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    AVBH
    Earnings call· Jun 2026(Q2 FY26)

    Avidbank Holdings, Inc. AVBH

    Jul 24, 2026 Source

    Executive summary

    Avidbank Holdings Q2 FY26 — Solid Core Profitability Despite Discrete Charges

    Avidbank Holdings reported a solid core performance in Q2 FY26, with strong loan and deposit growth and stable core profitability, despite discrete charges for a litigation settlement and increased provision for credit losses. The company launched a new SBA lending division and continues to invest in talent to drive future growth, maintaining a cautiously optimistic outlook for the second half of the year.

    Highlights

    5

    • Adjusted net income was $8.2 million or $0.76 per share.

    • Adjusted return on assets was 1.28%.

    • Loans grew $51 million in the quarter (9% annualized) and $312 million (16%) over the past year.

    • Deposits grew $123 million (22% annualized) with continued strength in core commercial relationships.

    • Nonperforming loans declined to 0.65% of total loans from 0.75% at Q1 end.

    Concerns

    4

    • Reported earnings were reduced by a $2.6 million pretax charge for a litigation settlement.

    • Net interest margin decreased by 12 basis points to 4.26% from 4.38% in Q1.

    • Provision for credit losses increased to $6.8 million from $1.4 million in Q1, driven by a $1.9 million partial charge-off.

    • Criticized loans ticked up due to a nonowner-occupied real estate relationship with $21 million in loans.

    Guidance & targets

    3
    CategoryTargetConfidence
    Loan and Deposit Growth
    low double-digit growth
    high materiality
    High
    Effective Tax Rate
    mid-27s range
    medium materiality
    High
    Net Interest Margin (NIM)
    could trend down to 420 bps
    high materiality
    Medium

    Operational metrics

    14
    Adjusted net income
    $8.2 million
    Q2 FY26

    Excluding litigation settlement and BOLI gain.

    Adjusted return on assets
    1.28%
    Q2 FY26

    Excluding discrete items.

    Litigation settlement charge
    $2.6 million
    Q2 FY26

    Related to a fraud wire transfer from Fall 2024.

    Gain on bank-owned life insurance (BOLI)
    $1.3 million
    Q2 FY26

    Benefit proceeds.

    Loan yield
    6.67%relatively flat compared to 6.68% in Q1
    Q2 FY26

    Loan yield remained stable.

    Cost of interest-bearing deposits
    3.06%up 8 bps QoQ
    Q2 FY26

    Increased due to deposit pricing pressure.

    Spot rate (interest-bearing deposits)
    3.07%up from 3.03% at March 31
    as of June 30

    Deposit pricing pressure moderated some during the quarter.

    Net charge-offs
    35 bps
    Q2 FY26

    Net charge-offs as a percentage of average loans.

    Noninterest income (excluding BOLI proceeds)
    $1.7 millionup from $1.5 million in Q1
    Q2 FY26

    Core noninterest income.

    Core noninterest expense
    $13.8 milliondecreased from $14.1 million in Q1
    Q2 FY26

    Excluding the litigation settlement, primarily from lower credit-related fees and professional fees.

    Salary and benefits
    $9.6 millionflat QoQ
    Q2 FY26

    Higher salary expense offset by lower payroll taxes, lower bonus accruals, and higher capitalized loan origination costs.

    Book value per share
    $0.64up 26.7%
    Q2 FY26

    Book value per share increased.

    Full-time employees
    162up from 154 at Q1 end
    Q2 FY26

    Additions include 5 senior revenue-generating bankers and support functions.

    Construction and land loan payoffs
    $250 million to $300 million
    Past 24 months

    Significant payoffs in construction and land loans, seems to be bottoming out.

    Industry KPIs

    13
    MetricValueDetails
    Loans$51 millionUSD
    Deposits$123 millionUSD
    Rotce ROE—
    Cet1 ratio11.50%%
    Capital returns—
    Fee income lines—
    Allowance reserves97 bpsbps
    Net interest income$26.7 millionUSD
    Net interest margin4.26%%
    Net charge offs npls0.65%%
    Total operating expenses$16.5 millionUSD
    Provision for credit losses$6.8 millionUSD
    Efficiency ratio operating leverage48.7%%

    Product announcements

    1
    ProductTypeDetails
    SBA Lending Divisionlaunch

    Risks & headwinds

    4
    Litigation matter from fraud wire transferSettled in Q2 FY26, originated Fall 2024

    $2.6 million pretax charge

    Mitigation: Resolved the issue, reinforced processes and operational controls.

    Criticized loans ticking upCurrent, expected resolution over 24 months

    Primarily due to a nonowner-occupied real estate relationship with 3 loans totaling $21 million, one with a DCR covenant default.

    Mitigation: Proactively risk-rated, actively managing, well collateralized with very low LTVs.

    Construction loan payoffsPast 24 months, seems to be bottoming out.

    $250 million to $300 million in payoffs over the past 24 months.

    Mitigation: Tightening underwriting for mixed-use projects and refocusing on single-family spec homes, which have historically shown zero losses.

    Net interest margin compressionQ2 FY26, potentially ongoing into next quarter.

    Down 12 bps QoQ to 4.26%. Could trend down to 4.20%.

    Mitigation: Hoping deposit pricing pressure moderates; NII expected to increase with deposit growth.

    What to watch in Q3 FY26

    5

    Loan and Deposit Growth Trajectory

    Second half of the year
    CurrentLoans up $51M (9% annualized), Deposits up $123M (22% annualized) in Q2 FY26
    TargetLow double-digit growth

    Why it matters

    Indicates continued business expansion and market share gains, crucial for revenue growth.

    We're going to continue to target low debt, low double-digit growth in loans and deposits, and we feel good about our position for the balance of the year.

    Q&A highlights

    6

    Clarification on the low double-digit loan growth target for the second half, given other banks' caution, and insights into regional and national business lines.

    Management confirmed confidence in achieving low double-digit growth, citing robust pipelines in C&I, corporate banking, and CRE, and a rebound in the local real estate market. They noted that the second half of the year is typically stronger for the bank.

    “I think, again, targeting in low double digits is a tenable -- everything we're seeing is pretty solid at this point for the second half of the year.”

    asked by Gary Tenner · answered by Mark Mordell

    1 min read5 chapters

    Detailed Narrative

    01

    Litigation Settlement

    The company recorded a pretax charge of $2.6 million in Q2 FY26 to settle a litigation matter stemming from a fraud wire transfer involving a client account in Fall 2024. Management stated this was an isolated incident, and resolving it was the right decision to avoid prolonged litigation and reinforce operational controls.

    02

    Talent Investment & Growth Strategy

    Avidbank increased its full-time employees to 162 from 154 at the end of Q1, including 5 senior revenue-generating bankers and support staff across business lines. This investment in talent is expected to add near-term expenses but is seen as crucial for driving future growth, leveraging market disruption🌐 to attract experienced bankers from larger institutions.

    03

    SBA Lending Division Launch

    The company announced the launch of a new SBA lending division, led by Brian Harper, with a full team of business development, credit, and operations professionals. This expansion aims to provide government-guaranteed financing for small and midsized businesses, focusing on an originate-to-sell strategy for 7(a) production, with some 504 loans held selectively.

    04

    Construction Loan Portfolio Review

    Following a $1.9 million partial charge-off on a construction loan, the bank is re-evaluating its underwriting for mixed-use projects, which have proven challenging. The focus will shift more towards its core business of single-family spec homes in the Bay Area, a segment that has historically shown zero losses over 20 years, aiming to return to its niche.

    05

    Deposit Funding Strategy

    Avidbank utilized brokered deposits in Q1 and early Q2, primarily short-term. The strategy is to allow these to run off if core deposit growth continues, with the goal of achieving a core-funded position. This approach has already helped improve the loan-to-deposit ratio.

    AI-generated summary of the company’s earnings call. Not investment advice.