Avidbank Holdings, Inc.

Previous wording

uncertain market conditions and economic trends nationally, regionally and particularly in the Bay Area and California;

Current wording

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;

Previous wording

our inability to successfully reposition our available-for-sale securities portfolio utilizing the proceeds from our recent public offering;

Current wording

our inability to successfully reposition our available-for-sale securities portfolio utilizing the proceeds from our public offering;

Previous wording

As disclosed in our Form S-1 (File No. 333-288743) filed with the SEC in connection with the IPO and Note 16 –Subsequent Events of the financial statements hereof, proceeds from the IPO could be used to increase the capital of the Bank to support our organic growth strategies, including expanding our overall market share and our lending activities, strengthening our regulatory capital, optimizing our balance sheet by repositioning a substantial portion of our available-for-sale securities portfolio as well as repaying short-term borrowings and non-core funding, and for working capital and other general corporate purposes. During the third quarter of 2025, we received approximately $275 million in proceeds from securities sold as part of this repositioning of the available-for-sale securities portfolio at a pre-tax loss of approximately $62 million. Additionally, we paid off short-term borrowings with part of the proceeds received from the sale of these securities. As a result of this repositioning, we will incur a net loss during the third quarter of 2025. We intend to reinvest a significant portion of the proceeds from the sale of securities into additional available-for-sale securities during the third and fourth quarters of 2025.

Current wording

As disclosed in our Form S-1 (File No. 333-288743) filed with the SEC in connection with the IPO, proceeds from the IPO were used to increase the capital of the Bank to support our organic growth strategies, including expanding our overall market share and our lending activities, strengthening our regulatory capital, optimizing our balance sheet by repositioning a substantial portion of our available-for-sale securities portfolio as well as repaying short-term borrowings and non-core funding, and for working capital and other general corporate purposes. During the third quarter of 2025, we received $274.7 million in proceeds from securities sold as part of this repositioning of the available-for-sale securities portfolio at a pre-tax loss of $62.4 million and purchased $163.2 million in available-for-sale securities with an average purchase yield of 4.54% and a duration of 2.8 years. Additionally, we paid off short-term borrowings using proceeds from the IPO and proceeds received from the sale of these securities.

Previous wording

Our net income for the three months ended June 30, 2025 was $5.8 million, or $0.75 per diluted share, an increase of $2.3 million, or 67%, compared to $3.5 million, or $0.46 per diluted share, for the same period in 2024. For the six months ended June 30, 2025, net income was $11.2 million, or $1.46 per diluted share, an increase of $2.5 million, or 29%, compared to $8.7 million, or $1.15 per diluted share, for the same period in 2024. The following provides highlights of our financial results for three and six months ended June 30, 2025:

Current wording

We reported a net loss for the three months ended September 30, 2025 of $37.7 million, or ($4.12) per diluted share, compared to net income of $5.8 million, or $0.77 per diluted share, for the same period in 2024. For the nine months ended September 30, 2025, we reported a net loss of $26.5 million, or ($3.28) per diluted share, compared to net income of $14.6 million, or $1.92 per diluted share, for the same period in 2024. The following provides highlights of our financial results for three and nine months ended September 30, 2025:

Previous wording

Net interest margin expanded to 3.60% in the second quarter of 2025, compared to 3.39% in the second quarter of 2024. For the six months ended June 30, 2025, net interest margin was 3.56% compared to 3.46% for the same period in 2024, and taxable equivalent net interest margin(2) was 3.56% compared to 3.47% for the same period in 2024.

Current wording

Net interest margin expanded to 3.90% in the third quarter of 2025, compared to 3.35% in the third quarter of 2024. For the nine months ended September 30, 2025, net interest margin was 3.68% compared to 3.42% for the same period in 2024.

Previous wording

Average loans, net of deferred fees increased $73.8 million, or 4%, compared to the second quarter of 2024. For the six months ended June 30, 2025, average loans, net of deferred fees increased $88.0 million, or 5% from the same period in 2024.

Current wording

Period-end loans, net of deferred fees increased $93.6 million, or 5%, compared to December 31, 2024.

Previous wording

Average deposits increased $214.9 million, or 12%, from the second quarter of 2024. For the six months ended June 30, 2025, average deposits increased $188.3 million, or 11%, from the same period in 2024.

Current wording

Average deposits increased $238.3 million, or 13%, from the third quarter of 2024. For the nine months ended September 30, 2025, average deposits increased $205.2 million, or 12%, from the same period in 2024.

Previous wording

Book value per share was $25.80, an increase of $2.23, or 9%, from December 31, 2024.

Current wording

Book value per share was $25.00 at September 30, 2025, an increase of $1.43, or 6%, from December 31, 2024.

Previous wording

Nonperforming assets to total assets totaled 0.06% as of June 30, 2025, unchanged from December 31, 2024.

Current wording

Nonperforming assets to total assets increased to 0.12% as of September 30, 2025 from 0.06% at December 31, 2024.

Previous wording

Average interest-earning assets for the three months ended June 30, 2025 increased $63.2 million compared to the same period in 2024, which included increases of $73.8 million in average total loans, partially offset by a $13.7 million decrease in average investment securities. Average interest-bearing liabilities increased $39.4 million for the three months ended June 30, 2025, compared to the same period in 2024, primarily due to a $226.2 million increase in average interest-bearing deposits, partially offset by decreases of $186.8 million in average short-term borrowings. Average noninterest-bearing deposits for the three months ended June 30, 2025, decreased to $425.2 million from $436.5 million for the same period in 2024.

Current wording

Average interest-earning assets for the three months ended September 30, 2025 increased $92.8 million compared to the same period in 2024, which included increases of $120.4 million in average total loans and $102.7 million in average balances due from the Federal Reserve Bank and interest-bearing deposits in banks, partially offset by a $130.3 million decrease in average investment securities. Average interest-bearing liabilities decreased $39.8 million for the three months ended September 30, 2025, compared to the same period in 2024, primarily due to a $203.9 million decrease in average short-term borrowings, a $59.4 million decrease in average non-reciprocal brokered deposits and a $32.1 million decrease in average time deposits, partially offset by increases of $170.5 million in average interest-bearing demand deposits and an increase of $85.0 million in average money market and savings. Average noninterest-bearing deposits for the three months ended September 30, 2025, increased to $74.2 million from $408.6 million for the same period in 2024.

Previous wording

Net interest margin for the three months ended June 30, 2025, was 3.60% compared to 3.39% for the same period in 2024. Taxable equivalent net interest margin for the three months ended June 30, 2025, was also 3.60% compared to 3.39% for the same period in 2024. The increase was primarily due to lower cost of deposits and lower rates on short-term borrowings. Partially offsetting these impacts to net interest margin was an increase in the rate for subordinated debt coupled with lower yields on loans and federal funds sold and interest-bearing deposits compared to the same period in 2024. As of December 30, 2024, the $22.0 million of subordinated debt repriced from a fixed rate of 5.00% to a quarterly floating rate of SOFR plus 359.5 basis points, or 7.91%.

Current wording

Net interest margin for the three months ended September 30, 2025, was 3.90% compared to 3.35% for the same period in 2024. The increase was primarily driven by lower average short-term borrowings, an increase in average noninterest-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 securities portfolio. Partially offsetting the improvement in net interest margin was an increase in the rate paid for subordinated debt. As of December 30, 2024, the $22.0 million of subordinated debt repriced from a fixed rate of 5.00% to a quarterly floating rate of SOFR plus 359.5 basis points, or 7.91%. As of September 30, 2025, the interest rate paid on the subordinated debt was 7.57%

Previous wording

The yield on total average loans of 6.98% for the six months ended June 30, 2025, declined 35 basis points compared to the same period in 2024, and the yield on interest-earning assets decreased to 6.30% for the six months ended June 30, 2025, compared to 6.56% for the same period in 2024. The average cost of total deposits decreased to 2.77% for the six months ended June 30, 2025, from 2.95% for the same period in 2024, and total funding costs, including all deposits, short-term borrowings and subordinated debt, decreased to 3.68% for the six months ended June 30, 2025, compared to 4.23% for the same period 2024.

