Press Release

Avidbank Holdings, Inc. Announces Net Income of $1,635,000 for the Third Quarter of 2016

Company Release - 10/21/2016 6:00 AM ET

PALO ALTO, Calif.--(BUSINESS WIRE)-- Avidbank Holdings, Inc. ("the Company") (OTCBB: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 $1,635,000 for the third quarter of 2016, a 29% increase compared to $1,269,000 for the same period in 2015.

Year-to-Date and Third Quarter 2016 Financial Highlights

  • Net income was $6,142,000 in the first nine months of 2016, compared to $2,037,000 in the first nine months of 2015. Results for the first nine months of 2016 included $1,473,000 of income from benefits on bank owned life insurance and no loan loss provision. Results for the first nine months of 2015 included a provision for loan losses of $3,047,000. Net interest income was $17,822,000 in the first nine months of 2016, an increase of $1,388,000 over the figure recorded in the first nine months of 2015.
  • Diluted earnings per common share were $1.33 in the first nine months of 2016, compared to $0.45 in the first nine months of 2015.
  • Net interest income was $5,980,000 for the third quarter of 2016, an increase of $192,000 over the $5,788,000 we achieved in the third quarter of 2015. The 3% increase over the prior year quarter reflects the improved earnings potential resulting from our continued loan growth in 2016 partially offset by subordinated debt borrowing costs.
  • Net income was $1,635,000 for the third quarter of 2016, compared to $1,269,000 for the third quarter of 2015. Results for the third quarter of 2016 included no loan loss provision compared to a $259,000 loan loss provision in the third quarter of 2015.
  • Diluted earnings per common share were $0.35 for the third quarter of 2016, compared to $0.28 for the third quarter of 2015.
  • Total assets grew by 13% in the first nine months of 2016, ending the third quarter at $677 million.
  • Total loans outstanding grew by 11% in the first nine months of 2016, ending the third quarter at $448 million.
  • Total deposits grew by 13% in the first nine months of 2016, ending the third quarter at $599 million.
  • The Company continues to be well capitalized with a Tier 1 Leverage Ratio of 9.4%, a Tier 1 Risk Based Capital and Common Equity Tier 1 Risk Based Capital Ratio of 10.1%, and a Total Risk Based Capital Ratio of 12.9%.

Mark D. Mordell, Chairman and Chief Executive Officer, stated, "Our strong third quarter performance is the result of our continued focus on growing our loan and deposit portfolios with quality, relationship based clients. Interest income increased to $6.5 million, a 7% increase over the third quarter of 2015. This revenue growth was accomplished with non-interest expenses of $3.6 million for the third quarter of 2016, a decrease of 7% over the immediately preceding quarter and 6% over the third quarter of 2015.”

"With this growth we are pleased that our non-performing loans declined to the historically low level of 0.09% of total loans compared to 0.57% one year ago. Cautious and realistic underwriting standards remain our priority as real estate and business valuations in the Bay Area are at or above historically high levels. Careful management of our expenses has reduced our efficiency ratio excluding the impact of death benefits from bank owned life insurance policies to 59.3% for the first nine months of 2016 compared to 63.8% for the same period of the prior year. The increased efficiencies from our growth and managed expenses allow us to continue to invest in key lending personnel as well as needed infrastructure as we expand our business and market franchise. The Bank's total deposits increased by $33 million in the third quarter of 2016 and by $108 million from the same quarter in 2015 as we saw dramatic increases in demand deposits from both new and existing clients. As a result, our core deposits increased to 92.2% of total deposits in September 2016 from 89.9% in June 2016. Our net interest margin was 3.78% for the quarter ended September 2016 compared to 4.41% for the immediately preceding quarter due to changes in the mix of earning assets and the absence of non-recurring interest income received from the payoff of non-performing loans in the second quarter of 2016."

Results for the nine months ended September 30, 2016

Net interest income before provision for loan losses was $17.8 million in the first nine months of 2016, an increase of $1.4 million or 8% over the same period from the prior year. Higher outstanding loan balances were the primary reason for the increase. Average earning assets were $590 million in the first nine months of 2016, a 20% increase over the prior year. Net interest margin was 4.02% for 2016 year to date compared to 4.46% for the same period in 2015. The decrease in net interest margin was primarily caused by a decline in loan yields due to the current competitive interest rate environment and by increased subordinated debt borrowing costs. No loan loss provision was recorded in the first nine months of 2016 and a $3,047,000 provision was taken in the comparable period of 2015. We had no charge-offs and recoveries of $37,000 in the first nine months of 2016 compared to charge-offs of $2,554,000 and recoveries of $27,000 in the same period of 2015.

Non-interest income was $2,679,000 in the first nine months of 2016, an increase of $1,442,000 or 117% over 2015 which was directly attributable to $1,473,000 in life insurance benefits received in the second quarter of 2016.

Non-interest expense of $11.3 million remained flat in the first nine months of 2016 compared to the first nine months of 2015 as investments in loan production personnel were offset by increased deferred costs on new loan originations and loan renewals.

Results for the quarter ended September 30, 2016

For the three months ended September 30, 2016, net interest income before provision for loan losses was $6 million, an increase of $0.2 million or 3% compared to the third quarter of 2015. The increase was primarily the result of higher average loans outstanding partially offset by an increase in interest expense from subordinated debt borrowing costs. Average gross loans outstanding for the quarter ended September 30, 2016 were $436.7 million, compared to $415.7 million for the same quarter in 2015, an increase of $21 million or 5%. Average earning assets were $630 million in the third quarter of 2016, a 21% increase over the third quarter of the prior year. Loans made up 69% of average earning assets at the end of the third quarter of 2016 compared to 80% at the end of the third quarter of 2015. Net interest margin was 3.78% for the third quarter of 2016, compared to 4.40% for the third quarter of 2015. No loan loss provision was taken in the third quarter of 2016 and a loan loss provision of $259,000 was taken in the third quarter of 2015.

Non-interest income was $362,000 in the third quarter of 2016, a decrease of $5,000 or 1% compared to the third quarter of 2015. The decrease was due to an FHLB special dividend in 2015 partially offset by income from an SBIC fund investment. There were losses on sales of securities in the third quarter of 2016 and 2015 of $4,000 and $33,000, respectively.

Non-interest expense declined by $215,000 in the third quarter of 2016 to $3,551,000 compared to $3,766,000 for the third quarter of 2015. This decrease was primarily due to increased deferrals of loan origination costs and the recovery of expenses associated with the payoff of non-performing loans, and was partially offset by hiring additional loan production personnel. The Bank's full time equivalent employees at September 30, 2016 and 2015 were 68 and 63, respectively. The Bank's efficiency ratio improved from 61% in the third quarter of 2015 to 56% in the third quarter of 2016.

Balance Sheet

Total assets increased to $677 million as of September 30, 2016, compared to $641 million at June 30, 2016 and $577 million on the same date one year ago. The increase in total assets of $36 million, or 6%, from June 30, 2016 was primarily due to our increase in demand deposits, which funded the increases in our loans, investments and federal funds sold in the third quarter of 2016. The Company reported gross loans outstanding at September 30, 2016 of $448 million, which represented an increase of $29 million, or 7%, from $419 million at June 30, 2016, and an increase of $23 million, or 5%, over $425 million at September 30, 2015. The increase in total gross loans from June 30, 2016 was primarily attributable to increased multi-family and Corporate Finance loans. The increase in loans from September 30, 2015 was also attributable to growth in multi-family and Corporate Finance loans.

Non-accrual loans totaled $0.4 million or 0.09% of total loans on September 30, 2016 compared to $2.4 million or 0.57% of total loans at the end of the third quarter of the prior year. "Credit quality remains the primary consideration in our lending decisions and our non-performing loans category currently represents a single loan," observed Mr. Mordell.

The Company’s total deposits were $599 million as of September 30, 2016, which represented an increase of $33 million, or 6%, compared to $566 million at June 30, 2016 and an increase of $108 million, or 22%, compared to $491 million at September 30, 2015. The increases in deposits from June 30, 2016 and from September 30, 2015 were both primarily attributable to increases in demand deposits.

Demand and transaction deposits represented 53.1% of total deposits at September 30, 2016, compared to 48.9% at June 30, 2016 and 39.4% for the same period one year ago. Core deposits represented 92.2% of total deposits at September 30, 2016, compared to 89.9% at June 30, 2016 and 89.4% at September 30, 2015.

About Avidbank

Avidbank Holdings, Inc., headquartered in Palo Alto, California, offers innovative financial solutions and services. We specialize in the following markets: commercial & industrial, corporate finance, asset-based lending, real estate construction and commercial real estate lending, and real estate bridge financing. Avidbank advances the success of our clients by providing them with financial opportunities and serving them as we wish to be served – with mutual effort, ingenuity and trust – creating long-term banking relationships.

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. These statements are based on current expectations, estimates and projections about Avidbank's business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including those described above and the following: Avidbank's timely implementation of new products and services, technological changes, changes in consumer spending and savings habits and other risks discussed from time to time in Avidbank's reports and filings with banking regulatory agencies. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward- looking statements speak only as of the date on which they are made, and Avidbank does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.

         

Avidbank Holdings, Inc.

Consolidated Balance Sheets

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

Assets

9/30/16

6/30/16

3/31/16

12/31/15

9/30/15

Cash and due from banks $ 15,363 $ 23,797 $ 27,125 $ 21,277 $ 21,674
Fed funds sold   92,950       80,775       73,885       89,045       36,220  
Total cash and cash equivalents 108,313 104,572 101,010 110,322 57,894
 
Investment securities - available for sale 100,350 94,853 68,541 69,766 71,723
 
Loans, net of deferred loan fees 447,852 418,809 422,855 402,658 425,224
Allowance for loan losses   (5,431 )     (5,431 )     (5,406 )     (5,394 )     (5,394 )
Loans, net of allowance for loan losses 442,421 413,378 417,449 397,264 419,830
 
Bank owned life insurance 10,261 10,186 12,380 12,293 12,204
Premises and equipment, net 640 704 795 862 901
Accrued interest receivable & other assets   14,895       17,521       13,169       11,129       14,197  
Total assets $ 676,880     $ 641,214     $ 613,344     $ 601,636     $ 576,749  
 

Liabilities

Non-interest-bearing demand deposits $ 298,275 $ 258,978 $ 199,630 $ 207,296 $ 173,600
Interest bearing transaction accounts 20,034 17,717 20,391 22,068 19,771
Money market and savings accounts 219,203 216,564 229,031 227,089 230,865
Time deposits   61,793       72,917       93,273       75,291       67,054  
Total deposits 599,305 566,176 542,325 531,744 491,290
 
FHLB advances - - - - 25,000
Subordinated debt 12,000 12,000 12,000 - -
Other liabilities   2,538       2,026       1,912       2,267       6,192  
Total liabilities 613,843 580,202 556,237 546,011 522,482
 

Shareholders' equity

Common stock/additional paid-in capital 46,539 46,082 45,610 45,950 47,032
Retained earnings 16,036 14,401 11,102 9,724 6,981
Accumulated other comprehensive income (loss)   462       529       395       (49 )     254  
Total shareholders' equity 63,037 61,012 57,107 55,625 54,267
 
Total liabilities and shareholders' equity $ 676,880     $ 641,214     $ 613,344     $ 601,636     $ 576,749  
 

Capital ratios

Tier 1 leverage ratio 9.42 % 9.83 % 9.30 % 9.41 % 9.52 %
Tier 1 and Common Equity Tier 1 RBC ratio 10.12 % 10.37 % 9.91 % 10.21 % 9.57 %
Total risk-based capital (RBC) ratio 12.94 % 13.36 % 12.94 % 13.40 % 10.60 %
 
Book value per common share $ 13.46 $ 13.27 $ 12.59 $ 12.49 $ 12.20
Total common shares outstanding 4,682,851 4,596,200 4,537,577 4,452,853 4,448,898
 

Other Ratios

Non-interest bearing/total deposits 49.8 % 45.7 % 36.8 % 39.0 % 35.3 %
Loan to deposit ratio 74.7 % 74.0 % 78.0 % 75.7 % 86.6 %
Allowance for loan losses/total loans 1.21 % 1.30 % 1.28 % 1.34 % 1.27 %
 
         
Avidbank Holdings, Inc.
Condensed Consolidated Statements of Income
($000, except share and per share amounts) (Unaudited)
 
Quarter Ended Year-to-Date

9/30/16

6/30/16

9/30/15

9/30/16

9/30/15

Interest and fees on loans and leases $ 5,856 $ 6,260 $ 5,658 $ 17,635 $ 15,799
Interest on investment securities 495 420 380 1,348 1,304
Other interest income   121       86       19       314       46  
Total interest income 6,472 6,766 6,057 19,297 17,149
 
