Avidbank Holdings, Inc. Announces Net Income of $2,435,000 for the First Quarter of 2020

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 individuals primarily in Northern California, announced unaudited consolidated net income of $2,435,000 for the first quarter of 2020 compared to $3,173,000 for the same period in 2019.

First Quarter 2020 Financial Highlights

• Net interest income was $11,080,000 for the first quarter of 2020, an increase of $37,000 over the $11,043,000 we recorded in the first quarter of 2019. The 0.3% increase over the prior year quarter reflects year over year loan growth offset by declining loan yields and increased interest expense related to growth in our deposit portfolio.
• Net income was $2,435,000 for the first quarter of 2020, compared to $3,173,000 for the first quarter of 2019. Results for the first quarter of 2020 were impacted by increased staffing expenses of $1.1 million, primarily from the hiring of additional personnel across the entire Bank. The first quarter of 2019 benefited from a gain of $306,000 from the sale of collateral on a workout loan.
• Diluted earnings per common share were $0.41 for the first quarter of 2020, compared to $0.54 for the first quarter of 2019.
• Total assets grew by 7% in the first three months of 2020, ending the first quarter at $1.2 billion.
• Total loans net of deferred fees grew by 9% in the first three months of 2020, ending the first quarter at $966 million.
• Total deposits grew by 2% in the first three months of 2020, ending the first quarter at $994 million.
• The Company continues to be well capitalized for regulatory purposes with a Tier 1 Leverage Ratio of 10.64%, a Tier 1 Risk Based Capital and Common Equity Tier 1 Risk Based Capital Ratio of 10.33%, and a Total Risk Based Capital Ratio of 13.24%.

Mark D. Mordell, Chairman and Chief Executive Officer, stated, "The COVID-19 pandemic has created an unprecedented situation for all of us and the economic and social effects will remain uncertain for some time. Avidbank's results in the first quarter were partially affected by the sharp drop in interest rates causing a reduction in the rate of growth of our net interest income. There will undoubtedly be additional effects as time progresses. During this time Avidbank has been and continues to be committed to the health and safety of our employees and partners as well as the safety and soundness of the Bank. We are playing our part in responding to this crisis by providing prudent loans to our business clients who need them as well as making appropriate loan modifications and providing liquidity to our deposit clients. Our business is fully functioning with over 95% of our employees working remotely. We are taking decisive measures to control our costs and are re-evaluating our expansion plans during the uncertainty created by this crisis. Our focus will be employee health and safety along with our fiduciary responsibility to our clients and shareholders.”

Mr. Mordell added, "Net interest income increased to $11.1 million in the first quarter of 2020, a 0.3% increase over the first quarter of 2019, as year over year loan growth was offset by declining loan yields and increased interest expense on our growing deposit portfolio. Loans grew $77 million in the first quarter with advances on existing lines comprising $51 million of the total in the first quarter of 2020 compared to $24 million in the first quarter of 2019. We remain committed to a responsible growth strategy to continue to achieve scale and optimal profitability while managing the effects caused by the COVID-19 pandemic.”

Mr. Mordell continued, “Non-interest expense increased by $1,167,000 to $8,234,000 in the first quarter of 2020, up from $7,067,000 in the first quarter of 2019 primarily due to increased investments in lending and administrative personnel. Our efficiency ratio increased to 69.3% in the first quarter of 2020, up from 59.2% in the first quarter of 2019 as a result of increased staffing and interest expense. Total deposits increased by $21 million in the first quarter of 2020 compared to the fourth quarter of 2019 and increased by $148 million from the first quarter of 2019. The increase in deposits from December 31, 2019 was due to higher demand deposits partially offset by lower money market accounts. The increase in deposits over the first quarter of 2019 was primarily due to an increase in demand deposits, brokered deposits and CDs over $250,000. Our net interest margin dropped to 4.21% in the first quarter of 2020, compared to 4.89% in the first quarter of 2019 primarily due to a drop in loan yields and increased interest expense. Return on assets was 0.88% in the first quarter of 2020 compared to 1.09% in the fourth quarter of 2020 and 1.33% in the first quarter of 2019.”

Results for the quarter ended March 31, 2020

For the three months ended March 31, 2020, net interest income before provision for loan losses was $11.1 million, an increase of $37,000 or 0.3% compared to the first quarter of 2019. The increase was primarily the result of higher average loans outstanding offset by lower loan yields and higher interest expense. Average total loans outstanding for the quarter ended March 31, 2020 were $917 million, compared to $811 million for the same quarter in 2019, an increase of 13%. Average earning assets were $1.1 billion in the first quarter of 2020, a 15% increase over the first quarter of the prior year. Loans made up 87% of average earning assets at the end of the first quarter of 2020 compared to 88% at the end of the first quarter of 2019. Net interest margin was 4.21% for the first quarter of 2020, compared to 4.89% for the first quarter of 2019. A loan loss provision of $273,000 was taken in the first quarter of 2020 compared with a $459,000 loan loss provision taken in the first quarter of 2019.