Current wording

The yield on total average loans of 6.98% for the three months ended September 30, 2025, declined 40 basis points compared to the same period in 2024, primarily driven by reductions in the prime rate. The yield on interest-earning assets decreased to 6.42% for the three months ended September 30, 2025, compared to 6.59% for the same period in 2024. The average cost of total deposits decreased to 2.67% for the three months ended September 30, 2025, from 3.22% for the same period in 2024, and total funding costs, including all deposits, short-term borrowings and subordinated debt, decreased to 3.58% for the three months ended September 30, 2025, compared to 4.33% for the same period 2024.

Previous wording

The average rate paid for short-term borrowings for the three months ended June 30, 2025, was 4.60% compared to 5.29% for the same period in 2024. The short-term borrowings typically consist of overnight borrowings.

Current wording

The average rate paid for short-term borrowings for the three months ended September 30, 2025, was 4.56% compared to 5.23% for the same period in 2024. The short-term borrowings typically consist of overnight borrowings. During the third quarter of 2025, short-term borrowings were paid off using proceeds from the IPO and from the sale of securities.

Previous wording

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 six months ended June 30, 2025 and 2024:

Current wording

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 nine months ended September 30, 2025 and 2024:

Previous wording

Net interest income for the three months ended June 30, 2025, was $20.3 million, an increase of $1.8 million, or 10%, compared to $18.5 million for the three months ended June 30, 2024. The increase in net interest income was primarily attributable to lower rates paid on deposits and short-term borrowings.

Current wording

Net interest income for the nine months ended September 30, 2025, was $62.3 million, an increase of $6.3 million, or 11%, compared to $56.0 million for the nine months ended September 30, 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 decrease in average short-term borrowings that were paid off in the third quarter of 2025 using proceeds from the IPO and securities sales as part of the repositioning of our securities portfolio.

Previous wording

Average interest-earning assets for the six months ended June 30, 2025 increased $73.7 million compared to the same period in 2024, which included increases of $88.0 million in average total loans, partially offset by a $18.3 million decrease in average investment securities. Average interest-bearing liabilities increased $83.1 million for the six months ended June 30, 2025, compared to the same period in 2024, primarily due to a $232.6 million increase in average interest-bearing deposits, partially offset by decreases of $149.6 million in average short-term borrowings. Average noninterest-bearing deposits for the six months ended June 30, 2025, decreased to $415.5 million from $459.8 million for the same period in 2024.

Current wording

Average interest-earning assets for the nine months ended September 30, 2025 increased $80.2 million compared to the same period in 2024, which included increases of $98.9 million in average total loans and $37.3 million in average balances due from the Federal Reserve Bank and interest-bearing deposits in banks, partially offset by a $56.1 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 $41.7 million for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to a $209.6 million increase in average interest-bearing deposits, partially offset by a decrease of $167.9 million in average short-term borrowings resulting from paydowns using the proceeds from the IPO and sales of securities. Average noninterest-bearing deposits for the nine months ended September 30, 2025, decreased to $438.2 million from $442.6 million for the same period in 2024.

Previous wording

Net interest margin for the six months ended June 30, 2025, was 3.56% compared to 3.46% for the same period in 2024. Net interest margin on a taxable equivalent basis for the six months ended June 30, 2025, was 3.56% compared to 3.47% for the same period in 2024. The increase was primarily due to lower cost of deposits and lower rates on short-term borrowings. Partially offsetting these impacts to net interest margin was an increase in the rate for subordinated debt coupled with lower yields on loans and federal funds sold and interest-bearing deposits compared to the same period in 2024.

Current wording

Net interest margin for the nine months ended September 30, 2025, was 3.68% compared to 3.42% for the same period in 2024. The increase was primarily due to lower cost of deposits and lower outstanding balances on short-term borrowings. Partially offsetting these 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.

