Avidbank Holdings posts $10.2M Q3 2026 profit

Available on EDGAR 11/12/2026 - 04:22 PM EST Accepted by SEC EDGAR 11/12/2026 - 04:21 PM EST Learn about SEC filing dates

Rhea-AI Filing Summary

Avidbank Holdings, Inc. (AVBH) reported third-quarter 2026 net income of $10.184 million, compared with a $37.735 million net loss a year earlier. The 2025 quarter included a $62.391 million loss on sale of debt securities; the 2026 quarter had no such loss. Net interest income was $28.674 million, versus $22.650 million. For the first nine months, net income was $26.852 million, compared with a $26.502 million loss, while net interest income was $81.854 million versus $62.292 million.

At September 30, 2026, assets totaled $2,966.832 million, deposits $2,612.046 million and loans, net of allowance, $2,259.739 million. Loans rated other than Pass rose to $68.2 million from $37.2 million at December 31, 2025; special-mention loans increased $27.5 million, primarily due to a fully collateralized non-owner-occupied real estate relationship totaling $28.8 million. The company issued $30.0 million of ten-year subordinated notes at 7.0% and redeemed its prior $22.0 million notes.

2 points · 1 major

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0 major · 1 point

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Positive

• Major pointThird-quarter net income was $10.184 million, versus a $37.735 million loss.
• Moderate pointThird-quarter net interest income was $28.674 million, versus $22.650 million.

Negative

• Moderate pointLoans rated other than Pass rose to $68.2 million from $37.2 million.

Filing Explained

In the first nine months of 2026, Avidbank modified financially distressed borrowers’ loans with an amortized cost basis of 19,789 thousand dollars.

Avidbank Holdings's Form 10-Q is an unaudited quarterly report; the company says a third-quarter amendment expanded its San Jose administrative offices and extends the lease to expire in 2032. At September 30, 2026, operating-lease liabilities were $11,974 thousand, representing payments the company is obligated to make.

For the nine months ended September 30, the amortized cost basis of loans modified for borrowers experiencing financial difficulty was $19,789 thousand: $15,020 thousand involved term extensions and $4,769 thousand principal forgiveness. The company reported no payment defaults during the period on loans modified in the prior 12 months.

Key Figures

Third-quarter net income: $10.184 million Third-quarter net interest income: $28.674 million Nine-month net income: $26.852 million +5 more

8 metrics

Third-quarter net income $10.184 million Three months ended September 30, 2026; compared with a $37.735 million net loss in 2025.

Third-quarter net interest income $28.674 million Three months ended September 30, 2026; $22.650 million in 2025.

Nine-month net income $26.852 million Nine months ended September 30, 2026; compared with a $26.502 million net loss in 2025.

Nine-month net interest income $81.854 million Nine months ended September 30, 2026; $62.292 million in 2025.

Loans rated other than Pass $68.2 million At September 30, 2026; $37.2 million at December 31, 2025.

Total assets $2,966.832 million At September 30, 2026.

Total deposits $2,612.046 million At September 30, 2026.

Subordinated notes issued $30.0 million Ten-year notes issued August 26, 2026, bearing 7.0% interest for the first five years.

Key Terms

available-for-sale, non-accrual, special mention, Capital Conservation Buffer, +1 more

5 terms

available-for-sale financial

"available-for-sale debt securities"

A classification for bonds, stocks or other investments that a company plans to keep but might sell before they reach full term. Think of it like items a shop keeps on a shelf for potential sale: their market value can go up or down while the company holds them, and those unrealized gains or losses are shown separately from operating profit until they are sold. Investors watch this because large swings can change a company’s reported net worth and signal how much flexibility it has to raise cash quickly.

non-accrual financial

"non-accrual loans"

A non-accrual loan or asset is one for which a lender has stopped counting expected interest as income because the borrower is very late on payments or in serious financial trouble. For investors, non-accruals signal that future cash from interest is uncertain and that the lender may need to write down the loan’s value or set aside extra reserves, similar to a landlord who stops recording rent when a tenant stops paying.

special mention financial

"loans risk rated as special mention increased $27.5 million"

A supervisory credit classification used by banks and regulators to flag a loan, asset, or borrower that shows potential weakness or risk that could lead to deterioration if not corrected; it means the problem is not yet severe enough to be classified as substandard, doubtful, or nonperforming but requires closer monitoring and possibly corrective action. The designation prompts more frequent review and documentation by the lender and can be escalated to a more adverse classification if the borrower’s condition worsens or mitigating steps are not taken.

Capital Conservation Buffer regulatory

"maintain a 2.5% Capital Conservation Buffer"

A capital conservation buffer is an extra layer of a bank's own money held above minimum capital rules so the bank can absorb losses and keep lending during tough times. Think of it like an emergency savings account for a bank: it lowers the chance of sudden dividend cuts, forced stock sales, or government support, and therefore affects investor views of a bank’s safety, earnings stability and valuation.

collateral-dependent financial

"identified as collateral-dependent"

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What were AVBH’s third-quarter 2026 earnings?

Avidbank Holdings, Inc. (AVBH) reported net income of $10.184 million for the third quarter of 2026, compared with a net loss of $37.735 million in 2025. The 2025 quarter included a $62.391 million loss on sale of debt securities; there was no such loss in the 2026 quarter.

What are the terms of AVBH’s new subordinated notes?

Avidbank issued $30.0 million of ten-year subordinated notes bearing 7.0% interest for the first five years, payable semiannually, then quarterly at a variable rate based on the then-current three-month Secured Overnight Financing Rate plus 291 basis points. They mature September 1, 2036, and may be redeemed starting September 1, 2031 or earlier upon certain limited specified events.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

(Mark One)

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

For the quarterly period ended September 30, 2026

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF 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  ☐

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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 October 31, 2026, the registrant had 11,010,374 shares of common stock, no par value per share (the “Common Stock”), outstanding.

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AVIDBANK HOLDINGS, INC.

FORM 10-Q

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Part I. Financial Information		Page
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Statements of Financial Condition (unaudited) as of September 30, 2026 and December 31, 2025	4
	Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2026 and 2025	5
	Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended September 30, 2026 and 2025	6
	Consolidated Statements of Changes in Shareholders' Equity (unaudited) for the three and nine months ended September 30, 2026 and 2025	7
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2026 and 2025	8
	Notes to Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	69
Item 4.	Controls and Procedures	69
Part II. Other Information
Item 1.	Legal Proceedings	70
Item 1A.	Risk Factors	70
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	70
Item 3.	Defaults Upon Senior Securities	71
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	71
Item 6.	Exhibits	72
Signatures		73

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PART I. FINANCIAL INFORMATION

AVIDBANK HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)

(In thousands, except per share data)		September 30, 2026				December 31, 2025
ASSETS
Cash and due from financial institutions		$	9,229			$	7,942
Due from Federal Reserve Bank and interest-bearing deposits in other financial institutions			344,830				146,627
Total cash and cash equivalents			354,059				154,569
Debt securities available-for-sale, at fair value (amortized cost $292,809 and $218,488, net of allowance for credit losses of $0 and $0)			279,712				218,160
Loans, net of allowance for credit losses on loans of $22,789 and $22,261			2,259,739				2,126,178
Federal Home Loan Bank stock, at cost			8,409				8,409
Premises and equipment, net			984				1,526
Cash surrender value of bank-owned life insurance policies			11,540				13,045
Accrued interest receivable and other assets			52,389				47,756
Total assets		$	2,966,832			$	2,569,643
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing		$	535,128			$	556,972
Interest-bearing			2,076,918				1,629,101
Total deposits			2,612,046				2,186,073
Short-term borrowings			-				60,000
Subordinated debentures, net			29,130				22,000
Accrued interest payable and other liabilities			26,146				20,591
Total liabilities			2,667,322				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 September 30, 2026 and December 31, 2025			-				-
Common stock - no par value; 25,000,000 shares authorized; 10,996,074 and 10,947,967 shares issued and outstanding at September 30, 2026 and December 31, 2025, respectively			170,843				169,990
Retained earnings			138,002				111,150
Accumulated other comprehensive loss, net of taxes			(9,335	)			(161	)
Total shareholders' equity			299,510				280,979
Total liabilities and shareholders' equity		$	2,966,832			$	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 September 30,								Nine Months Ended September 30,
(In thousands, except per share data)		2026				2025				2026				2025
Interest and fees on loans		$	37,426			$	33,880			$	109,339			$	98,732
Taxable debt securities			3,120				1,126				8,084				4,517
Tax-exempt debt securities			30				31				92				92
Federal Home Loan Bank dividends			200				184				646				550
Other interest income			2,796				2,033				4,376				3,532
Total interest income			43,572				37,254				122,537				107,423
Interest on deposits			14,411				13,776				38,950				40,272
Interest on short-term borrowings			-				385				437				3,538
Interest on subordinated debentures			487				443				1,296				1,321
Total interest expense			14,898				14,604				40,683				45,131
Net interest income			28,674				22,650				81,854				62,292
Provision for credit losses			1,151				1,355				5,385				2,280
Net interest income after provision for credit losses			27,523				21,295				76,469				60,012
Service charges and fees			887				779				2,559				2,381
Foreign exchange income			324				267				1,027				683
Bank-owned life insurance income (1)			97				96				1,700				279
Credit card income			106				57				320				254
Warrant and success fee income			112				-				179				273
Other investment income			55				315				112				339
Net loss on sale of debt securities			-				(62,391	)			-				(62,391	)
Other income			115				25				316				39
Total non-interest income			1,696				(60,852	)			6,213				(58,143	)
Salaries and employee benefits			10,178				9,766				29,296				27,841
Legal and professional fees			1,316				591				3,401				1,817
Data processing			901				792				2,487				2,166
Occupancy and equipment			830				723				2,397				2,478
Regulatory assessments			486				445				1,567				1,409
Other operating expenses			1,414				1,162				6,531				3,219
Total non-interest expense			15,125				13,479				45,679				38,930
Income / (loss) before provision for income taxes			14,094				(53,036	)			37,003				(37,061	)
Provision / (benefit) for income taxes			3,910				(15,301	)			10,151				(10,559	)
Net income / (loss)		$	10,184			$	(37,735	)		$	26,852			$	(26,502	)
Net income / (loss) per common share data
Basic earnings / (loss) per common share		$	0.96			$	(4.12	)		$	2.53			$	(3.28	)
Diluted earnings / (loss) per common share			0.94				(4.12	)			2.49				(3.28	)
Weighted average shares - basic			10,626,969				9,168,707				10,612,036				8,069,830
Weighted average shares - diluted			10,803,901				9,168,707				10,785,050				8,069,830

⁽¹⁾  Includes $1.3 million in income related to bank-owned life insurance (“BOLI”) death benefits for the nine months ended September 30, 2026.

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 September 30,								Nine Months Ended September 30,
(In thousands)		2026				2025				2026				2025
Net income / (loss)		$	10,184			$	(37,735	)		$	26,852			$	(26,502	)
Other comprehensive (loss) / income, before tax
Unrealized gains on securities:
Unrealized holdings (losses) / gains			(10,346	)			327				(12,769	)			9,518
Reclassification adjustment for losses included in net income			-				62,391				-				62,391
			(10,346	)			62,718				(12,769	)			71,909
Derivative instruments designated as cash flow hedges:
Amortization of terminated cash flow hedges			(11	)			21				(31	)			62
Other comprehensive (loss) / income, before tax			(10,357	)			62,739				(12,800	)			71,971
Tax effect			2,939				(18,044	)			3,626				(21,063	)
Total other comprehensive (loss) / income, after tax			(7,418	)			44,695				(9,174	)			50,908
Comprehensive income		$	2,766			$	6,960			$	17,678			$	24,406

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				(Loss) / Income				Equity
Balance, June 30, 2026			10,982,764			$	170,284			$	127,818			$	(1,917	)		$	296,185
Net income			-				-				10,184				-				10,184
Other comprehensive loss			-				-				-				(7,418	)			(7,418	)
Restricted stock issued, net of forfeitures			21,419				-				-				-				-
Restricted stock surrendered for tax withholding upon vesting			(8,109	)			(264	)			-				-				(264	)
Stock-based compensation			-				823				-				-				823
Balance, September 30, 2026			10,996,074			$	170,843			$	138,002			$	(9,335	)		$	299,510
Balance, December 31, 2025			10,947,967			$	169,990			$	111,150			$	(161	)		$	280,979
Net income			-				-				26,852				-				26,852
Other comprehensive loss			-				-				-				(9,174	)			(9,174	)
Restricted stock issued, net of forfeitures			104,060				-				-				-				-
Restricted stock surrendered for tax withholding upon vesting			(30,953	)			(928	)			-				-				(928	)
Repurchase of common stock			(25,000	)			(693	)			-				-				(693	)
Stock-based compensation			-				2,474				-				-				2,474
Balance, September 30, 2026			10,996,074			$	170,843			$	138,002			$	(9,335	)		$	299,510
Balance, June 30, 2025			7,923,946			$	107,608			$	141,936			$	(45,125	)		$	204,419
Net income			-				-				(37,735	)			-				(37,735	)
Other comprehensive income			-				-				-				44,695				44,695
Issuance of common stock upon initial public offering, net of offering costs			3,001,500				61,344				-				-				61,344
Restricted stock issued, net of forfeitures			15,900				-				-				-				-
Restricted stock surrendered for tax withholding upon vesting			(16,244	)			(422	)			-				-				(422	)
Stock-based compensation			-				812				-				-				812
Balance, September 30, 2025			10,925,102			$	169,342			$	104,201			$	(430	)		$	273,113
Balance, December 31, 2024			7,906,761			$	106,997			$	130,703			$	(51,338	)		$	186,362
Net income			-				-				(26,502	)			-				(26,502	)
Other comprehensive income			-				-				-				50,908				50,908
Issuance of common stock upon initial public offering, net of offering costs			3,001,500				61,344				-				-				61,344
Restricted stock issued, net of forfeitures			75,248				-				-				-				-
Restricted stock surrendered for tax withholding upon vesting			(58,407	)			(1,401	)			-				-				(1,401	)
Stock-based compensation			-				2,402				-				-				2,402
Balance, September 30, 2025			10,925,102			$	169,342			$	104,201			$	(430	)		$	273,113

