Avidbank Holdings (NASDAQ:AVBH) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
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The full earnings call is available at https://events.q4inc.com/attendee/983702195.
Summary
Avidbank Holdings Inc reported a net income of $9 million or $0.84 per diluted share for Q1 2026, up from $6.9 million or $0.65 per diluted share in the previous quarter.
Loans grew by $24 million, primarily driven by a $26 million increase in non-owner occupied CRE loans, while deposits increased by $13 million.
The net interest margin improved to 4.38%, with loan yields remaining stable and a decrease in interest-bearing deposit costs.
The company conducted a review of its SaaS and venture lending exposure, emphasizing a focus on AI-integrated SaaS models, and expressed concerns over companies not adapting to AI.
Operational highlights include the addition of three new hires in Q1 with plans for further hiring in Q2, and a focus on expanding business lines over real estate.
Management remains optimistic about achieving low double-digit growth in loans and deposits for the year despite some macroeconomic uncertainties.
Full Transcript
OPERATOR
Good morning. My name is Tiffany and I will be your conference operator today. At this time I would like to welcome everyone to the Avidbank Holdings Inc First Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Thank you. I’d like to introduce the presenters, Chairman and CEO Mark Mordell, Chief Financial Officer Pat Oaks and Chief Operating Officer Gina Thoma Peterson. You may begin your conference.
Gina Thoma Peterson (Chief Operating Officer)
Good morning. Thank you for joining us today for the Avidbank Holdings Inc. first quarter 2026 earnings call. Before we begin, let me remind you that today’s call is being recorded and is available in the investor relations section of our website at avidbank.com along with our earnings release and presentation materials. Today’s call contains forward looking statements which are subject to certain risks, uncertainties and other factors that could cause actual results to differ materially from those discussed. Those statements are intended to be covered in the safe harbor provisions of the federal securities laws. For a list of factors that may cause actual results to differ materially from expectations, please refer to our earnings release under the heading Forward looking Statements as well as the disclosures contained within our SEC filings. We will also reference non GAAP financial measures alongside our discussion of GAAP results. We encourage you to review the GAAP to non GAAP reconciliations provided in our earnings release. With that, I’d like to turn the call over to our Chairman and CEO Mark Mordell.
Mark Mordell (Chairman and CEO)
Thanks Gina and thank you all for attending our Q1 earnings call. We appreciate your interest as well as your support. As we stated in the release, overall we’re pleased with what we’ve accomplished not only for Q1, but certainly what we’ve done over the last several quarters and putting ourselves in a more profitable metric situation. You know, I’m not a big believer in seasonality, but as far as first quarters goes, this was a pretty good quarter for us. We usually have some pullback and shrinkage and we were able to grow loans by about 25 million and our core deposits were reasonably flat. Although Pat’s going to give you certainly some more metric information and we’re going to follow it up with some questions after that. So at this point I’d like to turn over to Patrick and kind of go through the quarter, the high level metrics and we’ll open up for questions.
Pat Oaks (Chief Financial Officer)
Thanks Mark. Good morning everyone. Let me start with the headline numbers. So in the first quarter we earned net income of $9 million or $0.84 per diluted share. That was up from 6.9 million or $0.65 per diluted share in the fourth quarter. Return on assets improved to 146 from 112 and return on average equity increased to 12.7%. Turning to the balance sheets, as Mark said, loans grew 24 million in the first quarter. That was driven mainly by a $26 million increase in non owner occupied Commercial Real Estate (CRE) loans, partially offset by a $9 million decline in Commercial and Industrial (C&I) balances due to higher payoffs and pay downs. Overall loans are up 332 million or 18% since March 31st, 2025. Deposits also moved higher, up 13 million in the first quarter and they’re up 270 million or 14% since March 31st 25. We reported a net interest margin of 438 in the first quarter, up 25 basis points from the fourth quarter. Loan yields were essentially flat and our interest bearing deposit costs came down 20 basis points. And just a reminder, the fourth quarter included a 726,000 interest reversal on non performing loans which reduced our margin in the fourth quarter by 12 basis points. And in the first quarter we also had the benefit of a special Federal Home Loan Bank (FHLB) dividend which added about 4 basis points to the margin. During the first quarter we did see some upward pressure on our cost of interest bearing deposits. The average cost for the quarter was 298 and the spot rate was 303 at March 31st. The provision of credit losses was 1.4 million in the first quarter down from 2.8 million in the fourth quarter. Net charge offs for the quarter were 2.8 million or 52 basis points of average loans, primarily driven by the charge off of 2c and I credits. Non performing loans declined 16.3 million or 75 basis points of of loans, mainly reflecting the payoff of a construction loan and the charge off of those 2 CNI credits. Non interest income was 1.5 million compared to 1.8 million in the fourth quarter. We saw higher core banking fee income including service charges, FX and credit card income that was offset by lower warrant and successfully income and fund investment income. On the expense side, non interest expense totaled 14.1 million, up 231,000 from the fourth quarter, mainly due to higher credit related legal and professional fees. We also saw another improvement in our efficiency ratio, which came down to 50.4%. Salary and benefits were flat at 9.6 million. Lower salary and bonus expense was offset by higher payroll taxes and benefits expense along with fewer capitalized loan origination costs. We added three people in the first quarter, bringing total headcount to 154, and we expect to hire additional bankers in the second quarter. Book value per share increased to 2633 and Tier 1 capital increased to 1139. During the quarter, we also repurchased 25,000 shares at an average price of 2,769, for a total of 693,000. The effective tax rate for the quarter was 27.5%. That included a discrete tax benefit related to equity or investing. And we continue to expect the tax rate to be the mid 28 for the remainder of 26. With that mark, back to you.
