January 27, 2020 - 6:00 AM EST
Avidbank Holdings, Inc. Announces Net Income of $3,049,000 for the Fourth Quarter of 2019

Avidbank Holdings, Inc. Announces Net Income of $3,049,000 for the Fourth Quarter of 2019

SAN JOSE, Calif.

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 $3,049,000 for the fourth quarter of 2019 compared to $3,481,000 for the same period in 2018.

Full Year and Fourth Quarter 2019 Financial Highlights

  • Net income was $12,857,000 in 2019 compared to $11,120,000 in 2018. Net income in 2019 included a $1.4 million loan loss provision while net income in 2018 reflected a $1.6 million loan loss provision. Net interest income was $44,702,000 in 2019, an increase of $6,836,000 or 18% over the figure recorded in 2018.
  • Diluted earnings per common share were $2.17 in 2019, compared to $1.90 in 2018. The increase in earnings per share was the result of higher earnings in 2019. Weighted average common fully diluted shares outstanding were 5,914,339 and 5,866,401 in 2019 and 2018, respectively.
  • Net interest income was $11,070,000 for the fourth quarter of 2019, an increase of $335,000 over the $10,735,000 we recorded in the fourth quarter of 2018. The 3% increase over the prior year quarter reflects year over year loan growth partially offset by increased interest expense and subordinated debt offering expenses.
  • Net income was $3,049,000 for the fourth quarter of 2019, compared to $3,481,000 for the fourth quarter of 2018. Results for the fourth quarter of 2019 were impacted by increased staffing expenses of $1.7 million, primarily from the hiring of additional personnel across the entire Bank. These expenses were partially offset by lower loan loss provision charges of $805,000. The fourth quarter of 2018 also benefited from a number of non-core income producing items totaling $383,000 including a gain on the sale of Other Real Property Owned (OREO), investment fund income and income from FHLB special dividends.
  • Diluted earnings per common share were $0.51 for the fourth quarter of 2019, compared to $0.59 for the fourth quarter of 2018.
  • Total assets grew by 23% in 2019, ending the fourth quarter at $1.1 billion.
  • Total loans net of deferred fees grew by 10% in 2019, ending the fourth quarter at $889 million.
  • Total deposits grew by 22% in 2019, ending the fourth quarter at $973 million.
  • The Company continues to be well capitalized for regulatory purposes with a Tier 1 Leverage Ratio of 10.51%, a Tier 1 Risk Based Capital and Common Equity Tier 1 Risk Based Capital Ratio of 10.72%, and a Total Risk Based Capital Ratio of 13.78%.

Mark D. Mordell, Chairman and Chief Executive Officer, stated, "Net interest income increased to $11.1 million in the fourth quarter of 2019, a 3% increase over the fourth quarter of 2018, as year over year loan growth was partially offset by increased interest expense. Loans declined $20.5 million in the fourth quarter primarily as a result of Commercial Real Estate, Multi-Family and Construction loan payoffs. We continue to be committed to a strong growth strategy to achieve scale and optimal profitability and previously announced a $22 million subordinated debt raise in December to support that effort and to retire existing subordinated debt which reduced our borrowing cost from 6.875% to 5.00%. We are also continuing to be opportunistic when identifying additional personnel and infrastructure that can be accretive to our cause. We added several new employees in 2019 reflecting the expansion of our Venture Lending and Structured Finance divisions that are key areas for diversification and growth. Additionally, we invested further in administrative infrastructure by adding personnel in Credit Administration, Operations, BSA and Gina Thoma-Peterson, our first Chief Operating Officer. The individuals we have in leadership and support roles position us well to continue our 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 24 to 36 months are generating results according to plan as our robust loan and deposit growth provide increased economies of scale. Non-interest expense increased by $1,563,000 to $7,439,000 in the fourth quarter of 2019, up from $5,876,000 in the fourth quarter of 2018 primarily due to these increased investments. Our efficiency ratio increased to 64.0% in the fourth quarter of 2019, up from 50.4% in the fourth quarter of 2018 as a result of increased staffing and interest expense and costs related to our subordinated debt offering. Total deposits increased by $85 million in the fourth quarter of 2019 compared to the third quarter of 2019 and increased by $176 million from the fourth quarter of 2018. The increase in deposits from September 30, 2019 was due to higher money market accounts and demand deposits. The increase in deposits over the fourth quarter of 2018 was primarily due to an increase in demand deposits, money market accounts and brokered deposits. Our net interest margin dropped to 4.17% in the fourth quarter of 2019, compared to 4.71% in the fourth quarter of 2018 primarily due to a drop in loan yields and increased interest expense. Return on assets was 1.09% in the fourth quarter of 2019 compared to 1.32% in the third quarter of 2019 and 1.46% in the fourth quarter of 2018.”

Results for the twelve months ended December 31, 2019

Net interest income before provision for loan losses was $44.7 million in 2019, an increase of $6.8 million or 18% over the previous year. Higher average outstanding loan balances were the primary reason for the increase. Average total loans were $857 million in 2019 compared to $707 million in 2018. Average earning assets were $982 million in 2019, a 19% increase over the prior year. Net interest margin was 4.55% in 2019 compared to 4.58% for 2018. The decrease in net interest margin was primarily caused by an increase in the cost of funds. A loan loss provision of $1.4 million was recorded in 2019 and a $1.6 million loan loss provision was recorded in 2018. We had $107,000 of charge-offs and $190,000 of recoveries in 2019 compared to $151,000 of charge-offs and minimal recoveries for 2018.

Non-interest income was $2,751,000 in 2019, an increase of $32,000 or 1% over 2018 reflecting increased service charges on deposit accounts. Non-interest income in 2019 included a $306,000 gain from the sale of collateral on a workout loan while non-interest income in 2018 included $281,000 of earnings from an investment in an SBIC fund and a $288,000 gain on sale of an OREO property.

Non-interest expense increased by $4.7 million to $28.2 million in 2019 compared to $23.5 million in 2018 due primarily to increased investments in personnel across the entire Bank.

The effective tax rate was 28.0% in 2019 compared to 28.0% for the same period in 2018.

Results for the quarter ended December 31, 2019

For the three months ended December 31, 2019, net interest income before provision for loan losses was $11.1 million, an increase of $0.3 million or 3% compared to the fourth quarter of 2018. The increase was primarily the result of higher average loans outstanding partially offset by higher interest expense and expenses related to our subordinated debt offering. Average total loans outstanding for the quarter ended December 31, 2019 were $893 million, compared to $777 million for the same quarter in 2018, an increase of 15%. Average earning assets were $1.1 billion in the fourth quarter of 2019, a 17% increase over the fourth quarter of the prior year. Loans made up 85% of average earning assets at the end of the fourth quarter of 2019 compared to 86% at the end of the fourth quarter of 2018. Net interest margin was 4.17% for the fourth quarter of 2019, compared to 4.71% for the fourth quarter of 2018. A loan loss provision of $142,000 was taken in the fourth quarter of 2019 compared with a $947,000 loan loss provision taken in the fourth quarter of 2018.

Non-interest income was $554,000 in the fourth quarter of 2019, a decrease of $369,000 or 40% compared to the fourth quarter of 2018. The decrease resulted from non-core sources of income in the fourth quarter of 2018 including a $288,000 gain on sale of an OREO property, $46,000 of income from investment in an SBIC fund and a $49,000 special dividend from the FHLB.

Non-interest expense increased by $1,563,000 in the fourth quarter of 2019 to $7,439,000 compared to $5,876,000 for the fourth quarter of 2018. This increase was primarily due to higher compensation costs related to increased staffing. The Company's full- time equivalent employees at December 31, 2019 and 2018 were 114 and 92, respectively. The Company's efficiency ratio increased from 50.4% in the fourth quarter of 2018 to 64% in the fourth quarter of 2019 due to increased expenses from the growth in staff, higher costs of deposits and costs associated with our subordinated debt offering.

Balance Sheet

Total assets were $1.132 billion as of December 31, 2019, compared to $1.115 billion at September 30, 2019 and $917 million on the same day one year ago. The increase in total assets of $17 million, or 2%, from September 30, 2019 was primarily due to higher overnight funds that were funded by increased money market accounts and demand deposits. The Company reported loans net of deferred fees at December 31, 2019 of $889 million, which represented a decrease of $20 million, or 2%, from $909 million at September 30, 2019, and an increase of $82 million, or 10%, over $807 million at December 31, 2018. The decrease in total loans from September 30, 2019 was primarily a result of Commercial Real Estate, Multi-Family and Construction loan payoffs. The increase in loans from December 31, 2018 was due to higher C&I, Specialty Finance, Multi-Family and Commercial Real Estate loans.

"We had $3.8 million in non-accrual loans on December 31, 2019, which was up from a $1.7 million balance at the end of the prior year. The non-accrual amount represents two loans secured by real estate," observed Mr. Mordell.

The Company’s total deposits were $973 million as of December 31, 2019, which represented an increase of $85 million, or 10%, compared to $888 million at September 30, 2019 and an increase of $176 million, or 22%, compared to $797 million at December 31, 2018. The increase in deposits from September 30, 2019 was due to higher money market accounts and demand deposits. The increase from December 31, 2018 was primarily due to an increase in demand deposits, money market accounts and brokered deposits. The Company had no FHLB advances outstanding as of December 31, 2019 compared to $80 million at September 30, 2019 and none as of December 31, 2018.

Demand and interest bearing transaction deposits represented 47% of total deposits at December 31, 2019, compared to 47% at September 30, 2019 and 49% 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 December 31, 2019, compared to 82% at September 30, 2019 and 85% at December 31, 2018. The Company’s loan to deposit ratio was 91% at December 31, 2019 compared to 102% at September 30, 2019 and 101% at December 31, 2018.

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

12/31/19

 

9/30/19

 

6/30/19

 

3/31/19

 

12/31/18

Cash and due from banks

$13,068

$24,649

$12,887

$12,204

$19,252

Due from Federal Reserve Bank

139,780

90,180

57,530

76,295

8,400

Total cash and cash equivalents

152,848

114,829

70,417

88,499

27,652

 

Investment securities - available for sale

52,014

53,571

55,002

55,654

56,491

 

Loans, net of deferred loan fees

888,780

909,312

857,831

831,772

807,339

Allowance for loan losses

(11,267)

(11,087)

(11,155)

(10,368)

(9,758)

Loans, net of allowance for loan losses

877,513

898,225

846,676

821,404

797,581

 

Bank owned life insurance

11,156

11,088

11,019

10,953

10,890

Premises and equipment, net

5,542

5,238

5,296

5,507

5,723

Other real estate owned

-

-

-

-

-

Accrued interest receivable & other assets

32,484

31,751

33,031

31,736

18,568

Total assets

$1,131,557

$1,114,702

$1,021,441

$1,013,753

$916,905

 

Liabilities

Non-interest-bearing demand deposits

$431,638

$401,360

$374,407

$376,976

$366,851

Interest bearing transaction accounts

21,465

20,114

21,076

28,045

25,378

Money market and savings accounts

320,683

287,082

283,734

297,941

267,185

Time deposits

199,357

179,645

150,952

143,834

137,183

Total deposits

973,143

888,201

830,169

846,796

796,597

 

FHLB advances

-

80,000

50,000

30,000

-

Subordinated debt, net

21,570

11,908

11,887

11,866

11,845

Other liabilities

20,449

21,897

20,750

20,607

7,947

Total liabilities

1,015,162

1,002,006

912,806

909,269

816,389

 

Shareholders' equity

Common stock/additional paid-in capital

69,377

68,851

68,583

68,157

68,012

Retained earnings

46,910

43,861

40,408

37,226

34,053

Accumulated other comprehensive income (loss)

108

(16)

(356)

(899)

(1,549)

Total shareholders' equity

116,395

112,696

108,635

104,484

100,516

 

Total liabilities and shareholders' equity

$1,131,557

$1,114,702

$1,021,441

$1,013,753

$916,905

 

Capital ratios

Tier 1 leverage ratio

10.51%

10.84%

10.69%

10.86%

10.82%

Common equity tier 1 capital ratio

10.72%

10.16%

10.28%

10.22%

10.38%

Tier 1 risk-based capital ratio

10.72%

10.16%

10.28%

10.22%

10.38%

Total risk-based capital ratio

13.78%

12.26%

12.49%

12.41%

12.62%

 

Book value per common share

$19.12

$18.54

$17.88

$17.28

$16.84

Total common shares outstanding

6,087,160

6,079,160

6,075,429

6,047,136

5,968,148

 

Other Ratios

Non-interest bearing deposits to total deposits

44.4%

45.2%

45.1%

44.5%

46.1%

Core deposits to total deposits

82.1%

82.5%

84.7%

85.8%

85.4%

Loan to deposit ratio

91.3%

102.4%

103.3%

98.2%

101.3%

Allowance for loan losses to total loans

1.27%

1.22%

1.30%

1.25%

1.21%

Avidbank Holdings, Inc.

Condensed Consolidated Statements of Income

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

 

Quarter Ended

Year-to-Date

12/31/19

 

9/30/19

 

12/31/18

 

12/31/19

 

12/31/18

Interest and fees on loans and leases

$12,577

$12,465

$11,322

$49,178

$39,874

Interest on investment securities

325

328

369

1,387

1,578

Other interest income

444

300

402

1,445

1,132

Total interest income

13,346

13,093

12,093

52,010

42,584

 

Deposit interest expense

1,368

1,381

968

5,120

2,958

Other interest expense

908

548

390

2,188

1,760

Total interest expense

2,276

1,929

1,358

7,308

4,718

Net interest income

11,070

11,164

10,735

44,702

37,866

 

Provision for loan losses

142

39

947

1,426

1,612

Net interest income after provision for

loan losses

10,928

11,125

9,788

43,276

36,254

 

Service charges, fees and other income

486

615

567

2,135

2,160

Income from bank owned life insurance

68

69

68

265

271

Gain on sale of assets

-

2

288

351

288

Total non-interest income

554

686

923

2,751

2,719

 

Compensation and benefit expenses

5,384

4,972

3,730

19,759

15,102

Occupancy and equipment expenses

770

881

798

3,457

3,436

Other operating expenses

1,285

1,140

1,348

4,954

4,991

Total non-interest expense

7,439

6,993

5,876

28,170

23,529

 

Income before income taxes

4,043

4,818

4,835

17,857

15,444

Provision for income taxes

994

1,366

1,354

5,000

4,324

Net income

$3,049

$3,452

$3,481

$12,857

$11,120

 
 
 

Basic earnings per common share

$0.52

$0.59

$0.60

$2.22

$1.93

Diluted earnings per common share

$0.51

$0.58

$0.59

$2.17

$1.90

 

Average common shares outstanding

5,814,852

5,807,384

5,770,997

5,801,337

5,751,400

Average common fully diluted shares

5,941,521

5,919,698

5,888,460

5,914,339

5,866,401

 

Annualized returns:

Return on average assets

1.09%

1.32%

1.46%

1.24%

1.28%

Return on average common equity

10.54%

12.31%

13.85%

11.77%

11.72%

 

Net interest margin

4.17%

4.49%

4.71%

4.55%

4.58%

Cost of funds

0.93%

0.84%

0.64%

0.81%

0.62%

Efficiency ratio

64.00%

59.01%

50.40%

59.36%

57.97%

Avidbank Holdings, Inc.

Credit Trends

($000) (Unaudited)

 

12/31/19

9/30/19

6/30/19

3/31/19

12/31/18

Allowance for Loan Losses

Balance, beginning of quarter

$11,087

$11,155

$10,368

$9,758

$8,811

Provision for loan losses, quarterly

142

39

787

459

947

Charge-offs, quarterly

-

(107)

-

-

-

Recoveries, quarterly

39

-

-

151

-

Balance, end of quarter

$11,267

$11,087

$11,155

$10,368

$9,758

 

 

 

 

 

Nonperforming Assets

Loans accounted for on a non-accrual basis

$3,817

$3,830

$1,640

$1,658

$1,689

Loans with principal or interest contractually past

due 90 days or more and still accruing interest

-

-

-

-

-

Nonperforming loans

3,817

3,830

1,640

1,658

1,689

Other real estate owned

-

-

-

-

-

Nonperforming assets

$3,817

$3,830

$1,640

$1,658

$1,689

Loans restructured and in compliance with

 

 

 

 

 

modified terms

-

-

-

-

-

Nonperforming assets & restructured loans

$3,817

$3,830

$1,640

$1,658

$1,689

 
 

Nonperforming Loans by Type:

Commercial

$1,580

$1,590

$1,640

$1,658

$1,689

Commercial Real Estate Loans

2,237

2,240

-

-

-

Residential Real Estate Loans

-

-

-

-

-

Construction Loans

-

-

-

-

-

Consumer Loans

-

-

-

-

-

Total Nonperforming loans

$3,817

$3,830

$1,640

$1,658

$1,689

 

 

 

 

 

 

Asset Quality Ratios

Allowance for loan losses (ALLL) to total loans

1.27%

1.22%

1.30%

1.25%

1.21%

ALLL to nonperforming loans

295.21%

289.48%

680.18%

625.22%

577.82%

Nonperforming assets to total assets

0.34%

0.34%

0.16%

0.16%

0.18%

Nonperforming loans to total loans

0.43%

0.42%

0.19%

0.20%

0.21%

Net quarterly charge-offs to total loans

0.00%

0.01%

0.00%

-0.02%

0.00%

 

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


Source: Business Wire (January 27, 2020 - 6:00 AM EST)