Tuesday, Stephens, a financial services firm, adjusted its price target for AvidBank Holdings Inc. (OTC: AVBH) to $23.00, down from the previous target of $24.00. Despite this reduction, Stephens continues to hold an Overweight rating on the stock.
The adjustment followed AvidBank's second-quarter operating earnings per share (EPS), which came in at $0.46, falling short of the anticipated $0.58. The bank's pre-provision net revenue (PPNR) was reported at $7.9 million, which was 5% lower than expected, primarily due to a lower-than-forecasted net interest income (NII).
Additionally, a higher-than-expected loan loss provision (LLP) influenced the quarter's results, with a $0.10 difference from forecasts primarily attributed to a specific reserve for a venture-backed loan that had been previously classified and is now fully reserved.
Stephens noted that the majority of net interest-bearing (NIB) outflows, which were down 15% quarter-over-quarter, likely occurred earlier in the second quarter, some of which were related to tax matters. However, the firm remains optimistic about NIB and core deposit growth trends heading into the second half of 2024.
This optimism is bolstered by the recent hiring of a specialty-deposit professional, which is expected to help continue the reduction of brokered deposits, which decreased by 42% quarter-over-quarter in the second quarter. Loan growth is also anticipated to accelerate in the latter half of the year, particularly in the commercial and industrial (C&I) sector.
Further projections include a modest net interest margin (NIM) decline of 3 basis points in the third quarter, with expectations of expansion thereafter. Stephens has also revised its operating EPS forecast for 2025 to $2.40, down from the previous estimate of $2.71, while reiterating its Overweight rating on AvidBank shares.
In other recent news, AvidBank Holdings Inc. reported robust financial results, including an earnings per share (EPS) of $0.69, which exceeded both Piper Sandler's and Wall Street's estimates. The bank has been actively working towards a low double-digit increase in loan growth, despite facing increased deposit costs due to heightened competition.
Investment firm DA Davidson maintains its Buy rating on AvidBank, reiterating a $27 price target, showcasing confidence in the bank's ability to reach its projected loan growth.
However, AvidBank received a Neutral rating from Janney, with a Fair Value Estimate set at $21.00 per share. This rating reflects the bank's near-term earnings being largely contingent upon its success in substituting high-cost borrowings with more affordable core deposits. AvidBank has been focusing on expanding its core deposit base and increasing fee income through strategic hires and new initiatives.
Despite the bank's robust credit quality and potential for market share growth in venture financing and high-end residential construction, Janney suggests that immediate challenges to earnings may outweigh long-term advantages.
Following the bank's first-quarter 2024 earnings report, Piper Sandler revised its price target for AvidBank. The adjustment came due to higher expenses, leading to a change in Piper Sandler's EPS forecasts for AvidBank for 2024 and 2025.
InvestingPro Insights
Following Stephens' recent price target adjustment for AvidBank Holdings Inc. (OTC: AVBH), InvestingPro data reveals a nuanced financial landscape for the bank. With a market capitalization of $148.46 million and a price-to-earnings (P/E) ratio standing at 10.2, AvidBank presents a value-oriented profile amidst the financial sector. Notably, the bank's shares are trading close to their 52-week low, which may catch the attention of value investors seeking entry points.
InvestingPro Tips highlight that AvidBank has been profitable over the last twelve months as of Q2 2024, with an adjusted operating income margin of 30.85%. Analysts predict profitability will continue into the current year, which aligns with the positive loan growth and deposit trends noted by Stephens. However, it's important to consider that the bank suffers from weak gross profit margins and does not pay a dividend, potentially affecting investors seeking regular income streams.
For investors looking to delve deeper into AvidBank's performance and potential, additional tips are available on InvestingPro. Subscribers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing access to comprehensive financial analysis and insights. With 5 additional InvestingPro Tips available, informed decision-making is within reach for those navigating the complexities of bank stocks.
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