Equibles

10-Q

RBB Bancorp (RBB)

10-Q 2025-11-07 For: 2025-09-30
View Original
Added on April 06, 2026

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025 or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-38149

RBB BANCORP

(Exact name of registrant as specified in its charter)

California 27-2776416
(State or other jurisdiction of<br> <br>incorporation or organization) (I.R.S. Employer<br> <br>Identification No.)
--- ---
1055 Wilshire Blvd. , Suite 1200 ,
--- ---
Los Angeles, California 90017
(Address of principal executive offices) (Zip Code)
--- ---

(213) 627-9888

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:

Title of each class Trading Symbol(s) Name of exchange on which registered
Common Stock, No Par Value RBB NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐   No  ☒

Number of shares of common stock of the registrant: 17,046,897 outstanding as of October 31, 2025.

Table of Contents

TABLE OF CONTENTS

PART I –FINANCIAL INFORMATION (UNAUDITED) 3
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 8
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 31
CRITICAL ACCOUNTING POLICIES 32
OVERVIEW 33
ANALYSIS OF THE RESULTS OF OPERATIONS 34
ANALYSIS OF FINANCIAL CONDITION 42
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 57
ITEM 4. CONTROLS AND PROCEDURES 58
PART II - OTHER INFORMATION 59
ITEM 1. LEGAL PROCEEDINGS 59
ITEM 1A. RISK FACTORS 59
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 59
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 59
ITEM 4. MINE SAFETY DISCLOSURES 59
ITEM 5. OTHER INFORMATION 59
ITEM 6. EXHIBITS 60
SIGNATURES 61

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PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

****
December 31,
2024
Assets **** ****
Cash and due from banks 24,251 $ 27,747
Interest-earning deposits with financial institutions 210,679 229,998
Cash and cash equivalents 234,930 257,745
Interest-earning time deposits in other financial institutions 600 600
Securities:
Available for sale 410,631 420,190
Held to maturity (fair value of 4,075 and 4,948 at September 30, 2025 and December 31, 2024) 4,185 5,191
Loans held for sale 756 11,250
Loans held for investment 3,302,577 3,053,230
Allowance for loan losses (44,892 ) (47,729 )
Loans held for investment, net of allowance for loan losses 3,257,685 3,005,501
Premises and equipment, net 23,851 24,601
Federal Home Loan Bank (FHLB) stock 15,000 15,000
Net deferred tax assets 14,935 19,055
Cash surrender value of bank owned life insurance (BOLI) 61,537 60,296
Goodwill 71,498 71,498
Servicing assets 6,252 6,985
Core deposit intangibles 1,495 2,011
Right-of-use assets - operating leases 24,305 28,048
Accrued interest and other assets 80,795 64,506
Total assets 4,208,455 $ 3,992,477
Liabilities and Shareholders’ Equity **** ****
Deposits:
Noninterest-bearing demand 550,488 $ 563,012
Savings, NOW and money market accounts 721,697 663,034
Time deposits 250,000 and under 1,119,258 1,007,452
Time deposits over 250,000 975,054 850,291
Total deposits 3,366,497 3,083,789
FHLB advances 130,000 200,000
Long-term debt, net of issuance costs 119,815 119,529
Subordinated debentures, net 15,320 15,156
Lease liabilities - operating leases 26,066 29,705
Accrued interest and other liabilities 36,422 36,421
Total liabilities 3,694,120 3,484,600
Commitments and contingencies - Note 12
Shareholders' equity:
Preferred Stock - 100,000,000 shares authorized, no par value; none outstanding — —
Common Stock - 100,000,000 shares authorized, no par value; 17,043,897 shares issued and outstanding at September 30, 2025 and 17,720,416 shares issued and outstanding at December 31, 2024 250,362 259,957
Additional paid-in capital 3,734 3,645
Retained earnings 274,608 264,460
Non-controlling interest 72 72
Accumulated other comprehensive loss, net (14,441 ) (20,257 )
Total shareholders’ equity 514,335 507,877
Total liabilities and shareholders’ equity 4,208,455 $ 3,992,477

All values are in US Dollars.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME – (UNAUDITED)

(In thousands, except share amounts)

Three Months Ended Nine Months Ended September 30,
September 30, 2025 June 30, 2025 September 30, 2024 2025 2024
Interest and dividend income:
Interest and fees on loans $ 50,094 $ 47,687 $ 47,326 $ 143,402 $ 138,193
Interest on interest-earning deposits 2,140 1,750 3,388 5,904 11,781
Interest on investment securities 4,592 4,213 3,127 12,941 10,369
Dividend income on FHLB stock 327 324 326 981 984
Interest on federal funds sold and other 239 231 258 705 779
Total interest and dividend income 57,392 54,205 54,425 163,933 162,106
Interest expense:
Interest on savings deposits, NOW and money market accounts 4,674 4,567 5,193 13,709 14,624
Interest on time deposits 20,152 19,250 22,553 58,486 67,725
Interest on long-term debt and subordinated debentures 1,635 1,634 1,681 4,901 5,039
Interest on FHLB advances 1,654 1,420 453 4,063 1,331
Total interest expense 28,115 26,871 29,880 81,159 88,719
Net interest income before provision for credit losses 29,277 27,334 24,545 82,774 73,387
Provision for credit losses 625 2,387 3,300 9,758 3,857
Net interest income after provision for credit losses 28,652 24,947 21,245 73,016 69,530
Noninterest income:
Service charges and fees 1,099 1,060 1,071 3,176 3,127
Gain on sale of loans 260 358 447 699 1,210
Loan servicing income, net of amortization 564 541 605 1,693 1,773
Increase in cash surrender value of life insurance 427 411 403 1,241 1,170
Gain on other real estate owned — — — — 1,016
Other income 943 6,108 3,220 7,257 4,310
Total noninterest income 3,293 8,478 5,746 14,066 12,606
Noninterest expense:
Salaries and employee benefits 10,600 11,080 10,008 32,323 29,468
Occupancy and equipment expenses 2,425 2,377 2,518 7,209 7,400
Data processing 1,805 1,713 1,472 5,120 4,358
Legal and professional 1,450 2,904 958 5,869 3,098
Office expenses 444 405 348 1,257 1,056
Marketing and business promotion 252 212 252 661 613
Insurance and regulatory assessments 732 709 658 2,171 2,621
Core deposit intangible 172 172 200 516 602
Other expenses 803 921 1,007 2,572 2,298
Total noninterest expense 18,683 20,493 17,421 57,698 51,514
Net income before income taxes 13,262 12,932 9,570 29,384 30,622
Income tax expense 3,114 3,599 2,571 7,613 8,342
Net income $ 10,148 $ 9,333 $ 6,999 $ 21,771 $ 22,280
Net income per share
Basic $ 0.59 $ 0.53 $ 0.39 $ 1.24 $ 1.22
Diluted $ 0.59 $ 0.52 $ 0.39 $ 1.24 $ 1.22
Weighted-average common shares outstanding
Basic 17,225,702 17,746,607 17,812,791 17,564,835 18,261,702
Diluted 17,301,627 17,797,735 17,885,359 17,621,599 18,313,086

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – (UNAUDITED)

(In thousands)

Three Months Ended Nine Months Ended
September 30, 2025 June 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
Net income $ 10,148 $ 9,333 $ 6,999 $ 21,771 $ 22,280
Other comprehensive income:
Unrealized gain on securities available for sale 2,571 1,850 6,936 8,693 4,894
Related income tax effect (999 ) (568 ) (2,111 ) (2,877 ) (1,472 )
Total other comprehensive income 1,572 1,282 4,825 5,816 3,422
Total comprehensive income $ 11,720 $ 10,615 $ 11,824 $ 27,587 $ 25,702

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY – (UNAUDITED)

(In thousands, except share amounts)

**** **** Accumulated ****
Amount Additional Paid-in Capital Retained Earnings Non- Controlling Interest Other Comprehensive Loss, net Total
Balance at June 30, 2025 17,699,091 $ 259,863 $ 3,579 $ 270,152 $ 72 $ (16,013 ) $ 517,653
Net income — — — 10,148 — — 10,148
Stock-based compensation, net — — 270 — — — 270
Restricted stock units vested 4,024 74 (115 ) — — — (41 )
Cash dividends on common stock (0.16 per share) — — — (2,783 ) — — (2,783 )
Stock options exercised — — — — — — —
Repurchase of common stock (659,218 ) (9,575 ) — (2,909 ) — — (12,484 )
Other comprehensive income, net of taxes — — — — — 1,572 1,572
Balance at September 30, 2025 17,043,897 $ 250,362 $ 3,734 $ 274,608 $ 72 $ (14,441 ) $ 514,335
Balance at June 30, 2024 18,182,154 $ 266,160 $ 3,456 $ 262,518 $ 72 $ (20,915 ) $ 511,291
Net income — — — 6,999 — — 6,999
Stock-based compensation, net — — 264 — — — 264
Restricted stock units vested 3,537 79 (123 ) — — — (44 )
Cash dividends on common stock (0.16 per share) — — — (2,871 ) — — (2,871 )
Stock options exercised 16,000 384 (77 ) — — — 307
Repurchase of common stock (508,275 ) (7,343 ) — (3,700 ) — — (11,043 )
Other comprehensive income, net of taxes — — — — — 4,825 4,825
Balance at September 30, 2024 17,693,416 $ 259,280 $ 3,520 $ 262,946 $ 72 $ (16,090 ) $ 509,728

All values are in US Dollars.

**** **** Accumulated ****
Amount Additional Paid-in Capital Retained Earnings Non- Controlling Interest Other Comprehensive Loss, net Total
Balance at January 1, 2025 17,720,416 $ 259,957 $ 3,645 $ 264,460 $ 72 $ (20,257 ) $ 507,877
Net income — — — 21,771 — — 21,771
Stock-based compensation, net — — 1,450 — — — 1,450
Restricted stock units vested 60,430 1,033 (1,298 ) — — — (265 )
Cash dividends on common stock (0.48 per share) — — — (8,502 ) — — (8,502 )
Stock options exercised 10,000 234 (63 ) — — — 171
Repurchase of common stock (746,949 ) (10,862 ) — (3,121 ) — — (13,983 )
Other comprehensive income, net of taxes — — — — — 5,816 5,816
Balance at September 30, 2025 17,043,897 $ 250,362 $ 3,734 $ 274,608 $ 72 $ (14,441 ) $ 514,335
Balance at January 1, 2024 18,609,179 $ 271,925 $ 3,623 $ 255,152 $ 72 $ (19,512 ) $ 511,260
Net income — — — 22,280 — — 22,280
Stock-based compensation, net — — 1,092 — — — 1,092
Restricted stock units vested 35,737 672 (780 ) — — — (108 )
Cash dividends on common stock (0.48 per share) — — — (8,857 ) — — (8,857 )
Stock options exercised 85,250 1,721 (415 ) — — — 1,306
Repurchase of common stock (1,036,750 ) (15,038 ) — (5,629 ) — — (20,667 )
Other comprehensive income, net of taxes — — — — — 3,422 3,422
Balance at September 30, 2024 17,693,416 $ 259,280 $ 3,520 $ 262,946 $ 72 $ (16,090 ) $ 509,728

All values are in US Dollars.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS – (UNAUDITED)

(In thousands)

Nine Months Ended
September 30,
2025 2024
Operating activities **** ****
Net income $ 21,771 $ 22,280
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization of premises and equipment 1,400 1,424
Net accretion of securities, loans, deposits, and other (2,679 ) (3,617 )
Amortization of investment in affordable housing tax credits 1,524 969
Amortization of intangible assets 1,405 1,735
Amortization of right-of-use asset 3,831 3,749
Change in operating lease liabilities (3,727 ) (3,540 )
Provision for credit losses 9,758 3,857
Stock-based compensation 1,450 1,092
Deferred tax expense (benefit) 1,243 (733 )
Gain on sale of loans (699 ) (1,210 )
Gain on sale and transfer of OREO — (1,016 )
Gain on sale of fixed assets (42 ) —
Increase in cash surrender value of life insurance (1,241 ) (1,170 )
Loans originated for sale, net (6,460 ) (26,302 )
Proceeds from loans held for sale 14,444 49,996
Other items (10,432 ) (6,493 )
Net cash provided by operating activities 31,546 41,021
Investing activities **** ****
Securities available for sale:
Purchases (216,805 ) (259,383 )
Maturities, repayments and calls 236,976 280,247
Securities held to maturity:
Maturities, repayments and calls 1,000 —
Net (increase) decrease in other equity securities (188 ) 343
Net increase of investment in qualified affordable housing projects (1,836 ) (1,540 )
Net increase in loans (305,571 ) (84,072 )
Proceeds from sales of loans originally classified as HFI 35,120 —
Proceeds from sales of OREO 7,526 2,936
Proceeds from sale of fixed assets 42 —
Purchases of premises and equipment (641 ) (555 )
Net cash used in investing activities (244,377 ) (62,024 )
Financing activities **** ****
Net increase in demand deposits and savings accounts 46,139 37,362
Net increase (decrease) in time deposits 236,456 (120,016 )
Proceeds from FHLB advances 170,000 50,000
Repayments of FHLB Advances (240,000 ) —
Cash dividends paid (8,502 ) (8,857 )
Restricted stock units vesting (265 ) (108 )
Common stock repurchased, net of repurchase costs (13,983 ) (20,667 )
Exercise of stock options 171 1,306
Net cash provided by (used in) financing activities 190,016 (60,980 )
Net decrease in cash and cash equivalents (22,815 ) (81,983 )
Cash and cash equivalents at beginning of period 257,745 431,373
Cash and cash equivalents at end of period $ 234,930 $ 349,390
Supplemental disclosure of cash flow information
Cash paid during the period:
Interest paid $ 80,351 $ 94,328
Taxes paid 5,163 4,831
Non-cash investing and financing activities:
Transfer from loans to other real estate owned 12,666 1,920
Loans transferred to held for sale, net 31,911 20,094
Additions to servicing assets 156 280
Recognition of operating lease right-of-use assets (88 ) (3,229 )
Recognition of operating lease liabilities 88 3,229

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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RBB BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)

NOTE 1 - BUSINESS DESCRIPTION

RBB Bancorp (“RBB”) 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 banking subsidiaries, Royal Business Bank ("Bank") and RBB Asset Management Company (“RAM”). RAM was formed to hold and manage problem assets acquired in business combinations. When we refer to “we”, “us”, “our”, or the “Company”, we are referring to RBB Bancorp and its consolidated subsidiaries including the Bank and RAM, 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.

At September 30, 2025, we had total assets of $4.2 billion, total loans of $3.3 billion, total deposits of $3.4 billion and total shareholders' equity of $514.3 million. RBB’s common stock trades on the Nasdaq Global Select Market under the symbol “RBB”.

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 areas, Chicago (Illinois), Edison (New Jersey) and Honolulu (Hawaii). 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.

We operate as a minority depository institution (“MDI”), which is defined by the Federal Deposit Insurance Corporation (“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. The MDI designation has been historically beneficial to us, and we continue to use the program for technical assistance.

We generate our revenue primarily from interest received on loans and, to a lesser extent, from interest received on investment securities. We also derive income from noninterest sources, such as fees received in connection with various lending and deposit services, loan servicing, gain on sales of loans and wealth management services. Our principal expenses include interest expense on deposits and borrowings, and operating expenses, such as salaries and employee benefits, occupancy and equipment, data processing, and income tax expense.

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements and notes thereto of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for Form 10-Q and conform to practices within the banking industry and include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair presentation of financial results for the interim periods presented. Certain prior period amounts have been reclassified to conform to the current period presentation. Such reclassifications had no impact on our net income or shareholders’ equity. The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results for the full year. These interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2024, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (our “2024 Annual Report”).

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. It is reasonably possible that these estimates could change as actual results could differ from those estimates. The allowance for credit losses, realization of deferred tax assets, the valuation of goodwill and other intangible assets, other derivatives, and the fair value measurement of financial instruments are particularly subject to change and such change could have a material effect on the consolidated financial statements.

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Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements were compiled in accordance with the accounting policies set forth in “Note 2 – Basis of Presentation and Summary of Significant Accounting Policies” in our consolidated financial statements as of and for the year ended December 31, 2024, included in our 2024 Annual Report. The Financial Accounting Standards Board (“FASB”) issues Accounting Standards Updates (“ASU” or “Update”) and Accounting Standards Codifications (“ASC”), which are the primary source of GAAP. We have not made any changes to our significant accounting policies from those disclosed in our 2024 Annual Report, except for the addition of the accounting policy for the Employee Retention Credit Refunds described below.

Employee Retention Credit Refunds

There is currently no GAAP that explicitly covers accounting for government "grants" to for-profit entities. In the absence of authoritative GAAP guidance, management considered the application of other authoritative accounting guidance by analogy and concluded that the guidance outlined in International Accounting Standard 20 – Accounting for Government Grants and Disclosures of Government Assistance (“IAS 20”) to be the most appropriate for the purpose of recording and classifying the application for and receipt of these types of federal funds. In accordance with IAS 20, the Company recognizes grants once both of the following conditions are met: (1) it is reasonably assured that the Company will comply with the relevant conditions of the grant, and (2) it is reasonably assured that the grant will be received. Costs or services paid to third parties assisting in applying for the grant are included in legal and professional services expense.

The Employee Retention Credit (“ERC”) was introduced as part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act in March 2020. The ERC is a refundable tax credit against certain employment taxes equal to 70% of up to $10,000 in qualified wages paid per employee per quarter for quarters in the year ended December 31, 2021. Companies who met the eligibility requirements could have claimed the ERC on an original or adjusted employment tax return for a period related to that year.

The Company filed amended payroll tax returns to claim the ERC for the first and second quarters of 2021, which were the only periods that management concluded the Company qualified for an ERC. During the quarter ended June 30, 2025, the Company received the ERC refunds, including interest, from the Internal Revenue Service (“IRS”) in the amount of $5.2 million (pre-tax). In addition, the statute of limitations for the IRS to audit the Company’s amended payroll tax filings for the first and second quarters of 2021 (which include the ERC claims) lapsed on April 15, 2025. The ERC claims were recognized as income in the quarter ended June 30, 2025.

Income associated with the Company’s ERC refunds are included in other income on the consolidated statements of income for the quarter ended June 30, 2025 and nine months ended September 30, 2025. Upon receipt of the ERC refunds, certain professional and tax advisory costs associated with the assessment of these funds became due and payable. These amounts totaled

$1.2

million and are included in legal and professional expense on the consolidated statements of income in the quarter ended June 30, 2025 and nine months ended September 30, 2025.

Recent Accounting Pronouncements

Recently adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segments. The amendments in this Update improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis. Amendments in this Update include: a requirement that a public entity provide all annual disclosures about a reportable segment’s profit or loss in its interim period disclosures, disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), disclosure of amounts for other segment items by reportable segment and a description of its composition, clarification that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit or loss, a requirement that a public entity disclose the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss, and a requirement that a public entity that has a single reportable segment provide all the disclosures required by this Update as well as all existing disclosures required in Topic 280. The amendments in this Update were effective for the Company beginning with its 2024 annual financial statement disclosures for the year ended December 31, 2024, and for all interim and annual periods thereafter. We adopted ASU 2023-07 on December 31, 2024 and the adoption did not have a material impact on our consolidated financial statements.

Recently issued not yet effective

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements. This pronouncement amends the FASB Accounting Standards Codification to reflect updates and simplifications to certain disclosure requirements referred to the FASB by the SEC in 2018, including disclosures for the statement of cash flows, earnings per share, commitments, debt and equity instruments, and certain industry information, among other things. Each amendment is effective when the related disclosure is effectively removed from Regulations S-X or S-K; early adoption is prohibited. All amendments should be applied prospectively. If the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K by June 30, 2027, the pending amendments will be removed and will not become effective for any entity. Adoption of ASU 2023-06 is not expected to have a material impact on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. This Update enhances the transparency and decision usefulness of income tax disclosures. The amendments in this Update require the following: 1) consistent categories and greater disaggregation of information in the rate reconciliation, and 2) income taxes paid disaggregated by jurisdiction. The amendments in the ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this Update should be applied on a prospective basis. However, retrospective application in all prior periods presented is permitted. Adoption of ASU 2023-09 is not expected to have a material impact on our consolidated financial statements.

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In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). ASU 2024-03 requires disaggregated disclosure of income statement expenses within the footnotes to the financial statements for any relevant expense caption presented on the face of the income statement within continuing operations into the following required natural expense categories, as applicable: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion and amortization recognized as part of oil- and gas-producing activities or other types of depletion services. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The guidance should be applied prospectively with an option to apply it retrospectively for each period presented. Adoption of ASU 2024-03 is not expected to have a material impact on our consolidated financial statements.

NOTE 3 - INVESTMENT SECURITIES

The following table summarizes the amortized cost and fair value of investment securities available for sale (“AFS”) and held to maturity (“HTM”) and the corresponding amounts of gross unrealized gains and losses as of the dates indicated:

Gross Gross
Amortized Unrealized Unrealized Fair
September 30, 2025 Cost Gains Losses Value
Available for sale (dollars in thousands)
Government agency securities $ 23,249 $ 29 $ (240 ) $ 23,038
SBA agency securities 23,027 187 (169 ) 23,045
Mortgage-backed securities: residential 89,351 530 (4,848 ) 85,033
Collateralized mortgage obligations: residential 100,423 179 (2,311 ) 98,291
Collateralized mortgage obligations: commercial 126,413 679 (9,226 ) 117,866
Commercial paper 24,942 — — 24,942
Corporate debt securities 31,183 73 (2,046 ) 29,210
Municipal tax-exempt securities 12,576 — (3,370 ) 9,206
Total available for sale $ 431,164 $ 1,677 $ (22,210 ) $ 410,631
Held to maturity ****
Municipal tax-exempt securities $ 4,185 $ — $ (110 ) $ 4,075
Total held to maturity $ 4,185 $ — $ (110 ) $ 4,075
Gross Gross
--- --- --- --- --- --- --- --- --- ---
Amortized Unrealized Unrealized Fair
December 31, 2024 Cost Gains Losses Value
Available for sale (dollars in thousands)
Government agency securities $ 21,592 $ — $ (550 ) $ 21,042
SBA agency securities 27,231 — (467 ) 26,764
Mortgage-backed securities: residential 62,351 — (6,674 ) 55,677
Collateralized mortgage obligations: residential 117,936 178 (12,638 ) 105,476
Collateralized mortgage obligations: commercial 94,284 175 (2,803 ) 91,656
Commercial paper 78,687 1 (3 ) 78,685
Corporate debt securities 34,733 43 (2,961 ) 31,815
Municipal tax-exempt securities 12,602 — (3,527 ) 9,075
Total available for sale $ 449,416 $ 397 $ (29,623 ) $ 420,190
Held to maturity ****
Municipal taxable securities $ 500 $ 1 $ — $ 501
Municipal tax-exempt securities 4,691 — (244 ) 4,447
Total held to maturity $ 5,191 $ 1 $ (244 ) $ 4,948

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At September 30, 2025 and December 31, 2024, investment securities with a fair value of $27.0 million and $23.4 million were pledged to secure certificates of deposit from the State of California.

There were no sales of investment securities during the three months ended September 30, 2025, June 30, 2025, and September 30, 2024 and nine months ended September 30, 2025 and 2024.

Accrued interest receivable for investment securities at September 30, 2025 and December 31, 2024 totaled $1.6 million and $1.6 million.

The table below summarizes amortized cost and fair value of the investment securities portfolio, by expected maturity, as of the dates indicated. Mortgage-backed securities are classified in accordance with their estimated average life. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

One Year or Less More than One Year to Five Years More than Five Years to Ten Years More than Ten Years Total
Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
September 30, 2025 (dollars in thousands)
Government agency securities $ 65 $ 65 $ 13,368 $ 13,128 $ 9,816 $ 9,845 $ — $ — $ 23,249 $ 23,038
SBA agency securities — — 6,747 6,717 16,280 16,328 — — 23,027 23,045
Mortgage-backed securities: residential — — 28,497 28,301 60,854 56,732 — — 89,351 85,033
Collateralized mortgage obligations: residential 8,702 8,643 51,379 51,253 40,342 38,395 — — 100,423 98,291
Collateralized mortgage obligations: commercial 2,562 2,599 71,994 71,371 51,857 43,896 — — 126,413 117,866
Commercial paper 24,942 24,942 — — — — — — 24,942 24,942
Corporate debt securities 2,011 2,001 11,426 11,217 15,150 14,037 2,596 1,955 31,183 29,210
Municipal tax-exempt securities — — — — 1,082 898 11,494 8,308 12,576 9,206
Total AFS $ 38,282 $ 38,250 $ 183,411 $ 181,987 $ 195,381 $ 180,131 $ 14,090 $ 10,263 $ 431,164 $ 410,631
Municipal tax-exempt securities $ — $ — $ 860 $ 859 $ 2,816 $ 2,712 $ 509 $ 504 $ 4,185 $ 4,075
Total HTM $ — $ — $ 860 $ 859 $ 2,816 $ 2,712 $ 509 $ 504 $ 4,185 $ 4,075
December 31, 2024
Government agency securities $ 90 $ 88 $ 11,644 $ 11,304 $ 9,858 $ 9,650 $ — $ — $ 21,592 $ 21,042
SBA agency securities — — 5,934 5,721 21,297 21,043 — — 27,231 26,764
Mortgage-backed securities: residential — — 8,892 8,099 53,459 47,578 — — 62,351 55,677
Collateralized mortgage obligations: residential 5,126 5,235 55,015 52,867 57,795 47,374 — — 117,936 105,476
Collateralized mortgage obligations: commercial 705 704 38,811 38,527 54,768 52,425 — — 94,284 91,656
Commercial paper 78,687 78,685 — — — — — — 78,687 78,685
Corporate debt securities 2,000 1,989 11,886 11,706 18,233 16,250 2,614 1,870 34,733 31,815
Municipal tax-exempt securities — — — — — — 12,602 9,075 12,602 9,075
Total AFS $ 86,608 $ 86,701 $ 132,182 $ 128,224 $ 215,410 $ 194,320 $ 15,216 $ 10,945 $ 449,416 $ 420,190
Municipal taxable securities $ 500 $ 501 $ — $ — $ — $ — $ — $ — $ 500 $ 501
Municipal tax-exempt securities — — 360 347 2,985 2,795 1,346 1,305 4,691 4,447
Total HTM $ 500 $ 501 $ 360 $ 347 $ 2,985 $ 2,795 $ 1,346 $ 1,305 $ 5,191 $ 4,948

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The following tables show the fair value and gross unrealized losses of our investment securities, aggregated by investment category and the length of time individual securities have been in a continuous unrealized loss position, as of the dates indicated:

Less than Twelve Months Twelve Months or More Total
Fair Value Unrealized Losses # of Issuances Fair Value Unrealized Losses # of Issuances Fair Value Unrealized Losses # of Issuances
September 30, 2025 (dollars in thousands)
Government agency securities $ 10,821 $ (81 ) 3 $ 2,371 $ (159 ) 2 $ 13,192 $ (240 ) 5
SBA agency securities 4,275 (53 ) 2 1,653 (116 ) 4 5,928 (169 ) 6
Mortgage-backed securities: residential 26,026 (145 ) 7 28,247 (4,703 ) 15 54,273 (4,848 ) 22
Collateralized mortgage obligations: residential 27,899 (177 ) 6 35,687 (2,134 ) 20 63,586 (2,311 ) 26
Collateralized mortgage obligations: commercial 9,225 (5 ) 1 57,913 (9,221 ) 25 67,138 (9,226 ) 26
Corporate debt securities — — — 23,369 (2,046 ) 26 23,369 (2,046 ) 26
Municipal tax-exempt securities — — — 9,206 (3,370 ) 11 9,206 (3,370 ) 11
Total AFS $ 78,246 $ (461 ) 19 $ 158,446 $ (21,749 ) 103 $ 236,692 $ (22,210 ) 122
Municipal tax-exempt securities $ — $ — — $ 3,635 $ (110 ) 8 $ 3,635 $ (110 ) 8
Total HTM $ — $ — — $ 3,635 $ (110 ) 8 $ 3,635 $ (110 ) 8
Less than Twelve Months Twelve Months or More Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Fair Value Unrealized Losses # of Issuances Fair Value Unrealized Losses # of Issuances Fair Value Unrealized Losses # of Issuances
December 31, 2024 (dollars in thousands)
Government agency securities $ 14,620 $ (219 ) 3 $ 6,422 $ (331 ) 4 $ 21,042 $ (550 ) 7
SBA agency securities 24,971 (273 ) 7 1,793 (194 ) 4 26,764 (467 ) 11
Mortgage-backed securities: residential 25,479 (578 ) 5 30,198 (6,096 ) 15 55,677 (6,674 ) 20
Collateralized mortgage obligations: residential 36,166 (649 ) 8 55,255 (11,989 ) 24 91,421 (12,638 ) 32
Collateralized mortgage obligations: commercial 35,753 (367 ) 7 30,114 (2,436 ) 18 65,867 (2,803 ) 25
Commercial paper 48,874 (3 ) 3 — — — 48,874 (3 ) 3
Corporate debt securities — — — 26,035 (2,961 ) 30 26,035 (2,961 ) 30
Municipal tax-exempt securities — — — 9,075 (3,527 ) 11 9,075 (3,527 ) 11
Total AFS $ 185,863 $ (2,089 ) 33 $ 158,892 $ (27,534 ) 106 $ 344,755 $ (29,623 ) 139
Municipal tax-exempt securities $ — $ — — $ 4,447 $ (244 ) 10 $ 4,447 $ (244 ) 10
Total HTM $ — $ — — $ 4,447 $ (244 ) 10 $ 4,447 $ (244 ) 10

The securities that were in an unrealized loss position at September 30, 2025 and December 31, 2024, were evaluated to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or other factors. We concluded that the unrealized losses were primarily attributed to yield curve movement. All SBA agency securities, mortgage-backed securities, and collateralized mortgage obligations are issued by government or government sponsored entities and have the support of the U.S. federal government. The issuers have not, to our knowledge, established any cause for default on these securities. We expect to recover the amortized cost basis of our securities and have no present intent to sell and do not expect to be required to sell securities that have declined below their cost before their anticipated recovery. As of September 30, 2025 and December 31, 2024, all of our HTM securities were rated “AA-” or above. Accordingly, no ACL was recorded as of September 30, 2025 and December 31, 2024, against HTM or AFS securities, and there was no provision for credit losses recognized for the three months and nine months ended September 30, 2025 and 2024.

Equity Securities - We have several Community Reinvestment Act (“CRA”) equity investments, other bank stocks, and other equity investments. We recorded net gain/(loss) (included in “Other income” in the consolidated statements of income) on such equity investments of $621,000, $94,000, and ($32,000) during the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, and net gain of $680*,000* and $108,000 during the nine months ended September 30, 2025 and 2024. Equity securities (included in “Accrued interest and other assets” in the consolidated balance sheets) were $23.1 million and $22.9 million as of September 30, 2025 and December 31, 2024.

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NOTE 4 - LOANS AND ALLOWANCE FOR CREDIT LOSSES

Our loan portfolio consists primarily of loans to borrowers within the Southern California metropolitan area, the New York City metropolitan area, Chicago (Illinois), Las Vegas (Nevada), Edison (New Jersey) and Honolulu (Hawaii). Although we seek to avoid concentrations of loans to a single industry or based upon a single class of collateral, real estate and real estate associated businesses are among the principal industries in our market area and, as a result, our loan and collateral portfolios are, to some degree, concentrated in those industries.

The following table presents the balances in our loan held for investment ("HFI") portfolio by loan segment and class as of the dates indicated:

September 30, 2025 December 31, 2024
Loans HFI: ^(1)^ (dollars in thousands)
Real Estate:
Single-family residential mortgages $ 1,650,989 $ 1,494,022
Commercial real estate ^(2)^ 1,286,603 1,201,420
Construction and land development 159,152 173,290
Commercial:
Commercial and industrial 146,667 129,585
SBA 54,033 47,263
Other 5,133 7,650
Total loans HFI $ 3,302,577 $ 3,053,230
Allowance for loan losses (44,892 ) (47,729 )
Total loans HFI, net $ 3,257,685 $ 3,005,501
(1) Net of premiums (discounts) on acquired loans and net deferred (fees) and costs on originated loans.
--- ---
(2) Includes non-farm and non-residential real estate loans, multifamily residential loans and non-owner occupied single-family residential loans.

The following table presents a summary of the changes in the ACL for the periods indicated:

For the Three Months Ended
September 30, 2025 June 30, 2025 September 30, 2024
Allowance for loan losses Reserve^^for unfunded loan commitments ^(1)^ Allowance for credit losses Allowance for loan losses Reserve for unfunded loan commitments ^(1)^ Allowance for credit losses Allowance for loan losses Reserve for unfunded loan commitments ^(1)^ Allowance for credit losses
(dollars in thousands)
Beginning balance $ 51,014 $ 629 $ 51,643 $ 51,932 $ 629 $ 52,561 $ 41,741 $ 624 $ 42,365
Provision for/(reversal of) credit losses 750 (125 ) 625 2,387 — 2,387 3,145 155 3,300
Charge-offs (7,019 ) — (7,019 ) (3,339 ) — (3,339 ) (1,210 ) — (1,210 )
Recoveries 147 — 147 34 — 34 9 — 9
Ending balance $ 44,892 $ 504 $ 45,396 $ 51,014 $ 629 $ 51,643 $ 43,685 $ 779 $ 44,464
(1) Included in “Accrued interest and other liabilities”
--- ---
For the Nine Months Ended September 30,
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
2025 2024
Allowance for loan losses Reserve for unfunded loan commitments ^(1)^ Allowance for credit losses Allowance for loan losses Reserve for unfunded loan commitments ^(1)^ Allowance for credit losses
(dollars in thousands)
Beginning balance $ 47,729 $ 729 $ 48,458 $ 41,903 $ 640 $ 42,543
Provision for/(reversal of) credit losses 9,983 (225 ) 9,758 3,718 139 3,857
Charge-offs (13,084 ) — (13,084 ) (1,991 ) — (1,991 )
Recoveries 264 — 264 55 — 55
Ending balance $ 44,892 $ 504 $ 45,396 $ 43,685 $ 779 $ 44,464
(1) Included in “Accrued interest and other liabilities”
--- ---

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The following tables present the balance and activity related to the allowance for loan losses (“ALL”) for loans HFI by loan portfolio segment for the periods presented.

For the Three Months Ended September 30, 2025
Single-family residential mortgages Commercial real estate Construction and land development Commercial and industrial SBA Other Total
Allowance for loan losses: (dollars in thousands)
Beginning balance $ 19,106 $ 21,423 $ 7,971 $ 1,493 $ 791 $ 230 $ 51,014
Provision for/(reversal of) credit losses 2,737 (2,730 ) 312 393 19 19 750
Charge-offs — (21 ) (6,929 ) (4 ) (11 ) (54 ) (7,019 )
Recoveries — — 138 1 — 8 147
Ending allowance balance $ 21,843 $ 18,672 $ 1,492 $ 1,883 $ 799 $ 203 $ 44,892
For the Three Months Ended June 30, 2025
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Single-family residential mortgages Commercial real estate Construction and land development Commercial and industrial SBA Other Total
Allowance for loan losses: (dollars in thousands)
Beginning balance $ 18,373 $ 24,200 $ 7,000 $ 1,400 $ 701 $ 258 $ 51,932
Provision for/(reversal of) credit losses 748 498 971 94 91 (15 ) 2,387
Charge-offs (15 ) (3,275 ) — (1 ) (1 ) (47 ) (3,339 )
Recoveries — — — — — 34 34
Ending allowance balance $ 19,106 $ 21,423 $ 7,971 $ 1,493 $ 791 $ 230 $ 51,014
For the Three Months Ended September 30, 2024
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Single-family residential mortgages Commercial real estate Construction and land development Commercial and industrial SBA Other Total
Allowance for loan losses: (dollars in thousands)
Beginning balance $ 19,840 $ 18,434 $ 1,352 $ 1,285 $ 675 $ 155 $ 41,741
(Reversal of)/provision for credit losses (2,898 ) 4,406 1,441 31 (9 ) 174 3,145
Charge-offs — (189 ) (974 ) (6 ) — (41 ) (1,210 )
Recoveries — — — 1 — 8 9
Ending allowance balance $ 16,942 $ 22,651 $ 1,819 $ 1,311 $ 666 $ 296 $ 43,685
For the Nine Months Ended September 30, 2025
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Single-family residential mortgages Commercial real estate Construction and land development Commercial and industrial SBA Other Total
Allowance for loan losses: (dollars in thousands)
Beginning balance $ 17,518 $ 21,879 $ 6,053 $ 1,339 $ 654 $ 286 $ 47,729
Provision for/(reversal of) credit losses 5,728 89 3,476 550 157 (17 ) 9,983
Charge-offs (1,403 ) (3,296 ) (8,175 ) (85 ) (12 ) (113 ) (13,084 )
Recoveries — — 138 79 — 47 264
Ending allowance balance $ 21,843 $ 18,672 $ 1,492 $ 1,883 $ 799 $ 203 $ 44,892
For the Nine Months Ended September 30, 2024
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Single-family residential mortgages Commercial real estate Construction and land development Commercial and industrial SBA Other Total
Allowance for loan losses: (dollars in thousands)
Beginning balance $ 20,117 $ 17,826 $ 1,219 $ 1,348 $ 1,196 $ 197 $ 41,903
(Reversal of)/provision for credit losses (3,175 ) 5,656 1,574 (30 ) (530 ) 223 3,718
Charge-offs — (831 ) (974 ) (9 ) — (177 ) (1,991 )
Recoveries — — — 2 — 53 55
Ending allowance balance $ 16,942 $ 22,651 $ 1,819 $ 1,311 $ 666 $ 296 $ 43,685

We categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. We analyze loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as commercial real estate (“CRE”) and commercial and industrial (“C&I”) loans. This analysis is performed on an ongoing basis as new information is obtained. We use the following definitions for risk ratings:

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Pass - Loans classified as pass include loans not meeting the risk ratings defined below.

Special Mention - **** Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful- Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable based on facts, conditions, and values that currently exist.

The following tables summarize our loans HFI by loan portfolio segment, risk rating and vintage year as of the dates indicated. The vintage year is the year of origination, renewal or major modification.

Term Loan by Vintage
September 30, 2025 2025 2024 2023 2022 2021 Prior Revolving Revolving Converted to Term During the Period Total
Real estate: (dollars in thousands)
Single-family residential mortgages
Pass $ 305,854 $ 125,982 $ 124,930 $ 512,565 $ 212,608 $ 364,645 $ 957 $ — $ 1,647,541
Special mention — — — — — — — — —
Substandard — 383 718 1,990 357 — — — 3,448
Doubtful — — — — — — — — —
Total $ 305,854 $ 126,365 $ 125,648 $ 514,555 $ 212,965 $ 364,645 $ 957 $ — $ 1,650,989
YTD gross charge-offs $ 1 $ — $ — $ 537 $ 174 $ 691 $ — $ — $ 1,403
Commercial real estate
Pass $ 189,626 $ 173,837 $ 49,977 $ 396,675 $ 138,625 $ 268,160 $ — $ — $ 1,216,900
Special mention — — — 7,113 19,529 8,356 — — 34,998
Substandard — 670 — 1,586 18,589 13,860 — — 34,705
Doubtful — — — — — — — — —
Total $ 189,626 $ 174,507 $ 49,977 $ 405,374 $ 176,743 $ 290,376 $ — $ — $ 1,286,603
YTD gross charge-offs $ — $ — $ — $ — $ — $ 3,296 $ — $ — $ 3,296
Construction and land development
Pass $ 3,649 $ 23,866 $ 8,965 $ 41,379 $ 4,049 $ 45,650 $ — $ — $ 127,558
Special mention — 3,372 — — — — — — 3,372
Substandard — — — — 19,465 8,757 — — 28,222
Doubtful — — — — — — — — —
Total $ 3,649 $ 27,238 $ 8,965 $ 41,379 $ 23,514 $ 54,407 $ — $ — $ 159,152
YTD gross charge-offs $ — $ — $ — $ 1,246 $ 6,929 $ — $ — $ — $ 8,175
Commercial:
Commercial and industrial
Pass $ 14,265 $ 68 $ 1,058 $ 2,040 $ 2,953 $ 6,378 $ 103,862 $ — $ 130,624
Special mention — 6,011 — — — — 2,690 — 8,701
Substandard 3 — 6 57 — 5,970 1,306 — 7,342
Doubtful — — — — — — — — —
Total $ 14,268 $ 6,079 $ 1,064 $ 2,097 $ 2,953 $ 12,348 $ 107,858 $ — $ 146,667
YTD gross charge-offs $ 2 $ 6 $ — $ — $ — $ 77 $ — $ — $ 85
SBA
Pass $ 10,636 $ 4,288 $ 1,654 $ 10,749 $ 9,708 $ 11,568 $ — $ — $ 48,603
Special mention — 2,278 — — — — — — 2,278
Substandard — — — — 480 2,672 — — 3,152
Doubtful — — — — — — — — —
Total $ 10,636 $ 6,566 $ 1,654 $ 10,749 $ 10,188 $ 14,240 $ — $ — $ 54,033
YTD gross charge-offs $ — $ 12 $ — $ — $ — $ — $ — $ — $ 12
Other:
Pass $ — $ — $ 94 $ 782 $ 4,135 $ 98 $ 13 $ — $ 5,122
Special mention — — — — — — — — —
Substandard — — — — 11 — — — 11
Doubtful — — — — — — — — —
Total $ — $ — $ 94 $ 782 $ 4,146 $ 98 $ 13 $ — $ 5,133
YTD gross charge-offs $ — $ — $ — $ — $ 108 $ 5 $ — $ — $ 113
Total by risk rating:
Pass $ 524,030 $ 328,041 $ 186,678 $ 964,190 $ 372,078 $ 696,499 $ 104,832 $ — $ 3,176,348
Special mention — 11,661 — 7,113 19,529 8,356 2,690 — 49,349
Substandard 3 1,053 724 3,633 38,902 31,259 1,306 — 76,880
Doubtful — — — — — — — — —
Total loans $ 524,033 $ 340,755 $ 187,402 $ 974,936 $ 430,509 $ 736,114 $ 108,828 $ — $ 3,302,577
Total YTD gross charge-offs $ 3 $ 18 $ — $ 1,783 $ 7,211 $ 4,069 $ — $ — $ 13,084

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Term Loan by Vintage
December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Revolving Converted to Term During the Period Total
Real estate: (dollars in thousands)
Single-family residential mortgages
Pass $ 159,940 $ 137,264 $ 549,525 $ 225,877 $ 108,541 $ 299,553 $ 1,126 $ — $ 1,481,826
Special mention — — — — — — — — —
Substandard — — 2,178 1,401 1,858 6,759 — — 12,196
Doubtful — — — — — — — — —
Total $ 159,940 $ 137,264 $ 551,703 $ 227,278 $ 110,399 $ 306,312 $ 1,126 $ — $ 1,494,022
YTD gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate
Pass $ 220,623 $ 58,597 $ 389,578 $ 158,188 $ 157,480 $ 186,619 $ — $ — $ 1,171,085
Special mention — — 936 10,251 3,040 7,060 — — 21,287
Substandard — — — — 1,188 7,860 — — 9,048
Doubtful — — — — — — — — —
Total $ 220,623 $ 58,597 $ 390,514 $ 168,439 $ 161,708 $ 201,539 $ — $ — $ 1,201,420
YTD gross charge-offs $ — $ 164 $ — $ — $ 2,064 $ 417 $ — $ — $ 2,645
Construction and land development
Pass $ 62,541 $ 8,945 $ — $ — $ 1,370 $ 65 $ — $ — $ 72,921
Special mention — — — — 44,042 — — — 44,042
Substandard — 8,782 — 38,101 9,444 — — — 56,327
Doubtful — — — — — — — — —
Total $ 62,541 $ 17,727 $ — $ 38,101 $ 54,856 $ 65 $ — $ — $ 173,290
YTD gross charge-offs $ — $ — $ 1,148 $ — $ — $ — $ — $ — $ 1,148
Commercial:
Commercial and industrial —
Pass $ 7,304 $ 1,126 $ 2,593 $ 3,991 $ 2,270 $ 5,242 $ 98,878 $ — $ 121,404
Special mention — — — — — — — — —
Substandard — — 70 — 1,317 4,820 1,974 — 8,181
Doubtful — — — — — — — — —
Total $ 7,304 $ 1,126 $ 2,663 $ 3,991 $ 3,587 $ 10,062 $ 100,852 $ — $ 129,585
YTD gross charge-offs $ 8 $ — $ 3 $ — $ — $ — $ — $ — $ 11
SBA
Pass $ 6,889 $ 1,813 $ 10,855 $ 9,731 $ 400 $ 14,209 $ — $ — $ 43,897
Special mention — — — — — — — — —
Substandard 65 — — 334 — 2,967 — — 3,366
Doubtful — — — — — — — — —
Total $ 6,954 $ 1,813 $ 10,855 $ 10,065 $ 400 $ 17,176 $ — $ — $ 47,263
YTD gross charge-offs $ 78 $ — $ — $ — $ — $ — $ — $ — $ 78
Other:
Pass $ — $ 130 $ 1,517 $ 5,718 $ 246 $ — $ 16 $ — $ 7,627
Special mention — — — — — — — — —
Substandard — — — 23 — — — — 23
Doubtful — — — — — — — — —
Total $ — $ 130 $ 1,517 $ 5,741 $ 246 $ — $ 16 $ — $ 7,650
YTD gross charge-offs $ — $ — $ 4 $ 191 $ 6 $ — $ — $ — $ 201
Total by risk rating:
Pass $ 457,297 $ 207,875 $ 954,068 $ 403,505 $ 270,307 $ 505,688 $ 100,020 $ — $ 2,898,760
Special mention — — 936 10,251 47,082 7,060 — — 65,329
Substandard 65 8,782 2,248 39,859 13,807 22,406 1,974 — 89,141
Doubtful — — — — — — — — —
Total loans $ 457,362 $ 216,657 $ 957,252 $ 453,615 $ 331,196 $ 535,154 $ 101,994 $ — $ 3,053,230
Total YTD gross charge-offs $ 86 $ 164 $ 1,155 $ 191 $ 2,070 $ 417 $ — $ — $ 4,083

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The following tables present the aging of the recorded investment in past due loans HFI, by loan segment and class, as of the dates indicated.

Accruing Loans
September 30, 2025 30-59 Days 60-89 Days 90 Days Or More Total Past Due ^(1)^ Nonaccrual Loans Current Total Loans HFI
Real estate: (dollars in thousands)
Single-family residential mortgages ^(2)^ $ 4,867 $ 574 $ — $ 5,441 $ 2,608 $ 1,642,940 $ 1,650,989
Commercial real estate 288 207 — 495 8,548 1,277,560 1,286,603
Construction and land development — — — — 28,222 130,930 159,152
Commercial:
Commercial and industrial 1 — — 1 4,708 141,958 146,667
SBA 543 — — 543 1,387 52,103 54,033
Other 53 — — 53 11 5,069 5,133
Total $ 5,752 $ 781 $ — $ 6,533 $ 45,484 $ 3,250,560 $ 3,302,577
(1) Past due loans exclude nonaccrual loans.
--- ---
(2) Nonaccrual SFR mortgage loans include $718,000 of loans in the process of foreclosure.
Accruing Loans
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
December 31, 2024 30-59 Days 60-89 Days 90 Days Or More Total Past Due ^(1)^ Nonaccrual Loans Current Total Loans HFI
Real estate: (dollars in thousands)
Single-family residential mortgages ^(2)^ $ 7,173 $ 1,013 $ — $ 8,186 $ 11,524 $ 1,474,312 $ 1,494,022
Commercial real estate 505 218 — 723 7,353 1,193,344 1,201,420
Construction and land development — 11,706 — 11,706 44,621 116,963 173,290
Commercial:
Commercial and industrial 51 64 — 115 4,819 124,651 129,585
SBA 315 1,041 — 1,356 1,514 44,393 47,263
Other — — — — 12 7,638 7,650
Total $ 8,044 $ 14,042 $ — $ 22,086 $ 69,843 $ 2,961,301 $ 3,053,230
(1) Past due loans exclude nonaccrual loans.
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(2) Nonaccrual SFR mortgage loans include $4.4 million of loans in the process of foreclosure.

The following table presents the loans HFI on nonaccrual status and the balance of such loans with no ALL, by loan segment and class, as of the dates indicated:

September 30, 2025 December 31, 2024
Nonaccrual Loans Nonaccrual Loans
with no with no
Allowance Allowance
for Loan Loss Nonaccrual Loans for Loan Loss Nonaccrual Loans
Real estate: (dollars in thousands)
Single-family residential mortgages $ 2,608 $ 2,608 $ 11,524 $ 11,524
Commercial real estate 5,016 8,548 346 7,353
Construction and land development 28,222 28,222 18,226 44,621
Commercial:
Commercial and industrial 4,708 4,708 4,708 4,819
SBA 1,387 1,387 1,514 1,514
Other: — 11 — 12
Total $ 41,941 $ 45,484 $ 36,318 $ 69,843

The following tables present the amortized cost basis of individually evaluated collateral-dependent loans, by loan segment and class, and type of collateral which secures such loans as of the dates indicated.

