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

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

FOR THETHREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2024, DECEMBER 31, 2023, AND ~~2016~~MARCH 31, 2023

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

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2024, DECEMBER 31, 2023, AND ~~2016~~MARCH 31, 2023

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

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

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

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

RBB Bancorp (“RBB”) is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. ~~Our~~RBB Bancorp’s principal business is to serve as the holding company for ~~our~~its wholly-owned banking subsidiaries, Royal Business Bank ("Bank") and RBB Asset Management Company ~~("RAM"~~(“RAM”). RAM was formed to hold and manage problem assets acquired in business combinations. When we refer to “we”, ~~collectively referred~~“us”, “our”, or the “Company”, we are referring to ~~herein as "the Company".~~ RBB Bancorp and its consolidated subsidiaries including the Bank and RAM, collectively. When we refer to the “parent company”, “Bancorp”, or the “holding company”, we are referring to RBB Bancorp, the parent company, on a stand-alone basis.

At ~~September 30, 2017, the Company~~March 31, 2024, we had total assets of ~~$1.6~~$3.9 billion, ~~gross~~total loans of ~~$1.2~~$3.0 billion, total deposits of ~~$1.3~~$3.0 billion and total ~~stockholders'~~shareholders' equity of ~~$260.3~~$514.0 million. ~~On July 31, 2017, the Company completed its initial public offering of 3,750,000 shares at a price to the public of $23.00 per share. The Company’s~~RBB’s common stock trades on the Nasdaq Global Select Market under the symbol “RBB”.

The Bank provides ~~business banking~~business-banking products and services predominantly to the ~~Chinese-American~~Asian-American communities through full service branches located in Los Angeles County, Orange County and Ventura County ~~and~~ in California, Las Vegas ~~including remote deposit, E-banking, mobile banking,~~(Nevada), the New York City metropolitan areas, Chicago (Illinois), Edison (New Jersey) and Honolulu (Hawaii). The products and services include commercial and investor real estate loans, business loans and lines of credit, ~~SBA~~ Small Business Administration (“SBA”) 7A and 504 loans, mortgage loans, trade finance and a full range of depository ~~accounts. RAM was formed~~accounts, including specialized services such as remote deposit, E-banking, and mobile banking.

We operate as a minority depository institution, which is defined by the FDIC as a federally insured depository institution where 51% or more of the voting stock is owned by minority individuals or a majority of the board of directors is minority and the community that the institution serves is predominantly minority. A minority depository institution is eligible to ~~hold~~receive from the FDIC and ~~manage problem assets acquired in business combinations.~~other federal regulatory agencies training, technical assistance and review, and assistance regarding the implementation of proposed new deposit taking and lending programs, as well as with respect to the adoption of applicable policies and procedures governing such programs. We intend to maintain our minority depository institution designation, as it is expected that at least 51% of our issued and outstanding shares of capital shall remain owned by minority individuals. The minority depository institution designation has been historically beneficial to us, as the FDIC has reviewed and assisted with the implementation of our deposit and lending programs, and we continue to use the program for technical assistance.

We operate full-service banking offices in Arcadia, Cerritos, Diamond Bar, Irvine, Los Angeles, Monterey Park, Oxnard, Rowland Heights, San Gabriel, Silver Lake, Torrance, ~~West LA,~~ and Westlake Village, ~~California and~~California; Las Vegas, ~~Nevada~~Nevada; Manhattan, Brooklyn, Flushing, and ~~a loan production office in~~Elmhurst, New York; the ~~City~~Chinatown and Bridgeport neighborhoods of ~~Industry, California. The Company's~~Chicago, Illinois; Edison, New Jersey; and Honolulu, Hawaii. Our primary source of revenue is providing loans to customers, who are ~~predominately~~predominantly small and middle-market businesses and individuals.

We generate our revenue primarily from interest received on loans and, ~~leases and,~~ to a lesser extent, from interest received on investment securities. We ~~have~~ also ~~derived~~derive income from noninterest sources, such as fees received in connection with various lending and deposit services, ~~residential mortgage loan originations,~~ loan servicing, ~~and~~ gain on sales of ~~loans.~~loans and wealth management services. Our ~~principle~~principal expenses include interest expense on deposits and ~~subordinated debentures,~~borrowings, and operating expenses, such as salaries and employee benefits, occupancy and equipment, data processing, and income tax expense.

We ~~have~~ completed ~~four~~six whole bank acquisitions and one branch acquisition from July 8, 2011 through ~~February 19, 2016, including the acquisition~~January 2022. All of ~~TFC Holding Company on February 19, 2016. Our~~our acquisitions have been accounted for using the acquisition method of accounting and, accordingly, the operating results of the acquired entities have been included in the consolidated financial statements from their respective acquisition dates. ~~See Note 3. Acquisitions, for more information about the TFC acquisition.~~

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements and notes thereto of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for Form ~~10-Q~~10-Q and conform to practices within the banking industry and include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair presentation of financial results for the interim periods presented. The results of operations for the ~~nine~~three months ended ~~September 30, 2017~~ March 31, 2024 are not necessarily indicative of the results for the full year. ~~Certain amounts reported for 2016 have been reclassified to be consistent with the reporting for 2017.~~ These interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the ~~years~~year ended December 31, ~~2016, 2015 and 2014,~~ 2023, included in our ~~registration statement filed under~~Annual Report on Form ~~S-1.~~

~~The accompanying unaudited consolidated financial statements include~~10-K for the ~~accounts of RBB Bancorp and its wholly-owned subsidiaries Royal Business Bank ("Bank"~~fiscal year ended December 31, 2023 (our “2023 Annual Report”) ~~and RBB Asset Management Company ("RAM"), collectively referred to herein as "the Company"~~. ~~All significant intercompany transactions have been eliminated.~~

~~RBB Bancorp was formed in January 2011 as a bank holding company. RAM was formed in 2012 to hold and manage problem assets acquired in business combinations.~~

~~RBB Bancorp has no significant business activity other than its investments in Royal Business Bank and RAM.~~

The preparation of financial statements in conformity with ~~accounting principles generally accepted in the United States of America~~GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. ~~Actual~~It is reasonably possible that these estimates could change as actual results could differ from those estimates. The allowance for credit losses, realization of deferred tax assets, the valuation of goodwill and other intangible assets, other derivatives, and the fair value measurement of financial instruments are particularly subject to change and such change could have a material effect on the consolidated financial statements.

The accompanying unaudited consolidated financial statements were compiled in accordance with the accounting policies set forth in "Note 12 – Basis of Presentation and Summary of Significant ~~Policies~~Accounting Policies" in our ~~Consolidated Financial Statements~~consolidated financial statements as of and for the ~~periods~~year ended December 31, ~~2016, 2015, and 2014,~~ 2023, included in our ~~registration statement on Form S-1.~~2023 Annual Report. The accompanying consolidated unaudited financial statements reflect all adjustments consisting of normal recurring adjustments that, in the opinion of management, are necessary to reflect a fair statement of our consolidated financial condition, results of operations, and cash flows. The results of operations for acquired companies are included from the dates of acquisition. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ended December 31, 2017.

~~In May 2014, the~~ Financial Accounting Standards Board ("FASB") ~~issued~~issues Accounting Standards ~~Update~~Updates ("ASU" or “Update”) ~~No. 2014-09,~~ ~~Revenue from Contracts with Customers~~and Accounting Standards Codifications (“ASC”), which are the primary source of GAAP.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic ~~606)~~.820)—Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This ~~Update requires~~pronouncement clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. ASU 2022-03 also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction and requires certain new disclosures for equity securities subject to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services. The following steps are applied in the updated guidance: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. These amendments are effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period and one year later for nonpublic business entities. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that period. The Company plans to adoptcontractual sale restrictions. We adopted ASU ~~2014-09~~2022-03 on January 1, ~~2019 utilizing~~2024 and the ~~modified retrospective approach. Since the guidance does~~ adoption did not ~~apply to revenue associated with financial instruments such as loans and investments, which are accounted for under other provisions of GAAP, we do not expect it to~~ have a material impact interest income, our largest component of income. The Company will perform an overall assessment of revenue streams potentially affected by the ASU, including certain deposit related fees and interchange fees, to determine the impact this guidance will have on our consolidated financial statements.

In ~~January 2016,~~ March 2023, the FASB issued ASU ~~2016-01,~~ ~~Financial Instruments-Overall: Recognition~~2023-02, Investments - Equity Method and ~~Measurement of Financial Assets~~Joint Ventures (Topic 323). This Update permits reporting entities to elect to account for their tax equity investments using the proportional amortization method if certain conditions are met. It requires that a liability to be recognized for delayed equity contributions that are unconditional and ~~Financial Liabilities (Subtopic 825-10). Changes made to the current measurement model primarily affect the accounting~~legally binding or for equity ~~securities~~contributions that are contingent upon a future event when that contingent event becomes probable. The reporting entity needs to disclose the nature of its tax equity investments and ~~readily determinable fair values, where changes in fair value will impact earnings instead~~the effect of ~~other comprehensive income. The accounting for other~~its tax equity investments on its financial ~~instruments, such as loans, investments in debt securities,~~position and ~~financial liabilities~~results of operations. ASU 2023-02 is largely unchanged. The Update also changes the presentation and disclosure requirements for financial instruments including a requirement that public business entities use exit price when measuring the fair value of financial instruments measured at amortized cost for disclosure purposes. This Update is generally effective for ~~public business entities~~us in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and one year later for nonpublic business entities. Based upon a preliminary evaluation of the guidance in ASU No. 2016-01 the Company does not believe that the ASU will have a material impact on the Company’s consolidated financial statements. The Company will continue to monitor any updates to the guidance.

~~In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02,~~ ~~Leases (Topic 842)~~. The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases, which is generally defined as a lease term of less than 12 months. This change will result in lessees recognizing right-of-use assets and lease liabilities for most leases currently accounted for as operating leases under current lease accounting guidance. ~~The amendments in this Update are effective for interim and annual periods beginning after December 15, 2018, for public business entities and one year later for all other entities.~~ The Company has several lease agreements which are currently considered operating leases and are therefore not included on the Company’s Consolidated Balance Sheets. Under the new guidance the Company expects that some of the lease agreements will have to be recognized on the Consolidated Balance Sheets as a right-of-use asset with a corresponding lease liability. Based upon a preliminary evaluation the Company expects that the ASU will have an impact on the Company’s Consolidated Balance Sheets. The Company will continue to evaluate how extensive the impact will be under the ASU on the Company’s consolidated financial statements.

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting (Topic 718.)~~ ASU 2016-09 includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. Under ASU 2016-09, excess tax benefits and certain tax deficiencies will no longer be recorded in additional paid-in capital ("APIC"). Instead, they will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement, and APIC pools will be eliminated. In addition, the guidance requires excess tax benefits be presented as an operating activity on the statement of cash flows rather than as a financing activity. ASU 2016-09 also permits an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required today, or recognized when they occur. This guidance is effective for public business entities for interim and annual reporting periods beginning after December 15, 2016, and for nonpublic business entities annual reporting periods beginning after December 15, 2017, and interim periods within the reporting periods beginning after December 15, 2018. Early adoption is permitted, but all of the guidance must be adopted in the same period. The Company early adopted the ASU as of January 1, 2017. The Company plans to recognize forfeitures as they occur. The early adoption of the ASU did not have a material effect on the company’s financial statements or disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instrument (Topic 326). This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. In issuing the standard, the FASB is responding to criticism that today's guidance delays recognition of credit losses. The standard will replace today's "incurred loss" approach with an "expected loss" model. The new model, referred to as the current expected credit loss ("CECL") model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held to maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available for sale ("AFS") debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 also expands the disclosure requirements regarding an entity's assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, public business entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019, for SEC filers, one year later for non SEC filing public business entities and annual reporting periods beginning after December 15, 2020, for nonpublic business entities and interim periods within the reporting periods beginning after December 15, 2021. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). The Company has begun its evaluation of the impact of the implementation of ASU 2016-13. The implementation of the provisions of ASU No. 2016-13 will most likely impact the Company’s Consolidated Financial Statements as to the level of reserves that will be required for credit losses. The Company will continue to access the potential impact that this ASU will have on the Company’s consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” The new guidance clarifies the classification within the statement of cash flows for certain transactions, including debt extinguishment costs, zero-coupon debt, contingent consideration related to business combinations, insurance proceeds, equity method distributions and beneficial interests in securitizations. The guidance also clarifies that cash flows with aspects of multiple classes of cash flows that cannot be separated by source or use should be classified based on the activity that is likely to be the predominant source or use of cash flows for the item. This guidance is effective for fiscal years beginning after December 15, 2017 and will require application using a retrospective transition method. The Company is currently evaluating the impact of adoption of this ASU on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. Currently, Topic 805 specifies three elements of a business – inputs, processes, and outputs. While an integrated set of assets and activities (collectively referred to as a “set”) that is a business usually has outputs, outputs are not required. In addition, all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs, for example, by integrating the acquired set with their own inputs and processes. This led many transactions to be accounted for as business combinations rather than asset purchases under legacy GAAP. The primary goal of ASU 2017-01 is to narrow the definition of a business, and the guidance in this update provides a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017, 2023, including interim periods within those fiscal years. ~~The amendments in this update should be applied prospectively~~We adopted ASU 2023-02 on ~~or after~~January 1, 2024 and the ~~effective date. The Company is currently evaluating this ASU to determine the~~adoption did not have a material impact on ~~its~~our consolidated financial statements.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)~~Recently issued not yet effective

In ~~January 2017,~~ October 2023, the FASB issued ASU ~~No. 2017-04, Intangibles—Goodwill~~2023-06, Disclosure Improvements. This pronouncement amends the FASB Accounting Standards Codification to reflect updates and ~~Other~~simplifications to certain disclosure requirements referred to the FASB by the SEC in 2018, including disclosures for the statement of cash flows, earnings per share, commitments, debt and equity instruments, and certain industry information, among other things. Each amendment is effective when the related disclosure is effectively removed from Regulations S-X or S-K; early adoption is prohibited. All amendments should be applied prospectively. If the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K by June 30, 2027, the pending amendments will be removed and will not become effective for any entity.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic ~~350).~~740) - Improvements to Income Tax Disclosures. This ~~ASU simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from~~Update enhances the ~~goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value~~transparency and decision usefulness of ~~a reporting unit’s goodwill with the carrying amount of that goodwill.~~income tax disclosures. The amendments in this Update ~~are required for public business entities~~require the following: 1) consistent categories and ~~other entities that have goodwill reported~~greater disaggregation of information in ~~their financial statements~~the rate reconciliation, and ~~have not elected the private company alternative for the subsequent measurement of goodwill. As a result, under the ASU, “an entity should perform its annual, or interim, goodwill impairment test~~2) income taxes paid disaggregated by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.” ASU No. 2017-14 is effective for annual and any interim impairment tests performed in periods beginning after December 15, 2019 for public business entities that are SEC filers, December 15, 2020 for business entities that are not SEC filers, and December 15, 2021 for all other entities. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company will continue to access the potential impact that this ASU will have on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which is intended to enhance “the accounting for the amortization of premiums for purchased callable debt securities.” The ASU shortens the amortization period for certain callable debt securities purchased at a premium by requiring that the premium be amortized to the earliest call date. Under current generally accepted accounting principles (GAAP), entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument.jurisdiction. The amendments in ~~this Update affects all entities that hold investments in callable debt securities that have an amortized cost basis in excess of~~ the amount that is repayable by the issuer at the earliest call date (that is, at a premium). The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The ASU’s amendments are effective for public business entities for interim and annual periods beginning after December 15, 2018. For other entities, the amendmentsASU are effective for annual periods beginning after December 15, ~~2019, and interim periods thereafter.~~ 2024. Early adoption is permitted ~~including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year~~for annual financial statements that ~~includes that interim period. An entity should apply the~~have not yet been issued or made available for issuance. The amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. The implementation of the provisions of ASU No. 2017-08 will most likely not have a material impact the Company’s consolidated financial statements. The Company will continue to access the potential impact that this ASU will have on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, “Compensation – Stock Compensation (Topic 718): Scope of codification Accounting.” The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share- entity to apply modification accounting. An entity should account for the effects of a modification unless all the following are met: (1) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification. (2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. (3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments in ASU No. 2017-09 are effective for annual periods, and interim within those annual reporting periods, beginning after December 15, 2017; early adoption is permitted. The amendments in this ASU should be applied ~~prospectively to an award modified~~ on ~~or after the adoption date. The Company does~~ a prospective basis. Retrospective application is permitted. Adoption of ASU 2023-09 is not ~~expect this ASU~~ expected to have a material impact on ~~the Company’s~~our consolidated financial statements.

~~In July 2017, the FASB issued~~ ASU 2017-13—Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments (SEC Update). At the July 20, 2017, EITF meeting, the SEC staff announced that it would not object when certain public business entities (PBEs) elect to use the non-PBE effective dates solely to adopt the FASB’s new standards on revenue (ASC 606) and leases (ASC 842). This ASU reflects comments made by the SEC. The Company will continue to evaluate how extensive the impact will be under the ASU on the Company’s consolidated financial statements.

On February 19, 2016, the Company acquired all the assets and assumed all the liabilities of TFC Holding Company in exchange for cash of $86.7 million. At closing, TFC primarily consisted of TomatoBank, its wholly owned subsidiary and $3.3 million of trust preferred debentures. TFC Holding Company operated six branches in the Los Angeles metropolitan area. The Company acquired TFC Holding Company to strategically increase its existing presence in the Los Angeles area. Goodwill in the amount of $25.9 million was recognized in this acquisition. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. Goodwill is not deductible for income tax purposes.

The total fair value of assets acquired approximated $469.9 million, which included $51.6 million in cash and cash equivalents, $2.3 million in interest bearing deposits in other financial institutions, $2.0 million in FHLB stock, $387.7 million in loans, $15.8 million in available for sale securities, $4.9 million in deferred tax assets, $225,000 in fixed assets, $1.7 million in core deposit intangible assets and $3.7 million in other assets. The total fair value of liabilities assumed was $409.1 million, which included $405.3 million in deposits, $3.3 million in subordinated debentures and $566,000 in other liabilities. The assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of February 19, 2016. The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. The Company determined the fair value of loans, leases, core deposit intangible, deposits, and subordinated debentures with the assistance of a third party valuation.

These fair values are estimates and are subject to adjustment for up to one year after the acquisition date or when additional information relative to the closing date fair values becomes available and such information is considered final, whichever is earlier. While additional significant changes to the closing date fair values are not expected, any information relative to the changes in these fair values will be evaluated to determine if such changes are due to events and circumstances that existed as of the acquisition date. During the measurement period, any such changes will be recorded as part of the closing date fair value. The measurement period ended on February 19, 2017.

In many cases, the fair values of assets acquired and liabilities assumed were determined by estimating the cash flows expected to result from those assets and liabilities and discounting them at appropriate market rates. The most significant category of assets for which this procedure was used was that of acquired loans. The excess of expected cash flows above the fair value of the majority of loans will be accreted to interest income over the remaining lives of the loans in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 310-20.

None of the loans acquired had evidence of deterioration of credit quality since origination for which it was probable, at acquisition, that the Company would be unable to collect all contractually required payments receivable.

~~In accordance with generally accepted accounting principles there was no carryover of the allowance for loan losses that had been previously recorded by TFC Holding Company.~~

Non-recurring acquisition related expenses in connection with the TFC acquisition were $1.7 million for the nine months ended September 30, 2016. There were no non-recurring acquisition related expenses for the nine months ended September 30, 2017

The following table summarizes the amortized cost and fair value of investment securities available for sale (“AFS”) and held to maturity ~~at September 30, 2017 and December 31, 2016,~~(“HTM”) and the corresponding amounts of gross unrealized gains and losses ~~recognized in accumulated other comprehensive income:~~as of the dates indicated:

We pledged investment securities with a fair value of ~~$840,000~~$33.1 million and ~~$933,000 was pledged to secure a~~$95.3 million for certificates of deposit from the State of California, secured Federal funds arrangements, and other local agency ~~deposit~~deposits at ~~September 30, 2017~~ March 31, 2024 and December 31, ~~2016, respectively.~~2023.

There were no sales of investment securities during the three months ended March 31, 2024, December 31, 2023, and March 31, 2023.

Accrued interest receivable for investment securities at March 31,2024 and December 31, 2023 totaled $1.1 million and $962,000.

The table below summarizes amortized cost and fair value of the investment securities portfolio, ~~at September 30, 2017 are shown~~ by expected maturity, ~~below.~~as of the dates indicated. Mortgage-backed securities are classified in accordance with their estimated average life. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

The following ~~table summarizes available for sale securities with~~tables show the fair value and gross unrealized losses ~~at September 30, 2017 and December 31, 2016,~~of our investment securities, aggregated by ~~major security type~~investment category and the length of time ~~in a continuous unrealized loss position. There were no held to maturity~~individual securities have been in a continuous unrealized loss position, ~~at September 30, 2017 and December 31, 2016:~~as of the dates indicated:

~~Unrealized losses have not been recognized into income because the issuer bonds are of high credit quality, management does not intend~~The securities that were in an unrealized loss position at March 31, 2024 and December 31, 2023, were evaluated to ~~sell, it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery and~~determine whether the decline in fair value ~~is largely due~~below the amortized cost basis resulted from a credit loss or other factors. At March 31, 2024 and December 31, 2023, there was no allowance for credit losses (“ACL”) on the HTM securities portfolio.

We concluded that the unrealized losses were primarily attributed to ~~changes in interest rates.~~yield curve movement, together with widened liquidity spreads and credit spreads. The ~~fair value is expected~~issuers have not, to our knowledge, established any cause for default on these securities. We expect to recover as the ~~bonds approach maturity.~~

~~Management evaluates~~amortized cost basis of our securities ~~for other-than-temporary impairment ("OTTI") on at least a semi-annual basis,~~ and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intendshave no present intent to sell ~~or it is more likely than~~ and will not ~~that it will~~ be required to sell ~~a security~~securities that have declined below their cost before their anticipated recovery. Accordingly, no ACL was recorded as of March 31, 2024 and December 31, 2023, against AFS securities, and there was no provision for credit losses recognized for the three months ended March 31, 2024 and 2023.

Equity Securities - We have several Community Reinvestment Act (“CRA”) equity investments. We recorded no gain nor loss for the three months ended March 31, 2024 and March 31, 2023. Other equity securities (included in ~~an unrealized loss position before recovery~~“Accrued interest and other assets” in the consolidated balance sheets) were $22.3 million as of ~~its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost~~ March 31, 2024 and ~~fair value is recognized as impairment through earnings.~~December 31, 2023.

Our loan portfolio consists primarily of loans to borrowers within ~~Los Angeles, Ventura and Orange County,~~the Southern California ~~and~~metropolitan area, the New York City metropolitan area, Chicago (Illinois), Las Vegas ~~Nevada.~~(Nevada), Edison (New Jersey) and Honolulu (Hawaii). Although ~~the Company seeks~~we seek to avoid concentrations of loans to a single industry or based upon a single class of collateral, real estate and real estate associated businesses are among the principal industries in ~~the Company's~~our market area and, as a result, ~~the Company's~~our loan and collateral portfolios are, to some degree, concentrated in those industries.

The following table presents the balances in our loan held for investment ("HFI") portfolio as of the dates indicated:

We use both internal and external qualitative factors within the Current Expected Credit Losses (“CECL”) model: lending policies, procedures, and strategies; economic conditions; changes in nature and volume of the portfolio; credit staffing and administration experience; problem loan trends; loan review results; collateral values; concentrations; and regulatory and business environment. During the first quarter of 2024, we recorded a decrease of $215,000 to the allowance for loan losses (“ALL”) and an increase of $31,000 to the reserve for unfunded commitments (“RUC”) compared to an increase of $2.0 million to the ALL and a decrease of $138,000 to the RUC during the first quarter of 2023.

The following table presents a summary of the changes in the ACL for the periods indicated:

The following tables present the balance and activity related to the ~~allowance~~ALL for loans HFI by loan ~~losses for held for investment loans by type~~portfolio segment for the periods presented.

The following table presents the recorded investment in loans and impairment method as of and for the nine months ended September 30, 2017 and September 30, 2016, and the activity in the allowance for loan losses for the year ended December 31, 2016, by portfolio segment:

~~The Company categorizes~~We categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. ~~The Company analyzes~~We analyze loans individually by classifying the loans as to credit risk. This

analysis typically includes larger, non-homogeneous loans such as commercial real estate and commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained. ~~The Company uses~~We use the following definitions for risk ratings:

Pass - Loans classified as pass include loans not meeting the risk ratings defined below.

Special Mention -Loans classified as special mention have a potential weakness that deserves ~~management's~~management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the ~~institution's~~institution’s credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - ~~A loan is considered impaired, when, based on current information and events, it is probable~~Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the ~~Company will be unable to collect all amounts due according to~~weaknesses make collection or liquidation in full, on the ~~contractual terms~~basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following tables summarize our loans HFI by loan portfolio segment, risk rating and vintage year as of the ~~loan agreement. Additionally, all loans classified as troubled debt restructurings are considered impaired.~~ dates indicated. The vintage year is the year of origination, renewal or major modification.

The ~~risk category~~following tables present the aging of the recorded investment in past due loans, by ~~class~~loan portfolio segment, as of the dates indicated.

We have no loans ~~was as follows~~that are 90 days or more past due and still accruing at ~~September 30, 2017~~ March 31, 2024 and December 31, ~~2016:~~2023.

The following table presents the ~~recorded investment in non-accrual~~ loans on nonaccrual status and the volume of such loans with no ALL, by ~~class~~loan portfolio segment, as of ~~loans. There were no loans past due 90 days and still on accrual at September 30, 2017 and December 31, 2016:~~the dates indicated:

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)~~The following tables present the class of collateral, by loan portfolio segment, for individually evaluated, collateral dependent loans as of the dates indicated:

~~The following table presents the aging of the recorded investment in past-due loans at September 30, 2017 and December 31, 2016 by class of loans:~~

~~Information relating to individually impaired loans presented by class of loans was as follows at September 30, 2017 and December 31, 2016:~~

No interest income was recognized on a cash basis ~~for~~during the ~~nine~~three months ended ~~September 30, 2017~~March 31,2024, and ~~2016~~2023. We did not recognize any interest income on nonaccrual loans during the three months ended March 31,2024, and ~~for~~March 31,2023, while the ~~year ended December 31, 2016.~~ loans were in nonaccrual status.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)~~Occasionally, we modify loans to borrowers in financial distress by providing principal forgiveness, term extension, or interest rate reduction. We may provide multiple types of concessions on one loan. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for loan losses.

The Company had five and six loans identified as troubled debt restructurings ("TDR's") at September 30, 2017 and December 31, 2016, respectively. A specific reserve of $1,782,000 had been allocated for one loan at December 31, 2016. There were no ~~specific reserves on TDRs as of September 30, 2017.~~ loans that were both experiencing financial difficulty and modified during the three months ended March 31,2024 and 2023.

There ~~are~~ were no commitments to lend additional amounts at ~~September 30, 2017~~ March 31, 2024 and December 31, ~~2016~~ 2023 to customers with outstanding modified loans. There were no nonaccrual loans that ~~are classified as TDR's.~~

~~During the year ended December 31, 2016 and for the nine months ended September 30, 2017, the terms of certain loans~~ were modified as TDR's. The modification of the terms generally included loans where a moratorium on loan payments was granted. Such moratoriums ranged from three months to twelve months on the loans restructured in 2017 and 2016.

~~The following table presents loans by class modified as TDRs that occurred~~ during the ~~nine~~past twelve months ~~ended September 30, 2017 and~~that had payment defaults during the ~~year ended December 31, 2016;~~periods.

The ~~Company has purchased~~ loans being serviced for others are not reported as ~~part~~assets in our consolidated balance sheet. The table below presents the principal balances of its whole bank acquisitions, for which there was at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

~~The outstanding balance and carrying amount of purchased credit-impaired loans at September 30, 2017 and December 31, 2016 were as follows:~~

~~For these purchased credit-impaired loans,~~ the Company did not increase the allowance for loan losses during the nine months ended September 30, 2017 or for the year ended December 31, 2016, as there were no significant reductions in the expected cash flows.

~~Below is a summary of activity in the accretable yield on purchased credit-impaired loans for the nine months ended September 30, 2017 and for the year ended December 31, 2016:~~

~~Mortgage and SBA~~ loans serviced for others, ~~are not reported~~by loan portfolio segment, as ~~assets. The principal balances at September 30, 2017 and December 31, 2016 are as follows:~~of the dates indicated:

~~Activity~~Servicing fee income is recorded for fees earned for servicing ~~assets follows:~~

loans. The ~~fair value~~fees are based on a contractual percentage of the outstanding principal. The amortization of mortgage servicing ~~assets for mortgage loans was $1,804,000 and $1,184,000 at September 30, 2017 and December 31, 2016, respectively. The fair value of~~rights is net against loan servicing ~~assets for SBA loans was $4,982,000 and $3,142,000 at September 30, 2017 and December 31, 2016, respectively.~~

~~Servicing~~fee income. Loan servicing fees, net of ~~servicing asset~~ amortization, totaled ~~$571,000~~$589,000, $616,000, and ~~$384,000~~$731,000 for the ~~nine~~three months ended ~~September 30, 2017~~ March 31, 2024, December 31, 2023, and ~~2016, respectively.~~March 31, 2023.

When ~~mortgage and Small Business Administration ("SBA")~~ loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on a valuation model that calculates the present value of estimated future net servicing income. All classes of servicing assets are subsequently measured using the amortization method, which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If ~~the Company~~we later ~~determines~~determine that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income.

The table below presents the activity in the servicing assets for ~~fees earned for servicing loans. The fees are based on a contractual percentage~~the periods indicated:

Estimates of the ~~outstanding principal. The amortization of mortgage servicing rights is netted against~~ loan servicing ~~fee income.~~asset fair value are derived through a discounted cash flow analysis. Portfolio characteristics include loan delinquency rates, age of loans, note rate and geography. The assumptions embedded in the valuation are obtained from a range of metrics utilized by active buyers in the marketplace. The analysis accounts for recent transactions, and supply and demand within the market.

The estimated fair value of servicing assets for mortgage loans was $12.1 million and $12.1 million as of March 31, 2024 and December 31, 2023. Fair value at March 31,2024 was determined using a discount rate of 11.22%, average prepayment speed of 7.85%, depending on the stratification of the specific right, and a weighted-average default rate of 0.09%. Fair value at December 31, 2023 was determined using a discount rate of 11.23%, average prepayment speed of 7.91%, depending on the stratification of the specific right, and a weighted-average default rate of 0.10%.

The fair value of servicing assets for SBA loans was $2.7 million and $2.8 million as of March 31,2024 and December 31, 2023. Fair value at March 31, 2024 was determined using a discount rate of 8.5%, average prepayment speed of 18.31%, depending on the stratification of the specific right, and a weighted-average default rate of 0.79%. Fair value at December 31, 2023 was determined using a discount rate of 8.5%, average prepayment speed of 17.68%, depending on the stratification of the specific right, and a weighted-average default rate of 0.73%.

Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any ~~noncontrolling~~non-controlling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill resulting from whole bank and branch acquisitions is ~~not amortized, but~~ tested for impairment at least ~~annually. The Company has selected~~ annually during the fourth quarter of each year, and more frequently, if events or circumstances indicate the value of goodwill may be impaired. We completed our most recent evaluation of goodwill as of December 31, ~~as the date to perform the annual~~2023 and determined that no goodwill impairment ~~test.~~existed. Goodwill amounted to ~~$29.9~~$71.5 million at ~~September 30, 2017~~ both March 31, 2024 and December 31, ~~2016,~~ 2023, and is the only intangible asset with an indefinite life on ~~the~~our balance sheet. There were no triggering events during the first quarter of 2024 that caused management to evaluate goodwill for a quantitative impairment ~~losses recognized on~~analysis as of March 31, 2024. We did not record any adjustments to goodwill during the ~~nine~~three months ended ~~September 30, 2017~~March 31,2024 and ~~2016.~~March 31,2023.

Other intangible assets consist of core deposit intangible ("CDI") assets arising from whole bank and branch acquisitions. CDI assets are amortized on an accelerated method over their estimated useful life of 8 to 10 years. ~~CDI was recognized in the 2013 acquisition of~~

~~Los Angeles National Bank and in the 2016 acquisition of TFC Holding Company.~~ The unamortized balance at ~~September 30, 2017~~ March 31, 2024 and December 31, ~~2016~~2023 was ~~$1,525,000~~$2.6 million and ~~$1,793,000, respectively, for both Los Angeles National Bank and TFC Holding Company.~~$2.8 million. CDI amortization expense was ~~$268,000~~$201,000 and ~~$268,000~~$237,000 for the ~~nine~~three months ended ~~September 30, 2017~~ March 31, 2024 and ~~September 30, 2016, respectively, for both Los Angeles National Bank and TFC Holding Company.~~2023.

Estimated CDI amortization expense for future years is as ~~follows (dollars in thousands):~~follows:

At ~~September 30, 2017,~~ March 31, 2024, the scheduled maturities of time deposits are as follows:

Time deposits include deposits acquired through both retail and wholesale channels. Wholesale channels include brokered deposits, collateralized deposits from the State of California, and deposits acquired through internet listing services. Such wholesale deposits totaled $197.6 million at March 31, 2024 and $405.6 million at December 31, 2023. Brokered time deposits were $153.0 million at March 31,2024 and $254.9 million at December 31, 2023. Collateralized deposits from the State of California totaled $10.0 million at March 31,2024 and $80.0 million at December 31, 2023. Time deposits acquired through internet listing services totaled $34.6 million at March 31,2024 and $61.4 million at December 31, 2023.

In addition, we offer retail deposit products where customers are able to achieve FDIC insurance for balances on deposit in excess of the $250,000 FDIC limit through the Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweeps (“ICS”) programs. Time deposits held through the CDARS program were $149.5 million at March 31,2024 and $135.7 million at December 31, 2023. ICS deposits totaled $122.2 million at March 31, 2024 and $109.2 million at December 31, 2023.

In ~~March 2016, the Company~~November 2018, we issued ~~$50~~$55.0 million of ~~6.5% fixed to floating~~6.18% fixed-to-floating rate subordinated ~~debentures, due March 31, 2026.~~notes, with a December 1, 2028 maturity date (the “2028 Subordinated Notes”). The interest rate iswas fixed through ~~March 31, 2021~~ December 1, 2023 and ~~floats~~was scheduled to float at ~~3 month LIBOR~~three-month CME Term SOFR plus ~~516~~applicable tenor spread adjustment of 26 basis points plus 315 basis points thereafter. ~~The sub-debt is considered Tier-two capital~~On December 1, 2023, we redeemed the 2028 Subordinated Notes at ~~the Company. The Company allocated $35 million~~a redemption price equal to ~~the Bank as Tier-one capital.~~

The Company, through the acquisition of TFC Bancorp, acquired TFC Statutory Trust. The Trust contained a pooled private offering of 5,000 trust preferred securities with a liquidation amount of $1,000 per security. TFC Bancorp issued $5,000,000 of subordinated debentures to the trust in exchange for ownership of all of the common security of the trust and the proceeds of the preferred securities sold by the trust. The Company is not considered the primary beneficiary of this trust (variable interest entity), therefore the trust is not consolidated in the Company's financial statements, but rather the subordinated debentures are shown as a liability at market value as of the close of the acquisition which was $3,255,000. There was a $1,900,000 valuation reserve recorded to arrive at market value which is treated as a yield adjustment and is amortized over the life of the security. The amount of amortization expense recognized for the nine months ended September 30, 2017 and 2016 was $68,000 and $55,000, respectively. The Company also purchased an investment in the common stock of the trust for $155,000 which is included in other assets. The Company may redeem the subordinated debentures, subject to prior approval by the Federal Reserve Bank on or after March 15, 2012, at 100% of the principal amount plus accrued and unpaid interest.

