RBB Bancorp 10-K

Item 8. Financial Statements and Supplementary Data.     CONTENTS   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ( Eide Bailly LLP Laguna Hills, California PCAOB ID 286 ) 86     CONSOLIDATED FINANCIAL STATEMENTS       Consolidated Balance Sheets 87 Consolidated Statements of Income 89 Consolidated Statements of Comprehensive Income 90 Consolidated Statement of Changes in Shareholders' Equity 91 Consolidated Statements of Cash Flows 92 Notes to Consolidated Financial Statements 93   85     Report of Independent Registered Public Accounting Firm     Board of Directors and Shareholders of RBB Bancorp and Subsidiaries Los Angeles, California     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, 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 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 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 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 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 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 financial statements.   Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.     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   86       RBB BANCORP AND SUBSIDIARIES   CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, (In thousands, except for share amounts)       2021     2020   Assets                 Cash and due from banks   $ 501,372     $ 137,654   Federal funds sold and other cash equivalents     193,000       57,000   Cash and cash equivalents     694,372       194,654   Interest-earning deposits in other financial institutions     600       600   Securities:                 Available for sale     368,260       210,867   Held to maturity (fair value of $ 6,577 and $ 7,603 at December 31, 2021 and December 31, 2020, respectively)     6,252       7,174   Mortgage loans held for sale     5,957       49,963   Loans held for investment:                 Real estate     2,560,465       2,320,216   Commercial and other     375,684       392,066   Total loans     2,936,149       2,712,282   Unaccreted discount on acquired loans     ( 1,727 )     ( 2,872 ) Deferred loan fees, net     ( 3,072 )     ( 2,644 ) Total loans, net of deferred loan fees and unaccreted discounts on acquired loans     2,931,350       2,706,766   Allowance for loan losses     ( 32,912 )     ( 29,337 ) Net loans     2,898,438       2,677,429                     Premises and equipment     27,199       27,103   Federal Home Loan Bank (FHLB) stock     15,000       15,641   Net deferred tax assets     4,855       2,547   Income tax receivable     477       —   Other real estate owned (OREO)     293       293   Cash surrender value of life insurance (BOLI)     55,988       35,121   Goodwill     69,243       69,243   Servicing assets     11,517       13,965   Core deposit intangibles     4,075       5,196   Right-of-use assets- operating leases     22,454       —   Accrued interest and other assets     43,214       40,276   Total assets   $ 4,228,194     $ 3,350,072     The accompanying notes are an integral part of these consolidated financial statements.   87     RBB BANCORP AND SUBSIDIARIES   CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, (In thousands, except for share amounts)       2021     2020   Liabilities and Shareholders’ Equity                 Deposits:                 Noninterest-bearing demand   $ 1,291,484     $ 617,206   Savings, NOW and money market accounts     927,609       731,084   Time deposits $250,000 and under     587,940       688,875   Time deposits over $250,000     578,499       597,963   Total deposits     3,385,532       2,635,128                     Reserve for unfunded commitments     1,203       1,383   FHLB advances     150,000       150,000   Long-term debt, net of debt issuance costs     173,007       104,391   Subordinated debentures     14,502       14,283   Lease liabilities - operating leases     23,282       —   Accrued interest and other liabilities     13,985       16,399   Total liabilities     3,761,511       2,921,584                     Commitments and contingencies - Note 13     —       —                     Shareholders' equity:                 Preferred Stock - 100,000,000 shares authorized, no par value; none outstanding     —       —   Common Stock - 100,000,000 shares authorized, no par value; 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       284,261   Additional paid-in capital     4,603       4,932   Retained earnings     181,329       138,094   Non-controlling interest     72       72   Accumulated other comprehensive (loss) income, net     ( 1,656 )     1,129   Total shareholders’ equity     466,683       428,488   Total liabilities and shareholders’ equity   $ 4,228,194     $ 3,350,072     The accompanying notes are an integral part of these consolidated financial statements.   88       RBB BANCORP AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, (In thousands, except share amounts)       2021     2020     2019   Interest and dividend income:                         Interest and fees on loans   $ 141,569     $ 133,894     $ 135,159   Interest on interest-earning deposits     552       641       1,785   Interest on investment securities     3,379       2,968       2,652   Dividend income on FHLB stock     869       572       1,079   Interest on federal funds sold and other     694       1,045       1,050   Total interest income     147,063       139,120       141,725   Interest expense:                         Interest on savings deposits, now and money market accounts     2,786       3,540       4,886   Interest on time deposits     9,170       21,665       29,347   Interest on subordinated debentures and long-term debt     8,999       7,677       7,698   Interest on other borrowed funds     1,765       1,483       2,930   Total interest expense     22,720       34,365       44,861   Net interest income     124,343       104,755       96,864   Provision for loan losses     3,959       11,823       2,390   Net interest income after provision for loan losses     120,384       92,932       94,474   Noninterest income:                         Service charges, fees and other     7,235       4,852       4,072   Gain on sale of loans     9,991       5,997       9,893   Loan servicing fees, net of amortization     684       2,052       3,383   Recoveries on loans acquired in business combinations     82       84       143   Unrealized (loss) gain on equity investments     ( 360 )     —       147   Gain on derivatives     46       78       —   Increase in cash surrender value of life insurance     1,067       767       775   Gain on sale of securities     —       210       7   Loss on sale of OREO     —       —       ( 106 ) Gain on sale of fixed assets     —       —       6         18,745       14,040       18,320   Noninterest expense:                         Salaries and employee benefits     33,568       33,312       32,909   Occupancy and equipment expenses     8,691       9,691       9,750   Data processing     4,474       4,236       3,699   Legal and professional     3,773       2,743       1,832   Office expenses     1,197       1,226       1,257   Marketing and business promotion     1,157       751       1,308   Insurance and regulatory assessments     1,561       984       900   Core deposit premium     1,121       1,395       1,501   OREO expenses     17       35       337   Merger expenses     137       746       471   Other expenses     2,496       4,394       3,509         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   Net income   $ 56,906     $ 32,928     $ 39,209                             Net income per share                         Basic   $ 2.92     $ 1.66     $ 1.96   Diluted     2.86       1.65       1.92   Cash dividends declared per common share     0.51       0.33       0.40                             Weighted-average common shares outstanding                         Basic     19,423,549       19,763,422       20,017,306   Diluted     19,834,306       19,921,859       20,393,424     The accompanying notes are an integral part of these consolidated financial statements   89       RBB BANCORP AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, (In thousands)                                                           2021     2020     2019   Net income   $ 56,906     $ 32,928     $ 39,209                             Other comprehensive income (loss):                         Unrealized (losses) gains on securities available for sale:                         Change in unrealized (losses) gains     ( 3,957 )     1,474       2,248   Reclassification of gains recognized in net income     —       ( 210 )     ( 7 )       ( 3,957 )     1,264       2,241   Related income tax effect:                         Change in unrealized (gains) losses     1,172       ( 436 )     ( 666 ) Reclassification of gains recognized in net income     —       62       2         1,172       ( 374 )     ( 664 )                           Total other comprehensive income (loss)     ( 2,785 )     890       1,577                             Total comprehensive income   $ 54,121     $ 33,818     $ 40,786     The accompanying notes are an integral part of these consolidated financial statements.   90       RBB BANCORP AND SUBSIDIARIES   CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019  (In thousands, except share amounts)       Common Stock                             Accumulated               Shares     Amount     Additional Paid-in Capital     Retained Earnings     Non- Controlling Interest     Other Comprehensive Income (Loss)     Total   Balance at December 31, 2018     20,000,022     $ 288,610     $ 5,659     $ 81,618     $ 72     $ ( 1,338 )   $ 374,621   Net income     —       —       —       39,209       —       —       39,209   Stock-based compensation     —       —       689       —       —       —       689   Restricted stock vested     —       425       ( 425 )     —       —       —       —   Cash dividend     —       —       —       ( 8,033 )     —       —       ( 8,033 ) Stock options exercised, net of expense recognized     200,629       3,802       ( 985 )     —       —       —       2,817   Repurchase of common stock     ( 169,785 )     ( 2,442 )     —       ( 748 )     —       —       ( 3,190 ) Other comprehensive income, net of taxes     —       —       —       —       —       1,577       1,577   Balance at December 31, 2019     20,030,866     $ 290,395     $ 4,938     $ 112,046     $ 72     $ 239     $ 407,690   Net income     —       —       —       32,928       —       —       32,928   Stock-based compensation     —       —       686       —       —       —       686   Restricted stock vested     —       425       ( 425 )     —       —       —       —   Cash dividend     —       —       —       ( 6,567 )     —       —       ( 6,567 ) Stock options exercised, net of expense recognized     56,498       979       ( 267 )     —       —       —       712   Repurchase of common stock     ( 521,443 )     ( 7,538 )     —       ( 313 )     —       —       ( 7,851 ) Other comprehensive income, net of taxes     —       —       —       —       —       890       890   Balance at December 31, 2020     19,565,921     $ 284,261     $ 4,932     $ 138,094     $ 72     $ 1,129     $ 428,488   Net income     —       —       —       56,906       —       —       56,906   Stock-based compensation     —       —       1,086       —       —       —       1,086   Restricted stock granted     60,000       —       —       —       —       —       —   Restricted stock vested     —       425       ( 425 )     —       —       —       —   Cash dividend     —       —       —       ( 9,947 )     —       —       ( 9,947 ) Stock options exercised, net of expense recognized     302,745       4,465       ( 990 )     —       —       —       3,475   Repurchase of common stock     ( 473,122 )     ( 6,816 )     —       ( 3,724 )     —       —       ( 10,540 ) Other comprehensive loss, net of taxes     —       —       —       —       —       ( 2,785 )     ( 2,785 ) Balance at December 31, 2021     19,455,544     $ 282,335     $ 4,603     $ 181,329     $ 72     $ ( 1,656 )   $ 466,683     The accompanying notes are an integral part of these consolidated financial statements   91       RBB BANCORP AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 (In thousands)       2021     2020     2019   Operating activities                         Net income   $ 56,906     $ 32,928     $ 39,209   Adjustments to reconcile net income to net cash from Operating activities:                         Depreciation and amortization of premises and equipment     1,943       2,009       1,914   Net accretion of securities, loans, deposits, and other     ( 191 )     ( 3,328 )     ( 2,845 ) Unrealized loss (gain) on equity securities     360       —       ( 147 ) Amortization of investment in affordable housing tax credits     1,037       979       900   Amortization of intangible assets     6,347       5,812       4,856   (Reversal of) Impairment loss on mortgage servicing rights     ( 417 )     417       —   Amortization of right-of-use asset     5,245       —       —   Change in operating lease liabilities     ( 5,058 )     —       —   Provision for loan losses     3,959       11,823       2,390   Stock-based compensation     1,086       686       689   Deferred tax (benefit) expense     ( 1,093 )     ( 2,998 )     1,503   Gain on sale of securities     —       ( 210 )     ( 7 ) Gain on sale of loans     ( 9,991 )     ( 5,997 )     ( 9,893 ) Loss on sale of OREO     —       —       106   Gain on sale of fixed assets     —       —       ( 6 ) Increase in cash surrender value of life insurance     ( 1,067 )     ( 767 )     ( 775 ) Loans originated and purchased for sale, net     ( 161,972 )     ( 115,146 )     ( 77,514 ) Proceeds from loans sold     305,337       203,799       521,594   Other items     ( 256 )     ( 5,493 )     ( 5,506 ) Net cash provided by operating activities     202,175       124,514       476,468   Investing activities                         Securities available for sale:                         Purchases     ( 603,836 )     ( 548,846 )     ( 197,386 ) Maturities, prepayments and calls     442,056       454,597       141,537   Sales     —       11,661       6,143   Securities held to maturity:                         Maturities, prepayments and calls     900       1,135       1,590   Redemption of Federal Home Loan Bank stock     641       —       —   Purchase of Federal Home Loan Bank stock and other equity securities, net     ( 5,839 )     ( 3,135 )     ( 6,933 ) Net increase of investment in qualified affordable housing projects     ( 763 )     ( 2,594 )     ( 2,598 ) Net increase in loans     ( 315,551 )     ( 361,252 )     ( 161,426 ) Proceeds from sales of OREO     —       —       1,053   Purchase of bank owned life insurance     ( 19,800 )     —       —   Net cash received in connection with acquisition     —       6,634       —   Proceeds from sale of fixed assets     —       —       17   Purchases of premises and equipment     ( 1,989 )     ( 4,206 )     ( 1,350 ) Net cash used in investing activities     ( 504,181 )     ( 446,006 )     ( 219,353 ) Financing activities                         Net increase (decrease) in demand deposits and savings accounts     870,803       163,674       ( 21,758 ) Net (decrease) decrease in time deposits     ( 120,178 )     34,415       126,627   Net decrease in short-term FHLB advances     —       —       ( 319,500 ) Advances on long-term FHLB advances     —       150,000       —   Cash dividends paid     ( 9,947 )     ( 6,567 )     ( 8,033 ) 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 )     ( 3,190 ) Exercise of stock options     3,475       712       2,817   Net cash provided by (used in) financing activities     801,724       334,383       ( 223,037 ) 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                         Cash paid during the period:                         Interest paid   $ 22,507     $ 36,186     $ 45,702   Taxes paid     25,786       13,475       14,470   Non-cash investing and financing activities:                         Transfer from loans to other real estate owned     —       —       974   Loans transfer to held for sale, net     89,368       24,425       107,859   Loan to facilitate OREO     —       1,008       623   Additions to servicing assets     2,361       1,715       3,068   Net change in unrealized holding (loss) gain on securities available for sale     ( 3,957 )     1,264       2,241   Recognition of operating lease right-of-use assets     ( 27,699 )     —       —   Recognition of operating lease liabilities     27,699       —       —   Acquisition:                         Assets acquired, net of cash received     —       182,895       —   Liabilities assumed     —       200,209       —   Cash considerations     —       32,885       —   Goodwill     —       10,680       —     The accompanying notes are an integral part of these consolidated financial statements   92       RBB BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021, 2020 AND 2019       NOTE 1 - BUSINESS DESCRIPTION   RBB Bancorp is a financial holding company registered under the Bank Holding Company Act of 1956, as amended. RBB Bancorp’s principal business is to serve as the holding company for its wholly-owned banking subsidiaries, Royal Business Bank ("Bank") and RBB Asset Management Company ("RAM"), collectively referred to herein as "the Company". 