RBB Bancorp

Previous wording

In this Quarterly Report on Form 10-Q (this “Report” or “Form 10-Q”), the terms “Bancorp” and “RBB” refer to RBB Bancorp and the term “Bank” refers to Royal Business Bank. The terms “Company,” “we,” “us,” and “our” refer to Bancorp and its consolidated subsidiaries, including the Bank collectively. When we refer to the “parent company,” “Bancorp,” or the “holding company,” we are referring to RBB Bancorp, the parent company, on a stand-alone basis. This Report contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

Current wording

In this Quarterly Report on Form 10-Q (this “Report” or “Form 10-Q”), the terms “Bancorp” and “RBB” refer to RBB Bancorp and the term “Bank” refers to Royal Business Bank. The terms “Company,” “we,” “us,” and “our” refer to Bancorp and its consolidated subsidiaries, including the Bank collectively. When we refer to the “parent company,” “Bancorp,” or the “holding company,” we are referring to RBB Bancorp, the parent company, on a stand-alone basis. This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

Previous wording

A sensitivity analysis of our ACL was performed as of June 30, 2026. Based on this sensitivity analysis, a 25% increase in the assumed prepayment speed on loans would result in a $1.2 million, or 2.7%, decrease to the ACL. A 25% decrease in the assumed prepayment speed on loans would result in a $794,000, or 1.8%, increase to the ACL. Additionally, a one percentage point increase in the unemployment rate would result in a $790,000, or 1.8%, increase to the ACL and a one percentage point decrease in the unemployment rate would result in a $1.3 million, or 2.9%, decrease to the ACL. Management reviews the results using the comparison scenario for sensitivity analysis and considers the results when evaluating the qualitative factor adjustments.

Current wording

A sensitivity analysis of our ACL was performed as of September 30, 2026. Based on this sensitivity analysis, a 25% increase in the assumed prepayment speed on loans would result in a $990,000, or 2.2%, decrease to the ACL. A 25% decrease in the assumed prepayment speed on loans would result in a $1.1 million, or 2.4%, increase to the ACL. Additionally, a one percentage point increase in the unemployment rate would result in a $1.0 million, or 2.3%, increase to the ACL and a one percentage point decrease in the unemployment rate would result in a $1.0 million, or 2.3%, decrease to the ACL. Management reviews the results using the comparison scenario for sensitivity analysis and considers the results when evaluating the qualitative factor adjustments.

Previous wording

On a quarterly basis, we stress test our nine qualitative risk factors, which are categorized by lending policy, procedures and strategies; economic conditions; changes in nature and volume of the portfolio; credit and lending staff; problem loan trends; loan review results; collateral value; concentrations; and regulatory and business environment, by creating two scenarios, a Moderate Stress scenario and a Major Stress scenario. In the Moderate Stress scenario, the status of the nine risk factors across all pooled loan types were set at “High-Moderate Risk” while in the Major Stress scenario, the status of the nine risk factors across all pooled loan types were set at “Major Risk.” Under the Moderate Stress scenario, the ACL would increase by $10.7 million, or 24.4%, as of June 30, 2026. Under the Major Stress scenario, the ACL would increase by $31.1 million, or 70.5%, as of June 30, 2026. Management compared the stress test results to our internal forecasts for earnings and capital and has concluded that the Company would remain well-capitalized under these stressed scenarios.

Current wording

On a quarterly basis, we stress test our nine qualitative risk factors, which are categorized by lending policy, procedures and strategies; economic conditions; changes in nature and volume of the portfolio; credit and lending staff; problem loan trends; loan review results; collateral value; concentrations; and regulatory and business environment, by creating two scenarios, a Moderate Stress scenario and a Major Stress scenario. In the Moderate Stress scenario, the status of the nine risk factors across all pooled loan types were set at “High-Moderate Risk” while in the Major Stress scenario, the status of the nine risk factors across all pooled loan types were set at “Major Risk.” Under the Moderate Stress scenario, the ACL would increase by $12.3 million, or 27.7%, as of September 30, 2026. Under the Major Stress scenario, the ACL would increase by $33.0 million, or 74.2%, as of September 30, 2026. Management compared the stress test results to our internal forecasts for earnings and capital and has concluded that the Company would remain well-capitalized under these stressed scenarios.

Previous wording

RBB Bancorp is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. RBB Bancorp’s principal business is to serve as the holding company for its wholly-owned subsidiaries, the Bank and RAM. RAM was formed in 2012 to hold and manage problem assets acquired in business combinations. There are no problem assets at RAM or activity in this subsidiary for the three months and six months ended June 30, 2026, or the year ended December 31, 2025. At June 30, 2026, we had total assets of $4.3 billion, gross loans held for investment ("HFI") of $3.3 billion, total deposits of $3.4 billion and total shareholders' equity of $535.2 million. RBB’s common stock trades on the Nasdaq Global Select Market under the symbol “RBB.”

