RBB(US:RBB)2025-08-08 20:30PART I – FINANCIAL INFORMATION (UNAUDITED) This section presents the unaudited consolidated financial statements and related notes of RBB Bancorp and its subsidiaries ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) This section presents the unaudited consolidated financial statements of RBB Bancorp and its subsidiaries, including balance sheets, statements of income, comprehensive income, changes in shareholders' equity, and cash flows. It also includes detailed notes explaining business operations, significant accounting policies, investment securities, loans and credit losses, loan servicing, goodwill and intangibles, deposits, debt, borrowing arrangements, income taxes, commitments, leases, related party transactions, stock-based compensation, regulatory matters, fair value measurements, earnings per share, revenue from customer contracts, segment information, affordable housing investments, stock repurchases, and subsequent events Consolidated Balance Sheets This statement presents the company's financial position, including assets, liabilities, and equity, at specific reporting dates | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total assets | $4,090,040 | $3,992,477 | | Loans held for investment, net | $3,183,681 | $3,005,501 | | Total deposits | $3,188,231 | $3,083,789 | | Total liabilities | $3,572,387 | $3,484,600 | | Total shareholders' equity | $517,653 | $507,877 | Consolidated Statements of Income This statement details the company's revenues, expenses, and net income over specific reporting periods | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :------------------------------------ | :----------------------------------- | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Total interest and dividend income | $54,205 | $52,336 | $52,886 | $106,541 | $107,681 | | Total interest expense | $26,871 | $26,173 | $28,921 | $53,044 | $58,839 | | Net interest income | $27,334 | $26,163 | $23,965 | $53,497 | $48,842 | | Provision for credit losses | $2,387 | $6,746 | $557 | $9,133 | $557 | | Total noninterest income | $8,478 | $2,295 | $3,488 | $10,773 | $6,860 | | Total noninterest expense | $20,493 | $18,522 | $17,124 | $39,015 | $34,093 | | Net income | $9,333 | $2,290 | $7,245 | $11,623 | $15,281 | | Basic Net income per share | $0.53 | $0.13 | $0.39 | $0.66 | $0.83 | | Diluted Net income per share | $0.52 | $0.13 | $0.39 | $0.65 | $0.82 | Consolidated Statements of Comprehensive Income This statement reports net income and other comprehensive income components, reflecting total changes in equity from non-owner sources | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------ | :----------------------------------- | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Net income | $9,333 | $2,290 | $7,245 | $11,623 | $15,281 | | Total other comprehensive income/(loss) | $1,282 | $2,962 | $67 | $4,244 | $(1,403) | | Total comprehensive income | $10,615 | $5,252 | $7,312 | $15,867 | $13,878 | Consolidated Statements of Changes in Shareholders' Equity This statement outlines the changes in shareholders' equity resulting from net income, dividends, stock transactions, and other comprehensive income - Shareholders' equity at June 30, 2025, was $517,653 thousand, increasing from $510,306 thousand at March 31, 2025, primarily due to net income of $9,333 thousand and other comprehensive income of $1,282 thousand, partially offset by cash dividends and stock repurchases17 - For the six months ended June 30, 2025, shareholders' equity increased to $517,653 thousand from $507,877 thousand at January 1, 2025, driven by net income of $11,623 thousand and other comprehensive income of $4,244 thousand, despite cash dividends of $5,719 thousand and stock repurchases of $1,499 thousand17 Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------- | :------------------------------------ | :------------------------------------ | | Net cash provided by operating activities | $29,430 | $16,521 | | Net cash used in investing activities | $(172,441) | $(29,238) | | Net cash provided by (used in) financing activities | $77,118 | $(165,887) | | Net decrease in cash and cash equivalents | $(65,893) | $(178,604) | | Cash and cash equivalents at end of period | $191,852 | $252,769 | NOTE 1 - BUSINESS DESCRIPTION This note describes RBB Bancorp's operations, primary business, and strategic focus within Asian-centric communities - RBB Bancorp operates as a bank holding company with total assets of $4.1 billion, total loans of $3.2 billion, total deposits of $3.2 billion, and total shareholders' equity of $517.7 million as of June 30, 202523 - The Company's primary business is providing business-banking products and services to Asian-centric communities through 24 full-service branches across California, Nevada, New York, Illinois, New Jersey, and Hawaii24 - RBB Bancorp holds both Minority Depository Institution (MDI) and Community Development Financial Institution (CDFI) designations, which provide access to federal support and funding programs2526 NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note explains the basis for preparing the unaudited financial statements and summarizes the company's key accounting policies - The unaudited consolidated financial statements are prepared in accordance with SEC rules for Form 10-Q and GAAP for interim financial reporting, reflecting normal recurring adjustments29 - The Company recognized $5.2 million (pre-tax) in Employee Retention Credit (ERC) refunds from the IRS in Q2 2025, included in other income, with associated professional and tax advisory costs of $1.2 million recognized in legal and professional expense3536 - ASU 2023-07, Segment Reporting, was adopted on December 31, 2024, with no material impact. Other ASUs (2023-06, 2023-09, 2024-03) are not yet effective and are not expected to have a material impact37383940 NOTE 3 - INVESTMENT SECURITIES This note provides details on the composition, fair value, and unrealized gains or losses of the company's investment securities portfolio | Security Type | June 30, 2025 Fair Value (in thousands) | December 31, 2024 Fair Value (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Total available for sale | $413,142 | $420,190 | | Total held to maturity | $3,995 | $4,948 | | Total Investment Securities | $417,137 | $425,138 | - As of June 30, 2025, total available for sale securities had gross unrealized losses of $24,687 thousand, primarily attributed to yield curve movement rather than credit loss, with no ACL recorded414647 - The weighted-average life of the total investment portfolio increased to 5.2 years at June 30, 2025, from 5.0 years at December 31, 2024, mainly due to a decrease in commercial paper248 NOTE 4 - LOANS AND ALLOWANCE FOR CREDIT LOSSES This note presents a detailed breakdown of the loan portfolio and the methodology for the allowance for credit losses | Loan Type (HFI) | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Real Estate: Construction and land development | $157,970 | $173,290 | | Real Estate: Commercial real estate | $1,273,442 | $1,201,420 | | Real Estate: Single-family residential mortgages | $1,603,114 | $1,494,022 | | Commercial: Commercial and industrial | $138,263 | $129,585 | | Commercial: SBA | $55,984 | $47,263 | | Other | $5,922 | $7,650 | | Total loans HFI | $3,234,695 | $3,053,230 | | Allowance for loan losses | $(51,014) | $(47,729) | | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------ | :----------------------------------- | :------------------------------------ | | Provision for credit losses | $2,387 | $6,846 | $604 | | Charge-offs | $(3,339) | $(2,727) | $(567) | | Recoveries | $34 | $84 | $16 | | Ending allowance balance | $51,014 | $51,932 | $41,741 | - Nonaccrual loans totaled $56.8 million at June 30, 2025, a decrease from $81.0 million at December 31, 2024. Loans modified due to financial difficulty totaled $8.4 million in Q2 2025, with $35.5 million of Construction and Land Development loans remaining on nonaccrual and having defaulted on modified terms667174281 NOTE 5 - LOAN SERVICING This note describes the company's loan servicing activities, including the fair value of servicing assets and related income | Loan Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Mortgage loans | $877,300 | $922,183 | | SBA loans | $91,866 | $92,678 | | Commercial real estate loans | $2,438 | $3,761 | | Construction loans | $8,276 | $7,315 | | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------ | :----------------------------------- | :------------------------------------ | | Loan servicing income, net of amortization | $541 | $588 | $579 | - Fair value of mortgage loan servicing assets was $10.3 million at June 30, 2025, using a 10.63% discount rate, 7.57% prepayment speed, and 0.13% default rate. SBA loan servicing assets fair value was $2.2 million, using an 8.5% discount rate, 20.42% prepayment speed, and 1.66% default rate80 NOTE 6 - GOODWILL AND INTANGIBLES This note details the company's goodwill and other intangible assets, including amortization and impairment assessments - Goodwill remained stable at $71.5 million at both June 30, 2025, and December 31, 2024, with no impairment identified81 - Core deposit intangible (CDI) assets decreased to $1.7 million at June 30, 2025, from $2.0 million at December 31, 2024, with amortization expense of $172 thousand for Q2 20258283 | Year | CDI Amortization Expense (in thousands) | | :---------------- | :------------------------------------ | | Remainder of 2025 | $328 | | 2026 | $501 | | 2027 | $417 | | 2028 | $297 | | 2029 | $64 | | Thereafter | $60 | | Total | $1,667 | NOTE 7 - DEPOSITS This note provides a breakdown of the company's deposit base by type and maturity, including wholesale and uninsured deposits | Time Deposits Maturities Periods | $250,000 and under (in thousands) | Greater than $250,000 (in thousands) | Total (in thousands) | | :------------------------------- | :-------------------------------- | :----------------------------------- | :------------------- | | One year or less | $1,003,896 | $940,868 | $1,944,764 | | One year to three years | $6,304 | $1,125 | $7,429 | | Over three years | $474 | — | $474 | | Total | $1,010,674 | $941,993 | $1,952,667 | - Wholesale time deposits increased to $183.8 million at June 30, 2025, from $147.5 million at December 31, 2024, including brokered deposits of $133.0 million85 - Time deposits held through CDARS and ICS programs totaled $120.4 million and $142.8 million, respectively, at June 30, 202586 NOTE 8 - LONG-TERM DEBT This note outlines the company's long-term debt obligations, including subordinated notes and their interest terms - The Company has $120.0 million of 4.00% fixed-to-floating rate subordinated notes, maturing April 1, 2031, with interest fixed until April 1, 2026, then floating at three-month SOFR plus 329 basis points87 - Interest expense on these notes was $1.2 million for Q2 2025 and $2.4 million for the six months ended June 30, 202588 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Principal | $120,000 | $120,000 | | Unamortized debt issuance costs | $(280) | $(471) | | Long-term debt, net | $119,720 | $119,529 | NOTE 9 - SUBORDINATED DEBENTURES This note describes the company's subordinated debentures, their interest rates, and their qualification as Tier 1 capital - Subordinated debentures totaled $15.3 million at June 30, 2025, consisting of TFC Trust, FAIC Trust, and PGBH Trust, all with variable interest rates based on three-month CME Term SOFR plus applicable spreads90919293 - These debentures qualify as Tier 1 capital for regulatory reporting purposes, subject to limitations95 - Interest expense on subordinated debentures was $283 thousand for Q2 2025 and $565 thousand for the six months ended June 30, 202594 NOTE 10 - BORROWING ARRANGEMENTS This note details the company's available and utilized borrowing capacities with the FHLB, FRB, and other financial institutions - At June 30, 2025, the Company had a secured borrowing