Q2 2026 RBB Bancorp Earnings Call

July 21, 2026

Speaker #1: Greetings. Good day, ladies and gentlemen, and welcome to the RBB Bancorp Second Quarter 2026 Earnings Conference Call. At this time, all participants are placed on listen-only mode, and a question-and-answer session will follow the formal presentation.

Operator: Good day, ladies and gentlemen, and welcome to the RBB Bancorp Q2 2026 earnings conference call. At this time, all participants are placed on a listen-only mode, and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Rebeca Rico, Investor Relations. Ma'am, you may begin.

Speaker #1: If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. And please note, this conference is being recorded. I will now turn the conference over to your host, Rebeca Rico, Investor Relations.

Speaker #1: Mom, you may begin.

Speaker #2: Thank you, Ollie. Good day, everyone, and thank you for joining us to discuss RBB Bancorp's results for the second quarter of 2026. With me today are President and CEO Johnny Lee, Chief Financial Officer Lynn Hopkins, Chief Credit Officer Jeffrey Yates, and Chief Operations Officer Gary Van.

Rebeca Rico: Thank you, Ollie. Good day, everyone, and thank you for joining us to discuss RBB Bancorp's results for Q2 2026. With me today are President and CEO, Johnny Lee, Chief Financial Officer, Lynn Hopkins, Chief Credit Officer, Jeffrey Yeh, and Chief Operations Officer, Gary Fan. Johnny and Lynn will briefly summarize the results which can be found in the earnings press release and investor presentation that are available on our investor relations website. Then we'll open up the call to your questions. I would ask that everyone please refer to the disclaimer regarding forward-looking statements in the investor presentation and the company's SEC filings. Now, I'd like to turn the call over to RBB Bancorp's President and Chief Executive Officer, Johnny Lee. Johnny?

Speaker #2: Johnny and Lynn will briefly summarize the results, which can be found in the earnings press release and investor presentation that are available on our investor relations website, and then will open up the call to your questions.

Speaker #2: I would ask that everyone please refer to the disclaimer regarding forward-looking statements in the investor presentation and the company's SEC filings. Now, I'd like to turn the call over to RBB Bancorp's President and Chief Executive Officer, Johnny Lee.

Speaker #2: Johnny?

Speaker #3: Thank you, Rebeca. Good day, everyone, and thank you for joining us today. We are pleased to report another solid quarter of earnings and continued progress across the key metrics we have been focused on.

Johnny Lee: Thank you, Rebeca. Good day, everyone, and thank you for joining us today. We are pleased to report another solid quarter of earnings and continued progress across the key metrics we have been focused on. We generate net income of $10.1 million, or $0.59 per share, which represents a 13% increase from the same quarter in 2025 as we improved credit quality through loans and deposits and through capital actions. While net income decreased $1.2 million compared to the prior quarter, this decrease relates mostly to OREO sales during H1 2026 as we resolve our non-performing assets. We did make further progress on credit quality during the quarter, with non-performing assets declining 11% to 1.02% of total assets. Loan originations accelerated in Q2 with $159 million of new loans at an average yield of 6.3%.

Speaker #3: We generated net income of $10.1 million, or $0.59 per share, which represented a 13% increase from the same quarter in 2025, as we improved credit quality through loans and deposits, and took capital actions.

Speaker #3: While net income decreased $1.2 million compared to the prior quarter, this decrease relates mostly to OREO sales during the first half of 2026, as we resolved our non-performing assets.

Speaker #3: And we did make further progress on further quality during the quarter, with non-performing assets declining 11% to 1.02% of total assets. Loan originations accelerated in the second quarter with $159 million of new loans, at an average yield of 6.3%.

Speaker #3: Our lending pipelines remain healthy across the franchise, and we expect continued progress on loan growth in the second half of the year. On that note, I want to highlight an exciting development in our franchise expansion into Northern California.

Johnny Lee: Our lending pipelines remain healthy across the franchise, and we expect continued progress on loan growth in H2 of the year. On that note, I want to highlight an exciting development in our franchise expansion into Northern California. We recently announced the opening of a loan production office in Burlingame and hiring of a commercial banking team in the San Francisco Bay Area that will be led by John Curtis. John brings over 37 years of financial services experience, including serving as President and CEO of Bank of the Orient, and has a strong track record of building high-performing lending organizations.

Speaker #3: We recently announced the opening of a loan production office in Burlingame, and the hiring of a commercial banking team in the San Francisco Bay Area that will be led by John Curtis.

Speaker #3: John brings over 37 years of financial services experience, including serving as President and CEO of the Bank of Orient, and has a strong track record of building high-performing lending organizations.

Speaker #3: The San Francisco Bay Area is home to one of the largest Asian American communities in the United States, and we believe this team and the loan production office will help us expand our commercial banking business in a market that is a natural fit for RBB.

Johnny Lee: The San Francisco Bay Area is home to one of the largest Asian American communities in the United States, and we believe this team in the loan production office will help us expand our commercial banking business in a market that is a natural fit for RBB. Deposits grew $50.8 million in the quarter, and our deposit mix continued to improve, with non-interest-bearing deposits increasing to 17.5% of total deposits and continued reductions in our reliance on wholesale funding. Our steady growth in core funding, combined with our strong regulatory capital, help position us to redeem $40 million of our subordinate debt on 1 July, which will reduce interest expense in future quarters. Overall, we believe the Q2 demonstrated continued progress in improving RBB's fundamental earnings power, and that we are on track for a strong H2 2026.

Speaker #3: Deposits grew $50.8 million in the quarter, and our deposit mix continued to improve. With non-interest-bearing deposits increasing to 17.5% of total deposits and continued reductions in our reliance on wholesale funding, our steady growth in core funding, combined with our strong regulatory capital, helped position us to redeem $40 million of export net debt on July 1st, which will reduce interest expense in future quarters.

Speaker #3: Overall, we believe the second quarter demonstrated continued progress in improving RBB's fundamental earnings power, and that we are on track for a strong second half of 2026.