Previous wording

The yield on total average loans of 7.01% for the three months ended June 30, 2025, declined 37 basis points compared to the same period in 2024, and the yield on interest-earning assets decreased to 6.32% for the three months ended June 30, 2025, compared to 6.62% for the same period in 2024. The average cost of total deposits decreased to 2.78% for the three months ended June 30, 2025, from 3.09% for the same period in 2024, and total funding costs, including all deposits, short-term borrowings and subordinated debt, decreased to 3.67% for the three months ended June 30, 2025, compared to 4.34% for the same period 2024.

Current wording

The yield on total average loans of 6.98% for the nine months ended September 30, 2025, declined 37 basis points compared to the same period in 2024, and the yield on interest-earning assets decreased to 6.34% for the nine months ended September 30, 2025, compared to 6.57% for the same period in 2024. The average cost of total deposits decreased to 2.74% for the nine months ended September 30, 2025, from 3.04% for the same period in 2024. Total funding costs, including all deposits, short-term borrowings and subordinated debt, decreased to 3.65% for the nine months ended September 30, 2025, compared to 4.26% for the same period 2024.

Previous wording

The average rate paid for short-term borrowings for the six months ended June 30, 2025, was 4.57% compared to 5.10% for the same period in 2024. The short-term borrowings typically consist of overnight borrowings. Total funding costs, including all deposits, short-term borrowings and subordinated debt, decreased to 3.68% for the six months ended June 30, 2025, compared to 4.23% for the same period in 2024.

Current wording

The average rate paid for short-term borrowings for the nine months ended September 30, 2025, was 4.57% compared to 5.14% for the same period in 2024. The short-term borrowings typically consist of overnight borrowings. During the third quarter of 2025, short-term borrowings were paid off using proceeds from the IPO and from the sale of securities.

Previous wording

The following table shows the effect of the interest differential of volume and rate changes for the three and six months ended June 30, 2025 compared to the same periods in 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.

Current wording

The following table shows the effect of the interest differential of volume and rate changes for the three and nine months ended September 30, 2025 compared to the same periods in 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.

Previous wording

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, nonperforming 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.

Current wording

Management considers a number of factors in determining the required level of the allowance for credit losses and the provision required to achieve what is believed to be an appropriate reserve level, including historical loss experience, loan growth, credit risk rating trends, nonperforming 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.

Previous wording

The provision for credit losses was $925,000 for the three and six months ended June 30, 2025, a decrease of $2.1 million, or 69%, compared to the three months ended June 30, 2024, and a decrease of $2.4 million, or 72%, compared to the six months ended June 30, 2024. The allowance for credit losses, which includes loans and unfunded commitments, as a percentage of outstanding loans was 1.15% and 1.36% at June 30, 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.”

Current wording

The provision for credit losses was $1.4 million for the three months ended September 30, 2025, an increase of $1.4 million compared to the three months ended September 30, 2024. The provision was higher in the third quarter of 2025 primarily due to higher loan balances and the addition of one nonaccrual loan. For the nine months ended September 30, 2025, provision for credit losses was $2.3 million, a decrease of $1.0 million, or 31%, compared to the nine months ended September 30, 2024. The allowance for credit losses, which includes loans and unfunded commitments, as a percentage of outstanding loans was 1.19% and 1.37% at September 30, 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.”

Previous wording

The following table reflects the major components of the Company’s noninterest income for the three and six months ended June 30, 2025 and 2024:

Current wording

The following table reflects the major components of the Company’s noninterest income for the three and nine months ended September 30, 2025 and 2024:

Previous wording

Service charges and bank fees for the three and six months ended June 30, 2025, increased $182,000, or 28%, and $327,000, or 26%, respectively, from the same periods in 2024, primarily due to an increase in the number of client relationships.

Current wording

Service charges and bank fees for the three and nine months ended September 30, 2025, increased $104,000, or 15%, and $430,000, or 22%, respectively, from the same periods in 2024, primarily due to an increase in the number of client relationships.

Previous wording

During the three and six months ended June 30, 2025, foreign exchange income decreased $12,000, or 6%, and $44,000, or 10%, respectively, compared to the same periods in 2024 as a result of lower transaction commissions. Foreign exchange income represents commissions earned on foreign exchange transactions, net of related commissions charged by our correspondent bank partners.

Current wording

During the three and nine months ended September 30, 2025, foreign exchange income increased $21,000, or 9%, and decreased $23,000, or 3%, respectively, compared to the same periods in 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.

Previous wording

Income from bank-owned life insurance for the three and six months ended June 30, 2025, decreased $44,000, or 32%, and $141,000, or 44%, respectively, compared to the same periods in 2024 due to the surrender of approximately $21 million in policies in the first quarter of 2024.

Current wording

Income from bank-owned life insurance for the three and nine months ended September 30, 2025, increased $6,000, or 7%, and decreased $136,000, or 33%, respectively, compared to the same periods in 2024 due to the surrender of approximately $21 million in policies in the first quarter of 2024.

Previous wording

Warrant and success fee income totaled $273,000 for the three and six months ended June 30, 2025. Refer to Note 13 –Derivative Financial Instruments for additional discussion of warrants.

Current wording

Warrant and success fee income totaled $273,000 for the nine months ended September 30, 2025. Refer to Note 13 –Derivative Financial Instruments for additional discussion of warrants.

Previous wording

Other investment income for the three and six months ended June 30, 2025, decreased $82,000 and $190,000 compared to the same periods in 2024 primarily due to fair value marks on fund investments.

Current wording

Other investment income for the three and nine months ended September 30, 2025, increased $75,000 and decreased $115,000 compared to the same periods in 2024 primarily due to fair value marks and distributions on fund investments.

Previous wording

During the three months ended June 30, 2025, noninterest expense increased by $851,000, or 7%, to $12.6 million compared to $11.8 million in the same period in 2024. The increase included higher salaries and benefits expense related to increased investment in personnel across the entire Bank as well as increases in legal and professional fees and data processing expense. Partially offsetting the increase in noninterest expense were decreases in occupancy and equipment expense and regulatory assessments.

Current wording

During the three and nine months ended September 30, 2025, noninterest expense increased by $1.4 million, or 11%, to $13.5 million and by $2.7 million, or 7%, to $38.9 million, respectively, compared to the same periods in 2024. The increase 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 noninterest expense were decreases in occupancy and equipment expense and regulatory assessments.

Previous wording

The following table reflects the major components of the Company’s noninterest expense for the three and six months ended June 30, 2025 and 2024:

Current wording

The following table reflects the major components of the Company’s noninterest expense for the three and nine months ended September 30, 2025 and 2024:

Previous wording

Salaries and employee benefits expense for the three and six months ended June 30, 2025, was $9.0 million, an increase of $998,000, or 13%, and $18.1 million, an increase of $1.3 million, or 8%, from the same periods in 2024. The increases were primarily due to increased investment in personnel across the entire Bank and severance expense of $222,000, partially offset by higher capitalized loan origination costs. Full time equivalent headcount totaled 149 at June 30, 2025 compared to 144 at June 30, 2024.

Current wording

Salaries and employee benefits expense for the three months ended September 30, 2025, was $9.8 million, an increase of $1.4 million, or 17%, compared to the three months ended September 30, 2024. The increase was primarily due to an increase in incentives expense, IPO-related expenses and lower capitalized loan origination costs. For the nine months ended September 30, 2025, salaries and employee benefits expense was $27.8 million, an increase of $2.7 million, or 11%, from the same period in 2024. The increase was primarily driven by increased investment in personnel across the entire Bank, severance expense of $222,000, IPO-related expenses and lower capitalized loan origination costs. Full time equivalent headcount totaled 151 at September 30, 2025 compared to 146 at September 30, 2024.

Previous wording

Occupancy and equipment expense totaled $759,000 and $1.8 million for the three and six months ended June 30, 2025, reflecting a decrease of $280,000, or 27%, and $312,000, or 15%, respectively, from the same periods in 2024 due to lower rent expense at one of our loan production offices.

Current wording

Occupancy and equipment expense totaled $723,000 and $2.5 million for the three and nine months ended September 30, 2025, reflecting a decrease of $310,000, or 30%, and $621,000, or 20%, respectively, from the same periods in 2024 due to lower rent expense at one of our loan production offices.

Previous wording

Data processing expense was $759,000 and $1.4 million for the three and six months ended June 30, 2025, an increase of $162,000, or 27%, and $213,000, or 18%, respectively, compared to the same periods in 2024. The increase was due to higher transaction volume.

Current wording

Data processing expense was $792,000 and $2.2 million for the three and nine months ended September 30, 2025, an increase of $154,000, or 24%, and $367,000, or 20%, respectively, compared to the same periods in 2024. The increase was due to higher transaction volume.

Previous wording

Legal and professional fees were $715,000 and $1.2 million for the three and six months ended June 30, 2025, an increase of $174,000, or 32%, and $74,000, or 6%, respectively, from 2024. The increase was driven by legal costs related to proxy matters and general corporate and securities matters.

Current wording

Legal and professional fees were $591,000 and $1.8 million for the three and nine months ended September 30, 2025, an increase of $57,000, or 11%, and $131,000, or 8%, respectively, from 2024. The increase was driven by legal costs related to proxy matters and general corporate and securities matters.

Previous wording

Income tax expense was $2.5 million and $1.4 million for the three months ended June 30, 2025 and 2024, respectively. The effective tax rate for the three months ended June 30, 2025 and 2024 was 30.1% and 28.8%, respectively. For the six months ended June 30, 2025 and 2024, income tax expense was $4.7 million and $3.6 million, respectively. The effective tax rate for the six months ended June 30, 2025 and 2024 was 29.7% and 29.1%, respectively. The higher effective tax rate for 2025 reflected the impact of a change in the California law requiring financial institutions to apportion business income using a single sales factor instead of an equally weighted three-factor formula. As a result, the second quarter of 2025 included $153,000 in additional tax expense related to the writedown of deferred tax assets. This change is expected to result in a lower effective tax rate related to the state of California in future periods.

Current wording

Income tax expense was a benefit of $15.3 million and an expense of $2.5 million for the three months ended September 30, 2025 and 2024, respectively. The effective tax rate for the three months ended September 30, 2025 and 2024 was 28.9% and 29.6%, respectively. For the nine months ended September 30, 2025 and 2024, income tax expense was a benefit of $10.6 million and and an expense of $6.0 million, respectively. The effective tax rate for the nine months ended September 30, 2025 and 2024 was 28.5% and 29.3%, respectively. During the second quarter of 2025, there was $153,000 in additional tax expense related to the writedown of deferred tax assets that resulted from a change in the California law requiring financial institutions to apportion business income using a single sales factor instead of an equally weighted three-factor formula. This change is expected to result in a lower effective tax rate related to the state of California in future periods.

Previous wording

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

Current wording

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

Previous wording

Management reviews yields on certain asset categories and the net interest margin of the Company on a fully taxable equivalent basis. The non-GAAP taxable equivalent net interest income and net interest margin adjustments facilitate performance comparisons between taxable and tax-free assets by increasing the tax-free income by an amount equivalent to the Federal income taxes that would have been paid if this income were taxable at the Company's 21% Federal statutory rate.

Current wording

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

Previous wording

Total assets of the Company were $2.39 billion at June 30, 2025 and $2.30 billion at 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.

Current wording

Total assets of the Company were $2.36 billion at September 30, 2025 and $2.30 billion at 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.

Previous wording

As of June 30, 2025, gross loans totaled $1.91 billion compared to $1.87 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 45% and 44% of commercial and industrial loans at June 30, 2025 and December 31, 2024, respectively. Commercial real estate loans comprised 43% of our loans at June 30, 2025 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.

Current wording

As of September 30, 2025, gross loans totaled $1.96 billion compared to $1.87 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 44% of commercial and industrial loans at both September 30, 2025 and December 31, 2024. Commercial real estate loans comprised 43% of our loans at September 30, 2025 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.

Previous wording

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.

Current wording

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 in most cases that have stepped up in distressed scenarios to provide follow on capital and right size bank debt.