Avidbank Holdings, Inc. Announces Net Income of $3,183,000 for the Second Quarter of 2019

SAN JOSE, Calif.--()--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 individuals primarily in Northern California, announced unaudited consolidated net income of $3,183,000 for the second quarter of 2019 compared to $2,666,000 for the same period in 2018.

Year-to-Date and Second Quarter 2019 Financial Highlights

  • Net income was $6,356,000 in the first six months of 2019 compared to $4,773,000 in the first six months of 2018. Net income in the first six months of 2019 included a $1.2 million loan loss provision while net income in 2018 reflected no loan loss provision. Net interest incomewas $22,468,000 in the first six months of 2019,an increase of $4,933,000 or 28% over the figure recorded in the first six months of 2018.
  • Diluted earnings per common share were $1.08 in the first six months of 2019, compared to $0.81 in the first six months of 2018. The increase in earnings per share was the result of higher earnings in 2019. Weighted average common shares outstanding were 5,791,394 and 5,742,988 in the first six months of 2019 and 2018, respectively.
  • Net interest income was $11,425,000 for the second quarter of 2019, an increase of $2,475,000 over the $8,950,000 we recorded in the second quarter of 2018. The 28% increase over the prior year quarter reflects the impact of our loan growth over the past twelve months.
  • Net income was $3,183,000 for the second quarter of 2019, compared to $2,666,000 for the second quarter of 2018. Results for the second quarter of 2019 reflected a loan loss provision of $787,000 compared to no loan loss provision in the second quarter of 2018.
  • Diluted earnings per common share were $0.54 for the second quarter of 2019, compared to $0.45 for the second quarter of 2018.
  • Total assets grew by 11% in the first six months of 2019, ending the second quarter at $1.0 billion.
  • Total loans net of deferred fees grew by 6% in the first six months of 2019, ending the second quarter at $858 million.
  • Total deposits grew by 4% in the first six months of 2019, ending the second quarter at $830 million.
  • The Company continues to be well capitalized for regulatory purposes with a Tier 1 Leverage Ratio of 10.69%, a Tier 1 Risk Based Capital and Common Equity Tier 1 Risk Based Capital Ratio of 10.28%, and a Total Risk Based Capital Ratio of 12.49%.

Mark D. Mordell, Chairman and Chief Executive Officer, stated, “Net interest income increased to $11.4 million in the second quarter of 2019, a 28% increase over the second quarter of 2018, due to our loan growth over the past twelve months. Loans grew $26.1 million in the second quarter primarily as a result of higher commercial real estate and C&I loans offsetting a significant amount of construction loan payoffs. We continue to be committed to a strong growth strategy to achieve scale and optimal profitability. We are also continuing to be opportunistic when identifying additional personnel and infrastructure that can be accretive to our cause. We have added several new employees in the second quarter of 2019 reflecting the expansion of our venture lending and structured finance divisions that are key areas for diversification and growth. The individuals we have in leadership and support roles position us well to continue our franchise growth strategy to scale our balance sheet and operations to serve our markets.”

Mr. Mordell continued, “Our investments in increased staffing and expanded infrastructure over the last 24 to 36 months are generating results according to plan as our robust loan and deposit growth provide increased economies of scale. Non-interest expense increased by $930,000 to $6,670,000 in the second quarter of 2019, up from $5,740,000 in the second quarter of 2018 primarily due to these increased investments. Our efficiency ratio decreased to 55.4% in the second quarter of 2019, down from 60.3% in the second quarter of 2018 as a result of increased earnings due to significant loan growth. Total deposits decreased by $17 million in the second quarter of 2019 compared to the first quarter of 2019, but increased by $152 million from the second quarter of 2018. The decrease in deposits from March 31, 2019 was due to lower money market and interest checking accounts. The increase in deposits over the second quarter of 2018 was primarily due to the efforts our team has made to increase demand deposits and money market accounts. Our net interest margin grew to 4.74% in the second quarter of 2019, compared to 4.56% in the second quarter of 2018 due to growth in loans and the favorable impact of interest rate increases on our variable rate loans. Return on assets was 1.25% in the second quarter of 2019 compared to 1.30% in the second quarter of 2018.”

