RBB Bancorp

Total Assets. At June 30, 2025, total assets were $4.1 billion, an increase of $97.6 million, from total assets of $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 equivalents.

***Cash and Cash Equivalents.***Cash and cash equivalents decreased $65.9 million, or 25.6%, to $191.9 million as of June 30, 2025 as compared to $257.8 million at December 31, 2024. This decrease in cash and cash equivalents was comprised of $172.4 million used in net investing activities, including a net increase in loans of $217.8 million, offset by a net decrease in AFS securities of $14.3 million and proceeds from loan and OREO sales of $32.1 million; $29.4 million provided by cash from operating activities; and $77.1 million provided by financing activities, with deposit growth of $104.4 million offset by a net decrease in FHLB advances of $20.0 million.

Investment Securities. We manage our securities portfolio and cash to maintain adequate liquidity and to ensure the safety and preservation of invested principal, with a secondary focus on yield and returns. Specific goals of our investment portfolio include:

Our investment portfolio is comprised primarily of U.S. government agency securities, corporate note securities, mortgage-backed securities backed by government-sponsored entities and taxable and tax-exempt municipal securities.

Our investment policy is reviewed annually by our board of directors. Overall investment goals are established by our board of directors, Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and members of our Asset Liability Committee (“ALCO”) of our board of directors. Our board of directors has delegated the responsibility of monitoring our investment activities to our ALCO. Day-to-day activities pertaining to the securities portfolio are conducted under the supervision of our CEO and CFO. We actively monitor our investments on an ongoing basis to identify any material changes in the securities. We monitor our securities portfolio to ensure it has adequate credit support and consider the lowest credit rating for identification of potential credit impairment.

The following table presents the book value of each category of securities and the percentage each category represents of total of securities as of the dates indicated. The book value for debt securities classified as AFS is reflected at fair market value and the book value for securities classified as HTM is reflected at amortized cost.

The tables below set forth investment debt securities AFS and HTM as of the dates indicated.

The weighted-average life of the total investment portfolio at June 30, 2025 was 5.2 years compared to a weighted-average life of 5.0 years at December 31, 2024. The increase in the weighted average life is due to a decrease in commercial paper, which generally has a 3 month term. The weighted-average life is the average number of years that each dollar of unpaid principal due remains outstanding. Average life is computed as the weighted-average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal pay-downs.

The table below shows our investment securities’ fair value and weighted average yields by maturity in the following maturity groupings as of June 30, 2025. The fair value of the securities portfolio is shown by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

The table below shows our investment securities’ gross unrealized losses and estimated fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2025 and December 31, 2024. The unrealized losses on these securities were primarily attributed to changes in interest rates. There was no ACL on the AFS or HTM securities portfolios as of June 30, 2025 or December 31, 2024. We monitor our securities portfolio to ensure that all our investments have adequate credit support and we consider the lowest credit rating for identification of potential impairment. The issuers of these securities have not, to our knowledge, evidenced any cause for default on these securities. As of June 30, 2025, all our investment securities in an unrealized loss position received an investment grade credit rating. These securities have fluctuated in value since their purchase dates as market rates have also fluctuated. However, we have the ability and the intention to hold these securities until their fair values recover to cost or maturity. As such, management does not deem these securities to be impaired under the current expected credit loss model. A summary of our analysis of these securities and the unrealized losses is described more fully in "Note 3 —* *Investment Securities" of our audited consolidated financial statements included in our 2024 Annual Report. Economic trends may adversely affect the value of the portfolio of investment securities that we hold.

Loans

The loan portfolio is the largest category of our earning assets, which was entirely held for investment as of June 30, 2025. Loans HFI increased $181.5 million, or 12.0% on an annualized basis, to $3.2 billion at June 30, 2025 since December 31, 2024. The increase was primarily due to increases in SFR mortgage loans of $109.1 million, CRE loans of $72.0 million, commercial and industrial ("C&I") loans of $8.7 million, and SBA loans of $8.7 million, partially offset by decreases in construction and land development ("C&D") loans of $15.3 million and in other loans of $1.7 million. SFR mortgage loans represent 49.6% of our total HFI loans as of June 30, 2025, which increased from 48.9% at December 31, 2024. There were no loans HFS at June 30, 2025 compared to $11.3 million loans HFS at December 31, 2024. The decrease in loans HFS was due to sales totaling $32.7 million, offset by loans transferred from HFI to HFS of $19.5 million and HFS originations totaling $1.9 million.

