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Avenue Financial Holdings, Inc. Announces Record 2014 Results

NASHVILLE, Tenn., Feb. 26, 2015 (GLOBE NEWSWIRE) -- Avenue Financial Holdings, Inc. (Nasdaq:AVNU) ("Avenue Financial" or "the Company") has announced record results for the fourth quarter and year ended December 31, 2014. Net income for the fourth quarter rose 114.3% to $0.15 per diluted common share compared with $0.07 per diluted common share for the fourth quarter of 2013. Net income per diluted common share was $0.64 for the year ended December 31, 2014, compared to net income per diluted common share of $0.45 for the year ended December 31, 2013, an increase of 42.2%.

"Avenue Financial's record results for 2014 were driven by strong loan growth from our significant business lines in our core Nashville market," stated Ronald L. Samuels, Chairman and Chief Executive Officer. "Loans rose 21.0% to a record $693.9 million and total assets increased 12.3% to $999.3 million in 2014 compared with the prior year. Our loan growth was purely organic and highlights the strength from our key vertical markets in music and entertainment, healthcare, and increased demand from quality commercial real estate developments.

"We also recently completed two important financing transactions that strengthened our balance sheet and capital ratios. At year-end 2014, we issued $20 million in subordinated debt in a private placement and completed a successful initial public stock offering in mid-February 2015, raising an additional $14.7 million in net proceeds for the Company. As stated in previous SEC filings, we plan to use $18.9 million of the proceeds to redeem preferred stock associated with the Small Business Lending Fund and the remainder will build our stockholders' equity. The additional equity will be an important part in funding our continued growth. We are very pleased with the market's response to our growth strategy and our plans to use these proceeds to fund our future growth," continued Samuels.

Balance Sheet Growth

  • Total assets increased $25.9 million, or 2.7%, to $999.3 million at December 31, 2014, from $973.4 million at September 30, 2014 and $109.7 million, or 12.3% compared with $889.6 million at December 31, 2013.
  • Loans increased $40.7 million, or 6.2%, to a record $693.9 million at December 31, 2014 compared with $653.2 million at September 30, 2014 and up $120.5 million from December 31, 2013, for a year-over-year growth rate of 21.0%. Mortgage loans held-for-sale increased $22.7 million, or 450%, to $27.7 million at December 31, 2014 compared with $5.0 million at December 31, 2013. Portfolio residential mortgage loans totaling $21.8 million were identified as available-for-sale in the fourth quarter 2014.
  • Cash surrender value of company owned life insurance totaled $20.0 million at December, 31, 2014, up $3.6 million from September 30, 2014, or 22.1%, compared with $16.4 million at September 30, 2014. Two new single premium whole life insurance policies totaling $3.5 million were purchased during the fourth quarter of 2014.
  • Deposits totaled $803.7 million at December 31, 2014, a decrease of 2.1% compared with $820.9 million at September 30, 2014 due to temporary cash flow needs for some of our significant commercial deposit accounts. Deposits grew $97.9 million, or 13.9%, compared with $705.8 million at December 31, 2013.

Revenue Growth and Profitability

  • For the fourth quarter of 2014, net income available to common stockholders was $1.2 million or $0.15 per diluted share, compared with $2.4 million or $0.28 per diluted share for the third quarter of 2014. The decrease is attributable primarily to lower gain on sale of loans.
  • Net interest income increased $26 thousand, to $7.6 million, for the fourth quarter of 2014, compared with $7.5 million for the third quarter of 2014 and $1.1 million for the fourth quarter of 2013. The fully tax equivalent net interest margin increased 14 basis points to 3.38% for the fourth quarter of 2014 from 3.24% for the fourth quarter of 2013. The increase can be attributed to a $91.0 million, or 11.2% increase, in net earning assets coupled with a 9 basis points increase in the yield on earning assets.
  • Non-interest income decreased $846 thousand, or 44.4%, to $1.1 million for the fourth quarter of 2014 compared with $1.9 million for the third quarter of 2014. The decrease was due primarily to lower gains on sale of loans.
  • Non-interest expense for the fourth quarter of 2014 increased $176 thousand, or 2.9%, to $6.3 million from $6.1 million for the third quarter of 2014. The increase was driven primarily by the write-off of a non-credit related loss of $200 thousand.

