Avidbank Deposits Accelerate After a Slow First Quarter

The Tip Desk · October 27, 2026 · 4 min read

Period-end deposits rose 22% annualized to $2.32 billion as net interest margin slipped 12 bps to 4.26%.

Avidbank Holdings, Inc. (AVBH), the holding company for Avidbank, a California state-chartered commercial lender, reported net income of $7.6 million, or $0.71 a diluted share, for the second quarter of 2026, down from $9.0 million, or $0.84 a share, in the first quarter.

Results included a $2.6 million expense to settle outstanding litigation and about $1.3 million of income on death-benefit proceeds from bank-owned life insurance. Excluding those items, adjusted net income was $8.2 million, or $0.76 a share.

The balance sheet expanded faster than it had in the prior quarter. Period-end loans, net of deferred fees, rose $51.3 million, or 9% annualized, to $2.22 billion, after a $24.4 million, or 5% annualized, increase in the first quarter. Growth included $70.9 million in commercial and industrial loans, $33.2 million in owner-occupied real estate and $12.7 million in multi-family, offset by $36.1 million lower construction and land and $18.7 million lower non-owner-occupied commercial real estate.

Deposits accelerated more sharply. Period-end deposits increased $122.6 million, or 22% annualized, to $2.32 billion, after a $13.2 million, or 2% annualized, rise in the first quarter. Average deposits rose $59.2 million, or 11% annualized, to $2.21 billion. The period-end mix included a $79.1 million increase in interest-bearing demand deposits, $27.0 million in non-reciprocal brokered deposits and $19.3 million in money market and savings, partially offset by an $8.6 million decline in non-interest-bearing checking. Short-term borrowings were zero at June 30, 2026, compared with $55.0 million at March 31.

Net interest income was $26.7 million, up only $181 thousand, or 3% annualized, from $26.5 million in the first quarter, after a $1.5 million, or 24% annualized, increase in that prior quarter. The company said higher average loan balances were partially offset by a lower FHLB dividend and higher deposit costs. Net interest margin compressed 12 bps to 4.26% from 4.38%, reversing the 25 bps expansion into the first quarter. The company attributed the second-quarter decline to higher deposit costs and a lower FHLB dividend after a $241 thousand special FHLB dividend in the first quarter.

The cost of interest-bearing deposits rose 8 bps to 3.06% and the cost of deposits rose 5 bps to 2.29%. The loan yield was 6.67%, relatively flat versus the first quarter. The yield on securities was 4.68%.

Credit costs rose with the construction charge-off. The provision for credit losses was $2.8 million, compared with $1.4 million in the first quarter, primarily due to a $1.9 million partial charge-off of one non-performing construction loan. Net charge-offs to average loans were 0.35%, down from 0.52% in the first quarter. Non-performing loans to total loans decreased to 0.65% from 0.75%, primarily because of that partial charge-off. The allowance for credit losses on loans was $21.5 million. The total allowance for loans and unfunded commitments was 1.09% of total loans. Chairman and Chief Executive Officer Mark Mordell said criticized and classified loans increased but the company was not seeing systemic or broad-based deterioration.

Non-interest income was $3.1 million, compared with $1.5 million in the first quarter, primarily from the BOLI proceeds. Non-interest expense was $16.5 million, up from $14.1 million, due to the litigation settlement, partially offset by lower credit-related legal and professional fees. The efficiency ratio widened to 55.41% from 50.35%; the adjusted efficiency ratio improved to 48.73%. Return on average assets declined to 1.20% from 1.46%; adjusted return on average assets was 1.28%.

Book value per share was $26.97 at June 30, 2026. The common equity tier 1 capital ratio was 11.35%. No shares were repurchased in the second quarter, compared with 25,000 shares for $693 thousand in the first quarter. Mordell said the company added several experienced bankers and launched a new SBA lending division.