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Avidbank Holdings, Inc. Announces Net Income for the Fourth Quarter of 2023

SAN JOSE, CA / ACCESSWIRE / January 22, 2024 / Avidbank Holdings, Inc. (OTC Pink:AVBH) announced net income for the fourth quarter of 2023 of $303,000, or $0.04 per diluted share, compared to $5.4 million, or $0.72 per diluted share, for the third quarter of 2023 and $8.4 million, or $1.13 per diluted share, for the fourth quarter of 2022. Adjusted net income(1) totaled $4.9 million, or $0.65 per diluted share for the fourth quarter of 2023.

Fourth Quarter 2023 Highlights

  • Book value per share was $21.27, an increase of $2.44, or 13%, from September 30, 2023 and an increase of $3.28, or 18%, from December 31, 2022.
  • Loans increased $70.7 million, or 17% annualized, from September 30, 2023, and $186.4 million, or 12%, from December 31, 2022.
  • Average deposits increased $26.5 million, or 6% annualized, from the third quarter of 2023.
  • Taxable equivalent net interest margin (1) was 3.47% in the fourth quarter of 2023, compared to 3.34% in the third quarter of 2023.
  • Annualized net charge-offs to average loans totaled 0.0% for the fourth and third quarters of 2023 and 0.01% for the full year 2023.
  • Nonperforming assets to total assets was 0.06% as of December 31, 2023, compared to 0.70% on September 30, 2023, following the fourth quarter sale of the $14.1 million foreclosed real estate property.

Profitability Improvement Initiatives

  • Sold $35.8 million in available-for-sale securities for a loss of $5.4 million. The securities had a book yield of 1.74% and an estimated average life of 5.5 years. The expected recovery of this loss is approximately 4.1 years.
  • Initiated the surrender of $21.2 million in bank-owned life insurance ("BOLI") policies, resulting in tax expense of $478,000. Proceeds from the surrender of BOLI are expected to be received in the first half of 2024. The pre-tax yield on this BOLI was 3.25%.
  • Completed the sale of the $14.1 million foreclosed real estate property in the fourth quarter of 2023 for a loss of $165,000.
  • Completed a reduction in staff of seven employees resulting in annual cost savings of approximately $1.2 million and fourth quarter 2023 severance expense of $324,000.
  • The proceeds from the foreclosed property sale, securities sale, and BOLI surrender will reduce Avidbank's reliance on wholesale funding by approximately $71 million.

"We are pleased with the diversified loan growth, improved net interest margin, and continued strong asset quality in the fourth quarter. Although deposit levels ended the year lower than expected, our deposit pipeline remains robust. We are optimistic that our growth in deposits will be strong as we move into 2024," said Mark Mordell, Chairman and Chief Executive Officer.

"We took several important steps in the fourth quarter of 2023 to improve our profitability in 2024. This included the resolution of our foreclosed real estate property, selling approximately 10 percent of our investment portfolio, initiating the surrender of a portion of our BOLI portfolio, and the difficult decision of reducing the size of our work force. These steps impacted fourth quarter net income by approximately $5 million but will improve profitability in 2024. Most importantly, these actions will reduce our reliance on wholesale funding, which is imperative as we execute our strategic plan for 2024 to strengthen our balance sheet and improve our performance metrics," added Mr. Mordell.

Income Statement

Taxable equivalent net interest income(1) totaled $18.3 million for the fourth quarter of 2023, an increase of $942,000, or 5%, from the third quarter of 2023, and a decrease of $3.6 million, or 16%, from the fourth quarter of 2022. The taxable equivalent net interest margin was 3.47% in the fourth quarter of 2023, an increase of 13 basis points compared to the third quarter of 2023, and a decrease of 94 basis points compared to the fourth quarter of 2022. The increase in taxable equivalent net interest income and net interest margin compared to the prior quarter was primarily driven by an overall increase in loan yields and balances. 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 fourth quarter of 2023 was 7.25%, an increase of 21 basis points from the third quarter of 2023 and an increase of 92 basis points from the fourth quarter of 2022. The overall increase in loan yields compared to prior periods was primarily due to increases in interest rates, primarily the Prime rate.

The cost of deposits in the fourth quarter of 2023 was 2.71%, an increase of 19 basis points from the third quarter of 2023 and an increase of 181 basis points from the fourth quarter of 2022. The cost of interest-bearing deposits in the fourth quarter of 2023 was 3.80% compared to 3.66% in the third quarter of 2023 and 1.59% in the fourth quarter of 2022.

The provision for credit losses was $1.27 million in the fourth quarter of 2023, compared to $120,000 in the third quarter of 2023 and $993,000 in the fourth quarter of 2022. The provision increased in the current quarter primarily due to loan growth of $70.7 million in the fourth quarter of 2023, compared to $19.6 million in the third quarter of 2023. The provision for credit losses in the fourth quarter of 2023 included a $1.33 million provision for loan losses offset by a $(65,000) provision for unfunded commitments.

Noninterest income was $(4.45) million in the fourth quarter of 2023 compared to $1.2 million in the third quarter of 2023 and $1.3 million in the fourth quarter of 2022. The fourth quarter of 2023 included a $5.40 million loss on sale of securities, a $165,000 loss on the sale of a foreclosed property, and a loss of $116,000 from changes in the fair value of fund investments.

Noninterest expense totaled $11.6 million for the fourth quarter of 2023, an increase of $654,000 compared to the third quarter of 2023. Salaries and benefits expense for the fourth quarter of 2023 included severance charges of $324,000. There were 143 full-time equivalent employees on December 31, 2023, compared to 147 on September 30, 2023.

Balance Sheet

Total assets were $2.23 billion as of December 31, 2023 compared to $2.20 billion at September 30, 2023, and $2.13 billion at December 31, 2022. Cash and cash equivalents were $81.4 million on December 31, 2023, compared to $80.0 million on September 30, 2023, and $47.3 million on December 31, 2022.

Period end loans on December 31, 2023, totaled $1.74 billion, an increase of $70.7 million, or 17% annualized, from September 30, 2023, and an increase of $186.4 million, or 12%, from December 31, 2022. The growth in loans during the fourth quarter of 2023 included an increase of $27.3 million in commercial loans and $22.7 million in construction loans, and $10.8 million in multi-family commercial real estate loans. Quarterly average loans for the fourth quarter of 2023 increased $58.6 million, or 4%, from the third quarter of 2023 and $248.7 million, or 17%, from the fourth quarter of 2022.

The allowance for credit losses on loans was $19.1 million on December 31, 2023, representing an increase of $1.3 million from September 30, 2023. The allowance for credit losses on loans to total loans was 1.10% on December 31, 2023, compared to 1.07% on September 30, 2023. Nonperforming loans to total loans was 0.08% on December 31, 2023, unchanged from September 30, 2023.

Investment securities were $325.3 million as of December 31, 2023, compared to $345.6 million on September 30, 2023, and $444.7 million at December 31, 2022. In the fourth quarter of 2023, we sold $35.8 million of securities for a loss of $5.4 million. During the first quarter of 2023, we sold $25 million in available for sale mortgage-backed securities and all $32 million in held to maturity municipal securities.

Period end deposits were $1.65 billion on December 31, 2023, a decrease of $53.9 million, or 3%, from September 30, 2023. The change in deposits during the fourth quarter of 2023 included a $17.8 million decrease in non-interest bearing deposits. Quarterly average deposits for the fourth quarter of 2023 were $1.71 billion, an increase of $26.5 million from the third quarter of 2023 and a decrease of $174 million from the fourth quarter of 2022.

Short-term borrowings on December 31, 2023, totaled $360.0 million, an increase of $60.0 million, or 20%, compared to September 30, 2023. The short-term borrowings on December 31, 2023 included $224.0 million in borrowings from the Bank Term Funding Program (BTFP).

Book value per share was $21.27 on December 31, 2023, an increase of $2.44 compared to $18.83 on September 30, 2023. Total shareholders' equity totaled $165.3 million on December 31, 2023, an increase of $19.7 million compared to September 30, 2023. This included a decrease in accumulated other comprehensive loss of $19.0 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.