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)

		Nine Months Ended September 30,
(In thousands)		2026				2025
Operating activities
Net income / (loss)		$	26,852			$	(26,502	)
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses			5,385				2,280
Depreciation, amortization and accretion			6				1,053
Net loss on sale of debt securities			-				62,391
Increase in deferred loan origination fees, net			(410	)			(318	)
Earnings on bank-owned life insurance policies			(1,700	)			(279	)
Repayment of operating lease liabilities			1,667				1,726
Stock-based compensation expense			2,474				2,402
Net increase in accrued interest receivable and other assets			(2,705	)			(18,059	)
Net increase / (decrease) in accrued interest payable and other liabilities			5,363				(1,613	)
Net cash provided by operating activities			36,932				23,081
Investing activities
Purchase of available-for-sale debt securities			(96,015	)			(163,169	)
Proceeds from sales of available-for-sale debt securities			-				274,708
Proceeds from paydowns/maturities of available-for-sale debt securities			22,274				20,579
Proceeds from the death benefit of bank-owned life insurance policies			3,205				-
Net increase in loans			(138,344	)			(93,234	)
Purchase of premises and equipment			(29	)			(93	)
Net cash (used in) / provided by investing activities			(208,909	)			38,791
Financing activities
Net increase in deposits			425,973				157,803
Payments for employee tax withholding on net settlement of restricted stock awards			(928	)			(1,401	)
Proceeds from the issuance of common stock upon initial public offering, net of offering costs			-				61,344
Repurchase of common stock			(693	)			-
Net (repayment) / proceeds from overnight borrowings			(60,000	)			(115,000	)
Net (repayment) / proceeds from Federal Home Loan Bank borrowings			-				(70,000	)
Proceeds from issuance of subordinated debt			30,000				-
Repayment of subordinated debt			(22,000	)			-
Payment of subordinated debt issuance costs			(885	)			-
Net cash provided by financing activities			371,467				32,746
Net change in cash and cash equivalents			199,490				94,618
Cash and cash equivalents at beginning of period			154,569				82,701
Cash and cash equivalents at end of period		$	354,059			$	177,319
Supplemental disclosure of cash flow information:
Net cash paid during the period for:
Interest expense		$	40,283			$	46,049
Income taxes, net of refunds			2,538				4,601
Supplemental non-cash disclosures:
Recording of right-of-use assets in exchange for lease liabilities		$	8,483			$	439
Change in unrealized losses / (gains) on available-for-sale debt securities, net of tax			9,143				(50,846	)

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 (“FHLB”) and the Federal Reserve Bank (“FRB”) on a net basis.

Operating results for the three and nine months ended September 30, 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 and taxes are particularly susceptible to significant change.

Issued Accounting Standards

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.   

In November 2025, 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.

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NOTE 2 – DEBT SECURITIES

The Company's debt securities portfolio was classified as available-for-sale as of  September 30, 2026 and  December 31, 2025. The Company did not hold any securities classified as trading or held-to-maturity as of  September 30, 2026 or  December 31, 2025. The amortized cost and estimated fair value of available-for-sale debt securities as of  September 30, 2026 and  December 31, 2025 consisted of the following:

		September 30, 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		$	363			$	-			$	(24	)		$	339
Commercial mortgage-backed securities			25,805				-				(1,329	)			24,476
Residential mortgage-backed securities			261,928				-				(11,329	)			250,599
U.S. states and political subdivisions			4,713				-				(415	)			4,298
Total available-for-sale		$	292,809			$	-			$	(13,097	)		$	279,712

		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 $9.4 million were recorded as accumulated other comprehensive loss, net of tax of $3.7 million, within shareholders' equity as of  September 30, 2026. Net unrealized losses on available-for-sale debt securities totaling $234 thousand were recorded as accumulated other comprehensive loss, net of tax of $94 thousand, within shareholders' equity as of  December 31, 2025.

During the nine months ended September 30, 2026, the Company purchased $96.0 million of available-for-sale debt securities with an average yield of 5.10% and a duration of 3.72 years. During the three and nine months ended September 30, 2026, 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 and nine months ended September 30, 2026 and 2025.

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Debt securities with unrealized losses as of  September 30, 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
September 30, 2026		Fair Value				Losses				Fair Value				Losses				Fair Value				Losses
U.S. Treasury securities and obligations of U.S. government agencies		$	-			$	-			$	339			$	(24	)		$	339			$	(24	)
Commercial mortgage-backed securities			24,476				(1,329	)			-				-				24,476				(1,329	)
Residential mortgage-backed securities			240,726				(10,777	)			9,873				(552	)			250,599				(11,329	)
U.S. states and political subdivisions			3,547				(232	)			751				(183	)			4,298				(415	)
Total available-for-sale		$	268,749			$	(12,338	)		$	10,963			$	(759	)		$	279,712			$	(13,097	)

		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	)

There were 4 individual available-for-sale securities in an unrealized loss position for greater than 12 months in the tables above as of  September 30, 2026, unchanged from  December 31, 2025. 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  September 30, 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 and nine months ended September 30, 2026 or  September 30, 2025, and there was no allowance for credit losses on securities available-for-sale recorded as of  September 30, 2026 or  December 31, 2025.

The amortized cost and estimated fair value of available-for-sale debt securities as of  September 30, 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			363				339
Due after five years through 10 years			1,003				935
Due after 10 years			3,710				3,363
			5,076				4,637
Debt securities not due at a single maturity date: mortgage-backed securities			287,733				275,075
Total available-for-sale		$	292,809			$	279,712

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Debt securities with fair values of $9.4 million and $8.9 million were pledged as of  September 30, 2026 and  December 31, 2025, respectively, toward certain letters of credit. No debt securities were pledged to secure public deposits as of  September 30, 2026 or  December 31, 2025.

NOTE 3 – LOANS

Outstanding loans are summarized below:

(In thousands)		September 30, 2026				December 31, 2025
Commercial and industrial		$	1,132,350			$	1,049,530
Construction			161,623				196,243
Residential real estate			37,933				45,669
Commercial real estate			950,196				854,342
Consumer			426				2,655
Total outstanding loans, net of deferred fees			2,282,528				2,148,439
Allowance for credit losses on loans			(22,789	)			(22,261	)
Total loans, net of allowance for credit losses on loans		$	2,259,739			$	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 $1.12 billion and $972.7 million of loans for borrowing capacity of $955.2 million and $853.9 million as of  September 30, 2026 and  December 31, 2025, respectively. The Bank had no Federal Reserve Bank borrowings outstanding that were secured by loans as of  September 30, 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 $813.4 million of loans for borrowing capacity of $564.1 million as of  September 30, 2026. In comparison, the Bank pledged a total of $773.0 million of loans for borrowing capacity of $530.0 million as of  December 31, 2025. There were no FHLB borrowings outstanding as of  September 30, 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 September 30,								Nine Months Ended September 30,
(In thousands)		2026				2025				2026				2025
Balance, beginning of period		$	21,501			$	19,624			$	22,261			$	18,679
Provision for credit losses on loans			1,299				1,364				5,193				2,255
Charge-offs			(11	)			-				(5,083	)			-
Recoveries			-				37				418				91
Balance, end of period		$	22,789			$	21,025			$	22,789			$	21,025

Accrued interest receivable related to loans totaled $8.7 million and $8.2 million as of  September 30, 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 and nine months ended September 30, 2026 and 2025 are as follows:

		For the Three Months Ended September 30,
		2026
		Commercial								Residential				Commercial
(In thousands)		and Industrial				Construction				Real Estate				Real Estate				Consumer				Total
Balance, June 30, 2026		$	14,596			$	1,560			$	437			$	4,906			$	2			$	21,501
Provision for credit losses on loans (1)			584				(354	)			58				1,010				1				1,299
Charge-offs			-				(11	)			-				-				-				(11	)
Recoveries			-				-				-				-				-				-
Balance, September 30, 2026		$	15,180			$	1,195			$	495			$	5,916			$	3			$	22,789
		2025
		Commercial								Residential				Commercial
(In thousands)		and Industrial				Construction				Real Estate				Real Estate				Consumer				Total
Balance, June 30, 2025		$	12,058			$	2,534			$	353			$	4,654			$	25			$	19,624
Provision for credit losses on loans (1)			959				270				25				107				3				1,364
Charge-offs			-				-				-				-				-				-
Recoveries			37				-				-				-				-				37
Balance, September 30, 2025		$	13,054			$	2,804			$	378			$	4,761			$	28			$	21,025

		For the Nine Months Ended September 30,
		2026
		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)			2,347				1,109				1				1,766				(30	)			5,193
Charge-offs			(3,197	)			(1,886	)			-				-				-				(5,083	)
Recoveries			418				-				-				-				-				418
Balance, September 30, 2026		$	15,180			$	1,195			$	495			$	5,916			$	3			$	22,789
		2025
		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 (1)			2,793				(201	)			92				(446	)			17				2,255
Charge-offs			-				-				-				-				-				-
Recoveries			91				-				-				-				-				91
Balance, September 30, 2025		$	13,054			$	2,804			$	378			$	4,761			$	28			$	21,025

⁽¹⁾ Excludes provision for unfunded commitments of ($148) thousand and $192 thousand for the three and nine months ended September 30, 2026, respectively, and ($9) thousand and $25 thousand for the three and nine months ended September 30, 2025, respectively.

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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  September 30, 2026 and  December 31, 2025:

		September 30, 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			14,437				1,500				15,937				-
Residential Real Estate			-				-				-				-
Commercial Real Estate			-				-				-				-
Consumer			-				-				-				-
Total		$	14,437			$	1,500			$	15,937			$	-

		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			$	-

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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
September 30, 2026
Commercial and industrial
Risk Rating
Pass		$	184,316			$	213,912			$	52,594			$	22,151			$	21,459			$	8,102			$	605,063			$	3,750			$	1,111,347
Special Mention			-				445				461				-				4,769				-				1,374				-				7,049
Substandard			1,963				-				-				4,828				371				-				6,792				-				13,954
Substandard - Non-accrual			-				-				-				-				-				-				-				-				-
Total		$	186,279			$	214,357			$	53,055			$	26,979			$	26,599			$	8,102			$	613,229			$	3,750			$	1,132,350
Gross charge-offs		$	-			$	-			$	-			$	3,197			$	-			$	-			$	-			$	-			$	3,197
Construction
Risk Rating
Pass		$	40,506			$	36,782			$	38,499			$	18,813			$	6,299			$	2,314			$	-			$	-			$	143,213
Special Mention			-				-				-				-				-				2,473				-				-				2,473
Substandard - Non-accrual			-				-				1,500				-				-				14,437				-				-				15,937
Total		$	40,506			$	36,782			$	39,999			$	18,813			$	6,299			$	19,224			$	-			$	-			$	161,623
Gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	1,886			$	-			$	-			$	1,886
Residential Real Estate
Risk Rating
Pass		$	1,220			$	3,270			$	-			$	4,275			$	663			$	2,665			$	25,840			$	-			$	37,933
Total		$	1,220			$	3,270			$	-			$	4,275			$	663			$	2,665			$	25,840			$	-			$	37,933
Gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Commercial Real Estate
Risk Rating
Pass		$	156,215			$	146,328			$	51,940			$	142,795			$	121,926			$	286,747			$	15,428			$	-			$	921,379
Special Mention			-				18,829				-				-				-				9,988				-				-				28,817
Total		$	156,215			$	165,157			$	51,940			$	142,795			$	121,926			$	296,735			$	15,428			$	-			$	950,196
Gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Consumer
Risk Rating
Pass		$	-			$	-			$	-			$	-			$	-			$	-			$	426			$	-			$	426
Total		$	-			$	-			$	-			$	-			$	-			$	-			$	426			$	-			$	426
Gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Total
Pass		$	382,257			$	400,292			$	143,033			$	188,034			$	150,347			$	299,828			$	646,757			$	3,750			$	2,214,298
Special Mention			-				19,274				461				-				4,769				12,461				1,374				-				38,339
Substandard			1,963				-				-				4,828				371				-				6,792				-				13,954
Substandard - Non-accrual			-				-				1,500				-				-				14,437				-				-				15,937
Total		$	384,220			$	419,566			$	144,994			$	192,862			$	155,487			$	326,726			$	654,923			$	3,750			$	2,282,528

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		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

During the nine months ended September 30, 2026, loans risk rated as special mention increased $27.5 million. The increase is primarily due to a fully collateralized non-owner-occupied real estate relationship totaling $28.8 million. Accruing substandard loans increased $12.1 million, primarily within the commercial and industrial loan portfolio. Partially offsetting these increases was an $8.6 million decrease in nonaccrual loans, reflecting loan payoffs, charge-offs and other changes in the portfolio. As a result, total loans rated other than Pass increased from $37.2 million at December 31, 2025 to $68.2 million at September 30, 2026. Management continues to monitor these relationships and evaluate their effect on expected credit losses.

