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Net interest margin (“NIM”) was 2.76% for the fourth quarter of 2024, an increase of 8 basis points from 2.68% for the third quarter of 2024. The increase was due to a 25 basis point decrease in the overall cost of funds, partially offset by a 15 basis point decrease in the yield on average interest-earning assets. The yield on average interest-earning assets decreased to 5.79% for the fourth quarter of 2024 from 5.94% for the third quarter of 2024 due mainly to a 55 basis point decrease in the yield on average cash and cash equivalents to 5.02%, a decrease in the loan yield of 10 basis points and the impact of a change in the mix of average-earnings assets. Average loans represented 82% of average interest-earning assets in the fourth quarter of 2024, a 2% decrease from the third quarter of 2024. The decrease in the loan yield was attributed mostly to a decrease in market rates and a change in the loan mix.

The overall cost of funds decreased to 3.32% in the fourth quarter of 2024 from 3.57% in the third quarter of 2024 due to a lower average cost of interest-bearing deposits. The overall funding mix for the fourth quarter of 2024 remained relatively unchanged from the third quarter of 2024 with the ratio of average noninterest-bearing deposits to average total funding sources of 16%. The all-in average spot rate for total deposits was 3.15% at December 31, 2024.

Net interest income was $99.4 million for the year ended December 31, 2024, compared to $119.3 million for the year ended December 31, 2023. The $19.9 million decrease was due to a $15.4 million increase in interest expense and a $4.5 million decrease in interest income. The decrease in interest income was mostly due to lower interest income on total loans of $9.7 million offset by higher interest income on interest-earning deposits of $4.7 million. The decrease in loan interest income was mostly due to lower average loans of $164.3 million. The increase in cash and investment interest income was attributed to higher average cash balances and a higher investment portfolio yield, offset by a lower average of investment securities. The increase in interest expense was mostly due to a 72 basis point increase in total average interest-bearing deposit rates and higher average interest-bearing deposits of $30.1 million in the year ended December 31, 2024.

NIM was 2.70% for the year ended December 31, 2024, a decrease of 46 basis points from 3.16% for the year ended December 31, 2023. The decrease was due to a 55 basis point increase in the overall cost of funds, partially offset by a 2 basis point increase in the yield on average interest-earning assets. The yield on average interest-earning assets increased to 5.88% for the year ended December 31, 2024 compared to the prior year due mainly to a 12 basis point increase in the yield on average cash and cash equivalents to 5.53%, an 18 basis point increase in the investment portfolio yield, offset by the impact of lower average loan balances. Average loans represented 83% of average interest-earning assets during 2024, and 85% during 2023.

The overall cost of funds increased to 3.49% in the year ended December 31, 2024 from 2.94% in the year ended December 31, 2023 due to a higher average cost of interest-bearing deposits in response to higher average market interest rates. The overall funding mix for December 31, 2024 remained relatively unchanged from the prior year with a ratio of average noninterest-bearing deposits to average total funding sources of 16%.

Provision for Credit Losses

The provision for credit losses was $6.0 million for the fourth quarter of 2024 compared to $3.3 million for the third quarter of 2024. The fourth quarter of 2024 provision for credit losses was due to an increase in specific reserves of $4.3 million and net charge-offs of $2.0 million, partially offset by lower general reserves. The fourth quarter increase in specific reserves included $4.5 million for a construction loan secured by a partially completed mixed-use commercial project. Fourth quarter net charge-offs included $1.8 million for nonaccrual loans that were moved to held for sale ("HFS"). Net charge-offs on an annualized basis represented 0.26% of average loans for the fourth quarter of 2024 compared to 0.16% for the third quarter of 2024. The fourth 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 higher nonperforming loans, and changes in special mention and substandard loans during the period.

The provision for credit losses was $9.9 million for the year ended December 31, 2024 compared to $3.4 million for the year ended December 31, 2023. The 2024 provision included the impact from an increase in specific reserves of $6.1 million and net charge-offs of $3.9 million. Net charge-offs totaled $3.9 million for the year ended December 31, 2024, compared to $3.1 million for the year ended December 31, 2023. Net charge-offs represented 0.13% of average loans for the fiscal year 2024 compared to 0.10% for the fiscal year 2023.

Noninterest Income

Noninterest income for the fourth quarter of 2024 was $2.7 million, a decrease of $3.0 million from $5.7 million for the third quarter of 2024. This decrease was mostly due to the third quarter of 2024 including a $2.8 million recovery of a fully charged off loan acquired in a bank acquisition.