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)

For the twelve months ended
2023 2022 December 31,
Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter 2023 2022
INCOME HIGHLIGHTS
Net income
$ 303 $ 5,408 $ 4,726 $ 6,364 $ 8,415 $ 16,801 $ 25,023
Loss on sale of securities, net of tax
3,888 - - 595 295 4,483 295
Severance, net of income tax
233 - - - - 233 -
BOLI surrender tax expense
478 - - - - 478 -
Adjusted net income (1)
$ 4,902 $ 5,408 $ 4,726 $ 6,959 $ 8,710 $ 21,995 $ 25,318

PER SHARE DATA
Basic earnings per share
$ 0.04 $ 0.74 $ 0.65 $ 0.87 $ 1.16 $ 2.29 $ 3.68
Diluted earnings per share
0.04 0.72 0.63 0.85 1.13 2.24 3.60
Diluted earnings per share - adjusted (1)
0.65 0.72 0.63 0.93 1.17 2.94 3.64
Book value per share
21.27 18.83 19.55 19.57 17.99 21.27 17.99

PERFORMANCE MEASURES
Return on average assets
0.05 % 0.99 % 0.87 % 1.19 % 1.61 % 0.77 % 1.21 %
Return on average assets - adjusted
0.89 % 0.99 % 0.87 % 1.30 % 1.67 % 1.01 % 1.22 %
Return on average equity
0.81 % 14.01 % 12.32 % 17.87 % 25.48 % 11.20 % 18.42 %
Taxable equivalent net interest margin
3.47 % 3.34 % 3.39 % 3.92 % 4.41 % 3.53 % 3.78 %
Efficiency ratio
83.68 % 58.75 % 56.05 % 55.21 % 45.42 % 61.90 % 51.80 %
Average loans to average deposits
99.41 % 97.49 % 97.57 % 88.70 % 76.98 % 95.75 % 70.12 %

CAPITAL
Tier 1 leverage ratio
9.77 % 9.84 % 9.55 % 9.33 % 9.46 % 9.77 % 9.46 %
Common equity tier 1 capital ratio
9.88 % 9.95 % 9.88 % 10.14 % 9.82 % 9.88 % 9.82 %
Tier 1 risk-based capital ratio
9.88 % 9.95 % 9.88 % 10.14 % 9.82 % 9.88 % 9.82 %
Total risk-based capital ratio
11.86 % 11.89 % 11.87 % 12.16 % 11.76 % 11.86 % 11.76 %
Tangible common equity ratio
7.41 % 6.61 % 6.83 % 6.95 % 6.45 % 7.41 % 6.45 %

SHARES OUTSTANDING
Number of common shares outstanding
7,770,439 7,731,404 7,712,278 7,703,748 7,645,428 7,770,439 7,645,428
Average common shares outstanding - basic
7,344,693 7,327,197 7,321,246 7,299,006 7,281,343 7,323,172 6,801,330
Average common shares outstanding - diluted
7,543,616 7,511,373 7,457,906 7,452,254 7,432,670 7,490,779 6,952,758

ASSET QUALITY
Allowance for credit losses to total loans
1.22 % 1.19 % 1.20 % 1.18 % 1.09 % 1.22 % 1.09 %
Nonperforming assets to total assets
0.06 % 0.70 % 0.70 % 0.66 % 0.67 % 0.06 % 0.67 %
Nonperforming loans to total loans
0.08 % 0.08 % 0.94 % 0.91 % 0.92 % 0.08 % 0.92 %
Net charge-offs to average loans (2)
0.00 % 0.00 % 0.03 % 0.00 % 0.00 % 0.01 % 0.01 %

AVERAGE BALANCES
Loans, net of deferred loan fees
$ 1,698,690 $ 1,640,080 $ 1,589,372 $ 1,555,207 $ 1,450,014 $ 1,621,283 $ 1,321,177
Investment securities
337,808 365,244 382,860 443,870 459,057 382,108 472,371
Total assets
2,191,198 2,168,443 2,171,559 2,164,441 2,072,887 2,173,969 2,072,989
Deposits
1,708,789 1,682,329 1,628,975 1,753,295 1,883,640 1,693,195 1,884,233
Shareholders' equity
148,723 153,099 153,877 144,402 131,046 150,045 135,841

(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)

Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
Assets
2023 2023 2023 2023 2022
Cash and due from banks
$ 9,754.00 $ 21,157 $ 33,849 19,452 $ 17,435
Due from Federal Reserve Bank and
interest-bearing deposits in banks
71,642 58,885 70,364 114,615 29,853
Total cash and cash equivalents
81,396 80,042 104,213 134,067 47,288

Investment securities - available for sale
325,320 345,547 371,753 386,947 412,993
Investment securities - held to maturity
- - - - 31,671
Total investment securities
325,320 345,547 371,753 386,947 444,664

Loans, net of deferred loan fees
1,740,647 1,669,914 1,650,265 1,564,501 1,554,222
Allowance for loan losses
(19,131 ) (17,800 ) (17,636 ) (16,389 ) (16,481 )
Loans, net of allowance for loan losses
1,721,516 1,652,114 1,632,629 1,548,112 1,537,741

