avbh20260331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OR THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OR THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ______________.

Commission File No. 001-42792

AVIDBANK HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)

California

6022

26-1731009

(State or other jurisdiction of incorporation or organization)

(Primary Standard Industrial Classification Code Number)

(I.R.S. Employer Identification No.)

1732 North First Street

6th Floor

San Jose, California 95112

(408) 200-7390

(Address, including zip code and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, No Par Value per Share		AVBH		The Nasdaq Stock Market LLC
(Title of class)		(Trading Symbol)		(Name of exchange on which registered)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of April 30, 2026, the registrant had 10,955,167 shares of common stock, no par value per share (the “Common Stock”), outstanding.

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AVIDBANK HOLDINGS, INC.

FORM 10-Q

TABLE OF CONTENTS


Part I. Financial Information		Page

Item 1.	Financial Statements (Unaudited)	3

	Consolidated Statements of Financial Condition (unaudited) at March 31, 2026 and December 31, 2025	3
	Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2026 and 2025	4
	Consolidated Statements of Comprehensive Income (unaudited) for the three months ended March 31, 2026 and 2025	5
	Consolidated Statements of Changes in Shareholders' Equity (unaudited) for the three months ended March 31, 2026 and 2025	6
	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2026 and 2025	7
	Notes to Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56
Item 4.	Controls and Procedures	56

Part II. Other Information

Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59

Signatures		60

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PART I. FINANCIAL INFORMATION

AVIDBANK HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)

(In thousands, except per share data)	*March 31, 2026*			*December 31, 2025*

ASSETS
Cash and due from financial institutions	$	10,569		$	7,942
Due from Federal Reserve Bank and interest-bearing deposits in other financial institutions		138,473			146,627
Total cash and cash equivalents		149,042			154,569
Debt securities available-for-sale, at fair value (amortized cost $212,366 and $218,488, net of allowance for credit losses of $0 and $0)		210,583			218,160
Loans, net of allowance for credit losses on loans of $20,938 and $22,261		2,151,908			2,126,178
Federal Home Loan Bank stock, at cost		8,409			8,409
Premises and equipment, net		1,340			1,526
Cash surrender value of bank-owned life insurance policies		13,151			13,045
Accrued interest receivable and other assets		45,121			47,756
Total assets	$	2,579,554		$	2,569,643

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing	$	577,101		$	556,972
Interest-bearing		1,622,218			1,629,101
Total deposits		2,199,319			2,186,073
Short-term borrowings		55,000			60,000
Subordinated debentures, net		22,000			22,000
Accrued interest payable and other liabilities		14,797			20,591
Total liabilities		2,291,116			2,288,664
Commitments and contingent liabilities (Note 9)
Shareholders' equity
Preferred stock - no par value; 5,000,000 shares authorized; no shares issued and outstanding at March 31, 2026 and December 31, 2025		-			-
Common stock - no par value; 25,000,000 shares authorized; 10,955,167 and 10,947,967 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively		169,474			169,990
Retained earnings		120,171			111,150
Accumulated other comprehensive loss, net of taxes		(1,207	)		(161	)
Total shareholders' equity		288,438			280,979
Total liabilities and shareholders' equity	$	2,579,554		$	2,569,643

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

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AVIDBANK HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	*Three Months Ended March 31,*
(In thousands, except per share data)	*2026*			*2025*
Interest income
Interest and fees on loans	$	35,429		$	31,885
Taxable debt securities		2,437			1,718
Tax-exempt debt securities		30			31
Federal Home Loan Bank dividends		426			185
Other interest income		716			706
Total interest income		39,038			34,525
Interest expense
Interest on deposits		11,899			12,827
Interest on short-term borrowings		240			1,911
Interest on subordinated debentures		399			435
Total interest expense		12,538			15,173
Net interest income		26,500			19,352
Provision for credit losses		1,445			-
Net interest income after provision for credit losses		25,055			19,352
Non-interest income
Service charges and fees		821			762
Foreign exchange income		363			220
Bank-owned life insurance income		106			90
Warrant and success fee income		3			-
Other investment income		(22	)		47
Other income		196			52
Total non-interest income		1,467			1,171
Non-interest expense
Salaries and employee benefits		9,555			9,097
Legal and professional fees		1,188			511
Data processing		799			615
Occupancy and equipment		790			996
Regulatory assessments		566			544
Other operating expenses		1,184			1,079
Total non-interest expense		14,082			12,842
Income before provision for income taxes		12,440			7,681
Provision for income taxes		3,419			2,245
Net income	$	9,021		$	5,436

Net income per common share data
Basic earnings per common share	$	0.85		$	0.73
Diluted earnings per common share		0.84			0.71

Weighted average shares - basic		10,600,902			7,488,051
Weighted average shares - diluted		10,773,884			7,682,884

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

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AVIDBANK HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	*Three Months Ended March 31,*
(In thousands)	*2026*			*2025*
Net income	$	9,021		$	5,436

Other comprehensive income, before tax
Unrealized gains on securities:
Unrealized holdings (losses) / gains		(1,455	)		7,011
		(1,455	)		7,011
Derivative instruments designated as cash flow hedges:
Unrealized holdings (losses) / gains on derivatives		(10	)		21
Other comprehensive (loss) / income, before tax		(1,465	)		7,032

Tax effect		419			(2,053	)
Total other comprehensive (loss) / income, after tax		(1,046	)		4,979
Comprehensive income	$	7,975		$	10,415

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

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AVIDBANK HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

									*Accumulated*
									*Other*			*Total*
	*Common Stock*						*Retained*		*Comprehensive*			*Shareholders'*
(In thousands)	*Shares*			*Amount*			*Earnings*		*Income/(Loss)*			*Equity*
Balance, December 31, 2025		10,947,967		$	169,990		$	111,150	$	(161	)	$	280,979
Net income		-			-			9,021		-			9,021
Other comprehensive loss		-			-			-		(1,046	)		(1,046	)
Restricted stock issued, net of forfeitures		54,895			-			-		-			-
Restricted stock surrendered for tax withholding upon vesting		(22,695	)		(660	)		-		-			(660	)
Repurchase of common stock		(25,000	)		(693	)		-		-			(693	)
Stock-based compensation		-			837			-		-			837
Balance, March 31, 2026		10,955,167		$	169,474		$	120,171	$	(1,207	)	$	288,438

Balance, December 31, 2024		7,906,761		$	106,997		$	130,703	$	(51,338	)	$	186,362
Net income		-			-			5,436		-			5,436
Other comprehensive income		-			-			-		4,979			4,979
Restricted stock issued, net of forfeitures		47,485			-			-		-			-
Restricted stock surrendered for tax withholding upon vesting		(42,062	)		(978	)		-		-			(978	)
Stock-based compensation		-			820			-		-			820
Balance, March 31, 2025		7,912,184		$	106,839		$	136,139	$	(46,359	)	$	196,619

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

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AVIDBANK HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	*Three Months Ended March 31,*
(In thousands)	*2026*			*2025*
Operating activities
Net income	$	9,021		$	5,436
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		1,445			-
Depreciation, amortization and accretion		31			379
Increase in deferred loan origination fees, net		(222	)		(306	)
Earnings on bank-owned life insurance policies		(106	)		(90	)
Repayment of operating lease liabilities		552			629
Stock-based compensation expense		837			820
Net decrease in accrued interest receivable and other assets		2,492			345
Net decrease in accrued interest payable and other liabilities		(5,806	)		(2,956	)
Net cash provided by operating activities		8,244			4,257

Investing activities
Proceeds from paydowns/maturities of available-for-sale debt securities		6,286			6,807
Net (increase) / decrease in loans		(26,941	)		24,104
Purchase of premises and equipment		(9	)		(23	)
Net cash (used in) / provided by investing activities		(20,664	)		30,888

Financing activities
Net increase in deposits		13,246			38,133
Restricted stock issued, net		(660	)		(978	)
Repurchase of common stock		(693	)		-
Net proceeds / (repayment) from overnight borrowings		(5,000	)		(45,000	)
Net proceeds / (repayment) from Federal Reserve Bank borrowings		-			-
Net proceeds / (repayment) from Federal Home Loan Bank borrowings		-			15,000
Net cash provided by financing activities		6,893			7,155

Net change in cash and cash equivalents		(5,527	)		42,300

Cash and cash equivalents at beginning of period		154,569			82,701
Cash and cash equivalents at end of period	$	149,042		$	125,001

Supplemental disclosure of cash flow information:
Net cash paid during the period for:
Interest expense	$	12,485		$	15,739
Income taxes, net of refunds		337			(41	)
Supplemental non-cash disclosures:
Recording of right-of-use assets in exchange for lease liabilities	$	-		$	439
Change in unrealized losses / (gains) on available-for-sale debt securities, net of tax		1,036			(4,958	)

The accompanying notes are an integral part of these consolidated financial statements (unaudited).

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AVIDBANK HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Avidbank Holdings, Inc. (the “Company”) have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. All material intercompany balances and transactions have been eliminated. In the Statement of Cash Flows the Company has elected to present proceeds and redemptions from borrowings from the Federal Home Loan Bank and the Federal Reserve Bank on a net basis.

Operating results for the three months ended March 31, 2026, are not necessarily indicative of the results that may be expected for the year ending December 31, 2026, or any other period. These statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the year ended December 31, 2025, as filed with the Securities and Exchange Commission (“SEC”) on the Company’s Form 10-K (File No. 001-42792).

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The allowance for credit losses for loans and unfunded commitments, securities, taxes and the fair value of financial instruments are particularly susceptible to significant change.

Issued Accounting Standards

ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. ASU 2023-09 is effective for Public Business Entities for the annual period beginning January 1, 2025. The Company has adopted this guidance, and the related updated disclosures can be found in Note 10 – Income Taxes in the Company's Form 10-K for the year ended December 31, 2025.

In November 2024, the FASB issued ASU No. 2024-03, “Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. ASU 2024-03 is not expected to have a material impact on our consolidated financial statements.

In January 2025, the FASB issued ASU 2025-01, “Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date.” ASU 2025-01 amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. ASU 2025-01 is not expected to have a material impact on our consolidated financial statements.

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In December 2026, the FASB issued ASU 2025-08, "Financial Instruments — Credit Losses (Topic 326): Purchased Loans." ASU 2025-08 expands the population of acquired financial assets subject to the gross-up approach for accounting for credit losses. This ASU introduces the concept of purchased seasoned loans and requires certain acquired loans that have not experienced significant credit deterioration since origination to be accounted for using the gross-up approach. The amendments clarify initial and subsequent measurement, including recognition of an allowance for credit losses at acquisition with an offsetting gross-up to the purchase price, and require purchased seasoned loans to follow the same interest income recognition model as originated financial assets. The amendments are effective for annual reporting periods beginning after December 15, 2026, and for interim reporting periods within those annual periods, with early adoption permitted. The amendments must be applied prospectively to loans acquired on or after the adoption date. This ASU is not expected to have a material impact on our consolidated financial statements.

NOTE 2 – DEBT SECURITIES

The Company did not hold securities classified as trading or held-to-maturity at March 31, 2026 or December 31, 2025. The amortized cost and estimated fair value of available-for-sale debt securities at March 31, 2026 and December 31, 2025 consisted of the following:

	*March 31, 2026*
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government agencies	$	425	$	-	$	(19	)	$	406
Commercial mortgage-backed securities		5,448		-		(46	)		5,402
Residential mortgage-backed securities		201,783		18		(1,669	)		200,132
U.S. states and political subdivisions		4,710		50		(117	)		4,643
Total available-for-sale	$	212,366	$	68	$	(1,851	)	$	210,583

	*December 31, 2025*
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-sale:
U.S. Treasury securities and obligations of U.S. government agencies	$	478	$	-	$	(20	)	$	458
Commercial mortgage-backed securities		5,454		3		(27	)		5,430
Residential mortgage-backed securities		207,847		340		(635	)		207,552
U.S. states and political subdivisions		4,709		72		(61	)		4,720
Total available-for-sale	$	218,488	$	415	$	(743	)	$	218,160

Net unrealized losses on available-for-sale debt securities totaling ($1.3 million) were recorded as accumulated other comprehensive loss, net of tax of $513 thousand, within shareholders' equity at March 31, 2026. Net unrealized losses on available-for-sale debt securities totaling ($234 thousand) were recorded as accumulated other comprehensive income, net of tax of $94 thousand, within shareholders' equity at December 31, 2025.

During the three months ended March 31, 2026 and March 31, 2025, there were no sales or calls of debt securities and no gains realized or losses recognized. There were no transfers between investment categories during the three months ended March 31, 2026 or March 31, 2025.

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Debt securities with unrealized losses at March 31, 2026 and December 31, 2025 are summarized and classified according to the duration of the loss period as follows: (in thousands)

	*Less than 12 Months*					*12 Months or More*					*Total*
			*Unrealized*					*Unrealized*					*Unrealized*
March 31, 2026	*Fair Value*		*Losses*			*Fair Value*		*Losses*			*Fair Value*		*Losses*
U.S. Treasury securities and obligations of U.S. government agencies	$	-	$	-		$	406	$	(19	)	$	406	$	(19	)
Commercial mortgage-backed securities		5,402		(46	)		-		-			5,402		(46	)
Residential mortgage-backed securities		176,085		(1,456	)		1,772		(213	)		177,857		(1,669	)
U.S. states and political subdivisions		1,739		(40	)		855		(77	)		2,594		(117	)
Total available-for-sale	$	183,226	$	(1,542	)	$	3,033	$	(309	)	$	186,259	$	(1,851	)

	*Less than 12 Months*					*12 Months or More*					*Total*
			*Unrealized*					*Unrealized*					*Unrealized*
December 31, 2025	*Fair Value*		*Losses*			*Fair Value*		*Losses*			*Fair Value*		*Losses*
U.S. Treasury securities and obligations of U.S. government agencies	$	-	$	-		$	458	$	(20	)	$	458	$	(20	)
Commercial mortgage-backed securities		3,441		(20	)		1,004		(7	)		4,445		(27	)
Residential mortgage-backed securities		103,636		(437	)		1,798		(198	)		105,434		(635	)
U.S. states and political subdivisions		1,004		-			871		(61	)		1,875		(61	)
Total available-for-sale	$	108,081	$	(457	)	$	4,131	$	(286	)	$	112,212	$	(743	)

At March 31, 2026, the Company held 3 securities available-for-sale, which were in a loss position for greater than 12 months. Management believes the unrealized losses on the Company’s debt securities were caused by interest rate changes. The contractual cash flows of those investments are generally guaranteed or supported by an agency or sponsored entity of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment. As of March 31, 2026, the Company did not intend to sell and does not believe it will be required to sell securities in an unrealized loss position prior to the recovery of their amortized cost basis. No credit impairment was recorded for those securities in an unrealized loss position for the three months ended March 31, 2026 or December 31, 2025, and there was no allowance for credit losses on securities available-for-sale recorded as of March 31, 2026 or December 31, 2025.

The amortized cost and estimated fair value of available-for-sale debt securities at March 31, 2026 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

	*Available-for-sale*
(In thousands)		*Amortized Cost*		*Fair Value*
Due in one year or less	$	-	$	-
Due after one year through five years		-		-
Due after five years through 10 years		425		406
Due after 10 years		4,710		4,643
		5,135		5,049
Debt securities not due at a single maturity date: mortgage-backed securities		207,231		205,534
Total available-for-sale	$	212,366	$	210,583

Debt securities with fair values of $9.4 million and $8.9 million were pledged at March 31, 2026 and December 31, 2025, respectively, toward certain letters of credit. No debt securities were pledged to secure public deposits at March 31, 2026 or December 31, 2025.

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NOTE 3 – LOANS

Outstanding loans are summarized below:

(In thousands)	*March 31, 2026*			*December 31, 2025*
Commercial and industrial	$	1,040,684		$	1,049,530
Construction		200,272			196,243
Residential real estate		48,726			45,669
Commercial real estate		882,751			854,342
Consumer		413			2,655
Total outstanding loans, net of deferred fees		2,172,846			2,148,439
Allowance for credit losses on loans		(20,938	)		(22,261	)
Total loans, net of allowance for credit losses on loans	$	2,151,908		$	2,126,178

From time to time, the Bank pledges loans as collateral under a short-term borrowing arrangement through the Discount Window of the Federal Reserve Bank. The Bank has pledged a total of $1.13 billion and $972.7 million of loans for borrowing capacity of $981.0 million and $853.9 million at March 31, 2026 and December 31, 2025, respectively. The Bank had no Federal Reserve Bank borrowings outstanding that were secured by loans as of March 31, 2026 and December 31, 2025.

The Bank has entered into an agreement providing for the pledging of loans for borrowing capacity with the Federal Home Loan Bank. The Bank pledged a total of $780.9 million of loans for remaining borrowing capacity of $548.7 million at March 31, 2026. In comparison, the Bank pledged a total of $773.0 million of loans for remaining borrowing capacity of $530.0 million at December 31, 2025. There were no FHLB borrowings outstanding at March 31, 2026 or December 31, 2025.

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES ON LOANS

Changes in the allowance for credit losses on loans during the periods presented were as follows:

	*Three Months Ended March 31,*
(In thousands)	*2026*			*2025*
Balance, beginning of period	$	22,261		$	18,679
Provision for credit losses on loans		1,433			-
Charge-offs		(3,171	)		-
Recoveries		415			43
Balance, end of period	$	20,938		$	18,722

Accrued interest receivable related to loans totaled $8.7 million and $8.2 million at March 31, 2026 and December 31, 2025, respectively, and was reported in accrued interest receivable and other assets on the consolidated statements of financial condition. Accrued interest receivable was excluded from the estimate of credit losses.