The following table presents the balance and associated percentage of each major category in our loan portfolio as of the dates indicated:

The following table presents the geographic locations of loans in our loan portfolio, by loan class, as of the date indicated:

The majority of our loan portfolio is based on collateral or businesses located in California and New York, which represented 88.3% of our loan portfolio. Loans secured by collateral in other states represented approximately 11.7% of our portfolio and the majority of these loans are secured by real estate with a weighted average LTV of 55.4% at June 30, 2025.

Construction and land development loans. C&D loans totaled $158.0 million, or 4.9% of the loan portfolio, at June 30, 2025. C&D loans decreased $15.3 million, or 8.8%, during the first six months of 2025 due to decreases in land development loans and residential construction loans, offset by an increase in commercial construction loans. Our C&D loans are comprised of residential construction, commercial construction, and land acquisition and development. Interest reserves are generally established on real estate construction loans. These loans are typically Prime rate based and have maturities of less than 18 months.

The following table shows the categories of our C&D portfolio as of the dates indicated:

*Commercial real estate loans.*CRE loans increased $72.0 million, or 6.0%, to $1.3 billion at June 30, 2025, compared to $1.2 billion at December 31, 2024.

CRE loans include owner occupied and non-owner occupied commercial real estate, multi-family residential and SFR loans originated for a business purpose. Except for the multi-family residential loan portfolio, the interest rate for the majority of these loans are based on the Prime rate and have a maturity of five years or less except for the SFR loans originated for a business purpose which may have a maturity of one year. The multi-family residential loans generally have interest rates based on the 5-year treasury, a 10-year maturity with a five year fixed-rate period followed by a five year floating-rate period, and have a declining prepayment penalty over the first five years.

The largest subset of CRE loans was the multi-family residential loan portfolio, which totaled $679.6 million as of June 30, 2025 and $605.5 million as of December 31, 2024. The SFR loan portfolio originated for a business purpose totaled $52.9 million as of June 30, 2025 and $54.1 million as of December 31, 2024.

The following table presents the LTV ratios at origination for CRE loans by property type as of the date indicated:

The following table presents the LTV ratios at origination for CRE loans by state as of the date indicated:

SFR Loans. SFR loans totaled $1.6 billion, or 49.6% of our loans HFI portfolio, as of June 30, 2025. SFR mortgage loans increased $109.1 million, or 7.3%, during the first six months of 2025 due to higher originations relative to payoffs, paydowns and sales. As of June 30, 2025, the weighted-average LTV of the portfolio was 55.2%, the weighted average FICO score was 764, and the average duration was 3.33 years.

We originate qualified SFR mortgage loans and non-qualified, alternative documentation SFR mortgage loans through wholesale channels and retail channels, including our branch network, to accommodate the needs of the Asian-centric market. The qualified SFR mortgage loans are 15-year and 30-year conforming mortgages and may be sold directly to FNMA and FHLMC. We originate non-qualified SFR mortgage loans both to sell and hold for investment.

For SFR mortgage loans sold to FNMA, FHLMC and to other third parties such as investment funds or other banks, we provide limited representations and warranties and with a repurchase and premium refund for loans that become delinquent in the first 90-days or a premium refund if paid-off in the first 90-days with respect to all loans sold. In certain loan sales to other banks, loans are sold with no representations or warranties and provide a replacement feature for the first six months if any loans pay off early. As a condition of the sale for all loans, the buyer must have the loans audited for underwriting and compliance standards. There were no SFR loans HFS at June 30, 2025 and December 31, 2024.

