RBB Bancorp

The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of RBB and its wholly owned subsidiaries. This information is intended to facilitate the understanding and assessment of significant changes and trends related to our financial condition and the results of our operations. This discussion and analysis should be read in conjunction with our audited consolidated financial statements included in our 2024 Annual Report, and the unaudited consolidated financial statements and accompanying notes presented elsewhere in this Report. The financial results for the three months ended March 31, 2025 are not necessarily indicative of the results expected for the year ending December 31, 2025.

We reported net income of $2.3 million, or $0.13 diluted earnings per share, for the quarter ended March 31, 2025, compared to net income of $4.3 million, or $0.25 diluted earnings per share, for the quarter ended December 31, 2024 and $8.0 million, or $0.43 diluted earnings per share for the quarter ended March 31, 2024. The provision for credit losses totaled $6.7 million, $6.0 million and zero for the quarters ended March 31, 2025, December 31, 2024 and March 31, 2024.

At March 31, 2025, total assets were $4.0 billion, an increase of $16.9 million from December 31, 2024, as total deposits increased $58.8 million to $3.1 billion while Federal Home Loan Bank ("FHLB") advances decreased $40.0 million to $160.0 million. For the first quarter of 2025 gross loans HFI increased $89.8 million, or 12% annualized, to $3.1 billion, while investment securities decreased $42.0 million, and cash and cash equivalents decreased $18.9 million. At March 31, 2025, available for sale ("AFS") investment securities totaled $378.2 million, inclusive of a pre-tax net unrealized loss of $25.0 million, compared to $420.2 million, inclusive of a pre-tax unrealized loss of $29.2 million at December 31, 2024. The decrease was due primarily to the net decrease in short-term commercial paper of $41.4 million, offset by lower unrealized losses. The loan to deposit ratio was 98.4% at March 31, 2025, compared to 97.5% at December 31, 2024 and 98.6% at March 31, 2024.

During the first quarter of 2025, $150.0 million in FHLB advances with an average cost of 1.18% matured and were largely replaced with $110.0 million in FHLB advances with various terms at an average rate of 3.88%. The overall funding mix for the first quarter of 2025 remained relatively unchanged from the fourth quarter of 2024 with total deposits representing 90% of the funding mix and average noninterest-bearing deposits representing 17% of average total deposits. The all-in average spot rate for total deposits was 3.06% at March 31, 2025.

The first quarter of 2025 provision for credit losses was due to an increase in specific reserves of $2.8 million, net charge-offs of $2.6 million and an increase in general reserves of $1.3 million due mainly to net loan growth. The first quarter increase in specific reserves related mostly to two lending relationships. Net charge-offs included $1.4 million related to a bulk sale of $10.8 million in underperforming single-family residential ("SFR") mortgage loans, of which $6.5 million were on nonaccrual at December 31, 2024, and $1.2 million related to an $8.8 million loan transferred to other real estate owned ("OREO") and subsequently sold in the first quarter of 2025. Net charge-offs on an annualized basis represented 0.35% of average loans for the first quarter of 2025 compared to 0.26% for the fourth quarter of 2024.

Nonperforming assets decreased $16.5 million to $64.6 million, or 1.61% of total assets, at March 31, 2025, from $81.0 million, or 2.03% of total assets, at December 31, 2024. The decrease in nonperforming assets was due to sales totaling $20.0 million and payoffs or paydowns of $1.8 million, partially offset by the addition of one $5.3 million commercial real estate ("CRE") loan placed on nonaccrual status in the first quarter of 2025. Loans classified as special mention, substandard and delinquent 30–89 days were reduced during the first quarter of 2025 based on the actions taken by management to resolve or reduce the exposure to such loans.

As of March 31, 2025, the allowance for credit losses totaled $52.6 million, up from $48.5 million at December 31, 2024. The $4.1 million increase in the allowance for credit losses for the first quarter of 2025 was due to a $6.7 million provision for credit losses offset by net charge-offs of $2.6 million. The allowance for loan losses ("ALL") as a percentage of loans HFI increased to 1.65% at March 31, 2025, compared to 1.56% at December 31, 2024, mostly due to an increase in specific reserves. The ALL as a percentage of nonperforming loans HFI was 86% at March 31, 2025, an increase from 68% at December 31, 2024.

Total shareholders' equity was $510.3 million, or $28.77 book value per share at March 31, 2025, compared to $507.9 million, or $28.66 book value per share at December 31, 2024, and $514.0 million, or $27.67 book value per share at March 31, 2024. The $2.4 million increase in shareholders' equity for the first quarter of 2025 was due to lower net unrealized losses on AFS securities of $3.0 million and net income of $2.3 million, offset by common stock cash dividends paid of $2.9 million. Tangible book value per share increased to $24.63 at March 31, 2025, up from $24.51 at December 31, 2024 and $23.68 at March 31, 2024. We repurchased 956,465 shares after the first quarter of 2024 at an average price of $19.85. For additional information on tangible book value per share, see “Non-GAAP Financial Measures.”