What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-11 compared with 2021-03-09 · 698 added, 327 removed, 2049 unchanged (33% of the section changed)

Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ( Eide Bailly LLP Laguna Hills, California PCAOB ID 286 )

CONSOLIDATED FINANCIAL STATEMENTS

6 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Board of Directors and Shareholders of

RBB Bancorp and Subsidiaries

1 unchanged sentence

Opinion on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of RBB Bancorp and Subsidiaries (the Company) as of December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, change in shareholders’

equity, and cash flows for the two years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of RBB Bancorp and Subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in shareholders’

equity, and cash flows for each of the years in the three year period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in 2013 Internal Control —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the two years then ended, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of RBB Bancorp and Subsidiaries as of December 31, 2021 and 2020, and the results of their operations and its cash flows for each of the three year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Change in Accounting Principle

As discussed in Note 2 and Note 14 to the financial statements, the Company has adopted the provisions of FASB Accounting Standards Codification Topic 842, Leases, as of January 1, 2021 using the modified retrospective approach with an adjustment at the beginning of the adoption period.

Our opinion is not modified with respect to this matter.

Basis for Opinion

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the entity’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that responds to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

An entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

An entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

An entity’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the consolidated financial statements.

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity;

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

1 unchanged sentence

We have served as the Company’s auditor since 2019.

Vavrinek, Trine, Day & Co., LLP, who joined Eide Bailly LLP in 2019, had served as the Company’s auditor since 2008.

Laguna Hills, California

March 11, 2022

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

RBB BANCORP AND SUBSIDIARIES

Los Angeles, California

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of RBB Bancorp and Subsidiaries as of December 31, 2018 and the related consolidated statements of income and comprehensive income, changes in shareholders’

equity, and cash flows, for the each of the years in the two year period ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of RBB Bancorp and Subsidiaries as of December 31, 2018, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the entity’s management.

Our responsibility is to express an opinion on these financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to RBB Bancorp and Subsidiaries in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company's auditor since 2008.

Rancho Cucamonga, California

March 27, 2019

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

17 unchanged sentences

49,963  

108,194  

Loans held for investment:

8 unchanged sentences

( 1,727 )  

Deferred loan costs (fees), net

Deferred loan fees, net

( 3,072 )  

Total loans, net of deferred loan fees

Total loans, net of deferred loan fees and unaccreted discounts on acquired loans

2,931,350  

11 unchanged sentences

Net deferred tax assets

Income tax receivable

Other real estate owned (OREO)

8 unchanged sentences

Core deposit intangibles

Right-of-use assets- operating leases

22,454  

Accrued interest and other assets

27 unchanged sentences

150,000  

Long-term debt, net of debt issuance costs

3 unchanged sentences

14,502  

14,283  

Lease liabilities - operating leases

23,282  

Accrued interest and other liabilities

4 unchanged sentences

2,921,584  

Commitments and contingencies - Note 7 and 13

Commitments and contingencies - Note 13

Shareholders' equity:

2 unchanged sentences

Common Stock - 100,000,000 shares authorized, no par value;

19,565,921 shares issued and outstanding at December 31, 2020 and 20,030,866 shares at December 31, 2019

19,455,544 shares issued and outstanding at December 31, 2021 and 19,565,921 shares issues and outstanding at December 31, 2020

282,335  

5 unchanged sentences

Non-controlling interest

Accumulated other comprehensive income, net

Accumulated other comprehensive (loss) income, net

( 1,656 )  

Total shareholders’

11 unchanged sentences

Interest and fees on loans

$ 141,569  

$ 133,894  

$ 135,159  

Interest on interest-earning deposits

3 unchanged sentences

Total interest income

147,063  

139,120  

141,725  

Interest expense:

1 unchanged sentence

Interest on time deposits

21,665  

29,347  

Interest on subordinated debentures and long-term debt

1 unchanged sentence

Total interest expense

22,720  

34,365  

44,861  

Net interest income

Provision for credit losses

Net interest income after provision for credit losses

124,343  

104,755  

96,864  

Provision for loan losses

11,823  

Net interest income after provision for loan losses

120,384  

92,932  

94,474  

Noninterest income:

3 unchanged sentences

Recoveries on loans acquired in business combinations

Unrealized gain on equity investments

Unrealized (loss) gain on equity investments

( 360 )  

Gain on derivatives

3 unchanged sentences

Gain on sale of fixed assets

18,745  

14,040  

18,320  

Noninterest expense:

Salaries and employee benefits

33,568  

33,312  

32,909  

Occupancy and equipment expenses

8 unchanged sentences

Other expenses

58,192  

59,513  

57,473  

Income before income taxes

80,937  

47,459  

55,321  

Income tax expense

24,031  

14,531  

16,112  

$ 56,906  

$ 32,928  

$ 39,209  

Net income per share

$ 2.92  

$ 1.66  

$ 1.96  

Cash dividends declared per common share

Weighted-average common shares outstanding

19,423,549  

19,763,422  

20,017,306  

19,834,306  

19,921,859  

20,393,424  

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

2 unchanged sentences

FOR THE YEARS ENDED DECEMBER 31, (In thousands)

$ 56,906  

$ 32,928  

$ 39,209  

Other comprehensive income (loss):

Unrealized gains (losses) on securities available for sale:

Change in unrealized gains (losses)

Unrealized (losses) gains on securities available for sale:

Change in unrealized (losses) gains

( 3,957 )  

Reclassification of gains recognized in net income

( 210 )  

( 3,957 )  

Related income tax effect:

Change in unrealized (gains) losses

( 436 )  

Reclassification of gains recognized in net income

( 374 )  

Total other comprehensive income (loss)

( 2,785 )  

Total comprehensive income

$ 54,121  

$ 33,818  

$ 40,786  

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

8 unchanged sentences

Balance at December 31, 2018

20,000,022  

$ 288,610  

$ 5,659  

$ 81,618  

$ ( 1,338 )  

$ 374,621  

39,209  

Stock-based compensation

Restricted stock awarded

Restricted stock vested

( 425 )  

Cash dividend

Stock options exercised

Issuance of common stock for acquisition

Non-controlling interest

Other comprehensive loss, net of taxes

( 8,033 )  

Stock options exercised, net of expense recognized

200,629  

( 985 )  

Repurchase of common stock

( 169,785 )  

( 2,442 )  

( 748 )  

Other comprehensive income, net of taxes

Balance at December 31, 2019

20,030,866  

$ 290,395  

$ 4,938  

$ 112,046  

$ 407,690  

32,928  

Stock-based compensation

Restricted stock vested

( 425 )  

Cash dividend

Stock options exercised

( 6,567 )  

Stock options exercised, net of expense recognized

56,498  

( 267 )  

Repurchase of common stock

Other comprehensive loss, net of taxes

( 521,443 )  

( 7,538 )  

( 313 )  

Other comprehensive income, net of taxes

Balance at December 31, 2020

19,565,921  

$ 284,261  

$ 4,932  

$ 138,094  

$ 1,129  

$ 428,488  

56,906  

Stock-based compensation

Restricted stock granted

60,000  

Restricted stock vested

( 425 )  

Cash dividend

Stock options exercised

( 9,947 )  

Stock options exercised, net of expense recognized

302,745  

( 990 )  

Repurchase of common stock

Other comprehensive income, net of taxes

( 473,122 )  

( 6,816 )  

( 3,724 )  

Other comprehensive loss, net of taxes

( 2,785 )  

Balance at December 31, 2021

19,455,544  

$ 282,335  

$ 4,603  

$ 181,329  

$ ( 1,656 )  

$ 466,683  

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

4 unchanged sentences

Operating activities

Adjustments to reconcile net income to net cash from

Operating activities:

$ 56,906  

$ 32,928  

$ 39,209  

Adjustments to reconcile net income to net cash from Operating activities:

Depreciation and amortization of premises and equipment

Net accretion of securities, loans, deposits, and other

Unrealized gain on equity securities

( 191 )  

( 3,328 )  

Unrealized loss (gain) on equity securities

Amortization of investment in affordable housing tax credits

Amortization of intangible assets

Impairment loss on mortgage servicing rights

(Reversal of) Impairment loss on mortgage servicing rights

( 417 )  

Amortization of right-of-use asset

Change in operating lease liabilities

( 5,058 )  

Provision for loan losses

11,823  

Stock-based compensation

Deferred tax expense (benefit)

Deferred tax (benefit) expense

( 1,093 )  

( 2,998 )  

Gain on sale of securities

( 210 )  

Gain on sale of loans

( 9,991 )  

( 5,997 )  

Loss on sale of OREO

1 unchanged sentence

Increase in cash surrender value of life insurance

( 1,067 )  

( 767 )  

Loans originated and purchased for sale, net

( 161,972 )  

( 115,146 )  

Proceeds from loans sold

Net cash provided by (used in) operating activities

305,337  

203,799  

521,594  

( 256 )  

