Avidbank Holdings, Inc. Announces Net Income of $3,452,000 for the Third 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 $3,452,000 for the third quarter of 2019 compared to $2,865,000 for the same period in 2018.

Year-to-Date and Third Quarter 2019 Financial Highlights

• Net income was $9,808,000 in the first nine months of 2019 compared to $7,639,000 in the first nine months of 2018. Net income in the first nine months of 2019 included a $1.3 million loan loss provision while net income in 2018 reflected a $0.7 million loan loss provision. Net interest income was $33,632,000 in the first nine months of 2019, an increase of $6,500,000 or 24% over the figure recorded in the first nine months of 2018.

• Diluted earnings per common share were $1.66 in the first nine months of 2019, compared to $1.30 in the first nine months of 2018. The increase in earnings per share was the result of higher earnings in 2019. Weighted average common fully diluted shares outstanding were 5,904,960 and 5,865,859 in the first nine months of 2019 and 2018, respectively.
• Net interest income was $11,164,000 for the third quarter of 2019, an increase of $1,568,000 over the $9,596,000 we recorded in the third quarter of 2018. The 16% increase over the prior year quarter reflects the impact of our loan growth over the past twelve months.

• Net income was $3,452,000 for the third quarter of 2019, compared to $2,865,000 for the third quarter of 2018. Results for the third quarter of 2019 reflected a loan loss provision of $39,000 compared to a $665,000 loan loss provision in the third quarter of 2018.
• Diluted earnings per common share were $0.58 for the third quarter of 2019, compared to $0.49 for the third quarter of 2018.
• Total assets grew by 22% in the first nine months of 2019, ending the third quarter at $1.1 billion.
• Total loans net of deferred fees grew by 13% in the first nine months of 2019, ending the third quarter at $909 million.
• Total deposits grew by 11% in the first nine months of 2019, ending the third quarter at $888 million.

The Company continues to be well capitalized for regulatory purposes with a Tier 1 Leverage Ratio of 10.84%, a Tier 1 Risk Based Capital and Common Equity Tier 1 Risk Based Capital Ratio of 10.16%, and a Total Risk Based Capital Ratio of 12.26%.

Mark D. Mordell, Chairman and Chief Executive Officer, stated, "Net interest income increased to $11.2 million in the third quarter of 2019, a 16% increase over the third quarter of 2018, due to our loan growth over the past twelve months. Loans grew $51.5 million in the third quarter primarily as a result of higher C&I, Commercial Real Estate, Specialty Finance and Venture Lending loans offsetting 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 first nine months of 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 as we scale. We have added personnel in Credit Administration, Operations, BSA and Gina Thoma-Peterson, our first Chief Operating Officer, started in September. 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 $1,331,000 to $6,993,000 in the third quarter of 2019, up from $5,662,000 in the third quarter of 2018 primarily due to these increased investments. Our efficiency ratio increased to 59% in the third quarter of 2019, up from 56% in the third quarter of 2018 as a result of the increased expenses. Total deposits increased by $58 million in the third quarter of 2019 compared to the second quarter of 2019 and increased by $99 million from the third quarter of 2018. The increase in deposits from June 30, 2019 was due to higher demand deposits and brokered deposits. The increase in deposits over the third quarter of 2018 was primarily due to an increase in money market accounts, brokered deposits and demand deposits. Our net interest margin grew to 4.49% in the third quarter of 2019, compared to 4.47% in the third quarter of 2018 due to growth in loans. Return on assets was 1.32% in the third quarter of 2019 compared to 1.25% in the second quarter of 2019 and 1.28% in the third quarter of 2018.”

Results for the nine months ended September 30, 2019

Net interest income before provision for loan losses was $33.6 million in the first nine months of 2019, an increase of $6.5 million or 24% over the same period of the prior year. Higher average outstanding loan balances were the primary reason for the increase. Average total loans were $845 million in the first nine months of 2019 compared to $683 million in the first nine months of 2018. Average earning assets were $957 million in the first nine months of 2019, a 19% increase over the prior year. Net interest margin was 4.70% in the first nine months of 2019 compared to 4.53% 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 $1.3 million was recorded in the first nine months of 2019 and a $0.7 million loan loss provision was recorded in the first nine months of 2018. We had $107,000 of charge-offs and $151,000 of recoveries in the first nine months of 2019 compared to $151,000 of charge-offs and minimal recoveries for the same period in 2018.