Speaker #3: With that, I'll hand it over to Lynn to talk about the results in more detail. Lynn?

Johnny Lee: With that, I'll hand it over to Lynn to talk about the results in more detail. Lynn?

Speaker #2: Thank you, Johnny. Please feel free to refer to the investor presentation we have provided, as I discuss the company's second quarter 2026 financial performance.

Lynn Hopkins: Thank you, Johnny. Please feel free to refer to the investor presentation we have provided as I discuss the company's Q2 2026 financial performance. Net income for the Q2 was $10.1 million, or $0.59 per diluted share. This compares to $11.3 million, or $0.66 per diluted share in the Q1, and $9.3 million or $0.52 per diluted share in the Q2 2025. The decline in net income from the Q1 was due primarily to $1.1 million in lower gains from REO sales as we continued to resolve our non-performing assets. The year-over-year improvement of approximately 13% in earnings per share reflects the impact of share repurchases and the sustained progress we have made in growing net interest income and reducing credit costs over the past year. Net interest income was $30.1 million for the Q2.

Speaker #2: Net income for the second quarter was $10.1 million, or $0.59 per diluted share. This compares to $11.3 million, or $0.66 per diluted share, in the first quarter, and $9.3 million, or $0.52 per diluted share, in the second quarter of 2025.

Speaker #2: The decline in net income from the first quarter was due primarily to $1.1 million in lower gains from REO sales, as we continued to resolve our non-performing assets.

Speaker #2: The year-over-year improvement of approximately 13% in earnings per share reflects the impact of share repurchases and the sustained progress we have made in growing net interest income and reducing credit costs over the past year.

Speaker #2: Net interest income was $30.1 million for the second quarter, compared to $30.5 million in the first quarter. The decrease was primarily due to lower FHLB dividend income and higher subordinated debt service, offset in part by a lower cost of deposits.

Lynn Hopkins: Compared to $30.5 million in the Q1. The decrease was primarily due to lower FHLB dividend income and higher subordinated debt service, offset in part by a lower cost of deposits. We received a special FHLB dividend of $430,000 in the Q1 versus no special dividend in the current Q. Our $120 million in subordinated debt repriced from its fixed 4% rate to a floating rate of 698, effective 1 April, which added approximately $830,000 of incremental interest expense in the Q2. At the same time, deposits have repriced lower, and the cost of average interest-bearing deposits declined five basis points to 334. Our net interest margin was 306 for the Q2, down nine basis points from 315 in the Q1. The primary drivers were the sub-debt repricing in the Q2 and the FHLB special dividend we received in the Q1.

Speaker #2: We received a special FHLB dividend of $430,000 in the first quarter, versus no special dividend in the current quarter. Our $120 million in subordinated debt repriced from its fixed 4% rate to a floating rate of 6.98%, effective April 1, which added approximately $830,000 of incremental interest expense in the second quarter.

Speaker #2: At the same time, deposits have repriced lower and the cost of average interest-bearing deposits declined 5 basis points to 3.34%. Our net interest margin was 3.06% for the second quarter, down 9 basis points from 3.15% in the first quarter.

Speaker #2: The primary drivers were the sub-debt repricing in the second quarter and the FHLB special dividend we received in the first quarter. On a year-over-year basis, our net interest margin improved 14 basis points, reflecting the cumulative benefit of our deposit repricing efforts and improved earning asset yields.

Lynn Hopkins: On a year-over-year basis, our net interest margin improved 14 basis points, reflecting the cumulative benefit of our deposit repricing efforts and improved earning asset yields. On 1 July, we completed the partial redemption of $40 million of our subordinated notes at 100% of par, plus accrued interest, for a total payment of approximately $40.7 million. The redemption, combined with the new 1 million share repurchase program announced in June, reflects our strong capital position and commitment to optimizing our capital structure. As a side note, our cash balances at 30 June were elevated compared to prior quarter-end levels, as we had accumulated cash in advance of the sub-debt redemption. Non-interest income was $3.0 million for Q2, compared to $4.3 million in Q1. The $1.3 million decrease was due mainly to the lower gains on sale of REO.

Speaker #2: On July 1st, we completed the partial redemption of $40 million of our subordinated notes at 100% of par, plus accrued interest, for a total payment of approximately $40.7 million.

Speaker #2: The redemption, combined with the new 1-million-share repurchase program announced in June, reflects our strong capital position and commitment to optimizing our capital structure.

Speaker #2: As a side note, our cash balances at June 30th were elevated compared to prior quarter-end levels, as we had accumulated cash in advance of the sub-debt redemption.

Speaker #2: Non-interest income was 30 wow, 30. Non-interest income was 3.0 million for the second quarter, compared to 4.3 million in the first quarter. The 1.3 million dollar decrease was due mainly to the lower gains on sale of REO, in addition, the first quarter included a 484,000 dollar recovery on a previously charged off acquired loan, and 360,000 of interest income on tax refunds related to purchased federal tax credits, there were no similar items in the second quarter.

Lynn Hopkins: The Q1 included a $484,000 recovery on a previously charged off acquired loan and $360,000 of interest income on tax refunds related to purchase to federal tax credits. There were no similar items in Q2. These decreases in Non-interest income were offset in part by higher gains on sale of loans of $640,000. Non-interest expense was $19 million for Q2, a modest decrease from $19.3 million in Q1. We expect our expense base will continue to track within the $18 to $19 million range we have mentioned in the past. The efficiency ratio was 57.5% for Q2, compared to 55.4% in Q1, with the increase driven primarily by lower Non-interest income. Q2 new loan originations increased 21% from Q1. Loans held for investment of $3.3 billion at 30 June were stable quarter over quarter.

Speaker #2: These decreases in non-interest income were offset in part by higher gains on sale of loans, of $640,000. Non-interest expense was $19.0 million for the second quarter, a modest decrease from $19.3 million in the first quarter.

Speaker #2: We expect our expense base will continue to track within the $18 million to $19 million range we have mentioned in the past. The efficiency ratio was 57.5% for the second quarter, compared to 55.4% in the first quarter, with the increase driven primarily by lower non-interest income.

