Market Overview

Avidbank Holdings, Inc. Announces Net Income of $2,666,000 for the Second Quarter of 2018

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Avidbank Holdings, Inc. ("the Company") (OTC: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
$2,666,000 for the second quarter of 2018 compared to $1,430,000 for the
same period in 2017.

Year-to-Date and Second Quarter 2018 Financial
Highlights

  • Net income was $4,773,000 in the first six months of 2018 compared to
    $2,984,000 in the first six months of 2017. Net income in the first
    six months of 2017 included a loan loss provision of $1,806,000 while
    no loan loss provision was recognized in the first six months of 2018.
    Net interest income was $17,535,000 in the first six months of 2018,
    an increase of $2,960,000 or 20% over the figure recorded in the first
    six months of 2017.
  • Diluted earnings per common share were $0.81 in the first six months
    of 2018, compared to $0.63 in the first six months of 2017. Weighted
    average common shares outstanding were 5,742,988 and 4,636,230 in the
    first six 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 $8,950,000 for the second quarter of 2018, an
    increase of $1,344,000 over the $7,606,000 we recorded in the second
    quarter of 2017. The 18% increase over the prior year quarter reflects
    the impact of our loan growth over the past twelve months.
  • Net income was $2,666,000 for the second quarter of 2018, compared to
    $1,430,000 for the second quarter of 2017. Results for the second
    quarter of 2018 reflected no loan loss provision compared to a loan
    loss provision of $1,085,000 in the second quarter of 2017.
  • Diluted earnings per common share were $0.45 for the second quarter of
    2018, compared to $0.30 for the second quarter of 2017.
  • Total assets grew by 8% in the first six months of 2018, ending the
    second quarter at $845 million.
  • Total loans net of deferred fees grew by 7% in the first six months of
    2018, ending the second quarter at $691 million.
  • Total deposits grew by 5% in the first six months of 2018, ending the
    second quarter at $679 million.
  • The Company continues to be well capitalized for regulatory purposes
    with a Tier 1 Leverage Ratio of 11.6%, a Tier 1 Risk Based Capital and
    Common Equity Tier 1 Risk Based Capital Ratio of 10.8%, and a Total
    Risk Based Capital Ratio of 13.2%.

Mark D. Mordell, Chairman and Chief Executive Officer, stated, "Net
interest income increased to $9 million in the second quarter of 2018,
an 18% increase over the second quarter of 2017 due to our loan growth
over the past twelve months. Loans grew $29 million in the second
quarter even as we experienced a high level of unexpected payoffs in our
Specialty Finance division due to the active merger and acquisition
markets. We are committed to a growth strategy to achieve optimal
profitability and have made substantial investments in personnel and
facilities to help realize that goal responsibly. Through the first six
months of 2018 we have added additional 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 infrastructure
to serve our markets."

Mr. Mordell continued, "In 2017 and the first half of 2018 we added both
business development and support staff to sustain and manage our growth.
We also expanded and relocated our facilities to accommodate our growth
in staff as well as lower our facilities cost per employee as we scale
our franchise. Non-interest expenses increased by $1.0 million to $5.7
million in the second quarter of 2018 from $4.7 million in the second
quarter of 2017 primarily due to these increased investments and the
remaining lease obligation from our old San Jose production office. Our
efficiency ratio increased to 60.3% in the second quarter of 2018 from
59.1% in the second quarter of 2017 as a result of the increased
expenses. Total deposits increased by $12 million in the second quarter
of 2018 compared to the first quarter of 2018 and increased by $60
million from the same quarter in 2017. The increase in deposits for the
second quarter of 2018 was primarily due to an increase in demand
deposits and brokered deposits. Our net interest margin grew to 4.56% in
the second quarter of 2018 compared to 4.37% in the second quarter of
2017 due to changes in the mix of earning assets in favor of higher
yielding loans. Return on assets was 1.30% in the second quarter of 2018
compared to 0.79% in the second quarter of 2017."

