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 nine months ended September 30, 2025 are not necessarily indicative of the results expected for the year ending December 31, 2025.

We reported net income of $10.1 million, or $0.59 diluted earnings per share, for the quarter ended September 30, 2025, compared to net income of $9.3 million, or $0.52 diluted earnings per share, for the quarter ended June 30, 2025 and $7.0 million, or $0.39 diluted earnings per share for the quarter ended September 30, 2024. Net income for the third quarter of 2025 reflected higher net interest income, lower credit costs and a lower effective tax rate as compared to the prior quarter. Net income for the prior quarter 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. There was no ERC income or related expenses for the third quarter of 2025.

The provision for credit losses totaled $625,000, $2.4 million and $3.3 million for the quarters ended September 30, 2025, June 30, 2025, and September 30, 2024. The third quarter of 2025 provision for credit losses reflected a provision for loan loss of $750,000 due mainly to net loan growth and a reversal of provision for credit losses for unfunded commitments of $125,000 due to a lower volume of unfunded commitments.

At September 30, 2025, total assets were $4.2 billion, an increase of $216.0 million from December 31, 2024. The increase in total assets was primarily the result of an increase of $249.3 million in gross loans held for investment ("HFI"), to $3.3 billion at September 30, 2025, and mostly funded by an increase of $282.7 million in deposits to $3.4 billion at September 30, 2025. The increase in total deposits was primarily the result of an increase of $295.2 million in interest-bearing deposits, including an increase in wholesale time deposits of $120.6 million, retail time deposits of $116.0 million, and interest-bearing non-maturity deposits of $58.7 million. Wholesale time deposits were raised to repay and refinance maturing FHLB advances, which decreased $70.0 million since year end to $130.0 million at September 30, 2025. The gross loan to deposit ratio was 98.1% at September 30, 2025, compared to 99.4% at December 31, 2024 and 98.6% at September 30, 2024.

Nonperforming assets decreased $6.7 million to $54.3 million, or 1.29% of total assets, at September 30, 2025, from $61.0 million, or 1.49% of total assets, at June 30, 2025. The $6.7 million decrease in nonperforming assets was mostly due to $7.0 million in gross charge-offs, $5.0 million in upgrades of loans to performing status and $1.2 million of payoffs or paydowns, partially offset by $3.6 million in SBA-related OREO additions and $2.8 million of loans that migrated to nonaccrual status in the third quarter of 2025. Loans classified as special mention or substandard decreased during the third quarter of 2025 due to upgrades of loans to pass status, payoffs or paydowns, and charge-offs of loan balances.

As of September 30, 2025, the allowance for credit losses totaled $45.4 million, down from $51.6 million at June 30, 2025. The $6.2 million decrease in the allowance for credit losses for the third quarter of 2025 was due to net charge-offs of $6.9 million, partially offset by a $625,000 provision for credit losses. The allowance for loan losses ("ALL") as a percentage of loans HFI decreased to 1.36% at September 30, 2025, compared to 1.58% at June 30, 2025, due mainly to net charge-offs of amounts included in specific reserves at June 30, 2025. The ALL as a percentage of nonperforming loans HFI was 98.70% at September 30, 2025, an increase from 89.79% at June 30, 2025.

Total shareholders' equity was $514.3 million, or $30.18 book value per share at September 30, 2025, compared to $517.7 million, or $29.25 book value per share, at June 30, 2025, and $509.7 million, or $28.81 book value per share at September 30, 2024. The decrease in shareholders' equity for the third quarter of 2025 compared to the prior quarter was due mostly to common stock repurchases totaling $12.5 million and common stock cash dividends paid totaling $2.8 million, offset by net income of $10.1 million and lower net unrealized losses on available for sale securities of $1.6 million. The increase in shareholders' equity for the last twelve months was due to net income of $26.2 million, lower net unrealized losses on AFS securities of $1.6 million, and equity compensation activity of $2.2 million, partially offset by common stock repurchases totaling $14.0 million and common stock cash dividends paid totaling $11.4 million. Tangible book value per share increased to $25.89 at September 30, 2025, up from $25.11 at June 30, 2025 and $24.51 at December 31, 2024. We repurchased 659,218 shares during the third quarter of 2025 at an average price of $18.75 per share and 746,949 shares at an average price of $18.55 during the nine months ended September 30, 2025. For additional information on tangible book value per share, see "Non-GAAP Financial Measures."