Avidbank Holdings, Inc. Announces Net Income of $3.6 Million for the Third Quarter of 2021
*SAN JOSE, CA / ACCESSWIRE / October 18, 2021 / *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 $3.6 million for the third quarter of 2021 compared to $2.4 million for the same period in 2020.
Year-to-Date and Third Quarter 2021 Financial Highlights
· Net income was $9.7 million in the first nine months of 2021 compared to $6.9 million in the first nine months of 2020. Net income in the first nine months of 2021 benefited from a $735,000 gain on the sale of investment securities. Net income in the prior year period was reduced by a $1.6 million loan loss provision while a $293,000 loan loss provision was taken in 2021. Net interest income was $36.7 million in the first nine months of 2021, an increase of $3.5 million or 10.7% compared to the figure recorded in the first nine months of 2020.
· Diluted earnings per common share were $1.61 in the first nine months of 2021, compared to $1.15 in the first nine months of 2020. Weighted average common fully diluted shares outstanding were 6,048,748 and 5,957,949 in the first nine months of 2021 and 2020, respectively.
· Total interest income was $13.6 million for the third quarter of 2021, an increase of $1.2 million over the $12.4 million we recorded in the third quarter of 2020. The 9.9% increase over the prior year quarter reflects year over year loan growth and increased investment securities income offset, in part, by declining loan yields.
· Net income was $3.6 million for the third quarter of 2021, compared to $2.4 million for the third quarter of 2020. Results for the third quarter of 2021 were affected by a $217,000 loan loss provision while a $303,000 loan loss provision was taken in the third quarter of 2020.
· Diluted earnings per common share were $0.59 for the third quarter of 2021, compared to $0.39 for the third quarter of 2020.
· Total assets grew by 27.8% in the first nine months of 2021, ending the third quarter at $1.83 billion.
· Total loans net of deferred fees grew by 8.0% in the first nine months of 2021, ending the third quarter at $1.07 billion.
· Total deposits grew by 31.4% in the first nine months of 2021, ending the third quarter at $1.65 billion.
· The Company continues to be well capitalized for regulatory purposes with a Tier 1 Leverage Ratio of 7.81%, a Tier 1 Risk Based Capital and Common Equity Tier 1 Risk Based Capital Ratio of 9.94%, and a Total Risk Based Capital Ratio of 12.44%.
Mark D. Mordell, Chairman and Chief Executive Officer, stated, "Net interest income increased to $12.7 million in the third quarter of 2021, a 15.4% increase over the third quarter of 2020, primarily due to a drop in deposit interest expense and an increase in investment securities income. Loans outstanding increased in the third quarter of 2021 due to increased CRE, Multi-Family, and Venture Lending loans, partially offset by several Construction loan payoffs. Our lending activity picked up in the third quarter even with the surplus liquidity in the economy from government programs. We increased our investment portfolio $68.2 million in the third quarter of 2021 with additional purchases of mortgage-backed securities."
Mr. Mordell continued, "Non-interest expense decreased by $120,000 to $8.5 million in the third quarter of 2021, down from $8.6 million in the second quarter of 2021, as we have reduced the pace of our hiring and restructured the staffing in our Specialty Finance Division to generate an estimated annual savings of over $1.2 million. Our efficiency ratio decreased to 61.9% in the third quarter of 2021, down from 72.6% in the third quarter of 2020, as a result of increased net interest income, higher service charges and controlling costs. We closed our Palo Alto branch at the end of the third quarter as the pandemic accelerated our plans to shutter the underutilized and high cost location. Beginning in 2022 the closure will generate an annual savings estimated to be over $600,000 in facilities and other costs. Total deposits increased by $220.4 million in the third quarter of 2021 compared to the second quarter of 2021 and increased by $379.2 million from the third quarter of 2020. The increase in deposits from June 30, 2021 was due to higher money market and demand deposit accounts. The increase in deposits over the third quarter of 2020 was also due to an increase in demand deposits and money market accounts partially offset by lower brokered deposits and CDs over $250,000. Our net interest margin dropped to 2.98% in the third quarter of 2021, compared to 3.28% in the second quarter of 2021, primarily due to a large surplus in overnight funds and a drop in loan and investment yields. Return on assets was 0.80% in the third quarter of 2021 compared to 0.94% in the second quarter of 2021 and 0.66% in the third quarter of 2020."
Mr. Mordell concluded, "We continue to maintain a hybrid work environment in our offices with the majority of staff splitting their time between the office and remote work at home and a growing number working full-time in the office. Our focus will continue to be employee health and safety along with our fiduciary responsibility to our clients and shareholders. For those reasons, we continue to be cautious in our plans for returning employees to the workplace."