September 30, 2025
Residential Real Estate Commercial Real Estate Business Assets Total
Real Estate: (dollars in thousands)
Single-family residential mortgages $ 2,608 $ — $ — $ 2,608
Commercial real estate — 8,548 — 8,548
Construction and land development 19,465 8,757 — 28,222
Commercial:
Commercial and industrial 4,708 — — 4,708
SBA — 1,302 85 1,387
Total loans $ 26,781 $ 18,607 $ 85 $ 45,473

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December 31, 2024
Residential Real Estate Commercial Real Estate Business Assets Total
Real Estate: (dollars in thousands)
Single-family residential mortgages $ 11,524 $ — $ — $ 11,524
Commercial real estate 222 7,131 — 7,353
Construction and land development 26,395 18,226 — 44,621
Commercial:
Commercial and industrial 4,708 — 111 4,819
SBA 40 1,323 151 1,514
Total loans $ 42,889 $ 26,680 $ 262 $ 69,831

We did not recognize any interest income on nonaccrual loans while the loans were in nonaccrual status during 2025 or 2024.

Loan Modifications to Borrowers Experiencing Financial Difficulty - In cases where a borrower is experiencing financial difficulties, we may make certain concessionary modifications to the contractual terms. These concessions may include term extension, payment delay, principal forgiveness, an interest rate reduction, or other actions intended to minimize potential losses. We may provide multiple types of concessions on one loan. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for loan losses. Loans modified to borrowers experiencing financial difficulty are individually evaluated for purposes of the allowance for loan losses.

The following tables present loan modifications made to borrowers experiencing financial difficulty by type of modification for the periods indicated:

Three Months Ended September 30, 2025
Payment Deferral Total Loan Modifications
Balance % of Loan Class Balance % of Loan Class
(dollars in thousands)
Commercial real estate $ 4,872 0.38 % $ 4,872 0.38 %
SBA 410 0.76 % 410 0.76 %
Total $ 5,282 0.16 % $ 5,282 0.16 %
Nine Months Ended September 30, 2025
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Payment Deferral Combination of Rate Reduction and Term Extension Combination of Principal Reduction, Rate Reduction, and Term Extension Total Loan Modifications
Balance % of Loan Class Balance % of Loan Class Balance % of Loan Class Balance % of Loan Class
(dollars in thousands)
Commercial real estate $ 4,872 0.38 % $ — 0.00 % $ 3,532 0.27 % $ 8,404 0.65 %
Commercial and industrial — 0.00 % 4,709 3.21 % — 0.00 % 4,709 3.21 %
SBA 410 0.76 % — 0.00 % — 0.00 % 410 0.76 %
Total $ 5,282 0.16 % $ 4,709 0.14 % $ 3,532 0.11 % $ 13,523 0.41 %
Three and Nine Months Ended September 30, 2024
--- --- --- --- --- --- --- --- --- --- ---
Term Extension Total Loan Modifications
Balance % of Loan Class Balance % of Loan Class
(dollars in thousands)
Construction and land development $ 10,036 5.79 % $ 10,036 5.79 %
Total $ 10,036 0.33 % $ 10,036 0.33 %

At September 30, 2025 and December 31, 2024, we had no commitments to lend to borrowers experiencing financial difficulty whose loans were modified during the period. We closely monitor the performance of loans modified to borrowers experiencing financial difficulty to understand the effectiveness of our modification efforts. The following table provides the aging information for loans that were modified over the last 12 months by loan class as of September 30, 2025.

Loan Class Current ^(1)^ 30-89 Days Past Due 90 Days Or More Past Due ^(2)^ Total
(dollars in thousands)
Commercial real estate $ 18,607 $ — $ — $ 18,607
Construction and land development — — 28,222 28,222
Commercial and industrial 4,708 — — 4,708
SBA 410 — — 410
Total $ 23,725 $ — $ 28,222 $ 51,947
(1) Includes CRE loans totaling $8.4 million and C&I loans totaling $4.7 million which are current in payments, however remain on nonaccrual at September 30, 2025. None of these loans have defaulted on their modified terms in the last 12 months.
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(2) Includes C&D loans totaling $28.2 million which remain on nonaccrual and have defaulted on their modified terms in the last 12 months.

During the three and nine months ended September 30, 2024, there were no defaults of loans that had been modified within the previous 12 months.

NOTE 5 - LOAN SERVICING

The loans being serviced for others are not reported as assets in our consolidated balance sheets. The table below presents the underlying principal balances of the loans serviced for others, by loan portfolio segment, as of the dates indicated:

September 30, December 31,
Loans serviced for others: 2025 2024
(dollars in thousands)
Mortgage loans $ 850,189 $ 922,183
SBA loans 88,166 92,678
Commercial real estate loans 2,429 3,761
Construction loans 8,772 7,315

Servicing income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal. The amortization of mortgage servicing assets is net against loan servicing income. Loan servicing income, net of amortization, totaled $564,000, $541,000, and $605,000 for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, and $1.7 million and $1.8 million for the nine months ended September 30, 2025 and 2024.

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When mortgage and SBA loans are sold with servicing retained, servicing assets are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on a valuation model that calculates the present value of estimated future net servicing income. All classes of servicing assets are subsequently measured using the amortization method, which requires servicing assets to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

Servicing assets are evaluated for impairment based upon the fair value of the assets as compared to carrying amount. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If we later determine that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income.

The table below presents the activity in the servicing assets for the periods indicated:

Three Months Ended
September 30, 2025 June 30, 2025 September 30, 2024
Mortgage SBA Mortgage SBA Mortgage SBA
Loans Loans Loans Loans Loans Loans
Servicing assets: (dollars in thousands)
Beginning of period $ 5,183 $ 1,299 $ 5,424 $ 1,342 $ 6,054 $ 1,491
Additions 37 13 24 15 59 14
Payoffs (94 ) (1 ) (98 ) (17 ) (107 ) (27 )
Amortization (151 ) (34 ) (167 ) (41 ) (171 ) (57 )
End of period $ 4,975 $ 1,277 $ 5,183 $ 1,299 $ 5,835 $ 1,421
Nine Months Ended
--- --- --- --- --- --- --- --- --- --- --- --- ---
September 30, 2025 September 30, 2024
Mortgage SBA Mortgage SBA
Loans Loans Loans Loans
Servicing assets: (dollars in thousands)
Beginning of period $ 5,656 $ 1,329 $ 6,509 $ 1,601
Additions 66 90 188 92
Payoffs (273 ) (21 ) (340 ) (94 )
Amortization (474 ) (121 ) (522 ) (178 )
End of period $ 4,975 $ 1,277 $ 5,835 $ 1,421

Estimates of the loan servicing asset fair value are derived through a discounted cash flow analysis. Portfolio characteristics include loan delinquency rates, age of loans, note rate and geography. The assumptions embedded in the valuation are obtained from a range of metrics utilized by active buyers in the marketplace. The analysis accounts for recent transactions, and supply and demand within the market.

The fair value of servicing assets for mortgage loans was $10.0 million and $11.4 million as of September 30, 2025 and  December 31, 2024. This fair value at September 30, 2025 was determined using an average discount rate of 10.11%, average prepayment speed of 7.80%, depending on the stratification of the specific right, and a weighted-average default rate of 0.11%. This fair value at December 31, 2024 was determined using an average discount rate of 11.16%, average prepayment speed of 7.52%, depending on the stratification of the specific right, and a weighted-average default rate of 0.10%

The fair value of servicing assets for SBA loans was $2.1 million and $2.3 million as of September 30, 2025 and  December 31, 2024. This fair value at September 30, 2025 was determined using an average discount rate of 8.5%, average prepayment speed of 20.74%, depending on the stratification of the specific right, and a weighted-average default rate of 1.31%. This fair value at December 31, 2024 was determined using an average discount rate of 8.5%, average prepayment speed of 19.46%, depending on the stratification of the specific right, and a weighted-average default rate of 1.04%.

NOTE 6 - GOODWILL AND INTANGIBLES

Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill resulting from whole bank and branch acquisitions is tested for impairment at least annually during the fourth quarter of each year, and more frequently, if events or circumstances indicate the value of goodwill may be impaired. We completed our most recent evaluation of goodwill as of October 1, 2024 and determined that no goodwill impairment existed. Goodwill amounted to $71.5 million at both September 30, 2025 and  December 31, 2024 and is the only intangible asset with an indefinite life on our consolidated balance sheets. There were no triggering events during the three and nine months ended September 30, 2025 that caused management to evaluate goodwill for a quantitative impairment analysis as of September 30, 2025.

Other intangible assets consist of core deposit intangible (“CDI”) assets arising from whole bank and branch acquisitions. CDI assets are amortized on an accelerated method over their estimated useful life of 8 to 10 years. The unamortized balance at September 30, 2025 and December 31, 2024 was $1.5 million and $2.0 million. CDI amortization expense was $172,000, $172,000, and $200,000 for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, and $516,000 and $602,000 for the nine months ended September 30, 2025 and 2024.

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Estimated CDI amortization expense for future years is as follows:

As of September 30, 2025: CDI Amortization Expense
(dollars in thousands)
Remainder of 2025 $ 157
2026 501
2027 417
2028 297
2029 64
Thereafter 59
Total $ 1,495

NOTE 7 - DEPOSITS

At September 30, 2025, the scheduled maturities of time deposits are as follows:

250,000 and under Greater than 250,000 Total
Time Deposits Maturities Periods: (dollars in thousands)
One year or less $ 1,112,976 973,524 2,086,500
One year to three years 5,610 1,530 7,140
Over three years 672 — 672
Total $ 1,119,258 975,054 2,094,312

All values are in US Dollars.

Time deposits include deposits acquired through both retail and wholesale channels. Wholesale channels include brokered deposits, collateralized deposits from the State of California, and deposits acquired through internet listing services. Wholesale time deposits totaled $268.1 million at September 30, 2025 and $147.5 million at December 31, 2024. Brokered time deposits were $205.9 million at September 30, 2025 and $93.2 million at December 31, 2024. Collateralized deposits from the State of California totaled $20.0 million at September 30, 2025 and $20.0 million at December 31, 2024. Time deposits acquired through internet listing services totaled $42.2 million at September 30, 2025 and $34.2 million at December 31, 2024.

In addition, we offer retail deposit products where customers are able to achieve FDIC insurance for balances on deposit in excess of the $250,000 FDIC insurance limit through the Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweeps (“ICS”) programs. Time deposits held through the CDARS program were $130.5 million at September 30, 2025 and $130.6 million at December 31, 2024. ICS deposits totaled $147.2 million at September 30, 2025 and $146.1 million at December 31, 2024.

NOTE 8 - LONG-TERM DEBT

The Company's long-term debt consists of $120.0 million of 4.00% fixed-to-floating rate subordinated notes, with an  April 1, 2031 maturity date (the "2031 Subordinated Notes"). The interest rate is fixed through April 1, 2026 and is scheduled to float at three-month Secured Overnight Financing Rate ("SOFR") plus 329 basis points thereafter. We can redeem the 2031 Subordinated Notes beginning April 1, 2026. The 2031 Subordinated Notes are considered Tier 2 capital at the Company.

We were in compliance with all covenants for the 2031 Subordinated Notes as of September 30, 2025. We recognized interest expense on such subordinated notes of $1.2 million, $1.2 million, and $1.2 million for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, and $3.6 million and $3.6 million for the nine months ended September 30, 2025 and 2024.

The table below presents the long-term debt and unamortized debt issuance costs as of the dates indicated:

September 30, 2025 December 31, 2024
(dollars in thousands)
Principal $ 120,000 $ 120,000
Unamortized debt issuance costs (185 ) (471 )
Long-term debt, net of issuance costs $ 119,815 $ 119,529

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NOTE 9 - SUBORDINATED DEBENTURES

Subordinated debentures consist of subordinated debentures issued in connection with three separate trust preferred securities and totaled $15.3 million and $15.2 million as of September 30, 2025 and December 31, 2024. Under the terms of our subordinated debentures issued in connection with the issuance of trust preferred securities, we are not permitted to declare or pay any dividends on our capital stock if an event of default occurs under the terms of the long-term debt. In addition, we have the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years. The subordinated debentures may be included in Tier 1 capital (with certain limitations applicable) under current regulatory guidelines and interpretations. We  may redeem the subordinated debentures, subject to prior approval by the Board of Governors of the Federal Reserve System at 100% of the principal amount, plus accrued and unpaid interest. These subordinated debentures consist of the following at September 30, 2025 and are described in detail after the table below:

Issue Date Principal Amount Unamortized Valuation Reserve Recorded Value Stated Rate Description Effective Stated Rate Stated Maturity
Subordinated debentures: (dollars in thousands)
TFC Trust 12/22/2006 $ 5,155 $ 1,031 $ 4,124 Three-month CME Term SOFR plus 0.26% plus 1.65% 5.95 % 3/15/2037
FAIC Trust 12/15/2004 7,217 707 6,510 Three-month CME Term SOFR plus 0.26% plus 2.25% 6.55 % 12/15/2034
PGBH Trust 12/15/2004 5,155 469 4,686 Three-month CME Term SOFR plus 0.26% plus 2.10% 6.40 % 12/15/2034
Total $ 17,527 $ 2,207 $ 15,320

In 2016, we acquired TFC Statutory Trust (the “TFC Trust”) through the acquisition of Tomato Bank and its holding company, TFC Holding Company. At the close of this acquisition, a $1.9 million valuation reserve was recorded to arrive at its fair market value, which is treated as a yield adjustment and amortized over the life of the security. The unamortized valuation reserve was $1.0 million at September 30, 2025 and $1.1 million at December 31, 2024. The subordinated debentures have a variable rate of interest equal to three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 1.65%, which was 5.95% as of September 30, 2025 and 6.27% at December 31, 2024.

In October 2018, we acquired First American International Statutory Trust I (“FAIC Trust”) through the acquisition of First American International Corp. (“FAIC”). At the close of this acquisition, a $1.2 million valuation reserve was recorded to arrive at its fair market value, which is treated as a yield adjustment and amortized over the life of the security. The unamortized valuation reserve was $707,000 at September 30, 2025 and $765,000 at December 31, 2024. The subordinated debentures have a variable rate of interest equal to three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 2.25%, which was 6.55% as of September 30, 2025 and 6.87% at December 31, 2024.

In January 2020, we acquired Pacific Global Bank Trust I (“PGBH Trust”) through the acquisition of PGB Holdings, Inc. At the close of this acquisition, a $763,000 valuation reserve was recorded to arrive at its fair market value, which is treated as a yield adjustment and amortized over the life of the security. The unamortized valuation reserve was $469,000 at September 30, 2025 and $507,000 at December 31, 2024. The subordinated debentures have a variable rate of interest equal to three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 2.10%, which was 6.40% as of September 30, 2025 and 6.72% at December 31, 2024.

We recognized interest expense on the subordinated debentures of $285,000, $283,000, and $331,000 for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, and $851,000 and $989,000 for the nine months ended September 30, 2025 and 2024. The aggregate amount of amortization expense was $55,000 for each of the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, and $164,000 for each of the nine months ended September 30, 2025 and 2024.

For regulatory reporting purposes, the Federal Reserve has indicated that the capital or trust preferred securities qualify as Tier 1 capital of the Company subject to previously specified limitations (including that the asset size of the issuer did not exceed $15 billion), until further notice. If regulators make a determination that the capital securities can no longer be considered in regulatory capital, the securities become callable and we may redeem them.

NOTE 10 - BORROWING ARRANGEMENTS

We have established secured and unsecured lines of credit. We may borrow funds from time to time on a term or overnight basis from the Federal Home Loan Bank of San Francisco (“FHLB”), the Federal Reserve Bank of San Francisco (“FRB”) and other financial institutions as indicated below.

FHLB Secured Line of Credit and Advances. At September 30, 2025, we had secured borrowing capacity with the FHLB of $1.3 billion collateralized by pledged residential and commercial loans with a carrying value of $1.8 billion. At September 30, 2025, we had no overnight advances and $130.0 million of putable term advances, with various call dates at the option of the FHLB, and a weighted average rate of 3.49%. The remaining secured borrowing capacity with the FHLB was $1.2 billion as of September 30, 2025.

At December 31, 2024, we had a secured borrowing capacity with the FHLB of $1.1 billion collateralized by pledged residential and commercial loans with a carrying value of $1.4 billion. At December 31, 2024, we had $200.0 million of outstanding term advances, of which $150.0 million with an average fixed rate of 1.18% matured in the first quarter of 2025 and $50.0 million was a putable advance with a rate of 3.42% that was called by the FHLB in September 2025.

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The details of the FHLB term advances outstanding at September 30, 2025 are shown in the table below:

Advance Date Amount Rate Call Structure Next Call Date Final Stated Maturity Date
(dollars in thousands)
5/8/2025 $ 10,000 3.69 % 1 time call 11/10/2025 5/10/2028
5/8/2025 20,000 3.49 % Quarterly call 11/10/2025 5/10/2028
8/14/2025 20,000 3.38 % Quarterly call 11/14/2025 8/14/2028
3/12/2025 20,000 3.34 % Quarterly call 12/12/2025 3/12/2029
3/14/2025 20,000 3.49 % Quarterly call 12/15/2025 3/15/2029
6/23/2025 10,000 3.64 % 1 time call 12/23/2025 6/23/2028
5/8/2025 20,000 3.52 % Quarterly call ^(1)^ 5/8/2026 5/8/2029
6/23/2025 10,000 3.55 % Quarterly call ^(1)^ 6/23/2026 6/23/2028
Total $ 130,000 3.49 %
(<br> 1) Call option after initial<br> one year lock out.
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FRB Secured Line of Credit. At September 30, 2025, we had secured borrowing capacity with the FRB of $63.4 million collateralized by pledged loans with a carrying value of $83.2 million.

Federal Funds Arrangements with Commercial Banks. At September 30, 2025, we have established unsecured borrowing lines with other financial institutions totaling $97.0 million.

There were no amounts outstanding under any of the other borrowing arrangements above as of September 30, 2025, except the FHLB term advances of $130.0 million.

NOTE 11 - INCOME TAXES

The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

We recorded an income tax provision of $3.1 million, $3.6 million, and $2.6 million, reflecting an effective tax rate of 23.5%, 27.8%, and 26.9% for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, and $7.6 million and $8.3 million, reflecting an effective tax rate of 25.9% and 27.2% for the nine months ended September 30, 2025 and 2024.

NOTE 12 - COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, we enter into financial commitments to meet the financing needs of our customers. These financial commitments include commitments to extend credit, unused lines of credit, commercial and similar letters of credit and standby letters of credit. Those instruments involve varying degrees of credit and interest rate risk not recognized in our financial statements.

Our exposure to loss in the event of nonperformance on these financial commitments is represented by the contractual amount of those instruments. We use the same credit policies in making commitments as we do for loans reflected in the financial statements.

We had the following financial commitments whose contractual amount represents credit risk, as of the dates indicated:

September 30, December 31,
2025 2024
(dollars in thousands)
Commitments to make loans $ 40,624 $ 84,241
Unused lines of credit 70,659 85,580
Commercial and similar letters of credit 2,144 2,393
Standby letters of credit 5,694 3,293
Total $ 119,121 $ 175,507

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. We evaluate each client's creditworthiness on a case-by-case basis.

We record a liability for lifetime expected losses on off-balance-sheet credit exposure that does not fit the definition of unconditionally cancelable commitments in accordance with ASC 326. We use the loss rate and exposure at default framework to estimate a reserve for unfunded commitments. Loss rates for the expected funded balances are determined based on the associated pooled loan analysis loss rate and the exposure at default is based on an estimated utilization given default. The reserve for off-balance sheet commitments was $504,000 and $729,000 as of September 30, 2025 and December 31, 2024. We recorded a (reversal of) provision for unfunded loan commitments of ($125,000), zero, and $155,000 for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024. We recorded a (reversal of) provision for unfunded loan commitments of ($225,000) and $139,000 for the nine months ended September 30, 2025 and 2024.

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In addition, we invest in various affordable housing partnerships and Small Business Investment Company funds. Pursuant to these investments, we commit to an investment amount to be fulfilled in future periods. Such unfunded commitments totaled $10.4 million as of September 30, 2025 and $5.7 million as of December 31, 2024.

We are involved in various matters of litigation which have arisen in the ordinary course of business and accruals for estimates of potential losses have been provided when necessary and appropriate under generally accepted accounting principles. In the opinion of management, the disposition of such pending litigation will not have a material effect on the Company's consolidated financial statements.

NOTE 13 - LEASES

We lease several of our operating facilities under various non-cancellable operating leases expiring at various dates through 2037. We are also responsible for common area maintenance, taxes, and insurance at the various branch locations.

Future minimum rent payments on our leases were as follows as of the date indicated:

As of September 30, 2025
(dollars in thousands)
Remainder of 2025 $ 1,016
2026 5,861
2027 5,766
2028 4,848
2029 2,682
Thereafter 8,296
Total future minimum lease payments $ 28,469
Less amount of payment representing interest (2,403 )
Total present value of lease payments $ 26,066

The minimum rent payments shown above are given for the existing lease obligation and are not a forecast of future rental expense. Total rental expense, recognized on a straight-line basis, was $1.5 million, $1.5 million, and $1.4 million for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, and $4.4 million and $4.4 million for the nine months ended September 30, 2025 and 2024. The Company received rental income of $161,000, $158,000, and $157,000 for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, and $477,000 and $454,000 for the nine months ended September 30, 2025 and 2024.

The following table presents the right-of-use (“ROU”) assets and lease liabilities recorded on our consolidated balance sheet, the weighted-average remaining lease terms and discount rates, as of the dates indicated*:*

September 30, December 31,
2025 2024
Operating Leases (dollars in thousands)
ROU assets $ 24,305 $ 28,048
Lease liabilities 26,066 29,705
Weighted-average remaining lease term (in years) 6.12 6.65
Weighted-average discount rate 2.93 % 2.83 %

NOTE 14 - RELATED PARTY TRANSACTIONS

There were no loans or outstanding loan commitments to any principal officers or directors, or any of their affiliates at September 30, 2025 and December 31, 2024.

Deposits from principal officers, directors, and their affiliates at September 30, 2025 and December 31, 2024 were $45.2 million and $32.5 million.

Certain directors and their affiliates own $6.0 million of RBB's subordinated debentures as of September 30, 2025 and December 31, 2024.

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NOTE 15 - STOCK-BASED COMPENSATION

Amended and Restated RBB Bancorp 2017 Omnibus Stock Incentive Plan

The Amended and Restated RBB Bancorp 2017 Omnibus Stock Incentive Plan (the "Amended OSIP") was approved by our board of directors in January 2019 and approved by our shareholders in May 2022. The Amended OSIP was designed to ensure continued availability of equity awards that will assist us in attracting and retaining competent managerial personnel and rewarding key employees, directors and other service providers for high levels of performance. Pursuant to the Amended OSIP, our board of directors are allowed to grant awards to eligible persons in the form of qualified and non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights and other incentive awards. Awards vest, become exercisable and contain such other terms and conditions as determined by the board of directors and set forth in individual agreements with the employees receiving the awards. The Amended OSIP enables the board of directors to set specific performance criteria that must be met before an award vests. The Amended OSIP allows for acceleration of vesting and exercise privileges of grants if a participant’s termination of employment is due to a change in control, death or total disability. If a participant’s job is terminated for cause, then all awards expire at the date of termination. We reserved up to 30% of issued and outstanding shares of common stock as of the date we adopted the Amended OSIP, or 3,848,341 shares. As of September 30, 2025, there were 878,916 shares of common stock available for issuance under the Amended OSIP. This represents 5.2% of the issued and outstanding shares of our common stock as of September 30, 2025.

Stock Options

Compensation expense for stock options was $9,000, $12,000, and $14,000 for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, and $35,000 and $49,000 for the nine months ended September 30, 2025 and 2024. Unrecognized stock-based compensation expense related to options was $82,000 as of September 30, 2025. Unrecognized compensation expense related to stock options, as of September 30, 2025, is expected to be recognized over the next 1.6 years.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. The table below summarizes the assumptions and grant date fair value for stock options granted in March 2023. No stock options have been granted after March 31, 2023.

At March 2023
Expected volatility 28.4 %
Expected term (years) 8.0
Expected dividends 2.92 %
Risk free rate 4.27 %
Grant date fair value $ 5.49

The expected volatility is based on the historical volatility of our stock trading history. The expected term is based on historical data and represents the estimated average period of time that the options remain outstanding. The risk-free rate of return reflects the grant date interest rate offered for zero coupon U.S. Treasury bonds over the expected term of the options.