Noninterest income for the year ended December 31, 2024 was $15.3 million, an increase of $317,000 from $15.0 million for the year ended December 31, 2023. This increase was mostly due to a $2.9 million increase in recoveries on purchased loans, a $1.2 million increase in gain on sale of loans and an $883,000 increase in gain on OREO, offset by income from a $5.0 million Community Development Financial Institution Equitable Recovery Program award that was recognized during 2023.

Noninterest Expense

Noninterest expense for the fourth quarter of 2024 was $17.6 million, an increase of $228,000 from $17.4 million for the third quarter of 2024. This increase was mostly due to higher legal and professional expenses of $397,000, partially offset by lower occupancy and equipment expenses of $115,000. The annualized noninterest expenses to average assets ratio was 1.76% for the fourth quarter of 2024, down from 1.78% for the third quarter of 2024. The efficiency ratio was 61.5% for the fourth quarter of 2024, up from 57.5% for the third quarter of 2024 due mostly to lower noninterest income as the third quarter included a $2.8 million recovery of a fully charged off loan acquired in a bank acquisition.

Noninterest expense for the year ended December 31, 2024 was $69.2 million, a decrease of $1.5 million from $70.7 million for the year ended December 31, 2023. This decrease was mostly due to lower legal and professional expenses of $3.7 million, partially offset by higher salaries and employee benefits of $1.6 million. The noninterest expenses to average assets ratio was 1.76% for the fiscal year 2024 and 2023. The efficiency ratio was 60.3% for the year ended December 31, 2024, up from 52.6% for the year ended December 31, 2023 due mostly to lower net interest income for 2024.

Income Taxes

The effective tax rate was 13.3% for the fourth quarter of 2024 and 26.9% for the third quarter of 2024. The decrease in the effective tax rate for the fourth quarter was due primarily to higher tax credits relative to pre-tax net income as compared to the prior quarter.

The effective tax rate was 25.3% for the year ended December 31, 2024 and 29.5% for the year ended December 31, 2023. The decrease in the effective tax rate for 2024 was due primarily to higher tax credits as compared to the prior year.

Balance Sheet

At December 31, 2024, total assets were $4.0 billion, a $2.0 million increase compared to September 30, 2024, and a $33.5 million decrease compared to December 31, 2023.

Loan and Securities Portfolio

Loans held for investment ("HFI") totaled $3.1 billion as of December 31, 2024, a decrease of $38.7 million compared to September 30, 2024 and a $21.4 million increase compared to December 31, 2023. The decrease from September 30, 2024 was primarily due to a $51.3 million decrease in commercial real estate ("CRE") loans, a $6.9 million decrease in construction and land development ("C&D") loans and an $826,000 decrease in Small Business Administration ("SBA") loans, partially offset by a $20.6 million increase in single-family residential ("SFR") mortgages and a $724,000 increase in commercial and industrial ("C&I") loans. The loan to deposit ratio was 97.5% at December 31, 2024, compared to 98.6% at September 30, 2024 and 94.2% at December 31, 2023.

As of December 31, 2024, available-for-sale securities totaled $420.2 million, an increase of $114.5 million from September 30, 2024, primarily related to the purchase of $79.2 million in short-term commercial paper. As of December 31, 2024, net unrealized losses totaled $29.2 million, a $6.0 million increase due mostly to increases in treasury rates, when compared to net unrealized losses of $23.2 million as of September 30, 2024.

Deposits

Total deposits were $3.1 billion as of December 31, 2024, an $8.4 million decrease compared to September 30, 2024 and a $91.0 million decrease compared to December 31, 2023. The decrease during the fourth quarter of 2024 was due to a $27.8 million decrease in interest-bearing deposits, while noninterest-bearing deposits increased $19.4 million to $563.0 million as of December 31, 2024 compared to $543.6 million as of September 30, 2024. The decrease in interest-bearing deposits included a decrease in time deposits of $24.7 million and non-maturity deposits of $3.1 million. Wholesale deposits remained relatively unchanged at $147.5 million at December 31, 2024 compared to $147.3 million at September 30, 2024. Noninterest-bearing deposits represented 18.3% of total deposits at December 31, 2024 compared to 17.6% at September 30, 2024.

Credit Quality

Nonperforming assets totaled $81.0 million, or 2.03% of total assets, at December 31, 2024, compared to $60.7 million, or 1.52% of total assets, at September 30, 2024. The $20.4 million increase in nonperforming assets was due to the addition of one $26.4 million C&D loan, $2.0 million in SFR loans and $890,000 in SBA loans that migrated to nonaccrual status during the fourth quarter of 2024, partially offset by payoffs and paydowns of $6.7 million and partial charge-offs of $2.0 million.

Nonperforming assets at December 31, 2024 include loans HFS with a total fair value of $11.2 million, which were transferred from HFI during the fourth quarter of 2024 after a $1.8 million charge-off against the allowance for credit losses. These loans were reported as nonperforming loans at September 30, 2024.

Special mention loans totaled $65.3 million, or 2.14% of total loans, at December 31, 2024, compared to $77.5 million, or 2.51% of total loans, at September 30, 2024. The $12.2 million decrease was primarily due to CRE loans totaling $11.8 million that were upgraded to pass-rated and $1.8 million in payoffs and paydowns, offset by CRE loans totaling $1.4 million downgraded during the fourth quarter of 2024. All special mention loans are paying current.

Substandard loans totaled $100.3 million, of which $11.2 million were HFS at December 31, 2024, compared to $79.8 million at September 30, 2024. This $20.5 million increase was primarily due to downgrades of one $26.4 million C&D loan, SFR loans totaling $2.0 million, C&I loans totaling $1.9 million and SBA loans totaling $747,000. These downgrades were offset by payoffs and paydowns totaling $6.5 million, upgrades totaling $2.0 million and partial charge-offs totaling $2.0 million. Of the total substandard loans at December 31, 2024, there are $19.3 million on accrual status, including an $11.7 million C&D loan that was in the process of renewal and also included in the 30-89 day delinquent category below.

30-89 day delinquent loans, excluding nonperforming loans, totaled $22.1 million at December 31, 2024, compared to $10.6 million at September 30, 2024. The $11.5 million increase was mostly due to one $11.7 million C&D loan in process of renewal for a completed multifamily project at December 31, 2024, and since year end, it has been brought current and paid down by $1.5 million. Other changes in delinquent loans included additions totaling $5.5 million, offset by $3.2 million that returned to current status, $1.8 million that migrated to nonaccrual status and $735,000 in payoffs.

As of December 31, 2024, the allowance for credit losses totaled $48.5 million and was comprised of an allowance for loan losses of $47.7 million and a reserve for unfunded commitments of $729,000 (included in “Accrued interest and other liabilities”). This compares to the allowance for credit losses of $44.5 million comprised of an allowance for loan losses of $43.7 million and a reserve for unfunded commitments of $779,000 at September 30, 2024. The $4.0 million increase in the allowance for credit losses for the fourth quarter of 2024 was due to a $6.0 million provision for credit losses offset by net charge-offs of $2.0 million. The increase in charge-offs in the fourth quarter of 2024 was primarily due to a decrease in the estimated fair value of collateral dependent loans and loans moved to HFS. The allowance for loan losses as a percentage of loans HFI increased to 1.56% at December 31, 2024, compared to 1.41% at September 30, 2024, due to an increase in specific reserves on one C&D loan mentioned previously. The allowance for loan losses as a percentage of nonperforming loans HFI was 68% at December 31, 2024, a decrease from 72% at September 30, 2024.

Shareholders' Equity

At December 31, 2024, total shareholders' equity was $507.9 million, a $1.9 million decrease compared to September 30, 2024, and a $3.4 million decrease compared to December 31, 2023. The decrease in shareholders' equity for the fourth quarter of 2024 was due to higher net unrealized losses on available-for-sale securities of $4.2 million and common stock cash dividends paid of $2.9 million, offset by net income of $4.4 million, and equity compensation activity of $794,000. The decrease in shareholders' equity for the year ended 2024 was due to common stock repurchases of $20.7 million, common stock cash dividends paid of $11.7 million and higher net unrealized losses on available-for-sale securities of $744,000, offset by net income of $26.7 million, and equity compensation activity of $3.1 million. Book value per share and tangible book value per share⁽¹⁾ decreased to $28.66 and $24.51 at December 31, 2024, down from $28.81 and $24.64 at September 30, 2024 and up from $27.47 and $23.48 at December 31, 2023.

Contact:
Lynn Hopkins, Chief Financial Officer
(213) 716-8066
lhopkins@rbbusa.com

Corporate Overview

RBB Bancorp is a community-based financial holding company headquartered in Los Angeles, California. As of December 31, 2024, the Company had total assets of $4.0 billion. Its wholly-owned subsidiary, Royal Business Bank, is a full service commercial bank, which provides consumer and business banking services predominately to the Asian-centric communities in Los Angeles County, Orange County, and Ventura County in California, in Las Vegas, Nevada, in Brooklyn, Queens, and Manhattan in New York, in Edison, New Jersey, in the Chicago neighborhoods of Chinatown and Bridgeport, Illinois, and on Oahu, Hawaii. Bank services include remote deposit, E-banking, mobile banking, commercial and investor real estate loans, business loans and lines of credit, commercial and industrial loans, SBA 7A and 504 loans, 1-4 single family residential loans, trade finance, a full range of depository account products and wealth management services. The Bank has nine branches in Los Angeles County, two branches in Ventura County, one branch in Orange County, California, one branch in Las Vegas, Nevada, three branches and one loan operation center in Brooklyn, three branches in Queens, one branch in Manhattan in New York, one branch in Edison, New Jersey, two branches in Chicago, Illinois, and one branch in Honolulu, Hawaii. The Company's administrative and lending center is located at 1055 Wilshire Blvd., Los Angeles, California 90017, and its operations center is located at 7025 Orangethorpe Ave., Buena Park, California 90621. The Company's website address is www.royalbusinessbankusa.com.

Conference Call

Management will hold a conference call at 11:00 a.m. Pacific time/2:00 p.m. Eastern time on Tuesday, February 4, 2025, to discuss the Company’s fourth quarter 2024 financial results.

To listen to the conference call, please dial 1-888-506-0062 or 1-973-528-0011, the Participant ID code is 834092, conference ID RBBQ424. A replay of the call will be made available at 1-877-481-4010 or 1-919-882-2331, the passcode is 51830, approximately one hour after the conclusion of the call and will remain available through February 5, 2025.

The conference call will also be simultaneously webcast over the Internet; please visit our Royal Business Bank website at www.royalbusinessbankusa.com and click on the “Investors” tab to access the call from the site. This webcast will be recorded and available for replay on our website approximately two hours after the conclusion of the conference call.

Disclosure

This press release contains certain non-GAAP financial disclosures for tangible common equity and tangible assets and adjusted earnings. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. Please refer to the tables at the end of this release for a presentation of performance ratios in accordance with GAAP and a reconciliation of the non-GAAP financial measures to the GAAP financial measures.

Safe Harbor

Certain matters set forth herein (including the exhibits hereto) constitute forward-looking statements relating to the Company’s current business plans and expectations and our future financial position and operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance and/or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, the effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures; the potential for additional 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; our ability to attract and retain deposits and access other sources of liquidity; 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; 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; compliance with the Bank Secrecy Act and other money laundering statutes and regulations; potential goodwill impairment; liquidity risk; failure to comply with debt covenants; fluctuations in interest rates; 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; or other adverse external events could harm our business; 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 conflicts between Russia and Ukraine, in the Middle East, and increasing tensions between China and Taiwan, which could impact business and economic conditions in the U.S. and abroad; 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; adverse results in legal proceedings; 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; the impact of future or recent 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 SEC, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters, including Accounting Standards Update 2016-13 (Topic 326, “Measurement of Current Losses on Financial Instruments, commonly referenced as the Current Expected Credit Losses Model, which changed how we estimate credit losses and may further increase the required level of our allowance for credit losses in future periods; market disruption and volatility; fluctuations in the Company’s stock price; restrictions on dividends and other distributions by laws and regulations and by our regulators and our capital structure; issuances of preferred stock; 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; our ongoing relations with our various federal and state regulators, including the SEC, FDIC, FRB and California Department of Financial Protection and Innovation; our success at managing the risks involved in the foregoing items and all other factors set forth in the Company’s public reports, including its Annual Report as filed under Form 10-K for the year ended December 31, 2023, and particularly the discussion of risk factors within that document. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by law. Any statements about future operating results, such as those concerning accretion and dilution to the Company’s earnings or shareholders, are for illustrative purposes only, are not forecasts, and actual results may differ.

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Non-GAAP Reconciliations

Tangible Book Value Reconciliations

Tangible book value per share is a non-GAAP disclosure. Management measures tangible book value per share to assess the Company’s capital strength and business performance and believes this is helpful to investors as additional tools for further understanding our performance. The following is a reconciliation of tangible book value to the Company shareholders’ equity computed in accordance with GAAP, as well as a calculation of tangible book value per share as of December 31, 2024, September 30, 2024, and December 31, 2023.

Return on Average Tangible Common Equity

Management measures return on average tangible common equity (“ROATCE”) to assess the Company’s capital strength and business performance and believes this is helpful to investors as an additional tool for further understanding our 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: