September 30, 2023, compared to $2.21 billion on June 30, 2023, and $1.98 billion at September 30, 2022. Cash and cash equivalents were $80.0 million on September 30, 2023, compared to $104.2 million on June 30, 2023, and $37.2 million on September 30, 2022.

Period end loans on September 30, 2023, totaled $1.67 billion, which represented an increase of $19.6 million, or 5% annualized, from June 30, 2023, and an increase of $277.4 million, or 20%, from September 30, 2022. The growth in loans during the third quarter of 2023 included an increase of $14.9 million in commercial loans and $5.2 million in commercial real estate loans, partially offset by a decrease of $1.4 million in construction loans. Quarterly average loans for the third quarter of 2023 increased $50.7 million, or 3%, from the second quarter of 2023 and $283.0 million, or 21%, from the third quarter of 2022.

The allowance for credit losses on loans was $17.8 million on September 30, 2023, representing an increase of $164,000 from June 30, 2023. The allowance for credit losses on loans to total loans was 1.07% on September 30, 2023, compared to 1.07% on June 30, 2023. Nonperforming loans to total loans was 0.08% on September 30, 2023, compared to 0.94% on June 30, 2023. The decrease was due to the foreclosure of one nonperforming loan totaling $14.1 million.

Investment securities were $345.6 million as of September 30, 2023, compared to $371.8 million on June 30, 2023, and $468.2 million at September 30, 2022. In the first quarter of 2023, we sold $57 million of securities for a loss of $815,000. This included the sale of $25 million in available for sale mortgage-backed securities and the sale of all $32 million in held to maturity municipal securities.

Period end deposits were $1.70 billion on September 30, 2023, a decrease of $40.5 million, or 2%, from June 30, 2023. This included a $2.3 million, or 2% annualized, increase in Venture Lending deposits. Deposits in our Venture Lending division totaled $608.3 million at September 30, 2023, and included $396.9 million in reciprocal deposits.

Short-term borrowings on September 30, 2023, totaled $300.0 million, an increase of $36.0 million, or 14%, compared to June 30, 2023. The short-term borrowings on September 30, 2023 included $35.0 million in FHLB borrowings and $224.0 million in borrowings from the Bank Term Funding Program (BTFP). The average rate on the BTFP on September 30, 2023 was 4.64%.

Book value per share was $18.83 on September 30, 2023, a decrease of $0.72 compared to $19.55 on June 30, 2023. Total shareholders' equity totaled $145.6 million on September 30, 2023, a decrease of $5.2 million compared to June 30, 2023. This included an increase in retained earnings of $5.4 million offset by an increase in accumulated other comprehensive loss of $11.2 million.

(1) A Non-GAAP performance measure. We provide detailed reconciliations in the "Non-GAAP Performance and Financial Measures Reconciliation" table.

About Avidbank

Avidbank Holdings, Inc. (OTC Pink: AVBH), headquartered in San Jose, California, offers innovative financial solutions and services. We specialize in commercial & industrial lending, venture lending, structured finance, asset-based lending, sponsor finance, fund finance, and real estate construction and commercial real estate lending. Avidbank provides a different approach to banking. We do what we say.

Forward-Looking Statement:

This news release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts, and generally include the words "believes," "plans," "intends," "expects," "opportunity," "anticipates," "targeted," "continue," "remain," "will," "should," "may," or words of similar meaning. While we believe that our forward-looking statements and the assumptions underlying them are reasonably based, such statements and assumptions, are, by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect. Accordingly, actual results could materially differ from forward-looking statements for a variety of reasons, including, but not limited to local, regional, national and international economic conditions and events and the impact they may have on us and our customers, and in particular in our market areas; ability to attract deposits and other sources of liquidity; oversupply of property inventory and deterioration in values of California real estate, both residential and commercial; a prolonged slowdown or decline in construction activity; changes in the financial performance and/or condition of our borrowers; changes in the level of nonperforming assets and charge-offs; the cost or effect of acquisitions we may make; the effect of changes in laws and regulations (including laws, regulations and judicial decisions concerning financial reform, capital requirements, taxes, banking, securities, employment, executive compensation, insurance, and information security) with which we and our subsidiaries must comply; changes in estimates of future reserve requirements and minimum capital requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; ability to adequately underwrite for our asset based and corporate finance lending business lines; our ability to raise capital; inflation, interest rate, securities market and monetary fluctuations; cyber-security threats including loss of system functionality or theft or loss of data; political instability; acts of war or terrorism, or natural disasters, such as earthquakes, or the effects of a pandemic; destabilization in international economies resulting from the European sovereign debt crisis; the timely development and acceptance of new banking products and services and perceived overall value of these products and services by users; changes in consumer spending, borrowing and savings habits; technological changes; the ability to increase market share, retain customers and control expenses; ability to retain and attract key management and personnel; changes in the competitive environment among financial and bank holding companies and other financial service providers; continued volatility in the credit and equity markets and its effect on the general economy; the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; changes in our organization, management, compensation and benefit plans, and our ability to retain or expand our management team; the costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; our success at managing the risks involved in the foregoing items. We do not undertake, and specifically disclaim any obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by law.

Contact:

Patrick Oakes
Executive Vice President and Chief Financial Officer
408-200-7390
IR@avidbank.com

AVIDBANK HOLDINGS, INC.
Selected Financial Data (Unaudited)
(in thousands, except share and per share amounts)

(1) A Non-GAAP performance measure. We provide detailed reconciliations in the "Non-GAAP Performance and Financial Measures Reconciliation" table.
(2) Annualized

AVIDBANK HOLDINGS, INC.
Consolidated Balance Sheets (Unaudited)
(in thousands)

AVIDBANK HOLDINGS, INC.
Consolidated Statements of Income (Unaudited)
(in thousands, except share and per share amounts)

AVIDBANK HOLDINGS, INC.
Average Balance Sheets and Net Interest Margin Analysis (Unaudited)
(dollars in thousands; taxable equivalent)

(1) Nonperforming loans are included in average loan balances. No adjustment has been made for these loans in the calculation of yields. Interest income on loans includes net amortization of deferred loan fees / (costs) of $441 thousand and $347 thousand, respectively.
(2) Average allowance for loan losses of $17.6 million and $16.8 million, respectively, is included as a contra asset.
(3) Net interest margin is net interest income divided by total interest-earning assets.

AVIDBANK HOLDINGS, INC.
Average Balance Sheets and Net Interest Margin Analysis (Unaudited)
(dollars in thousands; taxable equivalent)

(1) Nonperforming loans are included in average loan balances. No adjustment has been made for these loans in the calculation of yields. Interest income on loans includes net amortization of deferred loan fees / (costs) of $441 thousand and $513 thousand, respectively.
(2) Interest income on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 21%, reflecting the statutory federal income tax rate.
(3) Average allowance for loan losses of $17.6 million and $14.7 million, respectively, is included as a contra asset.
(4) Net interest margin is net interest income divided by total interest-earning assets.

AVIDBANK HOLDINGS, INC.
Average Balance Sheets and Net Interest Margin Analysis (Unaudited)
(dollars in thousands; taxable equivalent)

(1) Nonperforming loans are included in average loan balances. No adjustment has been made for these loans in the calculation of yields. Interest income on loans includes amortization of deferred loan fees / (costs) of $1.3 million and $1.6 million, respectively.
(2) Interest income on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 21%, reflecting the statutory federal income tax rate.
(3) Average allowance for loan losses of $16.9 million and $13.7 million, respectively, is included as a contra asset.
(4) Tax equivalent net interest income divided by total interest-earning assets.

AVIDBANK HOLDINGS, INC.
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