Asset Quality

  • Nonaccruing loans were $695.4 thousand, or 0.10% of total loans, at December 31, 2014, compared with $889 thousand or 0.14% of total loans, at September 30, 2014. Our ratio of non-performing assets to total assets increased to 0.41% at December 31, 2014, compared with 0.28% at September 30, 2014 due to the increase in other real estate owned. Total other real estate owned increased to $3.4 million at December 31, 2014 compared with $1.9 million at September 30, 2014 with the foreclosure of land and lot inventory from one borrower.
  • Net loan charge-offs for the fourth quarter of 2014 were $345.2 thousand, or 0.20% of average loans for the quarter, compared with $179.6 thousand, or 0.13% of average loans for the fourth quarter of 2013.
  • The allowance for loan losses was $8.5 million, or 1.23% of loans, at December 31, 2014, compared with $8.4 million, or 1.29% of loans at September 30, 2014 and $7.2 million, or 1.26% of loans at December 31, 2013.
  • The provision for loan losses was $456 thousand for the fourth quarter of 2014, compared with ($222 thousand) for the third quarter of 2014 due to increases in loan volume.

"We are very pleased with our record results for 2014," continued Samuels. "Our earnings benefited from the scalable platform we have built over the last eight years. We believe we have demonstrated the success of our model by growing revenues at a faster rate than expenses in 2014 and we are positioned well to serve our customers in the coming year."

"Loan demand remains strong in Nashville as we enter 2015," stated Samuels. "Our markets continue to benefit from new development, job growth and a vibrant regional economy that is attracting new businesses to our market. As a result, we expect to report increased loans and deposits in the coming year."

About Avenue Financial Holdings, Inc.

Avenue Financial Holdings, Inc., headquartered in Nashville, Tennessee, was formed as a single-bank holding company in 2006 and operates primarily through its subsidiary, Avenue Bank. The Company's operations are concentrated in the Nashville MSA, with the vision of building Nashville's signature bank and serving clients who value creativity, expertise, and an exceptional level of personal service. Avenue Bank embodies Nashville's creative spirit - redefining how clients experience banking through a unique "Concierge Banking" model. The bank provides a wide range of business and personal banking services, including mortgage loans, with a special emphasis on Commercial, Private Client, Healthcare, and Music & Entertainment banking. The Company serves clients through five locations (a corporate headquarters and four retail branches), a limited deposit courier service (mobile branch) for select commercial clients, and mobile and online banking services. The Company's stock is traded on the NASDAQ Global Select Market under the ticker symbol "AVNU."

Forward-Looking Statements

Certain statements in this press release contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "will likely result," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "would," and "outlook," or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

You should not place undue reliance on any forward-looking statement. There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but are not limited to, the following:

  • market and economic conditions (including interest rate environment, levels of public offerings, mergers and acquisitions, or M&A, and venture capital financing activities) and the associated impact on us;

  • changes in management personnel;

  • deterioration of our asset quality;

  • our overall management of interest rate risk, including managing the sensitivity of our interest-earning assets and interest-bearing liabilities to interest rates, and the impact to earnings from a change in interest rates;

  • our ability to execute our strategy and to achieve organic loan and deposit growth;

  • the adequacy of reserves (including allowance for loan and lease losses) and the appropriateness of our methodology for calculating such reserves;

  • volatility and direction of market interest rates;

  • the sufficiency of our capital, including sources of capital (such as funds generated through retained earnings) and the extent to which capital may be used or required;

  • our overall investment plans, strategies and activities, including our investment of excess cash/liquidity;

  • operational, liquidity and credit risks associated with our business;

  • increased competition in the financial services industry, nationally, regionally or locally, which may adversely affect pricing and terms;

  • the level of client investment fees and associated margins;

  • changes in the regulatory environment;

  • changes in trade, monetary and fiscal policies and laws;

  • governmental legislation and regulation, including changes in accounting regulation or standards, the nature and timing of the adoption and effectiveness of new requirements under the Dodd-Frank Act, Basel guidelines, capital requirements and other applicable laws and regulations;

  • changes in interpretation of existing law and regulation;

  • further government intervention in the U.S. financial system; and

  • other factors that are discussed under the heading "Risk Factors." in our filings with the Securities and Exchange Commission.

