Press Release

Avidbank Holdings, Inc. Announces Net Income of $1,660,000 for the Third Quarter of 2017

Company Release - 10/19/2017 6:00 AM ET

PALO ALTO, 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 $1,660,000 for the third quarter of 2017 compared to $1,635,000 for the same period in 2016.

Year-to-Date and Third Quarter 2017 Financial Highlights

  • Net income was $4,645,000 for the first nine months of 2017, compared to $6,142,000 for the same period in 2016. Net income in 2016 excluding benefits from life insurance proceeds of $1,472,000 was $4,670,000. Net income in the first nine months of 2017 included a loan loss provision of $1,880,000 while no loan loss provision was recognized in the first nine months of 2016. Net interest income was $22,348,000 in the first nine months of 2017, an increase of $4,526,000 or 25% over the figure recorded in the first nine months of 2016.
  • Diluted earnings per common share were $0.92 in the first nine months of 2017, compared to $1.33 in the first nine months of 2016. Weighted average common shares outstanding were 4,945,170 and 4,496,101 for the nine months ended September 30, 2017 and 2016, respectively. The increase was the result of a $20,000,000 capital raise completed during the third quarter of 2017.
  • Net interest income was $7,773,000 for the third quarter of 2017, an increase of $1,793,000 over the $5,980,000 we achieved in the third quarter of 2016. The 30% increase over the prior year quarter reflects the impact of our loan growth over the past twelve months.
  • Net income was $1,660,000 for the third quarter of 2017, compared to $1,635,000 for the third quarter of 2016. Results for the third quarter of 2017 included a $74,000 loan loss provision compared to no loan loss provision in the third quarter of 2016.
  • Diluted earnings per common share were $0.29 for the third quarter of 2017, compared to $0.35 for the third quarter of 2016. Weighted average common shares outstanding were 5,552,977 and 4,586,849 for the three months ended September 30, 2017 and 2016, respectively. The increase was the result of a $20,000,000 capital raise completed during the third quarter of 2017.
  • Total assets grew by 18% in the first nine months of 2017, ending the third quarter at $764 million.
  • Total loans net of deferred fees grew by 12% in the first nine months of 2017, ending the third quarter at $579 million.
  • Total deposits grew by 16% in the first nine months of 2017, ending the third quarter at $660 million.
  • The Company continues to be well capitalized with a Tier 1 Leverage Ratio of 11.9%, a Tier 1 Risk Based Capital and Common Equity Tier 1 Risk Based Capital Ratio of 11.6%, and a Total Risk Based Capital Ratio of 14.3%.

Mark D. Mordell, Chairman and Chief Executive Officer, stated, "Net interest income increased to $7.8 million in the third quarter of 2017, a 30% increase over the third quarter of 2016 due to our strong loan growth over the past twelve months, despite declines caused by anticipated construction loan payoffs. As a result of the significant loan growth over the past twelve months, we have increased our loan loss reserve to $8.2 million as our portfolio seasons. The downgrading of a single relationship due to weather-related construction delays has caused our non-performing loans to total loans ratio to increase to 0.96% at the end of the third quarter of 2017 compared to 0.09% at the end of the third quarter of 2016. We are pleased with the strengthening of our capital ratios as a result of our $20 million capital raise completed in July 2017. We are well positioned to continue the franchise growth strategy to scale our balance sheet and infrastructure to serve our markets.”

Mr. Mordell continued, "We have added business development and support staff to accelerate and manage our growth. Non-interest expenses increased by $1.68 million to $5.2 million in the third quarter of 2017 from $3.6 million in the third quarter of 2016 primarily due to these increased investments in staffing. Our efficiency ratio increased to 63.5% in the third quarter of 2017 from 56.0% in the third quarter 2016 due to increased staffing expense. Total deposits increased by $41 million in the third quarter of 2017 and increased by $60 million from the same quarter in 2016. The growth in deposits for the third quarter of 2017 was due to an increase in demand deposits and money market accounts. Our net interest margin grew to 4.32% for the first nine months of 2017 compared to 4.02% for the same period of the prior year due to changes in the mix of earning assets in favor of higher yielding loans."

Results for the nine months ended September 30, 2017

Net interest income before provision for loan losses was $22.3 million in the first nine months of 2017, an increase of $4.5 million or 25% over the same period of the prior year. Higher outstanding average loan balances were the primary reason for the increase. Average total loans were $563 million for 2017 compared to $425 million for 2016. Average earning assets were $692 million in the first nine months of 2017, a 17% increase over the prior year. Net interest margin was 4.32% in the first nine months of 2017 compared to 4.02% for the same period in 2016. The increase in net interest margin was primarily caused by an increase of higher yielding loans in the mix of earning assets. A loan loss provision of $1,880,000 was recorded in the first nine months of 2017 and no provision was taken in the same period of 2016. We had no charge-offs and recoveries of $68,000 in the first nine months of 2017 compared to no charge-offs and recoveries of $37,000 for the same period in 2016.

Non-interest income was $1,412,000 in the first nine months of 2017, an increase of $205,000 or 17% over 2016 when the $1,472,000 in life insurance proceeds recognized in the second quarter of 2016 is excluded. Non-interest income was higher in 2017 as a result of increased service charges and other investment income.

Non-interest expense increased by $3.1 million to $14.4 million in the first nine months of 2017 compared to $11.3 million in 2016 due primarily to increased investments in loan production and support personnel.

The effective tax rate was 38.2% in the first nine months of 2017 compared to 33.3% for the same period in 2016. The unusually low effective tax rate in 2016 was due to non-taxable proceeds from life insurance benefits.

Results for the quarter ended September 30, 2017

For the three months ended September 30, 2017, net interest income before provision for loan losses was $7.8 million, an increase of $1.8 million or 30% compared to the third quarter of 2016. The increase was primarily the result of higher average loans outstanding. Average total loans outstanding for the quarter ended September 30, 2017 were $578.9 million, compared to $435.5 million for the same quarter in 2016, an increase of $143.4 million or 33%. Average earning assets were $712.8 million in the third quarter of 2017, a 13% increase over the third quarter of the prior year. Loans made up 81% of average earning assets at the end of the third quarter of 2017 compared to 69% at the end of the third quarter of 2016. Net interest margin was 4.33% for the third quarter of 2017, compared to 3.78% for the third quarter of 2016. A loan loss provision of $74,000 was taken in the third quarter of 2017 and no loan loss provision was taken in the third quarter of 2016.

Non-interest income was $475,000 in the third quarter of 2017, an increase of $113,000 or 31% compared to the third quarter of 2016. The increase was primarily due to increased service charges and other investment income in the third quarter of 2017.

Non-interest expense increased by $1,683,000 in the third quarter of 2017 to $5,234,000 compared to $3,551,000 for the third quarter of 2016. This increase was primarily due to higher compensation costs related to increased staffing. The Bank's full time equivalent employees at September 30, 2017 and 2016 were 84 and 68, respectively. The Bank's efficiency ratio increased from 56.0% in the third quarter of 2016 to 63.5% in the third quarter of 2017 due to increased staffing expense.

Balance Sheet

Total assets increased to $763.8 million as of September 30, 2017, compared to $731.1 million at June 30, 2017 and $676.9 million on the same day one year ago. The increase in total assets of $32.7 million, or 4%, from June 30, 2017 was primarily due to growth in Fed Funds resulting from increased demand deposits in the third quarter of 2017. The Company reported total loans at September 30, 2017 of $578.5 million, which represented a decrease of $5.8 million, or 1%, from $584.3 million at June 30, 2017, and an increase of $130.6 million, or 29%, over $447.9 million at September 30, 2016. The decrease in total loans from June 30, 2017 was primarily attributable to construction loan payoffs partially offset by increased commercial loans. The increase in loans from September 30, 2016 was primarily attributable to growth in commercial real estate, construction and commercial loans.

“We had $5.5 million in non-accrual loans comprising 0.96% of total loans from one relationship on September 30, 2017 compared to $0.4 million non-accrual loans comprising 0.09% of total loans at the end of the third quarter of the prior year,” observed Mr. Mordell.

The Company’s total deposits were $659.7 million as of September 30, 2017, which represented an increase of $40.8 million, or 7%, compared to $618.9 million at June 30, 2017 and an increase of $60.4 million, or 10%, compared to $599.3 million at September 30, 2016. The increase in deposits from June 30, 2017 was due to an increase in demand deposits and money market accounts. The increase from September 30, 2016 was caused by an increase in brokered deposits, CDs greater than $100,000 and money market accounts. The Company had no Federal Home Loan Bank advances outstanding as of September 30, 2017.

Demand and interest bearing transaction deposits represented 47% of total deposits at September 30, 2017, compared to 46% at June 30, 2017 and 53% for the same period one year ago. Core deposits represented 87% of total deposits at September 30, 2017, compared to 86% at June 30, 2017 and 92% at September 30, 2016. The Company’s loan to deposit ratio was 88% at September 30, 2017 compared to 91% at December 31, 2016 and 75% at September 30, 2016.

About Avidbank

Avidbank Holdings, Inc. (OTC Pink: AVBH), headquartered in Palo Alto, California, offers innovative financial solutions and services. We specialize in commercial & industrial lending, technology and asset-based lending, specialty 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 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

 

9/30/17

 

6/30/17

 

3/31/17

 

12/31/16

 

9/30/16

Cash and due from banks $11,068 $10,845 $17,431 $12,458 $15,363
Fed funds sold 74,970   32,510   21,265   7,841   92,950  
Total cash and cash equivalents 86,038 43,355 38,696 20,299 108,313
 
Investment securities - available for sale 76,742 82,986 86,905 89,686 100,350
 
Loans, net of deferred loan fees 578,524 584,342 556,969 514,769 447,852
Allowance for loan losses (8,191)   (8,076)   (6,991)   (6,244)   (5,431)  
Loans, net of allowance for loan losses 570,333 576,266 549,978 508,525 442,421
 
Bank owned life insurance 10,551 10,479 10,406 10,334 10,261
Premises and equipment, net 3,387 1,155 668 600 640
Accrued interest receivable & other assets 16,756   16,818   15,205   17,211   14,895  
Total assets $763,807   $731,059   $701,858   $646,655   $676,880  
 

Liabilities

Non-interest-bearing demand deposits $295,862 $264,514 $261,172 $241,362 $298,275
Interest bearing transaction accounts 16,988 17,642 20,786 19,420 20,034
Money market and savings accounts 229,143 220,474 207,106 215,656 219,203
Time deposits 117,670   116,282   103,616   91,560   61,793  
Total deposits 659,663 618,912 592,680 567,998 599,305
 
FHLB advances - 30,000 30,000 - -
Subordinated debt, net 11,740 11,719 11,698 11,677 11,655
Other liabilities 4,421   3,572   2,425   3,471   2,883  
Total liabilities 675,824 664,203 636,803 583,146 613,843
 

Shareholders' equity

Common stock/additional paid-in capital 66,704 47,421 47,259 47,289 46,539
Retained earnings 21,802 20,142 18,711 17,157 16,036
Accumulated other comprehensive income (loss) (523)   (707)   (915)   (937)   462  
Total shareholders' equity 87,983 66,856 65,055 63,509 63,037
 
Total liabilities and shareholders' equity $763,807   $731,059   $701,858   $646,655   $676,880  
 

Capital ratios

Tier 1 leverage ratio 11.87% 9.28% 9.52% 9.96% 9.42%
Tier 1 and Common Equity Tier 1 RBC ratio 11.61% 8.94% 9.24% 9.67% 10.12%
Total risk-based capital (RBC) ratio 14.27% 11.61% 11.91% 12.41% 12.94%
 
Book value per common share $14.99 $13.91 $13.57 $13.50 $13.46
Total common shares outstanding 5,870,691 4,806,377 4,793,827 4,704,297 4,682,851
 

Other Ratios

Non-interest bearing/total deposits 44.9% 42.7% 44.1% 42.5% 49.8%
Core deposits to total deposits 86.7% 86.0% 86.6% 86.4% 92.2%
Loan to deposit ratio 87.7% 94.4% 94.0% 90.6% 74.7%
Allowance for loan losses/total loans 1.42% 1.38% 1.26% 1.21% 1.21%
 
 

Avidbank Holdings, Inc.