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The Company monitors loans by past due status. The following tables present the aging of past due loans as of  September 30, 2026 and  December 31, 2025:

		September 30, 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		$	-			$	-			$	-			$	-			$	-			$	1,132,350			$	1,132,350
Construction			-				-				-				15,937				15,937				145,686				161,623
Residential Real Estate			-				-				-				-				-				37,933				37,933
Commercial Real Estate			-				-				-				-				-				950,196				950,196
Consumer			-				-				-				-				-				426				426
Total		$	-			$	-			$	-			$	15,937			$	15,937			$	2,266,591			$	2,282,528

		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  September 30, 2026 and  December 31, 2025.

		Collateral Type
		Real				Business				Accounts
(In thousands)		Property				Assets				Receivable				Equipment				Other				Total
September 30, 2026
Commercial and industrial		$	-			$	-			$	3,882			$	-			$	-			$	3,882
Construction			15,937				-				-				-				-				15,937
Residential Real Estate			-				-				-				-				-				-
Commercial Real Estate			-				-				-				-				-				-
Consumer			-				-				-				-				-				-
Total		$	15,937			$	-			$	3,882			$	-			$	-			$	19,819
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.

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The following tables present the amortized cost basis of loans as of  September 30, 2026 and  September 30, 2025, that were both experiencing financial difficulty and were modified during the three and nine months ended September 30, 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 September 30, 2026
Commercial and industrial		$	3,907			$	-			$	-			$	-			$	-			$	3,907				0.35	%
Construction			-				-				-				-				-				-				-
Residential Real Estate			-				-				-				-				-				-				-
Commercial Real Estate			-				-				-				-				-				-				-
Consumer			-				-				-				-				-				-				-
Total		$	3,907			$	-			$	-			$	-			$	-			$	3,907				0.17	%
Nine Months Ended September 30, 2026
Commercial and industrial		$	12,548			$	4,769			$	-			$	-			$	-			$	17,317				1.53	%
Construction			2,472				-				-				-				-				2,472				1.53
Residential Real Estate			-				-				-				-				-				-				-
Commercial Real Estate			-				-				-				-				-				-				-
Consumer			-				-				-				-				-				-				-
Total		$	15,020			$	4,769			$	-			$	-			$	-			$	19,789				0.87	%
Three Months Ended September 30, 2025
Commercial and industrial		$	-			$	5,258			$	-			$	-			$	-			$	5,258				0.60	%
Construction			-				-				-				-				-				-				-
Residential Real Estate			-				-				-				-				-				-				-
Commercial Real Estate			-				-				-				-				-				-				-
Consumer			-				-				-				-				-				-				-
Total		$	-			$	5,258			$	-			$	-			$	-			$	5,258				0.27	%
Nine Months Ended September 30, 2025
Commercial and industrial		$	1,523			$	5,258			$	-			$	-			$	-			$	6,781				0.78	%
Construction			24,519				-				-				-				-				24,519				11.69
Residential Real Estate			-				-				-				-				-				-				-
Commercial Real Estate			-				-				-				-				-				-				-
Consumer			-				-				-				-				-				-				-
Total		$	26,042			$	5,258			$	-			$	-			$	-			$	31,300				1.60	%

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The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2026 and 2025:

														Weighted
										Weighted				Average
										Average				Term
		Principal				Payment				Interest Rate				Extension
(In thousands)		Forgiveness ($)				Delays ($) (1)				Reduction (%)				(Months)
Three Months Ended September 30, 2026
Commercial and industrial			-				-				-				16.0
Construction			-				-				-				-
Residential Real Estate			-				-				-				-
Commercial Real Estate			-				-				-				-
Consumer			-				-				-				-
Total			-				-				-				16.0
Nine Months Ended September 30, 2026
Commercial and industrial			-				567				-				11.8
Construction			-				-				-				6.0
Residential Real Estate			-				-				-				-
Commercial Real Estate			-				-				-				-
Consumer			-				-				-				-
Total			-				567				-				10.8
Three Months Ended September 30, 2025
Commercial and industrial			-				250				-				-
Construction			-				-				-				-
Residential Real Estate			-				-				-				-
Commercial Real Estate			-				-				-				-
Consumer			-				-				-				-
Total			-				250				-				-
Nine Months Ended September 30, 2025
Commercial and industrial			-				250				-				-
Construction			-				-				-				2.4
Residential Real Estate			-				-				-				-
Commercial Real Estate			-				-				-				-
Consumer			-				-				-				-
Total			-				250				-				2.4

⁽¹⁾ Represents delayed repayment of contractual principal while maintaining the original maturity date and contractual interest rate.

Commitments to lend additional funds to borrowers included in the previous tables totaled $351 thousand and $204 thousand at  September 30, 2026 and 2025, respectively. There were no loans to borrowers experiencing financial difficulty, which had been modified in the prior 12 months, with a payment default during the nine months ended September 30, 2026 or 2025.

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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 13 to 72 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. During the third quarter of 2026, the Company executed an amendment to this lease to expand the premises. The amendment extends the lease term to expire in 2032 and has two separate five-year renewal options. 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		September 30, 2026				December 31, 2025
Right-of-use assets:
Operating leases - Accrued interest receivable and other assets		$	11,201			$	5,606
Total right-of-use assets			11,201				5,606
Lease liabilities:
Operating leases - Accrued interest payable and other liabilities			11,974				6,211
Total lease liabilities		$	11,974			$	6,211

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Lease Expense

Total lease cost for the three and nine months ended September 30, 2026 and 2025 is as follows:

		Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands)		2026				2025				2026				2025
Operating lease cost		$	686			$	600			$	2,016			$	1,956
Sublease income			(89	)			(87	)		$	(268	)		$	(260	)
Total lease cost, net		$	597			$	513			$	1,748			$	1,696

Lease Obligations

Future undiscounted lease payments for operating leases with initial terms of one year or more as of  September 30, 2026 are as follows:

(In thousands)	​	Leases		​
Remainder of 2026	​	$	429	​
2027	​	​	2,294	​
2028	​	​	2,564	​
2029	​	​	2,641	​
2030	​	​	2,178	​
Thereafter	​	​	3,498	​
Total undiscounted lease payments	​	​	13,604	​
Less imputed interest	​	​	1,630	​
Net lease liabilities	​	$	11,974	​

Supplemental Lease Information

		September 30, 2026				December 31, 2025
Operating lease weighted average remaining lease term (years)			5.30				3.12
Operating lease weighted average discount rate			3.05	%			2.46	%

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NOTE 6 – DEPOSITS

The Company’s total deposits consisted of the following:

(In thousands)		September 30, 2026				December 31, 2025
Interest-bearing checking		$	1,145,612			$	1,069,272
Savings			6,167				3,922
Money market			877,630				528,227
Time, $250,000 or more			33,310				21,882
Other time			4,199				5,798
Non-reciprocal brokered (1)			10,000				-
Total interest-bearing deposits			2,076,918				1,629,101
Non-interest-bearing deposits			535,128				556,972
Total deposits		$	2,612,046			$	2,186,073

⁽¹⁾ FDIC regulations provide a limited exception from brokered deposit classification for certain reciprocal deposits, subject to a general cap determined using a tiered calculation based on the Bank's total liabilities. Due to changes from the 21st Century ROAD to Housing Act, as of  September 30, 2026, none of the Bank's reciprocal deposits exceeded the applicable general cap to be classified as brokered deposits. As of  December 31, 2025, an additional $475.4 million of our deposits were considered brokered deposits by the FDIC due to being in excess of the general cap then in effect.

Non-reciprocal brokered deposits are used to supplement the Company’s traditional deposit funding sources. As of  September 30, 2026, the Company had $10.0 million in non-reciprocal brokered deposits representing 0.38% of total deposits. As of  December 31, 2025, there were no non-reciprocal brokered deposits.

As of  September 30, 2026, scheduled maturities of time deposits for the next five years were as follows:

(In thousands)	​	September 30, 2026		​
Remainder of 2026	​	$	27,883	​
2027	​	​	7,437	​
2028	​	​	-	​
2029	​	​	2,189	​
2030 and after	​	​	-	​
Total time deposits	​	$	37,509	​

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Interest expense recognized on interest-bearing deposits for the three and nine months ended September 30, 2026 and  September 30, 2025, consisted of the following:

		Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands)		2026				2025				2026				2025
Interest-bearing checking		$	9,249			$	9,961			$	25,878			$	27,974
Savings			26				17				50				36
Money market			4,432				3,319				11,224				9,265
Time, $250,000 or more			284				360				726				1,031
Other time			16				5				65				292
Non-reciprocal brokered			404				114				1,007				1,674
Total interest-bearing deposits		$	14,411			$	13,776			$	38,950			$	40,272

Overdrawn deposit accounts reclassified as loans were $226 thousand and $15 thousand as of  September 30, 2026 and  December 31, 2025, respectively.

As of  September 30, 2026, the Company had two deposit relationships, one a technology company in our Specialty Finance division and the other a software company in our Venture Lending Division, that exceeded 5% of total deposits. These two deposit relationships totaled $439.2 million and together they represented 17% of total deposits as of  September 30, 2026. As of  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. These two deposit relationships totaled $228.7 million and together they represented 10% of total deposits as of  December 31, 2025.

Estimated uninsured deposits, including accrued interest, were 49% and 42% of total deposits as of  September 30, 2026 and  December 31, 2025, respectively. The uninsured amounts are estimated based on the methodologies and assumptions used for the Bank's regulatory reporting requirements.

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NOTE 7 – SUBORDINATED DEBENTURES AND OTHER BORROWING ARRANGEMENTS

On August 26, 2026, the Company closed on a $30.0 million private placement of new 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 September 1, 2036 and bear interest at the rate of 7.0% 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 291 basis points. The notes may be redeemed by the Company on September 1, 2031 (and any interest payment date thereafter) or earlier upon certain limited specified events. 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 of $885 thousand less accumulated amortization of $15 thousand as of  September 30, 2026.

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 had a maturity date of December 30, 2029 and bore 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 were redeemable subject to certain conditions. The indebtedness evidenced by these old subordinated notes, including principal and interest, was unsecured and subordinate and junior to general and secured creditors and depositors. As of December 31, 2024, the debt issuance costs associated with these notes were fully amortized. Effective with the issuance of $30.0 million in new subordinated notes on August 26, 2026, these old notes were redeemed and repurchased by the Company in their entirety during the third quarter of 2026. 

The Company had unsecured Federal Funds lines of credit with its correspondent banks totaling $229.0 million as of  September 30, 2026 and $206.0 million as of  December 31, 2025. As of  September 30, 2026, there were no borrowings outstanding, and as of  December 31, 2025, $60.0 million of borrowings were outstanding. The interest rate paid on the borrowings outstanding as of  December 31, 2025, was 3.75%.

The Company has a short-term borrowing arrangement with the FRB through the Discount Window. The Company currently has a detailed lien on certain loans to secure these borrowings. The borrowing capacity under this agreement with the FRB varies depending on the amount of loans pledged and totaled $955.2 million and $853.9 million as of  September 30, 2026 and  December 31, 2025, respectively. There were no borrowings outstanding under this agreement as of  September 30, 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  September 30, 2026 and  December 31, 2025, there were no borrowings outstanding from the FHLB. The remaining borrowing capacity as of  September 30, 2026 and  December 31, 2025, was $564.1 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 or repurchase its shares of common stock 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 or repurchasing 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. As of  September 30, 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 and nine months ended September 30, 2026 and  September 30, 2025 is shown below:

		Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands, except share and per share amounts)		2026				2025				2026				2025
Net income		$	10,184			$	(37,735	)		$	26,852			$	(26,502	)
Total weighted average shares outstanding – basic			10,626,969				9,168,707				10,612,036				8,069,830
Basic earnings per common share		$	0.96			$	(4.12	)		$	2.53			$	(3.28	)
Net income		$	10,184			$	(37,735	)		$	26,852			$	(26,502	)
Total weighted average shares outstanding – basic			10,626,969				9,168,707				10,612,036				8,069,830
Add: dilutive impact of restricted stock			176,932				-				173,014				-
Total weighted average shares outstanding – diluted			10,803,901				9,168,707				10,785,050				8,069,830
Diluted earnings per common share		$	0.94			$	(4.12	)		$	2.49			$	(3.28	)
Anti-dilutive award shares (1)			-				2				37				11

⁽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.

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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 nine months ended September 30, 2026, 25,000 shares were repurchased under the stock repurchase program for $693 thousand at an average price of $27.69 per share during the first quarter of 2026, and no shares were repurchased under the stock repurchase program during the second or third quarters of 2026. These repurchased shares are considered authorized but unissued shares. 

As of  September 30, 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.

