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 $2,865,000 for the third quarter of 2018 compared to $1,660,000 for the same period in 2017.
Year-to-Date and Third Quarter 2018 Financial Highlights
- Net income was $7,639,000 in the first nine months of 2018 compared to $4,645,000 in the first nine months of 2017. Net income in the first nine months of 2018 included a loan loss provision of $665,000 while net income in the first nine months of 2017 included a loan loss provision of $1,880,000. Net interest income was $27,132,000 in the first nine months of 2018, an increase of $4,784,000 or 21% over the figure recorded in the first nine months of 2017.
- Diluted earnings per common share were $1.30 in the first nine months of 2018, compared to $0.92 in the first nine months of 2017. Weighted average common shares outstanding were 5,751,400 and 4,945,170 in the first nine months of 2018 and 2017, respectively. The increase was primarily the result of a $20,000,000 capital raise completed during the third quarter of 2017.
- Net interest income was $9,596,000 for the third quarter of 2018, an increase of $1,823,000 over the $7,773,000 recorded in the third 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 $2,865,000 for the third quarter of 2018, compared to $1,660,000 for the third quarter of 2017. Results for the third quarter of 2018 reflected a loan loss provision of $665,000 compared to a loan loss provision of $74,000 in the third quarter of 2017.
- Diluted earnings per common share were $0.49 for the third quarter of 2018, compared to $0.29 for the third quarter of 2017.
- Total assets grew by 19% in the first nine months of 2018, ending the third quarter at $935 million.
- Total loans net of deferred fees grew by 17% in the first nine months of 2018, ending the third quarter at $757 million.
- Total deposits grew by 22% in the first nine months of 2018, ending the third quarter at $790 million.
- The Company continues to be well capitalized for regulatory purposes with a Tier 1 Leverage Ratio of 11.1%, a Tier 1 Risk Based Capital and Common Equity Tier 1 Risk Based Capital Ratio of 10.4%, and a Total Risk Based Capital Ratio of 12.6%.
Mark D. Mordell, Chairman and Chief Executive Officer, stated, “Net interest income increased to $9.6 million in the third quarter of 2018, a 23% increase over the third quarter of 2017 due to our loan growth over the past twelve months. Loans grew $66.1 million in the third quarter even as we experienced a high level of payoffs in our Construction Lending division due primarily to a large number of property sales. We are committed to a strong growth strategy to achieve optimal profitability and have made substantial investments in personnel and infrastructure to help realize that goal responsibly. Through the first nine months of 2018 we have added eight staff members primarily in loan production and support positions. We are well positioned to continue the 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 12 months are starting to generate the results we had planned as our expenses have begun to stabilize while our loan and deposit production are increasing. Non-interest expenses increased by $428,000 to $5,662,000 in the third quarter of 2018 from $5,234,000 in the third quarter of 2017, primarily due to these increased investments. Our efficiency ratio decreased to 56.0% in the third quarter of 2018 from 63.5% in the third quarter of 2017 as a result of increased revenue and deferred loan origination costs from higher loan activity. Total deposits increased by $111 million in the third quarter of 2018 compared to the second quarter of 2018 and increased by $130 million from the third quarter of 2017. The increase in deposits for the third quarter of 2018 was primarily due to an increase in demand deposits and money market accounts. Our net interest margin grew to 4.47% in the third quarter of 2018 compared to 4.33% in the third quarter of 2017 due to changes in the mix of earning assets in favor of higher yielding loans. Return on assets was 1.28% in the third quarter of 2018 compared to 0.88% in the third quarter of 2017.”
