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 2025 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, 2026 are not necessarily indicative of the results expected for the year ending December 31, 2026.

We reported net income of $10.1 million, or $0.59 diluted earnings per share, for the quarter ended June 30, 2026, compared to net income of $11.3 million, or $0.66 diluted earnings per share, for the quarter ended March 31, 2026 and $9.3 million, or $0.52 diluted earnings per share for the quarter ended June 30, 2025. Net income for the second quarter of 2026 reflected lower net interest income and lower noninterest income, offset partially by lower noninterest expense and lower income tax expense as compared to the prior quarter. Net income for the second quarter of 2026 compared to this same quarter last year reflected higher net interest income, lower credit costs, lower noninterest income and higher income tax expense.

There was no provision for credit losses for the second quarter of 2026 compared to a reversal of $200,000 for the first quarter of 2026. The second quarter of 2026 provision for credit losses reflected a provision for loan losses of $77,000 and a reversal of provision for unfunded loan commitments of $77,000 due to a lower volume of unfunded loan commitments. The second quarter of 2026 provision for credit losses was due mainly to the impact of net charge-offs, while portfolio credit quality trends, underlying economic forecast indicators, and changes in loan portfolio composition remained relatively stable. Net charge-offs in the second quarter of 2026 represented 0.01% of average loans on an annualized basis, compared to 0.00% for the first quarter of 2026 and 0.42% for the second quarter of 2025.

Pre-tax pre-provision income totaled $14.1 million for the quarter ended June 30, 2026, compared to $15.5 million for the quarter ended March 31, 2026 and $15.3 million for the quarter ended June 30, 2025. Pre-tax pre-provision income totaled $29.6 million for the six months ended June 30, 2026, compared to $25.3 million for the six months ended June 30, 2025. The $4.3 million, or 17%, increase year over year was due to our ability to grow net interest income by 13% while being able to control noninterest expense, which decreased 2% year over year. For additional information on pre-tax pre-provision income, including a reconciliation of this measure to its most comparable GAAP measure, see "Non-GAAP Financial Measures."

At June 30, 2026, total assets were $4.3 billion, an increase of $66.7 million from December 31, 2025. The increase in total assets was primarily the result of an increase of $70.7 million in cash and cash equivalents. A portion of this cash was held in anticipation of the $40.0 million redemption of subordinated notes on July 1, 2026. At June 30, 2026, total deposits were $3.4 billion, an increase of $40.2 million from December 31, 2025. The increase in total deposits was due to a $145.8 million increase in retail deposits offset by a $105.6 million decrease in wholesale deposits. The increase in retail deposits included a $234.9 million increase in nonmaturity interest-bearing deposits and a $154.2 million decrease in time deposits as a portion of the maturing time deposits moved into a high-yield savings product. Noninterest-bearing demand deposits increased $65.1 million to $591.6 million, or 17.5% of total deposits, at June 30, 2026, compared to $526.5 million, or 15.7% of total deposits, at December 31, 2025. The gross loan to deposit ratio was 97.6% at June 30, 2026, compared to 99.0% at December 31, 2025 and 101.5% at June 30, 2025.

Nonperforming assets decreased $5.3 million to $43.6 million, or 1.02% of total assets, at June 30, 2026, from $48.8 million, or 1.16% of total assets, at March 31, 2026. The $5.3 million decrease in nonperforming assets was primarily attributable to a $20.8 million decrease in nonperforming loans partially offset by a $15.6 million increase in OREO (included in "accrued interest and other assets"). The increase in OREO was due to the transfer of one nonperforming construction loan to OREO, offset by the sale of the existing OREO properties.

Loans classified as substandard decreased by $11.0 million during the second quarter of 2026 due to transfers to OREO of $19.4 million and payoffs/paydowns totaling $4.2 million, partially offset by additions of $12.6 million. Loans classified as special mention decreased $4.5 million due to payoffs/paydowns of $3.8 million, downgrades to substandard-rated loans of $1.8 million, and upgrades to pass-rated loans of $453,000, partially offset by additions of $1.5 million.

As of June 30, 2026, the allowance for credit losses totaled $44.1 million, down from $44.2 million at March 31, 2026. The $83,000 decrease in the allowance for credit losses for the second quarter of 2026 was due to net charge-off activity. The allowance for loan losses ("ALL") as a percentage of loans HFI increased to 1.32% at June 30, 2026, compared to 1.31% at March 31, 2026. The ALL as a percentage of nonperforming loans HFI was 184% at June 30, 2026, and 98% at March 31, 2026.

Total shareholders' equity was $535.2 million, or $31.51 book value per share, at June 30, 2026, compared to $531.1 million, or $31.10 book value per share, at March 31, 2026, and $517.7 million, or $29.25 book value per share at June 30, 2025. The increase in shareholders' equity for the second quarter of 2026 compared to the prior quarter was due mostly to net income of $10.1 million and stock-based compensation activity of $1.6 million, partially offset by common stock repurchases totaling $4.5 million and common stock cash dividends paid totaling $2.8 million. Tangible book value per share increased to $27.23 at June 30, 2026, up from $26.84 at March 31, 2026 and $26.42 at December 31, 2025. We repurchased 180,576 shares during the second quarter of 2026 at an average price of $24.65 per share. No shares were repurchased during the first quarter of 2026. For additional information on tangible book value per share, see "Non-GAAP Financial Measures."