AVBC 10-K & 10-Q changes, risk factors and insider trading

Allowance for Credit Losses. The allowance for credit losses (“ACL”) is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believesconfirms that the uncollectibility of a loan balance is confirmed.unlikely to be collected. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Management evaluates the appropriateness of the ACL on loans quarterly. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change from period to period.

Changes in the ACL are recorded as credit loss expense (or reversal). Losses are charged against the allowance when management believesconfirms the uncollectibility ofthat an available for sale debt security is confirmeduncollectible or when either ofcriterion therelated criteria regardingto intent or requirement to sell is met.

Goodwill. Goodwill is recognized when the fair value of consideration transferred in an acquisition is greater than the fair value of assets acquired and liabilities assumed. Goodwill has an indefinite useful life and is evaluated on at least an annual basis for potential impairment, and more often if circumstances warrant more frequent evaluations. An impairment loss is recognized to the extent that the carrying value exceeds fair value. Significant judgment and assumptions are utilized by management in the impairment analysis. Avidia Bank was created by a merger between Hudson Savings Bank and The Westborough Savings Bank in 2007. Goodwill of $11.9 million resulting from the merger is not amortized but is evaluated for impairment on an annual basis. Impairment of goodwill is recognized in earnings. As of MarchJune 31,30, 2026, no impairment has been recognized.

Comparison of Financial Condition at MarchJune 31,30, 2026 and December 31, 2025

Summary. Total assets were $2.81$2.78 billion at MarchJune 31,30, 2026, decreasing during$57 themillion firstsince quarteryear-end of2025 2026 by $30 million, or 1%,due primarily due to the use of lower yielding short termshort-term investments to reduce higher cost borrowings. Additionally, funds from deposit growth and loan run-off also contributed to increases in investment securities and bank-owned life insurance.

Total Securities. Total securities increased $27$45 million, or 9%,million to $309 million during the quarter due primarily to a $27 million increase in securities available for sale to $296$328 million due to continued purchases of mortgage-backed securities andfrom the deployment of available cash.

Borrowings. Federal Home Loan Bank advances decreased by $55$100 million, or 21%,million to $205$160 million year-to-date due primarily to the availabilityuse of cash on hand to reduce higher cost borrowings.

Total Shareholders’Stockholders’ Equity. Shareholders’Stockholders’ equity increased by $5$11 million, or 1%,3%, to $384$390 million atin period-endthe fromfirst $379half millionof at year-end 2025,2026 primarily due to the benefit of first quarter net income of $6$13 million.million Shareholders'offset by the $2 million dividends that were paid. Stockholders' equity to total assets was 13.7%14.0% as of Marchmidyear 31, 2026,2026 and the non-GAAP measure of tangible equity to tangible assets was 13.3%.13.6%. At that date, the regulatory ratio of common equity tier 1 capital as a percentage of risk-weighted assets measured 17.8%. As discussed in the subsequent event disclosure in Note 2: Basis of Presentation, the Company increased its quarterly dividend to $0.06 from $0.05 and also authorized a stock buyback plan in the third quarter.

Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. Yields on tax-exempt securities have not been computed on a tax-equivalent basis, as the effects are immaterial. Average balances are calculated using daily average balances. Non-accrualNonaccrual loans are included in average balances only. Average yields include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Deferred loan fees are immaterial. Loan balances include loans held for sale.

Comparison of Operating Results for the Three Months and Six Months Ended MarchJune 31,30, 2026 and March 31, 2025

Net Income/Loss. First quarter net income for the first half of the year was $6.0$13.2 million in 2026 compared to a net loss of $11.6$7.7 million forin 2025. The net loss in 2025 was due to an $18.8 million credit loss expense resulting from a charge-off related primarily to one commercial loan in the first quarter of 2025. TheEarnings 2025per netshare loss was due to a $17.6 million credit loss expense primarily reflecting a charge-off related to one commercial loan. Excluding credit loss expense, pre-tax income increased year-over-year to $9.3 million from $1.1 million, primarily due to a $4.8 million increase in net interest income and a $2.8 million reduction in non-interest expense. The efficiency ratio improved year-over-year to 67.2% from 95.2%. Infor the mostfirst recenthalf quarter,of 2026 measured $0.71. For this period, return on assets measured 0.86%,0.95%, return on equity was 6.4%,6.90%, and the non-GAAP measure of return on tangible common equity was 6.6%. Earnings per share in this period totaled $0.32.7.12%.