Speaker #2: Second quarter new loan originations increased 21% from the first quarter. Loans held for investment of $3.3 billion at June 30th were stable quarter over quarter.

Speaker #2: Our loan-to-deposit ratio ended the quarter at 98%, as strong deposit growth supported loan originations. Total deposits grew $51 million to $3.4 billion, with retail deposits increasing $94 million and wholesale deposits declining $44 million.

Lynn Hopkins: Our loan-to-deposit ratio ended the quarter at 98% as strong deposit growth supported loan originations. Total deposits grew $51 million to $3.4 billion, with retail deposits increasing $94 million and wholesale deposits declining $44 million. Non-interest-bearing deposits increased to $592 million, representing 17.5% of total deposits, up from 15.8% at the end of Q1. We recorded zero provision for credit losses in Q2, compared to a $200,000 reversal in Q1 and a $2.4 million provision in the same quarter last year. Net charge-offs totaled just $83,000 in Q2, or essentially 0% of loans on an annualized basis. Non-performing loans declined $20.8 million, or 47% from the prior quarter, to $23.8 million. The primary driver was the transfer of a $19.4 million credit to REO. This credit is our largest non-performing asset, and we continue to move it through the resolution process.

Speaker #2: Non-interest-bearing deposits increased to $592 million, representing 17.5% of total deposits, up from 15.8% at the end of the first quarter. We recorded zero provision for credit losses in the second quarter, compared to a $200,000 reversal in the first quarter, and a $2.4 million provision in this same quarter last year.

Speaker #2: Net charge-offs totaled just $83,000 in the second quarter, or essentially zero percent of loans on an annualized basis. Non-performing loans declined $20.8 million, or 47%, from the prior quarter to $23.8 million.

Speaker #2: The primary driver was the transfer of a $19.4 million credit to REO. This credit is our largest non-performing asset, and we continue to move it through the resolution process.

Speaker #2: Special mention and substandard loans declined 16% to $82 million, from $97 million at March 31. Criticized and classified assets have improved meaningfully over the past year, and we believe the portfolio continues to trend in the right direction.

Lynn Hopkins: Special mention and substandard loans declined 16% to $82 million from $97 million at 31 March. Criticized and classified assets have improved meaningfully over the past year, and we believe the portfolio continues to trend in the right direction. Our allowance for credit losses remained essentially flat at $43.7 million. As a result of the decline in non-performing loans, the allowance coverage of non-performing loans improved significantly to 184% at 30 June. The allowance represents 1.32% of loans held for investment, which we believe is appropriate given the improving credit trends. Book value per share increased to $31.15, and tangible book value per share increased to $27.23, or approximately 1.5% higher when compared to 31 March. Our capital ratios remain strong, with a CET1 ratio of approximately 18%. A TCE to tangible assets ratio of approximately 11%.

Speaker #2: Our allowance for credit losses remained essentially flat at $43.7 million, and as a result of the decline in non-performing loans, the allowance coverage of non-performing loans improved significantly to 184% at June 30th.

Speaker #2: The allowance represents 1.32% of loans held for investment, which we believe is appropriate given the improving credit trends. Book value per share increased to $3,115, and tangible book value per share increased to $2,723, or approximately 1.5% higher compared to March 31.

Speaker #2: Our capital ratios remained strong, with the CET-1 ratio at approximately 18% and the TCE to tangible assets ratio at approximately 11%. We were pleased to announce that our board authorized the repurchase of up to 1 million shares of our common stock, representing 6% of shares outstanding.

Lynn Hopkins: We were pleased to announce that our board authorized the repurchase of up to 1 million shares of our common stock, representing 6% of shares outstanding. Our board's decision was due to the company's strong capital position and reflects the work we've done resolving non-performing assets and returning the bank to higher profitability. This concludes my prepared remarks. Operator, we are now ready to take questions. Thank you.

Speaker #2: Our board's decision was due to the company's strong capital position and reflects the work we've done resolving non-performing assets and returning the bank to higher profitability.

Speaker #2: To conclude my prepared remarks, Operator, we are now ready to take questions. Thank you.

Speaker #1: Thank you. Ladies and gentlemen, at this time we will be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. Ladies and gentlemen, at this time we will be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is coming from Brendan Nosal with Hovde Group. Your line is live.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker #1: And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Speaker #1: Thank you. Our first question is coming from Brendan Nozel with Hofta Group. Your line is live.

Speaker #3: Hey, good morning, folks. Hope you're doing well.

Brendan Nosal: Hey, good morning, folks. Hope you're doing well.

Speaker #4: Hi, Brendan.

Johnny Lee: Hi, Brendan.

Speaker #3: We're just starting off here on the net interest margin. I guess sequential pressure this quarter, as expected, given the sub-net move from fixed to floating.

Lynn Hopkins: Hey.

Brendan Nosal: Maybe just starting off here on the net interest margin. I guess sequential pressure this quarter as expected given the sub-debt move from fixed to floating. Looking ahead to the Q3 and the tail end of this year, can you just walk through margin dynamics and where you think margin will land in the Q3, just given the partial repayment of the debt issuance?

Speaker #3: Looking ahead to kind of the third quarter, and I guess the tail end of this year, can you just walk through margin dynamics and where you think margin will land in the third quarter, just given the partial repayment of the debt issuance?

Speaker #2: So, I think the net interest margin still has an opportunity to improve. Based on opportunities for loan growth, also retiring a portion of the sub debt should also bias back a portion of our margin.

Lynn Hopkins: I think the net interest margin still has an opportunity to improve based on opportunities for loan growth. Also retiring a portion of the sub-debt should also bias back a portion of our margin. We continue to monitor our deposit costs very closely. The average cost of deposits for the quarter were higher than the spot rate at the end of the quarter. I think costs will continue to be relatively the same or slightly improved. I think that there's an expectation that the loan production that we talk about in our materials will come through as net loan growth in the H2. I think we've talked about in the past that we've been liability sensitive. Rates are probably higher for longer.