Bank owned life insurance
12,315 33,440 33,202 32,972 32,747
Premises and equipment, net
3,297 3,558 3,774 4,037 4,163
Other real estate owned
- 14,095 - - -
Accrued interest receivable and other assets
86,992 73,104 62,234 63,916 66,665
Total assets
$ 2,230,836 $ 2,201,900 $ 2,207,805 $ 2,170,051 2,133,268

Liabilities and Shareholders' Equity
Deposits:
Non-interest-bearing demand
$ 472,517 $ 490,289 $ 593,246 $ 605,093 $ 765,079
Interest-bearing checking
740,902 784,757 717,116 335,410 41,701
Money market and savings
298,117 322,983 316,991 563,097 948,731
Time
46,676 30,880 46,794 61,645 67,724
Brokered
96,117 79,291 74,566 52,823 -
Total deposits
1,654,329 1,708,200 1,748,713 1,618,068 1,823,235

Subordinated debt, net
21,906 21,881 21,855 21,830 21,805
Short-term borrowings
360,000 300,000 264,000 359,000 130,000
Accrued interest payable and other liabilities
29,289 26,250 22,432 20,414 20,690
Total liabilities
2,065,524 2,056,331 2,057,000 2,019,312 1,995,730

Shareholders' Equity
Common stock
104,499 104,018 103,420 102,718 102,359
Retained earnings
109,688 109,386 103,979 99,252 93,824
Accumulated other comprehensive (loss)
(48,875 ) (67,835 ) (56,594 ) (51,231 ) (58,645 )
Total shareholders' equity
165,312 145,569 150,805 150,739 137,538

Total liabilities and shareholders' equity
$ 2,230,836 $ 2,201,900 $ 2,207,805 $ 2,170,051 $ 2,133,268

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

Three Months Ended Year-to-Date
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2033 2023 2023 2023 2022 2023 2022
Interest and fees on loans
$ 31,078 $ 29,125 $ 26,713 $ 25,577 $ 23,160 $ 112,494 $ 71,813
Interest on investment securities
1,979 2,009 2,058 2,612 2,751 8,658 9,877
Other interest income
654 662 1,196 628 526 3,140 1,342
Total interest income
33,711 31,796 29,967 28,817 26,437 124,292 83,032

Deposit interest expense
11,692 10,704 7,989 6,030 4,269 36,414 7,513
Interest on short-term borrowings
3,467 3,480 4,189 2,673 114 13,808 239
Interest on long-term debt
300 300 300 300 300 1,201 1,201
Total interest expense
15,459 14,484 12,478 9,003 4,683 51,423 8,953
Net interest income
18,252 17,312 17,489 19,814 21,754 72,869 74,079

Provision for credit losses
1,266 120 1,471 185 993 3,042 3,510
Net interest income after
provision for credit losses
16,986 17,192 16,018 19,629 20,761 69,827 70,569

Service charges and bank fees
613 560 545 490 599 2,209 2,617
Foreign exchange income
210 53 66 83 61 411 254
Federal Home Loan Bank dividends
172 171 185 163 118 690 367
Income from bank owned life insurance
201 238 230 225 224 894 871
Gain/(loss) on sale of securities
(5,399 ) - - (815 ) (404 ) (6,214 ) (404 )
Warrant and success fee income
15 8 - - 119 23 281
Other investment income
(116 ) 142 37 (6 ) 521 56 605
Loss on sale of ORE
(165 ) - - - - (165 ) -
Other income
19 62 24 28 17 134 79
Total noninterest income
(4,450 ) 1,234 1,087 168 1,255 (1,962 ) 4,670

Salaries and benefit expenses
8,137 7,460 7,021 7,954 7,592 30,572 29,102
Occupancy and equipment expenses
986 1,002 1,005 961 911 3,954 3,652
Data processing
499 538 477 528 456 2,041 1,737
Regulatory assessments
403 478 555 226 221 1,663 1,816
Legal and professional fees
531 483 394 431 364 1,839 1,290
Other operating expenses
994 935 960 933 906 3,824 3,193
Total noninterest expense
11,550 10,896 10,412 11,033 10,450 43,893 40,790

Income before income taxes
986 7,530 6,693 8,764 11,566 23,972 34,449
Provision for income taxes
683 2,122 1,967 2,400 3,151 7,171 9,426
Net income
$ 303 $ 5,408 $ 4,726 $ 6,364 $ 8,415 $ 16,801 $ 25,023