( 5,493 )  

Net cash provided by operating activities

202,175  

124,514  

476,468  

Investing activities

Securities available for sale:

( 603,836 )  

( 548,846 )  

Maturities, prepayments and calls

442,056  

454,597  

141,537  

11,661  

Securities held to maturity:

2 unchanged sentences

Purchase of Federal Home Loan Bank stock and other equity securities, net

Net decrease of investment in qualified affordable housing projects

( 5,839 )  

( 3,135 )  

Net increase of investment in qualified affordable housing projects

( 763 )  

( 2,594 )  

Net increase in loans

( 315,551 )  

( 361,252 )  

Proceeds from sales of OREO

Net cash paid in connection with acquisition

Purchase of bank owned life insurance

( 19,800 )  

Net cash received in connection with acquisition

Proceeds from sale of fixed assets

Purchases of premises and equipment

( 1,989 )  

( 4,206 )  

Net cash used in investing activities

( 504,181 )  

( 446,006 )  

Financing activities

Net increase (decrease) in demand deposits and savings accounts

Net increase in time deposits

Net increase (decrease) in short-term FHLB advances

Advances of long-term FHLB borrowings

870,803  

163,674  

Net (decrease) decrease in time deposits

( 120,178 )  

34,415  

126,627  

Net decrease in short-term FHLB advances

Advances on long-term FHLB advances

150,000  

Cash dividends paid

( 9,947 )  

( 6,567 )  

Redemption of subordinated debentures

( 50,000 )  

Issuance of subordinated debentures, net of issuance costs

118,111  

Common stock repurchased, net of repurchased costs

( 10,540 )  

( 7,851 )  

Exercise of stock options

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

801,724  

334,383  

Net increase in cash and cash equivalents

499,718  

12,891  

34,078  

Cash and cash equivalents at beginning of period

194,654  

181,763  

147,685  

Cash and cash equivalents at end of period

$ 694,372  

$ 194,654  

$ 181,763  

Supplemental disclosure of cash flow information

1 unchanged sentence

Interest paid

$ 22,507  

$ 36,186  

$ 45,702  

25,786  

13,475  

14,470  

Non-cash investing and financing activities:

Transfer from loans to other real estate owned

Transfer of loans to held for sale, net

Loans transfer to held for sale, net

89,368  

24,425  

107,859  

Loan to facilitate OREO

1 unchanged sentence

Net change in unrealized holding (loss) gain on securities available for sale

( 3,957 )  

Recognition of operating lease right-of-use assets

( 27,699 )  

Recognition of operating lease liabilities

27,699  

Assets acquired, net of cash received

182,895  

Liabilities assumed

200,209  

Cash considerations

Stock considerations

32,885  

10,680  

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

5 unchanged sentences

RBB Bancorp’s principal business is to serve as the holding company for its wholly-owned banking subsidiaries, Royal Business Bank ("Bank") and RBB Asset Management Company ("RAM"), collectively referred to herein as "the Company".

At December 31, 2020 , the Company had total assets of $ 3.4 billion, gross consolidated loans (held for investment and held for sale) of $ 2.8 billion, total deposits of $ 2.6 billion and total stockholders' equity of $ 428.5 million.

At December 31, 2021 , the Company had total assets of $ 4.2  billion, gross consolidated loans (held for investment and held for sale) of $ 2.9  billion, total deposits of $ 3.4 billion and total stockholders' equity of $ 466.7  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.

6 unchanged sentences

the Chinatown and Bridgeport neighborhoods of Chicago, Illinois;

and Edison, New Jersey.

Edison, New Jersey;

and Honolulu, Hawaii.

The Company's primary source of revenue is providing loans to customers, who are predominately small and middle-market businesses and individuals.

5 unchanged sentences

FAICC is a real estate investment trust subsidiary of the Bank.

The Company has completed six acquisitions from July 8, 2011 through January 10, 2020, including the acquisition of Pacific Global Bank Holdings, Inc.

The Company has completed six bank acquisitions from July 8, 2011 through January 10, 2020, including the acquisition of Pacific Global Bank Holdings, Inc.

(“PGBH”) and its wholly-owned subsidiary, Pacific Global Bank (“PGB”), in which the PGBH acquisition closed on January 10, 2020.

28 unchanged sentences

Banking regulations require that banks maintain a percentage of their deposits as reserves in cash or on deposit with the Federal Reserve Bank.

The reserves required to be held as of December 31, 2020 and 2019  was none  and $ 29.5 million, respectively.

There were no reserves required to be held as of December 31, 2021 and 2020 .

The Company maintains amounts in due from bank accounts, which may exceed federally insured limits.

7 unchanged sentences

Interest income includes amortization of purchase premiums or discounts.

Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments.

Premiums and discounts on securities are amortized on the level-yield method. 

Premiums are amoritized to the earlier of maturity or call date.

Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

61 unchanged sentences

Servicing Rights

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.

When mortgage and 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.

11 unchanged sentences

2020  and 2019 , respectively.

Gains on sale of mortgage loans totaled $ 5.2  million, $ 8.2  million, and $ 4.3 million, and gains on sale of SBA loans totaled $ 754,000 , $ 1.5  million, and $ 2.8  million in 2020, 2019, and 2018, respectively.

Gains on sale of CRE totaled none  in 2020, $ 152,000 in 2019 and none in 2018 .

Gains on sale of mortgage loans totaled $ 7.9  million, $ 5.2  million, and $ 8.2  million, and gains on sale of SBA loans totaled $ 2.1 million, $ 754,000 , and $ 1.5  million in 2021, 2020, and 2019, respectively.

Gains on sale of CRE totaled none  in 2021 and  

2020 and $ 152,000  in 2019 .

Premises and Equipment

4 unchanged sentences

Expenditures for betterments or major repairs are capitalized and those for ordinary repairs and maintenance are charged to operations as incurred.

Operating Lease ROU Assets and Lease Liabilities

Operating lease ROU assets and lease liabilities are included in other assets and other liabilities, respectively, on the Company’s consolidated balance sheet.

The Company uses its incremental borrowing rate, factoring in the lease term, to determine the lease liability, which is measured at the present value of future lease payments.

The ROU asset, at adoption of this ASU, was recorded at the amount of the lease liability plus any prepaid rent and initial direct costs, less any lease incentives and accrued rent.

The lease terms include periods covered by options to extend or terminate the lease depending on whether the Company is reasonably certain to exercise such options.

Other Real Estate Owned

18 unchanged sentences

and 2020  was $ 5.7  million and $ 4.5  million, respectively.

CDI amortization expense was $ 1.4  million, $ 1.5 million, and $ 575,000 in 2020, 2019  and 2018, respectively.

CDI amortization expense was $ 1.1  million, $ 1.4  million, and $ 1.5 million in 2021, 2020  and 2019, respectively.

Estimated CDI amortization expense for the next 5 years is as follows:

2 unchanged sentences

$ 4,075  

$ 5,196  

Bank Owned Life Insurance

53 unchanged sentences

The Company is subject to interest rate and price risk on its mortgage loans held for sale from the loan funding date until the date the loan is sold. 

Best efforts commitments which fix the forward the forward sales price that will be realized in the secondary market are used to eliminate the interest rate and price risk to the Company. 

Best efforts commitments which fix the forward sales price that will be realized in the secondary market are used to eliminate the interest rate and price risk to the Company. 

The buyer can enter into mortgage loan sales commitments on a “mandatory”

21 unchanged sentences

Significant unobservable inputs that reflect the Company's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

See Note 17 and Note 18 for more information and disclosures relating to the Company's fair value measurements.

See Note 18  and Note 19  for more information and disclosures relating to the Company's fair value measurements.

Operating Segments

23 unchanged sentences

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 annual periods beginning after December 15, 2020 and for interim periods beginning after December 15, 2021, for an emerging growth company as the effective date was deferred by the FASB.

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 will recognize on the Consolidated Balance Sheets right-of-use assets with a corresponding lease liability. 

With the Company’s current leases, we anticipate recording the right-of-use asset and lease liability of approximately $ 26.7  million as of the January 1, 2021 adoption date.

The amendments in this Update are effective for annual periods beginning after December 15, 2020 and for interim periods beginning after December 15, 2021, for an EGC as the effective date was deferred by the FASB.

The Company early adopted this ASU on January 1, 2021 and recorded the right-of-use asset and lease liability of $ 26.8 million.

In June 2016, the FASB issued ASU 2016 - 13, Measurement of Credit Losses on Financial Instrument (Topic 326 ), including subsequent amending ASUs.

7 unchanged sentences

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 2016 - 13 was originally proposed to be effective for interim and annual reporting periods for an emerging growth company beginning after December 15, 2020 ( however, see below).

ASU 2016 - 13 was originally proposed to be effective for interim and annual reporting periods for an emerging growth company beginning after December 15, 2020.

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).