The following table presents the LTV ratios at origination for SFR loans by state as of the date indicated:

*Commercial and industrial loans.*C&I loans totaled $138.3 million, or 4.3% of the loan portfolio, as of June 30, 2025. C&I loans increased $8.7 million, or 6.7%, during the first half of 2025 due in part to an increase in commercial term loans and lines of credit, along with an increase in mortgage warehouse lines of credit. Our SFR mortgage lending unit originates mortgage warehouse lines of credit to certain correspondent banks. These loans are included in our C&I loans and totaled $3.1 million as of June 30, 2025. There were no such loans as of December 31, 2024.

The interest rates on C&I loans are generally based on the Wall Street Journal Prime rate. We originate both variable rate and fixed rate C&I loans. The loans are typically made to small- and medium-sized manufacturing, wholesale, retail and service businesses for working capital needs, business expansions and for international trade financing. C&I loans include lines of credit with a maturity of one year or less, term loans with maturities of five years or less, shared national credits with maturities of five years or less, mortgage warehouse lines with a maturity of one year or less, bank subordinated debentures with a maturity of 10 years and international trade discounts with a maturity of three months or less. Substantially all of our C&I loans are collateralized by business assets or by real estate.

*SBA loans.*SBA loans increased $8.7 million, or 18.5%, to $56.0 million at June 30, 2025 compared to $47.3 million at December 31, 2024. We originated SBA loans of $19.0 million during the first six months of 2025. Offsetting these loan originations were loan sales of $6.2 million and net loan payoffs and paydowns of $4.1 million during the first six months of 2025.

We are designated a Preferred Lender under the SBA Preferred Lender Program. We originate SBA loans through our branch staff, loan officers and through SBA brokers. We offer mostly SBA 7(a) variable-rate loans. We generally sell the 75% guaranteed portion of the SBA loans that we originate. Our SBA loans are typically made to small-sized manufacturing, wholesale, retail, hotel/motel and service businesses for working capital needs or business expansions. SBA loans secured by real estate can have any maturity up to 25 years. Typically, non-real estate secured loans mature in less than 10 years. Collateral may also include inventory, accounts receivable, equipment, and includes personal guarantees.

Loan Quality

We use what we believe is a comprehensive methodology to monitor credit quality and prudently manage credit concentration within our loan portfolio. Our underwriting policies and practices govern the risk profile and credit and geographic concentration for our loan portfolio. Our comprehensive methodology to monitor these credit quality standards includes a risk classification system that identifies potential problem loans based on risk characteristics by loan class as well as the early identification of deterioration at the individual loan level.

Analysis of the Allowance for Loan Losses

The following table presents the ALL, its corresponding percentage of the loan class balance, and the percentage of loan balance to total loans HFI as of the dates indicated:

Allowance for Credit Losses - Loans

We account for credit losses on loans in accordance with ASC 326, which requires us to record an estimate of expected lifetime credit losses for loans at the time of origination. The ACL includes the ALL and the reserve for unfunded commitments ("RUC") and is maintained at a level deemed appropriate by management to provide for expected credit losses in the portfolio as of the date of the consolidated balance sheets. Estimating expected credit losses requires management to use relevant forward looking information, including the use of reasonable and supportable forecasts. The measurement of the ACL for loans is performed by collectively evaluating loans with similar risk characteristics. We have elected to utilize a discounted cash flow approach for all segments except consumer loans and warehouse mortgage loans; for these a remaining life approach was elected.

Our discounted cash flow loss rate methodology incorporates a probability of default, loss given default and exposure at default to derive expected loss within the CECL model, as well as expectations of future economic conditions, using reasonable and supportable forecasts. We use both internal and external qualitative factors within the CECL model including: lending policies, procedures, and strategies; changes in nature and volume of the portfolio; credit and lending personnel experience; changes in volume and trends in classified, delinquent, and nonaccrual loans; concentration risk; collateral values; regulatory and business environment; loan review results; and economic conditions.