The table below presents a summary of our stock options awards and activity as of and for the nine months ended September 30, 2025.

Outstanding Options Weighted-Average Exercise Price Weighted- Average Remaining Contractual Term in years Aggregate Intrinsic Value
(dollars in thousands, except for per share data)
Outstanding at beginning of year 174,500 $ 18.29
Exercised (10,000 ) 17.08
Outstanding at end of period 164,500 $ 18.37 4.57 $ 146
Options exercisable 146,500 $ 18.02 4.24 $ 146

The total fair value of the options vested was $63,000 and $652,000 during the nine months ended September 30, 2025 and 2024. Unvested stock options totaled 18,000 and 21,333 with a weighted average grant date fair value of $6.16 and $6.02, respectively, as of September 30, 2025 and December 31, 2024. During the nine months ended September 30, 2025, 3,333 stock options vested with a weighted average grant date fair value of $5.28.

No stock options were exercised for the three months ended September 30, 2025. For the three months ended September 30, 2024, the cash received from the exercise of stock options was $307,000 with an intrinsic value of $55,000. For the nine months ended September 30, 2025 and 2024, the cash received from the exercise of stock options was $171,000 and $1.3 million with an intrinsic value of $1,000 and $316,000.

Restricted Stock Units

We award time-based restricted stock units (“TRSUs”) and performance-based restricted stock units (“PRSUs”), which we also refer to collectively as restricted stock units (“RSUs”). The PRSUs are subject to pre-established performance metrics, which may also include a market condition, that will be measured in the future and subject to oversight and approval by the Board of Director’s Compensation Committee. The TRSUs have original lives ranging from 1 to 4 years and PRSUs have an original life of 3 years. The RSUs granted during the nine months ended September 30, 2025 included 14,416 PRSUs with a performance metric subject to a market condition and grant date fair value per share of $11.08.

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The recorded compensation expense for RSUs was $262,000, $537,000, and $250,000 for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, and $1.0 million and $740,000 for the nine months ended September 30, 2025 and 2024. Unrecognized stock-based compensation expense related to RSUs was $2.4 million as of September 30, 2025. As of September 30, 2025, unrecognized stock-based compensation expense related to RSUs is expected to be recognized over the next 2.5 years.

The following table presents RSUs activity during the nine months ended September 30, 2025.

**** Weighted-Average
**** Grant Date
RSUs Fair Value Per Share
Outstanding at beginning of year 140,475 $ 18.33
Granted 138,922 15.70
Vested (75,126 ) 17.65
Forfeited/cancelled (13,180 ) 18.74
Outstanding at end of period 191,091 $ 16.66

NOTE 16 - REGULATORY MATTERS

Holding companies (with assets over $3 billion at the beginning of the year) and banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on our financial statements.

Final comprehensive regulatory capital rules for U.S. banking organizations pursuant to the capital framework of the Basel Committee on Banking Supervision, generally referred to as “Basel III,” implemented a requirement for all banking organizations to maintain a capital conservation buffer of 2.5% above the minimum risk-based capital requirements. The capital conservation buffer is exclusively comprised of common equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not to the leverage ratio. At September 30, 2025, the Company and the Bank were in compliance with the capital conservation buffer requirements. If the capital adequacy minimum ratios plus the phased-in conservation buffer amount exceed actual risk-weighted capital ratios, then dividends, share buybacks, and discretionary bonuses to executives could be limited in amount.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1 and CET1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). As permitted by the regulators for financial institutions that are not deemed to be “advanced approaches” institutions, we have elected to opt out of the Basel III requirement to include accumulated other comprehensive income in risk-based capital. Management believes, at September 30, 2025 and December 31, 2024, we satisfied all capital adequacy requirements to which we were subject.

The following tables set forth RBB’s consolidated and the Bank’s capital amounts and ratios and related regulatory requirements as of the dates indicated:

**** Amount of Capital Required
**** **** To Be Well-Capitalized
**** Minimum Required for Under Prompt Corrective
Actual Capital Adequacy Purposes Provisions
Amount Ratio Amount Ratio ^(1)^ Amount Ratio
As of September 30, 2025: (dollars in thousands)
Tier 1 Leverage Ratio
Consolidated $ 470,942 11.50 % $ 163,737 4.0 % $ 204,672 5.0 %
Bank 532,671 13.03 % 163,543 4.0 % 204,429 5.0 %
Common Equity Tier 1 Risk-Based Capital Ratio
Consolidated $ 456,082 17.28 % $ 118,755 4.5 % $ 171,534 6.5 %
Bank 532,671 20.23 % 118,471 4.5 % 171,125 6.5 %
Tier 1 Risk-Based Capital Ratio
Consolidated $ 470,942 17.85 % $ 158,340 6.0 % $ 211,119 8.0 %
Bank 532,671 20.23 % 157,962 6.0 % 210,616 8.0 %
Total Risk-Based Capital Ratio
Consolidated $ 623,898 23.64 % $ 211,119 8.0 % $ 263,899 10.0 %
Bank 565,734 21.49 % 210,616 8.0 % 263,270 10.0 %

(1) These ratios are exclusive of the 2.5% capital conservation buffer.

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**** Amount of Capital Required
**** **** To Be Well-Capitalized
**** Minimum Required for Under Prompt Corrective
Actual Capital Adequacy Purposes Provisions
Amount Ratio Amount Ratio ^(1)^ Amount Ratio
As of December 31, 2024: (dollars in thousands)
Tier 1 Leverage Ratio
Consolidated $ 469,785 11.92 % $ 157,660 4.0 % $ 197,075 5.0 %
Bank 549,889 13.96 % 157,529 4.0 % 196,912 5.0 %
Common Equity Tier 1 Risk Based Capital Ratio
Consolidated $ 455,084 17.94 % $ 114,133 4.5 % $ 164,859 6.5 %
Bank 549,889 21.74 % 113,843 4.5 % 164,440 6.5 %
Tier 1 Risk-Based Capital Ratio
Consolidated $ 469,785 18.52 % $ 152,178 6.0 % $ 202,903 8.0 %
Bank 549,889 21.74 % 151,791 6.0 % 202,388 8.0 %
Total Risk-Based Capital Ratio
Consolidated $ 621,225 24.49 % $ 202,903 8.0 % $ 253,629 10.0 %
Bank 581,720 22.99 % 202,388 8.0 % 252,985 10.0 %

(1) These ratios are exclusive of the 2.5% capital conservation buffer.

The California Financial Code generally acts to prohibit banks from making a cash distribution to its shareholders in excess of the lesser of the bank's undivided profits or the bank's net income for its last three fiscal years less the amount of any distribution made by the bank's shareholders during the same period.

The California General Corporation Law generally acts to prohibit companies from paying dividends on common stock unless retained earnings, immediately prior to the dividend payment, equals or exceeds the amount of the dividend. If a company fails this test, then it may still pay dividends if after giving effect to the dividend the company's assets are at least 125% of its liabilities.

Additionally, the Federal Reserve has issued guidance which requires that they be consulted before payment of a dividend if a bank holding company does not have earnings over the prior four quarters of at least equal to the dividend to be paid, plus other holding company obligations.

NOTE 17 - FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

In accordance with ASC 820-10, we group financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows:

Fair Value Hierarchy

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, prepayment speeds, volatilities, etc.) or model-based valuation techniques where all significant assumptions are observable, either directly or indirectly, in the market.

Level 3 - Valuation is generated from model-based techniques where one or more significant inputs are not observable, either directly or indirectly, in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques may include use of matrix pricing, discounted cash flow models, and similar techniques.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Securities:

The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1) or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2).

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Assets and Liabilities Measured on a Non-Recurring Basis

Collateral-dependent individually evaluated loans:

Collateral-dependent individually evaluated loans are carried at fair value when it is probable that we will be unable to collect all amounts due according to the contractual terms of the original loan agreement and the loan has been written down to the fair value of its underlying collateral, net of expected selling costs.

The fair value of collateral-dependent individually evaluated loans is based on third party appraisals of the property, less management’s estimate of selling costs. Third party appraisals generally use a sales comparison or income capitalization approach to derive the appraised value based on market transactions involving similar or comparable properties. Adjustments are routinely made by the third party appraisers to adjust for differences between the comparable sales and income data used in the appraisal. Adjustments may also result from the consideration of relevant economic and demographic factors which may affect property values. Positive adjustments in the appraisal represent increases to the sales comparisons and negative adjustments represent decreases.

Other Real Estate Owned ("OREO"):

OREO is initially recorded at fair value less estimated selling costs at the date of transfer. This amount becomes the property's new basis. Fair values are generally based on third party appraisals of the property and discounted by management to reflect estimated selling costs (Level 3).

Appraisals for OREO and collateral-dependent loans are performed by state licensed appraisers (for commercial properties) or state certified appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by us. We review the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison to independent data sources such as recent market data or industry wide statistics for residential appraisals. We also consider the actual selling price of collateral that has been sold in recent periods to determine what additional adjustments, if any, should be made to the appraisal values to arrive at fair value. In determining the net realizable value of the underlying collateral for individually evaluated loans and OREO, we discount the valuation to cover both market price fluctuations and selling costs, typically ranging from 6% to 10% of the collateral value, that may be incurred in the event of foreclosure. Generally, if the existing appraisal is older than twelve months for OREO or collateral-dependent loans, a new appraisal report is ordered.

The following table presents our financial assets and liabilities measured at fair value on a recurring basis or on a non-recurring basis as of the dates indicated:

Fair Value Measurements Using:
September 30, 2025 Level 1 Level 2 Level 3 Total
Assets measured at fair value: (dollars in thousands)
On a recurring basis:
Securities available for sale
Government agency securities $ — $ 23,038 $ — $ 23,038
SBA agency securities — 23,045 — 23,045
Mortgage-backed securities — 85,033 — 85,033
Collateralized mortgage obligations — 216,157 — 216,157
Commercial paper — 24,942 — 24,942
Corporate debt securities — 29,210 — 29,210
Municipal securities — 9,206 — 9,206
$ — $ 410,631 $ — $ 410,631
On a non-recurring basis:
Collateral dependent individually evaluated loans:
Commercial real estate loans $ — $ — $ 3,005 $ 3,005
Construction and land development loans — — 19,465 19,465
Commercial and industrial loans — — 4,708 4,708
Other real estate owned ^(1)^ — — 8,830 8,830
$ — $ — $ 36,008 $ 36,008

(1) Included in “Accrued interest and other assets” on the consolidated balance sheets.

December 31, 2024 Level 1 Level 2 Level 3 Total
Assets measured at fair value:
On a recurring basis:
Securities available for sale
Government agency securities $ — $ 21,042 $ — $ 21,042
SBA agency securities — 26,764 — 26,764
Mortgage-backed securities — 55,677 — 55,677
Collateralized mortgage obligations — 197,132 — 197,132
Commercial paper — 78,685 — 78,685
Corporate debt securities — 31,815 — 31,815
Municipal securities — 9,075 — 9,075
$ — $ 420,190 $ — $ 420,190
On a non-recurring basis:
Collateral dependent individually evaluated loans:
Commercial real estate loans $ — $ — $ 4,751 $ 4,751
Construction and land development loans — — 30,676 30,676
SBA loans — — 66 66
$ — $ — $ 35,493 $ 35,493

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The fair value of assets evaluated on a non-recurring basis is based on third party appraisals, including adjustments to comparable market data as summarized in the table below.

September 30, 2025 Fair Value Valuation Techniques Unobservable Input(s) Range
Collateral dependent loans: (dollars in thousands)
Commercial real estate loans ^(1)^ $ 3,005 Market approach Adjustments (2) (41%) to 4%
Construction and land development loans 19,465 Market approach Adjustments (2) 9% to 23%
Commercial and industrial loans ^(1)^ 4,708 Market approach Adjustments (2) (20%) to 20%
Other Real Estate Owned ^(3)^ 8,830 Market approach Adjustments (2) (10%) to 21%
Total $ 36,008

(1) Collateral includes single family and commercial real estate.

(2) Represents the minimum and maximum range of adjustments made by appraisers for differences in comparable sales.

(3) Included in “Accrued interest and other assets” on the consolidated balance sheets.

December 31, 2024 Fair Value Unobservable Input(s) Range
Collateral dependent loans: (dollars in thousands)
Commercial real estate loans ^(1)^ 4,751 Adjustments ^(2)^ (41%) to 4%
Construction and land development loans 30,676 Adjustments ^(2)^ (19%) to 5%
SBA loans 66 Adjustments ^(2)^ (4%) to 11%
Total 35,493

All values are in US Dollars.

(1) Collateral includes single family and commercial real estate.

(2) Represents the minimum and maximum range of adjustments made by appraisers for differences in comparable sales.

The fair value hierarchy level and estimated fair value of significant financial instruments as of the dates indicated are summarized as follows:

September 30, 2025 December 31, 2024
Fair Value Carrying Fair Carrying Fair
Hierarchy Value Value Value Value
Financial Assets: (dollars in thousands)
Cash and due from banks Level 1 $ 234,930 $ 234,930 $ 257,745 $ 257,745
Interest-earning deposits in other financial institutions Level 1 600 600 600 600
Investment securities – AFS Level 2 410,631 410,631 420,190 420,190
Investment securities – HTM Level 2 4,185 4,075 5,191 4,948
Loans held for sale Level 2 756 756 11,250 11,250
Loans, net Level 3 3,257,685 3,209,357 3,005,501 2,942,026
Equity securities ^(1)^ Level 3 23,069 23,069 22,944 22,944
Investment in FHLB stock Level 2 15,000 15,000 15,000 15,000
Servicing assets Level 3 6,252 12,144 6,985 13,761
Accrued interest receivable ^(1)^ Level 1/2/3 16,043 16,043 14,582 14,582
Carrying Fair Carrying Fair
Financial Liabilities: Value Value Value Value
Deposits Level 2 $ 3,366,497 $ 3,366,233 $ 3,083,789 $ 3,078,409
FHLB advances Level 3 130,000 128,709 200,000 198,783
Long-term debt Level 3 119,815 113,390 119,529 109,463
Subordinated debentures Level 3 15,320 15,156 15,156 14,975
Accrued interest payable ^(2)^ Level 2/3 8,645 8,645 7,950 7,950

(1) Included in “Accrued interest and other assets” on the consolidated balance sheets.

(2) Included in “Accrued interest and other liabilities” on the consolidated balance sheets.

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NOTE 18 - EARNINGS PER SHARE

The following is a reconciliation of net income and shares outstanding to the net income and number of shares used to compute earnings per share (“EPS”) for the periods indicated:

For the Three Months Ended
September 30, 2025 June 30, 2025 September 30, 2024
Income Shares Income Shares Income Shares
(dollars in thousands except per share data)
Net income $ 10,148 $ 9,333 $ 6,999
Shares outstanding 17,043,897 17,699,091 17,693,416
Impact of weighting shares 181,805 47,516 119,375
Used in basic EPS 10,148 17,225,702 9,333 17,746,607 6,999 17,812,791
Dilutive effect of outstanding
Stock options 10,160 1,637 30,678
Restricted stock units 43,597 38,068 34,610
Performance stock units 22,168 11,423 7,280
Used in dilutive EPS $ 10,148 17,301,627 $ 9,333 17,797,735 $ 6,999 17,885,359
Basic earnings per common share $ 0.59 $ 0.53 $ 0.39
Diluted earnings per common share $ 0.59 $ 0.52 $ 0.39
For the Nine Months Ended September 30,
--- --- --- --- --- --- --- --- ---
2025 2024
Income Shares Income Shares
(dollars in thousands except per share data)
Net income $ 21,771 $ 22,280
Shares outstanding 17,043,897 17,693,416
Impact of weighting shares 520,938 568,286
Used in basic EPS 21,771 17,564,835 22,280 18,261,702
Dilutive effect of outstanding
Stock options 5,690 15,943
Restricted stock units 37,135 32,529
Performance stock units 13,939 2,912
Used in dilutive EPS $ 21,771 17,621,599 $ 22,280 18,313,086
Basic earnings per common share $ 1.24 $ 1.22
Diluted earnings per common share $ 1.24 $ 1.22

Options to purchase 34,000, 155,500, and 40,000 shares of common stock were excluded from the calculation of diluted earnings per share for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, respectively, because their effect would have been anti-dilutive. Options to purchase 82,247 and 125,686 shares of common stock were excluded from the calculation of diluted earnings per share for the nine months ended September 30, 2025 and 2024, respectively, because their effect would have been anti-dilutive. There were 2,300, 14,999, and zero anti-dilutive unvested RSUs outstanding for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, and 6,786 and 12,381 anti-dilutive unvested RSUs outstanding for the nine months ended September 30, 2025 and 2024.

NOTE 19 – REVENUE FROM CONTRACTS WITH CUSTOMERS

The following is a summary of revenue from contracts with customers that are in-scope and not in-scope under ASC Topic 606 for the periods indicated:

For the Three Months Ended For the Nine Months Ended September 30,
September 30, 2025 June 30, 2025 September 30, 2024 2025 2024
Noninterest income, in scope (dollars in thousands)
Fees and service charges on deposit accounts $ 497 $ 475 $ 475 $ 1,446 $ 1,421
Other fees ^(1)^ 225 321 198 642 607
Other income ^(2)^ 602 585 597 1,730 1,706
Gain on sale of OREO — — — — 456
Total in-scope noninterest income 1,324 1,381 1,270 3,818 4,190
Noninterest income, not in scope ^(3)^ 1,969 7,097 4,476 10,248 8,416
Total noninterest income $ 3,293 $ 8,478 $ 5,746 $ 14,066 $ 12,606
(1) Other fees consist of wealth management fees, miscellaneous loan fees and postage/courier fees.
--- ---
(2) Other income consists of safe deposit box rental income, wire transfer fees, security brokerage fees, annuity sales, insurance activity, and OREO income.
--- ---
(3) Noninterest income outside the scope of ASC 606 primarily represents: net loan servicing income, letter of credit commissions, import/export commissions, BOLI income, gains (losses) on sales of loans and fixed assets, income from equity investments, gain on transfer to OREO, recoveries on loans acquired in a business combination, Bank Enterprise Award, and the ERC.
--- ---

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Revenue recognized in the table above reflects amounts from contracts with customers as defined in ASC 606. Other sources of income, such as government grant programs including the ERC, are not in the scope of ASC 606 and are discussed in Note 2 - Basis of Presentation and Summary of Significant Accounting Policies.

The major revenue streams by fee type that are within the scope of ASC 606 presented in the above tables are described in additional detail below:

Fees and Services Charges on Deposit Accounts

Fees and service charges on deposit accounts include charges for analysis, overdraft, cashier's check fees, ATM, and safe deposit activities executed by our deposit clients, as well as interchange income earned through card payment networks for the acceptance of card based transactions. Fees earned from our deposit clients are governed by contracts that provide for overall custody and access to deposited funds and other related services and can be terminated at will by either party; this includes fees from money service businesses (MSBs). Fees received from deposit clients for the various deposit activities are recognized as revenue once the performance obligations are met. Periodic service charges are generally collected monthly directly from the customer’s deposit account, and at the end of a statement cycle, while transaction based service charges are typically collected at the time of or soon after the service is performed.

Wealth Management Fees

In our wealth management division, revenue is primarily generated from (1) securities brokerage accounts, (2) investment advisor accounts, (3) full service brokerage implementation fees, and (4) life insurance and annuity products. We employ financial consultants to provide investment planning services for customers including wealth management services, asset allocation strategies, portfolio analysis and monitoring, investment strategies, and risk management strategies. The commission fees we earn are variable and are generally received monthly. We recognize revenue for the services performed based on actual transaction details received from the broker dealer we engage.

Gain/(loss) on Sales of Other Real Estate Owned

We record a gain or loss from the sale of OREO, when control of the property or asset transfers to the buyer, which generally occurs at the time of an executed deed or sales agreement. When we finance the sale of OREO to a buyer, we assess whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon transfer of control of the property to the buyer. In determining the gain or loss on the sale, we adjust the transaction price and related gain or loss on sale if a significant financing component is present.

NOTE 20 - SEGMENT INFORMATION

Our reportable segments are determined by the Chief Executive Officer and Chief Financial Officer, who are the designated chief operating decision makers ("CODM"), based upon information provided by our products and services offered, primarily banking operations. The segments are also distinguished by the level of information provided to the CODM, who uses such information to review performance of various components of the business, which are aggregated if operating performance, products/services, and customers are similar. The CODM will evaluate the financial performance of our business components such as by evaluating revenue streams, significant expenses, and budget to actual results in assessing our segment and in the determination of allocating resources. The CODM uses consolidated net income, total assets, total loans, and total deposits to benchmark us against our competitors. The benchmarking analysis coupled with monitoring of budget to actual results are used in assessment performance and in establishing compensation. Loans, investments, and deposits provide the revenues in the banking operation. Interest expense, provisions for credit losses and payroll provide the significant expenses in the banking operation. All operations are domestic.

Segment performance is evaluated using consolidated net income, total assets, total loans, and total deposits. Information reported internally for performance assessment by the CODM follows:

For the Three Months Ended For the Nine Months Ended September 30,
September 30, 2025 June 30, 2025 September 30, 2024 2025 2024
Banking Segment (dollars in thousands)
Interest and dividend income $ 57,392 $ 54,205 $ 54,425 $ 163,933 $ 162,106
Reconciliation of revenue
Other revenues 3,293 8,478 5,746 14,066 12,606
Total consolidated revenues $ 60,685 $ 62,683 $ 60,171 $ 177,999 $ 174,712
Less:
Interest expense 28,115 26,871 29,880 81,159 88,719
Segment net interest income and noninterest income $ 32,570 $ 35,812 $ 30,291 $ 96,840 $ 85,993
Less:
Provision for credit losses 625 2,387 3,300 9,758 3,857
Salaries and benefits expense 10,600 11,080 10,008 32,323 29,468
Other segment items ^(1)^ 8,083 9,413 7,413 25,375 22,046
Income tax expense 3,114 3,599 2,571 7,613 8,342
Consolidated net income $ 10,148 $ 9,333 $ 6,999 $ 21,771 $ 22,280
Total Assets $ 4,208,455 $ 4,090,040 $ 3,990,477 $ 4,208,455 $ 3,990,477
Total Loans $ 3,303,333 $ 3,234,695 $ 3,092,708 $ 3,303,333 $ 3,092,708
Total Deposits $ 3,366,497 $ 3,188,231 $ 3,092,184 $ 3,366,497 $ 3,092,184

(1) Other segment items include expenses for occupancy and equipment, data processing, legal and professional, office, marketing and business promotion, insurance and regulatory assessments, core deposit premium amortization and other expenses.

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NOTE 21 - QUALIFIED AFFORDABLE HOUSING PROJECT INVESTMENTS

At September 30, 2025 and December 31, 2024, investments in qualified affordable housing projects totaled $15.1 million and $10.1 million. These balances are reflected in accrued interest and other assets on the consolidated balance sheets. Total unfunded commitments related to the investments in qualified affordable housing projects totaled $9.5 million at September 30, 2025 and $4.8 million at December 31, 2024. We expect to fulfill these commitments between

2025 and 2041.

During the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, we recognized tax credits from these investments totaling $456,000, $515,000, and $336,000. During the nine months ended September 30, 2025 and 2024, we recognized tax credits from these investments totaling $1.4 million and $906,000. We had no impairment losses during each of the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, or the nine months ended September 30, 2025 and 2024. The amortization of these investments was also included within income tax expense as an offset to such tax credits. During the three months ended September 30, 2025, June 30, 2025, and September 30, 2024, we recognized amortization expense of $572,000, $533,000, and $367,000.During the nine months ended September 30, 2025 and 2024, we recognized amortization expense of $1.5 million and $969,000.

NOTE 22 - Repurchase of common stock

On May 29, 2025, the Board of Directors authorized the repurchase of up to $18.0 million of common stock through June 30, 2026, of which $4.1 million was available as of September 30, 2025. We repurchased 659,218 shares at a weighted average share price of $18.75 during the three months ended September 30, 2025 and 746,949 shares at a weighted average share price of $18.55 during the nine months ended September 30, 2025.

NOTE 23 - SUBSEQUENT EVENTS

On October 20, 2025*,* we announced the Board of Directors had declared a common stock cash dividend of $0.16 per share, payable on

November 12, 2025

to common shareholders of record as of October 31, 2025*.*

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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.

The following factors, among others, could cause our financial performance to differ materially from that expressed in such forward-looking statements:

● the effectiveness of the Company's internal control over financial reporting and disclosure controls and procedures;
● the potential for material weaknesses in the Company's internal controls over financial reporting or other potential control deficiencies of which the Company is not currently aware or which have not been detected;
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● business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic markets, including the tight labor market, ineffective management of the United States (“U.S.”) federal budget or debt or turbulence or uncertainly in domestic or foreign financial markets;
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● the strength of the U.S. economy in general and the strength of the local economies in which we conduct operations;
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● adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity and regulatory responses to these developments;
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● federal government shutdowns and uncertainty regarding the federal government's debt limit;
● possible additional provisions for credit losses and charge-offs;
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● credit risks of lending activities and deterioration in asset or credit quality;
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● extensive laws and regulations and supervision that we are subject to, including potential supervisory action by bank supervisory authorities;
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● compliance with the Bank Secrecy Act and other money laundering statutes and regulations;
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● potential goodwill impairment;
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● liquidity risk;
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● fluctuations in interest rates;
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● failure to comply with debt covenants;
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● risks associated with acquisitions and the expansion of our business into new markets;
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● inflation and deflation;
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● real estate market conditions and the value of real estate collateral;
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● the effects of having concentrations in our loan portfolio, including commercial real estate and the risks of geographic and industry concentrations;
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● environmental liabilities;
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● our ability to compete with larger competitors;
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● our ability to retain key personnel;
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● successful management of reputational risk;
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● severe weather, natural disasters, earthquakes, fires, including direct and indirect costs and impacts on clients, the Company and its employees from the January 2025 Los Angeles county wildfires;
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● geopolitical conditions, including acts or threats of terrorism, actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, including the war between Russia and Ukraine, conflict in the Middle East, and increasing tensions between China and Taiwan, which could impact business and economic conditions in the U.S. and abroad;
● tariffs, trade policies, and related tensions, which could impact our clients, specific industry sectors, and/or broader economic conditions and financial market;
● public health crises and pandemics, and their effects on the economic and business environments in which we operate, including our credit quality and business operations, as well as the impact on general economic and financial market conditions
● general economic or business conditions in Asia, and other regions where the Bank has operations;
● failures, interruptions, or security breaches of our information systems;
● climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs;
● cybersecurity threats and the cost of defending against them;
● our ability to adapt our systems to the expanding use of technology in banking;
● risk management processes and strategies;
● the impact of regulatory enforcement actions, if any;
● certain provisions in our charter and bylaws that may affect acquisition of the Company;
● changes in tax laws and regulations;
● the impact of governmental efforts to restructure the U.S. financial regulatory system and increased costs of compliance and other risks associated with changes in regulation, including any amendments to the Dodd-Frank Wall Street Reform and Consumer Protection Act;
● the impact of changes in the Federal Deposit Insurance Corporation (“FDIC”) insurance assessment rate and the rules and regulations related to the calculation of the FDIC insurance assessments;
● the effect of changes in accounting policies and practices or accounting standards, as may be adopted from time-to-time by bank regulatory agencies, the U.S. Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board (“FASB”) or other accounting standards setters;
● fluctuations in our stock price;
● restrictions on dividends and other distributions by laws and regulations and by our regulators and our capital structure;
● our ability to raise additional capital, if needed, and the potential resulting dilution of interests of holders of our common stock;
● the soundness of other financial institutions and our ongoing relations with our various federal and state regulators, including the SEC, FDIC, FRB, California Department of Financial Protection and Innovation and Consumer Financial Protection Bureau; and
● our success at managing the risks involved in the foregoing items.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

CRITICAL ACCOUNTING POLICIES

Management has established various accounting policies that govern the application of generally accepted accounting principles in the U.S. (“GAAP”) in the preparation of our financial statements. Certain accounting policies require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions. The Company’s critical accounting policies consist of the allowance for credit losses on loans held for investment, goodwill and income taxes. Please see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024 (our "2024 Annual Report") for additional discussion concerning these critical accounting policies. Also, our significant accounting policies are described in greater detail in Note 2 – Basis of Presentation and Summary of Significant Accounting Policies to the audited consolidated financial statements included in our 2024 Annual Report and the consolidated financial statements in this Form 10-Q, and are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Allowance for Credit Losses (ACL)

A sensitivity analysis of our ACL was performed as of September 30, 2025. Based on this sensitivity analysis, a 25% increase in the assumed prepayment speed on loans would result in a $903,000, or 2.01%, decrease to the ACL. A 25% decrease in the assumed prepayment speed on loans would result in a $1.1 million, or 2.52%, increase to the ACL. Additionally, a one percentage point increase in the unemployment rate would result in a $1.0 million, or 2.27%, increase to the ACL and a one percentage point decrease in the unemployment rate would result in a $942,000, or 2.10%, 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.

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 23.78%, as of September 30, 2025. Under the Major Stress scenario, the ACL would increase by $30.6 million, or 68.18%, as of September 30, 2025. 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.

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For additional information on the policies, methodologies and judgments used to determine the ACL, see Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies in our 2024 Annual Report and Note 4 — Loans and Allowance for Credit Losses in the consolidated financial statements in this Form 10-Q.

GENERAL

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 RBB Asset Management Company (“RAM”). RAM was formed to hold and manage problem assets acquired in business combinations. At September 30, 2025, we had total assets of $4.2 billion, gross loans held for investment ("HFI") of $3.3 billion, total deposits of $3.4 billion and total shareholders' equity of $514.3 million. RBB’s common stock trades on the Nasdaq Global Select Market under the symbol “RBB.”

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, in the Las Vegas (Nevada), the New York City metropolitan areas, Chicago (Illinois), Edison (New Jersey) and Honolulu (Hawaii). 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.

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. The MDI designation has been historically beneficial to us, and we continue to use the program for technical assistance.

We operate full-service banking offices in Arcadia, Cerritos, Diamond Bar, Irvine, Los Angeles, Monterey Park, Oxnard, Rowland Heights, San Gabriel, Silver Lake, Torrance, and Westlake Village, California; Las Vegas, Nevada; Manhattan, Brooklyn, Flushing and Elmhurst, New York; the Chinatown and Bridgeport neighborhoods of Chicago, Illinois; Edison, New Jersey; and Honolulu, Hawaii. Our primary source of revenue is providing loans to customers, who are predominately small and middle-market businesses and individuals.

OVERVIEW

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.

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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."

ANALYSIS OF RESULTS OF OPERATIONS

Financial Performance

Three Months Ended Nine Months Ended
September 30, 2025 June 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
(dollars in thousands, except per share data) ****
Interest and dividend income $ 57,392 $ 54,205 $ 54,425 $ 163,933 $ 162,106
Interest expense 28,115 26,871 29,880 81,159 88,719
Net interest income 29,277 27,334 24,545 82,774 73,387
Provision for credit losses 625 2,387 3,300 9,758 3,857
Net interest income after provision for credit losses 28,652 24,947 21,245 73,016 69,530
Noninterest income 3,293 8,478 5,746 14,066 12,606
Noninterest expense 18,683 20,493 17,421 57,698 51,514
Income before income taxes 13,262 12,932 9,570 29,384 30,622
Income tax expense 3,114 3,599 2,571 7,613 8,342
Net income $ 10,148 $ 9,333 $ 6,999 $ 21,771 $ 22,280
Share Data **** **** **** **** ****
Earnings per common share ^(1)^:
Basic $ 0.59 $ 0.53 $ 0.39 $ 1.24 $ 1.22
Diluted 0.59 0.52 0.39 1.24 1.22
Performance Ratios **** **** **** **** ****
Return on average assets, annualized 0.97 % 0.93 % 0.72 % 0.72 % 0.76 %
Return on average shareholders’ equity, annualized 7.85 % 7.29 % 5.47 % 5.67 % 5.82 %
Return on average tangible common equity, annualized ^(2)^ 9.16 % 8.50 % 6.40 % 6.62 % 6.81 %
Efficiency ratio ^(3)^ 57.36 % 57.22 % 57.51 % 59.58 % 59.90 %
Tangible common equity to tangible assets ^(2)^ 10.67 % 11.07 % 11.13 % 10.67 % 11.13 %
Tangible book value per share ^(2)^ $ 25.89 $ 25.11 $ 24.64 $ 25.89 $ 24.64
(1) 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.
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(2) Return on average tangible common equity, tangible common equity to tangible assets and tangible book value per share are non-GAAP financial measures. See "Non-GAAP Financial Measures" for a reconciliation of these measures to their most comparable GAAP measures.
(3) Ratio calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income.

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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. 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 2025 and 2024. 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.
June 30, 2025 September 30, 2024
Interest Yield / Average Interest Yield / Average Interest Yield /
& Fees Rate Balance & Fees Rate Balance & Fees Rate
****
Interest-earning assets: **** **** ****
Cash and cash equivalents (1) 202,317 $ 2,379 4.67 % $ 163,838 $ 1,980 4.85 % $ 260,205 3,646 5.57 %
FHLB Stock 15,000 327 8.65 % 15,000 324 8.66 % 15,000 326 8.65 %
Securities (2)
Available for sale 429,936 4,579 4.23 % 399,414 4,189 4.21 % 298,948 3,105 4.13 %
Held to maturity 4,186 38 3.60 % 5,028 48 3.83 % 5,198 46 3.52 %
Total loans (3) 3,245,193 50,094 6.12 % 3,171,570 47,687 6.03 % 3,069,578 47,326 6.13 %
Total interest-earning assets (2) 3,896,632 $ 57,417 5.85 % 3,754,850 $ 54,228 5.79 % 3,648,929 $ 54,449 5.94 %
Noninterest-earning assets 255,052 254,029 242,059
Total assets 4,151,684 $ 4,008,879 $ 3,890,988
Interest-bearing liabilities: **** **** ****
NOW 69,800 $ 406 2.31 % $ 66,755 $ 368 2.21 % $ 55,757 $ 277 1.98 %
Money market 491,561 3,861 3.12 % 482,669 3,774 3.14 % 439,936 4,093 3.70 %
Saving deposits 138,344 407 1.17 % 141,411 425 1.21 % 164,515 823 1.99 %
Time deposits, less than 250,000 1,050,682 10,312 3.89 % 996,249 9,768 3.93 % 1,037,365 12,312 4.72 %
Time deposits, 250,000 and over 960,094 9,840 4.07 % 922,540 9,482 4.12 % 819,207 10,241 4.97 %
Total interest-bearing deposits 2,710,481 24,826 3.63 % 2,609,624 23,817 3.66 % 2,516,780 27,746 4.39 %
FHLB advances 185,217 1,654 3.54 % 159,286 1,420 3.58 % 150,543 453 1.20 %
Long-term debt 119,752 1,295 4.29 % 119,657 1,296 4.34 % 119,370 1,295 4.32 %
Subordinated debentures 15,284 340 8.83 % 15,230 338 8.90 % 15,066 386 10.19 %
Total interest-bearing liabilities 3,030,734 28,115 3.68 % 2,903,797 26,871 3.71 % 2,801,759 29,880 4.24 %
Noninterest-bearing liabilities
Noninterest-bearing deposits 541,083 526,113 528,081
Other noninterest-bearing liabilities 66,990 65,278 52,428
Total noninterest-bearing liabilities 608,073 591,391 580,509
Shareholders' equity 512,874 513,691 508,720
Total liabilities and shareholders' equity 4,151,681 $ 4,008,879 $ 3,890,988
Net interest income/interest rate spreads(2) $ 29,302 2.17 % $ 27,357 2.08 % $ 24,569 1.70 %
Net interest margin 2.98 % 2.92 % 2.68 %
Total cost of deposits 3,251,564 $ 24,826 3.03 % $ 3,135,737 $ 23,817 3.05 % $ 3,044,861 $ 27,746 3.63 %
Total cost of funds 3,571,817 $ 28,115 3.12 % $ 3,429,910 $ 26,871 3.14 % $ 3,329,840 $ 29,880 3.57 %

All values are in US Dollars.

(1) Includes income and average balances for interest-earning time deposits and other miscellaneous interest-earning assets.
(2) Interest income and average rates for tax-exempt securities are presented on a tax-equivalent basis.
(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.

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2024
Interest Yield / Average Interest Yield /
& Fees Rate Balance & Fees Rate
Interest-earning assets: **** ****
Cash and cash equivalents (1) 186,827 $ 6,609 4.73 % $ 293,597 $ 12,560 5.71 %
FHLB Stock 15,000 981 8.74 % 15,000 984 8.76 %
Securities: (2)
Available for sale 406,655 12,880 4.23 % 312,352 10,302 4.41 %
Held to maturity 4,797 135 3.76 % 5,203 140 3.59 %
Total loans (3) 3,165,937 143,401 6.06 % 3,035,143 138,193 6.08 %
Total interest-earning assets (2) 3,779,216 $ 164,006 5.80 % 3,661,295 $ 162,179 5.92 %
Total noninterest-earning assets 256,509 242,802
Total average assets 4,035,725 $ 3,904,097
Interest-bearing liabilities: **** ****
NOW 65,957 $ 1,096 2.22 % $ 56,924 $ 851 2.00 %
Money market 479,328 11,260 3.14 % 427,884 11,496 3.59 %
Savings deposits 144,895 1,354 1.25 % 162,207 2,277 1.88 %
Time deposits, 250,000 and under 1,012,408 30,126 3.98 % 1,087,501 38,476 4.73 %
Time deposits, greater than 250,000 916,162 28,360 4.14 % 792,310 29,249 4.93 %
Total interest-bearing deposits 2,618,750 72,196 3.69 % 2,526,826 82,349 4.35 %
FHLB advances 173,810 4,063 3.13 % 150,182 1,331 1.18 %
Long-term debt 119,658 3,886 4.34 % 119,276 3,886 4.35 %
Subordinated debentures 15,230 1,014 8.90 % 15,012 1,153 10.26 %
Total interest-bearing liabilities 2,927,448 81,159 3.71 % 2,811,296 88,719 4.22 %
Noninterest-bearing liabilities
Noninterest-bearing deposits 529,190 528,624
Other noninterest-bearing liabilities 66,142 52,955
Total noninterest-bearing liabilities 595,332 581,579
Shareholders' equity 512,945 511,222
Total liabilities and shareholders' equity 4,035,725 $ 3,904,097
Net interest income/interest rate spreads(2) $ 82,847 2.09 % $ 73,460 1.70 %
Net interest margin 2.93 % 2.68 %
Total cost of deposits 3,147,940 $ 72,196 3.07 % $ 3,055,450 $ 82,349 3.60 %
Total cost of funds 3,456,638 $ 81,159 3.14 % $ 3,339,920 $ 88,719 3.55 %

All values are in US Dollars.

(1) Includes income and average balances for interest-earning time deposits and other miscellaneous interest-earning assets.
(2) Interest income and average rates for tax-exempt securities are presented on a tax-equivalent basis.
(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.

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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.

Three Months Ended September 30, 2025 compared with Three Months Ended September 30, 2024 Nine Months Ended September 30, 2025 compared with Nine Months Ended September 30, 2024
**** Change due to: **** Change due to: ****
Yield/Rate Interest Variance Volume Yield/Rate Interest Variance Volume Yield/Rate Interest Variance
Interest-earning assets: ****
Cash and cash equivalents (1) 943 $ (544 ) $ 399 $ (810 ) $ (457 ) $ (1,267 ) $ (4,577 ) $ (1,374 ) $ (5,951 )
FHLB Stock — 3 3 — 1 1 — (3 ) (3 )
Securities: (2)
Available for sale 366 24 390 1,371 103 1,474 3,437 (859 ) 2,578
Held to maturity (8 ) (2 ) (10 ) (13 ) 5 (8 ) (14 ) 9 (5 )
Total loans (3) 1,452 955 2,407 3,318 (550 ) 2,768 5,997 (789 ) 5,208
Total interest-earning assets (2) 2,753 $ 436 $ 3,189 $ 3,866 $ (898 ) $ 2,968 $ 4,843 $ (3,016 ) $ 1,827
Interest-bearing liabilities **** **** **** **** **** **** **** **** ****
NOW 19 $ 19 $ 38 $ 71 $ 58 $ 129 $ 136 $ 109 $ 245
Money market 209 (122 ) 87 2,194 (2,426 ) (232 ) 1,881 (2,117 ) (236 )
Saving deposits (7 ) (11 ) (18 ) (131 ) (285 ) (416 ) (242 ) (681 ) (923 )
Time deposits, less than 250,000 1,157 (613 ) 544 1,039 (3,039 ) (2,000 ) (2,661 ) (5,689 ) (8,350 )
Time deposits, 250,000 and over 1,006 (648 ) 358 7,556 (7,957 ) (401 ) 6,217 (7,106 ) (889 )
Total interest-bearing deposits 2,384 (1,375 ) 1,009 10,729 (13,649 ) (2,920 ) 5,331 (15,484 ) (10,153 )
FHLB advances 354 (120 ) 234 111 1,090 1,201 208 2,524 2,732
Long-term debt 7 (8 ) (1 ) 23 (23 ) — 14 (14 ) -
Subordinated debentures 7 (5 ) 2 35 (81 ) (46 ) 26 (165 ) (139 )
Total interest-bearing liabilities 2,752 (1,508 ) 1,244 10,898 (12,663 ) (1,765 ) 5,579 (13,139 ) (7,560 )
Changes in net interest income (2) 1 $ 1,944 $ 1,945 $ (7,032 ) $ 11,765 $ 4,733 $ (736 ) $ 10,123 $ 9,387

All values are in US Dollars.

(1) Includes income and average balances for interest-earning time deposits and other miscellaneous interest-earning assets.
(2) Interest income and average rates for tax-exempt securities are presented on a tax-equivalent basis.
(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

Three Months Ended September 30, 2025 Compared to Three Months Ended June 30, 2025

Net interest income increased $1.9 million to $29.3 million for the third quarter of 2025, compared to $27.3 million for the second quarter of 2025. The $1.9 million increase was due to a $3.2 million increase in interest income, offset by a $1.2 million increase in interest expense. The increase in interest income was mostly due to a $2.4 million increase in interest and fees on loans. The increase in interest expense was due to a $1.0 million increase in interest on deposits and a $235,000 increase in interest on borrowings.

The net interest margin ("NIM") was 2.98% for the third quarter of 2025, an increase of 6 basis points from 2.92% for the second quarter of 2025. The NIM expansion included a 6 basis point increase in the yield on average interest-earning assets, combined with a 2 basis point decrease in the overall cost of funds. The yield on average interest-earning assets increased to 5.85% for the third quarter of 2025 from 5.79% for the second quarter of 2025 driven by a 9 basis point increase in the yield on average loans to 6.12%. Average loans represented 83% of average interest-earning assets in the third quarter of 2025, as compared to 84% in the second quarter of 2025.

The average cost of funds decreased to 3.12% for the third quarter of 2025 from 3.14% for the second quarter of 2025, due to a 3 basis point decrease in the average cost of interest-bearing deposits and a 9 basis point decrease in the average cost of total borrowings. The average cost of interest-bearing deposits decreased to 3.63% for the third quarter of 2025 from 3.66% for the second quarter of 2025. The overall funding mix for the third quarter of 2025 remained relatively unchanged from the second quarter of 2025 with average interest-bearing deposits representing 89% of average interest-bearing liabilities and average noninterest-bearing deposits representing 17% of average total deposits. The spot rate for total deposits was 2.97% at September 30, 2025.

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Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

Net interest income increased $4.7 million to $29.3 million for the third quarter of 2025, compared to $24.5 million for the third quarter of 2024. The increase in net interest income was due to an increase in interest income of $3.0 million, combined with a $1.8 million decrease in interest expense. The increase in interest income was primarily due to average interest-earning asset growth of $247.7 million, or 6.8%, as compared to the same quarter in 2024. The growth in average interest-earning assets included higher average total loans and securities available for sale, offset partially by a decrease in average 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 2024. The decrease in interest expense was driven largely by lower rates paid on interest-bearing deposits, partially offset by an increase in the average balance of those interest-bearing deposits.

The $3.0 million increase in interest income was due mainly to a $2.8 million increase in interest income from average total loans, of which $3.3 million was attributed to higher average balances, offset by a $550,000 decrease due to lower rates. Average total loans were $3.2 billion for the quarter ended September 30, 2025, an increase of $175.6 million from the third quarter of 2024 due to strong loan growth in 2025. The yield on average total loans declined 1 basis point to 6.12% for the quarter ended September 30, 2025 compared to 6.13% for the quarter ended September 30, 2024.

The $1.8 million decrease in interest expense was due mainly to a $2.9 million decrease in interest expense on deposits, partially offset by higher interest expense on FHLB advances of $1.2 million. The decrease in interest expense on deposits was primarily due to a 76 basis point decrease in the rates paid on average interest-bearing deposits, partially offset by the impact of a $193.7 million increase in the average balance of interest-bearing deposits. Interest expense on FHLB advances increased due mainly to a 234 basis point increase in the average rate paid on FHLB advances as $150 million of fixed rate term advances matured during the first quarter of 2025 and were replaced in the current rate environment.

The NIM was 2.98% for the third quarter of 2025, an increase of 30 basis points from 2.68% for the third quarter of 2024. The increase was primarily due to a 45 basis point decrease in the total cost of funds to 3.12%, partially offset by a 9 basis point decrease in the yield on average interest-earning assets to 5.85% for the third quarter of 2025 from 5.94% for the third quarter of 2024. The decrease in the yield on average interest-earning assets was due mainly to lower market rates. 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 FHLB advances. Average noninterest-bearing deposits totaled $541.1 million, or 17% of total average deposits, for the third quarter of 2025 compared to $528.1 million, or 17% of total average deposits, for the third quarter of 2024.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Net interest income increased $9.4 million to $82.8 million for the nine months ended September 30, 2025, compared to $73.4 million for the nine months ended September 30, 2024. The increase in net interest income was due to a decrease in interest expense of $7.6 million, combined with an increase in interest income of $1.8 million. The decrease in interest expense was primarily due to lower average rates paid on interest-bearing deposits, partially offset by higher average balances of such deposits and an increase in the average rates paid on FHLB advances.

Interest expense on deposits decreased $10.2 million to $72.2 million for the nine months ended September 30, 2025 compared to $82.3 million for the nine months ended September 30, 2024. The decrease in interest expense on deposits was primarily due to a decrease in the average rates paid on interest-bearing deposits to 3.69% for the nine months ended September 30, 2025 compared to 4.35% for the nine months ended September 30, 2024. 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 $91.9 million to $2.6 billion for the nine months ended September 30, 2025. Average noninterest-bearing deposits totaled $529.2 million, or 17% of total average deposits, for the first nine months of 2025, which is approximately the same as 2024.

Partially offsetting the decrease in interest expense on deposits was an increase in interest expense on FHLB advances of $2.7 million for the first nine months of 2025. The increase was mostly due to $150 million in term advances costing 1.18% that matured in the first quarter of 2025 and were replaced at current market rates. The average cost of FHLB advances was 3.13% for the nine months ended September 30, 2025 compared to 1.18% for the nine months ended September 30, 2024. Interest expense on FHLB advances was also impacted by a $23.6 million increase in the average outstanding balance.

The $1.8 million increase in interest income was primarily due to an increase in the average balance of loans and securities available for sale, partially offset by a decrease in market rates and lower average cash and cash equivalents. Interest and fees on total loans increased $5.2 million for the nine months ended September 30, 2025 primarily due to a $130.8 million increase in the average balance of total loans from strong loan growth in 2025. The yield on loans decreased 2 basis points to 6.06% for the nine months ended September 30, 2025 from 6.08% for the same period in 2024. Interest income on available for sale securities increased $2.6 million during the nine months ended September 30, 2025 primarily due to an increase of $94.3 million in average portfolio balances, offset partially by lower market rates. Interest income from cash and cash equivalents decreased by $6.0 million for the nine months ended September 30, 2025, compared to the same period in 2024 due to lower average balances of $106.8 million, as cash was used to fund loan growth, combined with a 98 basis point decrease in the yield on cash and cash equivalents to 4.73% for the nine months ended September 30, 2025 from 5.71% for the nine months ended September 30, 2024.

The NIM was 2.93% for the nine months ended September 30, 2025, an increase of 25 basis points from 2.68% for the nine months ended September 30, 2024. The increase was primarily due to a 41 basis point decrease in the average cost of funds, including a 53 basis point decrease in the cost of average deposits, partially offset by a 12 basis point decrease in the yield on average interest-earning assets.

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Provision for Credit Losses

Three Months Ended September 30, 2025 Compared to Three Months Ended June 30, 2025

The provision for credit losses was $625,000 for the third quarter of 2025 compared to $2.4 million for the second quarter of 2025. The third quarter of 2025 provision for credit losses reflected a provision for loan losses of $750,000 due mainly to net loan growth and a reversal of provision for unfunded commitments of $125,000 due to a lower volume of unfunded commitments. The third quarter provision also took into consideration factors such as changes in the outlook for economic conditions and market interest rates, and changes in credit quality metrics, including decreases in nonperforming, classified, criticized, and loans 30-89 days past due during the period. Net charge-offs totaled $6.9 million in the third quarter and related almost entirely to a commercial construction loan, of which $6.6 million of this credit loss was reserved for in prior periods, and the borrower filed for bankruptcy this quarter. Net charge-offs on an annualized basis represented 0.84% of average loans for the third quarter of 2025 compared to 0.42% for the second quarter of 2025.

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

The provision for credit losses was $625,000 for the third quarter of 2025 compared to a $3.3 million provision for the third quarter of 2024. The third quarter of 2025 provision was primarily due to loan growth, as previously described, and we saw a reduction in nonperforming, classified, criticized and delinquent loans during the current quarter. The third quarter of 2024 provision for credit losses included an increase in nonperforming, classified, and criticized loans at that date. Net loan charge-offs of $6.9 million for the third quarter of 2025, as previously described, were higher than $1.2 million for the same quarter last year.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

The provision for credit losses was $9.8 million for the nine months ended September 30, 2025 compared to a $3.9 million provision for the nine months ended September 30, 2024. The provision for the first nine months of 2025 was $5.9 million higher than the same period in 2024 primarily due to increases in net charge-offs, partially offset by the impact of a decline in nonperforming, classified, and criticized loans as of September 30, 2025. There were $12.8 million in net loan charge-offs for the nine months ended September 30, 2025, as compared to $1.9 million in net loan charge-offs for the nine months ended September 30, 2024. The 2025 charge-offs included $6.8 million of credit loss that was reserved for in prior periods.

Noninterest Income

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

Three Months Ended Nine Months Ended
September 30, 2025 June 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
Noninterest income: (dollars in thousands)
Service charges and fees $ 1,099 $ 1,060 $ 1,071 $ 3,176 $ 3,127
Gain on sale of loans 260 358 447 699 1,210
Loan servicing income, net of amortization 564 541 605 1,693 1,773
Increase in cash surrender value of life insurance 427 411 403 1,241 1,170
Gain on OREO — — — — 1,016
Other income 943 6,108 3,220 7,257 4,310
Total noninterest income $ 3,293 $ 8,478 $ 5,746 $ 14,066 $ 12,606

Three Months Ended September 30, 2025 Compared to Three Months Ended June 30, 2025

Noninterest income for the third quarter of 2025 was $3.3 million, a decrease of $5.2 million from $8.5 million for the second quarter of 2025. The decrease was mostly due to the second quarter of 2025 including other income of $5.2 million for the receipt of ERC funds from the Internal Revenue Service. There were no such ERC amounts received or associated advisory costs recognized during the third quarter of 2025. In addition, other income increased $148,000 due to higher equity investment income of $498,000, offset by lower recoveries on fully charged-off acquired loans of $350,000.

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

Noninterest income decreased $2.5 million to $3.3 million for the third quarter of 2025 from $5.8 million for the same quarter in the prior year. The decrease in noninterest income primarily relates to a $2.8 million recovery of a fully charged-off loan, which had been acquired in a bank acquisition, that was recognized in other income during the third quarter of 2024.

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Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Noninterest income increased $1.5 million to $14.1 million for the nine months ended September 30, 2025, compared to $12.6 million for the same period in the prior year. The increase was mainly due to the increase in other income from ERC funds of $5.2 million recognized in the second quarter of 2025 with no similar income in 2024, offset by lower recoveries of fully charged-off loans of $2.4 million. We recognized recoveries of fully charged-off loans, which had been acquired in bank acquisitions, of $360,000 and $2.8 million for the nine months ended September 30, 2025 and 2024. The increase in other income was partially offset by a decrease in OREO-related gains of $1.0 million and gain on sale of loans of $511,000 for the nine months ended September 30, 2025 compared to the same 2024 period.

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

Three Months Ended Nine Months Ended
September 30, 2025 June 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
Loans sold: (dollars in thousands)
Single-family residential mortgage^(1)^ $ 14,278 $ 12,080 $ 19,629 $ 37,509 $ 38,867
SBA 1,896 2,281 2,115 7,920 9,774
Other ^(2)^ — — — 4,579 —
$ 16,174 $ 14,361 $ 21,744 $ 50,008 $ 48,641
Gain (loss) on sale of loans:
Single-family residential mortgage $ 174 $ 260 $ 357 $ 441 $ 634
SBA 86 98 90 341 576
Other ^(2)^ — — — (83 ) —
$ 260 $ 358 $ 447 $ 699 $ 1,210
(1) SFR mortgage loans sold with servicing rights retained were $3.4 million, $1.8 million, and $4.7 million for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024. SFR mortgage loans sold with servicing rights retained were $5.5 million and $15.3 million for the nine months ended September 30, 2025 and 2024.
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(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:

Three Months Ended Nine Months Ended
September 30, 2025 June 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
Loan servicing income, net of amortization: (dollars in thousands)
Single-family residential loans $ 369 $ 379 $ 441 $ 1,163 $ 1,296
SBA loans 195 162 164 530 477
Total $ 564 $ 541 $ 605 $ 1,693 $ 1,773

As of September 30, 2025, 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:

As of September 30, 2025 Compared to
September 30, 2025 June 30, 2025 September 30, 2024 June 30, 2025 September 30, 2024
Loans serviced: (dollars in thousands)
Single-family residential loans $ 850,189 $ 877,300 $ 955,134 $ (27,111 ) $ (104,945 )
SBA loans 88,166 91,866 96,756 (3,700 ) (8,590 )
Commercial real estate loans 2,429 2,438 3,774 (9 ) (1,345 )
Construction loans 8,772 8,276 6,378 496 2,394
Total $ 949,556 $ 979,880 $ 1,062,042 $ (30,324 ) $ (112,486 )

Noninterest Expense

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

Three Months Ended Nine Months Ended
September 30, 2025 June 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
Noninterest expense: (dollars in thousands)
Salaries and employee benefits $ 10,600 $ 11,080 $ 10,008 $ 32,323 $ 29,468
Occupancy and equipment expenses 2,425 2,377 2,518 7,209 7,400
Data processing 1,805 1,713 1,472 5,120 4,358
Legal and professional 1,450 2,904 958 5,869 3,098
Office expenses 444 405 348 1,257 1,056
Marketing and business promotion 252 212 252 661 613
Insurance and regulatory assessments 732 709 658 2,171 2,621
Core deposit intangible 172 172 200 516 602
Other expenses 803 921 1,007 2,572 2,298
Total noninterest expense $ 18,683 $ 20,493 $ 17,421 $ 57,698 $ 51,514

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Three Months Ended September 30, 2025 Compared to Three Months Ended June 30, 2025

Noninterest expense for the third quarter of 2025 was $18.7 million, a decrease of $1.8 million from $20.5 million for the second quarter of 2025. The decrease was mainly due to lower legal and professional expense of $1.5 million, including $1.2 million of ERC advisory costs incurred in the second quarter of 2025. Salaries and employee benefits expense also decreased by $480,000, of which $330,000 related to executive management transitions recognized in the prior quarter. The efficiency ratio was 57.36% for the third quarter of 2025, compared to 57.22% for the second quarter of 2025.

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

Noninterest expense for the third quarter of 2025 was $18.7 million, an increase of $1.3 million compared to $17.4 million for the third quarter of 2024, mainly due to increases in salaries and employee benefits and legal and professional expenses. The increase in salaries and employee benefits expense of $592,000 was due in part to higher incentives related to sustained production levels, one-time costs related to executive management transitions, and the impact of annual pay increases. The increase in legal and professional expense of $492,000 was primarily attributable to elevated legal costs related to credit, operations, and other corporate governance. The efficiency ratio was 57.36% for the third quarter of 2025 and 57.51% for the third quarter of 2024.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Noninterest expense for the nine months ended September 30, 2025 was $57.7 million, an increase of $6.2 million from $51.5 million for the nine months ended September 30, 2024. The increase in noninterest expense was primarily due to increases in salaries and employee benefits expense of $2.9 million, legal and professional fees of $2.8 million, and data processing expenses of $762,000. The increase in salaries and employee benefits expense was due in part to staffing and incentives supporting higher production levels, one-time costs related to executive management transitions, and the impact of annual pay increases. The increase in legal and professional fees 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. These increases were partially offset by a decrease of $450,000 in insurance and regulatory assessments. The efficiency ratio was 59.58% for the nine months ended September 30, 2025, down from 59.90% for the nine months ended September 30, 2024.

Income Tax Expense

We recorded an income tax provision of $3.1 million, $3.6 million, and $2.6 million, reflecting an effective tax rate of 23.5%, 27.8%, and 26.9% for the three months ended September 30, 2025, June 30, 2025, and September 30, 2024. We recorded an income tax provision of $7.6 million and $8.3 million, reflecting an effective tax rate of 25.9% and 27.2%, for the nine months ended September 30, 2025 and 2024. The effective tax rate is lower than the statutory rate for the 2025 reporting periods due in part to the realization of purchased Federal tax credits and a change in California tax law during the second quarter of 2025, which changes the way banks and financial institutions apportion income for California tax law purposes. The second quarter of 2025 income tax provision included a discrete charge of $379,000 resulting from this change in California tax law during the period. The effective tax rate is lower than the statutory rate for the 2024 reporting periods due in part to the realization of purchased Federal tax credits. The annual effective tax rate for fiscal 2025 is estimated to be in the range of 26% to 27%.

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ANALYSIS OF FINANCIAL CONDITION

Total Assets. At September 30, 2025, total assets were $4.2 billion, an increase of $216.0 million, from total assets of $4.0 billion  at December 31, 2024, including a $249.3 million increase in gross loans HFI, partially offset by a $22.8 million decrease in cash and cash equivalents.

Cash and Cash Equivalents. Cash and cash equivalents decreased $22.8 million, or 8.9%, to $234.9 million as of September 30, 2025 as compared to $257.7 million at December 31, 2024. This decrease in cash and cash equivalents was comprised of $244.4 million used in net investing activities, including a net increase in loans of $305.6 million, offset by a net decrease in AFS securities of $20.2 million and proceeds from loan and OREO sales of $42.6 million; $31.5 million provided by cash from operating activities; and $190.0 million provided by financing activities, with deposit growth of $282.6 million offset by a net decrease in FHLB advances of $70.0 million.

Investment Securities. We manage our securities portfolio and cash to maintain adequate liquidity and to ensure the safety and preservation of invested principal, with a secondary focus on yield and returns. Specific goals of our investment portfolio include:

● providing a ready source of balance sheet liquidity to ensure adequate availability of funds to meet fluctuations in loan demand, deposit balances and other changes in balance sheet volumes and composition;
● serving as a means for diversification of our assets with respect to credit quality, maturity and other attributes; and
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● serving as a tool for modifying our interest rate risk profile pursuant to our established policies.
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Our investment portfolio is comprised primarily of U.S. government agency securities, corporate note securities, mortgage-backed securities backed by government-sponsored entities and taxable and tax-exempt municipal securities.

Our investment policy is reviewed annually by our board of directors. Overall investment goals are established by our board of directors, Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and members of our Asset Liability Committee (“ALCO”) of our board of directors. Our board of directors has delegated the responsibility of monitoring our investment activities to our ALCO. Day-to-day activities pertaining to the securities portfolio are conducted under the supervision of our CEO and CFO. We actively monitor our investments on an ongoing basis to identify any material changes in the securities. We monitor our securities portfolio to ensure it has adequate credit support and consider the lowest credit rating for identification of potential credit impairment.

The following table presents the book value of each category of securities and the percentage each category represents of total of securities as of the dates indicated. The book value for debt securities classified as AFS is reflected at fair market value and the book value for securities classified as HTM is reflected at amortized cost.

September 30, 2025 December 31, 2024
Amount % of Total Amount % of Total
Securities, available for sale, at fair value (dollars in thousands)
Government agency securities $ 23,038 5.6 % $ 21,042 4.9 %
SBA agency securities 23,045 5.6 % 26,764 6.3 %
Mortgage-backed securities: residential 85,033 20.5 % 55,677 13.1 %
Collateralized mortgage obligations: residential 98,291 23.7 % 105,476 24.8 %
Collateralized mortgage obligations: commercial 117,866 28.4 % 91,656 21.5 %
Commercial paper 24,942 6.0 % 78,685 18.5 %
Corporate debt securities ^(1)^ 29,210 7.0 % 31,815 7.5 %
Municipal tax-exempt securities 9,206 2.2 % 9,075 2.2 %
Total securities, available for sale, at fair value $ 410,631 99.0 % $ 420,190 98.8 %
Securities, held to maturity, at amortized cost
Municipal taxable securities $ — 0.0 % $ 500 0.1 %
Municipal tax-exempt securities 4,185 1.0 % 4,691 1.1 %
Total securities, held to maturity, at amortized cost 4,185 1.0 % 5,191 1.2 %
Total securities $ 414,816 100.0 % $ 425,381 100.0 %
(1) Comprised of corporate note securities and financial institution subordinated debentures.
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The tables below set forth investment debt securities AFS and HTM as of the dates indicated.

Amortized Gross Unrealized Gross Unrealized Fair
September 30, 2025 Cost Gains Losses Value
(dollars in thousands)
Available for sale
Government agency securities $ 23,249 $ 29 $ (240 ) $ 23,038
SBA agency securities 23,027 187 (169 ) 23,045
Mortgage-backed securities: residential 89,351 530 (4,848 ) 85,033
Collateralized mortgage obligations: residential 100,423 179 (2,311 ) 98,291
Collateralized mortgage obligations: commercial 126,413 679 (9,226 ) 117,866
Commercial paper 24,942 — — 24,942
Corporate debt securities 31,183 73 (2,046 ) 29,210
Municipal tax-exempt securities 12,576 — (3,370 ) 9,206
$ 431,164 $ 1,677 $ (22,210 ) $ 410,631
Held to maturity
Municipal tax-exempt securities $ 4,185 $ — $ (110 ) $ 4,075
$ 4,185 $ — $ (110 ) $ 4,075
December 31, 2024 ****
Available for sale
Government agency securities $ 21,592 $ — $ (550 ) $ 21,042
SBA agency securities 27,231 — (467 ) 26,764
Mortgage-backed securities: residential 62,351 — (6,674 ) 55,677
Collateralized mortgage obligations: residential 117,936 178 (12,638 ) 105,476
Collateralized mortgage obligations: commercial 94,284 175 (2,803 ) 91,656
Commercial paper 78,687 1 (3 ) 78,685
Corporate debt securities 34,733 43 (2,961 ) 31,815
Municipal tax-exempt securities 12,602 — (3,527 ) 9,075
$ 449,416 $ 397 $ (29,623 ) $ 420,190
Held to maturity
Municipal taxable securities $ 500 $ 1 $ — $ 501
Municipal tax-exempt securities 4,691 — (244 ) 4,447
$ 5,191 $ 1 $ (244 ) $ 4,948

The weighted-average life of the total investment portfolio at September 30, 2025 and December 31, 2024 was 5.0 years. 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.

The table below shows our investment securities’ fair value and weighted average yields by maturity in the following maturity groupings as of September 30, 2025. The fair value of the securities portfolio is shown by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

One Year or Less More than One Year to Five Years More than Five Years to Ten Years More than Ten Years Total
Fair Weighted Fair Weighted Fair Weighted Fair Weighted Fair Weighted
Value Average Yield Value Average Yield Value Average Yield Value Average Yield Value Average Yield
September 30, 2025 (dollars in thousands)
Government agency securities $ 65 2.15 % $ 13,128 4.29 % $ 9,845 4.61 % $ — — % $ 23,038 4.42 %
SBA agency securities — — % 6,717 4.43 % 16,328 5.29 % — — % 23,045 5.04 %
Mortgage-backed securities: residential — — % 28,301 3.99 % 56,732 3.61 % — — % 85,033 3.73 %
Collateralized mortgage obligations: residential 8,643 4.48 % 51,253 4.93 % 38,395 4.37 % — — % 98,291 4.67 %
Collateralized mortgage obligations: commercial 2,599 5.59 % 71,371 4.54 % 43,896 2.11 % — — % 117,866 3.56 %
Commercial paper 24,942 4.60 % — — % — — % — — % 24,942 4.60 %
Corporate debt securities 2,001 3.13 % 11,217 3.79 % 14,037 3.63 % 1,955 2.89 % 29,210 3.59 %
Municipal tax-exempt securities — — % — — % 898 1.53 % 8,308 2.11 % 9,206 2.06 %
Total available for sale $ 38,250 4.56 % $ 181,987 4.49 % $ 180,131 3.55 % $ 10,263 2.25 % $ 410,631 4.00 %
Municipal tax-exempt securities $ — — % $ 859 3.47 % $ 2,712 3.61 % $ 504 3.15 % $ 4,075 3.53 %
Total held to maturity $ — — % $ 859 3.47 % $ 2,712 3.61 % $ 504 3.15 % $ 4,075 3.53 %

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The table below shows our investment securities’ gross unrealized losses and estimated fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2025 and December 31, 2024. The unrealized losses on these securities were primarily attributed to changes in interest rates. There was no ACL on the AFS or HTM securities portfolios as of September 30, 2025 or December 31, 2024. We monitor our securities portfolio to ensure that all our investments have adequate credit support and we consider the lowest credit rating for identification of potential impairment. The issuers of these securities have not, to our knowledge, evidenced any cause for default on these securities. As of September 30, 2025, all our investment securities in an unrealized loss position received an investment grade credit rating. These securities have fluctuated in value since their purchase dates as market rates have also fluctuated. However, we have the ability and the intention to hold these securities until their fair values recover to cost or until their respective maturity dates. As such, management does not deem these securities to be impaired under the current expected credit loss model. A summary of our analysis of these securities and the unrealized losses is described more fully in "Note 3 — **** Investment Securities" of our audited consolidated financial statements included in our 2024 Annual Report. Economic trends may adversely affect the value of the portfolio of investment securities that we hold.

Less than Twelve Months Twelve Months or More Total
Unrealized Unrealized Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses
September 30, 2025 (dollars in thousands)
Government agency securities $ 10,821 $ (81 ) $ 2,371 $ (159 ) $ 13,192 $ (240 )
SBA agency securities 4,275 (53 ) 1,653 (116 ) 5,928 (169 )
Mortgage-backed securities: residential 26,026 (145 ) 28,247 (4,703 ) 54,273 (4,848 )
Collateralized mortgage obligations: residential 27,899 (177 ) 35,687 (2,134 ) 63,586 (2,311 )
Collateralized mortgage obligations: commercial 9,225 (5 ) 57,913 (9,221 ) 67,138 (9,226 )
Corporate debt securities — — 23,369 (2,046 ) 23,369 (2,046 )
Municipal tax-exempt securities — — 9,206 (3,370 ) 9,206 (3,370 )
Total available for sale $ 78,246 $ (461 ) $ 158,446 $ (21,749 ) $ 236,692 $ (22,210 )
Municipal tax-exempt securities $ — $ — $ 3,635 $ (110 ) $ 3,635 $ (110 )
Total held to maturity $ — $ — $ 3,635 $ (110 ) $ 3,635 $ (110 )
Less than Twelve Months Twelve Months or More Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Unrealized Unrealized Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses
December 31, 2024 (dollars in thousands)
Government agency securities $ 14,620 $ (219 ) $ 6,422 $ (331 ) $ 21,042 $ (550 )
SBA agency securities 24,971 (273 ) 1,793 (194 ) 26,764 (467 )
Mortgage-backed securities: residential 25,479 (578 ) 30,198 (6,096 ) 55,677 (6,674 )
Collateralized mortgage obligations: residential 36,166 (649 ) 55,255 (11,989 ) 91,421 (12,638 )
Collateralized mortgage obligations: commercial 35,753 (367 ) 30,114 (2,436 ) 65,867 (2,803 )
Commercial paper 48,874 (3 ) — — 48,874 (3 )
Corporate debt securities — — 26,035 (2,961 ) 26,035 (2,961 )
Municipal tax-exempt securities — — 9,075 (3,527 ) 9,075 (3,527 )
Total available for sale $ 185,863 $ (2,089 ) $ 158,892 $ (27,534 ) $ 344,755 $ (29,623 )
Municipal tax-exempt securities $ — $ — $ 4,447 $ (244 ) $ 4,447 $ (244 )
Total held to maturity $ — $ — $ 4,447 $ (244 ) $ 4,447 $ (244 )

Loans

The loan portfolio is the largest category of our earning assets. Loans HFI increased $249.3 million, or 10.9% on an annualized basis, to $3.3 billion at September 30, 2025 since December 31, 2024. The increase was primarily due to increases in SFR mortgage loans of $157.0 million, CRE loans of $85.2 million, commercial and industrial ("C&I") loans of $17.1 million, and SBA loans of $6.8 million, partially offset by decreases in construction and land development ("C&D") loans of $14.1 million and in other loans of $2.5 million. SFR mortgage loans represented 50.0% of our total HFI loans as of September 30, 2025 and 48.9% at December 31, 2024. There were $756,000 of loans HFS at September 30, 2025 compared to $11.3 million loans HFS at December 31, 2024. The decrease in loans HFS was due to sales totaling $49.0 million, offset by loans originated or transferred into HFS of $37.8 million.

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The following table presents the balance and associated percentage of each major category in our loan portfolio as of the dates indicated:

As of September 30, 2025 As of December 31, 2024
% %
Loans HFI:^(1)^
Single-family residential mortgages 50.0 % 48.9 %
Commercial real estate ^(2)^ 39.0 % 39.3 %
Construction and land development 4.8 % 5.7 %
Commercial and industrial 4.4 % 4.2 %
SBA 1.6 % 1.5 %
Other loans 0.2 % 0.4 %
Total loans HFI 100.0 % 100.0 %
Allowance for loan losses ) )
Total loans HFI, net

All values are in US Dollars.

(1) Net of discounts and deferred fees and costs.
(2) Includes non-farm and non-residential real estate loans, multifamily residential loans and non-owner occupied single-family residential loans.
--- ---

The following table presents the geographic locations of loans in our loan portfolio, by loan class, as of the date indicated:

As of September 30, 2025
Single-family residential mortgages Commercial real estate Construction and land development Commercial and Industrial SBA Other Total loans HFI
%
Loans HFI:
California 59.8 %
Hawaii 0.4 %
Illinois 2.3 %
Nevada 1.5 %
New Jersey 1.3 %
New York 28.1 %
Other 6.6 %
Total loans, net 100.0 %

All values are in US Dollars.

The majority of our loan portfolio is based on collateral or businesses located in California and New York, which represented 87.9% of our loan portfolio. Loans secured by collateral in other states represented approximately 12.1% of our portfolio and the majority of these loans are secured by real estate with a weighted average LTV of 56.6% at September 30, 2025.

SFR loans. SFR loans totaled $1.7 billion, or 50.0% of our loans HFI portfolio, as of September 30, 2025. SFR loans increased $157.0 million, or 10.5%, during the first nine months of 2025 due to higher originations relative to payoffs, paydowns and sales. As of September 30, 2025, the weighted-average LTV of the portfolio was 55.0%, the weighted average FICO score was 764, and the average age was 3.33 years as of September 30, 2025.

We originate qualified SFR mortgage loans and non-qualified, alternative documentation SFR mortgage loans through wholesale channels and retail channels, including our branch network, to accommodate the needs of the Asian-centric market. The qualified SFR mortgage loans are 15-year and 30-year conforming mortgages and may be sold directly to FNMA and FHLMC. We originate non-qualified SFR mortgage loans both to sell and hold for investment.

For SFR mortgage loans sold to FNMA, FHLMC and to other third parties such as investment funds or other banks, we provide limited representations and warranties and with a repurchase and premium refund for loans that become delinquent in the first 90-days or a premium refund if paid-off in the first 90-days with respect to all loans sold. In certain loan sales to other banks, loans are sold with no representations or warranties and provide a replacement feature for the first six months if any loans pay off early. As a condition of the sale for all loans, the buyer must have the loans audited for underwriting and compliance standards. There were $756,000 and $11.3 million of SFR loans HFS at September 30, 2025 and December 31, 2024.

The following table presents the LTV ratios at origination for SFR loans by state as of the date indicated:

LTV Distribution
September 30, 2025 <45% 45%≤54% 55%≤64% 65%≤74% 75%≤84% >85% Total
(dollars in thousands)
California $ 137,187 $ 161,858 $ 315,921 $ 158,500 $ 14,192 $ 1,405 $ 789,063
New York 161,550 149,089 247,158 132,280 11,157 332 701,566
Illinois 15,408 9,510 16,085 10,068 2,873 1,430 55,374
New Jersey 5,391 9,103 14,377 8,049 590 774 38,284
Nevada 1,659 4,826 9,950 3,561 560 352 20,908
Hawaii 536 1,650 4,534 3,284 2,399 — 12,403
Other 8,818 6,205 8,650 8,777 941 — 33,391
Total $ 330,549 $ 342,241 $ 616,675 $ 324,519 $ 32,712 $ 4,293 $ 1,650,989

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Commercial real estate loans. CRE loans increased $85.2 million, or 7.1%, to $1.3 billion at September 30, 2025, compared to $1.2 billion at December 31, 2024.

CRE loans include owner occupied and non-owner occupied commercial real estate, multi-family residential and SFR loans originated for a business purpose. Except for the multi-family residential loan portfolio, the interest rate for the majority of these loans are based on the Prime rate and have a maturity of five years or less except for the SFR loans originated for a business purpose which may have a maturity of one year. The multi-family residential loans generally have interest rates based on the 5-year treasury, a 10-year maturity with a five year fixed-rate period followed by a five year floating-rate period, and have a declining prepayment penalty over the first five years.

The largest subset of CRE loans was the multi-family residential loan portfolio, which totaled $717.5 million as of September 30, 2025 and $605.5 million as of December 31, 2024.

The following table presents the LTV ratios at origination for CRE loans by property type as of the date indicated:

LTV Distribution
September 30, 2025 <45% 45%≤54% 55%≤64% 65%≤74% 75%≤84% >85% Total
Non-owner occupied: (dollars in thousands)
Mobile Home $ 37,849 $ 78,837 $ 109,793 $ 58,365 $ — $ — $ 284,844
Apartments 36,055 53,779 107,540 57,526 — 10,203 265,103
Mixed Use 44,902 14,992 134,044 14,115 11,956 — 220,009
Warehouse 27,617 19,108 26,289 — — — 73,014
Hotel/Motel 27,758 12,990 24,626 5,869 — — 71,243
Retail 27,163 28,958 14,222 — — — 70,343
SFR Rental 24,355 8,666 16,058 5,424 — — 54,503
Rent Controlled NY Multifamily 22,980 18,284 6,763 — — — 48,027
Office 14,281 — 8,228 4,191 — 8,386 35,086
Other 4,492 6,339 — — — — 10,831
Total non-owner occupied $ 267,452 $ 241,953 $ 447,563 $ 145,490 $ 11,956 $ 18,589 $ 1,133,003
Owner-occupied:
Mixed Use 1,714 3,175 3,581 — — — 8,470
Warehouse 7,894 18,868 13,928 15,461 — — 56,151
Hotel/Motel 3,383 30,541 21,318 — — — 55,242
Retail 3,874 7,939 8,274 — — — 20,087
SFR Rental — 1,087 — — — — 1,087
Rent Controlled NY Multifamily 1,398 331 — — — — 1,729
Office 827 1,957 764 815 — — 4,363
Gas Station 120 — — 5,686 — — 5,806
Other 89 150 426 — — — 665
Total owner-occupied $ 19,299 $ 64,048 $ 48,291 $ 21,962 $ — $ — $ 153,600
Total $ 286,751 $ 306,001 $ 495,854 $ 167,452 $ 11,956 $ 18,589 $ 1,286,603

The following table presents the LTV ratios at origination for CRE loans by state as of the date indicated:

LTV Distribution
September 30, 2025 <45% 45%≤54% 55%≤64% 65%≤74% 75%≤84% >85% Total
Non-owner occupied: (dollars in thousands)
California $ 149,884 $ 175,413 $ 371,228 $ 96,643 $ — $ — $ 793,168
New York 81,649 40,011 18,981 — 11,956 — 152,597
Nevada 19,687 1,692 — — — — 21,379
Illinois 4,103 2,187 1,597 — — 8,386 16,273
New Jersey 1,190 1,559 1,217 — — — 3,966
Other 10,939 21,091 54,540 48,847 — 10,203 145,620
Total non-owner occupied $ 267,452 $ 241,953 $ 447,563 $ 145,490 $ 11,956 $ 18,589 $ 1,133,003
Owner-occupied:
California 11,294 59,610 37,124 19,873 — — 127,901
New York 7,186 3,135 2,235 815 — — 13,371
Nevada 164 — 781 — — — 945
Illinois 655 336 — 1,274 — — 2,265
New Jersey — 967 — — — — 967
Other — — 8,151 — — — 8,151
Total owner-occupied $ 19,299 $ 64,048 $ 48,291 $ 21,962 $ — $ — $ 153,600
Total $ 286,751 $ 306,001 $ 495,854 $ 167,452 $ 11,956 $ 18,589 $ 1,286,603

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Construction and land development loans. C&D loans totaled $159.2 million, or 4.8% of the loan portfolio, at September 30, 2025. C&D loans decreased $14.1 million, or 8.2%, during the first nine months of 2025 due to decreases in land development loans and residential construction loans, offset by an increase in commercial construction loans. Our C&D loans are comprised of residential construction, commercial construction, and land acquisition and development. Interest reserves are generally established on real estate construction loans. These loans are typically Prime rate based and have maturities of less than 18 months.

The following table shows the categories of our C&D portfolio as of the dates indicated:

As of September 30, 2025 As of December 31, 2024 Increase (Decrease)
Mix % Mix % %
Residential construction 30.7 % 33.7 % ) (16.4 )%
Commercial construction 66.6 % 56.5 % 8.2 %
Land development 2.7 % 9.8 % ) (74.6 )%
Total construction and land development loans 100.0 % 100.0 % ) (8.2 )%

All values are in US Dollars.

Commercial and industrial loans. C&I loans totaled $146.7 million, or 4.4% of the loan portfolio, as of September 30, 2025. C&I loans increased $17.1 million, or 13.2%, during the first nine months of 2025 due in part to an increase in commercial term loans and lines of credit, along with an increase in mortgage warehouse lines of credit. Our SFR mortgage lending unit originates mortgage warehouse lines of credit to certain correspondent banks.

The interest rates on C&I loans are generally based on the Wall Street Journal Prime rate. We originate both variable rate and fixed rate C&I loans. The loans are typically made to small- and medium-sized manufacturing, wholesale, retail and service businesses for working capital needs, business expansions and for international trade financing. C&I loans include lines of credit with a maturity of one year or less, term loans with maturities of five years or less, shared national credits with maturities of five years or less, mortgage warehouse lines with a maturity of one year or less, bank subordinated debentures with a maturity of 10 years and international trade discounts with a maturity of three months or less. Substantially all of our C&I loans are collateralized by business assets or by real estate.

SBA loans. SBA loans increased $6.8 million, or 14.3%, to $54.0 million at September 30, 2025 compared to $47.3 million at December 31, 2024. We originated SBA loans of $20.4 million during the first nine months of 2025. Offsetting these loan originations were loan sales of $7.9 million, net loan payoffs and paydowns of $4.8 million, and transfers to OREO of $970,000 during the first nine months of 2025.

We are designated a Preferred Lender under the SBA Preferred Lender Program. We offer SBA guaranteed loans and mainly originate the SBA 7(a) product, which are variable rate loans, through our loan offices and independent brokers. We generally sell the 75% guaranteed portion of the SBA loans that we originate. Our SBA loans are typically made to small-sized manufacturing, wholesale, retail, hotel/motel and service businesses for working capital needs or business expansions. SBA loans secured by real estate can have any maturity up to 25 years. Typically, non-real estate secured loans mature in less than 10 years. Collateral may also include inventory, accounts receivable, equipment, and includes personal guarantees.

Loan Quality

We use what we believe is a comprehensive methodology to monitor credit quality and prudently manage credit concentration within our loan portfolio. Our underwriting policies and practices govern the risk profile and credit and geographic concentration for our loan portfolio. Our comprehensive methodology to monitor these credit quality standards includes a risk classification system that identifies potential problem loans based on risk characteristics by loan class as well as the early identification of deterioration at the individual loan level.

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Analysis of the Allowance for Loan Losses

The following table presents the ALL, its corresponding percentage of the loan class balance, and the percentage of loan balance to total loans HFI as of the dates indicated:
ALL as a % of Loan Type % of Total Loans ALL as a % of Loan Type % of Total Loans
Loans: (dollars in thousands)
Single-family residential mortgages 1.32 % 50.0 % 1.17 % 48.9 %
Commercial real estate ^(1)^ 1.45 % 39.0 % 1.82 % 39.3 %
Construction and land development 0.94 % 4.8 % 3.49 % 5.7 %
Commercial and industrial 1.28 % 4.4 % 1.03 % 4.2 %
SBA 1.48 % 1.6 % 1.38 % 1.5 %
Other 3.95 % 0.2 % 3.74 % 0.4 %
Allowance for loan losses 1.36 % 100.0 % 1.56 % 100.0 %

All values are in US Dollars.

(1) Includes non-farm and non-residential real estate loans, multi-family residential loans and non-owner occupied SFR loans.

Allowance for Credit Losses - Loans

The ACL includes the ALL and the reserve for unfunded commitments ("RUC") and is maintained at a level deemed appropriate by management to provide for expected credit losses in the portfolio as of the date of the consolidated balance sheets. Estimating expected credit losses requires management to use relevant forward looking information, including the use of reasonable and supportable forecasts. The measurement of the ACL for loans is performed by collectively evaluating loans with similar risk characteristics. We have elected to utilize a discounted cash flow approach for all segments except consumer loans and warehouse mortgage loans; for these a remaining life approach was elected.

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.

Management estimates the allowance balance required using past loan loss experience from peers with similar asset sizes and geographic locations to the Company. The nature and volume of the portfolio, information about specific borrower situations, changes in credit quality and estimated collateral values, economic conditions, and other factors are also considered. Our CECL methodology utilizes a four-quarter reasonable and supportable forecast period, and a four-quarter reversion period. We use the Federal Open Market Committee forecasts for the national unemployment rate, while reverting to historical loss information.

Individual loans considered to be uncollectible are charged off against the ACL. Factors used in determining the amount and timing of charge-offs on loans include consideration of the loan type, length of delinquency, sufficiency of collateral value, lien priority and the overall financial condition of the borrower. Loans deemed to be collateral-dependent are reviewed individually based on the estimated fair value of the collateral less selling costs. Collateral value is determined using appraisals and/or other market comparable information. Charge-offs are generally taken on loans when the loan balance is determined to be uncollectible. Recoveries on loans previously charged off are added to the ACL. Net charge-offs on an annualized basis represented 0.84% of average loans for the three months ended September 30, 2025, 0.54% for the nine months ended September 30, 2025, and 0.13% of average loans for the twelve months ended December 31, 2024. Net charge-offs for the third quarter of 2025 were higher than the same period in the prior year; however, $6.6 million of the 2025 charge-offs were related to one loan relationship and were reserved for in prior periods.

As of September 30, 2025, the ACL totaled $45.4 million and was comprised of an ALL of $44.9 million and a RUC of $504,000 (included in “accrued interest and other liabilities”). This compares to the ACL of $48.5 million comprised of an ALL of $47.7 million and a RUC of $729,000 at December 31, 2024. The $3.1 million decrease in the ACL for the first nine months of 2025 was due to net charge-offs of $12.8 million offset by a $9.8 million provision for credit losses. The ALL as a percentage of loans HFI decreased to 1.36% at September 30, 2025, compared to 1.56% at December 31, 2024 due mainly to net charge-offs in 2025 which were included in specific reserves in prior periods. The ALL as a percentage of nonperforming loans HFI was 98.70% at September 30, 2025, an increase from 58.90% at December 31, 2024.

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The following table provides an analysis of the ACL, provision for credit losses and net charge-offs for the periods indicated:

For the Three Months Ended September 30, For the Nine Month Ended September 30,
2025 2024 2025 2024
Allowance for Loan Loss ("ALL") (dollars in thousands) ****
Balance, beginning of period $ 51,014 $ 41,741 $ 47,729 $ 41,903
Charge-offs:
Single-family residential mortgages — — (1,403 ) —
Commercial real estate (21 ) (189 ) (3,296 ) (831 )
Construction and land development (6,929 ) (974 ) (8,175 ) (974 )
Commercial and industrial (4 ) (6 ) (85 ) (9 )
SBA (11 ) — (12 ) —
Other (54 ) (41 ) (113 ) (177 )
Total charge-offs (7,019 ) (1,210 ) (13,084 ) (1,991 )
Recoveries:
Construction and land development 138 — 138 —
Commercial and industrial 1 1 79 2
Other 8 8 47 53
Total recoveries 147 9 264 55
Net charge-offs (6,872 ) (1,201 ) (12,820 ) (1,936 )
Provision for credit losses - loans 750 3,145 9,983 3,718
Balance, end of period $ 44,892 $ 43,685 $ 44,892 $ 43,685
Reserve for unfunded commitments ("RUC") **** **** **** ****
Balance at beginning of period $ 629 $ 624 $ 729 $ 640
(Reversal of) provision for credit losses - unfunded commitments (125 ) 155 (225 ) 139
Balance at the end of period $ 504 $ 779 $ 504 $ 779
Total allowance for credit losses ("ACL") $ 45,396 $ 44,464 $ 45,396 $ 44,464
Total loans HFI at end of period $ 3,302,577 $ 3,091,896 $ 3,302,577 $ 3,091,896
Average loans HFI $ 3,244,499 $ 3,068,413 $ 3,162,665 $ 3,033,341
Net charge-offs to average loans HFI (0.84 %) (0.16 %) (0.54 %) (0.09 %)
Allowance for loan losses to total loans HFI 1.36 % 1.41 % 1.36 % 1.41 %

Problem Loans. Loans are considered delinquent when principal or interest payments are past due 30 days or more; delinquent loans may remain on accrual status between 30 days and 89 days past due. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Typically, the accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on nonaccrual loans is subsequently recognized only to the extent that cash is received and the loan’s principal balance is deemed collectible. Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is probable.

In cases where a borrower experiences financial difficulties and we make certain concessionary modifications to contractual terms, the loan is classified as a modified loan. These concessions may include a reduction of the interest rate, principal or accrued interest, extension of the maturity date or other actions intended to minimize potential losses. Loans modified at a rate equal to or greater than that of a new loan with comparable risk at the time the loan is modified may be excluded from modified loan disclosures in years subsequent to the modification if the loans are in compliance with their modified terms.

Real estate acquired by foreclosure or deed in lieu of foreclosure is recorded at fair value at the date of foreclosure, establishing a new cost basis (carrying value) by a charge to the allowance for credit losses, if necessary, or a gain recognized through noninterest income, as appropriate. Once classified as an OREO, it is subsequently carried at the lower of our carrying value of the property or its fair value. Fair value is based on current appraisals less estimated selling costs. Any subsequent write-downs are charged against operating expenses and recognized as a valuation allowance. Operating expenses and related income of such properties are included in other operating income and expenses. Gains on transfer of loans to OREO, and gains or losses on their disposition are included in gain on OREO.

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Table of Contents

Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest (of which there were none during the periods presented). The balances of nonperforming loans included in the table below are the net investment in these assets and do not include $538,000 in specific reserves included in the ALL. The following table presents the net investment in nonperforming assets by loan class and certain nonperforming asset ratios as of the dates indicated.

As of September 30, As of December 31,
2025 2024
Nonaccrual loans: (dollars in thousands)
Single-family residential mortgages $ 2,608 $ 11,524
Commercial real estate 8,548 17,096
Construction and land development 28,222 44,621
Commercial and industrial 4,708 6,271
SBA 1,387 1,514
Other 11 12
Total nonaccrual loans 45,484 81,038
Total nonperforming loans ^(1)^ 45,484 81,038
OREO 8,830 —
Nonperforming assets ^(1)^ $ 54,314 $ 81,038
Nonperforming loans HFI to total loans HFI 1.38 % 2.29 %
Nonperforming assets to total assets 1.29 % 2.03 %
Nonperforming loans to tangible common equity and ALL 9.35 % 16.78 %
Nonperforming assets to tangible common equity and ALL 11.17 % 16.78 %
(1) Nonperforming loans and nonperforming assets included loans HFS of $11.2 million at December 31, 2024. There were no nonperforming loans HFS at September 30, 2025.
--- ---

Nonperforming assets totaled $54.3 million, or 1.29% of total assets, at September 30, 2025, down from $81.0 million, or 2.03% of total assets, at December 31, 2024. The $26.7 million decrease in nonperforming assets was due to sales totaling $20.0 million, charge-offs of $10.2 million, reclassification of loans to performing loans of $5.0 million, and payoffs or paydowns of $4.8 million, partially offset by the addition of loans that migrated to nonperforming assets of $13.3 million during the first nine months of 2025. Nonperforming assets included three OREO properties totaling $8.8 million (included in “accrued interest and other assets”) at September 30, 2025. Of this amount, $3.7 million represented SBA payables associated with formerly SBA guaranteed loans.

Our 30-89 day delinquent loans, excluding nonperforming loans, totaled $6.5 million, or 0.20% of total loans, at September 30, 2025, down from $22.1 million, or 0.72% of total loans, at December 31, 2024. The $15.6 million decrease was mostly due to $14.8 million in loans returning to current status, $2.9 million in SFR mortgage loans included in a bulk sale of underperforming SFR mortgage loans and $931,000 in paydowns and payoffs. There were also $2.0 million of loans that were downgraded to nonperforming. These changes were partially offset by $5.2 million in new delinquent loans.

We did not recognize any interest income on nonaccrual loans during the three and nine months ended September 30, 2025 and 2024, while the loans were in nonaccrual status.

We utilize an asset risk classification system in compliance with guidelines established by the FDIC as part of our efforts to improve asset quality. In connection with examinations of insured institutions, examiners have the authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: “substandard,” “doubtful,” and “loss.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable based on facts, conditions and values that currently exist. An asset classified as loss is not considered collectable and is of such little value that continuance as an asset is not warranted.

We use a risk grading system to categorize and determine the credit risk of our loans. Potential problem loans include loans with a risk grade of 6, which are “special mention,” loans with a risk grade of 7, which are “substandard” loans that are generally not considered to be impaired and loans with a risk grade of 8, which are “doubtful” loans generally considered to be impaired. These loans generally require more frequent loan officer contact and receipt of financial data to closely monitor borrower performance. Potential problem loans are managed and monitored regularly through a number of processes, procedures and committees, including oversight by a loan administration committee comprised of executive officers and other members of the Bank’s senior management.

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The following table presents the risk categories for loans HFI, by segment and class, as of the dates indicated:

Special
September 30, 2025 Pass Mention Substandard Doubtful Total
Real Estate: (dollars in thousands)
Single-family residential mortgages $ 1,647,541 $ — $ 3,448 $ — $ 1,650,989
Commercial real estate 1,216,900 34,998 34,705 — 1,286,603
Construction and land development 127,558 3,372 28,222 — 159,152
Commercial:
Commercial and industrial 130,624 8,701 7,342 — 146,667
SBA 48,603 2,278 3,152 — 54,033
Other: 5,122 — 11 — 5,133
Total $ 3,176,348 $ 49,349 $ 76,880 $ — $ 3,302,577
Special
--- --- --- --- --- --- --- --- --- --- ---
December 31, 2024 Pass Mention Substandard Doubtful Total
Real Estate: (dollars in thousands)
Single-family residential mortgages $ 1,481,826 $ — $ 12,196 $ — $ 1,494,022
Commercial real estate 1,171,085 21,287 9,048 — 1,201,420
Construction and land development 72,921 44,042 56,327 — 173,290
Commercial:
Commercial and industrial 121,404 — 8,181 — 129,585
SBA 43,897 — 3,366 — 47,263
Other: 7,627 — 23 — 7,650
Total $ 2,898,760 $ 65,329 $ 89,141 $ — $ 3,053,230

Special mention loans totaled $49.4 million, or 1.49% of total loans, at September 30, 2025, down from $65.3 million, or 2.14% of total loans, at December 31, 2024. The $16.0 million decrease was primarily due to loans upgraded to pass of $45.9 million, loans downgraded to substandard of $12.3 million, and paydowns of $796,000, partially offset by loans downgraded to special mention from pass of $40.3 million and additional advances on special mention loans of $2.7 million. As of September 30, 2025, all special mention loans are paying current.

Substandard loans totaled $76.9 million at September 30, 2025, a decrease of $12.3 million from $89.1 million at December 31, 2024. In addition, there were $11.2 million of substandard loans HFS at December 31, 2024 that were subsequently sold in the first quarter of 2025. There were no substandard loans HFS at September 30, 2025. The $12.3 million decrease in substandard loans HFI was primarily due to payoffs and paydowns totaling $24.7 million, transfers to OREO of $13.8 million, charge-offs of $10.2 million, and upgrades to pass or special mention of $5.0 million, partially offset by the downgrade of loans totaling $42.3 million to substandard. Of the total substandard loans at September 30, 2025, there were $31.4 million on accrual status.

Goodwill and Other Intangible Assets. Goodwill was $71.5 million at both September 30, 2025 and December 31, 2024. Goodwill represents the excess of the consideration paid over the fair value of the net assets acquired.

Other intangible assets, which consist of core deposit intangibles, were $1.5 million and $2.0 million at September 30, 2025 and December 31, 2024. These core deposit intangible assets are amortized on an accelerated basis over their estimated useful lives, generally over a period of 3 to 10 years.

Liabilities. Total liabilities increased by $209.5 million to $3.7 billion at September 30, 2025 from $3.5 billion at December 31, 2024, primarily due to a $282.7 million increase in deposits, offset by a $70.0 million decrease in FHLB advances.

***Deposits.***Total deposits were $3.4 billion as of September 30, 2025, an increase of $282.7 million, or 12.3% on an annualized basis, compared to $3.1 billion as of December 31, 2024. The increase was due to a $295.2 million increase in interest-bearing deposits, while noninterest-bearing deposits decreased $12.5 million. The increase in interest-bearing deposits included an increase in non-maturity deposits of $58.7 million and time deposits of $236.6 million. Noninterest-bearing deposits totaled $550.5 million and represented 16.4% of total deposits at September 30, 2025 compared to $563.0 million and 18.3% at December 31, 2024. Wholesale deposits totaled $268.1 million at September 30, 2025 and $147.5 million at December 31, 2024.

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The following table presents the composition of our deposit portfolio by account type as of the dates indicated:

December 31, 2024
% %
Noninterest-bearing demand deposits: 16.4 % 18.3 %
Interest-bearing deposits:
NOW 2.1 % 1.7 %
Money market 15.4 % 14.6 %
Savings 3.9 % 5.3 %
Time deposits 250,000 and under 25.9 % 28.6 %
Time deposits over 250,000 28.3 % 26.7 %
Wholesale deposits 8.0 % 4.8 %
Total interest-bearing deposits 83.6 % 81.7 %
Total deposits 100.0 % 100.0 %

All values are in US Dollars.

The following table presents our average deposit balances and weighted average rates for the three months ended September 30, 2025:

For the Nine Months Ended
September 30, 2025
Weighted Weighted
Average Average Average
Rate (%) Balance Rate (%)
Noninterest-bearing demand deposits 541,083 — $ 529,190 —
Interest-bearing deposits:
NOW 69,800 2.31 % 65,957 2.22 %
Money market 491,561 3.12 % 479,328 3.14 %
Savings 138,344 1.17 % 144,895 1.25 %
Time deposits 250,000 and under 1,050,682 3.89 % 1,012,408 3.98 %
Time deposits over 250,000 960,094 4.07 % 916,162 4.14 %
Total interest-bearing deposits 2,710,481 3.63 % 2,618,750 3.69 %
Total deposits 3,251,564 3.03 % $ 3,147,940 3.07 %

All values are in US Dollars.

The following table presents the maturity schedule of time deposits as of September 30, 2025:
After Three to Six Months After Six to 12 Months After 12 Months Total
Time deposits 250,000 and under (1) 440,286 $ 369,354 $ 303,336 $ 6,282 $ 1,119,258
Time deposits over 250,000 (2) 469,432 340,005 164,087 1,530 975,054
Total time deposits 909,718 $ 709,359 $ 467,423 $ 7,812 $ 2,094,312

All values are in US Dollars.

(1) Includes wholesale deposits of $246.9 million.
(2) Includes wholesale deposits of $21.2 million.

Of the $975.1 million in time deposits over $250,000, the estimated aggregate amount of time deposits in excess of the FDIC insurance limit is $743.3 million at September 30, 2025. The following table presents the maturity distribution of uninsured time deposits in amounts of more than $250,000 as of the date indicated.

September 30, 2025
(dollars in thousands)
3 months or less $ 352,242
Over 3 months through 6 months 259,771
Over 6 months through 12 months 130,723
Over 12 months 531
Total $ 743,267

In addition, we offer deposit products through the Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweeps (“ICS”) programs where customers are able to achieve FDIC insurance for balances on deposit in excess of the $250,000 FDIC limit. Time deposits held through the CDARS program were $130.5 million at September 30, 2025 and $130.6 million at December 31, 2024 and ICS deposits totaled $147.2 million at September 30, 2025 and $146.1 million at December 31, 2024.

The following table presents the estimated deposits exceeding the FDIC insurance limit as of the dates indicated:

September 30, 2025 December 31, 2024
(dollars in thousands)
Uninsured deposits $ 1,519,677 $ 1,383,727

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FHLB Borrowings. In addition to deposits, we have used long- and short-term borrowings, such as federal funds purchased and FHLB long-and short-term advances, as a source of funds to meet the daily liquidity needs of our customers and fund growth in earning assets. FHLB advances totaled $130.0 million at September 30, 2025 compared to $200.0 million at December 31, 2024. FHLB borrowings at September 30, 2025 included $130.0 million in putable term advances.

The terms of all putable advances outstanding at September 30, 2025 are presented in Next Call Date order in the table below:

Advance Date Amount Rate Call Structure Next Call Date Final Stated Maturity Date
(dollars in thousands)
5/8/2025 $ 10,000 3.69 % 1 time call 11/10/2025 5/10/2028
5/8/2025 20,000 3.49 % Quarterly call 11/10/2025 5/10/2028
8/14/2025 20,000 3.38 % Quarterly call 11/14/2025 8/14/2028
3/12/2025 20,000 3.34 % Quarterly call 12/12/2025 3/12/2029
3/14/2025 20,000 3.49 % Quarterly call 12/15/2025 3/15/2029
6/23/2025 10,000 3.64 % 1 time call 12/23/2025 6/23/2028
5/8/2025 20,000 3.52 % Quarterly call ^(1)^ 5/8/2026 5/8/2029
6/23/2025 10,000 3.55 % Quarterly call ^(1)^ 6/23/2026 6/23/2028
Total $ 130,000 3.49 %
(1) Call option after initial one year lock out.
--- ---

The following table presents information on our total FHLB advances at and for the periods presented:

As of and For the Three Months Ended September 30, As of and For the Nine Months Ended September 30,
2025 2024 2025 2024
FHLB Borrowings: (dollars in thousands)
Outstanding at period-end $ 130,000 $ 200,000 $ 130,000 $ 200,000
Average amount outstanding 185,217 150,543 173,810 150,182
Maximum amount outstanding at any month-end 200,000 200,000 200,000 150,000
Weighted average interest rate:
During period 3.54 % 1.20 % 3.13 % 1.18 %
End of period 3.49 % 1.74 % 3.49 % 1.74 %

Long-term Debt. Long-term debt consists of subordinated notes. As of September 30, 2025, the amount of subordinated notes outstanding was $119.8 million as compared to $119.5 million at December 31, 2024.

In March 2021, we issued $120.0 million of 4.00% fixed to floating rate subordinated notes due April 1, 2031 (the “2031 Subordinated Notes”). The interest rate is fixed through April 1, 2026 and floats at three month Secured Overnight Financing Rate (“SOFR”) plus 329 basis points thereafter. We can redeem the 2031 Subordinated Notes beginning April 1, 2026. The 2031 Subordinated Notes are considered Tier 2 capital at the Company.

Subordinated Debentures. Subordinated debentures consist of subordinated debentures issued in connection with three separate trust preferred securities and totaled $15.3 million as of September 30, 2025 and $15.2 million as of December 31, 2024. Under the terms of our subordinated debentures issued in connection with the issuance of trust preferred securities, we are not permitted to declare or pay any dividends on our capital stock if an event of default occurs under the terms of the long-term debt. In addition, we have the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years. These subordinated debentures consist of the following at September 30, 2025 and are described in detail after the table below:

Issue Date Principal Amount Unamortized Valuation Reserve Recorded Value Stated Rate Description Effective Stated Rate Stated Maturity
Subordinated debentures: (dollars in thousands)
TFC Trust 12/22/2006 $ 5,155 $ 1,031 $ 4,124 Three-month CME Term SOFR plus 0.26% plus 1.65% 5.95 % 3/15/2037
FAIC Trust 12/15/2004 7,217 707 6,510 Three-month CME Term SOFR plus 0.26% plus 2.25% 6.55 % 12/15/2034
PGBH Trust 12/15/2004 5,155 469 4,686 Three-month CME Term SOFR plus 0.26% plus 2.10% 6.40 % 12/15/2034
Total $ 17,527 $ 2,207 $ 15,320

At September 30, 2025, we were in compliance with all covenants under our long-term debt agreements and subordinated debt.

The Company maintains the TFC Statutory Trust ("TFC Trust"), which has issued a total of $5.2 million securities ($5.0 million in capital securities and $155,000 in common securities). The TFC Trust subordinated debentures have a variable rate of interest equal to three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 1.65%, which was 5.95% as of September 30, 2025 and 6.27% at December 31, 2024.

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The Company maintains the First American International Statutory Trust I ("FAIC Trust"), which has issued a total of $7.2 million securities ($7.0 million in capital securities and $217,000 in common securities). The FAIC Trust subordinated debentures have a variable rate of interest equal to three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 2.25%, which was 6.55% as of September 30, 2025 and 6.87% at December 31, 2024.

The Company maintains the Pacific Global Bank Trust I ("PGBH Trust"), a Delaware statutory trust formed in December 2004. PGBH Trust issued 5,000 units of fixed-to-floating rate capital securities with an aggregate liquidation amount of $5.0 million and 155 common securities with an aggregate liquidation amount of $155,000. The PGBH subordinated debentures have a variable rate of interest equal to three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 2.10%, which was 6.40% as of September 30, 2025 and 6.72% at December 31, 2024.

Capital Resources and Liquidity Management

Capital Resources. Shareholders’ equity is influenced primarily by earnings, dividends, sales and redemptions of common stock and preferred stock and changes in accumulated other comprehensive income, net of taxes, from AFS investment securities.

Shareholders’ equity increased $6.5 million, or 1.3%, to $514.3 million as of September 30, 2025 from $507.9 million at December 31, 2024. The increase in shareholders' equity for the nine months of 2025 was due to net income of $21.8 million, lower unrealized losses on AFS securities in accumulated other comprehensive loss, net of tax, of $5.8 million, and equity compensation activity of $1.4 million, offset by common stock repurchases of $14.0 million and common stock cash dividends paid of $8.5 million. As a result, book value per share increased to $30.18 from $28.66 at December 31, 2024 and tangible book value per share increased to $25.89 from $24.51 at December 31, 2024. For additional information, see "Non-GAAP Financial Measures."

***Liquidity Management.***Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements, both known and unknown. We manage our liquidity position to meet the daily cash flow needs of customers, while also maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders.

Our liquidity position is supported by management of liquid assets and liabilities and access to alternative sources of funds. Liquid assets include cash, interest-earning deposits in banks, federal funds sold, available for sale securities, term federal funds, purchased receivables and maturing or prepaying balances in our securities and loan portfolios. Liquid liabilities include retail deposits, federal funds purchased, securities sold under repurchase agreements and other borrowings. Other sources of liquidity include the sale of loans, the ability to acquire additional wholesale funding, the issuance of additional collateralized borrowings through FHLB advances or the Federal Reserve’s discount window, and the ability to access the capital markets through the issuance of debt securities, preferred securities or common securities. Our short-term and long-term liquidity requirements are primarily to fund known and unknown on-going operations, including payment of interest on deposits and debt, extensions of credit to borrowers, capital expenditures and shareholder dividends. These liquidity requirements are met primarily through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, debt financing and increases in customer deposits. For additional information regarding our operating, investing and financing cash flows, see the consolidated statements of cash flows provided in our consolidated financial statements.

Integral to our liquidity management is the administration of short-term borrowings. To the extent we are unable to obtain sufficient liquidity through core deposits, we seek to meet our liquidity needs through wholesale funding or other borrowings on either a short- or long-term basis. Our wholesale funding ratio was 11.4% at September 30, 2025 compared to 10.7% at December 31, 2024.

We have sufficient capital and do not anticipate any need for additional liquidity sources as of September 30, 2025. As of September 30, 2025 and December 31, 2024, we had $97.0 million of unsecured federal funds lines with other financial institutions and no amounts advanced against these lines. In addition, secured lines of credit from the Federal Reserve Discount Window were $63.4 million at September 30, 2025 and $47.2 million at December 31, 2024. Federal Reserve Discount Window lines were collateralized by a pool of CRE loans totaling $83.2 million as of September 30, 2025 and $62.5 million as of December 31, 2024. We did not have any borrowings outstanding with the Federal Reserve at September 30, 2025 and December 31, 2024.

At September 30, 2025 and December 31, 2024, we had $130.0 million and $200.0 million in FHLB advances. Based on the values of loans pledged as collateral, we had $1.2 billion of remaining secured borrowing capacity with the FHLB as of September 30, 2025 and $1.1 billion at December 31, 2024.

Bancorp is a corporation separate and apart from the Bank and, therefore, must provide for its own liquidity. Bancorp’s main source of funding is dividends declared and paid to Bancorp by the Bank. There are statutory, regulatory and debt covenant limitations that affect the ability of the Bank to pay dividends to Bancorp. Management believes that these limitations will not impact our ability to meet our ongoing short-term cash obligations. The Bank paid cash dividends to Bancorp of $45.0 million and $20.0 million during the nine months ended September 30, 2025 and the twelve months ended December 31, 2024. Dividends on common stock during the nine months ended September 30, 2025, and the year ended December 31, 2024, totaled $8.5 million and $11.7 million. At September 30, 2025, Bancorp had $52.1 million in cash, of which $51.7 million was on deposit at the Bank.

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Contractual Obligations

The following table contains supplemental information regarding our total contractual obligations at September 30, 2025:

Payments Due
Within One to Over Three to After Five
One Year Three Years Five Years Years Total
(dollars in thousands)
Deposits without a stated maturity $ 1,272,185 $ — $ — $ — $ 1,272,185
Time deposits 2,086,500 7,140 672 — 2,094,312
FHLB advances (1) 130,000 — — — 130,000
Long-term debt — — — 119,815 119,815
Subordinated debentures — — — 15,320 15,320
Leases 5,413 11,006 5,627 6,423 28,469
Total contractual obligations $ 3,494,098 $ 18,146 $ 6,299 $ 141,558 $ 3,660,101
(1) See "FHLB Borrowings" for the structure of FHLB advances that are callable by FHLB within one year, however final stated maturities range from 2.6 to 3.6 years as of September 30, 2025.
--- ---

Off-Balance Sheet Arrangements

We have limited off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

In the ordinary course of business, we enter into financial commitments to meet the financing needs of our customers. These financial commitments include commitments to extend credit, unused lines of credit, commercial and similar letters of credit and standby letters of credit. Those instruments involve varying degrees of credit and interest rate risk in excess of the amount recognized in the ACL in the consolidated balance sheets. Such off-balance sheet commitments totaled $119.1 million as of September 30, 2025 and $175.5 million as of December 31, 2024.

Our exposure to loan loss in the event of nonperformance on these financial commitments is represented by the contractual amount of those instruments. We use the same credit policies in making commitments as we do for loans reflected in our financial statements.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. We evaluate each client’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company is based on management’s credit evaluation of the customer.

In addition, we invest in various affordable housing partnerships and Small Business Investment Company funds. Pursuant to these investments, we commit to an investment amount to be fulfilled in future periods. Such unfunded commitments totaled $10.4 million as of September 30, 2025 and $5.7 million as of December 31, 2024.

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Non-GAAP Financial Measures

Some of the financial measures included herein are not measures of financial performance recognized by GAAP. These non-GAAP financial measures include the “tangible common equity to tangible assets ratio,” “tangible book value per share,” and “return on average tangible common equity.” Our management uses these non-GAAP financial measures in our analysis of our performance.

Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share. The tangible common equity to tangible assets ratio and tangible book value per share are non-GAAP measures generally used by financial analysts and investment bankers to evaluate capital adequacy. We calculate: (i) tangible common equity as total shareholders’ equity less goodwill and other intangible assets (excluding mortgage servicing assets); (ii) tangible assets as total assets less goodwill and other intangible assets (excluding mortgage servicing assets); and (iii) tangible book value per share as tangible common equity divided by period end shares of common stock outstanding.

Our management, banking regulators, many financial analysts and other investors use these measures in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, which typically stem from the use of the purchase method of accounting for mergers and acquisitions. Tangible common equity, tangible assets, tangible book value per share and related measures should not be considered in isolation or as a substitute for total shareholders’ equity, total assets, book value per share or any other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate tangible common equity, tangible assets, tangible book value per share and any other related measures may differ from that of other companies reporting measures with similar names. The following table reconciles shareholders’ equity (on a GAAP basis) to tangible common equity and total assets (on a GAAP basis) to tangible assets, and calculates our tangible book value per share:

September 30, 2025 December 31, 2024 September 30, 2024
Tangible Common Equity Ratios: (dollars in thousands)
Tangible common equity:
Total shareholders' equity $ 514,335 $ 507,877 $ 509,728
Adjustments
Goodwill (71,498 ) (71,498 ) (71,498 )
Core deposit intangible (1,495 ) (2,011 ) (2,194 )
Tangible common equity $ 441,342 $ 434,368 $ 436,036
Tangible assets:
Total assets-GAAP $ 4,208,455 $ 3,992,477 $ 3,990,477
Adjustments
Goodwill (71,498 ) (71,498 ) (71,498 )
Core deposit intangible (1,495 ) (2,011 ) (2,194 )
Tangible assets $ 4,135,462 $ 3,918,968 $ 3,916,785
Common shares outstanding 17,043,897 17,720,416 17,693,416
Common equity to assets ratio 12.22 % 12.72 % 12.77 %
Book value per share $ 30.18 $ 28.66 $ 28.81
Tangible common equity to tangible assets ratio 10.67 % 11.08 % 11.13 %
Tangible book value per share $ 25.89 $ 24.51 $ 24.64

Return on Average Tangible Common Equity. Management measures return on average tangible common equity (“ROATCE”) to assess our capital strength and business performance. Tangible equity excludes goodwill and other intangible assets (excluding mortgage servicing assets), and is reviewed by banking and financial institution regulators when assessing a financial institution’s capital adequacy. This non-GAAP financial measure should not be considered a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures used by other companies. The following table reconciles ROATCE to its most comparable GAAP measure:

For the Three Months Ended For the Nine Months Ended
September 30, 2025 June 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024
Return on average tangible common equity: (dollars in thousands)
Net income available to common shareholders $ 10,148 $ 9,333 $ 6,999 $ 21,771 $ 22,280
Average shareholders' equity 512,874 513,691 508,720 512,945 511,222
Adjustments:
Average goodwill (71,498 ) (71,498 ) (71,498 ) (71,498 ) (71,498 )
Average core deposit intangible (1,608 ) (1,780 ) (2,326 ) (1,779 ) (2,525 )
Adjusted average tangible common equity $ 439,768 $ 440,413 $ 434,896 $ 439,668 $ 437,199
Return on average common equity, annualized 7.85 % 7.29 % 5.47 % 5.67 % 5.82 %
Return on average tangible common equity, annualized 9.16 % 8.50 % 6.40 % 6.62 % 6.81 %

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. We have identified three primary sources of market risk: interest rate risk, price risk and basis risk.

Interest Rate Risk. Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricing and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay residential mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and SOFR (basis risk).

Price Risk. Price risk represents the risk of loss arising from adverse movements in the prices of financial instruments that are carried at fair value and subject to fair value accounting. We have price risk from the available for sale SFR mortgage loans and fixed-rate available for sale securities.

Basis Risk. Basis risk represents the risk of loss arising from asset and liability pricing movements not changing in the same direction. We have basis risk primarily in the SFR mortgage loan portfolio, the multifamily loan portfolio and our securities portfolio.

Our ALCO establishes broad policy limits with respect to interest rate risk. The ALCO establishes specific operating guidelines within the parameters of the board of directors’ policies. In general, we seek to minimize the impact of changing interest rates on net interest income and the economic values of assets and liabilities. The ALCO monitors the level of interest rate risk sensitivity to ensure compliance with the board of directors’ approved risk limits and to oversee management's balance sheet risk management strategies.

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.

An asset sensitive position refers to a balance sheet position in which a short-term decrease in interest rates is expected to generate lower net interest income, as rates earned on interest-earning assets would reprice downward more quickly than rates paid on interest-bearing liabilities, thus compressing the net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which a short-term decrease in interest rates is expected to generate higher net interest income, as rates paid on interest-bearing liabilities would reprice downward more quickly than rates earned on interest-earning assets, thus expanding the net interest margin.

Income Simulation and Economic Value Analysis. Interest rate risk measurement is calculated and reported to the board and the ALCO at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.

We use two approaches to model interest rate risk: Net Interest Income at Risk (NII at Risk), and Economic Value of Equity (“EVE”). Under NII at Risk, net interest income is modeled utilizing various assumptions for assets, liabilities, and derivatives over a 12 month time horizon assuming a flat balance sheet and an instantaneous and parallel shift in market interest rates in 100 basis point increments. We report NII at Risk to isolate the change in income related solely to interest-earning assets and interest-bearing liabilities. The model results do not take into consideration any steps management might take to respond to the changes in interest rates or changes in competitor or customer behavior. EVE measures the period end market value of assets minus the market value of liabilities and the change in this value as rates change. EVE is a period end measurement.

Net Interest Income Sensitivity
Immediate Change in Rates
-300 -200 -100 +100 +200 +300
September 30, 2025 (dollars in thousands)
Dollar change $ 13,713 $ 6,758 $ 3,746 $ (2,090 ) $ (4,393 ) $ (6,740 )
Percent change 11.19 % 5.51 % 3.06 % (1.71 %) (3.58 %) (5.50 %)
December 31, 2024
Dollar change $ 12,278 $ 6,776 $ 2,810 $ (960 ) $ (2,321 ) $ (3,612 )
Percent change 10.73 % 5.92 % 2.46 % (0.84 %) (2.03 %) (3.16 %)

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At September 30, 2025, our NII at Risk profile is liability sensitive. This is directionally consistent with our profile at December 31, 2024. For the up rate scenarios, we are more liability sensitive. Actual results could vary materially from those calculated by our model, due to a variety of factors or assumptions such as the uncertainty of the magnitude, timing and direction of future interest rate movement or the shape of the yield curve. The NII at Risk results are within board policy limits.

Economic Value of Equity Sensitivity
Immediate Change in Rates
-300 -200 -100 +100 +200 +300
September 30, 2025 (dollars in thousands)
Dollar change $ (33,216 ) $ 13,481 $ 13,101 $ (20,854 ) $ (47,520 ) $ (78,723 )
Percent change (5.13 %) 2.08 % 2.02 % (3.22 %) (7.34 %) (12.15 %)
December 31, 2024
Dollar change $ (25,835 ) $ 3,288 $ 11,486 $ (19,175 ) $ (46,186 ) $ (80,285 )
Percent change (3.84 %) 0.49 % 1.71 % (2.85 %) (6.86 %) (11.93 %)

At September 30, 2025, the EVE position is projected to decrease in the up rate scenarios and down 300 rate scenario. When interest rates rise, fixed rate assets generally lose economic value as these instruments are discounted at a higher rate demonstrating the relative longer asset duration as compared to the overall liability duration. When interest rates decrease, the value of noninterest-bearing deposits also decreases. In addition, as the down rate shocks become more severe the pace of the increase in the value of loans also slows due to an increase in loan prepayments and the impact of discount rates reaching their floors; this results in a change of EVE volatility from positive to negative between the down 200 and 300 scenarios. Actual results could vary materially from those calculated by our model, due to a variety of factors or assumptions such as the uncertainty of the magnitude, timing and direction of future interest rate movement or the shape of the yield curve. The EVE results are within board policy limits.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

The Company’s management, including our principal executive officer and principal financial officer, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act), as of the end of the period covered by this Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2025, our disclosure controls and procedures were effective.

Changes in Internal Controls Over Financial Reporting.

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this Form 10-Q relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no material pending legal proceedings, other than ordinary routine litigation incidental to our business. Management believes that none of the legal proceedings occurring in the ordinary course of business, individually or in the aggregate, will have a material adverse impact on the results of operations or financial condition of the Company.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed in Part I, Item 1A. "Risk Factors" of our 2024 Annual Report. The materiality of any risks and uncertainties identified in our Forward Looking Statements contained in this Report or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations and cash flows. See Part I, Item 2 for “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On May 29, 2025, the Company announced a new stock repurchase program providing for the repurchase of up to $18.0 million of the Company's outstanding common stock. The stock repurchase program will expire on June 30, 2026 but may be discontinued or amended at any time.

During the third quarter of 2025, the Company repurchased 659,218 shares of common stock at an average price of $18.75 per share as part of the Company's stock repurchase program.

Issuer Purchases of Equity Securities
(a) (b) (c) (d)
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Number of Shares that May Yet Be Purchased Under the Plan
July 1, 2025 to July 31, 2025 484,594 $ 18.76 484,594 912,269
August 1, 2025 to August 31, 2025 174,624 $ 18.72 174,624 737,645
September 1, 2025 to September 30, 2025 — $ — — 737,645
Total 659,218 $ 18.75 659,218 737,645
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
--- ---

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Plans

During the quarter ended September 30, 2025, no officer or director of the Company adopted or terminated any contract, instruction, or written plan for the purchase or sale of securities of our common stock that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement as defined in 17 CFR§ 229.408(c).

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ITEM 6. EXHIBITS
Exhibit No Description of Exhibits
--- ---
3.1 Articles of Incorporation of RBB Bancorp ^(1)^
3.2 Bylaws of RBB Bancorp ^(2)^
3.3 Amendment to Bylaws of RBB Bancorp ^(4)^
4.1 Specimen Common Stock Certificate of RBB Bancorp ^(3)^
The other instruments defining the rights of holders of the long-term debt securities of the Company and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Company hereby agrees to furnish copies of these instruments to the SEC upon request.
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS Inline XBRL Instance Document
--- ---
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 The cover page of RBB Bancorp’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, formatted in Inline XBRL (contained in Exhibit 101)
(1) Incorporated by reference from Exhibit 3.1 of the Registrant’s Registration Statement in Form S-1 filed with the SEC on June 28, 2017.
--- ---
(2) Incorporated by reference from Exhibit 3.2 of the Registrant’s Registration Statement in Form S-1 filed with the SEC on June 28, 2017.
--- ---
(3) Incorporated by reference from Exhibit 4.1 of the Registrant’s Registration Statement in Form S-1 filed with the SEC on June 28, 2017.
--- ---
(4) Incorporated by reference from Exhibit 3.3 of the Registrant’s Quarterly Report in Form 10-Q filed with the SEC on November 13, 2018.
--- ---

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

RBB BANCORP
(Registrant)
Date: November 7, 2025 /s/ Johnny Lee
Johnny Lee<br> <br>President and Chief Executive Officer
Date: November 7, 2025 /s/ Lynn Hopkins
Lynn Hopkins<br> <br>Executive Vice President, Chief Financial Officer

61

ex_858729.htm

Exhibit 31.1

CERTIFICATION

I, Johnny Lee, certify that:

1. I have reviewed this quarterly report on Form 10-Q of RBB Bancorp;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
--- ---
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
--- ---
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
--- ---
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
--- ---
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
--- ---
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
--- ---
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting
--- ---
Date: November 7, 2025 By: /s/ Johnny Lee
--- --- ---
Johnny Lee,
President and Chief Executive Officer

ex_858730.htm

Exhibit 31.2

CERTIFICATION

I, Lynn Hopkins, certify that:

1. I have reviewed this quarterly report on Form 10-Q of RBB Bancorp;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
--- ---
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
--- ---
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
--- ---
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
--- ---
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
--- ---
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
--- ---
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
--- ---
Date: November 7, 2025 By: /s/ Lynn Hopkins
--- --- ---
Lynn Hopkins,
Executive Vice President and Chief Financial Officer

ex_858731.htm

Exhibit 32.1

CERTIFICATION

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RBB Bancorp (the “Company”) on Form 10-Q for the period ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Johnny Lee, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
--- ---
Date: November 7, 2025 By: /s/ Johnny Lee
--- --- ---
Johnny Lee,
President and Chief Executive Officer

ex_858732.htm

Exhibit 32.2

CERTIFICATION

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RBB Bancorp (the “Company”) on Form 10-Q for the period ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lynn Hopkins, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
--- ---
Date: November 7, 2025 By: /s/ Lynn Hopkins
--- --- ---
Lynn Hopkins,
Executive Vice President and Chief Financial Officer

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