Avidbank Holdings, Inc.

O CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION

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

Operating results for the three and nine months ended September 30, 2025, are not necessarily indicative of the results that may be expected for the year ending December 31, 2025, 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, 2024, as filed with the Securities and Exchange Commission (“SEC”) on the Company’s Form S-1 (File No. 333-288743).

Use of Estimates

The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make judgments in the application of certain accounting policies that involve significant estimates and assumptions. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The Company has established policies and control procedures that are intended to ensure valuation methods are well-controlled and applied consistently from period to period.

Issued Accounting Standards

ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. ASU 2023-09 is effective for Public Business Entities for the annual period beginning January 1, 2025. The Company is considered an emerging growth company and plans to adopt this standard for the annual period beginning January 1, 2026. ASU 2023-09 is not expected to have a significant impact on the Company’s financial statements.

ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” introduces requirements for reporting significant expenses by segment, presenting and describing other segment-related items, identifying the entity’s chief operating decision maker (including their role), and explaining how that individual uses reported profit or loss measures to evaluate segment performance. Additionally, it requires certain segment disclosures, previously only needed on an annual basis, to be presented in interim periods. Under ASU 2023-07, these changes become effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company has adopted this guidance, and the related updated disclosures can be found in Note 15 – Business Segment Information.

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

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

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NOTE 2 – INVEST MENT SECURITIES

The Company didnot hold securities classified as trading or held-to-maturity at September 30, 2025 or December 31, 2024. The amortized cost and estimated fair value of available-for-sale investment securities at September 30, 2025 and December 31, 2024 consisted of the following:

Net unrealized losses on available-for-sale investment securities totaling ($492,000) were recorded as accumulated other comprehensive loss, net of tax of $198,000, within shareholders' equity at September 30, 2025. Net unrealized losses on available-for-sale investment securities totaling $51.3 million were recorded as accumulated other comprehensive income, net of tax of $21.3 million, within shareholders' equity at December 31, 2024.

During the three and nine months ended September 30, 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 then purchased $163.2 million in available-for-sale securities with an average purchase yield of 4.54% and a duration of 2.8 years. In comparison, during the three and nine months ended September 30, 2024, there wereno sales or calls of investment securities andno gains realized or losses recognized. There wereno transfers between investment categories during the three and nine months ended September 30, 2025 or September 30, 2024.

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Investment securities with unrealized losses at September 30, 2025 and December 31, 2024 are summarized and classified according to the duration of the loss period as follows: (in thousands)

At September 30, 2025, the Company held 3 securities available-for-sale, which were in a loss position for greater than 12 months. Management believes the unrealized losses on the Company’s investment securities were caused by interest rate changes. The contractual cash flows of those investments are guaranteed or supported by an agency or sponsored entity of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment. As of September 30, 2025, the Company did not intend to sell and does not believe it will be required to sell securities in an unrealized loss position prior to the recovery of their amortized cost basis. No credit impairment was recorded for those securities in an unrealized loss position for the three and nine months ended September 30, 2025 or September 30, 2024, andthere wasno allowance for credit losses on securities available-for-sale recorded as of September 30, 2025 or December 31, 2024.

The amortized cost and estimated fair value of available-for-sale investment securities at September 30, 2025 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.

Investment securities with fair values of $8.9 million and $15.5 million were pledged at September 30, 2025 and December 31, 2024, respectively, toward certain letters of credit. No investment securities were pledged to secure public deposits at September 30, 2025 or December 31, 2024.

NOTE 3 – 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 $949.2 million and $897.5 million of loans for borrowing capacity of $839.4 million and $786.5 million at September 30, 2025 and December 31, 2024, respectively. The Bank hadno Federal Reserve Bank borrowings outstanding that were secured by loans as of September 30, 2025 and December 31, 2024.

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 $764.5 million of loans for remaining borrowing capacity of $500.2 million at September 30, 2025. In comparison, the Bank pledged a total of $654.8 million of loans for remaining borrowing capacity of $391.2 million at December 31, 2024. There wereno FHLB borrowings outstanding at September 30 2025. Comparatively, the Bank had $70.0 million in FHLB borrowings outstanding at December 31, 2024. See Note 7 –Subordinated Debt and Other Borrowing Arrangements.

NOTE 4 – 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 $7.4 million at both September 30, 2025 and December 31, 2024 and was reported in accrued interest receivable and other assets on the consolidated balance sheets. Accrued interest receivable was excluded from the estimate of credit losses.

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Allocation of the allowance for credit losses on loans by portfolio segment for the three and nine months ended September 30, 2025 and 2024 are as follows:

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The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing as of September 30, 2025 and December 31, 2024:

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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. Gross charge-offs are presented for the nine months ended September 30, 2025 and the year ended December 31, 2024 in the tables below:

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The Company monitors loans by past due status. The following tables present the aging of past due loans as of September 30, 2025 and December 31, 2024:

Loans that are deemed by management to no longer possess risk characteristics similar to other loans in the portfolio, or that have been identified ascollateral-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 ofcollateral-dependent loans by portfolio segment as of December 31, 2024. There wereno such collateral-dependent loans outstanding as of September 30, 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 on one loan.

The following tables present the amortized cost basis of loans at September 30, 2025 and September 30, 2024, that were both experiencing financial difficulty and were modified during the three and nine months ended September 30, 2025 and 2024, 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:

Commitments to lend additional funds to borrowers included in the previous tables totaled $204,000 and $128,000 at September 30, 2025 and 2024, respectively. The Company monitors the performance of modified loans to assess the effectiveness of the modifications. There wereno loans to borrowers experiencing financial difficulty, which had been modified in the prior 12 months, with a payment default during the nine months ended September 30, 2025 and 2024.

NOTE 5 – LEASES

Lease Arrangements

The Company enters into leases in the normal course of business primarily for headquarters, back-office operations locations and business development offices. The Company’s leases have remaining terms ranging from 27 to 59 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 noncancellable operating lease. The lease expires in 2027 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 the first quarter of 2025, the Redwood City loan production office lease expired. The Company then executed a new Redwood City loan production office lease, in a new location, with afive-year term that expires in 2030. The San Francisco loan production office lease also expires in 2030.

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

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

Right-of-use assets and lease liabilities by lease type, and the associated balance sheet classifications, are as follows:

Lease Expense

Total lease cost was comprised solely of operating lease expense and was as follows for the periods presented:

Lease Obligations

Future undiscounted lease payments for operating leases with initial terms of one year or more as of September 30, 2025 are as follows: (in thousands)

NOTE 6 – DEPOSITS

The Company’s total deposits consisted of the following:

Non-reciprocal brokered deposits are used to supplement the Company’s traditional deposit funding sources. At September 30, 2025, the Company hadno non-reciprocal brokered deposits, and at December 31, 2024, they represented 4% of total deposits.

At September 30, 2025, scheduled maturities of time deposits were as follows:

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Interest expense recognized on interest-bearing deposits for the three and nine months ended September 30, 2025 and September 30, 2024, consisted of the following:

Overdrawn deposit accounts reclassified as loans were $27,000 and $70,000 as of September 30, 2025 and December 31, 2024, respectively.

At September 30, 2025, the Company hadtwo deposit relationships that exceeded 5% of total deposits. Totaling $225.4 million, together they represented 11% of total deposits. At December 31, 2024, the Company hadone deposit relationship that exceeded 5% of total deposits. At $97.0 million, this deposit relationship represented 5% of total deposits.

NOTE 7 – SUBORDINATED DEBT AND OTHER BORROWING ARRANGEMENTS

On December 20, 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 December 30, 2029 and bear interest at the rate of 5.0% per annum, payable semiannually for the first five years of the term, and then quarterly at a variable rate based on the then current 3-month Secured Overnight Financing Rate plus 359.5 basis points. The notes are redeemable after five years 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 balance sheet 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 September 30, 2025 was 7.57%.

The Company had unsecured Federal Funds lines of credit with its correspondent banks totaling $200.0 million at September 30, 2025 and $175.0 million at December 31, 2024. There wereno borrowings outstanding as of September 30, 2025. At December 31, 2024, $115.0 million of borrowings were outstanding. The interest rate paid on the borrowings outstanding was 4.40%-4.65% as of December 31, 2024.

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 $839.4 million and $786.5 million as of September 30, 2025 and December 31, 2024, respectively. There wereno borrowings outstanding under the agreement at September 30, 2025 or December 31, 2024.

As a member of the Federal Home Loan Bank of San Francisco, the Bank is eligible to use the FHLB’s facilities for short- and long-term borrowing. Borrowing capacity requires stock ownership in the FHLB and is based on pledged assets or a lien against certain loan categories. As of September 30, 2025, there wereno borrowings outstanding from the FHLB. FHLB borrowings totaled $70.0 million with a floating rate of 4.78% as of December 31, 2024 with open maturity dates. The remaining borrowing capacity at September 30, 2025 and December 31, 2024, was $500.2 million and $391.2 million, respectively, under a detailed lien on loans.

NOTE 8 – SHAREHOLDERS' EQUITY

Dividends

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

Dividends paid from the Bank to the Company are restricted under certain Federal laws and regulations governing banks. In addition, the California Financial Code restricts the total dividend payment of any bank in any one year to the lesser of (1) the bank’s retained earnings or (2) the bank's net income for its last three fiscal years, less distributions made to shareholders during the same three-year period, without the prior approval of the California Department of Financial Protection and Innovation. At September 30, 2025, $63.3 million was free of such restrictions.

Earnings Per Common Share

Due to the Company's net loss for the three and nine months ended September 30, 2025, the assumed vesting of outstanding restricted stock awards had an anti-dilutive effect on diluted earnings per share and was therefore excluded from the calculation of diluted earnings per share. A reconciliation of the numerators and denominators of the basic and diluted earnings per common share computations for the three and nine months ended September 30, 2025 and September 30, 2024 is shown below:

Stock Repurchase Program

The Company announced a stock repurchase program on November 25, 2020, authorizing the repurchase of up to 5% or 307,780 shares of the Company's then outstanding common stock. The program has no expiration date. Under the stock repurchase program, the Company may, from time to time, repurchase shares of its outstanding common stock in the open market, in privately-negotiated transactions, or otherwise, subject to applicable laws and regulations. The extent to which the Company repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements, availability of funds, and other relevant considerations, as determined by the Company. The Company may, at its discretion, begin, suspend or terminate repurchases at any time prior to the program's expiration, without any prior notice. There is no obligation on the part of the Company to repurchase any shares of its common stock. For the three and nine months ended September 30, 2025 and September 30, 2024, no shares were repurchased.

Regulatory Capital

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Under the Basel III rules, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The net unrealized gain or loss on available-for-sale securities is not included in computing regulatory capital. Management believes as of September 30, 2025 and December 31, 2024, the Company and the Bank meet all capital adequacy requirements to which they are subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At September 30, 2025 and December 31, 2024, the most recent regulatory notifications categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category.

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

Actual and required capital amounts and ratios, exclusive of the capital conservation buffer, are presented below at September 30, 2025 and December 31, 2024:

NOTE 9 – COMMIT MENTS AND CONTINGENCIES

Financial Instruments with Off-Balance-Sheet Risk

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

The Company has some commitments that are unconditionally cancellable at its discretion, and these amounts are not included in the totals below. The contractual amounts of financial instruments with off-balance sheet credit risk at September 30, 2025 and December 31, 2024 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 24 years.

Standby letters of credit are generally secured and are issued by the Bank to guarantee the performance of a client to a third party. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to clients. The fair value of the liability related to these standby letters of credit, which represents the fees received for issuing the guarantees, was not significant at September 30, 2025 and December 31, 2024. The Company recognizes these fees as revenue in other income over the term of the commitment or when the commitment is used.

Significant Concentrations of Credit Risk

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

At September 30, 2025 and December 31, 2024, in management’s judgment, a concentration of loans existed in construction and commercial real estate related loans. At both September 30, 2025 and December 31 2024, approximately 54% of the Company's loans were construction and commercial real estate related, representing 11% and 43% of total outstanding loans, respectively, at September 30, 2025 and 13% and 41%, respectively, at December 31, 2024.

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. We do not believe that any currently pending proceedings will have a material adverse effect on our business, financial condition or results of operation.

In accordance with Accounting Standards Codification Topic 450, the Company establishes accruals for contingencies, including any litigation, regulatory, or tax matters (but excluding standard business-related legal fees), when the Company believes it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. We evaluate our outstanding legal and regulatory proceedings and other matters each quarter to assess our loss contingency accruals and make adjustments in such accruals, upward or downward, as appropriate, in light of additional information and based on management’s best judgment. For claims and legal actions where it is not reasonably possible that a loss may be incurred, or where we are not currently able to estimate the reasonably possible loss or range of loss, we do not establish an accrual. As of September 30, 2025, the Company didnot record an accrued contingent liability. However, a loss is possible in future quarters due to a lawsuit threatened against the Bank in connection with a wire sent by the Bank on behalf of a client whose email was fraudulently compromised.

NOTE 10 – RELATED PARTY TRANSACTIONS

During the normal course of business, the Company enters into transactions with related parties, including directors and officers. As of September 30, 2025 and December 31, 2024, there wereno balances outstanding for related party loans andno additions or amounts repaid during the three and nine months ended September 30, 2025 or during the year ended December 31, 2024. Undisbursed commitments to related parties totaled $5,000 as of both September 30, 2025 and December 31, 2024, respectively.

Deposits of certain officers, directors, and their associates totaled approximately $432,000 and $519,000 as of September 30, 2025 and December 31, 2024, respectively. Terms on such deposits and loan commitments were equivalent to those available to unrelated parties.

NOTE 11 – OTHER EXPENSES

Other expenses for the three and nine months ended September 30, 2025 and September 30, 2024 consisted of the following:

NOTE 12 – FAIR VALUE

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

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

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

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

Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the fair values presented. The following methods and assumptions were used by the Company to estimate the fair values of its financial instruments at September 30, 2025 and December 31, 2024:

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

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

Securities available-for-sale

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government bonds, certain mortgage products and exchange-traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Examples of such instruments, which would generally be classified within Level 2 of the valuation hierarchy, include certain collateralized mortgage and debt obligations, corporate bonds, municipal bonds and U.S. agency notes. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. Securities classified within Level 3 might include certain residual interests in securitizations and other less liquid securities. As of September 30, 2025 and December 31, 2024, all securities available for sale were Level 2.

Loans

The fair value of variable rate loans that reprice frequently and with no significant change in credit risk is based on the carrying value and results in a classification of Level 3 within the fair value hierarchy. Fair value for other loans is estimated using discounted cash flow analysis using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification in the fair value hierarchy. For collateral-dependent real estate loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. The estimated fair values of financial instruments disclosed above as of September 30, 2025 and December 31, 2024, follow the guidance in ASU 2016-01 which prescribes an “exit price” approach in estimating and disclosing fair value of financial instruments incorporating discounts for credit, liquidity, and marketability factors.

Deposits

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

Subordinated debt and Short-term borrowings

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

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

The carrying amounts and estimated fair values of financial instruments at September 30, 2025 and December 31, 2024, are as follows:

Assets Recorded at Fair Value

The following tables present information about the company's assets and liabilities measured at fair value on a recurring and nonrecurring basis as of September 30, 2025 and December 31, 2024:

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 investment securities are based on quoted market prices for similar securities (Level 2). During the nine months ended September 30, 2025 and 2024, there were no significant transfers in or out of Levels 1, 2 or 3.

Non-recurring Basis

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

A loan is considered to be collateral-dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. At the time a loan is considered collateral-dependent, it is valued at fair value, less estimated costs to sell. Collateral-dependent loans carried at fair value generally receive specific allocations of the allowance for credit losses. For collateral-dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. There were no changes in valuation techniques used during the nine months ended September 30, 2025 and 2024.

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.

Collateral-dependent loans were measured at fair value and had a principal balance of $1.5 million with a valuation allowance of $1.5 million at September 30, 2025 and $113,000 with no valuation allowance at December 31, 2024.

NOTE 13 – DERIVATIVE FINANCIAL INSTRUMENTS

There wereno active derivative contracts in place as of September 30, 2025 or December 31, 2024.

The Company receives equity warrants with net settlement terms in connection with extending loan commitments to certain of its clients. These warrants are obtained at the inception of a loan facility or the amendment of a loan facility. These warrants are not obtained in lieu of other fees, interest or payments. These warrants potentially provide an additional return, in addition to the traditional loan yield from interest and fees, in the event of a liquidity event of the borrowing company. The Company holds these equity warrants for future investment gains, rather than to hedge economic risks. In general, the equity warrants entitle the Company to buy a specific number of shares of the client’s stock at a specific price over a specific time period. The warrants may also include contingent provisions which provide for additional shares to be purchased at a specific price if defined future events occur, such as future rounds of equity financing by the client, or upon additional borrowings by the client. All of the Company’s equity warrants contain net share settlement provisions, which permit the client to deliver to the Company, upon the Company’s exercise of the warrant, the amount of shares with a current fair value equal to the net gain under the warrant agreement. Warrants held, which amounted to $926,000 and $663,000 at September 30, 2025 and December 31, 2024, respectively, are included in accrued interest receivable and other assets on the consolidated balance sheets.

NOTE 14 – REVENUE FROM CONTRACTS WITH CLIENTS

All of the Company’s revenue from contracts with clients in the scope of ASC 606 is recognized within Noninterest Income. The following table presents the Company’s sources of noninterest income for the three and nine months ended September 30, 2025 and 2024.

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.

Gains/Losses on Sale of ORE –The Company records a gain from the sale of ORE 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 ORE 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 ORE 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 priced and related gain on sale if a significant financing component is present. There wereno gains or losses on the sale of ORE during the three and nine months ended September 30, 2025 or September 30, 2024.

NOTE 15 – BUSINESS SEGMENT INFORMATION

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

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

The CODM regularly assesses performance of the aggregated single operating and reporting segment and decides how to allocate resources based on net income calculated on the same basis as is net income reported in the Company’s consolidated statements of income 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 income.

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.

NOTE 16 – SUBSEQUENT EVENTS

Management has evaluated subsequent events that occurred after September 30, 2025. During this period, up to the filing date of this quarterly report on Form 10-Q, management did not identify any material subsequent events that would require recognition or disclosure in our Consolidated Financial Statements as of or for the quarter ended September 30, 2025.

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