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Allocation of the allowance for credit losses on loans by portfolio segment for the three months ended March 31, 2026 and 2025 are as follows:

	*Commercial*						*Residential*		*Commercial*
(In thousands)	*and Industrial*			*Construction*			*Real Estate*		*Real Estate*			*Consumer*			*Total*
Balance, December 31, 2025	$	15,612		$	1,972		$	494	$	4,150		$	33		$	22,261
Provision for credit losses on loans		1,000			261			36		167			(31	)		1,433
Charge-offs		(3,171	)		-			-		-			-			(3,171	)
Recoveries		415			-			-		-			-			415
Balance, March 31, 2026	$	13,856		$	2,233		$	530	$	4,317		$	2		$	20,938

	*Commercial*						*Residential*		*Commercial*
(In thousands)	*and Industrial*			*Construction*			*Real Estate*		*Real Estate*			*Consumer*			*Total*
Balance, December 31, 2024	$	10,170		$	3,005		$	286	$	5,207		$	11		$	18,679
Provision for credit losses on loans		776			(183	)		81		(684	)		10			-
Charge-offs		-			-			-		-			-			-
Recoveries		43			-			-		-			-			43
Balance, March 31, 2025	$	10,989		$	2,822		$	367	$	4,523		$	21		$	18,722

The following table presents the amortized cost basis of loans on non-accrual status and loans past due over 89 days still accruing as of March 31, 2026 and December 31, 2025:

	*March 31, 2026*
	*Non-accrual*		*Non-accrual*				*Loans Past*
	*Loans With No*		*Loans With*		*Total*		*Due over 89*
	*Allowance for*		*Allowance for*		*Non-accrual*		*Days Still*
(In thousands)	*Credit Losses*		*Credit Losses*		*Loans*		*Accruing*
Commercial and industrial	$	-	$	-	$	-	$	-
Construction		16,323		-		16,323		-
Residential Real Estate		-		-		-		-
Commercial Real Estate		-		-		-		-
Consumer		-		-		-		-
Total	$	16,323	$	-	$	16,323	$	-

	*December 31, 2025*
	*Non-accrual*		*Non-accrual*				*Loans Past*
	*Loans With No*		*Loans With*		*Total*		*Due over 89*
	*Allowance for*		*Allowance for*		*Non-accrual*		*Days Still*
(In thousands)	*Credit Losses*		*Credit Losses*		*Loans*		*Accruing*
Commercial and industrial	$	-	$	5,088	$	5,088	$	-
Construction		19,414		-		19,414		-
Residential Real Estate		-		-		-		-
Commercial Real Estate		-		-		-		-
Consumer		-		-		-		-
Total	$	19,414	$	5,088	$	24,502	$	-

Table of Contents

The following tables present the risk category and gross charge-offs by vintage year, which is the year of origination or most recent renewal, as of the date indicated.

	*Term Loans Amortized Cost Basis by Origination Year*
													*Revolving*		*Revolving*
													*Loans*		*Loans*
													*Amortized*		*Converted*
(In thousands)	*2026*		*2025*		*2024*		*2023*		*2022*		*Prior*		*Cost Basis*		*to Term*		*Total*
March 31, 2026
Commercial and industrial
Risk Rating
Pass	$	84,136	$	245,673	$	66,672	$	39,444	$	26,702	$	19,026	$	536,120	$	4,617	$	1,022,390
Special Mention		-		1,431		595		-		3,774		-		8,789		-		14,589
Substandard		1,964		-		-		1,252		475		-		14		-		3,705
Substandard - Non-accrual		-		-		-		-		-		-		-		-		-
Total	$	86,100	$	247,104	$	67,267	$	40,696	$	30,951	$	19,026	$	544,923	$	4,617	$	1,040,684
Gross charge-offs	$	-	$	-	$	-	$	3,171	$	-	$	-	$	-	$	-	$	3,171

Construction
Risk Rating
Pass	$	7,044	$	46,716	$	71,465	$	43,523	$	6,295	$	6,601	$	-	$	-	$	181,644
Special Mention		-		-		-		-		-		2,305		-		-		2,305
Substandard - Non-accrual		-		-		-		-		-		16,323		-		-		16,323
Total	$	7,044	$	46,716	$	71,465	$	43,523	$	6,295	$	25,229	$	-	$	-	$	200,272
Gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential Real Estate
Risk Rating
Pass	$	-	$	3,724	$	2,711	$	4,308	$	669	$	2,704	$	34,610	$	-	$	48,726
Total	$	-	$	3,724	$	2,711	$	4,308	$	669	$	2,704	$	34,610	$	-	$	48,726
Gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial Real Estate
Risk Rating
Pass	$	36,295	$	160,746	$	53,432	$	152,196	$	126,126	$	326,351	$	8,797	$	-	$	863,943
Special Mention		-		18,808		-		-		-		-		-		-		18,808
Total	$	36,295	$	179,554	$	53,432	$	152,196	$	126,126	$	326,351	$	8,797	$	-	$	882,751
Gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer
Risk Rating
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	413	$	-	$	413
Total	$	-	$	-	$	-	$	-	$	-	$	-	$	413	$	-	$	413
Gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total
Pass	$	127,475	$	456,859	$	194,280	$	239,471	$	159,792	$	354,682	$	579,940	$	4,617	$	2,117,116
Special Mention		-		20,239		595		-		3,774		2,305		8,789		-		35,702
Substandard		1,964		-		-		1,252		475		-		14		-		3,705
Substandard - Non-accrual		-		-		-		-		-		16,323		-		-		16,323
Total	$	129,439	$	477,098	$	194,875	$	240,723	$	164,041	$	373,310	$	588,743	$	4,617	$	2,172,846

Table of Contents

	*Term Loans Amortized Cost Basis by Origination Year*
													*Revolving*		*Revolving*
													*Loans*		*Loans*
													*Amortized*		*Converted*
(In thousands)	*2025*		*2024*		*2023*		*2022*		*2021*		*Prior*		*Cost Basis*		*to Term*		*Total*
December 31, 2025
Commercial and industrial
Risk Rating
Pass	$	273,105	$	69,415	$	46,268	$	30,290	$	15,579	$	5,807	$	586,324	$	5,000	$	1,031,788
Special Mention		1,016		-		-		3,522		-		-		6,305		-		10,843
Substandard		-		-		1,295		26		-		-		490		-		1,811
Substandard - Non-accrual		-		-		3,850		-		-		-		-		-		3,850
Doubtful - Non-accrual		-		-		1,238		-		-		-		-		-		1,238
Total	$	274,121	$	69,415	$	52,651	$	33,838	$	15,579	$	5,807	$	593,119	$	5,000	$	1,049,530
Gross charge-offs	$	1,523	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	1,523

Construction
Risk Rating
Pass	$	42,573	$	65,573	$	46,201	$	12,847	$	6,005	$	3,630	$	-	$	-	$	176,829
Substandard - Non-accrual		-		-		-		3,091		16,323		-		-		-		19,414
Total	$	42,573	$	65,573	$	46,201	$	15,938	$	22,328	$	3,630	$	-	$	-	$	196,243
Gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential Real Estate
Risk Rating
Pass	$	3,477	$	2,663	$	4,325	$	673	$	-	$	2,724	$	31,807	$	-	$	45,669
Total	$	3,477	$	2,663	$	4,325	$	673	$	-	$	2,724	$	31,807	$	-	$	45,669
Gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial Real Estate
Risk Rating
Pass	$	179,320	$	56,045	$	152,850	$	128,199	$	124,128	$	206,499	$	7,301	$	-	$	854,342
Total	$	179,320	$	56,045	$	152,850	$	128,199	$	124,128	$	206,499	$	7,301	$	-	$	854,342
Gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer
Risk Rating
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	2,655	$	-	$	2,655
Total	$	-	$	-	$	-	$	-	$	-	$	-	$	2,655	$	-	$	2,655
Gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total
Pass	$	498,475	$	193,696	$	249,644	$	172,009	$	145,712	$	218,660	$	628,087	$	5,000	$	2,111,283
Special Mention		1,016		-		-		3,522		-		-		6,305		-		10,843
Substandard		-		-		1,295		26		-		-		490		-		1,811
Substandard - Non-accrual		-		-		3,850		3,091		16,323		-		-		-		23,264
Doubtful - Non-accrual		-		-		1,238		-		-		-		-		-		1,238
Total	$	499,491	$	193,696	$	256,027	$	178,648	$	162,035	$	218,660	$	634,882	$	5,000	$	2,148,439

Table of Contents

The Company monitors loans by past due status. The following tables present the aging of past due loans as of March 31, 2026 and December 31, 2025:

	*March 31, 2026*
					*Greater than*				*Total Past*
					*89 days and*				*Due and*
	*30-59 Days*		*60-89 Days*		*Still*		*Non-accrual*		*Non-accrual*
(In thousands)	*Past Due*		*Past Due*		*Accruing*		*Loans*		*Loans*		*Current*		*Total*
Commercial and industrial	$	32	$	-	$	-	$	-	$	32	$	1,040,652	$	1,040,684
Construction		-		-		-		16,323		16,323		183,949		200,272
Residential Real Estate		-		-		-		-		-		48,726		48,726
Commercial Real Estate		-		-		-		-		-		882,751		882,751
Consumer		-		-		-		-		-		413		413
Total	$	32	$	-	$	-	$	16,323	$	16,355	$	2,156,491	$	2,172,846

	*December 31, 2025*
					*Greater than*				*Total Past*
					*89 days and*				*Due and*
	*30-59 Days*		*60-89 Days*		*Still*		*Non-accrual*		*Non-accrual*
(In thousands)	*Past Due*		*Past Due*		*Accruing*		*Loans*		*Loans*		*Current*		*Total*
Commercial and industrial	$	-	$	-	$	-	$	5,088	$	5,088	$	1,044,442	$	1,049,530
Construction		-		-		-		19,414		19,414		176,829		196,243
Residential Real Estate		-		-		-		-		-		45,669		45,669
Commercial Real Estate		1,374		-		-		-		1,374		852,968		854,342
Consumer		-		-		-		-		-		2,655		2,655
Total	$	1,374	$	-	$	-	$	24,502	$	25,876	$	2,122,563	$	2,148,439

Loans that are deemed by management to no longer possess risk characteristics similar to other loans in the portfolio, or that have been identified as collateral-dependent, are evaluated individually for purposes of determining an appropriate lifetime allowance for credit losses. Loans deemed collateral-dependent require evaluation based on the estimated fair value of the underlying collateral, less estimated costs to sell. The following table presents outstanding loan balances of collateral-dependent loans by portfolio segment as of December 31, 2025.

	*Collateral Type*
	*Real*		*Business*		*Accounts*
(In thousands)	*Property*		*Assets*		*Receivable*		*Equipment*		*Other*		*Total*
March 31, 2026
Commercial and industrial	$	-	$	-	$	-	$	-	$	-	$	-
Construction		16,323		-		-		-		-		16,323
Residential Real Estate		-		-		-		-		-		-
Commercial Real Estate		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Total	$	16,323	$	-	$	-	$	-	$	-	$	16,323

December 31, 2025
Commercial and industrial	$	-	$	-	$	-	$	-	$	3,850		3,850
Construction		19,414		-		-		-		-		19,414
Residential Real Estate		-		-		-		-		-		-
Commercial Real Estate		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Total	$	19,414	$	-	$	-	$	-	$	3,850	$	23,264

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. In some cases, the Company provides multiple types of concessions on one loan.

Table of Contents

The following tables present the amortized cost basis of loans at March 31, 2026 and March 31, 2025, that were both experiencing financial difficulty and were modified during the three months ended March 31, 2026 and 2025, by portfolio segment and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each segment of financing receivable is also presented below:

							*Interest*		*Principal*
							*Rate*		*Forgiveness,*
							*Reduction,*		*Interest Rate*
			*Payment*		*Interest Rate*		*Payment*		*Reduction,*
			*Delay*		*Reduction*		*Delay*		*Payment*
			*and/or*		*and/or*		*and/or*		*Delay and*
	*Term*		*Term*		*Payment*		*Term*		*Term*				*% of*
(In thousands)	*Extension*		*Extension*		*Delay*		*Extension*		*Extension*		*Total*		*Total Class*
Three Months Ended March 31, 2026
Commercial and industrial	$	6,156	$	-	$	-	$	-	$	-	$	6,156		0.59	%
Construction		-		-		-		-		-		-		-
Residential Real Estate		-		-		-		-		-		-		-
Commercial Real Estate		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-
Total	$	6,156	$	-	$	-	$	-	$	-	$	6,156		0.28	%

Three Months Ended March 31, 2025
Commercial and industrial	$	5,375	$	-	$	-	$	-	$	-	$	5,375		0.67	%
Construction		-		-		-		-		-		-		-
Residential Real Estate		-		-		-		-		-		-		-
Commercial Real Estate		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-
Total	$	5,375	$	-	$	-	$	-	$	-	$	5,375		0.29	%

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three months ended March 31, 2026 and 2025:

					Weighted
			*Weighted*		*Average*
			*Average*		*Term*
	*Principal*		*Interest Rate*		*Extension*
	*Forgiveness ($)*		*Reduction (%)*		*(Months)*
Three Months Ended March 31, 2026
Commercial and industrial		-		-		11.1
Construction		-		-		-
Residential Real Estate		-		-		-
Commercial Real Estate		-		-		-
Consumer		-		-		-
Total		-		-		11.1


Three Months Ended March 31, 2025
Commercial and industrial		-		-		5.2
Construction		-		-		-
Residential Real Estate		-		-		-
Commercial Real Estate		-		-		-
Consumer		-		-		-
Total		-		-		5.2

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The Company had $434 thousand and $106 thousand in commitments to lend additional amounts to the borrowers included in the previous tables for the three months ended March 31, 2026 and 2025, respectively. There were no loans to borrowers experiencing financial difficulty, which had been modified within the prior 12 months, with a payment default during the three months ended March 31, 2026 or the three months ended March 31, 2025.

NOTE 5 – LEASES

Lease Arrangements

The Company enters into leases in the normal course of business primarily for headquarters, back-office operations locations and business development offices. The Company’s leases have remaining terms ranging from 19 to 50 months, some of which include termination or renewal options to extend the lease for up to 5 years.

The Company leases its administrative offices in San Jose under a non-cancellable operating lease. The lease expires in 2027 and has one five-year renewal option. The Company also leases office space for loan production offices in Redwood City, California and San Francisco, California. At the end of September 2021, the Company closed its Palo Alto branch office and the space has been subleased. In the first quarter of 2025, the Redwood City loan production office lease expired. The Company then executed a new Redwood City loan production office lease, in a new location, with a five-year term that expires in 2030. The San Francisco loan production office lease also expires in 2030.

Leases are classified as operating or finance leases at the lease commencement date. The Company does not currently have any significant finance leases in which it is the lessee. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments when the rate implicit in a lease is not known. The Company’s incremental borrowing rate is based on the Federal Home Loan Bank of San Francisco, adjusted for the lease term and other factors.

Right-of-use assets and lease liabilities by lease type, and the associated statement of financial condition classifications, are as follows:

(In thousands)
Balance Sheet Classification	*March 31, 2026*		*December 31, 2025*
Right-of-use assets:
Operating leases - Accrued interest receivable and other assets	$	5,099	$	5,606
Total right-of-use assets		5,099		5,606

Lease liabilities:
Operating leases - Accrued interest payable and other liabilities		5,665		6,211
Total lease liabilities	$	5,665	$	6,211

Lease Expense

Total lease cost for the three months ended March 31, 2026 and 2025 is as follows:

	*Three Months Ended March 31,*
(In thousands)	*2026*			*2025*
Operating lease cost	$	664		$	770
Sublease income		(89	)		(87	)
Total lease cost, net	$	575		$	683

Table of Contents

Lease Obligations

Future undiscounted lease payments for operating leases with initial terms of one year or more as of March 31, 2026 are as follows (in thousands):

March 31,	*Leases*
2026	$	2,018
2027		2,432
2028		838
2029		863
2030		347
Thereafter		-
Total undiscounted lease payments		6,498
Less imputed interest		833
Net lease liabilities	$	5,665

Supplemental Lease Information

	*March 31, 2026*			*December 31, 2025*
Operating lease weighted average remaining lease term (years)		2.93			3.12
Operating lease weighted average discount rate		2.42	%		2.46	%

NOTE 6 – DEPOSITS

The Company’s total deposits consisted of the following:

(In thousands)	*March 31, 2026*		*December 31, 2025*
Interest-bearing checking	$	1,036,178	$	1,069,272
Savings		3,899		3,922
Money market		515,160		528,227
Time, $250,000 or more		20,867		21,882
Other time		7,654		5,798
Non-reciprocal brokered ⁽¹⁾		38,460		-
Total interest-bearing deposits		1,622,218		1,629,101
Non-interest-bearing deposits		577,101		556,972
Total deposits	$	2,199,319	$	2,186,073

⁽¹⁾ FDIC regulations impose a general cap on reciprocal deposits that may be exempt from brokered deposits classification equal to 20% of the Bank's total liabilities. As of March 31, 2026 and December 31, 2025, an additional $447.6 million and $475.4 million of our deposits were considered brokered deposits by the FDIC due to being in excess of the general cap, respectively.

Non-reciprocal brokered deposits are used to supplement the Company’s traditional deposit funding sources. At March 31, 2026, the Company had $38.5 million in non-reciprocal brokered deposits representing 2% of total deposits. At December 31, 2025, there were no non-reciprocal brokered deposits.

At March 31, 2026, scheduled maturities of time deposits for the next five years were as follows:

(In thousands)
2026	$	23,331
2027		3,031
2028		-
2029		2,159
2030 and after		-
Total time deposits	$	28,521

Table of Contents

Interest expense recognized on interest-bearing deposits for the three months ended March 31, 2026 and March 31, 2025, consisted of the following:

	*Three Months Ended March 31,*
(In thousands)	*2026*		*2025*
Interest-bearing checking	$	8,260	$	8,530
Savings		13		9
Money market		3,376		2,862
Time, $250,000 or more		199		347
Other time		8		211
Non-reciprocal brokered		43		868
Total interest-bearing deposits	$	11,899	$	12,827

Overdrawn deposit accounts reclassified as loans were $227 thousand and $15 thousand as of March 31, 2026 and December 31, 2025, respectively.

At March 31, 2026 and at December 31, 2025, the Company had two deposit relationships, one a 1031 exchange intermediary service and the other a software company in our Venture Lending Division, that exceeded 5% of total deposits. Totaling $225.0 million at March 31, 2026 and $228.7 million at December 31, 2025, together they represented 10% of total deposits for both periods.

Estimated uninsured deposits, including accrued interest, were 42% of total deposits at March 31, 2026 and at December 31, 2025. The uninsured amounts are estimated based on the methodologies and assumptions used for the Bank's regulatory reporting requirements.