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 and the Bank 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  September 30, 2026 and  December 31, 2025, the Company and the Bank met all capital adequacy requirements to which it was 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” (not “well-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. As of  September 30, 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. The Company is currently subject to the Federal Reserve's Small Bank Holding Company Policy Statement, which generally applies to bank holding companies with less than $3.0 billion in consolidated assets that meet certain other eligibility requirements and exempts bank holding companies from the Federal Reserve’s risk-based capital and leverage rules. If the Company no longer were subject to the Small Bank Holding Company Policy Statement, the generally applicable capital requirements (described below) that apply to the Bank also would apply to the Company. The Company's consolidated assets were approximately $2.97 billion at  September 30, 2026.

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Actual and required capital amounts and ratios, exclusive of the capital conservation buffer, are presented below as of  September 30, 2026 and  December 31, 2025. Under the Basel III Capital Rules, the Bank must also maintain a 2.5% Capital Conservation Buffer (“CCB”) to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. The CCB is calculated as the lowest of the excesses of the Bank's CET1, Tier 1, and total risk-based capital ratios over the applicable minimum capital requirements. Failure to maintain the full 2.5% CCB may result in restrictions on capital distributions and certain discretionary bonus payments. As of  September 30, 2026 and  December 31, 2025, the Bank's risk-based capital exceeded the required CCB.

		September 30, 2026								December 31, 2025
(In thousands)		Amount				Ratio				Amount				Ratio
Leverage Ratio
Avidbank Holdings, Inc.		$	308,094				10.82	%		$	275,669				11.23	%
Minimum regulatory requirement		$	113,946				4.00	%		$	98,167				4.00	%
Avidbank		$	320,409				11.28	%		$	285,091				11.65	%
Minimum requirement for “Well-Capitalized” institution		$	142,045				5.00	%		$	122,359				5.00	%
Minimum regulatory requirement		$	113,636				4.00	%		$	97,887				4.00	%
Common Equity Tier I
Avidbank Holdings, Inc.		$	308,094				11.45	%		$	275,669				11.05	%
Minimum regulatory requirement		$	121,054				4.50	%		$	112,249				4.50	%
Avidbank		$	320,409				11.94	%		$	285,091				11.46	%
Minimum requirement for “Well-Capitalized” institution		$	174,356				6.50	%		$	161,678				6.50	%
Minimum regulatory requirement		$	120,708				4.50	%		$	111,931				4.50	%
Tier 1 Risk-Based Capital Ratio
Avidbank Holdings, Inc.		$	308,094				11.45	%		$	275,669				11.05	%
Minimum regulatory requirement		$	161,405				6.00	%		$	149,665				6.00	%
Avidbank		$	320,409				11.94	%		$	285,091				11.46	%
Minimum requirement for “Well-Capitalized” institution		$	214,592				8.00	%		$	198,988				8.00	%
Minimum regulatory requirement		$	160,944				6.00	%		$	149,241				6.00	%
Total Risk-Based Capital Ratio
Avidbank Holdings, Inc.		$	362,556				13.48	%		$	313,481				12.57	%
Minimum regulatory requirement		$	215,207				8.00	%		$	199,554				8.00	%
Avidbank		$	345,741				12.89	%		$	309,703				12.45	%
Minimum requirement for “Well-Capitalized” institution		$	268,240				10.00	%		$	248,735				10.00	%
Minimum regulatory requirement		$	214,592				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 as of  September 30, 2026 and  December 31, 2025 were as follows:

		September 30, 2026								December 31, 2025
(In thousands)			Fixed Rate				Variable Rate				Fixed Rate				Variable Rate
Commitments to extend credit		$	51,724			$	746,095			$	37,731			$	650,384
Standby letters of credit			-				20,710				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 $172 thousand and $152 thousand as of  September 30, 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.

As of  September 30, 2026 and  December 31, 2025, in management’s judgment, a concentration of loans existed in construction and commercial real estate related loans. As of both  September 30, 2026 and  December 31, 2025, approximately 49% of the Company's loans were construction and commercial real estate related, representing 7% and 41% of total outstanding loans as of  September 30, 2026, and 9% and 40%, respectively, as of  December 31, 2025.

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Contingencies

From time to time, the Company and/or its subsidiary are a party to claims and legal proceedings arising in the ordinary course of business. In the opinion of the Company's management, any such claims or legal proceedings are not expected to have a material adverse effect on the financial condition or results of operations of the Company taken as a whole.

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  September 30, 2026, the Company did not record an accrued contingent liability.

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  September 30, 2026 and  December 31, 2025, there were no balances outstanding for related party loans and no additions or amounts repaid during the three and nine months ended September 30, 2026 or during the year ended  December 31, 2025. Undisbursed commitments to related parties totaled $5 thousand as of both  September 30, 2026 and  December 31, 2025.

Deposits of certain officers, directors, and their associates totaled approximately $275 thousand and $248 thousand as of  September 30, 2026 and  December 31, 2025, respectively.

NOTE 11 – OTHER EXPENSES

Other expenses for the three and nine months ended September 30, 2026 and  September 30, 2025 consisted of the following:

		Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands)		2026				2025				2026				2025
Directors' fees and expenses		$	302			$	198			$	834			$	529
Correspondent bank charges			224				176				627				460
Advertising and marketing			134				114				346				310
Travel and meals			215				196				495				435
Business software and subscriptions			272				278				815				823
Settlement of litigation			-				-				2,637				-
Other			267				200				777				662
Total other expenses		$	1,414			$	1,162			$	6,531			$	3,219

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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.

Level 2 - Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3 - Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

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 as of  September 30, 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  September 30, 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. Individually evaluated loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. The estimated fair values of financial instruments disclosed above as of  September 30, 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.

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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.

Time deposits

Non-maturity deposits are carried at the amount payable on demand, so their fair value equals carrying value. 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. Time deposits are classified as Level 2.

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 as of  September 30, 2026 and  December 31, 2025, are as follows:

						Fair Value Measurements at
		Carrying				September 30, 2026
(In thousands)		Amount				Level 1				Level 2				Level 3				Total
Financial assets:
Cash and due from financial institutions		$	9,229			$	9,229			$	-			$	-			$	9,229
Due from Federal Reserve Bank and interest-bearing deposits in banks			344,830				344,830				-				-				344,830
Loans, net			2,259,739				-				-				2,237,322				2,237,322
Accrued interest receivable			10,441				10,441				-				-				10,441
Financial liabilities:
Time deposits			37,509				-				37,302				-				37,302
Subordinated debentures, net			29,130				-				-				32,417				32,417
Accrued interest payable			541				541				-				-				541

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						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:
Time deposits			27,680				-				27,562				-				27,562
Subordinated debentures, net			22,000				-				-				24,645				24,645
Short-term borrowings			60,000				60,000				-				-				60,000
Accrued interest payable			142				142				-				-				142

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  September 30, 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:

		September 30, 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		$	339			$	-			$	339			$	-
Commercial mortgage-backed securities			24,476				-				24,476				-
Residential mortgage-backed securities			250,599				-				250,599				-
U.S. states and political subdivisions			4,298				-				4,298				-
Total securities available-for-sale		$	279,712			$	-			$	279,712			$	-

		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			$	-

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Fair values for available-for-sale debt securities are based on quoted market prices for similar securities (Level 2). During the nine months ended September 30, 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 and nine months ended September 30, 2026.

Appraisals for collateral-dependent individually evaluated 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.

Collateral-dependent loans were measured at fair value and had a principal balance of $19.8 million with a valuation allowance of $7 thousand as of  September 30, 2026. As of  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  September 30, 2026 or  December 31, 2025. We recorded amortization of terminated cash flow hedges in the amount of ($11) thousand, ($31) thousand, $21 thousand, and $62 thousand, respectively, for the three and nine months ended September 30, 2026 and 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 $982 thousand and $945 thousand as of  September 30, 2026 and  December 31, 2025, respectively, are included in accrued interest receivable and other assets on the consolidated balance sheets.

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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 and nine months ended September 30, 2026 and 2025.

		Three Months Ended								Nine Months Ended
(In thousands)		September 30, 2026				September 30, 2025				September 30, 2026				September 30, 2025
Service charges and fees		$	887			$	779			$	2,559			$	2,381
Foreign exchange income			324				267				1,027				683
Bank-owned life insurance income (1)			97				96				1,700				279
Credit card income			106				57				320				254
Warrant and success fee income (1)			112				-				179				273
Other investment income (1)			55				315				112				339
Loss on sale of securities (1)			-				(62,391	)			-				(62,391	)
Other income (1)			115				25				316				39
Total non-interest income		$	1,696			$	(60,852	)		$	6,213			$	(58,143	)

⁽¹⁾ Not within the scope of ASC 606.

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.

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.

Credit card income – The Company earns interchange fees from credit and 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.

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 and nine months ended September 30, 2026 or  September 30, 2025.

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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, and with our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. 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 phrases 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;

● the effects of a prolonged government shutdown;

● 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;

● 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;

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● 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;

● 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;

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

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

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

● 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 banking 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 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. We recently established a Small Business Administration lending division to enhance our commercial banking suite of products and services. 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.

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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.

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.

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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.

Results of Operations Highlights

We reported net income for the three months ended September 30, 2026 of $10.2 million, or $0.94 per diluted share, compared to a net loss of $37.7 million, or $4.12 loss per diluted share, for the same period in 2025. For the nine months ended September 30, 2026, we reported net income of $26.9 million, or $2.49 per diluted share, compared to a net loss of $26.5 million, or $3.28 loss per diluted share, for the same period in 2025. The net loss in the prior year was due to the repositioning of the securities portfolio during the third quarter of 2025. We sold $274.7 million in available-for-sale securities for a loss of $62.4 million and purchased $163.2 million in available-for-sale securities with an average purchase yield of 4.54% in the third quarter of 2025. The following provides highlights of our financial results for the three and nine months ended September 30, 2026:

● Period-end loans, net of deferred fees, increased $134.1 million, or 6%, compared to December 31, 2025.

● Average deposits increased $449.9 million, or 22%, from the third quarter of 2025. Period-end deposits increased $426.0 million, or 19%, compared to December 31, 2025.

● Return on average equity was 13.43% compared to (63.19)% in the third quarter of 2025. Adjusted return on average equity ⁽¹⁾ was 13.43% compared to 11.23% in the third quarter of 2025.

● Return on average assets was 1.42% compared to (6.35)% in the third quarter of 2025. Adjusted return on average assets ⁽¹⁾ was 1.42 % compared to 1.13 % in the third quarter of 2025. 

● Net interest margin expanded to 4.07% in the third quarter of 2026, compared to 3.90% in the third quarter of 2025. For the nine months ended September 30, 2026, net interest margin was 4.23% compared to 3.68% for the same period in 2025.

● The efficiency ratio was 49.80% compared to (35.28)% in the third quarter of 2025. The adjusted efficiency ratio⁽¹⁾ was 49.80% compared to 55.72% in the third quarter of 2025.

● Book value per share was $27.24 as of September 30, 2026, an increase of $1.58, or 6%, from December 31, 2025.

● Redeemed $22.0 million of callable subordinated notes and closed on a $30.0 million private placement of new subordinated notes. The new subordinated notes have a maturity date of September 1, 2036, and carry a fixed rate of interest of 7.00% for the first five years.

● Nonperforming loans to total loans decreased to 0.70% as of September 30, 2026 from 1.14% as of December 31, 2025. Net charge-offs to average loans was 0% compared to (0.01)% in the third quarter of 2025. For the nine months ended September 30, 2026, net charge-offs to average loans was 0.28% compared to (0.01)% for the same period in 2025.

⁽¹⁾ A non-GAAP performance measure. We provide detailed reconciliations in the “Non-GAAP Performance and Financial Measures Reconciliation” table.

