RBB Bancorp

Financial Performance

(1)Non-GAAP financial measure. See "Non-GAAP Financial Measures" for a reconciliation of this measure to their most comparable GAAP measure.

(2)Basic earnings per share is calculated by dividing net income to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share is calculated by dividing net income by the weighted average number of shares adjusted for the dilutive effect of outstanding stock options and restricted stock units using the treasury stock method.

(3)Ratio calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income.

Average Balance Sheet, Interest and Yield/Rate Analysis

The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans, cash and investments (interest-earning assets) and the interest paid on deposits and borrowed funds (interest-bearing liabilities). Net interest margin is net interest income as a percentage of average interest-earning assets for the period. The level of interest rates and the volume and mix of interest-earning assets and interest-bearing liabilities impact net interest income and net interest margin. The net interest spread is the yield on average interest-earning assets minus the cost of average interest-bearing liabilities. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions. These conditions include short-term and long-term interest rates, inflation, monetary supply, and the strength of the international, national and state economies, in general, and more specifically, the local economies in which we conduct business. Our ability to manage net interest income during changing interest rate environments will have a significant impact on our overall performance. We manage net interest income through affecting changes in the mix of interest-earning assets as well as the mix of interest-bearing liabilities, changes in the level of interest-bearing liabilities in proportion to interest-earning assets, and in the growth and maturity of earning assets. For additional information see “Capital Resources and Liquidity Management” and Part I, Item 3. "Quantitative and Qualitative Disclosures about Market Risk" included in this Report.

The following tables present average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the periods presented. The average balances are daily averages and, for loans, include both performing and nonperforming balances. Interest and fees on securities, net interest margin and net interest spread are included on a tax equivalent (“TE”) basis by adjusting interest income utilizing the federal statutory tax rate of 21% for 2026 and 2025.

(3)Average loan balances include nonaccrual loans. Interest income on loans includes the effects of discount accretion and net deferred loan origination fees and costs accounted for as yield adjustments.

(3)Average loan balances include nonaccrual loans. Interest income on loans includes the effects of discount accretion and net deferred loan origination fees and costs accounted for as yield adjustments.

The following table summarizes the extent to which changes in (1) interest rates and (2) volume of average interest-earning assets and average interest-bearing liabilities affected our net interest income for the periods presented. The total change for each category of interest-earning assets and interest-bearing liabilities is segmented into changes attributable to variations in volume and yield/rate. Changes that are not solely due to either volume or yield/rate are allocated proportionally based on the absolute value of the change related to average volume and average yield/rate.

(3)Average loan balances include nonaccrual loans. Interest income on loans includes the effects of discount accretion and net deferred loan origination fees and costs accounted for as yield adjustments.

Net Interest Income/Average Balance Sheet

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.

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.

The average cost of funds decreased to 2.97% for the third quarter of 2026 from 3.00% for the second quarter of 2026, due mostly to a decrease in the average cost of total borrowings due to the partial redemption of $40.0 million of subordinated notes on July 1, 2026. The average cost of interest-bearing deposits increased to 3.35% for the third quarter of

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.

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.

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.

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.

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.

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.

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.

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.

Partially offsetting the decrease in interest expense on deposits was an increase in interest expense on total borrowings of $1.0 million for the first nine months of 2026. The increase was mainly due to the effective rate of the subordinated notes moving from 4.34% for the nine months ended September 30, 2025, to 6.08% for the nine months ended September 30, 2025, due to the subordinated note rate bearing a fixed rate of 4.00%, plus amortization of issuance costs, during 2025 and then moving to a floating rate index that resets quarterly starting on April 1, 2026.

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.

Provision for Credit Losses

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.

The provision for credit losses was $500,000 for the third quarter of 2026 compared to a $625,000 provision for the third quarter of 2025. The third quarter of 2025 provision was primarily due to loan growth, partially offset by the impact of reductions in nonperforming, classified, criticized and delinquent loans during the quarter. Net loan charge-offs of $122,000 for the third quarter of 2026 were lower than net charge-offs of $6.9 million for the third quarter of 2025, of which $6.6 million represented specific reserves.