Speaker #2: And we continue to monitor our deposit costs very closely. The average cost of deposits for the quarter was higher than the spot rate at the end of the quarter.

Speaker #2: So I think costs will continue to be relatively the same or slightly improved. And I think that there's an expectation that the loan production that we talk about in our materials will come through as net loan growth in the second half of the year.

Speaker #2: So, I think we've talked about in the past that we've been liability sensitive. Rates are probably higher for longer, so I think it'll have a little bit of a neutral impact on our funding sources, and then the earning asset side probably has a chance to come up.

Lynn Hopkins: I think it'll have a little bit of a neutral impact on our funding sources, and then the earning asset side probably has a chance to come up. I think just around where we were able to achieve in the Q1, and above where we are in the Q2.

Speaker #2: So I think just around where we were able to achieve in the first quarter and above where we are in the second quarter.

Speaker #3: All right, that's really helpful, Lynn. Maybe on a related note, can you just talk about the competitive backdrop for core funding and how it's evolved over the past couple of months across your footprint?

Brendan Nosal: All right. That's really helpful, Lynn. Maybe on a related note, can you just talk about the competitive backdrop for core funding, and how it's evolved over the past couple of months across your footprint?

Speaker #2: So, I'll start with a couple of comments, and then, from a competitive landscape perspective, if I leave anything out, others can chime in.

Lynn Hopkins: I'll start with a couple of comments, from a competitive landscape, if I leave anything out others can chime in. I think we all recognize that the market has sort of moved up. I think we started the quarter with deposit rates being kind of the high end around the 3.75% mark. Ended the quarter with kind of wholesale funding being closer to 4.0%, maybe even 4.15%. We've seen that reflected in our competitors' pricing as well when you go out and look at different specials. I think that we've been successful inside our marketplace with our customers sort of in that it's a higher end between those 3.75% to 4%. Also in bringing in some non-maturity and we did grow non-interest-bearing deposits as well. It remains very competitive.

Speaker #2: So I think we've all recognized that the market has sort of moved up. I think we started the quarter with deposit rates being kind of at the high end, around the 3.75 mark, and ended the quarter with wholesale funding being closer to 4, maybe even 4.15.

Speaker #2: And we've seen that reflected in our competitors' pricing as well. When you go out and look at different specials, I think that we've been successful inside our marketplace.

Speaker #2: With our customers, sort of at that higher end between those 3.75% to 4%, and then also in bringing in some non-maturity—and we did grow non-interest-bearing deposits as well.

Speaker #2: So, it remains very competitive. I think it's moved up towards the end of the quarter compared to the beginning of the quarter. And our biggest opportunity continues to be how we grow non-interest-bearing deposits.

Lynn Hopkins: I think it's moved up towards the end of the quarter compared to the beginning of the quarter, our biggest opportunity continues to be how we grow non-interest-bearing deposits.

Speaker #2: From a competitive—any other competitive?

Speaker #4: No, the market is still obviously very competitive as far as the deposit rates are concerned. But I think what we launched a couple of months ago in Q2 with the Flex Savings, that's been helping us to retain much of the customer base at a lower cost.

Johnny Lee: No, the market is obviously still very competitive as far as the deposit is concerned. I think what we launched a couple of months ago in the Q2 with the Flex savings, that's been helping us to retain much of the customer at a lower cost.

Speaker #3: Okay. Perfect. I'm going to speak one more in there. Just on the new LPO and new lending team in Northern California, how should those of us on the outside benchmark kind of break even times and kind of the portfolio size that you think can be kind of achieved in the medium term from the group that you've added there?

Brendan Nosal: Okay, perfect. I'm going to sneak one more in there. Just on the new LPO and new lending team in Northern California. How should those of us on the outside benchmark kind of break-even times and the portfolio size that you think can be kind of achieved in the medium term from the group that you've added there?

Johnny Lee: Brendan, what I would say is obviously this team brings a lot of relationships that we're obviously expecting to bring a lot of relationships to RBB in Northern California region, having a new team combined over 80 years of experience up there with a very strong network of relationships within the communities. With this team on board, I would expect hopefully during H2 to contribute to our commercial loan growth particularly, and hopefully that will move us to the mid to higher single-digit marks, if you will. That's what I would be expecting of them.

Speaker #4: Well, Brendan, Ryan, what I would say is, obviously, this team brings a lot of relationships that we’re obviously expecting to bring to RBB in the Northern California region, with the team having a combined over 80 years of experience up there and a very strong network of relationships within the communities.

Speaker #4: So with this team on board, I would expect, hopefully during the second half of the year, to contribute to our commercial loan growth, particularly, and hopefully that will move us through the mid- to higher-single-digit sort of marks, if you will.

Speaker #4: So that's what I would be expecting of them.

Speaker #2: I do think, yeah, the addition of the loan production office and the team—we definitely had, I think, strong originations and production. It’s just been more than, or equally, offset by, call it, Lynn’s sale activity, but payoff and paydowns, which has included, I’m going to say, strategic decisions to allow certain credits to refinance away.

Lynn Hopkins: I do think.

Johnny Lee: Okay.

Lynn Hopkins: Yeah, the addition of the loan production office and the team. We definitely had strong originations and production. It's just been more than or equally offset by, call it loan sale activity, but payoff and paydowns, which has included, I'm going to say, strategic decisions to allow certain credits to refinance away. I think there was, at one point, an idea that rates might come down. Now we see higher for longer, we definitely let some loan activity go to others. When we think about loan growth in H2 relative to, I'm going to say, a flattish growth in H1, production might be mildly higher than what we saw, but we're expecting refinancing and payoffs to be lower. Maybe we are at that mid-single-digit range.

Speaker #2: I think there was, at one point, an idea that rates might come down. Now we see 'higher for longer.' So we definitely let some loan activity go to others.

Speaker #2: So when we think about loan growth in the second half of the year relative to, I'm going to say, a flattish growth in the first half of the year, production might be mildly higher than what we saw, but we're expecting refinancing and payoffs to be lower.

