Avidbank Holdings, Inc. Announces Net Income of $3,183,000 for the Second Quarter of 2019

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 $3,183,000 for the second quarter of 2019 compared to $2,666,000 for the same period in 2018.

Year-to-Date and Second Quarter 2019 Financial Highlights

• Net income was $6,356,000 in the first six months of 2019 compared to $4,773,000 in the first six months of 2018. Net income in the first six months of 2019 included a $1.2 million loan loss provision while net income in 2018 reflected no loan loss provision. Net interest incomewas $22,468,000 in the first six months of 2019,an increase of $4,933,000 or 28% over the figure recorded in the first six months of 2018.
• Diluted earnings per common share were $1.08 in the first six months of 2019, compared to $0.81 in the first six months of 2018. The increase in earnings per share was the result of higher earnings in 2019. Weighted average common shares outstanding were 5,791,394 and 5,742,988 in the first six months of 2019 and 2018, respectively.
• Net interest income was $11,425,000 for the second quarter of 2019, an increase of $2,475,000 over the $8,950,000 we recorded in the second quarter of 2018. The 28% increase over the prior year quarter reflects the impact of our loan growth over the past twelve months.
• Net income was $3,183,000 for the second quarter of 2019, compared to $2,666,000 for the second quarter of 2018. Results for the second quarter of 2019 reflected a loan loss provision of $787,000 compared to no loan loss provision in the second quarter of 2018.
• Diluted earnings per common share were $0.54 for the second quarter of 2019, compared to $0.45 for the second quarter of 2018.
• Total assets grew by 11% in the first six months of 2019, ending the second quarter at $1.0 billion.
• Total loans net of deferred fees grew by 6% in the first six months of 2019, ending the second quarter at $858 million.
• Total deposits grew by 4% in the first six months of 2019, ending the second quarter at $830 million.
• The Company continues to be well capitalized for regulatory purposes with a Tier 1 Leverage Ratio of 10.69%, a Tier 1 Risk Based Capital and Common Equity Tier 1 Risk Based Capital Ratio of 10.28%, and a Total Risk Based Capital Ratio of 12.49%.

Mark D. Mordell, Chairman and Chief Executive Officer, stated, “Net interest income increased to $11.4 million in the second quarter of 2019, a 28% increase over the second quarter of 2018, due to our loan growth over the past twelve months. Loans grew $26.1 million in the second quarter primarily as a result of higher commercial real estate and C&I loans offsetting a significant amount of construction loan payoffs. We continue to be committed to a strong growth strategy to achieve scale and optimal profitability. We are also continuing to be opportunistic when identifying additional personnel and infrastructure that can be accretive to our cause. We have added several new employees in the second quarter of 2019 reflecting the expansion of our venture lending and structured finance divisions that are key areas for diversification and growth. 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 $930,000 to $6,670,000 in the second quarter of 2019, up from $5,740,000 in the second quarter of 2018 primarily due to these increased investments. Our efficiency ratio decreased to 55.4% in the second quarter of 2019, down from 60.3% in the second quarter of 2018 as a result of increased earnings due to significant loan growth. Total deposits decreased by $17 million in the second quarter of 2019 compared to the first quarter of 2019, but increased by $152 million from the second quarter of 2018. The decrease in deposits from March 31, 2019 was due to lower money market and interest checking accounts. The increase in deposits over the second quarter of 2018 was primarily due to the efforts our team has made to increase demand deposits and money market accounts. Our net interest margin grew to 4.74% in the second quarter of 2019, compared to 4.56% in the second quarter of 2018 due to growth in loans and the favorable impact of interest rate increases on our variable rate loans. Return on assets was 1.25% in the second quarter of 2019 compared to 1.30% in the second quarter of 2018.”

Results for the six months ended June 30, 2019

Net interest income before provision for loan losses was $22.5 million in the first six months of 2019, an increase of $4.9 million or 28% over the same period of the prior year. Higher average outstanding loan balances were the primary reason for the increase. Average total loans were $827 million in the first six months of 2019 compared to $664 million in the first six months of 2018. Average earning assets were $942 million in the first six months of 2019, a 21% increase over the prior year. Net interest margin was 4.81% in the first six months of 2019 compared to 4.56% for the same period in 2018. 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 $1.2 million was recorded in the first six months of 2019 and no loan loss provision was recorded in the first six months of 2018. We had no charge-offs and $151,000 of recoveries in the first six months of 2019 compared to no charge-offs and minimal recoveries for the same period in 2018.

Non-interest income was $1,511,000 in the first six months of 2019, an increase of $235,000 or 18% over 2018 reflecting increased service charges on deposit accounts. Non-interest income in the first six months of 2019 included a $306,000 gain from the sale of collateral on a workout loan while non-interest income in the first six months of 2018 included $281,000 of earnings from an investment in an SBIC fund.

Non-interest expense increased by $1.7 million to $13.7 million in the first six months of 2019 compared to $12.0 million in 2018 due primarily to increased investments in loan production personnel.

The effective tax rate was 29.3% in the first six months of 2019 compared to 30.0% for the same period in 2018.

Results for the quarter ended June 30, 2019

For the three months ended June 30, 2019, net interest income before provision for loan losses was $11.4 million, an increase of $2.5 million or 28% compared to the second quarter of 2018. The increase was primarily the result of higher average loans outstanding. Average total loans outstanding for the quarter ended June 30, 2019 were $844 million, compared to $673 million for the same quarter in 2018, an increase of 25%. Average earning assets were $968 million in the second quarter of 2019, a 23% increase over the second quarter of the prior year. Loans made up 87% of average earning assets at the end of the second quarter of 2019 compared to 86% at the end of the second quarter of 2018. Net interest margin was 4.74% for the second quarter of 2019, compared to 4.56% for the second quarter of 2018. A loan loss provision of $0.8 million was taken in the second quarter of 2019 compared with no loan loss provision taken in the second quarter of 2018.

Non-interest income was $621,000 in the second quarter of 2019, an increase of $50,000 or 9% compared to the second quarter of 2018. The increase was primarily the result of increased service charges on deposit accounts as a result of our growth.

Non-interest expense increased by $930,000 in the second quarter of 2019 to $6,670,000 compared to $5,740,000 for the second quarter of 2018. This increase was primarily due to higher compensation costs related to increased staffing. The Bank's full-time equivalent employees at June 30, 2019 and 2018 were 105 and 90, respectively. The Bank's efficiency ratio decreased from 60.3% in the second quarter of 2018 to 55.4% in the second quarter of 2019 due to increased revenue from significant loan growth.

Balance Sheet

Total assets were $1.021 billion as of June 30, 2019, compared to $1.014 billion at March 31, 2019 and $845 million on the same day one year ago. The increase in total assets of $7 million, or 1%, from March 31, 2019 was primarily due to higher loan balances that were funded by a $20 million increase in Federal Home Loan Bank (FHLB) borrowings. The Company reported loans net of deferred fees at June 30, 2019 of $858 million, which represented an increase of $26 million, or 3%, from $832 million at March 31, 2019, and an increase of $167 million, or 24%, over $691 million at June 30, 2018. The increase in total loans from March 31, 2019 was primarily attributable to growth in commercial real estate and C&I loans partially offset by a significant amount of construction loan payoffs. The increase in loans from June 30, 2018 was due to higher specialty finance, multi-family, C&I and commercial real estate loans.

“We had a $1.6 million non-accrual loan on June 30, 2019, which was down slightly from a $1.7 million balance at the end of the prior year. The non-accrual loan is secured by real estate,” observed Mr. Mordell.

The Company’s total deposits were $830 million as of June 30, 2019, which represented a decrease of $17 million, or 2%, compared to $847 million at March 31, 2019 and an increase of $151 million, or 22%, compared to $679 million at June 30, 2018. The decrease in deposits from March 31, 2019 was due to lower money market and interest checking accounts. The increase from June 30, 2018 was primarily due to an increase in money market and demand deposit accounts. The Company had $50 million of FHLB advances outstanding as of June 30, 2019 compared to $30 million at March 31, 2019 and $55 million as of June 30, 2018.

Demand and interest bearing transaction deposits represented 48% of total deposits at June 30, 2019, compared to 48% at March 31, 2019 and 50% for the same period one year ago. Core deposits, which include transaction deposits, money market accounts and CDs below $250,000, represented 85% of total deposits at June 30, 2019, compared to 86% at March 31, 2019 and 85% at June 30, 2018. The Company’s loan to deposit ratio was 103% at June 30, 2019 compared to 98% at March 31, 2019 and 102% at June 30, 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.