17 unchanged sentences

Adoption of ASU 2017 - 04 is not expected to have a significant impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU 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.”

This Update 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 GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. 

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 amendment does not require an accounting change for securities held at a discount;

the discount continues to be amortized to maturity. 

 The Company early adopted this guidance on January 1, 2018 since the accounting of the Company’s purchased callable debt securities have been consistent with the requirements of ASU 2017 - 08.

The adoption did not have a material impact on the Company’s consolidated financial statements.

In June 2018, the FASB issued ASU 2018 - 07, Compensation—Stock Compensation (Topic 718 ):

58 unchanged sentences

The Company has several LIBOR based debt issues, refer to Notes 9 and 10 of the consolidated financial statements.

At this point in time, SOFR is the alternative reference rate we plan to adopt as the replacing index rate for USD LIBOR. 

The Company will continue to assess the potential impact that this ASU will have on the Company’s consolidated financial statements.

In January 2020, the FASB issued ASU 2020 - 01, “Investments—Equity Securities (Topic 321 ), Investments—Equity Method and Joint Ventures (Topic 323 ), and Derivatives and Hedging (Topic 815 )”.

This ASU is for equity securities accounted for by the equity method.

The amendment clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.

27 unchanged sentences

The optional relief generally does not apply to contract modifications made, sales and transfers of HTM debt securities, and hedging relationships entered into or evaluated after December 31, 2022.

The guidance was effective upon issuance and generally can be applied through December 31, 2022.

The LIBOR termination deadline (except for the 1 -week and 2 -month indexes) is June 30, 2023. 

No  LIBOR indexed loans are being originated. 

The Company's current plan is to convert LIBOR to SOFR for all loans indexed under LIBOR by June 30, 2023.  

Of the Company’s $ 2.9  billion in total gross loans as of December 31, 2021 , approximately 8 % have a LIBOR based reference rate.

5 unchanged sentences

This ASU allows for the deferral of the effective dates of ASC 606 and ASC 842 (including amendments issued after the issuance of the original Update) to provide immediate, near-term relief for certain entities for whom these Updates are either currently effective or imminently effective.

The Company has already implemented Topic 606 and will implement Topic 842 on January 1, 2021.

The Company has already implemented Topic 606 and Topic 842 on January 1, 2021.

The FASB issued ASU 2021 - 08, "Accounting for Contract Assets and Contract Liabilities" in October 2021, to require an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with revenue recognition guidance as if the acquirer had originated the contract.

That is, such acquired contracts will not be measured at fair value. 

The ASU is potentially material to RBB, depending on the materiality of an acquired contract asset or liability.  The Update is effective for public companies in fiscal years starting after December 15, 2022.

Early adoption is permitted. 

This ASU will be effective for RBB on January 1, 2023.  

The FASB issued ASU2021 - 10 "Disclosures by Business Entities about Government Assistance" in November 2021.  

The amendments in this Update require the annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. 

This Update is applicable to RBB and will be adopted January 1, 2022.

NOTE 3 –

Completion of Acquisition of Certain Assets and Liabilities of the Honolulu, Hawaii Branch Office of Bank of the Orient

On January 14, 2022, the Company completed the acquisition of the Honolulu, Hawaii branch office the Bank of the Orient on January 14, 2022.

Royal Business Bank acquired all the premises and equipment at the Branch, all deposits totaling approximately $ 81.7  million, selected performing loans totaling approximately $ 7.4  million, an estimated premium of approximately $ 3.0 million, for a total consideration of approximately $ 71.0  million.

The transaction acquired all necessary regulatory approvals.

Agreement to Acquire Gateway Bank, F.S.B.

On December 28, 2021, RBB Bancorp announced that it entered into a definitive agreement to acquire Gateway Bank, F.S.B.

("Gateway Bank") in a cash transaction valued at approximately $ 22.9 million, subject to certain terms and conditions, including customary holdbacks if certain contingencies are not met, and other possible adjustments as contained in the definitive agreement.

Gateway Bank, a commercial bank based in Oakland, California, had total assets of $ 172.4 million, total gross loans of $ 123.1 million, total deposits of $ 147.5 million, and total tangible equity of $ 15.5 million as of September 30, 2021.

Principally serving the Asian-American communities in the San Francisco Bay Area, Gateway Bank has one branch located in Oakland’s Chinatown neighborhood, offering consumer and business banking and loan products and services.

All regulatory applications have been filed, and we are waiting for the regulatory agencies to make a decision.

PGB Holdings, Inc.

48 unchanged sentences

$ 10,680  

The fair values are estimates and are subject to adjustment for up to one year after the merger date.

The Company accounted for this transaction under the acquisition method of accounting in accordance with ASC 805, Business Combinations, which requires purchased assets and liabilities assumed to be recorded at their respective fair values at the date of acquisition.

12 unchanged sentences

For loans acquired from PGBH, the contractual amounts due, expected cash flows to be collected, interest component and fair value as of the respective acquisition dates were as follows (dollars in thousands):

(dollars in thousands)  

PGBH Acquired Loans  

(dollars in thousands)

PGBH Acquired Loans

Contractual amounts due

7 unchanged sentences

$ 173,109  

The operating results of the Company for the year ended December 31, 2020 include the operating results of PGBH since its acquisition date.

The operating results of the Company for the year ended December 31, 2020 

include the operating results of PGBH since its acquisition date.

The following table presents the net interest and other income, net income and earnings per share as if the acquisition of PGBH was effective as of January 1, 2020.

1 unchanged sentence

Twelve months ended

(dollars in thousands, except per share amounts)  

December 31, 2020  

December 31, 2019  

(dollars in thousands)

December 31, 2021

December 31, 2020

Net interest and other income

15 unchanged sentences

$ ( 83 )  

$ 5,610  

SBA agency securities

2 unchanged sentences

( 540 )  

55,025  

Collateralized mortgage obligations

2 unchanged sentences

119,511  

Commercial paper  

129,962  

4 unchanged sentences

( 254 )  

Municipal securities  

42,205  

Municipal securities

12,701  

1 unchanged sentence

12,514  

$ 370,613  

$ ( 3,094 )  

$ 368,260  

Held to maturity

5 unchanged sentences

$ 6,577  

(dollars in thousands)

Amortized  

Unrealized  

December 31, 2020

3 unchanged sentences

$ 1,294  

$ 1,572  

SBA agency securities

( 22 )  

Mortgage-backed securities- Government sponsored agencies

1 unchanged sentence

17,677  

19,171  

Collateralized mortgage obligations

2 unchanged sentences

48,874  

Commercial paper  

102,462  

( 14 )  

102,448  

Corporate debt securities

1 unchanged sentence

34,563  

Municipal securities

$ 209,263  

1 unchanged sentence

$ ( 127 )  

$ 210,867  

Held to maturity

5 unchanged sentences

$ 7,603  

Proceeds of  $ 11.7 million ,  $ 6.1 million and $ 44.6 million were received from the sale of investment securities during the twelve months ended December 31, 2020, 

2019 and 2018, respectively, There were gains realized on sales of investment securities of $ 210,000 , $ 7,000  and $ 5,000 during years ended December 31, 2020 and 2019 , respectively.

There was no sale of investment securities during the twelve months ended December 31, 2021.

Proceeds of $ 11.7 million and $ 6.1  million were received from the sale of investment securities during the twelve months ended December 31, 

2020  and 2019, respectively.

There were no gain nor loss recorded for sales of investement securities during year ended December 31, 2021.

During years ended December 31, 2020 and 2019, there were gains realized on sales of investment securities of $ 210,000  and $ 7,000 , respectively.

One security with a fair value of $ 117,000  and $ 320,000 was pledged to secure a local agency deposit at December 31, 2021 and 2020, respectively.