capacity of $1.1 billion with the FHLB, with $180.0 million in outstanding putable term advances at a weighted average rate of 3.51%9799 - The Company also had a secured borrowing capacity of $62.5 million with the FRB and could borrow up to $97.0 million on an unsecured basis from other financial institutions, with no amounts outstanding on these lines at June 30, 202599100 NOTE 11 - INCOME TAXES This note presents information on the company's income tax provision and effective tax rates | Period | Income Tax Provision (in thousands) | Effective Tax Rate | | :------------------------------------ | :-------------------------------- | :----------------- | | Three Months Ended June 30, 2025 | $3,599 | 27.8% | | Three Months Ended March 31, 2025 | $900 | 28.2% | | Three Months Ended June 30, 2024 | $2,527 | 25.9% | | Six Months Ended June 30, 2025 | $4,499 | 27.9% | | Six Months Ended June 30, 2024 | $5,771 | 27.4% | - The Q2 2025 income tax provision included a discrete adjustment of $379 thousand due to a change in California tax law, expected to reduce the annual effective tax rate in future periods237 NOTE 12 - COMMITMENTS AND CONTINGENCIES This note discloses the company's off-balance sheet commitments and potential liabilities | Commitment Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Commitments to make loans | $56,927 | $84,241 | | Unused lines of credit | $89,876 | $85,580 | | Commercial and similar letters of credit | $2,213 | $2,393 | | Standby letters of credit | $5,187 | $3,293 | | Total | $154,203 | $175,507 | - The reserve for off-balance sheet commitments was $629 thousand at June 30, 2025, a decrease from $729 thousand at December 31, 2024107 - Unfunded commitments for affordable housing partnerships and Small Business Investment Company funds totaled $10.7 million at June 30, 2025, up from $5.7 million at December 31, 2024108 NOTE 13 - LEASES This note provides information on the company's lease agreements, right-of-use assets, and lease liabilities | Period | Total future minimum lease payments (in thousands) | | :---------------- | :--------------------------------------- | | Remainder of 2025 | $2,476 | | 2026 | $5,854 | | 2027 | $5,758 | | 2028 | $4,841 | | 2029 | $2,674 | | Thereafter | $8,289 | | Total | $29,892 | | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :----------------------------- | | ROU assets | $25,554 | $28,048 | | Lease liabilities | $27,294 | $29,705 | | Weighted-average remaining lease term (in years) | 6.28 | 6.65 | | Weighted-average discount rate | 2.89% | 2.83% | NOTE 14 - RELATED PARTY TRANSACTIONS This note reports on financial transactions and balances with principal officers, directors, and their affiliates - Deposits from principal officers, directors, and their affiliates increased to $44.1 million at June 30, 2025, from $32.5 million at December 31, 2024113 - Certain directors and their affiliates own $6.0 million of RBB's subordinated debentures at both June 30, 2025, and December 31, 2024113 NOTE 15 - STOCK-BASED COMPENSATION This note details the company's stock-based compensation plans, including stock options and restricted stock units - Stock-based compensation expense for stock options was $12 thousand for Q2 2025 and $26 thousand for the six months ended June 30, 2025. Unrecognized expense was $91 thousand at June 30, 2025, to be recognized over 1.8 years117 - Compensation expense for Restricted Stock Units (RSUs) was $537 thousand for Q2 2025 and $779 thousand for the six months ended June 30, 2025. Unrecognized expense was $2.8 million at June 30, 2025, to be recognized over 2.6 years125 - As of June 30, 2025, 868,747 shares of common stock were available for issuance under the Amended OSIP, representing 4.9% of outstanding shares116 NOTE 16 - REGULATORY MATTERS This note summarizes the company's compliance with regulatory capital requirements and its 'well-capitalized' status - The Company and the Bank were in compliance with all Basel III capital adequacy requirements and the capital conservation buffer at June 30, 2025, and December 31, 2024, and were considered 'well-capitalized'129130313 | Capital Ratio | Consolidated June 30, 2025 | Bank June 30, 2025 | Minimum Required for Capital Adequacy Purposes | To Be Well-Capitalized Under Prompt Corrective Provisions | | :------------------------------------ | :------------------------- | :----------------- | :--------------------------------------------- | :---------------------------------------------------- | | Tier 1 Leverage Ratio | 12.04% | 13.20% | 4.0% | 5.0% | | Common Equity Tier 1 Risk-Based Capital Ratio | 17.61% | 19.96% | 4.5% | 6.5% | | Tier 1 Risk-Based Capital Ratio | 18.17% | 19.96% | 6.0% | 8.0% | | Total Risk-Based Capital Ratio | 24.00% | 21.21% | 8.0% | 10.0% | - Dividend payments are subject to restrictions under California Financial Code, California General Corporation Law, and Federal Reserve guidance134135136 NOTE 17 - FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS This note explains the fair value hierarchy and provides fair value measurements for the company's financial instruments - The Company categorizes financial assets and liabilities into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs) based on the fair value hierarchy137138139140 - Securities available for sale are primarily Level 2, while interest rate lock contracts are Level 3. Collateral-dependent individually evaluated loans and OREO are measured on a non-recurring basis using Level 3 inputs (third-party appraisals with management adjustments)141142143145146 | Financial Instrument | Fair Value Hierarchy | June 30, 2025 Fair Value (in thousands) | December 31, 2024 Fair Value (in thousands) | | :------------------------------------ | :------------------- | :------------------------------------ | :------------------------------------ | | Investment securities – AFS | Level 2 | $413,142 | $420,190 | | Loans, net | Level 3 | $3,127,634 | $2,942,026 | | Deposits | Level 2 | $3,185,653 | $3,078,409 | | FHLB