NOTE 7 – SUBORDINATED DEBENTURES AND OTHER BORROWING ARRANGEMENTS

On December 20, 2019, the Company issued $22.0 million in ten-year, fixed-to-floating rate subordinated notes to certain qualified institutional buyers and institutional accredited investors. The subordinated notes have a maturity date of December 30, 2029 and bear interest at the rate of 5.0% per annum, payable semiannually for the first five years of the term, and then quarterly at a variable rate based on the then current 3-month Secured Overnight Financing Rate plus 359.5 basis points. The notes are currently redeemable subject to certain conditions. The indebtedness evidenced by the subordinated notes, including principal and interest, is unsecured and subordinate and junior to general and secured creditors and depositors. On the statement of financial condition, the subordinated notes are carried net of debt issuance costs, and these were fully amortized as of December 31, 2024. The interest rate paid on the subordinated notes as of March 31, 2026 was 7.29%.

The Company had unsecured Federal Funds lines of credit with its correspondent banks totaling $209.0 million at March 31, 2026 and $206.0 million at December 31, 2025. As of March 31, 2026, there were $55.0 million of borrowings outstanding, and at December 31, 2025, $60.0 million of borrowings were outstanding. The interest rate paid on the borrowings outstanding at both March 31, 2026 and December 31, 2025, was 3.75%.

The Company has a short-term borrowing arrangement with the Federal Reserve Bank through the Discount Window. The Company currently has a detailed lien on certain loans to secure borrowings. The borrowing capacity under the agreement varies depending on the amount of loans pledged and totaled $981.0 million and $853.9 million as of March 31, 2026 and December 31, 2025, respectively. There were no borrowings outstanding under the agreement at March 31, 2026 or December 31, 2025.

As a member of the Federal Home Loan Bank of San Francisco, the Bank is eligible to use the FHLB’s facilities for short- and long-term borrowing. Borrowing capacity requires stock ownership in the FHLB and is based on pledged assets or a lien against certain loan categories. As of March 31, 2026 and December 31, 2025, there were no borrowings outstanding from the FHLB. The remaining borrowing capacity at March 31, 2026 and December 31, 2025, was $548.7 million and $530.0 million, respectively, under a detailed lien on loans.

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NOTE 8 – SHAREHOLDERS' EQUITY

Dividends

The Company’s ability to pay cash dividends is dependent on dividends paid to it by the Bank, if any, and limited by Federal and California law. Under California law, the holders of common stock of the Company are entitled to receive dividends when and as declared by the Board of Directors, out of funds legally available, subject to certain restrictions. The California General Corporation Law prohibits the Company from paying dividends on its common stock unless either: (i) the amount of retained earnings of the corporation immediately prior to the dividend equals or exceeds the sum of (A) the amount of the proposed dividend plus (B) the preferential preferred dividends in arrears amount, if any, or (ii) immediately after the dividend, the value of the corporation’s assets would equal or exceed the sum of its total liabilities plus the preferential rights amount, if any.

Dividends paid from the Bank to the Company are restricted under certain Federal laws and regulations governing banks. In addition, the California Financial Code restricts the total dividend payment of any bank in any one year to the lesser of (1) the bank’s retained earnings or (2) the bank's net income for its last three fiscal years, less distributions made to shareholders during the same three-year period, without the prior approval of the California Department of Financial Protection and Innovation. At March 31, 2026, $16.7 million was free of such restrictions.

Earnings Per Common Share

A reconciliation of the numerators and denominators of the basic and diluted earnings per common share computations for the three months ended March 31, 2026 and March 31, 2025 is shown below:

	*Three Months Ended March 31,*
(In thousands, except per share amounts)	*2026*		*2025*
Net income	$	9,021	$	5,436
Total weighted average shares outstanding - basic		10,600,902		7,488,051
Basic earnings per common share	$	0.85	$	0.73

Net income	$	9,021	$	5,436
Total weighted average shares outstanding - basic		10,600,902		7,488,051
Add: dilutive impact of restricted stock		172,982		194,833
Total weighted average shares outstanding - diluted		10,773,884		7,682,884
Diluted earnings per common share	$	0.84	$	0.71
Anti-dilutive awards⁽¹⁾		508		92

⁽¹⁾ Represents the total number of shares related to restricted stock awards that have been excluded from the computation of diluted earnings per share because the impact would have been anti-dilutive. These awards were considered anti-dilutive because the assumed proceeds divided by the weighted average shares issuable were higher than the average price of the shares.

Stock Repurchase Program

The Company announced a stock repurchase program on November 25, 2020, authorizing the repurchase of up to 5% or 307,780 shares of the Company's then outstanding common stock. The program has no expiration date. Under the stock repurchase program, the Company may, from time to time, repurchase shares of its outstanding common stock in the open market, in privately-negotiated transactions, or otherwise, subject to applicable laws and regulations. The extent to which the Company repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements, availability of funds, and other relevant considerations, as determined by the Company. The Company may, at its discretion, begin, suspend or terminate repurchases at any time prior to the program's expiration, without any prior notice. There is no obligation on the part of the Company to repurchase any shares of its common stock. For the three months ended March 31, 2026, 25,000 shares were repurchased under the stock repurchase program for $693 thousand at an average price of $27.69 per share. These repurchased shares are considered authorized but unissued shares.

As of March 31, 2026, the Company has repurchased a total of 50,347 shares since the announcement of the stock repurchase program in 2020, leaving 257,433 shares that may yet be purchased under the stock repurchase program. No shares were repurchased under the stock repurchase program during the three months ended March 31, 2025.

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Regulatory Capital

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Under the Basel III rules, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The net unrealized gain or loss on available-for-sale securities is not included in computing regulatory capital. Management believes as of March 31, 2026 and December 31, 2025, the Company and the Bank meet all capital adequacy requirements to which they are subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At March 31, 2026 and December 31, 2025, the most recent regulatory notifications categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category.

To be categorized as well-capitalized, under the regulatory framework for prompt corrective actions, the Company and the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below.

Actual and required capital amounts and ratios, exclusive of the capital conservation buffer, are presented below at March 31, 2026 and December 31, 2025:

	*March 31, 2026*					*December 31, 2025*

(In thousands)	*Amount*		*Ratio*			*Amount*		*Ratio*
Leverage Ratio
Avidbank Holdings, Inc.	$	284,814		11.39	%	$	275,669		11.23	%
Minimum regulatory requirement	$	99,985		4.00	%	$	98,167		4.00	%

Avidbank	$	296,059		11.88	%	$	285,091		11.65	%
Minimum requirement for "Well-Capitalized" institution	$	124,622		5.00	%	$	122,359		5.00	%
Minimum regulatory requirement	$	99,698		4.00	%	$	97,887		4.00	%

Common Equity Tier I
Avidbank Holdings, Inc.	$	284,814		11.39	%	$	275,669		11.05	%
Minimum regulatory requirement	$	112,564		4.50	%	$	112,249		4.50	%

Avidbank	$	296,059		11.87	%	$	285,091		11.46	%
Minimum requirement for "Well-Capitalized" institution	$	162,114		6.50	%	$	161,678		6.50	%
Minimum regulatory requirement	$	112,233		4.50	%	$	111,931		4.50	%

Tier 1 Risk-Based Capital Ratio
Avidbank Holdings, Inc.	$	284,814		11.39	%	$	275,669		11.05	%
Minimum regulatory requirement	$	150,085		6.00	%	$	149,665		6.00	%

Avidbank	$	296,059		11.87	%	$	285,091		11.46	%
Minimum requirement for "Well-Capitalized" institution	$	199,525		8.00	%	$	198,988		8.00	%
Minimum regulatory requirement	$	149,644		6.00	%	$	149,241		6.00	%

Total Risk-Based Capital Ratio
Avidbank Holdings, Inc.	$	321,315		12.85	%	$	313,481		12.57	%
Minimum regulatory requirement	$	200,114		8.00	%	$	199,554		8.00	%

Avidbank	$	319,359		12.80	%	$	309,703		12.45	%
Minimum requirement for "Well-Capitalized" institution	$	249,406		10.00	%	$	248,735		10.00	%
Minimum regulatory requirement	$	199,525		8.00	%	$	198,988		8.00	%

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NOTE 9 – COMMITMENTS AND CONTINGENCIES

Financial Instruments with Off-Balance-Sheet Risk

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet client financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. We manage our liquidity position to make sure we have adequate liquidity and funding if there are significant draws on our unfunded commitments.

The Company has some commitments that are unconditionally cancellable at its discretion, and these amounts are not included in the totals below. The contractual amounts of financial instruments with off-balance-sheet credit risk at March 31, 2026 and December 31, 2025 were as follows:

	*March 31, 2026*				*December 31, 2025*
(In thousands)		Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to extend credit	$	44,852	$	647,179	$	37,731	$	650,384
Standby letters of credit		174		19,387		174		18,994

Commitments to extend credit consist primarily of unfunded single-family residential and commercial real estate, construction loans and commercial revolving lines of credit. Construction loans are established under standard underwriting guidelines and policies and are secured by deeds of trust, with disbursements made over the course of construction. Commercial revolving lines of credit have a high degree of industry diversification. Commitments to make loans are generally made for periods of 10 years or less. The fixed rate loan commitments have interest rates ranging from 0% to 15.00% and maturities ranging primarily from 1 year to 23 years.

Standby letters of credit are generally secured and are issued by the Bank to guarantee the performance of a client to a third party. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to clients. The unamortized fees received for issuing the letters of credit were $159 thousand and $152 thousand at March 31, 2026 and December 31, 2025, respectively. The Company recognizes these fees as revenue over the term of the commitment or when the commitment is used.

Significant Concentrations of Credit Risk

The Company grants real estate mortgage, real estate construction, commercial and consumer loans primarily to clients in the California counties of San Mateo, San Francisco and Santa Clara. Although the Company has a diversified loan portfolio, a substantial portion of its portfolio is secured by commercial and residential real estate. Management believes the loans within this concentration have no more than the normal risk of collectability. However, a substantial decline in real estate values in the Company's primary market area could have an adverse impact on the collectability of these loans. Personal and business income represent the primary sources of repayment for a majority of these loans and management believes the risks presented by the concentration are further mitigated by diversification of property types within the Company's real estate portfolio and by conservative underwriting.

At March 31, 2026 and December 31, 2025, in management’s judgment, a concentration of loans existed in construction and commercial real estate related loans. At March 31, 2026 and December 31, 2025, approximately 50% and 49%, respectively, of the Company's loans were construction and commercial real estate related, representing 9% and 41% of total outstanding loans at March 31, 2026, and 9% and 40%, respectively, at December 31, 2025.

Contingencies

The Company and the Bank are routinely involved in legal actions and claims which arise in the ordinary course of business. The outcome of these matters and the timing of ultimate resolution is inherently difficult to predict.

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In accordance with Accounting Standards Codification Topic 450, the Company establishes accruals for contingencies, including any litigation, regulatory, or tax matters (but excluding standard business-related legal fees), when the Company believes it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. We evaluate our outstanding legal and regulatory proceedings and other matters each quarter to assess our loss contingency accruals and make adjustments in such accruals, upward or downward, as appropriate, in light of additional information and based on management’s best judgment. For claims and legal actions where it is not probable that a loss may be incurred, or where we are not currently able to reasonably estimate the loss or range of loss, we do not establish an accrual. As of March 31, 2026, the Company did not record an accrued contingent liability for any legal proceedings. However, a loss is possible in future quarters, but is currently not probable and reasonably estimable, due to a lawsuit filed against the Company and the Bank in the Superior Court of California, County of Santa Clara, in November 2025 (Klearnow Corporation v. Avidbank and Avidbank Holdings, Inc., Case No. 25CV480309) in connection with a $4.5 million wire sent by the Bank on behalf of a client whose email was allegedly fraudulently compromised.

We do not believe that the ultimate resolution of any currently pending legal proceedings will have a material adverse effect on our business, financial condition or results of operations. The outcome of litigation and other legal and regulatory matters is inherently uncertain, however, and it is possible that one or more of the legal matters currently pending or threatened against the Company or the Bank could have a material adverse effect on our business, financial condition or results of operations.

NOTE 10 – RELATED PARTY TRANSACTIONS

During the normal course of business, the Company enters into transactions with related parties, including directors and officers. As of March 31, 2026 and December 31, 2025, there were no balances outstanding for related party loans and no additions or amounts repaid during the three months ended March 31, 2026 or during the year ended December 31, 2025. Undisbursed commitments to related parties totaled $5,000 as of both March 31, 2026 and December 31, 2025, respectively.

Deposits of certain officers, directors, and their associates totaled approximately $357 thousand and $248 thousand as of March 31, 2026 and December 31, 2025, respectively.

NOTE 11 – OTHER EXPENSES

Other expenses for the three months ended March 31, 2026 and March 31, 2025 consisted of the following:

	*Three Months Ended March 31,*
(In thousands)	*2026*		*2025*
Director's fees and expenses	$	226	$	149
Correspondent bank charges		200		170
Advertising and marketing		116		127
Travel and meals		121		107
Business software and subscriptions		266		285
Other		255		241
Total other expenses	$	1,184	$	1,079

NOTE 12 – FAIR VALUE

In accordance with accounting guidance, the Company groups its financial assets and financial liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 - Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury, other U.S. government and agency mortgage-backed securities that are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

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Level 2 - Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities.

Level 3 - Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the fair values presented. The following methods and assumptions were used by the Company to estimate the fair values of its financial instruments at March 31, 2026 and December 31, 2025:

Cash and cash equivalents, Federal Funds Sold and interest-bearing deposits in other banks

The carrying amount of these instruments approximate the fair value and are classified as Level 1 in the fair value hierarchy.

Securities available-for-sale

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government bonds, certain mortgage products and exchange-traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Examples of such instruments, which would generally be classified within Level 2 of the valuation hierarchy, include certain collateralized mortgage and debt obligations, corporate bonds, municipal bonds and U.S. agency notes. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. Securities classified within Level 3 might include certain residual interests in securitizations and other less liquid securities. As of March 31, 2026 and December 31, 2025, all securities available for sale were Level 2.

Loans

The fair value of variable rate loans that reprice frequently and with no significant change in credit risk is based on the carrying value and results in a classification of Level 3 within the fair value hierarchy. Fair value for other loans is estimated using discounted cash flow analysis using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification in the fair value hierarchy. For collateral-dependent real estate loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. The estimated fair values of financial instruments disclosed above as of March 31, 2026 and December 31, 2025, follow the guidance in ASU 2016-01 which prescribes an “exit price” approach in estimating and disclosing fair value of financial instruments incorporating discounts for credit, liquidity, and marketability factors.

Accrued interest receivable

The carrying amount of accrued interest receivable approximates its fair value and is classified as Level 1 in the fair value hierarchy.

Deposits

The fair value of demand deposits, savings accounts, and money market deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposits is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturities. Deposits are classified as Level 2.

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Subordinated debentures and Short-term borrowings

Subordinated Debentures: The carrying amount of the Company’s subordinated debentures are estimated using discounted cash flow analysis based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

Short-term Borrowings: The carrying amount of short-term borrowings approximate their fair values resulting in a Level 1 classification. They generally mature within thirty days or have a variable interest rate.

Accrued interest payable

The carrying amount of accrued interest payable approximates its fair value and is classified as Level 1 in the fair value hierarchy.

The carrying amounts and estimated fair values of financial instruments not carried at fair value at March 31, 2026 and December 31, 2025, are as follows:

			*Fair Value Measurements at*
	*Carrying*		*March 31, 2026*
(In thousands)	*Amount*		*Level 1*		*Level 2*		*Level 3*		*Total*
Financial assets:
Cash and due from financial institutions	$	10,569	$	10,569	$	-	$	-	$	10,569
Due from Federal Reserve Bank and interest-bearing deposits in banks		138,473		138,473		-		-		138,473
Loans, net		2,151,908		-		-		2,140,411		2,140,411
Accrued interest receivable		9,511		9,511		-		-		9,511

Financial liabilities:
Deposits		2,199,319		-		2,061,416		-		2,061,416
Subordinated debentures, net		22,000		-		-		24,419		24,419
Short-term borrowings		55,000		55,000		-		-		55,000
Accrued interest payable		195		195		-		-		195

			*Fair Value Measurements at*
	*Carrying*		*December 31, 2025*
(In thousands)	*Amount*		*Level 1*		*Level 2*		*Level 3*		*Total*
Financial assets:
Cash and due from financial institutions	$	7,942	$	7,942	$	-	$	-	$	7,942
Due from Federal Reserve Bank and interest-bearing deposits in banks		146,627		146,627		-		-		146,627
Loans, net		2,126,178		-		-		2,110,338		2,110,338
Accrued interest receivable		9,297		9,297		-		-		9,297

Financial liabilities:
Deposits		2,186,073		-		2,067,565		-		2,067,565
Subordinated debentures, net		22,000		-		-		24,645		24,645
Short-term borrowings		60,000		60,000		-		-		60,000
Accrued interest payable		142		142		-		-		142

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Assets Recorded at Fair Value

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring and nonrecurring basis as of March 31, 2026 and December 31, 2025:

Recurring Basis

The Company is required or permitted to record the following assets at fair value on a recurring basis as follows:

	*March 31, 2026*
(In thousands)	*Fair Value*		*Level 1*		*Level 2*		*Level 3*
Securities available-for-sale
U.S. Treasury securities and obligations of U.S. government agencies	$	406	$	-	$	406	$	-
Commercial mortgage-backed securities		5,402		-		5,402		-
Residential mortgage-backed securities		200,132		-		200,132		-
U.S. states and political subdivisions		4,643		-		4,643		-
Total securities available-for-sale	$	210,583	$	-	$	210,583	$	-

	*December 31, 2025*
(In thousands)	*Fair Value*		*Level 1*		*Level 2*		*Level 3*
Securities available-for-sale
U.S. Treasury securities and obligations of U.S. government agencies	$	458	$	-	$	458	$	-
Commercial mortgage-backed securities		5,430		-		5,430		-
Residential mortgage-backed securities		207,552		-		207,552		-
U.S. states and political subdivisions		4,720		-		4,720		-
Total securities available-for-sale	$	218,160	$	-	$	218,160	$	-

Fair values for available-for-sale debt securities are based on quoted market prices for similar securities (Level 2). During the three months ended March 31, 2026 and 2025, there were no significant transfers in or out of Levels 1, 2 or 3.

Non-recurring Basis

The Company may be required, from time to time, to measure certain other financial assets at fair value on a non-recurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets.