16 unchanged sentences

35,000  

15,279  

15,027  

55,534  

55,025  

Collateralized mortgage obligations

15 unchanged sentences

42,205  

Municipal securities

12,701  

12,514  

Municipal securities

12,701  

12,514  

Total available for sale

22 unchanged sentences

$ 3,176  

$ 6,252  

$ 6,577  

(dollars in thousands)

December 31, 2020

8 unchanged sentences

17,677  

Collateralized mortgage obligations

11,911  

12,258  

Collateralized mortgage obligations

36,565  

36,616  

Commercial paper  

48,476  

48,874  

Commercial paper

102,462  

102,448  

102,462  

102,448  

Corporate debt securities

3 unchanged sentences

13,743  

33,907  

34,563  

Municipal securities

Total available for sale

33 unchanged sentences

December 31, 2021

Government agency securities

$ ( 83 )  

$ 4,860  

$ ( 83 )  

$ 4,860  

Mortgage-backed securities- Government sponsored agencies

8 unchanged sentences

17,782  

Commercial paper  

( 1,994 )  

97,633  

Commercial paper

( 36 )  

129,926  

( 36 )  

129,926  

Corporate debt securities

Municipal securities  

( 254 )  

13,208  

( 254 )  

13,208  

Municipal securities

( 160 )  

11,447  

( 27 )  

( 187 )  

12,514  

Total available for sale

3 unchanged sentences

$ 28,823  

$ ( 3,094 )  

$ 312,124  

Less than Twelve Months

8 unchanged sentences

December 31, 2020

Government agency securities

$ ( 19 )  

Mortgage-backed securities- Government sponsored agencies

$ ( 8 )  

1 unchanged sentence

$ ( 8 )  

SBA securities

$ 12,982  

Collateralized mortgage obligations

( 93 )  

Mortgage-backed securities- Government sponsored agencies

28,521  

( 93 )  

Collateralized mortgage obligations

28,521  

Commercial paper

( 14 )  

16,982  

Total available for sale

( 14 )  

16,982  

Corporate debt securities

Municipal securities

Total available for sale

$ ( 127 )  

42 unchanged sentences

32,882  

Total allowance for loan losses

$ 28,592  

9 unchanged sentences

2,910,625  

Total loans, net of deferred loan fees and unaccreted discount on acquired loans

$ 2,555,719  

1 unchanged sentence

$ 30,786  

$ 2,931,350  

December 31, 2020

13 unchanged sentences

28,812  

Total allowance for loan losses

$ 24,677  

$ 4,617  

$ 29,337  

Loans evaluated for impairment:

5 unchanged sentences

2,687,212  

Total loans, net of deferred loan fees and unaccreted discount on acquired loans

$ 2,314,717  

1 unchanged sentence

$ 4,089  

$ 2,706,766  

December 31, 2019

11 unchanged sentences

18,816  

Loans acquired with deteriorated credit quality

Total allowance for loan losses

$ 15,118  

8 unchanged sentences

2,183,716  

Total loans, net of deferred loan fees and unaccreted discount on acquired loans

$ 1,846,542  

$ 349,571  

$ 2,196,934  

The Company categorizes 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.

17 unchanged sentences

$ 3,662  

$ 303,144  

Commercial real estate

15 unchanged sentences

$ 70,522  

$ 20,725  

$ 2,931,350  

(dollars in thousands)

December 31, 2020

35 unchanged sentences

989,104  

1,004,576  

Commercial and industrial

10 unchanged sentences

$ 2,898,246  

$ 2,931,350  

$ 18,987  

Single-family residential mortgages held for sale

1 unchanged sentence

$ 5,957  

________________

( 1 ) Included in total loans

(dollars in thousands)

30 - 59  

10 unchanged sentences

1,109,271  

Commercial and industrial

1,124,357  

Commercial and industrial

289,152  

13 unchanged sentences

( 1 ) Included in total loans

The Company has 

no  loans that are 

90  days or more past due and still accruing at December 

2021  and 

December 31, 2020.

Information relating to individually impaired loans presented by class of loans was as follows as of December 31, 2021, 2020 and 2019 :

3 unchanged sentences

Construction and land development

Commercial and industrial  

Commercial real estate

Residential mortgage loans

Single-family residential mortgage loans

Commercial - SBA

11,589  

With related allowance recorded

Commercial and industrial  

Commercial-SBA

2 unchanged sentences

$ 26,980  

(dollars in thousands)

December 31, 2020

1 unchanged sentence

Construction and land development

Commercial and industrial  

Commercial real estate

1 unchanged sentence

Commercial - SBA

10,791  

With related allowance recorded

Commercial real estate

Commercial and industrial  

Commercial-SBA

2 unchanged sentences

$ 23,196  

Unpaid  

December 31, 2019

With no related allowance recorded  

Construction and land development

2 unchanged sentences

Commercial - SBA

10,791  

With related allowance recorded

Commercial real estate

Commercial-SBA

5 unchanged sentences

We recognized interest income on loans modified under troubled debt restructurings ("TDR's") of $ 159,000  and $ 170,000 during the years ended December 31, 2021 and 2020 , respectively.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), signed into law on March 27, 2020, permits financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by COVID- 19 that would otherwise be characterized as troubled debt restructurings ("TDRs") and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the coronavirus emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019 .

or 60 days after the end of the coronavirus emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019.

In addition, federal bank regulatory authorities have issued guidance to encourage financial institutions to make loan modifications for borrowers affected by COVID- 19 and have assured financial institutions that they will neither receive supervisory criticism for such prudent loan modifications, nor be required by examiners to automatically categorize COVID- 19 -related loan modifications as TDRs.

The Company is applying this guidance to qualifying loan modifications.

The Company identified 

six  loans as TDRs at December 31, 2020 and four  loans at December 31, 2019 , respectively, with aggregate balances of $ 3.1 million and $ 1.8 million, respectively.

Non-accrual TDRs were $ 1.1 million at December 31, 2020 , and zero  at December 31, 2019 .

There were $ 435,000  specific reserves allocated to the loans as of December 31, 2020 and none at  

The Company identified nine  loans as TDRs at December 31, 2021 and six  loans at December 31, 2020 , respectively, with aggregate balances of $ 3.4  million and $ 3.1 million, respectively.

Non-accrual TDRs were $ 1.7  million at December 31, 2021 , and $ 1.1 million at December 31, 2020 .

There were $ 3,000  specific reserves allocated to the loans as of December 31, 2021 and $ 435,000  at  

December 31, 2020 .

There are no commitments to lend additional amounts at December 31, 2021 and 2020 to customers with outstanding loans that are classified as TDRs.

There were two non-accrual loans that were modified as TDRs during the past twelve months that had payment defaults during the periods.

During the year ended December 31, 2020 , 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 six months on the loans restructured in 2020 .

The modification of the terms generally included loans where a moratorium on loan payments was granted.

There were no  non-accrual loans that were modified as TDRs during the past twelve months that had payment defaults during the periods.

During the year ended December 31, 2021 , 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 six months to nine months on the loans restructured in 2021 and 2020 .

The following table presents loans by class modified as TDR's that occurred during the years ended December 31, 2020 , 2019 and 2018:

The following table presents loans by class modified as TDR's that occurred during the years ended December 31, 2021 , 2020  and 2019:

(dollars in thousands)

$ 1,090  

Commercial real estate

Construction and land development

$ 1,695  

2 unchanged sentences

$ 1,719  

There were two non-accrual loans and no defaults of TDR’s in 2020 and 2019 , respectively, where the loan was modified within the prior twelve months.

There were five  and three  non-accrual loans defaults of TDR’s in 2021 and 2020 , respectively, where the loan was modified within the prior twelve months.

In the past the Company has purchased loans as part 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. 

No activity in the accretable yield on purchased credit-impaired loans for 2020  and 2019 .

NOTE 6 - LOAN SERVICING

9 unchanged sentences

Commercial real estate loans

The fair value of servicing assets for mortgage loans was $ 10.7 million and $ 15.1 million at December 31, 2020 and 2019 , respectively.

The fair value of servicing assets for SBA loans was $5.0 million and $ 5.6 million at December 31, 2020 and 2019 , respectively.

Estimates of the loan servicing asset fair value are derived through a discounted cash flow analysis.

2 unchanged sentences

The analysis accounts for recent transactions, and supply and demand within the market.

Servicing fees net of servicing asset amortization totaled $ 2.1 million, $ 3.4 million and $850,000 for the twelve months ended December 31, 2020, 

2019 and 2018, respectively. 

Custodial balances maintained in connection with the foregoing loan servicing (including in non-interest bearing deposits) totaled $.2 million and $ 3.7 million as of December 31, 2020 and 2019, respectively.

Servicing fees net of servicing asset amortization totaled $ 684,000 , $ 2.1  million and $ 3.4 million for the twelve months ended December 31, 2021, 

2020  and 2019, respectively. 

Custodial balances maintained in connection with the foregoing loan servicing (including in non-interest bearing deposits) totaled $ 14.3  million and $ 16.6  million as of December 31, 2021 

and 2020, respectively.

When mortgage and 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.

4 unchanged sentences

If the Company later determines 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.

During the twelve months ended December 31, 2020 , the Company recorded an impairment write-down of $ 417,000 on mortgage servicing rights.

During the twelve months ended December 31, 2021 , the Company reversed an impairment write-down of $ 416,000 on mortgage servicing rights.

Servicing fee income is recorded for fees earned for servicing loans.

15 unchanged sentences

( 128 )  

( 197 )  

Amortized to expense

4 unchanged sentences

( 1,821 )  

Impairment  

( 417 )  

9 unchanged sentences

Fair value at December 31, 2020 was determined using a discount rate of 11.04 %, average prepayment speed of 15.50 %, 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 $ 5.0  million and $ 5.6 million as of December 31, 2020 and 2019 , respectively.

The fair value of servicing assets for SBA loans was $ 4.1  million and $ 5.0  million as of December 31, 2021 and 2020 , respectively.