Condensed Consolidated Statements of Income

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

 
  Quarter Ended   Year-to-Date

9/30/17

 

6/30/17

 

9/30/16

9/30/17

 

9/30/16

Interest and fees on loans and leases $7,899 $7,721 $5,856 $22,598 $17,635
Interest on investment securities 466 516 495 1,511 1,348
Other interest income 160   107   121   336   314  
Total interest income 8,525 8,344 6,472 24,445 19,297
 
Deposit interest expense 475 423 279 1,231 835
Other interest expense 277   315   213   866   641  
Total interest expense 752   738   492   2,097   1,476  
Net interest income 7,773 7,606 5,980 22,348 17,822
 
Provision for loan losses 74   1,085   -   1,880   -  

 

Net interest income after provision for loan losses

7,699 6,521 5,980 20,468 17,822
 
Service charges, fees and other income 403 343 291 1,195 970
Income from bank owned life insurance 72 73 75 217 1,713
Gain (Loss) on sale of investment securities -   -   (4)   -   (4)  
Total non-interest income 475 416 362 1,412 2,679
 
Compensation and benefit expenses 3,421 3,020 2,145 9,309 7,034
Occupancy and equipment expenses 731 676 525 1,991 1,606
Other operating expenses 1,082   1,041   881   3,065   2,648  
Total non-interest expense 5,234 4,737 3,551 14,365 11,288
 
Income before income taxes 2,940 2,200 2,791 7,515 9,213
Provision for income taxes 1,280   770   1,156   2,870   3,071  
Net income $1,660   $1,430   $1,635   $4,645   $6,142  
 
 
Basic earnings per common share $0.30 $0.31 $0.36 $0.94 $1.37
Diluted earnings per common share $0.29 $0.30 $0.35 $0.92 $1.33
 
Average common shares outstanding 5,552,977 4,645,091 4,586,849 4,945,170 4,496,101
Average common fully diluted shares 5,658,098 4,740,832 4,694,744 5,046,031 4,635,011
 
Annualized returns:
Return on average assets 0.88% 0.79% 0.98% 0.86% 1.29%
Return on average common equity 7.75% 8.61% 10.50% 8.59% 13.89%
 
Net interest margin 4.33% 4.37% 3.78% 4.32% 4.03%
Cost of funds 0.45% 0.45% 0.33% 0.43% 0.35%
Efficiency ratio 63.46% 59.05% 55.99% 60.46% 55.06%
 
 

Avidbank Holdings, Inc.

Credit Trends

($000) (Unaudited)

 
 

9/30/17

 

6/30/17

 

3/31/17

 

12/31/16

 

9/30/16

Allowance for Loan Losses

Balance, beginning of quarter $8,076 $6,991 $6,244 $5,431 $5,431
Provision for loan losses, quarterly 74 1,085 721 813 -
Charge-offs, quarterly - - - - -
Recoveries, quarterly 41   -   26   -   -  
Balance, end of quarter $8,191   $8,076   $6,991   $6,244   $5,431  
 
 

Nonperforming Assets

Loans accounted for on a non-accrual basis $5,543 $5,210 $0 $0 $392

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

-   -   -   -   -  
Nonperforming loans 5,543 5,210 - - 392
Other real estate owned -   -   -   -   -  
Nonperforming assets $5,543   $5,210   $0   $0   $392  

Loans restructured and in compliance with modified terms

-   -   -   -   457  
Nonperforming assets & restructured loans $5,543   $5,210   $0   $0   $849  
 
 
Nonperforming Loans by Type:
Commercial $4,730 $4,377 $0 $0 $392
Real Estate Loans 714 724 - - -
Consumer Loans 99   109   -   -   -  
Total Nonperforming loans $5,543   $5,210   $0   $0   $392  
 
 

Asset Quality Ratios

Allowance for loan losses (ALLL) / total loans 1.42% 1.38% 1.26% 1.21% 1.21%
ALLL / nonperforming loans 147.77% 155.01% 0.00% 0.00% 1385.46%
Nonperforming assets / total assets 0.73% 0.71% 0.00% 0.00% 0.06%
Nonperforming loans / total loans 0.96% 0.89% 0.00% 0.00% 0.09%
Net quarterly charge-offs / total loans -0.01% 0.00% 0.00% 0.00% 0.00%
 

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

Source: Avidbank Holdings, Inc.