The foregoing factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included in our registration statement on Form S-1 filed with the Securities and Exchange Commission on January 9, 2015, as amended. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

AVENUE FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(unaudited)
December 31, 2014 September 30, 2014 December 31, 2013
Assets
Cash and due from banks $ 17,765,493 $ 66,117,738 $ 12,416,992
Federal funds sold -- 3,237,164 206
Cash and cash equivalents 17,765,493 69,354,902 12,417,198
Interest-bearing deposits in banks 210,754 210,754 2,319,754
Securities available-for-sale, at fair value 220,461,939 211,499,674 257,797,224
Securities held-to-maturity (fair value of $2,837,721 and $2,780,757 as of December 31, 2014 and December 31, 2013, respectively) 2,716,908 2,719,122 2,725,537
Mortgage loans held-for-sale 27,729,720 5,036,218 4,986,011
Loans, net of deferred fees 693,907,951 653,235,053 573,430,381
Less allowance for loan losses (8,517,744) (8,406,887) (7,204,201)
Net loans 685,390,207 644,828,166 566,226,180
Accrued interest receivable 2,389,997 2,169,586 2,413,364
Federal Home Loan Bank stock, at cost 2,924,400 2,924,400 2,674,100
Premises and equipment, net 3,280,186 3,457,229 3,925,103
Other real estate owned 3,375,811 1,854,811 3,451,356
Deferred tax assets 7,377,355 8,062,241 9,749,988
Cash surrender value of company owned life insurance 20,035,752 16,403,593 16,041,387
Goodwill 2,966,063 2,966,063 2,966,063
Other assets 2,657,381 1,931,399 1,884,835
Total assets $ 999,281,966 $ 973,418,158 $ 889,578,100
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing demand deposits $ 170,647,052 $ 186,210,126 $ 142,259,415
Interest-bearing demand deposits 56,144,680 52,672,601 51,629,242
Savings and money market accounts 415,779,182 422,429,840 388,085,764
Time 161,092,912 159,568,781 123,819,701
Total deposits 803,663,826 820,881,348 705,794,122
Accrued interest payable 169,913 261,503 134,112
Federal funds purchased 4,485,093 -- 15,280,142
Federal Home Loan Bank advances 70,300,000 55,000,000 79,250,000
Subordinated debt 20,000,000 -- --
Other liabilities 9,047,027 7,660,087 6,702,056
Total liabilities 907,665,859 883,802,938 807,160,432
Stockholders' equity:
Preferred Stock, no par value; 10,000,000 shares authorized, Series C, senior noncumulative perpetual preferred stock; 18,950 issued and outstanding at December 31, 2014 and December 31, 2013 18,950,000 18,950,000 18,950,000
Common Stock, no par value. Authorized 100,000,000 shares: issued and outstanding 8,636,682 and 8,567,912 shares at December 31, 2014 and December 31, 2013, respectively 75,407,157 75,407,157 75,407,157
Additional paid-in-capital 1,325,445 1,182,558 783,499
Accumulated deficit (1,581,649) (2,826,417) (7,004,696)
Accumulated other comprehensive loss (2,484,846) (3,098,078) (5,718,292)
Total stockholders' equity 91,616,107 89,615,220 82,417,668
Total liabilities and stockholders' equity $ 999,281,966 $ 973,418,158 $ 889,578,100
This information is preliminary and based on company data available at the time of the presentation.
AVENUE FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income
(unaudited)
Three Months Ended Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2014 2014 2013 2014 2013
Interest and dividend income:
Loans, including fees $ 7,354,666 $ 7,326,129 $ 5,922,925 $ 28,180,810 $ 21,995,645
Investment securities 1,110,396 1,112,142 1,424,724 4,722,133 4,925,042
Federal Funds sold and other 32,704 29,841 33,807 120,317 139,740
Total interest and dividend income 8,497,766 8,468,112 7,381,456 33,023,260 27,060,427
Interest expense:
Deposits 782,191 782,904 789,555 3,107,846 3,050,824
Other borrowings 155,815 151,837 133,645 660,818 509,056
Total interest expense 938,006 934,741 923,200 3,768,664 3,559,880
Net interest income 7,559,760 7,533,371 6,458,256 29,254,596 23,500,547
Provision for loan losses 456,059 (222,024) 631,351 1,642,975 1,592,906