Non-interest income was $809,000 in the first quarter of 2020, a decrease of $81,000 or 9% compared to the first quarter of 2019. While service charges on accounts increased 24%, they were more than offset by a drop in non-recurring income as the first quarter of 2019 included a $306,000 gain from the sale of collateral on a workout loan.

Non-interest expense increased by $1,167,000 in the first quarter of 2020 to $8,234,000 compared to $7,067,000 for the first quarter of 2019. This increase was primarily due to higher compensation costs related to increased staffing. The Company's full- time equivalent employees at March 31, 2020 and 2019 were 116 and 97, respectively. The Company's efficiency ratio increased from 59.2% in the first quarter of 2019 to 69.3% in the first quarter of 2020 due to increased expenses from the growth in staff and higher interest expense from our growing deposit portfolio.

The effective tax rate was 28.0% in the first quarter of 2020 compared to 28.0% for the same period in 2019.

Balance Sheet

Total assets were $1.2 billion as of March 31, 2020, compared to $1.1 billion at December 31, 2019 and $1.0 billion on the same day one year ago. The increase in total assets of $74 million, or 7%, from December 31, 2019 was primarily due to increased loans. The Company reported loans net of deferred fees at March 31, 2020 of $966 million, which represented an increase of $77 million, or 9%, from $889 million at December 31, 2019, and an increase of $134 million, or 16%, over $832 million at March 31, 2019. The increase in total loans from December 31, 2019 was primarily a result of increases in Specialty Finance, Commercial Real Estate and Venture Lending loans partially offset by increased Construction loans. The increase in loans from March 31, 2019 was due to higher Commercial Real Estate, Specialty Finance, Venture Lending and C&I loans.

"We had $3.9 million in non-accrual loans on March 31, 2020, compared to a balance of $3.8 million at the end of the prior year. The non-accrual amount primarily consists of two loans secured by real estate," observed Mr. Mordell.

The Company’s total deposits were $994 million as of March 31, 2020, which represented an increase of $21 million, or 2%, compared to $973 million at December 31, 2019 and an increase of $147 million, or 17%, compared to $847 million at March 31, 2019. The increase in deposits from December 31, 2019 was due to higher demand deposits partially offset by lower money market accounts. The increase from March 31, 2019 was primarily due to an increase in demand deposits, brokered deposits and CDs over $250,000. The Company had $50 million of FHLB advances outstanding as of March 31, 2020 compared to none at December 31, 2019 and $30 million as of March 31, 2019.

Demand and interest bearing transaction deposits represented 51% of total deposits at March 31, 2020, compared to 47% at December 31, 2019 and 48% for the same period one year ago. Core deposits, which include transaction deposits, money market accounts and CDs below $250,000, represented 82% of total deposits at March 31, 2020, compared to 82% at December 31, 2019 and 86% at March 31, 2019. The Company’s loan to deposit ratio was 97% at March 31, 2020 compared to 91% at December 31, 2019 and 98% at March 31, 2019.

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	3/31/20	12/31/19	9/30/19	6/30/19	3/31/19
Cash and due from banks	$17,042	$13,068	$24,649	$12,887	$12,204
Due from Federal Reserve Bank	141,405	139,780	90,180	57,530	76,295
Total cash and cash equivalents	158,447	152,848	114,829	70,417	88,499
Investment securities - available for sale	44,983	52,014	53,571	55,002	55,654
Loans, net of deferred loan fees	965,684	888,780	909,312	857,831	831,772
Allowance for loan losses	(11,540)	(11,267)	(11,087)	(11,155)	(10,368)
Loans, net of allowance for loan losses	954,144	877,513	898,225	846,676	821,404
Bank owned life insurance	11,222	11,156	11,088	11,019	10,953
Premises and equipment, net	5,522	5,542	5,238	5,296	5,507
Other real estate owned	-	-	-	-	-
Accrued interest receivable & other assets	30,812	32,484	31,751	33,031	31,736
Total assets	$1,205,130	$1,131,557	$1,114,702	$1,021,441	$1,013,753
Liabilities
Non-interest-bearing demand deposits	$477,404	$431,638	$401,360	$374,407	$376,976
Interest bearing transaction accounts	25,104	21,465	20,114	21,076	28,045
Money market and savings accounts	292,051	320,683	287,082	283,734	297,941
Time deposits	199,841	199,357	179,645	150,952	143,834
Total deposits	994,400	973,143	888,201	830,169	846,796
FHLB advances	50,000	-	80,000	50,000	30,000
Subordinated debt, net	21,509	21,570	11,908	11,887	11,866
Other liabilities	19,806	20,449	21,897	20,750	20,607
Total liabilities	1,085,715	1,015,162	1,002,006	912,806	909,269
Shareholders' equity
Common stock/additional paid-in capital	69,444	69,377	68,851	68,583	68,157
Retained earnings	49,345	46,910	43,861	40,408	37,226
Accumulated other comprehensive income (loss)	626	108	(16)	(356)	(899)
Total shareholders' equity	119,415	116,395	112,696	108,635	104,484
Total liabilities and shareholders' equity	$1,205,130	$1,131,557	$1,114,702	$1,021,441	$1,013,753
Capital ratios
Tier 1 leverage ratio	10.64%	10.51%	10.84%	10.69%	10.86%
Common equity tier 1 capital ratio	10.33%	10.72%	10.16%	10.28%	10.22%
Tier 1 risk-based capital ratio	10.33%	10.72%	10.16%	10.28%	10.22%
Total risk-based capital ratio	13.24%	13.78%	12.26%	12.49%	12.41%
Book value per common share	$19.46	$19.12	$18.54	$17.88	$17.28
Total common shares outstanding	6,136,189	6,087,160	6,079,160	6,075,429	6,047,136
Other Ratios
Non-interest bearing deposits to total deposits	48.0%	44.4%	45.2%	45.1%	44.5%
Core deposits to total deposits	82.2%	82.1%	82.5%	84.7%	85.8%
Loan to deposit ratio	97.1%	91.3%	102.4%	103.3%	98.2%
Allowance for loan losses to total loans	1.20%	1.27%	1.22%	1.30%	1.25%