Results for the six months ended June 30, 2018

Net interest income before provision for loan losses was $17.5 million
in the first six months of 2018, an increase of $3.0 million or 20% over
the same period of the prior year. Higher outstanding average loan
balances were the primary reason for the increase. Average total loans
were $664 million in the first six months of 2018 compared to $556
million in the first six months of 2017. Average earning assets were
$776 million in the first six months of 2018, a 14% increase over the
prior year. Net interest margin was 4.56% in the first six 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. No loan loss provision was recorded
in the first six months of 2018 and a loan loss provision of $1.8
million was taken in the first six months of 2017. We had no charge-offs
and minimal recoveries in the first six months of 2018 compared to no
charge-offs and recoveries of $26,000 for the same period in 2017.

Non-interest income was $1,276,000 in the first six months of 2018, an
increase of $339,000 or 36% compared to the same period in 2017.
Non-interest income in the first half of 2018 included $281,000 of
earnings from an investment in an SBIC fund while non-interest income in
the prior year's first half included $112,000 from the exercise of
common stock warrants related to a Specialty Finance loan.

Non-interest expense increased by $2.9 million to $12 million in the
first six months of 2018 compared to $9.1 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 30% in the first six months of 2018 compared
to 34.8% 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 June 30, 2018

For the three months ended June 30, 2018, net interest income before
provision for loan losses was $9 million, an increase of $1.3 million or
18% compared to the second quarter of 2017. The increase was primarily
the result of higher average loans outstanding. Average total loans
outstanding for the quarter ended June 30, 2018 were $673 million,
compared to $572 million for the same quarter in 2017, an increase of
18%. Average earning assets were $786 million in the second quarter of
2018, a 13% increase over the second quarter of the prior year. Loans
made up 86% of average earning assets at the end of the second quarter
of 2018 compared to 82% at the end of the second quarter of 2017. Net
interest margin was 4.56% for the second quarter of 2018, compared to
4.37% for the second quarter of 2017. No loan loss provision was taken
in the second quarter of 2018 compared with a loan loss provision of
$1.1 million taken in the second quarter of 2017.

Non-interest income was $571,000 in the second quarter of 2018, an
increase of $155,000 or 37% compared to the second 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 $1,003,000 in the second quarter of
2018 to $5,740,000 compared to $4,737,000 for the second quarter of
2017. This increase was primarily due to higher compensation costs
related to increased staffing and increased occupancy costs due to the
expansion of our facilities. The Bank's full time equivalent employees
at June 30, 2018 and 2017 were 90 and 77, respectively. The Bank's
efficiency ratio increased from 59.1% in the second quarter of 2017 to
60.3% in the second quarter of 2018 due to increased staffing and
facilities costs to accommodate our growth.

Balance Sheet

Total assets increased to $845 million as of June 30, 2018, compared to
$822 million at March 31, 2018 and $731 million on the same day one year
ago. The increase in total assets of $23 million, or 3%, from March 31,
2018 was primarily due to increased FHLB borrowings and increased demand
deposit accounts in the second quarter of 2018. The Company reported
loans net of deferred fees at June 30, 2018 of $691 million, which
represented an increase of $29 million, or 4%, from $662 million at
March 31, 2018, and an increase of $107 million, or 18%, over $584
million at June 30, 2017. The increase in total loans from March 31,
2018 was primarily attributable to growth in commercial real estate
loans. The increase in loans from June 30, 2017 was due to higher
commercial real estate, Specialty Finance and multi-family loans.

"We had $2.3 million in non-accrual loans comprising 0.32% of total
loans on June 30, 2018 compared to $5.2 million in non-accrual loans at
the end of the prior year. We are pleased that the balance of our
non-accrual loans was reduced by more than half in the first six months
of 2018," observed Mr. Mordell.

The Company's total deposits were $679 million as of June 30, 2018,
which represented an increase of $13 million, or 2%, compared to $666
million at March 31, 2018 and an increase of $60 million, or 10%,
compared to $619 million at June 30, 2017. The increase in deposits from
March 31, 2018 was due to an increase in demand deposits and brokered
deposits. The increase from June 30, 2017 was caused by an increase in
demand deposits and CDs greater than $250,000. The Company had $55
million of Federal Home Loan Bank advances outstanding as of June 30,
2018 compared to $30 million at June 30, 2017.