Results for the six months ended June 30, 2019

Net interest income before provision for loan losses was $22.5 million in the first six months of 2019, an increase of $4.9 million or 28% over the same period of the prior year. Higher average outstanding loan balances were the primary reason for the increase. Average total loans were $827 million in the first six months of 2019 compared to $664 million in the first six months of 2018. Average earning assets were $942 million in the first six months of 2019, a 21% increase over the prior year. Net interest margin was 4.81% in the first six months of 2019 compared to 4.56% for the same period in 2018. The increase in net interest margin was primarily caused by an increase in higher yielding loans in the mix of earning assets. A loan loss provision of $1.2 million was recorded in the first six months of 2019 and no loan loss provision was recorded in the first six months of 2018. We had no charge-offs and $151,000 of recoveries in the first six months of 2019 compared to no charge-offs and minimal recoveries for the same period in 2018.

Non-interest income was $1,511,000 in the first six months of 2019, an increase of $235,000 or 18% over 2018 reflecting increased service charges on deposit accounts. Non-interest income in the first six months of 2019 included a $306,000 gain from the sale of collateral on a workout loan while non-interest income in the first six months of 2018 included $281,000 of earnings from an investment in an SBIC fund.

Non-interest expense increased by $1.7 million to $13.7 million in the first six months of 2019 compared to $12.0 million in 2018 due primarily to increased investments in loan production personnel.

The effective tax rate was 29.3% in the first six months of 2019 compared to 30.0% for the same period in 2018.

Results for the quarter ended June 30, 2019

For the three months ended June 30, 2019, net interest income before provision for loan losses was $11.4 million, an increase of $2.5 million or 28% compared to the second quarter of 2018. The increase was primarily the result of higher average loans outstanding. Average total loans outstanding for the quarter ended June 30, 2019 were $844 million, compared to $673 million for the same quarter in 2018, an increase of 25%. Average earning assets were $968 million in the second quarter of 2019, a 23% increase over the second quarter of the prior year. Loans made up 87% of average earning assets at the end of the second quarter of 2019 compared to 86% at the end of the second quarter of 2018. Net interest margin was 4.74% for the second quarter of 2019, compared to 4.56% for the second quarter of 2018. A loan loss provision of $0.8 million was taken in the second quarter of 2019 compared with no loan loss provision taken in the second quarter of 2018.

Non-interest income was $621,000 in the second quarter of 2019, an increase of $50,000 or 9% compared to the second quarter of 2018. The increase was primarily the result of increased service charges on deposit accounts as a result of our growth.

Non-interest expense increased by $930,000 in the second quarter of 2019 to $6,670,000 compared to $5,740,000 for the second quarter of 2018. This increase was primarily due to higher compensation costs related to increased staffing. The Bank's full-time equivalent employees at June 30, 2019 and 2018 were 105 and 90, respectively. The Bank's efficiency ratio decreased from 60.3% in the second quarter of 2018 to 55.4% in the second quarter of 2019 due to increased revenue from significant loan growth.

Balance Sheet

Total assets were $1.021 billion as of June 30, 2019, compared to $1.014 billion at March 31, 2019 and $845 million on the same day one year ago. The increase in total assets of $7 million, or 1%, from March 31, 2019 was primarily due to higher loan balances that were funded by a $20 million increase in Federal Home Loan Bank (FHLB) borrowings. The Company reported loans net of deferred fees at June 30, 2019 of $858 million, which represented an increase of $26 million, or 3%, from $832 million at March 31, 2019, and an increase of $167 million, or 24%, over $691 million at June 30, 2018. The increase in total loans from March 31, 2019 was primarily attributable to growth in commercial real estate and C&I loans partially offset by a significant amount of construction loan payoffs. The increase in loans from June 30, 2018 was due to higher specialty finance, multi-family, C&I and commercial real estate loans.

We had a $1.6 million non-accrual loan on June 30, 2019, which was down slightly from a $1.7 million balance at the end of the prior year. The non-accrual loan is secured by real estate,” observed Mr. Mordell.

The Company’s total deposits were $830 million as of June 30, 2019, which represented a decrease of $17 million, or 2%, compared to $847 million at March 31, 2019 and an increase of $151 million, or 22%, compared to $679 million at June 30, 2018. The decrease in deposits from March 31, 2019 was due to lower money market and interest checking accounts. The increase from June 30, 2018 was primarily due to an increase in money market and demand deposit accounts. The Company had $50 million of FHLB advances outstanding as of June 30, 2019 compared to $30 million at March 31, 2019 and $55 million as of June 30, 2018.