Basic earnings per common share
$ 0.04 $ 0.74 $ 0.65 $ 0.87 $ 1.16 $ 2.29 $ 3.68
Diluted earnings per common share
0.04 0.72 0.63 0.85 1.13 2.24 3.60

Weighted average shares - basic
7,344,693 7,327,197 7,321,246 7,299,006 7,281,343 7,323,172 6,801,330
Weighted average shares - diluted
7,543,616 7,511,373 7,457,906 7,452,254 7,432,670 7,490,779 6,952,758

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

Three months ended
December 31, 2023 September 30, 2023
Interest Yields Interest Yields
Average Income/ or Average Income/ or
Balance Expense Rates Balance Expense Rates
Assets
Interest earning assets:
Loans (1)
$ 1,700,094 $ 31,078 7.25 % $ 1,641,475 $ 29,125 7.04 %
Fed funds sold/interest bearing deposits
47,906 654 5.34 % 48,350 662 5.36 %
Investment securities
Taxable investment securities
337,021 1,971 2.32 % 365,244 2,009 2.18 %
Non-taxable investment securities (2)
787 10 5.04 % - - 0.00 %
Total investment securities
337,808 1,981 2.33 % 365,244 2,009 2.18 %

Total interest-earning assets
2,085,808 33,713 6.41 % 2,055,069 31,796 6.14 %

Noninterest-earning assets:
Cash and due from banks
12,528 22,556
All other assets (3)
92,862 90,818

Total assets
$ 2,191,198 $ 2,168,443

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Deposits
Demand
$ 766,856 $ 7,650 3.96 % $ 748,016 $ 7,306 3.88 %
Money market and savings
305,240 2,218 2.88 % 296,865 2,193 2.93 %
Time
29,787 252 3.36 % 41,455 264 2.53 %
Brokered
119,605 1,572 5.21 % 75,420 941 4.95 %
Total interest-bearing deposits
1,221,488 11,692 3.80 % 1,161,756 10,704 3.66 %

Short-term borrowings
281,457 3,467 4.89 % 285,326 3,480 4.84 %
Subordinated debt
21,893 300 5.44 % 21,867 300 5.44 %
Total interest-bearing liabilities
1,524,838 15,459 4.02 % 1,468,949 14,484 3.91 %


Noninterest-bearing liabilities:
Demand deposits
487,301 520,573
Accrued expenses and other liabilities
30,336 25,822
Shareholders' equity
148,723 153,099

Total liabilities and
shareholders' equity
$ 2,191,198 $ 2,168,443

Net interest spread
2.39 % 2.23 %
Net interest income and margin (4)
$ 18,254 3.47 % $ 17,312 3.34 %

Non-taxable equivalent net interest margin
3.47 % 3.34 %

Cost of deposits
$ 1,708,789 $ 11,692 2.71 % $ 1,682,329 $ 10,704 2.52 %

(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 $449 thousand and $441 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 $17.8 million and $17.6 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)

Three months ended
December 31, 2023 December 31, 2022
Interest Yields Interest Yields
Average Income/ or Average Income/ or
Balance Expense Rates Balance Expense Rates
Assets
Interest earning assets:
Loans (1)
$ 1,700,094 $ 31,078 7.25 % $ 1,451,724 $ 23,160 6.33 %
Fed funds sold/interest bearing deposits
47,906 654 5.34 % 52,321 526 3.99 %
Investment securities
Taxable investment securities
337,021 1,971 2.32 % 428,520 2,481 2.30 %
Non-taxable investment securities (2)
787 10 5.04 % 30,537 345 4.48 %
Total investment securities
337,808 1,981 2.32 % 459,057 2,826 2.44 %

Total interest-earning assets
2,085,808 33,713 6.41 % 1,963,102 26,512 5.36 %

Noninterest-earning assets:
Cash and due from banks
12,528 25,494
All other assets (3)
92,862 84,291

Total assets
$ 2,191,198 $ 2,072,887

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Deposits
Demand
$ 766,856 $ 7,650 3.96 % $ 44,344 $ 60 0.54 %
Money market and savings
305,240 2,218 2.88 % 953,665 4,027 1.68 %
Time
29,787 252 3.36 % 70,409 182 1.03 %
Brokered
119,605 1,572 5.21 % - - -
Total interest-bearing deposits
1,221,488 11,692 3.80 % 1,068,418 4,269 1.59 %

Short-term borrowings
281,457 3,467 4.89 % 11,772 114 3.84 %
Subordinated debt
21,893 300 5.44 % 21,792 300 5.46 %
Total interest-bearing liabilities
1,524,838 15,459 4.02 % 1,101,982 4,683 1.69 %


Noninterest-bearing liabilities:
Demand deposits
487,301 815,222
Accrued expenses and other liabilities
30,336 24,637
Shareholders' equity
148,723 131,046

Total liabilities and
shareholders' equity
$ 2,191,198 $ 2,072,887

Net interest spread
2.39 % 3.67 %
Net interest income and margin (4)
$ 18,254 3.47 % $ 21,829 4.41 %

Non-taxable equivalent net interest margin
3.47 % 4.40 %

Cost of deposits
$ 1,708,789 $ 11,692 2.71 % $ 1,883,640 $ 4,269 0.90 %

(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 $449 thousand and $556 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 $15.6 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)

Twelve months ended
December 31, 2023 December 31, 2022
Interest Yields Interest Yields
Average Income/ or Average Income/ or
Balance Expense Rates Balance Expense Rates
Assets
Interest earning assets:
Loans (1)
$ 1,622,731 $ 112,494 6.93 % $ 1,322,969 $ 71,813 5.43 %
Fed funds sold/interest bearing deposits
61,331 3,140 5.12 % 166,665 1,342 0.81 %
Investment securities
Taxable investment securities
374,638 8,387 2.24 % 453,805 9,230 2.03 %
Non-taxable investment securities (2)
7,470 343 4.59 % 18,566 820 4.42 %
Total investment securities
382,108 8,730 2.28 % 472,371 10,050 2.13 %

Total interest-earning assets
2,066,170 124,364 6.02 % 1,962,005 83,205 4.24 %

Noninterest-earning assets:
Cash and due from banks
20,375 37,221
All other assets (3)
87,424 73,763

Total assets
$ 2,173,969 $ 2,072,989

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Deposits
Demand
$ 524,591 $ 19,548 3.73 % $ 46,468 $ 129 0.28 %
Money market and savings
461,352 12,226 2.65 % 867,419 6,656 0.77 %
Time
46,318 937 2.02 % 86,865 669 0.77 %
Brokered
73,179 3,703 5.06 % 12,688 59 0.47 %
Total interest-bearing deposits
1,105,440 36,414 3.29 % 1,013,440 7,513 0.74 %

Short-term borrowings
282,596 13,808 4.89 % 8,515 239 2.81 %
Subordinated debt
21,855 1,201 5.50 % 21,698 1,201 5.54 %
Total interest-bearing liabilities
1,409,891 51,423 3.65 % 1,043,653 8,953 0.86 %


Noninterest-bearing liabilities:
Demand deposits
587,755 870,793
Accrued expenses and other liabilities
26,278 22,702
Shareholders' equity
150,045 135,841

Total liabilities and
shareholders' equity
$ 2,173,969 $ 2,072,989

Net interest spread
2.37 % 3.38 %
Net interest income and margin (4)
$ 72,941 3.53 % $ 74,252 3.78 %

Non-taxable equivalent net interest margin
3.53 % 3.78 %

Cost of deposits
$ 1,693,195 $ 36,414 2.15 % $ 1,884,233 $ 7,513 0.40 %

(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 $1.9 million and $2.2 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 $17.2 million and $14.2 million, respectively, is included as a contra asset.
(4) Tax equivalent net interest income divided by total interest-earning assets.

AVIDBANK HOLDINGS, INC.
Loans and Credit Data (Unaudited)
(dollars in thousands)

Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Current Quarter Year over Year
2023 2023 2023 2023 2022 Change Change
Commercial loans
$ 758,552 $ 731,206 $ 716,355 $ 642,826 $ 700,022 $ 27,346 $ 58,530
Commercial real estate
Multi-family
194,981 184,147 193,014 188,411 169,048 10,834 25,933
Owner Occupied
139,059 135,950 132,078 137,118 128,790 3,109 10,269
Non-Owner Occupied
393,809 386,629 376,467 350,730 314,284 7,180 79,525
Construction and land
237,124 214,474 215,865 233,162 227,869 22,650 9,255
Residential
16,816 17,311 16,220 11,969 13,394 (495 ) 3,422
Total real estate loans
981,789 938,511 933,644 921,390 853,385 43,278 128,404
Other loans
306 197 266 285 815 109 (509 )
Total loans
$ 1,740,647 $ 1,669,914 $ 1,650,265 $ 1,564,501 $ 1,554,222 $ 70,733 $ 186,425

