Avenue Financial Holdings, Inc. Announces Record Fourth Quarter and 2015 Results

Avenue Financial Holdings, Inc. (NASDAQ: AVNU) (“Avenue Financial” or “the Company”) announced record results for the fourth quarter and year ended December 31, 2015. Net income available to common stockholders rose 71.4% to $2.1 million in the fourth quarter of 2015 compared with $1.2 million in the fourth quarter of 2014. Net income per diluted share available to common stockholders rose 40.0% to $0.21 in the fourth quarter of 2015 compared with $0.15 in the fourth quarter of 2014. For the full year, fiscal 2015 net income increased 27.9% to $6.9 million, or $0.69 per diluted share, compared with $5.4 million, or $0.64 per diluted share, in fiscal 2014.

Total loans, including loans held for sale, rose 20.0% to a record $865.2 million in 2015 compared with $721.1 million in 2014. Total deposits increased 20.7% to a record $969.6 million in 2015 compared with total deposits of $803.2 million in 2014. Demand deposits rose 42.6% to $322.6 million in 2015 and accounted for 33.3% of total deposits, up from 28.2% in 2014. Total assets grew 16.4% to a record $1.2 billion in 2015 compared with $998.4 million in 2014.

Balance Sheet Growth

• Total assets increased $54.1 million, or 4.9%, to $1.16 billion at December 31, 2015, rising from $1.11 billion at September 30, 2015; and up $163.9 million, or 16.4%, compared with $998.4 million at December 31, 2014. The growth in assets was due primarily to higher loans compared with prior quarters.

• Loans held for investment increased $33.8 million, or 4.2%, to a record $845.8 million at December 31, 2015 compared with $812.0 million at September 30, 2015; and were up $151.9 million from $693.9 million at December 31, 2014, for a year-over-year growth rate of 21.9%. Mortgage loans held-for-sale were $19.4 million compared with $18.4 million at September 30, 2015, and $27.2 million at December 30, 2014.
• Cash surrender value of company owned life insurance rose to $25.7 million at December 31, 2015, up from $25.6 million at September 30, 2015 and $20.0 million at December 31, 2014.
• Deposits rose to $969.6 million at December 31, 2015, an increase of $68.8 million, or 7.6%, compared with $900.8 million at September 30, 2015. Deposits grew $166.4 million, or 20.7%, compared with $803.2 million at December 31, 2014. Demand deposits rose $96.3 million, or 42.6%, to $322.6 million at December 31, 2015 compared with $226.3 million at December 31, 2014. For the fourth quarter of 2015, demand deposits represented 33.3% of average deposits compared with 28.2% for the fourth quarter of 2014.

Revenue Growth and Profitability

• For the fourth quarter of 2015, net income available to common stockholders rose 18.9% to $2.13 million compared with $1.79 million for the third quarter of 2015, and was up 71.4% from $1.24 million at December 31, 2014. The increase was attributable primarily to growth in loan volume that benefited net interest income, higher loan sales, including SBA loans that boosted non-interest income, and a decrease in our provision for loan losses that reflected our improved asset quality. Diluted net income per share rose 16.7% to $0.21 in the fourth quarter of 2015 from $0.18 in the third quarter of 2015, and jumped 40.0% from $0.15 per share the fourth quarter of 2014. Average shares outstanding rose 20.1% to 10.2 million at December 31, 2015 compared with 8.5 million at December 31, 2014 attributable to Avenue Financial’s initial public stock offering in February 2015.
• Net interest income increased 16.6% to $8.8 million for the fourth quarter of 2015, compared with $7.6 million for the fourth quarter of 2014 and was attributable primarily to growth in loans, offset partially by higher interest costs associated with $20.0 million in subordinated debt issued in December 2014.
• Growth in average non-interest bearing demand deposits over the past quarter contributed to the 2 basis point increase in the tax equivalent net interest margin which rose from 3.30% in the third quarter of 2015 to 3.32% in the fourth quarter of 2015. Net interest margin was down 3 basis points from 3.35% in the fourth quarter of 2014, primarily due the cost of the subordinated debt issued in December 2014, partially offset by an increase in the yield on investment securities.
• Non-interest income rose 60.5% to $1.7 million in the fourth quarter of 2015 compared with $1.1 million in the fourth quarter of 2014. The growth in non-interest income benefited from a 32.7% increase in customer service fees to $662.5 thousand, a 41.1% increase in cash surrender value of life insurance to $186.5 thousand and was offset partially by a 17.9% decrease in mortgage banking fees to $338.6 thousand. Growth in non-interest income also benefited from gains on loan sales and securities. Net gains on mortgage loan sales rose to $256.8 thousand compared with no sales in the fourth quarter of 2014. Net gains on SBA loan sales rose to $230.7 thousand in the fourth quarter of 2015 compared with $14.3 thousand in the fourth quarter of 2014. Net gain on sale of securities totaled $24.0 thousand in the fourth quarter of 2015 with no comparable securities gains in the fourth quarter of 2014.
• The provision for loan losses was $406.5 thousand for the fourth quarter of 2015, compared with $456.1 thousand for the fourth quarter of 2014.
• Non-interest expense for the fourth quarter of 2015 increased $101.0 thousand, or 1.4%, to $7.1 million from $7.0 million for the third quarter of 2015, and increased $808.0 thousand from the fourth quarter of 2014. The increase since last year was due primarily to higher compensation costs related to growth in employee headcount, merit increases, and higher legal, accounting and insurance related to public company expenses.

Asset Quality

• Asset quality improved in the fourth quarter compared with the third quarter of 2015 and fourth quarter of 2014 as measured by reductions in non-performing loans to total loans and other real estate owned. Total non-performing assets declined 19.2% to $1.1 million and total other real estate owned declined 48.8% to $508.0 thousand at December 31, 2015 compared with September 30, 2015, and was offset partially by an increase in nonaccruing loans. Our ratio of non-performing assets (nonaccruing loans plus other real estate owned and loans 90 days past due and still accruing) to total assets decreased to 0.09% at December 31, 2015, compared with 0.12% at September 30, 2015, and 0.41% at December 31, 2014 due primarily to a decrease in other real estate owned and growth in total assets. Troubled-debt restructurings totaled $423.7 thousand at December 31, 2015.
• Net loan recoveries for the fourth quarter of 2015 were $23 thousand compared with net loan charge-offs of $293 thousand, or 0.15% of average loans, for the quarter ended September 30, 2015, and $345 thousand, or 0.20% of average loans, for the quarter ended December 31, 2014. There were no past due loans still accruing greater than 90 days at December 31, 2015.
• The allowance for loan losses was $10.1 million, or 1.19% of loans, at December 31, 2015, compared with $9.6 million, or 1.19% of loans, at September 30, 2015 and $8.5 million, or 1.23% of loans, at December 31, 2014. The decrease in the allowance percentage to loans since last year was due primarily to the resolution of certain problem credits and a lower historical loss ratio offset somewhat by growth in the loan portfolio since last 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 the Company’s Form 10-K and subsequent periodic reports filed with the Securities and Exchange Commission. 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.