Credit Loss Expense. Based on management’s analysis of the adequacy of the allowance for credit losses, a firstsecond quarter credit loss expense of $1.1$900 millionthousand was recorded in 2026 and $17.6$1.1 million was recorded in 2025. For the first six months of the year, the expense was $2.0 million and $18.7 million for these respective periods. The expense in 2025 was due to a construction and land loan charge-off, as previously disclosed.

Non-InterestSix Expense.month Firstoccupancy quarterand non-interestequipment and data processing expense together decreased year-over-yearin total by $2.8$1.2 million,million. orThese 13%, to $19.0 millioncosts in 2026,2025 withincluded decreasesa new on-line banking platform and licensing costs, and $379 thousand in mostcontract expensetermination categories.expenses. SalaryPayments and employee benefitsprocessing expense decreased by $1.4$1.2 million due primarily to expenses recorded in 2025 related to the termination of the long-term incentive program and adjustments to short-term incentive expense. Data processing expense decreased $488 thousand as online platform development costs were incurred in 2025. Payment processing expense decreased $676 thousandmillion, primarily due to the impact of lower activity and the sale of the direct merchant portfolio. Professional fees increased $447$875 thousand primarily due to the engagement in 2026 of a third-party to help implement a process improvement program. Deposit insurance expense decreased $767 thousand due to lower assessment rates.

Avidia Bancorp, Inc. is a separate legal entity from Avidia Bank and must provide for its own liquidity to pay its operating expenses and other financial obligations. Its primary source of income is dividends received from Avidia Bank. The amount of dividends that Avidia Bank may declare and pay to the Company is subject to regulation. At MarchJune 31,30, 2026, Avidia Bancorp, Inc. had liquid assets of $74.6$69.8 million on a stand-alone, unconsolidated basis.

Capital Resources. At MarchJune 31,30, 2026, Avidia Bank exceeded all of its regulatory capital requirements and was categorized as well-capitalized at that date. Management is not aware of any conditions or events since the most recent notification of well-capitalized status that would change this categorization. For additional information, including tabular financial information regarding Avidia Bank’s capital levels relative to the requirements for well-capitalized status, see Note 11 of the notes to consolidated financial statements.

Interest Rate Derivatives. We employ various financial risk methodologies that limit, or “hedge,” the adverse effects of increasing or decreasing market interest rates on our investment or loan portfolio and short-term liabilities, such as Federal Home Loan Bank advances. At MarchJune 31,30, 2026, we had interest rate swaps related to Federal Home Loan Bank advances and investments with a notional amount of $75$60 millionmillion. andAt June 30, 2026, we had an interest rate swapscap related to investmentsFederal ofHome Loan Bank advances with a notional amount of $35$25 million. We also engage in hedging strategies with respect to arrangements where our commercial banking customers swap floating interest rate obligations for fixed interest rate obligations, or vice versa. At MarchJune 31,30, 2026, we had interest rate swaps related to customer loans of a notional amount of $105$104 million. Our hedging activity varies based on the level and volatility of interest rates and other changing market conditions. For additional information regarding these activities, see Note 6 in notes to consolidated financial statements.

The following table sets forth, as of MarchJune 31,30, 2026, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve. The changes indicated in the following table are within policy guidelines adopted by Avidia Bank’s board of directors.

The table above indicates that at MarchJune 31,30, 2026, we would have experienced a 5.6%6.0% decrease in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 1.4%1.8% increase in net interest income in the event of an instantaneous parallel 200 basis point decrease in market interest rates.

The following table sets forth, as of MarchJune 31,30, 2026, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve. The changes indicated in the following table are within policy guidelines adopted by Avidia Bank’s board of directors.

The table above indicates that at MarchJune 31,30, 2026, we would have experienced a 6.2%5.0% decrease in EVE in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 1.2%2.1% decrease in EVE in the event of an instantaneous 200 basis point decrease in market interest rates.