Current wording

RBB Bancorp ("RBB") is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. RBB’s principal business is to serve as the holding company for its wholly-owned subsidiaries, Royal Business Bank ("Bank") and RBB Asset Management Company ("RAM"), collectively referred to herein as "the Company". RAM was formed in 2012 to hold and manage problem assets acquired in business combinations. There are no problem assets in RAM or activity in this subsidiary at and for the three months and nine months ended September 30, 2026, or the year ended December 31, 2025. At September 30, 2026 we had total assets of $4.3 billion, gross loans held for investment ("HFI") of $3.4 billion, total deposits of $3.4 billion and total shareholders' equity of $534.2 million. RBB’s common stock trades on the Nasdaq Global Select Market under the symbol “RBB.”

Previous wording

The Bank provides business-banking products and services predominantly to Asian-centric communities through 24 full service branches located in Los Angeles County, Orange County and Ventura County in California, Las Vegas (Nevada), New York City metropolitan areas, Chicago (Illinois), Edison (New Jersey), and Honolulu (Hawaii) and a loan production office located in the San Francisco Bay area. The products and services include commercial and investor real estate loans, business loans and lines of credit, Small Business Administration (“SBA”) 7A and 504 loans, mortgage loans, trade finance, and a full range of depository accounts, including specialized services such as remote deposit, E-banking, mobile banking, and treasury management services. Our primary source of revenue is providing loans to customers, who are predominately small and middle-market businesses and individuals.

Current wording

The Bank provides business-banking products and services predominantly to Asian-centric communities through 24 full service branches located in Los Angeles County, Orange County and Ventura County in California, Las Vegas (Nevada), the New York City metropolitan area, Chicago (Illinois), Edison (New Jersey), and Honolulu (Hawaii) and a loan production office located in the San Francisco Bay area. The products and services include commercial and investor real estate loans, business loans and lines of credit, Small Business Administration (“SBA”) 7A and 504 loans, mortgage loans, trade finance, and a full range of depository accounts, including specialized services such as remote deposit, E-banking, mobile banking, and treasury management services. Our primary source of revenue is providing loans to customers, who are predominantly small and middle-market businesses and individuals.

Previous wording

We operate as a minority depository institution ("MDI"), which is defined by the FDIC as a federally insured depository institution where 51% or more of the voting stock is owned by minority individuals or a majority of the board of directors is minority and the community that the institution serves is predominantly minority. A MDI is eligible to receive support from the FDIC and other federal regulatory agencies such as training, technical assistance, and review of proposed new deposit taking and lending programs, and the adoption of applicable policies and procedures governing such programs. We intend to maintain our MDI designation, as it is expected that at least 51% of our issued and outstanding shares of capital shall remain owned by minority individuals or a majority of the board of directors is minority and the community that the institution serves is predominantly minority. The MDI designation has been historically beneficial to us, and we continue to use the program for technical assistance.

Current wording

We operate as a minority depository institution ("MDI"), which is defined by the FDIC as a federally insured depository institution where 51% or more of the voting stock is owned by minority individuals or a majority of the board of directors is minority and the community that the institution serves is predominantly minority. An MDI is eligible to receive support from the FDIC and other federal regulatory agencies such as training, technical assistance, and review of proposed new deposit taking and lending programs, and the adoption of applicable policies and procedures governing such programs. We expect to continue to meet the criteria for MDI designation and intend to maintain our MDI designation, which has been historically beneficial to us. We continue to use the program for technical assistance.

Previous wording

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.

Current wording

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 nine months ended September 30, 2026 are not necessarily indicative of the results expected for the year ending December 31, 2026.

Previous wording

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.

Current wording

We reported net income of $12.6 million, or $0.74 diluted earnings per share, for the quarter ended September 30, 2026, compared to net income of $10.1 million, or $0.59 diluted earnings per share, for the quarter ended June 30, 2026 and $10.1 million, or $0.59 diluted earnings per share for the quarter ended September 30, 2025. Compared with the prior quarter, net income for the third quarter of 2026 reflected higher net interest income and noninterest income, partially offset by higher credit costs, noninterest expense, and income tax expense. The third quarter of 2026 included a $2.7 million (pre-tax) gain on the sale of an office building in Brooklyn, New York. Compared with the third quarter of 2025, net income reflected higher net interest income and noninterest income and lower credit costs, partially offset by higher noninterest expense and income tax expense.

Previous wording

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."

