Avidia's Net Interest Margin Expands as Net Interest Income Rebounds
Net interest income rose 6.4% to $25.5 million and net interest margin widened 22 bps to 3.86% as loan yields lifted the spread.
Avidia Bancorp (AVBC), the holding company of Massachusetts-chartered Avidia Bank, reported third-quarter 2026 net income of $8.6 million, or $0.47 a share, compared with $7.2 million, or $0.39 a share, in the second quarter.
The earnings increase followed a quarter in which net interest income had been unchanged. Net interest income rose $1.5 million, or 6.4%, to $25.5 million, as the yield on earning assets increased 21 basis points to 5.26% and the loan yield rose to 5.55%. Average earning assets were $2.6 billion, steady from the prior quarter.
The net interest margin expanded 22 basis points to 3.86%, including an 11 basis point benefit from a $692 thousand loan prepayment penalty received on a large solar loan. Excluding the penalty, the margin was 3.75%, up 11 basis points from the second quarter. The 5.55% loan yield included 12 basis points from the prepayment penalties. The cost of interest-bearing liabilities fell 1 basis point to 1.88%, as lower-cost borrowings were only partially offset by a 3 basis point rise in the cost of deposits to 1.35%.
Total loans were essentially unchanged at $2.26 billion, after a $24 million decline in the prior quarter. Commercial and industrial loans fell $31.2 million, including a $23.0 million solar loan that had three years remaining to maturity. One-to-four family residential mortgages rose $30.1 million, primarily from a $21.3 million purchase of adjustable-rate loans from a local correspondent bank. Quarter-end non-medical office exposure was $90.6 million, or 4% of gross loans; excluding owner-occupied, it was $72.6 million.
Deposits grew $53.0 million, or 2.5%, to $2.21 billion, accelerating from $7 million, or 0.3%, growth in the second quarter. Money market accounts rose $19.7 million, certificates of deposit increased $12.1 million, and the bank purchased $22.9 million of brokered CDs. Lower-cost transaction accounts were 50% of period-end deposits. Federal Home Loan Bank advances decreased $50.0 million to $110.0 million, continuing a paydown that had cut them $45 million in the prior quarter.
Non-interest income decreased $250 thousand, or 4.2%, to $5.7 million, reversing a $1.6 million increase in the second quarter. Payments processing income fell $440 thousand after a $230 thousand contract-termination fee in the prior quarter. Mortgage banking income rose $149 thousand, or 51.9%, on a higher MSR valuation.
Non-interest expense decreased $121 thousand, or 0.6%, to $19.4 million, after a $509 thousand increase in the second quarter. The efficiency ratio improved to 62.2% from 65.3%. Salaries and benefits rose $235 thousand, including $77 thousand from new stock grants.
The provision for credit losses fell $681 thousand, or 76.3%, to $211 thousand, after an $892 thousand provision in the second quarter. The allowance declined to $23.2 million, or 1.03% of loans, from $23.9 million, or 1.06%. Net loan charge-offs were $755 thousand, or 0.13% of average loans annualized, versus a 0.07% net recovery rate in the prior quarter. Nonaccrual loans rose to $17.8 million, or 0.79% of loans, from $16.9 million, or 0.75%.
Return on assets increased 20 basis points to 1.24% and return on equity increased 136 basis points to 8.79%. Chief executive Robert Cozzone said quarterly earnings growth benefited from higher loan yields and a lower loan loss provision, and that a focus on pricing and operational discipline was producing continued improvements in operating leverage and balance sheet structure.
The company completed $23.8 million of share repurchases, or 1,079,051 shares, equal to 5.4% of outstanding shares and 6.1% of the prior quarter’s stockholders’ equity, after announcing a $30 million authorization. Stockholders’ equity fell $23.0 million, or 5.9%, to $366.6 million. Projected common equity tier 1 capital was 17.28% of risk-weighted assets. The company declared a quarterly cash dividend of $0.06 a share, payable on or about November 30, 2026.
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