Management estimates the allowance balance required using past loan loss experience from peers with similar asset sizes and geographic locations to the Company. The nature and volume of the portfolio, information about specific borrower situations, changes in credit quality and estimated collateral values, economic conditions, and other factors are also considered. Our CECL methodology utilizes a four-quarter reasonable and supportable forecast period, and a four-quarter reversion period. We use the Federal Open Market Committee forecasts for the national unemployment rate, while reverting to historical loss information.

Individual loans considered to be uncollectible are charged off against the ACL. Factors used in determining the amount and timing of charge-offs on loans include consideration of the loan type, length of delinquency, sufficiency of collateral value, lien priority and the overall financial condition of the borrower. Loans deemed to be collateral-dependent are reviewed individually based on the estimated fair value of the collateral less selling costs. Collateral value is determined using appraisals and/or other market comparable information. Charge-offs are generally taken on loans once the impairment is determined to be probable. Recoveries on loans previously charged off are added to the ACL. Net charge-offs on an annualized basis represented 0.42% of average loans for the three months ended June 30, 2025 and 0.13% of average loans for the twelve months ended December 31, 2024.

As of June 30, 2025, the ACL totaled $51.6 million and was comprised of an ALL of $51.0 million and a RUC of $629,000 (included in “accrued interest and other liabilities”). This compares to the ACL of $48.5 million comprised of an ALL of $47.7 million and a RUC of $729,000 at December 31, 2024. The $3.2 million increase in the ACL for the first half of 2025 was due to a $9.1 million provision for credit losses offset by net charge-offs of $5.9 million. The ALL as a percentage of loans HFI increased to 1.58% at June 30, 2025, compared to 1.56% at December 31, 2024. The ALL as a percentage of nonperforming loans HFI was 90% at June 30, 2025, an increase from 68% at December 31, 2024.

The following table provides an analysis of the ACL, provision for credit losses and net charge-offs for the periods indicated:

***Problem Loans.***Loans are considered delinquent when principal or interest payments are past due 30 days or more; delinquent loans may remain on accrual status between 30 days and 89 days past due. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Typically, the accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on nonaccrual loans is subsequently recognized only to the extent that cash is received and the loan’s principal balance is deemed collectible. Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is probable.

In cases where a borrower experiences financial difficulties and we make certain concessionary modifications to contractual terms, the loan is classified as a modified loan. These concessions may include a reduction of the interest rate, principal or accrued interest, extension of the maturity date or other actions intended to minimize potential losses. Loans modified at a rate equal to or greater than that of a new loan with comparable risk at the time the loan is modified may be excluded from modified loan disclosures in years subsequent to the modification if the loans are in compliance with their modified terms.

Real estate acquired by foreclosure or deed in lieu of foreclosure is recorded at fair value at the date of foreclosure, establishing a new cost basis (carrying value) by a charge to the allowance for credit losses, if necessary, or a gain recognized through noninterest income, as appropriate. Once classified as an OREO, it is subsequently carried at the lower of our carrying value of the property or its fair value. Fair value is based on current appraisals less estimated selling costs. Any subsequent write-downs are charged against operating expenses and recognized as a valuation allowance. Operating expenses and related income of such properties are included in other operating income and expenses. Gains on transfer of loans to OREO, and gains or losses on their disposition are included in gain on OREO.

Nonperforming loans include nonaccrual loans, loans past due 90 days or more and still accruing interest (of which there were none during the periods indicated), and modified loans. The balances of nonperforming loans included in the table below are the net investment in these assets and do not include $7.4 million in specific reserves included in the ALL. The following table presents the net investment in nonperforming assets by loan class and certain nonperforming asset ratios as of the dates indicated.

Nonperforming assets totaled $61.0 million, or 1.49% of total assets, at June 30, 2025, down from $81.0 million, or 2.03% of total assets, at December 31, 2024. The $20.1 million decrease in nonperforming assets was due to sales totaling $20.0 million, payoffs or paydowns of $3.6 million, and charge-offs of $3.3 million, partially offset by the addition of loans that migrated to nonperforming of $6.9 million during the first six months of 2025. Nonperforming assets included one $4.2 million OREO (included in “accrued interest and other assets”) at June 30, 2025, which was a nonaccrual loan at December 31, 2024.