Current wording

Pre-tax pre-provision income totaled $17.3 million for the quarter ended September 30, 2026, compared to $14.1 million for the quarter ended June 30, 2026 and $13.9 million for the quarter ended September 30, 2025. Pre-tax pre-provision income totaled $46.9 million for the nine months ended September 30, 2026, compared to $39.1 million for the nine months ended September 30, 2025. The $7.8 million, or 20%, increase for the year-to-date results was due to our ability to grow net interest income by 12% while controlling noninterest expense, which increased 0.2% 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."

Previous wording

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.

Current wording

At September 30, 2026, total assets were $4.3 billion, an increase of $43.0 million from December 31, 2025. The increase in total assets was primarily the result of an increase of $84.9 million in loans held for investment, partially offset by a decrease of $25.9 million in investment securities available for sale. At September 30, 2026, total deposits were $3.4 billion, an increase of $44.9 million from December 31, 2025. The increase in total deposits was due to a $209.1 million increase in retail deposits offset by a $164.2 million decrease in wholesale deposits. The increase in retail deposits included a $281.4 million increase in nonmaturity interest-bearing deposits and a $102.6 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 $30.3 million to $556.8 million, or 16.4% of total deposits, at September 30, 2026, compared to $526.5 million, or 15.7% of total deposits, at December 31, 2025. The gross loan to deposit ratio was 100.1% at September 30, 2026, compared to 99.0% at December 31, 2025 and 98.1% at September 30, 2025.

Previous wording

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.

Current wording

Loans classified as substandard decreased by $4.2 million during the third quarter of 2026 due to payoffs/paydowns totaling $5.4 million, partially offset by additions of $1.2 million. Loans classified as special mention increased $4.1 million due to additions of $7.0 million, partially offset by payoffs/paydowns of $1.5 million, and upgrades of $1.4 million to pass-rated loans.

Previous wording

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.

Current wording

As of September 30, 2026, the allowance for credit losses totaled $44.4 million, up from $44.1 million at June 30, 2026. The $378,000 increase in the allowance for credit losses for the third quarter of 2026 was due to a provision for credit losses of $500,000, partially offset by net charge-offs of $122,000. The allowance for loan losses ("ALL") as a percentage of loans HFI decreased to 1.30% at September 30, 2026, compared to 1.32% at June 30, 2026. The ALL as a percentage of nonperforming loans HFI was 234% at September 30, 2026, up from 184% at June 30, 2026.

Previous wording

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."

Current wording

September 30, 2025. The decrease in shareholders' equity for the third quarter of 2026 compared to the prior quarter was due mostly to an increase in unrealized losses on AFS securities, net of tax, of $6.8 million, common stock repurchases totaling $4.5 million and common stock cash dividends paid totaling $2.7 million, partially offset by net income of $12.6 million and stock-based compensation activity of $450,000. Tangible book value per share increased to $27.44 at September 30, 2026, up from $27.23 at June 30, 2026 and $25.89 at September 30, 2025. We repurchased 168,768 shares during the third quarter of 2026 at an average price of $26.37 per share. We repurchased 180,576 shares during the second quarter of 2026 at an average price of $24.65 per share. For additional information on tangible book value per share, see "Non-GAAP Financial Measures."

Previous wording

Net interest income decreased $417,000 to $30.1 million for the second quarter of 2026, compared to $30.5 million for the first quarter of 2026. The $417,000 decrease was due to a $773,000 increase in interest expense, offset by a $356,000 increase in interest income. The increase in interest expense was due mainly to an $829,000 increase in interest on subordinated notes as a result of these notes repricing from 4.00% to 6.98% effective April 1, 2026 and one additional day in the quarter. The increase in interest income was due to the combination of a $725,000 increase in loan interest income as average loans increased and one additional day in the quarter, partially offset by lower FHLB dividend income as the first quarter of 2026 included a special dividend of $430,000. There was no special dividend from the FHLB in the second quarter of 2026.

Current wording

Net interest income was $31.8 million for the third quarter of 2026, compared to $30.1 million for the second quarter of 2026. The $1.7 million increase was due to a $2.1 million increase in interest income, offset by a $473,000 increase in interest expense. The increase in interest income was due to the combination of a $1.5 million increase in loan interest income as average loans and nonaccrual interest recoveries increased, the impact of one additional day in the quarter, and a special dividend of $320,000 from the FHLB in the third quarter of 2026. There was no special dividend from the FHLB in the second quarter of 2026. The increase in interest expense was due to a $234,000 increase in interest on deposits, which is attributed largely to one additional day in the quarter, and a $239,000 increase in interest on total borrowings. The increase in total borrowings was due mainly to the impact of higher average FHLB advances, partially offset by the impact of lower average long-term debt outstanding.

