Press Release

Avidbank Holdings, Inc. Announces Net Income of $2,107,000 for the First Quarter of 2018

Company Release - 4/25/2018 6:00 AM ET

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 $2,107,000 for the first quarter of 2018 compared to $1,554,000 for the same period in 2017.

First Quarter 2018 Financial Highlights

  • Net interest income was $8,586,000 for the first quarter of 2018, an increase of $1,618,000 over the $6,968,000 we achieved in the first quarter of 2017. The 23% increase over the prior year quarter reflects the impact of our loan growth over the past twelve months.
  • Net income was $2,107,000 for the first quarter of 2018, compared to $1,554,000 for the first quarter of 2017. Results for the first quarter of 2018 included no loan loss provision compared to a loan loss provision of $721,000 in the first quarter of 2017.
  • Diluted earnings per common share were $0.36 for the first quarter of 2018, compared to $0.33 for the first quarter of 2017.
  • Total assets grew by 5% in the first three months of 2018, ending the first quarter at $822 million.
  • Total loans net of deferred fees grew by 2% in the first three months of 2018, ending the first quarter at $662 million.
  • Total deposits grew by 3% in the first three months of 2018, ending the first quarter at $666 million.
  • The Company continues to be well capitalized for regulatory purposes with a Tier 1 Leverage Ratio of 11.4%, 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 $8.6 million in the first quarter of 2018, a 23% increase over the first quarter of 2017 due to our loan growth over the past twelve months. Loans grew $14 million in the first quarter even as we absorbed our record growth from the previous quarter and experienced a high level of payoffs in our Specialty Finance division due primarily 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. In January 2018, we more than doubled the size of our space at our San Francisco location to accommodate our rapidly growing staff. 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, 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 increase staff retention due to more favorable commute times. Non-interest expenses increased by $1.9 million to $6.3 million in the first quarter of 2018, from $4.4 million in the first quarter of 2017 primarily due to these increased investments. Our efficiency ratio increased to 67.3% in the first quarter of 2018 from 58.7% in the first quarter of 2017 as a result of the increased expenses. Total deposits increased by $20 million in the first quarter of 2018 compared to the fourth quarter of 2017 and increased by $74 million from the same quarter in 2017. The increase in deposits for the first quarter of 2018 was primarily due to an increase in demand deposits and money market accounts. Our net interest margin grew to 4.55% in the first quarter of 2018 compared to 4.26% in the first quarter of 2017 due to changes in the mix of earning assets in favor of higher yielding loans. Return on assets was 1.06% in the first quarter of 2018 compared to 0.91% in the first quarter of 2017."

Results for the quarter ended March 31, 2018

For the three months ended March 31, 2018, net interest income before provision for loan losses was $8.6 million, an increase of $1.6 million or 23% compared to the first quarter of 2017. The increase was primarily the result of higher average loans outstanding. Average total loans outstanding for the quarter ended March 31, 2018 were $654 million, compared to $539 million for the same quarter in 2017, an increase of 21%. Average earning assets were $766 million in the first quarter of 2018, a 16% increase over the first quarter of the prior year. Loans made up 85% of average earning assets at the end of the first quarter of 2018 compared to 81% at the end of the first quarter of 2017. Net interest margin was 4.55% for the first quarter of 2018, compared to 4.26% for the first quarter of 2017. No loan loss provision was taken in the first quarter of 2018 compared with a loan loss provision of $721,000 taken in the first quarter of 2017.

Non-interest income was $704,000 in the first quarter of 2018, an increase of $183,000 or 35% compared to the first quarter of 2017. Non-interest income in the first quarter of 2018 included $281,000 from earnings from an investment in a Small Business Investment Corporation (SBIC) fund while non-interest income in the prior year's quarter included $112,000 from the exercise of common stock warrants related to a Specialty Finance loan.

Non-interest expense increased by $1,857,000 in the first quarter of 2018 to $6,252,000 compared to $4,395,000 for the first 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 March 31, 2018 and 2017 were 88 and 70, respectively. The Bank's efficiency ratio increased from 58.7% in the first quarter of 2017 to 67.3% in the first quarter of 2018 due to increased staffing and facilities costs to accommodate our growth.

The effective tax rate was 30.6% in the first three months of 2018 compared to 34.5% 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.

