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 an understanding and assessment of significant changes and trends related to our financial condition and results of 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 and six months ended June 30, 2025 are not necessarily indicative of the results expected for the year ending December 31, 2025.

We reported net income of $9.3 million, or $0.52 diluted earnings per share, for the quarter ended June 30, 2025, compared to net income of $2.3 million, or $0.13 diluted earnings per share, for the quarter ended March 31, 2025 and $7.2 million, or $0.39 diluted earnings per share for the quarter ended June 30, 2024. Net income for the second quarter of 2025 included income from an Employee Retention Credit ("ERC") refund of $5.2 million (pre-tax), which was included in other income, offset partially by professional and advisory costs associated with filing and determining eligibility for the ERC totaling $1.2 million (pre-tax), which was included in legal and professional expense in our consolidated statements of income.

The provision for credit losses totaled $2.4 million, $6.8 million and $557 thousand for the quarters ended June 30, 2025, March 31, 2025 and June 30, 2024. The second quarter of 2025 provision for credit losses reflected an increase in general reserves of $1.5 million due mainly to net loan growth, and an increase in a specific reserves of $924,000 related to one lending relationship.

At June 30, 2025, total assets were $4.1 billion, an increase of $97.6 million from December 31, 2024. The increase in total assets was primarily the result of an increase of $181.5 million in gross loans held for investment ("HFI"), to $3.2 billion at June 30, 2025. This increase was partially offset by a decrease of $65.9 million in cash and cash equivalents and a decrease of $11.3 million in loans held for sale ("HFS").

The increase in loans HFI was due to increases in commercial real estate ("CRE") loans of $72.0 million, single family residential ("SFR") mortgages of $109.1 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 other loans of $1.7 million. The gross loan to deposit ratio was 101.5% at June 30, 2025, compared to 99.4% at December 31, 2024 and 100.9% at June 30, 2024.

Total deposits were $3.2 billion at June 30, 2025, an increase of $104.4 million from December 31, 2024. The increase in total deposits was primarily the result of an increase of $123.6 million in interest-bearing deposits. FHLB advances decreased $20.0 million from December 31, 2024 to $180.0 million at June 30, 2025. The overall funding mix for the second quarter of 2025 remained relatively unchanged from the first quarter of 2025 with total deposits representing 91% of interest-bearing liabilities and average noninterest-bearing deposits representing 17% of average total deposits. The all-in average spot rate for total deposits was 2.95% at June 30, 2025.

Nonperforming assets decreased $3.6 million to $61.0 million, or 1.49% of total assets, at June 30, 2025, from $64.6 million, or 1.61% of total assets, at March 31, 2025. The decrease in nonperforming assets was due to $3.3 million in net charge-offs and $1.7 million of payoffs or paydowns, partially offset by the addition of $1.4 million of loans migrating to nonaccrual status in the second quarter of 2025. Loans classified as special mention or substandard increased during the second quarter of 2025 due to downgrades of certain loans and an increase in loans delinquent by 30-89 days.

As of June 30, 2025, the allowance for credit losses totaled $51.6 million, down from $52.6 million at March 31, 2025. The $918,000 decrease in the allowance for credit losses for the second quarter of 2025 was due to net charge-offs of $3.3 million, offset by a $2.4 million provision for credit losses. The allowance for loan losses ("ALL") as a percentage of loans HFI decreased to 1.58% at June 30, 2025, compared to 1.65% at March 31, 2025, due mainly to net charge-offs of amounts included in specific reserves at March 31, 2025. The ALL as a percentage of nonperforming loans HFI was 90% at June 30, 2025, an increase from 86% at March 31, 2025.

Total shareholders' equity was $517.7 million, or $29.25 book value per share at June 30, 2025, compared to $510.3 million, or $28.77 book value per share at March 31, 2025, and $511.3 million, or $28.12 book value per share at June 30, 2024. The increase in shareholders' equity for the second quarter of 2025 was due to net income of $9.3 million, lower net unrealized losses on available for sale securities of $1.3 million and equity compensation activity of $1.1 million, offset by common stock cash dividends paid totaling $2.9 million and common stock repurchases totaling $1.5 million. The increase in shareholders' equity for the last twelve months was due to net income of $23.0 million, lower net unrealized losses on AFS securities of $4.9 million, and equity compensation activity of $2.5 million, offset by common stock repurchases totaling $12.5 million and common stock cash dividends paid totaling $11.5 million. Tangible book value per share increased to $25.11 at June 30, 2025, up from $24.63 at March 31, 2025 and $24.51 at December 31, 2024. We repurchased 87,731 shares during the second quarter of 2025 at an average price of $17.04 per share. For additional information on tangible book value per share, see "Non-GAAP Financial Measures."