Allowance for Credit Losses on Loans
Balance, beginning of quarter
$ 17,800 $ 17,636 $ 16,389 $ 16,481 $ 15,488
Adoption of ASU 2016-13
- - - (249 ) -
Provision for loan losses
1,331 164 1,347 157 993
Charge-offs
- - (100 ) - -
Recoveries
- - - - -
Balance, end of quarter
$ 19,131 $ 17,800 $ 17,636 $ 16,389 $ 16,481

Allowance for Credit Losses
on Unfunded Commitments
Balance, beginning of quarter
$ 2,125 $ 2,169 $ 2,045 $ 449 $ 422
Adoption of ASU 2016-13
- - - 1,568 -
Provision for unfunded commitments
(65 ) (44 ) 124 28 27
Balance, end of quarter
$ 2,060 $ 2,125 $ 2,169 $ 2,045 $ 449

Total allowance for credit losses -
loans and unfunded commitments
$ 21,191 $ 19,925 $ 19,805 $ 18,434 $ 16,930

Provision for credit losses under CECL
Provision for loan losses
$ 1,331 $ 164 $ 1,347 $ 157 $ 993
Provision for unfunded commitments (1)
(65 ) (44 ) 124 28 -
Total provision for credit losses
$ 1,266 $ 120 $ 1,471 $ 185 $ 993

Nonperforming Assets
Loans accounted for on a non-accrual basis
$ 1,378 $ 1,385 $ 15,485 $ 14,240 $ 14,245
Loans past due 90 days or more and still accruing
- - - - -
Nonperforming loans
1,378 1,385 15,485 14,240 14,245
Other real estate owned
- 14,095 - - -
Nonperforming assets
$ 1,378 $ 15,480 $ 15,485 $ 14,240 $ 14,245

Nonperforming Loans by Type:
Commercial
$ 1,378 $ 1,385 $ 1,390 $ 145 $ 150
Commercial real estate loans
- - - - -
Construction and land
- - 14,095 14,095 14,095
Total Nonperforming loans
$ 1,378 $ 1,385 $ 15,485 $ 14,240 $ 14,245

Asset Quality Ratios
Allowance for loan losses to total loans
1.10 % 1.07 % 1.07 % 1.05 % 1.06 %
Allowance for credit losses to total loans
1.22 % 1.19 % 1.20 % 1.18 % 1.09 %
Allowance for loan losses to nonperforming loans
1388.32 % 1285.20 % 113.89 % 115.09 % 115.70 %
Nonperforming assets to total assets
0.06 % 0.70 % 0.70 % 0.66 % 0.67 %
Nonperforming loans to total loans
0.08 % 0.08 % 0.94 % 0.91 % 0.92 %
Net quarterly charge-offs to average loans (2)
0.00 % 0.00 % 0.03 % 0.00 % 0.00 %

(1) Prior to the adoption of ASU 2016-13, the provision for unfunded commitments was included in other expense and totaled $27 thousand for the fourth quarter of 2022.
(2) Annualized

AVIDBANK HOLDINGS, INC.
Deposits (Unaudited)
(dollars in thousands)


Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Current Quarter Year over Year
Period End Deposits
2023 2023 2023 2023 2022 Change Change
Non-interest-bearing demand
$ 472,517 $ 490,289 $ 593,246 $ 605,093 $ 765,079 $ (17,772 ) $ (292,562 )
Interest-bearing checking
740,902 784,757 717,116 335,410 41,701 (43,855 ) 699,201
Money market and savings
298,117 322,983 316,991 563,097 948,731 (24,866 ) (650,614 )
Time
46,676 30,880 46,794 61,645 67,724 15,796 (21,048 )
Brokered
96,117 79,291 74,566 52,823 - 16,826 96,117
Total deposits
$ 1,654,329 $ 1,708,200 $ 1,748,713 $ 1,618,068 $ 1,823,235 $ (53,871 ) $ (168,906 )

Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Current Quarter Year over Year
Average Deposits
2023 2023 2023 2023 2022 Change Change
Non-interest-bearing demand
$ 487,301 $ 520,573 $ 621,603 $ 724,894 $ 815,222 $ (33,272 ) $ (327,921 )
Interest-bearing checking
766,856 748,016 486,367 87,198 44,344 18,840 722,512
Money market and savings
305,240 296,865 389,036 862,195 953,665 8,375 (648,425 )
Time
29,787 41,455 48,650 65,830 70,409 (11,668 ) (40,622 )
Brokered
119,605 75,420 83,319 13,178 - 44,185 119,605
Total deposits
$ 1,708,789 $ 1,682,328 $ 1,628,975 $ 1,753,295 $ 1,883,640 $ 26,461 $ (174,851 )

AVIDBANK HOLDINGS, INC.
Non-GAAP performance and Financial Measures Reconciliation (Unaudited)
(in thousands, except share and per share amounts)

For the twelve months ended

2023 2022 December 31,
Fourth Third Second First Fourth
Non-GAAP adjusted net income reconciliation
Quarter Quarter Quarter Quarter Quarter 2023 2022
Net income - GAAP
$ 303 $ 5,408 $ 4,726 $ 6,364 $ 8,415 $ 16,801 $ 25,023
Loss on sale of securities, net of income tax
3,888 - - 595 295 4,483 295
Severance, net of income tax
233 - - - - 233 -
BOLI surrender tax expense
478 - - - - 478 -
Adjusted net income (non-GAAP)
$ 4,902 $ 5,408 $ 4,726 $ 6,959 $ 8,710 $ 21,995 $ 25,318
Non-GAAP adjusted net income reconciliation

Net income - GAAP
$ 303 $ 5,408 $ 4,726 $ 6,364 $ 8,415 $ 16,801 $ 25,023
Loss on sale of securities
5,399 - - 815 404 6,214 404
Tax impact of loss on sale of securities
(1,511) - - (220) (109) (1,731) (109)
Severance
324 - - - - 324 -
Tax impact of severance
(91) - - - - (91) -
BOLI surrender tax expense
478 - - - - 478 -
Adjusted net income (non-GAAP)
$ 4,902 $ 5,408 $ 4,726 $ 6,959 $ 8,710 $ 21,995 $ 25,318
Non-GAAP adjusted diluted earnings
per share reconciliation
Diluted earnings per share - GAAP
$ 0.04 $ 0.72 $ 0.63 $ 0.85 $ 1.13 $ 2.24 $ 3.60
Loss on sale of securities, net of income tax
0.52 - - 0.08 0.04 0.60 0.04
Severance, net of income tax
0.03 - - - - 0.03 -
BOLI surrender tax expense
0.06 - - - - 0.06 -
Diluted earnings per share - adjusted (non-GAAP)
$ 0.65 $ 0.72 $ 0.63 $ 0.93 $ 1.17 $ 2.94 $ 3.64
Non-GAAP adjusted return on average
assets reconciliation
Net income - GAAP
$ 303 $ 5,408 $ 4,726 $ 6,364 $ 8,415 $ 16,801 $ 25,023
Average total assets
2,191,198 2,168,443 2,171,559 2,164,441 2,072,887 2,173,969 2,072,989
Return on average assets - GAAP
0.05% 0.99% 0.87% 1.19% 1.61% 0.77% 1.21%
Adjusted net income (non-GAAP)
$ 4,902 $ 5,408 $ 4,726 $ 6,959 $ 8,710 $ 21,995 $ 25,318
Average total assets
2,191,198 2,168,443 2,171,559 2,164,441 2,072,887 2,173,969 2,072,989
Return on average assets - adjusted (non-GAAP)
0.89% 0.99% 0.87% 1.30% 1.67% 1.01% 1.22%
Non-GAAP taxable equivalent net interest

income reconciliation
Net interest income - GAAP
$ 18,252 $ 17,312 $ 17,489 $ 19,814 $ 21,754 $ 72,869 $ 74,079
Taxable equivalent adjustment
2 - - 70 75 72 173
Net interest income - taxable equivalent (non-GAAP)
$ 18,254 $ 17,312 $ 17,489 $ 19,884 $ 21,829 $ 72,941 $ 74,252
Non-GAAP taxable equivalent net interest

margin reconciliation
Net interest margin - GAAP
3.47% 3.34% 3.39% 3.91% 4.40% 3.53% 3.78%
Impact of taxable equivalent adjustment
- - - 0.01 0.01 - -
Net interest margin - taxable equivalent (non-GAAP)
3.47% 3.34% 3.39% 3.92% 4.41% 3.53% 3.78%

SOURCE: Avidbank Holdings, Inc.



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