Balance Sheet

Total assets increased to $822 million as of March 31, 2018, compared to $783 million at December 31, 2017 and $702 million on the same day one year ago. The increase in total assets of $39 million, or 5%, from December 31, 2017 was primarily due to increased FHLB borrowings and increased demand deposit accounts in the first quarter of 2018. The Company reported total loans at March 31, 2018 of $662 million, which represented an increase of $14 million, or 2%, from $648 million at December 31, 2017, and an increase of $105 million, or 19%, over $557 million at March 31, 2017. The increase in total loans for both periods was primarily attributable to growth in commercial real estate, multi-family and construction loans. The increase in loans from March 31, 2017 also included higher Specialty Finance and commercial loans.

"We had $2.3 million in non-accrual loans comprising 0.34% of total loans from one relationship on March 31, 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 quarter of 2018,” observed Mr. Mordell.

The Company’s total deposits were $666 million as of March 31, 2018, which represented an increase of $20 million, or 3%, compared to $646 million at December 31, 2017 and an increase of $73 million, or 12%, compared to $593 million at March 31, 2017. The increase in deposits from December 31, 2017 was due to an increase in demand deposits and money market accounts. The increase from March 31, 2017 was caused by an increase in money market accounts, demand deposits and CDs greater than $250,000. The Company had $50 million of Federal Home Loan Bank advances outstanding as of March 31, 2018.

Demand and interest bearing transaction deposits represented 46% of total deposits at March 31, 2018, compared to 45% at December 31, 2017 and 48% for the same period one year ago. Core deposits, which include transaction deposits, money market accounts and CDs below $250,000, represented 87% of total deposits at March 31, 2018, compared to 87% at December 31, 2017 and 87% at March 31, 2017. The Company’s loan to deposit ratio was 99% at March 31, 2018 compared to 100% at December 31, 2017 and 94% at March 31, 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

3/31/18

12/31/17

9/30/17

6/30/17

3/31/17

Cash and due from banks $15,729 $10,650 $11,068 $10,845 $17,431
Due from Federal Reserve Bank 48,475   22,710   74,970   32,510   21,265
Total cash and cash equivalents 64,204 33,360 86,038 43,355 38,696
 
Investment securities - available for sale 70,797 74,364 76,742 82,986 86,905
 
Loans, net of deferred loan fees 662,005 648,273 578,524 584,342 556,969
Allowance for loan losses (8,297)   (8,297)   (8,191)   (8,076)   (6,991)
Loans, net of allowance for loan losses 653,708 639,976 570,333 576,266 549,978
 
Bank owned life insurance 10,686 10,619 10,551 10,479 10,406
Premises and equipment, net 6,349 5,946 3,387 1,155 668
Accrued interest receivable & other assets 16,749   18,728   16,756   16,818   15,205
Total assets $822,493   $782,993   $763,807   $731,059   $701,858
 

Liabilities

Non-interest-bearing demand deposits $281,967 $275,925 $295,862 $264,514 $261,172
Interest bearing transaction accounts 23,228 16,555 16,988 17,642 20,786
Money market and savings accounts 250,218 243,198 229,143 220,474 207,106
Time deposits 110,906   110,730   117,670   116,282   103,616
Total deposits 666,319 646,408 659,663 618,912 592,680
 
FHLB advances 50,000 30,000 - 30,000 30,000
Subordinated debt, net 11,782 11,761 11,740 11,719 11,698
Other liabilities 3,578   5,717   4,421   3,572   2,425
Total liabilities 731,679 693,886 675,824 664,203 636,803
 

Shareholders' equity

Common stock/additional paid-in capital 67,230 66,996 66,704 47,421 47,259
Retained earnings 25,050 22,811 21,802 20,142 18,711
Accumulated other comprehensive income (loss) (1,466)   (700)   (523)   (707)   (915)
Total shareholders' equity 90,814 89,107 87,983 66,856 65,055
 
Total liabilities and shareholders' equity $822,493   $782,993   $763,807   $731,059   $701,858
 

Capital ratios

Tier 1 leverage ratio 11.45% 11.43% 11.87% 9.28% 9.52%
Common equity tier 1 capital ratio 10.84% 10.70% 11.61% 8.94% 9.24%
Tier 1 risk-based capital ratio 10.84% 10.70% 11.61% 8.94% 9.24%
Total risk-based capital ratio 13.24% 13.13% 14.27% 11.61% 11.91%
 
Book value per common share $15.25 $15.12 $14.99 $13.91 $13.57
Total common shares outstanding 5,956,609 5,893,144 5,870,691 4,806,377 4,793,827
 

Other Ratios

Non-interest bearing deposits to total deposits 42.3% 42.7% 44.9% 42.7% 44.1%
Core deposits to total deposits 86.9% 87.4% 86.7% 86.0% 86.6%
Loan to deposit ratio 99.4% 100.3% 87.7% 94.4% 94.0%
Allowance for loan losses to total loans 1.25% 1.28% 1.42% 1.38% 1.26%
 
     
Avidbank Holdings, Inc.

Condensed Consolidated Statements of Income

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

3/31/18

12/31/17

3/31/17

Interest and fees on loans and leases $8,896 $8,186 $6,978
Interest on investment securities 455 477 529
Other interest income 149   245   69
Total interest income 9,500 8,908 7,576
 
Deposit interest expense 549 496 334
Other interest expense 365   230   274
Total interest expense 914   726   608
Net interest income 8,586 8,182 6,968
 
Provision for loan losses -   106   721
Net interest income after provision for loan losses 8,586 8,076 6,247
 
Service charges, fees and other income 637 407 449
Income from bank owned life insurance 67   68   72
Total non-interest income 704 475 521
 
Compensation and benefit expenses 3,883 3,126 2,868
Occupancy and equipment expenses 1,066 1,038 584
Other operating expenses 1,303   1,068   943
Total non-interest expense 6,252 5,232 4,395
 
Income before income taxes 3,038 3,319 2,373
Provision for income taxes 931   2,310   819
Net income $2,107   $1,009   $1,554
 
 
 
Basic earnings per common share $0.37 $0.18 $0.34
Diluted earnings per common share $0.36 $0.17 $0.33
 
Average common shares outstanding 5,732,820 5,712,595 4,627,271
Average common fully diluted shares 5,850,614 5,825,747 4,728,967
 
Annualized returns:
Return on average assets 1.06% 0.51% 0.91%
Return on average common equity 9.43% 4.48% 9.69%
 
Net interest margin 4.55% 4.33% 4.26%
Cost of funds 0.52% 0.42% 0.39%
Efficiency ratio 67.30% 60.44% 58.69%
 
         
Avidbank Holdings, Inc.
Credit Trends
($000) (Unaudited)
 

3/31/18

12/31/17

9/30/17

6/30/17

3/31/17

Allowance for Loan Losses

Balance, beginning of quarter $8,297 $8,191 $8,076 $6,991 $6,244
Provision for loan losses, quarterly - 106 74 1,085 721
Charge-offs, quarterly - - - - -
Recoveries, quarterly -   -   41   -   26
Balance, end of quarter $8,297   $8,297   $8,191   $8,076   $6,991
 
 

Nonperforming Assets

Loans accounted for on a non-accrual basis $2,256 $5,151 $5,543 $5,210 $0
Loans with principal or interest contractually past due
90 days or more and still accruing interest -   -   -   -   -
Nonperforming loans 2,256 5,151 5,543 5,210 -
Other real estate owned -   -   -   -   -
Nonperforming assets $2,256   $5,151   $5,543   $5,210   $0
Loans restructured and in compliance with modified terms -   -   -   -   -
Nonperforming assets & restructured loans $2,256   $5,151   $5,543   $5,210   $0
 
 

Nonperforming Loans by Type:

Commercial $2,256 $4,353 $4,730 $4,377 $0
Real Estate Loans - 704 714 724 -
Consumer Loans -   94   99   109   -
Total Nonperforming loans $2,256   $5,151   $5,543   $5,210   $0
 
 

Asset Quality Ratios

Allowance for loan losses (ALLL) to total loans 1.25% 1.28% 1.42% 1.38% 1.26%
ALLL to nonperforming loans 367.81% 161.08% 147.77% 155.01% 0.00%
Nonperforming assets to total assets 0.27% 0.66% 0.73% 0.71% 0.00%
Nonperforming loans to total loans 0.34% 0.79% 0.96% 0.89% 0.00%
Net quarterly charge-offs to total loans 0.00% 0.00% -0.01% 0.00% 0.00%
 

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

Source: Avidbank Holdings, Inc.