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. The Company’s stock trades on the Nasdaq Global Select Market under the symbol “RBB”.   The Bank provides business-banking services to the Chinese-American communities in Los Angeles County, Orange County, Ventura County and in the Las Vegas, New York City metropolitan area, Chicago and Edison (New Jersey). Specific services include remote deposit, E-banking, mobile banking, commercial and investor real estate loans, business loans and lines of credit, Small Business Administration (“SBA”) 7A and 504 loans, mortgage loans, trade finance and a full range of depository accounts.   The Company operates full-service banking offices in Arcadia, Cerritos, Diamond Bar, Irvine, Los Angeles, Monterey Park, Oxnard, Rowland Heights, San Gabriel, Silver Lake, Torrance, and Westlake Village, California; Las Vegas, Nevada; Manhattan, Brooklyn, Flushing and Elmhurst, New York; the Chinatown and Bridgeport neighborhoods of Chicago, Illinois; Edison, New Jersey; and Honolulu, Hawaii. The Company's primary source of revenue is providing loans to customers, who are predominately small and middle-market businesses and individuals.   The Company generates its revenue primarily from interest received on loans and leases and, to a lesser extent, from interest received on investment securities. The Company also derives income from noninterest sources, such as fees received in connection with various lending and deposit services, loan servicing, gain on sales of loans and wealth management services. The Company’s principle expenses include interest expense on deposits and subordinated debentures, and operating expenses, such as salaries and employee benefits, occupancy and equipment, data processing, and income tax expense.   As part of the FAIC acquisition, the Company acquired FAIB Capital Corp. (FAICC) that was formed on January 29, 2014. FAICC is a real estate investment trust subsidiary of the Bank.   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. PGB operated three branches in the Chicago neighborhoods of Chinatown and Bridgeport. All of the Company’s acquisitions have been accounted for using the acquisition method of accounting and, accordingly, the operating results of the acquired entities have been included in the consolidated financial statements from their respective acquisition dates.       NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Basis of Presentation   The accompanying consolidated financial statements and notes thereto of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for Form 10 -K and conform to practices within the banking industry and include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for financial reporting.   Principles of Consolidation and Nature of Operations   The accompanying consolidated financial statements include the accounts of RBB Bancorp and its wholly-owned subsidiaries Royal Business Bank ("Bank") and RBB Asset Management Company ("RAM"), collectively referred to herein as "the Company". All significant intercompany transactions have been eliminated.   RBB Bancorp was formed in January 2011 as a bank holding company, and in 2018 changed to a financial holding company. RAM was formed in 2012 to hold and manage problem assets acquired in business combinations.   93     In connection with the 2018 acquisition of FAIC, the Company acquired a real estate investment trust (“REIT”) as a subsidiary of the Bank and is a New York State corporation. In addition to the REIT, the Company acquired four inactive subsidiaries: FAIC Insurance Services (a New York corporation formed in 2006 ), P4G8, LLC, FAIB Reacquisitions I, LLC and FAIB REO Acquisition II, LLC. FAIC Insurance services was dissolved in January 2020; the other three were dissolved in 2019.   We acquired three  statutory business trusts: TFC Statutory Trust in 2016,  FAIC Statutory Trust in 2018 and PGB Capital Trust I in 2020. These trusts issued trust preferred securities representing undivided preferred beneficial interests in the assets of the Trusts. The proceeds of these trust preferred securities were invested in certain securities issued by us, with similar terms to the relevant series of securities issued by the Trusts, which we refer to as subordinated debentures.   RBB Bancorp has no significant business activity other than its investments in Royal Business Bank and RAM. Parent only condensed financial information on RBB Bancorp is provided in Note 23.   Use of Estimates in the Preparation of Financial Statements   The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. It is reasonably possible our estimate of the allowance for loan losses and the fair value of mortgage servicing rights could change as actual results could differ from those estimates.   Cash and Cash Equivalents   Cash and cash equivalents include cash and due from banks, term federal funds sold and interest-bearing deposits in other financial institutions with original maturities of less than 90 days. Net cash flows are reported for customer loan and deposit transactions and interest-bearing deposits in other financial institutions.   Cash and Due from Banks   Banking regulations require that banks maintain a percentage of their deposits as reserves in cash or on deposit with the Federal Reserve Bank. 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. The Company has not experienced any losses in such accounts.   Interest-Earning Deposits in Other Financial Institutions     Interest-bearing deposits in other financial institutions not included in cash and cash equivalents are carried at cost and generally mature in one year or less.   Investment Securities   Investment securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities not classified as held to maturity are classified as available for sale. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax.   Interest income includes amortization of purchase premiums or discounts. 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.   94     Management evaluates debt securities for other-than-temporary impairment ("OTTI") on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows; OTTI related to credit loss, which must be recognized in the income statement and; OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.   Loans Held For Sale     Mortgage loans originated or acquired and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Loans held for sale consist primarily of first trust deed mortgages on single-family residential properties located in California and New York.   Mortgage loans held for sale are generally sold with servicing rights retained. The carrying value of mortgage loans sold is determined by reducing the amount allocated to the servicing right, when applicable. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loans sold.   Loans   Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding unpaid principal balances reduced by any charge-offs or specific valuation accounts and net of any deferred fees or costs on originated loans, or unamortized premiums or discounts on purchased loans. Loan origination fees and certain direct origination costs are deferred and recognized in interest income using the level-yield method without anticipating prepayments.   Premiums and discounts on loans purchased are grouped by type and certain common risk characteristics and amortized or accreted as an adjustment of yield over the weighted-average remaining contractual lives of each group of loans, adjusted for prepayments when applicable, using methodologies which approximate the interest method.   Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. The accrual of interest on loans is discontinued when principal or interest is past due 90 days or when, in the opinion of management, there is reasonable doubt as to collectability based on contractual terms of the loan. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on nonaccrual loans is subsequently recognized only to the extent that cash is received and the loan's principal balance is deemed collectible. Interest accruals are resumed on such loans only when they are brought current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to all principal and interest.   Allowance for Loan Losses   The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, should be charged-off. Amounts are charged-off when available information confirms that specific loans or portions thereof, are uncollectible. This methodology for determining charge-offs is consistently applied to each segment.   The Company determines a separate allowance for each portfolio segment. The allowance consists of specific and general reserves. Specific reserves relate to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Factors considered in determining impairment include payment status, collateral value and the probability of collecting all amounts when due. Measurement of impairment is based on the expected future cash flows of an impaired loan, which are to be discounted at the loan's effective interest rate, or measured by reference to an observable market value, if one exists, or the fair value of the collateral for a collateral-dependent loan. The Company selects the measurement method on a loan-by-loan basis except that collateral-dependent loans for which foreclosure is probable are measured at the fair value of the collateral.   95     The Company recognizes interest income on impaired loans based on its existing methods of recognizing interest income on nonaccrual loans. Loans, for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired with measurement of impairment as described above.   If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from the collateral.   General reserves cover non-impaired loans and are based on historical loss rates of peer institutions for each portfolio segment, adjusted for the effects of qualitative or environmental factors that are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio segment's historical loss experience. Qualitative factors include consideration of the following: changes in lending policies and procedures; changes in economic conditions, changes in the nature and volume of the portfolio; changes in the experience, ability and depth of lending management and other relevant staff; changes in the volume and severity of past due, nonaccrual and other adversely graded loans; changes in the loan review system; changes in the value of the underlying collateral for collateral-dependent loans; concentrations of credit and the effect of other external factors such as competition and legal and regulatory requirements.   Portfolio segments identified by the Company include real estate, commercial and other loans. Relevant risk characteristics for these portfolio segments generally include debt service coverage, loan-to-value ratios, and financial performance.   Certain Acquired Loans   As part of business acquisitions, the Company acquires certain loans that have shown evidence of credit deterioration since origination. These acquired loans are recorded at the allocated fair value, such that there is no carryover of the seller's allowance for loan losses. Such acquired loans are accounted for individually. The Company estimates the amount and timing of expected cash flows for each purchased loan, and the expected cash flows in excess of the allocated fair value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan's contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded through the allowance for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.   Servicing Rights   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. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.   Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company 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.   Servicing fee income, which is reported on the income statement as loan servicing fees, net of amortization , is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal. The amortization of mortgage servicing rights is netted against loan servicing fee income.   Transfers of Financial Assets     Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.   Gains on sales of mortgage, SBA and CRE loans totaled $ 10.0  million, $ 6.0  million, and $ 9.9  million in 2021,   2020  and 2019 , respectively. 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 .   96     Premises and Equipment   Land is carried at cost. Premises, leasehold improvements and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives, which is thirty years for premises and ranges from three to ten years for leasehold improvements and equipment. Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the improvements or the remaining lease term, whichever is shorter. 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   Real estate acquired by foreclosure or deed in lieu of foreclosure is recorded at fair value at the date of foreclosure, establishing a new cost basis by a charge to the allowance for loan losses, if necessary. Other real estate owned is carried at the lower of the Company's carrying value of the property or its fair value, less estimated carrying costs and costs of disposition. Fair value is based on current appraisals less estimated selling costs. Any subsequent write-downs are charged against operating expenses and recognized as a valuation allowance. Operating expenses and related income of such properties and gains and losses on their disposition are included in other operating income and expenses.   Goodwill and Other Intangible Assets   Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill resulting from whole bank acquisitions is not amortized, but tested for impairment at least annually. The Company has selected December 31 as the date to perform the annual impairment test. Goodwill amounted to $ 69.2  million and $ 69.2  million as of December 31, 2021  and 2020, respectively, and is the only intangible asset with an indefinite life on the balance sheet. No impairment was recognized on goodwill during 2021  and 2020.   Other intangible assets consist of core deposit intangible ("CDI") assets arising from whole bank acquisitions. CDI assets are amortized on an accelerated method over their estimated useful life of 8 to 10 years. CDI was recognized in the 2013 acquisition of Los Angeles National Bank, in the 2016 acquisition of TFC Holding Company, in the 2018 acquisition of FAIC and in the 2020 acquisition of PGBH. The unamortized balance as of December 31, 2021  and 2020  was $ 4.1  million and $ 5.2  million, respectively. Accumulated amortization as of December 31, 2021  and 2020  was $ 5.7  million and $ 4.5  million, 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:   (dollars in thousands)         Year ending December 31:         2022   $ 936   2023     800   2024     683   2025     589   2026     432   Thereafter     635   Total   $ 4,075     Bank Owned Life Insurance     The Company has purchased life insurance policies on a select group of employees and directors. Bank owned life insurance (“BOLI”) is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. Increases of the cash value of these policies, as well as insurance proceeds received, are recorded in the other noninterest income and are not subject to income tax for as long as they are held for the life of the covered employee and director.   97     FHLB Stock and Other Equity Securities   The Company is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.   The Company also owns equity investment in banker’s bank stock. The Company adopted ASU 2016 - 01 on January 1, 2019, and elected the measurement alternative for measuring equity securities without readily determinable fair values at cost less impairment, plus or minus observable price changes in orderly transactions.   As of December 31, 2021  the Company had several CRA equity investments without readily determinable fair values in the amount of $ 20.0  million, and $ 14.9  million at December 31, 2020 .   Stock-Based Compensation   Stock option compensation expense is calculated based on the fair value of the award at the grant date for those options expected to vest and is recognized as an expense over the vesting period of the grant using the straight-line method. The Company uses the Black-Scholes option pricing model to estimate the value of granted options. This model takes into account the option exercise price, the expected life, the current price of the underlying stock, the expected volatility of the Company’s stock, expected dividends on the stock and a risk-free interest rate. The Company estimates the expected volatility based on the Company’s historical stock prices for the period corresponding to the expected life of the stock options. Restricted stock units are valued at the closing price of the Company’s stock on the date of the grant. Compensation cost is recognized for stock options and restricted stock awards issued to employees and directors, based on the fair value of these awards. This cost is recognized over the period which an employee is required to provide services in exchange for the award, generally defined as the vesting period. When the options are exercised, the Company’s policy is to issue new shares of stock. The Company’s accounting policy is to recognize forfeitures as they occur.   Income Taxes   The Company files its income taxes on a consolidated basis with its subsidiaries. The allocation of income tax expense represents each entity’s proportionate share of the consolidated provision for income taxes. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. Tax effects from an uncertain tax position are recognized in the financial statements only if, based on its merits, the position is more likely than not to be sustained on audit by the taxing authorities. Interest and penalties related to uncertain tax positions are recorded as part of income tax expense.   Retirement Plans     The Company established a 401 (k) plan in 2010. The Company contributed $ 532,000 , $ 424,000 , and $ 570,000 in 2021, 2020  and 2019, respectively.   Comprehensive Income   Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale.   Financial Instruments   In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit, commercial letters of credit, and standby letters of credit as described in Note 13. Such financial instruments are recorded in the financial statements when they are funded.   Derivatives   Interest Rate Lock Commitments (IRLCs) are 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 (FMLSC)   were utilized to avoid interest rate risk at the time an interest rate lock commitment is made to the buyer.  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.  The buyer can enter into mortgage loan sales commitments on a “mandatory” or “best efforts” basis. 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.       98     Earnings Per Share ("EPS")   Basic and diluted EPS are calculated using the  two -class method since the Company has issued share-based payment awards considered participating securities because they entitle holders the rights to dividends during the vesting term. The two -class method is an earnings allocation formula that determines net income per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.   Fair Value Measurement   Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Current accounting guidance establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair values:   Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.   Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.   Level 3: 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 18  and Note 19  for more information and disclosures relating to the Company's fair value measurements.   Operating Segments   Management has determined that since generally all of the banking products and services offered by the Company are available in each branch of the Bank, all branches are located within the same economic environment and management does not allocate resources based on the performance of different lending or transaction activities, it is appropriate to aggregate the Bank branches and report them as a single operating segment.   Recent Accounting Pronouncements   When RBB conducted its IPO in 2017, we qualified as an emerging growth company (“EGC”). We will remain an EGC until the earliest of (i) the end of the fiscal year during which we have total annual gross revenues of $1.0 billion or more, (ii) the end of the fiscal year following the fifth anniversary of the completion of our IPO, (iii) the date on which we have, during the previous three -year period, issued more than $1.0 billion in non-convertible debt and (iv) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended. We will no longer qualify as an EGC on December 31, 2022. EGCs are entitled to reduced regulatory and reporting requirements under the Securities Act and the Exchange Act.   In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU" or “Update”) 2014 - 09, Revenue from Contracts with Customers (Topic 606 ) . This Update requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services. The following steps are applied in the updated guidance: ( 1 ) identify the contract(s) with a customer; ( 2 ) identify the performance obligations in the contract; ( 3 ) determine the transaction price; ( 4 ) allocate the transaction price to the performance obligations in the contract; and ( 5 ) recognize revenue when, or as, the entity satisfies a performance obligation. These amendments are effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Our revenue is primarily comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014 - 09, and non-interest income. Accordingly, the majority of the Company’s revenues will not be affected. In addition, the standard does not materially impact the timing or measurement of the Company’s revenue recognition as it is consistent with the Company’s existing accounting for contracts within the scope of the standard. As an emerging growth company, the Company adopted ASU 2014 - 09 as of January 1, 2019, utilizing the modified prospective approach.  Refer to Note 20 - Revenue from Contracts with Customers .   99     In February 2016, the FASB issued ASU 2016 - 02, Leases (Topic 842 ) . The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases, which is generally defined as a lease term of less than 12 months. This change will result in lessees recognizing right-of-use assets and lease liabilities for most leases currently accounted for as operating leases under current lease accounting guidance. The amendments in this Update are effective for 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. This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace today's "incurred loss" approach with an "expected loss" model. The new model, referred to as the current expected credit loss ("CECL") model, will apply to: ( 1 ) financial assets subject to credit losses and measured at amortized cost, and ( 2 ) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held to maturity securities, loan commitments, and financial guarantees. For available for sale (“AFS”) debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. ASU 2016 - 13 also expands the disclosure requirements regarding an entity's assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, public business entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU 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). The Company has begun its evaluation of the impact of the implementation of ASU 2016 - 13. The implementation of the provisions of ASU 2016 - 13 will most likely impact the Company’s consolidated financial statements as to the level of reserves that will be required for credit losses. The Company will continue to assess the potential impact that this Update will have on the Company’s consolidated financial statements. The Company will adopt CECL (ASU 2016 - 13 ) on December 31, 2022.   In February 2019, the U.S. federal bank regulatory agencies approved a final rule modifying their regulatory capital rules and providing an option to phase in over a three year period the day- one adverse regulatory capital effects of ASU 2016 - 13. Additionally, in March 2020, the U.S. federal bank regulatory agencies issued an interim final rule that provides banking organizations an option to delay the estimated CECL impact on regulatory capital for an additional two years for a total transition period of up to five years to provide regulatory relief to banking organizations to better focus on supporting lending to creditworthy households and businesses in light of recent strains on the U.S. economy as a result of the novel coronavirus disease 2019 ("COVID- 19" ) pandemic. As a result, entities will have the option to gradually phase in the full effect of CECL on regulatory capital over a five -year transition period.   In January 2017, the FASB issued ASU 2017 - 04, Intangibles—Goodwill and Other (Topic 350 ) . This Update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The amendments in this Update are required for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. As a result, under this Update, “an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.” The Company will adopt this ASU on December 31, 2022. Adoption of ASU 2017 - 04 is not expected to have a significant impact on the Company’s consolidated financial statements.   100     In June 2018, the FASB issued ASU 2018 - 07, Compensation—Stock Compensation (Topic 718 ): Improvements to Nonemployee Share-Based Payment Accounting . The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. An entity should apply the requirements of Topic 718 to non-employee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide ( 1 ) financing to the issuer or ( 2 ) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. For emerging growth companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. This Update has the potential to only impact share-based payments to the Company’s non-employees.  The Company adopted this ASU on January 1, 2020 and this ASU did not have a material impact on the Company’s consolidated financial statements.   In August 2018, the FASB issued ASU 2018 - 13, Fair Value Measurement (Topic 820 ): Disclosure Framework – Changes to the Disclosure Requirements for F air Value Measurement . The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. These disclosure requirements were removed from the topic: ( 1 ) The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, ( 2 ) the policy for timing of transfers between levels, and ( 3 ) the valuation processes for Level 3 fair value measurements. These disclosure requirements were modified: ( 1 ) For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly, and ( 2 ) the amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. The following disclosure requirements were added: ( 1 ) The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, ( 2 ) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. In addition, the amendments eliminate “at a minimum” from the phrase “an entity shall disclose at a minimum to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and to clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements”. The amendments in this Update are effective for emerging growth companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. As an EGC, RBB adopted this Update on January 1, 2020 and it did not have a material impact on the Company’s consolidated financial statements.   In August 2018, the FASB issued ASU 2018 - 15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350 - 40 ): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . This Update provides additional guidance to ASU 2015 - 05, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350 - 40 ): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement” (CCA), on the accounting for implementation, setup, and other upfront costs (collectively referred to as implementation costs) apply to entities that are a customer in a hosting arrangement. This Update applies to entities that are a customer in a hosting arrangement, which is a service contract. Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are performed. This Update also require the customer to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. This Update is effective for an EGC for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, for all entities. The amendments in this Update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. This Update could be material should RBB incur implementation costs for a CCA that is a service contract.   101     In November 2019, the FASB issued ASU 2019 - 08, Compensation—Stock Compensation (Topic 718 ) and Revenue from Contracts with Customers (Topic 606 ), Codification Improvements—Share-Based Consideration Payable to a Customer . This ASU will affect companies that issue share-based payments (e.g., options or warrants) to their customers. In June 2018, the FASB issued ASU 2018 - 07 that expanded the scope of Topic 718, Compensation—Stock Compensation, to include share-based payments to non-employees in exchange for goods and services. That ASU substantially aligned the accounting for share-based payments to non-employees and employees. However, it required share-based payments to nonemployee customers to be accounted for under Topic 606, Revenue from Contracts with Customers, as a reduction of revenue, similar to other sales incentives (such as coupons and rebates). While that ASU provided guidance on the income statement classification of payments to customers (as a reduction of revenue), that ASU did not specify when to measure such awards or how to classify awards on the balance sheet (for example as a liability or as equity). To address diversity in these areas, the new guidance requires companies to measure and classify (on the balance sheet) share-based payments to customers by applying the guidance in Topic 718. As a result, the amount recorded as a reduction in revenue would be measured based on the grant-date fair value of the share-based payment. ASU 2019 - 08 is effective for entities that have not yet adopted the amendments in ASU 2018 - 07, the amendments in ASU 2019 - 08 are effective for an EGC in fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company adopted the ASU as of December 31, 2019 and this ASU did not have a material impact on the Company’s financial statements as the Company has not issued share-based payments to non-employees, except for non-employee members of the board of directors.   In November 2019, the FASB issued ASU 2019 - 10, Financial Instruments—Credit Losses (Topic 326 ), Derivatives and Hedging (Topic 815 ), and Leases (Topic 842 ), Effective Dates . In July 2017, British banking regulators announced plans to eliminate the LIBOR rate by the end of 2021. The purpose of the ASU is to facilitate the effects of reference rate reform on financial reporting. It provides temporary, optional expedients and exceptions related to applying U.S. GAAP to contract modifications, hedging relationships, fair value hedges, and other transactions affected by reference rate reform. The ASU applies only to contracts or hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. Regulators have established an Alternative Reference Rate Committee to assist with this change. The Company has loans, long-term debt and subordinated debt that have interest rates that reference LIBOR. Of the Company’s $ 2.9  billion in total gross loans as of December 31, 2021, approximately 8 % have a LIBOR based reference rate. 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. The Company has equity securities on our balance sheet but are not material to be considered for the equity method. For an EGC, this ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.   In February 2020, the FASB issued ASU 2020 - 02, “Financial Instruments—Credit Losses (Topic 326 ) and Leases (Topic 842 )—Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016 - 02, Leases (Topic 842 ) (SEC Update)”. This is an amendment to add the SEC Staff guidance on CECL) to the FASB codification. It contains guidance on what the SEC would expect the Company to perform and document when measuring and recording its allowance for credit losses for financial assets recorded at amortized cost. As an EGC, the Company will implement CECL on December 31, 2022.   In March 2020, the FASB issued ASU 2020 - 03, “Codification Improvements to Financial Instruments”. The ASU clarifies the accounting and disclosure guidance in various codification topics for financial instruments. In particular, the amendments ( 1 ) clarify certain disclosure requirements, including fair value option disclosures, ( 2 ) add cross-references in U.S. GAAP to clarify certain guidance, ( 3 ) make clear the applicability of the portfolio exception in ASC 820, Fair Value Measurement, to nonfinancial items, ( 4 ) clarify the determination of the contractual life of a net investment in leases in estimating expected credit losses under ASC 326, Financial Instruments – Credit Losses, and ( 5 ) explain the interaction between the guidance in ASC 860 - 20, Transfers and Servicing: Sales of Financial Assets, and ASC 326. For RBB as an EGC, issues 1, 2, 4 and 5 were adopted January 1, 2020. The amendment related to Issue 3 is a conforming amendment that affects the guidance in the amendments in ASU 2019 - 04. We  determined the financial impact on the Company’s consolidated financial statements was not material.   102     In March 2020, the FASB issued ASU 2020 - 04, "Reference Rate Reform (Topic 848 ), Facilitation of the Effects of Reference Rate Reform on Financial Reporting," which provides temporary optional expedients to ease the financial reporting burdens of the expected market transition from London Interbank Offered Rate (“LIBOR”) to an alternative reference rate such as Secured Overnight Financing Rate (“SOFR”). This pronouncement is applicable to all companies with contracts or hedging relationships that reference an interest rate that is expected to be discontinued. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. Companies can apply the ASU immediately. However, the guidance will only be available for a limited time (generally through December 31, 2022). For contract modifications, companies can account for the modification as a continuation of the existing contract without additional analysis. For held-to-maturity (“HTM”) debt securities, one -time sale and/or transfer to available-for-sale or trading may be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM before January 1, 2020. Regarding the effective date and transition: ( 1 ) companies can apply the ASU as of the beginning of the interim period that includes March 12, 2020 ( e.g. January 1, 2020 for calendar year-end companies) or any date thereafter, ( 2 ) the ASU applies prospectively to contract modifications and hedging relationships, and ( 3 ) the one -time election to sell and/or transfer debt securities classified as HTM may be made at any time after March 12, 2020. 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. The Company has several issuances of LIBOR based long-term debt and subordinated debentures. Refer to Notes 9 and 10 of the Company’s consolidated financial statements included in this Form 10 -K. We are currently evaluating this guidance to determine the financial impact on the Company’s consolidated financial statements.   In June 2020, the FASB issued ASU 2020 - 05, “Revenue from Contracts with Customers (Topic 606 ) and Leases (Topic 842 ): Effective Dates for Certain Entities”. 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 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 – ACQUISITIONS   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. Acquisition:   On January 10, 2020, the Company acquired all the assets and assumed all the liabilities of PGBH and its wholly owned bank subsidiary, in exchange for cash of $ 32.9 million. PGBH operated three branches in the Chicago, Illinois metropolitan area. The Company acquired PGBH to strategically establish a presence in the Chicago area. Goodwill in the amount of $ 10.7 million was recognized in this acquisition. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. Goodwill is not deductible for income tax purposes.   103     The following table represents the assets acquired and liabilities assumed of PGBH as of January 10, 2020 and the fair value adjustments and amounts recorded by the Company through  2020  under the acquisition method of accounting:         PGBH     Fair Value     Fair   (dollars in thousands)   Book Value     Adjustments     Value   Assets acquired                         Cash and cash equivalents   $ 17,033     $ —     $ 17,033   Fed funds sold     8,300       —       8,300   Interest-bearing deposits in other financial Institutions     14,186       —       14,186   Loans, gross     172,443       666       173,109   Allowance for loan losses     ( 2,265 )     2,265       —   Bank premises and equipment     6,394       1,639       8,033   Core deposit premium     —       491       491   Investment in trust     155       —       155   Other assets     1,687       ( 580 )     1,107   Total assets acquired   $ 217,933     $ 4,481     $ 222,414                             Liabilities assumed                         Deposits   $ 187,393     $ 969     $ 188,362   Escrow Payable     4,277       —       4,277   Subordinated debentures     5,155       ( 763 )     4,392   Deferred income taxes     1,016       1,335       2,351   Other liabilities     1,211       ( 384 )     827   Total liabilities assumed     199,052       1,157       200,209   Excess of assets acquired over liabilities assumed     18,881       3,324       22,205       $ 217,933     $ 4,481           Cash paid                     32,885   Goodwill recognized                   $ 10,680     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.   The loan portfolio of PGBH was recorded at fair value at the date of acquisition with the assistance of a third -party valuation. A valuation of PGBH’s loan portfolio was performed as of the acquisition date to assess the fair value of the loan portfolio. The loan portfolio was segmented into two groups; loans with credit deterioration, of which there were none, and loans without credit deterioration, and then split further by loan type. The fair value was calculated on an individual loan basis using a discounted cash flow analysis. The discount rate utilized was based on a weighted average cost of capital, considering the cost of equity and cost of debt. Also factored into the fair value estimates were loss rates, recovery period and prepayment rates based on industry standards.   The Company also determined the fair value of the core deposit intangible, securities and deposits with the assistance of third -party valuations.   The core deposit intangible on non-maturing deposits was determined by evaluating the underlying characteristics of the deposit relationships, including customer attrition, deposit interest rates, service charge income, overhead expense and costs of alternative funding. Since the fair value of intangible assets are calculated as if they were stand-alone assets, the presumption is that a hypothetical buyer of the intangible asset would be able to take advantage of potential tax benefits resulting from the asset purchase. The value of the benefit is the present value over the period of the tax benefit, using the discount rate applicable to the asset.   In determining the fair value of certificates of deposit, a discounted cash flow analysis was used, which involved present valuing the contractual payments over the remaining life of the certificates of deposit at market-based interest rates.   104     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   Contractual amounts due   $ 195,227   Cash flows not expected to be collected     5,176   Expected cash flows     190,051   Interest component of expected cash flows     16,942   Fair value of acquired loans   $ 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 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. There were no material, nonrecurring adjustments to the pro forma net interest and other income, net income and earnings per share presented below:       Twelve months ended   (dollars in thousands)   December 31, 2021     December 31, 2020   Net interest and other income   $ 143,088     $ 119,029   Net income     56,906       31,762   Basic earnings per share     2.92       1.61   Diluted earnings per share     2.86       1.59     Third-party acquisition related expenses are recognized as incurred and continue until the acquired system is converted and operational functions become fully integrated. The Company incurred third -party acquisition related expenses in the consolidated statements of income for the periods indicated in the Statements of Income in the expense item “Merger and conversion expenses”.   105       NOTE 4 - INVESTMENT SECURITIES   The following table summarizes the amortized cost and fair value of available for sale (“AFS”) securities and held to maturity (“HTM”) securities at December 31, 2021 and 2020 , and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income:               Gross     Gross           (dollars in thousands)   Amortized     Unrealized     Unrealized     Fair   December 31, 2021   Cost     Gains     Losses     Value   Available for sale                                 Government agency securities   $ 5,689     $ 4     $ ( 83 )   $ 5,610   SBA agency securities     3,351       118       —       3,469   Mortgage-backed securities- Government sponsored agencies     55,534       31       ( 540 )     55,025   Collateralized mortgage obligations     121,377       128       ( 1,994 )     119,511   Commercial paper     129,962       —       ( 36 )     129,926   Corporate debt securities     41,999       460       ( 254 )     42,205   Municipal securities     12,701       —       ( 187 )     12,514   Total   $ 370,613     $ 741     $ ( 3,094 )   $ 368,260                                     Held to maturity                                 Municipal taxable securities   $ 1,506     $ 77     $ —     $ 1,583   Municipal securities     4,746       248       —       4,994   Total   $ 6,252     $ 325     $ —     $ 6,577                 Gross     Gross           (dollars in thousands)   Amortized     Unrealized     Unrealized     Fair   December 31, 2020   Cost     Gains     Losses     Value   Available for sale                                 Government agency securities   $ 1,257     $ 37     $ —     $ 1,294   SBA agency securities     4,125       269       —       4,394   Mortgage-backed securities- Government sponsored agencies     17,415       270       ( 8 )     17,677   Collateralized mortgage obligations     48,476       491       ( 93 )     48,874   Commercial paper     102,462       —       ( 14 )     102,448   Corporate debt securities     33,907       662       ( 6 )     34,563   Municipal securities     1,621       2       ( 6 )     1,617   Total   $ 209,263     $ 1,731     $ ( 127 )   $ 210,867                                     Held to maturity                                 Municipal taxable securities   $ 2,407     $ 139     $ —     $ 2,546   Municipal securities     4,767       290       —       5,057   Total   $ 7,174     $ 429     $ —     $ 7,603       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.   106     The amortized cost and fair value of the investment securities portfolio as of December 31, 2021 are shown by expected maturity below. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.       Less than One Year     More than One Year to Five Years     More than Five Years to Ten Years     More than Ten Years     Total       Amortized     Estimated     Amortized     Estimated     Amortized     Estimated     Amortized     Estimated     Amortized     Estimated   (dollars in thousands)   Cost     Fair Value     Cost     Fair Value     Cost     Fair Value     Cost     Fair Value     Cost     Fair Value   December 31, 2021                                                                                 Government agency securities   $ —     $ —     $ 5,689     $ 5,610     $ —     $ —     $ —     $ —     $ 5,689     $ 5,610   SBA securities     —       —       1,551       1,582       1,800       1,887       —       —       3,351       3,469   Mortgage-backed securities- Government sponsored agencies     5,001       4,998       35,254       35,000       15,279       15,027       —       —       55,534       55,025   Collateralized mortgage obligations     117       117       78,021       76,496       43,239       42,898       —       —       121,377       119,511   Commercial paper     129,962       129,926       —       —       —       —       —       —       129,962       129,926   Corporate debt securities     7,999       8,007       8,389       8,633       22,927       22,931       2,684       2,634       41,999       42,205   Municipal securities     —       —       —       —       —       —       12,701       12,514       12,701       12,514   Total available for sale   $ 143,079     $ 143,048     $ 128,904     $ 127,321     $ 83,245     $ 82,743     $ 15,385     $ 15,148     $ 370,613     $ 368,260                                                                                     Municipal taxable securities   $ 500     $ 502     $ 1,006     $ 1,081     $ —     $ —     $ —     $ —     $ 1,506     $ 1,583   Municipal securities     —       —       —       —       1,743       1,818       3,003       3,176       4,746       4,994   Total held to maturity   $ 500     $ 502     $ 1,006     $ 1,081     $ 1,743     $ 1,818     $ 3,003     $ 3,176     $ 6,252     $ 6,577   (dollars in thousands)                                                                                 December 31, 2020                                                                                 Government agency securities   $ —     $ —     $ 1,257     $ 1,294     $ —     $ —     $ —     $ —     $ 1,257     $ 1,294   SBA securities     —       —       595       625       3,530       3,769       —       —       4,125       4,394   Mortgage-backed securities- Government sponsored agencies     7,992       7,987       9,423       9,690       —       —       —       —       17,415       17,677   Collateralized mortgage obligations     —       —       11,911       12,258       36,565       36,616       —       —       48,476       48,874   Commercial paper     102,462       102,448       —       —       —       —       —       —       102,462       102,448   Corporate debt securities     4,991       5,029       11,683       11,740       13,233       13,743       4,000       4,051       33,907       34,563   Municipal securities     —       —       —       —       —       —       1,621       1,617       1,621       1,617   Total available for sale   $ 115,445     $ 115,464     $ 34,869     $ 35,607     $ 53,328     $ 54,128     $ 5,621     $ 5,668     $ 209,263     $ 210,867                                                                                     Municipal taxable securities   $ 899     $ 910     $ 1,508     $ 1,636     $ —     $ —     $ —     $ —     $ 2,407     $ 2,546   Municipal securities     —       —       —       —       874       925       3,893       4,132       4,767       5,057   Total held to maturity   $ 899     $ 910     $ 1,508     $ 1,636     $ 874     $ 925     $ 3,893     $ 4,132     $ 7,174     $ 7,603     The following table summarizes investment securities with unrealized losses at December 31, 2021 and December 31, 2020 , aggregated by major security type and length of time in a continuous unrealized loss position:       Less than Twelve Months     Twelve Months or More     Total   (dollars in thousands)   Unrealized Losses     Estimated Fair Value     No. of Issuances     Unrealized Losses     Estimated Fair Value     No. of Issuances     Unrealized Losses     Estimated Fair Value     No. of Issuances   December 31, 2021                                                                         Government agency securities   $ ( 83 )   $ 4,860       1     $ —     $ —       —     $ ( 83 )   $ 4,860       1   Mortgage-backed securities- Government sponsored agencies     ( 536 )     44,009       12       ( 4 )     9,974       2       ( 540 )     53,983       14   Collateralized mortgage obligations     ( 1,916 )     79,851       23       ( 78 )     17,782       4       ( 1,994 )     97,633       27   Commercial paper     ( 36 )     129,926       19       —       —       —       ( 36 )     129,926       19   Corporate debt securities     ( 254 )     13,208       12       —       —       —       ( 254 )     13,208       12   Municipal securities     ( 160 )     11,447       9       ( 27 )     1,067       2       ( 187 )     12,514       11   Total available for sale   $ ( 2,985 )   $ 283,301       76     $ ( 109 )   $ 28,823       8     $ ( 3,094 )   $ 312,124       84         Less than Twelve Months     Twelve Months or More     Total                                                                             (dollars in thousands)   Unrealized Losses     Estimated Fair Value     No. of Issuances     Unrealized Losses     Estimated Fair Value     No. of Issuances     Unrealized Losses     Estimated Fair Value     No. of Issuances   December 31, 2020                                                                         Mortgage-backed securities- Government sponsored agencies   $ ( 8 )   $ 12,982       3     $ —     $ —       —     $ ( 8 )   $ 12,982       3   Collateralized mortgage obligations     ( 93 )     28,521       6       —       —       —       ( 93 )     28,521       6   Commercial paper     ( 14 )     16,982       4       —       —       —       ( 14 )     16,982       4   Corporate debt securities     ( 6 )     994       2       —       —       —       ( 6 )     994       2   Municipal securities     ( 6 )     1,092       2       —       —       —       ( 6 )     1,092       2   Total available for sale   $ ( 127 )   $ 60,571       17     $ —     $ —       —     $ ( 127 )   $ 60,571       17     Unrealized losses have not been recognized into income because the issuer bonds are of high credit quality, management does not intend to sell, it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bonds approach maturity.   107     Management evaluates securities for other-than-temporary impairment (“OTTI”) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer.  Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis.  If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.     NOTE 5 - LOANS   The Company's loan portfolio consists primarily of loans to borrowers within the Los Angeles, California metropolitan area, the New York City metropolitan area, Chicago, Illinois metropolitan area and Las Vegas, Nevada. Although the Company seeks to avoid concentrations of loans to a single industry or based upon a single class of collateral, real estate and real estate associated businesses are among the principal industries in the Company's market area and, as a result, the Company's loan and collateral portfolios are, to some degree, concentrated in those industries.   A summary of the changes in the allowance for loan losses as of December 31 follows:   (dollars in thousands)   2021     2020     2019   Allowance for loan losses:                         Beginning balance   $ 29,337     $ 18,816     $ 17,577   Additions to the allowance charged to expense     3,959       11,823       2,390   Recoveries on loans charged-off     243       1       108   Less loans charged-off     ( 627 )     ( 1,303 )     ( 1,259 ) Ending balance   $ 32,912     $ 29,337     $ 18,816     The following table presents the recorded investment in loans and impairment method as of December 31, 2021, 2020 and 2019 and the activity in the allowance for loan losses for the years then ended, by portfolio segment:       (dollars in thousands)                                 December 31, 2021   Real Estate     Commercial     Other     Total   Allowance for loan losses:                                 Beginning of year   $ 24,677     $ 4,617     $ 43     $ 29,337   Provisions     3,982       ( 480 )     457       3,959   Charge-offs     ( 67 )     ( 501 )     ( 59 )     ( 627 ) Recoveries     —       157       86       243       $ 28,592     $ 3,793     $ 527     $ 32,912   Reserves:                                 Specific   $ —     $ 30     $ —     $ 30   General     28,592       3,763       527       32,882   Total allowance for loan losses   $ 28,592     $ 3,793     $ 527     $ 32,912   Loans evaluated for impairment:                                 Individually   $ 10,340     $ 10,385     $ —     $ 20,725   Collectively     2,545,379       334,460       30,786       2,910,625   Total loans, net of deferred loan fees and unaccreted discount on acquired loans   $ 2,555,719     $ 344,845     $ 30,786     $ 2,931,350     108     December 31, 2020   Real Estate     Commercial     Other     Unallocated     Total   Allowance for loan losses:                                         Beginning of year   $ 15,118     $ 3,588     $ 9     $ 101     $ 18,816   Provisions     9,559       2,286       79       ( 101 )     11,823   Charge-offs     —       ( 1,258 )     ( 45 )     —       ( 1,303 ) Recoveries     —       1       —       —       1       $ 24,677     $ 4,617     $ 43     $ —     $ 29,337   Reserves:                                         Specific   $ —     $ 525     $ —     $ —     $ 525   General     24,677       4,092       43       —       28,812   Total allowance for loan losses   $ 24,677     $ 4,617     $ 43     $ —     $ 29,337                                             Loans evaluated for impairment:                                         Individually   $ 10,514     $ 9,025     $ 15     $ —     $ 19,554   Collectively     2,304,203       378,935       4,074       —       2,687,212   Total loans, net of deferred loan fees and unaccreted discount on acquired loans   $ 2,314,717     $ 387,960     $ 4,089     $ —     $ 2,706,766       December 31, 2019   Real Estate     Commercial     Other     Unallocated     Total   Allowance for loan losses:                                         Beginning of year   $ 13,437     $ 4,140     $ —     $ —     $ 17,577   Provisions     1,847       433       9       101       2,390   Charge-offs     ( 166 )     ( 1,093 )     —       —       ( 1,259 ) Recoveries     —       108       —       —       108       $ 15,118     $ 3,588     $ 9     $ 101     $ 18,816   Reserves:                                         Specific   $ —     $ —     $ —     $ —     $ —   General     15,118       3,588       9       101       18,816   Total allowance for loan losses   $ 15,118     $ 3,588     $ 9     $ 101     $ 18,816   Loans evaluated for impairment:                                         Individually   $ 3,795     $ 9,423     $ —     $ —     $ 13,218   Collectively     1,842,747       340,148       821       —       2,183,716   Total loans, net of deferred loan fees and unaccreted discount on acquired loans   $ 1,846,542     $ 349,571     $ 821     $ —     $ 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. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as commercial real estate and commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained. The Company uses the following definitions for risk ratings:   Pass - Loans classified as pass include loans not meeting the risk ratings defined below.   Special Mention - Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.   Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.   109     Impaired - A loan is considered impaired, when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Additionally, all loans classified as troubled debt restructurings are considered impaired.   The risk category of loans by class of loans was as follows as of December 31, 2021 and 2020 :     (dollars in thousands)           Special                           December 31, 2021   Pass     Mention     Substandard     Impaired     Total   Real estate:                                         Construction and land development   $ 299,333     $ 3,662     $ —     $ 149     $ 303,144   Commercial real estate     1,184,889       2,006       55,104       6,000       1,247,999   Single-family residential mortgages     1,000,385       —       —       4,191       1,004,576   Commercial:                                         Commercial and industrial     255,439       —       9,148       4,122       268,709   SBA     62,300       1,303       6,270       6,263       76,136   Other:     30,786       —       —       —       30,786       $ 2,833,132     $ 6,971     $ 70,522     $ 20,725     $ 2,931,350       (dollars in thousands)           Special                           December 31, 2020   Pass     Mention     Substandard     Impaired     Total   Real estate:                                         Construction and land development   $ 186,550     $ —     $ —     $ 173     $ 186,723   Commercial real estate     947,643       756       52,611       2,627       1,003,637   Single-family residential mortgages     1,113,814       2,436       393       7,714       1,124,357   Commercial:                                         Commercial and industrial     278,357       999       8,620       2,163       290,139   SBA     86,573       186       4,200       6,862       97,821   Other:     4,074       —       —       15       4,089       $ 2,617,011     $ 4,377     $ 65,824     $ 19,554     $ 2,706,766     110     The following table presents the aging of the recorded investment in past-due loans as of December 31, 2021 and 2020 by class of loans. Past due loans presented in table below also includes non-accrual loans.        (dollars in thousands)   30 - 59     60 - 89     90 Days     Total     Loans Not             Non-Accrual   December 31, 2021   Days     Days     Or More     Past Due     Past Due     Total Loans     Loans (1)   Real estate:                                                         Construction and land development   $ —     $ —     $ 149     $ 149     $ 302,995     $ 303,144     $ 149   Commercial real estate     1,914       3,002       667       5,583       1,242,416       1,247,999       4,672   Single-family residential mortgages     10,554       2,238       2,680       15,472       989,104       1,004,576       4,191   Commercial:                                                         Commercial and industrial     1,575       —       3,689       5,264       263,445       268,709       3,712   SBA     —       1,733       4,839       6,572       69,564       76,136       6,263   Other:     57       7       —       64       30,722       30,786       —       $ 14,100     $ 6,980     $ 12,024     $ 33,104     $ 2,898,246     $ 2,931,350     $ 18,987   Real estate:                                                         Single-family residential mortgages held for sale   $ —     $ —     $ —     $ —     $ 5,957     $ 5,957     $ —   ________________   ( 1 ) Included in total loans     (dollars in thousands)   30 - 59     60 - 89     90 Days     Total     Loans Not             Non- Accrual   December 31, 2020   Days     Days     Or More     Past Due     Past Due     Total Loans     Loans (1)   Real estate:                                                         Construction and land development   $ —     $ —     $ 173     $ 173     $ 186,550     $ 186,723     $ 173   Commercial real estate     449       10       1,136       1,595       1,002,042       1,003,637       1,193   Single-family residential mortgages     4,219       4,859       6,008       15,086       1,109,271       1,124,357       7,714   Commercial:                                                         Commercial and industrial     —       —       987       987       289,152       290,139       1,661   SBA     —       33       6,828       6,861       90,960       97,821       6,828   Other     42       —       15       57       4,032       4,089       15       $ 4,710     $ 4,902     $ 15,147     $ 24,759     $ 2,682,007     $ 2,706,766     $ 17,584   Real estate:                                                         Single-family residential mortgages held for sale   $ —     $ —     $ —     $ —     $ 49,963     $ 49,963     $ —       ( 1 ) Included in total loans     The Company has  no  loans that are  90  days or more past due and still accruing at December  31,   2021  and  December 31, 2020.   111     Information relating to individually impaired loans presented by class of loans was as follows as of December 31, 2021, 2020 and 2019 :         Unpaid                                   (dollars in thousands)   Principal     Recorded     Average     Interest     Related   December 31, 2021   Balance     Investment     Balance     Income     Allowance   With no related allowance recorded                                         Construction and land development   $ 173     $ 149     $ 292     $ —     $ —   Commercial and industrial     4,096       4,096       4,390       27       —   Commercial real estate     6,059       6,000       6,163       132       —   Single-family residential mortgage loans     4,365       4,191       4,486       —       —   Commercial - SBA     6,274       6,245       11,589       —       —   With related allowance recorded                                         Commercial and industrial     27       26       34       —       27   Commercial-SBA     18       18       26       —       3   Total   $ 21,012     $ 20,725     $ 26,980     $ 159     $ 30         Unpaid                                   (dollars in thousands)   Principal     Recorded     Average     Interest     Related   December 31, 2020   Balance     Investment     Balance     Income     Allowance   With no related allowance recorded                                         Construction and land development   $ 173     $ 173     $ 173     $ —     $ —   Commercial and industrial     1,710       1,662       1,819       31           Commercial real estate     2,633       2,627       2,724       136       —   Residential mortgage loans     7,839       7,714       7,934       —       —   Commercial - SBA     6,828       6,829       9,928       —       —   Other     15       15       15       —       —   With related allowance recorded                                         Commercial and industrial     520       501       563       —       520   Commercial-SBA     33       33       40       3       5   Total   $ 19,751     $ 19,554     $ 23,196     $ 170     $ 525         Unpaid                                       Principal     Recorded     Average     Interest     Related   December 31, 2019   Balance     Investment     Balance     Income     Allowance   With no related allowance recorded                                         Construction and land development   $ 264     $ 264     $ 271     $ 24     $ —   Commercial real estate     2,198       2,197       2,384       100       —   Residential mortgage loans     1,349       1,334       1,351       —       —   Commercial - SBA     9,423       9,423       10,791       4       —   With related allowance recorded                                         Commercial real estate     —       —       —       —       —   Commercial-SBA     —       —       —       —       —   Total   $ 13,234     $ 13,218     $ 14,797     $ 128     $ —     No interest income was recognized on a cash basis as of December 31, 2021 and 2020 . We did not recognize any interest income on nonaccrual loans during the years ended December 31, 2021 and December 31, 2020 while the loans were in nonaccrual status. 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. 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 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 no  non-accrual loans that were modified as TDRs during the past twelve months that had payment defaults during the periods.   112     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, 2021 , 2020  and 2019:       December 31,       2021     2020     2019               Pre-     Post-             Pre-     Post-             Pre-     Post-               Modification     Modification             Modification     Modification             Modification     Modification   (dollars in thousands)   Number of     Recorded     Recorded     Number of     Recorded     Recorded     Number of     Recorded     Recorded       Loans     Investment     Investment     Loans     Investment     Investment     Loans     Investment     Investment   SBA     1     $ 1,090     $ 1,090       —     $ —     $ —       —     $ —     $ —   Commercial real estate     2       284       284       3       1,719       1,719       1       476       476   Construction and land development     1       165       165       —       —       —       —       —       —   SFR     1       156       156       —       —       —       —       —       —   Total     5     $ 1,695     $ 1,695       3     $ 1,719     $ 1,719       1     $ 476     $ 476     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.      NOTE 6 - LOAN SERVICING   Mortgage and SBA loans serviced for others are not reported as assets. The principal balances as of December 31, 2021 and 2020 are as follows:       December 31,     December 31,   (dollars in thousands)   2021     2020   Loans serviced for others:                 Mortgage loans   $ 1,308,672     $ 1,512,969   SBA loans     138,173       156,222   Commercial real estate loans     4,070       4,145     Estimates of the loan servicing asset fair value are derived through a discounted cash flow analysis. Portfolio characteristics include loan delinquency rates, age of loans, note rate and geography. The assumptions embedded in the valuation are obtained from a range of metrics utilized by active buyers in the market place. The analysis accounts for recent transactions, and supply and demand within the market.   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.   113     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. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.   Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company 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, 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. The fees are based on a contractual percentage of the outstanding principal. The amortization of mortgage servicing rights is netted against loan servicing fee income.       2021     2020     2019       Mortgage     SBA     Mortgage     SBA     Mortgage     SBA   (dollars in thousands)   Loans     Loans     Loans     Loans     Loans     Loans   Servicing assets:                                                 Beginning of period   $ 10,529     $ 3,436     $ 12,997     $ 4,086     $ 12,858     $ 4,512   Additions     1,920       441       1,422       293       2,088       980   Disposals     ( 2,129 )     ( 646 )     ( 1,513 )     ( 401 )     ( 128 )     ( 708 ) Amortized to expense     ( 1,988 )     ( 462 )     ( 1,960 )     ( 542 )     ( 1,821 )     ( 698 ) Impairment     416       —       ( 417 )     —       —       —   End of period   $ 8,748     $ 2,769     $ 10,529     $ 3,436     $ 12,997     $ 4,086     The fair value of servicing assets for mortgage loans was $ 15.4  million and $ 10.7  million as of December 31, 2021 and 2020 , respectively. Fair value at December 31, 2021 was determined using a discount rate of 10.86 %, average prepayment speed of 14.04 %, depending on the stratification of the specific right, and a weighted-average default rate of 0.10 %. 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 $ 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 %. Fair value at December 31, 2020 was determined using a discount rate of 8.5 % and average prepayment speed of 13.8 %, depending on the stratification of the specific right and a weighted-average default rate of 0.84 %.     NOTE 7 - PREMISES AND EQUIPMENT   A summary of premises and equipment as of December 31 follows:   (dollars in thousands)   2021     2020   Land   $ 9,066     $ 9,066   Building and improvements     15,265       15,040   Furniture, fixtures, and equipment     7,575       6,772   Leasehold improvements     6,455       5,315         38,361       36,193   Less accumulated depreciation and amortization     ( 11,629 )     ( 9,773 ) Construction in progress     467       683       $ 27,199     $ 27,103     Depreciation and leasehold amortization expense was $ 1.9  million, $ 2.0  million, and $ 1.9  million for 2021 , 2020 , and 2019 , respectively.   114     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 various branch locations.   Future minimum rent payments on the Company's leases were as follows as of December 31, 2021 :   (dollars in thousands)         As of December 31, 2021:         2022   $ 4,490   2023     3,931   2024     2,872   2025     2,724   2026     2,704   Thereafter     6,875   Total   $ 23,596     The minimum rent payments shown above are given for the existing lease obligations and are not a forecast of future rental expense. Total rental expense, recognized on a straight-line basis, was $ 5.3  million, $ 5.7  million, and $ 6.1  million for 2021, 2020, and 2019, respectively.   In July  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  24, 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. 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. The future payments for all of the new leases are included in the schedule above. The Company recorded $ 479,000 and $ 395,000 in sub-lease income in   2021  and 2020, respectively.     NOTE 8 - DEPOSITS   At December 31, 2021 the scheduled maturities of time deposits are as follows:   (dollars in thousands)   December 31, 2021   One year   $ 1,119,404   Two to three years     44,612   Over three years     2,422   Total   $ 1,166,439     Brokered time deposits were $ 2.4  million at December 31, 2021 and $ 17.4  million at December 31, 2020 .       NOTE 9 - LONG-TERM DEBT   In March 2016, the Company issued $ 50 million of 6.5 % fixed to floating rate subordinated debentures, due March 31, 2026. The interest rate is fixed through March 31, 2021 and floats at 3 month LIBOR plus 516 basis points thereafter. 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. The interest rate is fixed through December 1, 2023 and floats at 3 month LIBOR plus 315 basis points thereafter. The Company can redeem these subordinated debentures beginning December 1, 2023. 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  1, 2031. 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  1, 2026. 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,     December 31,   (dollars in thousands)   2021     2020   Principal   $ 175,000     $ 105,000   Unamortized debt issuance costs   $ 1,993     $ 609     115     The following table presents interest and amortization expense the Company incurred for the year ended December 31, 2021 and 2020 :       For the Year Ended December 31,   (dollars in thousands)   2021     2020   Interest Expense:                 Interest   $ 7,878     $ 6,649   Amortization     525       342     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   The Company, through the acquisition of TFC Bancorp in 2016, acquired TFC Statutory Trust (the “Trust”). The Trust contained a pooled private offering of 5,000 trust preferred securities with a liquidation amount of $ 1,000 per security. TFC Bancorp issued $ 5 million of subordinated debentures to the Trust in exchange for ownership of all of the common security of the Trust and the proceeds of the preferred securities sold by the trust. The Company is not considered the primary beneficiary of this trust (variable interest entity), therefore the Trust is not consolidated in the Company's financial statements, but rather the subordinated debentures are shown as a liability at market value as of the close of the acquisition which was $ 3.3 million. There was a $ 1.9 million valuation reserve recorded to arrive at market value, which is treated as a yield adjustment and is amortized over the life of the security. The Company also purchased an investment in the common stock of the trust for $ 155,000 , which is included in other assets. The Company may redeem the subordinated debentures, subject to prior approval by the Board of Governors of the Federal Reserve System on or after March 15, 2012, at 100 % of the principal amount, plus accrued and unpaid interest. The subordinated debentures mature on March 15, 2037. The Company has the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years. The Company has been paying interest on a quarterly basis. The subordinated debentures may be included in Tier I capital (with certain limitations applicable) under current regulatory guidelines and interpretations. The subordinated debentures have a variable rate of interest equal to the three month LIBOR plus 1.65 %, which was 1.85 % as of December 31, 2021 and 1.87 % at December 31, 2020 .   In October 2018, the Company, through the acquisition of First American International Corp., acquired First American International Statutory Trust I (“FAIC Trust”), a Delaware statutory trust formed in December 2004. The Trust issued 7,000 units of thirty -year fixed to floating rate capital securities with an aggregate liquidation amount of $ 7 million to an independent investor, and FAIC issued $ 7 million of subordinated debentures to the FAIC Trust and all of its common securities, amounting to $ 217,000 , which is included in other assets. There was a $ 1.2 million valuation reserve recorded to arrive at market value which is treated as a yield adjustment and is amortized over the life of the security. The Company has the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years. The subordinated debenture have a variable rate of interest equal to the three -month LIBOR plus 2.25 % through final maturity on December 15, 2034. The rate at December 31, 2021 , was 2.45 % and 2.47 % at December 31, 2020 .   In January 2020, the Company, through the acquisition of PGBH, acquired PGB Capital Trust I (“PGBH Trust”), a Delaware statutory trust formed in December 2004. PGBH Trust issued 5,000 units of fixed to floating rate capital securities with an aggregate liquidation amount of $ 5,000,000 and 155 common securities with an aggregate liquidation amount of $ 155,000 . PGBH issued $ 5.2 million of subordinated debentures to PGBH Trust in exchange for ownership of all the common securities of PGBH Trust. There was a $ 763,000 valuation reserve recorded to arrive at market value which is treated as a yield adjustment and is amortized over the life of the security. The Company has the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years. The subordinated debentures have a variable rate of interest equal to the three -month LIBOR plus 2.10 % through final maturity on December 15, 2034. The rate at December 31, 2021 was 2.30 % and 2.32 % at December 31, 2020 .   The Company paid interest expenses of $ 377,000  in 2021 , $ 468,000 in 2020 and $ 540,000 in 2019 . The amount of aggregate amortization expense recognized in 2021 was $ 218,000 , $ 218,000 in 2020 , and $ 167,000 in 2019 .   116     For regulatory reporting purposes, the Federal Reserve Board has indicated that the capital securities qualify as Tier I capital of the Company subject to previously specified limitations, until further notice. If regulators make a determination that the capital securities can no longer be considered in regulatory capital, the securities become callable and the Company may redeem them.   In July 2017, British banking regulators announced plans to eliminate the LIBOR rate by the end of 2021, before these subordinated notes and debentures mature. For these subordinated notes and debentures, there are provisions for amendments to establish a new interest rate benchmark.     NOTE 11 - BORROWING ARRANGEMENTS   The Company has established secured and unsecured lines of credit. The Company may borrow funds from time to time on a term or overnight basis from the Federal Home Loan Bank of San Francisco ("FHLB"), the Federal Reserve Bank of San Francisco ("FRB") and other financial institutions as indicated below.   Federal Funds Arrangements with Commercial Bank s. 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. As of December 31, 2021 the Company had an unsecured commercial letter of credit line with Wells Fargo Bank for $ 2.0 million.   FRB Secured Line of Credit. 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. The secured borrowing capacity with the FHLB of $ 833.6  million at December 31, 2021 is collateralized by loans pledged with a carrying value of $ 1.1  billion.   FHLB Advances. At  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 $ 1.1 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.       NOTE 12 - INCOME TAXES   The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.   Income tax expense consists of the following:   (dollars in thousands)   2021     2020     2019   Current:                         Federal   $ 15,000     $ 9,948     $ 8,074   State     9,087       6,602       5,614         24,087       16,550       13,688   Deferred     ( 1,093 )     ( 2,998 )     1,503   Deferred tax adjustment for change in tax rate     —       —       21   Amortization of investment in affordable housing tax credits     1,037       979       900       $ 24,031     $ 14,531     $ 16,112     117     A comparison of the federal statutory income tax rates to the Company's effective income tax rates as of December  31 follows:       2021     2020     2019   (dollars in thousands)   Amount     Rate     Amount     Rate     Amount     Rate   Statutory federal tax   $ 16,997     21.0 %   $ 9,966       21.0 %   $ 11,617       21.0 % State franchise tax, net of federal benefit     7,182     8.9 %     4,024       8.5 %     5,322       9.6 % Tax-exempt income     ( 285 )   - 0.4 %     ( 192 )     - 0.4 %     ( 25 )     0.0 % Tax impact from change in tax rate     ( 59 )   - 0.1 %     68       0.1 %     17       0.0 % Stock-based compensation     ( 404 )   - 0.5 %     123       0.3 %     ( 27 )     0.0 % Other items, net     600     0.7 %     542       1.1 %     ( 792 )     - 1.4 % Actual tax expense   $ 24,031       29.6 %   $ 14,531       30.6 %   $ 16,112       29.2 %     Deferred taxes are a result of differences between income tax accounting and generally accepted accounting principles with respect to income and expense recognition. The following is a summary of the components of the net deferred tax asset accounts recognized in the accompanying balance sheets as of December 31:   (dollars in thousands)   2021     2020   Deferred tax assets:                 Pre-opening expenses   $ 64     $ 242   Allowance for loan losses     9,735       8,575   Stock-based compensation     781       1,074   Off balance sheet reserve     367       425   Operating loss carryforwards     606       1,196   Unrealized loss on AFS securities     718       —   Lease liability     7,106       —   Mark to market on held for sale mortgage loans     74       486   State tax     1,967       1,473   Other     797       403         22,215       13,874   Deferred tax liabilities:                 Depreciation     ( 1,441 )     ( 1,212 ) Deferred loan costs     ( 2,598 )     ( 2,482 ) Unrealized gain on AFS securities     —       ( 497 ) Acquisition accounting fair value adjustments     ( 3,348 )     ( 3,584 ) Mortgage servicing rights     ( 2,667 )     ( 3,204 ) Right of use asset     ( 6,853 )     —   Other     ( 453 )     ( 348 )       ( 17,360 )     ( 11,327 ) Net deferred tax assets   $ 4,855     $ 2,547     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 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. In addition, the CARES Act allows net operating losses incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law and extends several provisions of the CARES Act. As of December 31, 2021, the Company has determined that neither this Act nor changes to income tax laws or regulations in other jurisdictions have a significant impact on our effective tax rate. The Company’s net operating losses were not generated during the 2018 - 2020 period.   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, 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.  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. The Company has determined that as of December 31, 2021 all tax positions taken to date are highly certain and, accordingly, no accounting adjustment has been made to the consolidated financial statements.   118       NOTE 13 - COMMITMENTS   In the ordinary course of business, the Company enters into financial commitments to meet the financing needs of its customers. These financial commitments include commitments to extend credit, unused lines of credit, commercial and similar letters of credit and standby letters of credit. Those instruments involve to varying degrees, elements of credit and interest rate risk not recognized in the Company's financial statements.   The Company's exposure to loan loss in the event of nonperformance on these financial commitments is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for loans reflected in the financial statements.   As of December 31, 2021 and 2020 , the Company had the following financial commitments whose contractual amount represents credit risk:       2021     2020       Fixed     Variable     Fixed     Variable   (dollars in thousands)   Rate     Rate     Rate     Rate   Commitments to make loans   $ 1,474     $ 200,814     $ 7     $ 281,489   Unused lines of credit     22,777       229,154       57,437       211,192   Commercial and similar letters of credit     1,214       —       8,284       —   Standby letters of credit     2,042       2,686       1,455       2,576   Total   $ 27,507     $ 432,654     $ 67,183     $ 495,257     Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. The Company evaluates each client's credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company is based on management's credit evaluation of the customer.   The Company is involved in various matters of litigation which have arisen in the ordinary course of business and accruals for estimates of potential losses have been provided when necessary and appropriate under generally accepted accounting principles.  In the opinion of management, the disposition of such pending litigation will not have a material effect on the Company's financial statements.   119         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:         2022   $ 4,490   2023     3,931   2024     2,872   2025     2,724   2026     2,704   Thereafter     6,875   Total   $ 23,596   Less amount of payment representing interest     ( 314 ) 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  1, 2021 :       December 31,     January 1,   (dollars in thousands)   2021     2021   Operating Leases                 ROU assets   $ 22,454     $ 26,770   Lease liabilities     23,282       27,412                     Weighted-average remaining lease term (in years)     6.84       7.38   Weighted-average discount rate     1.01 %     0.94 %     NOTE 15  - RELATED PARTY TRANSACTIONS   Loans to principal officers, directors, and their affiliates were as follows:       December 31,     December 31,   (dollars in thousands)   2021     2020   Beginning balance   $ 1,243     $ 4,000   New loans and advances     10,292       11,498   Repayments     ( 3,094 )   $ ( 14,255 ) Ending balance   $ 8,441     $ 1,243     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,  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. The Plan provides for options to purchase up to 30  percent of the outstanding common stock at a price not less than 100 percent of the fair market value of the stock on the date of the grant. Stock options expire no later than ten years from the date of the grant and generally vest over three years.   At December 31, 2021 , 981,853  shares were available under the 2017 Omnibus Stock Incentive Plan for future grants.   120     The Company recognized total stock-based compensation expense of $ 1.1 million, $ 686,000 , and $ 689,000 in  2021, 2020 and 2019 .   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 .       July 2021     January 2021     July 2020     January 2020     January 2019   Expected volatility     31.6 %     30.8 %     31.8 %     28.5 %     35.0 % Expected term (years)   6.0 years     6.0 years     6.0 years     6.0 years     6.0 years   Expected dividends     1.98 %     1.86 %     2.48 %     1.99 %     1.90 % Risk free rate     0.48 %     0.26 %     0.29 %     1.31 %     2.66 % Grant date fair value   $ 5.69     $ 4.14     $ 2.97     $ 4.61     $ 6.32     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 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. The risk free rate of return reflects the grant date interest rate offered for zero coupon U.S. Treasury bonds over the expected term of the options.   A summary of the status of the Company's stock option plan as of December 31, 2021 and changes during the year then ended is presented below:                       Weighted-                       Weighted-     Average                       Average     Remaining     Aggregate               Exercise     Contractual     Intrinsic   (dollars in thousands, except for share amounts)   Shares     Price     Term in years     Value   Outstanding at beginning of year     1,097,470     $ 13.30                   Granted     150,000       18.34                   Exercised     ( 302,744 )     11.48                   Forfeited/cancelled     ( 808 )     11.15                   Outstanding at end of period     943,918     $ 14.66       4.04     $ 10,895                                     Options exercisable     706,418     $ 13.59       2.46     $ 8,909       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  grant date. 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.                                  Weighted-               Average               Grant Date   (dollars in thousands, except for share amounts)   Shares     Fair Value   Outstanding at beginning of year     14,475     $ 29.38   Granted     60,000       17.74   Vested     ( 14,475 )     ( 29.38 ) Outstanding at end of period     60,000     $ 17.74       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.     121       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. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements.   In July,  2013, the federal bank regulatory agencies approved the final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks. The new rules became effective on January 1, 2015, with certain of the requirements phased-in over a multi-year schedule. Under the rules, minimum requirements increased for both the quantity and quality of capital held by the Bank. The rules include a new common equity Tier 1 ( "CET1" ) capital to risk-weighted assets ratio with minimums for capital adequacy and prompt corrective action purposes of 4.5 % and 6.5 %, respectively. The minimum Tier 1 capital to risk-weighted assets ratio was raised from 4.0 % to 6.0 % under the capital adequacy framework and from 6.0 % to 8.0 % to be well-capitalized under the prompt corrective action framework. 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). If the capital adequacy minimum ratios plus the phased-in conservation buffer amount exceed actual risk-weighted capital ratios, then dividends, share buybacks, and discretionary bonuses to executives could be limited in amount.   Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1 and CET1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). As permitted by the regulators for financial institutions that are not deemed to be “advanced approaches” institutions, the Company has elected to opt out of the Basel III requirement to include accumulated other comprehensive income in risk-based capital. Management believes, at December 31, 2021  and December 31, 2020 , that the Bank satisfied all capital adequacy requirements to which it is subject.   As of December 31, 2021 and 2020 , the most recent notification from the FDIC categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action (there are no conditions or events since that notification that management believes have changed the Bank's category). To be categorized as well-capitalized, the Bank must maintain minimum ratios as set forth in the table below.   122     The following table sets forth RBB Bancorp's consolidated and the Bank's actual capital amounts and ratios and related regulatory requirements for the Bank as of December 31, 2021 :                       Amount of Capital Required                                       To Be Well-Capitalized                       Minimum Required for     Under Prompt Corrective       Actual     Capital Adequacy Purposes     Provisions   (dollars in thousands)   Amount     Ratio     Amount     Ratio     Amount     Ratio   As of December 31, 2021:                                                 Tier 1 Leverage Ratio                                                 Consolidated   $ 410,134       10.21 %   $ 160,642       4.0 %   $ 200,803       5.0 % Bank     499,325       12.45 %     160,418       4.0 %     200,523       5.0 % Common Equity Tier 1 Risk-Based Capital Ratio                                                 Consolidated   $ 395,632       14.86 %   $ 119,841       4.5 %   $ 173,104       6.5 % Bank     499,325       18.80 %     119,550       4.5 %     172,684       6.5 % Tier 1 Risk-Based Capital Ratio                                                 Consolidated   $ 410,134       15.40 %   $ 159,788       6.0 %   $ 213,051       8.0 % Bank     499,325       18.80 %     159,401       6.0 %     212,534       8.0 % Total Risk-Based Capital Ratio                                                 Consolidated   $ 616,440       23.15 %   $ 213,051       8.0 %   $ 266,314       10.0 % Bank     532,544       20.05 %     212,534       8.0 %     265,668       10.0 %   The following table sets forth RBB Bancorp's consolidated and the Bank's actual capital amounts and ratios and related regulatory requirements for the Bank as of December 31, 2020 :                       Amount of Capital Required                                       To Be Well-Capitalized                       Minimum Required for     Under Prompt Corrective       Actual     Capital Adequacy Purposes     Provisions   (dollars in thousands)   Amount     Ratio     Amount     Ratio     Amount     Ratio   As of December 31, 2020:                                                 Tier 1 Leverage Ratio                                                 Consolidated   $ 368,413       11.32 %   $ 130,219       4.0 %   $ 162,774       5.0 % Bank     458,614       14.11 %     129,989       4.0 %     162,487       5.0 % Common Equity Tier 1 Risk Based Capital Ratio                                                 Consolidated   $ 354,130       14.62 %   $ 109,021       4.5 %   $ 157,474       6.5 % Bank     458,614       18.94 %     108,966       4.5 %     157,395       6.5 % Tier 1 Risk-Based Capital Ratio                                                 Consolidated   $ 368,413       15.21 %   $ 145,361       6.0 %   $ 193,814       8.0 % Bank     458,614       18.94 %     145,288       6.0 %     193,717       8.0 % Total Risk-Based Capital Ratio                                                 Consolidated   $ 503,093       20.77 %   $ 193,814       8.0 %   $ 242,268       10.0 % Bank     488,888       20.19 %     193,717       8.0 %     242,146       10.0 %   The California Financial Code generally acts to prohibit banks from making a cash distribution to its shareholders in excess of the lesser of the bank's undivided profits or the bank's net income for its last three fiscal years less the amount of any distribution made by the bank's shareholders during the same period.   The California general corporation law generally acts to prohibit companies from paying dividends on common stock unless its retained earnings, immediately prior to the dividend payment, equals or exceeds the amount of the dividend. If a company fails this test, then it may still pay dividends if after giving effect to the dividend the company's assets are at least 125 % of its liabilities.   Additionally, the Federal Reserve Bank has issued guidance which requires that they be consulted before payment of a dividend if a bank 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.   123       NOTE 18  - FAIR VALUE MEASUREMENTS   The following is a description of valuation methodologies used for assets and liabilities recorded at fair value:   Securities: The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 ) or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 ).   Other Real Estate Owned : Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned are measured at the lower of carrying amount or fair value, less costs to sell. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized. Fair values are generally based on third party appraisals of the property which are commonly adjusted by management to reflect an expectation of the amount to be ultimately collected and selling costs (Level 3 ).   Appraisals for other real estate owned are performed by state licensed appraisers (for commercial properties) or state certified appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.  When a Notice of Default is recorded, an appraisal report is ordered.  Once received, a member of the credit administration department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison to independent data sources such as recent market data or industry wide-statistics for residential appraisals.  Commercial appraisals are sent to an independent third party to review.  The Company also compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustments, if any, should be made to the appraisal values on any remaining other real estate owned to arrive at fair value.  If the existing appraisal is older than twelve months a new appraisal report is ordered. No significant adjustments to appraised values have been made as a result of this comparison process as of December 31, 2021.   Collateral-dependent impaired loans :  Collateral-dependent impaired loans are carried at fair value when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the original loan agreement and the loan has been written down to the fair value of its underlying collateral, net of expected disposition costs where applicable.   Off-Balance-Sheet Financial Instruments:   The fair value of commitments to extend credit, standby letters of credit, interest rate lock commitments, forward mortgage loan sales contracts and financial guarantees written were estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counter parties. The fair value of guarantees and letters of credit was based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counter parties at the reporting date. Off-balance-sheet financial instruments were valued based on the assumptions that a market participant would use, a Level 3 measurement.   Fair value was estimated in accordance with ASC Topic 825. Fair value estimates were made at specific points in time, based on relevant market information and information about the financial instrument. Because no market exists for a significant portion of the Bank’s financial instruments, fair value estimates were based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates were subjective in nature and involved uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.   124     The following table provides the hierarchy and fair value for each major category of assets and liabilities measured at fair value at December 31, 2021 and 2020 :   (dollars in thousands)   Fair Value Measurements Using:           December 31, 2021   Level 1     Level 2     Level 3     Total   Assets measured at fair value:                                 On a recurring basis:                                 Securities available for sale                                 Government agency securities   $ —     $ 5,610     $ —     $ 5,610   SBA agency securities     —       3,469       —       3,469   Mortgage-backed securities     —       55,025       —       55,025   Collateralized mortgage obligations     —       119,511       —       119,511   Commercial paper     —       129,926       —       129,926   Corporate debt securities     —       42,205       —       42,205   Municipal securities     —       12,514       —       12,514   Interest Rate Lock Contracts     —       —       141       141   Forward Mortgage Loan Sale Contracts     —       —       124       124       $ —     $ 368,260     $ 265     $ 368,525   On a non-recurring basis:                                 Other real estate owned   $ —     $ —     $ 293     $ 293                                       December 31, 2020   Level 1     Level 2     Level 3     Total   Assets measured at fair value:                                 On a recurring basis:                                 Securities available for sale                                 Government agency securities   $ —     $ 1,294     $ —     $ 1,294   SBA agency securities     —       4,394       —       4,394   Mortgage-backed securities     —       17,677       —       17,677   Collateralized mortgage obligations     —       48,874       —       48,874   Commercial paper     —       102,448       —       102,448   Corporate debt securities     —       34,563       —       34,563   Municipal securities     —       1,617       —       1,617   Interest Rate Lock Contracts     —       —       45       45   Forward Mortgage Loan Sale Contracts     —       —       214       214       $ —     $ 210,867     $ 259     $ 211,126   On a non-recurring basis:                                 Other real estate owned   $ —     $ —     $ 293     $ 293     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  2.00 %.   Quantitative information about the Company's non-recurring Level 3 fair value measurements as of December 31, 2021 and 2020 is as follows:   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” basis. 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.   125       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. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no market value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.   Fair value estimates are based on financial instruments both on and off the balance sheet without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Additionally, tax consequences related to the realization of the unrealized gains and losses can have a potential effect on fair value estimates and have not been considered in many of the estimates.   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 Due From Banks --  The carrying amounts of cash and short-term instruments approximate fair values.   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, 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 --  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. Fair value for fixed-rate certificates of deposit is estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregate expected monthly maturities on time deposits. Early withdrawal of fixed-rate certificates of deposit is not expected to be significant   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 --  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.   126     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 --  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 --  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. Unobservable inputs that reflect the Company's own assumptions about the assumptions that market participants would use in pricing an asset or liability. The fair value of these financial instruments is not material.   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     Fair Value   Carrying     Fair     Carrying     Fair   (dollars in thousands) Hierarchy   Value     Value     Value     Value   Financial Assets:                                   Cash and due from banks Level 1   $ 501,372     $ 501,372     $ 137,654     $ 137,654   Federal funds sold and other cash equivalents Level 1     193,000       193,000       57,000       57,000   Interest-earning deposits in other financial institutions Level 1     600       600       600       600   Investment securities - AFS Level 2     368,260       368,260       210,867       210,867   Investment securities - HTM Level 2     6,252       6,577       7,174       7,603   Mortgage loans held for sale Level 1     5,957       6,055       49,963       50,716   Loans, net Level 3     2,898,438       2,908,742       2,677,429       2,687,751   Equity securities Level 3     19,992       19,992       14,894       14,894   Servicing assets: Level 2     11,517       19,442       13,965       15,617                                               Notional       Fair       Notional       Fair   Derivative assets:       Value       Value       Value       Value   Interest Rate Lock Contracts Level 3   $ 8,099     $ 141     $ 27,665     $ 45   Forward Mortgage Loan Sale Contracts Level 3     14,296       124       55,089       214                                               Carrying       Fair       Carrying       Fair   Financial Liabilities:       Value       Value       Value       Value   Deposits Level 2   $ 3,385,532     $ 3,388,008     $ 2,635,128     $ 2,632,933   FHLB advances Level 3     150,000       143,237       150,000       149,964   Long-term debt Level 3     173,007       175,773       104,391       137,930   Subordinated debentures Level 3     14,502       13,991       14,283       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:       2021     2020     2019   (dollars in thousands except per share amounts)     Income       Shares       Income       Shares       Income       Shares   Net income as reported   $ 56,906             $ 32,928             $ 39,209           Less: Earnings allocated to participating securities     ( 192 )             ( 37 )             ( 74 )         Shares outstanding             19,455,544               19,565,921               20,030,866   Impact of weighting shares             ( 31,995 )             197,501               ( 13,560 ) Used in basic EPS     56,715       19,423,549       32,891       19,763,422       39,135       20,017,306   Dilutive effect of outstanding                                                 Stock options             410,756               158,437               376,118   Used in dilutive EPS   $ 56,715       19,834,306     $ 32,891       19,921,859     $ 39,135     $ 20,393,424                                                     Basic earnings per common share   $ 2.92             $ 1.66             $ 1.96           Diluted earnings per common share     2.86               1.65               1.92             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.   127         NOTE 21  – REVENUE FROM CONTRACTS WITH CUSTOMERS   On January 1, 2019, the Company adopted ASU 2014 - 09, Revenue from Contracts with Customers - Topic 606 and all subsequent ASUs that modified ASC 606. The Company adopted ASC 606 using the modified retrospective method applied to those contracts that were not completed as of January 1, 2019. The new standard did not materially impact the timing or measurement of the Company’s revenue recognition as it is consistent with the Company’s existing accounting for contracts within the scope of the new standard. There was no cumulative effect adjustment to retained earnings as a result of adopting this new standard.   The following is a summary of revenue from contracts with customers that are in-scope and not in-scope under Topic 606:       For the Year Ended December 31,   (dollars in thousands)   2021     2020     2019   Non-interest income, in scope (1)                         Fees and service charges on deposit accounts   $ 2,367     $ 1,636     $ 1,366   Other fees (2)     2,543       832       1,118   Other income (3)     2,157       2,013       1,429   (Loss) on sale of OREO and fixed assets     —       —       ( 100 ) Total in-scope non-interest income     7,067       4,481       3,813   Non-interest income, not in scope (4)     11,678       9,559       14,507   Total non-interest income   $ 18,745     $ 14,040     $ 18,320     ( 1 ) There were no adjustments to the Company's financial statements recorded as a result of the adoption of ASC 606. ( 2 ) Other fees consists of wealth management fees, miscellaneous loan fees and postage/courier fees. ( 3 ) Other income consists of safe deposit box rental income, wire transfer fees, security brokerage fees, annuity sales, insurance activity, and OREO income. ( 4 ) The amounts primarily represent revenue from contracts with customers that are out of scope of ASC 606: Net loan servicing income, letter of credit commissions, import/export commissions, recoveries on purchased loans, BOLI income, and gains (losses) on sales of mortgage loans, loans and investment securities.   The major revenue streams by fee type that are within the scope of ASC 606 presented in the above tables are described in additional detail below:   Fees and Services Charges on Deposit Accounts   Fees and service charges on deposit accounts include charges for analysis, overdraft, cashier's check fees, ATM, and safe deposit activities executed by our deposit clients, as well as interchange income earned through card payment networks for the acceptance of card based transactions. Fees earned from our deposit clients are governed by contracts that provide for overall custody and access to deposited funds and other related services, and can be terminated at will by either party; this includes fees from money service businesses (MSBs). Fees received from deposit clients for the various deposit activities are recognized as revenue once the performance obligations are met. Periodic service charges are generally collected monthly directly from the customer’s deposit account, and at the end of a statement cycle, while transaction based service charges are typically collected at the time of or soon after the service is performed. The adoption of ASU 2014 - 09 had no impact to the recognition of fees and service charges on deposit accounts.   Wealth Management Fees   The Company employs financial consultants to provide investment planning services for customers including wealth management services, asset allocation strategies, portfolio analysis and monitoring, investment strategies, and risk management strategies. The commission fees the Company earns are variable and are generally received monthly. The Company recognizes revenue for the services performed at quarter-end based on actual transaction details received from the broker dealer the Company engages.   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.   128     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. When the Company finances the sale of OREO to a buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain or loss on sale if a significant financing component is present.       NOTE 22  – QUALIFIED AFFORDABLE HOUSING PROJECT INVESTMENTS   The Company began investing in qualified affordable housing projects in 2016. At December 31, 2021 and December 31, 2020 , the balance of the investment for qualified affordable housing projects was $ 6.6  million and $ 7.6 million, respectively. 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 $ 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, 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 .       NOTE 23   - PARENT ONLY CONDENSED FINANCIAL INFORMATION   The parent company only condensed statements of financial condition as of December 31, 2021 and 2020 , and the related condensed statements of income and condensed statements of cash flows for the years ended December 31, 2021, 2020 and 2019 are presented below:   Condensed Statements of Financial Condition   (Dollars in Thousands)   2021     2020   ASSETS                 Cash and cash equivalents   $ 77,578     $ 7,089   Investment in Bank     570,610       532,972   Investment in RAM     2,992       2,933   Other assets     4,624       5,782   Total assets   $ 655,804     $ 548,776                     LIABILITIES AND SHAREHOLDERS' EQUITY                 Long term debt     173,007       104,391   Subordinated debentures     14,502       14,283   Other liabilities     1,612       1,614   Total liabilities     189,121       120,288   Shareholders' equity:                 Common stock     282,335       284,261   Additional paid-in capital     4,603       4,932   Retained earnings     181,329       138,094   Non-controlling interest     72       72   Accumulated other comprehensive income     ( 1,656 )     1,129   Total shareholders' equity     466,683       428,488   Total liabilities and shareholders' equity   $ 655,804     $ 548,776     129     Condensed Statements of Income   (Dollars in Thousands)   2021     2020     2019   Dividend from subsidiaries   $ 25,000     $ 29,000     $ —   Interest expense     8,999       7,677       7,697   Noninterest expense     1,452       1,292       1,300   Income (loss) before equity in undistributed income of subsidiaries     14,549       20,031       ( 8,997 ) Equity in undistributed income of:                         Bank     39,109       14,053       45,324   RAM     59       ( 3,936 )     74   Income before income taxes     53,717       30,148       36,401   Income tax benefit     3,189       2,780       2,808   Net income     56,906       32,928       39,209   Other comprehensive income (loss)     ( 2,785 )     890       1,577   Total comprehensive income   $ 54,121     $ 33,818     $ 40,786     Condensed Statements of Cash Flows     (Dollars in Thousands)   2021     2020     2019   Cash flows from operating activities:                         Net income   $ 56,906     $ 32,928     $ 39,209   Net amortization of other     724       560       508   Provision for deferred income taxes     ( 337 )     441       513   Undistributed income of subsidiaries     ( 39,168 )     ( 10,116 )     ( 45,398 ) Change in other assets and liabilities     1,645       ( 742 )     ( 1,981 )       19,770       23,071       ( 7,149 ) Cash flows from investment activities:                         Net cash acquired in connection with acquisition     —       6,634       —   Purchase of other equity securities, net     ( 380 )     —       —   Investment in subsidiaries     —       ( 38,895 )     —         ( 380 )     ( 32,261 )     —   Cash flows from financing activities:                         Issuance of subordinated debentures, net of issuance costs     118,111       —       —   Redemptions of subordinated debentures     ( 50,000 )     —       —   Dividends paid     ( 9,947 )     ( 6,567 )     ( 8,033 ) Common stock repurchased, net of repurchased costs     ( 10,540 )     ( 7,851 )     ( 3,190 ) Stock options exercised     3,475       712       2,817         51,099       ( 13,706 )     ( 8,406 )                           Increase (decrease) in cash and cash equivalents     70,489       ( 22,896 )     ( 15,555 ) Cash and cash equivalents beginning of year     7,089       29,985       45,540   Cash and cash equivalents end of year   $ 77,578     $ 7,089     $ 29,985       NOTE 24  – 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 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. Mr. Morris will continue in his role as CFO.    130       NOTE 25  – QUARTERLY INCOME STATEMENTS (Unaudited)   The following table presents the unaudited quarterly condensed income statements for the years 2021 and 2020 .       2021     2020   (dollars in thousands)   4th Quarter     3rd Quarter     2nd Quarter     1st Quarter     4th Quarter     3rd Quarter     2nd Quarter     1st Quarter                                                                     Interest income   $ 38,444     $ 37,108     $ 35,971     $ 35,540     $ 35,864     $ 35,125     $ 34,103     $ 34,028   Interest expense     5,219       5,532       5,914       6,055       6,987       7,874       9,069       10,435   Net interest income     33,225       31,576       30,057       29,485       28,877       27,251       25,034       23,593   Provision for credit losses     635       1,196       628       1,500       3,008       3,861       3,009       1,945   Net interest income after provision for credit losses     32,590       30,380       29,429       27,985       25,869       23,390       22,025       21,648   Noninterest income:     3,156       5,524       4,171       5,894       4,490       2,727       2,208       4,615   Noninterest expense:     13,300       14,420       14,680       15,792       14,453       13,978       14,819       16,263   Income before income taxes     22,446       21,484       18,920       18,087       15,906       12,139       9,414       10,000   Income tax expense     6,740       6,120       5,540       5,631       4,759       3,619       2,901       3,252   Net income   $ 15,706     $ 15,364     $ 13,380     $ 12,456     $ 11,147     $ 8,520     $ 6,513     $ 6,748                                                                     Net income per share                                                                 Basic   $ 0.81     $ 0.79     $ 0.69     $ 0.64     $ 0.57     $ 0.43     $ 0.33     $ 0.34   Diluted     0.79       0.77       0.67       0.63       0.56       0.43       0.33       0.33       NOTE 26  – REPURCHASE OF COMMON STOCK   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 .   131     Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.   None.