RBB Bancorp (RBB) Earnings

Management highlights

- Overall Financial Performance - Management reported a solid quarter with a 13% year-over-year increase in diluted EPS, to $0.59 per share, driven by improved credit quality, share repurchases, growing net interest income, and reduced credit costs. - The sequential decline in net income from Q1 2026 is primarily due to lower REO sale gains as the bank resolves legacy non-performing assets, plus the absence of one-time gains that boosted Q1 2026 income (a charged-off loan recovery and tax refund interest). - Capital ratios remain very strong, with a CET1 ratio of approximately 18% and TCE to tangible assets ratio of approximately 11%. - Credit Quality Improvements - Non-performing assets declined 11% quarter-over-quarter to 1.02% of total assets; non-performing loans fell 47% to $23.8 million, driven by the transfer of the bank's largest non-performing credit ($19.4 million) to REO. - Criticized and classified assets improved meaningfully over the past year; net charge-offs totaled just $83,000 in Q2 2026, equal to 0% of total loans annualized. - Allowance for credit losses coverage of non-performing loans improved significantly to 184% as of June 30, 2026. - Business Expansion - RBB Bancorp opened a new loan production office in Burlington, Northern California, and hired an experienced commercial banking team led by industry veteran John Curtis to serve the San Francisco Bay Area's large Asian American community, a natural strategic fit for the bank. - Capital Structure Actions - On July 1, 2026, the bank redeemed $40 million of subordinated debt at par, which will reduce future interest expense. - The board of directors authorized a new share repurchase program for up to 1 million common shares (representing 6% of outstanding shares), reflecting the bank's strong capital position and progress resolving non-performing assets.

Guidance

- Non-interest expense is expected to remain in the $18 million to $19 million range, with management noting near-term expense will run toward the higher end of this range as the bank builds out the new Northern California lending team. - Net interest margin is expected to improve in the second half of 2026, rising back toward Q1 2026 levels (above Q2 2026's 3.06%) driven by the subordinated debt redemption, continued deposit cost optimization, and net loan growth. - Management expects mid-to-high single-digit net loan growth annualized in the second half of 2026, after relatively flat loan growth in the first half of the year, supported by the new Northern California lending team and healthy overall origination pipelines. - Management expects to resolve the large $19.4 million REO asset (transferred from non-performing loans in Q2) in the second half of 2026, though the transaction remains complicated due to the asset's nature as a partially completed construction project. - Increasing the quarterly cash dividend is under consideration for future capital actions, after the bank prioritized completing the sub-debt redemption and launching the new share repurchase program.

Segment performance

RBB Bancorp is a commercial banking firm with performance reported across its core banking business, aggregated below: - Net income: $10.1 million in Q2 2026, down from $11.3 million in Q1 2026 and up 8.6% from $9.3 million in Q2 2025. - Net interest income: $30.1 million in Q2 2026, down from $30.5 million in Q1 2026; net interest margin was 3.06%, down 9 basis points from Q1 2026 but up 14 basis points year-over-year. - Non-interest income: $3.5 million in Q2 2026, down from $4.3 million in Q1 2026. - Non-interest expense: $19 million in Q2 2026, down slightly from $19.3 million in Q1 2026. - Loans held for investment: $3.3 billion as of June 30, 2026, stable quarter-over-quarter; total deposits grew $50.8 million quarter-over-quarter to $3.4 billion, with non-interest-bearing deposits accounting for 17.5% of total deposits (up from 15.8% in Q1 2026).

Risks & headwinds

- Core deposit funding remains highly competitive, with market deposit rates moving higher over the course of Q2 2026, requiring continued focused effort to grow low-cost non-interest-bearing deposits. - Commercial lending pricing competition remains intense, with market rates for 5-year fixed commercial loans trending 5.25% to 5.5%, forcing the bank to maintain discipline to avoid lending at unprofitable rates for non-relationship transactions. - Resolution of the large $19.4 million REO asset is uncertain, with no guarantee of a timely sale even though management targets a second half 2026 resolution. - Higher-for-longer interest rates create ongoing pressure on funding costs, though management notes the bank is liability sensitive with a broadly neutral impact from sustained elevated rates.

Analyst Q&A

• Q: Analyst asks how net interest margin will trend in the second half of 2026 after Q2's sequential decline driven by subordinated debt repricing, and asks for an update on core funding competition. /

  A: Management states the partial sub-debt redemption will restore some margin, and deposit costs are expected to stay flat or improve slightly. Loan growth in the second half will also support margin, with NIM expected to return to near Q1 2026 levels. Funding markets remain very competitive, with rates rising through Q2; the bank's new Flex Savings product has helped retain customers at lower cost and grow non-interest-bearing deposits. (332 words)

• Q: Analyst asks what medium-term performance can be expected from the new Northern California loan production office and team, including break-even timeline and target portfolio size. /

  A: Management notes the new team has over 80 years of combined experience and strong existing community relationships, and expects the team to contribute to commercial loan growth in the second half of 2026. The bank does not disclose specific portfolio targets at this stage, but expects the expansion to contribute to the bank's expected mid-to-high single-digit net annualized loan growth in the second half. (267 words)

• Q: Analyst asks what the share repurchase appetite is under the new 1 million share authorization, given the bank's strong capital position. /

  A: Management confirms healthy appetite for repurchases, noting that investing in the bank's own shares is an attractive use of excess capital, especially as the stock trades around tangible book value. Management will actively evaluate opportunities based on current stock price. (118 words)

• Q: Analyst asks what cadence is expected for resolving the large $19.4 million non-performing asset that was transferred to REO in Q2. /

  A: Management confirms the goal is to resolve the asset as soon as possible, with a target resolution in the second half of 2026. The asset is a large partially completed construction project that requires a specific buyer, so the process remains complicated and timing is not guaranteed. (104 words)

• Q: Analyst asks if the bank's 98% loan-to-deposit ratio is at the management's upper comfort limit, and if it would consider moving above 100% to pursue higher-yield loan growth. /

  A: Management states the bank is comfortable operating in the high 90% loan-to-deposit range, and it is not a hard ceiling. While management prefers to stay in the high 90% range, it would consider moving modestly above 100% to pursue attractive loan growth opportunities, supported by the bank's reduced reliance on wholesale funding. (115 words)