RBB Bancorp (NASDAQ:RBB) reported second-quarter 2026 net income of $10.1 million, or $0.59 per diluted share, as management highlighted improved credit quality, deposit growth and new lending initiatives in Northern California.
The Los Angeles-based bank’s earnings increased 13% from the year-earlier quarter, when it earned $9.3 million, or $0.52 per diluted share. Compared with the first quarter of 2026, however, net income declined from $11.3 million, or $0.66 per diluted share. President and Chief Executive Officer Johnny Lee said the sequential decrease was “mostly” tied to lower gains from real estate owned, or REO, sales as the company continues to resolve nonperforming assets.
Net Interest Margin Pressured by Subordinated Debt Repricing
Chief Financial Officer Lynn Hopkins said net interest income was $30.1 million in the second quarter, down from $30.5 million in the first quarter. The decline was driven primarily by lower Federal Home Loan Bank dividend income and higher subordinated debt service, partially offset by lower deposit costs.
Hopkins said the company received a special FHLB dividend of $430,000 in the first quarter, with no similar dividend in the second quarter. RBB’s $120 million in subordinated debt also repriced from a fixed 4% rate to a floating rate of 6.98% effective April 1, adding about $830,000 of incremental interest expense in the quarter.
RBB’s net interest margin was 3.06% in the second quarter, down nine basis points from 3.15% in the first quarter. On a year-over-year basis, the margin improved 14 basis points, which Hopkins attributed to deposit repricing efforts and improved earning asset yields.
During the question-and-answer session, Hopkins said the margin has “an opportunity to improve” because of loan growth and the July 1 redemption of $40 million of subordinated notes. She said management expects the margin to be around first-quarter levels and above the second-quarter level, depending on loan growth and deposit costs.
Deposits Rise as Mix Improves
Total deposits increased by $50.8 million during the quarter to $3.4 billion. Hopkins said retail deposits rose $94 million, while wholesale deposits declined $44 million. Non-interest-bearing deposits increased to $592 million, or 17.5% of total deposits, up from 15.8% at the end of the first quarter.
Lee said the company’s deposit mix continued to improve, with “continued reductions in our reliance on wholesale funding.” Management also said the company’s strong core funding and capital levels helped position it to redeem $40 million of subordinated debt after quarter-end.
Asked about deposit competition, Hopkins said the market remains competitive and that rates moved higher during the quarter, with wholesale funding closer to 4% to 4.15% late in the period. Chief Operations Officer Gary Fan said RBB’s Flex savings product, launched in the second quarter, helped retain customers at a lower cost.
Hopkins also said some of the second-quarter increase in non-interest-bearing deposits was seasonal, noting that some balances were used shortly after quarter-end. She said average balances should migrate higher, but the quarter-end level may moderate.
Credit Metrics Continue to Improve
RBB recorded no provision for credit losses in the second quarter, compared with a $200,000 reversal in the first quarter and a $2.4 million provision in the second quarter of 2025. Net charge-offs totaled $83,000, which Hopkins said was essentially 0% of loans on an annualized basis.
Nonperforming loans declined $20.8 million, or 47%, from the prior quarter to $23.8 million. Hopkins said the primary driver was the transfer of a $19.4 million credit to REO. She described that credit as the company’s largest nonperforming asset and said RBB continues to move it through the resolution process.
Nonperforming assets declined 11% to 1.02% of total assets, according to Lee. Special mention and substandard loans fell 16% to $82 million from $97 million at March 31.
Hopkins said the allowance for credit losses was essentially flat at $43.7 million. Because nonperforming loans declined, allowance coverage of nonperforming loans improved to 184% at June 30. The allowance represented 1.32% of loans held for investment.
When asked about the timing for resolving the large REO asset, Hopkins said the bank would like to move “ASAP,” but added that the partially completed construction project will require the right buyer. She said management is looking for a resolution in the second half of 2026 while recognizing the situation remains complicated.
Loan Growth and Northern California Expansion
RBB said second-quarter new loan originations rose 21% from the first quarter to $159 million, at an average yield of 6.3%. Loans held for investment were stable quarter-over-quarter at $3.3 billion as of June 30. The loan-to-deposit ratio ended the quarter at 98%.
Lee highlighted the company’s recently announced loan production office in Burlingame, California, and the hiring of a commercial banking team in the San Francisco Bay Area led by John Curtis. Lee said Curtis has more than 37 years of financial services experience, including serving as president and CEO of Bank of the Orient.
Lee said the San Francisco Bay Area is home to one of the largest Asian-American communities in the United States and called the market “a natural fit” for RBB. In response to an analyst question, he said the new team has a healthy pipeline and is expected to contribute to commercial loan growth in the second half of the year.
Hopkins said management expects net loan growth in the second half of 2026 after flattish growth in the first half. She said production could be modestly higher, while refinancing and payoff activity is expected to be lower.
Capital Actions and Expense Outlook
RBB completed the partial redemption of $40 million of subordinated notes at 100% of par plus accrued interest on July 1, for a total payment of approximately $40.7 million. The company also announced in June that its board authorized the repurchase of up to 1 million shares of common stock, representing about 6% of shares outstanding.
Hopkins said the capital actions reflect RBB’s strong capital position and work to resolve nonperforming assets. Book value per share rose to $31.15, and tangible book value per share increased to $27.23, about 1.5% higher than March 31. The company reported a common equity Tier 1 ratio of approximately 18% and a tangible common equity to tangible assets ratio of approximately 11%.
Non-interest expense was $19 million in the second quarter, down slightly from $19.3 million in the first quarter. Hopkins reiterated that expenses are expected to remain in the $18 million to $19 million range, though she said the near-term run rate is likely near the higher end. Potential future relief could come from technology decisions and lower professional service fees as credit issues are resolved, she said.
Lee concluded that the quarter showed “continued progress in improving RBB’s fundamental earnings power” and said the company is on track for a strong second half of 2026.
About RBB Bancorp (NASDAQ:RBB)
RBB Bancorp is a bank holding company headquartered in Los Angeles, California, and the parent of Royal Business Bank. Established in 2008, the company focuses on providing a full range of commercial banking services tailored to small- and medium-sized businesses, professionals and real estate investors. Through its subsidiary, RBB Bancorp delivers deposit products, loan facilities and cash management solutions designed to support operations and growth strategies.
The company’s core offerings include commercial real estate lending, construction and land development loans, Small Business Administration (SBA) lending and trade finance.