Net interest income after provision for loan losses 7,103,701 7,755,395 5,826,905 27,611,621 21,907,641
Noninterest income:
Customer service fees 499,279 604,095 516,672 2,313,085 1,919,764
Mortgage banking fees, net of commissions 412,541 327,275 239,889 979,169 1,939,265
Increase in cash surrender value of life insurance 132,159 120,908 126,230 494,365 565,130
Net gain on sale of loans 14,294 851,685 21,998 865,979 108,508
Net gain on sale of available-for-sale securities -- -- -- 11,917 522,294
Total noninterest income 1,058,273 1,903,963 904,789 4,664,515 5,054,961
Noninterest expenses:
Salaries and employee benefits 3,558,696 3,543,388 3,088,462 13,958,072 11,738,817
Equipment and occupancy 807,598 827,692 917,451 3,391,050 3,366,601
Other real estate expense (2,407) (35,043) 2,547 (21,362) 89,169
Data processing 378,727 356,692 341,773 1,418,035 1,161,181
Advertising, promotion, and public relations 195,325 148,648 196,931 640,058 651,374
Legal and accounting 232,954 250,131 231,636 888,172 776,690
FDIC insurance and other regulatory assessments 186,953 190,125 163,603 740,860 616,816
Other expenses 939,346 839,987 533,725 3,111,098 2,158,593
Total noninterest expenses 6,297,192 6,121,620 5,476,128 24,125,983 20,559,241
Income before taxes 1,864,782 3,537,738 1,255,566 8,150,153 6,403,361
Income tax expense 572,639 1,122,393 648,211 2,537,606 2,421,022
Net income 1,292,143 2,415,345 607,355 5,612,547 3,982,339
Preferred stock dividends (47,375) (47,375) (47,375) (189,500) (189,500)
Net income available to common stockholders $ 1,244,768 $ 2,367,970 $ 559,980 $ 5,423,047 $ 3,792,839
Per share information:
Basic net income per common share available to common stockholders $ 0.15 $ 0.28 $ 0.07 $ 0.64 $ 0.45
Diluted net income per common share available to common stockholders $ 0.15 $ 0.28 $ 0.07 $ 0.64 $ 0.45
Weighted average common shares outstanding:
Basic 8,487,515 8,487,516 8,452,474 8,487,515 8,424,598
Diluted 8,540,481 8,528,926 8,452,474 8,540,481 8,424,598
This information is preliminary and based on company data available at the time of the presentation.
AVENUE FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
SELECTED QUARTERLY FINANCIAL DATA
(unaudited)
At or for the Three Months
December 31, September 30, June 30, March 31, December 31, September 30,
2014 2014 2014 2014 2013 2013
SELECTED INCOME STATEMENT DATA
Interest income $ 8,498 $ 8,468 $ 8,237 $ 7,821 $ 7,381 $ 6,857
Interest expense 938 935 952 944 923 893
Net interest income 7,560 7,533 7,285 6,877 6,458 5,964
Provision for loan losses 456 (222) 549 860 631 221
Net interest income after provision for loan losses 7,104 7,755 6,736 6,017 5,827 5,743
Non-interest income 1,059 1,904 915 787 905 1,286
Non-interest expense 6,297 6,122 5,862 5,845 5,476 5,328
Income tax expense 573 1,122 555 288 648 639
Net income 1,293 2,415 1,234 671 608 1,062
Dividends on preferred shares (48) (47) (48) (47) (47) (47)
Net income available to common stockholders $ 1,245 $ 2,368 $ 1,186 $ 624 $ 561 $ 1,015
PER COMMON SHARE DATA:
Basic earnings per share $ 0.15 $ 0.28 $ 0.14 $ 0.07 $ 0.07 $ 0.12
Diluted earnings per share 0.15 0.28 0.14 0.07 0.07 0.12
Book value per common share 8.41 8.18 7.96 7.65 7.41 7.54
Tangible book value per common share (1) 8.07 7.84 7.62 7.30 7.06 7.19
Basic weighted average common shares 8,487,515 8,487,516 8,487,516 8,476,848 8,452,474 8,452,474
Diluted weighted average common shares 8,540,481 8,528,926 8,487,516 8,476,848 8,452,474 8,452,474
Common shares outstanding at period end 8,636,682 8,633,588 8,619,588 8,619,588 8,567,912 8,548,610
SELECTED BALANCE SHEET DATA
Total assets $ 999,282 $ 973,418 $ 955,100 $ 941,928 $ 889,578 $ 840,654
Residential real estate - Mortgage 110,929 122,128 127,462 109,909 94,238 87,045
Residential real estate - Multi-family 11,310 20,960 15,605 13,282 2,964 2,987
Commercial and industrial 235,911 181,688 188,421 181,518 170,662 149,268
Commercial real estate 271,001 268,907 275,526 262,696 236,030 197,888
Construction and land development 58,843 55,174 65,874 70,081 67,483 75,471