Fair value at December 31, 2021 was determined using a discount rate of 8.5 %, average prepayment speed of 15.87 %, depending on the stratification of the specific right, and a weighted-average default rate of 0.61 %.

3 unchanged sentences

(dollars in thousands)

$ 9,066  

$ 5,020  

Building and improvements

15,040  

Furniture, fixtures, and equipment

Leasehold improvements

36,193  

24,684  

Less accumulated depreciation and amortization

( 9,773 )  

Construction in progress

$ 27,103  

$ 16,813  

Depreciation and leasehold amortization expense was $ 2.0  million, $ 1.9  million, and $ 1.8 million for 2020 , 2019 , and 2018 , respectively.

Depreciation and leasehold amortization expense was $ 1.9  million, $ 2.0  million, and $ 1.9  million for 2021 , 2020 , and 2019 , respectively.

The Company leases several of its operating facilities under various noncancellable operating leases expiring at various dates through 2036.

The Company is also responsible for common area maintenance, taxes and insurance at the various branch locations.

The Company is also responsible for common area maintenance, taxes and insurance at various branch locations.

Future minimum rent payments on the Company's leases were as follows as of December 31, 2021 :

(dollars in thousands)

Year ending December 31:

$ 5,082  

$ 28,073  

As of December 31, 2021:

The minimum rent payments shown above are given for the existing lease obligations and are not a forecast of future rental expense.

1 unchanged sentence

In July 

2020, the Company signed a lease, commencing on August 1, 2020, for a branch on Canal Street in New York City, and it is projected that the branch will be open by June 30, 2021. 

In January 2020, the Company signed a lease to for a new branch in Edison, New Jersey, which the Company occupied in November 2020.

2020, the Company signed a lease, commencing on August 1, 2020, on Canal Street in New York City for our NY Bowery branch relocation, and the Canal Street branch opened by December 

 In January 2020, the Company signed a lease to for a new branch in Edison, New Jersey, which the Company occupied in November 2020.

In March 2019, the Company signed a new lease to move its Diamond Bar, California branch to a new location, which opened in January 2021.

5 unchanged sentences

(dollars in thousands)

December 31, 2021  

$ 1,119,404  

3 unchanged sentences

$ 1,166,439  

Brokered time deposits were $ 17.4  million at December 31, 2020 and $ 67.1 million at December 31, 2019 .

Brokered time deposits were $ 2.4  million at December 31, 2021 and $ 17.4  million at December 31, 2020 .

NOTE 9 - LONG-TERM DEBT

1 unchanged sentence

The interest rate is fixed through March 31, 2021 and floats at 3 month LIBOR plus 516 basis points thereafter.

The Company can redeem these subordinated debentures beginning March 31, 2021.

The sub-debt is considered Tier- two capital at the Company.

The Company allocated $ 35 million to the Bank as Tier- one capital.

The Company redeemed these subordinated debentures on March 31, 2021.

The redemption price for the subordinated debentures was equal to 100% of principal amount of the note redeemed, plus any accrued and unpaid interest up to, but excluding, redemption date of March 31, 2021.

In November 2018, the Company issued $ 55 million of 6.18 % fixed to floating rate subordinated debentures, due December 1, 2028.

1 unchanged sentence

The Company can redeem these subordinated debentures beginning December 1, 2023.

The sub-debt is considered Tier- two capital at the Company.

The sub-debt is considered Tier 2  capital at the Company.

The Company allocated $ 25 million to the Bank as Tier- one capital.

In March 

2021, the Company issued $ 120  million of 4.00 % fixed to floating rate subordinated debentures, due April 

The interest rate is fixed through April 

1, 2026  and floats at three  month SOFR plus 329  basis points thereafter.

The Company can redeem these subordinated debentures beginning April 

The subordinated debentures are considered Tier 2 capital at the Company.

At December 31, 2021 and 2020 , respectively, long-term debt was as follows:

December 31,  

(dollars in thousands)

2 unchanged sentences

Unamortized debt issuance costs

$ 1,993  

The following table presents interest and amortization expense the Company incurred for the year ended December 31, 2021 and 2020 :

4 unchanged sentences

$ 6,649  

The British banking regulators have announced plans to eliminate the LIBOR rate before this long-term debt and subordinated debentures mature.

For these subordinated debentures, there are provisions for amendments to establish a new interest rate benchmark.  At this point in time, SOFR 

is the alternative reference rate we plan to adopt as the replacing index rate for USD LIBOR.

NOTE 10 - SUBORDINATED DEBENTURES

34 unchanged sentences

Federal Funds Arrangements with Commercial Bank s.

As of December 31, 2020 the Company may borrow on an unsecured basis, up to $ 20.0 million, $ 10.0 million, $ 12.0 million and $ 50.0 million overnight from Zions Bank, Wells Fargo Bank, First Tennessee National Bank, and Pacific Coast Bankers' Bank, respectively.

As of December 31, 2021 the Company may borrow on an unsecured basis, up to $ 20.0 million, $ 10.0 million, $ 12.0 million and $ 50.0 million overnight from Zions Bank, Wells Fargo Bank, First Horizon Bank, and Pacific Coast Bankers' Bank, respectively.

Letter of Credit Arrangements.

1 unchanged sentence

FRB Secured Line of Credit.

The secured borrowing capacity with the FRB of $ 9.8  million at December 31, 2020 is collateralized by loans pledged with a carrying value of $ 20.1  million.

The secured borrowing capacity with the FRB of $ 22.3 million at December 31, 2021 is collateralized by loans pledged with a carrying value of $ 33.2  million.

FHLB Secured Line of Credit.

2 unchanged sentences

December 31, 2021 , the Company had $ 150.0 million at a weighted average rate of 1.18 % in long-term ( five year) advances with the FHLB. 

These advances were collateralized by $ 1.2 billion in SFR loans There were no overnight or long-term advances at December 31, 2019.

The Company paid interest expenses of $ 1.5  million, $ 2.9 million and $ 2.6 million on such FHLB advances for the twelve months ended December 31, 2020, 2019 and 2018 .

These advances were collateralized by $ 1.1 billion in residential and commercial loans.

There were no overnight or long-term advances at December 31, 2021.

The Company paid interest expenses of $ 1.8  million, $ 1.5  million and $ 2.9  million on such FHLB advances for the twelve months ended December 31, 2021, 2020 and 2019 .

There were no amounts outstanding under any of the other borrowing arrangements above as of December 31, 2021 except FHLB advances maturing in 2025.

11 unchanged sentences

( 1,093 )  

( 2,998 )  

Deferred tax adjustment for change in tax rate

9 unchanged sentences

21.0 %  

$ 11,617  

State franchise tax, net of federal benefit

11 unchanged sentences

( 792 )  

( 1.4 )  

Actual tax expense

2 unchanged sentences

$ 14,531  

30.6 %  

$ 16,112  

Deferred taxes are a result of differences between income tax accounting and generally accepted accounting principles with respect to income and expense recognition.

7 unchanged sentences

Operating loss carryforwards

Other real estate owned

Unrealized loss on AFS securities

Lease liability

Mark to market on held for sale mortgage loans

State tax  

22,215  

2 unchanged sentences

( 1,441 )  

Deferred loan costs  

( 2,598 )  

Unrealized gain on AFS securities

( 497 )  

Acquisition accounting fair value adjustments

2 unchanged sentences

( 2,667 )  

Right of use asset

( 6,853 )  

( 453 )  

( 17,360 )  

Net deferred tax assets

1 unchanged sentence

$ 2,547  

At December 31, 2020 , the Company has usable net operating loss carryforwards from acquisitions of approximately $ 29,000 for federal, $ 400,000 for California, $ 6.3  million for New York State, $ 5.5  million for New York City and $ 1.2  million for Illinois income tax purposes. Net operating loss carry forwards, to the extent not used will begin to expire in 2028.

At December 31, 2021 , the Company has usable net operating loss carryforwards from acquisitions of approximately $ 26,000 for federal, $ 409,000 for California, $ 3.9  million for New York State, $ 3.1  million for New York City and $ 0 for Illinois income tax purposes. Net operating loss carry forwards, to the extent not used will begin to expire in 2028.

 The net operating loss carryforwards were generated through acquisitions, and as a result, are substantially limited by Section 382 of the Internal Revenue Code.

Benefits not expected to be realized due to the limitation have been excluded from the deferred tax asset and net operating loss carryforward amounts noted above.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID- 19 pandemic.

On March 27, 2020, the CARES Act was enacted in response to the COVID- 19 pandemic.

The CARES Act, among other things, permits net operating loss carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021.

3 unchanged sentences

The Company is subject to federal income tax and state tax laws of California, New York and Illinois. 

Income tax returns for the years ended after December 31, 2016 are open to audit by the federal, New York and Illinois authorities and for the years ended after December 31, 2015 are open to audit by California state authorities. 