Deposit interest expense 279 277 250 835 641
Other interest expense   213       217       19       641       74  
Total interest expense   492       495       269       1,476       715  
Net interest income 5,980 6,271 5,788 17,822 16,434
 
Provision for loan losses   -       -       259       -       3,047  

Net interest income after provision for loan losses

5,980 6,271 5,529 17,822 13,387
 
Service charges, fees and other income 291 381 312 970 1,011
Income from bank owned life insurance 75 1,551 88 1,713 259
Gain (Loss) on sale of investment securities   (4 )     -       (33 )     (4 )     (33 )
Total non-interest income 362 1,932 367 2,679 1,237
 
Compensation and benefit expenses 2,145 2,274 2,292 7,034 7,086
Occupancy and equipment expenses 525 515 614 1,606 1,853
Other operating expenses   881       1,015       860       2,648       2,338  
Total non-interest expense 3,551 3,804 3,766 11,288 11,277
 
Income before income taxes 2,791 4,399 2,130 9,213 3,347
Provision for income taxes   1,156       1,100       861       3,071       1,310  
Net income $ 1,635     $ 3,299     $ 1,269     $ 6,142     $ 2,037  
 
 
 
Basic earnings per common share $ 0.36 $ 0.73 $ 0.29 $ 1.37 $ 0.46
Diluted earnings per common share $ 0.35 $ 0.71 $ 0.28 $ 1.33 $ 0.45
 
Average common shares outstanding 4,586,849 4,550,066 4,446,326 4,496,101 4,412,588
Average common fully diluted shares 4,694,744 4,636,192 4,553,640 4,635,011 4,514,388
 
Annualized returns:
Return on average assets 0.98 % 2.14 % 0.89 % 1.29 % 0.50 %
Return on average common equity 10.50 % 22.65 % 9.44 % 13.89 % 5.12 %
 
Net interest margin 3.78 % 4.41 % 4.40 % 4.02 % 4.46 %
Cost of funds 0.33 % 0.36 % 0.21 % 0.35 % 0.20 %
Efficiency ratio 55.99 % 46.37 % 61.19 % 55.06 % 63.82 %
 
         
Avidbank Holdings, Inc.
Credit Trends
($000) (Unaudited)
 

9/30/16

6/30/16

3/31/16

12/31/15

9/30/15

Allowance for Loan Losses

Balance, beginning of quarter $ 5,431 $ 5,406 $ 5,394 $ 5,394 $ 5,122
Provision for loan losses, quarterly - - - - 259
Charge-offs, quarterly - - - - -
Recoveries, quarterly   -       25       12       -       13  
Balance, end of quarter $ 5,431     $ 5,431     $ 5,406     $ 5,394     $ 5,394  
 
 

Nonperforming Assets

Loans accounted for on a non-accrual basis

$ 392 $ 392 $ 1,898 $ 1,899 $ 2,409

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

  -       -       -       -       -  
Nonperforming loans 392 392 1,898 1,899 2,409
Other real estate owned   -       -       -       -       -  
Nonperforming assets $ 392     $ 392     $ 1,898     $ 1,899     $ 2,409  

Loans restructured and in compliance with modified terms

  457       462       466       470       474  
Nonperforming assets & restructured loans $ 849     $ 854     $ 2,364     $ 2,369     $ 2,883  
 
 
Nonperforming Loans by Type:
Commercial $ 392 $ 392 $ 1,898 $ 1,899 $ 2,409
Real Estate Loans   -       -       -       -       -  
Total Nonperforming loans $ 392     $ 392     $ 1,898     $ 1,899     $ 2,409  
 
 

Asset Quality Ratios

Allowance for loan losses / gross loans 1.21 % 1.30 % 1.28 % 1.34 % 1.27 %
Allowance for loan losses / nonperforming loans 1385.46 % 1385.46 % 284.83 % 284.04 % 223.91 %
Nonperforming assets / total assets 0.06 % 0.06 % 0.31 % 0.32 % 0.42 %
Nonperforming loans / gross loans 0.09 % 0.09 % 0.45 % 0.47 % 0.57 %
Net quarterly charge-offs / gross loans 0.00 % -0.01 % 0.00 % 0.00 % 0.00 %
 

Avidbank Holdings, Inc.
Steve Leen, 650-843-2204
Executive Vice President and Chief Financial Officer
sleen@avidbank.com
avidbank.com

Source: Avidbank Holdings, Inc.