Demand and interest bearing transaction deposits represented 48% of total deposits at June 30, 2019, compared to 48% at March 31, 2019 and 50% 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, 2019, compared to 86% at March 31, 2019 and 85% at June 30, 2018. The Company’s loan to deposit ratio was 103% at June 30, 2019 compared to 98% at March 31, 2019 and 102% at June 30, 2018.

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, 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

 

6/30/19

3/31/19

12/31/18

9/30/18

6/30/18

Cash and due from banks

 

$12,887

$12,204

$19,252

$13,256

$10,767

Due from Federal Reserve Bank

 

57,530

76,295

8,400

79,670

57,070

Total cash and cash equivalents

 

70,417

88,499

27,652

92,926

67,837

   

Investment securities - available for sale

 

55,002

55,654

56,491

57,401

60,362

   

Loans, net of deferred loan fees

 

857,831

831,772

807,339

757,115

691,011

Allowance for loan losses

 

(11,155)

(10,368)

(9,758)

(8,811)

(8,297)

Loans, net of allowance for loan losses

 

846,676

821,404

797,581

748,304

682,714

   

Bank owned life insurance

 

11,019

10,953

10,890

10,822

10,754

Premises and equipment, net

 

5,296

5,507

5,723

5,951

6,165

Other real estate owned

 

-

-

-

2,094

-

Accrued interest receivable & other assets

 

33,031

31,736

18,568

17,776

17,212

Total assets

 

$1,021,441

$1,013,753

$916,905

$935,274

$845,044

 

 

Liabilities

 

Non-interest-bearing demand deposits

 

$374,407

$376,976

$366,851

$384,731

$313,143

Interest bearing transaction accounts

 

21,076

28,045

25,378

22,793

23,302

Money market and savings accounts

 

283,734

297,941

267,185

249,580

219,869

Time deposits

 

150,952

143,834

137,183

132,439

122,321

Total deposits

 

830,169

846,796

796,597

789,543

678,635

   

FHLB advances

 

50,000

30,000

-

30,000

55,000

Subordinated debt, net

 

11,887

11,866

11,845

11,824

11,803

Other liabilities

 

20,750

20,607

7,947

7,286

5,879

Total liabilities

 

912,806

909,269

816,389

838,653

751,317

   

Shareholders' equity

 

Common stock/additional paid-in capital

 

68,583

68,157

68,012

67,891

67,626

Retained earnings

 

40,408

37,226

34,053

30,581

27,716

Accumulated other comprehensive income (loss)

 

(356)

(899)

(1,549)

(1,851)

(1,615)

Total shareholders' equity

 

108,635

104,484

100,516

96,621

93,727

   

Total liabilities and shareholders' equity

 

$1,021,441

$1,013,753

$916,905

$935,274

$845,044

   

Capital ratios

 

Tier 1 leverage ratio

 

10.69%

10.86%

10.82%

11.07%

11.59%

Common equity tier 1 capital ratio

 

10.28%

10.22%

10.38%

10.39%

10.84%

Tier 1 risk-based capital ratio

 

10.28%

10.22%

10.38%

10.39%

10.84%

Total risk-based capital ratio

 

12.49%

12.41%

12.62%

12.61%

13.20%

   

Book value per common share

 

$17.88

$17.28

$16.84

$16.17

$15.66

Total common shares outstanding

 

6,075,429

6,047,136

5,968,148

5,974,645

5,983,390

   

Other Ratios

 

Non-interest bearing deposits to total deposits

 

45.1%

44.5%

46.1%

48.7%

46.1%

Core deposits to total deposits

 

84.7%

85.8%

85.4%

85.9%

85.1%

Loan to deposit ratio

 

103.3%

98.2%

101.3%

95.9%

101.8%

Allowance for loan losses to total loans

 

1.30%

1.25%

1.21%

1.16%

1.20%

 

Avidbank Holdings, Inc.