A loan is considered to be collateral-dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. At the time a loan is considered collateral-dependent, it is valued at fair value, less estimated costs to sell. Collateral-dependent loans carried at fair value generally receive specific allocations of the allowance for credit losses. For collateral-dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. There were no changes in valuation techniques used during the three months ended March 31, 2026.

Appraisals for collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value is compared with independent data sources such as recent market data or industry-wide statistics.

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Collateral-dependent loans were measured at fair value and had a principal balance of $16.3 million with no valuation allowance at March 31, 2026. At December 31, 2025, collateral-dependent loans were measured at fair value and had a principal balance of $23.3 million with a valuation allowance of $1.2 million.

NOTE 13 – DERIVATIVE FINANCIAL INSTRUMENTS

There were no active derivative contracts in place as of March 31, 2026 or December 31, 2025.

The Company receives equity warrants with net settlement terms in connection with extending loan commitments to certain of its clients. These warrants are obtained at the inception of a loan facility or the amendment of a loan facility. These warrants are not obtained in lieu of other fees, interest or payments. These warrants potentially provide an additional return, in addition to the traditional loan yield from interest and fees, in the event of a liquidity event of the borrowing company. The Company holds these equity warrants for future investment gains, rather than to hedge economic risks. In general, the equity warrants entitle the Company to buy a specific number of shares of the client’s stock at a specific price over a specific time period. The warrants may also include contingent provisions which provide for additional shares to be purchased at a specific price if defined future events occur, such as future rounds of equity financing by the client, or upon additional borrowings by the client. All of the Company’s equity warrants contain net share settlement provisions, which permit the client to deliver to the Company, upon the Company’s exercise of the warrant, the amount of shares with a current fair value equal to the net gain under the warrant agreement. Warrants held, which amounted to $935 thousand and $945 thousand at March 31, 2026 and December 31, 2025, respectively, are included in accrued interest receivable and other assets on the consolidated balance sheets.

NOTE 14 – REVENUE FROM CONTRACTS WITH CLIENTS

All of the Company’s revenue from contracts with clients in the scope of ASC 606 is recognized within Non-Interest Income. The following table presents the Company’s sources of non-interest income for the three months ended March 31, 2026 and 2025.

	*Three Months Ended*
(In thousands)	*March 31, 2026*			*March 31, 2025*
Service charges and fees	$	821		$	762
Foreign exchange income		363			220
Bank-owned life insurance income ⁽¹⁾		106			90
Warrant and success fee income ⁽¹⁾		3			-
Other investment income ⁽¹⁾		(22	)		47
Other income ⁽²⁾		196			52
Total non-interest income	$	1,467		$	1,171

⁽¹⁾ Not within the scope of ASC 606.

⁽²⁾ The Other income category includes $101 thousand and $46 thousand of revenue within the scope of ASC 606 for the three months ended March 31, 2026 and 2025, respectively.

Service charges and bank fees - Service charges on deposit accounts consist of account analysis fees, monthly service fees and other deposit account related fees. Account analysis and monthly service fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Other deposit account related fees are largely transaction based and therefore fees are recognized at the point in time when the Company has satisfied its performance obligation. The Company earns other service charges, commissions, and fees from its clients for transaction-based services. Such services include debit card, ATM, and other service charges. In each case, these service charges and fees are recognized in income at the time or within the same period that the Company’s performance obligation is satisfied. The Company earns interchange fees from debit cardholder transactions conducted through various payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services.

Foreign exchange income – The Company earns foreign exchange fees from clients who complete a transaction in a foreign currency. The fees represent a percentage of the underlying transaction value and are assessed concurrently with the transaction processing service provided to the client. They are then recognized at the end of the month following the transaction processing service.

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Gains/Losses on Sale of OREO – The Company records a gain from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized, and the gain on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain on sale, the Company adjusts the transaction price and related gain on sale if a significant financing component is present. There were no gains or losses on the sale of OREO during the three months ended March 31, 2026 or March 31, 2025.

NOTE 15 – BUSINESS SEGMENT INFORMATION

The Company is a bank holding company engaged in the business of commercial banking, which accounts for substantially all the revenues, operating income, and assets. Accordingly, all the Company’s operations are recorded in one segment, banking.

The Company has determined that all of its banking divisions meet the aggregation criteria of ASC 280, Segment Reporting, as its current operating model is structured whereby banking divisions serve a similar base of primarily commercial clients utilizing a company-wide offering of similar products and services managed through similar processes and platforms that are collectively reviewed by the Company’s Chief Financial Officer, who has been identified as the chief operating decision maker (“CODM”).

The CODM regularly assesses performance of the aggregated single operating and reporting segment and decides how to allocate resources based on net income calculated on the same basis as is net income reported in the Company’s consolidated statements of operations and other comprehensive income. The CODM is also regularly provided with expense information at a level consistent with that disclosed in the Company’s consolidated statements of operations.

Loans, investments and deposits provide the net revenues in the banking operation. Interest expense, provisions for credit losses and payroll provide the significant expenses in the banking operation. All operations are domestic.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this report. This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may prove to be inaccurate. Certain risks, uncertainties and other factors, including those set forth under sections entitled “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors” and elsewhere in this report, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis. We assume no obligation to update any of these forward-looking statements except as required by law.

The following discussion presents management's perspective on our results of operations and financial condition on a consolidated basis. However, because we conduct all of our material business operations through our bank subsidiary, Avidbank, the discussion and analysis relate to activities primarily conducted by the Bank.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “strive,” “intend,” “plan” or words or phases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Such forward-looking statements are based on various assumptions (some of which may be beyond our control) and are subject to risks and uncertainties, which change over time, and other factors which could cause actual results to differ materially from those currently anticipated. Such risks and uncertainties include, but are not limited to:

●

uncertain market conditions and economic trends nationally, regionally and particularly in the Bay Area (which we define as the counties of Alameda, Contra Costa, Marin, Monterey, Napa, San Francisco, San Mateo, Santa Clara, Santa Cruz, Solano and Sonoma) and California;

●

economic conditions affecting the venture capital and private equity industries, including any decline in overall portfolio company investment, merger and acquisition activity and other liquidity events affecting venture and private equity fund and their portfolio companies;

●

risks related to the concentration of our business in California, and specifically within the Bay Area, including risks associated with any downturn in the real estate sector;

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the effects of a prolonged government shutdown;

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the occurrence of significant natural disasters, including fires and earthquakes, geopolitical events, and acts of war or terrorism;

●

the effects of natural or man-made disasters, including the effects of pandemic viruses;

●

changes in market interest rates that affect the pricing of our loans and deposits and our net interest income;

●

risks related to our strategic focus on lending to small to medium-sized businesses;

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the sufficiency of the assumptions and estimates we make in establishing reserves for potential loan losses and the value of loan collateral and securities;

	●	our ability to attract and retain executive officers and key employees, including their client and community relationships;
	●	our ability to successfully manage any chief executive officer transition;

●

adverse changes in the financial performance and/or condition of our borrowers and, as a result, increased loan delinquency rates, deterioration in asset quality and losses in our loan portfolio;

●

the costs of and effects of legal and regulatory developments, including legal proceedings and lawsuits we are or may become subject to;

●

the results of regulatory examinations or reviews and the effect of and our ability to comply with, any regulations or regulatory orders or actions we are or may become subject to;

●

our level of nonperforming assets and the costs associated with resolving problem loans;

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our ability to maintain adequate liquidity and to raise necessary capital to fund our growth strategy and operations or to meet increased minimum regulatory capital levels;

●

the effects of increased competition from a wide variety of local, regional, national and other providers of financial services;

●

technological changes and developments;

●

negative trends in our market capitalization and adverse changes in the price of our common stock;

●

risks associated with unauthorized access, cyber-crime and other threats to data security;

●

the effects of any strategic transactions we may make or evaluate, and the costs associated with any potential or actual strategic transaction;

●

our ability to comply with various governmental and regulatory requirements applicable to financial institutions, including supervisory actions by federal and state banking agencies;

●

the impact of recent and future legislative and regulatory changes, including changes in banking, accounting, securities and tax laws and regulations and their application by our regulators, and economic stimulus programs;

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governmental monetary and fiscal policies, including the policies of the Federal Reserve and policies related to tariffs;

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our ability to implement, maintain and improve effective internal controls;

●

our use of the net proceeds from our recent completed public offering;

●

our success at managing any of the risks involved in the foregoing items; and

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other factors that are discussed in the sections entitled “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein and in our Annual Report on Form 10-K for the year ended December 31, 2025.

The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in this report, including those discussed in the section entitled “Risk Factors” herein and in our Annual Report on Form 10-K for the year ended December 31, 2025. New risks and uncertainties may emerge from time to time, and it is not possible for us to predict their occurrence or how they will affect us. If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this report. Therefore, we caution you not to place undue reliance on our forward-looking information and statements. We disclaim any duty to revise or update the forward-looking statements, whether written or oral, to reflect actual results or changes in the factors affecting the forward-looking statements, except as specifically required by law.

Company Overview

We are a bank holding company headquartered in San Jose, California that operates through our wholly owned subsidiary, Avidbank, or the Bank, a California state-chartered bank. We are registered under the Bank Holding Company Act of 1956, as amended. The Company was incorporated under the laws of the State of California in 2007 for the principal purpose of engaging in activities permitted for a bank holding company. As a bank holding company, the Company is authorized to engage in the activities permitted under the Bank Holding Company Act of 1956, as amended, and the regulations thereunder. We own 100% of the issued and outstanding common shares of our banking subsidiary, Avidbank.

We specialize in commercial and industrial lending, venture lending, structured finance, asset-based lending, sponsor finance, fund finance, real estate construction and commercial real estate lending. In addition to providing products and services, the Bank emphasizes the establishment of long-standing relationships with its customers and regularly modifies the products and services it offers to meet the unique demands of its customers. Our mission is to collaborate with our customers to meet their banking needs whether individual or business. We aim to consistently deliver value that exceeds our clients’ expectations.

Key Factors Affecting Our Business

Interest Rates

Net interest income is the most significant contributor to our net income and is the difference between the interest and fees earned on interest-earning assets and the interest expense incurred in connection with interest-bearing liabilities. Net interest income is primarily a function of the average balances and yields of these interest-earning assets and interest-bearing liabilities. These factors are influenced by internal considerations such as product mix and risk appetite as well as external influences such as economic conditions, competition for loans and deposits and market interest rates.

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The cost of our deposits and short-term borrowings is primarily based on short-term interest rates, which are largely driven by the Federal Reserve’s actions and market competition. The yields generated by our loans and securities are typically affected by short-term and long-term interest rates, which are driven by market competition and market rates often impacted by the Federal Reserve’s actions and economic conditions. The level of net interest income is influenced by movements in such interest rates and the pace at which such movements occur.

Non-interest Income

Non-interest income is also a contributor to our net income. Non-interest income consists primarily of service charges on deposit accounts, foreign exchange income, earnings on bank-owned life insurance, our net gains on the sale of debt securities and other fee income including warrant and success fee income, and other miscellaneous fees.

Non-interest Expense

Non-interest expense includes salaries and employee benefits, occupancy and equipment, data processing, professional fees, FDIC insurance assessments, legal and professional fees, and other expenses. In evaluating our level of non-interest expense, we closely monitor our efficiency ratio. The efficiency ratio is calculated by dividing non-interest expense by net interest income plus non-interest income. We continue to seek to identify ways to streamline our business and operate more efficiently.

Credit Quality

Our loan policies and underwriting practices have historically resulted in low levels of charge-offs and non-performing assets. Based upon selective deal origination and strong portfolio management, we intend to maintain the credit quality of our loan portfolio. However, credit trends in the markets in which we operate are largely impacted by economic conditions beyond our control. Negative trends affecting our clients’ performance could adversely impact our financial condition.

Competition

The industry and businesses in which we operate are highly competitive. We may see increased competition through more aggressive interest rates, underwriting standards, product offerings and structure. While we seek to maintain an appropriate return on our investments, we anticipate that we will experience continued pressure on our net interest margins as we operate in this competitive environment.

Economic Conditions

Our business and financial performance are affected by economic conditions generally in the United States and more directly in the Bay Area and California where we primarily operate. The economic factors that are most relevant to our business and our financial performance include, but are not limited to, real estate values, interest rates, gross domestic product and unemployment rates.

Regulatory Trends

We operate in a highly regulated environment and nearly all of our operations are subject to extensive regulation and supervision. Regulators appointed by President Trump and his administration, Congress, the State of California and the Department of Financial Protection and Innovation (”DFPI”) may revise the laws and regulations applicable to us, may impose new laws and regulations, increase the level of scrutiny of our business in the supervisory process, and pursue additional enforcement actions against financial institutions. Future legislative and regulatory changes such as these may increase our costs and have an adverse effect on our business, financial condition and results of operations. The legislative and regulatory trends that will affect us in the future are impossible to predict with any certainty.

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Results of Operations Highlights

We reported net income for the three months ended March 31, 2026 of $9.0 million, or $0.84 per diluted share, compared to net income of $5.4 million, or $0.71 per diluted share, for the same period in 2025. In August of 2025, the Company completed an initial public offering ("IPO") of its common stock, issuing an aggregate total of 3,001,500 shares of common stock at the public offering price of $23.00 per share. After deductions for underwriting fees, commissions and offering expenses, the Company's net proceeds from the IPO totaled $61.3 million. In the third and fourth quarters of 2025, we repositioned the securities portfolio and sold $274.7 million in available-for-sale securities for a loss of $62.4 million and purchased $205.4 million in available-for-sale securities with an average purchase yield of 4.57%. We paid off existing short-term borrowings at the time using proceeds from the IPO and securities sales.

The following provides highlights of our financial results for three months ended March 31, 2026:

	●	Return on average assets was 1.46% compared to 0.96% in the first quarter of 2025.
	●	Net interest marginexpanded to 4.38% in the first quarter of 2026, compared to 3.52% in the first quarter of 2025.
	●	The efficiency ratio was 50.35% in the first quarter of 2026, compared to 62.57% in the first quarter of 2025.
	●	Book value per share was $26.33 at March 31, 2026, an increase of $0.67, or 11% annualized, from December 31, 2025.
	●	Repurchased 25,000 shares of our common stock for $693 thousand at an average price of $27.69 per share as part of our share repurchase program.

●

Period-end loans, net of deferred fees, increased $24.4 million, or 5% annualized, compared to December 31, 2025.

●

Average deposits increased $265.1 million, or 14%, compared to the first quarter of 2025. Period-end deposits increased $13.2 million, or 2% annualized, compared to December 31, 2025.

●

Nonperforming assets to total assets decreased to 0.63% as of March 31, 2026 from 0.95% at December 31, 2025.

●

Net charge-offs to average loans totaled 0.52% compared to (0.01)% in the first quarter of 2025.

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Consolidated Financial Highlights

	Three Months Ended
(In thousands, except share and per share data)	March 31, 2026			March 31, 2025
INCOME HIGHLIGHTS
Net income	$	9,021		$	5,436
PER SHARE DATA
Basic earnings per share	$	0.85		$	0.73
Diluted earnings per share		0.84			0.71
Book value per share		26.33			24.85
PERFORMANCE MEASURES
Return on average assets ⁽¹⁾		1.46	%		0.96	%
Return on average equity ⁽¹⁾		12.74	%		11.49	%
Net interest margin ⁽¹⁾		4.38	%		3.52	%
Efficiency ratio		50.35	%		62.57	%
Average loans to average deposits		99.98	%		98.55	%
CAPITAL
Tier 1 leverage ratio		11.39	%		10.39	%
Common equity tier 1 capital ratio		11.39	%		11.10	%
Tier 1 risk-based capital ratio		11.39	%		11.10	%
Total risk-based capital ratio		12.85	%		12.86	%
Common equity ratio		11.18	%		8.48	%
SHARES OUTSTANDING
Number of common shares outstanding		10,955,167			7,912,184
Average common shares outstanding - basic		10,600,902			7,488,051
Average common shares outstanding - diluted		10,773,884			7,682,884
ASSET QUALITY
Total allowance for credit losses-loans and unfunded commitments to total loans		1.07	%		1.14	%
Allowance for credit losses on loans to total loans		0.96	%		1.02	%
Non-performing assets to total assets		0.63	%		0.06	%
Non-performing loans to total loans		0.75	%		0.07	%
Net charge-offs to average loans ⁽¹⁾		0.52	%		(0.01	)%
AVERAGE BALANCES
Loans, net of deferred fees	$	2,150,688		$	1,858,716
Debt securities available-for-sale		216,507			296,422
Total assets		2,504,616			2,289,935
Deposits		2,151,059			1,885,993
Shareholders' equity		287,191			191,891
PERIOD-END BALANCES
Loans, net of deferred fees	$	2,172,846		$	1,841,187
Debt securities available-for-sale		210,583			296,617
Total assets		2,579,554			2,319,922
Deposits		2,199,319			1,929,488
Shareholders' equity		288,438			196,619

⁽¹⁾ Annualized for each period presented.

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Explanation and Reconciliation of the Company’s Use of Non-GAAP Performance and Financial Measures

This report on Form 10-Q contains certain non-GAAP (“Generally Accepted Accounting Principles”) financial measures in addition to results presented in accordance with GAAP. The table below provides reconciliations between GAAP and adjusted financial measures including fully taxable equivalent net interest income and fully taxable equivalent net interest margin. Management has presented these non-GAAP financial measures because we believe that these measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP.

However, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other banking companies use. Other banking companies may use names similar to those we use for the non-GAAP financial measures we disclose but may calculate them differently. You should understand how we and other companies each calculate their non-GAAP financial measures when making comparisons.

Management believes that taxable equivalent net interest income and taxable equivalent net interest margin are reasonable measures to understand the Company’s core operating performance and are important to many investors in the marketplace who are interested in understanding our profitability prospects from our core operations. In addition, management reviews yields on certain asset categories and the net interest margin of the Company on a fully taxable equivalent basis. The non-GAAP taxable equivalent net interest income and net interest margin adjustments facilitate performance comparisons between taxable and tax-free assets by increasing the tax-free income by an amount equivalent to the Federal income taxes that would have been paid if this income were taxable at the Company's 21% Federal statutory rate.

