RBB 10-K & 10-Q changes, risk factors and insider trading

Shifts in short-term interest rates may reduce net interest income, which is the principal component of our earnings. Net interest income is the difference between the amounts received by us on our interest-earning assets and the interest paid by us on our interest-bearing liabilities. When interest rates rise, the rate of interest we receive on our assets, such as loans, risesmay rise more quickly than the rate of interest that we pay on our interest-bearing liabilities, such as deposits, which may cause our profits to increase. However, when interest rates decrease, the rate of interest we receive on our assets, such as loans, may decline more quickly than the rate of interest that we pay on our interest-bearing liabilities, such as deposits, which may cause our profits to decrease. The impact on earnings is more adverse when the slope of the yield curve flattens or becomes inverted, that is, when short-term interest rates remain constant or increase more than long-term interest rates or when long-term interest rates decrease more than short-term interest rates.

At December 31, 2024,2025, we had $1.5$1.6 billion of commercial loans, consisting of $1.2$1.3 billion of CRE loans, $129.6$140.1 million of C&I loans for which real estate is not the primary source of collateral and $173.3$155.5 million of C&D loans. C&I loans represented 4.2% of our total loan portfolio at December 31, 2024. Commercial loans are often larger and involve greater risks than other types of lending. Because payments on such loans are often dependent on the successful operation or development of the property or business involved, repayment of such loans is often more sensitive than other types of loans to adverse conditions in the real estate market or the general business climate and economy. Accordingly, a downturn in the real estate market and a challenging business and economic environment may increase our risk related to commercial loans, particularly commercial real estate loans. Unlike residential mortgage loans, which generally are made on the basis of the borrowers’ ability to make repayment from their employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial loans typically are made on the basis of the borrowers’ ability to make repayment from the cash flow of the commercial venture. Our C&I loansloans, which represented 4.2% of our total loan portfolio at December 31, 2025, are primarily made based on the identified cash flow of the borrower and secondarily on the collateral underlying the loans. Most often, this collateral consists of accounts receivable, inventory and equipment. Inventory and equipment may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. If the cash flow from business operations is reduced, the borrower’s ability to repay the loan may be impaired. Due to the larger average size of each commercial loan as compared with other loans such as residential loans, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial loans could have a material adverse impact on our financial condition and results of operations.

As of December 31, 2024,2025, our SFR mortgage loan portfolio amounted to $1.49$1.66 billion or 48.9%50.0% of our loans HFIloan portfolio. As of that date, 97.0%97.4% of our SFR mortgage loans consisted of non-qualified mortgage loans, which are considered to have a higher degree of risk and are less liquid than qualified mortgage loans. We offer two SFR mortgage products, a low loan-to-value, alternative document hybrid non-qualified SFR mortgage loan, orwhich we refer to as non-qualified SFR mortgage loan, and a qualified SFR mortgage loan. As of December 31, 2024,2025, our non-qualified SFR mortgage loans had an average loan-to-value of 55.9%54.6% and an average FICO score of 763. As of December 31, 2024,2025, 3.0% of our total SFR mortgage loan portfolio were loans originated to foreign nationals. The non-qualified SFR mortgage loans that we originate are designed to assist Asian-Americans who have recently immigrated to the United States and as such are willing to provide higher down payment amounts and pay higher interest rates and fees in return for reduced documentation requirements. Non-qualified SFR mortgage loans are considered less liquid than qualified SFR mortgage loans because such loans are not able to be securitized and can only be sold directly to other financial institutions. SuchSince non-qualified loans may be considered more risky than qualified mortgage loans althoughloans, we attempt to address this enhanced risk through our underwriting process, including requiring larger down payments and, in some cases, interest reserves.

We also have a concentration in our SFR secondary sale market, as a substantial portion of our non-qualified mortgage loans have been historically sold to twoa banks;small although,number we are currently selling SFR mortgage loans to threeof banks. Although, weWe are taking steps to reduce our dependence on these banks by expanding the number of banks that we sell our non-qualified SFR mortgages to, webut may not be successful in expanding our sales market for our non-qualified mortgage loans. These loans also present a pricing risk as rates change, and our sale premiums cannot be guaranteed. Further, the criteria for our loans to be purchased by other banks may change from time to time, which could result in a lower volume of corresponding loan originations.

A significant segment of our business consists of originating and periodically selling U.S. government guaranteed loans, in particular those guaranteed by the SBA. Presently, the SBA guarantees 75% of the principal amount of each qualifying SBA loan originated under the SBA’s 7(a) loan program. There is no assurance that the U.S. government will maintain the SBA 7(a) loan program or if it does, that such guaranteed portion will remain at its current level. In addition, from time to time, the government agencies that guarantee these loans reach their internal limits and cease to guarantee future loans. In addition, these agencies may change their rules for qualifying loans or Congress may adopt legislation that would have the effect of discontinuing or changing the loan guarantee programs. Non-governmental programs could replace government programs for some borrowers, but the terms might not be equally acceptable. Therefore, if these changes occur, the volume of loans to small businesses, industrial and agricultural borrowers of the types that now qualify for government guaranteed loans could decline. Also, the profitability associated with the sale of the guaranteed portion of these loans could decline as a result of market displacements due to increases in interest rates, and could cause the premiums realized on the sale of the guaranteed portions to decline from current levels. As the funding and sale of the guaranteed portion of SBA 7(a) loans is a portion of our business and a part of our noninterest income, any significant changes to the funding for the SBA 7(a) loan program and any prolonged government shutdown may have an unfavorable impact on our prospects, future performance and results of operations.

As a commercial bank, we provide services to a number of clients whose deposit levels vary considerably and have a significant amount of seasonality. 165Our clientsdeposits maintainedinclude $1.3 billion, or approximately 40%, of the Bank's total deposits, related to 166 client relationships who maintain balances (greater than $2 million, when aggregating all related accounts, including multiple business entities and personal funds of business owners) in excess of $2.0 million per clientowners, at December 31, 2024. This amounted to $1.1 billion, or approximately 34%, of the Bank’s total deposits as of December 31, 2024.2025. In addition, our ten largest depositor relationships accounted for approximately 11%12.5% of our deposits at December 31, 2024.2025. Our largest depositor relationship accounted for approximately 2.2%2.0% of our deposits at December 31, 2024.2025. These deposits can and do fluctuate substantially.fluctuate. The loss of any combination of these depositors, or a significant decline in the deposit balances due to ordinary course fluctuations related to these customers’ businesses, would adversely affect our liquidity and require us to raise deposit rates to attract new deposits, or otherwise purchase federal funds or borrow funds on a short-term basis to replace such deposits. Depending on the interest rate environment and competitive factors, low cost deposits may need to be replaced with higher cost funding, resulting in a decrease in net interest income and net income. Consequently, the occurrence of these events could have a material adverse impact to our operations and financial results.

As of January 1, 2022, we adopted ASU 2016-13 (ASC 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the CECL model, which changes how we estimate credit losses and increased the required level of our ACL. There are risks inherent in making any loan, including risks inherent in dealing with individual borrowers, risks of nonpayment, risks resulting from uncertainties as to the future value of collateral and cash flows available to service debt and risks resulting from changes in economic and market conditions. We cannot guarantee that our credit underwriting and monitoring procedures will reduce these credit risks, and they cannot be expected to completely eliminate our credit risks. If the overall economic climate in the U.S., generally, or our market areas, specifically, declines, our borrowers may experience difficulties in repaying their loans, and the level of nonperforming loans, charge-offs and delinquencies could rise and require further increases in the provision for credit losses, which would cause our net income, return on equity and capital to decrease.

If we fail to maintain effective internal control over financial reporting, or if we fail to remediate material weaknesses previously identified, we may not be able to report our financial results accurately and timely.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on that system of internal control. In the past, material weaknesses have been identified in our internal controls over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. Following identification of the material weaknesses, we implemented a number of controls and procedures designed to improve our control environment, which we believe will be sufficient to remediate our previously identified material weakness. Our actions to maintain effective controls and remedy any weakness or deficiency may not be sufficient to result in an effective internal control environment and any future failure to maintain effective internal control over financial reporting could impair the reliability of our financial statements, which in turn could harm our business, impair investor confidence in the accuracy and completeness of our financial reports, impair our access to the capital markets, cause the price of our common stock to decline and subject us to increased regulatory scrutiny and/or penalties, and higher risk of shareholder litigation.

We arecontinue continuouslyto enhancingenhance and expandingexpand our digital products and services to meet client needs and business needs with desired outcomes.objectives. These digital products and services often includerequire storing, transmitting, and processing confidentialsensitive client, employee, monetary,financial, and proprietary business information. Due to the nature ofBecause this information,information andcan thebe valuevaluable it has for internal and externalto threat actors, we,we and our third-party service providers,providers continueremain exposed to becyber-attacks, subjectfraud to cyber-attacksattempts, and fraudother activitymalicious thatactivities attemptsseeking to gain unauthorized access,access to systems or data, misuse information and information systems,or steal information, disrupt operations, or degrade information systems, spreaddeploy malicious software, and other illegal activities.software.

In addition, our clients and vendors rely on technology and systems not managed directly by us, us—such as networking devices, server infrastructure, personal computers, smartphones, tablets, and other mobile devices, tonetworking contactequipment, and software—to conduct business with us. If the devicestechnology or systems of our clients or vendors becomeis the target of a cyber-attack, or information security breach,compromised, it could result in unauthorized access to, misuse of, or loss of confidential client, employee, monetary,financial, or business information. Threat actors using improperly obtainedstolen personal or financial information of consumers canmay attempt to fraudulently obtain loans, lines of credit, or other financial products from us, or attempt to fraudulently persuadedeceive our employees, clients, or other users of our systems to disclose confidentialadditional information in order to gainobtain improperunauthorized access to our information and information systems.

We also face additionalincur costs when our customers become the victims of cyber-attacks. For example, various retailers have reported that they have been the victims of a cyber-attack in which large amounts of their clients’ data, including debit and credit card information, is obtained. Our clients may be the victims of phishing scams, providing cyber criminals access to their accounts, or credit or debit card information. In these situations, we incur costs to replace compromised cards and address fraudulent transaction activity affecting our clients.

Operational errors can include—including information system misconfiguration, clerical or record-keeping errors,mistakes, or disruptions fromcaused faultyby ortechnology disabled computer or telecommunications systems. Because the nature of the financial services business involves a high volume of transactions, certain errors failures—may be repeated or compoundedamplified before theydetection aredue discoveredto andthe successfullyhigh rectified. Becausevolume of ourtransactions largewe transactionprocess. volume and its necessary dependence upon automated systems to record and processWith these transactions, there is a risk that technical flaws, tampering, or manipulation of those automated systems, arising from events wholly or partially beyond itsour control, may give rise to disruption of service to customers and to financial loss or liability. We are also exposed to the risk that our business continuity and data security systems may prove toinadequate beunder inadequate.certain circumstances.

The occurrence of any of these risks could resultimpair in a diminishedour ability for us to operate oureffectively, business,result in additional costs to correctremediate defects,issues, potentialexpose liabilityus to clients,client claims, or cause reputational intervention,harm, any of which could adverselyhave affecta material adverse effect on our business, financial condition and results of operations.

In addition, California remains at the forefront of climate-related disclosure regulations, including the Climate-Related Financial Risk Act (SB 261), as amended by California Senate Bill 219. While these laws are currently subject to legal challenge and the extent to which these laws may be pre-empted by federal law is uncertain, in the absence of federal preemption the Climate-Related Financial Act would apply to us beginning in 2026 with disclosures based on 2025 data.us. Related compliance costs represent hard costs beyond current regulatory costs and would also involve the cost of management and personnel resources. In addition, we have multiple stakeholders, among them stockholders, customers, federal and state regulatory authorities, and political entities, who often have differing, and sometimes conflicting, priorities and expectations regarding environmental, social and governance issues. For instance, we operate extensively in California, which is at the forefront of requiring climate-related disclosures, but we also operate in states throughout the country, and there is an increasing number of state-level initiatives opposing environmental, social and governance practices.

We regularly use third party vendors as part of our business. We also have substantial ongoing business relationships with other third parties. These types of third party relationships are subject to increasingly demanding regulatory requirements and attention by our federal bank regulators. Recent regulation requires us to enhance our due diligence, ongoing monitoring and control over our third party vendors and other ongoing third party business relationships. In certain casescases, we may be required to renegotiate our agreements with these vendors to meet these enhanced requirements, which could increase our costs. We expect that our regulators will hold us responsible for deficiencies in our oversight and control of our third party relationships and in the performance of the parties with which we have these relationships. As a result, if our regulators conclude that we have not exercised adequate oversight and control over our third party vendors or other ongoing third party business relationships or that such third parties have not performed appropriately, we could be subject to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines as well as requirements for customer remediation, any of which could have a material adverse effect our business, financial condition or results of operations.

We have paid quarterly dividends since our initial public offering in the third quarter of 2017. We paid total dividends of $0.56 per share in 2022, and $0.64 per share in 20232023, 2024, and 2024.2025. We have no obligation to pay dividends and we may change our dividend policy at any time without notice to our shareholders. Holders of our common stock are only entitled to receive such cash dividends as our board of directors, in its discretion, may declare out of funds legally available for such payments. Furthermore, consistent with our strategic plans, growth initiatives, capital availability and requirements, projected liquidity needs, financial condition, and other factors, we have made, and will continue to make, capital management decisions and policies that could adversely impact the amount of dividends paid to our common shareholders.

We are a separate and distinct legal entity from our subsidiaries, including the Bank. We receive substantially all of our revenue from dividends from the Bank and RAM,Bank, which we use as the principal source of funds to pay our expenses. Various federal and/or state laws and regulations limit the amount of dividends that the Bank and certain of our non-bank subsidiaries may pay us. Such limits are also tied to the earnings of our subsidiaries. If the Bank does not receive regulatory approval or if our subsidiaries’ earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, our ability to pay our expenses and our business, financial condition or results of operations could be materially and adversely impacted.

We have outstanding options to purchase 174,500151,000 shares of our common stock and unvested restricted stock units of 191,091 as of December 31, 20242025, that may be exercised or vest and then otherwise be sold (assuming all vesting requirements are met), and we have the ability to issue optionsequity exercisableawards for up to an additional 1,004,658878,916 shares of common stock pursuant to our 2017 Omnibus Stock Incentive Plan. The sale of any of such shares could cause the market price of our stock to decline, and concerns that those sales may occur could cause the trading price of our common stock to decrease or to be lower than it might otherwise be.

A sensitivity analysis of our ACL was performed as of December 31, 2024.2025. Based on this sensitivity analysis, a positive 25% changeincrease in loan prepayment speeds would result in a $1.4 million,$891,000, or 2.8%,2.0%, decrease to the ACL. Conversely, a negative 25% changedecrease in loan prepayment speeds would result in a $1.5$1.1 million, or 3.2%,2.5%, increase to the ACL. Additionally, a one percentage point increase in the forecasted unemployment rate would result in a $966,000,$1.0 million, or 2.0%,2.4%, increase to the ACL and a one percentage point decrease in the forecasted unemployment rate would result in a $1.1 million,$943,000, or 2.2%,2.1%, decrease to the ACL. Management reviews the results using the comparison scenario for sensitivity analysis and considered the results when evaluating the qualitative factor adjustments.

For the year ended December 31, 2024,2025, we reported net earnings of $26.7$32.0 million, a 19.8% increase, compared withto $42.5$26.7 million for the year ended December 31, 2023.2024. This represented aan decreaseincrease of $15.8$5.3 million, or 37.2%,19.8%, from the prior year due to a $19.9$12.9 million decreaseincrease in net interest income,income and a $6.5$1.5 million increase in noninterest income, partially offset by increases of $501,000 in the provision for credit losses, partially offset by a $1.5$7.5 million decrease in noninterest expensesexpenses, and an $8.8$1.2 million decrease in income tax expense. The decreaseincrease in net interest income was attributed mostly to the higherdecrease costin the average rate paid on interest-bearing deposits and the increase in the average balance of fundstotal asloans. interestPre-tax expensepre-provision increasedincome $15.4totaled million.$52.5 million for the year ended December 31, 2025, a 15.3% increase compared to $45.5 million for the year ended December 31, 2024 (see Non-GAAP Financial Measures for a reconciliation of this amount). Diluted earnings per share was $1.83 for the year ended December 31, 2025, a 24.5% increase, compared to $1.47 for the year ended December 31, 2024.

The allowance for loan losses ("ALL") was $43.9 million at December 31, 2025, reflecting a decrease of $3.8 million from $47.7 million at December 31, 2024, reflecting an increase of $5.8 million from $41.9 million at December 31, 2023.2024. During 2024,2025, there was a $9.8 millionthe provision for loan losses totaled $10.6 million compared to $3.9$9.8 million for 2023.2024. The increase in the 20242025 provision for loan losses was due to aloan highergrowth and the level of specific reserves and net charge-offs and increases in nonperforming and classified loans.charge-offs. The ALL toas a percentage of loans HFI outstanding was 1.56%1.32% and 1.38%1.56% as of December 31, 20242025 and December 31, 2023.2024.

Shareholders’ equity decreasedincreased $3.4$15.5 million, or 0.7%,3.1%, to $507.9$523.4 million as of December 31, 20242025, from $511.3$507.9 million at December 31, 2023.2024. The decreaseincrease during 20242025 was primarily due to net income of $31.9 million, lower unrealized losses on available for sale ("AFS") securities, net of taxes, of $6.9 million, and equity compensation activity of $1.9 million, partially offset by common stock repurchases of $20.7$14.0 million,million and common stock cash dividends paid of $11.7 million and higher net unrealized losses on AFS securities of $745,000, partially offset by net income of $26.7 million and equity compensation activity of $3.2$11.3 million. As a result, book value per share increased 4.3%7.1% to $28.66$30.69 from $ 27.47$28.66 and tangible book value per share increased 4.4%7.8% to $24.51$26.42 from $23.48.$24.51. See Non-GAAP Financial Measures for a reconciliation of these measures to their most comparable GAAP measures.

In 2024,2025, we generated fully-taxable equivalent net interest income of $99.5$112.4 million, aan decreaseincrease of $19.9$12.9 million, or 16.7%,13.0%, from $119.4$99.5 million in 2023.2024. TheThis $19.9 million decreaseincrease was due to aan $15.4$8.5 million increasedecrease in interest expense and a $4.5 million decreaseincrease in interest income. The decreaseincrease in interest income was mostly due to lowerhigher interest and fee income on total loans of $9.7$9.3 million and securities of $2.7 million, partially offset by higherlower interest income on interest-earningcash depositsbalances of $4.7$7.6 million. The decreaseincrease in loan interest income was mostly due to a lowerhigher average total loan balance of $164.3$157.3 million.million, while the average loan yield remained relatively unchanged. The increasedecrease in cash and investment interest income from cash balances was attributed to highera decrease in the overnight Fed Funds rate and the impact of lower average cash balances as excess liquidity was deployed to the loans and asecurities higher investment portfolio yield, offset by a lower average balance of investment securities.portfolios. The increasedecrease in interest expense was mostly due to a 7264 basis point increasedecrease in total average interest-bearing deposit ratescosts, andpartially offset by the impact of higher average interest-bearing deposits of $30.1$134.8 million in 2025 compared to 2024. The average overnight Federal Funds Rate was 4.21% for the year ended December 31, 2024.2025, Thecompared weighted average Federal Funds Rate wasto 5.15% for the year ended December 31, 2024 compared to 5.03% for the year ended December 31, 2023.2024.

Our net interest margin ("NIM") was 2.95% for the year ended December 31, 2025, an increase of 25 basis points from 2.70% for the year ended December 31, 2024, a decrease of 46 basis points from 3.16% for the year ended December 31, 2023.2024. The decreaseincrease was due to a 5538 basis point increasedecrease in the overall cost of funds, partially offset by aan 28 basis point increasedecrease in the yield on average interest-earning assets. The yield on average interest-earning assets increaseddecreased to 5.88%5.80% for the year ended December 31, 20242025, compared to the prior year due mainly to a 1292 basis point increasedecrease in the yield on average cash and cash equivalents to 5.53%,4.61% and an 18 basis point increasedecrease in the investmentyield on our securities portfolio yield,as short term market rates decreased, partially offset by the impact of the change in the mix of interest-earning assets. Average total loan balances decreasedincreased $164.3$157.3 million year over year and average loans represented 83%84% of average interest-earning assets during 20242025 compared to 85%83% during 2023.2024. We maintained the overall loan yield at 6.06% for the year ended December 31, 2025, compared to the prior year.

The overall cost of funds increaseddecreased to 3.49%3.11% infor the year ended December 31, 20242025, from 2.94%3.49% infor the year ended December 31, 20232024, due to a higherlower average cost of interest-bearing deposits in response to higherlower average market interest rates. The overall funding mix for December 31, 20242025, remained relatively unchanged from the prior year with a ratio of average noninterest-bearing deposits to average total funding sources of 16%.15%.

Tax equivalent interest income from our securities portfolio increased $304,000,$2.7 million, or 2.2%,19.0%, to $14.4$17.2 million in 2024.2025. The increase was primarily due to the impact of a $79.7 million, or 24.2%, increase in the average balance of securities, partially offset by an 18 basis point increasedecrease in the tax equivalent yield due to increasesdecreases in market interest rates, partially offset by the impact of a $7.0 million, or 2.1%, decrease in the average balance of securities.rates.

Interest income on our cash and cash equivalents increaseddecreased $4.7$7.6 million, or 40.2%,46.0%, to $16.4$8.9 million in 2024.2025. The increasedecrease was primarily due to ana $80.5$104.7 million increasedecrease in the average balance of cash and cash equivalents combined with a 1292 basis point increase in yield. The increasedecrease in the averageyield. balance resulted from aThe decrease in average loancash balances,balances was offset partially by a decreaseincreases in the average balanceloan ofand totalsecurities deposits.balances as excess liquidity was deployed into these higher yielding assets.

Interest Expense. Interest expense on total interest-bearing liabilities increaseddecreased $15.4$8.5 million, or 15.2%,7.2%, to $117.3$108.8 million in 20242025 primarily due to a 5847 basis point increasedecrease in the average rate on these total interest-bearing liabilities, partially offset by a $29.1 million decrease inwhile the average balance of total interest-bearing liabilities.liabilities increased $135.4 million to fund loan growth.

Our average cost of total deposits was 3.54%3.04% for 2024,2025 compared to 2.87%3.54% for 2023.2024. The increasedecrease was due to a 7264 basis point increasedecrease in the average rate paid on interest-bearing deposits due to increasesdecreases in market interest rates coupled with peer bankand competition for such deposits.

Interest expense on interest-bearing deposits increaseddecreased to $97.1 million in 2025 compared to $108.4 million in 2024 compared to $89.0 million in 2023.2024. The $19.3$11.3 million, or 21.7%,10.4%, increasedecrease was primarily due to a 7264 basis point increasedecrease in the average rate paid on average interest-bearing deposits, andpartially offset by a $42.0$134.8 million increase in the average balance of interest-bearing non-maturity deposits, partially offset by an $11.9 million decrease in the average balance of time deposits. Average noninterest-bearing deposits decreasedtotaled $70.8$529.7 millionmillion, and represented 17% of total average deposits in 2025 compared to $531.5 millionmillion, fromor $602.317% millionof total average deposits, in 2023 as customers looked to higher yielding deposit products in response to higher market interest rates.2024.

The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans 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 on 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, 2024, 2023 and 2022.2023. 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 throughby affecting changes in the mix of interest-earning assets as well as the mix ofand interest-bearing liabilities, changes in the level of interest-bearing liabilities in proportion to the level of interest-earning assets, and inthrough the growth and maturity of earning assets. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity Management and Item 7A. Quantitative and Qualitative Disclosures About Market Risk included herein.

The provision for credit losses wastotaled $9.9$10.4 million for the year ended December 31, 2024,2025, ancompared increaseto ofa $6.5$9.9 million from $3.4 million in 2023. The provision for credit losses for the year ended December 31, 2024. The 2025 provision for credit losses reflected a provision for loan losses of $10.6 million and a negative provision for unfunded commitments of $245,000. The 2024 includedprovision for credit losses reflected a provision for loan losses of $9.8 million and a provision for unfunded commitments of $89,000. The increase in the 20242025 provision for loan losses was primarily due to anloan increasegrowth of 8.6% in specific2025 reservesand the resolution of $6.1certain nonperforming assets resulting in charge-offs during the year. The 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. Net charge-offs totaled $14.4 million, anor increase0.45% inof netaverage charge-offsloans, andfor increasesthe inyear nonperformingended andDecember classified31, loans as2025, compared to $3.9 million, or 0.13% of average loans, for the prioryear year. Specific reserves totaled $6.9 million atended December 31, 2024 and $816,000 at December 31, 2023 and net charge-offs totaled $3.9 million for 2024 compared to $3.1 million for 2023.2024.

Loan servicing income, net of amortization. Loan servicing income, net of amortization, decreased by $311,000$16,000 to $2.3 million for 20242025 compared to $2.6 million for 2023.2024. Loan servicing income, net of amortizationamortization, for SFR mortgage loans decreased due to a lower interestaverage rates,balance resultingof mortgage loans serviced for others in higher2025 pre-paymentcompared speeds.to 2024, while servicing income for SBA loans increased due to lower amortization of servicing assets due to lower prepayments in 2025. The following table presents information on loan servicing income for the years indicated:

As of December 31, 2024,2025, we were servicing SFR mortgage loans for other financial institutions, FHLMC, FNMAand FNMA, and SBA loans.loans Thewhere declinewe have sold the guaranteed portion in the respectivesecondary servicingmarket. portfoliosThe reflectsfollowing table presents the repayment of underlying loans, which exceeds the additions fromtotal loans being soldserviced withfor servicingothers retainedas duringof 2023the anddates 2024.indicated:

Gain on sale of loans. Gains on sale of loans are comprised primarily of gains on sale of SFR mortgage loans and SBA loans. Gains on sale of loans totaled $1.2 million in 2025, compared to $1.6 million in 2024, compared to $374,000 in 2023.2024. The $1.2$430,000 million increasedecrease was primarily due to a higherdecrease in the volume and margins of SBA loans sold in both2025 categories,compared andto an increase in the margins for gains on the sale of SFR mortgage loans sold.2024.

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

At December 31, 2024,2025, total assets were $4.0$4.2 billion, a $33.5$215.8 millionmillion, decreaseor 5.4%, increase compared to December 31, 2023.2024. The $33.5 million decreaseincrease was primarilydriven due toby a $173.6$261.1 millionmillion, decreaseor 8.6%, increase in cashloans andheld cashfor equivalents,investment, partially offset by a $101.2decrease of $45.4 million increase in investment securities and a $24.9 million increase in loans, including loans HFS. The decrease in cash and cash equivalents wasand dueinvestment to a decrease in reliance on wholesale deposits as a resultsecurities of our$14.0 stable liquidity position and an increase in lending activity.million.

The weighted-average life on the total investment portfolio at December 31, 20242025, was 5.04.9 years compared to a weighted-average life of 5.15.0 years at December 31, 2023.2024. 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, usingweighted as the weightsby the dollar amounts of the principal pay-downs.

Approximately 24.3%33.0% of the securities in the total investment portfolio at December 31, 2024,2025, arewere issued by the U.S. government or U.S. government-sponsored agencies and enterprises, which have the implied guarantee of payment of principal and interest. As of December 31, 2024,2025, no U.S. government agency bonds are callable.

The tables below show our investment securities’ gross unrealized losses and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 20242025, and December 31, 2023.2024. The unrealized losses on these securities were primarily attributed to changes in interest rates. The issuers of these securities have not evidenced any cause for default on these securities. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. However,The weissuers of these securities have not evidenced any cause for default on these securities. We have the ability and the intention to hold these securities until their fair values recover to cost or maturity. 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 Item 8. Financial Statements and Supplementary Data - Note 3 — Investment Securities in the notes to the consolidated financial statements included in this Annual Report.

We monitor our securities portfolio to ensure all of our investments have adequate credit support and we consider the lowest credit rating for identification of potential credit impairment. As of December 31, 20242025 and 2023,2024, we determined there was no credit impairment and accordingly there was no ACL on the HTM securities portfolio as of these dates. In addition, we did not have the current intent to sell securities with a fair value below amortized cost at December 31, 2024,2025, and it is more likely than not that we will not be required to sell such securities prior to the recovery of their amortized cost basis. As of December 31, 2024,2025, all of our investment securities in an unrealized loss position received an investment grade credit rating. The overall net decreasesunrealized losses in fairour valuesecurities during the periodportfolio were attributable to a combination of changes in interest rates and market conditions.

The loan portfolio is the largest category of our earning assets, which is almost entirely held for investment as of December 31, 2024.2025. Loans HFI totaled $3.1$3.3 billion, a netan increase of $21.4$261.1 million, or 0.7%,8.6%, as compared to $3.0$3.1 billion at December 31, 2023.2024. Loans HFS totaled $11.2$2.1 million at December 31, 20242025, compared to $1.9$11.3 million at December 31, 2023.2024. The net increase in loans HFI was primarily due to net increases in CRE loans of $33.6 million and SFR mortgage loans of $6.2$161.4 million, CRE loans of $101.6 million, C&I loans of $10.5 million, and SBA loans of $8.7 million, partially offset by decreases in C&D loans of $8.2$17.8 million, SBA loans of $4.8 million,million and other loans of $4.9$3.3 million. The 20242025 loan activity included $441.3$712.7 million in totalnew originations and $61.5$135.9 million in loansadvances sold,on mainlyexisting SFRloans, mortgagesoffset by payoffs/paydowns of $499.6 million, loan sales of $74.0 million, and the guaranteed portioncharge-offs of SBA$14.7 loans.million. SFR mortgage loans represent approximately 48.9%50.0% of our total loans as of December 31, 2024,2025, andcompared thisto ratio is relatively unchanged from 49.1%48.9% as of the end of 2023.2024.

The majority of our loan portfolio is based on collateral or businesses in California and New York, which represent 88%approximately 88.0% of our loan portfolio. Loans secured by collateral in other states represented approximately 12%12.0% of our portfolio and the majority of these loans are secured by real estate with a weighted average LTV of 55.4%55.7% at December 31, 2024.2025.

At December 31, 2024,2025, $44.6SFR million in C&Dmortgage loans were on nonaccrual status,status includingtotaled a$2.1 $26.4 million loan for a partially complete mixed-use commercial project for which we have established a specific reserve of $4.5 million, a $9.4 million loan for a completed mixed-use project, and $8.8 million for a land development project.million. For additional discussion on nonperforming loans, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Analysis of Financial Condition – Problem Loans.

There have been no material changes to the risk factors previously disclosed in Part I, Item 1A. "Risk Factors" of our 2025 Annual Report. The materiality of any risks and uncertainties identified in our Forward-LookingForward 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.

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, 2025 (our "2025 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 2025 Annual Report and the consolidated financial statements in this Form 10-Q10-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 MarchJune 31,30, 2026. Based on this sensitivity analysis, a 25% increase in the assumed prepayment speed on loans would result in ana $899,000,$1.2 million, or 2.04%,2.7%, decrease to the ACL. A 25% decrease in the assumed prepayment speed on loans would result in a $1.1 million,$794,000, or 2.56%,1.8%, increase to the ACL. Additionally, a one percentage point increase in the unemployment rate would result in a $1.1 million,$790,000, or 2.46%,1.8%, increase to the ACL and a one percentage point decrease in the unemployment rate would result in a $970,000,$1.3 million, or 2.20%,2.9%, decrease to the ACL. Management reviews the results using the comparison scenario for sensitivity analysis and considers the results when evaluating the qualitative factor adjustments.

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 moderateModerate stressStress scenario and a majorMajor stressStress 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 $11.0$10.7 million, or 24.89%,24.4%, as of MarchJune 31,30, 2026. Under the Major Stress scenario, the ACL would increase by $31.3$31.1 million, or 70.80%,70.5%, as of MarchJune 31,30, 2026. Management compared the stress test results to our internal forecasts for earnings and capital and has concluded that the Company would remain well-capitalized under these stressed scenarios.

RBB Bancorp is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. RBB Bancorp’s principal business is to serve as the holding company for its wholly-owned subsidiaries, the Bank and RAM. RAM was formed in 2012 to hold and manage problem assets acquired in business combinations. There are no problem assets at RAM or activity in this subsidiary for the three months and six months ended MarchJune 31,30, 2026, or the year ended December 31, 2025. At MarchJune 31,30, 2026, we had total assets of $4.2$4.3 billion, gross loans held for investment ("HFI") of $3.3 billion, total deposits of $3.3$3.4 billion,billion and total shareholders' equity of $531.1$535.2 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). and a loan production office located in the San Francisco Bay area. The products and services include commercial and investor real estate loans, business loans and lines of credit, Small Business Administration (“SBA”) 7A and 504 loans, mortgage loans, trade finance, and a full range of depository accounts, including specialized services such as remote deposit, E-banking, mobile banking, and treasury management services. Our primary source of revenue is providing loans to customers, who are predominately small and middle-market businesses and individuals.

The following discussion provides information about the results of operations, financial condition, liquidity,liquidity and capital resources of RBB and its wholly owned subsidiaries. This information is intended to facilitate an understanding and assessment of significant changes and trends related to our financial condition and results of operations. This discussion and analysis should be read in conjunction with our audited consolidated financial statements included in our 2025 Annual Report, and the unaudited consolidated financial statements and accompanying notes presented elsewhere in this Report. The financial results for the three and six months ended MarchJune 31,30, 2026,2026 are not necessarily indicative of the results expected for the year ending December 31, 2026.

We reported net income of $10.1 million, or $0.59 diluted earnings per share, for the quarter ended June 30, 2026, compared to net income of $11.3 million, or $0.66 diluted earnings per share, for the quarter ended March 31, 2026,2026 comparedand to net income of $10.2$9.3 million, or $0.59$0.52 diluted earnings per share,share for the quarter ended DecemberJune 31, 2025, and $2.3 million, or $0.13 diluted earnings per share, for the quarter ended March 31,30, 2025. Net income for the firstsecond quarter of 2026 reflected lower net interest income and lower noninterest income, offset partially by lower noninterest expense and lower income tax expense as compared to the prior quarter. Net income for the second quarter of 2026 compared to this same quarter last year reflected higher net interest income, lower credit costs, and higherlower noninterest income as compared to the prior quarter and thehigher sameincome quartertax last year.expense.

TheThere was no provision for credit losses wasfor the second quarter of 2026 compared to a reversal of $200,000 for the first quarter of 2026 compared to a provision of $600,000 and $6.8 million for the quarters ended December 31, 2025, and March 31, 2025.2026. The firstsecond quarter of 2026 provision for credit losses reflected a provision for loan losses of $77,000 and a reversal of provision for unfunded loan commitments of $77,000 due to a lower volume of unfunded loan commitments. The second quarter of 2026 provision for credit losses was supporteddue bymainly paydowns on loans with specific reserves,to the impact of stabilizednet charge-offs, while portfolio credit quality trends, and positive underlying economic forecast indicators, whichand offsetchanges the need for provisions related to newin loan originations.portfolio composition remained relatively stable. Net charge-offs in the firstsecond quarter of 2026 represented 0.00%0.01% of average loans on an annualized basis, compared to 0.20% for the fourth quarter of 2025 and 0.35%0.00% for the first quarter of 2026 and 0.42% for the second quarter of 2025.

At MarchJune 31,30, 2026, total assets were $4.2$4.3 billion, aan decreaseincrease of $14.0$66.7 million from December 31, 2025. The decreaseincrease in total assets was primarily the result of aan decreaseincrease of $15.4$70.7 million in cash and cash equivalentsequivalents. andA a decreaseportion of $10.5this cash was held in anticipation of the $40.0 million inredemption incomeof taxsubordinated receivable.notes Theon decreaseJuly in1, cash2026. supportedAt June 30, 2026, total deposits were $3.4 billion, an increase of $10.9$40.2 million infrom gross loans HFI to $3.3 billion at MarchDecember 31, 2026, and an increase of $8.6 million in securities available for sale ("AFS") to $415.8 million at March 31, 2026.2025. The decrease in income tax receivable of $10.5 million was the result of refunds of taxes previously paid that were received from taxing authorities in the first quarter of 2026. Total deposits decreased by $10.5 million to $3.3 billion as of March 31, 2026. The decreaseincrease in total deposits during the first quarter of 2026 was due to a $61.9$145.8 million decreaseincrease in wholesaleretail deposits offset by a $51.4$105.6 million increasedecrease in retailwholesale deposits. The increase in retail deposits included a $219.4$234.9 million increase in non-maturitynonmaturity interest-bearing deposits and a $168.4$154.2 million decrease in time deposits as a portion of the maturing time deposits moved into a high-yield savings product. Noninterest-bearing demand deposits totaledincreased $526.9$65.1 million to $591.6 million, or 15.8%17.5% of total deposits, at MarchJune 31,30, 2026, which is similarcompared to the$526.5 balancesmillion, or 15.7% of total deposits, at December 31, 2025. The gross loan to deposit ratio was 99.6%97.6% at MarchJune 31,30, 2026, compared to 99.0% at December 31, 2025 and 101.5% at June 30, 2025.

Nonperforming assets decreased $4.6$5.3 million to $43.6 million, or 1.02% of total assets, at June 30, 2026, from $48.8 million, or 1.16% of total assets, at March 31, 2026, from $53.5 million, or 1.27% of total assets, at December 31, 2025.2026. The $4.6$5.3 million decrease in nonperforming assets was primarily attributable to a $4.6$20.8 million decrease in OREOnonperforming toloans $4.3partially offset by a $15.6 million atincrease Marchin 31,OREO 2026,(included comparedin to"accrued $8.8interest millionand atother December 31, 2025.assets"). The decreaseincrease in OREO was due to the saletransfer of one propertynonperforming andconstruction aloan $350,000to valuationOREO, provisionoffset onby athe remainingsale of the existing OREO property. The sale resulted in a $1.2 million gain.properties.

Loans classified as substandard decreased by $2.7$11.0 million during the firstsecond quarter of 2026 due to payoffstransfers andto paydownsOREO totalingof $3.0$19.4 million and upgradespayoffs/paydowns tototaling pass-rated status of $1.1$4.2 million, partially offset by downgradesadditions toof substandard totaling $1.5$12.6 million. Loans classified as special mention increaseddecreased $5.5$4.5 million due to downgradespayoffs/paydowns of $5.8$3.8 million, downgrades to substandard-rated loans of $1.8 million, and upgrades to pass-rated loans of $453,000, partially offset by paydownsadditions of $303,000.$1.5 million.

As of MarchJune 31,30, 2026, the allowance for credit losses totaled $44.2$44.1 million, down from $44.4$44.2 million at DecemberMarch 31, 2025.2026. The $222,000$83,000 decrease in the allowance for credit losses for the firstsecond quarter of 2026 was due to a $200,000 reversal of provision for credit losses and net charge-offscharge-off of $22,000.activity. The allowance for loan losses ("ALL") as a percentage of loans HFI totaledincreased to 1.32% at June 30, 2026, compared to 1.31% at March 31, 2026, compared to 1.32% at December 31, 2025.2026. The ALL as a percentage of nonperforming loans HFI was 97.98%184% at June 30, 2026, and 98% at March 31, 2026, and 98.33% at December 31, 2025.2026.

Total shareholders' equity was $535.2 million, or $31.51 book value per share, at June 30, 2026, compared to $531.1 million, or $31.10 book value per share, at March 31, 2026, comparedand to $523.4$517.7 million, or $30.69$29.25 book value per share,share at DecemberJune 31,30, 2025. The increase in shareholders' equity for the firstsecond quarter of 2026 compared to the prior quarter was due mostly to net income of $11.3$10.1 million and stock-based compensation activity of $1.6 million, partially offset by common stock repurchases totaling $4.5 million and common stock cash dividends paid oftotaling $2.8 million and higher net unrealized losses on AFS securities of $962,000.million. Tangible book value per share increased to $27.23 at June 30, 2026, up from $26.84 at March 31, 2026,2026 up fromand $26.42 at December 31, 2025. We repurchased 180,576 shares during the second quarter of 2026 at an average price of $24.65 per share. No shares were repurchased during the first quarter of 2026. For additional information on tangible book value per share, see "Non-GAAP Financial Measures."

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 2026 and 2025. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions. These conditions include short-term and long-term interest rates, inflation, monetary supply, and the strength of the international, national and state economies, in general, and more specifically, the local economies in which we conduct business. Our ability to manage net interest income during changing interest rate environments will have a significant impact on our overall performance. We manage net interest income through affecting changes in the mix of interest-earning assets as well as the mix of interest-bearing liabilities, changes in the level of interest-bearing liabilities in proportion to interest-earning assets, and in the growth and maturity of earning assets. For additional information see “Capital Resources and Liquidity Management” and Part I, Item 3. "Quantitative and Qualitative Disclosures about Market Risk" included in this Report.

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

The following table summarizes the extent to which changes in (1) volumeinterest rates and (2) interest ratesvolume 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.

The net interest margin (“"NIM”") increasedwas 163.06% for the second quarter of 2026, a decrease of 9 basis points tofrom 3.15% for the first quarter of 2026, from 2.99% for the fourth quarter of 2025.2026. The NIM increasedecrease included ana 85 basis point increasedecrease in the yield on average total interest-earning assetsassets, andcombined anwith 8a 4 basis point decreaseincrease in the overall cost of funds. The yield on average total interest-earning assets increaseddecreased to 5.81% for the second quarter of 2026 from 5.86% for the first quarter of 2026 from 5.78% for the fourth quarter of 2025 due mostly to the impact of a 74 basis point increasedecrease from lower FHLB dividends and a 1 basis point decrease in the yield on average loanstotal and a 4 basis point increase from the FHLB special dividend. Average loans represented 84% of average interest-earning assets in the first quarter of 2026, which was unchanged from the fourth quarter of 2025.loans.

The average total cost of funds decreasedincreased to 3.00% for the second quarter of 2026 from 2.96% for the first quarter of 2026 from 3.04% for the fourth quarter of 2025,2026, due mostly to aan 10 basis point decreaseincrease in the overall cost of deposits$120.0 tomillion 2.86%in forsubordinated the first quarter of 2026. The total cost of deposits decreasednotes due to their repricing on April 1, 2026, partially offset by a 125 basis point decrease in the cost of average interest-bearingtotal deposits to 3.39% due to the mix of deposits and the continued repricing of deposits into the current rate environment.2.81%. The average overnightcost Federalof Fundsinterest-bearing Ratedeposits wasdecreased 3.64%to 3.34% for the second quarter of 2026 from 3.39% for the first quarter of 20262026. comparedThe tooverall 3.90%funding mix for the fourthsecond quarter of 2025.2026 Averageremained noninterest-bearingrelatively depositsunchanged represented approximately 16% of average total deposits forfrom the first quarter of 2026 andwith fourthaverage quarterinterest-bearing deposits representing 92% of 2025.average interest-bearing liabilities and average noninterest-bearing deposits representing 16% of average total deposits. The period end weighted average interest rate for total deposits was 2.75% at June 30, 2026 compared to 2.79% at March 31, 2026.

Net interest income increased $4.3$2.8 million to $30.5$30.1 million for the firstsecond quarter of 2026, compared to $26.2$27.3 million for the firstsecond quarter of 2025. The increase in net interest income was due to an increase in interest income of $4.5$3.0 million, partially offset by a $127,000$202,000 increase in interest expense. The increase in interest income was drivenprimarily bydue loanto average interest-earning asset growth asof average total interest-earning assets were $252.1$193.6 million, or 6.8%,5.2%, higher for the first quarter of 2026as compared to the same quarter in 2025. The growth in average interest-earning assets included higher average total loans, securities available for sale, and cash and cash equivalents. The impact of higher average interest-earning assets on income was partially offset by lower market interest rates as compared to the same period in 2025. The increase in interest expense was primarilydriven duelargely toby an increase in the average balancecost of interest-bearingsubordinated deposits,notes offsetdue byto lowertheir rates paidrepricing on thoseApril deposits.1, 2026, from 4.00% to 6.98%.

The $4.5$3.0 million increase in interest income was due mainly to a $4.3$3.0 million increase in interest income from average total loans, of which $3.3$2.2 million was attributed to higher average balancesbalances, and $1.0 million was$795,000 attributed to an increase inhigher rates. Average total loans increasedwere $216.9$3.3 millionbillion duefor the quarter ended June 30, 2026, an increase of $144.3 million, or 4.5%, compared to strong loan growth since the end of the firstsecond quarter of 2025. The yield on average total loans increased 1310 basis points to 6.14%6.13% for the quarter ended MarchJune 31,30, 2026 compared to 6.01%6.03% for the quarter ended MarchJune 31,30, 2025.

The NIM was 3.15%3.06% for the firstsecond quarter of 2026, an increase of 2714 basis points from 2.88%2.92% for the firstsecond quarter of 2025. The increase was primarily due to a 1914 basis point decrease in the total cost of funds to 2.96%3.00%, combined withand a 102 basis point increase in the yield on average total interest-earning assets to 5.86%5.81% for the firstsecond quarter of 2026 whenfrom compared to the rates5.79% for the firstsecond quarter of 2025. The increase in the yield on average total interest-earning assets was due mainly to an increase in loan rates, as well as the impact of the FHLB special dividend in the first quarter of 2026; there was no FHLB special dividend in 2025. The decrease in funding costs was due to the lower average total cost of interest-bearing deposits,deposits in response to lower market rates, offset by the higher average total cost for FHLB advances.borrowings. Average noninterest-bearing deposits totaled $526.1$535.8 million, or 16% of total average deposits, for the firstsecond quarter of 2026 compared to $520.2$526.1 million, or 17% of total average deposits, for the firstsecond quarter of 2025. The increase in the yield on average interest-earning assets was due mainly to a 10 basis point increase in the yield on average total loans.

The provision for credit losses was a $200,000 reversal$0 for the firstsecond quarter of 2026 compared to a $600,000reversal provisionof $200,000 for the fourth quarter of 2025. The first quarter of 2026. The second quarter of 2026 provision for credit losses reflected a provision for loan losses of $77,000 due mainly to net charge-offs and a reversal of provision for creditunfunded losses was supported by paydowns on loans with specific reserves, the impactcommitments of stabilized$77,000 due to a lower volume of unfunded commitments. The second quarter provision also took into consideration that portfolio credit quality trends, and positive underlying economic forecast indicators, whichand offsetchanges the need for provisions related to newin loan originations.portfolio composition remained relatively stable. Net charge-offs on an annualized basis represented 0.00%0.01% of average loans for the firstsecond quarter of 2026 compared to 0.20%0.00% for the fourthfirst quarter of 2025.2026.

The provision for credit losses was a $200,000 reversal$0 for the firstsecond quarter of 2026 compared to a $6.8$2.4 million provision for the firstsecond quarter of 2025. The second quarter of 2025 provision for credit losses for the first quarter of 2025 was the result of an increase in specific reserves of $2.8 million,included net charge-offs of $2.6$3.3 million andmillion, an increase in general reserves of $1.3 million due mainly to loan growth offset partially by a net decrease in specific reserves. Net loan growth. Net charge-offs onof an annualized basis represented 0.35%$83,000 for the firstsecond quarter of 2025.2026 were lower than $3.3 million for the same quarter last year.

Noninterest income for the second quarter of 2026 was $3.0 million, a decrease of $1.2 million from $4.3 million for the first quarter of 2026 was $4.3 million, an increase of $1.4 million from $2.8 million for the fourth quarter of 2025.2026. The increasedecrease in noninterest income was mainly due to lower gains from OREO of $1.1 million, and lower other income of $870,000, offset partially by higher gain on sale of loans of $640,000. The net loss on OREO was $221,000 in the second quarter compared to the net gain on OREO of $890,000,$890,000 recoveriesin the first quarter. The decrease in other income was due to the first quarter including a $484,000 recovery of a fully charged-off acquired loansloan and $360,000 of $484,000, and interest income on the tax refunds related to purchased federal tax credits; there were no similar items in the second quarter of $360,000, offset partially by lower gain on sale of loans of $133,000.2026. The sale of $4.9$42.1 million of mortgage loans and $4.0$8.1 million of Small Business Administration (“SBA”) loans resulted in gains of $324,000$1.0 million for the firstsecond quarter of 2026 compared to the sale of mortgage loans of $22.0$4.9 million and SBA loans of $2.9$4.0 million for gains of $457,000$324,000 for the fourthfirst quarter of 2025.2026.

Noninterest income increaseddecreased $2.0$3.5 million to $4.3$7.3 million for the firstsix quartermonths ofended 2026June from30, $2.32026, compared to $10.8 million for the same quarterperiod in the prior year. The increasedecrease inwas noninterestmainly income primarily relatesdue to the gainsecond on OREO, recoveriesquarter of fully2025 charged-offincluding acquired loans, and interestother income onof $5.2 million for the taxreceipt refundsof discussedthe above.previously Inmentioned addition,ERC grant. This was partially offset by a higher gain on sale of loans forof the$849,000 firstand quartergain on OREO of 2026 increased $243,000 to $324,000 from $81,000$669,000 for the six months ended June 30, 2026 compared to the same quarterperiod in the prior year. The first quarter of 2025 included losses on sales of nonperforming loans.2025.

As of MarchJune 31,30, 2026, we were servicing SFR mortgage loans for other financial institutions, the Federal Home Loan Mortgage Corporation ("FHLMC"), the Federal National Mortgage Association ("FNMA"), and SBA loans. The following table presents loans serviced for others as of the dates indicated:

Total Assets. At MarchJune 31,30, 2026, total assets were $4.2$4.3 billion, aan decreaseincrease of $14.0$66.7 millionmillion, from total assets of $4.2 billion at December 31, 2025. The decreaseincrease includedwas primarily due to a $15.4$70.7 million decreaseincrease in cash and cash equivalents and a $10.5 million decrease in income tax receivable. These decreases were partially offset by increases in loans HFI of $10.9 million and securities AFS of $8.6 million.equivalents.

Our investment portfolio is comprised primarily of U.S. government and SBA agency securities, corporate note securities, mortgage-backed securities ("MBS") backed by government-sponsored entities, andcollateral taxablemortgage obligations ("CMO") and tax-exemptcommercial municipal securities.paper.

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 weighted-average life of the total investment portfolio was 4.6 years at MarchJune 31,30, 2026, and 4.9 years at December 31, 2025. The weighted-average life is the average number of years that each dollar of unpaid principal due remains outstanding. Average life is computed as the weighted-average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal pay-downs.

The tablefollowing belowtables summarizesshow the amortized cost and fair value of the investment securities portfolio and their weighted average yieldsportfolio, by expected maturitymaturity, as of Marchthe 31,dates 2026.indicated. ExpectedHowever, expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Accordingly, MBS and CMO securities are classified in accordance with their estimated average life.

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 MarchJune 31,30, 2026 and December 31, 2025. 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 MarchJune 31,30, 2026 or December 31, 2025. 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 MarchJune 31,30, 2026, all of 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 2025 Annual Report. Economic trends may adversely affect the value of the portfolio of investment securities that we hold.

The loan portfolio is the largest category of our earning assets. Loans HFI increaseddecreased $10.9$4.8 million, or 1.3% on an annualized basis,million to $3.3 billion at MarchJune 31,30, 2026,2026 since December 31, 2025. The increasedecrease was primarily due to increasesdecreases in SFR mortgageCRE loans of $27.4$25.5 million, commercial and industrial ("C&I") loans of $12.9 million, and construction and land development ("C&D") loans of $3.8$9.2 million, and SBA loans of $6.3 million, partially offset by decreasesincreases in CRESFR mortgage loans of $28.9$25.3 millionmillion, and SBAcommercial and industrial ("C&I") loans of $3.7$11.9 million. SFR mortgage loans represented 50.6%50.8% of our total HFI loans as of MarchJune 31,30, 2026,2026 and 50.0% at December 31, 2025. There were no loans HFS at MarchJune 31,30, 2026,2026 compared to $2.1 million loans HFS at December 31, 2025. The decrease in loans HFS was due to sales totaling $8.9 million, offset by loans originated or transferred into HFS of $6.8 million.

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

The majority of our loan portfolio is based on collateral or businesses located in California and New York, which represented 88.2% of our loan portfolio. Loans secured by collateral in other states represented approximately 11.8% of our portfolio and the majority of these loans are secured by real estate with a weighted average loan-to-value ("LTV") ratio of 55.1%55% at MarchJune 31,30, 2026.

SFR loans. SFR loans totaled $1.7 billion, or 50.6%50.8% of our loans HFI portfolio, as of MarchJune 31,30, 2026. SFR loans increased $27.4$25.3 million, or 6.7% annualized,1.5%, during the first quartersix months of 2026 due to higher originations relative to payoffs, paydowns,paydowns and sales. As of MarchJune 31,30, 2026, the weighted-average LTV ratio of the portfolio was 54%, the weighted average FICO score was 764,765, and the weighted average age was 3.53.6 years.