Consumer 5,915 4,221 4,817 1,881 1,879 1,514
Other (1) 157 130 155 174 449
Total loans, net of deferred fees 693,908 653,235 677,835 639,522 573,430 514,622
Allowance for loan losses (8,518) (8,407) (8,625) (8,070) (7,204) (6,752)
Securities available for sale 220,462 211,500 217,478 240,100 257,797 265,770
Mortgage loans held for sale 27,730 5,036 7,457 2,636 4,986 4,986
Goodwill and other intangible assets 2,966 2,966 2,966 2,966 2,966 2,966
Demand deposits 170,647 186,209 166,181 162,023 142,259 122,375
Interest checking accounts 56,145 52,673 51,675 44,958 51,629 28,892
Savings accounts 11,919 10,613 8,434 8,412 7,738 6,658
Money market accounts 240,646 263,947 268,417 275,768 295,985 293,545
Reciprocal ICS Money Market 163,214 147,870 139,017 105,777 84,363 101,436
CDs 82,012 82,075 82,116 87,230 79,528 71,965
Reciprocal CDARs 44,081 41,662 39,780 27,827 23,291 25,572
Brokered CDs 35,000 35,832 29,097 26,049 21,001 20,902
Total Deposits 803,664 820,881 784,717 738,044 705,794 671,345
Advances from FHLB/FRB 70,300 55,000 75,500 79,000 79,250 79,500
Subordinated debt 20,000 -- -- -- -- --
Preferred stock 18,950 18,950 18,950 18,950 18,950 18,950
Tangible common stockholders' equity (1) 69,700 67,699 65,661 62,951 60,502 61,487
Total stockholders' equity 91,616 89,615 87,577 84,867 82,418 83,403
Average total assets 976,596 952,271 932,626 906,978 865,400 817,416
Average common stockholders' equity 72,438 69,908 66,972 65,717 65,417 63,321
Full time employees 134 130 125 120 120 115
This information is preliminary and based on company data available at the time of the presentation.
AVENUE FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
SELECTED QUARTERLY FINANCIAL DATA
(unaudited)
At or for the Three Months
December 31, September 30, June 30, March 31, December 31, September 30,
2014 2014 2014 2014 2013 2013
(Dollars in thousands)
SELECTED PERFORMANCE RATIOS
Return on average assets (2) (5) 0.51% 0.99% 0.51% 0.28% 0.26% 0.49%
Return on average common stockholders' equity (2) (5) 6.82 13.44 7.10 3.85 3.40 6.36
Net interest margin (fully tax equivalent) (2) 3.38 3.39 3.35 3.31 3.24 3.19
Efficiency ratio (1) (3) 7,317.8 7,131.0 7,147.0 7,640.5 7,459.5 7,440.3
SELECTED ASSET QUALITY DATA
Nonaccruing loans $ 695 $ 889 $ 897 $ 584 $ 591 $ 598
Past due loans over 90 days and still accruing interest -- -- -- -- -- --
Net loans charge-offs 345 (5) (5) (6) 180 657
Nonaccruing loans to total loans 0.10% 0.14% 0.13% 0.09% 0.10% 0.12%
Nonaccruing loans and loans past due 90 days and still accruing to total loans 0.10 0.14 0.13 0.09 0.10 0.12
Non-performing assets to total assets (4) 0.41 0.28 0.30 0.42 0.45 0.63
Nonperforming assets to loans and OREO 0.58 0.42 0.42 0.62 0.70 1.02
Allowance for loan losses to total loans 1.23 1.29 1.27 1.26 1.26 1.31
Allowance for loan losses to nonaccruing loans 1,224.87 945.67 961.54 1,381.85 1,219.43 1,129.10
Net loan charge-offs to average loans (2) 0.20 (0.00) (0.00) (0.00) 0.13 0.53
CAPITAL RATIOS (Consolidated)
Tier 1 Leverage ratio 9.21% 9.16% 8.78% 8.81% 9.12% 9.59%
Tier 1 Risk-based capital ratio 10.76 11.38 10.65 10.77 11.46 12.24
Total Risk-based capital ratio 14.18 12.49 11.77 11.86 12.52 13.30
Tangible common stockholders' equity to tangible assets (1) 699.58 697.60 689.62 670.43 682.40 734.01
GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures
The information set forth above contains certain financial information determined by methods other than in accordance with GAAP. These non-GAAP financial measures are "tangible book value per common share," "tangible common stockholders' equity," "efficiency ratio," and "tangible common stockholders' equity to tangible assets." Although we believe these non-GAAP financial measures provide a greater understanding of our business, these measures are not necessarily comparable to similar measures that may be presented by other companies.