	Three Months Ended
(In thousands)	March 31, 2026			March 31, 2025
Non-GAAP taxable equivalent net interest income reconciliation
Net interest income - GAAP	$	26,500		$	19,352
Taxable equivalent adjustment		8			8
Net interest income - taxable equivalent (non-GAAP)	$	26,508		$	19,360

Non-GAAP taxable equivalent net interest margin reconciliation
Net interest margin - GAAP		4.38	%		3.52	%
Impact of taxable equivalent adjustment		-			-
Net interest margin - taxable equivalent (non-GAAP)		4.38	%		3.52	%

Net Interest Income

The following table shows the composition of average earning assets and average funding sources, average yields and rates, and the net interest margin (on a taxable equivalent basis, a non-GAAP measure) for the three months ended March 31, 2026 and 2025:

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Distribution, Yield and Rate Analysis of Net Income

	Three Months Ended
	March 31, 2026							March 31, 2025
	Average				Yield/			Average				Yield/
(In thousands; except ratios)	Balance		Interest		Rate⁽⁶⁾			Balance		Interest		Rate⁽⁶⁾
ASSETS
Interest-earning assets:
Loans, net of deferred fees ⁽¹⁾	$	2,150,688	$	35,429		6.68	%	$	1,858,716	$	31,885		6.96	%
Interest-bearing deposits in banks		78,859		716		3.68	%		64,376		706		4.45	%
Debt securities
Taxable debt securities		213,820		2,437		4.62	%		293,736		1,718		2.37	%
Non-taxable debt securities ⁽²⁾		2,687		38		5.74	%		2,686		39		5.89	%
Total debt securities		216,507		2,475		4.64	%		296,422		1,757		2.40	%
FHLB stock ⁽⁵⁾		8,409		426		20.55	%		8,409		185		8.92	%
Total interest-earning assets		2,454,463		39,046		6.45	%		2,227,923		34,533		6.29	%

Non-interest-earning assets:
Cash and due from financial institutions		13,058							12,851
All other assets ⁽³⁾		37,095							49,161
TOTAL ASSETS	$	2,504,616						$	2,289,935

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits
Interest-bearing demand deposits	$	1,067,528	$	8,260		3.14	%	$	956,994	$	8,530		3.61	%
Money market and savings		517,342		3,389		2.66	%		385,434		2,871		3.02	%
Time deposits		27,589		207		3.04	%		60,282		558		3.75	%
Non-reciprocal brokered deposits		4,567		43		3.82	%		77,537		868		4.54	%
Total interest-bearing deposits		1,617,026		11,899		2.98	%		1,480,247		12,827		3.51	%

Short-term borrowings		25,500		240		3.82	%		170,111		1,911		4.56	%
Subordinated debentures, net		21,997		399		7.36	%		22,000		435		8.02	%
Total interest-bearing liabilities		1,664,523		12,538		3.05	%		1,672,358		15,173		3.68	%

Non-interest-bearing liabilities:
Demand deposits		534,033							405,746
Accrued expenses and other liabilities		18,869							19,940
Shareholders' equity		287,191							191,891
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	2,504,616						$	2,289,935

Net interest spread						3.40	%						2.61	%
Net interest income and margin ⁽⁴⁾			$	26,508		4.38	%			$	19,360		3.52	%

Non-taxable equivalent net interest margin						4.38	%						3.52	%

Cost of deposits	$	2,151,059	$	11,899		2.24	%	$	1,885,993	$	12,827		2.76	%

⁽¹⁾ Non-performing loans are included in average loan balances. No adjustment has been made for these loans in the calculation of yields. Interest income on loans includes amortization of deferred fees / (costs) of $252 thousand and $496 thousand for the three months ended March 31, 2026 and March 31, 2025, respectively.

⁽²⁾ Interest income on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 21%, reflecting the statutory federal income tax rate.

⁽³⁾ Including average allowance for credit losses on loans of $21.9 million and $18.8 million, respectively.

⁽⁴⁾ Net interest margin is net interest income divided by total interest-earning assets.

⁽⁵⁾ Includes a special FHLB dividend totaling $241 thousand for the three months ended March 31, 2026. Yield is annualized for the periods presented.

⁽⁶⁾ Annualized for the periods presented.

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Net interest income, the primary difference between interest earned on loans and investments and interest paid on deposits and borrowings, is the principal component of our earnings. Net interest income is affected by changes in the nature and volume of interest-earning assets and interest-bearing liabilities held during the period, the rates earned on such assets and the rates paid on interest-bearing liabilities.

Net interest income on a taxable equivalent basis for the three months ended March 31, 2026, was $26.5 million, an increase of $7.1 million, or 37%, compared to $19.4 million for the three months ended March 31, 2025. The increase in net interest income was primarily attributable to an increase in the balance of average loans and a decrease in interest expense. Additionally, the improvement in interest income was positively impacted by the repositioning of our available-for-sale securities portfolio during 2025.

Average interest-earning assets for the three months ended March 31, 2026 increased $226.5 million compared to the same period in 2025, which included increases of $292.0 million in average total loans and $14.5 million in average balances in interest-bearing deposits in banks, partially offset by a $79.9 million decrease in average debt securities. Average interest-bearing liabilities decreased $7.8 million for the three months ended March 31, 2026, compared to the same period in 2025, primarily due to a $144.6 million decrease in average short-term borrowings, a $73.0 million decrease in average non-reciprocal brokered deposits and a $32.7 million decrease in average time deposits, partially offset by increases of $110.5 million in average interest-bearing demand deposits and an increase of $131.9 million in average money market and savings. Average non-interest-bearing deposits for the three months ended March 31, 2026, increased to $534.0 million from $405.7 million for the same period in 2025.

Net interest margin for the three months ended March 31, 2026, was 4.38% compared to 3.52% for the same period in 2025. The increase was primarily driven by lower cost of deposits and lower rates and balances on short-term borrowings. Also contributing to the increase in net interest margin was the receipt of a special FHLB dividend totaling $241 thousand during the three months ended March 31, 2026. The FHLB dividend contributed 4 basis points to net interest margin for the three months ended March 31, 2026. Also positively impacting net interest margin in the first quarter of 2026 was the sale of low-yielding securities as part of the repositioning of our available-for-sale securities portfolio that took place during 2025.

The yield on total average loans of 6.68% for the three months ended March 31, 2026, declined 28 basis points compared to the same period in 2025, primarily driven by reductions in the prime rate. The yield on securities increased to 4.64% during the three months ended March 31, 2026, compared to 2.40% for the same period in 2025 due to the repositioning of our securities portfolio during 2025. The yield on interest-earning assets increased to 6.45% for the three months ended March 31, 2026, compared to 6.29% for the same period in 2025. The average cost of total deposits decreased to 2.24% for the three months ended March 31, 2026, from 2.76% for the same period in 2025, and total funding costs, including all deposits, short-term borrowings and subordinated debentures, decreased to 3.05% for the three months ended March 31, 2026, compared to 3.68% for the same period in 2025.

The average rate paid for short-term borrowings for the three months ended March 31, 2026, was 3.82% compared to 4.56% for the same period in 2025. Our short-term borrowings typically consist of overnight borrowings.

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The following table shows the effect of the interest differential of volume and rate changes for the three months ended March 31, 2026 compared to the same period in 2025. The change in interest due to both rate and volume has been allocated in proportion to the relationship of absolute dollar amounts of change in each.

	For the Three Months Ended
	March 31, 2026
	2026 vs. 2025
	Increase (Decrease)
	Due to Change in:
	Average			Average			Net
(In thousands)	Volume			Rate			Change
Interest income:
Loans, net of deferred fees	$	4,810		$	(1,266	)	$	3,544
Interest-bearing deposits in banks		131			(121	)		10
Debt securities		(914	)		1,632			718
FHLB stock		-			241			241
Interest expense:
Deposits
Interest-bearing demand deposits		855			(1,125	)		(270	)
Money market and savings		864			(346	)		518
Time deposits		(245	)		(106	)		(351	)
Non-reciprocal brokered deposits		(687	)		(138	)		(825	)
Short-term borrowings		(1,361	)		(310	)		(1,671	)
Subordinated debentures		-			(36	)		(36	)
Net interest income	$	4,601		$	2,547		$	7,148

Provision for Credit Losses

Management considers a number of factors in determining the required level of the allowance for credit losses and the provision required to achieve what is believed to be an appropriate reserve level, including historical loss experience, loan growth, credit risk rating trends, non-performing loan levels, delinquencies, loan portfolio concentrations, economic forecasts, and market trends. The provision for credit losses represents management’s determination of the amount necessary to be charged against the current period’s earnings to maintain the allowance for credit losses at a level that it considered adequate in relation to the estimated lifetime losses expected in the loan portfolio.

The provision for credit losses was $1.4 million for the three months ended March 31, 2026, compared to $0 for the three months ended March 31, 2025. The provision was higher in the first quarter of 2026 compared to the same period of 2025 primarily due to higher loan balances. The allowance for credit losses, including loans and unfunded commitments, as a percentage of outstanding loans was 1.07% and 1.14% at March 31, 2026 and 2025, respectively. See further discussion of the Provision for Credit Losses and Allowance for Credit Losses in “Financial Condition—Allowance for Credit Losses.”

The following table details the components of the Company's provision for credit losses for the three months ended March 31, 2026 and 2025.

	For the Three Months Ended
(In thousands)	March 31, 2026		March 31, 2025
Provision for credit losses
Provision for credit losses on loans	$	1,433	$	-
Provision for unfunded commitments		12		-
Total provision for credit losses	$	1,445	$	-

Non-interest Income

Non-interest income increased $296 thousand, or 25%, for the three months ended March 31, 2026, compared to the same period of 2025. The increase was primarily attributable to higher foreign exchange income and higher other income resulting from increased credit card interchange fee income. Partially offsetting the increase was a decrease in other investment income due to fair value marks on fund investments.

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The following table reflects the major components of the Company’s non-interest income for the three months ended March 31, 2026 and 2025:

(In thousands)	Three Months Ended March 31,					Increase/(Decrease)
	2026			2025		Amount			Percent⁽¹⁾
Service charges and fees	$	821		$	762	$	59			8	%
Foreign exchange income		363			220		143			65
Bank-owned life insurance income		106			90		16			18
Warrant and success fee income		3			-		3			NM
Other investment income		(22	)		47		(69	)		(147	)
Other income		196			52		144			277
Total non-interest income	$	1,467		$	1,171	$	296			25	%

⁽¹⁾ NM - Comparisons from positive to negative values or to zero values are considered not meaningful.

Service charges and bank fees for the three months ended March 31, 2026, increased $59 thousand, or 8%, from the same period in 2025, primarily due to an increase in the number of client relationships.

During the three months ended March 31, 2026, foreign exchange income increased $143 thousand, or 65%, compared to the same period in 2025 as a result of the volume of transaction commissions. Foreign exchange income represents commissions earned on foreign exchange transactions, net of related commissions charged by our correspondent bank partners.

Other investment income for the three months ended March 31, 2026, decreased $69 thousand, compared to the same period in 2025 primarily due to fair value marks on fund investments.

Other income increased $144 thousand for the three months ended March 31, 2026, compared the same period in 2025 primarily driven by an increase in credit card interchange fee income.

Non-interest Expense

During the three months ended March 31, 2026, non-interest expense increased by $1.2 million, or 10%, to $14.1 million compared to the same period in 2025.The increase was driven by higher salaries and employee benefits expense, increased legal and professional fees and higher data processing expense, partially offset by a decrease in occupancy and equipment expense.

The following table reflects the major components of the Company’s non-interest expense for the three months ended March 31, 2026 and 2025:

(In thousands)	Three Months Ended March 31,				Increase/(Decrease)
	2026		2025		Amount			Percent
Salaries and employee benefits	$	9,555	$	9,097	$	458			5	%
Legal and professional fees		1,188		511		677			132
Data processing		799		615		184			30
Occupancy and equipment		790		996		(206	)		(21	)
Regulatory assessments		566		544		22			4
Business software and subscriptions		266		285		(19	)		(7	)
Director's fees and expenses		226		149		77			52
Correspondent bank charges		200		170		30			18
Travel and meals		121		107		14			13
Advertising and marketing		116		127		(11	)		(9	)
Other expense		255		241		14			6
Total non-interest expense	$	14,082	$	12,842	$	1,240			10	%

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Salaries and employee benefits expense for the three months ended March 31, 2026, was $9.6 million, an increase of $458 thousand, or 5%, compared to the three months ended March 31, 2025. The increase was primarily driven by increased investment in personnel across the entire Bank. Full-time equivalent headcount totaled 154 at March 31, 2026 compared to 143 at March 31, 2025.

Legal and professional fees were $1.2 million for the three months ended March 31, 2026, an increase of $677 thousand compared to the same period in 2025. The increase was driven by higher credit-related legal and professional fees.

Data processing expense was $799 thousand, an increase of $184 thousand, or 30%, compared to the same period in 2025. The increase was due to higher transaction volume.

Occupancy and equipment expense totaled $790 thousand, reflecting a decrease of $206 thousand, or 21%, from the same period in 2025 due to lower rent expense at one of our loan production offices.

Income Taxes

We monitor and evaluate the potential impact of current events on the estimates used to establish income tax expenses and income tax liabilities. Periodically, we evaluate our income tax positions based on current tax law and positions taken by various tax auditors within the jurisdictions where we are required to file income tax returns.

Income tax expense was $3.4 million and $2.2 million for the three months ended March 31, 2026 and 2025, respectively. The effective tax rate for the three months ended March 31, 2026 and 2025 was 27.5% and 29.2%, respectively. The decrease compared to the first quarter of 2025 was primarily due to discrete tax benefits related to the vesting of equity awards.

Financial Condition

Total assets of the Company were $2.58 billion at March 31, 2026 and $2.57 billion at December 31, 2025. Loans increased $24.4 million compared to December 31, 2025, and were partially offset by decreases in cash and cash equivalents, the securities portfolio and other assets.

Loans

As of March 31, 2026, loans, net of deferred fees, totaled $2.17 billion compared to $2.15 billion at December 31, 2025. The increase from December 31, 2025, was primarily due to the increase in commercial real estate loans, partially offset by a decrease in commercial and industrial loans. The loan portfolio was comprised of approximately 48% and 49% of commercial and industrial loans at March 31, 2026 and December 31, 2025, respectively. Commercial real estate loans comprised 41% of our loans at March 31, 2026 compared to 40% at December 31, 2025. The loan portfolio information presented in this section should be read in conjunction with Note 3 — Loans and Note 4 — Allowance for Credit Losses on Loans of the consolidated financial statements.

The following table reflects the composition of the Company’s loan portfolio and the percentage distribution of each major loan type as of the dates indicated:

	March 31, 2026						December 31, 2025
(In thousands)	Amount			% of Loans			Amount			% of Loans
Commercial and industrial	$	1,040,684			48	%	$	1,049,530			49	%
Construction		200,272			9	%		196,243			9	%
Residential real estate		48,726			2	%		45,669			2	%
Commercial real estate		882,751			41	%		854,342			40	%
Consumer		413			0	%		2,655			0	%
Total outstanding loans, net of deferred fees		2,172,846						2,148,439
Allowance for credit losses on loans		(20,938	)					(22,261	)
Total loans, net of allowance for credit losses on loans	$	2,151,908					$	2,126,178

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The following table shows the maturity distribution for total loans outstanding as of March 31, 2026:

	Contractual Loan Maturities at March 31, 2026

			After One		After Five
			Year		Years		After
	One Year		Through		Through		Fifteen
(In thousands)	or Less		Five Years		Fifteen Years		Years		Total
Commercial and industrial	$	329,631	$	540,660	$	170,393	$	-	$	1,040,684
Construction		183,909		16,363		-		-		200,272
Residential real estate		6,393		27,504		14,829		-		48,726
Commercial real estate		82,966		212,574		587,211		-		882,751
Consumer		227		185		-		1		413
Total loans, net of deferred fees	$	603,126	$	797,286	$	772,433	$	1	$	2,172,846

The principal balances of loans are indicated by both fixed and variable rate categories as of March 31, 2026 in the table below:

	March 31, 2026
	Fixed		Adjustable		Floating
(In thousands)	Interest Rates		Interest Rates		Interest Rates		Total
Commercial and industrial	$	105,615	$	64	$	935,005	$	1,040,684
Construction		31,017		-		169,255		200,272
Residential real estate		2,164		7,345		39,217		48,726
Commercial real estate		336,569		537,484		8,698		882,751
Consumer		411		-		2		413
Total loans, net of deferred fees	$	475,776	$	544,893	$	1,152,177	$	2,172,846

Commercial and industrial loans consist of financing for commercial purposes in various lines of businesses, including manufacturing, service industry and professional service areas. Commercial and industrial loans can be secured or unsecured but are generally secured with the assets of the company and/or the personal guarantee of the business owners. Sponsor Finance loans are backed by well-known institutional funds/sponsors that have stepped up in distressed scenarios to provide follow-on capital and right-size bank debt. Our Venture Lending Division provides banking services to emerging growth technology companies that have received an infusion of equity capital from institutional investors such as venture capital and private equity firms. Repayment of these loans may be dependent upon receipt by borrowers of additional equity financing from venture firms or others, or in some cases, a successful sale to a third party, public offering or other form of liquidity event. Asset-Based Lending creates lending solutions that are designed to provide capital against assets such as accounts receivable and inventory. Our Corporate Banking division specializes in delivering customized commercial & industrial lending solutions to small to mid-sized privately held businesses across a wide range of industries in the Bay Area. These loans are primarily used for funding operations, expansions and acquisitions.

The following table presents the various product types of commercial and industrial loans as of March 31, 2026 and December 31, 2025:

	March 31, 2026					December 31, 2025
(In thousands)	Amount		% of Loans			Amount		% of Loans
Sponsor finance	$	310,544		14	%	$	303,303		14	%
Venture		281,967		13	%		273,887		13	%
Asset-based lending (ABL)		193,874		9	%		177,736		8	%
Corporate Banking		136,274		6	%		150,896		7	%
Capital Call Lines ⁽¹⁾		66,284		3	%		86,008		4	%
Other		51,741		3	%		57,700		3	%
Total commercial and industrial loans, net of deferred fees	$	1,040,684		48	%	$	1,049,530		49	%

⁽¹⁾Represents loans to non-depository financial institutions, primarily capital call loans to private equity funds.