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.

Noninterest Income

The following table presents the major components of our noninterest income for the periods presented:

Noninterest income for the third quarter of 2026 was $5.1 million, an increase of $2.1 million from $3.0 million for the second quarter of 2026. This increase was mainly due to higher other income of $2.7 million, offset partially by lower gain on sale of loans of $875,000 due to lower sales volume. The increase in other income was due to a $2.7 million gain on the sale of the Bank's office building in Brooklyn, New York. As part of the sale, the Bank entered into a four month lease to house the Bank's loan operations center through the end of 2026. These operations will relocate to new leased space, also located in Brooklyn, starting in 2027.

Noninterest income increased $1.8 million to $5.1 million for the third quarter of 2026 from $3.3 million for the same quarter in the prior year. This increase was mainly due to higher other income of $2.0 million, offset partially by lower gain on sale of loans of $171,000 due to lower sales volume. The increase in other income was primarily due to the $2.7 million gain on the sale of the Bank's office building in Brooklyn, New York, offset by $620,000 in lower gains on equity investments.

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.

The following table presents information on loans sold and the related net gain (loss) on the sale of such loans for the periods indicated:

(1)SFR mortgage loans sold with servicing rights retained were $1.6 million, $12.8 million, and $3.4 million for the three months ended September 30, 2026, June 30, 2026, and September 30, 2025. SFR mortgage loans sold with servicing rights retained were $17.7 million and $5.5 million for the nine months ended September 30, 2026 and 2025.

(2)Other loans sold in the nine months ended September 30, 2025 related to loans sold in the first quarter of 2025, which represented nonperforming loans HFS at December 31, 2024.

The following table presents information on loan servicing income for the periods indicated:

As of September 30, 2026, we were servicing SFR mortgage loans for other financial institutions, the Federal Home Loan Mortgage Corporation ("FHLMC"), the Federal National Mortgage Association ("FNMA"), and SBA loans. The following table presents loans serviced for others as of the dates indicated:

Noninterest Expense

The following table presents major components of our noninterest expense for the periods presented:

Noninterest expense for the third quarter of 2026 was $19.5 million, an increase of $526,000 from $19.0 million for the second quarter of 2026. This increase was mainly due to higher salaries and employee benefits and occupancy and equipment costs. Both of these categories increased due to including a full quarter of operations for the Northern California loan production office. In addition, occupancy costs included rent for the Brooklyn loan operations center after the sale of the building. The efficiency ratio was 53.02% for the third quarter of 2026, compared to 57.46% for the second quarter of 2026.

Noninterest expense for the third quarter of 2026 was $19.5 million, an increase of $865,000 compared to $18.7 million for the third quarter of 2025, mainly due to an increase in salaries and benefits expense of $867,000. The increase in salaries and benefits expense was due mainly to the impact of annual pay increases and the addition of the Northern California loan production office in 2026. The efficiency ratio was 53.02% for the third quarter of 2026 and 57.36% for the third quarter of 2025.

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.

Income Tax Expense

We recorded an income tax provision of $4.2 million, $3.9 million, and $3.1 million, reflecting an effective tax rate of 24.9%, 28.0%, and 23.5% for the three months ended September 30, 2026, June 30, 2026, and September 30, 2025. The decrease in the effective tax rate for the third quarter compared to the second quarter of 2026 was due to higher benefits from purchased Federal tax credits in the current quarter.

We recorded an income tax provision of $12.5 million and $7.6 million, reflecting an effective tax rate of 26.9% and 25.9%, for the nine months ended September 30, 2026 and 2025. The increase in the effective tax rate for the nine months ended September 30, 2026 compared to 2025 was due mainly to lower benefits from purchased Federal tax credits in the current year combined with a favorable impact in the prior year from the reversal of accrued penalties related to state tax planning initiatives. The full year effective tax rate for 2026 is estimated to be in the 26% to 27% range.