In March 2021, we issued $120.0 million of 4.00% fixed-to-floating rate subordinated notes, with an April 1,2031 maturity date (the “2031 Subordinated Notes”). The interest rate is fixed through April 1,2026 and is scheduled to float at three-month SOFR plus 329 basis points thereafter. We can redeem the 2031 Subordinated Notes beginning April 1,2026. The 2031 Subordinated Notes are considered Tier 2 capital at the Company.

Subordinated debentures consist of subordinated debentures ~~mature~~issued in connection with three separate trust preferred securities and totaled $15.0 million and $14.9 million as of March 31, 2024 and December 31, 2023. Under the terms of our subordinated debentures issued in connection with the issuance of trust preferred securities, we are not permitted to declare or pay any dividends on ~~March 15, 2037. The Company has~~our capital stock if an event of default occurs under the terms of the long-term debt. In addition, we have the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years. The ~~Company has been paying interest on a quarterly basis. The~~ subordinated debentures may be included in Tier I1 capital (with certain limitations applicable) under current regulatory guidelines and interpretations. We may redeem the subordinated debentures, subject to prior approval by the Board of Governors of the Federal Reserve System at 100% of the principal amount, plus accrued and unpaid interest. These subordinated debentures consist of the following and are described in detail after the table below:

(a) Represents applicable tenor spread adjustment when the original LIBOR index was discontinued on June 30, 2023.

In 2016, we, through the acquisition of Tomato Bank and its holding company, TFC Holding Company (“TFC”), acquired TFC Statutory Trust (the “TFC Trust”). TFC Trust issued 5,000 fixed-to-floating rate capital securities with an aggregate liquidation amount of $5.0 million to an independent investor, and all of its common securities, with an aggregate liquidation amount of $155,000. TFC issued $5 million of subordinated debentures to TFC Trust in exchange for ownership of all of the common securities of TFC Trust and the proceeds of the preferred securities sold by TFC Trust. We are not considered the primary beneficiary of TFC trust (variable interest entity), therefore TFC Trust is not consolidated in our financial statements, but rather the subordinated debentures are shown as a liability. We also purchased an investment in the common stock of TFC Trust for $155,000, which is included in other assets. At the close of this acquisition, a $1.9 million valuation reserve was recorded to arrive at its fair market value, which is treated as a yield adjustment and amortized over the life of the security. The unamortized valuation reserve was $1.2 million at March 31,2024 and $1.2 million at December 31, 2023. The subordinated debentures have a variable rate of interest equal to ~~the~~ three ~~month London Interbank Offered Rate (LIBOR)~~-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 1.65%, which was ~~2.97%~~7.24% as of March 31,2024 and ~~2.61%~~7.30% at ~~September 30, 2017 and~~ December 31, ~~2016, respectively.~~2023.

~~RBB BANCORP AND SUBSIDIARIES~~In October 2018, we, through the acquisition of First American International Corp. (“FAIC”), acquired First American International Statutory Trust I (“FAIC Trust”). FAIC Trust issued 7,000 units of thirty-year fixed-to-floating rate capital securities with an aggregate liquidation amount of $7.0 million to an independent investor, and all of its common securities, with an aggregate liquidation amount of $217,000. We are not considered the primary beneficiary of FAIC Trust (variable interest entity), therefore FAIC Trust is not consolidated in our financial statements, but rather the subordinated debentures are shown as a liability. We purchased an investment in the common stock of FAIC Trust for $217,000, which is included in other assets. At the close of this acquisition, a $1.2 million valuation reserve was recorded to arrive at its fair market value, which is treated as a yield adjustment and amortized over the life of the security. The unamortized valuation reserve was $822,000 at March 31,2024 and $842,000 at December 31, 2023. The subordinated debentures have a variable rate of interest equal to three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 2.25%, which was 7.84% as of March 31,2024 and 7.90% at December 31, 2023.

In January 2020, we, through the acquisition of PGB Holdings, Inc., acquired Pacific Global Bank Trust I (“PGBH Trust”). PGBH Trust issued 5,000 units of fixed-to-floating rate capital securities with an aggregate liquidation amount of $5 million to an independent investor, and all of its common securities, with an aggregate liquidation amount of $155,000. We are not considered the primary beneficiary of PGBH Trust (variable interest entity), therefore PGBH Trust is not consolidated in our financial statements, but rather the subordinated debentures are shown as a liability. We purchased an investment in the common stock of PGBH Trust for $155,000, which is included in other assets. At the close of this acquisition, a $763,000 valuation reserve was recorded to arrive at its fair market value, which is treated as a yield adjustment and amortized over the life of the security. The unamortized valuation reserve was $546,000 at March 31,2024 and $559,000 at December 31, 2023. The subordinated debentures have a variable rate of interest equal to three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 2.10%, which was 7.69% as of March 31,2024 and 7.75% at December 31, 2023.

We paid interest expense of $329,000 and $290,000 for three months ended March 31, 2024 and 2023 on the subordinated debentures. The aggregate amount of amortization expense was $55,000 for each of the three months ended March 31, 2024 and 2023.

For regulatory reporting purposes, the Federal Reserve has indicated that the capital or trust preferred securities qualify as Tier 1 capital of the Company subject to previously specified limitations (including that the asset size of the issuer did not exceed $15 billion), until further notice. If regulators make a determination that the capital securities can no longer be considered in regulatory capital, the securities become callable and we may redeem them.

We have established secured and unsecured lines of credit. ~~The Company~~ We may borrow funds from time to time on a term or overnight basis from the Federal Home Loan Bank of San Francisco ~~("FHLB"~~(“FHLB”), the Federal Reserve Bank of San Francisco ~~("FRB"~~(“FRB”) and other financial institutions as indicated below.

FHLB Secured Line of Credit and Advances. At March 31, 2024, we had a secured borrowing capacity with the FHLB of $1.0 billion collateralized by pledged residential and commercial loans with a carrying value of $1.4 billion. At March 31, 2024, we had no overnight advances and $150.0 million of advances with an original term of five years at a weighted average rate of 1.18% which mature in the first quarter of 2025. We paid interest expense on FHLB advances of $439,000 and $1.4 million for the three months ended March 31, 2024 and 2023.

FRB Secured Line of Credit. At March 31, 2024, we had secured borrowing capacity with the FRB of $43.9 million collateralized by pledged loans with a carrying value of $62.4 million.

Federal Funds Arrangements with Commercial Banks. At ~~September 30, 2017, the Company may borrow~~March 31, 2024, we had borrowing capacity of $92.0 million from other financial institutions, of which $80.0 million was on an unsecured basis ~~up to $20.0 million, $10.0 million,~~and $12.0 million ~~and $5.0 million overnight from Zions Bank, Wells Fargo Bank, First Tennessee National Bank, and Pacific Coast Bankers' Bank, respectively.~~

~~Letter~~was collateralized by investment securities with fair market value of ~~Credit Arrangements. At September 30, 2017, the Company had an unsecured commercial letter of credit line with Wells Fargo Bank for $2.0~~$21.1 million.

~~FRB Secured Line of Credit. The secured borrowing capacity of $15.2 million at September 30, 2017 is collateralized by loans pledged with a carrying value of $25.2 million.~~

~~FHLB Secured Line of Credit. The secured borrowing capacity of $326.9 million at September 30, 2017 is collateralized by loans pledged with a carrying value of $373.9 million.~~

There were no amounts outstanding under any of the other borrowing arrangements above ~~at September 30, 2017 or December~~as of March 31, ~~2016.~~2024, except the FHLB advances maturing in the first quarter of 2025.

The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

We recorded an income tax provision of ~~$13.8~~$3.2 million and ~~$9.6~~$4.6 million, ~~respectively,~~ reflecting an effective tax rate of ~~40.0%~~28.8% and ~~41.2%~~29.4% for the ~~nine~~three months ended ~~September 30, 2017~~ March 31, 2024 and ~~2016, respectively. During~~2023. We recognized a tax expense/(benefit) from stock option exercises of $8,000 and ($5,000) for the three months ended ~~September 30, 2017~~ March 31, 2024 and 2016, the Company recorded an income tax provision of $4.0 million and $4.1 million, respectively, reflecting and effective tax rate of 37.8% and 41.7% for the three months ended September 30, 2017 and 2019, respectively.

The Company leases several of its operating facilities under various noncancellable operating leases expiring at various dates through 2022. The Company is also responsible for common area maintenance, taxes and insurance at the various branch locations.

~~Future minimum rent payments on the Company's leases were as follows at September 30, 2017:~~2023.

The minimum rent payments shown above are given for the existing lease obligation and are not a forecast of future rental expense. Total rental expense, recognized on a straight-line basis, was $1.1 million and $1.2 million for the nine months ended September 30, 2017 and 2016, respectively.NOTE 12 - COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, ~~the Company enters~~we enter into financial commitments to meet the financing needs of ~~its~~our customers. These financial commitments include commitments to extend credit, unused lines of credit, commercial and similar letters of credit and standby letters of credit. Those instruments involve to varying degrees, elements of credit and interest rate risk not recognized in ~~the Company's~~our financial statements.

Our exposure to ~~loan~~ loss in the event of nonperformance on these financial commitments is represented by the contractual amount of those instruments. ~~The Company uses~~We use the same credit policies in making commitments as it does for loans reflected in the financial statements.

At ~~September 30, 2017~~ March 31, 2024 and December 31, ~~2016, the Company~~2023, we had the following financial commitments whose contractual amount represents credit risk:

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. ~~The Company evaluates~~We evaluate each client's ~~credit worthiness~~creditworthiness on a case-by-case basis. ~~The amount~~

We record a liability for lifetime expected losses on off-balance-sheet credit exposure that does not fit the definition of ~~collateral obtained if deemed necessary by~~unconditionally cancelable in accordance with ASC 326. We use the ~~Company~~loss rate and exposure of default framework to estimate a reserve for unfunded commitments. Loss rates for the expected funded balances are determined based on the associated pooled loan analysis loss rate and the exposure at default is based on ~~management's credit evaluation~~an estimated utilization given default. The reserve for off-balance sheet commitments was $671,000 and $640,000 as of March 31,2024 and December 31, 2023. We recorded a provision for unfunded loan commitments of $31,000 for the three months ended March 31, 2024, and a reversal of the ~~customer.~~provision for unfunded loan commitments of $138,000 for the three months ended March 31, 2023.

We are involved in various matters of litigation which have arisen in the ordinary course of business and accruals for estimates of potential losses have been provided when necessary and appropriate under generally accepted accounting principles. In the opinion of management, the disposition of such pending litigation will not have a material effect on the Company's financial statements.

We lease several of our operating facilities under various non-cancellable operating leases expiring at various dates through 2037. We are also responsible for common area maintenance, taxes, and insurance at the various branch locations.

Future minimum rent payments on our leases were as follows as of the date indicated:

The minimum rent payments shown above are given for the existing lease obligation and are not a forecast of future rental expense. Total rental expense, recognized on a straight-line basis, was $1.4 million for each of the three months ended March 31, 2024 and 2023. The Company received rental income of $146,000 and $140,000 in the first quarter of 2024 and 2023.

The following table presents the right-of-use ("ROU") assets and lease liabilities recorded on our consolidated balance sheet, the weighted-average remaining lease terms and discount rates, as of the dates indicated:

There were no loans or outstanding loan commitments to any principal officers or directors, ~~and~~or any of their affiliates ~~were as follows:~~

~~Loan commitments outstanding to executive officers, directors~~ at March 31, 2024 and ~~their related interests with whom they are associated totaled approximately $3.4 million and $2.3 million at September 30, 2017 and~~ December 31, ~~2016, respectively.~~2023.

Deposits from principal officers, directors, and their affiliates at ~~September 30, 2017~~March 31,2024 and December 31, ~~2016~~ 2023 were ~~$42.9~~$32.9 million and ~~$37.2 million, respectively.~~$25.7 million.

~~RBB BANCORP AND SUBSIDIARIES~~Certain directors and their affiliates own $6.0 million of RBB's subordinated debentures as of March 31, 2024 and December 31, 2023.

RBB Bancorp 2010 Stock Option Plan and 2017 Omnibus Stock Incentive ~~Plan.~~Plan

Under the RBB Bancorp 2010 Stock Option Plan (the “2010 Plan”), we were permitted to grant awards to eligible persons in the form of qualified and non-qualified stock options. We reserved up to 30% of the issued and outstanding shares of common stock as of the date we adopted the 2010 Plan, or 3,494,478 shares, for issuance under the 2010 Plan. Following receipt of shareholder approval of the 2017 Omnibus Stock Incentive Plan ~~or OSIP,~~(the “OSIP”) in May 2017,no additional grants were made under the 2010 Plan. The 2010 Plan has been terminated and options that were granted under the 2010 Plan have become subject to the OSIP. Awards that were granted under the 2010 Plan will remain exercisable pursuant to the terms and conditions set forth in individual award agreements, but such awards will be assumed and administered under the OSIP. The 2010 Plan award agreements allow for acceleration of exercise privileges of grants upon occurrence of a change in control of the Company. If a participant’s job is terminated for cause, then all unvested awards expire at the date of termination.

The Amended and Restated RBB Bancorp 2017 Omnibus Stock Incentive Plan (the "Amended OSIP") was ~~adopted~~approved by ~~the Company’s~~our board of directors on in January ~~18, 2017~~ 2019 and approved by ~~the Company’s~~our shareholders ~~at the Company’s annual meeting on~~ in May ~~23, 2017.~~ 2022. The Amended OSIP was designed to ensure continued availability of equity awards that will assist ~~the Company~~us in attracting and retaining competent managerial personnel and rewarding key employees, directors and other service providers for high levels of performance. Pursuant to the Amended OSIP, ~~the Company’s~~our board of directors are allowed to grant awards to eligible persons in the form of qualified and non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights and other incentive awards. ~~The Company has~~We reserved up to 30% of issued and outstanding shares of common stock as of the date ~~the Company~~we adopted the ~~2017~~Amended OSIP, or 3,848,341 shares. ~~This represents 24% of the issued and outstanding shares of the Company’s common stock as of September 30, 2017.~~ As of ~~September 30, 2017,~~ March 31, 2024, there were ~~1,353,207~~1,038,570 shares of common stock available for issuance under the Amended OSIP. This represents 5.6% of the issued and outstanding shares of our common stock as of March 31, 2024. Awards vest, become exercisable and contain such other terms and conditions as determined by the board of directors and set forth in individual agreements with the employees receiving the awards. The Amended OSIP enables the board of directors to set specific performance criteria that must be met before an award vests. The Amended OSIP allows for acceleration of vesting and exercise privileges of grants if a participant’s termination of employment is due to a change in control, death or total disability. If a participant’s job is terminated for cause, then all awards expire at the date of termination.

Compensation expense for stock options was $21,000, $56,000, and $64,000 for the ~~2010 Plan,~~three months ended March 31, 2024, December 31, 2023, and March 31, 2023. Unrecognized stock-based compensation expense related to options was $158,000 and $500,000 as of March 31, 2024 and 2023. Unrecognized compensation expense related to stock options, as of March 31 2024, is expected to be recognized over the ~~Company~~next 3.0 years.

The fair value of each option grant was ~~permitted to~~estimated on the date of grant ~~awards to eligible persons~~using the Black-Scholes option pricing model. The table below summarizes the assumptions and grant date fair value for stock options granted in March 2023. There were no stock options granted after March 31, 2023.

The expected volatility is based on the ~~form~~historical volatility of ~~qualified~~our stock trading history. The expected term is based on historical data and ~~non-qualified stock options.~~represents the estimated average period of time that the options remain outstanding. The ~~Company reserved up to 30%~~risk-free rate of return reflects the grant date interest rate offered for zero coupon U.S. Treasury bonds over the expected term of the ~~issued~~options.

The table below presents a summary of our stock options awards and ~~outstanding~~activity as of and for the three months ended March 31, 2024.

The total fair value of the shares vested was $630,000 and $636,000 during the three months ended March 31, 2024, and 2023. Unvested stock options totaled 30,666 and 111,005 with a weighted average grant date fair value of ~~common~~$5.97 and $5.09, respectively, as of March 31,2024 and 2023. The decrease of unvested stock options during the three months ended March 31, 2024 was due to 35,005 stock options vested with a weighted average grant date stock price of $17.74.

Cash received from the exercise of 41,000 stock options was $541,000 for the three months ended March 31, 2024 and cash received from the exercise of 9,153 stock options was $159,000 for the three months ended March 31, 2023. The intrinsic value of options exercised was $179,000 and $26,000 for the three months ended March 31, 2024 and 2023.

We award time-based restricted stock units (“TRSUs”) and performance-based restricted stock units (“PRSUs”), which we also refer to collectively as restricted stock units (“RSUs”). We granted 95,756 RSUs during the three months ended March 31, 2024, with a weighted average price of $17.70. The RSUs granted during the first quarter included 31,270 PRSUs with an estimated fair value as of the March 20, 2024, grant date of $19.13 and are subject to pre-established performance metrics and market conditions that will be measured in the ~~Company adopted~~future and subject to oversight and approval by the ~~2010 Plan or 3,494,478 shares,~~Board of Director’s Compensation Committee. The TRSUs have lives ranging from 1 to 3 years and PRSUs have lives of 3 years. See further discussion below describing the PRSUs. As of March 31, 2024, there were 127,025 unvested RSUs outstanding.

The recorded compensation expense for ~~issuance under~~RSUs was $118,000, $84,000, and $251,000 for the ~~2010 Plan. After approval~~three months ended March 31, 2024, December 31, 2023, and March 31, 2023. Unrecognized stock-based compensation expense related to RSUs was $2.1 million and $591,000 as of March 31, 2024 and 2023. As of March 31, 2024, unrecognized stock-based compensation expense related to RSUs is expected to be recognized over the ~~OSIP at~~next 2.6 years.

The following table presents restricted stock units activity during the three months ended March 31, 2024.

(1) Includes 31,270 PRSUs, of which half include a future performance criteria with a market condition with an estimated fair value of $20.50 and half include future performance financial metrics with a fair value of $17.75, the Company’s ~~annual meeting~~closing price on May 23, 2017, no additional grants will be made under the 2010 Plan. The 2010 Plan has terminated and options that were granted under that Plan have become subject to the OSIP. Awards that were granted under the 2010 Plan will remain exercisable pursuant to the terms and conditions set forth in individual award agreements, but such awards will be assumed and administered under the OSIP. The 2010 Plan award agreements allow for acceleration of exercise privileges of grants upon occurrence of a change in control of the Company. If a participant’s job is terminated for cause, then all unvested awards expire at the date of ~~termination.~~grant.

The Company recognized stock-based compensation expense of $592,000 and $646,000 and recognized income tax benefits on that expense of $487,000 and $191,000 for the nine months ended September 30, 2017 and 2016, respectively.

Holding companies (with assets over $1$3 billion at the beginning of the year) and banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on ~~the Company's~~our financial statements.

In July 2013, the federal bank regulatory agencies approved the final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks. The new rules became effective on January 1, 2015, with certain of the requirements phased-in over a multi-year schedule. Under the rules, minimum requirements increased for both the quantity and quality of capital held by the Bank. The rules include a new common equity Tier 1 ~~("CET1"~~ (“CET1”) capital to risk-weighted assets ratio with minimums for capital adequacy and prompt corrective action purposes of 4.5% and 6.5%, respectively. The minimum Tier 1 capital to risk-weighted assets ratio was raised from 4.0% to 6.0% under the capital adequacy framework and from 6.0% to 8.0% to be ~~well-capitalized~~well capitalized under the prompt corrective action framework. In addition, the rules introduced the concept of a ~~"conservation buffer"~~“conservation buffer” of 2.5% applicable to the three capital adequacy risk-weighted asset ratios ~~(CET1,~~(CET1, Tier 1, and Total). The implementation of the capital conservation buffer began on January 1, 2016 at 0.625% and ~~will be~~was phased in over a ~~four-year~~four-year period (increasing by that amount on each subsequent January 1, until it ~~reaches~~reached 2.5% on January 1, 2019). ~~The capital conservation buffer for September 30, 2017 is 11.08% and 12.49% for the Bank and Bancorp, respectively.~~ If the capital adequacy minimum ratios plus the phased-in conservation buffer amount exceed actual risk-weighted capital ratios, then dividends, share buybacks, and discretionary bonuses to executives could be limited in amount.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1 and CET1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). As permitted by the regulators for financial institutions that are not deemed to be “advanced approaches” institutions, the Company has elected to opt out of the Basel III requirement to include accumulated other comprehensive income in risk-based capital. Management believes, at ~~September 30, 2017~~ March 31, 2024 and December 31, ~~2016, that~~2023, RBB and the Bank ~~meets~~satisfied all capital adequacy requirements to which ~~it is~~they were subject.

The following ~~table sets~~tables set forth ~~RBB Bancorp's~~Bancorp’s consolidated and the ~~Bank's actual~~Bank’s capital amounts and ratios and related regulatory requirements ~~for~~as of the ~~Bank at September 30, 2017:~~dates indicated:

~~The following table sets forth RBB Bancorp's consolidated and~~(1) These ratios are exclusive of the ~~Bank's actual~~ capital ~~amounts and ratios and related regulatory requirements for the Bank at December 31, 2016:~~conservation buffer.

The California Financial Code generally acts to prohibit banks from making a cash distribution to its shareholders in excess of the lesser of the bank's undivided profits or the bank's net income for its last three fiscal years less the amount of any distribution made by the bank's shareholders during the same period.

The California ~~general corporation law~~General Corporation Law generally acts to prohibit companies from paying dividends on common stock unless ~~its~~ retained earnings, immediately prior to the dividend payment, equals or exceeds the amount of the dividend. If a company fails this test, then it may still pay dividends if after giving effect to the dividend the company's assets are at least 125% of its liabilities.

Additionally, the Federal Reserve ~~Bank~~ has issued guidance which requires that they be consulted before payment of a dividend if a ~~bank~~financial holding company does not have earnings over the prior four quarters of at least equal to the dividend to be paid, plus other holding company obligations.

In accordance with ASC 820-10, we group financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities ~~recorded~~are traded and the reliability of the assumptions used to determine fair value. The three levels of the fair value hierarchy are described as follows:

Level 1 - Unadjusted quoted prices in active markets that are accessible at ~~fair value:~~the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, prepayment speeds, volatilities, etc.) or model-based valuation techniques where all significant assumptions are observable, either directly or indirectly, in the market.

Level 3 - Valuation is generated from model-based techniques where one or more significant inputs are not observable, either directly or indirectly, in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques may include use of matrix pricing, DCF models, and similar techniques.

Interest Rate Lock Contracts and Forward Mortgage Loan Sale Contracts: The fair values of interest rate lock contracts and forward mortgage loan sale contracts are determined by loan lock-in rate, loan funded rate, market interest rate, fees to be collected from the borrower, fees and costs associated with the origination of the loan, expiration timing, sale price, and the value of the retained servicing. We classified these derivatives as level 3 due to management’s estimate of market rate, cost and expiration timing on these contracts.

Appraisals for other real estate owned are performed by state licensed appraisers (for commercial properties) or state certified appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by ~~the Company.~~us. When a Notice of Default is recorded, an appraisal report is ordered. Once received, a member of the credit administration department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison to independent data sources such as recent market data or industry ~~wide-statistics~~wide statistics for residential appraisals. Commercial appraisals are sent to an independent third party to review. ~~The Company~~We also ~~compares~~compare the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustments, if any, should be made to the appraisal values on any remaining other real estate owned to arrive at fair value. If the existing appraisal is older than twelve months, a new appraisal report is ordered. No significant adjustments to appraised values have been made as a result of this comparison process as of ~~September 30, 2017.~~March 31,2024.

Collateral-dependent individually evaluated loans: Collateral-dependent individually evaluated loans are carried at fair value when it is probable that we will be unable to collect all amounts due according to the contractual terms of the original loan agreement and the loan has been written down to the fair value of its underlying collateral, net of expected disposition costs where applicable.

The following table ~~provides the hierarchy and fair value for each major category of~~presents our financial assets and liabilities measured at fair value ~~at September 30, 2017~~on a recurring basis as of the dates indicated:

(1) Included in “Accrued interest and ~~December 31, 2016:~~other assets” on the consolidated balance sheets.

(1) Included in “Accrued interest and other assets” on the consolidated balance sheets.

During the three months ended March 31, 2024, there were write-downs of $116,000 on individually evaluated collateral-dependent loans with an aggregate fair value of $10.0 million as of March 31,2024. During the three months ended December 31, 2023, there write-downs of $521,000 on individually evaluated collateral-dependent loans with an aggregate fair value of $11.4 million as of December 31, 2023. The fair value of individually evaluated collateral-dependent loans were based on third party appraisals with a management adjustment of 10% to reflect selling costs.

OREO consisted of two single-family residences with a fair value of $1.1 million as of March 31, 2024 and no OREO as of December 31, 2023. During the first quarter of 2024, the Company foreclosed on three properties related to the same borrower and sold one of the properties for a gain of $164,000 and the other two properties were recorded at their estimated fair values with a $560,000 gain recognized on the transfer to OREO. The fair value of OREO was based on third party appraisals with management adjustment in the range of 5%-10% to reflect current conditions and selling costs.

The following table presents the gains recognized on assets measured at fair value on a non-recurring basis for the periods indicated:

No write-downs to OREO were recorded in for the ~~nine~~three months ended ~~September 30, 2017~~ March 31, 2024 or for the year ended December 31, ~~2016.~~2023.

~~Quantitative information about the Company's non-recurring Level 3 fair value measurements at September 30, 2017 and December 31, 2016 is as follows:~~

The fair value measurement of a financial instrument is the amount at which the asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time based on relevant market informationIRLCs and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no market value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on financial instruments both on and off the balance sheet without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Additionally, tax consequences related to the realization of the unrealized gains and losses can have a potential effect on fair value estimates and have not been considered in many of the estimates.

~~The following methods and assumptions~~FMLSCs were ~~used to estimate the fair value of significant financial instruments not previously presented:~~

~~The carrying amounts of cash and short-term instruments approximate fair values.~~

~~Fair values for time deposits with other banks are estimated using discounted cash flow analyses, using interest rates currently being offered with similar terms.~~

~~The Company records mortgage loans held for sale at fair value~~primarily based on the ~~net premium received on recent sales~~buy price from borrowers ranging from 99 to 101, the sale price to Fannie Mae ranging from 100 to 103, and the significant unobservable inputs using a margin cost rate of ~~mortgage loans for identical pools of loans.~~

For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying amounts. The fair values for all other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.0.88%.

The fair values disclosed for demand deposits, including interest and non-interest demand accounts, savings, and certain types of money market accounts are, by definition based on carrying value. Fair value for fixed-rate certificates of deposit is estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregate expected monthly maturities on time deposits. Early withdrawal of fixed-rate certificates of deposit is not expected to be significant

The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements. The fair value of these financial instruments is not material.

The fair value hierarchy level and estimated fair value of significant financial instruments ~~at September 30, 2017 and December 31, 2016~~as of the dates indicated are summarized as follows:

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (UNAUDITED)~~(1) Included in “Accrued interest and other assets” on the consolidated balance sheets.

The following is a reconciliation of net income and shares outstanding to the net income and number of shares used to compute ~~EPS:~~earnings per share (“EPS”) for the periods indicated:

Stock options for 222,500 shares and 99,000 shares of common stock and restricted stock units for 3,005 shares and 7,767 shares of common stock were not considered in computing diluted earnings per common share for March 31, 2024 and 2023, because they were anti-dilutive.

The following is a summary of revenue from contracts with customers that are in-scope and not in-scope under ASC Topic 606 for the periods indicated:

The major revenue streams by fee type that are within the scope of ASC 606 presented in the above tables are described in additional detail below:

Fees and service charges on deposit accounts include charges for analysis, overdraft, cash checking, ATM, and safe deposit activities executed by our deposit clients, as well as interchange income earned through card payment networks for the acceptance of card based transactions. Fees earned from our deposit clients are governed by contracts that provide for overall custody and access to deposited funds and other related services, and can be terminated at will by either party; this includes fees from money service businesses. Fees received from deposit clients for the various deposit activities are recognized as revenue once the performance obligations are met.

We employ financial consultants to provide investment planning services for customers including wealth management services, asset allocation strategies, portfolio analysis and monitoring, investment strategies, and risk management strategies. The fees we earn are variable and are generally received monthly. We recognize revenue for the services performed at quarter-end based on actual transaction details received from the broker dealer we engage.

In our wealth management division, revenue is primarily generated from (1) securities brokerage accounts, (2) investment advisor accounts, (3) full service brokerage implementation fees, and (4) life insurance and annuity products.

We record a gain or loss from the sale of OREO, when control of the property or asset transfers to the buyer, which generally occurs at the time of an executed deed or sales agreement.

At ~~September 30, 2017~~ March 31, 2024 and December 31, ~~2016, the balance of the investment for~~2023, investments in qualified affordable housing projects ~~was $5,768,000~~totaled $6.1 million and ~~$986,000, respectively. This balance is~~$6.4 million. These balances are reflected in the accrued interest and other assets line on the consolidated balance sheets. Total unfunded commitments related to the investments in qualified housing projects totaled ~~$4,572,000~~ $2.3 million at March 31, 2024 and ~~$840,000 at September 30, 2017 and~~ December 31, ~~2016, respectively. The Company expects~~2023. We expect to fulfill these commitments ~~during~~between 2024 and 2038.

~~For the nine~~three months ended ~~September 30, 2017~~ March 31, 2024, December 31, 2023, and ~~2016,~~March 31, 2023, we recognized tax credits from our investment in affordable housing tax projects of $285,000, $255,000, and $255,000, respectively. In addition, the Company recognized amortization expense related to these investments of ~~$218,000~~$301,000, $282,000, and ~~$10,000,~~$282,000, respectively, which was included within income tax expense on the consolidated statements of income. We had no impairment losses during each of the three months ended March 31, 2024, December 31, 2023, and March 31, 2023.

On ~~July 27, 2017,~~February 29,2024, the ~~Company completed its public offering~~Board of ~~3,750,000~~Directors authorized the repurchase of up to 1,000,000 shares of common stock, of which 956,465 shares were available as of March 31, 2024. We repurchased 80,285 shares at a weighted average share price toof $18.39 during the ~~public~~first quarter of $23.00 per share and a total offering size of $86,250,000. The offering was originally 3,000,000 shares but due to demand, it was increased to 3,750,000 shares. The Company sold 2,857,756 shares and the selling shareholders sold 892,244 shares of the Company’s common stock. The offering resulted in gross proceeds to the Company of approximately $65.7 million. The Company contributed $25 million of the net proceeds received from this offering to the Bank in July 2017. Our stock now trades on the Nasdaq Global Select Market under the symbol “RBB”. The increase to capital net of expenses is approximately $60.2 million.2024.

On ~~October 19, 2017, RBB Bancorp~~April18,2024, we announced the Board of Directors had declared a common stock cash dividend of ~~$0.08~~$0.16 per share, ~~for the third quarter of 2017. The dividend is~~ payable on ~~November 30, 2017~~May13,2024 to common shareholders of record as of ~~October 31, 2017.~~

~~Cautionary Note Regarding Forward-Looking Statements~~CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The following discussion and analysis presents our results of operations and financial condition on a consolidated basis for the nine months ended September 30, 2017. This discussion should be read in conjunction with the unaudited consolidated financial statements, accompanying footnotes and supplemental financial data included herein. The emphasis of

In this discussion will be amounts as of September 30, 2017 compared to December 31, 2016 for the balance sheets and the nine months ended September 30, 2017 compared to September 30, 2016 for the statements of income.

Because we conduct our material business operations through our bank subsidiary, Royal Business Bank, the discussion and analysis relates to activities primarily conducted by the Bank. We generate most of our revenue from interest on loans and investments and fee-based revenues. Our primary source of funding for our loans is deposits. Our largest expenses are interest on these deposits and salaries and related employee benefits. We measure our performance primarily through our net income, pre-tax and pre-loan provision earnings, net interest margin, efficiency ratio, ratio of allowance for credit losses to total loans, return on average assets and return on average equity, among other metrics, while maintaining appropriate regulatory leverage and risk-based capital ratios.

~~This~~Quarterly Report on Form 10-Q (this “Report” or “Form 10-Q”), the term “Bancorp” refers to RBB Bancorp and the term “Bank” refers to Royal Business Bank. The terms “Company,” “we,” “us,” and “our” refer to Bancorp and the Bank collectively. This Report contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

The following factors, ~~that~~among others, could cause our ~~actual results~~financial performance to differ materially from ~~those indicated~~that expressed in ~~these~~such forward-looking ~~statements, including, but not limited to, the following:~~statements:

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Management has established various accounting policies that govern the application of generally accepted accounting principles in the U.S. (“GAAP”) in the preparation of our financial statements. Certain accounting policies require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

A sensitivity analysis of our ACL was performed as of March 31, 2024. Based on this sensitivity analysis, a positive 25% change in prepayment speed would result in a $961,000, or (2.32)%, decrease to the ACL. A negative 25% change in prepayment speed would result in a $1.27 million, or 3.08%, increase to the ACL. Additionally, a one percentage point increase in the unemployment rate would result in a $742,000, or 1.80%, increase to the ACL and a one percentage point decrease in the unemployment rate would result in a $675,000, or (1.63)%, decrease to the ACL. Management reviews the results using the comparison scenario for sensitivity analysis and considered the results when evaluating the qualitative factor adjustments.

On a quarterly basis, we stress test the qualitative factors, which are lending policy, procedures and strategies, economic conditions, changes in nature and volume of the portfolio, credit and lending staff, problem loan trends, loan review results, collateral value, concentrations and regulatory and business environment by creating two scenarios, moderate risk and major risk. In the Moderate Stress scenario, the status of all nine risk factors across all pooled loan segments were set at “Moderate Risk” while in the Major Stress scenario, the status of all nine risk factors across all pooled loan segments were set at “Major Risk.” Under the Moderate Stress scenario, the ACL would increase by $3.8 million, or 9.20%, as of March 31, 2024. Under the Major Stress scenario, the ACL would increase by $19.0 million, or 46.01%, as of March 31, 2024.

For additional information on the policies, methodologies and judgments used to determine the ACL, see Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies in our Annual Report filed on Form 10-K for the fiscal year ended December 31, 2023 ("2023 Annual Report"), and Note 4 — Loans and Allowance for Credit Losses to the Notes to Consolidated Financial Statements in this Form 10-Q.

Our significant accounting policies are described in greater detail in our audited consolidated financial statements included in our 2023 Annual Report, which are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations.

