Avidbank Holdings, Inc. (AVBH)

CIK: 0001443575. SIC: 6022 State Commercial Banks. Latest 10-K as of: 2026-03-18.

SIC breadcrumb: Finance, Insurance, And Real Estate > Depository Institutions > SIC 6022 State Commercial Banks

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1443575. Latest filing source: 0001437749-26-008852.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-18. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001443575.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-13. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001443575.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001437749-26-016715.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high. Filing date: 2026-05-13. Report date: 2026-03-31.

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

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

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

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

●

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

●

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

●

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

●

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;

●

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

●

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

●

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

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●

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

●

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

●

technological changes and developments;

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

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

Company Overview

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

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

Key Factors Affecting Our Business

Interest Rates

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

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

Non-interest Income

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

Non-interest Expense

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

Credit Quality

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

Competition

The industry and businesses in which we operate are highly competitive. We may see increased competition through more aggressive interest rates, u

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-03-18. Report date: 2025-12-31.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations at and for the year ended December 31, 2025 and 2024, should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this report. This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may prove to be inaccurate. Certain risks, uncertainties and other factors, including those set forth under sections entitled “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors” and elsewhere in this report, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis. We assume no obligation to update any of these forward-looking statements.

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.

Company Overview

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

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

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 estimate most susceptible to significant change in the near term relates to determining the allowance for credit losses on loans and fair value of financial instruments. See Note 1 of the Company’s notes to the audited consolidated financial statements for all our accounting policies, including these identified critical accounting estimates.

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

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

We have identified the following accounting policy and estimate that, due to the difficult, subjective or complex judgments and assumptions inherent in this policy and estimate. We believe that the judgments, estimates and assumptions used in the preparation of our financial statements are reasonable and appropriate.

Allowance for Credit Losses on Loans

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

Management utilizes relevant available information, from internal and external sources, relating to past events, current conditions, historical loss experience, and reasonable and supportable forecasts.  The allowance is calculated using a discounted cash flow methodology applied at the loan level. The Company uses the FOMC Civilian Unemployment Rate and Real GDP Seasonally Adjusted Annual Rate to obtain various forecast scenarios to determine the loan portfolio’s quantitative portion of expected credit loss. The Company has elected to forecast the first four quarters of the credit loss estimate and revert on a straight-line basis over 8 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.

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

Commercial and Industrial

•

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

•

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

•

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

•

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

•

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

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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.

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.

Results of Operations Highlights

Full-Year 2025 Compared to 2024

We reported a net loss of $19.6 million in 2025 compared to net income of $21.0 million in 2024. The following provides highlights of our financial results for 2025:

•

In August of 2025, the Company completed an initial public offering ("IPO") of its common stock, issuing an aggregate total of 3,001,500 shares of common stock at the public offering price of $23.00 per share. After deductions for underwriting fees, commissions and offering expenses, the Company's net proceeds from the IPO totaled $61.3 million.

•

We repositioned the securities portfolio and took the following actions: sold $274.7 million in available-for-sale securities for a loss of $62.4 million; purchased $205.4 million in available-for-sale securities with an average purchase yield of 4.57%; and paid off existing short-term borrowings using proceeds from the IPO and securities sales.

•

Period-end loans, net of deferred fees increased $283.5 million, or 15%, for the year ended December 31, 2025, compared to December 31, 2024.

•

Average deposits increased $241.6 million, or 13%, for the year ended December 31, 2025, compared to December 31, 2024. Period-end deposits increased $294.7 million, or 16%, from December 31, 2024.

•

Net interest margin expanded to 3.80% for the year ended December 31, 2025, compared to 3.44% for the same period in the prior year.

•

Return on average assets was (0.83)% for the year ended December 31, 2025, compared to 0.93% for the previous year. Excluding the loss on the sale of available-for-sale securities, the return on average assets-adjusted (1) was 1.06% for the year ended December 31, 2025, compared to 0.93% for the same period in the prior year.

•

The efficiency ratio was 170.65% at December 31, 2025, compared to 58.27% at December 31, 2024. Excluding the loss from the sale of available-for-sale securities, the adjusted efficiency ratio (1) improved to 56.56% for the year ended December 31, 2025.

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Consolidated Financial Highlights

December 31,

(Dollars in thousands, except share and per share data)

2025

2024

INCOME HIGHLIGHTS

Net (loss) / income

$

(19,553

)

$

21,015

Net loss on sale of debt securities, net of tax

44,442

-

Net income – adjusted (1)

$

24,889

$

21,015

PER SHARE DATA

Basic (loss) / earnings per share

$

(2.25

)

$

2.83

Diluted (loss) / earnings per share

(2.25

)

2.76

Diluted earnings per share – adjusted (1)

2.80

2.76

Book value per share

25.66

23.57

PERFORMANCE MEASURES

Return on average assets

(0.83

)%

0.93

%

Return on average assets – adjusted (1)

1.06

%

0.93

%

Return on average equity

(8.61

)%

11.98

%

Return on average equity – adjusted (1)

10.95

%

11.98

%

Net interest margin

3.80

%

3.44

%

Efficiency ratio

170.65

%

58.27

%

Efficiency ratio – adjusted (1)

56.56

%

58.27

%

Average loans to average deposits

95.71

%

100.10

%

CAPITAL

Tier 1 leverage ratio

11.23

%

10.35

%

Common equity tier 1 capital ratio

11.05

%

10.59

%

Tier 1 risk-based capital ratio

11.05

%

10.59

%

Total risk-based capital ratio

12.57

%

12.30

%

Common equity ratio

10.93

%

8.09

%

SHARES OUTSTANDING

Number of common shares outstanding

10,947,967

7,906,761

Average common shares outstanding – basic

8,702,468

7,426,096

Average common shares outstanding – diluted

8,702,468

7,604,442

Average common shares outstanding – diluted – adjusted (1)