Mark Mordell (Chairman and CEO)
Thanks, Pat. As you all can see, we’ve had a lot of improvements in our profitability metrics which we mentioned earlier, and at this point just like to open it up for questions because that’s what’s really on your mind. So please, at this time, I would
OPERATOR
like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We’ll pause for just a moment to compile the Q and A roster. Your first question comes from the line of Andrew Terrell with Stevens. Your line is open.
Andrew Terrell
Hey, good morning. Morning, Andrew. Hey, I wanted to start off asking just a question around the Software as a Service (SaaS) exposure and venture lending. I appreciate the commentary you put in the presentation. It’s about $165 million of exposure. It looks like. Can you just talk about. It looks like you conducted a review in the quarter and there’s obviously a lot of headlines out there right now. But just maybe sum up for us what the conclusions around, you know, this, this review were. If you could talk about just kind of the, any, any reserves specifically against this pool, whether you’re worried about lost content and then how should we think about, you know, your, your interest in this space software specifically going forward? Are you pulling back the reins a bit, Modifying underwriting standards? Just kind of want to run the gamut on the Software as a Service (SaaS) exposure.
Mark Mordell (Chairman and CEO)
Well, from a 30,000ft, the SAS exposure is evolving. So we did, we did do kind of a deep dive and really looked at where we were exposed. And what we’re finding is that companies that, it’s just not SaaS, it’s how they’re dealing with AI and so a lot of these companies that have good space, that are SaaS based, have been utilizing AI or starting to utilize it more in their business plan in order to compete. And those, those companies are going to be the top end of the food chain. It’s the companies that aren’t adapting that are going to be more suspect as we go forward. And if they’re not, if they’re not able to get those funding, the funding that’s necessary because their metrics are off, because their platform is just not going to be as competitive as people anticipated, those are the ones that we’re concerned about. So Pat can get into some kind of the detail of how much dollar exposure we do have. But what we found is that the vertical integration of AI and SAS models is really where we want to be.
Pat Oaks (Chief Financial Officer)
Those are much more specialized in workflow applications versus the horizontal type, which is kind of encompassing more broad based aspects of it doesn’t mean one’s necessarily better than the other, but one just has a little bit more legs to it than, than the other at this point. And so we’ve done, you know, a strong analysis, talked to talk to VCs, you know, is there going to be additional losses embedded? You know, I don’t know. When we’re talking about early stage investing, it’s really are we going to let their cash balances cross over their loan balances? And so it gives us another factor that we have to monitor months ahead before that cash gets approaches their loan balance. So we know if we need to pull a investor abandonment clauses or something of that nature, are we going to let them borrow or are we going to let that cash cross over? And we’re being pretty critical that from across the board from a credit perspective. Pat, you got any additional color there? So as you can see from the schedule we provided, right. With the breakdown we did with the Venture Capital Group, it was really that horizontal stuff, this smaller piece of that that’s more general that I think is the most concern, that are they going to better raise funds going forward? You know, that portfolio is small. There’s two loans in there that are either criticized or classified. It’s about $4 million total. Okay. In fact, one of those is cash flow positive. Right. So so far the portfolio is doing well. I mean the concern is what’s going to happen 612 months from now. Right. So I think throughout bankers and I think the investors and everybody else, I think everybody’s on this and, and tracking this quite closely. So.