Demand and interest bearing transaction deposits represented 50% of
total deposits at June 30, 2018, compared to 46% at March 31, 2018 and
46% 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, 2018, compared to 87% at
March 31, 2018 and 86% at June 30, 2017. The Company's loan to deposit
ratio was 102% at June 30, 2018 compared to 99% at March 31, 2018 and
94% at June 30, 2017.

About Avidbank

Avidbank Holdings, Inc. (OTC: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)
         

Assets

6/30/18

3/31/18

12/31/17

9/30/17

6/30/17

Cash and due from banks $10,767 $15,729 $10,650 $11,068 $10,845
Due from Federal Reserve Bank 57,070   48,475   22,710   74,970   32,510
Total cash and cash equivalents 67,837 64,204 33,360 86,038 43,355
 
Investment securities - available for sale 60,362 70,797 74,364 76,742 82,986
 
Loans, net of deferred loan fees 691,011 662,005 648,273 578,524 584,342
Allowance for loan losses (8,297)   (8,297)   (8,297)   (8,191)   (8,076)
Loans, net of allowance for loan losses 682,714 653,708 639,976 570,333 576,266
 
Bank owned life insurance 10,754 10,686 10,619 10,551 10,479
Premises and equipment, net 6,165 6,349 5,946 3,387 1,155
Accrued interest receivable & other assets 17,212   16,749   18,728   16,756   16,818
Total assets $845,044   $822,493   $782,993   $763,807   $731,059
 

Liabilities

Non-interest-bearing demand deposits $313,143 $281,967 $275,924 $295,862 $264,514
Interest bearing transaction accounts 23,302 23,228 16,555 16,988 17,642
Money market and savings accounts 219,869 250,218 243,198 229,143 220,474
Time deposits 122,321   110,906   110,730   117,670   116,282
Total deposits 678,635 666,319 646,407 659,663 618,912
 
FHLB advances 55,000 50,000 30,000 - 30,000
Subordinated debt, net 11,803 11,782 11,761 11,740 11,719
Other liabilities 5,879   3,578   5,717   4,421   3,572
Total liabilities 751,317 731,679 693,886 675,824 664,203
 

Shareholders' equity

Common stock/additional paid-in capital 67,626 67,230 66,997 66,704 47,421
Retained earnings 27,716 25,050 22,811 21,802 20,142
Accumulated other comprehensive income (loss) (1,615)   (1,466)   (700)   (523)   (707)
Total shareholders' equity 93,727 90,814 89,108 87,983 66,856
 
Total liabilities and shareholders' equity $845,044   $822,493   $782,993   $763,807   $731,059
 

Capital ratios

Tier 1 leverage ratio 11.59% 11.45% 11.43% 11.87% 9.28%
Common equity tier 1 capital ratio 10.84% 10.84% 10.70% 11.61% 8.94%
Tier 1 risk-based capital ratio 10.84% 10.84% 10.70% 11.61% 8.94%
Total risk-based capital ratio 13.20% 13.24% 13.13% 14.27% 11.61%
 
Book value per common share $15.66 $15.25 $15.12 $14.99 $13.91
Total common shares outstanding 5,983,390 5,956,609 5,893,144 5,870,691 4,806,377
 

Other Ratios

Non-interest bearing deposits to total deposits 46.1% 42.3% 42.7% 44.9% 42.7%
Core deposits to total deposits 85.1% 86.9% 87.4% 86.7% 86.0%
Loan to deposit ratio 101.8% 99.4% 100.3% 87.7% 94.4%
Allowance for loan losses to total loans 1.20% 1.25% 1.28% 1.42% 1.38%
 
Avidbank Holdings, Inc.
Condensed Consolidated Statements of Income
($000, except share and per share amounts) (Unaudited)
         