Results for the nine months ended September 30, 2018
Net interest income before provision for loan losses was $27.1 million in the first nine months of 2018, an increase of $4.8 million or 21% over the same period of the prior year. Higher outstanding average loan balances were the primary reason for the increase. Average total loans were $683 million in the first nine months of 2018 compared to $564 million in the first nine months of 2017. Average earning assets were $802 million in the first nine months of 2018, a 16% increase over the prior year. Net interest margin was 4.53% in the first nine months of 2018 compared to 4.32% for the same period in 2017. 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 $0.7 million was recorded in the first nine months of 2018 and a loan loss provision of $1.9 million was taken in the first nine months of 2017. We had $151,000 of charge-offs and minimal recoveries in the first nine months of 2018 compared to no charge- offs and recoveries of $68,000 for the same period in 2017.
Non-interest income was $1,796,000 in the first nine months of 2018, an increase of $384,000 or 27% compared to the same period in 2017. Non-interest income in the first nine months of 2018 included $281,000 of earnings from an investment in an SBIC fund while non-interest income in the first nine months of 2017 included $112,000 from the exercise of common stock warrants related to a Specialty Finance loan.
Non-interest expense increased by $3.3 million to $17.7 million in the first nine months of 2018 compared to $14.4 million in the same period in 2017 due primarily to increased investments in loan production and support personnel and expanded facilities to accommodate the growth in staff.
The effective tax rate was 28.0% in the first nine months of 2018 compared to 38.2% 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.
Results for the quarter ended September 30, 2018
For the three months ended September 30, 2018, net interest income before provision for loan losses was $9.6 million, an increase of $1.8 million or 23% compared to the third quarter of 2017. The increase was primarily the result of higher average loans outstanding. Average total loans outstanding for the quarter ended September 30, 2018 were $720 million, compared to $580 million for the same quarter in 2017, an increase of 24%. Average earning assets were $852 million in the third quarter of 2018, a 19% increase over the third quarter of the prior year. Loans made up 85% of average earning assets at the end of the third quarter of 2018 compared to 81% at the end of the third quarter of 2017. Net interest margin was 4.47% for the third quarter of 2018, compared to 4.33% for the third quarter of 2017. A loan loss provision of $0.7 million was taken in the third quarter of 2018 compared with a loan loss provision of $0.1 million taken in the third quarter of 2017.
Non-interest income was $521,000 in the third quarter of 2018, an increase of $46,000 or 10% compared to the third quarter of 2017. The increase was primarily the result of increased service charges on deposit accounts as a result of our growth.
Non-interest expense increased by $428,000 in the third quarter of 2018 to $5,662,000 compared to $5,234,000 for the third quarter of 2017. This increase was primarily due to higher compensation costs related to increased staffing and occupancy costs associated with the expansion of our facilities. The Bank's full-time equivalent employees at September 30, 2018 and 2017 were 92 and 84, respectively. The Bank's efficiency ratio decreased from 63.5% in the third quarter of 2017 to 56.0% in the third quarter of 2018 due to increased revenue and deferred loan origination costs from higher loan activity.
Balance Sheet
Total assets increased to $935 million as of September 30, 2018, compared to $845 million at June 30, 2018 and $764 million on the same day one year ago. The increase in total assets of $90 million, or 11%, from June 30, 2018 was primarily due to increased loans and increased demand deposit accounts in the third quarter of 2018. The Company reported loans net of deferred fees at September 30, 2018 of $757 million, which represented an increase of $66 million, or 10%, from $691 million at June 30, 2018, and an increase of $179 million, or 31%, over $579 million at September 30, 2017. The increase in total loans from June 30, 2018 was primarily attributable to growth in Specialty Finance and commercial real estate loans. The increase in loans from September 30, 2017 was due to higher commercial real estate, Specialty Finance and multi-family loans.
“We had no non-accrual loans and $2.1 million of other real estate owned assets (OREO) on September 30, 2018 compared to $5.2 million in non-accrual loans and no OREO assets at the end of the prior year. The OREO asset represents a single property which is in the process of being sold,” observed Mr. Mordell.
The Company’s total deposits were $790 million as of September 30, 2018, which represented an increase of $111 million, or 16%, compared to $679 million at June 30, 2018 and an increase of $130 million, or 20%, compared to $660 million at September 30, 2017. The increase in deposits from June 30, 2018 was due to an increase in demand deposits and money market accounts. The increase from September 30, 2017 was also primarily due to an increase in demand deposits and money market accounts. The Company had $30 million of Federal Home Loan Bank advances outstanding as of September 30, 2018 compared to $55 million at June 30, 2018 and no advances at September 30, 2017.
Demand and interest bearing transaction deposits represented 52% of total deposits at September 30, 2018, compared to 50% at June 30, 2018 and 47% for the same period one year ago. Core deposits, which include transaction deposits, money market accounts and CDs below $250,000, represented 86% of total deposits at September 30, 2018, compared to 85% at June 30, 2018 and 87% at September 30, 2017. The Company’s loan to deposit ratio was 96% at September 30, 2018 compared to 102% at June 30, 2018 and 88% at September 30, 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) | ||||||||||
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Assets |
9/30/18 |
6/30/18 |
3/31/18 |
12/31/17 |
9/30/17 |
|||||
| Cash and due from banks | $13,256 | $10,767 | $15,729 | $10,650 | $11,068 | |||||
| Due from Federal Reserve Bank | 79,670 | 57,070 | 48,475 | 22,710 | 74,970 | |||||
| Total cash and cash equivalents | 92,926 | 67,837 | 64,204 | 33,360 | 86,038 | |||||
| Investment securities - available for sale | 57,401 | 60,362 | 70,797 | 74,364 | 76,742 | |||||
| Loans, net of deferred loan fees | 757,115 | 691,011 | 662,005 | 648,273 | 578,524 | |||||
| Allowance for loan losses | (8,811) | (8,297) | (8,297) | (8,297) | (8,191) | |||||
| Loans, net of allowance for loan losses | 748,304 | 682,714 | 653,708 | 639,976 | 570,333 | |||||
| Bank owned life insurance | 10,822 | 10,754 | 10,686 | 10,619 | 10,551 | |||||
| Premises and equipment, net | 5,951 | 6,165 | 6,349 | 5,946 | 3,387 | |||||
| Other real estate owned | 2,094 | 0 | 0 | 0 | 0 | |||||
| Accrued interest receivable & other assets | 17,776 | 17,212 | 16,749 | 18,728 | 16,756 | |||||
| Total assets | $935,274 | $845,044 | $822,493 | $782,993 | $763,807 | |||||
|
Liabilities |
||||||||||
| Non-interest-bearing demand deposits | $384,731 | $313,143 | $281,967 | $275,925 | $295,862 | |||||
| Interest bearing transaction accounts | 22,793 | 23,302 | 23,228 | 16,554 | 16,988 | |||||
| Money market and savings accounts | 249,580 | 219,869 | 250,218 | 243,198 | 229,143 | |||||
| Time deposits | 132,439 | 122,321 | 110,906 | 110,730 | 117,670 | |||||
| Total deposits | 789,543 | 678,635 | 666,319 | 646,407 | 659,663 | |||||
| FHLB advances | 30,000 | 55,000 | 50,000 | 30,000 | - | |||||
| Subordinated debt, net | 11,824 | 11,803 | 11,782 | 11,761 | 11,740 | |||||
| Other liabilities | 7,286 | 5,879 | 3,578 | 5,718 | 4,421 | |||||
| Total liabilities | 838,653 | 751,317 | 731,679 | 693,886 | 675,824 | |||||
|
Shareholders' equity |
||||||||||
| Common stock/additional paid-in capital | 67,891 | 67,626 | 67,230 | 66,996 | 66,704 | |||||
| Retained earnings | 30,581 | 27,716 | 25,050 | 22,811 | 21,802 | |||||
| Accumulated other comprehensive income (loss) | (1,851) | (1,615) | (1,466) | (700) | (523) | |||||
| Total shareholders' equity | 96,621 | 93,727 | 90,814 | 89,107 | 87,983 | |||||
| Total liabilities and shareholders' equity | $935,274 | $845,044 | $822,493 | $782,993 | $763,807 | |||||
|
Capital ratios |
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| Tier 1 leverage ratio | 11.07% | 11.59% | 11.45% | 11.43% | 11.87% | |||||
| Common equity tier 1 capital ratio | 10.39% | 10.84% | 10.84% | 10.70% | 11.61% | |||||
| Tier 1 risk-based capital ratio | 10.39% | 10.84% | 10.84% | 10.70% | 11.61% | |||||
| Total risk-based capital ratio | 12.61% | 13.20% | 13.24% | 13.13% | 14.27% | |||||
| Book value per common share | $16.17 | $15.66 | $15.25 | $15.12 | $14.99 | |||||
| Total common shares outstanding | 5,974,645 | 5,983,390 | 5,956,609 | 5,893,144 | 5,870,691 | |||||
|
Other Ratios |
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| Non-interest bearing deposits to total deposits | 48.7% | 46.1% | 42.3% | 42.7% | 44.9% | |||||
| Core deposits to total deposits | 85.9% | 85.1% | 86.9% | 87.4% | 86.7% | |||||
| Loan to deposit ratio | 95.9% | 101.8% | 99.4% | 100.3% | 87.7% | |||||
| Allowance for loan losses to total loans | 1.16% | 1.20% | 1.25% | 1.28% | 1.42% | |||||
| Avidbank Holdings, Inc. | ||||||||||
| Condensed Consolidated Statements of Income | ||||||||||
| ($000, except share and per share amounts) (Unaudited) | ||||||||||
| Quarter Ended | Year-to-Date | |||||||||
|
9/30/18 |
6/30/18 |
9/30/17 |
9/30/18 |
9/30/17 |
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| Interest and fees on loans and leases | $10,176 | $9,480 | $7,899 | $28,553 | $22,598 | |||||
| Interest on investment securities | 350 | 404 | 466 | 1,209 | 1,511 | |||||
| Other interest income | 349 | 232 | 160 | 730 | 336 | |||||
| Total interest income | 10,875 | 10,116 | 8,525 | 30,492 | 24,445 | |||||
| Deposit interest expense | 800 | 641 | 475 | 1,990 | 1,231 | |||||
| Other interest expense | 479 | 525 | 277 | 1,370 | 866 | |||||
| Total interest expense | 1,279 | 1,166 | 752 | 3,360 | 2,097 | |||||
| Net interest income | 9,596 | 8,950 | 7,773 | 27,132 | 22,348 | |||||
| Provision for loan losses | 665 | - | 74 | 665 | 1,880 | |||||
| Net interest income after provision for loan losses | 8,931 | 8,950 | 7,699 | 26,467 | 20,468 | |||||
| Service charges, fees and other income | 453 | 486 | 403 | 1,576 | 1,195 | |||||
| Income from bank owned life insurance | 68 | 68 | 72 | 203 | 217 | |||||
| Gain (Loss) on sale of investment securities | 0 | 17 | - | 17 | - | |||||
| Total non-interest income | 521 | 571 | 475 | 1,796 | 1,412 | |||||
| Compensation and benefit expenses | 3,619 | 3,756 | 3,421 | 11,258 | 9,309 | |||||
| Occupancy and equipment expenses | 842 | 731 | 731 | 2,638 | 1,991 | |||||
| Other operating expenses | 1,201 | 1,253 | 1,082 | 3,757 | 3,065 | |||||
| Total non-interest expense | 5,662 | 5,740 | 5,234 | 17,653 | 14,365 | |||||
| Income before income taxes | 3,790 | 3,781 | 2,940 | 10,610 | 7,515 | |||||
| Provision for income taxes | 925 | 1,115 | 1,280 | 2,971 | 2,870 | |||||
| Net income | $2,865 | $2,666 | $1,660 | $7,639 | $4,645 | |||||
| Basic earnings per common share | $0.50 | $0.46 | $0.30 | $1.33 | $0.94 | |||||
| Diluted earnings per common share | $0.49 | $0.45 | $0.29 | $1.30 | $0.92 | |||||
| Average common shares outstanding | 5,767,950 | 5,753,044 | 5,552,977 | 5,751,400 | 4,945,170 | |||||
| Average common fully diluted shares | 5,879,337 | 5,866,669 | 5,658,098 | 5,865,859 | 5,046,031 | |||||
| Annualized returns: | ||||||||||
| Return on average assets | 1.28% | 1.30% | 0.88% | 1.22% | 0.86% | |||||
| Return on average common equity | 11.82% | 11.48% | 7.75% | 10.95% | 8.59% | |||||
| Net interest margin | 4.47% | 4.56% | 4.33% | 4.53% | 4.32% | |||||
| Cost of funds | 0.65% | 0.65% | 0.45% | 0.61% | 0.43% | |||||
| Efficiency ratio | 55.97% | 60.29% | 63.46% | 61.02% | 60.46% | |||||
| Avidbank Holdings, Inc. | ||||||||||
| Credit Trends | ||||||||||
| ($000) (Unaudited) | ||||||||||
|
9/30/18 |
6/30/18 |
3/31/18 |
12/31/17 |
9/30/17 |
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|
Allowance for Loan Losses |
||||||||||
| Balance, beginning of quarter | $8,297 | $8,297 | $8,297 | $8,191 | $8,076 | |||||
| Provision for loan losses, quarterly | 665 | - | - | 106 | 74 | |||||
| Charge-offs, quarterly | (151) | - | - | - | - | |||||
| Recoveries, quarterly | - | - | - | - | 41 | |||||
| Balance, end of quarter | $8,811 | $8,297 | $8,297 | $8,297 | $8,191 | |||||
|
Nonperforming Assets |
||||||||||
| Loans accounted for on a non-accrual basis | $0 | $2,245 | $2,256 | $5,151 | $5,543 | |||||
|
Loans with principal or interest contractually past due 90 days or more and still accruing interest |
- | - | - | - | - | |||||
| Nonperforming loans | - | 2,245 | 2,256 | 5,151 | 5,543 | |||||
| Other real estate owned | 2,094 | - | - | - | - | |||||
| Nonperforming assets | $2,094 | $2,245 | $2,256 | $5,151 | $5,543 | |||||
|
Loans restructured and in compliance with modified terms |
- | - | - | - | - | |||||
| Nonperforming assets & restructured loans | $2,094 | $2,245 | $2,256 | $5,151 | $5,543 | |||||
|
Nonperforming Loans by Type: |
||||||||||
| Commercial | $0 | $2,245 | $2,256 | $4,353 | $4,730 | |||||
| Real Estate Loans | - | - | - | 704 | 714 | |||||
| Consumer Loans | - | - | - | 94 | 99 | |||||
| Total Nonperforming loans | $0 | $2,245 | $2,256 | $5,151 | $5,543 | |||||
|
Asset Quality Ratios |
||||||||||
| Allowance for loan losses (ALLL) to total loans | 1.16% | 1.20% | 1.25% | 1.28% | 1.42% | |||||
| ALLL to nonperforming loans | 0.00% | 369.54% | 367.81% | 161.08% | 147.77% | |||||
| Nonperforming assets to total assets | 0.22% | 0.27% | 0.27% | 0.66% | 0.73% | |||||
| Nonperforming loans to total loans | 0.00% | 0.32% | 0.34% | 0.79% | 0.96% | |||||
| Net quarterly charge-offs to total loans | 0.02% | 0.00% | 0.00% | 0.00% | -0.01% | |||||