Speaker #2: So maybe we are at that mid-single-digit range on an annualized basis. It might be a little bit higher than that. But we expect it to contribute; I don't know that we're prepared to say specifically the LPO's portfolio size.

Lynn Hopkins: On an annualized basis, it might be a little bit higher than that. We expect it to contribute. I don't know that we're prepared to say specifically that LPO's portfolio size.

Speaker #3: Yes. Yeah.

Speaker #4: Maybe I can just.

Brendan Nosal: Yes. That's helpful color.

Speaker #3: That's helpful color.

Speaker #4: Yeah, just comment that the pipeline is very healthy. Okay.

Johnny Lee: Maybe I can just comment. I think their pipeline is very healthy.

Speaker #2: Their pipeline is healthy, and all of our other pipelines have remained strong, which is why I think that origination levels have come through at the levels they have.

Lynn Hopkins: Their pipeline's healthy, and all of our other pipelines have remained strong, which is why I think that origination levels have come through at the levels they have.

Speaker #1: Thank you. Our next question is coming from Kelly Mota with KBW. Your line is live.

Operator: Thank you. Our next question is coming from Kelly Motta with KBW. Your line is live.

Speaker #5: Good morning. Thanks for the question. Congrats on getting the capital plan out there back in June. Just wondering, I think you have about 6% of your shares authorized as part of that repurchase program.

Kelly Motta: Good morning. Thanks for the question. Congrats on getting the capital plan out there back in June. Just wondering, I think you have about 6% of your shares authorized as part of that repurchase program. You guys obviously have a ton of capital and have been making progress on the credit front. Wondering the appetite and pace we should be expecting now that this is out. Thank you.

Speaker #5: You obviously have a ton of capital and have been making progress on the credit front. I'm wondering about the appetite and pace we should be expecting now that this is out.

Speaker #5: Thank you.

Speaker #2: Thanks, Kelly. As far as the appetite, I mean, I think we've demonstrated—and we still believe—investing ourselves is a good use of our capital.

Lynn Hopkins: Thanks, Kelly. As far as the appetite, I think we've demonstrated and we still believe investing in ourselves is a good use of our capital. Our appetite is healthy. We have traded a little bit below tangible book, and we're right around that level now with the Q2 results out there. I think that we'll pay attention to opportunities relative to our stock price.

Speaker #2: So our appetite is healthy. We have traded a little bit below tangible book, and we're kind of right around that level now with second quarter results out there.

Speaker #2: So I think that we'll pay attention to opportunities relative to our stock price.

Speaker #5: Okay, great. And then you noted that the move to OREO—that’s, I think, one of your larger, or largest, problem assets out there. Can you help us? I presume there’ll be some sort of workout on that.

Kelly Motta: Okay. Great. Then you noted that the move to OREO, that's I think one of your larger or largest problem assets out there. Can you help us? Presumably, there'll be some sort of workout on that. Any updated thoughts on the cadence? Obviously progress has been made, but I'm sure you want to get that off your books probably ASAP. Thank you.

Speaker #5: Any updated thoughts on the cadence? Obviously, progress has been made, but I'm sure you want to get that off your books probably ASAP. Thank you.

Lynn Hopkins: Yes. ASAP is a good way to think about it. As the loan moved from a non-performing loan to REO, we did view the REO value as appropriate. It is supported by a recent as-is appraisal. We also recognize that this is a large, partially completed construction project, and it will require the right buyer. We also appreciate that time is also a factor. I think all of those items together, we would be looking for a resolution in the H2 of this year, but appreciate it is still complicated.

Speaker #2: Yes, ASAP is a good way to think about it. So as the loan moved from a non-performing loan to OREO, we did view the OREO as valued as appropriate.

Speaker #2: It is supported by a recent as-is appraisal. But we also recognize that this is a large, partially completed construction project, and it will require the right buyer.

Speaker #2: And we also appreciate that time is a factor. So I think all of those items together mean we would be looking for a resolution in the second half of this year.

Speaker #2: But I appreciate that it is still complicated.

Speaker #5: Okay. Got it. I guess lastly for me, clearly you have the new team coming on a new occasion in Northern California. Wondering, as you kind of look ahead and think about where you stand now, any other additional areas that you're looking to build out in terms of the footprint in order to support growth and vis-a-vis how we should be thinking about that in the expense space?

Kelly Motta: Okay. Got it. I guess lastly from me, clearly, you have the new team coming on a new location in Northern California. Wondering as you look ahead and think about where you stand now, any other additional areas that you're looking to build out on in terms of the footprint in order to support growth and vis-a-vis how we should be thinking about that in the expense space? Thanks.

Speaker #5: Thanks.

Speaker #4: Well, I think more immediate, obviously, since we just hired this team, the focus is on making this team as successful as possible, given the very healthy pipeline they have. We're not looking beyond that at this time, Kelly, really.

Johnny Lee: Well, I think more immediate, obviously, since we just hired this team where the focus is on making this team successful and given the very healthy pipeline they have. Yeah, we're not looking beyond that at this time, Kelly, really. We're just want to making sure we can be well established in Northern California region with this commercial team. Yeah, nothing on the horizon other than just putting some attention and making sure this team getting the support that they need.

Speaker #4: We just want to make sure we can be well established in the Northern California region with this commercial team. And yeah, so nothing on the horizon other than just paying attention and making sure this team is getting the support that they need.

Speaker #5: Got it. And Lynn, do you have any color or commentary on the expense run rate? It's been pretty consistent the past couple of quarters now.

Kelly Motta: Got it. Lynn, do you have any color or commentary on the expense run rate has been pretty consistent the past couple quarters now. Any kind of gives and takes here?

Speaker #5: Any kind of gives and takes here?

Speaker #2: Sure. I think the run rate has been consistent, and I think that for now, it should remain at a fairly consistent level. I think there are some opportunities down the road.

Lynn Hopkins: Sure. I think the run rate has been consistent, and I think that for now it should remain at a fairly consistent level. I think there's some opportunities down the road as we make some technology decisions and credit continues to work itself out. I think in the near term, we're probably right about this level.