Quarter Ended

Year-to-Date

6/30/18

3/31/18

6/30/17

6/30/18

6/30/17

Interest and fees on loans and leases $9,480 $8,896 $7,721 $18,376 $14,699
Interest on investment securities 404 455 516 859 1,045
Other interest income 232   149   107   381   176
Total interest income 10,116 9,500 8,344 19,616 15,920
 
Deposit interest expense 641 549 423 1,191 756
Other interest expense 525   365   315   890   589
Total interest expense 1,166   914   738   2,081   1,345
Net interest income 8,950 8,586 7,606 17,535 14,575
 
Provision for loan losses -   -   1,085   -   1,806

Net interest income after provision for loan losses

8,950 8,586 6,521 17,535 12,769
 
Service charges, fees and other income 486 637 343 1,124 793
Income from bank owned life insurance 68 67 73 135 144
Gain (Loss) on sale of investment securities 17   -   -   17   -
Total non-interest income 571 704 416 1,276 937
 
Compensation and benefit expenses 3,756 3,883 3,020 7,639 5,888
Occupancy and equipment expenses 731 1,066 676 1,797 1,260
Other operating expenses 1,253   1,303   1,041   2,556   1,983
Total non-interest expense 5,740 6,252 4,737 11,992 9,132
 
Income before income taxes 3,781 3,038 2,200 6,819 4,574
Provision for income taxes 1,115   931   770   2,046   1,590
Net income $2,666   $2,107   $1,430   $4,773   $2,984
 
 
 
Basic earnings per common share $0.46 $0.37 $0.31 $0.83 $0.64
Diluted earnings per common share $0.45 $0.36 $0.30 $0.81 $0.63
 
Average common shares outstanding 5,753,044 5,732,820 4,645,091 5,742,988 4,636,230
Average common fully diluted shares 5,866,669 5,850,614 4,740,832 5,858,723 4,734,898
 
Annualized returns:
Return on average assets 1.30% 1.06% 0.79% 1.18% 0.85%
Return on average common equity 11.48% 9.43% 8.61% 10.48% 9.14%
 
Net interest margin 4.56% 4.55% 4.37% 4.56% 4.32%
Cost of funds 0.65% 0.52% 0.45% 0.58% 0.42%
Efficiency ratio 60.29% 67.30% 59.05% 63.75% 58.87%
 
Avidbank Holdings, Inc.
Credit Trends
($000) (Unaudited)
         

6/30/18

3/31/18

12/31/17

9/30/17

6/30/17

Allowance for Loan Losses

Balance, beginning of quarter $8,297 $8,297 $8,191 $8,076 $6,991
Provision for loan losses, quarterly - - 106 74 1,085
Charge-offs, quarterly - - - - -
Recoveries, quarterly -   -   -   41   -
Balance, end of quarter $8,297   $8,297   $8,297   $8,191   $8,076
 
 

Nonperforming Assets

Loans accounted for on a non-accrual basis $2,245 $2,256 $5,151 $5,543 $5,210

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 5,210
Other real estate owned -   -   -   -   -
Nonperforming assets $2,245   $2,256   $5,151   $5,543   $5,210

Loans restructured and in compliance with modified terms

-   -   -   -   -
Nonperforming assets & restructured loans $2,245   $2,256   $5,151   $5,543   $5,210
 
 

Nonperforming Loans by Type:

Commercial $2,245 $2,256 $4,353 $4,730 $4,377
Real Estate Loans - - 704 714 724
Consumer Loans -   -   94   99   109
Total Nonperforming loans $2,245   $2,256   $5,151   $5,543   $5,210
 
 

Asset Quality Ratios

Allowance for loan losses (ALLL) to total loans 1.20% 1.25% 1.28% 1.42% 1.38%
ALLL to nonperforming loans 369.54% 367.81% 161.08% 147.77% 155.01%
Nonperforming assets to total assets 0.27% 0.27% 0.66% 0.73% 0.71%
Nonperforming loans to total loans 0.32% 0.34% 0.79% 0.96% 0.89%
Net quarterly charge-offs to total loans 0.00% 0.00% 0.00% -0.01% 0.00%

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