Andrew Terrell
Great. Okay. And so I guess it sounds like important bifurcation between horizontal and vertical. It sounds like, you know, within the vertical space you’re still going to, you know, be lending and forming new relationships, picking up new clients in that specific vertical. So no kind of change. They’re just still being, you know, critical and diligent from a credit standpoint.
Mark Mordell (Chairman and CEO)
Well, I think they’re. Everybody’s looking at a little bit differently in terms of new funding. Obviously there’s a lot more fundings going into the AI space in the venture community at this point. So if there isn’t a. The new funding, you know, you could argue have a very strong model going forward. You know, because they started off with integrating AI. Some of these companies that are 2, 3, 4 years old are needing to pivot and they’ve needed to pivot to, you know, just not today, but, you know, months or quarters ago in order to be more competitive given the explosive growth that the AI has had on the industry. So I think it all pours into the underwriting for everything that we’re looking at and it’s very similar to what we’ve done for the last several years is how viable is the, are these early stage companies and what’s their backing like and you know, how strong is their business plan. And so it’s just another factor that we’re taking into account. And yes, we do have some legacy credits and we’re monitoring those pretty closely.
Andrew Terrell
Okay, great. I appreciate it. If I could move over Pat on the margin, you obviously outperformed a bit this quarter. Even, you know, normalizing for the FHLB special dividend. You know, it sounds like maybe some deposit cost pressure into, into period end. But just talk about, you know, relative to that 299 interest bearing cost and I think you said 303 on the spot rate. Just, you know, where you’re bringing on new deposits at on a weighted average basis and kind of general expectations for the margin as we move forward.
Pat Oaks (Chief Financial Officer)
Yeah, I think that’s why I wanted to throw that 303 out there because, you know, look, we’re growth bank. We’re having to put some deposit costs on at a higher cost than we’d like at this point. Right. Which is probably in the low threes at this point on average. You know, I think hopefully we can drive that down over time. But at this point we want to grow deposits. Right. So I would assume that that’s going to stay above 3% at this point. Cost and bearing deposits, could it creep up a little bit? Yes, potentially short term. So you know, that will you know that’s going to take the margin down a little bit from where it is today. We realized that, you know, loan deals I’m not as worried about. I think that loan yield me, you know, relatively stable. Could it get go up or down a few basis points? Sure. With loan fees and the mix change and all that stuff. But so, you know, you’ll see that margin move down a little bit here, that’s for sure. And one other factor too is just to keep in mind, DDA, DDA was probably a little bit high at 331. We had some clients bring into money late in the quarter that moved in the DDA account. That change has moved into April. So you know that I wouldn’t count on that DDA remaining as high as it is today. That’s a little bit of pressure too that we’re seeing is to grow that hopefully we can keep it in the, you know, in the mid-20s, but it is probably a little bit elevated. Yep.
Andrew Terrell
Okay, great. Thank you guys for taking the questions.
OPERATOR
Your next question comes from the line of Matthew Clark with Piper Sandler. Your line is open.
Adam Kroll
Hey, good morning, this is Adam Kroll on for Matthew Clark and thanks for taking my questions. Hello, good morning. Maybe just if we could get your updated thoughts on loan and deposit growth expectations for the year. I think your previous target was in the low double digit range. So I was just curious if that’s changed at all and maybe more broadly what you’re hearing from your borrowers given some of the macro uncertainty.
Mark Mordell (Chairman and CEO)
Well, I think there were, we did experience a little softness in the quarter in terms of people making decisions and fundraising and that aspect of it. But you know, I don’t think our outlook has really changed. I think it’s a low double digits going forward. You know, we have some work to do on the deposit side as, as Pat had mentioned, but feel pretty good about the overall pipelines that we’re seeing across the, across all verticals as far as loans go and in terms of deposits, we have a strong pipeline. But I think timing is an issue at this point a little bit more because I think fundings are seemingly taking a little bit longer. People are doing a little extra diligence. There’s geopolitical noise that’s been out there, which is constantly out there. So I don’t know why that should be as much of a factor, you know, in this quarter as it was, you know, historically every quarter in the last several years. So our outlook hasn’t changed. Hasn’t changed. I think we should, we are built for a growth bank and we should be low double digits for the year. And we do have some work to do on the liability side of the balance sheet as I mentioned.
Adam Kroll
Got it. I appreciate the color there. Maybe switching to expenses. They were really well managed during the quarter. So I was just curious, how are you thinking about maybe a 2Q run rate and overall growth for the year?