Our 30-89 day delinquent loans, excluding nonperforming loans, totaled $18.0 million, or 0.56% of total loans, at June 30, 2025, down from $22.1 million, or 0.72% of total loans, at December 31, 2024. The $4.1 million decrease was mostly due to $17.4 million in loans returning to current status, $2.9 million in SFR mortgage loans included in the bulk sale of underperforming SFR mortgage loans and $804,000 in paydowns and payoffs, offset by $17.1 million in new delinquent loans.

We did not recognize any interest income on nonaccrual loans during the three and six months ended June 30, 2025 and 2024, while the loans were in nonaccrual status.

We utilize an asset risk classification system in compliance with guidelines established by the FDIC as part of our efforts to improve asset quality. In connection with examinations of insured institutions, examiners have the authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: “substandard,” “doubtful,” and “loss.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable based on facts, conditions and values that currently exist. An asset classified as loss is not considered collectable and is of such little value that continuance as an asset is not warranted.

We use a risk grading system to categorize and determine the credit risk of our loans. Potential problem loans include loans with a risk grade of 6, which are “special mention,” loans with a risk grade of 7, which are “substandard” loans that are generally not considered to be impaired and loans with a risk grade of 8, which are “doubtful” loans generally considered to be impaired. These loans generally require more frequent loan officer contact and receipt of financial data to closely monitor borrower performance. Potential problem loans are managed and monitored regularly through a number of processes, procedures and committees, including oversight by a loan administration committee comprised of executive officers and other members of the Bank’s senior management.

The following table presents the risk categories for loans HFI, by class, as of the dates indicated:

Special mention loans totaled $91.3 million, or 2.82% of total loans, at June 30, 2025, up from $65.3 million, or 2.14% of total loans, at December 31, 2024. The $26.0 million increase was primarily due to the addition of loans totaling $32.4 million, partially offset by the downgrade of $4.0 million of loans to substandard, one $1.7 million loan that was upgraded, and $750,000 of paydowns or payoffs. As of June 30, 2025, all special mention loans are paying current.

Substandard loans totaled $91.0 million at June 30, 2025, an increase of $1.9 million from $89.1 million at December 31, 2024. In addition, there were $11.2 million of substandard loans HFS at December 31, 2024 that were subsequently sold; there were no substandard loans HFS at June 30, 2025. The $1.9 million increase in substandard loans HFI was primarily due to the downgrade of loans totaling $26.9 million offset by payoffs and paydowns totaling $8.1 million, charge-offs of $3.3 million, and transfers to OREO totaling $12.8 million, of which $8.8 million was subsequently sold. Of the total substandard loans at June 30, 2025, there were $34.2 million on accrual status.

***Goodwill and Other Intangible Assets.***Goodwill was $71.5 million at both June 30, 2025 and December 31, 2024. Goodwill represents the excess of the consideration paid over the fair value of the net assets acquired.

Other intangible assets, which consist of core deposit intangibles, were $1.7 million and $2.0 million at June 30, 2025 and December 31, 2024. These core deposit intangible assets are amortized on an accelerated basis over their estimated useful lives, generally over a period of 3 to 10 years.

***Liabilities.***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 advances.

***Deposits.***Total deposits were $3.2 billion as of June 30, 2025, an increase of $104.4 million, or 6.8% on an annualized basis, compared to $3.1 billion as of December 31, 2024. The increase was due to a $123.6 million increase in interest-bearing deposits, while noninterest-bearing deposits decreased $19.1 million. The increase in interest-bearing deposits included an increase in non-maturity deposits of $28.6 million and time deposits of $94.9 million. Noninterest-bearing deposits totaled $543.9 million and represented 17.1% of total deposits at June 30, 2025 compared to $563.0 million and 18.3% at December 31, 2024. Wholesale deposits totaled $183.8 million at June 30, 2025 and $147.5 million at December 31, 2024. Wholesale deposits include brokered deposits, collateralized deposits from the State of California, and deposits acquired through internet listing services. Brokered time deposits were $133.0 million at June 30, 2025 and $93.2 million at December 31, 2024.