Avidbank Holdings, Inc.
Condensed Consolidated Statements of Income
($000, except share and per share amounts) (Unaudited)
	Quarter Ended
	3/31/20	12/31/19	3/31/19
Interest and fees on loans and leases	$12,175	$12,577	$11,830
Interest on investment securities	306	325	374
Other interest income	295	444	283
Total interest income	12,776	13,346	12,487
Deposit interest expense	1,385	1,368	1,137
Other interest expense	311	908	307
Total interest expense	1,696	2,276	1,444
Net interest income	11,080	11,070	11,043
Provision for loan losses	273	142	459
Net interest income after provision for loan losses	10,807	10,928	10,584
Service charges, fees and other income	743	486	478
Income from bank owned life insurance	66	68	63
Gain on sale of assets	-	-	349
Total non-interest income	809	554	890
Compensation and benefit expenses	5,876	5,384	4,797
Occupancy and equipment expenses	942	770	943
Other operating expenses	1,416	1,285	1,327
Total non-interest expense	8,234	7,439	7,067
Income before income taxes	3,382	4,043	4,407
Provision for income taxes	947	994	1,234
Net income	$2,435	$3,049	$3,173
Basic earnings per common share	$0.42	$0.52	$0.55
Diluted earnings per common share	$0.41	$0.51	$0.54
Average common shares outstanding	5,836,045	5,814,852	5,782,847
Average common fully diluted shares	5,953,208	5,941,521	5,888,339
Annualized returns:
Return on average assets	0.88%	1.09%	1.33%
Return on average common equity	8.27%	10.54%	12.45%
Net interest margin	4.21%	4.17%	4.89%
Cost of funds	0.70%	0.93%	0.69%
Efficiency ratio	69.26%	64.00%	59.22%

Avidbank Holdings, Inc.
Credit Trends
($000) (Unaudited)
	3/31/20	12/31/19	9/30/19	6/30/19	3/31/19
Allowance for Loan Losses
Balance, beginning of quarter	$11,267	$11,087	$11,155	$10,368	$9,758
Provision for loan losses, quarterly	273	142	39	787	459
Charge-offs, quarterly	-	-	(107)	-	-
Recoveries, quarterly	-	39	-	-	151
Balance, end of quarter	$11,540	$11,267	$11,087	$11,155	$10,368
Nonperforming Assets
Loans accounted for on a non-accrual basis	$3,902	$3,817	$3,830	$1,640	$1,658
Loans with principal or interest contractually past due 90 days or more and still accruing interest	-	-	-	-	-
Nonperforming loans	3,902	3,817	3,830	1,640	1,658
Other real estate owned	-	-	-	-	-
Nonperforming assets	$3,902	$3,817	$3,830	$1,640	$1,658
Loans restructured and in compliance with modified terms	-	-	-	-	-
Nonperforming assets & restructured loans	$3,902	$3,817	$3,830	$1,640	$1,658
Nonperforming Loans by Type:
Commercial	$1,665	$1,580	$1,590	$1,640	$1,658
Commercial Real Estate Loans	2,237	2,237	2,240	-	-
Residential Real Estate Loans	-	-	-	-	-
Construction Loans	-	-	-	-	-
Consumer Loans	-	-	-	-	-
Total Nonperforming loans	$3,902	$3,817	$3,830	$1,640	$1,658
Asset Quality Ratios
Allowance for loan losses (ALLL) to total loans	1.20%	1.27%	1.22%	1.30%	1.25%
ALLL to nonperforming loans	295.78%	295.21%	289.48%	680.18%	625.22%
Nonperforming assets to total assets	0.32%	0.34%	0.34%	0.16%	0.16%
Nonperforming loans to total loans	0.40%	0.43%	0.42%	0.19%	0.20%
Net quarterly charge-offs to total loans	0.00%	0.00%	0.01%	0.00%	-0.02%