Speaker #2: As we make some technology decisions and credit continues to work itself out, I think in the near term, we're probably right at about this level.

Speaker #5: Got it. I'll step back. Thank you so much.

Kelly Motta: Got it. I'll step back. Thank you so much.

Speaker #2: Thank you, Kelly.

Lynn Hopkins: Thank you, Kelly.

Speaker #1: Thank you. Our next question is coming from Matthew Clark with Piper Sandler. Your line is live.

Operator: Thank you. Thank you. Our next question is coming from Matthew Clark with Piper Sandler. Your line is live.

Speaker #6: Hey, good morning everyone.

Matthew Clark: Good morning, everyone.

Speaker #4: Hi there.

Johnny Lee: Hi, Matthew.

Speaker #6: Can you just update us on the CDs coming due over the next couple of quarters, and the roll-on, roll-off rates?

Matthew Clark: Can you just update us on the CDs coming due over the next couple of quarters here and the roll-on/roll-off rates?

Speaker #2: Sure. So, for CDs, we introduced the Flex Savings. So, the percent of CDs as a part of our balance sheet is a little bit lower.

Lynn Hopkins: Sure. For CDs, we introduced the Flex savings. The percent of CDs as a part of our balance sheet is a little bit lower. As we ended the quarter, we had about $1.5 billion in CDs that would mature within the next 12 months, and they have an average price of about 360. About just shy of 40% are able to mature or reprice in Q3. The ones that are coming due in the near term are around a 370 cost. They have an opportunity to reprice into the current environment to the extent that we replace them with retail funding. The lower costing CDs are maturing in Q4 and into next year. That's when we may see a little bit impact to the cost of funds.

Speaker #2: As we ended the quarter, we had about $1.5 billion in CDs that will mature within the next 12 months, and they have an average price of about 360.

Speaker #2: And just shy of 40% are able to mature or reprice in the third quarter. The ones that are coming due in the near term are around a 3.70% cost.

Speaker #2: So they have an opportunity to reprice into the current environment to the extent that we replace them with retail funding. The higher—or rather, the lower—costing CDs are maturing in the fourth quarter and into next year.

Speaker #2: So that's when we may see a little bit impact to the cost of funds at the same time that's when we would the same time that's when we would probably see the impact to the earning assets being coming in at a higher yield as well.

Lynn Hopkins: At the same time, that's when we would probably see the impact to the earning assets coming in at a higher yield as well. That's the CDs and the cadence. As far as the Flex savings, that product has some attractive qualities to it, and we've been very successful at pricing that kind of in the high threes and not necessarily moving into the wholesale funding rate level.

Speaker #2: So that's the CDs and the cadence. And then, as far as the flex savings, that product has some attractive qualities to it, and we've been very successful at pricing that kind of in the high threes and not necessarily moving into the wholesale funding rate level.

Speaker #6: Got it. Okay. And then, on the retail deposit growth this quarter—really strong. Can you give us a sense for how much of that you would attribute to seasonality? And also, how much of that was from new versus existing customers?

Matthew Clark: Got it. Okay. On the retail deposit growth this quarter, really strong. Can you give us a sense for how much of that you would attribute to being seasonality and also how much of that was from new versus existing customers?

Speaker #2: Sure, thanks for that question. We did have some really attractive non-interest-bearing deposit growth in the quarter. I think a large portion of it has some seasonality to it.

Lynn Hopkins: Sure. Thanks for that question. We did have some really attractive Non-Interest-Bearing deposit growth in the quarter. I think a large portion of it has some seasonality to it. I think some balances were included at 30 June and some of those dollars were used directly after quarter end. I think a portion of the growth is staying in Non-Interest-Bearing, and then a portion of it is moving over to a non-maturity interest-bearing product. Non-Interest-Bearing deposits will likely moderate. I think the period imbalance was just a little bit on the high side. We have customers that have large balances in there doing business. We would expect kind of in and out and the average to migrate up. I think that we are going to be higher, just probably not the full $65 million that came through kind of quarter end to quarter end.

Speaker #2: I think some balances were included at June 30th, and some of those dollars were used directly after quarter end. I think a portion of the growth is staying in non-interest-bearing, and then a portion of it is moving over to a non-maturity interest-bearing product.

Speaker #2: So non-interest-bearing deposits will likely moderate. I think the period imbalance was just a little bit on the high side. But we have customers that have large balances in there doing business.

Speaker #2: So I would expect kind of in and out and the average to migrate up. So I think that we're going to be higher, just probably not this full $65 million that came through kind of quarter end to quarter end.

Speaker #6: Okay. And then on loan sales, you sold more loans than I think most of us probably expected. Is that maybe a pull forward, or how should we think about the volume of loan sales going forward, and whether or not that loan sale revenue might reset here in the back half?

Matthew Clark: Okay. On gain on sale, you sold more loans than I think most of us probably expected. Is that maybe a pull forward? How should we think about the volume of loan sales going forward and whether or not that gain on sale revenue might reset here in H2?

Speaker #2: Sure. I'm going to answer it in two parts, and Johnny might add some information as well. So, SBA—I think that we have a regular cadence there.

Lynn Hopkins: Sure. I am going to answer it in two parts, and Johnny might add some information as well. On SBA, I think that we have a regular cadence there. There is a good pipeline in production. There is a strong secondary market. The premiums are attractive. I think that the volume in Q1 and Q2 is an indication and maybe some consistency. I think on the mortgage portfolio, obviously the volumes are higher and the premiums are lower. We are happy to keep the mortgages on the books. They have some attractive yields. We have also tried to manage the balance sheet to keep mortgage and our commercial portfolio kind of a 50/50 split. To the extent that we have really strong production, it gives us an opportunity to package up more of them and sell them.

Speaker #2: There's a good pipeline in production. There's a strong secondary market. The premiums are attractive. So I think that the volume in the first and second quarter is an indication, and maybe some consistency, I think, on the mortgage portfolio. Obviously, the volumes are higher and the premiums are lower.

Speaker #2: So, that is a little bit more. We're happy to keep the mortgages on the books. They have some attractive yields, but we've also tried to manage the balance sheet to keep mortgage and our commercial portfolio kind of a 50/50 split.

Speaker #2: So, to the extent that we have really strong production, it gives us an opportunity to package up more of them and sell them. So, probably less of a pull through than maybe more just an opportunity.

Lynn Hopkins: Probably less of a pull-through than maybe more just an opportunity. It was probably on the larger side relative to what maybe a quarter loan sale would look like, a quarterly loan sales would look like.

Speaker #2: But it was probably on the larger side relative to what maybe a quarter loan sale would look like, a quarterly loan sale would look like.

Speaker #6: Okay. And then just back to the expense guide, you reiterated the $18 to $19 million, but it sounded like you're kind of guiding more toward the higher end of that range.

Matthew Clark: Okay. Just back to the expense guide. You've reiterated the $18 to $19 million, it sounded like you're guiding more toward the higher end of that range. Is that fair? Or I guess what I'm trying to get at is what would get you closer to $18 million? Where's the source of relief here? Or should we not expect any?

Speaker #6: Is that fair, or I guess what I'm trying to get at is what would get you closer to $18 million? Where is the source of relief here, or should we not expect any?

Speaker #2: Sure, I think I'll start with, it was a fair comment. And I think the opportunities in the future relate to our technology related to our core system.

Lynn Hopkins: Sure. I think I'll start with, it was a fair comment. I think the opportunities in the future relate to our technology, related to our core system and other investments, that has an opportunity to maybe lower our run rate, while at the same time investing in technology. The other opportunity lies in our professional service fees as we continue to resolve credit. Those are our two opportunities in the future. At the same time, we're adding folks to try to increase production, quality of production. For now, I think we're probably at the higher end of the range.

Speaker #2: And other investments that have an opportunity to maybe lower our run rate while at the same time investing in technology. The other opportunity lies in our professional service fees as we continue to resolve credit. So those are our two opportunities in the future.

Speaker #2: At the same time, we're adding folks to try to increase the production quality, so—but for now, I think we're probably at the higher end of the range.

Speaker #6: Got it. Okay. And the last one for me, just on the share buyback this quarter, can you give us the weighted average price at which you bought shares back?

Matthew Clark: Got it. Okay. The last one for me, just on the share buyback this quarter. Can you give us the weighted average price that you bought shares back?

Lynn Hopkins: I apologize. I do not have that with me.

Speaker #2: I apologize. I do not have that with me.

Speaker #6: If not the number of shares you bought back, we can back into it.

Matthew Clark: If not, the number of shares you bought back, we can back into it.

Speaker #2: Sure. So it's around so it's just around the 4 million. So we apologize. I think I left that note on my desk. So I'll have to follow up here in a moment.

Lynn Hopkins: Sure. It's just around the 4 million. I apologize. I think I left that note on my desk. I'll have to follow up here in a moment with your question. I would just share that the majority of the shares that were repurchased in Q2 related to the authorization that was outstanding from last year. That leaves the majority of the program that we just announced, that remains outstanding as of 30 June. I will pull those other pieces of information while we're on the call.

Speaker #2: In response to your question, I would just share that the majority of the shares that were repurchased in the second quarter related to the authorization that was outstanding from last year.

Speaker #2: And that leaves the majority of the program that we just announced that remains outstanding as of June 30th. And I will pull those other pieces of information.

Speaker #2: While we're on the call.

Speaker #6: Okay. No worries. Thank you.

Matthew Clark: Okay. No worries. Thank you.

Speaker #7: Thank you. Our next question is coming from Jacques Laurent from Stevens. Your line is live.

Operator: Thank you. Our next question is coming from Jackson Laurent from Stephens. Your line is live.

Speaker #8: Hey, good morning. This is Jackson on for Andrew Terrell.

Jackson Laurent: Hey, good morning. This is Jackson on for Andrew Terrell.

Johnny Lee: Yeah.

Lynn Hopkins: Yeah.

Speaker #9: Hi Jackson.

Johnny Lee: Hi, Jackson.

Speaker #8: Most of my questions have already been asked, but just one for me on origination yields. I know you guys have talked pretty consistently about staying disciplined on pricing.

Jackson Laurent: Most of my questions have already been asked, just one for me on origination yields. I know you guys have talked pretty consistently about staying disciplined on pricing, it was good to see yields stay pretty flat quarter-over-quarter. Just wondering if you'd give us some updated color on how competition has been shaping up for credit in your markets, if any of the dynamics have changed since we last spoke in April.

Speaker #8: And it was good to see yields stay pretty flat quarter over quarter. Just wondering if you could give us some updated color on how competition has been shaping up for credit in your markets, and if any of the dynamics have changed since we last spoke in April.

Speaker #9: I think generally it hasn't changed that much. Jackson, this, I think, is still fairly intensive on the commercial side. We're finding five-year fixed loans, for example, for around 5.25% to 5.5% on average, which is what we're competing against.

Johnny Lee: I think generally it hasn't changed that much, Jackson. I think it's still fairly intensive on the commercial side. 5-year fixed loans, for example, for around five and a quarter to five and a half on average is what we're competing against. I think we are last couple of quarters, or at least past quarters, we've been trying to stay consistently disciplined as far as our commercial pricing is concerned. We look at each deal from a more relationship standpoint, and if it's just a single transaction without any potential ancillary depository opportunities or fee income opportunities, we certainly want to stay above that six mark rather than competing at that sort of submarket rates.

Speaker #9: I think we, at the last couple of quarters, or at least past quarters, have been trying to stay consistently disciplined as far as our commercial pricing is concerned.

Speaker #9: We look at each deal from more of a relationship standpoint, and if it's just a single transaction without any potential ancillary depository opportunities or fee income opportunities, we would certainly want to stay above that six mark.

Speaker #9: Rather than competing at those sorts of sub-market rates.

Speaker #8: Got it. Thank you. That's all I had. Thank you for taking the questions.

Jackson Laurent: Got it. Thank you. That's all I had. Thank you for taking the questions.

