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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, 2023

☐	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

Incorporation or organization)

(I.R.S. Employer

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: 18,995,303 outstanding as of October 31, 2023.

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)	9
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	36
	CRITICAL ACCOUNTING POLICIES	37
	OVERVIEW	39
	ANALYSIS OF THE RESULTS OF OPERATIONS	40
	ANALYSIS OF FINANCIAL CONDITION	49
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	62
ITEM 4.	CONTROLS AND PROCEDURES	63
PART II - OTHER INFORMATION		65
ITEM 1.	LEGAL PROCEEDINGS	65
ITEM 1A.	RISK FACTORS	65
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	65
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	65
ITEM 4.	MINE SAFETY DISCLOSURES	65
ITEM 5.	OTHER INFORMATION	65
ITEM 6.	EXHIBITS	66
SIGNATURES		67

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2023 AND DECEMBER 31, 2022

(In thousands, except share amounts)

	(Unaudited)
	*September 30,*			*December 31,*
	*2023*			*2022*
Assets
Cash and due from banks	$	330,791		$	83,548
Interest-earning deposits in other financial institutions		600			600
Securities:
Available for sale		354,378			256,830
Held to maturity (fair value of $4,750 and $5,563 at September 30, 2023 and December 31, 2022, respectively)		5,214			5,729
Mortgage loans held for sale		62			—
Loans held for investment:
Real estate		2,929,017			3,053,864
Commercial and other		191,552			283,106
Total loans		3,120,569			3,336,970
Unaccreted discount on acquired loans		(998	)		(1,238	)
Deferred loan costs, net		1,381			717
Total loans, net of deferred loan costs and unaccreted discounts on acquired loans		3,120,952			3,336,449
Allowance for credit losses		(42,430	)		(41,076	)
Net loans		3,078,522			3,295,373

Premises and equipment, net		26,134			27,009
Federal Home Loan Bank (FHLB) stock		15,000			15,000
Net deferred tax assets		18,323			16,977
Cash surrender value of bank owned life insurance (BOLI)		58,346			57,310
Goodwill		71,498			71,498
Servicing assets		8,439			9,521
Core deposit intangibles		3,010			3,718
Right-of-use assets- operating leases		29,949			25,447
Accrued interest and other assets		69,088			50,498
Total assets	$	4,069,354		$	3,919,058

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

Table of Contents

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2023 AND DECEMBER 31, 2022

(In thousands, except share amounts)

	(Unaudited)
	*September 30,*			*December 31,*
	*2023*			*2022*
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing demand	$	572,393		$	798,741
Savings, NOW and money market accounts		608,020			615,339
Time deposits $250,000 and under		1,237,831			837,369
Time deposits over $250,000		735,828			726,234
Total deposits		3,154,072			2,977,683

Reserve for unfunded commitments		654			1,157
FHLB advances		150,000			220,000
Long-term debt (net of unamortized debt issuance costs of $981 and $1,415 at September 30, 2023 and December 31, 2022, respectively)		174,019			173,585
Subordinated debentures		14,884			14,720
Lease liabilities - operating leases		31,265			26,523
Accrued interest and other liabilities		41,949			20,827
Total liabilities		3,566,843			3,434,495

Commitments and contingencies - Note 13

Shareholders' equity:
Preferred Stock - 100,000,000 shares authorized, no par value; none outstanding		—			—
Common Stock - 100,000,000 shares authorized, no par value; 18,995,303 shares issued and outstanding at September 30, 2023 and 18,965,776 shares issues and outstanding at December 31, 2022		277,462			276,912
Additional paid-in capital		3,579			3,361
Retained earnings		247,159			225,883
Non-controlling interest		72			72
Accumulated other comprehensive loss, net		(25,761	)		(21,665	)
Total shareholders’ equity		502,511			484,563
Total liabilities and shareholders’ equity	$	4,069,354		$	3,919,058

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

Table of Contents

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME – (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(In thousands, except per share amounts)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Interest and dividend income:
Interest and fees on loans	$	47,617	$	43,588	$	148,369	$	121,631
Interest on interest-earning deposits		3,193		373		6,096		655
Interest on investment securities		4,211		1,784		10,321		4,210
Dividend income on FHLB stock		290		224		814		673
Interest on federal funds sold and other		252		445		716		1,149
Total interest income		55,563		46,414		166,316		128,318
Interest expense:
Interest on savings deposits, now and money market accounts		3,106		1,529		8,180		3,091
Interest on time deposits		21,849		2,460		54,424		5,540
Interest on subordinated debentures and long-term debt		2,579		2,427		7,668		7,154
Interest on other borrowed funds		440		1,020		2,428		1,974
Total interest expense		27,974		7,436		72,700		17,759
Net interest income		27,589		38,978		93,616		110,559
Provision for credit losses		1,399		1,766		3,793		3,048
Net interest income after provision for credit losses		26,190		37,212		89,823		107,511
Noninterest income:
Service charges, fees and other		1,357		1,214		4,150		3,745
Gain on sale of loans		212		265		258		1,783
Loan servicing fees, net of amortization		623		724		1,959		1,628
Increase in cash surrender value of life insurance		356		332		1,036		986
Gain on sale of OREO		190		—		190		—
Gain on sale of fixed assets		32		—		32		757
		2,770		2,535		7,625		8,899
Noninterest expense:
Salaries and employee benefits		9,744		9,561		28,935		28,558
Occupancy and equipment expenses		2,414		2,349		7,242		6,728
Data processing		1,315		1,306		3,969		3,857
Legal and professional		1,022		1,077		6,907		4,337
Office expenses		437		382		1,163		1,033
Marketing and business promotion		340		364		892		1,172
Insurance and regulatory assessments		730		441		2,043		1,360
Core deposit premium		236		277		708		833
Other expenses		638		940		2,445		2,489
		16,876		16,697		54,304		50,367
Income before income taxes		12,084		23,050		43,144		66,043
Income tax expense		3,611		6,398		12,752		19,297
Net income	$	8,473	$	16,652	$	30,392	$	46,746

Net income per share
Basic	$	0.45	$	0.88	$	1.60	$	2.44
Diluted		0.45		0.87		1.60		2.41

Weighted-average common shares outstanding
Basic		18,995,303		18,988,443		18,991,579		19,142,732
Diluted		18,997,304		19,130,447		19,013,838		19,415,558

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

Table of Contents

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(In thousands)

	*Three Months Ended*						*Nine Months Ended*
	*September 30,*						*September 30,*
	*2023*			*2022*			*2023*			*2022*
Net income	$	8,473		$	16,652		$	30,392		$	46,746

Other comprehensive loss:
Unrealized loss on securities available for sale:		(4,824	)		(9,773	)		(5,838	)		(30,140	)

Related income tax effect:		1,468			2,999			1,742			9,275

Total other comprehensive loss		(3,356	)		(6,774	)		(4,096	)		(20,865	)

Total comprehensive income	$	5,117		$	9,878		$	26,296		$	25,881

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

Table of Contents

RBB BANCORP AND SUBSIDIARIES

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

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(In thousands, except share amounts)

	*Common Stock*														*Accumulated*
	*Shares*			*Amount*			*Additional Paid-in Capital*			*Retained Earnings*			*Non- Controlling Interest*		*Other Comprehensive Loss, net*			*Total*
Balance at June 30, 2023		18,995,303		$	277,462		$	3,436		$	241,725		$	72	$	(22,405	)	$	500,290
Net income		—			—			—			8,473			—		—			8,473
Stock-based compensation		—			—			143			—			—		—			143
Cash dividends on common stock ($0.16 per share)		—			—			—			(3,039	)		—		—			(3,039	)
Other comprehensive loss, net of taxes		—			—			—			—			—		(3,356	)		(3,356	)
Balance at September 30, 2023		18,995,303		$	277,462		$	3,579		$	247,159		$	72	$	(25,761	)	$	502,511

Balance at June 30, 2022		18,881,829		$	275,096		$	4,193		$	197,889		$	72	$	(15,747	)	$	461,503
Net income		—			—			—			16,652			—		—			16,652
Stock-based compensation		—			—			274			—			—		—			274
Restricted stock unit vested		6,450			175			(175	)		—			—		—			—
Cash dividends on common stock ($0.14 per share)		—			—			—			(2,663	)		—		—			(2,663	)
Stock options exercised		217,932			3,680			(1,099	)		—			—		—			2,581
Repurchase of common stock		(94,539	)		(1,370	)		—			(608	)		—		—			(1,978	)
Other comprehensive loss, net of taxes		—			—			—			—			—		(6,774	)		(6,774	)
Balance at September 30, 2022		19,011,672		$	277,581		$	3,193		$	211,270		$	72	$	(22,521	)	$	469,595

	*Common Stock*														*Accumulated*
	*Shares*			*Amount*			*Additional Paid-in Capital*			*Retained Earnings*			*Non- Controlling Interest*		*Other Comprehensive Loss, net*			*Total*
Balance at January 1, 2023		18,965,776		$	276,912		$	3,361		$	225,883		$	72	$	(21,665	)	$	484,563
Net income		—			—			—			30,392			—		—			30,392
Stock-based compensation		—			—			609			—			—		—			609
Restricted stock unit vested		20,374			391			(391	)		—			—		—			—
Cash dividends on common stock ($0.48 per share)		—			—			—			(9,116	)		—		—			(9,116	)
Stock options exercised		9,153			159			—			—			—		—			159
Other comprehensive loss, net of taxes		—			—			—			—			—		(4,096	)		(4,096	)
Balance at September 30, 2023		18,995,303		$	277,462		$	3,579		$	247,159		$	72	$	(25,761	)	$	502,511

Balance at January 1, 2022		19,455,544		$	282,335		$	4,603		$	181,329		$	72	$	(1,656	)	$	466,683
Cumulative effect of change in accounting principle related to ASC 326 ⁽¹⁾		—			—			—			(2,204	)		—		—			(2,204	)
Net income		—			—			—			46,746			—		—			46,746
Stock-based compensation		—			—			680			—			—		—			680
Restricted stock cancelled		(40,000	)		—			—			—			—		—			—
Restricted stock vested		—			355			(355	)		—			—		—			—
Restricted stock unit vested		7,450			202			(202	)		—			—		—			—
Cash dividends on common stock ($0.42 per share)		—			—			—			(8,074	)		—		—			(8,074	)
Stock options exercised		442,308			6,969			(1,533	)		—			—		—			5,436
Repurchase of common stock		(853,630	)		(12,280	)		—			(6,527	)		—		—			(18,807	)
Other comprehensive loss, net of taxes		—			—			—			—			—		(20,865	)		(20,865	)
Balance at September 30, 2022		19,011,672		$	277,581		$	3,193		$	211,270		$	72	$	(22,521	)	$	469,595

(1) Represents the impact of the adoption of Accounting Standards Update ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) on January 1, 2022.

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

Table of Contents

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS – (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(In thousands)

	*Nine Months Ended*
	*September 30,*
	*2023*			*2022*
Operating activities
Net income	$	30,392		$	46,746
Adjustments to reconcile net income to net cash from Operating activities:
Depreciation and amortization of premises and equipment		1,520			1,869
Net accretion of securities, loans, deposits, and other		(4,257	)		(391	)
Amortization of investment in affordable housing tax credits		846			778
Amortization of intangible assets		1,976			3,023
Amortization of right-of-use asset		3,765			3,858
Change in operating lease liabilities		(3,525	)		(3,754	)
Provision for credit losses		3,793			3,048
Stock-based compensation		609			680
Deferred tax benefit		395			72
Gain on sale of loans		(258	)		(1,783	)
Gain on sale of OREO		(190	)		—
Gain on sale of fixed assets		(32	)		(757	)
Increase in cash surrender value of life insurance		(1,036	)		(986	)
Loans originated and purchased for sale, net		(10,236	)		(37,612	)
Proceeds from loans sold		14,626			56,480
Other items		21,716			17
Net cash provided by operating activities		60,104			71,288
Investing activities
Securities available for sale:
Purchases		(592,177	)		(340,226	)
Maturities, repayments and calls		493,220			412,480
Securities held to maturity:
Maturities, repayments and calls		500			500
Purchase of other equity securities, net		(378	)		(1,208	)
Net increase of investment in qualified affordable housing projects		(72	)		(133	)
Net decrease (increase) in loans		188,856			(294,693	)
Proceeds from sales of OREO		483			—
Net cash received in connection with a branch purchase		—			71,352
Proceeds from sale of fixed assets		32			757
Purchases of premises and equipment		(614	)		(1,473	)
Net cash provided by (used in) investing activities		89,850			(152,644	)
Financing activities
Net decrease in demand deposits and savings accounts		(233,667	)		(502,364	)
Net increase (decrease) in time deposits		409,913			(5,028	)
Proceeds from FHLB advances		80,000			470,000
Repayments of FHLB Advances		(150,000	)		(380,000	)
Cash dividends paid		(9,116	)		(8,074	)
Common stock repurchased, net of repurchased costs		—			(18,807	)
Exercise of stock options		159			5,436
Net cash provided by (used in) financing activities		97,289			(438,837	)
Net increase (decrease) in cash and cash equivalents		247,243			(520,193	)
Cash and cash equivalents at beginning of period		83,548			694,372
Cash and cash equivalents at end of period