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Consolidated Financial Highlights

		Three Months Ended								Nine Months Ended
(In thousands, except share and per share data)		September 30, 2026				September 30, 2025				September 30, 2026				September 30, 2025
INCOME HIGHLIGHTS
Net income		$	10,184			$	(37,735	)		$	26,852			$	(26,502	)
Net income - adjusted (2)			10,184				6,707				27,402				17,940
PER SHARE DATA
Basic earnings per share		$	0.96			$	(4.12	)		$	2.53			$	(3.28	)
Diluted earnings per share			0.94				(4.12	)			2.49				(3.28	)
Diluted earnings per share – adjusted (2)			0.94				0.72				2.54				2.18
Book value per share			27.24				25.00				27.24				25.00
PERFORMANCE MEASURES
Return on average assets (1)			1.42	%			(6.35	)%			1.36	%			(1.53	)%
Return on average assets – adjusted (1) (2)			1.42	%			1.13	%			1.39	%			1.03	%
Return on average equity (1)			13.43	%			(63.19	)%			12.20	%			(16.88	)%
Return on average equity – adjusted (1) (2)			13.43	%			11.23	%			12.45	%			11.42	%
Net interest margin (1)			4.07	%			3.90	%			4.23	%			3.68	%
Efficiency ratio			49.80	%			(35.28	)%			51.87	%			938.30	%
Efficiency ratio – adjusted (2)			49.80	%			55.72	%			49.63	%			58.51	%
Average loans to average deposits			89.36	%			94.14	%			95.86	%			96.05	%
CAPITAL
Tier 1 leverage ratio			10.82	%			11.14	%			10.82	%			11.10	%
Common equity tier 1 capital ratio			11.45	%			11.68	%			11.45	%			11.68	%
Tier 1 risk-based capital ratio			11.45	%			11.68	%			11.45	%			11.68	%
Total risk-based capital ratio			13.48	%			13.48	%			13.48	%			13.48	%
Common equity ratio			10.10	%			11.56	%			10.10	%			11.56	%
SHARES OUTSTANDING
Number of common shares outstanding			10,996,074				10,925,102				10,996,074				10,925,102
Weighted average shares outstanding – basic			10,626,969				9,168,707				10,612,036				8,069,830
Weighted average shares outstanding – diluted			10,803,901				9,168,707				10,785,050				8,069,830
Weighted average shares outstanding – diluted – adjusted (2)			10,803,901				9,353,444				10,785,050				8,247,765
ASSET QUALITY
Total allowance for credit losses-loans and unfunded commitments to total loans			1.11	%			1.19	%			1.11	%			1.19	%
Allowance for credit losses on loans to total loans			1.00	%			1.07	%			1.00	%			1.07	%
Non-performing assets to total assets			0.54	%			0.12	%			0.54	%			0.12	%
Non-performing loans to total loans			0.70	%			0.14	%			0.70	%			0.14	%
Net charge-offs to average loans (1)			0.00	%			(0.01	)%			0.28	%			(0.01	)%
AVERAGE BALANCES
Loans, net of deferred fees		$	2,228,603			$	1,924,537			$	2,191,770			$	1,890,413
Debt securities available-for-sale			262,585				181,154				233,180				256,650
Total assets			2,845,991				2,357,158				2,639,965				2,323,365
Deposits			2,494,085				2,044,228				2,286,394				1,968,059
Shareholders' equity			300,781				236,903				294,316				209,965
PERIOD-END BALANCES
Loans, net of deferred fees		$	2,282,528			$	1,958,585			$	2,282,528			$	1,958,585
Debt securities available-for-sale			279,712				173,588				279,712				173,588
Total assets			2,966,832				2,362,454				2,966,832				2,362,454
Deposits			2,612,046				2,049,158				2,612,046				2,049,158
Shareholders' equity			299,510				273,113				299,510				273,113

⁽¹⁾ Annualized for each period presented.

⁽²⁾ A non-GAAP performance measure. We provide detailed reconciliations in the “Non-GAAP Performance and Financial Measures Reconciliation” table.

40

Table of Contents

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. 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 adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average equity, adjusted non-interest income, adjusted non-interest expense, adjusted efficiency ratio, 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 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 adjustment facilitates performance comparisons between taxable and tax-exempt assets by increasing the tax-exempt 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. 

41

Table of Contents

		Three Months Ended								Nine Months Ended
(In thousands)		September 30, 2026				September 30, 2025				September 30, 2026				September 30, 2025
Non-GAAP adjusted net income reconciliation
Net income / (loss) – GAAP		$	10,184			$	(37,735	)		$	26,852			$	(26,502	)
Settlement of litigation			-				-				2,637				-
BOLI death benefit income			-				-				(1,338	)			-
Loss on sale of securities			-				62,391				-				62,391
Tax effect of adjustments			-				(17,949	)			(749	)			(17,949	)
Net income – adjusted (non-GAAP)		$	10,184			$	6,707			$	27,402			$	17,940
Non-GAAP adjusted diluted earnings per share reconciliation
Diluted earnings / (loss) per share – GAAP		$	0.94			$	(4.12	)		$	2.49			$	(3.28	)
Settlement of litigation, net of income tax			-				-				0.17				-
BOLI death benefit income			-				-				(0.12	)			-
Loss on sale of securities, net of income tax			-				4.84				-				5.46
Diluted earnings per share – adjusted (non-GAAP)		$	0.94			$	0.72			$	2.54			$	2.18
Average common shares – diluted – adjusted			10,803,901				9,353,444				10,785,050				8,247,765
Non-GAAP adjusted return on average assets reconciliation
Net income / (loss) – GAAP		$	10,184			$	(37,735	)		$	26,852			$	(26,502	)
Average total assets			2,845,991				2,357,158				2,639,965				2,323,365
Return on average assets – GAAP (1)			1.42	%			(6.35	)%			1.36	%			(1.53	)%
Net income – adjusted (non-GAAP)		$	10,184			$	6,707			$	27,402			$	17,940
Average total assets			2,845,991				2,357,158				2,639,965				2,323,365
Return on average assets – adjusted (non-GAAP) (1)			1.42	%			1.13	%			1.39	%			1.03	%
Non-GAAP adjusted return on average equity reconciliation
Net income / (loss) – GAAP		$	10,184			$	(37,735	)		$	26,852			$	(26,502	)
Average total equity			300,781				236,903				294,316				209,965
Return on average equity – GAAP (1)			13.43	%			(63.19	)%			12.20	%			(16.88	)%
Net income – adjusted (non-GAAP)		$	10,184			$	6,707			$	27,402			$	17,940
Average total equity			300,781				236,903				294,316				209,965
Return on average equity – adjusted (non-GAAP) (1)			13.43	%			11.23	%			12.45	%			11.42	%
Non-GAAP adjusted non-interest expense reconciliation
Non-interest expense		$	15,125			$	13,479			$	45,679			$	38,930
Settlement of litigation			-				-				(2,637	)			-
Non-interest expense – adjusted		$	15,125			$	13,479			$	43,042			$	38,930
Non-GAAP adjusted efficiency ratio reconciliation
Non-interest expense		$	15,125			$	13,479			$	45,679			$	38,930
Net interest income			28,674				22,650				81,854				62,292
Non-interest income			1,696				(60,852	)			6,213				(58,143	)
Efficiency ratio – GAAP			49.80	%			(35.28	)%			51.87	%			938.30	%
Non-interest expense – adjusted			15,125				13,479				43,042				38,930
Net interest income			28,674				22,650				81,854				62,292
Non-interest income			1,696				(60,852	)			6,213				(58,143	)
BOLI death benefit income			-				-				(1,338	)			-
Loss on sale of securities			-				62,391				-				62,391
Non-interest income – adjusted			1,696				1,539				4,875				4,248
Efficiency ratio – adjusted (non-GAAP)			49.80	%			55.72	%			49.63	%			58.51	%
Non-GAAP taxable equivalent net interest income reconciliation
Net interest income – GAAP		$	28,674			$	22,650			$	81,854			$	62,292
Taxable equivalent adjustment			8				8				24				24
Net interest income – taxable equivalent (non-GAAP)		$	28,682			$	22,658			$	81,878			$	62,316
Non-GAAP taxable equivalent net interest margin reconciliation
Net interest margin – GAAP			4.07	%			3.90	%			4.23	%			3.68	%
Impact of taxable equivalent adjustment			-				-				-				-
Net interest margin – taxable equivalent (non-GAAP)			4.07	%			3.90	%			4.23	%			3.68	%

⁽¹⁾  Annualized for the periods presented.

42

Table of Contents

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 September 30, 2026 and 2025:

Distribution, Yield and Rate Analysis of Net Interest Income

		Three Months Ended
		September 30, 2026												September 30, 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)		$	2,228,603			$	37,426				6.66	%		$	1,924,537			$	33,880				6.98	%
Interest-earning deposits			296,047				2,796				3.75	%			189,921				2,033				4.25	%
Debt securities
Taxable debt securities			259,993				3,120				4.76	%			178,637				1,126				2.50	%
Non-taxable debt securities (2)			2,592				38				5.82	%			2,517				39				6.15	%
Total debt securities			262,585				3,158				4.77	%			181,154				1,165				2.55	%
FHLB stock (3)			8,409				200				9.44	%			8,409				184				8.68	%
Total interest-earning assets			2,795,644				43,580				6.18	%			2,304,021				37,262				6.42	%
Non-interest-earning assets:
Cash and due from financial institutions			12,543												7,019
All other assets (4)			37,804												46,118
TOTAL ASSETS		$	2,845,991											$	2,357,158
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits
Interest-bearing demand deposits		$	1,136,531			$	9,249				3.23	%		$	1,074,064			$	9,961				3.68	%
Money market and savings			708,537				4,458				2.50	%			433,135				3,336				3.06	%
Time deposits			37,044				300				3.21	%			43,897				365				3.30	%
Non-reciprocal brokered deposits			40,246				404				3.98	%			10,283				114				4.40	%
Total interest-bearing deposits			1,922,358				14,411				2.97	%			1,561,379				13,776				3.50	%
Short-term borrowings			-				-				-	%			33,500				385				4.56	%
Subordinated debentures, net			26,506				487				7.29	%			22,000				443				7.99	%
Total interest-bearing liabilities			1,948,864				14,898				3.03	%			1,616,879				14,604				3.58	%
Non-interest-bearing liabilities:
Demand deposits			571,727												482,849
Accrued expenses and other liabilities			24,619												20,527
Shareholders' equity			300,781												236,903
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	2,845,991											$	2,357,158
Net interest spread											3.15	%											2.83	%
Net interest income and margin (5)						$	28,682				4.07	%						$	22,658				3.90	%
Non-taxable equivalent net interest margin											4.07	%											3.90	%
Cost of deposits		$	2,494,085			$	14,411				2.29	%		$	2,044,228			$	13,776				2.67	%

⁽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 $281 thousand and $444 thousand for the three months ended September 30, 2026 and September 30, 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⁾ Includes special FHLB dividends totaling $100 thousand for the three months ended September 30, 2026.

⁽⁴⁾ Including average allowance for credit losses on loans of $21.5 million and $20.1 million, respectively.

⁽⁵⁾ Net interest margin is net interest income divided by total interest-earning assets.

⁽⁶⁾ Annualized for the periods presented.

43

Table of Contents

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.

The securities repositioning and repayment of short-term borrowings completed in 2025 continued to benefit earnings during 2026 through a higher-yielding investment portfolio and lower funding costs. Net interest income on a taxable equivalent basis for the three months ended September 30, 2026, was $28.7 million, an increase of $6.0 million, or 27%, compared to $22.7 million for the three months ended September 30, 2025. The increase in net interest income was primarily driven by higher average loan balances, higher yields on securities, lower deposit costs and lower average short-term borrowings.

Average interest-earning assets for the three months ended September 30, 2026 increased $491.6 million compared to the same period in 2025, which included increases of $304.1 million in average total loans and $106.1 million in average balances in interest-earning deposits and an increase of $81.4 million in average debt securities. Average interest-bearing liabilities increased $332.0 million for the three months ended September 30, 2026, compared to the same period in 2025, primarily due to a $275.4 million increase in average money market and savings, primarily driven by a temporary customer deposit of approximately $270.0 million, a $62.5 million increase in average interest-bearing demand deposits, a $30.0 million increase in average non-reciprocal brokered deposits and an increase of $4.5 million in subordinated debentures, partially offset by a decrease of $33.5 million in average short-term borrowings and $6.9 million in average time deposits. Average non-interest-bearing deposits for the three months ended September 30, 2026, increased to $571.7 million from $482.8 million for the same period in 2025.

Net interest margin for the three months ended September 30, 2026, was 4.07% compared to 3.90% for the same period in 2025. The increase was primarily driven by higher yields on securities, lower cost of deposits and lower rates and balances on short-term borrowings.

The yield on total average loans of 6.66% for the three months ended September 30, 2026, declined 32 basis points compared to the same period in 2025, primarily driven by reductions in the Prime rate. The yield on securities increased to 4.77% during the three months ended September 30, 2026, compared to 2.55% for the same period in 2025 due to the repositioning of our securities portfolio during 2025. The yield on interest-earning assets decreased to 6.18% for the three months ended September 30, 2026, compared to 6.42% for the same period in 2025, primarily due to the decrease in loan yields and higher average cash balances, partially offset by higher yield on debt securities.

The average cost of total deposits decreased to 2.29% for the three months ended September 30, 2026, from 2.67% for the same period in 2025, and the cost of interest-bearing liabilities, including interest-bearing deposits, short-term borrowings and subordinated debentures, decreased to 3.03% for the three months ended September 30, 2026, compared to 3.58% for the same period in 2025, primarily driven by the reduction in the Federal Funds rate.

The average rate paid for short-term borrowings for the three months ended September 30, 2026, was 0% compared to 4.56% for the same period in 2025. Our short-term borrowings typically consist of overnight borrowings.

​

​

Nine Months Ended

​

​

​

September 30, 2026

​

​

September 30, 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)

​

$

2,191,770

​

​

$

109,339

​

​

​

6.67

%

​

$

1,890,413

​

​

$

98,732

​

​

​

6.98

%

Interest-earning deposits

​

​

156,199

​

​

​

4,376

​

​

​

3.75

%

​

​

109,743

​

​

​

3,532

​

​

​

4.30

%

Debt securities

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Taxable debt securities

​

​

230,544

​

​

​

8,084

​

​

​

4.69

%

​

​

254,061

​

​

​

4,517

​

​

​

2.38

%

Non-taxable debt securities (2)

​

​

2,636

​

​

​

116

​

​

​

5.88

%

​

​

2,589

​

​

​

116

​

​

​

5.99

%

Total debt securities

​

​

233,180

​

​

​

8,200

​

​

​

4.70

%

​

​

256,650

​

​

​

4,633

​

​

​

2.41

%

FHLB stock (3)

​

​

8,409

​

​

​

646

​

​

​

10.27

%

​

​

8,409

​

​

​

550

​

​

​

8.74

%

Total interest-earning assets

​

​

2,589,558

​

​

​

122,561

​

​

​

6.33

%

​

​

2,265,215

​

​

​

107,447

​

​

​

6.34

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Non-interest-earning assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and due from financial institutions

​

​

13,866

​

​

​

​

​

​

​

​

​

​

​

9,975

​

​

​

​

​

​

​

​

​

All other assets (4)

​

​

36,541

​

​

​

​

​

​

​

​

​

​

​

48,175

​

​

​

​

​

​

​

​

​

TOTAL ASSETS

​

$

2,639,965

​

​

​

​

​

​

​

​

​

​

$

2,323,365

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LIABILITIES AND SHAREHOLDERS' EQUITY

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest-bearing liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Deposits

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest-bearing demand deposits

​

$

1,086,798

​

​

$

25,878

​

​

​

3.18

%

​

$

1,023,572

​

​

$

27,974

​

​

​

3.65

%

Money market and savings

​

​

579,249

​

​

​

11,274

​

​

​

2.60

%

​

​

405,844

​

​

​

9,301

​

​

​

3.06

%

Time deposits

​

​

33,397

​

​

​

791

​

​

​

3.17

%

​

​

50,466

​

​

​

1,323

​

​

​

3.51

%

Non-reciprocal brokered deposits

​

​

34,005

​

​

​

1,007

​

​

​

3.96

%

​

​

49,978

​

​

​

1,674

​

​

​

4.48

%

Total interest-bearing deposits

​

​

1,733,449

​

​

​

38,950

​

​

​

3.00

%

​

​

1,529,860

​

​

​

40,272

​

​

​

3.52

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Short-term borrowings

​

​

15,308

​

​

​

437

​

​

​

3.82

%

​

​

103,495

​

​

​

3,538

​

​

​

4.57

%

Subordinated debentures, net

​

​

23,517

​

​

​

1,296

​

​

​

7.37

%

​

​

22,000

​

​

​

1,321

​

​

​

8.03

%

Total interest-bearing liabilities

​

​

1,772,274

​

​

​

40,683

​

​

​

3.07

%

​

​

1,655,355

​

​

​

45,131

​

​

​

3.65

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Non-interest-bearing liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Demand deposits

​

​

552,945

​

​

​

​

​

​

​

​

​

​

​

438,199

​

​

​

​

​

​

​

​

​

Accrued expenses and other liabilities

​

​

20,430

​

​

​

​

​

​

​

​

​

​

​

19,846

​

​

​

​

​

​

​

​

​

Shareholders' equity

​

​

294,316

​

​

​

​

​

​

​

​

​

​

​

209,965

​

​

​

​

​

​

​

​

​

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

​

$

2,639,965

​

​

​

​

​

​

​

​

​

​

$

2,323,365

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net interest spread

​

​

​

​

​

​

​

​

​

​

3.26

%

​

​

​

​

​

​

​

​

​

​

2.70

%

Net interest income and margin (5)

​

​

​

​

​

$

81,878

​

​

​

4.23

%

​

​

​

​

​

$

62,316

​

​

​

3.68

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Non-taxable equivalent net interest margin

​

​

​

​

​

​

​

​

​

​

4.23

%

​

​

​

​

​

​

​

​

​

​

3.68

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cost of deposits

​

$

2,286,394

​

​

$

38,950

​

​

​

2.28

%

​

$

1,968,059

​

​

$

40,272

​

​

​

2.74

%

⁽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 $793 thousand and $1.4 million for the nine months ended September 30, 2026 and September 30, 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⁾ Includes a special FHLB dividend totaling $341 thousand for the nine months ended  September 30, 2026.

⁽⁴⁾ Including average allowance for credit losses on loans of $21.3 million and $19.3 million, respectively.

⁽⁵⁾ Net interest margin is net interest income divided by total interest-earning assets.

⁽⁶⁾ Annualized for the periods presented.

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Table of Contents

Net interest income on a taxable equivalent basis for the nine months ended September 30, 2026, was $81.9 million, an increase of $19.6 million, or 31%, compared to $62.3 million for the nine months ended September 30, 2025. The increase in net interest income was primarily due to higher average loan balances, higher yields on securities and lower average short-term borrowings.

Average interest-earning assets for the nine months ended September 30, 2026, increased $324.3 million compared to the same period in 2025, which included increases of $301.4 million in average total loans and $46.5 million in average balances in interest-earning deposits, partially offset by a $23.5 million decrease in average debt securities. Average interest-bearing liabilities increased $116.9 million for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to a $173.4 million increase in average money market and savings, a $63.2 million increase in average interest-bearing demand deposits and an increase of $1.5 million in subordinated debt, partially offset by decreases of $88.2 million in average short-term borrowings, $17.1 million in average time deposits and $16.0 million in average non-reciprocal brokered deposits. Average non-interest-bearing deposits for the nine months ended September 30, 2026, increased to $552.9 million from $438.2 million for the same period in 2025.

Net interest margin for the nine months ended September 30, 2026, was 4.23% compared to 3.68% for the same period in 2025. The increase was primarily driven by higher yields on securities, 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 special FHLB dividends totaling $341 thousand during the nine months ended September 30, 2026. Also positively impacting net interest margin during the first nine months 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 6.67% for the nine months ended September 30, 2026, declined 31 basis points compared to the same period in 2025, primarily driven by reductions in the Prime rate. The yield on securities increased to 4.70% during the nine months ended September 30, 2026, compared to 2.41% for the same period in 2025 due to the repositioning of our securities portfolio during 2025. The yield on interest-earning assets decreased to 6.33% for the nine months ended September 30, 2026, compared to 6.34% for the same period in 2025.

The average cost of total deposits decreased to 2.28% for the nine months ended September 30, 2026, from 2.74% for the same period in 2025, and total interest-bearing liabilities cost, including all interest-bearing deposits, short-term borrowings and subordinated debentures, decreased to 3.07% for the nine months ended September 30, 2026, compared to 3.65% for the same period in 2025.

The average rate paid for short-term borrowings for the nine months ended September 30, 2026, was 3.82% compared to 4.57% for the same period in 2025. There were no short-term borrowings outstanding during the third quarter of 2026. Our short-term borrowings typically consist of overnight borrowings.

The following table shows the effect of the interest differential of volume and rate changes for the three and nine months ended September 30, 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												For the Nine Months Ended
		September 30, 2026												September 30, 2026
		2026 vs. 2025												2026 vs. 2025
		Increase (Decrease)												Increase (Decrease)
		Due to Change in:												Due to Change in:
		Average				Average				Net				Average				Average				Net
(In thousands)		Volume				Rate				Change				Volume				Rate				Change
Interest income:
Loans, net of deferred fees		$	5,106			$	(1,560	)		$	3,546			$	15,034			$	(4,427	)		$	10,607
Interest-earning deposits			1,002				(239	)			763				1,301				(457	)			844
Debt securities			979				1,014				1,993				(825	)			4,392				3,567
FHLB stock			-				16				16				-				96				96
Interest expense:
Deposits
Interest-bearing demand deposits			508				(1,220	)			(712	)			1,505				(3,601	)			(2,096	)
Money market and savings			1,733				(611	)			1,122				3,375				(1,402	)			1,973
Time deposits			(55	)			(10	)			(65	)			(404	)			(128	)			(532	)
Non-reciprocal brokered deposits			301				(11	)			290				(473	)			(194	)			(667	)
Short-term borrowings			(385	)			-				(385	)			(2,517	)			(584	)			(3,101	)
Subordinated debentures			83				(39	)			44				84				(109	)			(25	)
Net interest income		$	4,902			$	1,122			$	6,024			$	13,940			$	5,622			$	19,562

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Table of Contents

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 $1.2 million for the three months ended September 30, 2026, compared to $1.4 million for the three months ended September 30, 2025. For the nine months ended September 30, 2026, provision for credit losses was $5.4 million, an increase of $3.1 million compared to the nine months ended September 30, 2025. The provision was lower in the third quarter of 2026 compared to the same period of 2025 due to the addition of a $1.5 million non-performing commercial and industrial loan in the third quarter of 2025. The provision was higher for the first nine months of 2026 compared to the nine months ended September 30, 2025, primarily due to higher average loan balances, $3.2 million in charge-offs of two commercial and industrial loans and a $1.9 million partial charge-off of one non-performing construction loan. The allowance for credit losses, including loans and unfunded commitments, as a percentage of outstanding loans was 1.11% and 1.19% as of September 30, 2026 and 2025, respectively. Criticized and classified loans as of September 30, 2026 were $68.2 million, an increase of $31.1 million, or 84%, compared to December 31, 2025, primarily driven by one well-collateralized non-owner-occupied relationship totaling $28.8 million. 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 and nine months ended September 30, 2026 and 2025.

		Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands)		2026				2025				2026				2025
Provision for credit losses
Provision for credit losses on loans		$	1,299			$	1,364			$	5,193			$	2,255
Provision for unfunded commitments			(148	)			(9	)			192				25
Total provision for credit losses		$	1,151			$	1,355			$	5,385			$	2,280

Non-interest Income

Non-interest income increased $62.5 million and $64.4 million, respectively, for the three and nine months ended September 30, 2026, compared to the same periods of 2025. The increase was primarily driven by the $62.4 million loss on the sale of securities in the third quarter of 2025 resulting from the repositioning of the available-for-sale securities portfolio. Excluding the prior year loss on the sale of securities and the income related to BOLI death benefits received during the nine months ended September 30, 2026, adjusted non-interest income⁽³⁾ was $1.7 million for the three months ended September 30, 2026, compared to $1.5 million for the same period in 2025 and $4.9 million for the nine months ended September 30, 2026, compared to $4.2 million for the same period in 2025. The increase for the quarter ended September 30, 2026, was primarily driven by higher warrant and success fee income and higher income from service charges and fees, partially offset by lower other investment income. The increase for the nine months ended September 30, 2026, was primarily driven by higher foreign exchange income, higher income from service charges and fees and higher other income. Partially offsetting the increase was a decrease in other investment income.

The following table reflects the major components of the Company’s non-interest income for the three and nine months ended September 30, 2026 and 2025:

		Three Months Ended September 30,								Increase/(Decrease)								Nine Months Ended September 30,								Increase/(Decrease)
(In thousands)			2026				2025				Amount				Percent(2)				2026				2025				Amount				Percent(2)
Service charges and fees		$	887			$	779			$	108				14	%		$	2,559			$	2,381			$	178				7	%
Foreign exchange income			324				267				57				21	%			1,027				683				344				50	%
Bank-owned life insurance income (1)			97				96				1				1	%			1,700				279				1,421				NM
Credit card income			106				57				49				86	%			320				254				66				26	%
Warrant and success fee income			112				-				112				NM				179				273				(94	)			(34	)%
Other investment income			55				315				(260	)			(83	)%			112				339				(227	)			(67	)%
Net loss on sale of debt securities			-				(62,391	)			62,391				(100	)%			-				(62,391	)			62,391				(100	)%
Other income			115				25				90				NM				316				39				277				NM
Total non-interest income		$	1,696			$	(60,852	)		$	62,548				NM			$	6,213			$	(58,143	)		$	64,356				NM

⁽¹⁾ Includes $1.3 million in income related to BOLI death benefits for the nine months ended September 30, 2026.

⁽²⁾ NM - Greater than 100% are considered not meaningful.

Service charges and bank fees for the three and nine months ended September 30, 2026, increased $108 thousand, or 14%, and $178 thousand, or 7%, respectively, from the same periods in 2025, primarily due to an increase in the number of client relationships.

⁽³⁾ A non-GAAP performance measure. We provide detailed reconciliations in the “Non-GAAP Performance and Financial Measures Reconciliation” table.

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Table of Contents

During the three and nine months ended September 30, 2026, foreign exchange income increased $57 thousand, or 21%, and $344 thousand, or 50%, respectively, compared to the same periods 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.

Income from bank-owned life insurance was flat for the three months ended September 30, 2026, compared to the same period in the prior year and increased $1.4 million for the nine months ended September 30, 2026, compared to the same period in 2025 primarily driven by income of approximately $1.3 million on death benefit proceeds received during the second quarter of 2026.

Credit card income for the three and nine months ended September 30, 2026, increased $49 thousand, or 86%, and $66 thousand, or 26%, respectively, primarily due to an increase in credit card interchange fee income. 

Warrant and success fee income increased $112 thousand and decreased $94 thousand, or 34%, for the three and nine months ended September 30, 2026, respectively. Refer to Note 13 — Derivative Financial Instruments for additional discussion of warrants.

Other investment income for the three and nine months ended September 30, 2026, decreased $260 thousand, or 83%, and $227 thousand, or 67%, respectively, compared to the same periods in 2025 primarily due to fair value marks on fund investments.

The net loss on the sale of securities for the nine months ended September 30, 2025, was $62.4 million. As part of the repositioning of our available-for sale securities portfolio during the latter part of 2025, we received $274.7 million in proceeds from securities sold at a pre-tax loss of $62.4 million and purchased $163.2 million in available-for-sale securities with an average purchase yield of 4.54% and a duration of 2.8 years.

Other income increased $90 thousand and $277 thousand for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025 primarily driven by an increase in letter of credit fee income.

Non-interest Expense

For the three months ended September 30, 2026, non-interest expense increased by $1.6 million, or 12%, to $15.1 million compared to the same period in 2025. The increase was primarily driven by higher salaries and employee benefits expense, increased legal and professional fees, including higher recruiting fees and credit-related legal fees.

During the nine months ended September 30, 2026, non-interest expense increased by $6.7 million, or 17%, to $45.7 million compared to the same period in 2025. The increase was primarily driven by a charge of $2.6 million for the settlement of outstanding litigation, higher salaries and employee benefits expense, increased legal and professional fees, higher data processing expense and higher directors' fees and expenses.

The following table reflects the major components of the Company’s non-interest expense for the three and nine months ended September 30, 2026 and 2025:

		Three Months Ended September 30,								Increase/(Decrease)								Nine Months Ended September 30,								Increase/(Decrease)
(In thousands)			2026				2025				Amount				Percent (1)				2026				2025				Amount				Percent (1)
Salaries and employee benefits		$	10,178			$	9,766			$	412				4	%		$	29,296			$	27,841			$	1,455				5	%
Legal and professional fees			1,316				591				725				NM				3,401				1,817				1,584				87	%
Data processing			901				792				109				14	%			2,487				2,166				321				15	%
Occupancy and equipment			830				723				107				15	%			2,397				2,478				(81	)			(3	)%
Regulatory assessments			486				445				41				9	%			1,567				1,409				158				11	%
Directors' fees and expenses			302				198				104				53	%			834				529				305				58	%
Correspondent bank charges			224				176				48				27	%			627				460				167				36	%
Advertising and marketing			134				114				20				18	%			346				310				36				12	%
Travel and meals			215				196				19				10	%			495				435				60				14	%
Business software and subscriptions			272				278				(6	)			(2	)%			815				823				(8	)			(1	)%
Settlement of litigation			-				-				-				NM				2,637				-				2,637				NM
Other expense			267				200				67				34	%			777				662				115				17	%
Total non-interest expense		$	15,125			$	13,479			$	1,646				12	%		$	45,679			$	38,930			$	6,749				17	%

⁽¹⁾ NM - Greater than 100% are considered not meaningful.

47

Table of Contents

Salaries and employee benefits expense for the three months ended September 30, 2026, was $10.2 million, an increase of $412 thousand, or 4%, compared to the same period in 2025. For the nine months ended September 30, 2026, salaries and employee benefits expense was $29.3 million, an increase of $1.5 million, or 5%, compared to the same period in 2025. The increases were primarily driven by increased investment in personnel across the entire Bank, partially offset by higher capitalized loan origination costs. Full-time equivalent headcount totaled 171 as of September 30, 2026 compared to 151 as of September 30, 2025.

Legal and professional fees were $1.3 million and $3.4 million for the three and nine months ended September 30, 2026, an increase of $725 thousand and $1.6 million, or 87%, respectively, compared to the same periods in 2025. The increases were driven by higher credit-related legal fees and higher professional fees.

Data processing expense was $901 thousand and $2.5 million for the three and nine months ended September 30, 2026, an increase of $109 thousand, or 14%, and $321 thousand, or 15%, respectively, compared to the same periods in 2025. The increases were due to higher transaction volume.

Occupancy and equipment expense totaled $830 thousand for the three months ended September 30, 2026, reflecting an increase of $107 thousand, or 15%, from the same period in 2025, due to the expanded space at our headquarters. For the nine months ended September 30, 2026, occupancy and equipment expense decreased $81 thousand, or 3%, compared to the same period in 2025 due to lower rent expense at one of our loan production offices.

Regulatory assessments totaled $486 thousand and $1.6 million for the three and nine months ended September 30, 2026, an increase of $41 thousand, or 9%, and $158 thousand, or 11%, respectively, compared to the same periods in 2025 resulting from asset growth.

Directors' fees and expenses totaled $302 thousand and $834 thousand for the three and nine months ended September 30, 2026, an increase of $104 thousand, or 53%, and $305 thousand, or 58%, respectively, compared to the same periods in 2025 resulting from the increased number of Directors compared to the same periods in 2025. 

Correspondent bank charges totaled $224 thousand and $627 thousand for the three and nine months ended September 30, 2026, an increase of $48 thousand, or 27%, and $167 thousand, or 36%, respectively, compared to the same periods in 2025 due to higher transaction volume.

Settlement of litigation expense totaled $2.6 million for the nine months ended September 30, 2026. Outstanding litigation was settled during the second quarter of 2026, and the Company recognized litigation charges of $2.6 million in connection with the settlement.

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.

Provision for income taxes was an expense of $3.9 million for the three months ended September 30, 2026, compared to a benefit for income taxes of $15.3 million for the three months ended September 30, 2025. The effective tax rate for the three months ended September 30, 2026 and 2025, was 27.7% and 28.9%, respectively. The change compared to the third quarter of 2025 was primarily due to discrete tax benefits related to the vesting of equity awards. For the nine months ended September 30, 2026 and 2025, provision for income taxes was an expense of $10.2 million and a benefit for income taxes of $10.6 million, respectively. The effective tax rate for the nine months ended September 30, 2026 and 2025, was 27.4% and 28.5%, respectively. The change compared to the same period of 2025 was primarily due to the receipt of tax-exempt income on BOLI death benefit proceeds and from state tax impacts from changes in California law requiring financial institutions to apportion business income using a single sales factor for tax years beginning on or after January 1, 2025. As a result, the second quarter of 2025 included $153 thousand in additional tax expense related to the write-down of deferred tax assets. In addition, the nine months ended September 30, 2026, included approximately $881 thousand in discrete tax benefits related to the vesting of equity awards.

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Table of Contents

Financial Condition

Total assets of the Company were $2.97 billion as of September 30, 2026 and $2.57 billion as of December 31, 2025. Cash and cash equivalents increased $199.5 million, loans, net of deferred fees increased $134.1 million, and debt securities increased $61.6 million compared to December 31, 2025. The increase in cash and cash equivalents was primarily due to a temporary increase of approximately $270.0 million in deposit balances during the third quarter of 2026.

Loans

As of September 30, 2026, loans, net of deferred fees, totaled $2.28 billion compared to $2.15 billion as of December 31, 2025. The increase from December 31, 2025, was primarily due to increases in commercial real estate loans and commercial and industrial loans. The loan portfolio was comprised of approximately 50% and 49% of commercial and industrial loans as of September 30, 2026 and December 31, 2025, respectively. Commercial real estate loans comprised 41% of our loans as of September 30, 2026 compared to 40% as of 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:

		September 30, 2026								December 31, 2025
(In thousands)		Amount				% of Loans				Amount				% of Loans
Commercial and industrial		$	1,132,350				50	%		$	1,049,530				49	%
Construction			161,623				7	%			196,243				9	%
Residential real estate			37,933				2	%			45,669				2	%
Commercial real estate			950,196				41	%			854,342				40	%
Consumer			426				0	%			2,655				0	%
Total outstanding loans, net of deferred fees			2,282,528								2,148,439
Allowance for credit losses on loans			(22,789	)							(22,261	)
Total loans, net of allowance for credit losses on loans		$	2,259,739							$	2,126,178

The following table shows the maturity distribution for total loans outstanding as of September 30, 2026:

		Contractual Loan Maturities as of September 30, 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		$	287,744			$	674,173			$	170,433			$	-			$	1,132,350
Construction			124,442				37,181				-				-				161,623
Residential real estate			5,811				19,259				12,863				-				37,933
Commercial real estate			76,470				250,121				623,605				-				950,196
Consumer			227				195				-				4				426
Total loans, net of deferred fees		$	494,694			$	980,929			$	806,901			$	4			$	2,282,528

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Table of Contents

The principal balances of loans are indicated by both fixed and variable rate categories as of September 30, 2026 in the table below:

		September 30, 2026
		Fixed				Adjustable				Floating
(In thousands)		Interest Rates				Interest Rates				Interest Rates				Total
Commercial and industrial		$	121,638			$	1,052			$	1,009,660			$	1,132,350
Construction			17,782				185				143,656				161,623
Residential real estate			2,130				7,290				28,513				37,933
Commercial real estate			340,160				591,217				18,819				950,196
Consumer			425				-				1				426
Total loans, net of deferred fees		$	482,135			$	599,744			$	1,200,649			$	2,282,528

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 (“ABL”) 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 September 30, 2026 and December 31, 2025:

		September 30, 2026								December 31, 2025
(In thousands)		Amount				% of Total Loans				Amount				% of Total Loans
Sponsor finance		$	314,131				14	%		$	303,303				14	%
Venture			310,820				14	%			273,887				13	%
Asset-based lending			210,847				9	%			177,736				8	%
Corporate Banking			171,446				8	%			150,896				7	%
Capital Call Lines (1)			62,689				3	%			86,008				4	%
Other			62,417				2	%			57,700				3	%
Total commercial and industrial loans, net of deferred fees		$	1,132,350				50	%		$	1,049,530				49	%

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

As of September 30, 2026 and December 31, 2025, we had $950.2 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, office, retail, industrial, warehouse or other commercial properties. As of September 30, 2026 and December 31, 2025, 19% and 20%, respectively, of our loan portfolio is comprised of commercial real estate loans classified as non-owner-occupied. All commercial real estate loans were collateralized by properties in California as of September 30, 2026 and December 31, 2025.

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

		September 30, 2026								December 31, 2025
(In thousands)		Amount				% of Total Loans				Amount				% of Total Loans
Office		$	156,638				7	%		$	147,708				7	%
Retail			102,171				4	%			86,309				4	%
Hotel/motel			77,174				3	%			78,566				4	%
Industrial			60,383				3	%			68,408				3	%
Warehouse			16,562				1	%			16,611				1	%
Other			27,656				1	%			26,505				1	%
Total non-owner-occupied		$	440,584				19	%		$	424,107				20	%
Multi-family			298,632				13	%			265,105				12	%
Owner-occupied			210,980				9	%			165,130				8	%
Total commercial real estate, net of deferred fees		$	950,196				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 as of September 30, 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:

		September 30,				December 31,
(In thousands)		2026				2025
Non-accrual loans
Commercial and industrial		$	-			$	5,088
Construction			15,937				19,414
Residential real estate			-				-
Commercial real estate			-				-
Consumer			-				-
Loans over 90 days past due and still accruing			-				-
Total non-performing loans			15,937				24,502
Other real estate owned			-				-
Total non-performing assets		$	15,937			$	24,502
Non-performing assets to total assets			0.54	%			0.95	%
Non-performing loans to total loans			0.70	%			1.14	%

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Non-performing loans to total loans were 0.70% as of September 30, 2026, a decrease of 44 basis points from 1.14% as of December 31, 2025. The decrease during the nine months ended September 30, 2026, was primarily due to the payoff of a $3.1 million well-collateralized construction loan that was non-performing, the charge-off of two commercial and industrial loans totaling $3.2 million and the partial charge-off of one construction loan totaling $1.9 million.

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 and nine months ended September 30, 2026 and 2025. The increase in the ACL compared to December 31, 2025, was primarily due to loan growth.

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. During 2026, Management transitioned from FOMC economic forecasts based on publicly available economic data to forecasts sourced from Moody's Analytics. The change did not materially alter the Company's ACL methodology but provides a consistent source of economic assumptions used in estimated expected credit losses. 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. Additional information regarding our ACL policy is included in the section titled “Critical Accounting Policies and Estimates”.

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.

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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, loan-to-value (“LTV”) 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.

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.

During the nine months ended September 30, 2026, loans risk rated as special mention increased $27.5 million. The increase is primarily due to a non-owner-occupied real estate relationship totaling $28.8 million with very low LTVs. Accruing substandard loans increased $12.1 million, primarily within the commercial and industrial loan portfolio. Partially offsetting these increases was an $8.6 million decrease in nonaccrual loans, reflecting loan payoffs, charge-offs and other changes in the portfolio. As a result, total loans rated other than Pass increased from $37.2 million at December 31, 2025 to $68.2 million at September 30, 2026. Management continues to monitor these relationships and evaluate their effect on expected credit losses.

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

		Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands)		2026				2025				2026				2025
Allowance for credit losses on loans, beginning of period		$	21,501			$	19,624			$	22,261			$	18,679
Provision for credit losses on loans			1,299				1,364				5,193				2,255
Charge-offs
Commercial and industrial			-				-				(3,197	)			-
Construction			(11	)			-				(1,886	)			-
Residential real estate			-				-				-				-
Commercial real estate			-				-				-				-
Consumer			-				-				-				-
Total charge-offs			(11	)			-				(5,083	)			-
Recoveries
Commercial and industrial			-				37				418				91
Construction			-				-				-				-
Residential real estate			-				-				-				-
Commercial real estate			-				-				-				-
Consumer			-				-				-				-
Total recoveries			-				37				418				91
Net charge-offs			(11	)			37				(4,665	)			91
Allowance for credit losses on loans, end of period		$	22,789			$	21,025			$	22,789			$	21,025
Average loans, net of deferred fees			2,228,603				1,924,537				2,191,770				1,890,413
Loans at the end of period, net of deferred fees			2,282,528				1,958,585				2,282,528				1,958,585
Net charge-offs to average loans (1)			0.00	%			(0.01	)%			0.28	%			(0.01	)%
Allowance for credit losses on loans to total loans			1.00	%			1.07	%			1.00	%			1.07	%
Allowance for credit losses on loans to non-performing loans			142.99	%			761.50	%			142.99	%			761.50	%
Non-performing loans to total loans			0.70	%			0.14	%			0.70	%			0.14	%

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

Provision for credit losses on loans was $1.3 million and $5.2 million for the three and nine months ended September 30, 2026, respectively, compared to $1.4 million and $2.3 million for the three and nine months ended September 30, 2025, respectively, primarily due to higher loan balances, the charge-off of two commercial and industrial loans totaling $3.2 million and a $1.9 million partial charge-off of one non-performing construction loan. The following table presents the allocation of the allowance for credit losses as of the dates indicated:

		September 30, 2026								December 31, 2025
(In thousands)		Amount				% of Total Loans				Amount				% of Total Loans
Commercial and industrial		$	15,180				0.67	%		$	15,612				0.73	%
Construction			1,195				0.05	%			1,972				0.09	%
Residential real estate			495				0.02	%			494				0.02	%
Commercial real estate			5,916				0.26	%			4,150				0.19	%
Consumer			3				0.00	%			33				0.01	%
Total		$	22,789				1.00	%		$	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 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 $279.7 million as of September 30, 2026, compared to $218.2 million as of 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. As of September 30, 2026, debt securities available-for-sale had a net unrealized loss of $13.1 million compared to a net unrealized loss of $328 thousand as of 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 as of September 30, 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 the 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 September 30, 2026 and December 31, 2025. As of the dates indicated, none of our debt securities were classified as held-to-maturity.

		September 30, 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		$	363			$	339			$	478			$	458
Commercial mortgage-backed securities			25,805				24,476				5,454				5,430
Residential mortgage-backed securities			261,928				250,599				207,847				207,552
U.S. states and political subdivisions			4,713				4,298				4,709				4,720
Total available-for-sale securities		$	292,809			$	279,712			$	218,488			$	218,160

As of September 30, 2026, the weighted average life of the Bank’s securities was 5.6 years, and the effective duration was 4.2 years, compared to a weighted average life of 4.8 years and effective duration of 3.5 years as of December 31, 2025.

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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.

		September 30, 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		$	-				-			$	363				2.45	%		$	-				-			$	-				-			$	363				2.45	%
Commercial mortgage-backed securities			-				-				1,009				3.73				730				4.60				24,066				5.13				25,805				5.06
Residential mortgage-backed securities			-				-				-				-				9,687				5.01				252,241				4.69				261,928				4.71
U.S. states and political subdivisions			-				-				-				-				1,003				4.82				3,710				5.91				4,713				5.68
Total available-for-sale securities		$	-				-			$	1,372				3.39	%		$	11,420				4.96	%		$	280,017				4.75	%		$	292,809				4.75	%

⁽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 reciprocal deposit networks 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.

FDIC regulations provide a limited exception from brokered deposit classification for certain reciprocal deposits, subject to a general cap determined using a tiered calculation based on the Bank's total liabilities. Due to changes from the 21st Century ROAD to Housing Act, as of September 30, 2026, none of the Bank's reciprocal deposits exceeded the applicable general cap to be classified as brokered deposits. As of December 31, 2025, an additional $475.4 million of our deposits were considered brokered deposits by the FDIC due to being in excess of the general cap then in effect.

As of September 30, 2026 and December 31, 2025, approximately 21% and 26%, respectively, of our deposits were in non-interest-bearing demand deposits. The balance of our deposits as of September 30, 2026 and December 31, 2025, were held in interest-bearing checking, savings and money market accounts, time and non-reciprocal brokered deposits. Approximately 78% and 73% of total deposits were held in interest-bearing checking, money market and savings deposit accounts as of September 30, 2026 and December 31, 2025, respectively, which provide our clients with interest and liquidity. Time and non-reciprocal brokered deposits comprised the remaining 1% of our deposits as of both September 30, 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 Interest 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.

		September 30, 2026
(In thousands)		Balance				% of Total
Non-interest-bearing demand		$	535,128				21	%
Interest-bearing checking			1,145,612				44	%
Money market and savings (1)			883,797				34	%
Time			37,509				1	%
Non-reciprocal brokered (2)			10,000				0	%
Total deposits		$	2,612,046				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 (2)			-				0	%
Total deposits		$	2,186,073				100	%

⁽¹⁾ Includes approximately $270.0 million in temporary deposits in the third quarter of 2026.

⁽²⁾ FDIC regulations provide a limited exception from brokered deposit classification for certain reciprocal deposits, subject to a general cap determined using a tiered calculation based on the Bank's total liabilities. Due to changes from the 21st Century ROAD to Housing Act, as of September 30, 2026, none of the Bank's reciprocal deposits exceeded the applicable general cap to be classified as brokered deposits. As of December 31, 2025, an additional $475.4 million of our deposits were considered brokered deposits by the FDIC due to being in excess of the general cap then in effect.

As of September 30, 2026, the Company had two deposit relationships, one a technology company in our Specialty Finance division and the other a software company in our Venture Lending division, that exceeded 5% of total deposits. Totaling $439.2 million, together they represented 17% of total deposits as of September 30, 2026. As of 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 $228.7 million, together they represented 10% of total deposits as of December 31, 2025. 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 $1.29 billion and $915.5 million as of September 30, 2026 and December 31, 2025, respectively, representing approximately 49% and 42% of our total deposit portfolio as of September 30, 2026 and December 31, 2025, respectively.

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The following table sets forth the scheduled maturities of time deposits as of September 30, 2026.

		September 30, 2026
						Greater Than
		Less than				(or Equal To)
(In thousands)		$250,000				$250,000				Total
Remaining maturity:
Three months or less		$	3,645			$	24,238			$	27,883
Over three through six months			385				3,733				4,118
Over six through twelve months			154				2,880				3,034
Over twelve months			15				2,459				2,474
		$	4,199			$	33,310			$	37,509

Borrowings

The Bank has several supplementary funding sources, including a secured line of credit with the FHLB and various available unsecured lines of credit with correspondent banks. The Bank's wholesale funding was 0% and 2% of total assets as of September 30, 2026 and December 31, 2025, respectively.

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

(In thousands)		September 30, 2026				December 31, 2025
Federal funds lines of credit		$	-			$	60,000
Federal Home Loan Bank advances			-				-
Subordinated notes, net			29,130				22,000
Total		$	29,130			$	82,000

Other Short-Term Borrowings

The Company had unsecured Federal Funds lines of credit from correspondent banks totaling $229.0 million as of September 30, 2026 and $206.0 million as of December 31, 2025, with outstanding balances of $0 and $60.0 million as of September 30, 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 $955.2 million and $853.9 million as of September 30, 2026 and December 31, 2025, respectively. There were no borrowings outstanding under this arrangement as of September 30, 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 September 30, 2026, the secured line of credit had no outstanding balance and $564.1 million in remaining borrowing capacity. As of December 31, 2025, the secured line of credit had no outstanding balance and $530.0 million in remaining borrowing capacity.

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Long-Term Debt

On August 26, 2026, the Company closed on a $30.0 million private placement of new 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 September 1, 2036 and bear interest at the rate of 7.0% 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 291 basis points. The notes may be redeemed by the Company on September 1, 2031 (and any interest payment date thereafter) or earlier upon certain limited specified events. 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 new subordinated notes are carried net of debt issuance costs of $885 thousand less accumulated amortization of $15 thousand as of September 30, 2026.

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 had a maturity date of December 30, 2029, and bore 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 were redeemable subject to certain conditions. The indebtedness evidenced by the subordinated notes, including principal and interest, was unsecured and subordinate and junior to general and secured creditors and depositors. As of December 31, 2024, the debt issuance costs associated with these notes were fully amortized. Following the issuance of $30.0 million in new subordinated notes on August 26, 2026, these old subordinated notes were redeemed and repurchased by the Company.

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 September 30, 2026 and December 31, 2025, our reported liquidity ratios were 23.4% and 15.9%, respectively.

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 September 30, 2026, we had remaining borrowing capacity totaling $564.1 million and $955.2 million with the FHLB and Federal Reserve, respectively. The Bank maintains unsecured lines of credit with correspondent banks that provide combined availability of $229.0 million and $206.0 million as of September 30, 2026 and December 31, 2025. There were no outstanding balances on these unsecured lines of credit as of September 30, 2026. Outstanding balances on these unsecured lines of credit as of December 31, 2025, totaled $60.0 million.

In addition to these sources of liquidity, we also utilize One-way deposits. One-way deposits involve receiving deposits from other banks’ clients through the network. This mechanism can provide an additional source of liquidity by allowing us to increase our deposits without reciprocating. There were no outstanding One-way deposits as of September 30, 2026 or December 31, 2025.

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 September 30, 2026 and December 31, 2025, our AFS securities portfolio had a fair value of $279.7 million and $218.2 million, respectively, and an amortized cost of $292.8 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 September 30, 2026, non-reciprocal brokered deposits totaled $10.0 million, representing less than 1% of total deposits, compared to $0 as of December 31, 2025.

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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, redeeming outstanding 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. The Company did not repurchase any shares of its common stock during the three months ended September 30, 2026 under this repurchase program. During the nine months ended September 30, 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 September 30, 2026, was $299.5 million, an increase of $18.5 million, or 7%, compared to $281.0 million as of December 31, 2025. The increase included an increase in retained earnings of $26.9 million, partially offset by an increase in unrealized losses on AFS securities in accumulated other comprehensive loss of $9.2 million. Book value per share as of September 30, 2026 was $27.24, an increase of $1.58 from December 31, 2025. The increase was partially offset by a $9.2 million increase in accumulated other comprehensive loss, net of tax, primarily due to the impact of higher interest rates on the fair value of available-for-sale securities. Accumulated other comprehensive loss reduced book value per share by $0.85 at September 30, 2026, compared to $0.01 at December 31, 2025.

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 September 30, 2026 and December 31, 2025, respectively, 14.0% 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.

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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
		September 30, 2026								December 31, 2025
(In thousands)		Amount				Ratio				Amount				Ratio
Total risk-based capital ratio		$	362,556				13.48	%		$	313,481				12.57	%
Tier 1 risk-based capital ratio			308,094				11.45	%			275,669				11.05	%
Common equity tier 1 capital ratio			308,094				11.45	%			275,669				11.05	%
Tier 1 leverage ratio			308,094				10.82	%			275,669				11.23	%

		Bank
		September 30, 2026								December 31, 2025
(In thousands)		Amount				Ratio				Amount				Ratio
Total risk-based capital ratio		$	345,741				12.89	%		$	309,703				12.45	%
Tier 1 risk-based capital ratio			320,409				11.94	%			285,091				11.46	%
Common equity tier 1 capital ratio			320,409				11.94	%			285,091				11.46	%
Tier 1 leverage ratio			320,409				11.28	%			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)		September 30, 2026				December 31, 2025
Commitments to extend credit		$	797,819			$	688,115
Standby letters of credit		$	20,710				19,168

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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.

Contractual Obligations

The following table presents, as of September 30, 2026, our significant contractual obligations to third parties on debt and lease agreements and service obligations:

		September 30, 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)		$	35,035			$	285			$	2,189			$	-			$	37,509
Subordinated debentures (1)			-				-				-				30,000				30,000
Operating leases, net			2,056				2,581				6,877				2,090				13,604
Significant contracts (2)			1,568				3,626				2,157				-				7,351
Total		$	38,659			$	6,492			$	11,223			$	32,090			$	88,464

⁽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.

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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.

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.

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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 as of September 30, 2026 and December 31, 2025, was 87.4% and 98.3%, respectively. As of September 30, 2026 and December 31, 2025, the Company had cash of $354.1 million and $154.6 million, respectively, and total other liquidity sources, including available borrowing capacity and unpledged debt securities of approximately $2.0 billion and $1.80 billion, respectively. Total available sources of liquidity as a percentage of uninsured and uncollateralized deposits were approximately 185% and 213%, respectively.

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 have adopted the NIST Cybersecurity Framework (“CSF”) 2.0 and enhanced 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.

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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.

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.

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As of September 30, 2026, 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)		September 30, 2026				December 31, 2025
+400			15.92	%			16.65	%
+300			11.90				12.37
+200			7.83				8.01
+100			3.82				3.76
-100			(2.26	)			(1.41	)
-200			(2.21	)			(1.35	)
-300			(1.67	)			(0.19	)
-400			(1.45	)			0.86

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. As of September 30, 2026, approximately 6% 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, 56% of our floating rate loans will be at their floor rate, and if rates decrease 400 basis points, 85% 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 – Summary of Significant Accounting Policies 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.

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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 Moody's Analytics Unemployment Rate and the GDP 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.

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.

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● 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

● 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.

Commercial real estate

● 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.

● 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

● 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.

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Consumer

● 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 in 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(f) and 15d-15(f) 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.

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 September 30, 2026, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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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.

The Company did not repurchase any shares of its common stock under the publicly announced stock repurchase program during the three months ended September 30, 2026.

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 surrendered during the quarter ended September 30, 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
July 1, 2026 to July 31, 2026			-			$	-				-				257,433
August 1, 2026 to August 31, 2026			8,109				32.61				-				257,433
September 1, 2026 to September 30, 2026			-				-				-				257,433
Total			8,109			$	32.61				-				257,433

⁽¹⁾ During the three months ended September 30, 2026, 8,109 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  September 30, 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		Articles 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/A filed by the Registrant on August 4, 2025)
10.1		Employment Confirmation Letter by and between Avidbank and Jonathan M. Dale dated June 26, 2026 (incorporated by reference to Exhibit 10.1 filed with the Form 8-K filed by the Registrant on August 3, 2026).
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 **
*		Filed herewith.
**		Furnished herewith.
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		Inline 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 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: November 12, 2026

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