Avidbank Holdings, Inc.

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        For investors seeking a clear understanding of Avidbank Holdings, Inc., this summary distills the key insights from its annual report for the fiscal year ended December 31, 2025. We delve into the bank's financial performance, loan portfolio health, funding strategies, risk management, and future outlook, comparing results to the prior year.

Avidbank Holdings, Inc. Annual Report: A Comprehensive Review for Investors

Business Overview

Avidbank Holdings, Inc. is the parent company of Avidbank, a commercial bank that primarily serves businesses and high-net-worth individuals. The bank offers a comprehensive suite of financial products and services, including commercial and industrial loans, real estate loans, and various deposit products like checking, savings, and money market accounts. Avidbank focuses its operations on specific geographic markets, aiming to build strong client relationships and provide tailored financial solutions. Its business model emphasizes disciplined credit underwriting, diversified loan portfolios, and efficient operations to drive sustainable growth and profitability.

Strategic Focus and Business Model

Avidbank's core strategy centers on being a relationship-focused commercial bank that serves businesses and high-net-worth individuals within its target markets. The bank emphasizes disciplined credit underwriting, a diversified loan portfolio, and strong client relationships. It aims to achieve sustainable growth by expanding its market share in commercial real estate and technology lending, while maintaining efficient operations.

Loan Portfolio Health and Trends

Avidbank's loan portfolio serves as a critical indicator of its asset quality.

• Commercial & Industrial (C&I) Loans: This segment notably decreased from $369.1 million in 2024 to $218.4 million in 2025. Loans categorized as 'Special Mention' (those with potential weaknesses requiring close monitoring but not yet substandard) increased from $18.6 million to $22.2 million. This trend suggests a need for continued vigilance in this segment.
• Real Estate Loans:
  • Residential Real Estate: This portfolio grew healthily, increasing from $7.9 million in 2024 to $10.9 million in 2025.
  • Commercial Real Estate: This segment also grew significantly, jumping from $15.0 million to $25.0 million.
  • Construction Loans: This portfolio remained stable at $5.0 million in both 2024 and 2025.
• Asset Quality: Notably, Avidbank reported zero loans across all categories (C&I, construction, residential, and commercial real estate) that were 30, 60, or 90+ days past due, or considered non-accrual (loans no longer earning interest due to borrower distress) as of December 31, 2025. This indicates rigorous underwriting standards and effective credit risk management.

Funding and Liquidity: Managing Deposits

Deposits serve as Avidbank's primary funding source.

• Brokered Deposits: The bank uses brokered deposits, which are large deposits gathered by third-party brokers. Regulators, specifically the FDIC, impose limits on the amount of brokered deposits a bank can hold without additional scrutiny, often tying these limits to the bank's capital levels. Avidbank classified an additional $475.4 million in 2025 (up from $470.0 million in 2024) as brokered deposits because they exceeded these regulatory thresholds. While these deposits are insured and provide stable funding, they can sometimes carry higher interest costs compared to core deposits. This may signal a need for greater diversification in funding sources to reduce reliance on rate-sensitive funds.

Risk Factors

Effective risk management is crucial for any financial institution.

• Cybersecurity: Avidbank's Board of Directors actively oversees cybersecurity risks, receiving regular updates on threat landscapes, defensive measures, and incident response protocols. The bank dedicates resources, including a Chief Technology Officer (CTO) and an Information Security Officer (ISO), who manage the day-to-day cybersecurity program, ensuring the protection of customer data and operational integrity. This proactive approach is essential in today's digital environment.
• Other Key Risks: Beyond cybersecurity, Avidbank actively manages other inherent banking risks, including:
  • Credit Risk: The risk of loss if a borrower fails to repay a loan. The bank mitigates this through stringent underwriting and ongoing portfolio monitoring.
  • Interest Rate Risk: The risk that changes in interest rates will adversely affect the bank's earnings or capital. The bank manages this through asset-liability management strategies.
  • Liquidity Risk: The risk of not being able to meet financial obligations when they come due. The bank manages this through diversified funding sources and by maintaining sufficient liquid assets.
  • Regulatory Compliance Risk: The risk of non-compliance with banking laws and regulations. The bank manages this through robust internal controls and compliance programs.
  • Economic Risk: The impact of broader economic conditions on loan demand, credit quality, and deposit flows.
  • Operational Risk: The risk of loss from inadequate or failed internal processes, people, and systems, or from external events.
  • Competition Risk: The risk of losing market share or profitability due to intense competition from other financial institutions.

Management Discussion (MD&A Highlights)

Management's discussion and analysis (MD&A) highlights the company's financial condition and operational results, focusing on key areas such as financial performance, loan portfolio health, funding, liquidity, and risk management. Management prioritizes maintaining strong asset quality, optimizing the loan portfolio mix, managing funding costs, and ensuring robust capital levels. These efforts support strategic initiatives and help navigate the evolving economic landscape. The decrease in C&I loans and growth in real estate segments, for example, reflect management's strategic adjustments to market conditions and risk appetite.

Competitive Position

Avidbank operates within a highly competitive financial services industry. It faces competition from national, regional, and community banks, alongside non-bank financial institutions and fintech companies. Key competitive factors include interest rates on loans and deposits, service fees, product offerings, digital capabilities, and customer service. Avidbank's competitive strategy focuses on:

• Relationship Banking: Emphasizing personalized service and deep client relationships, particularly with businesses and high-net-worth individuals.
• Market Niche: Targeting specific market segments or geographic areas where it can leverage local expertise and strong networks.
• Credit Expertise: Maintaining a reputation for sound credit underwriting and understanding the unique needs of its commercial borrowers.
• Agility and Responsiveness: Being more nimble than larger institutions in responding to client needs and market changes.

The bank strives to differentiate itself through its service model and specialized lending capabilities, aiming to attract and retain clients who value a more tailored banking experience.

Future Outlook and Considerations

Avidbank's 2025 performance demonstrates resilience and strategic adaptation within a dynamic economic environment. Investors should monitor the bank's ability to grow core deposits, manage its C&I loan portfolio, and adapt to evolving interest rate environments. The bank's strong capital position and robust asset quality provide a solid foundation for future operations. Its future strategy will likely involve a continued focus on prudent growth, enhancing digital capabilities, and optimizing its funding mix to support long-term profitability and shareholder value.