advances | Level 3 | $173,205 | $198,783 | | Long-term debt | Level 3 | $111,978 | $109,463 | | Subordinated debentures | Level 3 | $15,118 | $14,975 | NOTE 18 - EARNINGS PER SHARE This note presents the calculation of basic and diluted earnings per common share for various periods | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------------------ | :------------------------------- | :----------------------------- | | Net income (in thousands) | $9,333 | $11,623 | | Basic earnings per common share | $0.53 | $0.66 | | Diluted earnings per common share | $0.52 | $0.65 | | Weighted-average common shares outstanding (Basic) | 17,746,607 | 17,737,212 | | Weighted-average common shares outstanding (Diluted) | 17,797,735 | 17,784,237 | - Options to purchase 155,500 shares and 106,771 shares were excluded from diluted EPS calculations for the three and six months ended June 30, 2025, respectively, due to their anti-dilutive effect155 NOTE 19 – REVENUE FROM CONTRACTS WITH CUSTOMERS This note details the components of revenue from customer contracts and other noninterest income sources | Revenue Type | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Total in-scope noninterest income | $1,381 | $2,494 | | Noninterest income, not in scope | $7,097 | $8,279 | | Total Noninterest Income | $8,478 | $10,773 | - Major in-scope revenue streams include fees and service charges on deposit accounts, wealth management fees, and gain/loss on sales of OREO. Noninterest income outside ASC 606 primarily includes net loan servicing income, BOLI income, and the ERC refund157158159160161 NOTE 20 - SEGMENT INFORMATION This note describes the company's operating segments and how performance is evaluated by management - The Company's reportable segments are determined by the Chief Executive Officer and Chief Financial Officer, who evaluate performance using consolidated net income, total assets, total loans, and total deposits162163 | Metric | June 30, 2025 (in thousands) | | :-------------------- | :----------------------------- | | Total Assets | $4,090,040 | | Total Loans | $3,234,695 | | Total Deposits | $3,188,231 | | Consolidated net income | $9,333 | NOTE 21 - QUALIFIED AFFORDABLE HOUSING PROJECT INVESTMENTS This note reports on the company's investments in affordable housing projects and associated tax credits - Investments in qualified affordable housing projects totaled $15.6 million at June 30, 2025, with unfunded commitments of $9.8 million166 - Tax credits recognized from these investments were $515 thousand for Q2 2025 and $912 thousand for the six months ended June 30, 2025167 NOTE 22 - REPURCHASE OF COMMON STOCK This note details the company's common stock repurchase programs and shares repurchased during the period - The Board authorized a new $18.0 million stock repurchase program through June 30, 2026, with $16.5 million available at June 30, 2025168 - The Company repurchased 87,731 shares at a weighted average price of $17.04 during Q2 2025168 NOTE 23 - SUBSEQUENT EVENTS This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On July 21, 2025, the Board declared a common stock cash dividend of $0.16 per share, payable August 12, 2025169 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial condition and results of operations, including a cautionary note on forward-looking statements, critical accounting policies, and an overview of financial performance. It details the analysis of results of operations, covering net interest income, provision for credit losses, noninterest income, noninterest expense, and income tax expense. Furthermore, it analyzes the financial condition by examining total assets, cash and cash equivalents, investment securities, loans, allowance for credit losses, goodwill and intangibles, liabilities, deposits, borrowings, capital resources, liquidity management, regulatory capital requirements, contractual obligations, and off-balance sheet arrangements. The section concludes with a discussion of non-GAAP financial measures CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This section warns that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements subject to risks and uncertainties, including business and economic conditions, credit risks, regulatory compliance, interest rate fluctuations, and geopolitical conditions170171178 - Actual results may differ materially from expectations, and the Company does not undertake to update any forward-looking statements170174 CRITICAL ACCOUNTING POLICIES This section identifies key accounting policies that involve significant management estimates and judgments - Critical accounting policies include the allowance for credit losses (ACL) on loans held for investment, goodwill, and income taxes, which involve significant management estimates and assumptions176 - A sensitivity analysis of the ACL at June 30, 2025, showed a 25% decrease in prepayment speed would increase ACL by $1.8 million (3.58%), and a one percentage point increase in unemployment rate would increase ACL by $1.2 million (2.42%)177 - Under a Moderate Stress scenario, the ACL would increase by $9.3 million (18.03%), and under a Major Stress scenario, it would increase by $25.3 million (49.07%) at June 30, 2025, with the Company projected to remain well-capitalized179 GENERAL This section provides a general overview of RBB Bancorp's business, financial position, and market focus - RBB Bancorp, a bank holding company, had total assets of $4.1 billion, gross loans HFI of $3.2 billion, total deposits of $3.2 billion, and total shareholders' equity of $517.7 million at June 30, 2025182 - The Bank serves Asian-centric communities through 24 branches across multiple states, offering commercial and investor real estate loans, business loans, SBA loans, mortgage loans, and a full range of depository services182184 - The Company maintains its Minority Depository Institution (MDI) designation, which provides support from federal regulatory agencies183 OVERVIEW This section provides a summary of the