Results for the nine months ended September 30, 2021
Net interest income before provision for loan losses was $36.7 million in the first nine months of 2021, an increase of $3.5 million or 10.7% over the same period of the prior year. Reduced interest expense and higher investment income were the primary reasons for the increase. Average loans net of deferred fees were $1.02 billion in the first nine months of 2021 compared to $976.7 million in the first nine months of 2020. Average earning assets were $1.53 billion in the first nine months of 2021, a 24.4% increase over the prior year figure of $1.23 billion. Net interest margin was 3.22% in the first nine months of 2021 compared to 3.61% for the same period in 2020. The decrease in net interest margin was primarily caused by a decline in loan and investment yields and an increase in overnight funds. A $293,000 loan loss provision was taken in the first nine months of 2021 compared to a $1.6 million loan loss provision recorded in the first nine months of 2020. We had $75,000 of charge-offs and no recoveries in the first nine months of 2021 compared to $411,000 of charge-offs and no recoveries for the same period in 2020.
Non-interest income was $3.2 million in the first nine months of 2021, an increase of $1.3 million or 68.8% compared to $1.9 million in the first nine months of 2020, reflecting a $735,000 gain on the sale of investments and increased service charge and investment fund income.
Non-interest expense increased by $1.5 million to $26.1 million in the first nine months of 2021 compared to $24.6 million for the same period in 2020 due primarily to increased investments in personnel across the entire Bank.
The effective tax rate was 28.5% in the first nine months of 2021 compared to 23.2% for the same period in 2020. The effective tax rate in 2020 reflected the favorable impact of affordable housing tax credit investments and the re-allocation of income taxes to states outside of California.
Results for the quarter ended September 30, 2021
For the three months ended September 30, 2021, interest and fees on loans were $12.5 million, an increase of $344,000 or 2.8% compared to the third quarter of 2020. The increase was primarily the result of higher loan balances partially offset by lower loan yields. Average loans net of deferred fees for the quarter ended September 30, 2021 were $1.03 billion, compared to $1.01 billion for the same quarter in 2020, an increase of 2.0%. Average earning assets were $1.69 billion in the third quarter of 2021, a 24.3% increase over the third quarter of the prior year. Loans made up 61% of average earning assets at the end of the third quarter of 2021 compared to 74% at the end of the third quarter of 2020. Net interest margin was 2.98% for the third quarter of 2021, compared to 3.22% for the third quarter of 2020. A $217,000 loan loss provision was taken in the third quarter of 2021 compared with a $303,000 loan loss provision taken in the third quarter of 2020.
Non-interest income was $1.0 million in the third quarter of 2021, an increase of $434,000 or 77.1% compared to the third quarter of 2020. The increase resulted primarily from increased service charge and investment fund income.
Non-interest expense increased by $89,000 or 1.1% in the third quarter of 2021 to $8.5 million compared to $8.4 million for the third quarter of 2020. This increase was primarily due to inflationary increases in compensation and benefit costs. The Company's full-time equivalent employees at September 30, 2021 and 2020 were 126 for both periods. The Company's efficiency ratio decreased from 72.6% in the third quarter of 2020 to 61.9% in the third quarter of 2021 primarily due to controlled expenses, increased investment and loan interest income, and reduced interest expense.
Balance Sheet
Total assets were $1.83 billion as of September 30, 2021, compared to $1.60 billion at June 30, 2021 and $1.44 billion at September 30, 2020. The increase in total assets of $223.7 million, or 13.9%, from June 30, 2021 was primarily due to increased deposits causing an increase in overnight funds with the Federal Reserve. Investments increased $68.2 million due to the purchase of mortgage-backed securities with excess funds. The Company reported loans net of deferred fees at September 30, 2021 of $1.073 billion, which represented an increase of $58.4 million, or 5.8%, from $1.01475 billion at June 30, 2021, and an increase of $62.0 million, or 6.1%, over $1.011 billion at September 30, 2020. The increase in loans from June 30, 2021 was primarily the result of an increase in CRE, Multi-Family and Venture Lending loans, partially offset by a decrease in Construction loans. The increase in loans from September 30, 2020 was due to higher CRE, Multi-Family and Venture Lending loans, partially offset by lower Asset-Based loans.
"We had $3.3 million in three non-accrual loans on September 30, 2021, unchanged from a balance of $3.3 million at the end of the prior quarter. Two of the non-accrual loans totaling $3.1 million are secured by commercial real estate with a very low loan to value," observed Mr. Mordell.
The Company's total deposits were $1.65 billion as of September 30, 2021, which represented an increase of $220.4 million, or 15.4%, compared to $1.43 billion at June 30, 2021 and an increase of $379.2 million, or 29.9%, compared to $1.27 billion at September 30, 2020. The increase in deposits from June 30, 2021 was due to higher demand deposit and money market accounts. The increase from September 30, 2020 was also due to an increase in money market accounts and demand deposits, partially offset by lower brokered deposits and CDs over $250,000. The Company had no FHLB advances outstanding as of September 30, 2021, June 30, 2021 or September 30, 2020.
