Avidbank Holdings, Inc. (AVBH) Earnings

Management highlights

Mark Mordell mentioned being pleased with Q1 results, loans grew by about $25 million, and core deposits were reasonably flat. Patrick Oakes went through headline numbers, balance sheet details including loan and deposit growth, net interest margin, provision for credit losses, noninterest income and expense, efficiency ratio, book value per share, and Tier 1 capital. Gina Thoma-Peterson reminded about the call being recorded and forward-looking statements. Mark noted they are pleased with Q1 and recent quarters' progress, and Patrick provided detailed financial metrics. They also discussed hiring plans with three people added in Q1 and more expected in Q2.

Guidance

Expects low double-digit loan and deposit growth for the year. Anticipates cost of interest-bearing deposits to stay above 3% in the near term, which may take the margin down a bit. Plans to add more bankers this year than in the last several years, with three added in Q1 and more expected in Q2. The tax rate is expected to be in the mid-28% range for the remainder of 2026.

Segment performance

In the first quarter, net income was $9 million, or $0.84 per diluted share, up from $6.9 million, or $0.65 per diluted share in the fourth quarter. Return on assets improved to 1.46% from 1.12%, and return on average equity increased to 12.7%. Loans grew $24 million in the quarter, driven by a $26 million increase in non-owner-occupied CRE loans, offset by a $9 million decline in C&I balances. Loans are up $332 million, or 18%, since March 31, 2025. Deposits are up $13 million in the quarter and $270 million, or 14%, since March 31, 2025. Net interest margin was 4.38%, up 25 basis points from the fourth quarter. Provision for credit losses was $1.4 million, down from $2.8 million in the fourth quarter. Net charge-offs were $2.8 million, or 52 basis points of average loans. Nonperforming loans declined $16.3 million, or 75 basis points of loans. Noninterest income was $1.5 million, compared to $1.8 million in the fourth quarter. Noninterest expense totaled $14.1 million, up $231 thousand from the fourth quarter. Efficiency ratio came down to 50.4%. Book value per share increased to $26.33, and Tier 1 capital increased to 11.39%.

Risks & headwinds

Concerns about SaaS and venture lending exposure, including potential losses in horizontal segments if companies can't raise funds. Deposit cost pressure and potential impact on margin. Geopolitical noise and macro uncertainty affecting borrower decisions and fundraising. Credit concerns with criticized real estate loans and monitoring of existing investments in venture lending.

Analyst Q&A

• Q: Good morning. I want to start off asking a question around the SaaS exposure in venture lending. I appreciate the commentary you put in the presentation. It is about $165 million of exposure, it looks like. Can you talk about the review you conducted in the quarter? There are a lot of headlines out there now. Maybe sum up for us what the conclusions around this review were. If you could talk about any reserves specifically against this pool, whether you are worried about loss content, and then how should we think about your interest in this space—software specifically—going forward? Are you pulling back the reins a bit, modifying underwriting standards?

  A: From a 30,000-foot view, we did a deep dive and looked at where we were exposed. We are finding it is not just SaaS; it is how companies are dealing with AI. A lot of SaaS-based companies with a good space have been utilizing AI or starting to utilize it more in their business plan in order to compete, and those companies are going to be at the top end of the food chain. Companies that are not adapting are going to be more suspect as we go forward. If they are not able to get the funding that is necessary because their metrics are off and their platform is not going to be as competitive as anticipated, those are the ones we are concerned about. Patrick can get into some detail of how much dollar exposure we have, but what we found is that the vertical integration of AI and the SaaS model is really where we want to be. Those are much more specialized in workflow versus the horizontal type, which is more broad based. It does not mean one is necessarily better than the other, but one has a little more legs at this point. We have done a strong analysis and talked to VCs. Are there going to be additional losses embedded? I do not know. When we are talking about early-stage investing, it is really whether we are going to let their cash balances cross over their loan balances. It gives us another factor we have to monitor months ahead before that cash approaches their loan balance, so we know if we need to pull an investor abandonment clause or something of that nature, whether we are going to let them borrow, or let that cash cross over. We are being pretty critical of that from a credit perspective across the board. Patrick, any additional color?