Speaker #9: Thank you.

Operator: Thank you. Thank you. Our next question is coming from Tim Coffey with Brean Capital. Your line is live.

Speaker #7: Thank you. Our next question is coming from Tim Coffey with Breen Capital. Your line is live.

Speaker #10: Thank you. Morning everybody. Just in the kind of conversations we've been having today about the competitiveness of the deposit pricing as well as kind of your loan outlook, as we think about the loaner deposit ratio, are we kind of bumping up against that kind of level you feel most comfortable at?

Tim Coffey: Thank you. Morning, everybody. In the kind of conversations we've been having today about the competitiveness of the deposit pricing, as well as kind of your loan outlook. As we think about the loan-to-deposit ratio, are we kind of bumping up against that kind of level you feel most comfortable at?

Speaker #2: Thanks, Tim. So, we have run the balance sheet in the high 90% loan-to-deposit ratio range, and we are comfortable. As far as bumping up against it, I think there's been some talk about how, as long as there's appropriate risk management, you can be above 100% now.

Lynn Hopkins: Thanks, Tim. We have run the balance sheet in the high 90% loan-to-deposit ratio range, and we are comfortable. As far as bumping up against it, I think there's been some talk of how as long as there's appropriate risk management, you can be above 100% now. I think, and given our balance sheets, lower reliance on wholesale funding, some of the growth opportunities, I think that there is still an opportunity to operate in the kind of high 90% loan-to-deposit ratio range. I'm not sure if it's going to change materially, but Yeah, we're comfortable here.

Speaker #2: But I think and given our balance sheet lower reliance on wholesale funding, some of the growth opportunities I think that there's still an opportunity to operate in the kind of high 90% loan to deposit ratio.

Speaker #2: Range, so I'm not sure if it's going to change materially, but we're comfortable here.

Speaker #10: Okay, yeah. I ask because the last time we did see interest rates move higher, the loan-to-deposit ratio did move above 100%. So, I'm trying to get an idea of whether or not, if we do see rates go higher, there's more opportunity to book higher yields under assets or loans—that that was something that you would consider, going above 100, or if that was just a hard ceiling.

Tim Coffey: Okay. Yeah, I ask because the last time we did see interest rates move higher, the loan deposit ratio did move above 100%. I'm trying to get an idea of whether or not, if we do see rates go higher, there's more opportunity to book higher yields on earning assets or on loans, that that was something that you'd consider going above 100%, or if that was just a hard ceiling. Okay.

Speaker #10: Okay.

Speaker #2: Yeah, no, good question. I don't know that it's a hard ceiling, but we also want to be mindful of the marketplace and sort of the perception there.

Lynn Hopkins: Yeah, no, good question. I don't know that it's a hard ceiling, but we also want to be mindful of the marketplace and sort of the perception there. We did de-leverage at one point to bring us down, but there may be opportunity there, as you're pointing out. Just to circle back on the repurchase question. Looks like we had repurchased about 181,000 shares. The average price was, I think, around $24.65, $24.75.

Speaker #2: So we did deleverage at one point to bring us down, but there may be opportunity there, as you're pointing out. And then just to circle back on the repurchase question, looks like we had repurchased about 181,000 shares.

Speaker #2: The average price was, I think, around $2,465, $2,475.

Tim Coffey: Yeah. Speaking on the capital returns, any thoughts on increasing the quarterly cash dividend?

Speaker #10: Yeah. Speaking on the capital returns, any thoughts on increasing the quarterly cash dividend?

Speaker #2: Yeah, I think we're looking at it. I think we needed to prioritize getting these capital actions in place. But as we look forward, it is something we would consider.

Lynn Hopkins: Yeah, I think we're looking at it. I think we needed to prioritize getting these capital actions in place. As we look forward, it is something we would consider.

Speaker #10: Okay. And then, Lynn, can you remind me about the tax rate again? Is it going to remain at this level that it's been at for the last couple of quarters?

Tim Coffey: Okay. Lynn, can you remind me about the tax rate again? Is it permanently going to be kind of at this level it's been at the last couple of quarters?

Speaker #2: We are looking at opportunities that are out there, but until there's something more definitive, our effective tax rate is around the 28% level.

Lynn Hopkins: We are looking at opportunities that are out there, but until there's something more definitive, our effective tax rate is around the 28% level.

Speaker #10: Okay, great. Those are my questions. Thank you.

Tim Coffey: Okay, great. Those are my questions. Thank you.

Speaker #2: Thanks Tim.

Lynn Hopkins: Thanks, Tim.

Speaker #9: Thanks Tim.

Speaker #7: Thank you. We have a question from Kelly Marter with KBW. Your line is live.

Operator: Thank you. We have a question from Kelly Motta with KBW. Your line is live.

Speaker #11: Hi. I apologize. Matt Clark took my question on the movement on NIBD, so I'm good. Thank you.

Kelly Motta: Hi, I apologize. Matt Clark took my question on the movement on NIBDs, I'm good. Thank you.

Speaker #2: All right. Thanks Kelly.

Lynn Hopkins: All right.

Operator: Thank you, Kelly.

Johnny Lee: Thank you, Kelly.

Lynn Hopkins: Thanks, Kelly.

Speaker #7: Thank you, Lynn. As we have no further questions in the queue at this time, I would like to turn the call back over to Mr. Johnny Lee for any closing remarks.

Operator: Thank you. As we have no further questions in the queue at this time, I would like to turn the call back over to Mr. Johnny Lee for any closing remarks.

Speaker #9: Thank you. Once again, thank you for joining us today. We look forward to speaking with many of you in the coming days and weeks.

Johnny Lee: Thank you. Once again, thank you for joining us today. We look forward to speaking to many of you in the coming days and weeks. Have a great day, everyone.

Speaker #9: Have a great day everyone.

Speaker #7: Thank you, ladies and gentlemen. This does conclude today's call. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation.

Operator: Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time. Have a wonderful day, and we thank you for your participation.

Q2 2026 RBB Bancorp Earnings Call

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