SAN JOSE, Calif.--(BUSINESS WIRE)--Avidbank Holdings, Inc. ("the Company") (OTC Pink: AVBH), a bank holding company and the parent company of Avidbank ("the Bank"), an independent full-service commercial bank serving businesses and consumers in Northern California, announced unaudited consolidated net income of $2,666,000 for the second quarter of 2018 compared to $1,430,000 for the same period in 2017.
Year-to-Date and Second Quarter 2018 Financial Highlights
- Net income was $4,773,000 in the first six months of 2018 compared to $2,984,000 in the first six months of 2017. Net income in the first six months of 2017 included a loan loss provision of $1,806,000 while no loan loss provision was recognized in the first six months of 2018. Net interest income was $17,535,000 in the first six months of 2018, an increase of $2,960,000 or 20% over the figure recorded in the first six months of 2017.
- Diluted earnings per common share were $0.81 in the first six months of 2018, compared to $0.63 in the first six months of 2017. Weighted average common shares outstanding were 5,742,988 and 4,636,230 in the first six months of 2018 and 2017, respectively. The increase was primarily the result of a $20,000,000 capital raise completed during the third quarter of 2017.
- Net interest income was $8,950,000 for the second quarter of 2018, an increase of $1,344,000 over the $7,606,000 we recorded in the second quarter of 2017. The 18% increase over the prior year quarter reflects the impact of our loan growth over the past twelve months.
- Net income was $2,666,000 for the second quarter of 2018, compared to $1,430,000 for the second quarter of 2017. Results for the second quarter of 2018 reflected no loan loss provision compared to a loan loss provision of $1,085,000 in the second quarter of 2017.
- Diluted earnings per common share were $0.45 for the second quarter of 2018, compared to $0.30 for the second quarter of 2017.
- Total assets grew by 8% in the first six months of 2018, ending the second quarter at $845 million.
- Total loans net of deferred fees grew by 7% in the first six months of 2018, ending the second quarter at $691 million.
- Total deposits grew by 5% in the first six months of 2018, ending the second quarter at $679 million.
- The Company continues to be well capitalized for regulatory purposes with a Tier 1 Leverage Ratio of 11.6%, a Tier 1 Risk Based Capital and Common Equity Tier 1 Risk Based Capital Ratio of 10.8%, and a Total Risk Based Capital Ratio of 13.2%.
Mark D. Mordell, Chairman and Chief Executive Officer, stated, "Net interest income increased to $9 million in the second quarter of 2018, an 18% increase over the second quarter of 2017 due to our loan growth over the past twelve months. Loans grew $29 million in the second quarter even as we experienced a high level of unexpected payoffs in our Specialty Finance division due to the active merger and acquisition markets. We are committed to a growth strategy to achieve optimal profitability and have made substantial investments in personnel and facilities to help realize that goal responsibly. Through the first six months of 2018 we have added additional staff members primarily in loan production and support positions. We are well positioned to continue the franchise growth strategy to scale our balance sheet and infrastructure to serve our markets.”
Mr. Mordell continued, "In 2017 and the first half of 2018 we added both business development and support staff to sustain and manage our growth. We also expanded and relocated our facilities to accommodate our growth in staff as well as lower our facilities cost per employee as we scale our franchise. Non-interest expenses increased by $1.0 million to $5.7 million in the second quarter of 2018 from $4.7 million in the second quarter of 2017 primarily due to these increased investments and the remaining lease obligation from our old San Jose production office. Our efficiency ratio increased to 60.3% in the second quarter of 2018 from 59.1% in the second quarter of 2017 as a result of the increased expenses. Total deposits increased by $12 million in the second quarter of 2018 compared to the first quarter of 2018 and increased by $60 million from the same quarter in 2017. The increase in deposits for the second quarter of 2018 was primarily due to an increase in demand deposits and brokered deposits. Our net interest margin grew to 4.56% in the second quarter of 2018 compared to 4.37% in the second quarter of 2017 due to changes in the mix of earning assets in favor of higher yielding loans. Return on assets was 1.30% in the second quarter of 2018 compared to 0.79% in the second quarter of 2017."
Results for the six months ended June 30, 2018
Net interest income before provision for loan losses was $17.5 million in the first six months of 2018, an increase of $3.0 million or 20% over the same period of the prior year. Higher outstanding average loan balances were the primary reason for the increase. Average total loans were $664 million in the first six months of 2018 compared to $556 million in the first six months of 2017. Average earning assets were $776 million in the first six months of 2018, a 14% increase over the prior year. Net interest margin was 4.56% in the first six months of 2018 compared to 4.32% for the same period in 2017. The increase in net interest margin was primarily caused by an increase in higher yielding loans in the mix of earning assets. No loan loss provision was recorded in the first six months of 2018 and a loan loss provision of $1.8 million was taken in the first six months of 2017. We had no charge-offs and minimal recoveries in the first six months of 2018 compared to no charge-offs and recoveries of $26,000 for the same period in 2017.
Non-interest income was $1,276,000 in the first six months of 2018, an increase of $339,000 or 36% compared to the same period in 2017. Non-interest income in the first half of 2018 included $281,000 of earnings from an investment in an SBIC fund while non-interest income in the prior year's first half included $112,000 from the exercise of common stock warrants related to a Specialty Finance loan.
Non-interest expense increased by $2.9 million to $12 million in the first six months of 2018 compared to $9.1 million in the same period in 2017 due primarily to increased investments in loan production and support personnel and expanded facilities to accommodate the growth in staff.
The effective tax rate was 30% in the first six months of 2018 compared to 34.8% for the same period in 2017. The rate declined in 2018 due to the Tax Cuts and Jobs Act federal income tax rate reduction becoming effective for the 2018 tax year.
Results for the quarter ended June 30, 2018
For the three months ended June 30, 2018, net interest income before provision for loan losses was $9 million, an increase of $1.3 million or 18% compared to the second quarter of 2017. The increase was primarily the result of higher average loans outstanding. Average total loans outstanding for the quarter ended June 30, 2018 were $673 million, compared to $572 million for the same quarter in 2017, an increase of 18%. Average earning assets were $786 million in the second quarter of 2018, a 13% increase over the second quarter of the prior year. Loans made up 86% of average earning assets at the end of the second quarter of 2018 compared to 82% at the end of the second quarter of 2017. Net interest margin was 4.56% for the second quarter of 2018, compared to 4.37% for the second quarter of 2017. No loan loss provision was taken in the second quarter of 2018 compared with a loan loss provision of $1.1 million taken in the second quarter of 2017.
Non-interest income was $571,000 in the second quarter of 2018, an increase of $155,000 or 37% compared to the second quarter of 2017. The increase was primarily the result of increased service charges on deposit accounts as a result of our growth.
Non-interest expense increased by $1,003,000 in the second quarter of 2018 to $5,740,000 compared to $4,737,000 for the second quarter of 2017. This increase was primarily due to higher compensation costs related to increased staffing and increased occupancy costs due to the expansion of our facilities. The Bank's full time equivalent employees at June 30, 2018 and 2017 were 90 and 77, respectively. The Bank's efficiency ratio increased from 59.1% in the second quarter of 2017 to 60.3% in the second quarter of 2018 due to increased staffing and facilities costs to accommodate our growth.
Balance Sheet
Total assets increased to $845 million as of June 30, 2018, compared to $822 million at March 31, 2018 and $731 million on the same day one year ago. The increase in total assets of $23 million, or 3%, from March 31, 2018 was primarily due to increased FHLB borrowings and increased demand deposit accounts in the second quarter of 2018. The Company reported loans net of deferred fees at June 30, 2018 of $691 million, which represented an increase of $29 million, or 4%, from $662 million at March 31, 2018, and an increase of $107 million, or 18%, over $584 million at June 30, 2017. The increase in total loans from March 31, 2018 was primarily attributable to growth in commercial real estate loans. The increase in loans from June 30, 2017 was due to higher commercial real estate, Specialty Finance and multi-family loans.
“We had $2.3 million in non-accrual loans comprising 0.32% of total loans on June 30, 2018 compared to $5.2 million in non-accrual loans at the end of the prior year. We are pleased that the balance of our non-accrual loans was reduced by more than half in the first six months of 2018,” observed Mr. Mordell.
The Company’s total deposits were $679 million as of June 30, 2018, which represented an increase of $13 million, or 2%, compared to $666 million at March 31, 2018 and an increase of $60 million, or 10%, compared to $619 million at June 30, 2017. The increase in deposits from March 31, 2018 was due to an increase in demand deposits and brokered deposits. The increase from June 30, 2017 was caused by an increase in demand deposits and CDs greater than $250,000. The Company had $55 million of Federal Home Loan Bank advances outstanding as of June 30, 2018 compared to $30 million at June 30, 2017.
Demand and interest bearing transaction deposits represented 50% of total deposits at June 30, 2018, compared to 46% at March 31, 2018 and 46% for the same period one year ago. Core deposits, which include transaction deposits, money market accounts and CDs below $250,000, represented 85% of total deposits at June 30, 2018, compared to 87% at March 31, 2018 and 86% at June 30, 2017. The Company’s loan to deposit ratio was 102% at June 30, 2018 compared to 99% at March 31, 2018 and 94% at June 30, 2017.
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, technology and asset-based lending, sponsor finance, real estate construction and commercial real estate lending. Avidbank provides a different approach to banking. We do what we say.
Forward-Looking Statement:
This news release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts, and generally include the words “believes,” “plans,” “intends,” “expects,” “opportunity,” “anticipates,” “targeted,” “continue,” “remain,” “will,” “should,” “may,” or words of similar meaning. While we believe that our forward-looking statements and the assumptions underlying them are reasonably based, such statements and assumptions, are, by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect. Accordingly, actual results could materially differ from forward-looking statements for a variety of reasons, including, but not limited to local, regional, national and international economic conditions and events and the impact they may have on us and our customers, and in particular in our market areas; ability to attract deposits and other sources of liquidity; oversupply of property inventory and deterioration in values of California real estate, both residential and commercial; a prolonged slowdown or decline in construction activity; changes in the financial performance and/or condition of our borrowers; changes in the level of non-performing 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 pandemic flu; destabilization in international economies resulting from the European sovereign debt crisis; the effects of the Tax Cuts and Jobs Act; 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.
| Avidbank Holdings, Inc. | ||||||||||
| Consolidated Balance Sheets | ||||||||||
| ($000, except share and per share amounts) (Unaudited) | ||||||||||
|
Assets |
6/30/18 |
3/31/18 |
12/31/17 |
9/30/17 |
6/30/17 |
|||||
| Cash and due from banks | $10,767 | $15,729 | $10,650 | $11,068 | $10,845 | |||||
| Due from Federal Reserve Bank | 57,070 | 48,475 | 22,710 | 74,970 | 32,510 | |||||
| Total cash and cash equivalents | 67,837 | 64,204 | 33,360 | 86,038 | 43,355 | |||||
| Investment securities - available for sale | 60,362 | 70,797 | 74,364 | 76,742 | 82,986 | |||||
| Loans, net of deferred loan fees | 691,011 | 662,005 | 648,273 | 578,524 | 584,342 | |||||
| Allowance for loan losses | (8,297) | (8,297) | (8,297) | (8,191) | (8,076) | |||||
| Loans, net of allowance for loan losses | 682,714 | 653,708 | 639,976 | 570,333 | 576,266 | |||||
| Bank owned life insurance | 10,754 | 10,686 | 10,619 | 10,551 | 10,479 | |||||
| Premises and equipment, net | 6,165 | 6,349 | 5,946 | 3,387 | 1,155 | |||||
| Accrued interest receivable & other assets | 17,212 | 16,749 | 18,728 | 16,756 | 16,818 | |||||
| Total assets | $845,044 | $822,493 | $782,993 | $763,807 | $731,059 | |||||
|
Liabilities |
||||||||||
| Non-interest-bearing demand deposits | $313,143 | $281,967 | $275,924 | $295,862 | $264,514 | |||||
| Interest bearing transaction accounts | 23,302 | 23,228 | 16,555 | 16,988 | 17,642 | |||||
| Money market and savings accounts | 219,869 | 250,218 | 243,198 | 229,143 | 220,474 | |||||
| Time deposits | 122,321 | 110,906 | 110,730 | 117,670 | 116,282 | |||||
| Total deposits | 678,635 | 666,319 | 646,407 | 659,663 | 618,912 | |||||
| FHLB advances | 55,000 | 50,000 | 30,000 | - | 30,000 | |||||
| Subordinated debt, net | 11,803 | 11,782 | 11,761 | 11,740 | 11,719 | |||||
| Other liabilities | 5,879 | 3,578 | 5,717 | 4,421 | 3,572 | |||||
| Total liabilities | 751,317 | 731,679 | 693,886 | 675,824 | 664,203 | |||||
|
Shareholders' equity |
||||||||||
| Common stock/additional paid-in capital | 67,626 | 67,230 | 66,997 | 66,704 | 47,421 | |||||
| Retained earnings | 27,716 | 25,050 | 22,811 | 21,802 | 20,142 | |||||
| Accumulated other comprehensive income (loss) | (1,615) | (1,466) | (700) | (523) | (707) | |||||
| Total shareholders' equity | 93,727 | 90,814 | 89,108 | 87,983 | 66,856 | |||||
| Total liabilities and shareholders' equity | $845,044 | $822,493 | $782,993 | $763,807 | $731,059 | |||||
|
Capital ratios |
||||||||||
| Tier 1 leverage ratio | 11.59% | 11.45% | 11.43% | 11.87% | 9.28% | |||||
| Common equity tier 1 capital ratio | 10.84% | 10.84% | 10.70% | 11.61% | 8.94% | |||||
| Tier 1 risk-based capital ratio | 10.84% | 10.84% | 10.70% | 11.61% | 8.94% | |||||
| Total risk-based capital ratio | 13.20% | 13.24% | 13.13% | 14.27% | 11.61% | |||||
| Book value per common share | $15.66 | $15.25 | $15.12 | $14.99 | $13.91 | |||||
| Total common shares outstanding | 5,983,390 | 5,956,609 | 5,893,144 | 5,870,691 | 4,806,377 | |||||
|
Other Ratios |
||||||||||
| Non-interest bearing deposits to total deposits | 46.1% | 42.3% | 42.7% | 44.9% | 42.7% | |||||
| Core deposits to total deposits | 85.1% | 86.9% | 87.4% | 86.7% | 86.0% | |||||
| Loan to deposit ratio | 101.8% | 99.4% | 100.3% | 87.7% | 94.4% | |||||
| Allowance for loan losses to total loans | 1.20% | 1.25% | 1.28% | 1.42% | 1.38% | |||||
| Avidbank Holdings, Inc. | ||||||||||
| Condensed Consolidated Statements of Income | ||||||||||
| ($000, except share and per share amounts) (Unaudited) | ||||||||||
|
Quarter Ended |
Year-to-Date | |||||||||
|
6/30/18 |
3/31/18 |
6/30/17 |
6/30/18 |
6/30/17 |
||||||
| Interest and fees on loans and leases | $9,480 | $8,896 | $7,721 | $18,376 | $14,699 | |||||
| Interest on investment securities | 404 | 455 | 516 | 859 | 1,045 | |||||
| Other interest income | 232 | 149 | 107 | 381 | 176 | |||||
| Total interest income | 10,116 | 9,500 | 8,344 | 19,616 | 15,920 | |||||
| Deposit interest expense | 641 | 549 | 423 | 1,191 | 756 | |||||
| Other interest expense | 525 | 365 | 315 | 890 | 589 | |||||
| Total interest expense | 1,166 | 914 | 738 | 2,081 | 1,345 | |||||
| Net interest income | 8,950 | 8,586 | 7,606 | 17,535 | 14,575 | |||||
| Provision for loan losses | - | - | 1,085 | - | 1,806 | |||||
|
Net interest income after provision for loan losses |
8,950 | 8,586 | 6,521 | 17,535 | 12,769 | |||||
| Service charges, fees and other income | 486 | 637 | 343 | 1,124 | 793 | |||||
| Income from bank owned life insurance | 68 | 67 | 73 | 135 | 144 | |||||
| Gain (Loss) on sale of investment securities | 17 | - | - | 17 | - | |||||
| Total non-interest income | 571 | 704 | 416 | 1,276 | 937 | |||||
| Compensation and benefit expenses | 3,756 | 3,883 | 3,020 | 7,639 | 5,888 | |||||
| Occupancy and equipment expenses | 731 | 1,066 | 676 | 1,797 | 1,260 | |||||
| Other operating expenses | 1,253 | 1,303 | 1,041 | 2,556 | 1,983 | |||||
| Total non-interest expense | 5,740 | 6,252 | 4,737 | 11,992 | 9,132 | |||||
| Income before income taxes | 3,781 | 3,038 | 2,200 | 6,819 | 4,574 | |||||
| Provision for income taxes | 1,115 | 931 | 770 | 2,046 | 1,590 | |||||
| Net income | $2,666 | $2,107 | $1,430 | $4,773 | $2,984 | |||||
| Basic earnings per common share | $0.46 | $0.37 | $0.31 | $0.83 | $0.64 | |||||
| Diluted earnings per common share | $0.45 | $0.36 | $0.30 | $0.81 | $0.63 | |||||
| Average common shares outstanding | 5,753,044 | 5,732,820 | 4,645,091 | 5,742,988 | 4,636,230 | |||||
| Average common fully diluted shares | 5,866,669 | 5,850,614 | 4,740,832 | 5,858,723 | 4,734,898 | |||||
| Annualized returns: | ||||||||||
| Return on average assets | 1.30% | 1.06% | 0.79% | 1.18% | 0.85% | |||||
| Return on average common equity | 11.48% | 9.43% | 8.61% | 10.48% | 9.14% | |||||
| Net interest margin | 4.56% | 4.55% | 4.37% | 4.56% | 4.32% | |||||
| Cost of funds | 0.65% | 0.52% | 0.45% | 0.58% | 0.42% | |||||
| Efficiency ratio | 60.29% | 67.30% | 59.05% | 63.75% | 58.87% | |||||
| Avidbank Holdings, Inc. | ||||||||||
| Credit Trends | ||||||||||
| ($000) (Unaudited) | ||||||||||
|
6/30/18 |
3/31/18 |
12/31/17 |
9/30/17 |
6/30/17 |
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|
Allowance for Loan Losses |
||||||||||
| Balance, beginning of quarter | $8,297 | $8,297 | $8,191 | $8,076 | $6,991 | |||||
| Provision for loan losses, quarterly | - | - | 106 | 74 | 1,085 | |||||
| Charge-offs, quarterly | - | - | - | - | - | |||||
| Recoveries, quarterly | - | - | - | 41 | - | |||||
| Balance, end of quarter | $8,297 | $8,297 | $8,297 | $8,191 | $8,076 | |||||
|
Nonperforming Assets |
||||||||||
| Loans accounted for on a non-accrual basis | $2,245 | $2,256 | $5,151 | $5,543 | $5,210 | |||||
|
Loans with principal or interest contractually past due 90 days or more and still accruing interest |
- | - | - | - | - | |||||
| Nonperforming loans | 2,245 | 2,256 | 5,151 | 5,543 | 5,210 | |||||
| Other real estate owned | - | - | - | - | - | |||||
| Nonperforming assets | $2,245 | $2,256 | $5,151 | $5,543 | $5,210 | |||||
|
Loans restructured and in compliance with modified terms |
- | - | - | - | - | |||||
| Nonperforming assets & restructured loans | $2,245 | $2,256 | $5,151 | $5,543 | $5,210 | |||||
|
Nonperforming Loans by Type: |
||||||||||
| Commercial | $2,245 | $2,256 | $4,353 | $4,730 | $4,377 | |||||
| Real Estate Loans | - | - | 704 | 714 | 724 | |||||
| Consumer Loans | - | - | 94 | 99 | 109 | |||||
| Total Nonperforming loans | $2,245 | $2,256 | $5,151 | $5,543 | $5,210 | |||||
|
Asset Quality Ratios |
||||||||||
| Allowance for loan losses (ALLL) to total loans | 1.20% | 1.25% | 1.28% | 1.42% | 1.38% | |||||
| ALLL to nonperforming loans | 369.54% | 367.81% | 161.08% | 147.77% | 155.01% | |||||
| Nonperforming assets to total assets | 0.27% | 0.27% | 0.66% | 0.73% | 0.71% | |||||
| Nonperforming loans to total loans | 0.32% | 0.34% | 0.79% | 0.96% | 0.89% | |||||
| Net quarterly charge-offs to total loans | 0.00% | 0.00% | 0.00% | -0.01% | 0.00% | |||||