Income tax returns for the years ended after December 31, 2017 

are open to audit by the federal, New York and Illinois authorities and for the years ended after December 31, 2016 

are open to audit by California state authorities. 

The Company expanded operations to the state of New Jersey starting December 1, 2020. 

No income tax returns are open to audit by New Jersey state authorities at December 31, 2020.

The 2020 tax returns are open to audit by New Jersey state authorities at December 31, 2021.

There were no recorded interest or penalties related to uncertain tax positions as part of income tax for the years ended December 31, 2021, 2020 and 2019 , respectively.

11 unchanged sentences

$ 200,814  

$ 281,489  

Unused lines of credit

15 unchanged sentences

In the opinion of management, the disposition of such pending litigation will not have a material effect on the Company's financial statements.

NOTE 14 - RELATED PARTY TRANSACTIONS

NOTE 14 - LEASES

On January 1, 2021, the Company adopted ASU 

2016 - 02, Leases (Topic 842 ) and elected the package of practical expedients that permits the Company to not reassess its prior conclusions about lease identification, lease classification and initial direct costs.

The Company also elected all of the new standard’s available transition practical expedients, including the short-term lease recognition exemption that includes not recognizing Right-of-Use (“ROU”) assets or lease liabilities for existing short-term leases, and the practical expedient to not separate lease and non-lease components for all of the Company's leases.

The Company determines if a contract arrangement is a lease at inception and primarily enters into operating lease contracts for its branch locations, office space, and certain equipment.

As part of its property lease agreements, the Company may seek to include options to extend or terminate at lease when it is reasonably certain that the Company will exercise those options.

The Company's measurement of the ROU assets and operating lease liabilities does not include payments associated with the option to extend or terminate the lease.

The ROU lease asset also includes any lease payments made and lease incentives.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company did 

not possess any leases that have variable lease payments or residual value guarantees as of December 31, 2021.

The ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

The Company uses its incremental borrowing rate to determine the present value of its lease liabilities.

The Company leases several of its operating facilities under various non-cancellable operating leases expiring at various dates through 2036.

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 December 31, 2021:

(dollars in thousands)

As of December 31, 2021:

$ 4,490  

$ 23,596  

Less amount of payment representing interest

Total present value of lease payments

$ 23,282  

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 $ 5.3  million and $ 5.7  million for the twelve months ended December 31, 2021 and 2020, respectively. The Company received rental income of $ 479,000  and $ 395,000  for the twelve months ended December 31, 2021 and 2020, respectively.

The following table presents the operating lease related assets and liabilities recorded on the Consolidated Balance Sheet, and the weighted-average remaining lease terms and discount rates as of 

December 31, 2021 

and January 

(dollars in thousands)

Operating Leases

$ 22,454  

$ 26,770  

Lease liabilities

23,282  

27,412  

Weighted-average remaining lease term (in years)

Weighted-average discount rate

1.01 %  

NOTE 15  - RELATED PARTY TRANSACTIONS

Loans to principal officers, directors, and their affiliates were as follows:

December 31,  

(dollars in thousands)

9 unchanged sentences

$ 1,243  

Outstanding loan commitments to executive officers, directors and their related interests with whom they are associated were $ 2.0 million as of December 31, 2020 and 2019 .

Outstanding loan commitments to executive officers, directors and their related interests with whom they are associated were $ 0  and $ 2 million as of December 31, 2021 and 2020 .

Deposits from principal officers, directors, and their affiliates at December 31, 

2020 and 2019 were $ 50.0  million and $ 84.6 million.

NOTE 15 - STOCK OPTION PLAN

2021 and 2020 were $ 57.6  million and $ 50.0  million.

Several directors and their affiliates own $ 8.1 million of RBB subordinated debentures as of December 31, 2021.

NOTE 16  

- STOCK OPTION PLAN

Under the terms of the Company's 2017 Omnibus Stock Incentive Plan, officers and key employees may be granted both nonqualified and incentive stock options and directors and organizers, who are not also an officer or employee, may only be granted nonqualified stock options.

2 unchanged sentences

At December 31, 2021 , 981,853  shares were available under the 2017 Omnibus Stock Incentive Plan for future grants.

The Company recognized stock-based compensation expense of $ 686,000 , $ 689,000 , and $ 684,000 in 

The Company recognized total stock-based compensation expense of $ 1.1 million, $ 686,000 , and $ 689,000 in 

2021, 2020 and 2019 .

The Company did not grant restricted stock awards in 2020 or 2019 .

The Company granted restricted stock awards for 43,425 shares at a closing price of $ 29.38 in 2018 .

There were no restricted stock grants in prior years.

These restricted stock units are scheduled to vest over a three year period from the August 15, 2018 grant date.

During the year ended 2020 , 14,475  restricted stock units vested.

As of December 31, 2020 , there were 14,475  remaining unvested restricted stock units.

As of December 31, 2020 there was $ 266,000 of total unamortized restricted stock compensation and weighted average grant price was $ 29.38 .

The intrinsic value of vested restricted was $ 223,000 as of December 31, 2020 .

The recorded compensation expense for stock option was $ 485,000 , $ 260,000 , and $ 152,000 and the Company recognized income tax benefit of $ 873,000 , $ 26,000 , and $ 78,000 for the twelve months ended December 

31, 2021, 2020, and 2019, respectively.

Unrecognized stock-based compensation expense related to options was $ 635,000 , $ 476,000 , and $ 332,000  as of December 31, 2021, 2020, and 2019, respectively. Unrecognized stock-based compensation expense will be recognized over a weighted-average period of 1.4 years as of 

December 31, 2021.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions presented below for 

2021, 2020 and 2019 .

There were no stock options granted in 2018 .

Expected volatility

31.8 %  

28.5 %  

Expected term

 6.0 

Expected term (years)

Expected dividends

2.48 %  

1.99 %  

Risk free rate

0.29 %  

1.31 %  

Grant date fair value

$ 2.97  

$ 4.61  

$ 6.32  

Since the Company had a limited amount of historical stock activity, the expected volatility was based on the historical volatility of similar banks that had a longer trading history.

The expected volatility was based on the historical volatility of the Company stock trading history.

The expected term represents the estimated average period of time that the options remain outstanding.

The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding.

3 unchanged sentences

(dollars in thousands, except for share amounts)

Term in years

Outstanding at beginning of year

1,090,968  

$ 13.11  

108,000  

( 56,498 )  

Forfeited/cancelled  

( 36,000 )  

Outstanding at end of year

1,106,470  

$ 13.30  

3.59 years  

$ 3,184,187  

Forfeited/cancelled

Outstanding at end of period

Options exercisable

958,470  

$ 12.73  

2.76 years  

$ 3,067,737  

As of December 31, 2020 there was $ 476,000 of total unrecognized compensation cost related to outstanding stock options that will be recognized over a weighted-average period of 1.8  years. 

The intrinsic value of options exercised was $ 278,000 , $ 1.2 million, and $ 13.6 million in 2020 , 2019 , and 2018 , respectively.

The total fair value of the shares vested was $ 300,000 , $ 460,000 , and $ 734,000 in 2020 , 2019 , and 2018 , respectively.

The number of unvested stock options were 147,000 , 76,500 and 62,008 with a weighted average grant date fair value of $ 4.43 , $ 6.32 and $ 6.48 as of December 31, 2020, 2019 and 2018 .

Cash received from the exercise of 56,498  share options was $ 712,000  for the period ended December 31, 2020 .

NOTE 16 - REGULATORY MATTERS

The Company granted restricted stock for 60,000  shares at a closing price of $ 17.74  in 2021.

There were no restricted stock awards in 2020 and 2019.

 These restricted stock awards are scheduled to vest over a 

three  year period from the January 21, 2021 

As of December 31, 2021, there were 

60,000  remaining unvested restricted stock awards. 

The recorded compensation expense for restricted stock was $ 602,000 , $ 425,000 , and $ 425,000  for the twelve  months ended December 

31, 2021, 2020, and 2019, respectively.

Unrecognized stock-based compensation expense related to restricted stock was $ 729,000 , $ 266,000 , $ 691,000 as of December 31, 2021, 2020, and 2019, respectively.

As of December 31, 2021, unrecognized stock-based compensation expense related to restricted stock are expected to be recognized over the next 2.1 years.  

The following table presents restricted stock activity during the twelve  months ended December 31, 2021. 

(dollars in thousands, except for share amounts)

Outstanding at beginning of year

Outstanding at end of period

The total fair value of the shares vested was $ 1.2 million, $ 300,000 , and $ 460,000 in 2021, 2020, and 2019, respectively.

The number of unvested stock options were 237,500 , 147,500 , and 76,500  with a weighted average grant date fair value of $ 4.28 , $ 4.43 , and $ 6.32  as of December 31, 2021, 2020 and 2019.

Cash received from the exercise of 302,744  share options was $ 3.5 million for the period ended December 31, 2021. 

Cash received from the exercise of 56,498 share options was $ 712,000 for the period ended December 31, 2020.

Cash received from the exercise of 200,629  share options was $ 2.8 million for the period ended December 31, 2019.

The intrinsic value of options exercised was $ 3.8 million, $ 278,000 , and $ 1.2 million in 2021,  

2020, and 2019.

NOTE 17  - REGULATORY MATTERS

Holding companies (with assets over $ 3 billion at the beginning of the year) and banks are subject to various regulatory capital requirements administered by the federal banking agencies.

7 unchanged sentences

In addition, the rules introduced the concept of a "conservation buffer" of 2.5 % applicable to the three capital adequacy risk-weighted asset ratios ( CET1, Tier 1, and Total).

The implementation of the capital conservation buffer began on January 1, 2016 at 0.625 % and was phased in over a four -year period (increasing by that amount on each

subsequent January 1, until it reached 2.5 % on January 1, 2019).

The implementation of the capital conservation buffer began on January 1, 2016 at 0.625 % and was phased in over a four -year period (increasing by that amount on each subsequent January 1, until it reached 2.5 % on January 1, 2019).

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.

16 unchanged sentences

Tier 1 Leverage Ratio

Consolidated  

$ 410,134  

7 unchanged sentences

Common Equity Tier 1 Risk-Based Capital Ratio

Consolidated  

$ 395,632  

7 unchanged sentences

Tier 1 Risk-Based Capital Ratio

Consolidated  

$ 410,134  

7 unchanged sentences

Total Risk-Based Capital Ratio

Consolidated  

$ 616,440  

21 unchanged sentences

14.11 %  

129,989  

162,487  

Common Equity Tier 1 Risk Based Capital Ratio

5 unchanged sentences

18.94 %  

108,966  

157,395  

Tier 1 Risk-Based Capital Ratio

5 unchanged sentences

18.94 %  

145,288  

193,717  

Total Risk-Based Capital Ratio

5 unchanged sentences

20.19 %  

193,717  

242,146  

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.

2 unchanged sentences

Additionally, the Federal Reserve Bank has issued guidance which requires that they be consulted before payment of a dividend if a bank 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.

NOTE 17 - FAIR VALUE MEASUREMENTS

NOTE 18  - FAIR VALUE MEASUREMENTS

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value:

38 unchanged sentences

119,511  

Commercial paper  

129,926  

3 unchanged sentences

42,205  

Municipal securities  

Interest Rate Lock Contracts  

Forward Mortgage Loan Sale Contracts  

Municipal securities

Interest Rate Lock Contracts

Forward Mortgage Loan Sale Contracts

$ 368,260  

1 unchanged sentence

On a non-recurring basis:

Commercial real estate - collateral dependent impaired loans  

SBA - collateral dependent impaired loans  

Other real estate owned

$ 4,470  

December 31, 2020

12 unchanged sentences

48,874  

Commercial paper  

102,448  

3 unchanged sentences

34,563  

Municipal securities

Interest Rate Lock Contracts

Forward Mortgage Loan Sale Contracts

$ 210,867  

2 unchanged sentences

Other real estate owned

No write-downs to OREO were recorded in 2020 or 2019 .

Quantitative information about the Company's recurring Level 3 fair value measurements as of December 31, 2021 and 2020 is as follows:

At December 31, 2020, fair value for IRLCs and FMLSCs totaled $ 259,000 . 

All IRLCs and FMLSCs at December 31, 2020, were funded and sold to Fannie Mae in the first six months of 2021 except one FMLSC with fair value less than a thousand dollars. 

Changes in fair value were $ 6,000 in 2021.

Fair value for IRLCs and FMLSCs totaled $ 265,000 at December 31, 2021.

The fair value measurement of IRLCs and FMLSCs were primarily based on the buy price from borrowers ranging from 96 to 100 , the sale price to Fannie Mae ranging from 

99 to 104 , and the significant unobservable inputs using margin cost rate from 

1.50 % to 

Quantitative information about the Company's non-recurring Level 3 fair value measurements as of December 31, 2021 and 2020 is as follows:

(dollars in thousands)

December 31, 2020

Other real estate owned

$ 293 Third Party

Management Adjustments

5 % - 6 %  

to Reflect Current

Conditions and Selling

Commercial real estate - collateral dependent impaired loans  

643 Third Party Management Adjustments  

Appraisals to Reflect Current  

Conditions and Selling  

SBA - collateral dependent impaired loans  

3,534 Third Party Management Adjustments  

to Reflect Current

Conditions and Selling

December 31, 2018

Other real estate owned

$ 293 Third Party

Management Adjustments

5 % - 6 %  

Appraisals to Reflect Current  

Conditions and Selling  

NOTE 18 - FAIR VALUE OF FINANCIAL INSTRUMENTS

OREO consists of one single-family residence with a fair value of $ 293,000 as of December 31, 2021 and December 31, 2020. 

OREO was evaluated by third party appraisals with unobservable input of management adjustment in the range of 5 %- 6 % to reflect current conditions and selling costs.

No write-downs to OREO were recorded in 2021 or 2020 .

Quantitative information about the Company's recurring Level 3 fair value measurements as of December 31, 2021 and 2020 is as follows:

Interest Rate Lock Commitments ("IRLCs"): 

Agreements under which the Company agrees to extend credit to a borrower under certain specified terms and conditions in which the interest rate and the maximum amount of the loan are set prior to funding.

Under the agreement, the Company commits to lend funds to a potential borrower (subject to the Company’s approval of the loan) on a fixed or adjustable rate basis, regardless of whether interest rates change in the market, or on a floating rate basis. 

As such, outstanding IRLCs are subject to interest rate risk and related price risk during the period from the date of issuance through the date of loan funding, cancelling or expiration. 

Loan commitments generally range between 30 and 90 days;

however, the borrower is not obligated to obtain the loan. 

The Company is subject to fallout risk related to IRLCs, which is realized if approved borrowers choose not to close on the loans within the terms of the IRLCs. 

The Company uses best efforts commitments to substantially eliminate these risks. 

Historical commitment-to-closing ratios are considered to estimate the quantity of mortgage loans that will fund within the terms of the IRLCs.

The FASB Accounting Standards Codification (“FASB ASC”) provides that IRLCs on mortgage loans that will be held for resale are derivatives and must be accounted for at fair value on the balance sheet (if material).

FASB ASC Topic 820 –

Fair Value Measurements and Disclosures specifies how these derivatives are to be valued. 

Commitments to originate mortgage loans to be held for investment and other types of loans are generally not derivatives.

Consequently, the Company has elected to account for these obligations at fair value.

Forward Mortgage Loan Sale Contracts ("FMLSCs"):  The Company is subject to interest rate and price risk on its mortgage loans held for sale from the loan funding date until the date the loan is sold. 

Best efforts commitments which fix the forward sales price that will be realized in the secondary market are used to eliminate the interest rate and price risk to the Company. 

To avoid interest rate risk, the Company will enter into FMLSCs at the time they make an interest rate lock commitment to the buyer.

They can enter into mortgage loan sales commitments on a “mandatory”

or “best efforts”

Mandatory commitments provide that the loan must be delivered or the commitment be “paired off”.

In general, best efforts commitments provide that the loan be delivered if and when it closes.

Mandatory delivery commitments, also known as forward loan sales commitments, are considered to be derivatives under FASB ASC Topic 815 (Derivatives and Hedging) because they meet all of the following criteria:

They have a specified underlying (the contractually specified price for the loans)

They have a notional amount (the committed loan principal amount)

They require little or no initial net investment

They require or permit net settlement as the institution via a pair-off transaction or the payment of a pair-off fee.

NOTE 19  - FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value 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.

6 unchanged sentences

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.

In accordance with accounting guidance, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy are described as follows:

Level 1 - Unadjusted quoted prices in active markets that are accessible at 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 the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability.

Valuation techniques may include use of matrix pricing, discounted cash flow models, and similar techniques.

Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments, and other factors.

These estimates are subjective in nature, and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.

Changes in assumptions could significantly affect the fair values presented.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments;

however, there are inherent limitations in any estimation technique.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Management maximizes the use of observable inputs and attempts to minimize the use of unobservable inputs when determining fair value measurements.

Estimated fair values are disclosed for financial instruments for which it is practicable to estimate fair value.

These estimates are made at a specific point in time based on relevant market data and information about the financial instruments.

These estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of a particular financial instrument for sale at one time, nor do they attempt to estimate the value of anticipated future business related to the instruments.

In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates.

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

Cash and Cash Equivalents

Cash and Due From Banks -- 

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

Time Deposits in Other Banks

Time Deposits in Other Banks -- 

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

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.

In accordance with the prospective adoption of ASU 2016 - 01, the fair value of loans as of December 31, 2019  was measured using an exit price notion. 

Mortgage Loans Held for Sale

In accordance with the prospective adoption of ASU 2016 - 01, the fair value of loans as of December 31, 2021 

was measured using an exit price notion. 

Mortgage Loans Held for Sale -- 

The Company records mortgage loans held for sale at fair value based on the net premium received on recent sales of mortgage loans for identical pools of loans.

Equity Securities

Equity Securities -- 

The fair values of the Company’s equity securities are estimated using discounted cash flow analyses resulting in a Level 2  classification.

Deposits -- 

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.

1 unchanged sentence

Early withdrawal of fixed-rate certificates of deposit is not expected to be significant

FHLB Advances

FHLB Advances -- 

The carrying amounts of short-term debt with maturities of less than ninety days, such as FHLB Advances, approximate their fair values. The fair values of the Company’s long-term FHLB Advances 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.

Long-Term Debt

Long-Term Debt -- 

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.

Subordinated Debentures

Subordinated Debentures -- 

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 2  classification.

Servicing Rights

Servicing Rights -- 

Mortgage and SBA servicing rights are calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan, a Level 

2  measurement

Off-Balance Sheet Financial Instruments

Off-Balance Sheet Financial Instruments -- 

The fair value of commitments to extend credit and standby letters of credit, interest rate lock commitments and forward mortgage loan sales contracts is estimated using the fees currently charged to enter into similar agreements.

2 unchanged sentences

The fair value hierarchy level and estimated fair value of significant financial instruments at December 31, 2021 and 2020 are summarized as follows:

December 31, 2021

December 31, 2020

(dollars in thousands)

17 unchanged sentences

Investment securities - HTM

Mortgage loans held for sale Level 1  

49,963  

50,716  

Mortgage loans held for sale

49,963  

50,716  

Loans, net Level 3  

2,898,438  

7 unchanged sentences

14,894  

Mortgage servicing rights

Servicing assets:

11,517  

5 unchanged sentences

Derivative assets:

Interest Rate Lock Contracts Level 3  

Interest Rate Lock Contracts

$ 8,099  

Forward Mortgage Loan Sale Contracts Level 3  

$ 27,665  

Forward Mortgage Loan Sale Contracts

14,296  

55,089  

Carrying  

8 unchanged sentences

143,237  

150,000  

149,964  

Long-term debt

7 unchanged sentences

14,283  

NOTE 19 - EARNINGS PER SHARE ("EPS")

14,654  

NOTE 20  - EARNINGS PER SHARE ("EPS")

The following is a reconciliation of net income and shares outstanding to the income and number of shares used to compute EPS:

(dollars in thousands except per share amounts)

Income  

Net income as reported

5 unchanged sentences

( 37 )  

( 74 )  

Shares outstanding

5 unchanged sentences

197,501  

( 2,848,800 )

Used in basic EPS

17 unchanged sentences

$ 20,393,424  

Basic earnings per common share  

$ 2.92  

1 unchanged sentence

$ 1.96  

Diluted earnings per common share  

Stock options for 301,500 , 76,500 and 399,000 shares of common stock were not considered in computing diluted earnings per common share for December 31, 2020, 2019 and 2018, respectively because they were anti-dilutive.

NOTE 20 –

Diluted earnings per common share

Stock options for zero , 

301,500 and 76,500 shares of common stock were not considered in computing diluted earnings per common share for December 31, 2021, 2020  and 2019, respectively because they were anti-dilutive.

NOTE 21  –

REVENUE FROM CONTRACTS WITH CUSTOMERS

14 unchanged sentences

(Loss) on sale of OREO and fixed assets

( 100 )  

Total in-scope non-interest income

24 unchanged sentences

In the Company’s 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.

Gain on Sales of Other Real Estate Owned and Fixed Assets

Gain (loss) on Sales of Other Real Estate Owned and Fixed Assets

The Company records a gain or loss from the sale of OREO and fixed assets, when control of the property or asset transfers to the buyer, which generally occurs at the time of an executed deed or sales agreement.

7 unchanged sentences

This balance is reflected in the accrued interest and other assets line on the consolidated balance sheets.

Total unfunded commitments related to the investments in qualified affordable housing projects totaled $ 1.6  million and $ 4.2 million at December 31, 2020 and December 31, 2019 .

Total unfunded commitments related to the investments in qualified affordable housing projects totaled $ 826,000  and $ 1.6  million at December 31, 2021 and December 31, 2020 .

The Company expects to fulfill these commitments between 2022  and 2029.

During the years ending December 31, 2020, 2019 and 2018 , the Company recognized amortization expense of $ 979,000 , $ 900,000 and $ 644,000 , respectively, which was included within income tax expense on the consolidated statements of income.

During the years ended December 31, 2020, 2019 and 2018 , the Company recognized tax credits from its investment in affordable housing tax credits of $ 891,000 , $ 1.1 million and $ 573,000 , respectively.

During the years ending December 31, 2021, 2020 and 2019 , the Company recognized amortization expense of $ 1.0 million, $ 979,000 , and $ 900,000 , respectively, which was included within income tax expense on the consolidated statements of income.

During the years ended December 31, 2021, 2020 and 2019 , the Company recognized tax credits from its investment in affordable housing tax credits of $ 1.0 million, $ 891,000  and $ 1.1 million, respectively.

The Company had no impairment losses during the years ended December 31, 2021, 2020 and 2019 .

7 unchanged sentences

$ 7,089  

Investment in Bank  

570,610  

9 unchanged sentences

14,502  

Other liabilities  

14,283  

Other liabilities

Total liabilities

5 unchanged sentences

Additional paid-in capital

Retained earnings  

181,329  

2 unchanged sentences

Accumulated other comprehensive income

( 1,656 )  

Total shareholders' equity

6 unchanged sentences

(Dollars in Thousands)

Interest income

Dividend from subsidiaries  

$ 25,000  

$ 29,000  

Interest expense

17 unchanged sentences

Other comprehensive income (loss)

( 2,785 )  

Total comprehensive income

8 unchanged sentences

$ 39,209  

Net amortization of debt issue costs and valuation reserve

Net amortization of other

Provision for deferred income taxes

( 337 )  

Undistributed income of subsidiaries

5 unchanged sentences

23,071  

( 7,149 )  

Cash flows from investment activities:

Net cash acquired (outlay) in connection with acquisition

Net cash acquired in connection with acquisition

Purchase of other equity securities, net

( 380 )  

Investment in subsidiaries

1 unchanged sentence

( 380 )  

( 32,261 )  

Cash flows from financing activities:

1 unchanged sentence

118,111  

Redemptions of subordinated debentures

( 50,000 )  

Dividends paid

1 unchanged sentence

( 6,567 )  

Common stock repurchased, net of repurchased costs  

( 10,540 )  

3 unchanged sentences

( 13,706 )  

57,894  

Increase in cash and cash equivalents

Increase (decrease) in cash and cash equivalents

70,489  

3 unchanged sentences

45,540  

45,769  

Cash and cash equivalents end of year

4 unchanged sentences

SUBSEQUENT EVENTS

On January 19, 2022, the board of directors of RBB Bancorp approved an amendment and restatement of the RBB 2017 Omnibus Stock Incentive Plan.

On January 20, 2022, RBB announced a cash dividend of $ 0.14  per share for the fourth quarter of 2021.

The dividend is payable on February 1, 2022  

to common shareholders of record as of February 1, 2021 .

In February 2021, the Company closed its Chinatown Square branch in Chicago, Illinois. 

The staff will transfer to the other branches in Chicago. 

The Company does not anticipate any material termination or relocation costs.

to common shareholders of record as of January 31, 2022 .

On January 21, 2022, RBB Bancorp announced that it had completed the acquisition of the Bank of the Orient Hawaii branch on January 14, 2022. 

On February 22, 2022, RBB Bancorp announced that President and Chief Executive Officer Alan Thian will take a leave of absence, effective immediately, pending an internal investigation being conducted by a special committee of the RBB Board of Directors.

The RBB Board of Directors has appointed David Morris, Executive Vice President and Chief Financial Officer, as Interim President and Chief Executive Officer.

Morris will continue in his role as CFO. 

NOTE 25  –

13 unchanged sentences

10,435  

10,784  

11,157  

11,626  

11,294  

Net interest income

55 unchanged sentences

REPURCHASE OF COMMON STOCK

During 2019 the board of directors approved the Company to repurchase up to 1,000,000 shares of stock.

As of December 31, 2020 the Company had repurchased 691,228 shares of stock at an average per share price of $ 15.97 .

On June 24, 2019, the Board of Directors approved a stock repurchase program to buy back up to an aggregate of 1.0 million shares of our common stock.

On April 

22, 2021, the Board of Directors approved a stock repurchase program to buy back up to an aggregate of 500,000  shares of our common stock. 

As of December 31, 2021, the Company may repurchase up to 335,650  shares under the repurchase program.  As of December 31, 2021 the Company had repurchased 1,164,350  shares of stock at an average per share price of $ 18.53 .

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data