KBRA cuts Avidbank

KBRA said it downgraded Avidbank Holdings Inc.’s senior unsecured debt rating to BBB- from BBB and subordinated debt rating to BB+ from BBB-. The agency also lowered subsidiary Avidbank’s senior unsecured debt ratings to BBB from BBB+ and the subordinated debt rating to BBB- from BBB. The watch developing status for all ratings has been resolved.

“The rating downgrade is primarily driven by the 11% deposit outflow which occurred in 1Q23 (largely stemming from venture lending deposits), comparatively greater reliance on spread revenue and continued below peer capital profile. As of 1Q23, non-core funding utilization represented over 20% of total liabilities, and uninsured deposits accounted for 59% of total deposits, higher than many similarly rated peers,” KBRA said in a press release.

On the positive side, the bank has not suffered any charge-off activity because of increased non-performing assets, and profitability metrics should benefit from rising interest ratings, the agency said.

The outlook is stable.

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