Janney Starts AvidBank Holdings Inc. (AVBH) at Neutral

Janney analyst Timothy Coffey initiates coverage on AvidBank Holdings Inc. (OTC: AVBH) with a Neutral rating.

The analyst commented: "We are initiating coverage on AVBH-Avidbank Holdings, Inc. with a NEUTRAL rating and Fair Value Estimate of $21.00. Our thesis is near-term earnings power is highly dependent on AVBH's ability to replace high cost borrowings with lower costing core deposits. In our opinion, doing so would improve Net Interest Income (currently +90% of operating revenue) and, by extension, earnings per share. The company's trailing earnings power has been hindered by the expense of the borrowings (~20% of average interest-bearing liabilities as of 1Q24). Due to the costs of current funding sources, management has slowed loan growth and the loan-to-deposit ratio is now 101% (compared to 85% in 4Q22). We view these as potentially short-term issues. AVBH has made a number of strategic hires to grow core deposits and launched initiatives to grow fee income, including treasury management services and a business credit card. Moreover, AVBH's credit quality remains very strong, and we believe that the bank's niche lending verticals of venture financing and high-end residential construction can grow market share in a highly fragmented marketplace following the collapse of two (2) large competitors. However, in our opinion, the near-term challenge to earnings outweighs the long-term benefits of credit culture and innovative lending. We can understand why investors would buy the stock now, but we believe waiting for signs of progress on earnings is more prudent."

For an analyst ratings summary and ratings history on AvidBank Holdings Inc. click here. For more ratings news on AvidBank Holdings Inc. click here.

Shares of AvidBank Holdings Inc. closed at $19.20 yesterday.

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