UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
| | 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:
RBB BANCORP
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
| | |
| (Address of principal executive offices) | (Zip Code) |
(
(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 | ||
| | | |
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.
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).
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 | ☐ | | ☒ | |||
| 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
Number of shares of common stock of the registrant:
PART I - FINANCIAL INFORMATION
| CONSOLIDATED FINANCIAL STATEMENTS |
RBB BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
| (Unaudited) | ||||||||
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Assets | ||||||||
| Cash and due from banks | $ | $ | ||||||
| Interest-earning deposits with financial institutions | ||||||||
| Cash and cash equivalents | ||||||||
| Interest-earning time deposits in other financial institutions | ||||||||
| Securities: | ||||||||
| Available for sale | ||||||||
| Held to maturity (fair value of $ and $ at March 31, 2025 and December 31, 2024) | ||||||||
| Mortgage loans held for sale | ||||||||
| Loans held for investment | ||||||||
| Allowance for loan losses | ( | ) | ( | ) | ||||
| Loans held for investment, net of allowance for loan losses | ||||||||
| Premises and equipment, net | ||||||||
| Federal Home Loan Bank (FHLB) stock | ||||||||
| Net deferred tax assets | ||||||||
| Cash surrender value of bank owned life insurance (BOLI) | ||||||||
| Goodwill | ||||||||
| Servicing assets | ||||||||
| Core deposit intangibles | ||||||||
| Right-of-use assets - operating leases | ||||||||
| Accrued interest and other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Deposits: | ||||||||
| Noninterest-bearing demand | $ | $ | ||||||
| Savings, NOW and money market accounts | ||||||||
| Time deposits $250,000 and under | ||||||||
| Time deposits over $250,000 | ||||||||
| Total deposits | ||||||||
| FHLB advances | ||||||||
| Long-term debt, net of issuance costs | ||||||||
| Subordinated debentures, net | ||||||||
| Lease liabilities - operating leases | ||||||||
| Accrued interest and other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies - Note 12 | ||||||||
| Shareholders' equity: | ||||||||
| Preferred Stock - shares authorized, par value; outstanding | ||||||||
| Common Stock - shares authorized, par value; shares issued and outstanding at March 31, 2025 and shares issued and outstanding at December 31, 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Non-controlling interest | ||||||||
| Accumulated other comprehensive loss, net | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
RBB BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME – (UNAUDITED)
(In thousands, except share amounts)
| Three Months Ended |
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| March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
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| Interest and dividend income: |
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| Interest and fees on loans |
$ | $ | $ | |||||||||
| Interest on interest-earning deposits |
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| Interest on investment securities |
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| Dividend income on FHLB stock |
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| Interest on federal funds sold and other |
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| Total interest and dividend income |
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| Interest expense: |
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| Interest on savings deposits, NOW and money market accounts |
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| Interest on time deposits |
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| Interest on long-term debt and subordinated debentures |
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| Interest on FHLB advances |
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| Total interest expense |
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| Net interest income before provision for credit losses |
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| Provision for credit losses |
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| Net interest income after provision for credit losses |
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| Noninterest income: |
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| Service charges and fees |
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| Gain on sale of loans |
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| Loan servicing income, net of amortization |
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| Increase in cash surrender value of life insurance |
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| Gain on other real estate owned |
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| Other income |
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| Total noninterest income |
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| Noninterest expense: |
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| Salaries and employee benefits |
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| Occupancy and equipment expenses |
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| Data processing |
||||||||||||
| Legal and professional |
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| Office expenses |
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| Marketing and business promotion |
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| Insurance and regulatory assessments |
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| Core deposit intangible |
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| Other expenses |
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| Total noninterest expense |
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| Net income before income taxes |
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| Income tax expense |
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| Net income |
$ | $ | $ | |||||||||
| Net income per share |
||||||||||||
| Basic |
$ | $ | $ | |||||||||
| Diluted |
$ | $ | $ | |||||||||
| Weighted-average common shares outstanding |
||||||||||||
| Basic |
||||||||||||
| Diluted |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
RBB BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – (UNAUDITED)
(In thousands)
| Three Months Ended |
||||||||||||
| March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
||||||||||
| Net income |
$ | $ | $ | |||||||||
| Other comprehensive income/(loss): |
||||||||||||
| Unrealized gain/(loss) on securities available for sale |
( |
) | ( |
) | ||||||||
| Related income tax effect |
( |
) | ||||||||||
| Total other comprehensive income/(loss) |
( |
) | ( |
) | ||||||||
| Total comprehensive income |
$ | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
RBB BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY – (UNAUDITED)
(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 January 1, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||
| Stock-based compensation, net | — | |||||||||||||||||||||||||||
| Restricted stock units vested | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cash dividends on common stock ($ per share) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive income, net of taxes | — | |||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||
| Stock-based compensation, net | — | |||||||||||||||||||||||||||
| Restricted stock units vested | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cash dividends on common stock ($ per share) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Stock options exercised | ( | ) | ||||||||||||||||||||||||||
| Repurchase of common stock | ( | ) | ( | ) | ( | ) | — | — | ( | ) | ||||||||||||||||||
| Other comprehensive loss, net of taxes | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
RBB BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS – (UNAUDITED)
(In thousands)
| Three Months Ended |
||||||||
| March 31, |
||||||||
| 2025 |
2024 |
|||||||
| Operating activities |
||||||||
| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash from operating activities: |
||||||||
| Depreciation and amortization of premises and equipment |
||||||||
| Net accretion of securities, loans, deposits, and other |
( |
) | ( |
) | ||||
| Amortization of investment in affordable housing tax credits |
||||||||
| Amortization of intangible assets |
||||||||
| Amortization of right-of-use asset |
||||||||
| Change in operating lease liabilities |
( |
) | ( |
) | ||||
| Provision for credit losses |
||||||||
| Stock-based compensation |
||||||||
| Deferred tax benefit |
( |
) | ( |
) | ||||
| Gain on sale of loans |
( |
) | ( |
) | ||||
| Gain on sale and transfer of OREO |
( |
) | ||||||
| Increase in cash surrender value of life insurance |
( |
) | ( |
) | ||||
| Loans originated and purchased for sale, net |
( |
) | ( |
) | ||||
| Proceeds from loans held for sale |
||||||||
| Other items |
( |
) | ( |
) | ||||
| Net cash provided by operating activities |
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| Investing activities |
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| Securities available for sale: |
||||||||
| Purchases |
( |
) | ( |
) | ||||
| Maturities, repayments and calls |
||||||||
| Net increase in other equity securities |
( |
) | ( |
) | ||||
| Net increase of investment in qualified affordable housing projects |
( |
) | ||||||
| Net increase in loans |
( |
) | ( |
) | ||||
| Proceeds from sales of loans originally classified as HFI |
||||||||
| Proceeds from sales of OREO |
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| Purchases of premises and equipment |
( |
) | ( |
) | ||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Financing activities |
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| Net increase in demand deposits and savings accounts |
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| Net increase (decrease) in time deposits |
( |
) | ||||||
| Proceeds from FHLB advances |
||||||||
| Repayments of FHLB Advances |
( |
) | ||||||
| Cash dividends paid |
( |
) | ( |
) | ||||
| Restricted stock units vesting |
( |
) | ( |
) | ||||
| Common stock repurchased, net of repurchase costs |
( |
) | ||||||
| Exercise of stock options |
||||||||
| Net cash provided by (used in) financing activities |
( |
) | ||||||
| Net decrease in cash and cash equivalents |
( |
) | ( |
) | ||||
| Cash and cash equivalents at beginning of period |
||||||||
| Cash and cash equivalents at end of period |
$ | $ | ||||||
| Supplemental disclosure of cash flow information |
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| Cash paid during the period: |
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| Interest paid |
$ | $ | ||||||
| Taxes paid |
||||||||
| Non-cash investing and financing activities: |
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| Transfer from loans to other real estate owned |
||||||||
| Loans transferred to held for sale, net |
||||||||
| Additions to servicing assets |
||||||||
| Recognition of operating lease right-of-use assets |
( |
) | ||||||
| Recognition of operating lease liabilities |
||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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 March 31, 2025, we had total assets of $
The Bank provides business-banking products and services predominantly to Asian-centric communities through
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.
In addition, we have been designated a Community Development Financial Institution (“CDFI”). CDFIs are certified by the CDFI Fund at the U.S. Department of the Treasury, which provide funds to CDFIs through a variety of programs. We have established a CDFI advisory board to assist the Bank in finding organizations to support low-to-moderate income individuals.
We operate
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.
We completed whole bank acquisitions and one branch acquisition from July 2011 through January 2022. All of our acquisitions have been accounted for using the acquisition method of accounting and, accordingly, the operating results of the acquired entities have been included in the consolidated financial statements from their respective acquisition dates.
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 months ended March 31, 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.
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.
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 are 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.
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. We are currently evaluating the potential impact of the pending adoption of ASU 2024-03 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 | |||||||||||||
| March 31, 2025 | Cost | Gains | Losses | Value | ||||||||||||
| Available for sale | (dollars in thousands) | |||||||||||||||
| Government agency securities | $ | $ | $ | ( | ) | $ | ||||||||||
| SBA agency securities | ( | ) | ||||||||||||||
| Mortgage-backed securities: residential | ( | ) | ||||||||||||||
| Collateralized mortgage obligations: residential | ( | ) | ||||||||||||||
| Collateralized mortgage obligations: commercial | ( | ) | ||||||||||||||
| Commercial paper | ( | ) | ||||||||||||||
| Corporate debt securities | ( | ) | ||||||||||||||
| Municipal tax-exempt securities | ( | ) | ||||||||||||||
| Total available for sale | $ | $ | $ | ( | ) | $ | ||||||||||
| Held to maturity | ||||||||||||||||
| Municipal taxable securities | $ | $ | $ | $ | ||||||||||||
| Municipal tax-exempt securities | ( | ) | ||||||||||||||
| Total held to maturity | $ | $ | $ | ( | ) | $ | ||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | |||||||||||||
| December 31, 2024 | Cost | Gains | Losses | Value | ||||||||||||
| Available for sale | (dollars in thousands) | |||||||||||||||
| Government agency securities | $ | $ | $ | ( | ) | $ | ||||||||||
| SBA agency securities | ( | ) | ||||||||||||||
| Mortgage-backed securities: residential | ( | ) | ||||||||||||||
| Collateralized mortgage obligations: residential | ( | ) | ||||||||||||||
| Collateralized mortgage obligations: commercial | ( | ) | ||||||||||||||
| Commercial paper | ( | ) | ||||||||||||||
| Corporate debt securities | ( | ) | ||||||||||||||
| Municipal tax-exempt securities | ( | ) | ||||||||||||||
| Total available for sale | $ | $ | $ | ( | ) | $ | ||||||||||
| Held to maturity | ||||||||||||||||
| Municipal taxable securities | $ | $ | $ | $ | ||||||||||||
| Municipal tax-exempt securities | ( | ) | ||||||||||||||
| Total held to maturity | $ | $ | $ | ( | ) | $ | ||||||||||
We pledged investment securities with a fair value of $
There were sales of investment securities during the three months ended March 31, 2025, December 31, 2024, and March 31, 2024.
for investment securities at March 31, 2025 and December 31, 2024 totaled $
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 | |||||||||||||||||||||||||||||||
| March 31, 2025 | (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||
| Government agency securities | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| SBA agency securities | ||||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities: residential | ||||||||||||||||||||||||||||||||||||||||
| Collateralized mortgage obligations: residential | ||||||||||||||||||||||||||||||||||||||||
| Collateralized mortgage obligations: commercial | ||||||||||||||||||||||||||||||||||||||||
| Commercial paper | ||||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | ||||||||||||||||||||||||||||||||||||||||
| Municipal tax-exempt securities | ||||||||||||||||||||||||||||||||||||||||
| Total available for sale | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Municipal taxable securities | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Municipal tax-exempt securities | ||||||||||||||||||||||||||||||||||||||||
| Total held to maturity | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||
| Government agency securities | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| SBA agency securities | ||||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities: residential | ||||||||||||||||||||||||||||||||||||||||
| Collateralized mortgage obligations: residential | ||||||||||||||||||||||||||||||||||||||||
| Collateralized mortgage obligations: commercial | ||||||||||||||||||||||||||||||||||||||||
| Commercial paper | ||||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | ||||||||||||||||||||||||||||||||||||||||
| Municipal tax-exempt securities | ||||||||||||||||||||||||||||||||||||||||
| Total available for sale | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Municipal taxable securities | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Municipal tax-exempt securities | ||||||||||||||||||||||||||||||||||||||||
| Total held to maturity | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
| March 31, 2025 | (dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Government agency securities | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||
| SBA agency securities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Mortgage-backed securities: residential | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Collateralized mortgage obligations: residential | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Collateralized mortgage obligations: commercial | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Commercial paper | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Corporate debt securities | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Municipal tax-exempt securities | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Total available for sale | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||
| Municipal tax-exempt securities | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||
| Total held to maturity | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||
| 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 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||
| SBA agency securities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Mortgage-backed securities: residential | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Collateralized mortgage obligations: residential | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Collateralized mortgage obligations: commercial | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Commercial paper | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Corporate debt securities | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Municipal tax-exempt securities | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Total available for sale | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||
| Municipal tax-exempt securities | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||
| Total held to maturity | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||
The securities that were in an unrealized loss position at March 31, 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, together with widened liquidity spreads and credit spreads. 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 March 31, 2025, all of our HTM securities were rated “AA-” or above. Accordingly, no ACL was recorded as of March 31, 2025 and December 31, 2024, against HTM or AFS securities, and there was provision for credit losses recognized for the three months ended March 31, 2025 and 2024.
Equity Securities - We have several Community Reinvestment Act (“CRA”) equity investments, other bank stocks, and other equity investments. We recorded no gain or loss for any of the periods presented. Other equity securities (included in “Accrued interest and other assets” in the consolidated balance sheets) were $
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 as of the dates indicated:
| March 31, 2025 | December 31, 2024 | |||||||
| Loans HFI: (1) | (dollars in thousands) | |||||||
| Real Estate: | ||||||||
| Construction and land development | $ | $ | ||||||
| Commercial real estate (2) | ||||||||
| Single-family residential mortgages | ||||||||
| Commercial: | ||||||||
| Commercial and industrial | ||||||||
| SBA | ||||||||
| Other | ||||||||
| Total loans HFI | $ | $ | ||||||
| Allowance for loan losses | ( | ) | ( | ) | ||||
| Total loans HFI, net | $ | $ | ||||||
| (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 and single-family residential loans for a business purpose. |
The following table presents a summary of the changes in the ACL for the periods indicated:
| For the Three Months Ended | ||||||||||||||||||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | March 31, 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 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Provision for/(reversal of) credit losses | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| (1) | Included in “Accrued interest and other liabilities” |
The following tables present the balance and activity related to the ALL for loans HFI by loan portfolio segment for the periods presented.
| For the Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||
| Construction and land development | Commercial real estate | Single-family residential mortgages | Commercial and industrial | SBA | Other | Total | ||||||||||||||||||||||
| Allowance for loan losses: | (dollars in thousands) | |||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Provision for/(reversal of) credit losses | ( | ) | ||||||||||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||
| Ending allowance balance | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| For the Three Months Ended December 31, 2024 | ||||||||||||||||||||||||||||
| Construction and land development | Commercial real estate | Single-family residential mortgages | Commercial and industrial | SBA | Other | Total | ||||||||||||||||||||||
| Allowance for loan losses: | (dollars in thousands) | |||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Provision for/(reversal of) credit losses | ( | ) | ||||||||||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||
| Ending allowance balance | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| For the Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||
| Construction and land development | Commercial real estate | Single-family residential mortgages | Commercial and industrial | SBA | Other | Total | ||||||||||||||||||||||
| Allowance for loan losses: | (dollars in thousands) | |||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Provision for/(reversal of) credit losses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||
| Ending allowance balance | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
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 and commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained. We use the following definitions for risk ratings:
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, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
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 | ||||||||||||||||||||||||||||||||||||
| March 31, 2025 | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving | Revolving Converted to Term During the Period | Total | |||||||||||||||||||||||||||
| Real estate: | (dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Construction and land development | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard (1) | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Single-family residential mortgages | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| SBA | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Other: | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total by risk rating: | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
(1) The $
| 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) | |||||||||||||||||||||||||||||||||||
| Construction and land development | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Single-family residential mortgages | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||||||||||||
| Commercial and industrial | — | |||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| SBA | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Other: | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total by risk rating: | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
| March 31, 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) | |||||||||||||||||||||||||||
| Construction and land development | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||||||
| Single-family residential mortgages | ||||||||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||
| SBA | ||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| (1) | Past due loans exclude nonaccrual loans. |
| 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) | |||||||||||||||||||||||||||
| Construction and land development | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||||||
| Single-family residential mortgages (2) | ||||||||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||
| SBA | ||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| (1) | Past due loans exclude nonaccrual loans. | |
| (2) | Nonaccrual SFR mortgage loans include $ |
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:
| March 31, 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) | |||||||||||||||
| Construction and land development | $ | $ | $ | $ | ||||||||||||
| Commercial real estate | ||||||||||||||||
| Single-family residential mortgages | ||||||||||||||||
| Commercial: | ||||||||||||||||
| Commercial and industrial | ||||||||||||||||
| SBA | ||||||||||||||||
| Other: | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
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:
| March 31, 2025 | ||||||||||||||||
| Commercial Real Estate | Residential Real Estate | Business Assets | Total | |||||||||||||
| Real Estate: | (dollars in thousands) | |||||||||||||||
| Construction and land development | $ | $ | $ | $ | ||||||||||||
| Commercial real estate | ||||||||||||||||
| Commercial: | ||||||||||||||||
| Commercial and industrial | ||||||||||||||||
| SBA | ||||||||||||||||
| Total loans | $ | $ | $ | $ | ||||||||||||
| December 31, 2024 | ||||||||||||||||
| Commercial Real Estate | Residential Real Estate | Business Assets | Total | |||||||||||||
| Real Estate: | (dollars in thousands) | |||||||||||||||
| Construction and land development | $ | $ | $ | $ | ||||||||||||
| Commercial real estate | ||||||||||||||||
| Single-family residential mortgages | ||||||||||||||||
| Commercial: | ||||||||||||||||
| Commercial and industrial | ||||||||||||||||
| SBA | ||||||||||||||||
| Total loans | $ | $ | $ | $ | ||||||||||||
Loan Modifications to Borrowers Experiencing Financial Difficulty - On January 1, 2023, we adopted ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." Under this guidance, 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 borrower’s experiencing financial difficulty are individually evaluated for purposes of the allowance for loan losses.
There were , $
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 as of March 31, 2025 for loans that were modified over the last 12 months.
| Current (1) | 30-89 Days Past Due | 90 Days Or More Past Due (2) | Total | |||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Construction and land development | $ | $ | $ | $ | ||||||||||||
| Commercial real estate | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| (1) | Included in current loans are CRE loans totaling $ | |
| (2) | Included in loans past due 90 days or more are C&D loans totaling $ |
During the three months ended March 31, 2024, there were no defaults of loans that had been modified within the last 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:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Loans serviced for others: | (dollars in thousands) | |||||||
| Mortgage loans | $ | $ | ||||||
| SBA loans | ||||||||
| Commercial real estate loans | ||||||||
| Construction loans | ||||||||
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 rights is net against loan servicing income. Loan servicing income, net of amortization, totaled $
When mortgage and SBA loans are sold with servicing retained, servicing rights 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 rights 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 rights are evaluated for impairment based upon the fair value of the rights 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 | ||||||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||||||||||||||||||||||
| Mortgage | SBA | Mortgage | SBA | Mortgage | SBA | |||||||||||||||||||
| Loans | Loans | Loans | Loans | Loans | Loans | |||||||||||||||||||
| Servicing assets: | (dollars in thousands) | |||||||||||||||||||||||
| Beginning of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Additions | ||||||||||||||||||||||||
| Payoffs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Amortization | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| End of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
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 $
The fair value of servicing assets for SBA loans was $
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 million at both March 31, 2025 and December 31, 2024 and is the only intangible asset with an indefinite life on our consolidated balance sheets. There were
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
Estimated CDI amortization expense for future years is as follows:
| As of March 31, 2025: | CDI Amortization Expense | |||
| (dollars in thousands) | ||||
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
NOTE 7 - DEPOSITS
At March 31, 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 | $ | $ | $ | |||||||||
| One year to three years | ||||||||||||
| Over three years | ||||||||||||
| Total | $ | $ | $ | |||||||||
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 $
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 limit through the Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweeps (“ICS”) programs. Time deposits held through the CDARS program were $
NOTE 8 - LONG-TERM DEBT
In March 2021, we issued $
| March 31, 2025 | December 31, 2024 | |||||||
| (dollars in thousands) | ||||||||
| Principal | $ | $ | ||||||
| Unamortized debt issuance costs | ( | ) | ( | ) | ||||
| Long-term debt, net of issuance costs | $ | $ | ||||||
NOTE 9 - SUBORDINATED DEBENTURES
Subordinated debentures consist of subordinated debentures issued in connection with three separate trust preferred securities and totaled $
| Issue Date | Principal Amount | Unamortized Valuation Reserve | Recorded Value | Stated Rate Description | March 31, 2025 Effective Stated Rate | Stated Maturity | |||||||||||||
| Subordinated debentures: | (dollars in thousands) | ||||||||||||||||||
| TFC Trust |
| $ | $ | $ |
| % |
| ||||||||||||
| FAIC Trust |
|
| % |
| |||||||||||||||
| PGBH Trust |
|
| % |
| |||||||||||||||
| Total | $ | $ | $ | ||||||||||||||||
(a) Represents applicable tenor spread adjustment when the original LIBOR index was discontinued on September 30, 2023.
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 $
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 $
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 $
We recorded interest expense of $
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 March 31, 2025, we had a secured borrowing capacity with the FHLB of $
The details of the FHLB term advances outstanding at March 31, 2025 are shown in the table below:
| Advance Date | Amount | Rate | Structure | Next Call Date | Final Stated Maturity Date | |||||||||
| (dollars in thousands) | ||||||||||||||
| 3/12/2025 | $ | % | Quarterly call, 3 month initial lock out | 6/12/2025 | 3/12/2029 | |||||||||
| 3/14/2025 | $ | % | 1 time call, 3 month initial lock out | 6/17/2025 | 3/17/2031 | |||||||||
| 3/12/2025 | $ | % | 1 time call, 6 month initial lock out | 9/12/2025 | 3/12/2031 | |||||||||
| 3/14/2025 | $ | % | Quarterly call, 6 month initial lock out | 9/15/2025 | 3/15/2029 | |||||||||
| 9/30/2024 | $ | % | 1 time call, 1 year initial lock out | 9/29/2025 | 9/29/2028 | |||||||||
| Total | $ | % | ||||||||||||
FRB Secured Line of Credit. At March 31, 2025, we had secured borrowing capacity with the FRB of $
Federal Funds Arrangements with Commercial Banks. At March 31, 2025, we may borrow on an unsecured basis, up to $
There were no amounts outstanding under any of the other borrowing arrangements above as of March 31, 2025, except the FHLB overnight advances of $
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 $
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.
At March 31, 2025 and December 31, 2024, we had the following financial commitments whose contractual amount represents credit risk:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (dollars in thousands) | ||||||||
| Commitments to make loans | $ | $ | ||||||
| Unused lines of credit | ||||||||
| Commercial and similar letters of credit | ||||||||
| Standby letters of credit | ||||||||
| Total | $ | $ | ||||||
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 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 $
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 $
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 March 31, 2025 | ||||
| (dollars in thousands) | ||||
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total future minimum lease payments | $ | |||
| Less amount of payment representing interest | ( | ) | ||
| Total present value of lease payments | $ | |||
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 $
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:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Operating Leases | (dollars in thousands) | |||||||
| ROU assets | $ | $ | ||||||
| Lease liabilities | ||||||||
| Weighted-average remaining lease term (in years) | ||||||||
| Weighted-average discount rate | % | % | ||||||
NOTE 14 - RELATED PARTY TRANSACTIONS
There were
Deposits from principal officers, directors, and their affiliates at March 31, 2025 and December 31, 2024 were $
Certain directors and their affiliates own $
NOTE 15 - STOCK-BASED COMPENSATION
RBB Bancorp 2010 Stock Option Plan and 2017 Omnibus Stock Incentive Plan
Under the RBB Bancorp 2010 Stock Option Plan (the “2010 Plan”), we were permitted to grant awards to eligible persons in the form of qualified and non-qualified stock options. We reserved up to
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. We reserved up to
Stock Options
Compensation expense for stock options was $
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 | % | |||
| Expected term (years) | ||||
| Expected dividends | % | |||
| Risk free rate | % | |||
| Grant date fair value | $ | |||
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 three months ended March 31, 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 | $ | |||||||||||||||
| Outstanding at end of period | $ | $ | ||||||||||||||
| Options exercisable | $ | $ | ||||||||||||||
The total fair value of the shares vested was
Cash received from the exercise of
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 with market conditions 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
The recorded compensation expense for RSUs was $
The following table presents RSUs activity during the three months ended March 31, 2025.
| Weighted-Average | ||||||||
| Grant Date | ||||||||
| RSUs | Fair Value Per Share | |||||||
| Outstanding at beginning of year | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Outstanding at end of period | $ | |||||||
NOTE 16 - REGULATORY MATTERS
Holding companies (with assets over $
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 March 31, 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 March 31, 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 March 31, 2025: | (dollars in thousands) | |||||||||||||||||||||||
| Tier 1 Leverage Ratio | ||||||||||||||||||||||||
| Consolidated | $ | % | $ | % | $ | % | ||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
| Common Equity Tier 1 Risk-Based Capital Ratio | ||||||||||||||||||||||||
| Consolidated | $ | % | $ | % | $ | % | ||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
| Tier 1 Risk-Based Capital Ratio | ||||||||||||||||||||||||
| Consolidated | $ | % | $ | % | $ | % | ||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
| Total Risk-Based Capital Ratio | ||||||||||||||||||||||||
| Consolidated | $ | % | $ | % | $ | % | ||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
(1) These ratios are exclusive of the
| 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 | $ | % | $ | % | $ | % | ||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
| Common Equity Tier 1 Risk Based Capital Ratio | ||||||||||||||||||||||||
| Consolidated | $ | % | $ | % | $ | % | ||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
| Tier 1 Risk-Based Capital Ratio | ||||||||||||||||||||||||
| Consolidated | $ | % | $ | % | $ | % | ||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
| Total Risk-Based Capital Ratio | ||||||||||||||||||||||||
| Consolidated | $ | % | $ | % | $ | % | ||||||||||||||||||
| Bank | % | % | % | |||||||||||||||||||||
(1) These ratios are exclusive of the
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
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:
Interest Rate Lock Contracts and Forward Mortgage Loan Sale Contracts:
The fair values of interest rate lock contracts and forward mortgage loan sale contracts are determined by loan lock-in rate, loan funded rate, market interest rate, fees to be collected from the borrower, fees and costs associated with the origination of the loan, expiration timing, sale price, and the value of the retained servicing. We classified these derivatives as level 3 due to management’s estimate of market rate, cost and expiration timing on these contracts.
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"):
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: | ||||||||||||||||
| March 31, 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 | $ | $ | $ | $ | ||||||||||||
| SBA agency securities | ||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||
| Collateralized mortgage obligations | ||||||||||||||||
| Commercial paper | ||||||||||||||||
| Corporate debt securities | ||||||||||||||||
| Municipal securities | ||||||||||||||||
| Interest rate lock contracts (1) | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| On a non-recurring basis: | ||||||||||||||||
| Collateral dependent individually evaluated loans: | ||||||||||||||||
| Construction and land development loans | $ | $ | $ | $ | ||||||||||||
| Commercial real estate loans | ||||||||||||||||
| Other real estate owned (1) | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
(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 | $ | $ | $ | $ | ||||||||||||
| SBA agency securities | ||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||
| Collateralized mortgage obligations | ||||||||||||||||
| Commercial paper | ||||||||||||||||
| Corporate debt securities | ||||||||||||||||
| Municipal securities | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| On a non-recurring basis: | ||||||||||||||||
| Collateral dependent individually evaluated loans: | ||||||||||||||||
| Construction and land development loans | $ | $ | $ | $ | ||||||||||||
| Commercial real estate loans | ||||||||||||||||
| SBA loans | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
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.
| March 31, 2025 | Fair Value | Valuation Techniques | Unobservable Input(s) | Range | |||||||
| Collateral dependent loans: | (dollars in thousands) | ||||||||||
| Construction and land development loans | $ | Market approach | Adjustments (1) | to | |||||||
| Commercial real estate loans | Market approach | Adjustments (1) | (41%) to 4% | ||||||||
| Other Real Estate Owned (2) | Market approach | Adjustments (1) | (10%) to 21% | ||||||||
| Total | $ | ||||||||||
(1) Represents the minimum and maximum range of adjustments made by appraisers for differences in comparable sales.
(2) Included in “Accrued interest and other assets” on the consolidated balance sheets.
| December 31, 2024 | Fair Value | Valuation Techniques | Unobservable Input(s) | Range | ||||
| Collateral dependent loans: | (dollars in thousands) | |||||||
| Construction and land development loans |
| Market approach | Adjustments (2) |
| ||||
| Commercial real estate loans (1) | | Market approach | Adjustments (2) |
| ||||
| SBA loans | | Market approach | Adjustments (2) |
| ||||
| Total |
| |||||||
(1) Collateral includes CRE and a SFR.
(2) Represents the minimum and maximum range of adjustments made by appraisers for differences in comparable sales.
The fair value measurement of Interest Rate Lock Contracts (IRLCs) and Forward Mortgage Loan Sale Contracts (FMLSCs) were primarily based on the buy price from borrowers at
The fair value hierarchy level and estimated fair value of significant financial instruments as of the dates indicated are summarized as follows:
| March 31, 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 | $ | $ | $ | $ | ||||||||||||
| Interest-earning deposits in other financial institutions | Level 1 | ||||||||||||||||
| Investment securities - AFS | Level 2 | ||||||||||||||||
| Investment securities - HTM | Level 2 | ||||||||||||||||
| Loans held for sale | Level 2 | ||||||||||||||||
| Loans, net | Level 3 | ||||||||||||||||
| Equity securities (1) | Level 3 | ||||||||||||||||
| Investment in FHLB stock | Level 2 | ||||||||||||||||
| Servicing assets | Level 3 | ||||||||||||||||
| Accrued interest receivable (1) | Level 1/2/3 | ||||||||||||||||
| Notional | Fair | Notional | Fair | ||||||||||||||
| Derivative assets: | Value | Value | Value | Value | |||||||||||||
| Interest rate lock contracts (1) | Level 3 | $ | $ | $ | $ | ||||||||||||
| Carrying | Fair | Carrying | Fair | ||||||||||||||
| Financial Liabilities: | Value | Value | Value | Value | |||||||||||||
| Deposits | Level 2 | $ | $ | $ | $ | ||||||||||||
| FHLB advances | Level 3 | ||||||||||||||||
| Long-term debt | Level 3 | ||||||||||||||||
| Subordinated debentures | Level 3 | ||||||||||||||||
| Accrued interest payable | Level 2/3 | ||||||||||||||||
(1) Included in “Accrued interest and other assets” on the consolidated balance sheets.
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 | ||||||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||||||||||||||||||||||
| Income | Shares | Income | Shares | Income | Shares | |||||||||||||||||||
| (dollars in thousands except per share data) | ||||||||||||||||||||||||
| Net income | $ | $ | $ | |||||||||||||||||||||
| Shares outstanding | ||||||||||||||||||||||||
| Impact of weighting shares | ( | ) | ( | ) | ||||||||||||||||||||
| Used in basic EPS | ||||||||||||||||||||||||
| Dilutive effect of outstanding | ||||||||||||||||||||||||
| Stock options | ||||||||||||||||||||||||
| Restricted stock units | ||||||||||||||||||||||||
| Performance stock units | ||||||||||||||||||||||||
| Used in dilutive EPS | $ | $ | $ | |||||||||||||||||||||
| Basic earnings per common share | $ | $ | $ | |||||||||||||||||||||
| Diluted earnings per common share | $ | $ | $ | |||||||||||||||||||||
Options to purchase
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 | ||||||||||||
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||||||||||
| Noninterest income, in scope | (dollars in thousands) | |||||||||||
| Fees and service charges on deposit accounts | $ | $ | $ | |||||||||
| Other fees (1) | ||||||||||||
| Other income (2) | ||||||||||||
| Gain on sale of OREO | ||||||||||||
| Total in-scope noninterest income | ||||||||||||
| Noninterest income, not in scope (3) | ||||||||||||
| Total noninterest income | $ | $ | $ | |||||||||
| (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) | Primarily represents: Net loan servicing income, letter of credit commissions, import/export commissions, recoveries on purchased loans, BOLI income, gains (losses) on sales of loans, income from equity investments, gain on transfer to OREO, and Bank Enterprise Award. |
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 | ||||||||||||
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||||||||||
| Banking Segment | (dollars in thousands) | |||||||||||
| Interest and dividend income | $ | $ | $ | |||||||||
| Reconciliation of revenue | ||||||||||||
| Other revenues | ||||||||||||
| Total consolidated revenues | $ | $ | $ | |||||||||
| Less: | ||||||||||||
| Interest expense | ||||||||||||
| Segment net interest income and noninterest income | $ | $ | $ | |||||||||
| Less: | ||||||||||||
| Provision for credit losses | ||||||||||||
| Salaries and benefits expense | ||||||||||||
| Other segment items (1) | ||||||||||||
| Income tax expense | ||||||||||||
| Consolidated net income | $ | $ | $ | |||||||||
| Total Assets | $ | $ | $ | |||||||||
| Total Loans | $ | $ | $ | |||||||||
| Total Deposits | $ | $ | $ | |||||||||
(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.
NOTE 21 - QUALIFIED AFFORDABLE HOUSING PROJECT INVESTMENTS
At March 31, 2025 and December 31, 2024, investments in qualified affordable housing projects totaled $
During the three months ended March 31, 2025, December 31, 2024, and March 31, 2024, we recognized tax credits from these investments totaling $
NOTE 22 - SUBSEQUENT EVENTS
On , we announced the Board of Directors had declared a common stock cash dividend of $
| 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; |
| ● |
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; |
| ● |
the strength of the U.S. economy in general and the strength of the local economies in which we conduct operations; |
| ● |
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; |
| ● |
possible additional provisions for credit losses and charge-offs; |
| ● |
credit risks of lending activities and deterioration in asset or credit quality; |
| ● |
extensive laws and regulations and supervision that we are subject to, including potential supervisory action by bank supervisory authorities; |
| ● |
compliance with the Bank Secrecy Act and other money laundering statutes and regulations; |
| ● |
potential goodwill impairment; |
| ● |
liquidity risk; |
| ● |
fluctuations in interest rates; |
| ● | failure to comply with debt covenants; |
| ● |
risks associated with acquisitions and the expansion of our business into new markets; |
| ● |
inflation and deflation; |
| ● |
real estate market conditions and the value of real estate collateral; |
| ● |
the effects of having concentrations in our loan portfolio, including commercial real estate and the risks of geographic and industry concentrations; |
| ● |
environmental liabilities; |
| ● |
our ability to compete with larger competitors; |
| ● |
our ability to retain key personnel; |
| ● |
successful management of reputational risk; |
| ● |
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; |
| ● |
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 (“DFPI”) 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.
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, investment securities, 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 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 March 31, 2025. Based on this sensitivity analysis, a positive 25% change in prepayment speed would result in a $1.4 million, or 2.62%, decrease to the ACL. A negative 25% change in prepayment speed would result in a $1.6 million, or 3.09%, increase to the ACL. Additionally, a one percentage point increase in the unemployment rate would result in a $1.0 million, or 1.92%, increase to the ACL and a one percentage point decrease in the unemployment rate would result in a $1.1 million, or 2.02%, 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 the qualitative factors, which are 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, moderate risk and major risk. In the Moderate Stress scenario, the status of all nine risk factors across all pooled loan types were set at “High-Moderate Risk” while in the Major Stress scenario, the status of all nine risk factors across all pooled loan types were set at “Major Risk.” Under the Moderate Stress scenario, the ACL would increase by $8.8 million, or 16.8%, as of March 31, 2025. Under the Major Stress scenario, the ACL would increase by $24.5 million, or 46.7%, as of March 31, 2025. Management compares 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.
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 to the Notes to 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 March 31, 2025, we had total assets of $4.0 billion, gross loans held for investment ("HFI") of $3.1 billion, total deposits of $3.1 billion and total shareholders' equity of $510.3 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.
We have completed six whole bank acquisitions and one branch acquisition from July 2011 through January 2022. All of our acquisitions have been accounted for using the acquisition method of accounting and, accordingly, the operating results of the acquired entities have been included in the consolidated financial statements from their respective acquisition dates.
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 the understanding and assessment of significant changes and trends related to our financial condition and the results of our 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 months ended March 31, 2025 are not necessarily indicative of the results expected for the year ending December 31, 2025.
We reported net income of $2.3 million, or $0.13 diluted earnings per share, for the quarter ended March 31, 2025, compared to net income of $4.3 million, or $0.25 diluted earnings per share, for the quarter ended December 31, 2024 and $8.0 million, or $0.43 diluted earnings per share for the quarter ended March 31, 2024. The provision for credit losses totaled $6.7 million, $6.0 million and zero for the quarters ended March 31, 2025, December 31, 2024 and March 31, 2024.
At March 31, 2025, total assets were $4.0 billion, an increase of $16.9 million from December 31, 2024, as total deposits increased $58.8 million to $3.1 billion while Federal Home Loan Bank ("FHLB") advances decreased $40.0 million to $160.0 million. For the first quarter of 2025 gross loans HFI increased $89.8 million, or 12% annualized, to $3.1 billion, while investment securities decreased $42.0 million, and cash and cash equivalents decreased $18.9 million. At March 31, 2025, available for sale ("AFS") investment securities totaled $378.2 million, inclusive of a pre-tax net unrealized loss of $25.0 million, compared to $420.2 million, inclusive of a pre-tax unrealized loss of $29.2 million at December 31, 2024. The decrease was due primarily to the net decrease in short-term commercial paper of $41.4 million, offset by lower unrealized losses. The loan to deposit ratio was 98.4% at March 31, 2025, compared to 97.5% at December 31, 2024 and 98.6% at March 31, 2024.
During the first quarter of 2025, $150.0 million in FHLB advances with an average cost of 1.18% matured and were largely replaced with $110.0 million in FHLB advances with various terms at an average rate of 3.88%. The overall funding mix for the first quarter of 2025 remained relatively unchanged from the fourth quarter of 2024 with total deposits representing 90% of the funding mix and average noninterest-bearing deposits representing 17% of average total deposits. The all-in average spot rate for total deposits was 3.06% at March 31, 2025.
The first quarter of 2025 provision for credit losses was due to an increase in specific reserves of $2.8 million, net charge-offs of $2.6 million and an increase in general reserves of $1.3 million due mainly to net loan growth. The first quarter increase in specific reserves related mostly to two lending relationships. Net charge-offs included $1.4 million related to a bulk sale of $10.8 million in underperforming single-family residential ("SFR") mortgage loans, of which $6.5 million were on nonaccrual at December 31, 2024, and $1.2 million related to an $8.8 million loan transferred to other real estate owned ("OREO") and subsequently sold in the first quarter of 2025. Net charge-offs on an annualized basis represented 0.35% of average loans for the first quarter of 2025 compared to 0.26% for the fourth quarter of 2024.
Nonperforming assets decreased $16.5 million to $64.6 million, or 1.61% of total assets, at March 31, 2025, from $81.0 million, or 2.03% of total assets, at December 31, 2024. The decrease in nonperforming assets was due to sales totaling $20.0 million and payoffs or paydowns of $1.8 million, partially offset by the addition of one $5.3 million commercial real estate ("CRE") loan placed on nonaccrual status in the first quarter of 2025. Loans classified as special mention, substandard and delinquent 30–89 days were reduced during the first quarter of 2025 based on the actions taken by management to resolve or reduce the exposure to such loans.
As of March 31, 2025, the allowance for credit losses totaled $52.6 million, up from $48.5 million at December 31, 2024. The $4.1 million increase in the allowance for credit losses for the first quarter of 2025 was due to a $6.7 million provision for credit losses offset by net charge-offs of $2.6 million. The allowance for loan losses ("ALL") as a percentage of loans HFI increased to 1.65% at March 31, 2025, compared to 1.56% at December 31, 2024, mostly due to an increase in specific reserves. The ALL as a percentage of nonperforming loans HFI was 86% at March 31, 2025, an increase from 68% at December 31, 2024.
Total shareholders' equity was $510.3 million, or $28.77 book value per share at March 31, 2025, compared to $507.9 million, or $28.66 book value per share at December 31, 2024, and $514.0 million, or $27.67 book value per share at March 31, 2024. The $2.4 million increase in shareholders' equity for the first quarter of 2025 was due to lower net unrealized losses on AFS securities of $3.0 million and net income of $2.3 million, offset by common stock cash dividends paid of $2.9 million. Tangible book value per share increased to $24.63 at March 31, 2025, up from $24.51 at December 31, 2024 and $23.68 at March 31, 2024. We repurchased 956,465 shares after the first quarter of 2024 at an average price of $19.85. For additional information on tangible book value per share, see “Non-GAAP Financial Measures.”
ANALYSIS OF RESULTS OF OPERATIONS
Financial Performance
| Three Months Ended |
||||||||||||
| March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
||||||||||
| (dollars in thousands, except per share data) |
||||||||||||
| Interest income |
$ | 52,336 | $ | 54,555 | $ | 54,795 | ||||||
| Interest expense |
26,173 | 28,578 | 29,918 | |||||||||
| Net interest income |
26,163 | 25,977 | 24,877 | |||||||||
| Provision for credit losses |
6,746 | 6,000 | — | |||||||||
| Net interest income after provision for credit losses |
19,417 | 19,977 | 24,877 | |||||||||
| Noninterest income |
2,295 | 2,729 | 3,372 | |||||||||
| Noninterest expense |
18,522 | 17,649 | 16,969 | |||||||||
| Income before income taxes |
3,190 | 5,057 | 11,280 | |||||||||
| Income tax expense |
900 | 672 | 3,244 | |||||||||
| Net income |
$ | 2,290 | $ | 4,385 | $ | 8,036 | ||||||
| Share Data |
||||||||||||
| Earnings per common share (1): |
||||||||||||
| Basic |
$ | 0.13 | $ | 0.25 | $ | 0.43 | ||||||
| Diluted |
0.13 | 0.25 | 0.43 | |||||||||
| Performance Ratios |
||||||||||||
| Return on average assets, annualized |
0.24 | % | 0.44 | % | 0.81 | % | ||||||
| Return on average shareholders’ equity, annualized |
1.81 | % | 3.41 | % | 6.30 | % | ||||||
| Return on average tangible common equity, annualized (2) |
2.12 | % | 3.98 | % | 7.37 | % | ||||||
| Efficiency ratio (3) |
65.09 | % | 61.48 | % | 60.07 | % | ||||||
| Tangible common equity to tangible assets (2) |
11.10 | % | 11.08 | % | 11.56 | % | ||||||
| Tangible book value per share (2) |
$ | 24.63 | $ | 24.51 | $ | 23.68 | ||||||
| (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. |
||
| (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. |
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.
| Three Months Ended |
||||||||||||||||||||||||||||||||||||
| March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
||||||||||||||||||||||||||||||||||
| Average |
Interest |
Yield / |
Average |
Interest |
Yield / |
Average |
Interest |
Yield / |
||||||||||||||||||||||||||||
| Balance |
& Fees |
Rate |
Balance |
& Fees |
Rate |
Balance |
& Fees |
Rate |
||||||||||||||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents (1) |
$ | 194,236 | $ | 2,249 | 4.70 | % | $ | 308,455 | $ | 3,890 | 5.02 | % | $ | 364,979 | 5,306 | 5.85 | % | |||||||||||||||||||
| FHLB Stock |
15,000 | 330 | 8.92 | % | 15,000 | 330 | 8.75 | % | 15,000 | 331 | 8.88 | % | ||||||||||||||||||||||||
| Securities (2) |
||||||||||||||||||||||||||||||||||||
| Available for sale |
390,178 | 4,113 | 4.28 | % | 361,253 | 3,939 | 4.34 | % | 320,015 | 3,589 | 4.51 | % | ||||||||||||||||||||||||
| Held to maturity |
5,189 | 49 | 3.83 | % | 5,194 | 48 | 3.68 | % | 5,207 | 46 | 3.55 | % | ||||||||||||||||||||||||
| Total loans (3) |
3,079,224 | 45,621 | 6.01 | % | 3,059,786 | 46,374 | 6.03 | % | 3,018,423 | 45,547 | 6.07 | % | ||||||||||||||||||||||||
| Total interest-earning assets |
3,683,827 | $ | 52,362 | 5.76 | % | 3,749,688 | $ | 54,581 | 5.79 | % | 3,723,624 | $ | 54,819 | 5.92 | % | |||||||||||||||||||||
| Noninterest-earning assets |
260,508 | 244,609 | 246,341 | |||||||||||||||||||||||||||||||||
| Total assets |
$ | 3,944,335 | $ | 3,994,297 | $ | 3,969,965 | ||||||||||||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||||||||||||||
| NOW |
$ | 61,222 | $ | 321 | 2.13 | % | $ | 53,879 | $ | 254 | 1.88 | % | $ | 58,946 | $ | 298 | 2.03 | % | ||||||||||||||||||
| Money market |
463,443 | 3,625 | 3.17 | % | 463,850 | 3,735 | 3.20 | % | 411,751 | 3,526 | 3.44 | % | ||||||||||||||||||||||||
| Saving deposits |
155,116 | 522 | 1.36 | % | 162,351 | 682 | 1.67 | % | 157,227 | 654 | 1.67 | % | ||||||||||||||||||||||||
| Time deposits, less than $250,000 |
989,622 | 10,046 | 4.12 | % | 1,034,946 | 11,583 | 4.45 | % | 1,175,804 | 13,805 | 4.72 | % | ||||||||||||||||||||||||
| Time deposits, $250,000 and over |
864,804 | 9,038 | 4.24 | % | 835,583 | 9,778 | 4.66 | % | 785,172 | 9,517 | 4.88 | % | ||||||||||||||||||||||||
| Total interest-bearing deposits |
2,534,207 | 23,552 | 3.77 | % | 2,550,609 | 26,032 | 4.06 | % | 2,588,900 | 27,800 | 4.32 | % | ||||||||||||||||||||||||
| FHLB advances |
176,833 | 989 | 2.27 | % | 200,000 | 886 | 1.76 | % | 150,000 | 439 | 1.18 | % | ||||||||||||||||||||||||
| Long-term debt |
119,562 | 1,295 | 4.39 | % | 119,466 | 1,295 | 4.31 | % | 119,180 | 1,295 | 4.37 | % | ||||||||||||||||||||||||
| Subordinated debentures |
15,175 | 337 | 9.01 | % | 15,121 | 365 | 9.60 | % | 14,957 | 384 | 10.33 | % | ||||||||||||||||||||||||
| Total interest-bearing liabilities |
2,845,777 | 26,173 | 3.73 | % | 2,885,196 | 28,578 | 3.94 | % | 2,873,037 | 29,918 | 4.19 | % | ||||||||||||||||||||||||
| Noninterest-bearing liabilities |
||||||||||||||||||||||||||||||||||||
| Noninterest-bearing deposits |
520,145 | 539,900 | 528,346 | |||||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities |
66,151 | 56,993 | 55,795 | |||||||||||||||||||||||||||||||||
| Total noninterest-bearing liabilities |
586,296 | 596,893 | 584,141 | |||||||||||||||||||||||||||||||||
| Shareholders' equity |
512,262 | 512,208 | 512,787 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity |
$ | 3,944,335 | $ | 3,994,297 | $ | 3,969,965 | ||||||||||||||||||||||||||||||
| Net interest income / interest rate spreads |
$ | 26,189 | 2.03 | % | $ | 26,003 | 1.85 | % | $ | 24,901 | 1.73 | % | ||||||||||||||||||||||||
| Net interest margin |
2.88 | % | 2.76 | % | 2.69 | % | ||||||||||||||||||||||||||||||
| Total cost of deposits |
$ | 3,054,352 | $ | 23,552 | 3.13 | % | $ | 3,090,509 | $ | 26,032 | 3.35 | % | $ | 3,117,246 | $ | 27,800 | 3.59 | % | ||||||||||||||||||
| Total cost of funds |
$ | 3,365,922 | $ | 26,173 | 3.15 | % | $ | 3,425,096 | $ | 28,578 | 3.32 | % | $ | 3,401,383 | $ | 29,918 | 3.54 | % | ||||||||||||||||||
| (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. |
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 March 31, 2025 compared with Three Months Ended December 31, 2024 |
Three Months Ended March 31, 2025 compared with Three Months Ended March 31, 2024 |
|||||||||||||||||||||||
| Change due to: |
Change due to: |
|||||||||||||||||||||||
| Volume |
Yield/Rate |
Interest Variance |
Volume |
Yield/Rate |
Interest Variance |
|||||||||||||||||||
| Interest-earning assets: |
(dollars in thousands) |
|||||||||||||||||||||||
| Cash and cash equivalents (1) |
$ | (1,400 | ) | $ | (241 | ) | $ | (1,641 | ) | $ | (2,153 | ) | $ | (904 | ) | $ | (3,057 | ) | ||||||
| FHLB Stock |
— | — | — | — | (1 | ) | (1 | ) | ||||||||||||||||
| Securities: (2) |
||||||||||||||||||||||||
| Available for sale |
518 | (344 | ) | 174 | 1,653 | (1,129 | ) | 524 | ||||||||||||||||
| Held to maturity |
— | 1 | 1 | (2 | ) | 5 | 3 | |||||||||||||||||
| Total loans (3) |
845 | (1,598 | ) | (753 | ) | 1,833 | (1,759 | ) | 74 | |||||||||||||||
| Total interest-earning assets |
$ | (37 | ) | $ | (2,182 | ) | $ | (2,219 | ) | $ | 1,331 | $ | (3,788 | ) | $ | (2,457 | ) | |||||||
| Interest-bearing liabilities |
||||||||||||||||||||||||
| NOW |
$ | 34 | $ | 33 | $ | 67 | $ | 10 | $ | 13 | $ | 23 | ||||||||||||
| Money market |
(9 | ) | (101 | ) | (110 | ) | 1,429 | (1,330 | ) | 99 | ||||||||||||||
| Saving deposits |
(31 | ) | (129 | ) | (160 | ) | (9 | ) | (123 | ) | (132 | ) | ||||||||||||
| Time deposits, less than $250,000 |
(571 | ) | (966 | ) | (1,537 | ) | (2,085 | ) | (1,674 | ) | (3,759 | ) | ||||||||||||
| Time deposits, $250,000 and over |
1,755 | (2,495 | ) | (740 | ) | 4,174 | (4,653 | ) | (479 | ) | ||||||||||||||
| Total interest-bearing deposits |
1,178 | (3,658 | ) | (2,480 | ) | 3,519 | (7,767 | ) | (4,248 | ) | ||||||||||||||
| FHLB advances |
(553 | ) | 656 | 103 | 77 | 473 | 550 | |||||||||||||||||
| Long-term debt |
- | — | - | - | - | - | ||||||||||||||||||
| Subordinated debentures |
8 | (36 | ) | (28 | ) | 36 | (83 | ) | (47 | ) | ||||||||||||||
| Total interest-bearing liabilities |
633 | (3,038 | ) | (2,405 | ) | 3,632 | (7,377 | ) | (3,745 | ) | ||||||||||||||
| Changes in net interest income |
$ | (670 | ) | $ | 856 | $ | 186 | $ | (2,301 | ) | $ | 3,589 | $ | 1,288 | ||||||||||
| (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 March 31, 2025 Compared to Three Months Ended December 31, 2024
Net interest income was $26.2 million for the first quarter of 2025, compared to $26.0 million for the fourth quarter of 2024. The $186,000 increase was due to a $2.4 million decrease in interest expense, offset by a $2.2 million decrease in interest income. The decrease in interest income was mostly due to the impact of fewer days in the quarter of $1.2 million and the impact of lower average excess liquidity (cash and cash equivalents and investment securities) of $1.5 million. The decrease in interest expense was mostly due to the impact of lower average funding rates of $1.5 million, fewer days in the quarter of $621,000 and lower average interest-bearing liabilities of $336,000. The $1.5 million attributed to lower average funding rates included $1.8 million due to a 29 basis point decrease in the average cost of interest-bearing deposits.
Net interest margin ("NIM") was 2.88% for the first quarter of 2025, an increase of 12 basis points from 2.76% for the fourth quarter of 2024. The NIM expansion was due to a 17 basis point decrease in the overall cost of funds, partially offset by a 3 basis point decrease in the yield on average interest-earning assets. The yield on average interest-earning assets decreased to 5.76% for the first quarter of 2025 from 5.79% for the fourth quarter of 2024 due mainly to a decrease in the yield on average cash and cash equivalents of 32 basis points and average loans of 2 basis points, partially offset by the benefit of a change in the mix in average-earning assets. Average loans represented 84% of average interest-earning assets in the first quarter of 2025, as compared to 82% in the fourth quarter of 2024.
The average cost of funds decreased to 3.15% for the first quarter of 2025 from 3.32% for the fourth quarter of 2024, driven by a 29 basis point decrease in the average cost of interest-bearing deposits, partially offset by a 38 basis point increase in the average cost of borrowings. The average cost of interest-bearing deposits decreased to 3.77% for the first quarter of 2025 from 4.06% for the fourth quarter of 2024. During the first quarter of 2025, $150.0 million in FHLB advances with an average cost of 1.18% matured and were replaced with $110.0 million in FHLB advances with various terms at an average rate of 3.88%. The overall funding mix for the first quarter of 2025 remained relatively unchanged from the fourth quarter of 2024 with total deposits representing 90% of the funding mix and average noninterest-bearing deposits representing 17% of average total deposits. The all-in average spot rate for total deposits was 3.06% at March 31, 2025.
Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
Net interest income was $26.2 million for the first quarter of 2025, compared to $24.9 million for the first quarter of 2024. The $1.3 million increase in net interest income was primarily due to lower interest expense of $3.7 million, offset by lower interest income of $2.5 million. The decrease in net interest income was driven largely by lower market interest rates, offset by the mix and volume of interest-earning assets and interest-bearing liabilities. The Federal Funds Rate averaged 4.33% during the first quarter of 2025 compared to 5.33% during the first quarter of 2024.
The $2.5 million increase in interest income was due mostly to a $3.1 million decrease in interest income on cash and cash equivalents, of which $2.2 million was attributed to lower average cash balances and $904,000 was attributed to lower rates paid on such cash balances. Average cash and cash equivalents decreased $170.7 million and the yield on such balances decreased 115 basis points. Investment securities interest income increased $525,000 due to the impact of the average investments increasing $70.1 million, partially offset by a 23 basis point decrease in the average yield. Interest and fees on total loans increased $74,000 for the first quarter of 2025 to $45.6 million when compared to the same quarter in 2024. This increase included the benefit of higher average loan balances, offset by a 6 basis point reduction in the overall loan yield. Average loans increased $60.8 million to $3.08 billion for the first quarter of 2025 compared to $3.02 billion for the first quarter of 2024 due to strong loan growth in 2025. Average loans represented 84% of average interest-earning assets in the first quarter of 2025 compared to 81% in the first quarter of 2024. For the three months ended March 31, 2025 and 2024, the yield on total loans was 6.01% and 6.07%.
The $3.7 million decrease in interest expense was due mostly to a $4.2 million decrease in deposit interest expense. The decrease in interest expense on deposits was primarily due to a 55 basis point decrease in the average rates paid on such funds, offset by the impact of a $54.7 million decrease in average interest-bearing deposits. Interest expense on FHLB advances increased $550,000 due mostly to a higher rate paid on such borrowings. The cost of FHLB advances increased 109 basis points as certain term advances matured and were replaced in the current rate environment.
NIM was 2.88% for the first quarter of 2025, an increase of 19 basis points from 2.69% for the first quarter of 2024. The increase was primarily due to a 39 basis point decrease in the overall cost of funds, partially offset by a 16 basis point decrease in the yield on interest-earnings assets to 5.76% for the first quarter of 2025 from 5.92% for the first quarter of 2024. The decrease in the yield on interest-earning assets was due mainly to lower market rates. The decrease in funding costs was due to the lower cost of interest-bearing deposits in response to lower market rates, offset by the impact of competition and a higher average cost for FHLB advances. Average noninterest-bearing deposits totaled $520.1 million, or 17.0% of total average deposits, for the first quarter of 2025 compared to $528.3 million, or 16.9% of total average deposits, for the first quarter of 2024.
Provision for Credit Losses
Three Months Ended March 31, 2025 Compared to Three Months Ended December 31, 2024
We recorded a $6.7 million provision for credit losses for the first quarter of 2025 compared to a $6.0 million provision for credit losses for the fourth quarter of 2024. The first quarter of 2025 provision for credit losses was due to an increase in specific reserves of $2.8 million, net charge-offs of $2.6 million and an increase in general reserves of $1.3 million due mainly to net loan growth. The first quarter increase in specific reserves related mostly to two lending relationships. Net charge-offs included $1.4 million related to a bulk sale of $10.8 million in underperforming SFR mortgage loans, of which $6.5 million were on nonaccrual at the end of the year, and $1.2 million related to an $8.8 million loan transferred to OREO and subsequently sold. Net charge-offs on an annualized basis represented 0.35% of average loans for the first quarter of 2025 compared to 0.26% for the fourth quarter of 2024. The first quarter provision also took into consideration factors such as changes in loan balances, the loan portfolio mix, the outlook for economic conditions and market interest rates, and changes in credit quality metrics, including changes in nonperforming loans, special mention and substandard loans during the period.
Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
We recorded a provision for credit losses of $6.7 million for the first quarter of 2025 compared to no provision for the first quarter of 2024. The first quarter provision increased primarily due to higher specific reserves of $2.8 million, net charge-offs of $2.6 million and an increase in general reserves of $1.3 million due mainly to net loan growth. The specific reserves for the first quarter of 2025 related to loans that migrated to nonaccrual status after the first quarter of 2024. There were $2.6 million in net loan charge-offs in the first quarter of 2025, as compared to $184,000 in net loan charge-offs in the first quarter of 2024.
Noninterest Income
The following table presents the major components of our noninterest income for the periods presented:
| Three Months Ended |
||||||||||||
| March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
||||||||||
| Noninterest income: |
(dollars in thousands) |
|||||||||||
| Service charges and fees |
$ | 1,017 | $ | 988 | $ | 992 | ||||||
| Gain on sale of loans |
81 | 376 | 312 | |||||||||
| Loan servicing income, net of amortization |
588 | 492 | 589 | |||||||||
| Increase in cash surrender value of life insurance |
403 | 407 | 382 | |||||||||
| Gain on OREO |
— | — | 724 | |||||||||
| Other income |
206 | 466 | 373 | |||||||||
| Total noninterest income |
$ | 2,295 | $ | 2,729 | $ | 3,372 | ||||||
Three Months Ended March 31, 2025 Compared to Three Months Ended December 31, 2024
Noninterest income for the first quarter of 2025 was $2.3 million, a decrease of $434,000 from $2.7 million in the fourth quarter of 2024. This decrease was mostly due to the fourth quarter of 2024 including $258,000 of income from a Bank Enterprise Award grant (included in other income) and lower net gain on sale of loans as compared to the fourth quarter of 2024.
Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
Noninterest income decreased $1.1 million to $2.3 million for the first quarter of 2025 from $3.4 million for the same quarter in the prior year. This decrease was mostly due to lower gain on OREO of $724,000 and lower gain on sale of loans of $231,000.
The following table presents information on loan servicing income for the periods indicated:
| Three Months Ended |
||||||||||||
| March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
||||||||||
| Loan servicing income, net of amortization: |
(dollars in thousands) |
|||||||||||
| Single-family residential loans |
$ | 415 | $ | 403 | $ | 443 | ||||||
| SBA loans |
173 | 89 | 146 | |||||||||
| Total |
$ | 588 | $ | 492 | $ | 589 | ||||||
As of March 31, 2025, we were servicing SFR mortgage loans for other financial institutions, FHLMC, FNMA and SBA loans.
The following table presents loans serviced for others as of the dates indicated:
| As of |
||||||||||||
| March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
||||||||||
| Loans serviced: |
(dollars in thousands) |
|||||||||||
| Single-family residential loans |
$ | 894,310 | $ | 922,183 | $ | 990,930 | ||||||
| SBA loans |
94,725 | 92,678 | 100,713 | |||||||||
| Commercial real estate loans |
3,746 | 3,761 | 3,798 | |||||||||
| Construction loans |
7,881 | 7,315 | 5,096 | |||||||||
| Total |
$ | 1,000,662 | $ | 1,025,937 | $ | 1,100,537 | ||||||
The following table presents information on loans sold and gain (loss) on sale of loans for the periods indicated:
| Three Months Ended |
||||||||||||
| March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
||||||||||
| Loans sold: |
(dollars in thousands) |
|||||||||||
| SBA |
$ | 3,742 | $ | 4,056 | $ | 3,407 | ||||||
| Single-family residential mortgage (1) |
11,182 | 8,791 | 5,288 | |||||||||
| Other (2) |
4,579 | — | — | |||||||||
| $ | 19,503 | $ | 12,847 | $ | 8,695 | |||||||
| Gain (loss) on sale of loans: |
||||||||||||
| SBA |
$ | 156 | $ | 191 | $ | 220 | ||||||
| Single-family residential mortgage |
8 | 185 | 92 | |||||||||
| Other |
(83 | ) | — | — | ||||||||
| $ | 81 | $ | 376 | $ | 312 | |||||||
| (1) |
SFR mortgage loans sold with servicing rights retained were $400,000, $8.8 million, and $3.6 million for the three months ended March 31, 2025, December 31, 2024 and March 31, 2024. The first quarter of 2025 also included a bulk sale of $10.8 million underperforming SFR mortgage loans resulting in charge-offs of $1.4 million, and no gain or loss on sale. |
|
| (2) | Other loans sold in the first quarter of 2025 represent nonperforming loans held for sale at December 31, 2024. |
The following table presents major components of our noninterest expense for the periods presented:
| Three Months Ended |
||||||||||||
| March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
||||||||||
| Noninterest expense: |
(dollars in thousands) |
|||||||||||
| Salaries and employee benefits |
$ | 10,643 | $ | 9,927 | $ | 9,927 | ||||||
| Occupancy and equipment expenses |
2,407 | 2,403 | 2,443 | |||||||||
| Data processing |
1,602 | 1,499 | 1,420 | |||||||||
| Legal and professional |
1,515 | 1,355 | 880 | |||||||||
| Office expenses |
408 | 399 | 356 | |||||||||
| Marketing and business promotion |
197 | 251 | 172 | |||||||||
| Insurance and regulatory assessments |
730 | 677 | 982 | |||||||||
| Core deposit premium |
172 | 182 | 201 | |||||||||
| Other expenses |
848 | 956 | 588 | |||||||||
| Total noninterest expense |
$ | 18,522 | $ | 17,649 | $ | 16,969 | ||||||
Three Months Ended March 31, 2025 Compared to Three Months Ended December 31, 2024
Noninterest expense for the first quarter of 2025 was $18.5 million, an increase of $873,000 compared to $17.6 million for the fourth quarter of 2024. This increase was mostly due to higher salaries and employee benefits expense of $716,000, attributed to higher payroll taxes and annual pay increases, which are typically reflected in the first quarter of the year. The annualized noninterest expenses to average assets ratio was 1.90% for the first quarter of 2025, up from 1.76% for the fourth quarter of 2024. The efficiency ratio was 65.1% for the first quarter of 2025, up from 61.5% for the fourth quarter of 2024 due mostly to higher noninterest expense and lower noninterest income in the first quarter of 2025.
Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
Noninterest expense for the first quarter of 2025 was $18.5 million, an increase of $1.6 million compared to $17.0 million for the first quarter of 2024. This increase was due to higher salaries and employee benefits expense of $716,000 due in part to annual pay increases, and higher legal and professional expenses of $635,000 in the first quarter of 2025. The annualized noninterest expenses to average assets ratio was 1.72% and the efficiency ratio was 60.1% for the first quarter of 2024.
Income Tax Expense
Three Months Ended March 31, 2025 Compared to Three Months Ended December 31, 2024
We recorded an income tax provision of $900,000 and $672,000, reflecting an effective tax rate of 28.2% and 13.3%, for the three months ended March 31, 2025 and December 31, 2024. The increase in the effective tax rate for the first quarter of 2025 was due in part to lower tax credits combined with higher estimated pre-tax net income for the full year of 2025 as compared to the prior quarter.
Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
We recorded an income tax provision of $900,000 and $3.2 million, reflecting an effective tax rate of 28.2% and 28.8%, for the three months ended March 31, 2025 and 2024.
ANALYSIS OF FINANCIAL CONDITION
Total Assets. At March 31, 2025, total assets were $4.0 billion, an increase of $16.9 million, from total assets of $4.0 billion at December 31, 2024, primarily due to an $89.8 million increase in gross loans HFI, partially offset by a $42.0 million decrease in investment securities and an $18.9 million decrease in cash and cash equivalents.
Cash and Cash Equivalents. Cash and cash equivalents decreased $18.9 million, or 7.3%, to $238.8 million as of March 31, 2025 as compared to $257.7 million at December 31, 2024. This decrease in cash and cash equivalents was comprised of $42.4 million used in net investing activities, including a net increase in loans of $110.4 million, offset by a net decrease in AFS securities of $46.9 million and proceeds from loan and OREO sales of $21.4 million; $7.8 million provided by cash from operating activities; and $15.7 million provided by financing activities, with deposit growth of $58.8 million offset by a net decrease in FHLB advances of $40 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 |
| ● | serving as a tool for modifying our interest rate risk profile pursuant to our established policies. |
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 are reflected at fair market value and the book value for securities classified as HTM are reflected at amortized cost.
| March 31, 2025 |
December 31, 2024 |
|||||||||||||||
| Amount |
% of Total |
Amount |
% of Total |
|||||||||||||
| Securities, available for sale, at fair value |
(dollars in thousands) | |||||||||||||||
| Government agency securities |
$ | 19,968 | 5.2 | % | $ | 21,042 | 4.9 | % | ||||||||
| SBA agency securities |
25,571 | 6.7 | % | 26,764 | 6.3 | % | ||||||||||
| Mortgage-backed securities: residential |
59,815 | 15.6 | % | 55,677 | 13.1 | % | ||||||||||
| Collateralized mortgage obligations: residential |
103,965 | 27.1 | % | 105,476 | 24.8 | % | ||||||||||
| Collateralized mortgage obligations: commercial |
90,395 | 23.6 | % | 91,656 | 21.5 | % | ||||||||||
| Commercial paper |
37,440 | 9.8 | % | 78,685 | 18.5 | % | ||||||||||
| Corporate debt securities (1) |
32,096 | 8.4 | % | 31,815 | 7.5 | % | ||||||||||
| Municipal tax-exempt securities |
8,938 | 2.3 | % | 9,075 | 2.2 | % | ||||||||||
| Total securities, available for sale, at fair value |
$ | 378,188 | 98.7 | % | $ | 420,190 | 98.8 | % | ||||||||
| Securities, held to maturity, at amortized cost |
||||||||||||||||
| Municipal taxable securities |
$ | 500 | 0.1 | % | $ | 500 | 0.1 | % | ||||||||
| Municipal tax-exempt securities |
4,688 | 1.2 | % | 4,691 | 1.1 | % | ||||||||||
| Total securities, held to maturity, at amortized cost |
5,188 | 1.3 | % | 5,191 | 1.2 | % | ||||||||||
| Total securities |
$ | 383,376 | 100.0 | % | $ | 425,381 | 100.0 | % | ||||||||
| (1) |
Comprised of corporate note securities and financial institution subordinated debentures. |
The tables below set forth investment debt securities AFS and HTM as of the dates indicated.
| Amortized |
Gross Unrealized |
Gross Unrealized |
Fair |
|||||||||||||
| March 31, 2025 |
Cost |
Gains |
Losses |
Value |
||||||||||||
| (dollars in thousands) | ||||||||||||||||
| Available for sale |
||||||||||||||||
| Government agency securities |
$ | 20,179 | $ | 20 | $ | (231 | ) | $ | 19,968 | |||||||
| SBA agency securities |
25,644 | 141 | (214 | ) | 25,571 | |||||||||||
| Mortgage-backed securities: residential |
65,348 | 178 | (5,711 | ) | 59,815 | |||||||||||
| Collateralized mortgage obligations: residential |
114,505 | 410 | (10,950 | ) | 103,965 | |||||||||||
| Collateralized mortgage obligations: commercial |
92,710 | 174 | (2,489 | ) | 90,395 | |||||||||||
| Commercial paper |
37,446 | — | (6 | ) | 37,440 | |||||||||||
| Corporate debt securities |
34,717 | 53 | (2,674 | ) | 32,096 | |||||||||||
| Municipal tax-exempt securities |
12,593 | — | (3,655 | ) | 8,938 | |||||||||||
| $ | 403,142 | $ | 976 | $ | (25,930 | ) | $ | 378,188 | ||||||||
| Held to maturity |
||||||||||||||||
| Municipal taxable securities |
$ | 500 | $ | 1 | $ | — | $ | 501 | ||||||||
| Municipal tax-exempt securities |
4,688 | — | (269 | ) | 4,419 | |||||||||||
| $ | 5,188 | $ | 1 | $ | (269 | ) | $ | 4,920 | ||||||||
| 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 on the total investment portfolio at March 31, 2025 was 5.3 years compared to a weighted-average life of 5.0 years at December 31, 2024. The increase in the weighted average life is due to a decrease in commercial paper, which generally has a 3 month term. 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 March 31, 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 | |||||||||||||||||||||||||||||||
| March 31, 2025 |
(dollars in thousands) |
|||||||||||||||||||||||||||||||||||||||
| Government agency securities |
$ | 152 | 2.23 | % | $ | 9,919 | 3.90 | % | $ | 9,897 | 4.63 | % | $ | — | — | % | $ | 19,968 | 4.24 | % | ||||||||||||||||||||
| SBA agency securities |
— | — | % | 7,139 | 4.54 | % | 18,432 | 5.34 | % | — | — | % | 25,571 | 5.12 | % | |||||||||||||||||||||||||
| Mortgage-backed securities: residential |
— | — | % | 16,384 | 3.12 | % | 43,431 | 3.34 | % | — | — | % | 59,815 | 3.28 | % | |||||||||||||||||||||||||
| Collateralized mortgage obligations: residential |
4,482 | 5.69 | % | 54,816 | 4.31 | % | 44,667 | 2.09 | % | — | — | % | 103,965 | 3.32 | % | |||||||||||||||||||||||||
| Collateralized mortgage obligations: commercial |
5,039 | 4.52 | % | 33,690 | 4.87 | % | 51,666 | 4.54 | % | — | — | % | 90,395 | 4.66 | % | |||||||||||||||||||||||||
| Commercial paper |
37,440 | 4.59 | % | — | — | % | — | — | % | — | — | % | 37,440 | 4.59 | % | |||||||||||||||||||||||||
| Corporate debt securities |
3,991 | 3.56 | % | 11,566 | 3.96 | % | 14,672 | 3.74 | % | 1,867 | 2.89 | % | 32,096 | 3.73 | % | |||||||||||||||||||||||||
| Municipal tax-exempt securities |
— | — | % | — | — | % | 455 | 1.53 | % | 8,483 | 2.09 | % | 8,938 | 2.03 | % | |||||||||||||||||||||||||
| Total available for sale |
$ | 51,104 | 4.59 | % | $ | 133,514 | 4.25 | % | $ | 183,220 | 3.60 | % | $ | 10,350 | 2.23 | % | $ | 378,188 | 3.90 | % | ||||||||||||||||||||
| Municipal taxable securities |
$ | 501 | 5.25 | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | 501 | 5.25 | % | |||||||||||||||||||||
| Municipal tax-exempt securities |
— | — | % | 828 | 3.14 | % | 2,787 | 3.46 | % | 804 | 3.38 | % | 4,419 | 3.39 | % | |||||||||||||||||||||||||
| Total held to maturity |
$ | 501 | 5.25 | % | $ | 828 | 3.14 | % | $ | 2,787 | 3.46 | % | $ | 804 | 3.38 | % | $ | 4,920 | 3.57 | % | ||||||||||||||||||||
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 March 31, 2025 and December 31, 2024. The unrealized losses on these securities were primarily attributed to changes in interest rates. The issuers of these securities have not, to our knowledge, evidenced any cause for default on these securities. These securities have fluctuated in value since their purchase dates as market rates have fluctuated. However, 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 "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 | |||||||||||||||||||
| March 31, 2025 |
(dollars in thousands) |
|||||||||||||||||||||||
| Government agency securities |
$ | 4,813 | $ | (10 | ) | $ | 5,258 | $ | (221 | ) | $ | 10,071 | $ | (231 | ) | |||||||||
| SBA agency securities |
9,726 | (67 | ) | 1,785 | (147 | ) | 11,511 | (214 | ) | |||||||||||||||
| Mortgage-backed securities: residential |
12,806 | (314 | ) | 29,696 | (5,397 | ) | 42,502 | (5,711 | ) | |||||||||||||||
| Collateralized mortgage obligations: residential |
19,834 | (216 | ) | 54,817 | (10,734 | ) | 74,651 | (10,950 | ) | |||||||||||||||
| Collateralized mortgage obligations: commercial |
22,466 | (165 | ) | 38,608 | (2,324 | ) | 61,074 | (2,489 | ) | |||||||||||||||
| Commercial paper |
19,809 | (6 | ) | — | — | 19,809 | (6 | ) | ||||||||||||||||
| Corporate debt securities |
— | — | 26,295 | (2,674 | ) | 26,295 | (2,674 | ) | ||||||||||||||||
| Municipal tax-exempt securities |
— | — | 8,938 | (3,655 | ) | 8,938 | (3,655 | ) | ||||||||||||||||
| Total available for sale |
$ | 89,454 | $ | (778 | ) | $ | 165,397 | $ | (25,152 | ) | $ | 254,851 | $ | (25,930 | ) | |||||||||
| Municipal taxable securities |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| Municipal tax-exempt securities |
— | — | 4,419 | (269 | ) | 4,419 | (269 | ) | ||||||||||||||||
| Total held to maturity |
$ | — | $ | — | $ | 4,419 | $ | (269 | ) | $ | 4,419 | $ | (269 | ) | ||||||||||
| 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 | ) | ||||||||||
There was no ACL on the HTM securities portfolio as of March 31, 2025 and December 31, 2024. 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 March 31, 2025, we believe there was no impairment. In addition, we did not have the current intent to sell securities with a fair value below amortized cost at March 31, 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 March 31, 2025, all of our investment securities in an unrealized loss position received an investment grade credit rating. The overall net increases in fair value during the period were attributable to a combination of changes in interest rates and market conditions.
Loans
The loan portfolio is the largest category of our earning assets, which is almost entirely held for investment as of December 31, 2025. Loans HFI increased $89.8 million, or 2.9%, to $3.1 billion at March 31, 2025 as compared to $3.0 billion at December 31, 2024. The increase was primarily due to a $51.8 million increase in SFR mortgage loans, a $44.0 million increase in CRE loans, a $6.0 million increase in commercial and industrial ("C&I") loans and a $3.4 million increase in Small Business Administration ("SBA") loans, partially offset by a $14.4 million decrease in construction and land development ("C&D") loans. In addition, mortgage loans held for sale ("HFS") decreased $10.6 million to $655,000 at March 31, 2025 due to sales totaling $5.0 million and the transfer of a $6.6 million loan to HFI, offset by HFS originations totaling $1.0 million. SFR mortgage loans HFI represent approximately 49.2% of our total loans as of March 31, 2025, and this ratio is relatively unchanged from 48.9% at December 31, 2024.
The following table presents the balance and associated percentage of each major category in our loan portfolio as of the dates indicated:
| As of March 31, 2025 |
As of December 31, 2024 |
|||||||||||||||
| $ |
% |
$ |
% |
|||||||||||||
| Loans HFI:(1) |
(dollars in thousands) | |||||||||||||||
| Construction and land development |
$ | 158,883 | 5.1 | % | $ | 173,290 | 5.7 | % | ||||||||
| Commercial real estate (2) |
1,245,402 | 39.6 | % | 1,201,420 | 39.3 | % | ||||||||||
| Single-family residential mortgages |
1,545,822 | 49.2 | % | 1,494,022 | 48.9 | % | ||||||||||
| Commercial and industrial |
135,538 | 4.3 | % | 129,585 | 4.2 | % | ||||||||||
| SBA |
50,651 | 1.6 | % | 47,263 | 1.5 | % | ||||||||||
| Other loans |
6,767 | 0.2 | % | 7,650 | 0.4 | % | ||||||||||
| Total loans HFI |
3,143,063 | 100.0 | % | 3,053,230 | 100.0 | % | ||||||||||
| Allowance for loan losses |
(51,932 | ) | (47,729 | ) | ||||||||||||
| Total loans HFI, net |
$ | 3,091,131 | $ | 3,005,501 | ||||||||||||
| (1) |
Net of discounts and deferred fees and costs. |
| (2) |
Includes non-farm and non-residential real estate loans, multifamily residential and SFR mortgage loans for a business purpose. |
The following table presents the geographic locations of loans in our loan portfolio, by loan class, as of the date indicated:
| As of March 31, 2025 |
||||||||||||||||||||||||||||||||
| Construction and land development |
Commercial real estate |
Single-family residential mortgages |
Commercial and Industrial |
SBA |
Other |
Total loans HFI |
||||||||||||||||||||||||||
| $ |
$ |
$ |
$ |
$ |
$ |
$ |
% |
|||||||||||||||||||||||||
| Loans HFI: |
(dollars in thousands) | |||||||||||||||||||||||||||||||
| California |
$ | 100,847 | $ | 867,936 | $ | 734,244 | $ | 122,491 | $ | 35,362 | $ | 976 | $ | 1,861,856 | 59.2 | % | ||||||||||||||||
| Hawaii |
— | — | 8,891 | 78 | — | 8 | 8,977 | 0.3 | % | |||||||||||||||||||||||
| Illinois |
— | 27,309 | 52,972 | 938 | — | 53 | 81,272 | 2.6 | % | |||||||||||||||||||||||
| New Jersey |
— | 3,732 | 32,971 | 82 | 505 | 131 | 37,421 | 1.2 | % | |||||||||||||||||||||||
| Nevada |
— | 22,046 | 18,907 | 511 | 2,334 | 87 | 43,885 | 1.4 | % | |||||||||||||||||||||||
| New York |
58,036 | 182,202 | 663,497 | 845 | 1,942 | 1,603 | 908,125 | 28.9 | % | |||||||||||||||||||||||
| Other |
— | 142,177 | 34,340 | 10,593 | 10,508 | 3,909 | 201,527 | 6.4 | % | |||||||||||||||||||||||
| Total loans, net |
$ | 158,883 | $ | 1,245,402 | $ | 1,545,822 | $ | 135,538 | $ | 50,651 | $ | 6,767 | $ | 3,143,063 | 100.0 | % | ||||||||||||||||
The majority of our loan portfolio is based on collateral or businesses located in California and New York, which represented 88.1% of our loan portfolio. Loans secured by collateral in other states represented approximately 11.9% of our portfolio and the majority of these loans are secured by real estate with a weighted average LTV of 56.9% at March 31, 2025.
Construction and land development loans. C&D loans totaled $158.9 million, or 5.1% of the loan portfolio, at March 31, 2025. C&D loans decreased $14.4 million, or 8.3%, during first quarter of 2025 due to decreases in residential construction loans and land development 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 March 31, 2025 |
As of December 31, 2024 |
Increase (Decrease) |
||||||||||||||||||||||
| $ |
Mix % |
$ |
Mix % |
$ |
% |
|||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
| Residential construction |
$ | 49,538 | 31.1 | % | $ | 58,368 | 33.7 | % | $ | (8,830 | ) | (15.1 | )% | |||||||||||
| Commercial construction |
101,157 | 63.7 | % | 97,954 | 56.5 | % | 3,203 | 3.3 | % | |||||||||||||||
| Land development |
8,188 | 5.2 | % | 16,968 | 9.8 | % | (8,780 | ) | (51.7 | )% | ||||||||||||||
| Total construction and land development loans |
$ | 158,883 | 100.0 | % | $ | 173,290 | 100.0 | % | $ | (14,407 | ) | (8.3 | )% | |||||||||||
Commercial real estate loans. CRE loans increased $44.0 million, or 3.7%, to $1.25 billion at March 31, 2025, compared to $1.20 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 Prime rate based 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, 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 $648.9 million as of March 31, 2025 and $605.5 million as of December 31, 2024. The SFR loan portfolio originated for a business purpose totaled $55.3 million as of March 31, 2025 and $54.1 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 |
||||||||||||||||||||||||
| March 31, 2025 |
<45% |
45%≤54% |
55%≤64% |
65%≤74% (1) |
>85% |
Total |
||||||||||||||||||
| Non-owner occupied: |
(dollars in thousands) |
|||||||||||||||||||||||
| Hotel/Motel |
$ | 22,331 | $ | 11,650 | $ | 24,911 | $ | 5,937 | $ | — | $ | 64,829 | ||||||||||||
| Office |
15,486 | — | 16,805 | — | 5,780 | 38,071 | ||||||||||||||||||
| Rent Controlled NY Multifamily |
25,770 | 12,741 | 6,286 | — | — | 44,797 | ||||||||||||||||||
| Mobile Home |
38,253 | 68,586 | 90,187 | 68,059 | — | 265,085 | ||||||||||||||||||
| Mixed Use |
49,988 | 84,625 | 21,196 | 60,990 | — | 216,799 | ||||||||||||||||||
| Apartments |
30,588 | 39,730 | 91,280 | 52,836 | 10,201 | 224,635 | ||||||||||||||||||
| Warehouse |
24,077 | 18,577 | 47,358 | — | — | 90,012 | ||||||||||||||||||
| Retail |
29,860 | 28,604 | 19,151 | 882 | — | 78,497 | ||||||||||||||||||
| SFR Rental |
15,846 | 21,060 | 17,871 | 5,461 | — | 60,238 | ||||||||||||||||||
| Other |
4,556 | 419 | 1,649 | — | — | 6,624 | ||||||||||||||||||
| Total non-owner occupied |
$ | 256,755 | $ | 285,992 | $ | 336,694 | $ | 194,165 | $ | 15,981 | $ | 1,089,587 | ||||||||||||
| Owner-occupied: |
||||||||||||||||||||||||
| Hotel/Motel |
3,424 | 30,853 | 21,545 | — | — | 55,822 | ||||||||||||||||||
| Office |
841 | 1,979 | 772 | 1,271 | — | 4,863 | ||||||||||||||||||
| Rent Controlled NY Multifamily |
1,416 | 340 | — | — | — | 1,756 | ||||||||||||||||||
| Mixed Use |
2,146 | 3,218 | 3,614 | — | — | 8,978 | ||||||||||||||||||
| Warehouse |
7,701 | 19,976 | 13,526 | 18,022 | — | 59,225 | ||||||||||||||||||
| Retail |
3,956 | 8,033 | 5,542 | — | — | 17,531 | ||||||||||||||||||
| SFR Rental |
— | 1,096 | — | — | — | 1,096 | ||||||||||||||||||
| Gas Station |
122 | — | — | 5,730 | — | 5,852 | ||||||||||||||||||
| Other |
105 | 157 | 430 | — | — | 692 | ||||||||||||||||||
| Total owner-occupied |
$ | 19,711 | $ | 65,652 | $ | 45,429 | $ | 25,023 | $ | — | $ | 155,815 | ||||||||||||
| Total |
$ | 276,466 | $ | 351,644 | $ | 382,123 | $ | 219,188 | $ | 15,981 | $ | 1,245,402 | ||||||||||||
The following table presents the LTV ratios at origination for CRE loans by state as of the date indicated:
| LTV Distribution |
||||||||||||||||||||||||
| March 31, 2025 |
<45% |
45%≤54% |
55%≤64% |
65%≤74% (1) |
>85% |
Total |
||||||||||||||||||
| Non-owner occupied: |
(dollars in thousands) |
|||||||||||||||||||||||
| California |
$ | 142,613 | $ | 207,617 | $ | 284,025 | $ | 102,248 | $ | — | $ | 736,503 | ||||||||||||
| New York |
81,927 | 51,984 | 31,617 | 3,049 | — | 168,577 | ||||||||||||||||||
| Nevada |
19,852 | 1,242 | — | — | — | 21,094 | ||||||||||||||||||
| Illinois |
4,897 | 1,768 | 11,251 | 589 | 5,780 | 24,285 | ||||||||||||||||||
| New Jersey |
293 | 855 | 349 | 882 | — | 2,379 | ||||||||||||||||||
| Other |
7,173 | 22,526 | 9,452 | 87,397 | 10,201 | 136,749 | ||||||||||||||||||
| Total non-owner occupied |
$ | 256,755 | $ | 285,992 | $ | 336,694 | $ | 194,165 | $ | 15,981 | $ | 1,089,587 | ||||||||||||
| Owner-occupied: |
||||||||||||||||||||||||
| California |
11,470 | 60,285 | 36,773 | 22,905 | — | 131,433 | ||||||||||||||||||
| New York |
7,355 | 3,183 | 2,259 | 828 | — | 13,625 | ||||||||||||||||||
| Nevada |
166 | — | 786 | — | — | 952 | ||||||||||||||||||
| Illinois |
340 | 1,211 | 183 | 1,290 | — | 3,024 | ||||||||||||||||||
| New Jersey |
380 | 973 | — | — | — | 1,353 | ||||||||||||||||||
| Other |
— | — | 5,428 | — | — | 5,428 | ||||||||||||||||||
| Total owner-occupied |
$ | 19,711 | $ | 65,652 | $ | 45,429 | $ | 25,023 | $ | — | $ | 155,815 | ||||||||||||
| Total |
$ | 276,466 | $ | 351,644 | $ | 382,123 | $ | 219,188 | $ | 15,981 | $ | 1,245,402 | ||||||||||||
| (1) | No loans in the 75%-85% LTV distribution. |
SFR Loans. SFR loans totaled $1.5 billion, or 49.2% of our loans HFI portfolio, as of March 31, 2025. SFR mortgage loans increased $51.8 million, or 3.5%, during the first three months of 2025 due to higher originations relative to higher payoffs and paydowns. As of March 31, 2025, the weighted-average LTV of the portfolio was 55.0%, the weighted average FICO score was 764, and the average duration was 3.1 years.
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. In addition, our SFR mortgage lending unit originates mortgage warehouse lines of credit to certain correspondent banks. These loans are included in our C&I loans and totaled $2.1 million as of March 31, 2025 and zero as of December 31, 2024.
There were $655,000 SFR loans HFS as of March 31, 2025 compared to zero SFR loans HFS as of December 31, 2024. 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.
The following table presents the LTV ratios at origination for SFR loans by state as of the date indicated:
| LTV Distribution |
||||||||||||||||||||||||||||
| March 31, 2025 |
<45% |
45%≤54% |
55%≤64% |
65%≤74% |
75%≤84% |
>85% |
Total |
|||||||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||||||||||
| California |
$ | 122,759 | $ | 148,701 | $ | 265,562 | $ | 180,896 | $ | 14,910 | $ | 1,416 | $ | 734,244 | ||||||||||||||
| New York |
144,932 | 141,750 | 220,282 | 144,164 | 12,034 | 335 | 663,497 | |||||||||||||||||||||
| Illinois |
15,856 | 8,890 | 15,154 | 8,859 | 2,774 | 1,439 | 52,972 | |||||||||||||||||||||
| New Jersey |
3,678 | 6,524 | 13,243 | 7,954 | 442 | 1,130 | 32,971 | |||||||||||||||||||||
| Nevada |
1,135 | 4,278 | 8,804 | 4,126 | 564 | — | 18,907 | |||||||||||||||||||||
| Hawaii |
639 | 1,659 | 2,437 | 1,743 | 2,413 | — | 8,891 | |||||||||||||||||||||
| Other |
7,482 | 6,637 | 10,369 | 8,902 | 950 | — | 34,340 | |||||||||||||||||||||
| Total |
$ | 296,481 | $ | 318,439 | $ | 535,851 | $ | 356,644 | $ | 34,087 | $ | 4,320 | $ | 1,545,822 | ||||||||||||||
Commercial and industrial loans. C&I loans totaled $135.5 million, or 4.3% of the loan portfolio, as of March 31, 2025. C&I loans increased $6.0 million, or 4.6%, during the first quarter of 2025 due in part to an increase in mortgage warehouse lines of credit, combined with growth in other C&I loans.
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 $3.4 million, or 7.2%, to $50.7 million at March 31, 2025 compared to $47.3 million at December 31, 2024. We originated SBA loans of $9.6 million during the first three months of 2025. Offsetting these loan originations were loan sales of $3.7 million and net loan payoffs and paydowns of $2.5 million during the first three months of 2025.
We are designated a Preferred Lender under the SBA Preferred Lender Program. We originate SBA loans through our branch staff, loan officers and through SBA brokers. We offer mostly SBA 7(a) variable-rate loans. 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 type as well as the early identification of deterioration at the individual loan level.
Analysis of the Allowance for Loan Losses
The following table presents the ALL, its corresponding percentage of the loan type balance, and the percentage of loan balance to total loans HFI as of the dates indicated:
| As of March 31, 2025 |
As of December 31, 2024 |
|||||||||||||||||||||||
| $ |
ALL as a % of Loan Type |
% of Total Loans |
$ |
ALL as a % of Loan Type |
% of Total Loans |
|||||||||||||||||||
| Loans: |
(dollars in thousands) |
|||||||||||||||||||||||
| Construction and land development |
$ | 7,000 | 4.41 | % | 5.1 | % | $ | 6,053 | 3.49 | % | 5.7 | % | ||||||||||||
| Commercial real estate (1) |
24,200 | 1.94 | % | 39.6 | % | 21,879 | 1.82 | % | 39.3 | % | ||||||||||||||
| Single-family residential mortgages |
18,373 | 1.19 | % | 49.2 | % | 17,518 | 1.17 | % | 48.9 | % | ||||||||||||||
| Commercial and industrial |
1,400 | 1.03 | % | 4.3 | % | 1,339 | 1.03 | % | 4.2 | % | ||||||||||||||
| SBA |
701 | 1.38 | % | 1.6 | % | 654 | 1.38 | % | 1.5 | % | ||||||||||||||
| Other |
258 | 3.81 | % | 0.2 | % | 286 | 3.74 | % | 0.4 | % | ||||||||||||||
| Allowance for loan losses |
$ | 51,932 | 1.65 | % | 100.0 | % | $ | 47,729 | 1.56 | % | 100.0 | % | ||||||||||||
| (1) |
Includes non-farm and non-residential real estate loans, multi-family residential and SFR loans originated for a business purpose. |
Allowance for Credit Losses - Loans
We account for credit losses on loans in accordance with ASC 326, which requires us to record an estimate of expected lifetime credit losses for loans at the time of origination. 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 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 once the impairment is determined to be probable. Recoveries on loans previously charged off are added to the ACL. Net charge-offs to average loans HFI were 0.35% for the three months ended March 31, 2025 and 0.13% for the twelve months ended December 31, 2024.
As of March 31, 2025, the ACL totaled $52.6 million and was comprised of an ALL of $51.9 million and a RUC of $629,000 (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 $4.1 million increase in the ACL for the first quarter of 2025 was due to a $6.7 million provision for credit losses offset by net charge-offs of $2.6 million. Net charge-offs included $1.4 million related to a bulk sale of $10.8 million in underperforming SFR mortgage loans, of which $6.5 million were on nonaccrual at the end of the year, and $1.2 million related to an $8.8 million loan transferred to OREO and subsequently sold. The ALL as a percentage of loans HFI increased to 1.65% at March 31, 2025, compared to 1.56% at December 31, 2024, due to an increase in specific reserves. The ALL as a percentage of nonperforming loans HFI was 86% at March 31, 2025, an increase from 68% at December 31, 2024.
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 March 31, |
||||||||
| 2025 |
2024 |
|||||||
| Allowance for Loan Loss ("ALL") |
(dollars in thousands) | |||||||
| Balance, beginning of period |
$ | 47,729 | $ | 41,903 | ||||
| Charge-offs: |
||||||||
| Construction and land development |
(1,246 | ) | — | |||||
| Commercial real estate |
— | (116 | ) | |||||
| Single-family residential mortgages |
(1,388 | ) | — | |||||
| Commercial and industrial |
(80 | ) | (3 | ) | ||||
| SBA |
— | (95 | ) | |||||
| Other |
(13 | ) | — | |||||
| Total charge-offs |
(2,727 | ) | (214 | ) | ||||
| Recoveries: |
||||||||
| Commercial and industrial |
78 | 1 | ||||||
| SBA |
— | — | ||||||
| Other |
6 | 29 | ||||||
| Total recoveries |
84 | 30 | ||||||
| Net charge-offs |
(2,643 | ) | (184 | ) | ||||
| Provision for (reversal of) credit losses - loans |
6,846 | (31 | ) | |||||
| Balance, end of period |
$ | 51,932 | $ | 41,688 | ||||
| Reserve for unfunded commitments ("RUC") |
||||||||
| Balance at beginning of period |
$ | 729 | $ | 640 | ||||
| (Reversal of) provision for credit losses - unfunded commitments |
(100 | ) | 31 | |||||
| Balance at the end of period |
$ | 629 | $ | 671 | ||||
| Total allowance for credit losses ("ACL") |
$ | 52,561 | $ | 42,359 | ||||
| Total loans HFI at end of period |
$ | 3,143,063 | $ | 3,027,361 | ||||
| Average loans HFI |
$ | 3,079,224 | $ | 3,018,423 | ||||
| Net charge-offs to average loans HFI |
0.35 | % | 0.02 | % | ||||
| Allowance for loan losses to total loans HFI |
1.65 | % | 1.38 | % | ||||
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.
Nonperforming loans include nonaccrual loans, loans past due 90 days or more and still accruing interest (of which there were none during the periods indicated), and modified loans. The balances of nonperforming loans included in the table below are the net investment in these assets and do not include $9.7 million in specific reserves. 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 March 31, |
As of December 31, |
|||||||
| 2025 | 2024 | |||||||
| Nonaccrual loans: |
(dollars in thousands) |
|||||||
| Construction and land development |
$ | 35,613 | $ | 44,621 | ||||
| Commercial real estate |
18,451 | 17,096 | ||||||
| Single-family residential mortgages |
— | 11,524 | ||||||
| Commercial and industrial |
4,819 | 6,271 | ||||||
| SBA |
1,478 | 1,514 | ||||||
| Other |
19 | 12 | ||||||
| Total nonaccrual loans |
60,380 | 81,038 | ||||||
| Total nonperforming loans (1) |
60,380 | 81,038 | ||||||
| OREO |
4,170 | — | ||||||
| Nonperforming assets (1) |
$ | 64,550 | $ | 81,038 | ||||
| Nonperforming loans HFI to total loans HFI |
1.92 | % | 2.29 | % | ||||
| Nonperforming assets to total assets |
1.61 | % | 2.03 | % | ||||
| Nonperforming loans to tangible common equity and ALL |
12.35 | % | 16.78 | % | ||||
| Nonperforming assets to tangible common equity and ALL |
13.20 | % | 16.78 | % | ||||
| (1) | Nonperforming loans and nonperforming assets included loans HFS of zero and $11.2 million at March 31, 2025 and December 31, 2024. |
Nonperforming assets totaled $64.6 million, or 1.61% of total assets, at March 31, 2025, down from $81.0 million, or 2.03% of total assets, at December 31, 2024. The $16.5 million decrease in nonperforming assets was due to sales totaling $20.0 million and payoffs or paydowns of $1.8 million, partially offset by the addition of one $5.3 million CRE loan placed on nonaccrual status in the first quarter of 2025. Nonperforming assets included one $4.2 million OREO (included in “Accrued interest and other assets”) at March 31, 2025, which was a nonaccrual loan at December 31, 2024.
Our 30-89 day delinquent loans, excluding nonperforming loans, totaled $5.9 million, or 0.19% of total loans, at March 31, 2025, down from $22.1 million, or 0.72% of total loans, at December 31, 2024. The $16.2 million decrease was mostly due to $16.3 million in loans returning to current status, $2.9 million in SFR mortgage loans included in the bulk sale of underperforming SFR mortgage loans and $398,000 in paydowns and payoffs, offset by $3.5 million in new delinquent loans.
We did not recognize any interest income on nonaccrual loans during the three months ended March 31, 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 questionable and there is a high probability of loss based on currently existing facts, conditions and values. 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.
The following table presents the risk categories for loans HFI, by class, as of the dates indicated:
| Special |
||||||||||||||||||||
| March 31, 2025 |
Pass |
Mention |
Substandard |
Doubtful |
Total |
|||||||||||||||
| Real Estate: |
(dollars in thousands) | |||||||||||||||||||
| Construction and land development |
$ | 79,022 | $ | 44,248 | $ | 35,613 | $ | — | $ | 158,883 | ||||||||||
| Commercial real estate |
1,195,726 | 19,452 | 30,224 | — | 1,245,402 | |||||||||||||||
| Single-family residential mortgages |
1,545,777 | — | 45 | — | 1,545,822 | |||||||||||||||
| Commercial: |
||||||||||||||||||||
| Commercial and industrial |
128,722 | 579 | 6,237 | — | 135,538 | |||||||||||||||
| SBA |
46,436 | — | 4,215 | — | 50,651 | |||||||||||||||
| Other: |
6,729 | — | 38 | — | 6,767 | |||||||||||||||
| Total |
$ | 3,002,412 | $ | 64,279 | $ | 76,372 | $ | — | $ | 3,143,063 | ||||||||||
| Special |
||||||||||||||||||||
| December 31, 2024 |
Pass |
Mention |
Substandard |
Doubtful |
Total |
|||||||||||||||
| Real Estate: |
(dollars in thousands) |
|||||||||||||||||||
| Construction and land development |
$ | 72,921 | $ | 44,042 | $ | 56,327 | $ | — | $ | 173,290 | ||||||||||
| Commercial real estate |
1,171,085 | 21,287 | 9,048 | — | 1,201,420 | |||||||||||||||
| Single-family residential mortgages |
1,481,826 | — | 12,196 | — | 1,494,022 | |||||||||||||||
| 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 $64.3 million, or 2.05% of total loans, at March 31, 2025, down from $65.3 million, or 2.14% of total loans, at December 31, 2024. The $1.1 million decrease was primarily due to the upgrade of one $1.7 million CRE loan to a pass-rated loan, offset by the addition of one $578,000 C&I loan. All special mention loans are paying current.
Substandard loans HFI totaled $76.4 million at March 31, 2025, down from $89.1 million at December 31, 2024. Substandard loans HFS were zero at March 31, 2025, down from $11.2 million at December 31, 2024. The $24.0 million decrease in total substandard loans was primarily due to loan sales totaling $11.7 million, transfers to OREO totaling $12.8 million, of which $8.8 million was subsequently sold during the first quarter of 2025 and payoffs and paydowns totaling $5.4 million, partially offset by the downgrade of two loans totaling $6.2 million. Of the total substandard loans at March 31, 2025, there were $16.0 million on accrual status.
Goodwill and Other Intangible Assets. Goodwill was $71.5 million at both March 31, 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 $1.8 million and $2.0 million at March 31, 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 $14.5 million to $3.5 billion at March 31, 2025 from $3.5 billion at December 31, 2024, primarily due to a $58.8 million increase in deposits, offset by a $40.0 million decrease in FHLB advances. During the first quarter of 2025, $150.0 million in FHLB advances with an average cost of 1.18% matured and were largely replaced with $110.0 million in FHLB advances with various terms at an average rate of 3.88%.
Deposits. Total deposits were $3.1 billion as of March 31, 2025, an increase of $58.8 million, or 7.7% annualized, compared to $3.1 billion as of December 31, 2024. The increase was due to a $93.6 million increase in interest-bearing deposits, while noninterest-bearing deposits decreased $34.8 million. The increase in interest-bearing deposits included an increase in non-maturity deposits of $58.2 million and time deposits of $35.5 million. Noninterest-bearing deposits totaled $528.2 million and represented 16.8% of total deposits at March 31, 2025 compared to $563.0 million and 18.3% at December 31, 2024. Wholesale deposits totaled $158.5 million at March 31, 2025 and $147.5 million at December 31, 2024. Wholesale deposits include brokered deposits, collateralized deposits from the State of California, and deposits acquired through internet listing services. Brokered time deposits were $109.5 million at March 31, 2025 and $93.2 million at December 31, 2024.
The following table presents the composition of our deposit portfolio by account type as of the dates indicated:
| March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
||||||||||||||||||||||
| $ |
% | $ |
% | $ |
% | |||||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||||||
| Noninterest-bearing demand deposits: |
$ | 528,205 | 16.8 | % | $ | 563,012 | 18.3 | % | $ | 539,517 | 17.8 | % | ||||||||||||
| Interest-bearing deposits: |
||||||||||||||||||||||||
| NOW |
65,716 | 2.1 | % | 51,043 | 1.7 | % | 55,095 | 1.8 | % | |||||||||||||||
| Money market |
509,412 | 16.2 | % | 449,324 | 14.6 | % | 428,495 | 14.1 | % | |||||||||||||||
| Savings |
146,088 | 4.6 | % | 162,667 | 5.3 | % | 159,250 | 5.3 | % | |||||||||||||||
| Time deposits $250,000 and under |
863,962 | 27.5 | % | 882,438 | 28.6 | % | 901,738 | 29.8 | % | |||||||||||||||
| Time deposits over $250,000 |
870,708 | 27.8 | % | 827,854 | 26.7 | % | 746,611 | 24.7 | % | |||||||||||||||
| Wholesale deposits |
158,537 | 5.0 | % | 147,451 | 4.8 | % | 197,623 | 6.5 | % | |||||||||||||||
| Total interest-bearing deposits |
2,614,423 | 83.2 | % | 2,520,777 | 81.7 | % | 2,488,812 | 82.2 | % | |||||||||||||||
| Total deposits |
$ | 3,142,628 | 100.0 | % | $ | 3,083,789 | 100.0 | % | $ | 3,028,329 | 100.0 | % | ||||||||||||
The following table presents our average deposit balances and weighted average rates for the three months ended March 31, 2025:
| For the Three Months Ended |
||||||||
| March 31, 2025 |
||||||||
| Weighted |
||||||||
| Average |
Average |
|||||||
| Balance |
Rate (%) |
|||||||
| (dollars in thousands) |
||||||||
| Noninterest-bearing demand deposits |
$ | 520,145 | — | |||||
| Interest-bearing deposits: |
||||||||
| NOW |
61,222 | 2.13 | % | |||||
| Money market |
463,443 | 3.17 | % | |||||
| Savings |
155,116 | 1.36 | % | |||||
| Time deposits $250,000 and under |
989,622 | 4.12 | % | |||||
| Time deposits over $250,000 |
864,804 | 4.24 | % | |||||
| Total interest-bearing deposits |
2,534,207 | 3.77 | % | |||||
| Total deposits |
$ | 3,054,352 | 3.13 | % | ||||
The following table presents the maturity schedule of time deposits as of March 31, 2025:
| Maturity Within: |
||||||||||||||||||||
| Three Months or less |
After Three to Six Months |
After Six to 12 Months |
After 12 Months |
Total |
||||||||||||||||
| Time Deposits: |
(dollars in thousands) | |||||||||||||||||||
| Time deposits $250,000 and under (1) |
$ | 318,619 | $ | 326,983 | $ | 332,398 | $ | 22,106 | $ | 1,000,106 | ||||||||||
| Time deposits over $250,000 (2) |
321,917 | 307,590 | 262,030 | 1,564 | 893,101 | |||||||||||||||
| Total time deposits |
$ | 640,536 | $ | 634,573 | $ | 594,428 | $ | 23,670 | $ | 1,893,207 | ||||||||||
| (1) |
Includes wholesale deposits of $136.1 million. |
|
| (2) |
Includes wholesale deposits of $22.4 million. |
Of the $893.1 million in time deposits over $250,000, the estimated aggregate amount of time deposits in excess of the FDIC insurance limit is $679.5 million at March 31, 2025. The following table presents the maturity distribution of uninsured time deposits in amounts of more than $250,000 as of the date indicated.
| March 31, 2025 | ||||
| (dollars in thousands) |
||||
| 3 months or less |
$ | 214,944 | ||
| Over 3 months through 6 months |
237,240 | |||
| Over 6 months through 12 months |
226,721 | |||
| Over 12 months |
563 | |||
| Total |
$ | 679,468 | ||
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 $125.9 million at March 31, 2025 and $130.6 million at December 31, 2024 and ICS deposits totaled $150.9 million at March 31, 2025 and $146.1 million at December 31, 2024. The increase in the participation in these programs is due to our focus on enhancing liquidity in recent periods.
The following table presents the estimated deposits exceeding the FDIC insurance limit as of the dates indicated:
| March 31, 2025 | December 31, 2024 | |||||||
| (dollars in thousands) |
||||||||
| Uninsured deposits |
$ | 1,423,768 | $ | 1,383,727 | ||||
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 $160.0 million at March 31, 2025 compared to $200.0 million at December 31, 2024. FHLB borrowings at March 31, 2025 included $30.0 million in overnight advances and $130.0 million in putable term advances.
During the first quarter of 2025, $150.0 million in FHLB advances with a weighted average rate of 1.18% matured. These maturities were largely replaced with $110.0 million in FHLB advances with various terms at a weighted average rate of 3.88%, including $30.0 million in overnight advances and $80.0 million in putable term advances with prepayment symmetry. The terms of all putable advances outstanding at March 31, 2025 are presented in Next Call Date order in the table below:
| Advance Date |
Amount |
Rate |
Structure |
Next Call Date |
Final Stated Maturity Date |
|||||||||
| (dollars in thousands) |
||||||||||||||
| 3/12/2025 |
$ | 20,000 | 3.34 | % | Quarterly call, 3 month initial lock out |
6/12/2025 |
3/12/2029 |
|||||||
| 3/14/2025 |
$ | 20,000 | 3.81 | % | 1 time call, 3 month initial lock out |
6/17/2025 |
3/17/2031 |
|||||||
| 3/12/2025 |
$ | 20,000 | 3.72 | % | 1 time call, 6 month initial lock out |
9/12/2025 |
3/12/2031 |
|||||||
| 3/14/2025 |
$ | 20,000 | 3.49 | % | Quarterly call, 6 month initial lock out |
9/15/2025 |
3/15/2029 |
|||||||
| 9/30/2024 |
$ | 50,000 | 3.42 | % | 1 time call, 1 year initial lock out |
9/29/2025 |
9/29/2028 |
|||||||
| Total |
$ | 130,000 | 3.52 | % | ||||||||||
The following table presents information on our total FHLB advances at and for the periods presented:
| As of and For the Three Months Ended March 31, |
||||||||
| 2025 |
2024 |
|||||||
| FHLB Borrowings: |
(dollars in thousands) |
|||||||
| Outstanding at period-end |
$ | 160,000 | $ | 150,000 | ||||
| Average amount outstanding |
176,833 | 150,000 | ||||||
| Maximum amount outstanding at any month-end |
160,000 | 150,000 | ||||||
| Weighted average interest rate: |
||||||||
| During period |
2.27 | % | 1.18 | % | ||||
| End of period |
3.73 | % | 1.18 | % | ||||
Long-term Debt. Long-term debt consists of subordinated notes. As of March 31, 2025, the amount of subordinated notes outstanding was $119.6 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 $15.2 million as of March 31, 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 March 31, 2025 and are described in detail after the table below:
| Issue Date |
Principal Amount |
Unamortized Valuation Reserve |
Recorded Value |
Stated Rate Description |
March 31, 2025 Effective Stated Rate |
Stated Maturity |
|||||||||||||
| Subordinated debentures: |
(dollars in thousands) |
||||||||||||||||||
| TFC Trust |
December 22, 2006 |
$ | 5,155 | $ | 1,075 | $ | 4,080 | Three-month CME Term SOFR plus 0.26% (a) plus 1.65% |
6.21 | % | March 15, 2037 |
||||||||
| FAIC Trust |
December 15, 2004 |
7,217 | 746 | 6,471 | Three-month CME Term SOFR plus 0.26% (a) plus 2.25% |
6.81 | % | December 15, 2034 |
|||||||||||
| PGBH Trust |
December 15, 2004 |
5,155 | 495 | 4,660 | Three-month CME Term SOFR plus 0.26% (a) plus 2.10% |
6.66 | % | December 15, 2034 |
|||||||||||
| Total |
$ | 17,527 | $ | 2,316 | $ | 15,211 | |||||||||||||
| (a) |
Represents applicable tenor spread adjustment when the original LIBOR index was discontinued on September 30, 2023. |
At March 31, 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 6.21% as of March 31, 2025 and 6.27% at December 31, 2024.
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 6.81% as of March 31, 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 6.66% as of March 31, 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 $2.4 million, or 0.48%, to $510.3 million as of March 31, 2025 from $507.9 million at December 31, 2024. The increase in shareholders' equity for the first quarter of 2025 was due to lower net unrealized losses on AFS securities of $3.0 million, net income of $2.3 million and equity compensation activity of $43,000, offset by common stock cash dividends paid of $2.9 million. As a result, book value per share increased to $28.77 from $28.66 at December 31, 2024 and tangible book value per share increased to $24.63 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 9.8% at March 31, 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 March 31, 2025. As of March 31, 2025, we had $97.0 million of unsecured federal funds lines, with no amounts advanced against the lines. At December 31, 2024, we had $97.0 million of unsecured federal funds lines, with no advances drawn. In addition, secured lines of credit from the Federal Reserve Discount Window were $59.7 million at March 31, 2025 and $47.2 million at December 31, 2024. Federal Reserve Discount Window lines were collateralized by a pool of CRE loans totaling $79.7 million as of March 31, 2025 and $62.5 million as of December 31, 2024. We did not have any borrowings outstanding with the Federal Reserve at March 31, 2025 and December 31, 2024, and our borrowing capacity is limited only by eligible collateral.
At March 31, 2025 and December 31, 2024, we had $160.0 million and $200.0 million in FHLB advances. Based on the values of loans pledged as collateral, we had $936.0 million of remaining secured borrowing capacity with the FHLB as of March 31, 2025 and $1.1 billion at December 31, 2024.
RBB is a corporation separate and apart from the Bank and, therefore, must provide for its own liquidity. RBB’s main source of funding is dividends declared and paid to RBB by the Bank and RAM. There are statutory, regulatory and debt covenant limitations that affect the ability of the Bank to pay dividends to RBB. Management believes that these limitations will not impact our ability to meet our ongoing short-term cash obligations. During the three months ended March 31, 2025, the Bank paid no dividends to Bancorp and paid $20.0 million during the year ended December 31, 2024. We paid $2.9 million in cash dividends on common stock during the three months ended March 31, 2025 and $11.7 million in cash dividends on common stock throughout the year ended December 31, 2024. At March 31, 2025, Bancorp had $26.1 million in cash, of which $25.3 million was on deposit at the Bank.
Regulatory Capital Requirements
We are subject to various regulatory capital requirements administered by the federal and state banking regulators. Failure to meet regulatory capital requirements may result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for “prompt corrective action” (described below), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies.
The table below summarizes the minimum capital requirements applicable to us and the Bank pursuant to Basel III regulations including the capital conservation buffer as of the dates reflected. The minimum capital requirements are only regulatory minimums and banking regulators can impose higher requirements on individual institutions. For example, banks and bank holding companies experiencing internal growth or making acquisitions generally will be expected to maintain strong capital positions substantially above the minimum supervisory levels. Higher capital levels may also be required if warranted by the particular circumstances or risk profiles of individual banking organizations. We exceeded all regulatory capital requirements under Basel III and were considered to be "well-capitalized" at March 31, 2025 and December 31, 2024.
The table below presents the capital requirements applicable to Bancorp and the Bank in order to be considered “well-capitalized” from a regulatory perspective, and the capital ratios for the consolidated Company and Bank as of March 31, 2025 and December 31, 2024.
| Ratio at March 31, 2025 |
Ratio at December 31, 2024 |
Regulatory Capital Ratio Requirements |
Minimum Requirement for "Basel III Capital Conservation Buffer" |
Minimum Requirement for "Well Capitalized" Depository Institution |
||||||||||||||||
| Tier 1 Leverage Ratio |
||||||||||||||||||||
| Consolidated |
12.07 | % | 11.92 | % | 4.00 | % | 4.00 | % | 5.00 | % | ||||||||||
| Bank |
14.27 | % | 13.96 | % | 4.00 | % | 4.00 | % | 5.00 | % | ||||||||||
| Common Equity Tier 1 Risk-Based Capital Ratio (1) |
||||||||||||||||||||
| Consolidated |
17.87 | % | 17.94 | % | 4.50 | % | 7.00 | % | 6.50 | % | ||||||||||
| Bank |
21.84 | % | 21.74 | % | 4.50 | % | 7.00 | % | 6.50 | % | ||||||||||
| Tier 1 Risk-Based Capital Ratio |
||||||||||||||||||||
| Consolidated |
18.45 | % | 18.52 | % | 6.00 | % | 8.50 | % | 8.00 | % | ||||||||||
| Bank |
21.84 | % | 21.74 | % | 6.00 | % | 8.50 | % | 8.00 | % | ||||||||||
| Total Risk-Based Capital Ratio |
||||||||||||||||||||
| Consolidated |
24.42 | % | 24.49 | % | 8.00 | % | 10.50 | % | 10.00 | % | ||||||||||
| Bank |
23.10 | % | 22.99 | % | 8.00 | % | 10.50 | % | 10.00 | % | ||||||||||
Contractual Obligations
The following table contains supplemental information regarding our total contractual obligations at March 31, 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: |
$ | 1,249,421 | $ | — | $ | — | $ | — | $ | 1,249,421 | ||||||||||
| Time deposits |
1,869,537 | 23,670 | — | — | 1,893,207 | |||||||||||||||
| FHLB advances (1) |
160,000 | — | — | — | 160,000 | |||||||||||||||
| Long-term debt |
— | — | — | 119,624 | 119,624 | |||||||||||||||
| Subordinated debentures |
— | — | — | 15,211 | 15,211 | |||||||||||||||
| Leases |
5,391 | 11,534 | 6,693 | 7,663 | 31,281 | |||||||||||||||
| Total contractual obligations |
$ | 3,284,349 | $ | 35,204 | $ | 6,693 | $ | 142,498 | $ | 3,468,744 | ||||||||||
| (1) |
See "FHLB Borrowings" for the structure of FHLB advances that are callable by FHLB within one year, however final stated maturities range from 3.5 to 6 years as of March 31, 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 to 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 $152.3 million as of March 31, 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 $5.7 million as of March 31, 2025 and $5.7 million as of December 31, 2024.
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 rights); (ii) tangible assets as total assets less goodwill and other intangible assets (excluding mortgage servicing rights); 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:
| March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
||||||||||
| Tangible Common Equity Ratios: |
(dollars in thousands) |
|||||||||||
| Tangible common equity: |
||||||||||||
| Total shareholders' equity |
$ | 510,306 | $ | 507,877 | $ | 513,986 | ||||||
| Adjustments |
||||||||||||
| Goodwill |
(71,498 | ) | (71,498 | ) | (71,498 | ) | ||||||
| Core deposit intangible |
(1,839 | ) | (2,011 | ) | (2,594 | ) | ||||||
| Tangible common equity |
$ | 436,969 | $ | 434,368 | $ | 439,894 | ||||||
| Tangible assets: |
||||||||||||
| Total assets-GAAP |
$ | 4,009,400 | $ | 3,992,477 | $ | 3,878,006 | ||||||
| Adjustments |
||||||||||||
| Goodwill |
(71,498 | ) | (71,498 | ) | (71,498 | ) | ||||||
| Core deposit intangible |
(1,839 | ) | (2,011 | ) | (2,594 | ) | ||||||
| Tangible assets |
$ | 3,936,063 | $ | 3,918,968 | $ | 3,803,914 | ||||||
| Common shares outstanding |
17,738,628 | 17,720,416 | 18,578,132 | |||||||||
| Common equity to assets ratio |
12.73 | % | 12.72 | % | 13.25 | % | ||||||
| Book value per share |
$ | 28.77 | $ | 28.66 | $ | 27.67 | ||||||
| Tangible common equity to tangible assets ratio |
11.10 | % | 11.08 | % | 11.56 | % | ||||||
| Tangible book value per share |
$ | 24.63 | $ | 24.51 | $ | 23.68 | ||||||
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 rights), 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 |
||||||||||||
| March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
||||||||||
| Return on average tangible common equity: |
(dollars in thousands) |
|||||||||||
| Net income available to common shareholders |
$ | 2,290 | $ | 4,385 | $ | 8,036 | ||||||
| Average shareholders' equity |
512,262 | 512,208 | 512,787 | |||||||||
| Adjustments: |
||||||||||||
| Average goodwill |
(71,498 | ) | (71,498 | ) | (71,498 | ) | ||||||
| Average core deposit intangible |
(1,951 | ) | (2,129 | ) | (2,726 | ) | ||||||
| Adjusted average tangible common equity |
$ | 438,813 | $ | 438,581 | $ | 438,563 | ||||||
| Return on average tangible common equity |
2.12 | % | 3.98 | % | 7.37 | % | ||||||
| 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 |
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| Immediate Change in Rates |
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| -300 | -200 | -100 | +100 | +200 | +300 | |||||||||||||||||||
| March 31, 2025 |
(dollars in thousands) | |||||||||||||||||||||||
| Dollar change |
$ | 11,606 | $ | 6,475 | $ | 2,913 | $ | (877 | ) | $ | (2,267 | ) | $ | (3,658 | ) | |||||||||
| Percent change |
10.29 | % | 5.74 | % | 2.58 | % | (0.78 | %) | (2.01 | %) | (3.24 | %) | ||||||||||||
| December 31, 2024 |
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| 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 | %) | ||||||||||||
At March 31, 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 |
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| Immediate Change in Rates |
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| -300 | -200 | -100 | +100 | +200 | +300 | |||||||||||||||||||
| March 31, 2025 |
(dollars in thousands) | |||||||||||||||||||||||
| Dollar change |
$ | (77,065 | ) | $ | (44,386 | ) | $ | (18,237 | ) | $ | 10,354 | $ | (2,420 | ) | $ | (33,746 | ) | |||||||
| Percent change |
(11.92 | %) | (6.86 | %) | (2.80 | %) | 1.60 | % | (0.37 | %) | (5.22 | %) | ||||||||||||
| 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 March 31, 2025, the EVE position is projected to generally decrease in the down rate and up rate scenarios. 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 lower EVE position in the down 300 scenario. 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.
| 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 March 31, 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.
| 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.
| 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.
| UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
During the first quarter of 2025, the Company did not repurchase any shares of common stock.
| DEFAULTS UPON SENIOR SECURITIES |
None.
| MINE SAFETY DISCLOSURES |
Not applicable.
| OTHER INFORMATION |
Rule 10b5-1 Trading Plans
During the quarter ended March 31, 2025, 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).
| EXHIBITS |
| Exhibit No |
Description of Exhibits |
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| 3.1 |
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| 3.2 |
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| 3.3 |
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| 4.1 |
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| 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. |
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| 10.1 | Agreement and Release of Claims, effective as of February 26, 2025, between RBB Bancorp, Royal Business Bank and Mr. David R. Morris | |
| 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 |
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| 32.2 |
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS |
Inline XBRL Instance Document |
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| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
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| 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 |
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| 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 March 31, 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. |
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 |
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| (Registrant) |
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| Date: May 12, 2025 |
/s/ David Morris |
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| David Morris Chief Executive Officer |
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| Date: May 12, 2025 | /s/ Lynn Hopkins | |
| Lynn Hopkins Executive Vice President, Chief Financial Officer |
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