The following table presents the composition of our deposit portfolio by account type as of the dates indicated:

The following table presents our average deposit balances and weighted average rates for the three months ended June 30, 2025:

The following table presents the maturity schedule of time deposits as of June 30, 2025:

Of the $942.0 million in time deposits over $250,000, the estimated aggregate amount of time deposits in excess of the FDIC insurance limit is $710.7 million at June 30, 2025. The following table presents the maturity distribution of uninsured time deposits in amounts of more than $250,000 as of the date indicated.

In addition, we offer deposit products through the Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweeps (“ICS”) programs where customers are able to achieve FDIC insurance for balances on deposit in excess of the $250,000 FDIC limit. Time deposits held through the CDARS program were $120.4 million at June 30, 2025 and $130.6 million at December 31, 2024 and ICS deposits totaled $142.8 million at June 30, 2025 and $146.1 million at December 31, 2024.

The following table presents the estimated deposits exceeding the FDIC insurance limit as of the dates indicated:

***FHLB Borrowings.***In addition to deposits, we have used long- and short-term borrowings, such as federal funds purchased and FHLB long-and short-term advances, as a source of funds to meet the daily liquidity needs of our customers and fund growth in earning assets. FHLB advances totaled $180.0 million at June 30, 2025 compared to $200.0 million at December 31, 2024. FHLB borrowings at June 30, 2025 included $180.0 million in putable term advances.

The terms of all putable advances outstanding at June 30, 2025 are presented in Next Call Date order in the table below:

The following table presents information on our total FHLB advances at and for the periods presented:

***Long-term Debt.***Long-term debt consists of subordinated notes. As of June 30, 2025, the amount of subordinated notes outstanding was $119.7 million as compared to $119.5 million at December 31, 2024.

In March 2021, we issued $120.0 million of 4.00% fixed to floating rate subordinated notes due April 1, 2031 (the “2031 Subordinated Notes”). The interest rate is fixed through April 1, 2026 and floats at three month Secured Overnight Financing Rate (“SOFR”) plus 329 basis points thereafter. We can redeem the 2031 Subordinated Notes beginning April 1, 2026. The 2031 Subordinated Notes are considered Tier 2 capital at the Company.

***Subordinated Debentures.***Subordinated debentures consist of subordinated debentures issued in connection with three separate trust preferred securities and totaled $15.3 million as of June 30, 2025 and $15.2 million as of December 31, 2024. Under the terms of our subordinated debentures issued in connection with the issuance of trust preferred securities, we are not permitted to declare or pay any dividends on our capital stock if an event of default occurs under the terms of the long-term debt. In addition, we have the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years. These subordinated debentures consist of the following at June 30, 2025 and are described in detail after the table below:

At June 30, 2025, we were in compliance with all covenants under our long-term debt agreements and subordinated debt.

The Company maintains the TFC Statutory Trust ("TFC Trust"), which has issued a total of $5.2 million securities ($5.0 million in capital securities and $155,000 in common securities). The TFC Trust subordinated debentures have a variable rate of interest equal to three*-*month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 1.65%, which was 6.23% as of June 30, 2025 and 6.27% at December 31, 2024.

The Company maintains the First American International Statutory Trust I ("FAIC Trust"), which has issued a total of $7.2 million securities ($7.0 million in capital securities and $217,000 in common securities). The FAIC Trust subordinated debentures have a variable rate of interest equal to three*-*month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 2.25%, which was 6.83% as of June 30, 2025 and 6.87% at December 31, 2024.

The Company maintains the Pacific Global Bank Trust I ("PGBH Trust"), a Delaware statutory trust formed in December 2004. PGBH Trust issued 5,000 units of fixed-to-floating rate capital securities with an aggregate liquidation amount of $5.0 million and 155 common securities with an aggregate liquidation amount of $155,000. The PGBH subordinated debentures have a variable rate of interest equal to three*-*month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 2.10%, which was 6.68% as of June 30, 2025 and 6.72% at December 31, 2024.