Demand and interest bearing transaction deposits represented 56% of total deposits at September 30, 2021, compared to 53% at June 30, 2021 and 55% at September 30, 2020. Core deposits, which include transaction deposits, money market accounts and CDs below $250,000, represented 94% of total deposits at September 30, 2021, compared to 92% at June 30, 2021 and 87% at September 30, 2020. The Company's loan to deposit ratio was 65% at September 30, 2021 compared to 71% at June 30, 2021 and 80% at September 30, 2020.
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 a pandemic; 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.
Contact: Steve Leen
Executive Vice President and Chief Financial Officer
408-831-5653
sleen@avidbank.com
*Avidbank Holdings, Inc.*
*Consolidated Balance Sheets*
($000, except share and per share amounts) (Unaudited)
Assets
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20
Cash and due from banks
$ 34,864 $ 27,977 $ 21,870 $ 14,327 $ 20,857
Due from Federal Reserve Bank
378,380 308,596 258,921 215,705 327,795
Total cash and cash equivalents
413,244 336,573 280,791 230,032 348,652
Investment securities - available for sale
276,670 208,482 184,504 163,631 40,316
Loans, net of deferred loan fees
1,073,132 1,014,750 1,027,336 993,483 1,011,137
Allowance for loan losses
(12,775 ) (12,558 ) (12,558 ) (12,558 ) (12,443 )
Loans, net of allowance for loan losses
1,060,357 1,002,192 1,014,778 980,925 998,694
Bank owned life insurance
31,663 11,559 11,491 11,425 11,355
Premises and equipment, net
4,913 5,138 5,375 5,565 5,432
Other real estate owned
- - - - -
Accrued interest receivable & other assets
41,174 40,329 38,744 39,048 39,321
Total assets
$ 1,828,021 $ 1,604,273 $ 1,535,683 $ 1,430,626 $ 1,443,770
Liabilities
Non-interest-bearing demand deposits
$ 872,972 $ 728,522 $ 702,785 $ 665,096 $ 671,663
Interest bearing transaction accounts
49,722 30,538 27,863 25,390 24,808
Money market and savings accounts
614,992 541,145 499,507 419,038 382,394
Time deposits
109,927 126,972 133,314 144,230 189,529
Total deposits
1,647,613 1,427,177 1,363,469 1,253,754 1,268,394
Subordinated debt, net
21,671 21,636 21,601 21,565 21,571
Other liabilities
23,940 23,229 23,294 27,383 28,409
Total liabilities
1,693,224 1,472,042 1,408,364 1,302,702 1,318,374
Shareholders' equity
Common stock/additional paid-in capital
72,124 71,542 71,152 70,721 70,595
Retained earnings
66,267 62,693 59,044 56,537 53,773
Accumulated other comprehensive (loss) income
(3,594 ) (2,004 ) (2,877 ) 666 1,028
Total shareholders' equity
134,797 132,231 127,319 127,924 125,396
Total liabilities and shareholders' equity
$ 1,828,021 $ 1,604,273 $ 1,535,683 $ 1,430,626 $ 1,443,770
Capital ratios
Tier 1 leverage ratio
7.81 % 8.64 % 8.87 % 8.67 % 8.79 %
Common equity tier 1 capital ratio
9.94 % 10.57 % 10.38 % 10.35 % 10.33 %
Tier 1 risk-based capital ratio
9.94 % 10.57 % 10.38 % 10.35 % 10.33 %
Total risk-based capital ratio
12.44 % 13.30 % 13.14 % 13.15 % 13.19 %
Book value per common share
$ 21.55 $ 21.26 $ 20.42 $ 20.74 $ 20.37
Total common shares outstanding
6,255,752 6,220,872 6,236,392 6,168,313 6,155,265
Other Ratios
Non-interest bearing deposits to total deposits
53.0 % 51.0 % 51.5 % 53.0 % 53.0 %
Core deposits to total deposits
94.0 % 91.9 % 91.3 % 90.0 % 86.7 %
Loan to deposit ratio
65.1 % 71.1 % 75.3 % 79.2 % 79.7 %
Allowance for loan losses to total loans
1.19 % 1.24 % 1.22 % 1.26 % 1.23 %
Quarterly Average Balances ($000s)
Loans, net of deferred loan fees
$ 1,026,812 $ 1,022,364 $ 1,008,379 $ 997,442 $ 1,006,167
Earning assets
1,685,193 1,485,107 1,404,752 1,407,390 1,355,862
Total assets
1,771,292 1,554,049 1,468,597 1,467,588 1,414,571
Total deposits
1,589,384 1,376,736 1,291,767 1,290,320 1,244,890
Total shareholders' equity
135,721 131,300 128,844 126,840 123,726
*Avidbank Holdings, Inc.*
*Condensed Consolidated Statements of Income*
($000, except share and per share amounts) (Unaudited)
Quarter Ended Year-to-Date
9/30/21 6/30/21 9/30/20 9/30/21 9/30/20
Interest and fees on loans
$ 12,533 $ 12,246 $ 12,189 $ 36,896 $ 36,785
Interest on investment securities
946 808 157 2,453 710
Other interest income
156 59 65 263 404
Total interest income
13,635 13,113 12,411 39,612 37,899
Deposit interest expense
671 651 1,144 1,963 3,789
Other interest expense
310 310 306 931 933
Total interest expense
981 961 1,450 2,894 4,722
Net interest income
12,654 12,152 10,961 36,718 33,177
Provision for loan losses
217 - 303 293 1587
Net interest income after provision for loan losses
12,437 12,152 10,658 36,425 31,590
Service charges, fees and other income
894 736 495 2,253 1,724
Income from bank owned life insurance
103 68 68 238 200
Gain on sale of assets
- 735 - 756 -
Total non-interest income
997 1,539 563 3,247 1,924
Compensation and benefit expenses
5,860 6,001 5,746 18,336 17,261
Occupancy and equipment expenses
1,066 1,017 1,070 3,154 2,984
Other operating expenses
1,526 1,554 1,547 4,576 4,327
Total non-interest expense
8,452 8,572 8,363 26,066 24,572
Income before income taxes
4,982 5,119 2,858 13,606 8,942
Provision for income taxes
1,408 1,470 499 3,876 2,078
Net income
$ 3,574 $ 3,649 $ 2,359 $ 9,730 $ 6,864
Basic earnings per common share
$ 0.60 $ 0.62 $ 0.40 $ 1.65 $ 1.17
Diluted earnings per common share
$ 0.59 $ 0.60 $ 0.39 $ 1.61 $ 1.15
Average common shares outstanding
5,898,208 5,892,713 5,864,952 5,885,421 5,854,487
Average common fully diluted shares
6,072,085 6,051,243 5,974,216 6,048,748 5,957,949
Annualized returns:
Return on average assets
0.80 % 0.94 % 0.66 % 0.81 % 0.71 %
Return on average common equity
10.45 % 11.15 % 7.59 % 9.86 % 7.57 %
Net interest margin
2.98 % 3.28 % 3.22 % 3.22 % 3.61 %
Cost of funds
0.24 % 0.28 % 0.46 % 0.27 % 0.55 %
Efficiency ratio
61.91 % 62.61 % 72.57 % 65.22 % 70.00 %
*Avidbank Holdings, Inc.*
*Credit Trends*
($000) (Unaudited)
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20
Allowance for Loan Losses
Balance, beginning of quarter
$ 12,558 $ 12,558 $ 12,558 $ 12,443 $ 12,521
Provision for loan losses, quarterly
217 - 75 115 303
Charge-offs, quarterly
- - (75 ) - (380 )
Recoveries, quarterly
- - - - -
Balance, end of quarter
$ 12,775 $ 12,558 $ 12,558 $ 12,558 $ 12,443
Nonperforming Assets
Loans accounted for on a non-accrual basis
$ 3,285 $ 3,326 $ 3,367 $ 3,547 $ 331
Loans with principal or interest contractually past due 90 days or
more and still accruing interest
- - - - -
Nonperforming loans
3,285 3,326 3,367 3,547 331
Other real estate owned
- - - - -
Nonperforming assets
$ 3,285 $ 3,326 $ 3,367 $ 3,547 $ 331
Loans restructured and in compliance with modified terms
- - - - -
Nonperforming assets & restructured loans
$ 3,285 $ 3,326 $ 3,367 $ 3,547 $ 331
Nonperforming Loans by Type:
Commercial
$ 456 $ 463 $ 470 $ 618 $ 331
Commercial Real Estate Loans
2,829 2,863 2,897 2,929 -
Total Nonperforming loans
$ 3,285 $ 3,326 $ 3,367 $ 3,547 $ 331
Asset Quality Ratios
Allowance for loan losses (ALLL) to total loans
1.19 % 1.24 % 1.22 % 1.26 % 1.23 %
ALLL to nonperforming loans
388.88 % 377.59 % 373.03 % 354.00 % 3759.27 %
Nonperforming assets to total assets
0.18 % 0.21 % 0.22 % 0.25 % 0.02 %
Nonperforming loans to total loans
0.31 % 0.33 % 0.33 % 0.36 % 0.03 %
Net quarterly charge-offs to total loans
0.00 % 0.00 % 0.01 % 0.00 % 0.04 %
*SOURCE: *Avidbank Holdings, Inc.
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