Condensed Consolidated Statements of Income

($000, except share and per share amounts) (Unaudited)

 
 

Quarter Ended

Year-to-Date

 

6/30/19

3/31/19

6/30/18

6/30/19

6/30/18

Interest and fees on loans and leases

 

$12,307

$11,830

$9,480

$24,137

$18,376

Interest on investment securities

 

359

374

404

733

859

Other interest income

 

418

283

232

701

381

Total interest income

 

13,084

12,487

10,116

25,571

19,616

   

Deposit interest expense

 

1,234

1,137

641

2,371

1,191

Other interest expense

 

425

307

525

732

890

Total interest expense

 

1,659

1,444

1,166

3,103

2,081

Net interest income

 

11,425

11,043

8,950

22,468

17,535

   

Provision for loan losses

 

787

459

-

1,246

-

Net interest income after provision for loan losses

 

10,638

10,584

8,950

21,222

17,535

   

Service charges, fees and other income

 

555

478

486

1,033

1,124

Income from bank owned life insurance

 

66

63

68

129

135

Gain on sale of assets

 

-

349

17

349

17

Total non-interest income

 

621

890

571

1,511

1,276

   

Compensation and benefit expenses

 

4,605

4,797

3,756

9,402

7,639

Occupancy and equipment expenses

 

863

943

731

1,806

1,797

Other operating expenses

 

1,202

1,327

1,253

2,529

2,556

Total non-interest expense

 

6,670

7,067

5,740

13,737

11,992

   

Income before income taxes

 

4,589

4,407

3,781

8,996

6,819

Provision for income taxes

 

1,406

1,234

1,115

2,640

2,046

Net income

 

$3,183

$3,173

$2,666

$6,356

$4,773

   
   
   

Basic earnings per common share

 

$0.55

$0.55

$0.46

$1.10

$0.83

Diluted earnings per common share

 

$0.54

$0.54

$0.45

$1.08

$0.81

   

Average common shares outstanding

 

5,799,847

5,782,847

5,753,044

5,791,394

5,742,988

Average common fully diluted shares

 

5,907,107

5,888,339

5,866,669

5,897,476

5,858,723

   

Annualized returns:

 

Return on average assets

 

1.25%

1.33%

1.30%

1.29%

1.18%

Return on average common equity

 

11.90%

12.45%

11.48%

12.17%

10.48%

   

Net interest margin

 

4.74%

4.89%

4.56%

4.81%

4.56%

Cost of funds

 

0.75%

0.69%

0.65%

0.72%

0.58%

Efficiency ratio

 

55.37%

59.22%

60.29%

57.29%

63.75%

 

Avidbank Holdings, Inc.

Credit Trends

($000) (Unaudited)

   
 

6/30/19

3/31/19

12/31/18

9/30/18

6/30/18

Allowance for Loan Losses

 

Balance, beginning of quarter

 

$10,368

$9,758

$8,811

$8,297

$8,297

Provision for loan losses, quarterly

 

787

459

947

665

-

Charge-offs, quarterly

 

-

-

-

(151)

-

Recoveries, quarterly

 

-

151

-

-

-

Balance, end of quarter

 

$11,155

$10,368

$9,758

$8,811

$8,297

 

 

 

 

 

   

Nonperforming Assets

 

Loans accounted for on a non-accrual basis

 

$1,640

$1,658

$1,689

$0

$2,245

Loans with principal or interest contractually past due 90 days or more and still accruing interest

 

-

-

-

-

-

Nonperforming loans

 

1,640

1,658

1,689

-

2,245

Other real estate owned

 

-

-

-

2,094

-

Nonperforming assets

 

$1,640

$1,658

$1,689

$2,094

$2,245

Loans restructured and in compliance with modified terms

 

-

-

-

-

-

Nonperforming assets & restructured loans

 

$1,640

$1,658

$1,689

$2,094

$2,245

   
   

Nonperforming Loans by Type:

 

Commercial

 

$1,640

$1,658

$1,689

$0

$2,245

Real Estate Loans

 

-

-

-

-

-

Consumer Loans

 

-

-

-

-

-

Total Nonperforming loans

 

$1,640

$1,658

$1,689

$0

$2,245

 

 

 

 

 

 

   

Asset Quality Ratios

 

Allowance for loan losses (ALLL) to total loans

 

1.30%

1.25%

1.21%

1.16%

1.20%

ALLL to nonperforming loans

 

680.18%

625.22%

577.82%

0.00%

369.54%

Nonperforming assets to total assets

 

0.16%

0.16%

0.18%

0.22%

0.27%

Nonperforming loans to total loans

 

0.19%

0.20%

0.21%

0.00%

0.32%

Net quarterly charge-offs to total loans

 

0.00%

-0.02%

0.00%

0.02%

0.00%

 

Contacts

Steve Leen
Executive Vice President and Chief Financial Officer
408-831-5653
sleen@avidbank.com

Contacts

Steve Leen
Executive Vice President and Chief Financial Officer
408-831-5653
sleen@avidbank.com