Capital Resources and Liquidity Management

***Capital Resources.***Shareholders’ equity is influenced primarily by earnings, dividends, sales and redemptions of common stock and preferred stock and changes in accumulated other comprehensive income, net of taxes, from AFS investment securities.

Shareholders’ equity increased $9.8 million, or 1.9%, to $517.7 million as of June 30, 2025 from $507.9 million at December 31, 2024. The increase in shareholders' equity for the first half of 2025 was due to net income of $11.6 million and lower unrealized losses on AFS securities, net of tax, of $4.2 million, and equity compensation activity of $1.1 million, offset by common stock cash dividends paid of $5.7 million and common stock repurchases of $1.5 million. As a result, book value per share increased to $29.25 from $28.66 at December 31, 2024 and tangible book value per share increased to $25.11 from $24.51 at December 31, 2024. For additional information, see*"Non-GAAP Financial Measures."*

***Liquidity Management.***Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements, both known and unknown. We manage our liquidity position to meet the daily cash flow needs of customers, while also maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders.

Our liquidity position is supported by management of liquid assets and liabilities and access to alternative sources of funds. Liquid assets include cash, interest-earning deposits in banks, federal funds sold, available for sale securities, term federal funds, purchased receivables and maturing or prepaying balances in our securities and loan portfolios. Liquid liabilities include retail deposits, federal funds purchased, securities sold under repurchase agreements and other borrowings. Other sources of liquidity include the sale of loans, the ability to acquire additional wholesale funding, the issuance of additional collateralized borrowings through FHLB advances or the Federal Reserve’s discount window, and the ability to access the capital markets through the issuance of debt securities, preferred securities or common securities. Our short-term and long-term liquidity requirements are primarily to fund known and unknown on-going operations, including payment of interest on deposits and debt, extensions of credit to borrowers, capital expenditures and shareholder dividends. These liquidity requirements are met primarily through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, debt financing and increases in customer deposits. For additional information regarding our operating, investing and financing cash flows, see the consolidated statements of cash flows provided in our consolidated financial statements.

Integral to our liquidity management is the administration of short-term borrowings. To the extent we are unable to obtain sufficient liquidity through core deposits, we seek to meet our liquidity needs through wholesale funding or other borrowings on either a short- or long-term basis. Our wholesale funding ratio was 10.8% at June 30, 2025 compared to 10.7% at December 31, 2024.

We have sufficient capital and do not anticipate any need for additional liquidity sources as of June 30, 2025. As of June 30, 2025 and December 31, 2024, we had $97.0 million of unsecured federal funds lines, with no amounts advanced against the lines. In addition, secured lines of credit from the Federal Reserve Discount Window were $62.5 million at June 30, 2025 and $47.2 million at December 31, 2024. Federal Reserve Discount Window lines were collateralized by a pool of CRE loans totaling $83.2 million as of June 30, 2025 and $62.5 million as of December 31, 2024. We did not have any borrowings outstanding with the Federal Reserve at June 30, 2025 and December 31, 2024.

At June 30, 2025 and December 31, 2024, we had $180.0 million and $200.0 million in FHLB advances. Based on the values of loans pledged as collateral, we had $918.4 million of remaining secured borrowing capacity with the FHLB as of June 30, 2025 and $1.1 billion at December 31, 2024.

RBB is a corporation separate and apart from the Bank and, therefore, must provide for its own liquidity. RBB’s main source of funding is dividends declared and paid to RBB by the Bank and RAM. There are statutory, regulatory and debt covenant limitations that affect the ability of the Bank to pay dividends to RBB. Management believes that these limitations will not impact our ability to meet our ongoing short-term cash obligations. During the six months ended June 30, 2025, the Bank paid $45.0 million of dividends to Bancorp and paid $20.0 million during the year ended December 31, 2024. We paid $5.7 million in cash dividends on common stock during the six months ended June 30, 2025 and $11.7 million in cash dividends on common stock throughout the year ended December 31, 2024. At June 30, 2025, Bancorp had $67.1 million in cash, of which $66.0 million was on deposit at the Bank.