Previous wording

The net interest margin ("NIM") was 3.06% for the second quarter of 2026, a decrease of 9 basis points from 3.15% for the first quarter of 2026. The NIM decrease included a 5 basis point decrease in the yield on average total interest-earning assets, combined with a 4 basis point increase in the overall cost of funds. The yield on average interest-earning assets decreased to 5.81% for the second quarter of 2026 from 5.86% for the first quarter of 2026 due mostly to the impact of a 4 basis point decrease from lower FHLB dividends and a 1 basis point decrease in the yield on average total loans.

Current wording

The net interest margin ("NIM") was 3.16% for the third quarter of 2026, an increase of 10 basis points from 3.06% for the second quarter of 2026. The NIM increase included a 9 basis point increase in the yield on average total interest-earning assets, combined with a 3 basis point decrease in the overall cost of funds. The yield on average interest-earning assets increased to 5.90% for the third quarter of 2026 from 5.81% for the second quarter of 2026 due mostly to the impact of higher nonaccrual interest recoveries on loans and the FHLB special dividend received in the third quarter.

Previous wording

The average cost of funds increased to 3.00% for the second quarter of 2026 from 2.96% for the first quarter of 2026, due mostly to an increase in the cost of $120.0 million in subordinated notes due to their repricing on April 1, 2026, partially offset by a 5 basis point decrease in the cost of average total deposits to 2.81%. The average cost of interest-bearing deposits decreased to 3.34% for the second quarter of 2026 from 3.39% for the first quarter of 2026. The overall funding mix for the second quarter of 2026 remained relatively unchanged from the first quarter of 2026 with average interest-bearing deposits representing 92% of average interest-bearing liabilities and average noninterest-bearing deposits representing 16% of average total deposits. The period end weighted average interest rate for total deposits was 2.75% at June 30, 2026 compared to 2.79% at March 31, 2026.

Current wording

2026 from 3.34% for the second quarter of 2026. The overall funding mix for the third quarter of 2026 remained relatively unchanged from the second quarter of 2026 with average interest-bearing deposits representing 91% of average interest-bearing liabilities and average noninterest-bearing deposits representing 17% of average total deposits. The period end weighted average interest rate for total deposits was 2.82% at September 30, 2026 compared to 2.75% at June 30, 2026. The increase is due in part to the impact of the recent 25 basis point increase to the Federal funds rate.

Previous wording

Net interest income increased $2.8 million to $30.1 million for the second quarter of 2026, compared to $27.3 million for the second quarter of 2025. The increase in net interest income was due to an increase in interest income of $3.0 million, partially offset by a $202,000 increase in interest expense. The increase in interest income was primarily due to average interest-earning asset growth of $193.6 million, or 5.2%, as compared to the same quarter in 2025. The growth in average interest-earning assets included higher average total loans, securities available for sale, and cash and cash equivalents. The impact of higher average interest-earning assets on income was partially offset by lower market interest rates as compared to the same period in 2025. The increase in interest expense was driven largely by an increase in the cost of subordinated notes due to their repricing on April 1, 2026, from 4.00% to 6.98%.

Current wording

Net interest income increased $2.5 million to $31.8 million for the third quarter of 2026, compared to $29.3 million for the third quarter of 2025. The increase in net interest income was due to an increase in interest income of $1.9 million, combined with a $569,000 decrease in interest expense. The increase in interest income was primarily due to average interest-earning asset growth of $90.7 million, or 2.3%, as compared to the same quarter in 2025. The growth in average interest-earning assets included higher average total loans and cash and cash equivalents. The impact of higher average interest-earning assets on income was partially offset by lower market interest rates as compared to the same period in 2025. The decrease in interest expense was driven largely by a decrease in the cost of deposits due to lower market rates combined with the impact of lower average long-term debt from the partial redemption of the subordinated notes and partially offset by an increase in the cost of the remaining long-term debt.

Previous wording

The $3.0 million increase in interest income was due mainly to a $3.0 million increase in interest income from average total loans, of which $2.2 million was attributed to higher average balances, and $795,000 attributed to higher rates. Average total loans were $3.3 billion for the quarter ended June 30, 2026, an increase of $144.3 million, or 4.5%, compared to the second quarter of 2025. The yield on average total loans increased 10 basis points to 6.13% for the quarter ended June 30, 2026 compared to 6.03% for the quarter ended June 30, 2025.

Current wording

The $1.9 million increase in interest income was due mainly to a $2.1 million increase in interest income from average total loans, of which $1.2 million was attributed to higher average balances, and $881,000 attributed mostly to higher nonaccrual interest recoveries which increased the yield by 7 basis points. Average total loans were $3.3 billion for the quarter ended September 30, 2026, an increase of $81.2 million, or 2.50%, compared to the third quarter of 2025. The yield on average total loans increased 11 basis points to 6.23% for the quarter ended September 30, 2026 compared to 6.12% for the quarter ended September 30, 2025 due mostly to higher nonaccrual interest recoveries.

Previous wording

The $202,000 increase in interest expense was due mainly to higher interest expense on borrowings of $425,000, partially offset by a $223,000 decrease in interest expense on deposits. Interest expense on borrowings increased mainly due to the repricing of the subordinated notes from 4.00% to 6.98% on April 1, 2026.The decrease in interest expense on deposits was primarily due to a 32 basis point decrease in the rates paid on average interest-bearing deposits, partially offset by the impact of a $224.4 million increase in the average balance of interest-bearing deposits.

Current wording

The $569,000 decrease in interest expense was due mainly to a $1.0 million decrease in interest expense on deposits, partly offset by higher interest expense on total borrowings of $429,000. The decrease in interest expense on deposits was primarily due to a decrease in market rates which resulted in a 28 basis point decrease in the rates paid on average interest-bearing deposits, partially offset by the impact of a $110.6 million increase in the average balance of interest-bearing deposits. The average Federal Funds rate declined from 4.46% for the three months ended September 30, 2025, to 3.79% for the three months ended September 30, 2026. Interest expense on total borrowings increased mainly due to the subordinated notes being fixed at 4.00% for the third quarter of 2025 compared to 7.02% for the third quarter of 2026, offset by the impact of lower average long-term debt outstanding.

Previous wording

The NIM was 3.06% for the second quarter of 2026, an increase of 14 basis points from 2.92% for the second quarter of 2025. The increase was primarily due to a 14 basis point decrease in the total cost of funds to 3.00%, and a 2 basis point increase in the yield on average interest-earning assets to 5.81% for the second quarter of 2026 from 5.79% for the second quarter of 2025. The decrease in funding costs was due to the lower average cost of interest-bearing deposits in response to lower market rates, offset by the higher average cost for borrowings. Average noninterest-bearing deposits totaled $535.8 million, or 16% of total average deposits, for the second quarter of 2026 compared to $526.1 million, or 17% of total average deposits, for the second quarter of 2025. The increase in the yield on average interest-earning assets was due mainly to a 10 basis point increase in the yield on average total loans.

Current wording

The NIM was 3.16% for the third quarter of 2026, an increase of 18 basis points from 2.98% for the third quarter of 2025. The increase was primarily due to a 15 basis point decrease in the total cost of funds to 2.97%, and a 5 basis point increase in the yield on average interest-earning assets to 5.90% for the third quarter of 2026. The decrease in funding costs was due to the lower average cost of interest-bearing deposits in response to lower market rates, offset by the higher average cost for total borrowings. Average noninterest-bearing deposits totaled $564.0 million, or 17% of total average deposits, for the third quarter of 2026 compared to $541.1 million, or 17% of total average deposits, for the third quarter of 2025. The increase in the yield on average interest-earning assets was due mainly to an 11 basis point increase in the yield on average total loans.

Previous wording

Net interest income increased $7.1 million to $60.6 million for the six months ended June 30, 2026, compared to $53.5 million for the six months ended June 30, 2025. The increase in net interest income was due to an increase in interest income of $7.4 million partially offset by an increase in interest expense of $329,000. The increase in interest income was due primarily to higher income on loans due to a higher average balance and higher yield. The increase in interest expense was primarily due to higher average rates paid on borrowings.

Current wording

Net interest income increased $9.6 million to $92.4 million for the nine months ended September 30, 2026, compared to $82.8 million for the nine months ended September 30, 2025. The increase in net interest income was due to an increase in interest income of $9.3 million coupled with a decrease in interest expense of $240,000. The increase in interest income was due primarily to higher income on loans due to a higher average balance and higher yield. The decrease in interest expense was primarily due to lower average rates paid on deposits partially offset by higher interest expense on total borrowings.

Previous wording

Interest and fees on total loans increased $7.3 million for the six months ended June 30, 2026 primarily due to a $180.4 million increase in the average balance of total loans from loan growth since the end of the second quarter of 2025. The yield on loans increased 12 basis points to 6.14% for the six months ended June 30, 2026 from 6.02% for the same period in 2025.

Current wording

Interest and fees on total loans increased $9.4 million for the nine months ended September 30, 2026 primarily due to a $147.0 million increase in the average balance of total loans from loan growth since the end of the third quarter of 2025. The yield on loans increased 11 basis points to 6.17% for the nine months ended September 30, 2026 from 6.06% for the same period in 2025.

Previous wording

Interest expense on deposits decreased $207,000 to $47.2 million for the six months ended June 30, 2026 compared to $47.4 million for the six months ended June 30, 2025. The decrease in interest expense on deposits was primarily due to a decrease in the average rates paid on interest-bearing deposits to 3.37% for the six months ended June 30, 2026 compared to 3.71% for the six months ended June 30, 2025. The effect of the decrease in the average rate paid on deposits was partially offset by an increase in average interest-bearing deposit balances of $252.8 million to $2.8 billion for the six months ended June 30, 2026. Average noninterest-bearing deposits totaled $531.0 million, or 15.8% of total average deposits, for the first six months of 2026, compared to 16.9% for the first six months of 2025.

Current wording

Interest expense on deposits decreased $1.2 million to $71.0 million for the nine months ended September 30, 2026 compared to $72.2 million for the nine months ended September 30, 2025. The decrease in interest expense on deposits was primarily due to a decrease in market rates which resulted in a decrease in the average rates paid on interest-bearing deposits to 3.36% for the nine months ended September 30, 2026 compared to 3.69% for the nine months ended September 30, 2025. The average Federal Funds rate declined from 4.49% for the nine months ended September 30, 2025, to 3.76% for the nine months ended September 30, 2026. The effect of the decrease in the average rate paid on deposits was partially offset by an increase in average interest-bearing deposit balances of $204.9 million to $2.8 billion for the nine months ended September 30, 2026. Average noninterest-bearing deposits totaled $542.1 million, or 16.1% of total average deposits, for the first nine months of 2026, compared to $529.2 million, or 16.8% of total average deposits, for the first nine months of 2025.

Previous wording

The NIM was 3.10% for the six months ended June 30, 2026, an increase of 20 basis points from 2.90% for the six months ended June 30, 2025. The increase was primarily due to a 17 basis point decrease in the average cost of funds, including a 26 basis point decrease in the cost of average deposits, and a 5 basis point increase in the yield on average interest-earning assets, including a 12 basis point increase in the yield on average loans.

Current wording

The NIM was 3.12% for the nine months ended September 30, 2026, an increase of 19 basis points from 2.93% for the nine months ended September 30, 2025. The increase was primarily due to a 16 basis point decrease in the average cost of funds, including a 25 basis point decrease in the cost of average deposits, and a 6 basis point increase in the yield on average interest-earning assets, including an 11 basis point increase in the yield on average loans.

Previous wording

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.

Current wording

The provision for credit losses was $500,000 for the third quarter of 2026 compared to no provision for the second quarter of 2026. The third quarter of 2026 provision for credit losses reflected a provision for loan losses of $500,000 and no provision for unfunded commitments. The third quarter provision for loan losses was due mainly to the impact of net loan growth, partially offset by improved credit quality trends and underlying economic forecast indicators. Net charge-offs on an annualized basis represented 0.01% of average loans for both the third quarter of 2026 and the second quarter of 2026.

Previous wording

The provision for credit losses was a reversal of $200,000 for the six months ended June 30, 2026 compared to a $9.1 million provision for the six months ended June 30, 2025. This $9.3 million decrease was primarily due to lower net charge-offs, combined with the impact of declines in nonperforming, classified, and criticized loans as of June 30, 2026. There were $105,000 in net loan charge-offs for the six months ended June 30, 2026, as compared to $5.9 million in net loan charge-offs for the six months ended June 30, 2025.

Current wording

The provision for credit losses was $300,000 for the nine months ended September 30, 2026 compared to a $9.8 million provision for the nine months ended September 30, 2025. This $9.5 million decrease was primarily due to lower net charge-offs, combined with the impact of declines in nonperforming, classified, and criticized loans since September 30, 2025. There were $227,000 in net loan charge-offs for the nine months ended September 30, 2026, as compared to $12.8 million in net loan charge-offs for the nine months ended September 30, 2025.

Previous wording

Noninterest income decreased $3.5 million to $7.3 million for the six months ended June 30, 2026, compared to $10.8 million for the same period in the prior year. The decrease was mainly due to the second quarter of 2025 including other income of $5.2 million for the receipt of the previously mentioned ERC grant. This was partially offset by a higher gain on sale of loans of $849,000 and gain on OREO of $669,000 for the six months ended June 30, 2026 compared to the same period in 2025.

Current wording

Noninterest income decreased $1.7 million to $12.4 million for the nine months ended September 30, 2026, compared to $14.1 million for the same period in the prior year. This decrease was mainly due to 2025 including other income of $5.2 million for the receipt of Employee Retention Credit ("ERC") funds from the Internal Revenue Service while the 2026 period included the $2.7 million gain on the sale of the office building. This decrease in other income was partially offset by a higher gain on sale of loans of $678,000 and higher gain on OREO of $669,000 for the nine months ended September 30, 2026 compared to the same period in 2025.

Previous wording

Noninterest expense for the six months ended June 30, 2026 was $38.3 million, a decrease of $735,000 from $39.0 million for the six months ended June 30, 2025. The decrease in noninterest expense was primarily due to a decrease in legal and professional expense of $1.6 million, partially offset by an increase in salaries and employee benefits of $583,000. The decrease in legal and professional expense was due mainly to $1.2 million of ERC advisory costs incurred in the second quarter of 2025 along with higher legal costs related to credit, operations, and other corporate governance. The increase in salaries and employee benefits was due mainly to the impact of annual pay increases. The efficiency ratio was 56.41% for the six months ended June 30, 2026, down from 60.70% for the six months ended June 30, 2025 due to the combination of $3.9 million in revenue growth and the decrease in noninterest expense.