company's financial performance and key changes in financial condition for the reporting period | Metric | Q2 2025 (in thousands) | Q1 2025 (in thousands) | Q2 2024 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income | $9,333 | $2,290 | $7,245 | | Diluted EPS | $0.52 | $0.13 | $0.39 | | Provision for credit losses | $2,387 | $6,746 | $557 | - Net income for Q2 2025 included a $5.2 million (pre-tax) Employee Retention Credit (ERC) refund, partially offset by $1.2 million (pre-tax) in associated professional and advisory costs188 - Total assets increased by $97.6 million to $4.1 billion at June 30, 2025, driven by a $181.5 million increase in gross loans HFI, partially offset by a $65.9 million decrease in cash and cash equivalents190 - Total deposits increased by $104.4 million to $3.2 billion at June 30, 2025, while FHLB advances decreased by $20.0 million. The all-in average spot rate for total deposits was 2.95% at June 30, 2025192 - Nonperforming assets decreased by $3.6 million to $61.0 million (1.49% of total assets) at June 30, 2025. The Allowance for Loan Losses (ALL) as a percentage of loans HFI decreased to 1.58% at June 30, 2025, from 1.65% at March 31, 2025193194 - Shareholders' equity increased to $517.7 million ($29.25 book value per share) at June 30, 2025, due to net income, lower unrealized losses on AFS securities, and equity compensation, partially offset by dividends and stock repurchases195 ANALYSIS OF RESULTS OF OPERATIONS Financial Performance This section summarizes key financial performance metrics, including net interest income, net income, and efficiency ratio | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------ | :------- | :------- | | Net interest income (in thousands) | $27,334 | $26,163 | $23,965 | $53,497 | $48,842 | | Net income (in thousands) | $9,333 | $2,290 | $7,245 | $11,623 | $15,281 | | Diluted EPS | $0.52 | $0.13 | $0.39 | $0.65 | $0.82 | | Return on average assets, annualized | 0.93% | 0.24% | 0.76% | 0.59% | 0.79% | | Return on average shareholders' equity, annualized | 7.29% | 1.81% | 5.69% | 4.57% | 6.00% | | Efficiency ratio | 57.22% | 65.09% | 62.38% | 60.70% | 61.21% | Net Interest Income/Average Balance Sheet This section analyzes changes in net interest income and net interest margin based on average balance sheet components and interest rates - Net interest income increased by $1.2 million to $27.3 million in Q2 2025 compared to Q1 2025, driven by a $1.9 million increase in interest income (mostly from loans) offset by a $698 thousand increase in interest expense208 - Net Interest Margin (NIM) expanded by 4 basis points to 2.92% in Q2 2025 from 2.88% in Q1 2025, due to a 3 basis point increase in asset yield and a 1 basis point decrease in the overall cost of funds209 - Compared to Q2 2024, net interest income increased by $3.4 million to $27.3 million in Q2 2025, primarily due to lower interest expense ($2.1 million decrease) and higher interest income ($1.3 million increase). NIM increased by 25 basis points to 2.92% from 2.67%212215 - For the six months ended June 30, 2025, net interest income increased by $4.7 million to $53.5 million compared to the same period in 2024, mainly due to a $5.8 million decrease in interest expense, partially offset by a $1.1 million decrease in interest income. NIM increased by 22 basis points to 2.90%216219 Provision for Credit Losses This section discusses the provision for credit losses, net charge-offs, and their impact on the allowance for credit losses - The provision for credit losses decreased to $2.4 million in Q2 2025 from $6.7 million in Q1 2025, reflecting a $1.5 million increase in general reserves due to net loan growth and a $924 thousand increase in specific reserves for one lending relationship220 - Net charge-offs were $3.3 million in Q2 2025, compared to $551 thousand in Q2 2024, and $5.9 million for the six months ended June 30, 2025, compared to $735 thousand for the same period in 2024221222 - The provision for the first six months of 2025 was $9.1 million, significantly higher than $557 thousand in the prior year, primarily due to increased net charge-offs and specific reserves222 Noninterest Income This section details the components and drivers of the company's noninterest income, including significant one-time items | Noninterest Income Component | Q2 2025 (in thousands) | Q1 2025 (in thousands) | Q2 2024 (in thousands) | YTD 2025 (in thousands) | YTD 2024 (in thousands) | | :--------------------------------------- | :--------------------- | :--------------------- | :--------------------- | :---------------------- | :---------------------- | | Service charges and fees | $1,060 | $1,017 | $1,064 | $2,077 | $2,056 | | Gain on sale of loans | $358 | $81 | $451 | $439 | $763 | | Loan servicing income, net of amortization | $541 | $588 | $579 | $1,129 | $1,168 | | Increase in cash surrender value of life insurance | $411 | $403 | $385 | $814 | $767 | | Gain on OREO | — | — | $292 | — | $1,016 | | Other income | $6,108 | $206 | $717 | $6,314 | $1,090 | | Total noninterest income | $8,478 | $2,295 | $3,488 | $10,773 | $6,860 | - Noninterest income significantly increased by $6.2 million to $8.5 million in Q2 2025 compared to Q1 2025, primarily due to a $5.2 million Employee Retention Credit (ERC) refund224 - Compared to Q2 2024, noninterest income increased by $5.0 million, mainly due to the ERC refund, partially offset by a $292 thousand decrease in gain on OREO226227 - For the six months ended June 30, 2025, noninterest income increased by $3.9 million to $10.8 million, driven by the ERC refund, partially offset by decreases in gain on sale of loans and OREO-related gains228 Noninterest Expense This section analyzes the components and changes in the company's noninterest expenses, including salaries and professional fees | Noninterest Expense Component | Q2 2025 (in thousands) | Q1 2025 (in thousands) | Q2 2024 (in thousands) | YTD 2025 (in thousands) | YTD 2024 (in