RBB Bancorp

Evaluation of Disclosure Controls and Procedures.

The Company’s management, including our principal executive officer and principal financial officer, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective due to material weaknesses in the Company’s internal control over financial reporting described below.

Management’s Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with GAAP.

The Company's internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Company's transactions and dispositions of the Company's assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company's management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of December 31, 2023, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, the Company assessed the effectiveness of its internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control — Integrated Framework (2013),” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management identified material weaknesses related to the Company’s internal control over financial reporting and, as such, concluded that the Company's internal control over financial reporting was ineffective as of December 31, 2023. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected and corrected on a timely basis. The following material weaknesses were identified in the Company’s internal control over financial reporting:

Crowe LLP, the independent registered public accounting firm that audited the Company's consolidated financial statements included in this Annual Report, has issued an attestation report on the effectiveness of the Company's internal control over financial reporting, a copy of which appears in Item 8.

Remediation Efforts

Subsequent to the period covered by the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, with respect to the material weakness set forth in the first bullet point above, and subsequent to the period covered by the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, with respect to the material weakness set forth in the second bullet point above, management has been actively engaged in developing remediation plans to address the material weaknesses noted above.

In order to remediate the material weakness related to the Company’s control environment, the Company has invested in additional resources in the area of internal controls over financial reporting. In the fourth quarter of 2023, the Company hired an Interim Chief Financial Officer who has more than 30 years of experience in the financial services industry, specifically with public company financial institutions that are similar (or larger) in, size, and complexity to the Company. Also during 2023, the Company hired a dedicated SOX Manager with knowledge and skills in the area of internal control over financial reporting. In addition to supplementing internal staff, the Company engaged an outside advisory firm to assist the Company with enhancing the design of its internal control over financial reporting and testing of such internal controls. These newly hired individuals, supplemented by the efforts of the outside advisory firm and ongoing oversight by the Audit Committee will focus on the remediation of controls that have been deficient in the past while ensuring that the overall system of internal control over financial reporting is appropriately designed and regularly evaluated for operating effectiveness.

In order to remediate the material weakness related to infrequent transactions, the Company has designed and implemented new and enhanced controls to address infrequent transactions. The Company has enhanced its internal disclosure committee meetings, which are conducted prior to the filing of documents with the SEC that contain financial information, to specifically include the identification and discussion of infrequent transactions. For the CDFI ERP award related process, the Company plans to enhance controls to review performance requirements and conditions to be fully satisfied prior to recognizing the full basis of the CDFI ERP award.

We believe the actions described above will be sufficient to remediate the identified material weaknesses and strengthen our internal control over financial reporting. However, the new and enhanced controls have not operated for a sufficient amount of time to conclude that the described controls are effective and the material weaknesses have been remediated. We will continue to monitor the effectiveness of these controls and will make any further changes management determines appropriate. We expect that the remediation of these material weaknesses will be completed in the first half of 2024.

Changes in Internal Control over Financial Reporting

During the quarter ended December 31, 2023, the Company has fully remediated the internal control weaknesses related to related party transactions, journal entries and accounts payable transactions, and CECL. In addition, the Company believes it has retained competent individuals in the area of internal controls over financial reporting and has designed and implemented a control to ensure that unusual or infrequent transactions are evaluated for the proper accounting treatment and financial statement disclosure. The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Other than described above, during the most recent fiscal year, there have not been any changes in the Company’s internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.