Pat Oaks (Chief Financial Officer)
So, you know, what I would say is, you know, I kind of mentioned that we’ve been doing some hiring here, Mark, and talk, talk a little bit more detail around that in the first quarter, then more in the second quarter. So that’s going to put pressure on the growth and expenses here along with Q1 merit increases and other things. So, you know, it’s really the, the variable here is really that personnel expense, you know, it was 9.5 million ish. You know, I could see that creeping up to closer to 10 for the quarter when you factor in everything, you know what we did have a little bit of higher legal and professional fees that could come down a little bit to offset some of that. But you know, expenses will definitely be up in the second quarter. But hopefully that’s all investment in growth here.
Mark Mordell (Chairman and CEO)
Yeah, I think, I think Pat, spot on on that. I think we have, you know, with the successful IPO that we had and our profitability metrics going where they are and with our plan, long term plan of scale in our operation, I think we could probably will likely add more bankers this year than we have, you know, in the last several years. So as we mentioned, we brought on, I think three in the, in Q1 and we’re probably going to have, you know, two to four in more in Q2 and probably more a couple more after that. And as we look down the road, so I think there’s, there’s some opportunity out there, there’s some consolidation and we’re going to take advantage of it given, given, given our overall business plan. Got it.
Adam Kroll
Thanks for taking my questions. I’ll send back.
Mark Mordell (Chairman and CEO)
Thank you.
OPERATOR
Your next question comes from the line of Gary Tenner with DA Davidson. Your line is open.
Gary Tenner
Thanks. Good morning everybody. I wanted to kind of follow up on the SaaS conversation earlier and just kind of broaden it to the larger venture lending business. Obviously SaaS is a big part of that business, but just curious about kind of the pace of what, what you’re seeing in the pace of venture investment into startups at this point.
Mark Mordell (Chairman and CEO)
Has that, you know, have you seen much diminution of that flow and then how that impacts both the venture Lending and potentially the capital call business. Well, as far as venture lending goes, I think it has, you know, gained a lot more momentum over the last couple of quarters is, you know, so-called SaaS apocalypse or whatever they’re calling at this point. So I think everyone’s doing the homework that’s necessary because nobody wants to throw good money after bad. And, and so there’s no question that the new fundings are better valuations than a company that’s two or three years old. And the question is how they, how can they pivot? Do they need to pivot? And so I think the VCs and the entrepreneurs out there are looking at it, you know, very analytically. When and, but when this kind of transition or disruption happens, they really choose, decide to pick their horses. And so for us, again, we monitor everything on a monthly basis, you know, in terms of growth, in terms of metrics and, and if they’re not on plan, if they’re falling off plan, we know that ahead of time, we’re having these conversations way ahead of time. So, so I do think just, just like anytime a vertical gets really hot, which AI is just like cyber was a few years ago, there’s more money going into AI based investments than most anything else at this point. So, you know, we just got to use solid judgment across the board and you know, as far as the new investments are being made and really be ultra critical on the investments that we do have at this point and you know, determining do they have an opportunity for new funding or are they going to die on the vine and are we going to let that cash cross over? Like I mentioned earlier, our loan balance, because that’s our only savior at that point is to not let them, not let them borrow and, or sweep the account if necessary because the investors are not going to continue to support the company. Got it. Thank you for that.
Gary Tenner
And I’m sure you would have flagged this. I just wanted to confirm the 3.1 million construction loan that paid off in the quarter. There was no related interest, recovery or benefit from that, correct?
Pat Oaks (Chief Financial Officer)
No, we were, we had everything that was owed to us on that one.
Gary Tenner
Okay, thank you again.
OPERATOR
If you would like to ask a question, press Star, then the number one on your telephone keypad. Your next question comes from the line of Kim Coffee with Breen Capital. Your line is open.
Kim Coffee
Thank you. Morning everybody. Morning, Tim. Mark, if I can just kind of follow back up on the SAS discussion, just, you know, I appreciate the details in the deck, kind of parsing through the loans and deposits stuff. It looks like the SAS portfolio, both vertical and horizontal have loan deposit ratios somewhere around 45%, whereas the total venture portfolio is somewhere around the same 30% lower deposit ratio. I’m wondering, historically speaking, has the SAS book always kind of been there in that kind of 45% ratio?
Pat Oaks (Chief Financial Officer)
No, I would say, look, I think what I would hear from our bankers is these companies are still getting funding. I would say it’s at a slower pace than it was previously. This is almost like 22, where the rounds of funding shrink a little bit. They’re not getting as much, so they’re just being a little bit more careful. I think if they’re giving out funding, especially in some of the horizontal stuff.
Kim Coffee
Right. So it probably is a little bit less than it has been historically. We could run that analysis, but I haven’t done it, but that would, my gut would tell me that a little bit.
Mark Mordell (Chairman and CEO)
I think what Pat’s saying does make sense. I think when you do have a little stress in a vertical, they do tend to spoon feed it as opposed to give it to, you know, two years of Runway, which is, which is what is typically happening in a more, you know, a less concerning vertical. And so I think companies are getting funded, but it’s, it’s, it’s, it’s a, it’s more metric based. So they may, you know, just fund it for the next four to, four to six months as opposed to two years. See where they end up on that, see if they’re making, getting the traction that’s necessary. And that’s kind of typical when there’s this kind of disruption in the market.
Kim Coffee
And that’s why we’re taking a closer look at these 60 plus counts. Right. Watching them very, very carefully. Right, right. It sounds like a topic I should follow up with next quarter to kind of see how things are playing out. Probably happen next couple quarters. I’ll mark that down. Mark, as you talk to clients in the technology space and in the venture space, do you get a sense that there’s been any material slowdown in place, planned IPOs or takeout activity?
Mark Mordell (Chairman and CEO)
Yeah, I think the IPO market has been, you know, certainly quiet at best for a period of time. So. And M and A, given some of the disruption is slowing down at this point until people kind of figure out what’s viable and what’s not. I think there’s going to be a lot of companies out there that are going to be looking for soft landings that are, aren’t going to find us off landing. So, so whenever there’s this Kind of disruption. People are pretty cautious at this point because I think with this kind of disruption there’s bound, some, some people feel there’s bound to be more opportunities, the more stress there is in the marketplace as opposed to getting too far ahead of it. And, and I think, I think we got to just continue to continue to monitor the, the overall space like we do. But certainly with this disruption, we have to really pay attention to where money’s flowing and what’s happening there from an M and A perspective because the IPO market just I think is not something we’re focused on at this point.
Kim Coffee
Okay, all right, appreciate that color. And then Mark, as you go look to add bankers, is there specific geographies or business lines you’re looking to support?
Mark Mordell (Chairman and CEO)
I think, you know, the overall feeling is continue to be the same that the bankers that we’re adding are going to be more on the business lines than real estate. You know, we do a good job in commercial real estate, a good job in construction. But as far as the number of employees go, you can run that those two verticals with a lot less employees than we’re talking about in the, in the business lines and venture and traditional CNI asset based sponsor search. So I think what you’re going to see, those bankers are going to be more in the business lines of the overall strategy because we feel that adds more to our franchise value. Okay.
Kim Coffee
Okay, great. And then Pat, question about the margin. So coming into the quarter, I think, you know, we were kind of looking for margin to in the fourth quarter to be somewhere around 420. 425. Does that still seem reasonable given all the puts and takes we’ve discussed today?
Pat Oaks (Chief Financial Officer)
Yeah, you know, you know that probably it’s going to be below probably my guess is below that 430, maybe 425ish. Right. In that general range that would, my guess, hopefully we can stay above 425, but it’s probably not 425 to 430 range, I would guess, you know, certainly moving pieces to it. Right, but. Right.
Kim Coffee
Yeah. Deposit costs being the kind of the biggest one. Sounds like.
Pat Oaks (Chief Financial Officer)
Yeah, yeah. Yep.
Kim Coffee
All right, well, those are my questions. Thank you very much.
Mark Mordell (Chairman and CEO)
Thanks, Jim.
OPERATOR
Your next question comes from the line of Matthew Clark with Piper Sandler. Your line is open.
Matthew Clark
Hi guys. Maybe just to follow up on credit quality, was wondering if you could just provide some additional color on, you know, what drove the increase in criticized loans during the quarter. And if there’s any concern there,
Mark Mordell (Chairman and CEO)
you know, we’re always concerned about credit for sure. So I think the, I think the biggest increase was a criticized real estate loan which drove that up. And we think it’s a money good loan again, but it’s performing. But there’s some, there’s some concerns about a near term tenant vacating so low loan to value. I think it’s fine. I think we’re going to get through it. So that’s the main reason for the increase was a relationship that needed to be downgraded that consisted of two buildings in the South Bay here.
Matthew Clark
Got it. Appreciate it for taking my questions.
OPERATOR
There are no further questions at this time. I would like to turn the call back over to the presenters.
Mark Mordell (Chairman and CEO)
Again. We certainly do appreciate everyone’s interest and support and appreciate you attending our Q1 earnings release and earnings call and look forward to following up with a solid quarter for Q2.
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