Non-interest income was $2,197,000 in the first nine months of 2019, an increase of $401,000 or 22% over 2018 reflecting increased service charges on deposit accounts. Non-interest income in the first nine months of 2019 included a $306,000 gain from the sale of collateral on a workout loan while non-interest income in the first nine months of 2018 included $281,000 of earnings from an investment in an SBIC fund.

Non-interest expense increased by $3.1 million to $20.7 million in the first nine months of 2019 compared to $17.7 million in 2018 due primarily to increased investments in loan production personnel.

The effective tax rate was 29.0% in the first nine months of 2019 compared to 28.0% for the same period in 2018.

Results for the quarter ended September 30, 2019

For the three months ended September 30, 2019, net interest income before provision for loan losses was $11.2 million, an increase of $1.6 million or 16% compared to the third quarter of 2018. The increase was primarily the result of higher average loans outstanding. Average total loans outstanding for the quarter ended September 30, 2019 were $880 million, compared to $720 million for the same quarter in 2018, an increase of 22%. Average earning assets were $987 million in the third quarter of 2019, a 16% increase over the third quarter of the prior year. Loans made up 89% of average earning assets at the end of the third quarter of 2019 compared to 85% at the end of the third quarter of 2018. Net interest margin was 4.49% for the third quarter of 2019, compared to 4.47% for the third quarter of 2018. A loan loss provision of $39,000 was taken in the third quarter of 2019 compared with a $665,000 loan loss provision taken in the third quarter of 2018.

Non-interest income was $686,000 in the third quarter of 2019, an increase of $165,000 or 32% compared to the third 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 $1,331,000 in the third quarter of 2019 to $6,993,000 compared to $5,662,000 for the third quarter of 2018. This increase was primarily due to higher compensation costs related to increased staffing. The Company's full-time equivalent employees at September 30, 2019 and 2018 were 107 and 92, respectively. The Company's efficiency ratio increased from 56% in the third quarter of 2018 to 59% in the third quarter of 2019 due to increased expenses from the growth in staff.

Balance Sheet

Total assets were $1.1 billion as of September 30, 2019, compared to $1.0 billion at June 30, 2019 and $935 million on the same day one year ago. The increase in total assets of $93 million, or 9%, from June 30, 2019 was primarily due to higher loan balances and overnight funds that were funded by increased demand deposits, brokered deposits and Federal Home Loan Bank (FHLB) borrowings. The Company reported loans net of deferred fees at September 30, 2019 of $909 million, which represented an increase of $51 million, or 6%, from $858 million at June 30, 2019, and an increase of $152 million, or 20%, over $757 million at September 30, 2018. The increase in total loans from June 30, 2019 was primarily attributable to higher C&I, Commercial Real Estate, Specialty Finance and Venture Lending loans. The increase in loans from September 30, 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 September 30, 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 $888 million as of September 30, 2019, which represented an increase of $58 million, or 7%, compared to $830 million at June 30, 2019 and an increase of $98 million, or 12%, compared to $790 million at September 30, 2018. The increase in deposits from June 30, 2019 was due to higher demand deposits and brokered deposits. The increase from September 30, 2018 was primarily due to an increase in money market accounts, brokered deposits and demand deposits. The Company had $80 million of FHLB advances outstanding as of September 30, 2019 compared to $50 million at June 30, 2019 and $30 million as of September 30, 2018.

Demand and interest bearing transaction deposits represented 47% of total deposits at September 30, 2019, compared to 48% at June 30, 2019 and 52% 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 September 30, 2019, compared to 85% at June 30, 2019 and 86% at September 30, 2018. The Company’s loan to deposit ratio was 102% at September 30, 2019 compared to 103% at June 30, 2019 and 96% at September 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.