8,880,454

7,604,442

ASSET QUALITY

Total allowance for credit losses-loans and unfunded commitments to total loans

1.15

%

1.12

%

Non-performing assets to total assets

0.95

%

0.06

%

Non-performing loans to total loans

1.14

%

0.07

%

Net charge-offs to average loans

0.07

%

0.24

%

AVERAGE BALANCES

Loans, net of deferred loan fees

$

1,924,166

$

1,797,626

Debt securities

241,480

311,662

Total assets

2,357,580

2,252,814

Deposits

2,010,357

1,795,904

Shareholders' equity

227,210

175,348

PERIOD-END BALANCES

Loans, net of deferred loan fees

$

2,148,439

$

1,864,942

Debt securities

218,160

296,556

Total assets

2,569,643

2,304,488

Deposits

2,186,073

1,891,355

Shareholders' equity

280,979

186,362

(1) 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

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

This report on Form 10-K contains certain non-GAAP ("Generally Accepted Accounting Principles") financial measures in addition to results presented in accordance with GAAP. The table below provides reconciliations between GAAP and adjusted financial measures including fully taxable equivalent net interest income. 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 the 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 efficiency ratio, and taxable equivalent net interest income are reasonable measures to understand the Company’s core operating performance and are important to many investors in the marketplace who are interested in understanding our profitability prospects from our core operations. In addition, management reviews yields on certain asset categories and the net interest margin of the Company on a fully taxable equivalent basis. The non-GAAP taxable equivalent net interest income adjustment facilitates performance comparisons between taxable and tax-free assets by increasing the tax-free income by an amount equivalent to the Federal income taxes that would have been paid if this income were taxable at the Company's 21% Federal statutory rate.

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Table of Contents

December 31,

(Dollars in thousands, except share and per share data)

2025

2024

Non-GAAP adjusted net income reconciliation

Net income – GAAP

$

(19,553

)

$

21,015

Net loss on sale of debt securities

62,391

-

Tax impact of net loss on sale of debt securities

(17,949

)

-

Net income – adjusted (non-GAAP)

$

24,889

$

21,015

Non-GAAP adjusted diluted earnings per share reconciliation

Diluted (loss) / earnings per share – GAAP

$

(2.25

)

$

2.76

Net loss on sale of debt securities, net of income tax

5.05

-

Diluted earnings per share – adjusted (non-GAAP)

$

2.80

$

2.76

Average common shares – diluted – adjusted

8,880,454

7,604,442

Non-GAAP adjusted return on average assets reconciliation

Net (loss) / income – GAAP

$

(19,553

)

$

21,015

Average total assets

2,357,580

2,252,814

Return on average assets – GAAP

(0.83

)%

0.93

%

Net income – adjusted (non-GAAP)

$

24,889

$

21,015

Average total assets

2,357,580

2,252,814

Return on average assets – adjusted (non-GAAP)

1.06

%

0.93

%

Non-GAAP adjusted return on average equity reconciliation

Net (loss) / income – GAAP

$

(19,553

)

$

21,015

Average total equity

227,210

175,348

Return on average equity – GAAP

(8.61

)%

11.98

%

Net income – adjusted (non-GAAP)

$

24,889

$

21,015

Average total equity

227,210

175,348

Return on average equity – adjusted (non-GAAP)

10.95

%

11.98

%

Non-GAAP adjusted efficiency ratio reconciliation

Non-interest expense

$

52,781

$

47,333

Net interest income

87,305

75,222

Non-interest income

(56,376

)

6,010

Efficiency ratio – GAAP

170.65

%

58.27

%

Non-interest expense

$

52,781

$

47,333

Net interest income

87,305

75,222

Non-interest income

(56,376

)

6,010

Net loss on sale of debt securities

62,391

-

Adjusted non-interest income

6,015

6,010

Efficiency ratio – adjusted (non-GAAP)

56.56

%

58.27

%

Non-GAAP taxable equivalent net interest income reconciliation

Net interest income – GAAP

$

87,305

$

75,222

Taxable equivalent adjustment

33

25

Net interest income – taxable equivalent (non-GAAP)

$

87,338

$

75,247

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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 years ended December 31, 2025 and 2024:

For the Years Ended December 31,

(Dollars in thousands; taxable equivalent)

2025

2024

Interest

Yields

Interest

Yields

Average

Income/

or

Average

Income/

or

Balance

Expense

Rates

Balance

Expense

Rates

ASSETS

Interest-earning assets:

Loans, net of deferred fees (1)

$

1,924,166

$

132,825

6.90

%

$

1,797,626

$

130,878

7.28

%

Fed funds sold / interest-bearing deposits

126,340

5,307

4.20

%

68,722

3,649

5.31

%

Debt securities

Taxable debt securities

238,877

6,761

2.83

%

309,652

7,067

2.28

%

Non-taxable debt securities (2)

2,603

155

5.95

%

2,010

120

5.97

%

Total debt securities

241,480

6,916

2.86

%

311,662

7,187

2.31

%

FHLB stock

8,409

735

8.74

%

8,409

752

8.94

%

Total interest-earning assets

2,300,395

145,783

6.34

%

2,186,419

142,466

6.52

%

Non-interest-earning assets:

Cash and due from banks

10,865

13,048

All other assets (3)

46,320

53,347

TOTAL ASSETS

$

2,357,580

$

2,252,814

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing liabilities:

Interest-bearing demand deposits

$

1,039,916

$

37,160

3.57

%

$

857,409

$

35,112

4.10

%

Money market and savings

426,951

12,750

2.99

%

326,934

10,729

3.28

%

Time deposits

45,626

1,575

3.45

%

76,846

3,144

4.09

%

Non-reciprocal brokered deposits

37,381

1,674

4.48

%

97,078

5,161

5.32

%

Total interest-bearing deposits

1,549,874

53,159

3.43

%

1,358,267

54,146

3.99

%

Short-term borrowings

77,573

3,544

4.57

%

233,290

11,879

5.09

%

Subordinated debt

22,000

1,742

7.92

%

21,956

1,194

5.44

%

Total interest-bearing liabilities

1,649,447

58,445

3.54

%

1,613,513

67,219

4.17

%

Non-interest-bearing liabilities:

Demand deposits

460,483

437,637

Accrued expenses and other liabilities

20,440

26,316

Shareholders' equity

227,210

175,348

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

2,357,580

$

2,252,814

Net interest spread

2.80

%

2.35

%

Net interest income and margin (4)

$

87,338

3.80

%

$

75,247

3.44

%

Non-taxable equivalent net interest margin

3.80

%

3.44

%

Cost of deposits

$

2,010,357

$

53,159

2.64

%

$

1,795,904

$

54,146

3.01

%

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Table of Contents

(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 loan fees/(costs) of $1.7 million and $1.8 million, respectively.

(2)

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

(3)

Including negative balance on average allowance for credit losses on loans of $20.0 million and $20.9 million, respectively.

(4)

Net interest margin is taxable equivalent net interest income divided by total interest-earning assets.

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

Net interest income on a taxable equivalent basis for the year ended December 31, 2025, was $87.3 million, an increase of $12.1 million, or 16% over $75.2 million for the year ended December 31, 2024. The increase in net interest income was primarily attributable to lower rates paid on deposits and short-term borrowings. Also positively impacting net interest income was the increase in average loans and the decrease in average short-term borrowings, the result of paying off the existing balances in the third quarter of 2025 using proceeds from the IPO and securities sales.

Average earning assets for the year ended December 31, 2025 increased $114.0 million compared to the same period in 2024, which included increases of $126.5 million in average total loans and $57.6 million in average balances due from the Federal Reserve Bank and interest-bearing deposits in banks, partially offset by a $70.2 million decrease in average investment securities resulting from the securities sales as part of the repositioning of our available-for-sale securities portfolio. Average interest-bearing liabilities increased $35.9 million for the year ended December 31, 2025 compared to the same period in 2024, primarily due to a $191.6 million increase in average interest-bearing deposits, partially offset by a decrease of $155.7 million in average short-term borrowings resulting from paydowns using the proceeds from the IPO and sales of securities. Average non-interest-bearing deposits for the year ended December 31, 2025, increased to $460.5 million from $437.6 million for the same period in 2024.

Net interest margin for the year ended December 31, 2025 was 3.80% compared to 3.44% for 2024. The increase was primarily due to higher average loan balances, lower outstanding balances on average short-term borrowings, an increase in average non-interest-bearing demand deposits, and lower cost of deposits as well as improvement in interest income due to the sale of low-yielding securities as part of the repositioning of our available-for-sale portfolio during the third quarter of 2025. Partially offsetting these favorable impacts to net interest margin was an increase in the rate for subordinated debt coupled with lower yields on loans and average balances with the Federal Reserve Bank and interest-bearing deposits with banks compared to the same period in 2024.

The yield on total loans of 6.90% for the year ended December 31, 2025 was down 38 basis points compared to the same period in 2024, and the yield on interest-earning assets decreased to 6.34% for the year ended December 31, 2025 compared to 6.52% for the same period in 2024. The decreases were driven by interest income reversals totaling $726 thousand related to loans placed on non-accrual status and by reductions in the prime rate. The average cost of total deposits decreased to 2.64% for 2025 from 3.01% for the same period in 2024, and total funding costs, including all deposits, short-term borrowings and subordinated debt, decreased to 3.54% for 2025 compared to 4.17% for the same period 2024.

The average rate paid for short-term borrowings for the year ended December 31, 2025, was 4.57% compared to 5.09% for the same period in 2024. Short-term borrowings typically consist of overnight borrowings.

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The following table shows the effect of the interest differential of volume and rate changes for the years ended December 31, 2025 and 2024. 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 Years Ended

December 31,

2025 vs. 2024

Increase / (Decrease)

Due to Change in:

Average

Average

Net

(Dollars in thousands)

Volume

Rate

Change

Interest income:

Loans, net of deferred fees

$

8,735

$

(6,788

)

$

1,947

Due from Federal Reserve Bank and interest-bearing deposits in banks

2,420

(762

)

1,658

Debt securities

(2,010

)

1,739

(271

)

FHLB stock

-

(17

)

(17

)

Interest expense:

Deposits

Interest-bearing demand deposits

6,522

(4,474

)

2,048

Money market and savings

2,987

(966

)

2,021

Time deposits

(1,078

)

(491

)

(1,569

)

Non-reciprocal brokered deposits

(2,673

)

(814

)

(3,487

)

Short-term borrowings

(7,114

)

(1,221

)

(8,335

)

Subordinated debt

3

545

548

Net interest income

$

10,498

$

1,593

$

12,091

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 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 $5.1 million in 2025, an increase of $1.0 million, compared to 2024. We recorded net loan charge-offs of $1.4 million in the year ended December 31, 2025 compared to net loan charge-offs of $4.4 million during the same period of 2024. The provision was higher primarily due to higher loan balances and the specific reserve on one commercial non-accrual loan. The allowance for credit losses, including loans and unfunded commitments, as a percent of outstanding loans was 1.15% and 1.12% at December 31, 2025 and 2024, respectively. See further discussion of the Provision for Credit Losses and Allowance for Credit Losses in “Financial Condition – Allowance for Credit Losses.”

Non-Interest Income

Non-interest income decreased by $62.4 million for the year ended December 31, 2025 compared to the same period of 2024. The decrease was primarily attributable to the $62.4 million loss on the sale of securities in 2025 resulting from the repositioning of our available-for-sale securities portfolio, partially offset by increases in service charges and fees and warrant and success fee income.

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Table of Contents

The following table reflects the major components of the Company’s non-interest income for the years ended December 31, 2025 and 2024.

For the Years Ended

(Dollars in thousands)

December 31,

Increase / (Decrease)

2025

2024

Amount

Percent

Service charges and fees

$

3,178

$

2,600

$

578

22

%

Foreign exchange income

937

896

41

5

Bank-owned life insurance income

372

508

(136

)

(27

)

Warrant and success fee income

648

65

583

897

Other investment income

485

1,092

(607

)

(56

)

Loss on sale of debt securities

(62,391

)

-

(62,391

)

NM

Other income

395

849

(454

)

(53

)

Total non-interest income

$

(56,376

)

$

6,010

$

(62,386

)

(1,038

)

NM — Comparisons from positive to negative values or to zero values are considered not meaningful.

Service charges and bank fees for the year ended December 31, 2025 increased $578 thousand, or 22% from 2024, primarily due to an increase in the number of client relationships.

Foreign exchange income increased $41 thousand, or 5%, compared to 2024 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 decreased $136 thousand, or 27%, compared to 2024 due to the surrender of approximately $21 million in policies in 2024.

Warrant and success fee income totaled $648 thousand for the year ended December 31, 2025. Refer to Note 16 – Derivative Financial Instruments for additional discussion of warrants.

Other investment income for the year ended December 31, 2025, decreased $607 thousand primarily due to fair value marks on fund investments.

The loss on the sale of securities for the year ended December 31, 2025, was $62.4 million. As part of the repositioning of our available-for-sale securities portfolio, we received $274.7 million in proceeds from securities sold at a pre-tax loss of $62.4 million and purchased $205.4 million in available-for-sale securities with an average purchase yield of 4.57% and a duration of 5.4 years.

Other income decreased $454 thousand, or 53%, for the year ended December 31, 2025, compared to the same period in 2024 due to $625 thousand in proceeds received from a litigation settlement in the third quarter of 2024.

Non-Interest Expense

During the year ended December 31, 2025, non-interest expense increased by $5.4 million, or 12%, to $52.8 million compared to $47.3 million in the same period of 2024. Non-interest expense for the year ended December 31, 2025 included higher salaries and benefits expense related to increased investment in personnel across the entire Bank as well as IPO-related expenses, increases in legal and professional fees and data processing expense. Partially offsetting the increase in non-interest expense were decreases in occupancy and equipment expense and regulatory assessments.

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The following table reflects the major components of the Company’s non-interest expense for the years ended December 31, 2025 and 2024.

For the Years Ended

(Dollars in thousands)

December 31,

Increase / (Decrease)

2025

2024

Amount

Percent

Salaries and employee benefits

$

37,415

$

32,499

$

4,916

15

%

Occupancy and equipment

3,208

4,019

(811

)

(20

)

Data processing

2,936

2,412

524

22

Legal and professional fees

2,707

2,139

568

27

Regulatory assessments

1,930

2,083

(153

)

(7

)

Business software and subscriptions

1,098

1,051

47

4

Director's fees and expenses

792

746

46

6

Travel and meals

646

545

101

19

Correspondent bank charges

634

608

26

4

Advertising and marketing

431

412

19

5

Other expense

984

819

165

20

Total non-interest expense

$

52,781

$

47,333

$

5,448

12

%

Salaries and employee benefits expense for the year ended December 31, 2025 was $37.4 million, an increase of $4.9 million, or 15%, from 2024. The increase was primarily driven by increased investment in personnel across the entire Bank, severance expense of $222 thousand and IPO-related expenses. Full time equivalent headcount totaled 151 at December 31, 2025 compared to 148 at December 31, 2024.

Occupancy and equipment expense totaled $3.2 million for the year ended December 31, 2025, reflecting a decrease of $811 thousand, or 20%, from the same period in 2024 due to lower rent expense at one of our loan production offices.

Data processing expense was 2.9 million for the year ended December 31, 2025, an increase of $524 thousand, or 22%, compared to the same period in 2024. The increase was due to higher transaction volume.

Legal and professional fees were $2.7 million for the year ended December 31, 2025, an increase of $568 thousand, or 27% from 2024. The increase was driven by legal costs related to proxy matters, general corporate and credit matters.

Income Taxes

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

Income tax expense was a benefit of $7.4 million and an expense of $8.8 million for the years ended December 31, 2025 and 2024, respectively. The effective tax rate for the years ended December 31, 2025 and 2024 was 27.5% and 29.5%, respectively. During 2025, there was $259 thousand in additional tax expense related to the write-down of deferred tax assets from state rate changes, primarily related to a change in the California law requiring financial institutions to apportion business income using a single sales factor for tax years beginning on or after January 1, 2025.

Financial Condition

Total assets of the Company were $2.57 billion as of December 31, 2025, compared to $2.30 billion as of December 31, 2024. Cash and cash equivalents and loans increased compared to December 31, 2024, and were partially offset by decreases in the securities portfolio and other assets.

As of December 31, 2025, loans, net of deferred fees totaled $2.15 billion compared to $1.86 billion at December 31, 2024. The increase from December 31, 2024, was primarily due to the increase in commercial and industrial loans and commercial real estate loans, partially offset by a decrease in construction loans. The loan portfolio was comprised of approximately 49% of commercial and industrial loans at December 31, 2025 and 44% at December 31, 2024. Commercial real estate loans comprised 40% of our loans at December 31, 2024 compared to 41% at December 31, 2024. 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.

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Table of Contents

The following table reflects the composition of the Company’s loan portfolio and the percentage distribution of each major loan type at December 31, 2025 and 2024.

As of December 31,

(Dollars in thousands)

2025

2024

Amount

% of Loans

Amount

% of Loans

Commercial and industrial

$

1,049,530

49

%

$

816,963

44

%

Construction

196,243

9

%

246,301

13

%

Residential real estate

45,669

2

%

27,494

2

%

Commercial real estate

854,342

40

%

773,219

41

%

Consumer

2,655

0

%

965

0

%

Total outstanding loans, net of deferred fees

2,148,439

1,864,942

Allowance for credit losses on loans

(22,261

)

(18,679

)

Total loans, net of allowance for credit losses on loans

$

2,126,178

$

1,846,263

The following table shows the maturity distribution for total loans outstanding as of December 31, 2025.

Contractual Loan Maturities at December 31, 2025

After One

After Five

Year

Years

After

One Year

Through

Through

Fifteen

(Dollars in thousands)

or Less

Five Years

Fifteen Years

Years

Total

Commercial and industrial

$

326,981

$

535,262

$

187,287

$

-

$

1,049,530

Construction

187,113

9,130

-

-

196,243

Residential real estate

6,104

25,432

14,133

-

45,669

Commercial real estate

82,612

182,820

588,910

-

854,342

Consumer

2,518

137

-

-

2,655

Total loans, net of deferred fees

$

605,328

$

752,781

$

790,330

$

-

$

2,148,439

The principal balances of loans are indicated by both fixed and variable rate categories in the table below.

December 31, 2025

Fixed

Adjustable

Floating

(Dollars in thousands)

Interest Rates

Interest Rates

Interest Rates

Total

Commercial and industrial

$

134,223

$

70

$

915,237

$

1,049,530

Construction

34,229

-

162,014

196,243

Residential real estate

2,181

7,374

36,114

45,669

Commercial real estate

329,618

517,582

7,142

854,342

Consumer

2,652

-

3

2,655

Total loans, net of deferred fees

$

502,903

$

525,026

$

1,120,510

$

2,148,439

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Table of Contents

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. Our Venture Lending Division provides banking services to emerging growth technology companies that have received an infusion of equity capital from institutional investors such as venture capital and private equity firms. Repayment of these loans may be dependent upon receipt by borrowers of additional equity financing from venture firms or others, or in some cases, a successful sale to a third party, public offering or other form of liquidity event. Asset-Based Lending creates lending solutions that are designed to provide capital against assets such as accounts receivable and inventory, 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.

The following table presents the various product types of commercial and industrial loans as of December 31, 2025 and 2024.

As of December 31,

(Dollars in thousands)

2025

2024

Amount

% of Loans

Amount

% of Loans

Venture

$

376,799

18

%

$

298,562

16

%

Asset-based lending (ABL)

148,918

7

%

89,601

5

%

Sponsor finance

303,303

14

%

253,689

14

%

Invoice financing

28,818

1

%

34,780

2

%

Other

191,692

9

%

140,331

7

%

Total commercial and industrial loans, net of deferred fees

$

1,049,530

49

%

$

816,963

44

%

As of December 31, 2025 and 2024, we had $854.3 million and $773.2 million, respectively, in commercial real estate loans representing 40% and 41%, respectively, of our total loans. Our commercial real estate loans consist of commercial, multi-family and mixed-use property loans for investors and owner-users. Our commercial real estate loans are typically secured by multi-family, hotel/motel, retail, industrial, warehouse or other commercial properties. At December 31, 2025 and 2024, 20% and 21%, respectively, of our commercial real estate loans were for non-owner-occupied purposes. All commercial real estate loans were collateralized by properties in California as of December 31, 2025 and 2024.

The following table presents the components of commercial real estate loans as of December 31, 2025 and 2024.

As of December 31,

(Dollars in thousands)

2025

2024

Amount

% of Loans

Amount

% of Loans

Office

$

147,708

7

%

$

151,693

8

%

Hotel / motel

78,566

4

%

80,037

4

%

Retail

86,309

4

%

74,296

4

%

Industrial

68,408

3

%

58,747

3

%

Warehouse

16,611

1

%

15,585

1

%

Other

26,505

1

%

34,193

1

%

Total non-owner-occupied

$

424,107

20

%

$

414,551

21

%

Owner-occupied

165,130

8

%

142,650

8

%

Multi-family

265,105

12

%

216,018

12

%

Total commercial real estate, net of deferred fees

$

854,342

40

%

$

773,219

41

%

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Non-Performing Assets

Non-performing assets are comprised of loans on non-accrual status, loans 90 days or more past due and still accruing interest, and other real estate owned. We had no loans 90 days or more past due and still accruing interest and no other real estate owned at December 31, 2025 or December 31, 2024. A loan is placed on non-accrual 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.

Non-performing loans increased during 2025 compared to 2024, primarily due to the downgrade of two well-collateralized construction loans and one commercial loan. The following table presents information regarding the Company’s non-performing assets at December 31, 2025 and 2024.

December 31,

(Dollars in thousands)

2025

2024

Non-accrual loans

Commercial and industrial

$

5,088

$

1,367

Construction

19,414

-

Residential real estate

-

-

Commercial real estate

-

-

Consumer

-

-

Loans over 90 days past due and still accruing

-

-

Total non-performing loans

24,502

1,367

Other real estate owned

-

-

Total non-performing assets

$

24,502

$

1,367

Non-performing assets to total assets

0.95

%

0.06

%

Non-performing loans to total loans

1.14

%

0.07

%

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 years ended December 31, 2025 and 2024.

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

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

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

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

Potential Problem Loans

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

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

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

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

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

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.

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The following table provides information on the activity within the allowance for loan losses as of and for the periods indicated.

December 31,

(Dollars in thousands)

2025

2024

Allowance for credit losses on loans, beginning of period

$

18,679

$

19,131

Provision for credit losses on loans

5,014

3,909

Charge-offs

Commercial and industrial

(1,523

)

(4,361

)

Construction

-

-

Residential real estate

-

-

Commercial real estate

-

-

Consumer

-

-

Total charge-offs

(1,523

)

(4,361

)

Recoveries

Commercial and industrial

91

-

Construction

-

-

Residential real estate

-

-

Commercial real estate

-

-

Consumer

-

-

Total recoveries

91

-

Net charge-offs

(1,432

)

(4,361

)

Allowance for credit losses on loans, end of period

$

22,261

$

18,679

Average loans, net of deferred loans fees

1,924,166

1,797,626

Loans, net of deferred fees, end of period

2,148,439

1,864,942

Net charge-offs to average loans

0.07

%

0.24

%

Allowance for credit losses on loans to total loans

1.04

%

1.00

%

Allowance for credit losses on loans to non-performing loans

90.85

%

1,366.42

%

Non-performing loans to total loans

1.14

%

0.07

%

Provision for credit losses on loans was $5.0 million and $3.9 million for the years ended December 31, 2025 and 2024, respectively, primarily due to higher loan balances and the specific reserve on one commercial non-accrual loan in 2025 and the charge-off of one venture lending relationship in 2024. The following table presents the allocation of the allowance for credit losses as of the dates indicated:

(Dollars in thousands)

As of December 31,

2025

2024

Amount

% of Loans

Amount

% of Loans

Commercial and industrial

$

15,612

0.73

%

$

10,170

0.54

%

Construction

1,972

0.09

%

3,005

0.16

%

Residential real estate

494

0.02

%

286

0.02

%

Commercial real estate

4,150

0.19

%

5,207

0.28

%

Consumer

33

0.01

%

11

0.00

%

Total

$

22,261

1.04

%

$

18,679

1.00

%

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Credit Quality Indicators

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 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 years ended December 31, 2025 and 2024.

Debt Securities

Debt securities available-for-sale totaled $218.2 million at December 31, 2025 compared to $296.6 million at December 31, 2024. 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 December 31, 2025, investment securities available-for-sale had a net unrealized loss of $328 thousand compared to a net unrealized loss of $72.6 million as of December 31, 2024. During December 31, 2025, the Company sold $274.7 million in available-for-sale securities and recognized a loss of $62.4 million on the sale of the securities. The Company purchased $205.4 million in available-for-sale securities with an average purchase yield of 4.57% and a duration of 5.4 years. Market changes in interest rates and credit spreads will result in temporary unrealized gains or losses as the market price of securities fluctuates. Management evaluated all available-for-sale securities in an unrealized loss position at December 31, 2025 and December 31, 2024, 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 AFS security interest rate sensitivity as part of total interest rate risk management. For further discussion, see sub-section entitled “— Interest Rate Sensitivity and Market Risk." The majority of our available-for-sale investment portfolio is comprised of mortgage-backed securities (MBSs) that are either issued or guaranteed by U.S. government agencies or government-sponsored enterprises (GSEs).

The following table reflects the amortized cost and fair market values for the total portfolio of investments in our securities portfolio as of December 31, 2025 and 2024. As of the dates indicated, none of our investment securities were classified as held-to-maturity.

(Dollars in thousands)

December 31, 2025

December 31, 2024

Amortized

Fair

Amortized

Fair

Cost

Value

Cost

Value

Available-for-sale securities

U.S. Treasury securities and obligations of U.S. government agencies

$

478

$

458

$

578

$

538

Commercial mortgage-backed securities

5,454

5,430

3,161

2,863

Residential mortgage-backed securities

207,847

207,552

360,713

288,461

U.S. states and political subdivisions

4,709

4,720

4,703

4,694

Total available-for-sale securities

$

218,488

$

218,160

$

369,155

$

296,556

As of December 31, 2025, the average life of the Bank's securities was 4.8 years, and the effective duration was 3.5 years, compared to an average life of 7.9 years and effective duration of 6.2 years as of December 31, 2024.

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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.

December 31, 2025

(Dollars in thousands)

Due Less Than One Year

Due After One Year Through Five Years

Due After Five Years Through Ten Years

Due After Ten Years

Total

Amortized

Weighted

Amortized

Weighted

Amortized

Weighted

Amortized

Weighted

Amortized

Weighted

Cost

Average Yield (1)

Cost

Average Yield (1)

Cost

Average Yield (1)

Cost

Average Yield (1)

Cost

Average Yield (1)

U.S. Treasury securities and obligations of U.S. government agencies

$

-

-

%

$

-

-

%

$

478

2.36

%

$

-

-

%

$

478

2.36

%

Commercial mortgage-backed securities

-

-

1,011

3.73

-

-

4,443

4.92

5,454

4.70

Residential mortgage-backed securities

-

-

-

-

-

-

207,847

4.58

207,847

4.58

U.S. states and political subdivisions

-

-

-

-

-

-

4,709

5.71

4,709

5.71

Total available-for-sale securities

$

-

-

%

$

1,011

3.73

%

$

478

2.36

%

$

216,999

4.61

%

$

218,488

4.60

%

(1)

Weighted average yields are computed based on the amortized cost of the underlying securities.

Deposits

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

We participate in a reciprocal deposit network to provide our clients with access to FDIC insurance beyond the standard maximum deposit insurance amount at a single insured depository institution. A reciprocal position means that we receive an equal amount of network deposits for our enrolled accounts, and those deposits are reflected on our statement of financial condition. 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 particular, under FDIC regulations, qualifying reciprocal deposits which do not exceed 20% of the liabilities of the Bank may be excluded from being classified as brokered deposits. As of December 31, 2025 and December 31, 2024, our total reciprocal interest-bearing checking deposits totaled $929.8 million and $889.2 million, respectively. As a result, as of December 31, 2025 and December 31, 2024, an additional $475.4 million and $470.0 million of our deposits were considered brokered deposits by the FDIC due to being in excess of the general 20% cap.

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At December 31, 2025 and 2024, approximately 26% and 22%, respectively, of our deposits were in non-interest-bearing demand deposits. The balance of our deposits at December 31, 2025 and 2024 were held in interest-bearing checking, savings and money market accounts, time and brokered deposits. Approximately 73% and 71% of total deposits were held in interest-bearing demand, savings and money market deposit accounts at December 31, 2025 and 2024, respectively, which provide our clients with interest and liquidity. Time and brokered deposits comprised the remaining 1% and 7% of our deposits at December 31, 2025 and 2024, respectively.

Information concerning average balances and rates paid on deposits by deposit type for the past two fiscal years is contained in the Distribution, Yield and Rate Analysis of Net Income table located in the previous section titled “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.

(Dollars in thousands)

Balance

% of Total

At December 31, 2025

Non-interest-bearing demand

$

556,972

26

%

Interest-bearing checking

1,069,272

49

%

Money market and savings

532,149

24

%

Time

27,680

1

%

Non-reciprocal brokered (1)

-

-

%

Total deposits

$

2,186,073

100

%

At December 31, 2024

Non-interest-bearing demand

$

414,327

22

%

Interest-bearing checking

993,219

53

%

Money market and savings

338,578

18

%

Time

74,468

3

%

Non-reciprocal brokered (1)

70,763

4

%

Total deposits

$

1,891,355

100

%

(1)

FDIC regulations impose a general cap on reciprocal deposits that may be exempt from brokered deposits classification equal to 20% of the Bank's total liabilities. As of December 31, 2025 and 2024, an additional $475.4 million and $470.0 million of our deposits were considered brokered deposits by the FDIC due to being in excess of the general cap, respectively.

FDIC deposit insurance covers $250 thousand 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 $915.5 million and $632.6 million as of December 31, 2025 and 2024, respectively, representing approximately 42% and 33% of our total deposit portfolio as of December 31, 2025 and 2024, respectively.

The following table sets forth the scheduled maturities of time deposits of $250,000 and greater as of December 31, 2025. 

December 31, 2025

Less Than

$250,000 or

(Dollars in thousands)

$250,000

Greater

Total

Remaining maturity:

Three months or less

$

1,214

$

10,562

$

11,776

Over three through six months

2,936

4,210

7,146

Over six through twelve months

1,515

4,736

6,251

Over twelve months

133

2,374

2,507

$

5,798

$

21,882

$

27,680

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Borrowings

The Bank has several supplementary funding sources, including a secured line of credit with the Federal Home Loan Bank of San Francisco ("FHLB") and various available secured and unsecured lines of credit with correspondent banks. As of December 31, 2025, total deposits increased $294.7 million, or 16%, compared to December 31, 2024. Based on this additional funding of deposits received, the Bank reduced wholesale funding to 2% of total assets at December 31, 2025, compared to 11% as of December 31, 2024.

The following table summarizes our borrowings as of December 31, 2025 and 2024.

December 31,

(Dollars in thousands)

2025

2024

Federal funds lines of credit

$

60,000

$

115,000

Federal Home Loan Bank advances

-

70,000

Subordinated notes, net

22,000

22,000

Total

$

82,000

$

207,000

Other Short-Term Borrowings

The Bank had unsecured Federal Funds lines of credit from correspondent banks totaling $206.0 million at December 31, 2025 and $175.0 million at December 31, 2024, with outstanding balances of $60.0 million and $115.0 million as of December 31, 2025 and 2024, respectively. The Company has a short-term borrowing arrangement with the Federal Reserve Bank through the Discount Window with a borrowing capacity of $853.9 million and $786.5 million as of December 31, 2025 and December 31, 2024, respectively. There were no borrowings outstanding under this arrangement at December 31, 2025 and December 31, 2024.

Federal Home Loan Bank Advance

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 December 31, 2025, the secured line of credit had no outstanding balance and $530.0 million in remaining borrowing capacity. In comparison, at December 31, 2024, the secured line of credit had an outstanding balance of $70.0 million and $391.2 million in remaining borrowing capacity.

Long-Term Debt

On December 20, 2019, the Company issued $22.0 million in ten-year, fixed-to-floating rate subordinated notes to certain qualified institutional buyers and institutional accredited investors. The subordinated notes have a maturity date of December 30, 2029, and are currently redeemable, subject to certain conditions. The subordinated notes bear interest at the rate of 5.0% per annum, payable semiannually for the first five years of the term, and then quarterly at a variable rate based on the then current 3-month Secured Overnight Financing Rate plus 359.5 basis points. The interest rate as of December 31, 2025 was 7.26%. The indebtedness evidenced by the subordinated notes, including principal and interest, is unsecured and subordinate and junior to general and secured creditors and depositors. On the statement of financial condition, the subordinated notes are carried net of debt issuance costs, and these were fully amortized as of December 31, 2024.

Liquidity and Capital Resources

Liquidity Management

Liquidity refers to our capacity to meet cash and collateral obligations in a timely manner. Maintaining appropriate levels of liquidity depends on our ability to address both expected and unexpected cash flows and collateral needs while aiming to avoid adverse effects on our daily operations or the financial condition of the Bank. Effective liquidity management is considered essential to our business model, as deposits, which can generally be withdrawn on demand, form a primary source of our funding. The liquidity ratio is typically calculated as the sum of our cash and cash equivalents plus unpledged securities classified as investment grade divided by total liabilities. Based on this calculation method, as of December 31, 2025 and December 31, 2024, our reported liquidity ratios were 15.9% and 17.2%, respectively.

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We maintain secured lines of credit with the FHLB and the Federal Reserve Discount Window, for which we can borrow up to the allowable amount of pledged collateral. As of December 31, 2025, we had remaining borrowing capacity totaling $530.0 million and $853.9 million with the FHLB and Federal Reserve, respectively. The Bank maintains unsecured lines of credit with correspondent banks that provide combined availability of $206.0 million and $175.0 million at December 31, 2025 and December 31, 2024. Outstanding balances on these unsecured lines of credit as of December 31, 2025 and 2024 totaled $60.0 million and $115.0 million, respectively.

In addition to these sources of liquidity, we also utilize the ICS® network for One-Way Buy® deposits. One-Way Buy® deposits involve receiving deposits from other banks’ clients through the ICS® network. This mechanism can provide an additional source of liquidity by allowing us to increase our deposits without reciprocating. At December 31, 2025 and 2024, One-Way Buy® deposits totaled $0 and $20.0 million, respectively.

As an intermediate source of liquidity, we may sell AFS securities or allow AFS securities to mature without reinvestment in the securities portfolio. As of December 31, 2025 and 2024, our AFS securities portfolio had a fair value of $218.2 million and $296.6 million, respectively, and an amortized cost of $218.5 million and $369.2 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.

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.

Capital Resources

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

Shareholders’ equity as of December 31, 2025, was $281.0 million, an increase of $94.6 million, or 51%, compared to $186.4 million as of December 31, 2024. The increase included net proceeds from the IPO totaling $61.3 million, improvement in accumulated other comprehensive loss of $51.2 million due to the recognized loss on the sale of available-for-sale securities, partially offset by a decrease in retained earnings of $19.6 million.

Book value per share as of December 31, 2025 and December 31, 2024, was $25.66 and $23.57, respectively. The increase from December 31, 2024, was primarily the result of the increase in equity capital in connection with our IPO.

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Because total assets on a consolidated basis are less than $3.0 billion, we are not subject to the consolidated capital requirements imposed by federal regulations. However, the Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Certain regulatory measurements of capital adequacy are “risk based,” meaning they utilize a formula that considers the individual risk profile of the financial institution’s assets. For example, certain assets, such as cash at the Federal Reserve and investments in U.S. Treasury securities, are deemed to carry zero risk by the regulators because of explicit or implied federal government guarantees. As of December 31, 2025 and December 31, 2024, respectively, 8.0% and 6.2% of the Bank’s total assets were invested in such zero-risk assets. The tier 1 leverage ratio, another regulatory capital measurement, does not consider the riskiness of assets. The leverage ratio is computed as tier 1 capital divided by total average assets for the relevant quarter.

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

Consolidated

(Dollars in thousands)

December 31, 2025

December 31, 2024

Amount

Ratio

Amount

Ratio

Total risk-based capital ratio

$

313,481

12.57

%

$

276,225

12.30

%

Tier 1 risk-based capital ratio

275,669

11.05

%

237,700

10.59

%

Common equity Tier 1 capital ratio

275,669

11.05

%

237,700

10.59

%

Tier 1 leverage ratio

275,669

11.23

%

237,700

10.35

%

Bank

(Dollars in thousands)

December 31, 2025

December 31, 2024

Amount

Ratio

Amount

Ratio

Total risk-based capital ratio

$

309,703

12.45

%

$

274,362

12.26

%

Tier 1 risk-based capital ratio

285,091

11.46

%

253,437

11.32

%

Common equity Tier 1 capital ratio

285,091

11.46

%

253,437

11.32

%

Tier 1 leverage ratio

285,091

11.65

%

253,437

11.07

%

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 customer 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:

December 31,

(Dollars in thousands)

2025

2024

Commitments to extend credit

$

688,115

$

716,695

Standby letters of credit

19,168

18,043

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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 customer’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 tables present, as of December 31, 2025, our significant contractual obligations to third parties on debt and lease agreements and service obligations:

After One

After Two

One Year

Year Through

Year Through

After

(Dollars in thousands)

or Less

Two Years

Five Years

Five Years

Total

Time deposits (1)

$

25,173

$

1,358

$

1,149

$

-

$

27,680

Subordinated debt (1)

-

-

22,000

-

22,000

Operating leases, net

2,684

3,270

1,201

-

7,155

Significant contracts (2)

1,685

4,234

2,662

-

8,581

Total

$

29,542

$

8,862

$

27,012

$

-

$

65,416

(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 December 31, 2025 expenses extrapolated over the remaining contract life

We believe that will we 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 eight (8) major risk categories: (i) operational risk; (ii) strategic risk; (iii) credit risk; (iv) liquidity risk; (v) technology risk; (vi) compliance risk (vii) reputation risk and (viii) interest rate sensitivity risk.

Operational Risk

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

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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.

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.

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

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

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

Our loan-to-deposit ratio at December 31, 2025 and 2024, was 98.3% and 98.6%, respectively. As of December 31, 2025 and 2024, the Company had cash on its statement of financial condition of $154.6 million and $82.7 million, respectively, and total other liquidity sources, including available borrowing capacity and unpledged debt securities of approximately $1.80 billion and $1.50 billion, respectively. Total available sources of liquidity as a percentage of uninsured and uncollateralized deposits were approximately 213% and 253%, 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 are transitioning from implementing and following the Cybersecurity Assessment Tool (CAT) to the NIST Cybersecurity Framework (CSF) 2.0 and enhancing our Business Impact Analysis (BIA).

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

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

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

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

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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 customer 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.

Reputation Risk

Reputation risk is the risk that negative stakeholder opinion or negative publicity of our business practices may cause our brand to suffer as a result of the actions of the Company itself, an employee, or through other parties such as strategic and third-party business partners. This can lead to losses of client relationships and negatively impact our earnings and liquidity. Reputation risk has become more significant for banks following prior financial crises and prominent bank failures in 2023. While reputation risk is not always directly predictable or controllable, our operating model attempts to minimize such risk by focusing on the markets and products we believe we have experience and expertise with, and we prioritize client satisfaction.

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.

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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 is important to note that despite these measures, significant changes in interest rates could potentially impact our earnings, liquidity and capital positions.

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

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

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

Estimated Change in Net Interest Income

Change in interest rates (basis points)

December 31, 2025

December 31, 2024

+400

16.65

%

11.89

%

+300

12.37

8.80

+200

8.01

5.73

+100

3.76

2.64

-100

(1.41

)

(1.07

)

-200

(1.35

)

(0.21

)

-300

(0.19

)

1.88

-400

0.86

5.69

We expect net interest income to benefit from an increase in interest rates as the rates on interest earning assets reprice at a faster pace than the rate on interest bearing liabilities. As rates decrease, net interest income is negatively impacted as the rates on interest earning assets reprice lower at a faster pace than the rates on interest bearing liabilities. The decrease in net interest income is offset by the benefits from the floor rates on our floating rate loans. At December 31, 2025, approximately 22% 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, 69% 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.