RBB is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. RBB Bancorp’s principal business is to serve as the holding company for its wholly-owned banking subsidiaries, the Bank and RBB Asset Management Company (“RAM”). RAM was formed to hold and manage problem assets acquired in business combinations. When we refer to “we”, “us”, “our”, or the “Company”, we are referring to RBB Bancorp and its consolidated subsidiaries including the Bank, collectively. When we refer to the “parent company”, “Bancorp”, or the “holding company”, we are referring to RBB Bancorp, the parent company, on a stand-along basis. At March 31, 2024, we had total assets of $3.9 billion, gross loans of $3.0 billion, total deposits of $3.0 billion and total shareholders' equity of $514.0 million. RBB’s common stock trades on the Nasdaq Global Select Market under the symbol “RBB.”

The Bank provides business-banking products and services predominantly to the Asian-American communities through full service branches located in Los Angeles County, Orange County and Ventura County in California, in the Las Vegas, Nevada and New York City metropolitan areas, Chicago (Illinois), Edison (New Jersey) and Honolulu (Hawaii). The products and services include commercial and investor real estate loans, business loans and lines of credit, Small Business Administration (“SBA”) 7A and 504 loans, mortgage loans, trade finance and a full range of depository accounts, including specialized services such as remote deposit, E-banking, and mobile banking.

We operate as a minority depository institution, which is defined by the FDIC as a federally insured depository institution where 51% or more of the voting stock is owned by minority individuals or a majority of the board of directors is minority and the community that the institution serves is predominantly minority. A minority depository institution is eligible to receive from the FDIC and other federal regulatory agencies training, technical assistance and review, and assistance regarding the implementation of proposed new deposit taking and lending programs, as well as with respect to the adoption of applicable policies and procedures governing such programs. We intend to maintain our minority depository institution designation, as it is expected that at least 51% of our issued and outstanding shares of capital shall remain owned by minority individuals. The minority depository institution designation has been historically beneficial to us, as the FDIC has reviewed and assisted with the implementation of our deposit and lending programs, and we continue to use the program for technical assistance.

We operate full-service banking offices in Arcadia, Cerritos, Diamond Bar, Irvine, Los Angeles, Monterey Park, Oxnard, Rowland Heights, San Gabriel, Silver Lake, Torrance, and Westlake Village, California; Las Vegas, Nevada; Manhattan, Brooklyn, Flushing and Elmhurst, New York; the Chinatown and Bridgeport neighborhoods of Chicago, Illinois; Edison, New Jersey; and Honolulu, Hawaii. Our primary source of revenue is providing loans to customers, who are predominately small and middle-market businesses and individuals.

We have completed six whole bank acquisitions and one branch acquisition from July 2011 through January 2022. All of our acquisitions have been accounted for using the acquisition method of accounting and, accordingly, the operating results of the acquired entities have been included in the consolidated financial statements from their respective acquisition dates.

The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of RBB ~~Bancorp~~ and its wholly owned subsidiaries. This information is intended to facilitate the understanding and assessment of significant changes and trends related to our financial condition and the results of our operations. This discussion and analysis should be read in conjunction with our audited financial statements included in our ~~registration statement on Form S-1 filed with the SEC, for the year ended December 31, 2016,~~2023 Annual Report, and the unaudited consolidated financial statements and accompanying notes presented elsewhere in this ~~report.~~Report.

The discussion and analysis of the Company’s unaudited consolidated financial statements are based upon its unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

The following is a summary of the more judgmental and complex accounting estimates and principles. In each area, we have identified the variables we believe are most important in our estimation process. We utilize information available to us to make the necessary estimates to value the related assets and liabilities. Actual performance that differs from our estimates and future changes in the key variables and information could change future valuations and impact the results of operations.

Our significant accounting policies are described in greater detail in our 2016 audited financial statements included in the Form S-1 in “Note 1 – Summary of Significant Accounting Policies” section, and in the “Critical Accounting Policies and Estimates” section, included in our registration statement on Form S-1 as filed with the SEC on July 25, 2017, which are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~For the third quarter of 2017, we~~ reported net ~~earnings~~income of ~~$6.6~~$8.0 million, compared with $8.5 million for the second quarter of 2017 and $5.7 million for the third quarter of 2016. This represented a decrease of $1.9 million over the prior quarter and an increase of $914,000 from the third quarter of 2016. Dilutedor $0.43 diluted earnings ~~per share were $0.42~~ per share, for the ~~third~~ quarter ~~of 2017,~~ended March 31, 2024, compared to ~~$0.62 in the prior quarter and $0.42 for the same period last year. The decline in~~net income of $12.1 million, or $0.64 diluted earnings per share, ~~relative to~~for the ~~second~~ quarter ~~of 2017 was attributable to the recapture of $4.2~~ended December 31, 2023 and $11.0 million, ~~of provision for loan losses that positively impacted the prior quarter’s results. Diluted earnings~~or $0.58 per share ~~remained~~for the ~~same from~~quarter ended March 31, 2023. The results for the 3^rdquarter ended December 31, 2023 included a Community Development Financial Institution (“CDFI”) Equitable Recovery Program (“ERP”) award of ~~2016 due to additional shares issued as~~$5.0 million on a ~~result of~~pre-tax basis; there was no similar income in the ~~recent public offering.~~ other periods presented.

At ~~September 30, 2017,~~March 31, 2024, total assets were ~~$1.6~~$3.9 billion, ~~an increase~~a decrease of ~~$247.2~~$148.0 million, or ~~17.7%~~3.7%, from total assets of ~~$1.4~~$4.0 billion at December 31, 2016. Interest-earning assets were $1.5 billion as of September 30, 2017, an increase of $229.9 million, or 17.4%, when compared with $1.3 billion at December 31, 2016. The increase in interest-earning assets was2023, primarily due to ~~an $86.1~~a $162.1 million ~~increase in total loans, a $47.3 million increase~~decrease in cash and cash equivalents and ~~an $81.4~~a $2.5 million decrease in gross loans, including loans held for sale (“HFS”), partially offset by a $16.2 million increase in ~~mortgage loans held for sale.~~

~~At September 30, 2017,~~ available for sale ~~(AFS)~~("AFS") investment securities. The decrease in cash and cash equivalents was primarily due to a decrease of $208.0 million in wholesale deposits. Wholesale deposits include brokered deposits, collateralized deposits from the State of California, and deposits acquired through internet listing services.

At March 31, 2024, AFS investment securities totaled ~~$55.7~~$335.2 million, inclusive of a pre-tax net unrealized loss of $30.2 million, compared to $319.0 million, inclusive of a pre-tax unrealized loss of ~~$231,000, compared to $39.3~~$28.1 million ~~inclusive of a~~at December 31, 2023. The pre-tax unrealized loss was due to a decline in the value of ~~$453,000 at December 31, 2016. At September 30, 2017, held to maturity (HTM)~~AFS investment securities ~~totaled $5.2 million.~~due to continued higher market interest rates in 2023 and the first quarter of 2024.

Total loans ~~and leases,~~held for investment (“HFI”), net of deferred fees and discounts, ~~were $1.2~~decreased $4.5 million, or 0.15%, to $3.0 billion at ~~September 30, 2017, compared to $1.1~~March 31, 2024, from $3.0 billion at December 31, ~~2016 and $1.1 billion at September 30, 2016. Total loans and leases (net of deferred fees, discounts and the allowance for loan losses) increased $88.8 million, or 8.1%, from December 31, 2016.~~2023. The ~~$88.8 million increase in total loans~~decrease was ~~principally~~primarily due to ~~increases of approximately $80.7 million~~a decrease in single-family residential (~~SFR) mortgage loans, $22.1~~("SFR") mortgages of $24.3 million inand commercial and industrial (“C&I”) loans ~~$4.9~~of $8.7 million, ~~in construction loans and~~ partially offset by ~~decreases~~increases in construction and land development ("C&D") loans of ~~$10.7~~$16.6 million, in commercial real estate ("CRE") loans of $10.6 million, and ~~$11.0 million in SBA loans.~~

~~Noninterest-bearing deposits~~Small Business Administration (“SBA”) loans of $2.6 million. In addition, mortgage loans HFS were ~~$287.6~~$3.9 million at ~~September 30, 2017, an increase of $113.3 million, or 65.0%,~~March 31, 2024, compared to ~~$174.3~~$1.9 million at December 31, ~~2016. At September 30, 2017,~~2023. The loanto deposit ratio was 98.6% at March 31, 2024, compared to 94.2% at December 31, 2023, and 104.7% at March 31, 2023.

Total deposits were $3.0 billion as of March 31, 2024, a $146.4 million, or 4.6%, decrease compared to December 31, 2023. This decrease was due to a decrease in interest-bearing deposits as noninterest-bearing deposits ~~were 21.8%~~remained relatively stable at $539.5 million. At March 31, 2024, noninterest-bearing deposits represented 17.8% of total deposits, compared to ~~15.1%~~17.0% at December 31, ~~2016.~~2023. The ~~growth~~decrease in ~~non-interest~~interest-bearing deposits ~~is mainly due to marketing efforts by our branches and by branch management.~~

Our average cost of total deposits was 0.83% for the quarter ended September 30, 2017, compared to 0.77% for the same period last year. The increase is due to a slight increase in rates of 7 basis points offset byincluded a decrease in ~~volume due to TomatoBank deposit runoff.~~ time deposits of $156.4 million, offset by an increase in non-maturity deposits of $10.1 million. The decrease in time deposits included a $208.0 million decrease in wholesale deposits. Wholesale deposits totaled $197.6 million at March 31, 2024 and $405.6 million at December 31, 2023.

Borrowings, consisting of Federal Home Loan Bank ("FHLB")advances, long-term debt ~~remained constant~~and subordinated debt, were $284.2 million at ~~$52.9 million as of September 30, 2017~~March 31, 2024, relatively unchanged compared to ~~$52.7~~$284.1 million as of December 31, ~~2016. Although we borrowed from~~2023. These balances include FHLB term advances of $150.0 million, which mature in the ~~FHLB~~first quarter of 2025.

As of March 31, 2024, the ACL totaled $42.4 million and was comprised of an ALL of $41.7 million and a reserve for unfunded commitments of $671,000 (included in “Accrued interest and other liabilities”). This compares to the ACL of $42.5 million comprised of an ALL of $41.9 million and a reserve for unfunded commitments of $640,000 at December 31, 2023. The ACL decreased $184,000 during the first quarter ~~we had no FHLB borrowings at September 30, 2017.~~

of 2024 due to net charge-offs. The allowance for loan losses (“ALL”) as a percentage of loans HFI was ~~$11.4 million~~1.38% at ~~September 30, 2017, compared to $14.2 million~~March 31, 2024, unchanged from December 31, 2023. The ALL as a percentage of nonperforming loans was 116% at March 31, 2024, a decrease from 133% at December 31, ~~2016. The allowance for loan losses increased by $793,000 during the third quarter of 2017.~~2023.

At March 31, 2024, total shareholders' equity was $514.0 million, a $2.7 million increase compared to December 31, 2023, and a $19.2 million increase compared to March 31, 2023. The increase in shareholders' equity for the first quarter was due to net earnings of $8.0 million and $541,000 from the exercise of stock options, offset by dividends paid of $3.0 million, common stock share repurchases totaling $1.5 million, and higher net after tax unrealized losses on AFS securities of $1.5 million. As a result, book value per share increased to $27.67 from $27.47 and tangible book value per share increased to $23.68 from $23.48. For additional information, see “Non-GAAP Financial Measures.”

On February 29, 2024, the Board of ~~a $700,000 loan loss provision due~~Directors authorized the repurchase of up to ~~an increase in loan volume plus a $93,000 recovery on loans charged-off. The allowance for loan losses to total loans and leases outstanding was 0.95% and 1.19%~~1,000,000 shares of common stock, of which 956,465 shares were available as of ~~September 30, 2017~~March 31, 2024. The repurchase program permits shares to be repurchased in open market or private transactions, through block trades, and December 31, 2016, respectively. In the first nine months of 2017 there was a $3.5 million net recapture in the provision for loan losses compared to $3.6 million provision expense for the same period of 2016. The decrease was $7.1 million or 196.9%. The recapture reflects both the receipt of a guaranteed payment on a SBA 7A guaranteed loan of $629,000 in May 2017 that was previously charged-off and the receipt of $3.6 million in July 2017 pursuant to any trading plan that may be adopted in accordance with SEC Rules 10b5-1 and 10b-8. We repurchased 80,285 shares at a ~~SBA loan guaranty that we previously fully reserved for in the allowance for loan losses.~~

~~Shareholders’ equity increased $78.7 million, or 43.4%, to $260.3 million~~weighted average share price of $18.39 during the first ~~nine months~~quarter of 2017 as $20.6 million of net income, $60.2 million from the Company’s public offering, $268,000 of additional paid in capital and $130,000 increase in accumulated other comprehensive income exceeded $3.8 million of common dividends declared. The increase in accumulated other comprehensive income primarily resulted from increases in unrealized gains on available for sale securities.2024.

Our capital ratios under the revised capital framework referred to as Basel III remain ~~well-above regulatory standards.~~well capitalized. As of ~~September 30, 2017,~~March 31, 2024, the Company’s Tier 1 leverage capital ratio ~~totaled 14.91%~~was 12.16%, ~~our~~the common equity Tier 1 ratio ~~totaled 18.23%~~was 19.10%, ~~our~~the Tier 1 risk-based capital ratio was 19.72%, and the total risk-based capital ratio was 25.91%. As of December 31, 2023, the Company's Tier 1 leverage capital ratio was 11.99%, common equity Tier 1 ratio was 19.07%, Tier 1 risk-based capital ratio totaled ~~18.49%~~19.69%, and ~~our~~ total risk-based capital ratio ~~totaled 23.37%~~was 25.92%. ~~Refer to our~~ See “Analysis of Financial Condition -- Regulatory Capital Requirements” herein for further discussion onof our regulatory capital ~~ratios. During~~ ~~the quarter we raised $60.2 million in common stock (which was net of $5.5 million in expenses) through our initial public offering (IPO), which was completed on July 27, 2017.~~

~~Net~~Average Balance Sheet, Interest ~~Income~~and Yield/Rate Analysis

The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans and investments (interest-earning assets) and the interest paid on deposits and borrowed funds (interest-bearing liabilities). Net interest margin is net interest income as a percentage of average interest-earning assets for the period. The level of interest rates and the volume and mix of interest-earning assets and interest-bearing liabilities impact net interest income and net interest margin. The net interest spread is the yield on average interest earning assets minus the cost of average interest-bearing liabilities. Net interest margin and net interest spread are included on a tax equivalent ~~(TE)~~(“TE”) basis by adjusting interest income utilizing the federal statutory tax rate of ~~35%.~~21% for 2024 and 2023. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions. These conditions include short-term and long-term interest rates, inflation, monetary supply, and the strength of the international, national and state economies, in general, and more specifically, the local economies in which we conduct business. Our ability to manage net interest income during changing interest rate environments will have a significant impact on our overall performance. We manage net interest income through affecting changes in the mix of interest-earning assets as well as the mix of interest-bearing liabilities, changes in the level of interest-bearing liabilities in proportion to interest-earning assets, and in the growth and maturity of earning assets. ~~See the sections on~~ For additional information see “Capital Resources and Liquidity Management” and ~~Quantitative~~Part I, Item 3. "Quantitative and Qualitative Disclosures about Market Risk" included ~~herein.~~in this Report.

The following tables present average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the ~~three months ended September 30, 2017 and 2016 and the nine months ended September 30, 2017 and 2016.~~periods presented. The average balances are ~~principally~~ daily averages and, for loans, include both performing and nonperforming balances. Interest income on loans includes the effects of discount accretion and net deferred loan origination costs accounted for as yield adjustments.

~~(4)~~

~~Includes purchased receivables, which are short term loans made to investment grade companies~~costs of $474,000, $542,000 and ~~are used~~$91,000 for ~~cash - management purposes by~~ the ~~Company.~~

three months ended March 31, 2024, December 31, 2023, and March 31, 2023, respectively.

Table of Contents

The following table summarizes the extent to which changes in (1) interest rates and (2) volume of average interest-earning assets and average interest-bearing liabilities affected by our net interest income for the periods presented. The total change for each category of interest-earning assets and interest-bearing liabilities is segmented into changes attributable to variations in volume and yield/rate. Changes that are not solely due to either volume or yield/rate are allocated proportionally based on the absolute value of the change related to average volume and average yield/rate.

For the nine months ended September 30,

2017

2016

Average

Interest

Yield /

Average

Interest

Yield /

(tax-equivalent basis, dollars in thousands)

Balance

& Fees

Rate

Balance

& Fees

Rate

Earning assets:

Federal funds sold, cash
   equivalents and other (1)

$
151,755

$
1,712

1.51
%

$
80,475

$
811

1.35
%
Securities (2)

Available for sale

40,862

746

2.44
%

28,703

433

2.01
%
Held to maturity

5,980

176

3.94
%

6,378

187

3.92
%
Mortgage loans held for sale

74,230

2,617

4.71
%

66,848

2,421

4.84
%
Loans held for investment: (3)

Real estate

766,974

31,990

5.58
%

771,131

34,386

5.96
%
Commercial (4)

374,979

15,384

5.49
%

351,731

13,236

5.03
%
Total loans HFI

1,141,953

47,375

5.55
%

1,122,862

47,621

5.67
%
Total earning assets

1,414,780

$
52,627

4.97
%

1,305,266

$
51,474

��

5.27
%
Noninterest-earning assets

93,160

84,539

Total assets

$
1,507,940

$
1,389,806

Interest-bearing liabilities

NOW and money market deposits

$
301,254

$
1,577

0.70
%

$
282,790

$
1,371

0.65
%
Savings deposits

34,879

121

0.46
%

34,718

118

0.45
%
Time deposits

695,020

5,903

1.14
%

682,484

5,144

1.01
%
Total interest-bearing deposits

1,031,153

7,602

0.99
%

999,992

6,634

0.89
%
FHLB short-term advances

5,128

29

0.77
%

5,949

24

0.54
%
Long-term debt

49,433

2,547

6.89
%

33,001

1,697

6.87
%
Subordinated debentures

3,366

173

6.88
%

2,673

127

6.34
%
Total interest-bearing liabilities

1,089,080

$
10,352

1.27
%

1,041,615

$
8,481

1.09
%
Noninterest-bearing liabilities

Noninterest-bearing deposits

205,532

163,518

Other noninterest-bearing liabilities

10,274

15,052

Total noninterest-bearing liabilities

215,805

178,569

Shareholders' equity

203,054

169,622

Total liabilities and shareholders
   equity

$
1,507,940

$
1,389,806

Net interest income / interest rate
   spreads

$
42,275

3.70
%

$
42,993

4.18
%
Net interest margin

4.00
%

4.40
%


	Three Months Ended March 31, 2024 compared with Three Months Ended December 31, 2023									Three Months Ended March 31, 2024 compared with Three Months Ended March 31, 2023
	Change due to:									Change due to:
*(tax-equivalent basis, dollars in thousands)*	Volume			Yield/Rate			Interest Variance			Volume			Yield/Rate			Interest Variance
Interest-earning assets:
Federal funds sold, cash equivalents & other ⁽¹⁾	$	391		$	15		$	406		$	3,913		$	452		$	4,365
Securities: ⁽²⁾
Available for sale		(359	)		264			(95	)		384			695			1,079
Held to maturity		—			—			—			(4	)		(1	)		(5	)
Mortgage loans held for sale		(27	)		24			(3	)		23			2			25
Loans held for investment:
Real estate		(2,508	)		2,323			(185	)		(4,703	)		1,565			(3,138	)
Commercial		(119	)		(41	)		(160	)		(2,211	)		929			(1,282	)
Total loans held for investment		(2,627	)		2,282			(345	)		(6,914	)		2,494			(4,420	)
Total interest-earning assets	$	(2,622	)	$	2,585		$	(37	)	$	(2,598	)	$	3,642		$	1,044

Interest-bearing liabilities
NOW	$	18		$	66		$	84		$	(53	)	$	243		$	190
Money market		(504	)		778			274			(1,428	)		2,814			1,386
Saving deposits		32			62			94			19			586			605
Time deposits, less than $250,000		119			442			561			2,560			3,820			6,380
Time deposits, $250,000 and over		28			320			348			184			3,352			3,536
Total interest-bearing deposits		(307	)		1,668			1,361			1,282			10,815			12,097
FHLB advances		-			(1	)		(1	)		(427	)		(543	)		(970	)
Long-term debt		(426	)		(174	)		(600	)		(613	)		(286	)		(899	)
Subordinated debentures		2			(7	)		(5	)		6			34			40
Total interest-bearing liabilities		(731	)		1,486			755			248			10,020			10,268
Changes in net interest income	$	(1,891	)	$	1,099		$	(792	)	$	(2,846	)	$	(6,378	)	$	(9,224	)

(1)

Includes income ~~and average balances~~ for FHLB stock, term federal funds, interest-bearing time deposits and other miscellaneous ~~interest-earning~~interest-bearing assets.

(2)

~~We have an insignificant amount of tax-exempt loans and securities, less than $1 million.~~ Interest income and average rates for tax-exempt ~~loans and~~ securities are presented on a tax-equivalent ~~basis as of September 30, 2017 and 2016.~~

basis.

~~(3)~~

~~Average loan balances include nonaccrual loans and loans held for sale. Interest income on loans includes - amortization of deferred loan fees, net of deferred loan costs.~~

~~(4)~~

~~Includes purchased receivables, which are short term loans made to investment grade companies and are used for cash - management purposes by the Company.~~

Table of Contents

~~Interest Rates and Operating Interest Differential~~

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following tables show the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the previous period’s volume. Changes which are not due solely to volume or rate have been allocated to these categories based on the respective percent changes in average volume and average rate as they compare to each other.

Three Months Ended September 30, 2017 Compared with Three Months Ended September 30, 2016

Nine Months Ended September 30, 2017 Compared with Nine Months Ended September 30, 2016

Change due to:

Change due to:

(tax-equivalent basis, dollars in thousands)

Volume

Rate

Interest Variance

Volume

Rate

Interest Variance

Earning assets:

Federal funds sold, cash equivalents & other (1)

$
394

$
95

$
489

$
269

$
632

$
901

Securities (2)

Available for sale

82

46

128

74

239

313

Held to maturity

(7
)

8

1

(4
)

(7
)

(11
)
Mortgage loans held for sale

409

(24
)

385

87

110

197

Loans held for investment: (3)

Real estate

(556
)

(1,482
)

(2,038
)

(58
)

(2,337
)

(2,395
)
Commercial (4)

230

452

682

319

1,830

2,148

Total loans

(326
)

(1,030
)

(1,356
)

261

(508
)

(247
)
Total earning assets

$
552

$
(905
)

$
(353
)

$
687

$
466

$
1,153

Interest-bearing liabilities

NOW and money market deposits

$
77

$
50

$
127

$
32

$
174

$
206

Savings deposits

1

1

2

—

3

3

Time deposits

(67
)

327

260

36

723

759

Total interest-bearing deposits

11

378

389

68

900

968

FHLB short-term advances

0

(16
)

(16
)

(2
)

7

5

Long-term debt

2

(4
)

(2
)

283

566

849

Subordinated debentures

2

4

6

12

35

47

Total interest-bearing liabilities

15

362

377

361

1,509

1,869

Net interest

$
537

$
(1,267
)

$
(730
)

$
326

$
(1,042
)

$
(716
)

~~(1)~~

~~Includes income and average balances for FHLB stock, term federal funds, interest-bearing time deposits and other miscellaneous interest-earning assets.~~

~~(2)~~

We have an insignificant amount of tax-exempt loans and securities, less than $1 million. Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis as of September 30, 2017 and 2016.

~~(3)~~

~~Average loan balances include nonaccrual loans and loans held for sale. Interest income on loans includes - amortization of deferred loan fees, net of deferred loan costs.~~

~~(4)~~

~~Includes purchased receivables, which are short term loans made to investment grade companies and are used for cash - management purposes by the Company.~~

~~Results of Operations—Comparison of Results of Operations for the Three Months Ended September 30, 2017 and 2016~~

The following discussion of our results of operations compares the three months ended September 30, 2017 to the three months ended September 30, 2016. The results of operations for the three months ended September 30, 2017 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2017.

Net Interest Income/Average Balance Sheet

Our primary source of revenue is net interest income, which is the difference between interest income from earning assets (primarily loans and securities) and interest expense on funding sources (primarily interest-bearing deposits and borrowings).

Three Months Ended March 31, 2024 Compared to Three Months Ended December 31, 2023

Net interest income ~~is impacted by~~was $24.9 million for the level of interest-earning assets and related funding sources, as well as changes in the levels of interest rates. The difference between the average yield on earning assets and the average rate paid for interest-bearing liabilities is the net interest spread. Noninterest-bearing sources of funds, such as demand deposits and shareholders’ equity, also support earning assets. The impact of the noninterest-bearing sources of funds is captured in the net interest margin, which is calculated as net interest income divided by average earning assets.

~~In the third~~first quarter of ~~2017, we generated $14.7~~2024, compared to $25.7 million ~~of net interest income, which was a decrease of $730,000, or 4.72%, from~~for the ~~$15.5 million of net interest income we produced in the third~~fourth quarter of ~~2016.~~2023. The $792,000 decrease in net interest income was ~~primarily~~due to higher interest expense of $755,000 and lower interest income of $37,000. The increase in interest expense was due to higher average rates paid on total interest-bearing liabilities, which are mostly average interest-bearing deposits, offset by lower average balances of total interest-bearing liabilities, including the favorable impact of our $55.0 million redemption of subordinated notes in the prior quarter. The increase in interest expense included a $1.4 million increase in interest expense on deposits due to a ~~55 basis point decrease in the average yield on interest-earning assets, and an 12~~24 basis point increase in the average rate paid on interest-bearing deposits ~~reflecting an~~and a $19.7 million increase in ~~deposit rates, partially offset by an 8.9% increase~~average interest-bearing deposits. The decrease in interest income included a $345,000 decrease in interest and fees on total loans due mostly to a $36.8 million, or 1.2%, decrease in the average balance of total loans outstanding as loan production moderated in the current interest rate environment.

Net interest margin was 2.69% for the first quarter of 2024, a decrease of four basis points from 2.73% for the fourth quarter of 2023. The decrease was due to the 16 basis point increase in the total cost of funds exceeding the 10 basis point increase in the yield on average total interest-earning assets. The yield on average total interest-earning assets increased to 5.92% for the first quarter of 2024 compared to 5.82% for the fourth quarter of 2023 due mainly to an 11 basis point increase in the yield on average total loans to 6.07% for the first quarter of 2024 compared to 5.96% for the fourth quarter of 2023. The 16 basis point increase in the overall cost of funds was due primarily to a 24 basis point increase in the average ~~balance~~cost of ~~interest-earning assets reflected increases~~total interest-bearing deposits to 4.32% in ~~federal funds sold, cash~~the first quarter of 2024, offset by the positive impact of our $55.0 million redemption of subordinated notes during the fourth quarter of 2023. The cost of total interest-bearing deposits increased due primarily to repricing deposits as a result of the higher interest rate environment and ~~other equivalents and securities~~peer bank deposit competition. In addition, while average ~~balances.~~noninterest-bearing deposits decreased $7.2 million, the ratio of average noninterest-bearing deposits to average total funding sources remained unchanged from the prior quarter at 16%.

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Net interest income was $24.9 million for the first quarter of 2024, compared to $34.1 million for the first quarter of 2023. The ~~increase~~$9.2 million decrease in ~~federal funds sold, cash equivalents and other average balances of $98.4 million is~~net interest income was primarily due to ~~the Company’s public offering in July 2017, runoff~~higher interest expense of ~~loans and increased deposit production in the third quarter~~$10.3 million offset partially by higher interest income of 2017. The decrease in average loan balances of $24.0 million is primarily due to the runoff of loans following the acquisition of TomatoBank on February 19, 2016. Our deposit average balances increased by $86.9 million primarily due to enhanced marketing efforts in 2017.$1.1 million. The increase in interest expense was ~~primarily~~ due to ~~increased time deposit rates. For~~higher average rates paid on interest-bearing deposits, and a change in the three months ended September 30, 2017 and 2016, our reported net interest margin was 3.91% and 4.48%, respectively. Our net interest margin benefits from discount accretion on our purchased loan portfolios. Our net interest margin for the three months ended September 30, 2017 and 2016, excluding accretion income would have been 3.74% and 3.67%, respectively.

~~Interest Income.~~ ~~Total interest income was $18.3 million for the third quarter~~mix of ~~2017 compared to $18.7 million for the third quarter of 2016.~~total deposits. The ~~$353,000, or 1.9%, decrease~~increase in interest income was primarily due to ~~decreases in purchase discount accretion, partially~~higher market rates, offset by ~~increases~~a change in the mix of interest earning assets including lower average loan balances ~~and yields on federal funds sold and other cash equivalents and securities.~~as compared to the same quarter last year.

~~Interest and fees on loans~~

Net interest margin was 2.69% for the ~~third~~first quarter of ~~2017 was $17.2 million compared to $18.2 million~~2024, a decrease of 101 basis points from 3.70% for the ~~third~~first quarter of ~~2016.~~2023. The ~~$969,000, or 5.3%,~~ decrease was primarily due to a 37157 basis point ~~decrease~~increase in the ~~average yield on loans~~cost of interest-bearing deposits, partially offset by an increase in the yield on interest earning cash, investment securities, and loans. The cost of interest-bearing deposits increased due to increased market rates including the Federal Reserve raising the target Federal Funds Rates during 2023 and peer bank deposit competition. The Federal Reserve increased the target Federal Funds Rate 100 basis points since the end of 2022, including 50 basis points since the end of first quarter of 2023. The weighted average Federal Funds Rate was 5.33% for the first quarter of 2024 compared to 4.65% for the first quarter of 2023.

Interest and fees on total loans for the first quarter of 2024 were $45.5 million compared to $49.9 million for the first quarter of 2023. The $4.4 million decrease was primarily due to a ~~0.9% increase~~$324.2 million decrease in the average balance of total loans outstanding. ~~In addition interest and fees on loans decreased compared to~~The decrease in the ~~third quarter of 2016~~average loan balance was primarily due to ~~lower accretion associated with purchase accounting discounts established on TomatoBank loans. Accretion income totaled $639,000~~strategic loans sales and moderated loan production to improve the risk profile of the loan portfolio and strengthen overall on-balance sheet liquidity in ~~the third quarter of 2017 compared~~response to ~~$2.8 million in the third quarter of 2016. The average yield on loans benefits from discount accretion on our purchased loan portfolio.~~market conditions during 2023. For the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, the yield on total loans was ~~5.56%~~6.07% and 5.93%, respectively, while the yield on total loans excluding accretion income would have been 5.34% and 4.97%, respectively. Due to payoffs of acquired loans, we expect accretion income to continue to decline throughout 2017 in comparison to 2016. The table below illustrates by loan type the accretion income for September 30, 2017 and September 30, 2016. There were no additions due to acquisitions during the third quarters of 2017 and 2016.6.06%.

As of and for the

Three Months

Ended September 30,

(Dollars are in thousands)

2017

2016

Beginning balance of discount on purchased loans

$
6,140

$
12,184

Accretion:

Commercial and industrial

54

231

SBA

5

(7
)
Construction and land development

4

80

Commercial real estate

569

2,471

Single-family residential mortgages

7

32

Total accretion

$
639

$
2,807

Ending balance of discount on purchased loans

$
5,501

$
9,377

Interest income on our securities portfolio increased $128,000, or 63.1%, to $331,000 in the third quarter of 2017 compared to $203,000 in the third quarter of 2016. This increase is mainly attributable to an increase in average balances of $12.1 million or 33.2%, as management purchased $16.8 million in corporate bonds and transferred a corporate sub-debt loan of $1 million to investments once the loan became DTC eligible.

Interest income on federal funds sold, cash equivalents and other investments increased to $326,000 for the three months ended September 30, 2017 compared to $92,000 for the three months ended September 30, 2016. This increase was primarily due to an increase in the level of short-term cash investments in addition to an increase in short-term interest rates. The increase in short-term cash investments is primarily due to raising capital through our public offering in July and an increase in deposits during the third quarter.

~~Interest Expense.~~ Interest expense on interest-bearing liabilities increased $377,000, or 11.6%, to $3.6 million for the third quarter of 2017 as compared to $3.2 million in the third quarter of 2016 due to increases in interest expense on both deposits and borrowings.

Interest expense on deposits increased to ~~$2.7~~$27.8 million for the ~~third~~first quarter of ~~2017~~2024 as compared to ~~$2.3~~$15.7 million for the ~~third~~first quarter of ~~2016.~~2023. The ~~$388,000, or 16.7%,~~$12.1 million increase in interest expense on deposits was primarily due to ~~a 12 basis point~~the increase in the average ~~rate~~rates paid on interest-bearing deposits ~~plus~~and a ~~2.0%~~$270.5 million increase in ~~the~~ average ~~balance of~~interest-bearing deposits. Average interest-bearing deposits ~~The increase~~increased, in ~~the average balance of interest-bearing~~part, to help offset a decrease in noninterest-bearing deposits ~~resulted from increases~~as we worked to lower concentration risk in ~~NOW and money market balances partially offset by decreases in time~~our deposit ~~maturities. The increase in the average rate paid was primarily due to~~portfolio coupled with the impact of customers preferring their deposit balances in higher yielding deposit products in response to higher market interest ~~rates on deposits.~~

~~Interest expense on subordinated notes and subordinated debentures increased $5,000~~rates. Average noninterest-bearing deposits decreased $170.0 million to ~~$908,000~~$528.3 million in the ~~third~~first quarter of ~~2017~~2024 from $698.4 million in the first quarter of 2023. Average noninterest-bearing deposits as a percentage of total average deposits was 16% for the first quarter of 2024 compared to ~~$903,000~~23% for the first quarter of 2023.

Table of Contents

Provision for Credit Losses

Three Months Ended March 31, 2024 Compared to Three Months Ended December 31, 2023

We recorded no provision for credit losses for the first quarter of 2024 compared to a reversal of provision for credit losses of $431,000 in the ~~third~~fourth quarter of ~~2016. Interest expense on FHLB short-term advances was zero in~~2023. The provision for credit losses for the ~~third quarter~~three months ended March 31, 2024, included a reversal of ~~2017 as compared to $16,000 in the third quarter of 2016.~~

~~Provision for (or Recapture of) Loan Losses.~~ ~~The~~ provision for loan losses ~~decreased $550,000 or 44.0%, to $700,000~~of $31,000, offset by a provision for credit losses for unfunded commitments of $31,000. The overall provision for credit losses for the first quarter of 2024 took into consideration several factors including: lower specific reserves, changes in the ~~third~~loan portfolio mix, credit quality metrics, including higher nonperforming loans at the end of the first quarter of ~~2017 from $1.25 million~~2024 compared to the end of 2023, and ongoing uncertainty in the ~~third quarter~~economic indicators such as inflation and the outlook on market interest rates.

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

We recorded a provision for credit losses of ~~2016, primarily due to increased loan quality in the SBA loan portfolio.~~

~~Noninterest Income.~~ ~~Noninterest income increased $1.2 million, or 46.2%, to $3.8~~$2.0 million for the ~~third~~first quarter of ~~2017,~~2023 compared to ~~$2.6 million~~no provision for the first quarter of 2024. There were $184,000 in net loan charge-offs in the ~~prior comparable quarter.~~ first quarter of 2024, as compared to $157,000 in net loan charge-offs in the first quarter of 2023. The higher provision during the first quarter of 2023 was reflective of increases in classified loans during the first quarter of 2023 that increased the qualitative factors in the our CECL model.

Noninterest Income

The following table sets forth the major components of our noninterest income for the ~~third~~periods presented:

		Three Months Ended							March 31, 2024 Compared To
*(dollars in thousands)*		March 31, 2024		December 31, 2023			March 31, 2023		December 31, 2023			March 31, 2023
Noninterest income:
Service charges, fees and other	$	992	$	972		$	1,023	$	20		$	(31	)
Loan servicing income, net of amortization		589		616			731		(27	)		(142	)
Increase in cash surrender of bank owned life insurance		382		374			335		8			47
Gain on sale of loans		312		116			29		196			283
Gain/(loss) on OREO		724		(57	)		—		781			724
Other income		373		5,373			244		(5,000	)		129
Total noninterest income	$	3,372	$	7,394		$	2,362	$	(4,022	)	$	1,010

Three Months Ended March 31, 2024 Compared to Three Months Ended December 31, 2023

Noninterest income for the first quarter of ~~2017 compared~~2024 was $3.4 million, a decrease of $4.0 million from $7.4 million in the fourth quarter of 2023. The decrease was due primarily to the ~~third~~CDFI ERP award of $5.0 million recognized in the fourth quarter of ~~2016:~~

For the Three Months Ended

September 30,

Increase

(dollars in thousands)

2017

2016

(decrease)

Noninterest income:

Service charges, fees and other

$
518

$
443

$
75

Gain on sale of loans

2,584

1,870

714

Loan servicing fee, net of amortization

314

95

219

Recoveries on loans acquired in business
combinations

19

47

(28
)
Increase in cash surrender of
life insurance

219

141

78

Gain on sale of OREO

142

—

142

Total noninterest income

$
3,796

$
2,596

$
1,200

~~Service charges, fees and other income.~~ ~~Service charges, fees and other~~2023 with no similar income ~~totaled $518,000~~ in the ~~third~~first quarter of ~~2017 compared~~2024. This decrease was partially offset by gains on the transfer of two loans to ~~$443,000~~other real estate owned (“OREO”) of $560,000 and higher net gains on the sale of OREO of $221,000 (both of which are included in “Gain on OREO”). There were three loans transferred to OREO totaling $2.5 million during the ~~third~~first quarter of ~~2016. The increase in services charges, fees and other income is attributable to increased fee income on deposit accounts primarily due to increased demand deposits and restructuring~~2024, of ~~our fee schedule.~~

~~Gain on sale~~which one OREO with a carrying value of ~~loans.~~ ~~Gain~~$1.4 million was sold. We also recognized a higher gain on sale of loans ~~is comprised~~ of ~~gains~~$196,000.

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Noninterest income increased $1.0 million to $3.4 million for the first quarter of 2024, compared to $2.4 million for the same quarter in the prior year. The increase was primarily attributable to a $724,000 increase in gain on ~~sale of single-family residential mortgage loans~~OREO, as described above, and ~~gains on sale of SBA loans. Gain~~a $283,000 increase in gain on sale of loans, ~~totaled $2.6 million~~offset partially by a $142,000 decrease in ~~the third quarter of 2017 compared to $1.9 million in the third quarter of 2016. The following table presents loans sold and gains earned for the third quarter of 2017 and 2016:~~

For the Three Months Ended

(dollars in thousands)

September 30 2017

September 30 2016

Loans sold:

SBA

$
22,614

$
15,971

Mortgage

43,415

41,602

$
66,030

$
57,573

Gain on loans sold:

SBA

$
1,615

$
978

Mortgage

969

892

$
2,584

$
1,870

~~The increase in SBA~~ loan sales is a result of the Company changing the timing of our SBA loan sales. Prior to 2017, we sold the majority of our SBA loans during the fourth quarter of each year. Beginning in 2017, we are selling SBA loans on a quarterly basis, and we intend to sell such loans through the remaining quarter of 2017 in the amount of approximately $16 million.

In the third quarter of 2017 we sold $43.4 million of single-family mortgage loans for a gain of $969,000. In the third quarter of 2016 we sold $41.6 million of single-family mortgage loans for a gain of $892,000 million. For the fourth quarter of 2017, we plan to sell approximately $90 million of single-family mortgage loans.

~~Loan~~ servicing income, net of amortization. ~~Loan servicing income, net of amortization was $315,000 for the three months ended September 30, 2017 compared to $96,000 for the three months ended September 30, 2016.~~ The ~~increase~~decrease in loan servicing income is due to a decrease in average loans being serviced, offset by the ~~increase in~~impact of lower pre-payments on such loans due to higher market rates.

The following table presents information on loans servicing income for the ~~loan~~periods presented:

	Three Months Ended						March 31, 2024 Compared To
*(dollars in thousands)*		March 31, 2024		December 31, 2023		March 31, 2023		December 31, 2023			March 31, 2023
Loan servicing income, net of amortization:
Single-family residential loans	$	443	$	505	$	566	$	(62	)	$	(123	)
SBA loans		146		111		165		35			(19	)
Total	$	589	$	616	$	731	$	(27	)	$	(142	)

During the three months ended March 31, 2024, we were servicing ~~portfolio.~~SFR mortgage loans for other financial institutions, FHLMC and FNMA as well as servicing SBA loans. The single-family residential mortgage loan servicing portfolio was $306.2 million as of September 30, 2017 compared to $230.6 million as of September 30, 2016. The SBA loan servicing portfolio was $166.1 million as of September 30, 2017 compared to $101.4 million as of September 30, 2016. The increasedecline in the respective servicing portfolios ~~reflect~~is due to lower amounts of loans sold with servicing retained combined with the ~~growth in our originations and sales~~underlying loan portfolio activity of ~~single-family residential and SBA~~ loans ~~in 2016 and~~from the first ~~nine months of 2017.~~

~~Recoveries on loans acquired in business combinations.~~ ~~Recoveries on loans acquired in business combinations decreased $28,000 to $19,000 in the quarter ended September 30, 2017 compared to $47,000 in the comparable~~ quarter of ~~2016. This decrease is primarily due to our having completed collections on former VCBB and FAB loans, offset slightly by new recoveries resulting from~~2023 through the ~~TomatoBank acquisition.~~

~~Increase in cash surrender of life insurance.~~ Cash surrender value increased $78,000 to $219,000 in the quarter ended September 30, 2017 compared to $141,000 in the third quarter in 2016 primarily due to our purchase of an additional $10.0 million in bank owned life insurance, or BOLI, in January 2017.

~~Gain on sale of OREO. In the third~~first quarter of ~~2017, one OREO property was sold for a gain of $142,000.~~2024.

~~Noninterest expense~~ ~~increased $163,000, or 2.3%, to $7.2 million in the third quarter of 2017 compared to $7.0 million in the third quarter of 2016.~~ The following table ~~sets forth~~presents loans serviced for others as of the ~~major components of our noninterest expense for the third quarter of 2017 compared to the third quarter of 2016:~~dates indicated:

	As of						March 31, 2024 Compared To
*(dollars in thousands)*		March 31, 2024		December 31, 2023		March 31, 2023		December 31, 2023			March 31, 2023
Loans serviced:
Single-family residential loans serviced	$	990,930	$	1,014,017	$	1,098,526	$	(23,087	)	$	(107,596	)
SBA loans serviced		100,713		100,336		114,756		377			(14,043	)
Commercial real estate loans serviced		3,798		3,813		3,970		(15	)		(172	)
Construction loans		5,096		4,710		3,884		386			1,212
Total	$	1,100,537	$	1,122,876	$	1,221,136	$	(22,339	)	$	(120,599	)

For the Three Months Ended

September 30,

Increase

(dollars in thousands)

2017

2016

(decrease)

Noninterest expense:

Salaries and employee benefits

$
4,178

$
3,481

$
697

Occupancy and equipment expenses

705

766

(61
)
Data processing

458

563

(105
)
Legal and professional

318

511

(193
)
Office expenses

153

153

—

Marketing and business promotion

250

102

148

Insurance and regulatory assessments

201

284

(83
)
Amortization of intangibles

87

103

(16
)
OREO expenses (income)

6

6

—

Other expenses

844

1,068

(224
)
Total noninterest expense

$
7,200

$
7,037

$
163

Table of Contents

~~Salaries and employee benefits.~~ Salaries and employee benefits expense increased $697,000, or 20.0%, to $4.2 million for the third quarter of 2017 compared to $3.5 million for the third quarter of 2016. The increase in salaries and employee benefits is due to additional employees in mortgage, BSA, compliance and finance/accounting (related to the Company going public), as well as normal salary increases.

~~Occupancy and equipment.~~ Occupancy and equipment expense decreased $61,000, or 7.9%, to $705,000 for the third quarter of 2017 compared to $766,000 for the third quarter of 2016. The decrease is mainly due to furniture and fixture being fully depreciated in our Los Angeles headquarters and San Gabriel credit and administration locations.

~~Data processing.~~ Data processing expense decreased $105,000, or 18.7%, to $458,000 for the third quarter of 2017, compared to $563,000 for the third quarter of 2016. The decrease was primarily due to discontinuing data lines that were duplicative.

~~Legal and professional.~~ Legal and professional expense decreased $193,000 to $318,000 for the third quarter of 2017, compared to $511,000 for the third quarter of 2016. Prior to 2017, we would accrue the entire amount of our estimate of the legal expense for a particular matter. Beginning in 2017, we began accruing for legal expenses as such expenses are incurred.

~~Office expenses.~~ ~~Office expenses were unchanged at $153,000 in the third quarter of 2017 from the third quarter of 2016.~~

~~Marketing and business promotion.~~ Marketing and business promotion expense increased $148,000, or 145.6%, to $250,000 in the third quarter of 2017, compared to $102,000 for the third quarter of 2016. This increase was due to additional donations to CRA organizations, as per our policy.

~~Insurance and regulatory assessments.~~ Insurance and regulatory assessments decreased $83,000, or 29.2%, to $201,000 for the third quarter of 2017, compared to $284,000 for the third quarter of 2016. The decrease was primarily due to lower FDIC insurance expense due to lower accrual rates after our de novo period ended. Our FDIC insurance expense was $120,000 for the three months ended September 30, 2017 compared to $200,000 for the three months ended September 30, 2016. Our DBO regulatory assessment was $31,000 for the three months ended September 30, 2017 compared to $32,000 for the same period in 2016. Our corporate insurance was $49,000 for the three months ended September 30, 2017 compared to $52,000 for the three months ended September 30, 2016.

~~Amortization of intangibles.~~ ~~Amortization of intangibles totaled $87,000 for the three months ended September 30, 2017 versus $103,000 for the three months ended September 30, 2016.~~

~~OREO expenses (income).~~ ~~Net OREO expenses were $6,000 for the third quarter of 2017, and $6,000 in the third quarter of 2016.~~

~~Other expenses.~~ Other expenses decreased $224,000, or 21.0%, to $844,000 for the third quarter of 2017, compared to $1.1 million in the third quarter of 2016. This decrease is primarily due to a reduction in the provision for off-balance sheet commitments of $350,000, which primarily consist of commercial real estate and commercial & industrial commitments.

~~Income Tax Expense~~

Income tax expense was $4.0 million in the third quarter of 2017 compared to $4.1 million in the third quarter of 2016. Effective tax rates were 37.8% and 41.7% in the third quarter of 2017 and the third quarter of 2016, respectively. The decrease in income tax expense and the effective tax rate was primarily due to tax benefits recognized on stock option expense for the exercise of incentive stock options which was $310,000 for the three months ended September 30, 2017.

~~Net Income~~

Net income amounted to $6.6 million for the third quarter 2017, a $914,000 or 16.1% increase from the third quarter of 2016, primarily due to the increased gain on loan sales and net loan servicing fees.

~~Results of Operations—Comparison of Results of Operations for the Nine Months Ended September 30, 2017 and September 30, 2016~~

The following ~~discussion of our results of operations compares the nine months ended September 30, 2017~~table presents information on loans sold and ~~September 30, 2016, respectively. The results of operations~~gain on loans sold for the ~~nine months ended September 30, 2017 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2017.~~periods presented:

~~Net Interest Income/Average Balance Sheet~~

In the first nine months of 2017, we generated net interest income of $42.3 million, a decrease of $716,000 or 1.7%, from the net interest income of the same period in 2016. This decrease was largely due to a 30 basis point decrease in the average yield on interest-earning assets partially offset by 8.4% increase in the average balance of interest-earning assets. The increase in the average balance of interest-earning assets was primarily due to funds from the Company’s July public offering, organic growth in commercial and industrial, construction and single-family residential mortgage loans. The decrease in the average yield on interest-earning assets was primarily due to the reduction in accretion income associated with purchase accounting discounts established on loans acquired in the TomatoBank acquisition. For the nine months ended September 30, 2017 and 2016, our reported net interest margin was 4.00% and 4.40%, respectively. Our net interest margin benefits from discount accretion on our purchased loan portfolios. Our net interest margin for the nine months ended September 30, 2017 and 2016, excluding accretion income, would have been 3.75% and 3.76%, respectively.

~~Interest Income.~~ Total interest income was $52.6 million for the first nine months of 2017 compared to $51.5 million for the same period in 2016. The $1.2 million, or 2.2%, increase in total interest income was due to increases in interest earned on our interest-earning balances, securities portfolio and Federal funds sold.

	Three Months Ended
*(dollars in thousands)*	March 31, 2024		December 31, 2023		March 31, 2023
Loans sold:
SBA	$	3,407	$	1,024	$	127
Single-family residential mortgage		5,288		2,968		836
	$	8,695	$	3,992	$	963
Gain on loans sold:
SBA	$	220	$	64	$	10
Single-family residential mortgage		92		52		19
	$	312	$	116	$	29

Interest and fees on loans (held for investment and held for sale) was $50.0 million for the nine months ending September 30, 2017 compared to $50.0 million for the same period in 2016. The $50,000, or 0.1%, decrease in interest income on loans was primarily due to a 13 basis point decrease in the yield on loans partially offset by a 2.2% increase in the average balanceTable of loans outstanding. The increase in the average balance of loans outstanding was primarily due to organic loan growth in commercial and industrial, single-family residential mortgage loans and construction loans during 2017. The average yield on loans held for investment benefits from discount accretion on our acquired loan portfolios. For the nine months ended September 30, 2017 and 2016, the yield on total loans was 5.55% and 5.67%, respectively, while the yield on total loans excluding accretion income would have been 5.21% and 4.92%, respectively. A substantial portion of our acquired loan portfolio that is subject to discount accretion consists of commercial real estate loans. The table below illustrates by loan type the accretion income for the first nine months of 2017 and 2016:

As of and for the

Nine Months

Ended September 30,

(Dollars are in thousands)

2017

2016

Beginning balance of discount on purchased loans

$
8,085

$
1,712

Additions due to acquisitions:

Commercial and industrial

—

737

SBA

—

177

Construction and land development

—

736

Commercial real estate

—

12,224

Single-family residential mortgages

—

—

Total additions

$
—

$
13,874

Accretion:

Commercial and industrial

186

726

SBA

17

17

Construction and land development

41

620

Commercial real estate

2,293

4,735

Single-family residential mortgages

47

111

Total accretion

$
2,584

$
6,209

Ending balance of discount on purchased loans

$
5,501

$
9,377

Contents

Interest income on our securities portfolio increased $302,000, or 48.8%, to $922,000 in the first nine months of 2017 compared to the same period of 2016. The increase in interest income on securities was primarily due to an increased average balance of $11.8 million, or 33.5%, and by a 27 basis point increase in the average yield on securities. We purchased $19.8 million of debt securities with an average yield of 3.39%, which includes the transfer of a corporate sub-debt loan for $1 million to investments once the loan became DTC eligible, in the first nine months of 2017. These purchases increased our average yield by changing the mix of asset classes in our securities portfolio. We have temporarily invested a portion of the proceeds received from our issuance of $50 million of subordinated notes into subordinated debt issued by other community banks and expect to deploy such funds into new loan originations over the next two years.

Interest income on our federal funds sold, cash equivalents and other investments increased $469,000, or 294.7%, to $628,000 in the first nine months of 2017 compared to $159,000 in the same period of 2016. The increase in interest income on cash equivalents was due to a 16 basis point increase in average yield of cash equivalents plus a major increase in the average balance of $71.3 million from the Company’s public offering. The main reasons for the increased yield were the increase in the federal funds rate and placing higher balances into term federal funds for liquidity management purposes.

~~Interest Expense.~~ Interest expense on interest-bearing liabilities increased $1.9 million, or 22.0%, to $10.4 million in in the first nine months of 2017 compared to the same period of 2016 due to a 4.6% increase in the average balance outstanding and an 18 basis point increase in the average rate. Deposit expense increased due to the addition of, and having TomatoBank deposits, for the full nine months in 2017 compared to four and a half months in 2016. In addition, the sub-debt interest expense is higher because the debt was outstanding for the first nine months of 2017, compared to three months in the same period in 2016.

Interest expense on interest-bearing deposits increased to $7.6 million in the first nine months of 2017 compared to $6.6 million in the same period in 2016. The $968,000, or 14.6%, increase in interest expense on deposits was primarily due to the average balance of deposits increasing 3.1%, combined with a 10 basis point increase in rates. The increase in the average balance of deposits resulted primarily from normal growth of deposit accounts.Noninterest Expense

Interest expense on borrowings increased to $2.7 million in the first nine months of 2017 compared to $1.8 million in the same period of 2016. This increase reflected increased interest expense on subordinated notes, subordinated debentures and other borrowed funds, consisting of FHLB short-term advances of less than 90-days. The increase in interest expense on subordinated notes of $2.7 million followed the issuance of $50.0 million of subordinated notes on March 31, 2016. The increase in interest expense on subordinated debentures of $47,000 was due to a 25.9% increase in the average balance plus a 55 basis point increase in the average rate. The increase in interest expense on other borrowed funds of $5,000 was due to the average rate on these borrowings increasing 23 basis points partially offset by a 13.8% decrease in the average FHLB short-term advances during the first nine months of 2017, which were utilized to fund single-family residential mortgage loans that were originated and held for sale during the year.

~~Provision for (or Recapture) of Loan Losses.~~ In the first nine months of 2017 there was a $3.5 million net recapture in the provision for loan losses compared to $3.6 million provision expense for the same period of 2016. The decrease was $7.1 million or 196.9%. The recapture reflects both the receipt of a guaranteed payment on a SBA 7A guaranteed loan of $629,000 in May 2017 that was previously charged-off and the receipt of $3.6 million in July 2017 pursuant to a SBA loan guaranty that we previously fully reserved for in the allowance for loan losses.

~~Noninterest Income.~~ Noninterest income increased $3.1 million or 49.7%, to $9.4 million in the first half of 2017. The following table sets forth major components of our noninterest income for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016:

For the Nine Months Ended

September 30,

Increase

(dollars in thousands)

2017

2016

(decrease)

Noninterest income:

Service charges, fees and other

$
1,624

$
1,182

$
442

Gain on sale of loans

6,370

4,136

2,234

Loan servicing fee, net of amortization

571

384

187

Recoveries on loans acquired in business
combinations

76

139

(63
)
Increase in cash surrender of
life insurance

620

423

197

Gain on sale of securities

—

19

(19
)
Gain on sale of OREO

142

—

142

Total noninterest income

$
9,403

$
6,283

$
3,120

~~Service charges, fees and others.~~ Noninterest income from service charges, fees and other income increased to $1.6 million in the first nine months of 2017 compared to $1.2 million in the first same period of 2016. This increase primarily resulted from services charges on deposit accounts and fees from other operations.

~~Gain on sale of loans.~~ Our gain on sale of loans increased to $6.4 million in the first nine months of 2017 compared to $4.1 million in the same period of 2016 due to an increased amount of SBA loans sold. The gain on sale of single-family residential mortgage loans was $1.8 million in the first nine months of 2017 compared to $2.5 million in the first nine months of 2016, for a $682,000 decrease.

For the Nine Months Ended

(dollars in thousands)

September 30 2017

September 30 2016

Loans sold:

SBA

$
68,927

$
27,620

Mortgage

81,071

139,805

$
149,998

$
167,425

Gain on loans sold:

SBA

$
4,599

$
1,683

Mortgage

1,771

2,453

$
6,370

$
4,136

We sold $68.9 million in SBA loans in the first nine months of 2017 compared to $27.6 million in the same period of 2016, resulting in a gain on sale of loans of $4.6 million in the first nine months of 2017 compared to $1.7 million in the same period of 2016. The increase reflects our efforts to increase our originations and sales of such loans to generate additional

~~noninterest income. A lower volume of single-family residential mortgage loans was sold as a result of management’s decision to retain more loans in the portfolio.~~

~~Loan servicing income, net of amortization.~~ Our loan servicing income, net of amortization increased by $187,000 to $571,000 for the nine months ended September 30, 2017 compared to $384,000 for the nine months ended September 30, 2016. Servicing income increased due to the increased volume of loans being serviced for others. We were servicing $306.2 million of single-family residential mortgage loans as of September 30, 2017 compared to $230.6 million as of December 31, 2016. We were also servicing $166.1 million of SBA loans as of September 30, 2017 compared to $101.4 million as of December 31, 2016. The increase in the respective servicing portfolios reflects the growth in our originations and sales of single-family residential and SBA loans in 2017.

~~Recoveries on loans acquired in business combinations.~~ Recoveries on loans acquired in business combinations decreased $63,000 to $76,000 in the first nine months of 2017 compared to $139,000 in the same period of 2016. This decrease primarily resulted from lesser recoveries on loans acquired from other bank acquisitions.

~~Increase in cash surrender value of life insurance.~~ Cash surrender value increased $197,000 to $620,000 in the first nine months of 2017 compared to $423,000 in the same period of 2016, primarily due to an additional $10 million purchase of bank owned life insurance (BOLI) in 2017.

~~Gain on sales of securities, net.~~ During the first nine months of 2017, we sold no securities. During the first nine months of 2016, we sold a taxable municipal bond for $452,000 that resulted in a gain of $19,000, and we sold $4.6 million of mortgage-backed securities for no gain or loss.

~~Gain on sale of OREO. During the first nine months of 2017, one OREO property was sold for a gain of $142,000.~~

~~Noninterest Expense~~

~~Noninterest expense decreased $1.6 million or 7.3%, to $20.7 million for the first nine months of 2017 compared to the same period of 2016.~~ The following table sets forth major components of our noninterest expense for the ~~nine months ended September 30, 2017 compared to the nine months ended September 30, 2016:~~periods presented:

	For the Nine Months Ended
	September 30,				Increase				Three Months Ended						March 31, 2024 Compared To
(dollars in thousands)	2017		2016		(decrease)				March 31, 2024		December 31, 2023		March 31, 2023		December 31, 2023			March 31, 2023
Noninterest expense:
Salaries and employee benefits	$	12,604	$	10,547	$	2,057		$	9,927	$	8,860	$	9,864	$	1,067		$	63
Occupancy and equipment expenses		2,176		2,388		(212	)		2,443		2,387		2,398		56			45
Data processing		1,264		1,488		(224	)		1,420		1,357		1,299		63			121
Legal and professional		227		1,478		(1,251	)		880		1,291		3,013		(411	)		(2,133	)
Office expenses		484		455		29			356		349		375		7			(19	)
Marketing and business promotion		575		408		167			172		241		300		(69	)		(128	)
Insurance and regulatory assessments		611		810		(199	)		982		1,122		504		(140	)		478
Amortization of intangibles		268		268		—
OREO expenses (income)		34		16		18
Core deposit premium									201		215		237		(14	)		(36	)
Other expenses		2,495		4,516		(2,021	)		588		571		921		17			(333	)
Total noninterest expense	$	20,738	$	22,374	$	(1,636	)	$	16,969	$	16,393	$	18,911	$	576		$	(1,942	)

~~Salaries and employee benefits.~~ ~~Salaries~~Three Months Ended March 31, 2024 Compared to Three Months Ended December 31, 2023

Noninterest expense for the first quarter of 2024 was $17.0 million, an increase of $576,000 from $16.4 million for the fourth quarter of 2023. This increase was due primarily to higher salaries and employee benefits ~~expense increased $2.1~~expenses of $1.1 million, ~~or 19.5%,~~partially offset by lower legal and professional fees of $411,000 and lower insurance and regulatory assessments of $140,000. The increase in salaries and benefits is attributed to ~~$12.6 million~~the timing of taxes and benefits, which are higher in the first ~~nine months~~quarter of ~~2017 compared to $10.5 million in~~ the ~~same period of 2016. This increase was primarily attributable to increased staff in credit administration, finance, single-family residential mortgage and risk management.~~year. The number of full-time equivalent employees was ~~195~~371 at ~~September 30, 2017~~March 31, 2024 compared to ~~169~~376 at ~~September 30, 2016.~~December 31, 2023. The decrease in legal and professional expenses from the fourth quarter of 2023 was due in part to higher legal recoveries of $65,000 as the first quarter included $165,000 in recoveries compared to $100,000 in the fourth quarter of 2023 coupled with lower external auditor fees.

~~Occupancy and equipment.~~ ~~Occupancy and equipment~~

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Noninterest expense decreased ~~$212,000, or 8.9%,~~$1.9 million to ~~$2.2~~$17.0 million in the first ~~nine months~~quarter of ~~2017~~2024 compared to ~~$2.4~~$18.9 million for the ~~same period~~first quarter of ~~2016. This decrease was mainly due to closing two TomatoBank branches in June 2016 and decreased furniture depreciation in our Los Angeles headquarter office and credit administration department.~~

~~Data processing.~~ ~~Data processing expense decreased $224,000, or 15.1%, to $1.3~~2023. The $1.9 million in the first nine months of 2017 compared to $1.5 million for the same period of 2016. This decrease resulted primarily from the reduction of duplicated processing costs and data line expense incurred subsequent to the TomatoBank acquisition. Conversion expense associated with the TomatoBank acquisition is in the “other expenses” line item.

~~Legal and professional.~~ ~~Legal and professional expense decreased $1.3 million, or 84.6%, to $227,000 in the first nine months of 2017 compared to $1.5 million for the same period of 2016. This~~ decrease was primarily due to ~~resolution~~a decrease in legal and other professional expenses of ~~lawsuits~~$2.1 million, other expenses of $333,000, and ~~a change in the legal accrual procedure.~~

~~Office expenses.~~ Office expenses are comprised of communications, postage, armored car, and office supplies and totaled $484,000 in first nine months of 2017 compared to $455,000 for same period of 2016. This 6.4% increase primarily resulted from normal business growth.

~~Marketing~~marketing and business ~~promotion.~~ promotion expense of $128,000, partially offset by an increase in insurance and regulatory assessments of $478,000. The decrease in legal and professional expenses was due mostly to lower legal expenses and external consulting and audit fees related to the previously disclosed internal investigation that was subsequently resolved. Marketing and business promotion expense ~~increased $167,000, or 41.0%,~~decreased due to ~~$575,000~~decreases in advertising and CRA donation expenses. Other expenses includes board of director compensation costs, which decreased $270,000 due to the reconstitution of the board after the first ~~nine~~quarter of 2023. Insurance and regulatory assessments increased due mostly to a $435,000 increase in our FDIC assessment due in part to the consent order issued in October 2023.

Income Tax Expense

Three Months Ended March 31, 2024 Compared to Three Months Ended December 31, 2023

We recorded an income tax provision of $3.2 million and $5.0 million, reflecting an effective tax rate of 28.8% and 29.4%, for the three months ended March 31, 2024 and December 31, 2023. Income tax included an $8,000 expense for stock options exercised for the three months ended March 31, 2024 and December 2023.

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

We recorded an income tax provision of ~~2017 compared to $408,000~~$3.2 million and $4.6 million, reflecting an effective tax rate of 28.8% and 29.4%, for the three months ended March 31, 2024 and 2023. Income tax included an $8,000 expense for stock options exercised for the three months ended March 31, 2024 and a $5,000 benefit for the same period in 2023.

Table of ~~2016. This~~Contents

ANALYSIS OF FINANCIAL CONDITION

Assets

At March 31, 2024, total assets were $3.9 billion, a decrease of $148.0 million, from total assets of $4.0 billion at December 31, 2023, primarily due to a $162.1 million decrease in cash and cash equivalents and a $2.5 million decrease in gross loans, partially offset by a $16.2 million increase in AFS investment securities. The decrease in cash and cash equivalents was primarily due to ~~normal business growth.~~

~~Insurance and regulatory assessments.~~ ~~Insurance and regulatory assessment expense was $611,000 in the first nine months~~a decrease of 2017 compared to $810,000 in the same period of 2016. The $199,000 or 24.6% decrease was primarily due to lower FDIC assessment following exiting our denovo period. Our FDIC insurance assessment was $360,000 for the first nine months of 2017 compared to $563,000 in the same period of 2016. Our DBO regulatory assessment was $95,000 for the first nine months of 2017 compared to $82,000 in the same period of 2016. Our corporate insurance expenses, including our directors and officers insurance and our fidelity bond, was $155,000 for the first nine months of 2017 compared to $163,000 in the same period of 2016.

~~Amortization of intangibles.~~ Amortization of intangibles was $268,000 in the first nine months of 2017 compared to $268,000 in the same period of 2016. The core deposit intangible asset associated with the acquisition of TomatoBank is being amortized.

~~OREO expenses (income).~~ Net OREO expense was $34,000 in the first nine months of 2017 compared to $16,000 in the same period of 2016, an increase of $18,000, which was mainly due to the addition of a $540,000 OREO property in 2016 that was marketed for sale. The OREO was subsequently sold in August 2017 for a gain of $142,000.

~~Other noninterest expense.~~ ~~Other noninterest expense totaled $2.5~~$208.0 million in the first nine months of 2017 compared to $4.5 million for the same period of 2016. This decrease of $2.0 million followed the TomatoBank acquisition in 2016, with $854,000 in systems termination and conversion fees and $1.1 million in change in control payments pursuant to agreements assumed by us in such acquisition not repeating in 2017.

~~Income Tax Expense~~

Income tax expense was $13.8 million in the first nine months of 2017 compared to $9.6 million in the same period of 2016. The increase in income tax expense was consistent with the related growth in pre-tax income. Effective tax rates were 40.1% and 41.2% in the first nine months of 2017 and 2016, respectively. The lower effective tax rate in 2017 was primarily due to higher permanent tax differences. The tax benefit on the exercise of incentive stock options was $310,000 for the nine months ended September 30, 2017.

~~Net Income~~

Net income increased $6.9 million to $20.6 million in the first nine months of 2017, compared to $13.7 million in the same period of 2016. The increase is primarily due to the recapture of the loan loss provision, and an increase in noninterest income due to increased gain on sales of SBA loans, partially offset by higher staff expenses. In addition legal and professional and other noninterest expenses decreased from the same period of 2016 due to the additional expenses incurred as a result of the Tomato Bank acquisition in 2016.

~~ANALYSIS OF FINANCIAL CONDITION~~

~~Assets.~~ Total assets were $1.6 billion as of September 30, 2017 and $1.4 billion as of December 31, 2016. We increased our loans held for investment by $86.1 million, primarily in construction, single-family residential mortgages, and commercial and industrial loans, partially offset by decreases in commercial real estate and SBA loans. The decrease in SBA loans is primarily due to the Company selling more SBA loans than originating and the decrease in commercial real estate loans is due to payoffs from the acquired TomatoBank loans. Our mortgage loans held for sale increased by $81.4 million in the first nine-months of 2017. We alsowholesale deposits.

~~purchased $10.0 million in bank owned life insurance (BOLI) in~~Investment Securities

We manage our securities portfolio and cash to maintain adequate liquidity and to ensure the ~~first quarter~~safety and preservation of ~~2017 to partially offset the increase in benefit expenses. The increase in assets was funded by an increase in deposits~~invested principal, with a secondary focus on yield and returns. Specific goals of ~~$165.5 million and $78.7 million increase in equity.~~our investment portfolio include:

~~Investment Securities~~

●

providing a ready source of balance sheet liquidity to ensure adequate availability of funds to meet fluctuations in loan demand, deposit balances and other changes in balance sheet volumes and composition;

●

serving as a means for diversification of our assets with respect to credit quality, maturity and other attributes; and

●

serving as a tool for modifying our interest rate risk profile pursuant to our established policies.

Our investment ~~strategy aims~~portfolio is comprised primarily of U.S. government agency securities, corporate note securities, mortgage-backed securities backed by government-sponsored entities and taxable and tax-exempt municipal securities.

Our investment policy is reviewed annually by our board of directors. Overall investment goals are established by our board of directors, Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and members of our Asset Liability Committee (“ALCO”) of our board of directors. Our board of directors has delegated the responsibility of monitoring our investment activities to ~~maximize earnings while maintaining liquidity~~our ALCO. Day-to-day activities pertaining to the securities portfolio are conducted under the supervision of our CEO and CFO. We actively monitor our investments on an ongoing basis to identify any material changes in the securities. We monitor our securities ~~with minimal~~portfolio to ensure it has adequate credit ~~risk. The types~~support and ~~maturities~~consider the lowest credit rating for identification of ~~securities purchased are primarily based on our current and projected liquidity and interest rate sensitivity positions.~~potential credit impairment.

The following table sets forth the book value and percentage of each category of securities ~~at September 30, 2017 and December 31, 2016.~~as of the dates indicated. The book value for debt securities classified as ~~available for sale is equal to~~AFS are reflected at fair market value and the book value for securities classified as ~~held to maturity is equal to~~HTM are reflected at amortized cost.

	September 30, 2017					December 31, 2016
	Book		% of			Book		% of			March 31, 2024					December 31, 2023
(dollars in thousands)	Value		Total			Value		Total			Amount		% of Total			Amount		% of Total
Securities, available for sale, at fair value
U.S. government agency securities	$	4,957		8.1	%	$	5,317		11.7	%
Mortgage-backed securities
Government sponsored agencies		33,256		54.6			23,640		52.0
Corporate debt securities		17,484		28.7			10,320		22.6
Government agency securities											$	7,059		2.1	%	$	8,161		2.5	%
SBA agency securities												14,314		4.2	%		13,217		4.1	%
Mortgage-backed securities: residential												33,180		9.7	%		34,652		10.7	%
Collateralized mortgage obligations: residential												88,099		26.0	%		82,327		25.3	%
Collateralized mortgage obligations: commercial												75,637		22.2	%		67,299		20.8	%
Commercial paper												77,066		22.6	%		73,105		22.6	%
Corporate debt securities ⁽¹⁾												30,630		9.0	%		30,691		9.5	%
Municipal securities												9,209		2.7	%		9,509		2.8	%
Total securities, available for sale, at fair value	$	55,697		91.5	%	$	39,277		86.3	%	$	335,194		98.5	%	$	318,961		98.3	%
Securities, held to maturity, at amortized cost
Taxable municipal securities	$	4,296		7.1	%	$	5,301		11.7	%	$	501		0.1	%	$	501		0.2	%
Tax-exempt municipal securities		895		1.5			913		2.0			4,703		1.4	%		4,708		1.5	%
Total securities, held to maturity, at amortized cost		5,191		8.5			6,214		13.7			5,204		1.5	%		5,209		1.7	%
Total securities	$	60,888		100.0	%	$	45,491		100.0	%	$	340,398		100.0	%	$	324,170		100.0	%

(1)

Comprised of corporate ~~debt~~note securities, commercial paper and financial institution subordinated ~~debentures~~debentures.

Table of Contents

The tables below set forth investment debt securities AFS and HTM ~~for~~as of the ~~periods presented.~~dates indicated.

			Gross		Gross					Amortized		Unrealized		Unrealized			Fair
March 31, 2024										Cost		Gains		Losses			Value
(dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
September 30, 2017	Cost		Gains		Losses			Value
Available for sale
U.S government agency securities	$	5,057	$	—	$	(100	)	$	4,957
Mortgage-backed securities
Government sponsored agencies		33,530		44		(318	)		33,256
Government agency securities										$	7,586	$	—	$	(527	)	$	7,059
SBA agency securities											14,524		40		(250	)		14,314
Mortgage-backed securities: residential											39,567		—		(6,387	)		33,180
Collateralized mortgage obligations: residential											100,808		169		(12,878	)		88,099
Collateralized mortgage obligations: commercial											78,404		105		(2,872	)		75,637
Commercial paper											77,088		—		(22	)		77,066
Corporate debt securities		17,341		203		(60	)		17,484		34,784		21		(4,175	)		30,630
	$	55,928	$	247	$	(478	)	$	55,697
Municipal securities											12,627		—		(3,418	)		9,209
										$	365,388	$	335	$	(30,529	)	$	335,194
Held to maturity
Municipal taxable securities	$	4,296	$	278	$	—		$	4,574	$	501	$	—	$	(1	)	$	500
Municipal securities		895		16		—			911		4,703		—		(156	)		4,547
	$	5,191	$	294	$	—		$	5,485	$	5,204	$	—	$	(157	)	$	5,047

December 31, 2016
December 31, 2023
Available for sale
U.S. government agency securities	$	5,453	$	—	$	(136	)	$	5,317
Mortgage-backed securities
Government sponsored agencies		23,913		38		(311	)		23,640
Government agency securities										$	8,705	$	—	$	(544	)	$	8,161
SBA agency securities											13,289		144		(216	)		13,217
Mortgage-backed securities: residential											40,507		—		(5,855	)		34,652
Collateralized mortgage obligations: residential											94,071		454		(12,198	)		82,327
Collateralized mortgage obligations: commercial											69,941		22		(2,664	)		67,299
Commercial paper											73,121		—		(16	)		73,105
Corporate debt securities		10,364		21		(65	)		10,320		34,800		—		(4,109	)		30,691
	$	39,730	$	59	$	(512	)	$	39,277
Municipal securities											12,636		—		(3,127	)		9,509
										$	347,070	$	620	$	(28,729	)	$	318,961
Held to maturity
Municipal taxable securities	$	5,301	$	328	$	—		$	5,629	$	501	$	3	$	—		$	504
Municipal securities		913		11		—			924		4,708		—		(115	)		4,593
	$	6,214	$	339	$	—		$	6,553	$	5,209	$	3	$	(115	)	$	5,097

The weighted-average book yield on the total investment portfolio at ~~September 30, 2017~~March 31, 2024 was ~~2.63%~~4.16% with a weighted-average life of ~~6.4~~5.1 years. This compares to a weighted-average book yield of ~~2.51% at December 31, 2016~~4.00% with a weighted-average life of ~~4.8 years.~~5.1 years at December 31, 2023. The ~~weighted average~~weighted-average life is the average number of years that each dollar of unpaid principal due remains outstanding. Average life is computed as the weighted-average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal pay-downs.

~~Approximately 62%~~

The table below shows our investment securities’ fair value and weighted average yields by maturity in the following maturity groupings as of March 31, 2024. The amortized cost and fair value of the investment securities ~~in the total investment~~ portfolio ~~at September 30, 2016,~~ are ~~issued~~shown by ~~the U.S. government or U.S. government- sponsored agencies and enterprises, which~~expected maturity. Expected maturities may differ from contractual maturities if borrowers have the ~~implied guarantee of payment of principal and interest. As of September 30, 2017, no U.S. government agency bonds are callable.~~right to call or prepay obligations with or without call or prepayment penalties.

	Less than One Year					More than One Year to Five Years					More than Five Years to Ten Years					More than Ten Years					Total
	Fair		Weighted			Fair		Weighted			Fair		Weighted			Fair		Weighted			Fair		Weighted
March 31, 2024	Value		Average Yield			Value		Average Yield			Value		Average Yield			Value		Average Yield			Value		Average Yield
*(dollars in thousands)*
Government agency securities	$	—		—	%	$	7,059		2.97	%	$	—		—	%	$	—		—	%	$	7,059		2.97	%
SBA securities		—		—	%		2,024		2.65	%		12,290		5.93	%		—		—	%		14,314		5.43	%
Mortgage-backed securities: residential		—		—	%		9,428		0.93	%		16,327		2.27	%		7,425		2.04	%		33,180		1.86	%
Collateralized mortgage obligations: residential		16		1.80	%		35,226		4.74	%		52,857		2.08	%		—		—	%		88,099		3.04	%
Collateralized mortgage obligations: commercial		4,071		7.14	%		18,023		3.93	%		53,543		5.86	%		—		—	%		75,637		5.44	%
Commercial paper		77,066		5.98	%		—		—	%		—		—	%		—		—	%		77,066		5.98	%
Corporate debt securities		—		—	%		12,533		4.09	%		16,160		3.61	%		1,937		2.89	%		30,630		3.73	%
Municipal securities		—		—	%		—		—	%		—		—	%		9,209		1.92	%		9,209		1.92	%
Total available for sale	$	81,153		6.04	%	$	84,293		3.85	%	$	151,177		3.92	%	$	18,571		2.07	%	$	335,194		4.27	%

Municipal taxable securities	$	—		—	%	$	500		5.25	%	$	—		—	%	$	—		—	%	$	500		5.25	%
Municipal securities		—		—	%		—		—	%		2,847		2.77	%		1,700		2.59	%		4,547		2.71	%
Total held to maturity	$	—		—	%	$	500		5.25	%	$	2,847		2.77	%	$	1,700		2.59	%	$	5,047		2.96	%

Table of Contents

The ~~tables~~table below ~~show the Company’s~~shows our investment securities’ gross unrealized losses and estimated fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016.~~2023. The unrealized losses on these securities were primarily attributed to changes in interest rates. The issuers of these securities have not, to our knowledge, evidenced any cause for default on these securities. These securities have fluctuated in value since their purchase dates as market ~~interest~~ rates have fluctuated. However, we have the ability and the intention to hold these securities until their fair values recover to cost or maturity. As such, management does not deem these securities to be ~~other-than-temporarily-impaired~~other-than-temporarily-impaired. A summary of our analysis of these securities and the unrealized losses is described more fully in "Note 3 4—Investment Securities~~in the notes to the 2016~~" of our consolidated financial statements included in ~~the Form S-1.~~our 2023 Annual Report. Economic trends may adversely affect the value of the portfolio of investment securities that we hold.

	Less than Twelve Months					Twelve Months or More					Total					Less than Twelve Months					Twelve Months or More					Total
	Unrealized			Estimated		Unrealized			Estimated		Unrealized			Estimated				Unrealized					Unrealized					Unrealized
March 31, 2024																Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
(dollars in thousands)	Losses			Fair Value		Losses			Fair Value		Losses			Fair Value
September 30, 2017
Government agency securities	$	(100	)	$	4,957	$	—		$	—	$	(100	)	$	4,957
Mortgage-backed securities
Government sponsored agencies		(255	)		26,916		(63	)		2,105		(318	)		29,021	$	3,513	$	(57	)	$	3,546	$	(470	)	$	7,059	$	(527	)
SBA securities																	6,341		(33	)		2,023		(217	)		8,364		(250	)
Mortgage-backed securities: residential																	—		—			33,180		(6,387	)		33,180		(6,387	)
Collateralized mortgage obligations: residential																	13,963		(146	)		60,647		(12,732	)		74,610		(12,878	)
Collateralized mortgage obligations: commercial																	26,029		(267	)		34,431		(2,605	)		60,460		(2,872	)
Commercial paper ⁽¹⁾																	39,731		(22	)		—		—			39,731		(22	)
Corporate debt securities		(60	)		5,994		—			—		(60	)		5,994		—		—			27,559		(4,175	)		27,559		(4,175	)
Municipal securities																	—		—			9,209		(3,418	)		9,209		(3,418	)
Total available for sale	$	(415	)	$	37,867	$	(63	)	$	2,105	$	(478	)	$	39,972	$	89,577	$	(525	)	$	170,595	$	(30,004	)	$	260,172	$	(30,529	)

December 31, 2016
Government agency securities	$	(136	)	$	5,317	$	—		$	—	$	(136	)	$	5,317
Mortgage-backed securities
Government sponsored agencies		(221	)		16,231		(90	)		2,504		(311	)		18,735
Corporate debt securities		(65	)		5,147		—			—		(65	)		5,147
Total available for sale	$	(422	)	$	26,695	$	(90	)	$	2,504	$	(512	)	$	29,199
Municipal taxable securities																$	500	$	(1	)	$	—	$	—		$	500	$	(1	)
Municipal securities																	788		(12	)		3,759		(144	)		4,547		(156	)
Total held to maturity																$	1,288	$	(13	)	$	3,759	$	(144	)	$	5,047	$	(157	)

(1)

We held $37.3 million of commercial paper where the amortized cost and fair value are equal as of March 31, 2024.

	Less than Twelve Months					Twelve Months or More					Total
			Unrealized					Unrealized					Unrealized
December 31, 2023	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
*(dollars in thousands)*
Government sponsored agencies	$	4,238	$	(72	)	$	3,923	$	(472	)	$	8,161	$	(544	)
SBA securities		5,102		(18	)		2,094		(198	)		7,196		(216	)
Mortgage-backed securities: residential		—		—			34,652		(5,855	)		34,652		(5,855	)
Collateralized mortgage obligations: residential		2,597		(37	)		60,275		(12,161	)		62,872		(12,198	)
Collateralized mortgage obligations: commercial		18,463		(70	)		35,077		(2,594	)		53,540		(2,664	)
Commercial paper ⁽¹⁾		53,211		(16	)		—		—			53,211		(16	)
Corporate debt securities		—		—			30,691		(4,109	)		30,691		(4,109	)
Municipal securities		—		—			9,509		(3,127	)		9,509		(3,127	)
Total available for sale	$	83,611	$	(213	)	$	176,221	$	(28,516	)	$	259,832	$	(28,729	)

Municipal securities	$	1,397	$	(19	)	$	3,196	$	(96	)	$	4,593	$	(115	)
Total held to maturity	$	1,397	$	(19	)	$	3,196	$	(96	)	$	4,593	$	(115	)

(1)

We held $19.9 million of commercial paper where the amortized cost and fair value are equal as of December 31, 2023.

~~The Company~~There was no ACL on the HTM securities portfolio as of March 31, 2024 and December 31, 2023. We monitor our securities portfolio to ensure all of our investments have adequate credit support and we consider the lowest credit rating for identification of potential credit impairment. As of March 31, 2024, we believe there was no impairment. In addition, we did not ~~record any charges for other-than-temporary impairment losses for~~have the ~~nine months ended September 30, 2017~~current intent to sell securities with a fair value below amortized cost at March 31, 2024, and ~~2016.~~it is more likely than not that we will not be required to sell such securities prior to the recovery of their amortized cost basis. As of March 31, 2024, all of our investment securities in an unrealized loss position received an investment grade credit rating. The overall net decreases in fair value during the period were attributable to a combination of changes in interest rates and market conditions.

Loans

The loan portfolio is the largest category of our earning assets. At ~~September 30, 2017,~~March 31, 2024, total loans HFI, net of ~~allowance for loan losses,~~ALL, totaled ~~$1.2~~$3.0 billion. ~~Prior~~Net loans HFI decreased $4.5 million, or 0.1%, to ~~2014, we mainly had two lending products, commercial and industrial~~$3.0 billion at March 31, 2024 as compared to $3.0 billion at December 31, 2023. The decrease was primarily due a $24.3 million decrease in SFR mortgages, an $8.7 million decrease in C&I loans, and ~~commercial real estate (CRE) loans. In 2014, we made the strategic move to diversify our lending into single-family residential mortgage~~a $1.4 million decrease in other loans, partially offset by a $16.6 million increase in C&D loans, a $10.6 million increase in CRE loans, and a $2.6 million increase in SBA loans. SFR mortgage loans represent approximately 50% of our total loans as of March 31, 2024 and December 31, 2023.

The following table presents the balance and associated percentage of ~~each major category in~~ our loan portfolio, ~~at September 30, 2017 and December 31, 2016:~~by loan segment, as of the dates indicated:

	As of September 30, 2017					As of December 31, 2016					As of March 31, 2024						As of December 31 2023
(dollars in thousands)	$			%		$			%		$			%			$			%
Loans:
Loans HFI:⁽¹⁾
Construction and land development											$	198,070			6.5	%	$	181,469			6.0	%
Commercial real estate ⁽²⁾												1,178,498			38.9	%		1,167,857			38.5	%
Single-family residential mortgages												1,463,497			48.4	%		1,487,796			49.1	%
Commercial and industrial	$	225,967			18.9	$	203,843			18.4		121,441			4.0	%		130,096			4.3	%
SBA		148,005			12.4		158,968			14.3		54,677			1.8	%		52,074			1.7	%
Construction and land development		94,297			7.9		89,409			8.1
Commercial real estate (1)		491,086			41.0		501,798			45.2
Single-family residential mortgages		237,167			19.8		156,428			14.1
Total loans,(2)	$	1,196,522			100.0	$	1,110,446			100.0
Other loans												11,178			0.4	%		12,569			0.4	%
Total loans HFI												3,027,361			100.0	%		3,031,861			100.0	%
Allowance for loan losses		(11,420	)				(14,162	)				(41,688	)					(41,903	)
Total loans, net	$	1,185,102				$	1,096,284
Total loans HFI, net ⁽¹⁾											$	2,985,673					$	2,989,958

(1)

~~Includes non-farm & non-residential real estate loans, multifamily resident and 1-4 family single family residential loan for a business purpose~~

~~(2)~~

Net of discounts and deferred fees and ~~costs~~costs.

(2)

Includes non-farm and non-residential real estate loans, multifamily residential and SFR loans for a business purpose.

~~Net~~

The following table presents the geographic locations of loans ~~increased $88.8 million, or 8.1%, to $1.2 billion at September 30, 2017~~in our loan portfolio, by loan segment, as ~~compared to December 31, 2016. The increase in net loans primarily resulted from organic growth in single-family residential mortgage, and commercial and industrial~~of the date indicated:

	As of March 31, 2024
	Construction and land development		Commercial real estate		Single-family residential mortgages		Commercial and Industrial		SBA		Other		Total loans, net
*(dollars in thousands)*	$		$		$		$		$		$		$		%
Loans HFI:
California	$	129,794	$	575,876	$	689,255	$	110,692	$	36,916	$	1,517	$	1,544,050		51.0	%
Hawaii		—		2,049		4,709		105		—		10		6,873		0.2	%
Illinois		225		37,711		48,724		1,006		—		97		87,763		2.9	%
New Jersey		—		21,158		23,946		462		—		184		45,750		1.5	%
Nevada		—		61,885		22,029		398		2,792		117		87,221		2.9	%
New York		56,362		171,882		667,354		792		1,976		3,501		901,867		29.8	%
Other		11,689		307,937		7,480		7,986		12,993		5,752		353,837		11.7	%
Total loans HFI	$	198,070	$	1,178,498	$	1,463,497	$	121,441	$	54,677	$	11,178	$	3,027,361		100.0	%

The majority of our loan portfolio is based on collateral or businesses located in California and New York, which represent 80.8% of our loan portfolio. Loans secured by collateral in other states represented approximately 19.2% of our portfolio and the majority of these loans ~~which was partially offset~~are secured by ~~the sale~~CRE with a weighted average loan-to-value (“LTV”) of ~~SBA loans and continued run-off of TomatoBank commercial real estate loans (the runoff of TomatoBank loans decreased substantially).~~58.5% at March 31, 2024.

Outstanding loan balances increased due to new loan originations, advances on outstanding commitments and loans acquired as a result of acquisitions of other financial institutions, net of amounts received for loan payments and payoffs, charge-offs of loans and transfers of loans to OREO.

Commercial and industrial loans. We provide a mix of variable and fixed rate ~~commercial and industrial~~C&I loans. The loans are typically made to small- and medium-sized manufacturing, wholesale, retail and service businesses for working capital needs, business expansions and for international trade financing. ~~Commercial and industrial~~C&I loans include lines of credit with a maturity of one year or less, commercial and industrial term loans with maturities of five years or less, shared national credits with maturities of five years or less, mortgage warehouse lines with a maturity of one year or less, ~~bank subordinated debentures with a maturity of 10 years,~~ purchased receivables with a maturity of two months or less and international trade discounts with a maturity of three months or less. Substantially all of our ~~commercial and industrial~~C&I loans are collateralized by business assets or by real estate.

~~Commercial and industrial~~

C&I loans ~~increased $22.1~~decreased $8.7 million, or ~~10.9%~~6.7%, to ~~$226.0~~$121.4 million as of ~~September 30, 2017~~March 31, 2024 compared to ~~$203.8~~$130.1 million at December 31, ~~2016. This increase resulted~~2023 primarily ~~from an increase~~due to decreases in ~~shared national credits of $9.9 million,~~ mortgage warehouse lines ~~of $7.9 million~~ and a decrease in ~~purchased receivables~~usages of ~~$20.2 million.~~the credit lines due to increases in market rates of interest. The interest rate on these loans are generally Wall Street Journal Prime rate based.

Commercial real estate loans. ~~Commercial real estate~~CRE loans include owner-occupied and non-occupied ~~commercial real estate,~~CRE, multi-family residential and ~~single-family residential~~SFR mortgage loans originated for a business purpose. ~~The~~Except for the multi-family residential loan portfolio, the interest rate for the majority of these loans are Prime rate based and have a maturity of five years or less except for the ~~single-family residential~~SFR loans originated for a business purpose which may have a maturity of one year. ~~At September 30, 2017, approximately 9.9% of~~The multi-family residential loans generally have interest rates based on the ~~commercial real estate portfolio consisted of fixed-rate loans. Our policy maximum loan-to-value, or LTV is 75% for commercial real estate loans.~~5-year treasury, 10-year maturity with a five year fixed rate period followed by a five year floating rate period, and have a declining prepayment penalty over the first five years. The total ~~commercial real estate~~CRE portfolio ~~totaled $491.1~~increased $10.6 million, or 0.9%, to $1.18 billion at ~~September 30, 2017~~March 31, 2024, compared to $1.17 billion at December 31, 2023. The multi-family residential loan portfolio was $570.2 million as of March 31, 2024 and ~~$501.8~~$573.4 million as of December 31, ~~2016, of which $178.2 million and $159.5 million, respectively, are secured by owner occupied properties.~~2023. The ~~multi-family residential loan portfolio totaled $71.0 million as of September 30, 2017 and $70.6 million as of December 31, 2016. The single-family residential~~SFR mortgage loan portfolio originated for a business purpose totaled ~~$46.7~~$51.9 million as of ~~September 30, 2017~~March 31, 2024 and ~~$51.6~~$48.7 million as of December 31, ~~2016.~~2023.

~~Commercial~~

The following table presents the LTV ratios at origination for CRE loans by property type as of the date indicated:

March 31, 2024	LTV Distribution
*(dollars in thousands)*	<45%		45%≤54%		55%≤64%		65%≤74% ⁽¹⁾		>85%		Total
Non-owner occupied:
Hotel/Motel	$	18,500	$	11,845	$	15,905	$	6,069	$	—	$	52,319
Office		8,644		—		17,156		—		8,535		34,335
Rent Controlled NY Multifamily		25,712		18,119		8,364		—		—		52,195
Mobile Home		42,867		72,389		68,259		87,127		—		270,642
Mixed Use		90,194		23,672		8,832		64,456		—		187,154
Apartments		20,912		45,020		33,183		53,907		—		153,022
Warehouse		13,412		23,662		46,501		4,209		1,438		89,222
Retail		26,362		19,813		22,597		905		—		69,677
SFR Rental		12,842		30,501		14,767		5,791		—		63,901
Other		4,565		—		1,686		—		—		6,251
Total non-owner occupied	$	264,010	$	245,021	$	237,250	$	222,464	$	9,973	$	978,718
Owner-occupied:
Hotel/Motel		642		28,411		42,913		—		—		71,966
Office		661		2,842		786		1,301		—		5,590
Rent Controlled NY Multifamily		1,449		—		358		—		—		1,807
Mixed Use		3,430		4,043		5,236		—		—		12,709
Warehouse		5,426		11,039		37,786		26,993		—		81,244
Retail		4,131		8,543		4,856		—		—		17,530
SFR Rental		—		1,113		—		—		—		1,113
Other		1,402		166		440		5,813		—		7,821
Total owner-occupied	$	17,141	$	56,157	$	92,375	$	34,107	$	—	$	199,780
Total	$	281,151	$	301,178	$	329,625	$	256,571	$	9,973	$	1,178,498

(1)

No loans in the 75% - 85% LTV Distribution

The following table presents the LTV ratios at origination for CRE loans by state as of the date indicated:

March 31, 2024	LTV Distribution
*(dollars in thousands)*	<45%		45%≤54%		55%≤64%		65%≤74% ⁽¹⁾		>85%		Total
Non-owner occupied:
California	$	138,603	$	120,577	$	88,884	$	73,871	$	—	$	421,935
New York		67,475		56,712		30,317		4,040		—		158,544
Nevada		22,308		17,332		16,862		1,441		—		57,943
Illinois		17,318		2,637		3,239		1,159		9,973		34,326
New Jersey		324		865		16,259		905		—		18,353
Hawaii		299		894		—		—		—		1,193
Other		17,683		46,004		81,689		141,048		—		286,424
Total non-owner occupied	$	264,010	$	245,021	$	237,250	$	222,464	$	9,973	$	978,718
Owner-occupied:
California		8,861		35,613		77,537		31,930		—		153,941
New York		7,187		1,885		3,413		853		—		13,338
Nevada		—		2,618		—		1,324		—		3,942
Illinois		557		1,267		1,561		—		—		3,385
New Jersey		536		1,969		300		—		—		2,805
Hawaii		—		856		—		—		—		856
Other		—		11,949		9,564		—		—		21,513
Total owner-occupied	$	17,141	$	56,157	$	92,375	$	34,107	$	—	$	199,780
Total	$	281,151	$	301,178	$	329,625	$	256,571	$	9,973	$	1,178,498

(1)

No loans in the >75% - 85% LTV Distribution

Construction and land development loans. Our C&D loans are comprised of residential construction, commercial construction and land acquisition and development construction. Interest reserves are generally established on real estate construction loans. These loans ~~decreased $10.7~~are typically Prime rate based and have maturities of less than 18 months. C&D loans increased $16.6 million, or ~~2.1%~~9.1%, to ~~$491.1~~$198.1 million at ~~September 30, 2017~~March 31, 2024 as compared to ~~$501.8~~$181.5 million at December 31, ~~2016. This decrease resulted primarily from the continued pay-off of TomatoBank commercial real estate and single-family residential loans originated for a business purpose.~~

~~Construction and land development loans. Construction and land development loans increased $4.9 million or 5.5%, to $94.3 million at September 30, 2017~~2023, as ~~compared to $89.4 million at December 31, 2016. This increase in construction and land development loans was primarily due to construction loan~~ originations ~~exceeding~~exceeded loan repayments.

The following table shows the categories of our ~~construction and land development~~C&D portfolio as of ~~September 30, 2017 and December 31, 2016:~~the dates indicated:

	As of September 30, 2017				As of December 31, 2016				As of March 31, 2024					As of December 31, 2023					Increase (Decrease)
(dollars in thousands)	$		%		$		%		$		Mix %			$		Mix %			$			%
Residential construction	$	55,048		55.1	$	47,986		53.7	$	84,161		42.5	%	$	80,341		44.2	%	$	3,820			4.8	%
Commercial construction		26,511		30.1		35,404		39.6		93,167		47.0	%		78,053		43.0	%		15,114			19.4	%
Land development		12,738		14.8		6,019		6.7		20,742		10.5	%		23,075		12.7	%		(2,333	)		(10.1	)%
Total Construction and land development loans	$	94,297		100.0	$	89,409		100.0
Total construction and land development loans									$	198,070		100.0	%	$	181,469		100.0	%	$	16,601			9.1	%

~~Small Business Administration~~SBA guaranteed loans. We are designated a Preferred Lender under the SBA Preferred Lender Program. We offer mostly SBA 7(a) variable-rate loans. We generally sell the 75% guaranteed portion of the SBA loans that we originate. Our SBA loans are typically made to small-sized manufacturing, wholesale, retail, hotel/motel and service businesses for working capital needs or business expansions. SBA loans can have any maturity up to 25 years. Typically, non-real estate secured loans mature in less than 10 years. Collateral may also include inventory, accounts receivable and equipment, and includes personal guarantees. ~~Our unguaranteed SBA loans collateralized by real estate are monitored by collateral type and are included in our CRE Concentration Guidance.~~

We originate SBA loans through our branch staff, loan officers and through SBA brokers. For the first nine months of 2017, $14.8 million or 17.5% of SBA loan originations were produced by branch staff and loan officers. The remaining $66.3 million was referred to us through SBA brokers.

As of September 30, 2017 our SBA portfolio totaled $148.0 million of which $68.7 million is guaranteed by the SBA and $79.1 million is unguaranteed, of which $75.8 million is secured by real estate and $3.3 million is unsecured or secured by business assets. We monitor the unguaranteed portfolio by type of real estate collateral. As of September 30, 2017, $44.3 million or 56.0% is secured by hotel/motels; $11.5 million or 14.6% by gas stations; and $20.0 million or 25.3% in other real estate types. We further analyze the unguaranteed portfolio by location. As of September 30, 2017, $63.3 million or 39.8% is located in California; $3.0 million or 3.5% is located in Nevada; $23.5 million or 19.4% is located in Texas; $23.3 million or 15.6% is located in Washington; and $34.7 million or 21.7% is located in other states.

SBA loans ~~decreased $11.0~~increased $2.6 million, or ~~6.9%~~5.0%, to ~~$148.0~~$54.7 million at ~~September 30, 2017~~March 31, 2024 compared to ~~$159.0~~$52.1 million at December 31, ~~2016. This decrease was primarily due to~~2023. We originated SBA loans of $8.4 million during the first three months of 2024. Offsetting these loan originations were loan sales of ~~$68.9~~$3.4 million ~~offset by $74.0~~and net loan payoffs and paydowns of $2.4 million ~~in originations in~~during the first ~~nine-months~~three months of ~~2017. In 2017,~~2024.

SFR Loans. As of March 31, 2024, we ~~began selling SBA loans quarterly, whereas previously, we primarily sold SBA loans annually in November~~had $1.5 billion of ~~each year.~~

~~Single-family residential~~SFR real estate ~~loans.~~ loans, representing 48.4% of our loans HFI portfolio. SFR real estate loans decreased $24.3 million, or 1.6%, during the first quarter of 2024 due to lower loan originations compared to net payoffs and paydowns. As of March 31, 2024, the weighted-average LTV of the portfolio was 60.0%, the weighted average FICO score was 763, and the average duration was 2.8 years. We originate ~~mainly~~qualified SFR mortgage loans and non-qualified, alternative documentation ~~single-family residential~~SFR mortgage loans through correspondent relationships ~~or through~~and retail channels, including our branch network, ~~or retail channel. The loan product is a seven-year hybrid adjustable mortgage with a current start rate of 4.6% which re-prices after seven years~~ to accommodate the ~~one-year LIBOR plus 2.75%. As of September 30, 2017, the average loan-to-value~~needs of the portfolio was 59.9%, the average FICO score was 750 and the average duration of the portfolio was 4.7 years. We also offer qualified single-family residential mortgage loans as a correspondent to a national financial institution.

~~We originate these non-qualified single-family residential mortgage loans both to sell and hold for investment.~~Asian-American market. The loans ~~held for investment~~HFI are generally originated through our retail branch network to our ~~customers, many of whom establish a deposit relationships with us. During the first nine-months of 2017, we~~customers. The qualified SFR mortgage loans are 15-year and 30-year conforming mortgages, which are generally originated ~~$113.1 million of such loans~~ through our ~~retail channel~~branch network and ~~$173.7 million through our correspondent channel.~~may be sold directly to FNMA and FHLMC. We ~~sell many of these~~originate non-qualified ~~single-family residential~~SFR mortgage loans both to ~~other Asian-American banks. While our loan sales to date have been primarily to two banks, we expect to be expanding our network of banks who will purchase our single-family loan product.~~sell and hold for investment.

~~Single-family residential real estate~~

There were $3.9 million loans ~~which include $2.2 million of home equity loans, increased $80.7 million, or 51.6%, to $237.2 million~~HFS as of ~~September 30, 2017 as~~March 31, 2024 compared to ~~$156.4~~$1.9 million loans HFS as of December 31, ~~2016. In addition,~~2023. The loans ~~held~~sold to other banks are sold with no representations or warranties and with a replacement feature for ~~sale increased $81.4 million or 183.5%~~the first 90-days if the loan pays off early. For SFR loans sold to ~~$125.7 million as of September 30, 2017 compared~~FNMA, FHLMC and to ~~$44.3 million December 31, 2016. The increase in~~investment funds we provide limited representations and warranties and with a repurchase and premium refund for loans ~~held for sale is mainly due to a decrease in selling single-family residential mortgage loans~~that become delinquent in the first ~~quarter~~90-days or a premium refund if paid-off in the first 90-days with respect to all loans sold. As a condition of ~~2017 compared to~~ the ~~same period in 2016. For~~sale, the ~~fourth quarter~~buyer must have the loans audited for underwriting and compliance standards.

Table of ~~2017 we plan to sell approximately $40 million in single-family residential mortgage loans.~~Contents

Loan Quality

We use what we believe is a comprehensive methodology to monitor credit quality and prudently manage credit concentration within our loan portfolio. Our underwriting policies and practices govern the risk profile and credit and geographic concentration for our loan portfolio. ~~We also have what we believe to be a~~Our comprehensive methodology to monitor these credit quality standards ~~including~~includes a risk classification system that identifies potential problem loans based on risk characteristics by loan type as well as the early identification of deterioration at the individual loan level. ~~In addition to our allowance for loan losses, our purchase discounts on acquired loans provide additional protections against credit losses.~~

~~Discounts on Purchased Loans.~~ At acquisition we hire a third-party to determine the fair value of loans acquired. In many of the cases fair values were determined by estimating the cash flows expected to result from those loans and discounting them at appropriate market rates. The excess of expected cash flows above the fair value of the majority of loans will be accreted to interest income over the remaining lives of the loans in accordance with FASB Accounting Standards Codification, or ASC, 310-20.

None of the loans we acquired after 2011 had evidence of deterioration of credit quality since origination for which it was probable, at acquisition, that the Company would be unable to collect all contractually required payments receivable. Loans acquired that had evidence of deterioration of credit quality since origination are referred to as PCI (“purchase credit impaired”) loans.

With our acquisitions of FAB and VCBB, we acquired $16.7 million contractual amount due with a fair value of $9.7 million of PCI loans. The outstanding balance and carrying amount of PCI loans as of September 30, 2017 and December 31, 2016 were $324,000 and $316,000 and $878,000 and $730,000, respectively. For these PCI loans, the Company did not record an allowance for loan losses for 2017 or 2016 as there were no significant reductions in the expected cash flows.

Analysis of the Allowance for Loan ~~Losses.~~ Losses

The following table allocates the ~~allowance for loan losses,~~ALL, or the allowance, by category:

									As of March 31,					As of December 31,
	As of September 30, 2017				As of December 31, 2016				2024					2023
(dollars in thousands)	$		% (1)		$		% (1)		$		% ⁽¹⁾			$		%⁽¹⁾
Loans:
Construction and land development									$	1,311		0.66	%	$	1,219		0.67	%
Commercial real estate ⁽²⁾										18,307		1.55	%		17,826		1.53	%
Single-family residential mortgages										19,878		1.36	%		20,117		1.35	%
Commercial and industrial	$	2,303		1.02	$	2,581		1.27		1,294		1.07	%		1,348		1.04	%
SBA (2)		1,059		0.72		3,345		2.10
Construction and land development		1,057		1.12		1,206		1.35
Commercial real estate (3)		3,581		0.73		5,952		1.19
Single-family residential mortgages		3,034		1.28		1,078		0.69
Unallocated		386		—		—		—
SBA										735		1.34	%		1,196		2.30	%
Other										163		1.46	%		197		1.57	%
Allowance for loan losses	$	11,420		0.95	$	14,162		1.28	$	41,688		1.38	%	$	41,903		1.38	%

(1)

~~Represents the percentage~~% of ~~the~~ allowance to total loans in the respective ~~category.~~category

(2)

~~The decrease in the allowance on SBA~~Includes non-farm and non-residential real estate loans, ~~from December 31, 2016 is attributable to the receipt of $3.6 million from the SBA as previously discussed.~~

multi-family residential and single-family residential loans originated for a business purpose.

~~(3)~~

~~Includes non-farm and non-residential real estate loans, multi-family residential and single-family residential loans originated~~

Allowance for Credit Losses

We account for ~~a business purpose.~~

~~The allowance and the balance of accretable~~ credit ~~discounts represent our~~losses on loans in accordance with ASC 326, which requires us to record an estimate of ~~probable and reasonably estimable~~expected lifetime credit losses ~~inherent~~for loans at the time of origination. The ACL for loans is maintained at a level deemed appropriate by management to provide for expected credit losses in ~~loans held for investment~~the portfolio as of the ~~respective balance sheet date. The accretable credit discount was $3.1 million at September 30, 2017. Including the non-accretable credit discount as a percentage~~date of the ~~allowance~~consolidated balance sheet. Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and ~~credit discounts~~supportable forecasts. The measurement of the ACL for loans is performed by collectively evaluating loans with similar risk characteristics. We have elected to utilize a DCF approach for all segments except consumer loans and warehouse mortgage loans, for these a remaining life approach was ~~1.2%.~~elected.

~~Allowance for loan losses.~~ Our DCF loss rate methodology ~~for assessing~~incorporates a probability of default, loss given default and exposure at default to derive expected loss within the ~~appropriateness~~CECL model, as well as expectations of future economic conditions, using reasonable and supportable forecasts. We use both internal and external qualitative factors within the CECL model including: lending policies, procedures, and strategies; changes in nature and volume of the portfolio; credit and lending personnel experience; changes in volume and trends in classified, delinquent, and nonaccrual loans; concentration risk; collateral values; regulatory and business environment; loan review results; and economic conditions. Management estimates the allowance ~~for~~balance required using past loan ~~losses includes~~loss experience from peers with similar portfolio sizes and geographic locations to the Company, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Our CECL methodology utilizes a ~~general allowance for performing loans, which are grouped based on similar characteristics,~~four-quarter reasonable and supportable forecast period, and a ~~specific allowance~~four-quarter reversion period. We are using the Federal Open Market Committee to obtain forecasts for ~~individual impaired loans or loans~~the unemployment rate, while reverting to a long-run average of each considered by management to be in a high-risk category. General allowances are established based on a number of factors, including historical loss rates, an assessment of portfolio trends and conditions, accrual status and economic ~~conditions.~~

For commercial and industrial, SBA, commercial real estate, construction and land development and single family residential mortgage loans held for investment, a specific allowance may be assigned to individual loans based on an impairment analysis. Loans are considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. The amount of impairment is based on an analysis of the most probable source of repayment, including the present value of the loan’s expected future cash flows, the estimated market value or the fair value of the underlying collateral. Interest income on impaired loans is accrued as earned, unless the loan is placed on nonaccrual status.factor.

~~Credit-discount on loans purchased through acquisition.~~ ~~Purchased loans are recorded at market value in two categories, credit discount and liquidity discount and premiums. The remaining credit discount at the end~~Table of a period is compared to the analysis for loan losses for each acquisition. If the credit discount is greater than the expected loss no additional provision is needed. The following table shows our credit discounts by loan portfolio for purchased loans only as of September 30, 2017 and December 31, 2016. We have recorded additional reserves of $221,000 due to the credit discounts on the LANB acquisitions being less than the analysis for loan losses on those acquisitions as of September 30, 2017.

As of September 30,

As of December 31,

(dollars in thousands)

2017

2016

Commercial and industrial

$
178

$
346

SBA

69

91

Construction and land development

4

61

Commercial real estate

2,818

4,516

Single-family residential mortgages

73

110

Total credit discount on purchased loans

$
3,142

$
5,124

Total remaining balance of purchased loans through
acquisition

$
267,931

$
336,310

Credit-discount to remaining balance of
purchased loans

1.17
%

1.52
%
Contents

Individual loans considered to be uncollectible are charged off against the ~~allowance.~~ACL. Factors used in determining the amount and timing of charge-offs on loans include consideration of the loan type, length of delinquency, sufficiency of collateral value, lien priority and the overall financial condition of the borrower. Collateral value is determined using updated appraisals and/or other market comparable information. Charge-offs are generally taken on loans once the impairment is determined to be ~~other-than-temporary.~~probable. Recoveries on loans previously charged off are added to the ~~allowance.~~ACL. Net charge-offs to average loans HFI were ~~(0.06)% and none~~0.02% for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016 and (0.07)% and 0.02%~~0.10% for the ~~nine~~twelve months ended ~~September 30, 2017 and 2016, respectively.~~December 31, 2023.

The ~~allowance for loan losses~~ACL was ~~$11.4~~$42.4 million at ~~September 30, 2017~~March 31, 2024 compared to ~~$14.2~~$42.5 million at December 31, ~~2016.~~2023. The ~~$2.7 million~~$184,000 decrease ~~at September 30, 2017 compared to December 31, 2016~~in the first quarter of 2024 was primarily due to ~~receipt~~net charge-offs of a guaranteed payment on a SBA 7A guaranteed loan of $629,000 in May 2017 that was previously charged-off and the receipt of $3.6 million in July 2017 pursuant to a SBA loan guaranty that we previously fully reserved for in the allowance for loan losses plus the $700,000 loan loss provision for the third quarter of 2017.

We analyze the loan portfolio, including delinquencies, concentrations, and risk characteristics, at least quarterly in order to assess the overall level of the allowance and nonaccretable discounts. We also rely on internal and external loan review procedures to further assess individual loans and loan pools, and economic data for overall industry and geographic trends.

In determining the allowance and the related provision for loan losses, we consider three principal elements: (i) valuation allowances based upon probable losses identified during the review of impaired commercial and industrial, commercial real estate, construction and land development loans, (ii) allocations, by loan classes, on loan portfolios based on historical loan loss experience and qualitative factors and (iii) review of the credit discounts in relationship to the valuation allowance calculated for purchased loans. Provisions for loan losses are charged to operations to record changes to the total allowance to a level deemed appropriate by us.$184,000.

The following table provides an analysis of the ~~allowance for loan losses,~~ACL, provision for ~~loan~~credit losses and net charge-offs for the ~~nine months ended September 30, 2017 and 2016:~~periods indicated:

	As of and for the
	Nine Months
	Ended September 30,						For the Three Months Ended March 31,
(dollars in thousands)	2017			2016			2024			2023
Balance, beginning of period	$	14,162		$	10,023		$	41,903		$	41,076
Charge-offs:
SBA		—			223
Commercial real estate								(116	)		—
Single-family residential mortgages								—			(93	)
Commercial and industrial								(3	)		—
Other								(95	)		(68	)
Total charge-offs		—			223			(214	)		(161	)
Recoveries:
Commercial and industrial								1
SBA		746			—			—			1
Other								29			3
Total recoveries		746			—			30			4
Net charge-offs		(746	)		223
Provision for (recapture of) loan losses		(3,488	)		3,599
Net (charge-offs)/recoveries								(184	)		(157	)
(Reversal of ) provision for credit losses - loans								(31	)		2,152
Balance, end of period		11,420			13,399		$	41,688		$	43,071
Total loans at end of period (1)		1,196,522			1,121,873
Average loans(2)		1,141,953			1,122,862
Net charge-offs to average loans		-0.07	%		0.02	%
Allowance for loan losses to total loans		0.95	%		1.19	%
Credit-discount on loans purchased through acquisition		3,142			6,247
Allowance for loan losses plus credit-discount to total loans		1.22	%		1.75	%

Reserve for off-balance sheet credit commitments
Balance at beginning of year							$	640		$	1,156
Reserve for (reversal of) unfunded commitments								31			(138	)
Balance at the end of period							$	671		$	1,018

Total allowance for credit losses (ACL)							$	42,359		$	44,089

Total loans HFI at end of period							$	3,027,361		$	3,342,416
Average loans HFI							$	3,017,208		$	3,342,578
Net charge-offs to average loans HFI								(0.02	%)		(0.02	%)
Allowance for loan losses to total loans HFI								1.38	%		1.29	%

~~(1)~~

~~Total loans are net of discounts and deferred fees and cost~~

~~(2)~~

~~Excludes loans held for sale~~

Problem Loans. Loans are considered delinquent when principal or interest payments are past due 30 days or more; delinquent loans may remain on accrual status between 30 days and 89 days past due. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Typically, the accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on nonaccrual loans is subsequently recognized only to the extent that cash is received and the loan’s principal balance is deemed collectible. Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is probable.

A loan is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans include loans on nonaccrual status and performing restructured loans. Income from loans on nonaccrual status is recognized to the extent cash is received and when the loan’s principal balance is deemed collectible. Depending on a particular loan’s circumstances, we measure impairment of a loan based upon either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral less estimated costs to sell if the loan is collateral dependent. A loan is considered collateral dependent when repayment of the loan is based solely on the liquidation of the collateral. Fair value, where possible, is determined by independent appraisals, typically on an annual basis. Between appraisal periods, the fair value may be adjusted based on specific events, such as if deterioration of quality of the collateral comes to our attention as part of our problem loan monitoring process, or if discussions with the borrower lead us to believe the last appraised value no longer reflects the actual market for the collateral. The impairment amount on a collateral-dependent loan is charged-off to the allowance if deemed not collectible and the impairment amount on a loan that is not collateral-dependent is set up as a specific reserve.

In cases where a borrower experiences financial difficulties and we make certain concessionary modifications to contractual terms, the loan is classified as a ~~troubled debt restructuring, or TDR.~~modified loan. These concessions may include a reduction of the interest rate, principal or accrued interest, extension of the maturity date or other actions intended to minimize potential losses. Loans restructured at a rate equal to or greater than that of a new loan with comparable risk at the time the loan is modified may be excluded from restructured loan disclosures in years subsequent to the restructuring if the loans are in compliance with their modified terms. ~~A restructured loan~~

Real estate acquired by foreclosure or deed in lieu of foreclosure is ~~considered impaired despite its accrual status and a specific reserve is calculated based on the present~~recorded at fair value ~~of expected cash flows discounted~~ at the ~~loan’s effective interest rate~~date of foreclosure, establishing a new cost basis (carrying value) by a charge to the allowance for credit losses, if necessary, or a gain recognized through noninterest income, as appropriate. Once classified as an OREO, it is subsequently carried at the ~~fair~~lower of our carrying value of the ~~collateral~~property or its fair value. Fair value is based on current appraisals less estimated ~~costs to sell if the loan is collateral dependent.~~selling costs. Any subsequent write-downs are charged against operating expenses and recognized as a valuation allowance. Operating expenses and related income of such properties and gains and losses on their disposition are included in other operating income and expenses.

Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as OREO until sold, and is carried at the balance of the loan at the time of foreclosure or at estimated fair value less estimated costs to sell, whichever is less.

The following table sets forth the allocation of our nonperforming assets among our different asset categories as of the dates indicated. Nonperforming loans include nonaccrual loans, loans past due 90 days or more and still accruing interest (of which there were none during the periods presented), and ~~loans~~ modified ~~under troubled debt restructurings. Nonperforming loans exclude PCI~~ loans. The balances of nonperforming loans reflect the net investment in these assets.

As of

As of

September 30,

December 31,

(dollars in thousands)

2017

2016

Nonperforming loans:

Commercial and industrial

$
1,293

$
—

   Construction and land development

293

303

   Commercial real estate

2,287

2,253

Total troubled debt restructures

3,873

2,556

Non-accrual loans:

   SBA

77

3,577

Total non-accrual loans

77

3,577

Total non-performing loans

3,950

6,133

Other real estate owned

293

833

Nonperforming assets

$
4,243

$
6,966

Nonperforming loans to total loans

0.33
%

0.55
%
Nonperforming assets to total assets

0.26
%

0.50
%

	As of March 31,			As of December 31,
*(dollars in thousands)*	2024			2023
Nonaccrual loans:
Commercial real estate	$	10,314		$	10,569
Single-family residential mortgages		22,806			18,103
Commercial and industrial		1,780			854
SBA		1,026			2,085
Other		9			8
Total nonaccrual loans		35,935			31,619
Total nonperforming loans		35,935			31,619
OREO		1,071			—
Nonperforming assets	$	37,006		$	31,619
Nonperforming loans to total loans HFI		1.19	%		1.04	%
Nonperforming assets to total assets		0.95	%		0.79	%
Nonperforming loans to tangible common equity and ALL		7.46	%		6.60	%
Nonperforming assets to tangible common equity and ALL		7.68	%		6.60	%

Nonperforming assets totaled $37.0 million, or 0.95% of total assets, at March 31, 2024, compared to $31.6 million, or 0.79% of total assets, at December 31, 2023. The ~~decrease~~$5.4 million increase in nonperforming ~~loans at September 30, 2017~~assets was ~~primarily~~ due to ~~receiving~~loans placed on nonaccrual status of ~~a $3.6~~$7.7 million, ~~payment on a guaranteed non-accrual SBA~~consisting primarily of SFR mortgages, and additional OREO of $1.1 million (included in “Accrued interest and other assets”), partially offset by payoffs or paydowns of $3.0 million of nonaccrual loans, loans that migrated to accruing status of $257,000, and nonaccrual loan ~~in July 2017, two loans~~charge-offs of $539,000 were paid off subsequent to September 30, 2017, and $1.7 million was returned to accrual status. We had one addition to the nonperforming loans of $1.3 million during the first nine months of 2017.$125,000.

Our 30-89 day delinquent loans, ~~decreased~~excluding nonperforming loans, increased $4.1 million to ~~$2.4~~$21.0 million as of ~~September 30, 2017. Of this amount, all have been brought current or been paid-off except for $1.7 million. Of the $1.7~~March 31, 2024 compared to $16.8 million as of December 31, 2023. The increase in past due loans was due to $19.6 million in new delinquent loans, ~~$1.4~~partially offset by $7.3 million ~~is currently~~in loans that were placed on ~~a payment plan.~~nonaccrual status, $5.9 million in loans that migrated back to past due for less than 30 days, and $2.2 million in loan payoffs or paydowns.

We did not recognize any interest income on nonaccrual loans during the ~~periods~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~December 31, 2016~~2023, while the loans were in nonaccrual status. We recognized interest income on commercial and commercial real estate loans modified under troubled debt restructurings of $348,000 and $301,000 during the periods ended September 30, 2017 and December 31, 2016, respectively.

We utilize an asset risk classification system in compliance with guidelines established by the FDIC as part of our efforts to improve asset quality. In connection with examinations of insured institutions, examiners have the authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: “substandard,” “doubtful,” and “loss.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full questionable and there is a high probability of loss based on currently existing facts, conditions and values. An asset classified as loss is not considered collectable and is of such little value that continuance as an asset is not warranted.

We use a risk grading system to categorize and determine the credit risk of our loans. Potential problem loans include loans with a risk grade of 6, which are “special mention,” loans with a risk grade of 7, which are “substandard” loans that are generally not considered to be impaired and loans with a risk grade of 8, which are “doubtful” loans generally considered to be impaired. These loans generally require more frequent loan officer contact and receipt of financial data to closely monitor borrower performance. Potential problem loans are managed and monitored regularly through a number of processes, procedures and committees, including oversight by a loan administration committee comprised of executive officers and other members of the Bank’s senior management.

~~Cash and Cash Equivalents.~~ ~~Cash and cash equivalents increased $47.3~~

The following table presents the risk categories for total loans by class of loans as of the dates indicated:

			Special
March 31, 2024	Pass		Mention		Substandard		Doubtful		Total
*(dollars in thousands)*
Real Estate:
Construction and land development	$	186,381	$	11,689	$	—	$	—	$	198,070
Commercial real estate		1,148,697		6,851		22,950		—		1,178,498
Single-family residential mortgages		1,440,007		—		23,490		—		1,463,497
Commercial:
Commercial and industrial		112,364		678		8,399		—		121,441
SBA		51,072		1,362		2,243		—		54,677
Other:		11,090		—		88		—		11,178
Total	$	2,949,611	$	20,580	$	57,170	$	—	$	3,027,361

			Special
December 31, 2023	Pass		Mention		Substandard		Doubtful		Total
*(dollars in thousands)*
Real Estate:
Construction and land development	$	169,793	$	11,676	$	—	$	—	$	181,469
Commercial real estate		1,123,887		12,599		31,371		—		1,167,857
Single-family residential mortgages		1,464,531		4,474		18,791		—		1,487,796
Commercial:										—
Commercial and industrial		119,858		2,737		7,501		—		130,096
SBA		47,397		1,356		3,321		—		52,074
Other:		12,454		—		115		—		12,569
Total	$	2,937,920	$	32,842	$	61,099	$	—	$	3,031,861

Special mention loans totaled $20.6 million, or ~~39.9%, to $166.1 million as~~0.68% of ~~September 30, 2017 as~~total loans, at March 31, 2024, compared to ~~$118.7~~$32.8 million, or 1.08% of total loans, at December 31, ~~2016. This increase~~2023. The decrease was ~~primarily~~ due to ~~$223.3~~upgrades to pass loans of $6.5 million, a downgrade to substandard loans of ~~cash from financing activities, primarily $60.2~~$3.9 million, ~~from the issuance~~and loan paydowns of ~~common stock (net of expenses), net increases in deposits of $178.6~~$2.7 million, partially offset by ~~funds used in investment activities~~additional special mention loans of ~~$155.8 million.~~$674,000.

Substandard loans totaled $57.2 million, or 1.89% of total loans, at March 31, 2024, compared to $61.1 million, or 2.02% of total loans, at December 31, 2023. The $3.9 million decrease was due to loan paydowns of $11.0 million, upgrades to pass loans of $277,000, an upgrade to special mention loans of $200,000, and substandard loan charge-offs of $125,000, partially offset by a downgrade from special mention loans of $3.9 million and additional substandard loans of $3.8 million.

Goodwill and Other Intangible Assets. Goodwill was ~~$29.9~~$71.5 million at ~~September 30, 2017~~both March 31, 2024 and December 31, ~~2016, respectively.~~2023. Goodwill represents the excess of the consideration paid over the fair value of the net assets acquired. ~~Our other~~Other intangible assets, which consist of ~~core deposit intangibles,~~CDI, were ~~$1.5~~$2.6 million and ~~$1.8~~$2.8 million at ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016, respectively.~~2023. These core deposit intangible assets are amortized primarily on an accelerated basis over their estimated useful lives, generally over a period of 3 to 10 years.

On February 17, 2016, we completed the TFC acquisition. At closing, the acquired entity primarily consisted of TomatoBank, and $5.2 million of subordinated debentures. TomatoBank provided commercial and retail banking services primarily to Asian-Americans through six branches in the metro Los Angeles area.

We acquired TFC for $86.7 million in cash. The identifiable assets acquired of $469.9 million and liabilities assumed of $409.1 million were recorded at fair value. The identifiable assets acquired included the establishment of a $1.7 million core deposit intangible, which is being amortized on an accelerated basis over 8 to 10 years. Based upon the acquisition date fair values of the net assets acquired, we recorded $25.9 million of goodwill in our consolidated balance sheet.

Liabilities. Total liabilities ~~increased $168.4~~decreased by $150.7 million to ~~$1.4~~$3.4 billion ~~or 13.9%,~~ at ~~September 30, 2017~~March 31, 2024 from $3.5 billion at December 31, ~~2016,~~2023, primarily due to ~~deposit growth.~~

~~Deposits.~~ As a ~~Chinese-American business bank that focuses on successful businesses and their owners, many of our depositors choose~~$146.4 million decrease in deposits. This decrease was due to ~~leave large~~a decrease in interest-bearing deposits ~~with us.~~as noninterest-bearing deposits remained relatively stable at $539.5 million. The ~~Bank measures core~~decrease in interest-bearing deposits ~~by reviewing all relationships over $250,000 on~~included a quarterly basis. After discussions with our regulators on the proper way to measure core deposits, we now track all deposit relationships over $250,000 on a quarterly basis and consider a relationship to be core if there are any three or more of the following: (i) relationships with us (as a director or shareholder); (ii) deposits within our market area; (iii) additional non-deposit services with us; (iv) electronic banking services with us; (v) active demand deposit account with us; (vi) deposits at market interest rates; and (vii) longevity of the relationship with us. We consider all deposit relationships under $250,000 as a core relationship except fordecrease in time deposits ~~originated through~~of $156.4 million, offset by an ~~internet service. This differs from the traditional definition~~increase in non-maturity deposits of ~~core deposits which is demand and savings deposits plus~~$10.1 million. The decrease in time deposits ~~less than $250,000. As many~~included a $208.0 million decrease in wholesale deposits.

Table of ~~our customers have more than $250,000 on deposit with us, we believe that using this method reflects a more accurate assessment~~Contents

Deposits.

The following table presents the composition of our deposit ~~base. As of September 30, 2017, the Bank considers $1.0 billion or 79.4% of our deposits~~portfolio by account type as ~~core relationships. As of September 30, 2017, our top ten deposit relationships totaled $319.5 million, of which four are related to directors and shareholders~~ of the Company for a total of $104.2 million or 32.6% of our top ten deposit relationships. As of September 30, 2017, our directors and shareholders with deposits over $250,000 totaled $194.9 million or 18.4% of all relationships over $250,000.dates indicated:

	March 31, 2024					December 31, 2023
*(dollars in thousands)*	$		%			$		%
Noninterest-bearing demand deposits:	$	539,517		17.82	%	$	539,621		17.00	%
Interest-bearing deposits:
NOW		55,095		1.82	%		57,969		1.83	%
Money market		428,505		14.15	%		412,415		12.99	%
Savings		159,240		5.26	%		162,344		5.11	%
Time deposits $250,000 and under		1,083,898		35.79	%		1,190,821		37.51	%
Time deposits over $250,000		762,074		25.16	%		811,589		25.56	%
Total interest-bearing deposits		2,488,812		82.18	%		2,635,139		83.00	%
Total deposits	$	3,028,329		100.00	%	$	3,174,760		100.00	%

The following table summarizes our average deposit balances and weighted average rates ~~at September 30, 2017 and December 31, 2016:~~for the periods presented:

	For the quarter ended				For the year ended				For the Three Months Ended					For the Year Ended
	September 30, 2017				December 31, 2016				March 31, 2024					December 31, 2023
			Weighted				Weighted				Weighted					Weighted
	Average		Average		Average		Average		Average		Average			Average		Average
(dollars in thousands)	Balance		Rate		Balance		Rate		Balance		Rate (%)			Balance		Rate (%)
Noninterest-bearing demand	$	227,854		—	$	151,441		—
Interest-bearing:
Noninterest-bearing demand deposits									$	528,346		—		$	602,291		—
Interest-bearing deposits:
NOW		19,192		0.23		18,848		0.25		58,946		2.03	%		58,191		1.25	%
Money market										411,751		3.44	%		429,102		2.46	%
Savings		36,746		0.46		34,149		0.49		157,227		1.67	%		126,062		0.73	%
Money market		314,279		0.75		252,472		0.66
Time, less than $250,000		327,926		1.18		311,071		1.07
Time, $250,000 and over		362,452		1.18		354,733		1.17
Total interest-bearing		1,060,596				971,272
Time deposits $250,000 and under										1,175,804		4.72	%		1,146,513		4.11	%
Time deposits over $250,000										785,172		4.88	%		742,839		4.00	%
Total interest-bearing deposits										2,588,900		4.32	%		2,502,707		3.56	%
Total deposits	$	1,288,450			$	1,122,713			$	3,117,246		3.59	%	$	3,104,998		2.87	%

The following table sets forth the maturity of time deposits ~~of $250,000 or more~~ as of ~~September 30, 2017:~~March 31, 2024:

As of September 30, 2017

Maturity Within:

(dollars in thousands)

Three Months

Three to Six Months

Six to 12 Months

After 12 Months

Total

Time, $250,000 and over

$
82,259

$
81,992

$
181,632

$
5,190

$
351,073

Wholesale deposits (1)

11,767

5,825

22,652

—

40,244

Total

$
94,026

$
87,817

$
204,284

$
5,190

$
391,317

	Maturity Within:
*(dollars in thousands)*	Three Months or less		After Three to Six Months		After Six to 12 Months		After 12 Months		Total
Time Deposits:
Time deposits $250,000 and under ⁽¹⁾	$	286,012	$	268,368	$	363,467	$	13,051	$	1,083,898
Time deposits over $250,000 ⁽²⁾		207,974		220,864		332,510		726		762,074
Total time deposits	$	493,986	$	489,232	$	695,977	$	13,777	$	1,845,972

	(1)	~~Wholesale~~Includes wholesale deposits ~~are defined as time~~of $187.6 million.
	(2)	Includes wholesale deposits ~~under $250,000 originated through via internet rate line and/or through other deposit originators and are considered non-core deposits.~~of $10.0 million.

The following table sets forth the estimated deposits exceeding the FDIC insurance limit:

*(dollars in thousands)*			March 31 2024				December 31 2023
Uninsured deposits		$	1,305,040			$	1,367,568

Of the $762.1 million in time deposits over $250,000, the estimated aggregate amount of time deposits in excess of the FDIC insurance limit is $566.5 million at March 31, 2024. The following table sets forth the maturity distribution of time deposits in amounts of more than $250,000 as of the date indicated.

*(dollars in thousands)*	March 31, 2024
3 months or less	$	167,492
Over 3 months through 6 months		162,706
Over 6 months through 12 months		236,039
Over 12 months		226
Total	$	566,463

We ~~acquired time~~acquire deposits through wholesale channels including brokered deposits, collateralized deposits from the State of California, and internet ~~and outside deposits originators~~listing services as needed to supplement liquidity. ~~These time deposits are primarily under $250,000 and we do not consider them core deposits.~~ The total amount of such deposits ~~as of September 30, 2017~~at March 31, 2024 was ~~$40.2~~$197.6 million ~~or 3.2% of total deposits. The balances of such deposits as of December 31, 2016 were $31.0 million. The Bank did not have any brokered deposits during any of the time periods presented.~~

~~Total deposits increased $165.5~~and $405.6 million ~~to $1.3 billion at September 30, 2017 as compared to $1.2 billion~~ at December 31, ~~2016, as we grew non-maturity deposit categories. As of September 30, 2017, total~~2023. Brokered time deposits were ~~comprised~~$153.0 million at March 31, 2024 and $254.9 million at December 31, 2023.

In addition, we offer deposit products through the Certificate of ~~22% noninterest-bearing demand accounts, 27% interest-bearing transaction accounts~~Deposit Account Registry Service (“CDARS”) and ~~51%~~Insured Cash Sweeps (“ICS”) programs where customers are able to achieve FDIC insurance for balances on deposit in excess of ~~time deposits.~~the $250,000 FDIC limit. Time deposits held through the CDARS program were $149.5 million at March 31, 2024 and $135.7 million at December 31, 2023 and ICS deposits totaled $122.2 million at March 31, 2024 and $109.2 million at December 31, 2023. The increase in the participation in these programs is due to our focus on enhancing liquidity in recent periods.

~~Short-Term~~

FHLB Borrowings. In addition to deposits, we ~~use~~have used long- and short-term borrowings, such as federal funds purchased and FHLB long-and short-term advances, as a source of funds to meet the daily liquidity needs of our customers and fund growth in earning assets. We ~~did not have any short-term borrowings as of September 30, 2017 or~~had no FHLB overnight advances at March 31, 2024 and December 31, ~~2016.~~2023. We had $150.0 million in FHLB advances at March 31, 2024 and December 31, 2023, which had an original term of five years and a maturity date in the first quarter of 2025. The ~~weighted~~ average fixed interest rate on ~~our short-term borrowings was 0.77%~~FHLB advances is 1.18%. We secured this funding in case it experienced a liquidity issue caused by the COVID-19 pandemic and ~~0.18% for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively.~~to obtain an attractive interest rate. The following table sets forth information on our ~~short-term~~total FHLB advances ~~during~~at and for the periods presented:

As of and for the

Nine Months Ended
September 30,

(dollars in thousands)

2017

2016

Outstanding at period-end

$
—

$
10,000

Average amount outstanding

$
5,128

$
5,949

Maximum amount outstanding at any month-end

$
10,000

$
20,000

Weighted average interest rate:

During period

0.77
%

0.54
%
End of period

—

0.49
%

	As of and For the Three Months Ended March 31,
*(dollars in thousands)*	2024			2023
FHLB Borrowings:
Outstanding at period-end	$	150,000		$	220,000
Average amount outstanding		150,000			229,778
Maximum amount outstanding at any month-end		150,000			220,000
Weighted average interest rate:
During period		1.18	%		2.49	%
End of period		1.18	%		2.43	%

~~Long-Term~~Long-term Debt. Long-term debt consists of subordinated notes. As of ~~September 30, 2017~~March 31, 2024, the amount of subordinated notes outstanding was ~~$49.5~~$119.2 million ~~and $49.4~~as compared to $119.1 million at December 31, ~~2016. On~~2023.

In March ~~31 and April 15, 2016,~~2021, we issued ~~$50~~$120.0 million of 4.00% fixed to floating rate subordinated notes ~~for aggregate proceeds of $49.4 million.~~due April 1, 2031 (the “2031 Subordinated Notes”). The ~~subordinated notes have a maturity date of~~interest rate is fixed through April 1, 2026 and floats at ~~a fixed rate of 6.5% for the first five years and a floating rate based on the three-month London Interbank Offered~~three month Secured Overnight Financing Rate ~~(LIBOR)~~(“SOFR”) plus ~~516~~329 basis points thereafter. We can redeem the 2031 Subordinated Notes beginning April 1, 2026. The 2031 Subordinated Notes are considered Tier 2 capital at the Company.

Subordinated Debentures. Subordinated debentures consist of subordinated debentures issued in connection with three separate trust preferred securities and totaled $15.0 million as of March 31, 2024 and $14.9 million as of December 31, 2023. Under the terms of our subordinated ~~notes and~~debentures issued in connection with the ~~related subordinated notes purchase agreements,~~issuance of trust preferred securities, we are not permitted to declare or pay any dividends on our capital stock if an event of default occurs under the terms of the ~~long term~~long-term debt. In addition, we have the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years. These subordinated debentures consist of the following and are described in detail after the table below:

~~Subordinated Debentures.~~ ~~We acquired~~


*(dollars in thousands)*	Issue Date	Principal Amount	Unamortized Valuation Reserve	Recorded Value	Stated Rate Description	March 31, 2024 Effective Rate	Stated Maturity
Subordinated debentures:
TFC Trust	December 22, 2006	$ 5,155	$ 1,166	$ 3,989	Three-month CME Term SOFR plus 0.26% (a) plus 1.65%,	7.24%	March 15, 2037
FAIC Trust	December 15, 2004	7,217	822	6,395	Three-month CME Term SOFR plus 0.26% (a) plus 2.25%	7.84%	December 15, 2034
PGBH Trust	December 15, 2004	5,155	546	4,609	Three-month CME Term SOFR plus 0.26% (a) plus 2.10%	7.69%	December 15, 2034
Total		$ 17,527	$ 2,534	$ 14,993

(a)	Represents applicable tenor spread adjustment when the original LIBOR index was discontinued on June 30, 2023.

At March 31, 2024, we were in compliance with all covenants under our long-term debt agreements.

The Company maintains the TFC Statutory Trust ("TFC Trust"), which has issued a total of $5.2 million securities ($5.0 million in capital securities and $155,000 in common securities). The TFC Trust subordinated debentures as part of the TFC acquisition (TFC Statutory Trust I) and recorded it at fair value of $3.3 million. The fair value adjustment is being accreted over the remaining life of the securities. As of September 30, 2017 and December 31, 2016, we had $3.4 million, and $3.3 million, respectively, of subordinated debentures. These debentures mature on March 15, 2037 and have a variable rate of interest equal to ~~the~~three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 1.65%, which was 7.24% as of March 31, 2024, and three-month LIBOR plus 1.65%., which was 7.30% at December 31, 2023.

~~In July 2017, British banking regulators announced plans~~

The Company maintains the First American International Statutory Trust I ("FAIC Trust"), which has issued a total of $7.2 million securities ($7.0 million in capital securities and $217,000 in common securities). The FAIC Trust subordinated debentures have a variable rate of interest equal to ~~eliminate~~three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 2.25%, which was 7.84% as of March 31, 2024, and three-month LIBOR plus 2.25%, which was 7.90% at December 31, 2023.

The Company maintains the Pacific Global Bank Trust I ("PGBH Trust"), a Delaware statutory trust formed in December 2004. PGBH Trust issued 5,000 units of fixed-to-floating rate capital securities with an aggregate liquidation amount of $5.0 million and 155 common securities with an aggregate liquidation amount of $155,000. The PGBH subordinated debentures have a variable rate of interest equal to three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 2.10%, which was 7.69% as of March 31, 2024, and three-month LIBOR ~~rate by the end~~plus 2.10%, which was 7.75% at December 31, 2023.

Table of ~~2021, before these subordinated notes and debentures mature. For these subordinated notes and debentures, there are provisions for amendments to establish a new interest rate benchmark.~~Contents

Capital Resources and Liquidity Management

Capital Resources. Shareholders’ equity is influenced primarily by earnings, dividends, sales and redemptions of common ~~stock and preferred~~ stock and changes in accumulated other comprehensive income caused primarily by fluctuations in unrealized holding gains or losses, net of taxes, on available for sale investment securities.

Shareholders’ equity increased ~~$78.7~~$2.7 million, or ~~43.4%~~0.5%, to ~~$260.3~~$514.0 million ~~during the first nine months~~as of ~~2017 as $60.2~~March 31, 2024 from $511.3 million from the July public offering, $20.6 million of net income, $268,000 of additional paid in capital and $130,000 increase in accumulated other comprehensive income exceeded $3.8 million of common dividends declared.at December 31, 2023. The increase in ~~accumulated other comprehensive income primarily resulted~~shareholders' equity for the first quarter was due to net earnings of $8.0 million and $541,000 from ~~increases in~~the exercise of stock options, partially offset by dividends paid of $3.0 million, common stock share repurchases totaling $1.5 million, and higher net after tax unrealized ~~gains~~losses on ~~available for sale securities.~~AFS securities of $1.5 million. As a result, book value per share increased to $27.67 from $27.47 and tangible book value per share increased to $23.68 from $23.48. For additional information, see "Non-GAAP Financial Measures."

On July 27, 2017, we completed our initial public offering of 3,750,000 shares at a price to the public of $23.00 per share and a total offering size of $86,250,000. The offering was originally 3,000,000 shares but due to demand, we increased it to 3,750,000 shares. RBB Bancorp sold 2,857,756 shares and the selling shareholders sold 892,244 shares of RBB Bancorp’s common stock. The offering resulted in gross proceeds to RBB Bancorp of approximately $65.7 million. RBB Bancorp contributed $25 million of the net proceeds received from this offering to the Bank. Our stock now trades on the Nasdaq Global Select Market under the symbol “RBB”. The increase to capital net of expenses is approximately $60.2 million.

Liquidity Management. Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders.

Our liquidity position is supported by management of liquid assets and liabilities and access to alternative sources of funds. Liquid assets include cash, ~~interest-earning~~interest-bearing deposits in banks, federal funds sold, available for sale securities, term federal funds, purchased receivables and maturing or prepaying balances in our securities and loan portfolios. Liquid liabilities include core deposits, federal funds purchased, securities sold under repurchase agreements and other borrowings. Other sources of liquidity include the sale of loans, the ability to acquire additional national market ~~noncore~~non-core deposits, the issuance of additional collateralized borrowings such as FHLB advances, the issuance of debt securities, additional borrowings through the Federal Reserve’s discount window and the issuance of preferred or common securities. Our short-term and long-term liquidity requirements are primarily to fund on-going operations, including payment of interest on deposits and debt, extensions of credit to borrowers, capital expenditures and shareholder dividends. These liquidity requirements are met primarily through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, debt financing and increases in customer deposits. For additional information regarding our operating, investing and financing cash flows, see the consolidated statements of cash flows provided in our consolidated financial statements.

Integral to our liquidity management is the administration of short-term borrowings. To the extent we are unable to obtain sufficient liquidity through core deposits, we seek to meet our liquidity needs through wholesale funding or other borrowings on either a short- or long-term basis.

We have sufficient capital and do not anticipate any need for additional liquidity as of March 31, 2024. As of ~~September 30, 2017 and December~~March 31, ~~2016,~~2024, we had ~~$47.0~~$92.0 million ~~and $49.0 million~~ of ~~unsecured~~ federal funds lines, ~~respectively,~~of which $80.0 million is on an unsecured basis and $12.0 million is collateralized by investment securities with fair market value of $21.1 million, with no amounts advanced against the ~~lines as~~lines. At December 31, 2023, we had $92.0 million of ~~such dates.~~unsecured fed funds line, with no advances drawn. In addition, lines of credit from the Federal Reserve Discount Window were $43.9 million at ~~September 30, 2017~~March 31, 2024 and $42.3 million at December 31, ~~2016 were $15.2 million and $15.0 million, respectively.~~2023. Federal Reserve Discount Window lines were collateralized by a pool of ~~commercial real estate~~CRE loans totaling ~~$25.3 million and $25.6~~$62.4 million as of ~~September 30, 2017~~March 31, 2024 and $62.8 million as of December 31, ~~2016, respectively.~~2023. We did not have any borrowings outstanding with the Federal Reserve at ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016~~2023, and our borrowing capacity is limited only by eligible collateral.

At ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016~~2023, we ~~did not have any~~had $150.0 million in FHLB term advances ~~outstanding.~~outstanding which mature in the first quarter of 2025. Based on the values of loans pledged as collateral, we had ~~$326.9 million and $387.3 million~~$1.0 billion of ~~additional~~secured borrowing capacity with the FHLB as of ~~September 30, 2017~~March 31, 2024 and $1.0 billion at December 31, ~~2016, respectively. We also maintain relationships in the capital markets with brokers and dealers to issue certificates of deposit.~~2023.

~~The Company~~

RBB is a corporation separate and apart from the Bank and, therefore, must provide for its own liquidity. ~~The Company’s~~RBB’s main source of funding is dividends declared and paid to usRBB by the Bank and RAM. There are statutory, regulatory and debt covenant limitations that affect the ability of the Bank to pay dividends to ~~the Company.~~RBB. Management believes that these limitations will not impact our ability to meet our ongoing short-term cash obligations. At March 31, 2024, RBB had $41.4 million in cash, of which $40.6 million was on deposit at the Bank.

Table of Contents

Regulatory Capital Requirements

We are subject to various regulatory capital requirements administered by the federal and state banking regulators. Failure to meet regulatory capital requirements may result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for “prompt corrective action” (described below), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies.

In the wake of the global financial crisis of 2008 and 2009, the role of capital has become fundamentally more important, as banking regulators have concluded that the amount and quality of capital held by banking organizations was insufficient to absorb losses during periods of severely distressed economic conditions. The Dodd-Frank Act and new banking regulations promulgated by the U.S. federal banking regulators to implement Basel III have established strengthened capital standards for banks and bank holding companies and require more capital to be held in the form of common stock. These provisions, which generally became applicable to the Company and the Bank on January 1, 2015, impose meaningfully more stringent regulatory capital requirements than those applicable to the Company and the Bank prior to that date. In addition, the Basel III regulations will implement a concept known as the “capital conservation buffer.” In general, banks and bank holding companies will be required to hold a buffer of common equity Tier 1 capital equal to 2.5% of risk-weighted assets over each minimum capital ratio to avoid being subject to limits on capital distributions (e.g., dividends, stock buybacks, etc.) and certain discretionary bonus payments to executive officers. For community banks, the capital conservation buffer requirement commenced on January 1, 2016, with a gradual phase-in. Full compliance with the capital conservation buffer will be required by January 1, 2019.

The table below summarizes the minimum capital requirements applicable to usRBB and the Bank pursuant to Basel III regulations as of the dates ~~reflected and assuming the capital conservation buffer has been fully-phased in.~~reflected. The minimum capital requirements are only regulatory minimums and banking regulators can impose higher requirements on individual institutions. For example, banks and bank holding companies experiencing internal growth or making acquisitions generally will be expected to maintain strong capital positions substantially above the minimum supervisory levels. Higher capital levels may also be required if warranted by the particular circumstances or risk profiles of individual banking organizations. The table below also summarizes the capital requirements applicable to usRBB and the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as ~~our~~RBB’s and the Bank’s capital ratios as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016. We~~2023. RBB and the Bank exceeded all regulatory capital requirements under Basel III and ~~were~~the Bank was considered to be “well-capitalized” as of the dates reflected in the table below:

	Ratio at March 31, 2024			Ratio at December 31, 2023			Regulatory Capital Ratio Requirements			Regulatory Capital Ratio Requirements			Minimum Requirement for "Well Capitalized" Depository Institution
Tier 1 Leverage Ratio
Consolidated		12.16	%		11.99	%		4.00	%		4.00	%		5.00	%
Bank		13.95	%		13.62	%		4.00	%		4.00	%		5.00	%
Common Equity Tier 1 Risk-Based Capital Ratio
Consolidated		19.10	%		19.07	%		4.50	%		7.00	%		6.50	%
Bank		22.60	%		22.41	%		4.50	%		7.00	%		6.50	%
Tier 1 Risk-Based Capital Ratio
Consolidated		19.72	%		19.69	%		6.00	%		8.50	%		8.00	%
Bank		22.60	%		22.41	%		6.00	%		8.50	%		8.00	%
Total Risk-Based Capital Ratio
Consolidated		25.91	%		25.92	%		8.00	%		10.50	%		10.00	%
Bank		23.86	%		23.67	%		8.00	%		10.50	%		10.00	%

Ratio at
September 30,
2017

Ratio at
December 31,
2016

Regulatory
Capital Ratio
Requirements

Regulatory
Capital Ratio
Requirements,
including fully
phased-in
Capital
Conservation
Buffer

Minimum
Requirement
for "Well
Capitalized"
Depository
Institution

Tier 1 Leverage Ratio

Consolidated

14.91%

11.00%

4.00%

4.00%

N/A

Bank

14.57%

12.81%

4.00%

4.00%

5.00%

Common Equity Tier 1 Risk-Based Capital Ratio (1)

Consolidated

18.23%

13.30%

4.50%

7.00%

N/A

Bank

18.13%

15.81%

4.50%

7.00%

6.50%

Tier 1 Risk-Based Capital Ratio

Consolidated

18.49%

13.56%

6.00%

8.50%

N/A

Bank

18.13%

15.81%

6.00%

8.50%

8.00%

Total Risk-Based Capital Ratio

Consolidated

23.37%

19.17%

8.00%

10.50%

N/A

Bank

19.08%

17.06%

8.00%

10.50%

10.00%

Table of Contents

~~(1)~~

~~The common equity tier 1 risk-based ratio, or CET1, is a new ratio created by the Basel III regulations beginning January 1, 2015.~~

The Basel III regulations also revise the definition of capital and describe the capital components and eligibility criteria for common equity Tier 1 capital, additional Tier 1 capital and Tier 2 capital. The most significant changes to the capital criteria are that: (i) the prior concept of unrestricted Tier 1 capital and restricted Tier 1 capital has been replaced with additional Tier 1 capital and a regulatory capital ratio that is based on common equity Tier 1 capital; and (ii) trust preferred securities and cumulative perpetual preferred stock issued after May 19, 2010 no longer qualify as Tier 1 capital. This change is already effective due to the Dodd-Frank Act, although such instruments issued prior to May 19, 2010 continue to qualify as Tier 1 capital (assuming they qualified as such under the prior regulatory capital standards), subject to the 25% of Tier 1 capital limit.Contractual Obligations

~~Contractual Obligations~~

The following table contains supplemental information regarding our total contractual obligations at ~~September 30, 2017:~~March 31, 2024:

	Payments Due										Payments Due
	Within		One to		Three to		After Five				Within		One to		Three to		After Five
(dollars in thousands)	One Year		Three Years		Five Years		Years		Total		One Year		Three Years		Five Years		Years		Total
Deposits without a stated maturity	$	649,592	$	—	$	—	$	—	$	649,592
Deposits without a stated maturity:											$	1,182,357	$	—	$	—	$	—	$	1,182,357
Time deposits		660,188		8,514		—		—		668,702		1,832,195		12,586		1,191		—		1,845,972
FHLB advances												150,000		—		—		—		150,000
Long-term debt		—		—		—		50,000		50,000		—		—		—		119,243		119,243
Subordinated debentures		—		—		—		5,155		5,155		—		—		—		14,993		14,993
Leases		410		2,104		878		130		3,522		5,137		11,390		9,672		10,101		36,300
Total contractual obligations	$	1,310,190	$	10,618	$	878	$	55,285	$	1,376,971	$	3,169,689	$	23,976	$	10,863	$	144,337	$	3,348,865

Off-Balance Sheet Arrangements

We have limited off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

In the ordinary course of business, ~~the Company enters~~we enter into financial commitments to meet the financing needs of ~~its~~our customers. These financial commitments include commitments to extend credit, unused lines of credit, commercial and similar letters of credit and standby letters of credit. Those instruments involve to varying degrees, elements of credit and interest rate risk ~~not~~in excess of the amount recognized in the ~~Company’s financial statements.~~ACL in the consolidated balance sheets. Such off-balance sheet commitments totaled $197.4 million as of March 31, 2024 and $190.7 million as of December 31, 2023.

~~The Company’s~~

Our exposure to loan loss in the event of nonperformance on these financial commitments is represented by the contractual amount of those instruments. ~~The Company uses~~We use the same credit policies in making commitments as ~~it does~~we do for loans reflected in ~~the~~our financial statements.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. ~~The Company evaluates~~We evaluate each client’s ~~credit worthiness~~creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company is based on management’s credit evaluation of the customer.

In addition, we invest in various affordable housing partnerships and Small Business Investment Company ("SBIC") funds. Pursuant to these investments, we commit to an investment amount to be fulfilled in future periods. Such unfunded commitments totaled $3.3 million as of March 31, 2024 and $3.3 million as of December 31, 2023.

Non-GAAP Financial Measures

Some of the financial measures included ~~in this Form 10-Q~~herein are not measures of financial performance recognized by GAAP. These non-GAAP financial measures include “tangible common equity to tangible assets,” “tangible book value per share,” “return on average tangible common equity,” “adjusted earnings,” “adjusted diluted earnings per share,” “adjusted return on average assets,” and “adjusted return on average tangible common equity.” Our management uses these non-GAAP financial measures in ~~its~~our analysis of our performance.

Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share. The tangible common equity to tangible assets ratio and tangible book value per share are non-GAAP measures generally used by financial analysts and investment bankers to evaluate capital adequacy. We calculate: (i) tangible common equity as total shareholders’ equity less goodwill and other intangible assets (excluding mortgage servicing rights); (ii) tangible assets as total assets less goodwill and other intangible assets; and (iii) tangible book value per share as tangible common equity divided by shares of common stock outstanding.

Table of Contents

Our management, banking regulators, many financial analysts and other investors use these measures in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, which typically stem from the use of the purchase ~~accounting~~ method of accounting for mergers and acquisitions. Tangible common equity, tangible assets, tangible book value per share and related measures should not be considered in isolation or as a substitute for total shareholders’ equity, total assets, book value per share or any other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate tangible common equity, tangible assets, tangible book value per share and any other related measures may differ from that of other companies reporting measures with similar names. The following table reconciles shareholders’ equity (on a GAAP basis) to tangible common equity and total assets (on a GAAP basis) to tangible assets, and calculates our tangible book value per share:

(dollars in thousands)	September 30, 2017			December 31, 2016			March 31, 2024			December 31, 2023
Tangible Common Equity Ratios:
Tangible common equity:
Total shareholders' equity	$	260,331		$	181,585		$	513,986		$	511,260
Adjustments
Goodwill		(29,940	)		(29,940	)		(71,498	)		(71,498	)
Core deposit intangible		(1,525	)		(1,793	)		(2,594	)		(2,795	)
Tangible common equity	$	228,866		$	149,852		$	439,894		$	436,967
Tangible assets:
Total assets-GAAP	$	1,642,714		$	1,395,551		$	3,878,006		$	4,026,025
Adjustments
Goodwill		(29,940	)		(29,940	)		(71,498	)		(71,498	)
Core deposit intangible		(1,525	)		(1,793	)		(2,594	)		(2,795	)
Tangible assets:	$	1,611,249		$	1,363,818		$	3,803,914		$	3,951,732
Common shares outstanding		15,790,611			12,827,803			18,578,132			18,609,179
Common equity to assets ratio								13.25	%		12.70	%
Book value per share							$	27.67		$	27.47
Tangible common equity to tangible assets ratio		14.20	%		10.99	%		11.56	%		11.06	%
Tangible book value per share	$	14.49		$	11.68		$	23.68		$	23.48

Return on Average Tangible Common Equity. Management measures return on average tangible common equity ~~(ROATCE)~~(“ROATCE”) to assess ~~the Company’s~~our capital strength and business performance. Tangible equity excludes goodwill and other intangible assets (excluding mortgage servicing rights), and is reviewed by banking and financial institution regulators when assessing a financial institution’s capital adequacy. This non-GAAP financial measure should not be considered a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures used by other companies. The following table reconciles return on average tangible common equity to its most comparable GAAP measure:

As of and for the

As of and for the

Three Months

Nine Months

Ended September 30,

Ended September 30,

(dollars in thousands)

2017

2016

2017

2016

Net income available to common shareholders

$
6,611

$
5,697

$
20,640

$
13,693

Average shareholder's equity

237,480

176,021

203,054

169,622

Adjustments:

Goodwill

(29,940
)

(29,940
)

(29,940
)

(29,940
)

Core deposit intangible

(1,577
)

(1,959
)

(1,665
)

(1,754
)

Adjusted average tangible common equity

$
205,964

$
144,122

$
171,449

$
137,929

Return on average tangible common equity

12.73
%

15.73
%

16.10
%

13.26
%

~~Adjusted Earnings Metrics.~~ Management uses the measure adjusted earnings to assess the performance of our core business and the strength of our capital position. We believe that this non-GAAP financial measure provides meaningful additional information about us to assist investors in evaluating our operating results. 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 adjusted earnings, adjusted diluted earnings per share, adjusted return on average assets and adjusted return on average tangible common equity to their most comparable GAAP measures:

As of and for the

As of and for the

Three Months

Nine Months

Ended September 30,

Ended September 30,

(dollars in thousands)

2017

2016

2017

2016

Adjusted earnings metrics

Income before taxes - GAAP

10,624

9,767

34,429

23,302

Adjustments to interest income

Accretion of purchase discounts

(638
)

(2,895
)

(2,584
)

(6,298
)

Provision (recapture) for loan loss

700

—

(3,488
)

2,349

Adjustments to noninterest income

Gain on sale of OREO

142

—

142

—

Gain on sale on investment securities, net

—

—

—

(19
)

Integration and acquisition expenses

—

—

14

1,944

Total adjustments to income

204

(2,895
)

(5,916
)

(2,024
)

Adjusted earnings pre-tax

10,828

6,872

28,513

21,278

Adjusted taxes

4,090

2,864

11,420

8,774

Adjusted earnings non-GAAP

6,738

4,008

17,094

12,504

Adjusted diluted EPS

$
0.43

$
0.29

$
1.17

$
0.91

Weighted average diluted common shares
outstanding

15,851,929

13,717,232

14,559,043

13,687,998

Average assets

$
1,590,388

$
1,452,032

$
1,507,940

$
1,389,806

Adjusted return on average assets

1.68
%

1.10
%

1.52
%

1.20
%

Average tangible common equity

$
205,964

$
144,122

$
171,449

$
137,929

Adjusted return on average tangible common
equity

12.98
%

11.06
%

13.33
%

12.11
%

~~Regulatory Reporting to Financial Statements~~

Some of the financial measures included in this prospectus differ from those reported on the FRB Y-9(c) report. These financial measures include “core deposits to total deposits” and “net non-core funding dependency ratio”. Our management uses these financial measures in its analysis of our performance.

~~Core Deposits to Total Deposits Ratio.~~ The Bank measures core deposits by reviewing all relationships over $250,000 on a quarterly basis. After discussions with our regulators on the proper way to measure core deposits, we now track all deposit relationships over $250,000 on a quarterly basis and consider a relationship to be core if there are any three or more of the following: (i) relationships with us (as a director or shareholder); (ii) deposits within our market area; (iii) additional non-deposit services with us; (iv) electronic banking services with us; (v) active demand deposit account with us; (vi) deposits at market interest rates; and (vii) longevity of the relationship with us. We consider all deposit relationships under $250,000 as a core relationship except for time deposits originated through an internet service. This differs from the traditional definition of core deposits which is demand and savings deposits plus time deposits less than $250,000. As many of our customers have more than $250,000 on deposit with us, we believe that using this method reflects a more accurate assessment of our deposit base. The following table reconciles the adjusted core deposit to total deposits.

As of

As of

September 30, 2017

December 31, 2016

(dollars in thousands)

Adjusted core deposit to total deposit ratio and net
   non-core funding dependency ratio:

Core deposits  (1)

$
967,219

$
781,940

Adjustments to core deposits

CD > $250,000 considered core deposits (2)

298,191

325,453

Less internet deposits < $250,000 considered
   non-core (3)

(40,244
)

(30,971
)
Less other deposits not considered core (4)

(178,325
)

(171,800
)
Adjusted core deposits

1,046,841

904,622

Total deposits

1,318,292

$
1,152,763

Adjusted core deposits to total deposits ratio

79.41
%

78.47
%

~~(1)~~

~~Core deposits comprise all demand and savings deposits of any amount plus time deposits less than $250,000.~~

~~(2)~~

~~Comprised of time deposits to core customers over $250,000 as defined in the lead-in to the table above.~~

~~(3)~~

~~Comprised of internet and outside deposit originator time deposits less than $250,000 which are not considered to be core deposits.~~

~~(4)~~

Comprised of demand and savings deposits in relationships over $250,000 which are considered non-core deposits because they do not satisfy the definition of core deposits set forth in the lead-in to the table above.

~~Net Non-Core Funding Dependency Ratio.~~ Management measures net non-core funding dependency ratio by using the data provided under “Core Deposits to Total Deposits Ratio” on page 65 to make adjustments to the traditional definition of net non-core funding dependency ratio. The traditional net non-core funding dependency ratio measures non-core funding sources less short term assets divided by total earning assets. The ratio indicates the dependency of the Company on non-core funding. The following table reconciles the adjusted net non-core dependency ratio.

As of

As of

September 30, 2017

December 31, 2016

(dollars in thousands)

Non-core deposits (1)

$
351,073

$
370,823

Adjustment to Non-core deposits

CD > $250,000 considered core deposits (2)

(298,191
)

(325,453
)
Internet deposits considered non-core (3)

40,244

30,971

Other deposits not considered core

178,325

171,800

Adjusted non-core deposits

271,451

248,141

Short term borrowings outstanding

—

—

Adjusted non-core liabilities (A)

271,451

248,141

Short term assets (4)

166,152

108,537

Adjustment to short term assets

Purchased receivables with maturities less
than 90-days

2,238

22,368

Adjusted short term assets (B)

168,390

130,905

Net non-core funding (A-B)

$
103,061

$
117,236

Total earning assets

$
1,549,266

$
1,316,651

Adjusted net non-core funding dependency ratio

6.65
%

8.90
%

~~(1)~~

~~Non-core deposits are time deposits greater than $250,000~~

~~(2)~~

~~Time deposits to core customers over $250,000~~

~~(3)~~

~~Internet and outside deposit originator time deposits less than $250,000~~

~~(4)~~

~~Short term assets include cash equivalents and investment with maturities less than one year~~

	For the Three Months Ended March 31,
*(dollars in thousands)*	2024			2023
Return on average tangible common equity:
Net income available to common shareholders	$	8,036		$	10,970
Average shareholders' equity		512,787			492,300
Adjustments:
Average goodwill		(71,498	)		(71,498	)
Average core deposit intangible		(2,726	)		(3,636	)
Adjusted average tangible common equity	$	438,563		$	417,166
Return on average tangible common equity		7.37	%		10.66	%

Table of Contents

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk.

Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. We have identified ~~two~~three primary sources of market risk: interest rate risk, price risk and ~~price~~basis risk.

Interest Rate ~~Risk~~

~~Overview.~~ Risk.Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the ~~repricings~~repricing and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay residential mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and ~~LIBOR~~SOFR (basis risk).

Price Risk. Price risk represents the risk of loss arising from adverse movements in the prices of financial instruments that are carried at fair value and subject to fair value accounting. We have price risk from the available for sale SFR mortgage loans and fixed-rate available for sale securities.

Basis Risk. Basis risk represents the risk of loss arising from asset and liability pricing movements not changing in the same direction. We have basis risk in the SFR mortgage loan portfolio, the multifamily loan portfolio and our securities portfolio.

Our ~~asset liability committee, or~~ ALCO establishes broad policy limits with respect to interest rate risk. The ALCO establishes specific operating guidelines within the parameters of the board of directors’ policies. In general, we seek to minimize the impact of changing interest rates on net interest income and the economic values of assets and liabilities. ~~Our~~The ALCO ~~meets monthly to monitor~~monitors the level of interest rate risk sensitivity to ensure compliance with the board of directors’ approved risk ~~limits.~~limits and to oversee management's balance sheet risk management strategies.

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.

An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on ~~our~~ interest-earning assets would reprice upward more quickly than rates paid on ~~our~~ interest-bearing liabilities, thus expanding ~~our~~the net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on ~~our~~ interest-bearing liabilities would reprice upward more quickly than rates earned on ~~our~~ interest-earning assets, thus compressing ~~our~~the net interest margin.

Income Simulation and Economic Value Analysis.Interest rate risk measurement is calculated and reported to the board and the ALCO at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.

We use two approaches to model interest rate risk: Net Interest Income at Risk ~~or NII~~(NII at ~~Risk,~~Risk), and Economic Value of Equity ~~or EVE.~~(“EVE”). Under NII at Risk, net interest income is modeled utilizing various assumptions for assets, liabilities, and ~~derivatives.~~derivatives over a 12 month time horizon assuming a flat balance sheet and an instantaneous and parallel shift in market interest rates in 100 basis point increments. We report NII at Risk to isolate the change in income related solely to interest-earning assets and interest-bearing liabilities. The model results do not take into consideration any steps management might take to respond to the changes in interest rates or changes in competitor or customer behavior. EVE measures the period end market value of assets minus the market value of liabilities and the change in this value as rates change. EVE is a period end measurement.

	Net Interest Income Sensitivity									Net Interest Income Sensitivity
	Immediate Change in Rates									Immediate Change in Rates
(dollars in thousands)	-100			100			200				-300			-200			-100		+100			+200			+300
September 30, 2017
March 31, 2024
Dollar change	$	(1,947	)	$	4,432		$	9,317		$	9,640		$	5,982		$	2,606		$	1,032		$	1,376		$	1,958
Percent change		-3.44	%		7.84	%		16.47	%		9.1	%		5.7	%		2.5	%		1.0	%		1.3	%		1.9	%
December 31, 2016:
December 31, 2023
Dollar change		650			3,315			7,813		$	11,086		$	6,553		$	2,545		$	470		$	50		$	(455	)
Percent change		1.30	%		6.61	%		15.58	%		10.5	%		6.2	%		2.4	%		0.4	%		0.1	%		(0.4	)%

~~We report~~As of March 31, 2024, our NII at Risk ~~to isolate~~profile is liability sensitive in the ~~change~~down rate scenarios and generally neutral in ~~income related solely to interest earning assets and interest- bearing liabilities.~~the up rate scenarios. This is directionally consistent with our profile at December 31, 2023. The NII at Risk results included in the table above reflect the analysis used quarterly by management. It models gradual -100, +100 and +200 basis point parallel shifts in market interest rates, implied by the forward yield curve over the next one-year period. Due to the current low level of short-term interest rates, the analysis reflects a declining interest rate scenario of 100 basis points, the point at which many assets and liabilities reach zero percent.

We are within board policy ~~limits for~~limits. Actual results could vary materially from those calculated by our model, due to a variety of factors or assumptions such as the ~~+/-100~~uncertainty of the magnitude, timing and ~~+200 basis point scenarios. The NII at Risk reported at September 30, 2017, projects that our earnings are expected to be materially sensitive to changes in~~direction of future interest ~~rates over~~rate movement or the ~~next year. In recent periods,~~shape of the ~~amount of fixed rate assets increased resulting in a position shift from slightly asset sensitive to asset sensitive.~~yield curve.

Economic Value of Equity Sensitivity (Shock)

Immediate Change in Rates

(dollars in thousands)

-100

100

200

September 30, 2017

Dollar change

$
(33,612
)

$
11,571

$
19,375

Percent change

-12.78
%

4.40
%

7.37
%
December 31, 2016:

Dollar change

(23,016
)

13,611

20,980

Percent change

-9.60
%

5.70
%

8.80
%

Table of Contents

	Economic Value of Equity Sensitivity (Shock)
	Immediate Change in Rates
*(dollars in thousands)*		-300			-200			-100		+100			+200			+300
March 31, 2024
Dollar change	$	(69,169	)	$	(37,622	)	$	(13,447	)	$	(18,303	)	$	(49,462	)	$	(90,129	)
Percent change		(10.6	)%		(5.8	)%		(2.1	)%		(2.8	)%		(7.6	)%		(13.8	)%
December 31, 2023
Dollar change	$	(26,488	)	$	(7,430	)	$	4,856		$	(28,251	)	$	(69,646	)	$	(111,281	)
Percent change		(4.8	%)		(1.3	%)		0.9	%		(5.1	%)		(12.6	%)		(20.1	)%

The EVE ~~results included in~~at March 31, 2024 indicates that the table above reflect the analysis used quarterly by management. It models immediate -100, +100 and +200 basis point parallel shifts in market interest rates. Due to the current low level of short-term interest rates, the analysis reflects a declining interest rate scenario of 100 basis points, the point at which many assets and liabilities reach zero percent.

~~We are within board policy limits for the +/-100 and +200 basis point scenarios. The~~ EVE ~~reported at September 30, 2017 projects that as interest rates increase immediately, the economic value of equity~~ position ~~will be~~is expected to ~~increase.~~decrease in both the up and down rate scenarios. When interest rates rise, fixed rate assets generally lose economic ~~value;~~value as these assets are discounted at a higher rate demonstrating that the longer ~~the~~ duration ~~the~~assets result in greater ~~the~~ value to be lost. ~~The~~When interest rates fall, the opposite is true, ~~when interest rates fall.~~

~~Price Risk.~~ ~~Price risk represents the risk of loss arising from adverse movements~~however these positives are offset by a decrease in the ~~prices~~value of ~~financial instruments that~~floating rate assets as well as the value of noninterest-bearing deposits. Noninterest-bearing deposits have a lower value in lower interest rate environments. Actual results could vary materially from those calculated by our model, due to a variety of factors or assumptions such as the uncertainty of the magnitude, timing and direction of future interest rate movement or the shape of the yield curve. The EVE results are ~~carried at fair value and subject to fair value accounting. We have price risk from our available for sale single-family residential mortgage loans and our fixed-rate available for sale securities.~~within board policy limits.

~~Basis Risk.~~ Basis risk represents the risk of loss arising from asset and liability pricing movements not changing in the same direction. We have basis risk in our single-family residential mortgage loan portfolio and our securities portfolio.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of ~~disclosure controls~~Disclosure Controls and ~~procedures.~~Procedures.

The Company’s management, including our ~~President~~principal executive officer and ~~Chief Executive Officer and our Chief Financial Officer,~~principal financial officer, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the ~~Securities~~ Exchange ~~Act of 1934, as amended (the “Exchange Act”))~~Act), as of the end of the period covered by this ~~report.~~Quarterly Report. Based on ~~such~~this evaluation, our ~~President~~principal executive officer and ~~Chief Executive Officer and our Chief Financial Officer~~principal financial officer have concluded that, as of ~~the end of such period, the Company’s~~March 31, 2024, our disclosure controls and procedures were ~~effective as~~effective.

Table of ~~that date~~Contents

Remediation Efforts.

During the quarter ended March 31, 2024, we fully remediated the internal control weaknesses related to ~~provide reasonable assurance that the information required~~our control environment and infrequent transactions. We believe we have demonstrated our commitment to ~~be disclosed by the Company~~attracting, developing and retaining competent individuals in the ~~reports it files~~area of internal controls over financial reporting with respect to strengthening our control environment. We believe we have designed and implemented controls to ensure unusual or ~~submits under~~infrequent transactions are evaluated completely and timely for the ~~Exchange Act is recorded, processed, summarized~~proper accounting treatment and ~~reported within the time periods specified in the rules~~financial statement disclosure. These material weaknesses are considered remediated and ~~forms of the SEC and~~management has concluded, through testing, that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer and its Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.these controls are operating effectively.

Changes in ~~internal control over financial reporting.~~ ~~There~~Internal Controls Over Financial Reporting.

Other than described above, during the most recent quarter ended March 31, 2024, there have not been any changes in the Company’s internal ~~control~~controls over financial reporting, ~~(as~~as such term is defined in Rule 13a-15(f) under the Exchange ~~Act) during the fiscal quarter to which this report relates~~Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal ~~control~~controls over financial reporting.

Table of Contents

PART II - ~~OTHE~~ROTHER INFORMATION

ITEM1.

LEGAL PROCEEDINGS

~~Certain lawsuits and claims arising~~

There are no material pending legal proceedings, other than ordinary routine litigation incidental to our business. Management believes that none of the legal proceedings occurring in the ordinary course of business, ~~have been filed~~individually or are pending against us or our affiliates, including but not limited to actions involving federal and state securities law claims, employment, wage-hour and labor law claims, lender liability claims, trust and estate administration claims, and consumer and privacy claims, some of which may be styled as “class action” or representative cases. Where appropriate, we establish reserves in accordance with FASB guidance over loss contingencies (ASC 450). The outcome of litigation and other legal and regulatory matters is inherently uncertain, however, and it is possible that one or more of the ~~legal or regulatory matters currently pending or threatened could~~aggregate, will have a material adverse ~~effect~~impact on ~~our liquidity, consolidated financial position, and/or~~the results of ~~operations. As~~operations or financial condition of ~~June 30, 2017,~~ the ~~Company does not have any litigation reserves.~~Company.

ITEM1A.

RISK FACTORS

There have been no material changes to the risk factors as previously disclosed in ~~Item 1A to~~ Part I, Item 1A. "Risk Factors" of our ~~consolidated audited financial statements included in our registration statement on Form S-1 filed with the SEC, for the year ended December 31, 2016.~~2023 Annual Report. The materiality of any risks and uncertainties identified in our Forward Looking Statements contained in this ~~report~~Report or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations and cash flows. See Part I, Item 2 for ~~“Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations” in this ~~Quarterly Report on Form 10-Q.~~Report.

ITEM2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF ~~EQUITY SECURITIES AND USE OF~~ PROCEEDS

On February 29, 2024 the Board of Directors approved a stock repurchase program to buy back up to an aggregate of 1,000,000 shares of Company common stock. We repurchased 80,285 shares for $1.5 million of our outstanding common stock during the first quarter of 2024 and as of March 31, 2024. There are 956,465 shares remaining under an authorized repurchase program.

	Issuer Purchases of Equity Securities
	(a)		(b)		(c)		(d)
Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan		Maximum Number of Shares that May Yet Be Purchased Under the Plan
January 1, 2024 to January 31, 2024		36,636	$	19.49		36,636		114
February 1, 2024 to February 39, 2024		—	$	—		—		114
March 1, 2024 to March 31, 2024		43,649	$	17.47		43,649		956,465
Total		80,285	$	18.39		43,649		956,465

~~Not Applicable~~

ITEM3.

DEFAULTS UPON SENIOR SECURITIES

None.

~~Not Applicable~~

ITEM4.

MINE SAFETY DISCLOSURES

Not ~~Applicable~~applicable.

ITEM5.

OTHER INFORMATION

~~None~~

Rule 10b5-1 Trading Plans

During the quarter ended March 31, 2024, no officer or director of the Company adopted or terminated any contract, instruction, or written plan for the purchase or sale of securities of our common stock that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement as defined in 17 CFR§ 229.408(c).

~~ITEM~~6.

~~EXHIBITS~~

Table of Contents

ITEM 6.

EXHIBITS

ExhibitNo.		Description ofExhibits

3.1		Articles of Incorporation of RBB Bancorp⁽¹⁾

3.2		Bylaws of RBB Bancorp⁽²⁾

3.3		Amendment to Bylaws of RBB Bancorp⁽⁴⁾

4.1		Specimen Common Stock Certificate of RBB Bancorp⁽³⁾

		~~Description~~The other instruments defining the rights of ~~Exhibits~~holders of the long-term debt securities of the Company and its subsidiaries are omitted pursuant to section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Company hereby agrees to furnish copies of these instruments to the SEC upon request.

10.1		RBB Bancorp 2017 Omnibus Stock Incentive Plan Form of Performance Share Award Agreement

10.2		Third Amendment of Employment Agreement, effective as of March 25, 2024, between RBB Bancorp, Royal Business Bank and Mr. David Morris⁽⁵⁾

10.3		Second Amendment of Employment Agreement, effective as of March 25, 2024, between RBB Bancorp, Royal Business Bank and Mr. Jeffrey Yeh⁽⁶⁾

10.4		Second Amendment of Employment Agreement, effective as of March 25, 2024, between RBB Bancorp, Royal Business Bank and Mr. I-Ming (Vincent) Liu⁽⁷⁾

10.5		First Amendment of Employment Agreement, effective as of March 25, 2024, between RBB Bancorp, Royal Business Bank and Mr. Gary Fan⁽⁸⁾

10.6		Employment Agreement, effective as of April 22, 2024, between RBB Bancorp, Royal Business Bank and Ms. Lynn M. Hopkins⁽⁹⁾

31.1		CertificationofChiefExecutiveOfficerpursuanttoSection302oftheSarbanes-OxleyActof2002

31.2		CertificationofChiefFinancialOfficerpursuanttoSection302oftheSarbanes-OxleyActof2002

32.1		CertificationofChiefExecutiveOfficerpursuanttoSection906oftheSarbanes-OxleyActof2002

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		The cover page of RBB Bancorp’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL (contained in Exhibit 101)

(1)	Incorporated by reference from Exhibit 3.1 of the Registrant’s Registration Statement in Form S-1 filed with the SEC on June 28, 2017.

(2)	Incorporated by reference from Exhibit 3.2 of the Registrant’s Registration Statement in Form S-1 filed with the SEC on June 28, 2017.

(3)	Incorporated by reference from Exhibit 4.1 of the Registrant’s Registration Statement in Form S-1 filed with the SEC on June 28, 2017.

(4)	Incorporated by reference from Exhibit 3.3 of the Registrant’s Quarterly Report in Form 10-Q filed with the SEC on November 13, 2018.

(5)	Incorporated by reference from Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on March, 29, 2024.

(6)	Incorporated by reference from Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on March, 29, 2024.

(7)	Incorporated by reference from Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed with the SEC on March, 29, 2024.

(8)	Incorporated by reference from Exhibit 10.4 of the Registrant’s Current Report on Form 8-K filed with the SEC on March, 29, 2024.

(9)	Incorporated by reference from Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on April 22, 2024.