"Efficiency ratio" is defined as non-interest expenses divided by our operating revenue, which is equal to net interest income plus non-interest income excluding gains and losses on sales of securities. In our judgment, the adjustments made to operating revenue allow investors and analysts to better assess our operating expenses in relation to our core operating revenue by removing the volatility that is associated with certain non-recurring items and other discrete items that are unrelated to our core business.
"Tangible common stockholders' equity" is defined as common stockholders' equity reduced by goodwill. We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in common stockholders' equity exclusive of changes in intangible assets. Goodwill, an intangible asset that is recorded in a purchase business combination, has the effect of increasing both common stockholders' equity and assets while not increasing our tangible common stockholders' equity or tangible assets.
"Tangible common stockholders' equity to tangible assets" is defined as the ratio of common stockholders' equity reduced by goodwill divided by total assets reduced by goodwill. We believe that this measure is important to many investors in the marketplace who are interested in relative changes from period to period in common stockholders' equity and total assets, each exclusive of changes in intangible assets. Goodwill, an intangible asset that is recorded in a purchase business combination, has the effect of increasing both common stockholders' equity and assets while not increasing our tangible common equity or tangible assets.
"Tangible book value per common share" is defined as tangible common stockholders' equity divided by total common shares outstanding. We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets. Goodwill, an intangible asset that is recorded in a purchase business combination, has the effect of increasing book value while not increasing our tangible book value.
The information provided below reconciles each non-GAAP measure to its most comparable GAAP measure.
NON-GAAP FINANCIAL MEASURES
Efficiency Ratio
Non-interest expense (numerator) $ 6,297 $ 6,122 $ 5,862 $ 5,845 $ 5,476 $ 5,328
Net interest income 7,560 7,533 7,285 6,877 6,458 5,964
Non-interest income 1,059 1,904 915 787 905 1,286
Less: gains on sale of loans (14) (852) -- -- (22) (87)
Less: gains (losses) on sales of securities -- -- 2 (14) -- (2)
Adjusted operating revenue (denominator) 8,605 8,585 8,202 7,650 7,341 7,161
Efficiency Ratio 73.18% 71.31% 71.47% 76.41% 74.59% 74.40%
Tangible Common Stockholders' Equity and Tangible Common Stockholders' Equity/Tangible Assets
Common equity $ 72,666 $ 70,665 $ 68,627 $ 65,917 $ 63,468 $ 64,453
Less: intangible assets (2,966) (2,966) (2,966) (2,966) (2,966) (2,966)
Tangible common stockholders' equity 69,700 67,699 65,661 62,951 60,502 61,487
Total assets 999,282 973,418 955,100 941,928 889,578 840,654
Less: Intangible assets (2,966) (2,966) (2,966) (2,966) (2,966) (2,966)
Tangible assets 996,316 970,452 952,134 938,962 886,612 837,688
Tangible Common Stockholders' Equity/Tangible Assets 7.00% 6.98% 6.90% 6.70% 6.82% 7.34%
Tangible Book Value per Common Share
Book Value Per Common Share $ 8.41 $ 8.18 $ 7.96 $ 7.65 $ 7.41 $ 7.54
Less: Effects of intangible assets (0.34) (0.34) (0.34) (0.34) (0.35) (0.35)
Tangible Book Value per Common Share 8.07 7.84 7.62 7.30 7.06 7.19
(1) These measures are not measures recognized under generally accepted accounting principles (United States) ("GAAP"), and are therefore considered to be non-GAAP financial measures.
(2) Data has been annualized.
(3) Efficiency ratio is total non-interest expense divided by the sum of net interest income and total non-interest income, (excluding securities and loan sale gains/(losses)) and is not a GAAP measure.
(4) Non-performing assets are deemed to be nonaccruing loans and OREO.
(5) Return on average assets is defined as net income available to common stockholders divided by average total assets; Return on average common stockholders equity is defined by net income available to common stockholders divided by average common stockholders' equity
This information is preliminary and based on company data available at the time of the presentation.
Average Balance Sheets and Net Interest Analysis
On a Fully Taxable-Equivalent Basis
Three Months Ended December 31,
(In thousands, except Average Yields and Rates)
2014 2013
Average Interest Average Average Interest Average
Balance Earned / Yield / Balance Earned / Yield /
Paid Rate Paid Rate
Assets:
Interest earning assets:
Interest-bearing deposits in banks $ 211 0 0.74% $ 2,320 $ 8 1.32%
Investments (1) (3) 219,501 1,245 2.25 273,165 1,606 2.33
Federal funds sold 4,432 3 0.25 907 1 0.43
Total loans (2) 676,099 7,356 4.32 532,829 5,923 4.41
Total interest earning assets 900,243 8,604 3.79 809,221 7,538 3.70
Allowance for loan losses (8,517) (6,886)
Non-interest earning assets 84,870 63,065
Total assets $ 976,596 $ 865,400
Interest bearing liabilities:
Interest bearing deposits:
Checking 52,933 46 0.35% 43,400 51 0.47%
Savings 11,697 3 0.11 7,578 3 0.15
Money market 408,469 417 0.40 410,091 529 0.51
Time deposits 158,951 316 0.79 118,924 206 0.69
Federal funds purchased 476 1 0.98 2,264 4 0.68
Other borrowings 58,036 155 1.06 62,193 130 0.83
Total interest bearing liabilities 690,562 938 0.54 644,450 923 0.57
Non-interest bearing checking 186,261 129,734
Other liabilities 8,385 6,849
Stockholders' equity 91,388 84,367
Total liabilities and stockholders' equity $ 976,596 $ 865,400
Net interest spread 3.25% 3.13%
Net interest margin 3.38 3.24
(1) Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 34%.
(2) Non-accrual loans are included in average loan balances in all periods. Loan fees of $193,000 and $114,000 are included in interest income in 2014 and 2013, respectively
(3) Unrealized gains/(losses) of ($1,408,000) and ($3,810,000) are excluded from the yield calculation in 2014 and 2013, respectively.
This information is preliminary and based on company data available at the time of the presentation.
Average Balance Sheets and Net Interest Analysis
On a Fully Taxable-Equivalent Basis
Twelve Months Ended December 31,
(In thousands, except Average Yields and Rates)
2014 2013
Average Interest Average Average Interest Average
Balance Earned / Yield / Balance Earned / Yield /
Paid Rate Paid Rate
Assets:
Interest earning assets:
Interest-bearing deposits in banks $ 429 5 1.10% $ 2,586 $ 37 1.43%
Investments (1) (3) 233,308 5,301 2.27 241,615 5,554 2.30
Federal funds sold 1,530 4 0.25 635 2 0.31
Total loans (2) 650,123 28,181 4.33 497,216 21,996 4.42
Total interest earning assets 885,390 33,491 3.78 742,052 27,589 3.72
Allowance for loan losses (8,248) (6,986)
Non-interest earning assets 65,514 63,846
Total assets $ 942,656 $ 798,912
Interest bearing liabilities:
Interest bearing deposits:
Checking 50,231 201 0.40% 31,751 143 0.45%
Savings 9,353 12 0.13 6,356 9 0.14
Money market 396,949 1,765 0.44 368,152 1,917 0.52
Time deposits 147,535 1,130 0.77 126,428 982 0.78
Federal funds purchased 6,243 42 0.68 1,469 12 0.82
Other borrowings 68,947 618 0.90 56,896 497 0.87
Total interest bearing liabilities 679,258 3,768 0.55 591,052 3,560 0.60
Non-interest bearing checking 167,959 116,509
Other liabilities 7,358 6,850
Stockholders' equity 88,081 84,501
Total liabilities and stockholders' equity $ 942,656 $ 798,912
Net interest spread 3.23% 3.12%
Net interest margin 3.36 3.24
(1) Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 34%.
(2) Non-accrual loans are included in average loan balances in all periods. Loan fees of $637,000 and $395,000 are included in interest income in 2014 and 2013, respectively
(3) Unrealized gains/(losses) of ($2,979,000) and ($1,095,000) are excluded from the yield calculation in 2014 and 2013, respectively.
This information is preliminary and based on company data available at the time of the presentation.

CONTACT: Barbara J. Zipperian Chief Financial Officer (615) 736-7786Source:Avenue Financial Holdings, Inc.