Avidbank Holdings, Inc. Announces Net Income for the Second Quarter of 2024

SAN JOSE, CA / ACCESSWIRE / July 22, 2024 / Avidbank Holdings, Inc. (OTC Pink:AVBH) announced net income for the second quarter of 2024 of $3.5 million, or $0.46 per diluted share, compared to $5.2 million, or $0.69 per diluted share, for the first quarter of 2024 and $4.7 million, or $0.63 per diluted share, for the second quarter of 2023.

Second Quarter 2024 Highlights

• Book value per share was $21.77, an increase of $0.36, or 2%, from March 31, 2024, and an increase of $2.22, or 11%, from June 30, 2024.

• Loans increased $23.6 million, or 5% annualized, from March 31, 2024, and $66.0 million, or 4%, from December 31, 2023.

• Average deposits increased $32.5 million, or 8% annualized, from the first quarter of 2024, and $128.3 million, or 8%, from the second quarter of 2023.

• Period end deposits (excluding brokered deposits)⁽¹⁾ increased $39.6 million, or 10% annualized, from March 31, 2024, and $99.7 million, or 6%, from December 31, 2023.

• The efficiency ratio improved to 59.92% from 61.62% in the first quarter of 2024.

• Annualized net charge-offs to average loans totaled 0.0% for the second quarter and first quarter of 2024. Nonperforming assets to total assets was 0.16% as of June 30, 2024, compared to 0.06% as of March 31, 2024.

• Net income totaled $3.5 million, a decrease of $1.8 million from the first quarter of 2024, and a decrease of $1.3 million from the second quarter of 2023. A $3.0 million increase in the provision for credit losses was a primary contributor to the decrease.

"We continue to make solid progress on our overall goal for this year of strengthening our balance sheet. This included another quarter of the growth in core deposits outpacing our growth in loans. Total deposits, excluding brokered, increased approximately $40 million while loans grew approximately $24 million in the second quarter. Net income in the second quarter was negatively impacted by a $2.4 million specific reserve on a nonperforming venture-backed loan. Pre-tax, pre-provision income⁽¹⁾ in the second quarter was $7.9 million, compared to $7.8 million in the first quarter. Overall credit quality remains solid with criticized and classified loans representing 2.0% of total loans," said Mark Mordell, Chairman and Chief Executive Officer.

"Our new clients as well as existing clients continue to move deposits from noninterest bearing accounts to interest earning accounts. This shift was elevated in the second quarter, which negatively impacted our net interest margin," added Mr. Mordell.

Income Statement

Taxable equivalent net interest income⁽¹⁾ totaled $18.5 million for the second quarter of 2024, a decrease of $360,000, or 2%, from the first quarter of 2024, and an increase of $857,000, or 5%, from the second quarter of 2023. The taxable equivalent net interest margin was 3.39% in the second quarter of 2024, a decrease of 15 basis points compared to the first quarter of 2024, and a decrease of 3 basis points compared to the second quarter of 2023. The decrease in taxable equivalent net interest income and net interest margin compared to the prior quarter was primarily driven by a decrease in noninterest bearing deposits and an overall increase in the cost of deposits and borrowings. The increase in borrowing costs included the renewal of $244.0 million in borrowings from the Bank Term Funding Program during the first quarter of 2024.

The yield on loans in the second quarter of 2024 was 7.37%, an increase of 9 basis points from the first quarter of 2024 and an increase of 63 basis points from the second quarter of 2023. The overall increase in loan yields compared to prior periods was primarily due to higher rates on new loans.

The cost of deposits in the second quarter of 2024 was 3.09%, an increase of 28 basis points from the first quarter of 2024 and an increase of 112 basis points from the second quarter of 2023. The cost of interest-bearing deposits in the second quarter of 2024 was 4.11% compared to 3.90% in the first quarter of 2024 and 3.18% in the second quarter of 2023.

The provision for credit losses was $3.0 million in the second quarter of 2024, compared to $319,000 in the first quarter of 2024 and $1.5 million in the second quarter of 2023. The provision increased in the current quarter primarily due to the addition of a $2.3 million nonaccrual loan. The provision for credit losses in the second quarter of 2024 included a $3.1 million provision for credit losses on loans offset by a $(70,000) provision for unfunded commitments.

Noninterest income was $1.1 million in the second quarter of 2024 compared to $1.3 million in the first quarter of 2024 and $902,000 in the second quarter of 2023.

Noninterest expense totaled $11.8 million for the second quarter of 2024, a decrease of $669,000 compared to the first quarter of 2024 primarily due to a lower incentive accrual and seasonally higher FICA taxes in the previous quarter. There were 144 full-time equivalent employees on June 30, 2024, compared to 141 on March 31, 2024.

Balance Sheet

Total assets were $2.29 billion as of June 30, 2024, compared to $2.26 billion as of March 31, 2024, and $2.21 billion at June 30, 2023. Cash and cash equivalents were $111.7 million on June 30, 2024, compared to $90.2 million on March 31, 2024, and $104.2 million on June 30, 2023.

Period end loans on June 30, 2024, totaled $1.81 billion, an increase of $23.6 million, or 5% annualized, from March 31, 2024, and an increase of $156.3 million, or 9%, from June 30, 2023. The growth in loans during the second quarter of 2024 included an increase of $38.5 million in commercial loans, partially offset by a decrease of $16.6 million in construction loans. Quarterly average loans for the second quarter of 2024 increased $56.7 million, or 3%, from the first quarter of 2024 and $224.1 million, or 14%, from the second quarter of 2023.

The allowance for credit losses on loans was $22.4 million on June 30, 2024, representing an increase of $3.1 million from March 31, 2024. The allowance for credit losses on loans to total loans was 1.24% on June 30, 2024, compared to 1.08% on March 31, 2024. Nonperforming loans to total loans was 0.20% on June 30, 2024, compared to 0.08% on March 31, 2024. The increase was due to the addition of one nonperforming venture-backed loan totaling $2.3 million.

Investment securities were $308.7 million as of June 30, 2024, compared to $314.8 million on March 31, 2024, and $371.8 million at June 30, 2023.

Period end deposits were $1.74 billion on June 30, 2024, a decrease of $19.4 million, or 1%, from March 31, 2024. The change in deposits during the second quarter of 2024 included a $76.1 million and $43.1 million increase in interest-bearing checking and time deposits, respectively, offset by a $72.1 million decrease in non-interest bearing and a $58.9 million decrease in brokered deposits. Quarterly average deposits for the second quarter of 2024 were $1.76 billion, an increase of $32.5 million from the first quarter of 2024, and an increase of $128.3 million from the second quarter of 2023.

Short-term borrowings on June 30, 2024, totaled $330.0 million, an increase of $40.0 million, or 14%, compared to March 31, 2024. The short-term borrowings on June 30, 2024 included $244.0 million in borrowings from the Bank Term Funding Program (BTFP).

Book value per share was $21.77 on June 30, 2024, an increase of $0.36 compared to $21.41 on March 31, 2024. Total shareholders' equity was $171.4 million on June 30, 2024, an increase of $4.4 million compared to March 31, 2024. This included an increase in retained earnings of $3.5 million.

(1) A Non-GAAP performance measure. We provide detailed reconciliation 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.

Non-GAAP Financial Measures

This news release contains certain non-GAAP (Generally Accepted Accounting Principles) financial measures in addition to results presented in accordance with GAAP. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in the Company's current quarter and year-to-date results and facilitate comparison of our performance with the performance of our peers. Where applicable, the Company has also presented comparable earnings information using GAAP financial measures. These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for operating results determined in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

Forward-Looking Statements

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)