Table of Contents

~~SIGNATURES~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		RBB BANCORP
		(Registrant)

Date: ~~November 13, 2017~~May 9, 2024		/s/ David Morris
		David Morris ~~Duly Authorized~~Chief Executive Officer

Date: May 9, 2024		/s/ Lynn Hopkins
		Lynn Hopkins Executive Vice President, ~~and~~ Chief Financial Officer

1055Wilshire Blvd., Suite 1200,
~~660 S. Figueroa Street, Suite 1888~~
Los Angeles, California	90017

Title of each class		Trading Symbol(s)		Name of exchange on which registered
Common Stock, No Par Value		RBB		NASDAQ Global Select Market

PART I – FINANCIAL INFORMATION (UNAUDITED)			3
~~PART I – FINANCIAL INFORMATION (UNAUDITED)~~ITEM 1.	3

~~ITEM 1.~~	CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	3

	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	98

ITEM 2.	~~MANAGEMENT’S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3230
	CRITICAL ACCOUNTING POLICIES		31
	OVERVIEW	~~CRITICAL ACCOUNTING POLICIES~~33	34

	~~OVERVIEW~~	34

	ANALYSIS OF THE RESULTS OF OPERATIONS	3634

	ANALYSIS OF FINANCIAL CONDITION	4941

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	68

~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~57	69

ITEM 4.	CONTROLS AND PROCEDURES	58
PART II - OTHER INFORMATION		7060
ITEM 1.	LEGAL PROCEEDINGS	60
ITEM 1.1A.	~~LEGAL PROCEEDINGS~~RISK FACTORS	7060

ITEM ~~1A.~~2.	~~RISK FACTORS~~	70

~~ITEM 2.~~	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	7060

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	70

~~ITEM 4.~~	~~MINE SAFETY DISCLOSURES~~60	70

~~ITEM 5.~~	~~OTHER INFORMATION~~	70

~~ITEM 6.~~	~~EXHIBITS~~	70

~~SIGNATURES~~ITEM 4.	MINE SAFETY DISCLOSURES	7160
ITEM 5.	OTHER INFORMATION	60
ITEM 6.	EXHIBITS	61
SIGNATURES		62

							(Unaudited)
	September 30,			December 31,			March 31,			December 31,
	2017			2016			2024			2023
Assets
Cash and due from banks	$	69,552		$	74,213		$	269,243		$	431,373
Federal funds sold and other cash equivalents		96,500			44,500
Cash and cash equivalents		166,052			118,713

Interest-earning deposits in other financial institutions		100			345			600			600

Securities:
Available for sale		55,697			39,277			335,194			318,961
Held to maturity (fair value of $5,485 and $6,553 at September 30, 2017 and December 31, 2016, respectively)		5,191			6,214
Held to maturity (fair value of $5,047 and $5,097 at March 31, 2024 and December 31, 2023)								5,204			5,209
Mortgage loans held for sale		125,704			44,345			3,903			1,911
Loans held for investment								3,026,887			3,031,319
Unaccreted discount on acquired loans								(921	)		(970	)
Deferred loan costs, net								1,395			1,512
Total loans held for investment, net of deferred loan costs and unaccreted discounts on acquired loans								3,027,361			3,031,861
Allowance for loan losses								(41,688	)		(41,903	)
Total loans held for investment, net								2,985,673			2,989,958

Loans held for investment:
Real estate		827,535			755,301
Commercial		372,531			361,227
Total loans		1,200,066			1,116,528
Unaccreted discount on acquired loans		(5,501	)		(8,085	)
Deferred loan costs (fees), net		1,957			2,003
		1,196,522			1,110,446
Allowance for loan losses		(11,420	)		(14,162	)
Net loans		1,185,102			1,096,284

Premises and equipment		6,300			6,585
Premises and equipment, net								25,363			25,684
Federal Home Loan Bank (FHLB) stock		6,770			6,770			15,000			15,000
Net deferred tax assets		9,517			11,097			16,554			15,765
Other real estate owned (OREO)		293			833
Cash surrender value of life insurance		32,578			21,958
Cash surrender value of bank owned life insurance (BOLI)								59,101			58,719
Goodwill		29,940			29,940			71,498			71,498
Servicing assets		5,370			3,704			7,794			8,110
Core deposit intangibles		1,525			1,793			2,594			2,795
Right-of-use assets- operating leases								31,231			29,803
Accrued interest and other assets		12,575			7,693			49,054			50,639
Total assets							$	3,878,006		$	4,026,025
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing demand							$	539,517		$	539,621
Savings, NOW and money market accounts								642,840			632,729
Time deposits $250,000 and under								1,083,898			1,190,821
Time deposits over $250,000								762,074			811,589
Total deposits								3,028,329			3,174,760
	$	1,642,714		$	1,395,551
Reserve for unfunded commitments								671			640
FHLB advances								150,000			150,000
Long-term debt, net of issuance costs								119,243			119,147
Subordinated debentures, net								14,993			14,938
Lease liabilities - operating leases								32,690			31,191
Accrued interest and other liabilities								18,094			24,089
Total liabilities								3,364,020			3,514,765

Commitments and contingencies - Note 12

Shareholders' equity:
Preferred Stock - 100,000,000 shares authorized, no par value; none outstanding								—			—
Common Stock - 100,000,000 shares authorized, no par value; 18,578,132 shares issued and outstanding at March 31, 2024 and 18,609,179 shares issued and outstanding at December 31, 2023								271,645			271,925
Additional paid-in capital								3,348			3,623
Retained earnings								259,903			255,152
Non-controlling interest								72			72
Accumulated other comprehensive loss, net								(20,982	)		(19,512	)
Total shareholders’ equity								513,986			511,260
Total liabilities and shareholders’ equity							$	3,878,006		$	4,026,025

Liabilities and Shareholders’ Equity
	September 30,			December 31,
	2017			2016
Deposits:
Noninterest-bearing demand	$	287,574		$	174,272
Savings, NOW and money market accounts		362,018			296,699
Time deposits under $250,000		317,627			310,969
Time deposits $250,000 and over		351,073			370,823
Total deposits		1,318,292			1,152,763

Reserve for unfunded commitments		489			604
Income tax payable		—			793
Long-term debt		49,492			49,383
Subordinated debentures		3,402			3,334
Accrued interest and other liabilities		10,708			7,089
Total liabilities		1,382,383			1,213,966

Commitments and contingencies - Note 13		—			—

Shareholders' equity:
Preferred Stock - 100,000,000 shares authorized, no par value; none outstanding		—			—
Common Stock - 100,000,000 shares authorized, no par value; 15,790,611 shares issued and outstanding at September 30, 2017 and 12,827,803 shares at December 31,2016		204,206			142,651
Additional paid-in capital		8,686			8,417
Retained earnings		47,576			30,784
Accumulated other comprehensive income (loss) - net unrealized loss on securities available for sale, net of tax of $95 at September 30, 2017 and $186 at December 31, 2016		(137	)		(267	)
Total shareholders’ equity		260,331			181,585
	$	1,642,714		$	1,395,551

	Three Months Ended				Nine Months Ended
	September 30,				September 30,					*Three Months Ended*
	2017		2016		2017			2016		*March 31, 2024*		*December 31, 2023*			*March 31, 2023*
Interest and dividend income:
Interest and fees on loans	$	17,200	$	18,169	$	49,992		$	50,042	$	45,547	$	45,895		$	49,942
Interest on interest-earning deposits		371		80		731			236		5,040		4,650			791
Interest on investment securities		331		203		922			620		3,611		3,706			2,536
Dividend income on FHLB stock		118		155		353			416		331		312			265
Interest on federal funds sold and other		326		92		628			159		266		269			217
Total interest income		18,346		18,699		52,626			51,473
Total interest and dividend income											54,795		54,832			53,751
Interest expense:
Interest on savings deposits, now and money market accounts		649		521		1,698			1,489
Interest on savings deposits, NOW and money market accounts											4,478		4,026			2,296
Interest on time deposits		2,061		1,801		5,903			5,144		23,322		22,413			13,406
Interest on subordinated debentures and other		908		903		2,720			1,824
Interest on long-term debt and subordinated debentures											1,679		2,284			2,539
Interest on other borrowed funds		—		16		29			24		439		440			1,409
Total interest expense		3,618		3,241		10,350			8,481		29,918		29,163			19,650
Net interest income		14,728		15,458		42,276			42,992
Provision (recapture) for credit losses		700		1,250		(3,488	)		3,599

Net interest income after provision (recapture) for credit losses		14,028		14,208		45,764			39,393
Net interest income before provision/(reversal) for credit losses											24,877		25,669			34,101
Provision/(reversal) for credit losses											—		(431	)		2,014
Net interest income after provision/(reversal) for credit losses											24,877		26,100			32,087
Noninterest income:
Service charges, fees and other		518		443		1,624			1,182
Service charges and fees											992		972			1,023
Gain on sale of loans		2,584		1,870		6,370			4,136		312		116			29
Loan servicing fees, net of amortization		314		95		571			384		589		616			731
Recoveries on loans acquired in business combinations		19		47		76			139
Increase in cash surrender value of life insurance		219		141		620			423		382		374			335
Gain on sale of securities		—		—		—			19
Gain on sale of OREO		142		—		142			—
		3,796		2,596		9,403			6,283
Gain/(loss) on other real estate owned											724		(57	)		—
Other income											373		5,373			244
Total noninterest income											3,372		7,394			2,362
Noninterest expense:
Salaries and employee benefits		4,178		3,481		12,604			10,547		9,927		8,860			9,864
Occupancy and equipment expenses		705		766		2,176			2,388		2,443		2,387			2,398
Data processing		458		563		1,264			1,488		1,420		1,357			1,299
Legal and professional		318		511		227			1,478		880		1,291			3,013
Office expenses		153		153		484			455		356		349			375
Marketing and business promotion		250		102		575			408		172		241			300
Insurance and regulatory assessments		201		284		611			810		982		1,122			504
Amortization of intangibles		87		103		268			268
OREO expenses		6		6		34			16
Core deposit premium											201		215			237
Other expenses		844		1,068		2,495			4,516		588		571			921
		7,200		7,037		20,738			22,374
Income before income taxes		10,624		9,767		34,429			23,302
Total noninterest expense											16,969		16,393			18,911
Net income before income taxes											11,280		17,101			15,538
Income tax expense		4,013		4,070		13,789			9,609		3,244		5,028			4,568
Net income	$	6,611	$	5,697	$	20,640		$	13,693	$	8,036	$	12,073		$	10,970

Net income per share
Basic	$	0.45	$	0.44	$	1.53		$	1.07	$	0.43	$	0.64		$	0.58
Diluted	$	0.42	$	0.42	$	1.42		$	1.00		0.43		0.64			0.58
Cash dividends declared per common share	$	—	$	—	$	0.30		$	0.20

Weighted-average common shares outstanding
Basic											18,601,277		18,887,501			18,985,846
Diluted											18,666,683		18,900,351			19,049,685

											Accumulated
					Additional						Other
	Common Stock				Paid-in			Retained			Comprehensive
	Shares		Amount		Capital			Earnings			Income (Loss)			Total
Balance at January 1, 2017		12,827,803	$	142,651	$	8,417		$	30,784		$	(267	)	$	181,585
Net income									20,640						20,640
Stock-based compensation						592									592
Cash dividend									(3,848	)					(3,848	)
Stock options exercised		105,052		1,338		(323	)								1,015
Issuance of common stock, net of issuance costs		2,857,756		60,217											60,217
Other comprehensive income, net of taxes												130			130
Balance at September 30, 2017		15,790,611	$	204,206	$	8,686		$	47,576		$	(137	)	$	260,331

Balance at January 1, 2016		12,770,571	$	141,873	$	7,706		$	14,259		$	(193	)	$	163,645
Net income									13,693						13,693
Stock-based compensation						646									646
Cash dividend									(2,554	)					(2,554	)
Stock options exercised		57,232		778		(183	)								595
Other comprehensive income, net of taxes												408			408
Balance at September 30, 2016		12,827,803	$	142,651	$	8,169		$	25,398		$	215		$	176,433

	*Common Stock*														*Accumulated*
	*Shares*			*Amount*			*Additional Paid-in Capital*			*Retained Earnings*			*Non- Controlling Interest*		*Other Comprehensive (Loss)/income, net*			*Total*
Balance at January 1, 2024		18,609,179		$	271,925		$	3,623		$	255,152		$	72	$	(19,512	)	$	511,260
Net income		—			—			—			8,036			—		—			8,036
Stock-based compensation, net		—			—			140			—			—		—			140
Restricted stock units vested		8,238			145			(209	)		—			—		—			(64	)
Cash dividends on common stock ($0.16 per share)		—			—			—			(2,976	)		—		—			(2,976	)
Stock options exercised		41,000			747			(206	)		—			—		—			541
Repurchase of common stock		(80,285	)		(1,172	)		—			(309	)		—		—			(1,481	)
Other comprehensive loss, net of taxes		—			—			—			—			—		(1,470	)		(1,470	)
Balance at March 31, 2024		18,578,132		$	271,645		$	3,348		$	259,903		$	72	$	(20,982	)	$	513,986

Balance at January 1, 2023		18,965,776		$	276,912		$	3,361		$	225,883		$	72	$	(21,665	)	$	484,563
Net income		—			—			—			10,970			—		—			10,970
Stock-based compensation, net		—			—			316			—			—		—			316
Restricted stock units vested		17,974			361			(361	)		—			—		—			—
Cash dividends on common stock ($0.16 per share)		—			—			—			(3,038	)		—		—			(3,038	)
Stock options exercised		9,153			205			(46	)		—			—		—			159
Other comprehensive income, net of taxes		—			—			—			—			—		1,787			1,787
Balance at March 31, 2023		18,992,903		$	277,478		$	3,270		$	233,815		$	72	$	(19,878	)	$	494,757

	*Three Months Ended*
	*March 31,*
	*2024*			*2023*
Operating activities
Net income	$	8,036		$	10,970
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization of premises and equipment		479			504
Net accretion of securities, loans, deposits, and other		(1,430	)		(629	)
Amortization of investment in affordable housing tax credits		301			282
Amortization of intangible assets		597			609
Amortization of right-of-use asset		1,251			1,280
Change in operating lease liabilities		(1,180	)		(1,209	)
Provision for credit losses		—			2,014
Stock-based compensation		140			316
Deferred tax benefit		(174	)		(293	)
Gain on sale of loans		(312	)		(29	)
Gain on sale and transfer of OREO		(724	)		—
Increase in cash surrender value of life insurance		(382	)		(335	)
Loans originated and purchased for sale, net		(7,252	)		(831	)
Proceeds from loans sold		9,077			991
Other items		(3,578	)		3,178
Net cash provided by operating activities		4,849			16,818
Investing activities
Securities available for sale:
Purchases		(113,293	)		(87,070	)
Maturities, repayments and calls		96,082			53,838
Purchase of other equity securities, net		(71	)		(222	)
Net increase of investment in qualified affordable housing projects		—			(24	)
Net increase in loans		(674	)		(6,124	)
Proceeds from sales of OREO		1,573			—
Purchases of premises and equipment		(149	)		(524	)
Net cash used in investing activities		(16,532	)		(40,126	)
Financing activities
Net increase (decrease) in demand deposits and savings accounts		10,007			(124,803	)
Net (decrease) increase in time deposits		(156,474	)		298,145
Proceeds from FHLB advances		—			80,000
Repayments of FHLB Advances		—			(80,000	)
Cash dividends paid		(2,976	)		(3,038	)
Restricted stock units vesting		(64	)		—
Common stock repurchased, net of repurchased costs		(1,481	)		—
Exercise of stock options		541			159
Net cash (used in) provided by financing activities		(150,447	)		170,463
Net (decrease) increase in cash and cash equivalents		(162,130	)		147,155
Cash and cash equivalents at beginning of period		431,373			83,548
Cash and cash equivalents at end of period	$	269,243		$	230,703
Supplemental disclosure of cash flow information
Cash paid during the period:
Interest paid	$	35,300		$	18,700
Taxes paid (refund)		—			(46	)
Non-cash investing and financing activities:
Transfer from loans to other real estate owned		1,920			—
Loans transfer to held for sale, net		3,505			132
Additions to servicing assets		80			10
Net change in unrealized holding gain on securities available for sale		(2,085	)		2,577
Recognition of operating lease right-of-use assets		(2,679	)		(5,764	)
Recognition of operating lease liabilities		2,679			5,764

			Gross		Gross							*Gross*		*Gross*
(dollars in thousands)	Amortized		Unrealized		Unrealized			Fair		*Amortized*		*Unrealized*		*Unrealized*			*Fair*
September 30, 2017	Cost		Gains		Losses			Value
March 31, 2024										*Cost*		*Gains*		*Losses*			*Value*
Available for sale
Government agency securities	$	5,057	$	—	$	(100	)	$	4,957	$	7,586	$	—	$	(527	)	$	7,059
Mortgage-backed securities
Government sponsored agencies		33,530		44		(318	)		33,256
SBA agency securities											14,524		40		(250	)		14,314
Mortgage-backed securities: residential											39,567		—		(6,387	)		33,180
Collateralized mortgage obligations: residential											100,808		169		(12,878	)		88,099
Collateralized mortgage obligations: commercial											78,404		105		(2,872	)		75,637
Commercial paper											77,088		—		(22	)		77,066
Corporate debt securities		17,341		203		(60	)		17,484		34,784		21		(4,175	)		30,630
	$	55,928	$	247	$	(478	)	$	55,697
Municipal securities											12,627		—		(3,418	)		9,209
Total available for sale										$	365,388	$	335	$	(30,529	)	$	335,194

Held to maturity
Municipal taxable securities	$	4,296	$	278	$	—		$	4,574	$	501	$	—	$	(1	)	$	500
Municipal securities		895		16		—			911		4,703		—		(156	)		4,547
	$	5,191	$	294	$	—		$	5,485

December 31, 2016
Available for sale
Government agency securities	$	5,453	$	—	$	(136	)	$	5,317
Mortgage-backed securities
Government sponsored agencies		23,913		38		(311	)		23,640
Corporate debt securities		10,364		21		(65	)		10,320
	$	39,730	$	59	$	(512	)	$	39,277

Held to maturity
Municipal taxable securities	$	5,301	$	328	$	—		$	5,629
Municipal securities		913		11		—			924
	$	6,214	$	339	$	—		$	6,553
Total held to maturity										$	5,204	$	—	$	(157	)	$	5,047

*(dollars in thousands)*	*Less than One Year*				*More than One Year to Five Years*				*More than Five Years to Ten Years*				*More than Ten Years*				*Total*
March 31, 2024	*Amortized Cost*		*Fair Value*		*Amortized Cost*		*Fair Value*		*Amortized Cost*		*Fair Value*		*Amortized Cost*		*Fair Value*		*Amortized Cost*		*Fair Value*
Government agency securities	$	—	$	—	$	7,586	$	7,059	$	—	$	—	$	—	$	—	$	7,586	$	7,059
SBA agency securities		—		—		2,241		2,024		12,283		12,290		—		—		14,524		14,314
Mortgage-backed securities: residential		—		—		10,505		9,428		19,435		16,327		9,627		7,425		39,567		33,180
Collateralized mortgage obligations: residential		17		16		36,137		35,226		64,654		52,857		—		—		100,808		88,099
Collateralized mortgage obligations: commercial		4,096		4,071		19,849		18,023		54,459		53,543		—		—		78,404		75,637
Commercial paper		77,088		77,066		—		—		—		—		—		—		77,088		77,066
Corporate debt securities		—		—		12,906		12,533		19,245		16,160		2,633		1,937		34,784		30,630
Municipal securities		—		—		—		—		—		—		12,627		9,209		12,627		9,209
Total available for sale	$	81,201	$	81,153	$	89,224	$	84,293	$	170,076	$	151,177	$	24,887	$	18,571	$	365,388	$	335,194

Municipal taxable securities	$	—	$	—	$	501	$	500	$	—	$	—	$	—	$	—	$	501	$	500
Municipal securities		—		—		—		—		2,951		2,847		1,752		1,700		4,703		4,547
Total held to maturity	$	—	$	—	$	501	$	500	$	2,951	$	2,847	$	1,752	$	1,700	$	5,204	$	5,047

December 31, 2023
Government agency securities	$	—	$	—	$	8,705	$	8,161	$	—	$	—	$	—	$	—	$	8,705	$	8,161
SBA agency securities		—		—		2,292		2,095		10,997		11,122		—		—		13,289		13,217
Mortgage-backed securities: residential		—		—		11,023		9,986		19,762		16,965		9,722		7,701		40,507		34,652
Collateralized mortgage obligations: residential		18		17		36,876		35,758		57,177		46,552		—		—		94,071		82,327
Collateralized mortgage obligations: commercial		3,014		3,018		20,296		18,481		46,631		45,800		—		—		69,941		67,299
Commercial paper		73,121		73,105		—		—		—		—		—		—		73,121		73,105
Corporate debt securities		—		—		12,912		12,491		19,249		16,232		2,639		1,968		34,800		30,691
Municipal securities		—		—		—		—		—		—		12,636		9,509		12,636		9,509
Total available for sale	$	76,153	$	76,140	$	92,104	$	86,972	$	153,816	$	136,671	$	24,997	$	19,178	$	347,070	$	318,961

Municipal taxable securities	$	—	$	—	$	501	$	504	$	—	$	—	$	—	$	—	$	501	$	504
Municipal securities		—		—		—		—		2,952		2,873		1,756		1,720		4,708		4,593
Total held to maturity	$	—	$	—	$	501	$	504	$	2,952	$	2,873	$	1,756	$	1,720	$	5,209	$	5,097

*(dollars in thousands)*	*Less than Twelve Months*					*Twelve Months or More*					*Total*
March 31, 2024	*Fair Value*		*Unrealized Losses*			*Fair Value*		*Unrealized Losses*			*Fair Value*		*Unrealized Losses*
Government agency securities	$	3,513	$	(57	)	$	3,546	$	(470	)	$	7,059	$	(527	)
SBA securities		6,341		(33	)		2,023		(217	)		8,364		(250	)
Mortgage-backed securities: residential		—		—			33,180		(6,387	)		33,180		(6,387	)
Collateralized mortgage obligations: residential		13,963		(146	)		60,647		(12,732	)		74,610		(12,878	)
Collateralized mortgage obligations: commercial		26,029		(267	)		34,431		(2,605	)		60,460		(2,872	)
Commercial paper ⁽¹⁾		39,731		(22	)		—		—			39,731		(22	)
Corporate debt securities		—		—			27,559		(4,175	)		27,559		(4,175	)
Municipal securities		—		—			9,209		(3,418	)		9,209		(3,418	)
Total available for sale	$	89,577	$	(525	)	$	170,595	$	(30,004	)	$	260,172	$	(30,529	)

Municipal taxable securities	$	500	$	(1	)	$	—	$	—		$	500	$	(1	)
Municipal securities		788		(12	)		3,759		(144	)		4,547		(156	)
Total held to maturity	$	1,288	$	(13	)	$	3,759	$	(144	)	$	5,047	$	(157	)

	(1)	Net of discounts and deferred fees and costs.
	(2)	Includes non-farm and non-residential real estate loans, multifamily residential and 1-4 residential loans for a business purpose.

	*For the Three Months Ended March 31,*
	*2024*								*2023*
*(dollars in thousands)*		*Allowance for loan losses*			*Reserve for unfunded loan commitments*		*Allowance for credit losses*			*Allowance for loan losses*			*Reserve for unfunded loan commitments*			*Allowance for credit losses*
Beginning balance	$	41,903		$	640	$	42,543		$	41,076		$	1,156		$	42,232
(Reversal)/provision for credit losses		(31	)		31		—			2,152			(138	)		2,014
Less loans charged-off		(214	)		—		(214	)		(161	)		—			(161	)
Recoveries on loans charged-off		30			—		30			4			—			4
Ending balance	$	41,688		$	671	$	42,359		$	43,071		$	1,018		$	44,089

	Three Months Ended September 30,
	2017										2016
(dollars in thousands)	Real Estate		Commercial			Unallocated			Total		Real Estate		Commercial		Unallocated		Total
Beginning balance	$	6,433	$	3,384		$	810		$	10,627	$	9,455	$	2,694	$	—	$	12,149
Additions (reductions) to the allowance charged to expense		1,239		(115	)		(424	)		700		820		430		—		1,250
Recoveries on loans charged-off		—		93			—			93		—		—		—		—
Less loans charged-off		—		—			—			—		—		—		—		—
Ending balance	$	7,672	$	3,362		$	386		$	11,420	$	10,275	$	3,124	$	—	$	13,399

	*For the Three Months Ended March 31, 2024*
*(dollars in thousands)*	*Construction and land development*		*Commercial real estate*			*Single-family residential mortgages*			*Commercial and industrial*			*SBA*			*Other*			*Total*
Allowance for loan losses:
Beginning balance	$	1,219	$	17,826		$	20,117		$	1,348		$	1,196		$	197		$	41,903
Provisions/(reversal) for credit losses		92		597			(239	)		(52	)		(461	)		32			(31	)
Charge-offs		—		(116	)		—			(3	)		—			(95	)		(214	)
Recoveries		—		—			—			1			—			29			30
Ending allowance balance	$	1,311	$	18,307		$	19,878		$	1,294		$	735		$	163		$	41,688

	For the Three Months Ended December 31, 2023
*(dollars in thousands)*	Construction and land development			Commercial real estate		Single-family residential mortgages			Commercial and industrial			SBA		Other			Total
Allowance for loan losses:
Beginning balance	$	1,767		$	17,575	$	20,340		$	1,367		$	1,176	$	205		$	42,430
(Reversal)/provisions for credit losses		(419	)		171		(223	)		(20	)		20		53			(418	)
Charge-offs		(129	)		—		—			—			—		(74	)		(203	)
Recoveries		—			80		—			1			—		13			94
Ending allowance balance	$	1,219		$	17,826	$	20,117		$	1,348		$	1,196	$	197		$	41,903

	For the Three Months Ended March 31, 2023
*(dollars in thousands)*	Construction and land development			Commercial real estate		Single-family residential mortgages			Commercial and industrial			SBA		Other			Total
Allowance for loan losses:
Beginning balance	$	2,638		$	17,657	$	17,640		$	1,804		$	621	$	716		$	41,076
(Reversal)/provisions for credit losses		(247	)		491		2,169			(303	)		50		(8	)		2,152
Charge-offs		—			—		(93	)		—			—		(68	)		(161	)
Recoveries		—			—		—			—			1		3			4
Ending allowance balance	$	2,391		$	18,148	$	19,716		$	1,501		$	672	$	643		$	43,071

	Nine Months Ended September 30,
	2017											2016
(dollars in thousands)	Real Estate			Commercial			Unallocated		Total			Real Estate		Commercial			Unallocated		Total
Beginning balance	$	8,111		$	6,051		$	—	$	14,162		$	5,788	$	4,235		$	—	$	10,023
Additions (reductions) to the allowance charged to expense		(439	)		(3,435	)		386		(3,488	)		4,487		(888	)		—		3,599
Recoveries on loans charged-off		—			746			—		746			—		—			—		—
Less loans charged-off		—			—			—		—			—		(223	)		—		(223	)
Ending balance	$	7,672		$	3,362		$	386	$	11,420		$	10,275	$	3,124		$	—	$	13,399

	*Term Loan by Vintage*
March 31, 2024	*2024*		*2023*		*2022*		*2021*		*2020*		*Prior*		*Revolving*		*Revolving Converted to Term During the Period*		*Total*
*(dollars in thousands)*
Real estate:
Construction and land development
Pass	$	103,198	$	47,311	$	17,582	$	14,140	$	3,925	$	225	$	—	$	—	$	186,381
Special mention		—		—		—		11,689		—		—		—		—		11,689
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	103,198	$	47,311	$	17,582	$	25,829	$	3,925	$	225	$	—	$	—	$	198,070
YTD gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate
Pass	$	61,366	$	72,397	$	417,258	$	183,574	$	174,650	$	239,452	$	—	$	—	$	1,148,697
Special mention		—		—		—		—		—		6,851		—		—		6,851
Substandard		—		299		—		—		11,171		11,480		—		—		22,950
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	61,366	$	72,696	$	417,258	$	183,574	$	185,821	$	257,783	$	—	$	—	$	1,178,498
YTD gross write-offs	$	—	$	—	$	—	$	—	$	116	$	—	$	—	$	—	$	116
Single-family residential mortgages
Pass	$	8,666	$	152,528	$	583,948	$	235,679	$	121,112	$	336,587	$	1,487	$	—	$	1,440,007
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		712		1,690		5,073		16,015		—		—		23,490
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	8,666	$	152,528	$	584,660	$	237,369	$	126,185	$	352,602	$	1,487	$	—	$	1,463,497
YTD gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial:
Commercial and industrial																		—
Pass	$	7,467	$	1,216	$	3,118	$	5,912	$	2,377	$	6,574	$	85,700	$	—	$	112,364
Special mention		—		—		—		—		—		—		678		—		678
Substandard		—		—		83		—		1,387		4,854		2,075		—		8,399
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	7,467	$	1,216	$	3,201	$	5,912	$	3,764	$	11,428	$	88,453	$	—	$	121,441
YTD gross write-offs	$	—	$	—	$	3	$	—	$	—	$	—	$	—	$	—	$	3
SBA
Pass	$	7,071	$	3,295	$	10,979	$	9,869	$	1,998	$	17,860	$	—	$	—	$	51,072
Special mention		—		—		—		332		—		1,030		—		—		1,362
Substandard		—		—		—		—		—		2,243		—		—		2,243
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	7,071	$	3,295	$	10,979	$	10,201	$	1,998	$	21,133	$	—	$	—	$	54,677
YTD gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Other:
Pass	$	—	$	181	$	2,401	$	7,915	$	551	$	20	$	22	$	—	$	11,090
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		73		9		6		—		—		—		88
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	—	$	181	$	2,474	$	7,924	$	557	$	20	$	22	$	—	$	11,178
YTD gross write-offs	$	—	$	—	$	—	$	95	$	—	$	—	$	—	$	—	$	95
Total by risk rating:
Pass	$	187,768	$	276,928	$	1,035,286	$	457,089	$	304,613	$	600,718	$	87,209	$	—	$	2,949,611
Special mention		—		—		—		12,021		—		7,881		678		—		20,580
Substandard		—		299		868		1,699		17,637		34,592		2,075		—		57,170
Doubtful		—		—		—		—		—		—		—		—		—
Total loans	$	187,768	$	277,227	$	1,036,154	$	470,809	$	322,250	$	643,191	$	89,962	$	—	$	3,027,361
Total YTD gross write-offs	$	—	$	—	$	3	$	95	$	116	$	—	$	—	$	—	$	214


March 31, 2024	*30-59 Days*		*60-89 Days*		*90 Days Or More*		Total Past Due ⁽¹⁾		*Loans Not Past Due*		Total Loans ⁽¹⁾		Nonaccrual Loans ⁽¹⁾
*(dollars in thousands)*
Real estate:
Construction and land development	$	—	$	—	$	—	$	—	$	198,070	$	198,070	$	—
Commercial real estate		9,479		—		1,582		11,061		1,167,437		1,178,498		10,314
Single-family residential mortgages		3,400		929		19,986		24,315		1,439,182		1,463,497		22,806
Commercial:
Commercial and industrial		100		6,934		1,640		8,674		112,767		121,441		1,780
SBA		1,065		—		477		1,542		53,135		54,677		1,026
Other		23		18		9		50		11,128		11,178		9
Total	$	14,067	$	7,881	$	23,694	$	45,642	$	2,981,719	$	3,027,361	$	35,935

					*March 31, 2024*				*December 31, 2023*
					*Nonaccrual*				*Nonaccrual*
					*with no*				*with no*
	September 30		December 31,		*Allowance*				*Allowance*
(dollars in thousands)	2017		2016		*for Loan Loss*		*Nonaccrual*		*for Loan Loss*		*Nonaccrual*
Real estate:
Commercial real estate					$	10,314	$	10,314	$	10,569	$	10,569
Single-family residential mortgages						22,806		22,806		18,103		18,103
Commercial:
Commercial and industrial						1,640		1,780		610		854
SBA	$	77	$	3,577		1,026		1,026		937		2,085
Other						—		9		—		8
Total					$	35,786	$	35,935	$	30,219	$	31,619

	*March 31, 2024*
(dollars in thousands)	*Commercial Real Estate*		*Residential Real Estate*		*Business Assets*		*Total*
Real Estate:
Commercial real estate	$	10,116	$	198	$	—	$	10,314
Single-family residential mortgages		—		22,806		—		22,806
Commercial:
Commercial and industrial		—		1,640		140		1,780
SBA		903		38		85		1,026
Total loans	$	11,019	$	24,682	$	225	$	35,926

	30-59		60-89		Greater Than
(dollars in thousands)	Days		Days		89 Days		Total		Loans Not
September 30, 2017	Past Due		Past Due		Past Due		Past Due		Past Due		Total
Real estate:
Construction and land development	$	—	$	—	$	—	$	—	$	94,297	$	94,297
Commercial real estate		—		—		—		—		491,086		491,086
Single-family residential mortgages		531		—		—		531		236,636		237,167
Commercial:								—
Other		213		—		—		213		225,754		225,967
SBA		254		1,434		—		1,688		146,317		148,005
	$	998	$	1,434	$	—	$	2,432	$	1,194,090	$	1,196,522

December 31, 2016
Real estate:
Construction and land development	$	—	$	—	$	—	$	—	$	89,409	$	89,409
Commercial real estate		—		—		—		—		501,798		501,798
Single-family residential mortgages		—		—		—		—		156,428		156,428
Commercial:
Other		343		—		—		343		203,500		203,843
SBA		—		—		3,577		3,577		155,391		158,968
	$	343	$	—	$	3,577	$	3,920	$	1,106,526	$	1,110,446

	Unpaid
(dollars in thousands)	Principal		Recorded		Average		Interest		Related
September 30, 2017	Balance		Investment		Balance		Income		Allowance
With no related allowance recorded
Construction and land development	$	293	$	293	$	298	$	16	$	—
Commercial real estate		2,287		2,287		2,270		253		—
Commercial - SBA		1,370		1,370		685		79		—
Total	$	3,950	$	3,950	$	3,253	$	348	$	—

December 31, 2016
With no related allowance recorded
Construction and land development	$	303	$	303	$	309	$	21	$	—
Commercial real estate		2,253		2,253		1,710		280		—
Commercial - SBA		18		18		93		—		—
Subtotal		2,574		2,574		2,112		301		—

With an allowance recorded
Commercial - SBA		3,559		3,559		3,559		—		1,782
Total	$	6,133	$	6,133	$	5,671	$	301	$	1,782

*(dollars in thousands)*
As of March 31, 2024		*CDI Amortization Expense*
Remainder of 2024	$	583
2025		672
2026		501
2027		417
2028		297
Thereafter		124
Total	$	2,594

Year ending December 31:
2017 remaining	$	87
2018		311
2019		274
2020		244
2021		172
Thereafter		437
Total	$	1,525

*(dollars in thousands)*		*$250,000 and under*		*Greater than $250,000*		*Total*
Time Deposits Maturities Periods:
Within one year	$	1,070,847	$	761,348	$	1,832,195
Two to three years		12,160		426		12,586
Over three years		891		300		1,191
Total	$	1,083,898	$	762,074	$	1,845,972

(dollars in thousands)
One year	$	660,187
Two to three years		8,513
	$	668,700


*(dollars in thousands)*	*Issue Date*	*Principal Amount*		*Unamortized Valuation Reserve*		*Recorded Value*		*Stated Rate Description*	*March 31, 2024 Effective Rate*			*Stated Maturity*
Subordinated debentures:
TFC Trust	December 22, 2006	$	5,155	$	1,166	$	3,989	Three-month CME Term SOFR plus 0.26% (a) plus 1.65%,		7.24	%	March 15, 2037
FAIC Trust	December 15, 2004		7,217		822		6,395	Three-month CME Term SOFR plus 0.26% (a) plus 2.25%		7.84	%	December 15, 2034
PGBH Trust	December 15, 2004		5,155		546		4,609	Three-month CME Term SOFR plus 0.26% (a) plus 2.10%		7.69	%	December 15, 2034
Total		$	17,527	$	2,534	$	14,993

*(dollars in thousands)*
As of March 31, 2024
2024 remaining	$	3,734
2025		5,681
2026		5,715
2027		5,615
2028		4,694
Thereafter		10,861
Total future minimum lease payments	$	36,300
Less amount of payment representing interest		(3,610	)
Total present value of lease payments	$	32,690

	*March 31,*			*December 31,*
*(dollars in thousands)*	*2024*			*2023*
Operating Leases
ROU assets	$	31,231		$	29,803
Lease liabilities		32,690			31,191

Weighted-average remaining lease term (in years)		7.26			7.63
Weighted-average discount rate		2.73	%		1.72	%

	March 2023
Expected volatility		28.4	%
Expected term (years)		8.0
Expected dividends		2.92	%
Risk free rate		4.27	%
Grant date fair value	$	5.49





*(dollars in thousands, except for per share data)*	*Outstanding Options*			*Weighted-Average Exercise Price*		*Weighted- Average Remaining Contractual Term in years*		*Aggregate Intrinsic Value*
Outstanding at beginning of year		397,903		$	17.61
Exercised		(41,000	)		13.21
Forfeited/cancelled		(102,153	)		17.57
Outstanding at end of period		254,750		$	18.33		5.09	$	140

Options exercisable		224,084		$	17.93		4.61	$	140

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