thousands) | | :------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :---------------------- | :---------------------- | | Salaries and employee benefits | $11,080 | $10,643 | $9,533 | $21,723 | $19,460 | | Legal and professional | $2,904 | $1,515 | $1,260 | $4,419 | $2,140 | | Total noninterest expense | $20,493 | $18,522 | $17,124 | $39,015 | $34,093 | - Noninterest expense increased by $2.0 million to $20.5 million in Q2 2025 compared to Q1 2025, mainly due to a $1.4 million increase in legal and professional expense (including $1.2 million for ERC advisory costs) and a $437 thousand increase in salaries and employee benefits234 - The efficiency ratio decreased to 57.22% in Q2 2025 from 65.09% in Q1 2025, primarily due to higher noninterest income from the ERC refund, partially offset by increased noninterest expense from ERC advisory costs234 - For the six months ended June 30, 2025, noninterest expense increased by $4.9 million to $39.0 million compared to the same period in 2024, driven by increases in salaries and employee benefits ($2.3 million) and legal and professional fees ($2.3 million)236 Income Tax Expense This section provides an analysis of the company's income tax provision and effective tax rates for the reporting periods | Period | Income Tax Provision (in thousands) | Effective Tax Rate | | :------------------------------------ | :-------------------------------- | :----------------- | | Three Months Ended June 30, 2025 | $3,599 | 27.8% | | Three Months Ended March 31, 2025 | $900 | 28.2% | | Three Months Ended June 30, 2024 | $2,527 | 25.9% | | Six Months Ended June 30, 2025 | $4,499 | 27.9% | | Six Months Ended June 30, 2024 | $5,771 | 27.4% | - The Q2 2025 income tax provision included a discrete adjustment of $379 thousand resulting from a change in California tax law, which is expected to reduce the annual effective tax rate in future periods237 ANALYSIS OF FINANCIAL CONDITION Total Assets This section discusses the primary drivers of changes in the company's total assets over the reporting period - Total assets increased by $97.6 million to $4.1 billion at June 30, 2025, from $4.0 billion at December 31, 2024, primarily due to a $181.5 million increase in gross loans HFI, partially offset by a $65.9 million decrease in cash and cash equivalents240 Cash and Cash Equivalents This section analyzes the changes in cash and cash equivalents resulting from operating, investing, and financing activities - Cash and cash equivalents decreased by $65.9 million (25.6%) to $191.9 million at June 30, 2025, from $257.8 million at December 31, 2024241 - This decrease was due to $172.4 million used in investing activities (net increase in loans, AFS securities decrease, loan/OREO sales), partially offset by $29.4 million from operating activities and $77.1 million from financing activities (deposit growth, FHLB advances decrease)241 Investment Securities This section details the composition, fair value, and unrealized gains or losses within the company's investment securities portfolio | Security Type | June 30, 2025 Fair Value (in thousands) | December 31, 2024 Fair Value (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Total securities, available for sale | $413,142 | $420,190 | | Total securities, held to maturity | $3,995 | $4,948 | | Total securities | $417,137 | $425,138 | - The weighted-average life of the total investment portfolio increased to 5.2 years at June 30, 2025, from 5.0 years at December 31, 2024, due to a decrease in commercial paper248 - Unrealized losses on investment securities were primarily attributed to changes in interest rates, with no Allowance for Credit Losses (ACL) recorded on AFS or HTM securities as of June 30, 2025, or December 31, 2024252 Loans This section provides a detailed breakdown and analysis of the loan portfolio - Loans HFI increased by $181.5 million (12.0% annualized) to $3.2 billion at June 30, 2025, driven by increases in SFR mortgages ($109.1 million), CRE loans ($72.0 million), C&I loans ($8.7 million), and SBA loans ($8.7 million)254 | Loan Type (HFI) | June 30, 2025 % of Total | December 31, 2024 % of Total | | :-------------------------------- | :----------------------- | :----------------------- | | Single-family residential mortgages | 49.6% | 48.9% | | Commercial real estate | 39.4% | 39.3% | | Construction and land development | 4.9% | 5.7% | | Commercial and industrial | 4.3% | 4.2% | | SBA | 1.7% | 1.5% | | Other loans | 0.1% | 0.4% | - The majority of the loan portfolio (88.3%) is based on collateral or businesses located in California and New York256 - SFR loans had a weighted-average LTV of 55.2% and a weighted average FICO score of 764 at June 30, 2025263 Analysis of the Allowance for Loan Losses This section examines the allowance for loan losses, nonperforming assets, and credit quality trends within the loan portfolio | Loan Type (HFI) | ALL as a % of Loan Type (June 30, 2025) | ALL as a % of Loan Type (December 31, 2024) | | :-------------------------------- | :-------------------------------------- | :------------------------------------------ | | Construction and land development | 5.05% | 3.49% | | Commercial real estate | 1.68% | 1.82% | | Single-family residential mortgages | 1.19% | 1.17% | | Commercial and industrial | 1.08% | 1.03% | | SBA | 1.41% | 1.38% | | Other | 3.88% | 3.74% | | Total Allowance for Loan Losses | 1.58% | 1.56% | - The Allowance for Credit Losses (ACL) totaled $51.6 million at June 30, 2025, an increase of $3.2 million from $48.5 million at December 31, 2024, due to a $9.1 million provision for credit losses offset by $5.9 million in net charge-offs276 - Nonperforming assets decreased to $61.0 million (1.49% of total assets) at June 30, 2025, from $81.0 million (2.03% of total assets) at December 31, 2024282 - Special mention loans increased by $26.0 million to $91.3 million (2.82% of total loans) at June 30, 2025, and substandard loans increased by $1.9 million to $91.0 million287288 Goodwill and Other Intangible Assets This section reports on the carrying value and changes in the company's goodwill and other intangible assets - Goodwill remained at $71.5 million at June 30, 2025, and December 31, 2024. Other intangible assets (core deposit intangibles) were $1.7 million at June 30, 2025, down from $2.0 million at December 31, 2024289 Liabilities This section discusses the primary drivers of changes in the company's total liabilities over the reporting period - Total liabilities increased by $87.8 million to $3.6 billion at June 30, 2025, from $3.5 billion at December 31, 2024, primarily due to a $104.4 million increase in deposits, offset by a $20.0 million decrease in FHLB advances290 Deposits This section analyzes the composition, growth, and cost of the company's deposit base - Total deposits increased by $104.4 million (6.8% annualized) to $3.2 billion at June 30, 2025, with interest-bearing deposits increasing by $123.6 million and noninterest-bearing deposits decreasing by $19.1 million291 | Deposit Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Noninterest-bearing demand deposits | $543,885 | $563,012 | | Total interest-bearing deposits | $2,644,346 | $2,520,777 | | Total deposits | $3,188,231 | $3,083,789 | - Wholesale deposits increased to $183.8 million at June 30, 2025, from $147.5 million at December 31, 2024. Estimated uninsured deposits were $1.5 billion at June 30, 2025291296 FHLB Borrowings This section details the company's Federal Home Loan Bank borrowings, outstanding advances, and remaining borrowing capacity - FHLB advances decreased to $180.0 million at June 30, 2025, from $200.0 million at December 31, 2024, consisting entirely of putable term advances with a weighted average interest rate of 3.51%297298 - The Company had $918.4 million of remaining secured borrowing capacity with the FHLB as of June 30, 2025310 Long-term Debt This section describes the company's long-term debt obligations, including subordinated notes and their terms - Long-term debt, consisting of 4.00% fixed-to-floating rate subordinated notes due April 1, 2031, was $119.7 million outstanding at June 30, 2025299 Subordinated Debentures This section provides details on the company's subordinated debentures, their interest rates, and regulatory capital treatment - Subordinated debentures totaled $15.3 million at June 30, 2025, comprising TFC Trust, FAIC Trust, and PGBH Trust, all with variable interest rates tied to three-month CME Term SOFR300302303304 - The Company was in compliance with all covenants under its long-term debt agreements and subordinated debt at June 30, 2025301 Capital Resources and Liquidity Management This section discusses the company's strategies for maintaining adequate capital and managing liquidity through various funding sources - Shareholders' equity increased by $9.8 million (1.9%) to $517.7 million at June 30, 2025, driven by net income, lower unrealized losses on AFS securities, and equity compensation, offset by dividends and repurchases306 - Book value per share increased to $29.25 and tangible book value per share increased to $25.11 at June 30, 2025306 - The Company maintains liquidity through liquid assets, liabilities, and access to alternative funding sources, with a wholesale funding ratio of 10.8% at June 30, 2025307308 - RBB Bancorp's main source of funding is dividends from the Bank, which paid $45.0 million in dividends to Bancorp during the six months ended June 30, 2025311 Regulatory Capital Requirements This section summarizes the company's compliance with all applicable regulatory capital requirements and its 'well-capitalized' status - The Company and the Bank exceeded all regulatory capital requirements under Basel III and were considered 'well-capitalized' at June 30, 2025, and December 31, 2024313 | Capital Ratio | Consolidated June 30, 2025 | Bank June 30, 2025 | Minimum Requirement for "Well Capitalized" Depository Institution | | :------------------------------------ | :------------------------- | :----------------- | :---------------------------------------------------- | | Tier 1 Leverage Ratio | 12.04% | 13.20% | 5.00% | | Common Equity Tier 1 Risk-Based Capital Ratio | 17.61% | 19.96% | 6.50% | | Tier 1 Risk-Based Capital Ratio | 18.17% | 19.96% | 8.00% | | Total Risk-Based Capital Ratio | 24.00% | 21.21% | 10.00% | Contractual Obligations This section details the company's future contractual payment obligations across various categories | Obligation Type | Within One Year (in thousands) | One to Three Years (in thousands) | Over Three to Five Years (in thousands) | After Five Years (in thousands) | Total (in thousands) | | :-------------------------------- | :----------------------------- | :-------------------------------- | :------------------------------------ | :------------------------------ | :------------------- | | Deposits without a stated maturity | $1,235,564 | — | — | — | $1,235,564 | | Time deposits | $1,944,764 | $7,429 | $474 | — | $1,952,667 | | FHLB advances | $180,000 | — | — | — | $180,000 | | Long-term debt | — | — | — | $119,720 | $119,720 | | Subordinated debentures | — | — | — | $15,265 | $15,265 | | Leases | $5,411 | $11,367 | $6,068 | $7,046 | $29,892 | | Total contractual obligations | $3,365,739 | $18,796 | $6,542 | $142,031 | $3,533,108 | Off-Balance Sheet Arrangements This section discloses the company's significant off-balance sheet financial commitments and arrangements - Off-balance sheet financial commitments, including commitments to extend credit, unused lines of credit, and letters of credit, totaled $154.2 million at June 30, 2025, down from $175.5 million at December 31, 2024318 - Unfunded commitments for affordable housing partnerships and Small Business Investment Company funds totaled $10.7 million at June 30, 2025321 Non-GAAP Financial Measures This section explains and reconciles the non-GAAP financial measures used by management to evaluate performance and capital adequacy - The Company uses non-GAAP financial measures such as 'tangible common equity to tangible assets ratio,' 'tangible book value per share,' and 'return on average tangible common equity' to evaluate capital adequacy and performance322323324 | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Tangible common equity (in thousands) | $444,488 | $434,368 | | Tangible assets (in thousands) | $4,016,875 | $3,918,968 | | Tangible common equity to tangible assets ratio | 11.07% | 11.08% | | Tangible book value per share | $25.11 | $24.51 | | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------ | :------- | :------- | | Return on average tangible common equity, annualized | 8.50% | 2.12% | 6.65% | 5.33% | 7.01% | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section outlines the Company's exposure to market risk, primarily focusing on interest rate risk, price risk, and basis risk. It describes how the Asset Liability Committee (ALCO) establishes and monitors policy limits to manage these risks. The Company uses income simulation (Net Interest Income at Risk) and economic value analysis (Economic Value of Equity) to measure interest rate risk, indicating a liability-sensitive NII at Risk profile and a generally decreasing EVE position in both down and up rate scenarios, all within board policy limits Market Risk This section describes the company's exposure to market risks, particularly interest rate risk, and its management strategies - The Company's primary sources of market risk are interest rate risk (repricing, option, yield curve, basis risk), price risk (AFS securities), and basis risk (SFR, multifamily, and securities portfolios)326327328329 - The Asset Liability Committee (ALCO) establishes and monitors policy limits for interest rate risk, aiming to minimize the impact of changing interest rates on net interest income and economic values330 - At June 30, 2025, the Net Interest Income (NII) at Risk profile is liability sensitive, with a projected dollar change of $(2,100) thousand for a +100 basis point rate change and $3,455 thousand for a -100 basis point rate change335336 - The Economic Value of Equity (EVE) position at June 30, 2025, is projected to generally decrease in both down and up rate scenarios, with a dollar change of $(20,896) thousand for a +100 basis point rate change and $13,712 thousand for a -100 basis point rate change337 ITEM 4. CONTROLS AND PROCEDURES This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal controls over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of the reporting date - Management, including the principal executive officer and principal financial officer, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025338 Changes in Internal Controls Over Financial Reporting This section reports on any material changes in the company's internal controls over financial reporting during the period - There have been no material changes in the Company's internal control over financial reporting during the fiscal quarter ended June 30, 2025339 PART II - OTHER INFORMATION This section covers additional required disclosures not included in the financial statements, such as legal proceedings and risk factors ITEM 1. LEGAL PROCEEDINGS This section states that there are no material pending legal proceedings beyond ordinary routine litigation incidental to the Company's business, and management believes such proceedings will not materially affect financial statements - There are no material pending legal proceedings, and management believes existing litigation will not have a material adverse impact on the Company's financial condition or results of operations342 ITEM 1A. RISK FACTORS This section confirms that there have been no material changes to the risk factors previously disclosed in the Company's 2024 Annual Report, reiterating that unforeseen risks could significantly impact financial performance - No material changes to the risk factors previously disclosed in the 2024 Annual Report have occurred343 - Unforeseen risks or uncertainties could still result in significant adverse effects on the Company's financial condition, results of operations, and cash flows343 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section details the Company's stock repurchase program, including the authorization of a new program and the shares repurchased during the second quarter of 2025 - On May 29, 2025, the Board authorized a new stock repurchase program for up to $18.0 million of common stock through June 30, 2026344 - During Q2 2025, the Company repurchased 87,731 shares of common stock at an average price of $17.04 per share345346 - As of June 30, 2025, 912,269 shares remained available for repurchase under the program346 ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section confirms whether there were any defaults on senior securities during the reporting period - There were no defaults upon senior securities347 ITEM 4. MINE SAFETY DISCLOSURES This section states the applicability of mine safety disclosures to the company's operations - Mine safety disclosures are not applicable to the Company348 ITEM 5. OTHER INFORMATION This section reports on any other material information not otherwise disclosed, such as Rule 10b5-1 trading plans - No officer or director adopted or terminated any Rule 10b5-1 trading plans for the purchase or sale of common stock during the quarter ended June 30, 2025349 ITEM 6. EXHIBITS This section lists all documents filed as exhibits to the Form 10-Q, including corporate governance and certification documents - The exhibits include corporate governance documents (Articles of Incorporation, Bylaws), specimen common stock certificate, RBB Bancorp Award Agreement for Employees, CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL documents350 SIGNATURES This section contains the official certifications and signatures of the company's principal executive and financial officers - The report is duly signed by Johnny Lee, President and Chief Executive Officer, and Lynn Hopkins, Executive Vice President and Chief Financial Officer, on August 8, 2025353