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As of March 31, 2026 and December 31, 2025, we had $882.8 million and $854.3 million, respectively, in commercial real estate loans representing 41% and 40% respectively, of our total loans. Our commercial real estate loans consist of commercial, multi-family and mixed-use property loans for investors and owner-users. Our commercial real estate loans are typically secured by multi-family, hotel/motel, retail, industrial, warehouse or other commercial properties. At March 31, 2026 and December 31, 2025, 21% and 20%, respectively, of our commercial real estate loans were for non-owner-occupied purposes. All commercial real estate loans were collateralized by properties in California as of March 31, 2026 and December 31, 2025.

The following table presents the components of commercial real estate loans as of the dates indicated:

	March 31, 2026					December 31, 2025
(In thousands)	Amount		% of Loans			Amount		% of Loans
Office	$	147,619		7	%	$	147,708		7	%
Retail		103,631		5	%		86,309		4	%
Hotel/motel		83,985		4	%		78,566		4	%
Industrial		67,712		3	%		68,408		3	%
Other		30,953		1	%		26,505		1	%
Warehouse		16,603		1	%		16,611		1	%
Total non-owner-occupied	$	450,503		21	%	$	424,107		20	%
Multi-family		268,057		12	%		265,105		12	%
Owner-occupied		164,191		8	%		165,130		8	%
Total commercial real estate, net of deferred fees	$	882,751		41	%	$	854,342		40	%

Non-performing Assets

Non-performing assets are comprised of loans on non-accrual status, loans 90 days or more past due and still accruing interest, and other real estate owned. We had no loans 90 days or more past due and still accruing interest and no other real estate owned at March 31, 2026 or December 31, 2025. A loan is placed on nonaccrual status if there is concern that principal and interest may not be fully collected or if the loan has been past due for a period of 90 days or more, unless the obligation is both well-secured and in process of legal collection. When loans are placed on non-accrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on non-accrual loans is subsequently recognized only to the extent that cash is received, and the loan’s principal balance is deemed collectible. Loans are returned to accrual status when they are brought current with respect to principal and interest payments and future payments are reasonably assured. Additionally, assets that have been restructured due to the borrower’s financial difficulties may also be classified as non-performing if the restructuring does not restore the asset to a performing status.

The following table presents information regarding the Company’s non-performing assets at the dates indicated:

	March 31,			December 31,
(In thousands)	2026			2025
Non-accrual loans
Commercial and industrial	$	-		$	5,088
Construction		16,323			19,414
Residential real estate		-			-
Commercial real estate		-			-
Consumer		-			-
Loans over 90 days past due and still accruing		-			-
Total non-performing loans		16,323			24,502
Other real estate owned		-			-
Total non-performing assets	$	16,323		$	24,502

Non-performing assets to total assets		0.63	%		0.95	%
Non-performing loans to total loans		0.75	%		1.14	%

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Allowance for Credit Losses

The allowance for credit losses (“ACL”) represents an amount that is intended to absorb the lifetime expected credit losses that may be sustained on outstanding loans at the balance sheet date. Additional information regarding the ACL evaluation can be found in Note 4 — Allowance for Credit Losses on Loans to our consolidated financial statements for the three months ended March 31, 2026 and 2025. The decrease in the ACL compared to December 31, 2025 was primarily due to the payoff of a $3.1 million construction loan that was non-performing and the charge-off of two commercial and industrial loans totaling $3.2 million. The individual reserve on the two commercial and industrial loans prior to them being charged-off was $1.2 million each.

The estimate for expected credit losses is based on an evaluation of the various factors, including, but not limited to, size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions, and prepayment experience as related to credit contractual term information. The ACL is generally measured on a collective (pool) basis when similar risk characteristics exist and is typically recorded upon the initial recognition of a financial asset.

The ACL may be adjusted by charge-offs, net of recoveries of previous losses, and may be increased or decreased by a provision for or recapture of credit losses, which is recorded in the consolidated statements of operations. Management estimates the allowance balance using various information sources, both internal and external, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience typically provides a basis for the estimation of expected credit losses. Adjustments to historical loss information may be made for differences in current loan-specific risk characteristics and changes in environmental conditions. Expected credit losses are typically estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term generally excludes expected extensions, renewals, and modifications.

For loans that do not share risk characteristics with a pool of other loans, expected credit losses are measured on an individual loan basis. Management individually evaluates the expected credit loss for certain loans, such as those that are collateral-dependent, or are identified as having risk characteristics dissimilar to those of the established loan pools. For loans considered collateral-dependent, the Company has adopted a practical expedient to the ACL, which allows recording an ACL based on the fair value of the collateral rather than by estimating expected losses over the life of the loan.

While the ACL on loans follows these guidelines, and management believes the allowance is appropriate based on current information, the judgmental nature of the calculation could lead to fluctuations due to ongoing evaluations of the loan portfolio. These evaluations may be influenced by economic conditions in our local area, changes in asset quality, or loan portfolio growth, among other factors which could potentially require additional provisions for the allowance for credit losses. The quality of the loan portfolio and the adequacy of the allowance are subject to review by our internal and external auditors as well as our regulators.

Potential Problem Loans

We assign a risk rating to all loans and periodically perform detailed reviews of all such loans exhibiting variances in expected payment and/or financial performance to identify credit risks and to assess the overall collectability of the portfolio. These risk ratings are also subject to examination by independent specialists engaged by us and by our regulators. During these internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans. These credit quality indicators are used to assign a risk rating to each individual loan. We individually rate loans based on internal credit risk ratings using numerous factors, including thorough analysis of historical and expected cash flows, LTV (loan-to-value) ratios, collateral, collection experience, and other internal metrics. The risk ratings can be grouped into six major categories, defined as follows:

Pass – A pass loan is a strong credit with no existing or known potential weaknesses deserving of management’s close attention.

Special Mention – A special mention loan has potential weaknesses deserving management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date. Special Mention loans are not adversely classified, and we believe do not expose us to sufficient risk to warrant adverse classification.

Substandard – A substandard loan is not adequately protected by the current net worth and paying capacity of the borrower or the value of the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses jeopardizing the liquidation of the loan. Well-defined weaknesses include the potential for: lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time or the project’s failure to fulfill economic expectations. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Substandard - Non-accrual – These loans are typically on nonaccrual and have many of the same weaknesses as substandard loans.

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Doubtful - Non-accrual – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.

Loss – Loans classified as loss are considered uncollectible and charged off immediately.

The following table provides information on the activity within the allowance for credit losses on loans as of and for the periods indicated:

	For the Three Months Ended
	March 31,
(In thousands)	2026			2025
Allowance for credit losses on loans, beginning of period	$	22,261		$	18,679
Provision for credit losses on loans		1,433			-
Charge-offs
Commercial and industrial		(3,171	)		-
Construction		-			-
Residential real estate		-			-
Commercial real estate		-			-
Consumer		-			-
Total charge-offs		(3,171	)		-
Recoveries
Commercial and industrial		415			43
Construction		-			-
Residential real estate		-			-
Commercial real estate		-			-
Consumer		-			-
Total recoveries		415			43
Net charge-offs		(2,756	)		43
Allowance for credit losses on loans, end of period	$	20,938		$	18,722

Average loans, net of deferred fees		2,150,688			1,858,716
Loans at the end of period, net of deferred fees		2,172,846			1,841,187
Net charge-offs to average loans ⁽¹⁾		0.52	%		(0.01	)%
Allowance for credit losses on loans to total loans		0.96	%		1.02	%
Allowance for credit losses on loans to non-performing loans		128.27	%		1376.62	%
Non-performing loans to total loans		0.75	%		0.07	%

⁽¹⁾ Charge-off ratios are annualized for the periods presented.

Provision for credit losses on loans was $1.4 million for the three months ended March 31, 2026 compared to $0 for the three months ended March 31, 2025 due to higher loan balances in the first quarter of 2026. The following table presents the allocation of the allowance for credit losses as of the dates indicated:

	March 31, 2026					December 31, 2025
(In thousands)	Amount		% of Loans			Amount		% of Loans
Commercial and industrial	$	13,856		0.64	%	$	15,612		0.73	%
Construction		2,233		0.10	%		1,972		0.09	%
Residential real estate		530		0.02	%		494		0.02	%
Commercial real estate		4,317		0.20	%		4,150		0.19	%
Consumer		2		0.00	%		33		0.01	%
Total	$	20,938		0.96	%	$	22,261		1.04	%

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Credit Quality Indicators

We assign a risk rating to all loans and periodically perform detailed reviews of any such loans exhibiting variances in expected payment and/or financial performance to identify credit risks and to assess the overall collectability of the portfolio. These risk ratings are also subject to examination by independent specialists engaged by us and by our regulators. During these internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans. These credit quality indicators are used to assign a risk rating to each individual loan. We individually rate loans based on internal credit risk ratings using numerous factors, including thorough analysis of historical and expected cash flows, rating agency information, LTV (loan-to-value) ratios, collateral, collection experience, and other internal metrics. Additional information on our risk ratings can be found in Note 1 — Summary of Significant Accounting Policies to our consolidated financial statements for the year ended December 31, 2025.

Debt Securities

Debt securities available-for-sale totaled $210.6 million at March 31, 2026, compared to $218.2 million at December 31, 2025. Available-for-sale securities are reported at their aggregate fair value, and unrealized gains and losses are included as a component of other comprehensive income, net of deferred taxes. At March 31, 2026, debt securities available-for-sale had a net unrealized loss of $1.8 million compared to a net unrealized loss of $328 thousand at December 31, 2025. Market changes in interest rates and credit spreads will result in temporary unrealized gains or losses as the market price of securities fluctuates. Management evaluated all available-for-sale securities in an unrealized loss position at March 31, 2026 and December 31, 2025, and concluded no impairment existed at the balance sheet dates.

Our investments provide a source of liquidity as they can be pledged to support borrowed funds or can be liquidated to generate cash proceeds. The investment portfolio is also a resource to us in managing interest rate risk, as the maturity and interest rate characteristics of this asset class can be changed to match changes in the loan and deposit portfolios. We consider available-for-sale security interest rate sensitivity as part of total interest rate risk management. For further discussion, see sub-section entitled “— Interest Rate Sensitivity and Market Risk.” The majority of our available-for-sale investment portfolio is comprised of mortgage-backed securities (MBSs) that are either issued or guaranteed by U.S. government agencies or government-sponsored enterprises (GSEs).

The following table reflects the amortized cost and fair market values for the total portfolio of investments in our securities portfolio March 31, 2026 and December 31, 2025. As of the dates indicated, none of our debt securities were classified as held-to-maturity.

	March 31, 2026				December 31, 2025
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale securities
U.S. Treasury securities and obligations of U.S. government agencies	$	425	$	406	$	478	$	458
Commercial mortgage-backed securities		5,448		5,402		5,454		5,430
Residential mortgage-backed securities		201,783		200,132		207,847		207,552
U.S. states and political subdivisions		4,710		4,643		4,709		4,720
Total available-for-sale securities	$	212,366	$	210,583	$	218,488	$	218,160

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As of March 31, 2026, the weighted average life of the Bank’s securities was 5.0 years, and the effective duration was 3.5 years, compared to a weighted average life of 4.8 years and effective duration of 3.5 years as of December 31, 2025.

The following table presents the amortized cost of securities by contractual maturity of investment securities and weighted-average yields. Yields on state and political subdivision securities are shown on a tax equivalent basis, assuming a 21% federal income tax rate. The composition and maturity/repricing distribution of the securities portfolio is subject to change depending on rate sensitivity, capital and liquidity needs.

	March 31, 2026
					Due after one year through					Due after five years through
	Due less than one year				five years					ten years					Due after ten years					Total
	Amortized		WA		Amortized		WA			Amortized		WA			Amortized		WA			Amortized		WA
(In thousands)	Cost		Yield ⁽¹⁾		Cost		Yield ⁽¹⁾			Cost		Yield ⁽¹⁾			Cost		Yield ⁽¹⁾			Cost		Yield ⁽¹⁾
U.S. Treasury securities and obligations of U.S. government agencies	$	-		-	$	-		-		$	425		2.43	%	$	-		-		$	425		2.43	%
Commercial mortgage-backed securities		-		-		1,010		3.73			-		-			4,438		4.88			5,448		4.66
Residential mortgage-backed securities		-		-		-		-			-		-			201,783		4.49			201,783		4.49
U.S. states and political subdivisions		-		-		-		-			-		-			4,710		5.61			4,710		5.61
Total available-for-sale securities	$	-		-	$	1,010		3.73	%	$	425		2.43	%	$	210,931		4.53	%	$	212,366		4.55	%

⁽¹⁾ Weighted average yields are computed based on the amortized cost of the individual underlying securities.

Deposits

Our deposits are primarily generated through our bankers’ commercial banking relationships. Many of our business clients maintain liquid balances in their demand deposit accounts and use the Bank’s treasury management services.

We participate in a reciprocal deposits network to provide our clients with access to FDIC insurance beyond the standard maximum deposit insurance amount at a single insured depository institution. A reciprocal position means that we receive an equal amount of network deposits for our enrolled accounts, and those deposits are reflected on our balance sheet. If we elect to receive reciprocal deposits, we are required to pay a fee equal to our reciprocal deposits balances multiplied by an annualized rate. The reciprocal deposit placement fee represents an additional cost that is not incurred with traditional deposit accounts and is factored into our overall cost of deposits. Our participation in the reciprocal deposit network is subject to certain terms and conditions, and there can be no assurances that we will be able to participate in the network in the future. See "Risk Factors —We participate in reciprocal deposit networks to provide additional FDIC deposit insurance coverage to support our clients and to efficiently manage our balance sheet and liquidity position” in our Annual Report on Form 10-K for the year ended December 31, 2025. In particular, under FDIC regulations, qualifying reciprocal deposits which do not exceed 20% of the liabilities of the Bank may be excluded from being classified as brokered deposits. As of March 31, 2026 and December 31, 2025, our total reciprocal interest-bearing checking deposits totaled $902.1 million and $929.8 million, respectively. As a result, as of March 31, 2026 and December 31, 2025, an additional $447.6 million and $475.4 million of our deposits were considered brokered deposits by the FDIC due to being in excess of the general 20% cap.

At both March 31, 2026 and December 31, 2025, approximately 26% of our deposits were in non-interest-bearing demand deposits. The balance of our deposits at March 31, 2026 and December 31, 2025, were held in interest-bearing checking, savings and money market accounts, time and non-reciprocal brokered deposits. Approximately 71% and 73% of total deposits were held in interest-bearing checking, money market and savings deposit accounts at March 31, 2026 and December 31, 2025, respectively, which provide our clients with interest and liquidity. Time and non-reciprocal brokered deposits comprised the remaining 3% and 1% of our deposits at March 31, 2026 and December 31, 2025, respectively.

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Information concerning average balances and rates paid on deposits by deposit type is contained in the Distribution, Yield and Rate Analysis of Net Income table located in the previous section entitled “Results of Operations—Net Interest Income.” The following table provides a comparative distribution of our deposits by outstanding balance as well as by percentage of total deposits at the dates indicated.

	March 31, 2026
(In thousands)	Balance		% of Total
Non-interest-bearing demand	$	577,101		26	%
Interest-bearing checking		1,036,178		47	%
Money market and savings		519,059		24	%
Time		28,521		1	%
Non-reciprocal brokered ⁽¹⁾		38,460		2	%
Total deposits	$	2,199,319		100	%

	December 31, 2025
(In thousands)	Balance		% of Total
Non-interest-bearing demand	$	556,972		26	%
Interest-bearing checking		1,069,272		49	%
Money market and savings		532,149		24	%
Time		27,680		1	%
Non-reciprocal brokered ⁽¹⁾		-		0	%
Total deposits	$	2,186,073		100	%

⁽¹⁾ FDIC regulations impose a general cap on reciprocal deposits that may be exempt from brokered deposits classification equal to 20% of the Bank's total liabilities. As of March 31, 2026 and December 31, 2025, an additional $447.6 million and $475.4 million of our deposits were considered brokered deposits by the FDIC due to being in excess of the general cap, respectively.

At March 31, 2026 and at December 31, 2025, the Company had two deposit relationships, one a 1031 exchange intermediary service and the other a software company in our Venture Lending Division, that exceeded 5% of total deposits. Totaling $225.0 million at March 31, 2026 and $228.7 million at December 31, 2025, together they represented 10% of total deposits for both periods. FDIC deposit insurance covers $250,000 per depositor (subject to the rules and regulations of the FDIC), per FDIC-insured bank, for each account ownership category. We estimate total uninsured deposits were $924.1 million and $915.5 million as of March 31, 2026 and December 31, 2025, respectively, representing approximately 42% of our total deposit portfolio as of both March 31, 2026 and December 31, 2025.

The following table sets forth the scheduled maturities of time deposits of $250,000 and greater as of March 31, 2026.

	March 31, 2026
			Greater Than
	Less than		(or Equal To)
(In thousands)	$250,000		$250,000		Total
Remaining maturity:
Three months or less	$	5,500	$	10,255	$	15,755
Over three through six months		1,071		2,124		3,195
Over six through twelve months		1,056		5,094		6,150
Over twelve months		27		3,394		3,421
	$	7,654	$	20,867	$	28,521

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Borrowings

The Bank has several supplementary funding sources, including a secured line of credit with the Federal Home Loan Bank of San Francisco (“FHLB”) and various available unsecured lines of credit with correspondent banks. The Bank's wholesale funding was 4% of total assets at March 31, 2026, compared to 2% at December 31, 2025.

The following table summarizes our borrowings as of the periods indicated.

(In thousands)	March 31, 2026		December 31, 2025
Federal funds lines of credit	$	55,000	$	60,000
Federal Home Loan Bank advances		-		-
Subordinated notes, net		22,000		22,000
Total	$	77,000	$	82,000

Other Short-Term Borrowings

The Company had unsecured Federal Funds lines of credit from correspondent banks totaling $209.0 million at March 31, 2026 and $206.0 million at December 31, 2025, with outstanding balances of $55.0 million and $60.0 million as of March 31, 2026 and December 31, 2025, respectively. The Company has a short-term borrowing arrangement with the Federal Reserve Bank through the Discount Window with a borrowing capacity of $981.0 million and $853.9 million as of March 31, 2026 and December 31, 2025, respectively. There were no borrowings outstanding under this arrangement at March 31, 2026 and December 31, 2025.

Federal Home Loan Bank Advances

The Bank has a secured line of credit with the FHLB, which requires the Bank to pledge collateral to establish credit availability. The Bank has historically pledged multi-family and commercial real estate loans within the Bank’s loan portfolio to establish credit availability. As of March 31, 2026, the secured line of credit had no outstanding balance and $548.7 million in remaining borrowing capacity. At December 31, 2025, the secured line of credit had no outstanding balance and $530.0 million in remaining borrowing capacity.

Long-Term Debt

On December 20, 2019, the Company issued $22.0 million in ten-year, fixed-to-floating rate subordinated notes to certain qualified institutional buyers and institutional accredited investors. The subordinated notes have a maturity date of December 30, 2029, and are currently redeemable, subject to certain conditions. The subordinated notes bear interest at the rate of 5.0% per annum, payable semiannually for the first five years of the term, and then quarterly at a variable rate based on the then current 3-month Secured Overnight Financing Rate plus 359.5 basis points. The interest rate as of March 31, 2026 was 7.29%. The indebtedness evidenced by the subordinated notes, including principal and interest, is unsecured and subordinate and junior to general and secured creditors and depositors. On the statement of financial condition, the subordinated notes are carried net of debt issuance costs, and these were fully amortized as of December 31, 2024.

Liquidity and Capital Resources

Liquidity Management

Liquidity refers to our capacity to meet cash and collateral obligations in a timely manner. Maintaining appropriate levels of liquidity depends on our ability to address both expected and unexpected cash flows and collateral needs while aiming to avoid adverse effects on our daily operations or the financial condition of the Bank. Effective liquidity management is considered essential to our business model, as deposits, which can generally be withdrawn on demand, form a primary source of our funding. The liquidity ratio is typically calculated as the sum of our cash and cash equivalents plus unpledged securities classified as investment grade divided by total liabilities. Based on this calculation method, as of March 31, 2026 and December 31, 2025, our reported liquidity ratios were 15.3% and 15.9%, respectively.

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We maintain secured lines of credit with the FHLB and the Federal Reserve Discount Window, for which we can borrow up to the allowable amount of pledged collateral. As of March 31, 2026, we had remaining borrowing capacity totaling $548.7 million and $981.0 million with the FHLB and Federal Reserve, respectively. The Bank maintains unsecured lines of credit with correspondent banks that provide combined availability of $209.0 million and $206.0 million at March 31, 2026 and December 31, 2025. Outstanding balances on these unsecured lines of credit as of March 31, 2026 and December 31, 2025, totaled $55.0 million and $60.0 million, respectively.

In addition to these sources of liquidity, we also utilize the ICS® network for One-Way Buy® deposits. One-Way Buy® deposits involve receiving deposits from other banks’ clients through the ICS® network. This mechanism can provide an additional source of liquidity by allowing us to increase our deposits without reciprocating. At March 31, 2026 and December 31, 2025, One-Way Buy® deposits totaled $4.5 million and $0, respectively.

As an intermediate source of liquidity, we may sell AFS securities or allow AFS securities to mature without reinvestment in the securities portfolio. As of March 31, 2026 and December 31, 2025, our AFS securities portfolio had a fair value of $210.6 million and $218.2 million, respectively, and an amortized cost of $212.4 million and $218.5 million, respectively. In the event liquidity is needed from the bond portfolio, management will take into consideration a number of factors when determining which investments to sell including the marketability of the bonds, current prices and estimated losses.

Our liquidity management framework distinguishes between primary liquidity sources, which are expected to fund routine balance sheet needs under normal operating conditions, and secondary liquidity sources, which provide additional capacity during periods of asset growth, deposit volatility, or market stress. Our primary sources of liquidity mainly consist of customer deposits and cash balances due from other financial institutions, such as the Federal Reserve. Overnight unsecured borrowed funds are also intentionally used by management to routinely supplement deposits and fund asset growth under normal operating conditions. Secondary sources of liquidity include unencumbered investment securities, brokered deposits and other borrowed funds such as FHLB advances and the FRB discount window.

Non-reciprocal brokered deposits are used as a supplemental funding source to support loan growth, manage balance sheet liquidity, and maintain funding diversification. These deposits generally have contractual maturities and predictable repricing characteristics, which can aid in cash flow planning and interest rate risk management. Management does not rely on brokered deposits as a primary source of day‑to‑day liquidity but utilizes them opportunistically to complement customer deposit funding, particularly when core deposit growth does not fully align with asset growth or when market conditions make such funding cost‑effective. As of March 31, 2026, non-reciprocal brokered deposits totaled $38.5 million, representing 2% of total deposits, compared to $0, as of December 31, 2025.

Liquidity Risk Management

Liquidity risk refers to the potential that the Bank’s financial condition or overall safety and soundness could be adversely affected by a real or perceived inability to meet contractual obligations. This risk category includes potential challenges in managing unplanned decreases or changes in funding sources. Liquidity risk management involves efforts to identify, measure, monitor and control liquidity events.

The Bank’s Asset/Liability Committee (ALCO) of the Board typically reviews the current liquidity position and projected liquidity scenarios, including stressed scenarios, at its quarterly meetings. The ALCO seeks to ensure that measurement systems are designed to identify and quantify the Bank’s liquidity exposure, and that reporting systems and practices are intended to communicate relevant information about the level and sources of that exposure. Management is responsible for implementing board-approved policies, strategies, and procedures, and for monitoring liquidity on both a daily and long-term basis. For additional information on liquidity risk management, see the section titled, "Risk Framework — Liquidity Risk" found elsewhere in this Form 10-Q.

Capital Resources

Capital adequacy is generally considered an important indicator of financial stability and performance. Our objectives include maintaining capitalization at levels that we believe are sufficient to support asset growth and to promote confidence among our depositors, investors, and regulators. We recognize that robust capital management practices are integral to addressing various financial and operational challenges, which may include managing credit risk, liquidity risk, balance sheet growth, new products, regulatory changes and competitive pressures. Our Board of Directors reviews our capital position on an ongoing basis to ensure it is adequate, including but not limited to, the need for raising additional capital (whether in the form of debt and/or equity), replacing existing capital, or returning capital to our shareholders whether through dividends and/or share repurchases.

The Company announced a stock repurchase program on November 25, 2020, authorizing the repurchase of up to 5% or 307,780 shares of the Company’s then outstanding common stock. The program has no expiration date. Under the stock repurchase program, the Company may, from time to time, repurchase shares of its outstanding common stock in the open market, in privately-negotiated transactions, or otherwise, subject to applicable laws and regulations. During the three months ended March 31, 2026, the Company repurchased 25,000 shares of its common stock for $693 thousand at an average price of $27.69 per share under the publicly announced stock repurchase program. The extent to which the Company repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements, availability of funds, and other relevant considerations, as determined by the Company. The Company may, at its discretion, begin, suspend or terminate repurchases at any time prior to the program's expiration, without any prior notice. An aggregate of 257,433 shares remain available for repurchase under the Company’s stock repurchase program. There is no obligation on the part of the Company to repurchase any shares of its common stock and there can be no assurance that any future share repurchases will be made.

Shareholders’ equity as of March 31, 2026, was $288.4 million, an increase of $7.5 million, or 3%, compared to $281.0 million as of December 31, 2025. The increase included an increase in retained earnings of 9.0 million, partially offset by an increase in unrealized losses on AFS securities in accumulated other comprehensive loss of $1.0 million. Book value per share as of March 31, 2026 and December 31, 2025, was $26.33 and $25.66, respectively.

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Because total assets on a consolidated basis are less than $3.0 billion, we are not subject to the consolidated capital requirements imposed by federal regulations. However, the Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Certain regulatory measurements of capital adequacy are “risk-based,” meaning they utilize a formula that considers the individual risk profile of the financial institution’s assets. For example, certain assets, such as cash at the Federal Reserve and investments in U.S. Treasury securities, are deemed to carry zero risk by the regulators because of explicit or implied federal government guarantees. As of March 31, 2026 and December 31, 2025, respectively, 7.8% and 8.0% of the Bank’s total assets were invested in such zero-risk assets. The tier 1 leverage ratio, another regulatory capital measurement, does not consider the riskiness of assets. The leverage ratio is computed as tier 1 capital divided by total average assets for the relevant quarter.

Accumulated other comprehensive income, which includes unrealized gains and losses on securities available-for-sale and unrealized gains and losses on derivatives qualifying as cash flow hedges, is excluded in the calculation of regulatory capital ratios. The Bank’s capital level is characterized as “well capitalized” for regulatory purposes. A summary of the Company’s consolidated and Bank’s regulatory capital ratios are presented for the periods indicated below:

	Consolidated
	March 31, 2026					December 31, 2025
(In thousands)	Amount		Ratio			Amount		Ratio
Total risk-based capital ratio	$	321,315		12.85	%	$	313,481		12.57	%
Tier 1 risk-based capital ratio		284,814		11.39	%		275,669		11.05	%
Common equity tier 1 capital ratio		284,814		11.39	%		275,669		11.05	%
Tier 1 leverage ratio		284,814		11.39	%		275,669		11.23	%

	Bank
	March 31, 2026					December 31, 2025
(In thousands)	Amount		Ratio			Amount		Ratio
Total risk-based capital ratio	$	319,359		12.80	%	$	309,703		12.45	%
Tier 1 risk-based capital ratio		296,059		11.87	%		285,091		11.46	%
Common equity tier 1 capital ratio		296,059		11.87	%		285,091		11.46	%
Tier 1 leverage ratio		296,059		11.88	%		285,091		11.65	%

Off-Balance Sheet Arrangements

In the normal course of business, we enter into various transactions that are not included in our consolidated statements of financial condition in accordance with GAAP. These transactions, including commitments to extend credit, letters of credit, and overdraft protection, are issued to meet client financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instruments. The total commitment amounts do not necessarily represent future cash requirements.

The following is a summary of our off-balance sheet commitments outstanding as of the dates indicated. The Bank has some commitments that are unconditionally cancellable at our discretion and these amounts are not included in the table below:

(In thousands)	March 31, 2026		December 31, 2025
Commitments to extend credit	$	692,031	$	688,115
Standby letters of credit		19,561		19,168

Based on historical experience, many of the commitments and letters of credit will expire unfunded. Through our various sources of liquidity, we believe we will be able to fund these obligations as they arise. We evaluate each client’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on our credit evaluation of the borrower. Collateral varies but may include accounts receivable, inventory, property, plant and equipment, and commercial and residential real estate.

We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. The allowance for credit losses on unfunded commitments is adjusted through provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The estimate utilizes the same factors and assumptions as the allowance for credit losses on loans and is applied at the same collective segment level.

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Contractual Obligations

The following table presents, as of March 31, 2026, our significant contractual obligations to third parties on debt and lease agreements and service obligations:

	March 31, 2026
			After One		After Two
	One Year		Year Through		Years Through		After
(In thousands)	or Less		Two Years		Five Years		Five years		Total
Time deposits ⁽¹⁾	$	25,100	$	1,262	$	2,159	$	-	$	28,521
Subordinated debentures ⁽¹⁾		-		-		22,000		-		22,000
Operating leases, net		2,018		3,270		1,210		-		6,498
Significant contracts ⁽²⁾		1,305		2,304		1,060		-		4,669
Total	$	28,423	$	6,836	$	26,429	$	-	$	61,688

⁽¹⁾ Amounts exclude interest.

⁽²⁾ We have a significant, long-term contract for core processing services. Actual obligation is dependent on certain factors including volume and activity. For purposes of this disclosure, future obligations are estimated using 2026 expenses extrapolated over the remaining contract life.

We believe that we will be able to meet our contractual obligations as they come due. Adequate cash levels are expected through profitability, repayments from loans and securities, deposit gathering activity and access to borrowing sources.

Risk Framework

We have established a risk appetite framework as part of our overall risk management policies to define the type and amount of risk we are willing to accept, while balancing the needs of all stakeholders. The risk appetite framework is developed in accordance with industry practice and regulatory expectations. It is reviewed and approved annually by the Risk Oversight Committee and the Audit Committee and ratified by the Board. The framework covers seven (7) major risk categories: (i) operational risk; (ii) strategic risk; (iii) credit risk; (iv) liquidity risk; (v) technology risk; (vi) compliance risk (vii) interest rate sensitivity risk.

Operational Risk

Operational risk is the risk to earnings or capital arising from problems in people, processes, systems and external events. This risk is significant within any bank and is interconnected with other risk categories in most activities throughout the Company. It arises daily throughout the Company as transactions are processed. It pervades all divisions, departments and centers and is inherent in all products and services we offer.

In general, operational risk by major area is categorized as high, medium or low by the Company. The audit plan ensures that high risk areas are reviewed annually. We utilize internal auditors and independent audit firms to test key controls of operational processes and to audit information systems, compliance management programs, and loan programs.

We believe the key to managing operational risk is in the design, documentation and implementation of well-defined policies, procedures and controls. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, but not absolute, assurances of the effectiveness of these systems and controls, and that the objectives of these controls have been met.

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Strategic Risk

Strategic risk is the risk of loss or foregone opportunities due to a failure in strategies caused by external and internal factors adversely influencing the outcome or execution of strategies. Strategic risks are identified as part of the strategic planning process. Offsite strategic planning sessions, with members of the Board of Directors and executive officers, are held annually. The strategic review consists of an economic assessment, competitive analysis, industry outlook and risk and regulatory review and includes participation from outside parties.

Credit Risk

Credit risk is the risk arising from an obligor’s failure to meet the terms of any contract with the Bank or otherwise perform as agreed. Credit risk exists anytime bank funds are extended, committed, invested or otherwise exposed through actual or implied contractual arrangements, whether reflected on or off the balance sheet and rises in conjunction with a broad array of bank activities.

The bank serves its clients through separate lending divisions and can face challenges from a variety of factors including higher interest rates, a slowdown in the economy, lower valuations for commercial real estate and a challenging environment for venture-backed businesses. The bank has established concentration levels with each loan product to help manage diversification, and the Board measures the concentrations relative to total risk-based capital regularly. These limits are reassessed periodically to reflect current economic conditions. The bank has also established regular monitoring and portfolio review of credit clients to evaluate and assess the risk associated with its credits.

The bank engages in an established underwriting process in accordance with its credit policies, assessing the credit risk and matching the risk to an appropriate credit structure. The bank regularly stress tests its loan portfolio utilizing macroeconomic scenarios based on current conditions as well as historical data. Credit approvals are governed by the Bank’s credit approval policy and consider the size of the credit, the aggregate indebtedness owed to the Bank by the borrower, and the loan risk rating. Credit policies are approved by the Credit Committee of the Board and ratified by the full Board. In addition, the Bank has adopted robust monitoring and portfolio reviews to identify risks and address loans which may become criticized or classified or otherwise become identified as problem loans. The Special Assets Committee (SAC) includes our Chief Executive Officer, Chief Credit Officer, Chief Legal Officer and other credit officers. The SAC reviews criticized and classified loans, and loans requiring close monitoring on a semi-monthly basis.

Liquidity Risk

Our objective in managing liquidity is to maintain a balance between sources and uses of funds in order to economically meet the cash requirements of clients for loans and deposit withdrawals and participate in lending and investment opportunities as they arise. We monitor our liquidity position in relation to changes in loan and deposit balances on a daily basis to assure maximum utilization, maintenance of an adequate level of readily marketable assets and access to short-term funding sources.

The high-profile regional bank failures in the first half of 2023 drove several precautionary actions to ensure adequate liquidity including securing multiple additional funding sources and pledges of additional collateral to ensure that we could meet our liquidity needs. The Bank also introduced a fully insured reciprocal deposit program to maintain deposits and offer clients deposit insurance in the amount they requested.

The Bank actively monitors and manages the Bank’s current and forecasted liquidity position, expected fund inflows and outflows, large depositor trends, contingency funding sources and other metrics. The Company maintains policies regarding liquidity levels, and ratios are presented to the ALCO quarterly. Management has also established early warning indicators to anticipate significant liquidity stress. If any of these indicators are triggered, we maintain action plans and responsibilities for each liquidity scenario and report this to ALCO.

Deposits have historically provided us with a sizable source of relatively stable and low-cost funds but are subject to competitive pressure in our market. A portion of our deposits are granular, long-tenured, and relationship-based. In addition to deposit funding, we also have access to a variety of other short-term and long-term funding sources, which include proceeds from maturities of our loans and investment securities, as well as secondary funding sources available to meet our liquidity needs such as the FHLB, secured repurchase agreements, brokered deposits, and the Federal Reserve Discount Window.

Our loan-to-deposit ratio at March 31, 2026 and December 31, 2025, was 98.8% and 98.3%, respectively. As of March 31, 2026 and December 31, 2025, the Company had cash of $149.0 million and $154.6 million, respectively, and total other liquidity sources, including available borrowing capacity and unpledged debt securities of approximately $1.88 billion and $1.80 billion, respectively. Total available sources of liquidity as a percentage of uninsured and uncollateralized deposits were approximately 220% and 213%, respectively.

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Technology Risk

Technology risk threatens our ability to secure data, maintain system availability, and meet business, client, and regulatory requirements. As we grow, our technology infrastructure must scale to support increasing transaction volumes and evolving client needs while mitigating cybersecurity threats, including social engineering and AI-driven attacks. To strengthen our defenses, we are transitioning from implementing and following the Cybersecurity Assessment Tool (CAT) to the NIST Cybersecurity Framework (CSF) 2.0 and enhancing our Business Impact Analysis (BIA).

We employ a layered security approach, including firewalls, intrusion detection, multi-factor authentication, encryption, and regular penetration testing. We conduct bi-weekly vulnerability scans and third-party security assessments to help identify and address risks. Our information security policies align with regulatory requirements from the Federal Reserve, FDIC, and DFPI. In addition, we conduct annual Gramm-Leach-Bliley Act (GLBA) risk assessments to ensure compliance.

Vendor security is one of our priorities. We strive to conduct rigorous assessments for all vendors and annual reviews of critical and high-risk providers. We collect Service Organization Controls (SOC) reports and other security documentation from vendors and service providers and have confidentiality agreements in place to prevent external sharing.

Our Information Security Officer provides regular updates to our IT Steering and Risk Oversight Committee, and significant findings are escalated to our board of directors. As an FDIC-regulated community bank, we believe we comply with extensive cybersecurity and risk management regulations. We share detailed reports only with regulators and auditors.

We remain committed to protecting client information, ensuring regulatory compliance, and strengthening our technology infrastructure against evolving cybersecurity threats.

Compliance Risk

Compliance risk is the risk to earnings or capital arising from violations of, or non-conformance with, laws, rules, regulations, prescribed practices or ethical standards. Compliance risk also arises in situations where the laws or rules governing certain products or activities of the Bank’s clients may be ambiguous or untested. Compliance risk exposes us to fines, civil money penalties, payment of damages, and the voiding of contracts. Compliance risk can also lead to a diminished reputation, reduced business value, limited business opportunities, lessened expansion potential, and lack of contract enforceability. The Company utilizes independent external firms to conduct compliance audits as a means of identifying weaknesses in the compliance program.

There is no single or primary source of compliance risk. It is inherent in every activity. Frequently, it blends into operational risk. A portion of this risk is sometimes referred to as legal risk. This is not limited solely to risk from failure to comply with consumer protection laws; it encompasses all laws and regulations, as well as prudent ethical standards and contractual obligations. It also includes the exposure to litigation from all aspects of banking, traditional and non-traditional.

Our risk management policies and codes of ethical conduct are key components in controlling compliance risk. An integral part of controlling this risk is the proper training and development of employees and board members. We seek to provide our employees with adequate training commensurate to their job functions to ensure compliance with banking laws and regulations.

Our risk management policies and programs include a risk-based audit program aimed at identifying internal control deficiencies and weaknesses including inconsistencies with established policies and bank laws and regulations. We have in-depth internal audits supplemented by independent external firms, and periodic monitoring performed by our risk management personnel. Annually, an Audit Plan for the Company is developed and presented for approval to the Audit Committee.

Our risk management team conducts periodic monitoring of our compliance efforts with a special focus on those areas that expose us to compliance risk. The purpose of the periodic monitoring is to verify whether our employees are adhering to established policies and procedures. Any material exceptions or violations identified are brought forward to the appropriate department head, the Risk Oversight Committee, the Audit Committee and the Board as warranted.

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We recognize that client complaints can often identify weaknesses in our compliance program which could expose us to risk. Therefore, we attempt to ensure that all complaints are given prompt attention.

Interest Rate Sensitivity and Market Risk

Our business activities include attracting deposits and using those deposits to invest in cash, securities, and loans. These activities involve interest rate risk, which arises from factors such as timing and volume differences in the repricing of our rate-sensitive assets and liabilities, changes in credit spreads, fluctuations in the general level of market interest rates, and shifts in the shape and level of market yield curves. Changes in interest rates affect our current and future earnings by impacting our net interest income and the level of other interest-sensitive income and operating expenses. Interest rate fluctuations also influence the underlying economic value of our assets, liabilities and off-balance sheet items. This is because the present value of future cash flows, and in some cases the cash flows themselves, may change when interest rates vary.

Interest rate risk is generally considered a significant market risk for financial institutions. We have developed an interest rate risk policy that aims to provide management with guidelines for managing interest rate risk. We have also established a system for monitoring our net interest rate sensitivity position. However, it’s important to note that despite these measures, significant changes in interest rates could potentially impact our earnings, liquidity and capital positions.

Our ALCO is composed of our Chief Executive Officer and at least two independent directors and meets at least quarterly to manage interest rate risk in accordance with policies approved by the Bank’s board of directors. Members of management from various departments also participate in the ALCO meetings, including the Chief Financial Officer, Treasurer, and Chief Revenue Officer. The board of directors receives quarterly interest rate risk measurement results. The ALCO monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

We use interest rate risk models and rate shock simulations to assess the interest rate risk (“IRR”) sensitivity of net interest income and the economic value of equity over a variety of parallel and non-parallel rate scenarios. Many assumptions are used to calculate the impact of interest rate fluctuations on our net interest income, such as asset prepayments, non-maturity deposit price sensitivity and decay rates, and rate drivers. Due to the inherent use of estimates and assumptions in the model, our actual results may, and most likely will, differ from our simulated results. Management reviews the assumptions on an as-needed basis and at least annually through a thorough examination. Key changes are presented to the ALCO.

The table below summarizes the results of our IRR analysis in simulating the change in net interest income over a 12-month horizon as of the indicated dates. This scenario assumes that the parallel shift in interest rates occurs immediately.

	Estimated Change in Net Interest Income
Change in interest rates (basis points)	March 31, 2026			December 31, 2025
+400		16.27	%		16.65	%
+300		12.09			12.37
+200		7.85			8.01
+100		3.75			3.76
-100		(1.57	)		(1.41	)
-200		(1.64	)		(1.35	)
-300		(0.37	)		(0.19	)
-400		1.48			0.86

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We expect net interest income to benefit from an increase in interest rates as the rates on interest earning assets reprice at a faster pace than the rate on interest bearing liabilities. As rates decrease, net interest income is negatively impacted as the rates on interest earning assets reprice lower at a faster pace than the rates on interest bearing liabilities. The decrease in net interest income is offset by the benefits from the floor rates on our floating rate loans. At March 31, 2026, approximately 19% of our floating rate loans were at their floor rate. As rates decrease, a larger percentage of the coupon on our floating rate loans will be at the floor rate. If rates decrease 100 basis points, 70% of our floating rate loans will be at their floor rate, and if rates decrease 400 basis points, 84% will be at their floor rate.

Critical Accounting Policies and Estimates

The Company’s consolidated financial statements are prepared in accordance with GAAP and follow general practices within the financial services industry. It is management’s opinion that accounting estimates covering certain aspects of the Company’s business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity required in making such estimates. We believe that the estimates most susceptible to significant change in the near term relate to determining the allowance for credit losses on loans. See Note 1 – Basis of Presentation to our consolidated financial statements included in the Company's Form 10-K for the year ended December 31, 2025 for all our accounting policies, including these identified critical accounting estimates.

Pursuant to the JOBS Act, as an emerging growth company, we can elect to opt out of the extended transition period for adopting any new or revised accounting standards. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we may adopt the standard on the application date for private companies.

We have elected to take advantage of the scaled disclosures and other relief under the JOBS Act, and we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us under the JOBS Act, so long as we qualify as an emerging growth company.

We have identified the following accounting policies and estimates that, due to the difficult, subjective or complex judgments and assumptions inherent in those policies and estimates and the potential sensitivity of our consolidated financial statements to those judgments and assumptions, are critical to an understanding of our consolidated financial condition and results of operations. We believe that the judgments, estimates and assumptions used in the preparation of our financial statements are reasonable and appropriate.

Allowance for Credit Losses on Loans

The allowance for credit losses on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed and recoveries are credited to the allowance when received. The Company may also account for expected recoveries should information of an anticipated recovery become available. In the case of actual or expected recoveries, amounts may not exceed the aggregate of amounts previously charged off.

Management utilizes relevant available information, from internal and external sources, relating to past events, current conditions, historical loss experience, and reasonable and supportable forecasts. The allowance is calculated using a discounted cash flow methodology applied at the loan level. The Company uses the FOMC Civilian Unemployment Rate, Median and Real GDP Seasonally Adjusted Annual Rate to obtain various forecast scenarios to determine the loan portfolio’s quantitative portion of expected credit loss. The Company has elected to forecast the first four quarters of the credit loss estimate and revert on a straight-line basis over eight quarters. Adjustments to historical loss information are made when management determines historical data are not likely reflective of the current portfolio such as limited data sets or lack of default or loss history. These adjustments include factors such as differences in underwriting standards, local economic conditions, portfolio mix, credit quality, concentrations, collateral or other relevant factors. Management may selectively apply external market data to subjectively adjust the Company’s own loss history including index or peer data. The Company utilizes an external vendor model as well as internally developed tools and non-statistical estimation approaches. Accrued interest receivable is excluded from the estimate of credit losses for loans.

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The allowance for credit losses on loans is measured on a collective (pool) basis when similar risk characteristics exist. Management segments the loans into pools by product groupings with similar risk characteristics in estimating credit losses, and the loans are reported by portfolio segment. These portfolio segments for reporting include commercial and industrial, construction, residential real estate, commercial real estate and consumer loans.

The general reserve component of the allowance for credit losses also consists of reserve factors based on management’s assessment of the following for each portfolio segment: (1) inherent credit risk, (2) historical losses and (3) other qualitative factors. Management estimates an allowance based upon loans outstanding as well as unfunded commitments. These reserve factors are inherently subjective and are driven by the repayment risk associated with each category described below:

Commercial and Industrial

●

Commercial and industrial loans consist of working capital and term loans which are generally underwritten to existing cash flows of operating businesses. Debt coverage is provided by business cash flows and economic trends influenced by unemployment rates and other key economic indicators which are closely correlated to the credit quality of these loans.

●

Asset-based loans are generally made against accounts receivable and inventory to companies generating consistent sales without yet having reached consistent profitability. As such, these loans are more collateral focused and are primarily subject to the risks of collecting and liquidating the collateral.

●

Sponsor finance loans are made to companies based upon their cash flow and often have risks associated with merger and acquisition activities. Additional risks for this loan category include insufficient levels of collateral in the form of accounts receivable, inventory or equipment. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt.

●

Venture loans are made to companies with modest or negative cash flows and no established record of profitable operations. Repayment of these loans may be dependent upon receipt by borrowers of additional equity financing from venture firms or others, or in some cases, a successful sale to a third party, public offering or other form of liquidity event. Declines in venture capital financing activity, as well as mergers and acquisitions and initial public offerings – may impact the financial health of some of our clients.

●

Our venture loans are typically originated by examining and evaluating the quality of the investor syndicate, experience of the company’s senior management team, strength of relationships with management and investors, projected liquidity, performance to plan, size of addressable market, strength of product and intellectual property, if any. The loan terms vary depending on the borrowers’ business, credit rating, and financial position. We provide working capital, revolving lines of credit, as well as term loans, which typically include an interest-only draw period typically up to 24 months followed by an amortization period typically up to 36 months. We also attempt to negotiate the receipt of a de minimis amount of equity warrants or a success fee at loan originations and renewals. Once a loan is originated, we collect financial reporting monthly to monitor performance and compliance with any covenants and assess the likelihood of additional equity financing. Particularly, through our proactive loan monitoring and risk assessing process, we closely review the borrowers’ liquidity and cash balances on a regular basis and evaluate their ability for loan repayment and the need for new funding.

Construction

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Construction loans, including land and development loans are comprised of loans collateralized by land or real estate. The primary source of repayment is the eventual sale or refinance of the completed project. Risk arises from the necessity to complete projects within specified cost and timelines. Trends in the construction industry significantly impact the credit quality of these loans, as demand drives construction activity. In addition, trends in real estate values significantly impact the credit quality of these loans, as property values determine the economic viability of construction projects.

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Commercial real estate

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Non-owner-occupied commercial real estate loans are collateralized by real estate where the owner is not the primary tenant. Adverse economic developments, or an overbuilt market, impact commercial real estate projects and may result in troubled loans. Trends in vacancy rates of commercial properties impact the credit quality of these loans. High vacancy rates reduce operating revenues and the ability for properties to produce sufficient cash flow to service debt obligations. Another common risk for this loan category includes a lack of a suitable alternative use for the property.

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Owner-occupied commercial real estate loans are collateralized by real estate where the owner is the primary tenant. These loans are generally underwritten to existing cash flows of operating businesses. Debt coverage is provided by business cash flows and economic trends influenced by unemployment rates and other key economic indicators which are closely correlated to the credit quality of these loans.

Residential real estate

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Residential real estate loans are typically home equity lines of credit secured by residential real estate. These are not typical mortgage loans and may have a variety of reasons for the borrowing including providing funding to a business or paying for large personal expenditures. The degree of risk in home equity loans depends primarily on the loan amount in relation to collateral value, the interest rate and the borrower’s ability to repay in an orderly fashion. Risks common to home equity lines of credit are general economic conditions, including an increase in unemployment rates, and declining real estate values that reduce or eliminate the borrower’s home equity.

Consumer

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Consumer loans are primarily loans to individuals that may be unsecured or secured by collateral other than real estate. The unsecured loans are generally revolving personal lines of credit to established clients. The high quality of the clients who are offered these products has historically caused this loan product to have less risk of loss than commercial loan products. Risks common to consumer loans include unemployment and changes in local economic conditions as well as the inability to monitor collateral consisting of personal property.

Loans that do not share risk characteristics are evaluated on an individual basis. Also, loans evaluated individually are not included in the collective evaluation. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral, adjusted for selling costs as appropriate.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, we are not required to provide the information required by this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures, as defined Rules 13a-15(e) and 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our internal control system is a process designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements in accordance with GAAP. All internal control systems, no matter how well designed, have inherent limitations and can only provide reasonable assurance with respect to financial reporting.

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There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Information required by this item is set forth in Note 9 – Commitments and Contingencies – Contingencies in the Notes to the Consolidated Financial Statements (Unaudited) in Part I. Item 1. of this quarterly report, which is incorporated by reference.

Item 1A. Risk Factors

Except as described below, there have been no other material changes from the Risk Factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 18, 2026. Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial may also adversely affect us.

Our Exposure to Software‑as‑a‑Service Borrowers Subjects Us to Risks From Rapid Developments in Artificial Intelligence

We maintain lending relationships with software and technology-enabled companies, including those operating under software‑as‑a‑service (“SaaS”) business models. While SaaS borrowers represent approximately 8% of our total loan portfolio, their operating results and credit profiles may be more sensitive to rapid technological change than those of borrowers in more established industries. In particular, ongoing advances in artificial intelligence (“AI”), including generative AI and automation technologies, may adversely affect the competitive position, revenue stability, and long‑term viability of certain SaaS borrowers.

AI developments may increase competitive intensity by lowering barriers to entry, accelerating product commoditization, and enabling customers or third‑party platforms to replicate or replace functionality traditionally provided by standalone software vendors. These pressures may result in pricing compression, higher customer churn, increased research and development costs, or reduced demand for certain software products. Smaller or less diversified SaaS companies, including those that rely on a limited number of products, customers, or end‑markets, may be less able to adapt quickly to these changes.

As a lender, we do not control our borrowers’ business strategies, product development timelines, or ability to successfully incorporate AI into their offerings. To the extent that AI‑related disruption adversely affects a borrower’s revenues, margins, or access to capital, its cash flows and ability to service debt obligations to us could be impaired. These risks may be amplified during periods of economic uncertainty or tightening financial conditions, when SaaS companies may have reduced access to external financing or equity capital.

While we seek to manage these risks through underwriting standards, portfolio diversification, borrower monitoring, and ongoing credit reviews that consider technological and industry developments, the pace and scope of AI‑driven change remain uncertain. Technological disruption may occur more rapidly or in ways that are difficult to anticipate, which could limit the effectiveness of our risk management practices. A sustained deterioration in the financial condition of certain SaaS borrowers could result in increased nonperforming loans, charge‑offs, or provisions for credit losses and could adversely affect our business, earnings and financial condition.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

(a)	Unregistered Sales of Equity Securities

None.

(b)	Use of Proceeds

None.

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(c)	Issuer Purchases of Equity Securities

The Company announced a stock repurchase program on November 25, 2020, authorizing the repurchase of up to 5% or 307,780 shares of the Company’s then outstanding common stock. The program has no expiration date. Under the stock repurchase program, the Company may, from time to time, repurchase shares of its outstanding common stock in the open market, in privately-negotiated transactions, or otherwise, subject to applicable laws and regulations. The extent to which the Company repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements, availability of funds, and other relevant considerations, as determined by the Company. The Company may, at its discretion, begin, suspend or terminate repurchases at any time prior to the program's expiration, without any prior notice. There is no obligation on the part of the Company to repurchase any shares of its common stock. See further Note 8 – Shareholders’ Equity – Stock Repurchase Program.

During the three months ended March 31, 2026, the Company repurchased 25,000 shares of its common stock for $693 thousand at an average price of $27.69 per share under the publicly announced stock repurchase program as described in the table below.

In connection with income tax withholding obligations related to the vesting of restricted stock, the grantees may surrender awards necessary to cover the statutory tax withholding requirements. Such shares remitted to settle employee tax withholding obligations related to the vesting of restricted stock awards are not part of the publicly announced stock repurchase program.

The following table provides information about shares of our Common Stock that were repurchased under our publicly announced stock repurchase program as well as shares surrendered during the quarter ended March 31, 2026 to settle employee tax withholding obligations related to the vesting of restricted stock awards.

					Total Number of Shares		Maximum Number of Shares
	Total Number of		Average Price		Purchased as Part of Publicly		That May Yet Be Purchased
Period	Shares Purchased ⁽¹⁾		Paid Per Share⁽¹⁾		Announced Plans or Programs		Under the Plans or Programs
January 1, 2026 to January 31, 2026		3,254	$	26.19		-		282,433
February 1, 2026 to February 28, 2026		17,041		29.74		-		282,433
March 1, 2026 to March 31, 2026		27,400		28.06		25,000		257,433
Total		47,695	$	27.99		25,000		257,433

⁽¹⁾ During the three months ended March 31, 2026, 22,695 shares of Common Stock were acquired by the Company to satisfy tax withholding obligations in connection with the vesting of restricted shares of Common Stock. The value of such shares of Common Stock remitted to the Company was based on the closing price of the Company's Common Stock on the applicable withholding date. These purchases were not included within the Company's publicly announced share repurchase program.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the three months ended March 31, 2026, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in item 408(a) of Regulation S-K.

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Item 6. Exhibits


Exhibit ‎Number		Description of Exhibit
3.1		Arti cles of Incorporation of Avidbank Holdings, Inc., as amended (incorporated by reference to Exhibit 3.1 filed with the Form S-1 filed by the Registrant on July 18, 2025)
3.2		Third Amended and Restated Bylaws of Avidbank Holdings, Inc., as amended (incorporated by reference to Exhibit 3.2 filed with the Form S-1 filed by the Registrant on July 18, 2025)
4.1		Form of Certificate of Common Stock of Avidbank Holdings, Inc. (incorporated by reference to Exhibit 4.1 filed with the Form S-1 filed by the Registrant on August 4, 2025)
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002 **
**		Furnished herewith.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Scheme Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded with the Inline XBRL document contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			Avidbank Holdings, Inc.



By:			/s/ Mark D. Mordell
			Mark D. Mordell
			Chairman, President and Chief Executive Officer
			(Principal Executive Officer)

By:		/s/ Patrick T. Oakes
		Patrick T. Oakes
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

Date: May 13, 2026