Regulatory Capital Requirements

We are subject to various regulatory capital requirements administered by the federal and state banking regulators. Failure to meet regulatory capital requirements may result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for “prompt corrective action” (described below), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies.

The table below summarizes the minimum capital requirements applicable to us and the Bank pursuant to Basel III regulations including the capital conservation buffer as of the dates reflected. The minimum capital requirements are only regulatory minimums and banking regulators can impose higher requirements on individual institutions. For example, banks and bank holding companies experiencing internal growth or making acquisitions generally will be expected to maintain strong capital positions substantially above the minimum supervisory levels. Higher capital levels may also be required if warranted by the particular circumstances or risk profiles of individual banking organizations. We exceeded all regulatory capital requirements under Basel III and were considered to be "well-capitalized" at June 30, 2025 and December 31, 2024.

The table below presents the capital requirements applicable to Bancorp and the Bank in order to be considered “well-capitalized” from a regulatory perspective, and the capital ratios for the consolidated Company and Bank as of June 30, 2025 and December 31, 2024.

Contractual Obligations

The following table contains supplemental information regarding our total contractual obligations at June 30, 2025:

Off-Balance Sheet Arrangements

We have limited off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

In the ordinary course of business, we enter into financial commitments to meet the financing needs of our customers. These financial commitments include commitments to extend credit, unused lines of credit, commercial and similar letters of credit and standby letters of credit. Those instruments involve varying degrees of credit and interest rate risk in excess of the amount recognized in the ACL in the consolidated balance sheets. Such off-balance sheet commitments totaled $154.2 million as of June 30, 2025 and $175.5 million as of December 31, 2024.

Our exposure to loan loss in the event of nonperformance on these financial commitments is represented by the contractual amount of those instruments. We use the same credit policies in making commitments as we do for loans reflected in our financial statements.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. We evaluate each client’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company is based on management’s credit evaluation of the customer.

In addition, we invest in various affordable housing partnerships and Small Business Investment Company funds. Pursuant to these investments, we commit to an investment amount to be fulfilled in future periods. Such unfunded commitments totaled $10.7 million as of June 30, 2025 and $5.7 million as of December 31, 2024.

Non-GAAP Financial Measures

Some of the financial measures included herein are not measures of financial performance recognized by GAAP. These non-GAAP financial measures include the “tangible common equity to tangible assets ratio,” “tangible book value per share,” and “return on average tangible common equity.” Our management uses these non-GAAP financial measures in our analysis of our performance.

***Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share.***The tangible common equity to tangible assets ratio and tangible book value per share are non-GAAP measures generally used by financial analysts and investment bankers to evaluate capital adequacy. We calculate: (i) tangible common equity as total shareholders’ equity less goodwill and other intangible assets (excluding mortgage servicing assets); (ii) tangible assets as total assets less goodwill and other intangible assets (excluding mortgage servicing assets); and (iii) tangible book value per share as tangible common equity divided by period end shares of common stock outstanding.

Our management, banking regulators, many financial analysts and other investors use these measures in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, which typically stem from the use of the purchase method of accounting for mergers and acquisitions. Tangible common equity, tangible assets, tangible book value per share and related measures should not be considered in isolation or as a substitute for total shareholders’ equity, total assets, book value per share or any other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate tangible common equity, tangible assets, tangible book value per share and any other related measures may differ from that of other companies reporting measures with similar names. The following table reconciles shareholders’ equity (on a GAAP basis) to tangible common equity and total assets (on a GAAP basis) to tangible assets, and calculates our tangible book value per share:

***Return on Average Tangible Common Equity.***Management measures return on average tangible common equity (“ROATCE”) to assess our capital strength and business performance. Tangible equity excludes goodwill and other intangible assets (excluding mortgage servicing assets), and is reviewed by banking and financial institution regulators when assessing a financial institution’s capital adequacy. This non-GAAP financial measure should not be considered a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures used by other companies. The following table reconciles ROATCE to its most comparable GAAP measure: