Avidbank Holdings, Inc.

NOTE1 – BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Avidbank Holdings, Inc. (the “Company”) have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form10-Q and Rule10-01 of Regulation S-X. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. All material intercompany balances and transactions have been eliminated. In the Statement of Cash Flows the Company has elected to present proceeds and redemptions from borrowings from the Federal Home Loan Bank and the Federal Reserve Bank on a net basis.

Operating results for thethree months ended* March 31, 2026*, arenot necessarily indicative of the results that* maybe expected for the year ending December**31,* 2026, or any other period. These statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the year ended* December 31, 2025*, as filed with the Securities and Exchange Commission (“SEC”) on the Company’s Form10-K (FileNo. 001-42792).

Use of Estimates

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

Issued Accounting Standards

ASUNo. 2023-09, “Income Taxes (Topic740): Improvements to Income Tax Disclosures.” ASU2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. ASU2023-09 is effective for Public Business Entities for the annual period beginning* January 1, 2025.The Company has adopted this guidance, and the related updated disclosures can be found in Note10* –Income Taxes in the Company's Form10-K for the year ended* December 31, 2025*.

In* November 2024,the FASB issued ASUNo.* 2024-03, “Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic220-40): Disaggregation of Income Statement Expenses.” ASU2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that arenot separately disaggregated quantitatively. ASU2024-03 is effective for public business entities for annual reporting periods beginning after* December 15, 2026,and interim reporting periods beginning after December 15, 2027.Implementation of ASU2024*-03 * maybe applied prospectively or retrospectively. ASU2024*-03 isnot expected to have a material impact on our consolidated financial statements.

In* January 2025,the FASB issued ASU2025*-01, “Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic220-40): Clarifying the Effective Date.” ASU2025-01 amends the effective date of ASU2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after* December 15, 2026,and interim periods within annual reporting periods beginning after December 15, 2027.Early adoption of ASU2024*-03 is permitted. ASU2025-01 isnot expected to have a material impact on our consolidated financial statements.

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In* December 2026,the FASB issued ASU2025*-08, "Financial Instruments — Credit Losses (Topic326): Purchased Loans." ASU2025-08 expands the population of acquired financial assets subject to the gross-up approach for accounting for credit losses. This ASU introduces the concept of purchased seasoned loans and requires certain acquired loans that havenot experienced significant credit deterioration since origination to be accounted for using the gross-up approach. The amendments clarify initial and subsequent measurement, including recognition of an allowance for credit losses at acquisition with an offsetting gross-up to the purchase price, and require purchased seasoned loans to follow the same interest income recognition model as originated financial assets. The amendments are effective for annual reporting periods beginning after* December 15, 2026,and for interim reporting periods within those annual periods, with early adoption permitted. The amendments must be applied prospectively to loans acquired on or after the adoption date. This ASU isnot* expected to have a material impact on our consolidated financial statements.

NOTE2 – DEBT SECURITIES

The Company didnot hold securities classified as trading or held-to-maturity at* March 31, 2026* or* December 31, 2025*. The amortized cost and estimated fair value of available-for-sale debt securities at* March 31, 2026* and* December 31, 2025* consisted of the following:

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

During thethree months ended* March 31, 2026* and* March 31, 2025*, there wereno sales or calls of debt securities andno gains realized or losses recognized. There wereno transfers between investment categories during thethree months ended* March 31, 2026* or* March 31, 2025*.

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

At* March 31, 2026*, the Company held3 securities available-for-sale, which were in a loss position for greater than12 months. Management believes the unrealized losses on the Company’s debt securities were caused by interest rate changes. The contractual cash flows of those investments are generally guaranteed or supported by an agency or sponsored entity of the U.S. Government. Accordingly, it is expected that the securities wouldnot be settled at a price less than the amortized cost of the Company’s investment. As of* March 31, 2026*, the Company didnot intend to sell and doesnot believe it will be required to sell securities in an unrealized loss position prior to the recovery of their amortized cost basis. No credit impairment was recorded for those securities in an unrealized loss position for thethree months ended* March 31, 2026* or* December 31, 2025*, and there wasno allowance for credit losses on securities available-for-sale recorded as of* March 31, 2026* or* December 31, 2025*.

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

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

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NOTE3 – LOANS

Outstanding loans are summarized below:

From time to time, the Bank pledges loans as collateral under a short-term borrowing arrangement through the Discount Window of the Federal Reserve Bank. The Bank has pledged a total of $1.13 billion and $972.7 million of loans for borrowing capacity of $981.0 million and $853.9 million at* March 31, 2026* and* December 31, 2025*, respectively. The Bank hadno Federal Reserve Bank borrowings outstanding that were secured by loans as of* March 31, 2026* and* December 31, 2025*.

The Bank has entered into an agreement providing for the pledging of loans for borrowing capacity with the Federal Home Loan Bank. The Bank pledged a total of $780.9 million of loans for remaining borrowing capacity of $548.7 million at* March 31, 2026*. In comparison, the Bank pledged a total of $773.0 million of loans for remaining borrowing capacity of $530.0 million at* December 31, 2025*. There wereno FHLB borrowings outstanding at* March 31, 2026* or* December 31, 2025*.

NOTE4 – ALLOWANCE FOR CREDIT LOSSES ON LOANS

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

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

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Allocation of the allowance for credit losses on loans by portfolio segment for thethree months ended* March 31, 2026and2025* are as follows:

The following table presents the amortized cost basis of loans on non-accrual status and loans past due over89 days still accruing as of* March 31, 2026* and* December 31, 2025*:

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

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

Loans that are deemed by management tono longer possess risk characteristics similar to other loans in the portfolio, or that have been identified as collateral-dependent, are evaluated individually for purposes of determining an appropriate lifetime allowance for credit losses. Loans deemed collateral-dependent require evaluation based on the estimated fair value of the underlying collateral, less estimated costs to sell. The following table presents outstanding loan balances of collateral-dependent loans by portfolio segment as of* December 31, 2025*.

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

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The following tables present the amortized cost basis of loans at* March 31, 2026* and* March 31, 2025*, that were both experiencing financial difficulty and were modified during thethree months ended* March 31, 2026and2025*, by portfolio segment and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each segment of financing receivable is also presented below:

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during thethree months ended* March 31, 2026and2025*:

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The Company had $434 thousand and $106 thousand in commitments to lend additional amounts to the borrowers included in the previous tables for thethree months ended* March 31, 2026and2025*, respectively. There wereno loans to borrowers experiencing financial difficulty, which had been modified within the prior12 months, with a payment default during thethree months ended* March 31, 2026* or thethree months ended* March 31, 2025*.

NOTE5 – LEASES

Lease Arrangements

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

The Company leases its administrative offices in San Jose under a non-cancellable operating lease. The lease expires in2027 and hasone five-year renewal option. The Company also leases office space for loan production offices in Redwood City, California and San Francisco, California. At the end of* September 2021,the Company closed its Palo Alto branch office and the space has been subleased. In thefirst* quarter of2025, the Redwood City loan production office lease expired. The Company then executed a new Redwood City loan production office lease, in a new location, with afive-year term that expires in2030. The San Francisco loan production office lease also expires in2030.

Leases are classified as operating or finance leases at the lease commencement date. The Company doesnot currently have any significant finance leases in which it is the lessee. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments when the rate implicit in a lease isnot known. The Company’s incremental borrowing rate is based on the Federal Home Loan Bank of San Francisco, adjusted for the lease term and other factors.

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

Lease Expense

Total lease cost for thethree months ended* March 31, 2026and2025* is as follows:

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Lease Obligations

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

Supplemental Lease Information

NOTE6 – DEPOSITS

The Company’s total deposits consisted of the following:

(1) FDIC regulations impose a general cap on reciprocal deposits that* maybe exempt from brokered deposits classification equal to20%* of the Bank's total liabilities. As of* March 31, 2026* and* December 31, 2025*, an additional $447.6 million and $475.4 million of our deposits were considered brokered deposits by the FDIC due to being in excess of the general cap, respectively.

Non-reciprocal brokered deposits are used to supplement the Company’s traditional deposit funding sources. At* March 31, 2026*, the Company had $38.5 million in non-reciprocal brokered deposits representing 2% of total deposits. At* December 31, 2025*, there wereno non-reciprocal brokered deposits.

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

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

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

At* March 31, 2026* and at* December 31, 2025*, the Company hadtwo deposit relationships,one a1031 exchange intermediary service and the other a software company in our Venture Lending Division, that exceeded5% of total deposits. Totaling $225.0 million at* March 31, 2026* and $228.7 million at* December 31, 2025*, together they represented 10% of total deposits for both periods.

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

NOTE7 – SUBORDINATED DEBENTURES AND OTHER BORROWING ARRANGEMENTS

On* December20,* 2019, the Company issued $22.0 million inten-year, fixed-to-floating rate subordinated notes to certain qualified institutional buyers and institutional accredited investors. The subordinated notes have a maturity date of* December30,* 2029 and bear interest at the rate of 5.0% per annum, payable semiannually for thefirst five years of the term, and then quarterly at a variable rate based on the then current3-month Secured Overnight Financing Rate plus 359.5 basis points. The notes are currently redeemable subject to certain conditions. The indebtedness evidenced by the subordinated notes, including principal and interest, is unsecured and subordinate and junior to general and secured creditors and depositors. On the statement of financial condition, the subordinated notes are carried net of debt issuance costs, and these were fully amortized as of* December 31, 2024.The interest rate paid on the subordinated notes as of March 31, 2026* was 7.29%.

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

The Company has a short-term borrowing arrangement with the Federal Reserve Bank through the Discount Window. The Company currently has a detailed lien on certain loans to secure borrowings. The borrowing capacity under the agreement varies depending on the amount of loans pledged and totaled $981.0 million and $853.9 million as of* March 31, 2026* and* December 31, 2025*, respectively. There wereno borrowings outstanding under the agreement at* March 31, 2026* or* December 31, 2025*.

As a member of the Federal Home Loan Bank of San Francisco, the Bank is eligible to use the FHLB’s facilities for short- and long-term borrowing. Borrowing capacity requires stock ownership in the FHLB and is based on pledged assets or a lien against certain loan categories. As of* March 31, 2026* and* December 31, 2025*, there wereno borrowings outstanding from the FHLB. The remaining borrowing capacity at* March 31, 2026* and* December 31, 2025*, was $548.7 million and $530.0 million, respectively, under a detailed lien on loans.

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**NOTE8 **–SHAREHOLDERS' EQUITY

Dividends

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

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

Earnings Per Common Share

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

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

Stock Repurchase Program

The Company announced a stock repurchase program on* November**25,* 2020, authorizing the repurchase of up to 5% or 307,780 shares of the Company's then outstanding common stock. The program hasno expiration date. Under the stock repurchase program, the Company* may,from time to time, repurchase shares of its outstanding common stock in the open market, in privately-negotiated transactions, or otherwise, subject to applicable laws and regulations. The extent to which the Company repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements, availability of funds, and other relevant considerations, as determined by the Company. The Company may,at its discretion, begin, suspend or terminate repurchases at any time prior to the program's expiration, without any prior notice. There isno* obligation on the part of the Company to repurchase any shares of its common stock. For thethree months ended* March 31, 2026*,25,000 shares were repurchased under the stock repurchase program for $693 thousand at an average price of $27.69 per share. These repurchased shares are considered authorized but unissued shares.

As of* March 31, 2026*, the Company has repurchased a total of 50,347 shares since the announcement of the stock repurchase program in2020, leaving 257,433 shares that* mayyet be purchased under the stock repurchase program. No shares were repurchased under the stock repurchase program during thethree* months ended* March 31, 2025*.

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Regulatory Capital

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Under the Basel III rules, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The net unrealized gain or loss on available-for-sale securities isnot included in computing regulatory capital. Management believes as of* March 31, 2026* and* December 31, 2025*, the Company and the Bank meet all capital adequacy requirements to which they are subject.

Prompt corrective action regulations providefive classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms arenot used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At* March 31, 2026* and* December 31, 2025*, the most recent regulatory notifications categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. There areno conditions or events since that notification that management believes have changed the institution's category.

To be categorized as well-capitalized, under the regulatory framework for prompt corrective actions, the Company and the Bank must maintain minimum total risk-based, Tier1 risk-based and Tier1 leverage ratios as set forth in the table below.

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

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**NOTE9 **–COMMITMENTS AND CONTINGENCIES

Financial Instruments with Off-Balance-Sheet Risk

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet client financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met and usually have expiration dates. Commitments* mayexpire without being used. Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses arenot* anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. We manage our liquidity position to make sure we have adequate liquidity and funding if there are significant draws on our unfunded commitments.

The Company has some commitments that are unconditionally cancellable at its discretion, and these amounts arenot included in the totals below. The contractual amounts of financial instruments with off-balance-sheet credit risk at* March 31, 2026* and* December 31, 2025* were as follows:

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

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

Significant Concentrations of Credit Risk

The Company grants real estate mortgage, real estate construction, commercial and consumer loans primarily to clients in the California counties of San Mateo, San Francisco and Santa Clara. Although the Company has a diversified loan portfolio, a substantial portion of its portfolio is secured by commercial and residential real estate. Management believes the loans within this concentration haveno more than the normal risk of collectability. However, a substantial decline in real estate values in the Company's primary market area could have an adverse impact on the collectability of these loans. Personal and business income represent the primary sources of repayment for a majority of these loans and management believes the risks presented by the concentration are further mitigated by diversification of property types within the Company's real estate portfolio and by conservative underwriting.

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

Contingencies

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

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In accordance with Accounting Standards Codification Topic450, the Company establishes accruals for contingencies, including any litigation, regulatory, or tax matters (but excluding standard business-related legal fees), when the Company believes it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. We evaluate our outstanding legal and regulatory proceedings and other matters each quarter to assess our loss contingency accruals and make adjustments in such accruals, upward or downward, as appropriate, in light of additional information and based on management’s best judgment. For claims and legal actions where it isnot probable that a loss* maybe incurred, or where we arenot* currently able to reasonably estimate the loss or range of loss, we donot establish an accrual. As of* March 31, 2026*, the Company didnot record an accrued contingent liability for any legal proceedings. However, a loss is possible in future quarters, but is currentlynot probable and reasonably estimable, due to a lawsuit filed against the Company and the Bank in the Superior Court of California, County of Santa Clara, in* November 2025 (Klearnow Corporation v. Avidbank and Avidbank Holdings, Inc., CaseNo. 25CV480309) in connection with a$4.5* million wire sent by the Bank on behalf of a client whose email was allegedly fraudulently compromised.

We donot believe that the ultimate resolution of any currently pending legal proceedings will have a material adverse effect on our business, financial condition or results of operations. The outcome of litigation and other legal and regulatory matters is inherently uncertain, however, and it is possible thatone or more of the legal matters currently pending or threatened against the Company or the Bank could have a material adverse effect on our business, financial condition or results of operations.

**NOTE10 **–RELATED PARTY TRANSACTIONS

During the normal course of business, the Company enters into transactions with related parties, including directors and officers. As of* March 31, 2026* and* December 31, 2025*, there wereno balances outstanding for related party loans andno additions or amounts repaid during thethree months ended* March 31, 2026* or during the year ended* December 31, 2025*. Undisbursed commitments to related parties totaled $5,000 as of both* March 31, 2026* and* December 31, 2025*, respectively.

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

**NOTE11 **–OTHER EXPENSES

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

**NOTE12 **–FAIR VALUE

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

Level1 - Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level1 also includes U.S. Treasury, other U.S. government and agency mortgage-backed securities that are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

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Level2 - Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained fromthird party pricing services for identical or comparable assets or liabilities.

Level3 - Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, andnot based on market exchange, dealer, or broker traded transactions. Level3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

Becauseno market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the fair values presented. The following methods and assumptions were used by the Company to estimate the fair values of its financial instruments at* March 31, 2026* and* December 31, 2025*:

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

The carrying amount of these instruments approximate the fair value and are classified as Level1 in the fair value hierarchy.

Securities available-for-sale

Where quoted prices are available in an active market, securities are classified within Level1 of the valuation hierarchy. Level1 securities include highly liquid government bonds, certain mortgage products and exchange-traded equities. If quoted market prices arenot available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Examples of such instruments, which would generally be classified within Level2 of the valuation hierarchy, include certain collateralized mortgage and debt obligations, corporate bonds, municipal bonds and U.S. agency notes. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level3 of the valuation hierarchy. Securities classified within Level3 might include certain residual interests in securitizations and other less liquid securities. As of* March 31, 2026* and* December 31, 2025*, all securities available for sale were Level2.

Loans

The fair value of variable rate loans that reprice frequently and withno significant change in credit risk is based on the carrying value and results in a classification of Level3 within the fair value hierarchy. Fair value for other loans is estimated using discounted cash flow analysis using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level3 classification in the fair value hierarchy. For collateral-dependent real estate loans, fair value is commonly based on recent real estate appraisals. These appraisals* mayutilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level3* classification of the inputs for determining fair value. Non-real estate collateral* maybe valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level3* fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. The estimated fair values of financial instruments disclosed above as of* March 31, 2026* and* December 31, 2025*, follow the guidance in ASU2016-01 which prescribes an “exit price” approach in estimating and disclosing fair value of financial instruments incorporating discounts for credit, liquidity, and marketability factors.

Accrued interest receivable

The carrying amount of accrued interest receivable approximates its fair value and is classified as Level1 in the fair value hierarchy.

Deposits

The fair value of demand deposits, savings accounts, and money market deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposits is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturities. Deposits are classified as Level2.

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Subordinated debentures and Short-term borrowings

Subordinated Debentures: The carrying amount of the Company’s subordinated debentures are estimated using discounted cash flow analysis based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level3 classification.

Short-term Borrowings: The carrying amount of short-term borrowings approximate their fair values resulting in a Level1 classification. They generally mature withinthirty days or have a variable interest rate.

Accrued interest payable

The carrying amount of accrued interest payable approximates its fair value and is classified as Level1 in the fair value hierarchy.

The carrying amounts and estimated fair values of financial instrumentsnot carried at fair value at* March 31, 2026* and* December 31, 2025*, are as follows:

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Assets Recorded at Fair Value

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

Recurring Basis

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

Fair values for available-for-sale debt securities are based on quoted market prices for similar securities (Level2). During thethree months ended* March 31, 2026and2025*, there wereno significant transfers in or out of Levels1, 2 or3.

Non-recurring Basis

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

A loan is considered to be collateral-dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. At the time a loan is considered collateral-dependent, it is valued at fair value, less estimated costs to sell. Collateral-dependent loans carried at fair value generally receive specific allocations of the allowance for credit losses. For collateral-dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals* mayutilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level3* classification of the inputs for determining fair value. Non-real estate collateral* maybe valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level3* fair value classification. There wereno changes in valuation techniques used during thethree months ended* March 31, 2026*.

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

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Collateral-dependent loans were measured at fair value and had a principal balance of $16.3 million withno valuation allowance at* March 31, 2026*. At* December 31, 2025*, collateral-dependent loans were measured at fair value and had a principal balance of $23.3 million with a valuation allowance of $1.2 million.

**NOTE13 **–DERIVATIVE FINANCIAL INSTRUMENTS

There wereno active derivative contracts in place as of* March 31, 2026* or* December 31, 2025*.

The Company receives equity warrants with net settlement terms in connection with extending loan commitments to certain of its clients. These warrants are obtained at the inception of a loan facility or the amendment of a loan facility. These warrants arenot obtained in lieu of other fees, interest or payments. These warrants potentially provide an additional return, in addition to the traditional loan yield from interest and fees, in the event of a liquidity event of the borrowing company. The Company holds these equity warrants for future investment gains, rather than to hedge economic risks. In general, the equity warrants entitle the Company to buy a specific number of shares of the client’s stock at a specific price over a specific time period. The warrants* mayalso include contingent provisions which provide for additional shares to be purchased at a specific price if defined future events occur, such as future rounds of equity financing by the client, or upon additional borrowings by the client. All of the Company’s equity warrants contain net share settlement provisions, which permit the client to deliver to the Company, upon the Company’s exercise of the warrant, the amount of shares with a current fair value equal to the net gain under the warrant agreement. Warrants held, which amounted to $935 thousand and $945 thousand at March 31, 2026* and* December 31, 2025*, respectively, are included in accrued interest receivable and other assets on the consolidated balance sheets.

**NOTE14 **–REVENUE FROM CONTRACTS WITH CLIENTS

All of the Company’s revenue from contracts with clients in the scope of ASC606 is recognized within Non-Interest Income. The following table presents the Company’s sources of non-interest income for thethree months ended* March 31, 2026and2025*.

(1) Not within the scope of ASC 606.

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

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

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

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Gains/Losses on Sale of OREO–* The Company records a gain from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized, and the gain on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain on sale, the Company adjusts the transaction price and related gain on sale if a significant financing component is present. There wereno gains or losses on the sale of OREO during thethree* months ended* March 31, 2026* or* March 31, 2025*.

**NOTE15 **–BUSINESS SEGMENT INFORMATION

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

The Company has determined that all of its banking divisions meet the aggregation criteria of ASC280, Segment Reporting, as its current operating model is structured whereby banking divisions serve a similar base of primarily commercial clients utilizing a company-wide offering of similar products and services managed through similar processes and platforms that are collectively reviewed by the Company’s Chief Financial Officer, who has been identified as the chief operating decision maker (“CODM”).

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

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

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