• Q: Hey. Good morning. This is Adam Kroll on Matthew Clark, and thanks for taking my question. Maybe 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. Has that changed at all, and what are you hearing from your borrowers given some of the macro uncertainty?

  A: We did experience a little softness in the quarter in terms of people making decisions and fundraising, but I do not think our outlook has changed. We are looking for low double digits going forward. We have some work to do on the deposit side, as Patrick mentioned, but we feel pretty good about the overall pipelines across all verticals for loans. In terms of deposits, we have a strong pipeline, but timing is more of an issue because fundings are taking a little longer. People are doing a little extra diligence. There is geopolitical noise out there, which is constantly out there, so I do not know why that should be more of a factor this quarter than historically. Our outlook has not changed. We are built for growth and expect low double digits for the year. We do have some work to do on the liability side of the balance sheet.

• Q: I wanted to follow up on the SaaS conversation and broaden it to the larger venture lending business. SaaS is a big part of that business, but what are you seeing in the pace of venture investment into startups at this point? Have you seen much diminution of that flow, and how does that impact both the venture lending and potentially the capital call business?

  A: As far as venture lending goes, it has gained a lot more momentum over the last couple of quarters. Everyone is doing the necessary homework because nobody wants to throw good money after bad. New fundings are at better valuations than for companies that are two or three years old. The question is can they pivot, and do they need to pivot? VCs and entrepreneurs are looking at it analytically. When this kind of transition or disruption happens, they decide to pick their horses. We monitor everything monthly—growth and metrics—and if they are not on plan, we know ahead of time and have those conversations. Like any time a vertical gets really hot, which AI is, there is more money going into AI-based investments than most anything else right now. We just need to use solid judgment across the board for new investments and be ultra-critical on existing investments. We need to determine whether they have an opportunity for new funding or are going to die on the vine, and whether we are going to let cash cross over our loan balance. That is our only savior at that point—not to let them borrow and to sweep the account if necessary because investors are not going to continue to support the company.

• Q: Thank you. Good morning, everybody. Mark, to follow up on the SaaS discussion, parsing through the loans and deposit data, it looks like the SaaS portfolio, both vertical and horizontal, has loan-to-deposit ratios somewhere around 45%. The total venture portfolio is somewhere around a 30% lower deposit ratio. Historically, has the SaaS segment always been around that 45% ratio?

  A: What I hear from our bankers is these companies are still getting funding, but at a slower pace than previously. It is similar to 2022, where rounds of funding shrink a little and not get as much. Funders are being a little more careful, especially in some of the horizontal areas. It is probably a little less than historically. We could run that analysis; I have not done it, but that would be my gut.

• Q: Mark, as you talk to clients in the technology and venture space, do you sense any material slowdown in planned IPOs or takeout activity?

  A: The IPO market has been quiet at best for a period of time. M&A, given some of the disruption, is slowing down until people figure out what is viable and what is not. There will be a lot of companies looking for soft landings that will find a soft landing. When there is this kind of disruption, people are cautious because some feel there will be more opportunities as stress rises in the marketplace, as opposed to getting too far ahead of it. We will continue to monitor the overall space like we do, but with this disruption, we have to pay attention to where money is flowing and what is happening from an M&A perspective. The IPO market is not something we are focused on at this point.

• Q: As you look to add bankers, are there specific geographies or business lines you are looking to support?

  A: The overall feeling is the same: the bankers we are adding will be more in the business lines than in real estate. We do a good job in commercial real estate and construction, but those two verticals require fewer employees than business lines like venture, traditional C&I, asset-based, sponsor, and search. You will see more bankers added in the business lines of our overall strategy because we feel that adds more to our franchise value.

• Q: Hi, guys. Maybe just to follow up on credit quality. Could you provide some additional color on what drove the increase in criticized loans during the quarter and if there is any concern there?

  A: We are always concerned about credit. The biggest increase was a criticized real estate loan, which drove that up. We think it is a money-good loan. It is performing, but there are concerns about a near-term tenant vacating. It is a low loan-to-value relationship, and we think we are going to get through it. The main reason for the increase was a relationship that needed to be downgraded that consisted of two buildings in the South Bay.