Current wording

Noninterest expense for the nine months ended September 30, 2026 was $57.8 million, an increase of $130,000 from $57.7 million for the nine months ended September 30, 2025. This increase was primarily due to an increase in salaries and employee benefits expense of $1.5 million and occupancy expense of $338,000 partially offset by a decrease in legal and professional expense of $1.7 million. The increase in salaries and employee benefits was due mainly to the impact of annual pay increases and the addition of the Northern California loan production office in June 2026. The increase in occupancy costs included the impact of the new loan production office and Brooklyn building sale in 2026. The decrease in legal and professional expense was due mainly to $1.2 million of ERC advisory costs incurred in 2025 versus no similar fee in 2026 and lower legal costs related to credit, operations, and other corporate governance in 2026 compared to 2025. The efficiency ratio was 55.22% for the nine months ended September 30, 2026, down from 59.58% for the nine months ended September 30, 2025 due to the combination of $7.9 million in revenue growth while noninterest expense remained flat. The operating expense ratio was 1.83% for the nine months ended September 30, 2026, down from 1.91% for the nine months ended September 30, 2025.

Previous wording

Total Assets. At June 30, 2026, total assets were $4.3 billion, an increase of $66.7 million, from total assets of $4.2 billion at December 31, 2025. The increase was primarily due to a $70.7 million increase in cash and cash equivalents.

Current wording

Total Assets. At September 30, 2026, total assets were $4.3 billion, an increase of $43.0 million, from total assets of $4.2 billion at December 31, 2025. The increase was primarily due to an $84.9 million increase in loans held for investment, partially offset by a decrease of $25.9 million in investment securities available for sale.

Previous wording

Our investment portfolio is comprised primarily of U.S. government and SBA agency securities, mortgage-backed securities ("MBS") backed by government-sponsored entities, collateral mortgage obligations ("CMO") and commercial paper.

Current wording

Our investment portfolio is comprised primarily of U.S. government and SBA agency securities, mortgage-backed securities ("MBS") backed by government-sponsored entities, collateralized mortgage obligations ("CMO"), commercial paper, and municipal tax-exempt securities.

Previous wording

The weighted-average life of the total investment portfolio was 4.6 years at June 30, 2026, and 4.9 years at December 31, 2025. 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.

Current wording

The weighted-average life of the total investment portfolio was 4.8 years at September 30, 2026, and 4.9 years at December 31, 2025. 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.

Previous wording

The loan portfolio is the largest category of our earning assets. Loans HFI decreased $4.8 million to $3.3 billion at June 30, 2026 since December 31, 2025. The decrease was primarily due to decreases in CRE loans of $25.5 million, construction and land development ("C&D") loans of $9.2 million, and SBA loans of $6.3 million, partially offset by increases in SFR mortgage loans of $25.3 million, and commercial and industrial ("C&I") loans of $11.9 million. SFR mortgage loans represented 50.8% of our total HFI loans as of June 30, 2026 and 50.0% at December 31, 2025. There were no loans HFS at June 30, 2026 compared to $2.1 million loans HFS at December 31, 2025.

Current wording

The loan portfolio is the largest category of our earning assets. Loans HFI increased $84.9 million to $3.4 billion at September 30, 2026 since December 31, 2025. The increase was primarily due to increases in SFR mortgage loans of $106.0 million and commercial and industrial ("C&I") loans of $11.7 million, partially offset by decreases in CRE loans of $23.0 million, SBA loans of $7.5 million, and construction and land development ("C&D") loans of $844,000. SFR mortgage loans represented 51.8% of our total HFI loans as of September 30, 2026 and 50.0% at December 31, 2025. There were no loans HFS at September 30, 2026 compared to $2.1 million loans HFS at December 31, 2025.

Previous wording

The majority of our loan portfolio is based on collateral or businesses located in California and New York, which represented 88.2% of our loan portfolio. Loans secured by collateral in other states represented approximately 11.8% of our portfolio and the majority of these loans are secured by real estate with a weighted average loan-to-value ("LTV") ratio of 55% at June 30, 2026.

Current wording

The majority of our loan portfolio is based on collateral or businesses located in California and New York, which represented 87.8% of our loan portfolio. Loans secured by collateral in other states represented approximately 12.2% of our portfolio and the majority of these loans are secured by real estate with a weighted average loan-to-value ("LTV") ratio of 55% at September 30, 2026.

Previous wording

SFR loans. SFR loans totaled $1.7 billion, or 50.8% of our loans HFI portfolio, as of June 30, 2026. SFR loans increased $25.3 million, or 1.5%, during the first six months of 2026 due to higher originations relative to payoffs, paydowns and sales. As of June 30, 2026, the weighted-average LTV ratio of the portfolio was 54%, the weighted average FICO score was 765, and the weighted average age was 3.6 years.

Current wording

SFR loans. SFR loans totaled $1.8 billion, or 51.8% of our loans HFI portfolio, as of September 30, 2026. SFR loans increased $106.0 million, or 6.4%, during the first nine months of 2026 due to higher originations relative to payoffs, paydowns and sales. As of September 30, 2026, the weighted-average LTV ratio of the portfolio was 54%, the weighted average FICO score was 765, and the weighted average age since origination was 3.6 years.

Previous wording

Commercial real estate loans. CRE loans decreased $25.5 million, or 2.0%, to $1.3 billion at June 30, 2026, compared to $1.3 billion at December 31, 2025. The decrease in the first half of 2026 was driven by above-average payoff activity more than offsetting new loan production.

Current wording

Commercial real estate loans. CRE loans decreased $23.0 million, or 1.8%, to $1.3 billion at September 30, 2026, compared to $1.3 billion at December 31, 2025. The decrease in 2026 was driven by above-average payoff activity more than offsetting new loan production.

Previous wording

The largest subset of CRE loans was the multi-family residential loan portfolio, which totaled $748.4 million as of June 30, 2026 and $745.3 million as of December 31, 2025.

Current wording

The largest subset of CRE loans was the multi-family residential loan portfolio, which totaled $645.9 million, or 50.5% of CRE loans, as of September 30, 2026 and $745.3 million as of December 31, 2025.

Previous wording

Construction and land development loans. C&D loans totaled $146.3 million, or 4.4% of the loan portfolio, at June 30, 2026. C&D loans decreased $9.2 million, or 5.9%, during the first six months of 2026 due to a decrease in residential construction loans, offset by increases in commercial construction loans and land development loans. The net decrease in the first six months of 2026 included a $19.4 million nonperforming construction loan migrating to OREO in the second quarter. At June 30, 2026, the weighted average LTV ratio of the portfolio was 58%. Our C&D loans are comprised of commercial construction, residential construction, and land acquisition and development. Interest reserves are generally established on real estate construction loans. These loans generally have interest rates based on the Wall Street Journal Prime rate and have maturities of less than 18 months.

Current wording

Construction and land development loans. C&D loans totaled $154.6 million, or 4.5% of the loan portfolio, at September 30, 2026. C&D loans decreased $844,000, or 0.5%, during the first nine months of 2026 due to a $19.4 million nonperforming construction loan migrating to OREO in the second quarter of 2026, offset by increases in commercial construction and land development loans. At September 30, 2026, the weighted average LTV ratio of the portfolio was 58%. Our C&D loans are comprised of commercial construction, residential construction, and land acquisition and development. Interest reserves are generally established on real estate construction loans. These loans generally have interest rates based on the Wall Street Journal Prime rate and have maturities of less than 18 months.

Previous wording

Commercial and industrial loans. C&I loans totaled $152.0 million, or 4.6% of the loan portfolio, as of June 30, 2026. C&I loans increased $11.9 million, or 8.5%, during the first six months of 2026 due in part to an increase in commercial lines of credit, partially offset by decreases in commercial term loans and mortgage warehouse lines of credit.

Current wording

Commercial and industrial loans. C&I loans totaled $151.8 million, or 4.5% of the loan portfolio, as of September 30, 2026. C&I loans increased $11.7 million, or 8.4%, during the first nine months of 2026 due in part to an increase in commercial lines of credit, partially offset by decreases in commercial term loans and mortgage warehouse lines of credit.

Previous wording

SBA loans. SBA loans decreased $6.3 million, or 11.3%, to $49.7 million at June 30, 2026 compared to $56.0 million at December 31, 2025. We originated SBA loans of $7.0 million during the first six months of 2026. Offsetting these loan originations were loan sales of $12.1 million and net loan payoffs/paydowns of $1.3 million during the first six months of 2026.

Current wording

SBA loans. SBA loans decreased $7.5 million, or 13.3%, to $48.5 million at September 30, 2026 compared to $56.0 million at December 31, 2025. We originated SBA loans of $7.3 million during the first nine months of 2026. Offsetting these loan originations were loan sales of $13.2 million and net loan payoffs/paydowns of $1.8 million during the first nine months of 2026.

Previous wording

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 data to determine 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.

Current wording

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 data to determine 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 criticized, classified, delinquent, and nonaccrual loans; concentration risk; collateral values; regulatory and business environment; loan review results; and economic conditions.