OP Bancorp (NASDAQ: OPBK) lifts Q2 2026 earnings as loans and deposits grow
OP Bancorp reported stronger results for the quarter ended June 30, 2026. Net income was $7.98 million versus $6.33 million a year earlier, and diluted EPS was $0.53 versus $0.42. Net interest income rose to $20.07 million, though net interest margin narrowed to 3.08% from 3.23% as funding costs remained elevated.
Total assets reached $2.74 billion, with gross loans of $2.26 billion and deposits of $2.37 billion, each up 3–4% from December 31, 2025. Noninterest income increased, helped by higher gains on loan sales. Asset quality remained sound with nonperforming loans at 0.76% of gross loans and an allowance equal to 1.24% of loans. Capital ratios were strong, including a consolidated common equity Tier 1 ratio of 10.98% and total risk-based capital ratio of 13.32%. The company plans to elect the Community Bank Leverage Ratio framework in the third quarter of 2026.
Positive
- Quarterly net income rose 26% year over year to $7.98 million, with diluted EPS increasing to $0.53 from $0.42.
- Profitability improved, with ROAA at 1.18% and ROAE at 13.61% for Q2 2026, both higher than the prior-year period.
Negative
- None.
Key Figures
Q2 2026 net income: $7,978 thousand
Q2 2026 diluted EPS: $0.53
Total assets: $2,744,306 thousand
+5 more
8 metrics
Q2 2026 net income
$7,978 thousand
Net income for the three months ended June 30, 2026
Q2 2026 diluted EPS
$0.53
Diluted earnings per share for the three months ended June 30, 2026
Total assets
$2,744,306 thousand
Total assets as of June 30, 2026
Gross loans
$2,259,061 thousand
Gross loans outstanding as of June 30, 2026
Total deposits
$2,368,339 thousand
Total deposits as of June 30, 2026
Net interest margin
3.08 %
Net interest margin for the three months ended June 30, 2026
Nonperforming loans to gross loans
0.76 %
Nonperforming loans as a percentage of gross loans at June 30, 2026
Common equity Tier 1 capital ratio
10.98 %
Consolidated CET1 capital ratio as of June 30, 2026
Key Terms
Community Bank Leverage Ratio, Current Expected Credit Losses, collateral-dependent loans, cash flow hedges, +1 more
5 terms
Community Bank Leverage Ratio regulatory
"The Community Bank Leverage Ratio (CBLR) framework is an optional regulatory capital framework"
Community bank leverage ratio is a regulatory measure that compares a bank’s core capital (its safety cushion) to the size of its balance sheet, showing what share of assets is backed by tangible equity rather than borrowed money. Investors use it like a health check: a higher ratio means the bank has more buffer to absorb losses, support lending and dividends, and face fewer regulatory limits, while a lower ratio signals greater risk.
Current Expected Credit Losses financial
"With the adoption of Current Expected Credit Losses (CECL), the Company elected not to consider accrued interest"
An accounting rule that requires lenders and creditors to estimate and record expected loan losses up front, based on current information and reasonable forecasts, rather than waiting until losses actually occur. Think of it as a bank setting aside a rainy-day fund based on the weather report instead of only after storms hit; for investors this affects reported profits, reserves and capital levels and can change perceptions of a firm’s financial strength.
collateral-dependent loans financial
"Collateral-dependent loans are loans where repayment is expected to be provided solely by the sale of the underlying collateral"
cash flow hedges financial
"Derivatives designated as hedging instruments cash flow hedges interest rate products"
A cash flow hedge is an accounting label companies use when they enter financial contracts—like currency or interest-rate agreements—to protect expected future cash payments or receipts from unpredictable moves. For investors, it signals that the company is trying to smooth out future cash variability (think of locking in a price to avoid surprises), which can reduce reported profit swings but also means the company has exposure to derivative instruments and their associated risks.
Accumulated other comprehensive income financial
"Accumulated other comprehensive income (loss) (AOCI), net of tax is reported within shareholders’ equity"
Accumulated other comprehensive income is a running total on a company’s balance sheet that records certain gains and losses not included in reported profit, such as unrealized gains or losses on some investments, currency translation differences, and pension plan adjustments. Think of it like items in a shopping cart you haven’t paid for yet: it doesn’t affect current profit but changes the company’s overall equity and signals potential future swings in value that investors should watch.
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FAQ
How did OPBK perform financially in Q2 2026?
OP Bancorp earned $7.98 million in net income in Q2 2026, up from $6.33 million a year earlier. Diluted EPS was $0.53 versus $0.42, with ROAA at 1.18% and ROAE at 13.61%, indicating stronger profitability.
What happened to OPBK's net interest margin in Q2 2026?
Net interest income reached $20.07 million in Q2 2026, but net interest margin declined to 3.08% from 3.23% a year earlier. The yield on earning assets was 5.87%, while higher funding costs kept pressure on spreads.
How are OPBK's loans and deposits trending as of June 30, 2026?
Gross loans were $2.26 billion and total deposits were $2.37 billion at June 30, 2026. Both categories grew about 3–4% from December 31, 2025, driven mainly by commercial real estate lending and increases in noninterest-bearing and money market balances.
What is OPBK's asset quality and reserve coverage at June 30, 2026?
Nonperforming loans were 0.76% of gross loans at June 30, 2026. The allowance for credit losses on loans totaled $28.1 million, equal to 1.24% of gross loans and 163% of nonperforming loans, providing substantial loss absorption capacity.
What are OPBK's key capital ratios as of June 30, 2026?
Consolidated capital ratios remained strong, with a common equity Tier 1 ratio of 10.98%, total risk-based capital ratio of 13.32%, and Tier 1 leverage ratio of 9.21%. The bank subsidiary also exceeded regulatory well-capitalized benchmarks.
What dividends did OPBK declare in the first half of 2026?
OP Bancorp declared cash dividends of $0.14 per share in Q2 2026, totaling $2.084 million. For the first six months of 2026, cumulative cash dividends declared were $0.26 per share, or $3.871 million, paid from growing retained earnings.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q
________________________
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2026
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from ________ to ________
Commission File Number: 001-38437
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
(213 ) 892-9999
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | ☒ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares outstanding of the Registrant’s Common Stock as of July 31, 2026 was 14,932,615 .
Table of Contents
Forward-Looking Statements | 1 | |||||||
| PART I - FINANCIAL INFORMATION | ||||||||
| Item 1. | Financial Statements (unaudited) | 2 | ||||||
Consolidated Balance Sheets | 2 | |||||||
Consolidated Statements of Income | 3 | |||||||
Consolidated Statements of Comprehensive Income | 4 | |||||||
Consolidated Statements of Changes in Shareholders' Equity | 5 | |||||||
Consolidated Statements of Cash Flows | 6 | |||||||
Notes to Consolidated Financial Statements (Unaudited) | 7 | |||||||
1 — Business and Basis of Presentation | 7 | |||||||
2 — Securities | 7 | |||||||
3 — Loans and Allowance for Credit Losses on Loans | 10 | |||||||
4 — Premises and Equipment | 19 | |||||||
5 — Servicing Assets | 19 | |||||||
6 — Borrowing Arrangements | 20 | |||||||
7 — Subordinated Note | 20 | |||||||
8 — Commitments and Contingencies | 21 | |||||||
9 — Stock-based Compensation Plan | 22 | |||||||
10 — Fair Value of Financial Instruments | 23 | |||||||
11 — Derivative Financial Instruments | 27 | |||||||
12— Regulatory Capital Matters | 29 | |||||||
13 — Earnings Per Share | 31 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 32 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 53 | ||||||
| Item 4. | Controls and Procedures | 54 | ||||||
| PART II - OTHER INFORMATION | ||||||||
| Item 1. | Legal Proceedings | 55 | ||||||
| Item 1A. | Risk Factors | 55 | ||||||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 68 | ||||||
| Item 5. | Other Information | 68 | ||||||
| Item 6. | Exhibits | 69 | ||||||
SIGNATURES | 70 | |||||||
INTRODUCTION
This Quarterly Report on Form 10-Q (this "Form 10-Q") is filed by OP Bancorp, a California corporation and a registered bank holding company (“Company”) with respect to its consolidated financial condition, results of operations, and business as of June 30, 2026. The Company’s primary business operations are conducted through its wholly owned subsidiary, Open Bank, a California chartered commercial bank (“Bank”), and unless the context requires otherwise, statements about the Company generally are intended to describe the consolidated operations of the Company and the Bank.
FORWARD-LOOKING STATEMENTS
Certain matters set forth herein constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements that are not statements of historical fact are forward-looking. Forward-looking statements in this Form 10-Q include comments about the Company’s current business plans and expectations regarding future operating results, as well as management’s statements about expected future events and economic developments, plans, strategies and objectives. All such statements reflect the current intentions, beliefs and expectations of the Company’s executive management based on currently available information and current and expected market conditions. Forward-looking statements can sometimes be identified by the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs. Readers should not construe these statements as assurances of a given level of performance, or as promises that we will take the actions our management currently expects.
Our forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected, or that could cause us to change plans or strategies or otherwise to take actions that differ from those we currently expect. The known risks and uncertainties that may have these effects are described in Part II, Item 1A, of this Form 10-Q, and in our other filings with the Securities and Exchange Commission. You should read all forward-looking statements in the context of the foregoing and should not consider them to be reliable predictions of future events or as assurances of a particular level of performance or intended course of action. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
OP BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
| ($ in thousands) | June 30, 2026 (Unaudited) | December 31, 2025 | ||||||||||||
| ASSETS | ||||||||||||||
| Cash and due from banks | $ | $ | ||||||||||||
| Interest-bearing deposits with banks | ||||||||||||||
| Cash and cash equivalents | ||||||||||||||
| Available-for-sale ("AFS") debt securities, at fair value | ||||||||||||||
| Other investments | ||||||||||||||
| Loans held-for-sale | ||||||||||||||
Net loans (net of allowance for credit losses on loans of $ | ||||||||||||||
| Premises and equipment, net | ||||||||||||||
| Accrued interest receivable | ||||||||||||||
| Servicing assets | ||||||||||||||
| Company owned life insurance | ||||||||||||||
| Deferred tax assets, net | ||||||||||||||
| Operating right-of-use assets | ||||||||||||||
| Other assets | ||||||||||||||
| TOTAL ASSETS | $ | $ | ||||||||||||
| LIABILITIES | ||||||||||||||
| Deposits: | ||||||||||||||
| Noninterest-bearing | $ | $ | ||||||||||||
| Interest-bearing: | ||||||||||||||
| Money market and others | ||||||||||||||
| Time deposits greater than $250 | ||||||||||||||
| Other time deposits | ||||||||||||||
| Total deposits | ||||||||||||||
| Federal Home Loan Bank ("FHLB") advances | ||||||||||||||
Subordinated note (net of unamortized debt issuance cost of $ | ||||||||||||||
| Accrued interest payable | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Other liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| SHAREHOLDERS' EQUITY | ||||||||||||||
Preferred stock – | ||||||||||||||
Common stock – | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Retained earnings | ||||||||||||||
| Accumulated other comprehensive income (loss) ("AOCI"), net of tax | ( | ( | ||||||||||||
| Total shareholders’ equity | ||||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | $ | ||||||||||||
See accompanying notes to unaudited Consolidated Financial Statements
2
OP BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| ($ in thousands, except per share data) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| INTEREST INCOME | ||||||||||||||||||||||||||
| Interest and fees on loans | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest on AFS debt securities | ||||||||||||||||||||||||||
| Other interest income | ||||||||||||||||||||||||||
| Total interest income | ||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||
| Interest on deposits | ||||||||||||||||||||||||||
| Interest on borrowings | ||||||||||||||||||||||||||
| Interest on subordinated note | ||||||||||||||||||||||||||
| Total interest expense | ||||||||||||||||||||||||||
| Net interest income | ||||||||||||||||||||||||||
| (Reversal of) provision for credit losses | ( | |||||||||||||||||||||||||
| Net interest income after provision for credit losses | ||||||||||||||||||||||||||
| NONINTEREST INCOME | ||||||||||||||||||||||||||
| Service charges on deposits | ||||||||||||||||||||||||||
| Loan servicing fees, net of amortization | ||||||||||||||||||||||||||
| Gains on sale of loans | ||||||||||||||||||||||||||
| Other income | ||||||||||||||||||||||||||
| Total noninterest income | ||||||||||||||||||||||||||
| NONINTEREST EXPENSE | ||||||||||||||||||||||||||
| Salaries and employee benefits | ||||||||||||||||||||||||||
| Occupancy and equipment | ||||||||||||||||||||||||||
| Data processing and communication | ||||||||||||||||||||||||||
| Professional fees | ||||||||||||||||||||||||||
| FDIC insurance and regulatory assessments | ||||||||||||||||||||||||||
| Promotion and advertising | ||||||||||||||||||||||||||
| Directors’ fees | ||||||||||||||||||||||||||
| Foundation donation and other contributions | ||||||||||||||||||||||||||
| Other expenses | ||||||||||||||||||||||||||
| Total noninterest expense | ||||||||||||||||||||||||||
| INCOME BEFORE INCOME TAX EXPENSE | ||||||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||
| NET INCOME | $ | $ | $ | $ | ||||||||||||||||||||||
| BASIC EARNINGS PER SHARE ("EPS") | $ | $ | $ | $ | ||||||||||||||||||||||
| DILUTED EPS | $ | $ | $ | $ | ||||||||||||||||||||||
See accompanying notes to unaudited Consolidated Financial Statements
3
OP BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Other comprehensive (loss) income, net of tax: | ||||||||||||||||||||||||||
Net change in AFS debt securities | ( | ( | ( | |||||||||||||||||||||||
| Net change in cash flow hedges | ( | ( | ||||||||||||||||||||||||
| Total other comprehensive (loss) income | ( | ( | ( | |||||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | ||||||||||||||||||||||
See accompanying notes to unaudited Consolidated Financial Statements
4
OP BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)
| Common Stock | Additional Paid-in Capital | Retained Earnings | AOCI | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||
| ($ in thousands, except per share data) | Shares Outstanding | Amount | ||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
Stock issued under stock-based compensation plans, net of shares withheld to satisfy tax liability | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||
| Stock-based compensation, net | — | — | — | — | ||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
Stock issued under stock-based compensation plans, net of shares withheld to satisfy tax liability | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||
| Stock-based compensation, net | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Repurchase of common stock | ( | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Retained Earnings | AOCI | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||
| ($ in thousands, except per share data) | Shares Outstanding | Amount | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
Stock issued under stock-based compensation plans, net of shares withheld to satisfy tax liability | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||
| Stock-based compensation, net | — | — | — | — | ||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | ||||||||||||||||||||||||||||||||||
Stock issued under stock-based compensation plans, net of shares withheld to satisfy tax liability | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||
| Stock-based compensation, net | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Repurchase of common stock | ( | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
See accompanying notes to unaudited Consolidated Financial Statements
5
OP BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
| Six Months Ended June 30, | ||||||||||||||
| ($ in thousands) | 2026 | 2025 | ||||||||||||
| Cash flows from operating activities | ||||||||||||||
| Net income | $ | $ | ||||||||||||
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: | ||||||||||||||
| Provision for credit losses | ||||||||||||||
| Deferred income tax expense | ||||||||||||||
| Depreciation, amortization and accretion, net | ||||||||||||||
| Gains on sale of loans | ( | ( | ||||||||||||
| Stock-based compensation | ||||||||||||||
| Earnings on company owned life insurance | ( | ( | ||||||||||||
| Origination of loans held-for-sale | ( | ( | ||||||||||||
| Proceeds from sales of loans held-for-sale | ||||||||||||||
| Net change in: | ||||||||||||||
| Accrued interest receivable and other assets | ( | ( | ||||||||||||
| Accrued interest payable and other liabilities | ( | |||||||||||||
| Net cash provided by (used in) operating activities | ( | |||||||||||||
| Cash flows from investing activities | ||||||||||||||
| Net change in loans receivable | ( | ( | ||||||||||||
Proceeds from matured, called, or paid-down AFS debt securities | ||||||||||||||
| Purchase of loans | ( | ( | ||||||||||||
| Purchase of AFS debt securities | ( | |||||||||||||
| Purchase of FHLB stock | ( | ( | ||||||||||||
| Purchase of premises and equipment, net | ( | ( | ||||||||||||
| Net change in investments in low-income housing partnerships | ( | ( | ||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| Cash flows from financing activities | ||||||||||||||
| Net change in deposits | ||||||||||||||
| Proceeds from FHLB advances | ||||||||||||||
| Repayment of FHLB advances | ( | ( | ||||||||||||
| Repurchase of common stock | ( | |||||||||||||
| Cash dividend paid on common stock | ( | ( | ||||||||||||
| Payments related to tax-withholding for vested restricted stock awards | ( | ( | ||||||||||||
| Net cash provided by financing activities | ||||||||||||||
| Net change in cash and cash equivalents | ||||||||||||||
| Cash and cash equivalents at beginning of period | ||||||||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||||||||
| Supplemental cash flow information: | ||||||||||||||
| Cash paid during the period for: | ||||||||||||||
| Income taxes | ||||||||||||||
| Federal | $ | $ | ||||||||||||
| State/Local | ||||||||||||||
| California | ||||||||||||||
| All other states | ||||||||||||||
| Total income taxes paid | $ | $ | ||||||||||||
| Interest | $ | $ | ||||||||||||
| Supplemental noncash disclosure: | ||||||||||||||
| Initial recognition of right-of-use assets | $ | $ | ||||||||||||
| New commitments to low income housing partnership investment | $ | $ | ||||||||||||
See accompanying notes to unaudited Consolidated Financial Statements
6
OP BANCORP AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Basis of Presentation and Significant Accounting Policies
OP Bancorp (referred to herein on an unconsolidated basis as "OP Bancorp" and on a consolidated basis as the "Company") is a California corporation and the registered bank holding company for Open Bank ("Open Bank" or the “Bank”).
The accompanying unaudited Consolidated Financial Statements and notes thereto have been prepared in accordance with the Securities and Exchange Commission's (“SEC”) rules and regulations for Form 10-Q, conform to practices within the banking industry, and include all of information and disclosures required by Generally Accepted Accounting Principles in the United States of America (“GAAP”) for interim financial reporting. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair presentation of the financial results for the interim periods presented, including eliminating intercompany transactions and balances. Certain items in our Consolidated Financial Statements and notes for prior periods have been reclassified to conform to the current presentation. Reclassification had no effect on prior year net income or shareholders' equity. The results of operations for the interim periods are not necessarily indicative of the results for the full year. These interim unaudited financial statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (“2025 Annual Report on Form 10-K”). Descriptions of our significant accounting policies are included in Note 1. Significant Accounting Policies to Consolidated Financial Statements in the 2025 Annual Report on Form 10-K.
Accounting Pronouncements Adopted in 2026
The following standards were adopted on January 1, 2026, but they did not have a material impact on the Company's Consolidated Financial Statements:
•ASU 2024-04, Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments
•ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Account Receivable and Contract Assets
Note 2 — Securities
The following tables summarize the amortized cost, gross unrealized gains and losses, and fair value of AFS debt securities as of June 30, 2026 and December 31, 2025:
| June 30, 2026 | ||||||||||||||||||||||||||
| ($ in thousands) | Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | ||||||||||||||||||||||
| U.S. Government agencies or sponsored agency securities: | ||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Residential collateralized mortgage obligations | ( | |||||||||||||||||||||||||
| Municipal securities - tax exempt | ( | |||||||||||||||||||||||||
| Total AFS debt securities | $ | $ | $ | ( | $ | |||||||||||||||||||||
7
| December 31, 2025 | ||||||||||||||||||||||||||
| ($ in thousands) | Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | ||||||||||||||||||||||
| U.S. Government agencies or sponsored agency securities: | ||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Residential collateralized mortgage obligations | ( | |||||||||||||||||||||||||
| Municipal securities - tax exempt | ( | |||||||||||||||||||||||||
| Total AFS debt securities | $ | $ | $ | ( | $ | |||||||||||||||||||||
Expected maturities may differ from contractual maturities on certain securities as the issuers and borrowers of the underlying collateral may have the right to call or prepay obligations with or without call or prepayment penalties. The amortized cost and fair value of AFS debt securities as of June 30, 2026, by contractual maturity, are shown below:
| ($ in thousands) | Amortized Cost | Fair Value | ||||||||||||
| Within one year | $ | $ | ||||||||||||
| After one year through five years | ||||||||||||||
| After five years through ten years | ||||||||||||||
| After ten years | ||||||||||||||
| Total AFS debt securities | $ | $ | ||||||||||||
The following tables present the fair values and the associated gross unrealized losses of AFS debt securities, aggregated by length of time that the securities have been in a continuous unrealized loss position as of June 30, 2026 and December 31, 2025:
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
| Less Than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Fair Value | Gross Unrealized Loss | Fair Value | Gross Unrealized Loss | Fair Value | Gross Unrealized Loss | ||||||||||||||||||||||||||||||||
| U.S. Government agencies or sponsored agency securities: | ||||||||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
| Residential collateralized mortgage obligations | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Municipal securities - tax exempt | ( | ( | ||||||||||||||||||||||||||||||||||||
| Total AFS debt securities | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
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| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Less Than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Fair Value | Gross Unrealized Loss | Fair Value | Gross Unrealized Loss | Fair Value | Gross Unrealized Loss | ||||||||||||||||||||||||||||||||
| U.S. Government agencies or sponsored agency securities: | ||||||||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||
| Residential collateralized mortgage obligations | ( | ( | ||||||||||||||||||||||||||||||||||||
| Municipal securities - tax exempt | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Total AFS debt securities | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
As of June 30, 2026 and December 31, 2025, the number of AFS debt securities in an unrealized loss position was 87 and 78 , respectively.
The Company monitors credit quality of individual AFS debt securities by evaluating a range of factors, including issuer credit ratings, changes in those ratings over time, market indicators of credit risk, and any adverse economic or sector-specific conditions that may affect the issuer's ability to meet its obligations. These evaluations inform the Company's assessment of the appropriateness of the allowance for credit losses. The gross unrealized losses presented in the preceding tables were primarily attributable to changes in interest rates rather than credit deterioration.
As of June 30, 2026 and December 31, 2025, the Company's AFS debt securities portfolio was primarily composed of securities issued, guaranteed, or otherwise supported by the U.S. government. These securities were considered to have a zero credit loss assumption, and no material changes in credit ratings or adverse conditions were identified. Approximately 97 % of the portfolio consisted of residential mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies, including Ginnie Mae, Fannie Mae and Freddie Mac. The remaining 3 % consisted of the portfolio comprised of tax-exempt municipal securities. These securities were evaluated using similar criteria, including issuer credit ratings and financial condition. No significant deterioration in credit quality or adverse developments was noted for these securities, and there were no downgrades in credit ratings during the period. Based on this evaluation, the Company did not record an allowance for credit losses on its AFS debt securities as of June 30, 2026 and December 31, 2025. For a discussion of the factors and criteria the Company uses in analyzing securities for impairment related to credit losses, see Note 1. Significant Accounting Policies to Consolidated Financial Statements in the 2025 Annual Report on Form 10-K.
The amortized cost of the AFS debt securities excluded accrued interest receivables of $660 thousand and $604 thousand as of June 30, 2026 and December 31, 2025, respectively, which are included in Accrued interest receivable on the Consolidated Balance Sheets. For additional information on the Company's accounting policy related to securities' accrued interest receivables and impairment, see Note 1.Significant Accounting Policies to Consolidated Financial Statements in the 2025 Annual Report on Form 10-K.
As of June 30, 2026 and December 31, 2025, there were no
9
The following table presents the other investment securities, which are included in Other investments on the Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025:
| ($ in thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
| FHLB stock | $ | $ | ||||||||||||
| Pacific Coast Bankers Bank ("PCBB") stock | ||||||||||||||
Mutual fund - Community Reinvestment Act ("CRA") qualified (1) | ||||||||||||||
| Time deposits placed in other banks | ||||||||||||||
| Total other investments | $ | $ | ||||||||||||
(1)The Company recorded $15 thousand and $39 thousand unrealized losses for the three and six months ended June 30, 2026, respectively. In comparison, the Company recorded $12 thousand and $64 thousand unrealized gains for the three and six months ended June 30, 2025, respectively. The unrealized (losses) gains of the mutual fund are included in other income in the Consolidated Statements of Income.
Note 3 — Loans and Allowance for Credit Losses on Loans
Loans
The following table presents the composition of the loan portfolio as of June 30, 2026 and December 31, 2025:
| ($ in thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
| Commercial real estate ("CRE") | $ | $ | ||||||||||||
| Small Business Administration ("SBA")—real estate | ||||||||||||||
| SBA—non-real estate | ||||||||||||||
| Commercial and industrial ("C&I") | ||||||||||||||
| Home mortgage | ||||||||||||||
| Consumer | ||||||||||||||
| Gross loans | ||||||||||||||
| Allowance for credit losses | ( | ( | ||||||||||||
Net loans (1) | $ | $ | ||||||||||||
(1)Includes net deferred loan costs (fees) and net unamortized premiums (discounts) of $(1.8 ) million as of June 30, 2026 and $(331 ) thousand as of December 31, 2025.
Allowance for Credit Losses on Loans
For loans that share risk characteristics, the Company employs a modeled approach that takes into account current and future economic conditions to estimate lifetime expected losses on a collective basis. With the adoption of Current Expected Credit Losses ("CECL"), the Company elected not to consider accrued interest receivable in its estimated credit losses as the Company writes off the uncollectible accrued interest receivable in a timely manner. Generally, loans are placed on nonaccrual status when they become 90 days or more past due, and any previously accrued but unpaid interest is reversed against interest income. Accrued interest receivable on loans totaled $9.2 million and $8.8 million as of June 30, 2026 and December 31, 2025, respectively.
For collectively evaluated loans, the Company uses transition matrices to develop the Probability of Default ("PD") and Loss Given Default ("LGD") approaches, incorporating quantitative factors and qualitative considerations in the calculation of the allowance. The model provides forecasts of PD based on national unemployment rates using regression analysis. The Company incorporates future economic conditions using a weighted multiple scenario approach: baseline and adverse. The Company applies a reasonable and supportable period of one year for the baseline scenario and two years for the adverse scenario, after which loss assumptions revert to historical loss information through a one-year reversion period for the baseline scenario and a two-year reversion period for the adverse scenario. The Company segments the loan portfolio by major loan type using the Call Report codes and internal loan risk ratings to determine the Bank's allowance for credit losses.
10
The methodologies described above generally rely on historical loss experience to determine the quantitative portion of the allowance for credit losses. The Company also considers other qualitative and macroeconomic variables related to current conditions and reasonable and supportable forecasts that may indicate current expected credit losses could differ from the historical information reflected in the quantitative models. Key qualitative and macroeconomic variables include GDP, unemployment rates, interest rates, asset quality ratios, loan portfolio concentration, California house price index, and CRE price index. The parameters for making adjustments are established under a Credit Risk Matrix that provides different possible scenarios for each of the factors listed below. The Credit Risk Matrix and the possible scenarios enable the Bank to qualitatively adjust the loss rates. This matrix considers the following nine factors, which are patterned after the guidelines provided under the Federal Financial Institutions Examination Council Interagency Policy Statement on the Allowance for Credit Losses, updated to reflect the adoption of CECL:
• Changes in lending policies and procedures, including changes in underwriting standards and practices for collection, charge-offs, and recoveries;
• Actual and expected changes in national and local economic and business conditions and developments in which the institution operates that affect the collectivity of loans;
• Changes in the nature and volume of the loan portfolio;
• Changes in the experience, ability, and depth of lending management and staff;
• Changes in the volume and severity of past-due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified loans;
• Changes in the quality of the credit review function;
• Changes in the value of the underlying collateral for loans that are not collateral-dependent;
• The existence, growth, and effect of any concentrations of credit, and
• The effect of other external factors, such as the regulatory, legal and technological environments; competition; and events such as natural disasters.
The Company evaluates loans individually when they do not share similar risk characteristics with other loans in the portfolio and are not eligible for the practical expediency threshold. As a practical expedient, the Company generally does not individually evaluate loans with an outstanding net exposure of less than $500 thousand, net of government guarantees, where applicable. Instead, expected credit losses for these loans are estimated on a collective basis within the applicable loan segment. Loans with an outstanding net exposure of $500 thousand or greater that do not share similar risk characteristics with the collectively evaluated population are assessed individually, as appropriate.
When a loan is individually evaluated for the allowance for credit losses, the Company uses one of two valuation methods: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; or (2) for collateral-dependent loans, the fair value of the underlying collateral. For collateral-dependent loans, the Company obtains an updated "as-is" appraisal or other appropriate valuation to estimate the collateral's fair value. To help ensure valuations remain current, appraisals are generally updated every twelve months by a qualified independent appraiser. If the fair value of the collateral is less than the loan's amortized cost basis, the Company records an allowance for credit losses with a corresponding provision for credit losses.
The Company maintains a separate allowance for credit losses for its off-balance sheet commitments. The Company uses an estimated funding rate to allocate an allowance to undrawn exposures. This funding rate serves as a credit conversion factor, reflecting the likelihood that undrawn lines of credit may be drawn at any time. The funding rate is determined based on a look-back period of eight quarters. Credit loss is not estimated for off-balance sheet commitments that are unconditionally cancellable by the Company.
11
The following table summarizes the activity in the allowance for credit losses on loans by portfolio segment and unfunded commitments for the three months ended June 30, 2026 and 2025:
| ($ in thousands) | CRE | SBA— Real Estate | SBA —Non- Real Estate | C&I | Home Mortgage | Consumer | Total | |||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2026 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Provision for (reversal of) credit losses | (a) | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2026 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Provision for (reversal of) credit losses | (a) | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2025 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| ($ in thousands) | CRE | SBA— Real Estate | SBA —Non- Real Estate | C&I | Home Mortgage | Consumer | Total | |||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Provision for (reversal of) credit losses | (a) | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2026 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| (Reversal of) provision for credit losses | (a) | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2025 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
($ in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||
| Unfunded commitments | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
Allowance for credit losses on unfunded commitments, beginning of period | $ | $ | $ | $ | ||||||||||||||||||||||
| Reversal of provision for credit losses | (b) | ( | ( | ( | ||||||||||||||||||||||
Allowance for credit losses on unfunded commitments, end of period | $ | $ | $ | $ | ||||||||||||||||||||||
| (Reversal of) provision for credit losses | (a) + (b) | $ | ( | $ | $ | $ | ||||||||||||||||||||
Collateral-dependent loans are loans where repayment is expected to be provided solely by the sale of the underlying collateral, and there are no other available and reliable sources of repayment. The estimated credit losses for these loans are based on the collateral’s fair value less selling costs. Generally, the Company records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less selling costs at the time of foreclosure.
12
The following table represents the amortized cost basis of collateral-dependent loans by property type as of June 30, 2026 and December 31, 2025, for which repayment is expected to be obtained through the sale of the underlying collateral:
| ($ in thousands) | Hotel / Motel | Retail | Single-Family Residential | Office | Total (1)(2) | |||||||||||||||||||||||||||||||||
| As of June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
CRE | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| SBA—real estate | ||||||||||||||||||||||||||||||||||||||
| SBA—non-real estate | ||||||||||||||||||||||||||||||||||||||
| Home mortgage | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| As of December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
CRE | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| SBA—real estate | ||||||||||||||||||||||||||||||||||||||
| Home mortgage | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
(1)Excludes guaranteed portion of SBA loans totaling $22.5 million and $12.7 million as of June 30, 2026 and December 31, 2025, respectively.
(2)The allowance for credit losses allocated to these loans as of June 30, 2026 and December 31, 2025 was $2.2 million and $1.3 million, respectively.
The following table presents the amortized cost in nonaccrual loans and loans past due 90 or more days and still accruing interest as of June 30, 2026 and December 31, 2025:
| ($ in thousands) | Nonaccrual Loans with a Related Allowance for Credit Losses | Nonaccrual Loans without a Related Allowance for Credit Losses | Total Nonaccrual Loans | 90 or More Days Past Due & Still Accruing | Total (1) | |||||||||||||||||||||||||||
| As of June 30, 2026 | ||||||||||||||||||||||||||||||||
CRE | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| SBA—real estate | ||||||||||||||||||||||||||||||||
| SBA—non-real estate | ||||||||||||||||||||||||||||||||
| C&I | ||||||||||||||||||||||||||||||||
| Home mortgage | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| As of December 31, 2025 | ||||||||||||||||||||||||||||||||
CRE | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| SBA—real estate | ||||||||||||||||||||||||||||||||
| SBA—non-real estate | ||||||||||||||||||||||||||||||||
| C&I | ||||||||||||||||||||||||||||||||
| Home mortgage | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
(1) Excludes guaranteed portion of loans totaling $30.5 million and $20.9 million as of June 30, 2026 and December 31, 2025, respectively.
Nonaccrual loans and accruing loans past due 90 days or more include both (i) loans with similar risk characteristics that are collectively evaluated for allowance, and (ii) loans that do not share similar risk characteristics that are individually evaluated for allowance. Under the Company's policy, nonaccrual loans with outstanding balances above the $500 thousand threshold that lack shared risk characteristics are subject to individual evaluation for expected credit losses.
13
The following table represents the aging analysis of gross loans as of June 30, 2026 and December 31, 2025:
| Still Accruing | ||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 30-59 Days Past Due (1) | 60-89 Days Past Due | 90 or More Days Past Due | Nonaccrual Loans (2) | Current Accruing Loans | Total | ||||||||||||||||||||||||||||||||
| As of June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
| CRE | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| SBA—real estate | ||||||||||||||||||||||||||||||||||||||
| SBA—non-real estate | ||||||||||||||||||||||||||||||||||||||
| C&I | ||||||||||||||||||||||||||||||||||||||
| Home mortgage | ||||||||||||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| As of December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| CRE | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| SBA—real estate | ||||||||||||||||||||||||||||||||||||||
| SBA—non-real estate | ||||||||||||||||||||||||||||||||||||||
| C&I | ||||||||||||||||||||||||||||||||||||||
| Home mortgage | ||||||||||||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
(1)Excludes guaranteed portion of loans totaling $3.2 million as of December 31, 2025, with the excluded portion classified within "Current Accruing" loans. As of June 30, 2026, there was no guaranteed portion.
(2)Excludes guaranteed portion of loans totaling $30.5 million as of June 30, 2026, including $28.5 million in SBA—real estate and $2.0 million in SBA—non-real estate and $20.9 million as of December 31, 2025, including $18.9 million in SBA—real estate, $1.7 million in SBA—non-real estate, and $319 thousand in a CRE loan
Loan Modifications to Borrowers Experiencing Financial Difficulty
To help borrowers facing financial difficulty, the Company may agree to modify the contractual terms of a loan as a way to mitigate loss. These modifications are handled individually, aiming to create terms that support both repayment and the borrower's financial needs. A borrower is considered as experiencing financial difficulty when there is significant uncertainty regarding the borrower's ability to meet required debt payments or secure comparable financing from another creditor at a market rate for similar debt. Modifications may include, but not limited to, payment delays, interest rate reductions, term extensions, principal forgiveness, or a combination of such modifications.
14
The following tables present the amortized cost of loans as of June 30, 2026 that were modified for borrowers experiencing financial difficulty during the three and six months ended June 30, 2026 and 2025 by loan segment and modification type:
| Three Months Ended June 30, 2026 | Modification Type | Percentage to Each Loan Segment | ||||||||||||||||||||||||
| ($ in thousands) | Payment Delay | Total | ||||||||||||||||||||||||
| CRE | $ | $ | % | |||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||
| Three Months Ended June 30, 2025 | Modification Type | Percentage to Each Loan Segment | ||||||||||||||||||||||||
| ($ in thousands) | Payment Delay | Total | ||||||||||||||||||||||||
CRE | $ | $ | % | |||||||||||||||||||||||
SBA—real estate (1) | % | |||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||
| Six Months Ended June 30, 2026 | Modification Type | Percentage to Each Loan Segment | ||||||||||||||||||||||||||||||
| ($ in thousands) | Payment Delay | Total | ||||||||||||||||||||||||||||||
CRE | $ | $ | % | |||||||||||||||||||||||||||||
SBA—real estate (1) | % | |||||||||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2025 | Modification Type | Percentage to Each Loan Segment | ||||||||||||||||||||||||||||||
| ($ in thousands) | Payment Delay | Total | ||||||||||||||||||||||||||||||
CRE (2) | $ | $ | % | |||||||||||||||||||||||||||||
SBA—real estate (1) | % | |||||||||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||||||||
(1) Excludes guaranteed portion of SBA loans totaling $2.9 million and $3.2 million as of June 30, 2026 and June 30, 2025, respectively.
(2) Interest-only payment arrangements are included within payment deferments as other-than-significant payment delays under ASC 310-10-50-39.
The following tables describe the financial effect of the loan modifications made to borrowers experiencing financial difficulty for the periods presented:
| Financial Effect | ||||||||||||||||||||
| Modification & Loan Types | Description of Financial Effect | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 | |||||||||||||||||
| Payment Delay: | ||||||||||||||||||||
| CRE | Deferment of payment by a weighted average of | |||||||||||||||||||
| SBA—real estate | Deferment of payment by a weighted average of | N/A | ||||||||||||||||||
| Financial Effect | ||||||||||||||||||||
| Modification & Loan Types | Description of Financial Effect | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | |||||||||||||||||
| Payment Delay: | ||||||||||||||||||||
CRE (1) | Deferment of payment by a weighted average of | |||||||||||||||||||
| SBA—real estate | Deferment of payment by a weighted average of | |||||||||||||||||||
(1)Interest-only payment arrangements are included within payment deferments as other-than-significant payment delays under ASC 310-10-50-39.
A modified loan may become delinquent and may result in a payment default (generally 90 days past due) subsequent to modification. There were no loans that received modifications within the previous 12 months
15
preceding June 30, 2026 and 2025, and subsequently defaulted in three and six months ended June 30, 2026, and 2025.
For both the six months ended June 30, 2026, and 2025, the Company had no
The Company closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that were modified in the twelve months ended June 30, 2026 and 2025:
| Payment Performance as of June 30, 2026 | ||||||||||||||||||||||||||
| ($ in thousands) | Current | 30 - 89 Days Past Due | 90+ Days Past Due | Total | ||||||||||||||||||||||
CRE | $ | $ | $ | $ | ||||||||||||||||||||||
SBA—real estate (1) | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| Payment Performance as of June 30, 2025 | ||||||||||||||||||||||||||
| ($ in thousands) | Current | 30 - 89 Days Past Due | 90+ Days Past Due | Total | ||||||||||||||||||||||
| CRE | $ | $ | $ | $ | ||||||||||||||||||||||
SBA—real estate (1) | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
(1)Excludes guaranteed portion of SBA loans totaling $9.3 million and $7.4 million as of June 30, 2026 and 2025, respectively.
Credit Quality Indicators
The Company categorizes loans into risk categories based on relevant information about borrowers' ability to service their debt including: current financial information, historical payment experience, credit documentation, public information, and current economic trends. For consumer loans, a credit grade is established at inception, and generally only adjusted based on performance. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
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 Company’s credit position at some future date.
Substandard — Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful — Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.
16
The following table presents the loan portfolio's amortized cost and current year-to-date gross write-offs by loan type, risk rating and year of origination as of June 30, 2026 and December 31, 2025:
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Origination Year | Revolving Loans | Revolving Loans Converted to Term Loans | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | 2024 | 2023 | 2022 | Prior | ||||||||||||||||||||||||||||||||||||||||||||||||||
| CRE | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| SBA— real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass (1) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Special mention (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| SBA—non-real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass (1) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| C&I | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Home mortgage | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
17
Pass (1) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Special mention (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Origination Year | Revolving Loans | Revolving Loans Converted to Term Loans | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | ||||||||||||||||||||||||||||||||||||||||||||||||||
| CRE | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass (1) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| SBA— real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass (1) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Special mention (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| SBA—non-real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass (1) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Special mention (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| C&I | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Home mortgage | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
18
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass (1) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Special mention (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
(1)As of June 30, 2026 and December 31, 2025, $35.8 million and $27.3 million, respectively, of criticized loans with payments guaranteed by government agencies were classified as "Pass" rated.
Note 4 — Premises and Equipment
The following table presents information regarding the premises and equipment as of June 30, 2026 and December 31, 2025:
| ($ in thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
| Leasehold improvements | $ | $ | ||||||||||||
| Furniture and fixtures | ||||||||||||||
| Equipment and others | ||||||||||||||
| Total premises and equipment | ||||||||||||||
| Accumulated depreciation | ( | ( | ||||||||||||
| Total premises and equipment, net | $ | $ | ||||||||||||
Note 5 — Servicing Assets
The Company recognizes the rights to service SBA loans for others as servicing assets when the benefit of servicing is expected to more than adequately compensate the Company for performing the servicing. Servicing assets are initially recorded at fair value and subsequently amortized in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. As of June 30, 2026 and December 31, 2025, the Company serviced SBA loans for others with principal balances of $697.4 million and $682.9 million, respectively.
The Company periodically stratifies its servicing assets into groupings based on risk characteristics and evaluates each group for impairment based on the fair value. Based on the impairment test as of June 30, 2026 and December 31, 2025, there was no
19
The following table presents the activity in the servicing assets for the three and six months ended June 30, 2026 and 2025:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||||||||||||||
| Additions from loans sold with servicing retained | ||||||||||||||||||||||||||
| Amortized to expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | ||||||||||||||||||||||
The fair value of the servicing assets was $15.1 million as of June 30, 2026, which was determined using discount rates ranging from 4.50 % to 12.02 % and prepayment speeds ranging from 12.90 % to 13.60 %, depending on the stratification of the specific assets.
The fair value of the servicing assets was $15.7 million as of June 30, 2025, which was determined using discount rates ranging from 4.76 % to 11.53 % and prepayment speeds ranging from 12.90 % to 13.60 % depending on the stratification of the specific assets.
Note 6 — Borrowing Arrangements
As of June 30, 2026, the Company had $75.0 million in advances from FHLB with a weighted average interest rate of 3.56 % and a weighted average remaining term of 1.8 years, compared to $75.0 million with a weighted average interest rate of 3.55 % and a weighted average remaining term of 2.1 years as of December 31, 2025. The Company had letters of credit from the FHLB in the amount of $170.0 million and $135.0 million to secure public deposits as of June 30, 2026 and December 31, 2025, respectively.
The Company had available borrowing capacity from the following institutions as of June 30, 2026:
| ($ in thousands) | June 30, 2026 | |||||||
| FHLB | $ | |||||||
| Federal Reserve Bank | ||||||||
| Pacific Coast Bankers Bank | ||||||||
| Zions Bank | ||||||||
| First Horizon Bank | ||||||||
| Total | $ | |||||||
The Company has pledged approximately $1.69 billion and $1.64 billion of loans as collateral for these lines of credit as of June 30, 2026 and December 31, 2025, respectively.
Note 7. Subordinated Note
On November 7, 2025, OP Bancorp issued in a private placement a $25.0 million principal amount of fixed-to-floating rate note due 2035 (the "2035 Note"). The 2035 Note will mature on November 15, 2035. From the original issue date to, but excluding, November 15, 2030, the 2035 Note will bear interest at a fixed rate of 7.50 % per annum and payable semi-annually in arrears on May 15 and November 15 of each year, beginning May 15, 2026. Thereafter, until maturity or earlier redemption, the 2035 Note will bear interest at a floating rate, reset quarterly, equal to the three-month term Secured Overnight Financing Rate ("SOFR") plus 411 basis points and payable in arrears on February 15, May 15, August 15, and November 15 of each year. The Company may, at its option, redeem the 2035 Note, in whole or part, at any time after the fifth anniversary of issuance, subject to any required regulatory approvals. The 2035 Note is qualified as tier 2 capital under current regulatory guidelines and interpretations. Debt issuance costs incurred in connection with the issuance of the 2035 Note totaled $426 thousand and were capitalized in accordance with ASC 835-30. These costs are presented as a direct deduction from the carrying amount of the subordinated note on the Consolidated Balance Sheet and are amortized into interest expense over the contractual term of the note using the straight-line method. As of both June 30, 2026 and December 31, 2025, the balance of the 2035 Note, net of unamortized
20
debt issuance cost was $24.6 22 thousand and $43 thousand for three and six months ended June 30, 2026, respectively.
Note 8 — Commitments and Contingencies
Off-Balance-Sheet Credit Risk
In the normal course of business, the Company enters into commitments to extend credit such as loan commitments and standby letters of credits. These commitments expose the Company to varying degrees of credit and market risk and are subject to the same credit and market reviews as those instruments recorded on the Consolidated Balance Sheets. Loan commitments represent arrangements to lend funds or provide liquidity subject to specified contractual conditions. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These commitments generally have fixed expiration dates or contain termination clauses in the event the customer’s credit quality deteriorates. Since many of the commitments are expected to expire without being drawn upon, the commitment amounts do not necessarily represent future funding requirements.
The Company applies the same credit underwriting criteria to extend loans and commitments to customers. Each customer’s credit worthiness is evaluated on a case-by-case basis. Collateral may be obtained based on management’s assessment of a customer’s credit. Collateral may include securities, accounts receivable, inventory, property, plant and equipment, and income producing commercial or other properties. The majority of these off-balance sheet commitments have a variable interest rate. Management does not anticipate any material losses as a result of these transactions.
The following table presents the distribution of undisbursed credit-related commitments as of June 30, 2026 and December 31, 2025:
| ($ in thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
| Loan commitments | $ | $ | ||||||||||||
| Standby letter of credit | ||||||||||||||
| Commercial letter of credit | ||||||||||||||
| Total undisbursed credit related commitments | $ | $ | ||||||||||||
Investments in low-income housing partnership
The Company invests in certain affordable housing partnerships. The following table shows the investments and unfunded commitments of the Company's affordable housing partnerships as of June 30, 2026 and December 31, 2025:
| ($ in thousands) | June 30, 2026 | December 31, 2025 | ||||||||||||
Investments in low-income housing partnerships (1) | $ | $ | ||||||||||||
Unfunded commitments to fund investments for low-income housing partnerships (1) | ||||||||||||||
(1)These balances are reflected in other assets and other liabilities on the Consolidated Balance Sheets. The Company expects to finish fulfilling these commitments during the year ending 2042.
Under the proportional amortization method, the Company amortizes the initial cost of the investment in proportion to the tax credit and other benefits received, and recognizes the amortization in income tax expense on the Consolidated Statements of Income. The Company recognized amortization expense of $568 thousand and $565 thousand for the three months ended June 30, 2026 and 2025, respectively, and $1.1 730 thousand and $578 thousand for the three months ended June 30, 2026 and 2025, respectively, and $1.5 million and $1.3 million for the six months ended June 30, 2026 and 2025, respectively.
21
Legal Proceedings
Note 9 — Stock-Based Compensation Plan
The Company has one stock-based compensation plan, the OP Bancorp 2021 Equity Incentive Plan ("2021 Plan") as of June 30, 2026. The Board of Directors approved the 2021 Plan, an equity incentive plan for granting stock options and restricted stock awards to key employees, officers, and non-employee directors of the Company. An aggregate of 1,500,000 shares of the Company’s common stock was authorized under the 2021 Plan. The exercise prices of stock options granted under the 2021 Plan may not be less than 100 % of the fair value of the Company’s stock at the date of grant. There were no
Restricted stock awards issued under the 2021 Plan may or may not be subject to vesting provisions. These awards do not confer voting rights or receive dividend entitlements until the shares have vested. Stock compensation cost for the restricted stock awards are recognized based on the grant-date fair value over the vesting period.
The following table presents a summary of the activity in the Company’s restricted stock awards under the 2021 Plan for the six months ended June 30, 2026:
| ($ in thousands, except share data) | Shares Issued | Weighted Average Grant Date Fair Value | Aggregate Intrinsic Value | |||||||||||||||||
| Outstanding (unvested), as of January 1, 2026 | $ | $ | ||||||||||||||||||
| Awards granted | ||||||||||||||||||||
| Awards vested | ( | |||||||||||||||||||
| Awards forfeited | ( | |||||||||||||||||||
| Outstanding (unvested), as of June 30, 2026 | $ | $ | ||||||||||||||||||
The following table presents compensation cost and the related tax benefit for the restricted stock awards under the 2021 Plan for the periods indicated follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Stock compensation cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Tax benefit realized from awards vested | ||||||||||||||||||||||||||
There were 1,056,625 shares available for future grants of either stock options or restricted stock awards under the 2021 Plan as of June 30, 2026. The Company had approximately $1.1 million of unrecognized compensation cost related to unvested restricted stock awards under the 2021 Plan as of June 30, 2026. The Company expects to recognize these costs over a weighted average period of 3.1 years.
22
Note 10 — Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or the price that would be paid to transfer a liability on the measurement date and is determined using an exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Assets and liabilities recorded at fair value on a recurring basis, such as AFS securities, equity investments and derivatives. Additionally, from time to time, the Company records fair value adjustments on a nonrecurring basis. These nonrecurring adjustments typically involve application of lower of cost or fair value accounting and write-downs of individual assets.
The Company classifies its assets and liabilities recorded at fair value as one of the following three categories and a financial instrument’s level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement:
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 a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy.
AFS Debt Securities —The fair values of investment securities are determined by matrix pricing, which is a mathematical technique used to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2). Management obtains fair values of investment securities on a monthly basis from a third-party pricing service.
Equity Investments — The Company has an equity investment with readily determinable fair value. The fair value is obtained from unadjusted quoted prices in active markets on the date of measurement and classified as Level 1.
Derivatives —The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2).
23
Assets and liabilities measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025 are summarized below:
| Fair Value Measure on a Recurring Basis | ||||||||||||||||||||||||||
| ($ in thousands) | Total Fair Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||
| AFS debt securities: | ||||||||||||||||||||||||||
| U.S. Government agencies or sponsored agency securities: | ||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | $ | $ | ||||||||||||||||||||||
| Residential collateralized mortgage obligations | ||||||||||||||||||||||||||
| Municipal securities - tax exempt | ||||||||||||||||||||||||||
| Equity Investments: | ||||||||||||||||||||||||||
| Mutual fund - CRA qualified | ||||||||||||||||||||||||||
| Derivative assets: | ||||||||||||||||||||||||||
| Interest rate products | ||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||
| Derivative liabilities: | ||||||||||||||||||||||||||
| Interest rate products | ||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||
| AFS debt securities: | ||||||||||||||||||||||||||
| U.S. Government agencies or sponsored agency securities: | ||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | $ | $ | ||||||||||||||||||||||
| Residential collateralized mortgage obligations | ||||||||||||||||||||||||||
| Municipal securities - tax exempt | ||||||||||||||||||||||||||
| Equity Investments: | ||||||||||||||||||||||||||
| Mutual fund - CRA qualified | ||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||
| Derivative liabilities: | ||||||||||||||||||||||||||
| Interest rate products | ||||||||||||||||||||||||||
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower of cost or fair value and write-downs of individual assets.
Collateral-dependent loans — Collateral-dependent loans are loans where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment. Fair value for collateral-dependent loans is measured based on the value of the collateral securing these loans and are classified as Level 3. Collateral may include real estate, or business assets including equipment, inventory and accounts receivable. The fair value of real estate collateral is determined based on third-party appraisals. The fair value of business equipment is based on third-party appraisals if significant, or the equipment’s net book value on the business’ financial statements. The fair value of inventory and accounts receivable collateral are determined based on independent field examiner review or aging reports. Appraisals may utilize a single valuation approach or a combination of approaches including comparable sales
24
and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Appraised values are reviewed by management using historical knowledge, market considerations, and knowledge of the client and client’s business.
Other real estate owned ("OREO")— Fair value of OREO is determined primarily based on third-party appraisals, less costs to sell and therefore, is classified as Level 3. Appraisals are required annually and may be updated more frequently when circumstances require, and the fair value adjustments are made to OREO based on the updated appraisals, as appropriate.
The following table presents the fair value hierarchy and fair value of assets that were still held and had fair value adjustments measured on a nonrecurring basis as of June 30, 2026 and December 31, 2025:
| Fair Value Measure on a Nonrecurring Basis | ||||||||||||||||||||||||||
| ($ in thousands) | Total Fair Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||||||||
| Collateral-dependent loans: | ||||||||||||||||||||||||||
| CRE | $ | $ | $ | $ | ||||||||||||||||||||||
| SBA—real estate | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| Collateral-dependent loans: | ||||||||||||||||||||||||||
| CRE | $ | $ | $ | $ | ||||||||||||||||||||||
| SBA—real estate | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
The following table presents the increase (decrease) in the fair value of certain assets held at the end of the reporting periods presented for which a nonrecurring fair value adjustment was recognized during the respective periods:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Collateral-dependent loans: | ||||||||||||||||||||||||||
| CRE | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
| SBA—real estate | ( | ( | ( | |||||||||||||||||||||||
| Total | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||
25
The following table presents information about significant unobservable inputs utilized in the Company’s nonrecurring Level 3 fair value measurements as of June 30, 2026 and December 31, 2025:
| ($ in thousands) | Fair Value Measurements (Level 3) | Valuation Techniques | Unobservable Inputs | Input Value | ||||||||||||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||||||||||||||
| Collateral-dependent loans: | $ | Fair value of collateral | Selling cost | |||||||||||||||||||||||||||||
Fair value of collateral | Selling cost and Discount | |||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Collateral-dependent loans: | $ | Fair value of collateral | Selling cost | |||||||||||||||||||||||||||||
| Fair value of collateral | Selling cost and Discount | |||||||||||||||||||||||||||||||
Financial Instruments
The carrying amounts and estimated fair values of financial instruments that are not carried at fair value on a recurring basis as of June 30, 2026 and December 31, 2025 are as follows. These financial assets and liabilities are measured at amortized cost basis on the Company’s Consolidated Balance Sheets:
| June 30, 2026 | ||||||||||||||||||||||||||||||||
| ($ in thousands) | Carrying Amount | Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Loans held for sale | ||||||||||||||||||||||||||||||||
| Net loans | ||||||||||||||||||||||||||||||||
| Accrued interest receivable, net | ||||||||||||||||||||||||||||||||
| Other investments: | ||||||||||||||||||||||||||||||||
| FHLB and PCBB stock | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||
| Time deposits placed | ||||||||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | ||||||||||||||||||||||||||||||||
| FHLB advances | ||||||||||||||||||||||||||||||||
| Subordinated note, net | ||||||||||||||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||||||||||||||
26
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| ($ in thousands) | Carrying Amount | Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Loans held for sale | ||||||||||||||||||||||||||||||||
| Net loans | ||||||||||||||||||||||||||||||||
| Accrued interest receivable, net | ||||||||||||||||||||||||||||||||
| Other investments: | ||||||||||||||||||||||||||||||||
| FHLB and PCBB stock | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||
| Time deposits placed | ||||||||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | ||||||||||||||||||||||||||||||||
| FHLB advances | ||||||||||||||||||||||||||||||||
| Subordinated note, net | ||||||||||||||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||||||||||||||
Note 11 — Derivative Financial Instruments
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. As of June 30, 2026, the Company anticipates reclassifying an estimated $130 thousand of pre-tax of deferred net gains from AOCI into earnings during the next 12 months. For the Company's accounting policy on derivatives, see Note 1. Significant Accounting Policies to the Consolidated Financial Statements in the 2025 Annual Report on Form 10-K.
27
The following table presents the notional amounts, fair values and classification on consolidated balance sheets of the Company's derivatives as of June 30, 2026 and December 31, 2025:
| Derivative Assets | Derivative Liabilities | |||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Notional Amount | Balance Sheet Location | Fair Value | Notional Amount | Balance Sheet Location | Fair Value | ||||||||||||||||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments: | ||||||||||||||||||||||||||||||||||||||
Cash flow hedges: | ||||||||||||||||||||||||||||||||||||||
| Interest rate products | $ | Other assets | $ | $ | Other liabilities | $ | ||||||||||||||||||||||||||||||||
| Total derivatives designated as hedging instruments | $ | $ | ||||||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments: | ||||||||||||||||||||||||||||||||||||||
Cash flow hedges: | ||||||||||||||||||||||||||||||||||||||
| Interest rate products | $ | Other assets | $ | $ | Other liabilities | $ | ||||||||||||||||||||||||||||||||
| Total derivatives designated as hedging instruments | $ | $ | ||||||||||||||||||||||||||||||||||||
The following table presents the pre-tax changes in AOCI from cash flow hedges for the three and six months ended June 30, 2026 and 2025:
($ in thousands) | (Losses) Gains Recognized in AOCI | Location of Gains (Losses) Reclassified from AOCI into Earnings | Amount of Gains (Losses) Reclassified from AOCI into Earnings | |||||||||||||||||
| Three Months Ended June 30, 2026 | ||||||||||||||||||||
| Interest rate products | $ | ( | Interest expense on deposits | $ | ( | |||||||||||||||
| Total | $ | ( | $ | ( | ||||||||||||||||
| Three Months Ended June 30, 2025 | ||||||||||||||||||||
| Interest rate products | $ | ( | Interest expense on deposits | $ | ||||||||||||||||
| Total | $ | ( | $ | |||||||||||||||||
| Six Months Ended June 30, 2026 | ||||||||||||||||||||
| Interest rate products | $ | ( | Interest expense on deposits | $ | ( | |||||||||||||||
| Total | $ | ( | $ | ( | ||||||||||||||||
| Six Months Ended June 30, 2025 | ||||||||||||||||||||
| Interest rate products | $ | ( | Interest expense on deposits | $ | ||||||||||||||||
| Total | $ | ( | $ | |||||||||||||||||
28
The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company's derivatives as of June 30, 2026 and December 31, 2025. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheet:
| Gross Amounts of Recognized Assets | Gross Amounts Offset in the Balance Sheet | Net Amounts of Assets presented in the Balance Sheet | Gross Amounts Not Offset in the Balance Sheet | |||||||||||||||||||||||||||||||||||
| ($ in thousands) | Financial Instruments | Cash Collateral Received | Net Amount | |||||||||||||||||||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
| Derivatives assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Derivatives assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Balance Sheet | Net Amounts of Liabilities presented in the Balance Sheet | Gross Amounts Not Offset in the Balance Sheet | |||||||||||||||||||||||||||||||||||
| ($ in thousands) | Financial Instruments | Cash Collateral Posted | Net Amount | |||||||||||||||||||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
| Derivatives liabilities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Derivatives liabilities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Note 12 — Regulatory Capital Matters
The Bank is subject to certain risk-based capital and leverage ratio requirements under the U.S. Basel III capital rules administered by the federal and state banking agencies. Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on the Company's operations or financial condition. The Basel III capital rules also require the Bank to maintain a capital conservation buffer of 2.50 % above the minimum risk-based capital ratios in order to absorb losses during periods of economic stress. Banking institutions with a ratio of common equity tier 1 capital to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. As of both June 30, 2026 and December 31, 2025, the Bank met all applicable capital adequacy requirements.
29
The following table presents the regulatory capital amounts and ratios for the Company and the Bank as of dates indicated:
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
Actual (1) | Required for Capital Adequacy Purposes | Minimum To be Considered "Well Capitalized" | ||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||
| Total capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||
| Consolidated | $ | % | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||
| Bank | $ | % | $ | % | ||||||||||||||||||||||||||||||||||
| Tier 1 capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||
| Consolidated | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||
| Bank | ||||||||||||||||||||||||||||||||||||||
| Common equity Tier 1 capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||
| Consolidated | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||
| Bank | ||||||||||||||||||||||||||||||||||||||
| Tier 1 capital (to average assets) | ||||||||||||||||||||||||||||||||||||||
| Consolidated | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||
| Bank | ||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
Actual (1) | Required for Capital Adequacy Purposes | Minimum To be Considered "Well Capitalized" | ||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||
| Total capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||
| Consolidated | $ | % | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||
| Bank | $ | % | $ | % | ||||||||||||||||||||||||||||||||||
| Tier 1 capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||
| Consolidated | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||
| Bank | ||||||||||||||||||||||||||||||||||||||
| Common equity Tier 1 capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||
| Consolidated | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||
| Bank | ||||||||||||||||||||||||||||||||||||||
| Tier 1 capital (to average assets) | ||||||||||||||||||||||||||||||||||||||
| Consolidated | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||
| Bank | ||||||||||||||||||||||||||||||||||||||
(1)Regulatory capital requirements apply only to Open Bank, and OP Bancorp’s ratios are presented solely for information purposes.
30
Note 13 — Earnings Per Share
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| ($ in thousands, except share and per share data) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
Basic | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Distributed and undistributed earnings allocated to participating securities | ( | ( | ||||||||||||||||||||||||
| Net income allocated to common shares | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted-average number of common shares outstanding | ||||||||||||||||||||||||||
| Basic EPS | $ | $ | $ | $ | ||||||||||||||||||||||
Diluted | ||||||||||||||||||||||||||
| Net income allocated to common shares | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted-average number of common shares outstanding | ||||||||||||||||||||||||||
Add: Dilutive impact of unvested restricted stock awards (1) | ||||||||||||||||||||||||||
| Average shares and dilutive potential common shares | ||||||||||||||||||||||||||
| Diluted earnings per common share | $ | $ | $ | $ | ||||||||||||||||||||||
31
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview | 32 | ||||
Financial Review | 34 | ||||
Critical Accounting Policies and Estimates | 35 | ||||
Results of Operations | 36 | ||||
Net Interest Income | 36 | ||||
Provision for Credit Losses | 41 | ||||
Noninterest Income | 41 | ||||
Noninterest Expense | 42 | ||||
Income Taxes | 43 | ||||
Financial Condition | 43 | ||||
Investment Portfolio | 44 | ||||
Loans | 45 | ||||
Allowance for Credit Losses | 46 | ||||
Nonperforming Assets | 48 | ||||
Deposits and Other Sources of Funds | 49 | ||||
Liquidity and Capital Resources | 50 | ||||
Capital Requirements | 51 | ||||
OVERVIEW
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related notes thereto contained in this Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review “Part II, Item 1A. Risk Factors” for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
OP Bancorp (referred to herein on an unconsolidated basis as "OP Bancorp" and on a consolidated basis as the "Company") is a bank holding company headquartered in Los Angeles, California. Our commercial community banking activities are operated through Open Bank ("Open Bank" or the "Bank"), our wholly owned banking subsidiary, and we do not conduct material business operations other than through the Bank. We offer commercial banking services to small and medium-sized businesses, their owners and retail customers primarily in the Korean-American communities within our primary market areas. We currently operate twelve full service branches: nine branches across Los Angeles and Orange Counties in California, as well as one branch each in Santa Clara, California; Carrollton, Texas; and Las Vegas, Nevada. In addition,we have one loan production office in Bellevue, Washington, which we opened in May 2026. During the first half of 2026, we closed five loan production offices due to limited market demand, including offices in Pleasanton, California; Atlanta, Georgia; Aurora, Colorado; and Fairfax, Virginia in May 2026, and Lynnwood, Washington in June 2026.
Our results of operations depend primarily on net interest income, which represents the interest we earn on loans and related products, reduced by the interest we pay on deposits and other borrowings including our senior subordinated note. In addition to net interest income, we derive earnings from fee income we receive in connection with our deposits, and from gains on sale and service of SBA loans. Our major operating expenses are salaries and related benefits we pay our management and staff, and rent we pay on our leased properties. We rely primarily on locally-generated deposits, mostly from the Korean-American market within California, to fund our loan activities.
32
Current Developments
Interest Rate Environment
The Board of Governors of the Federal Reserve System ("Federal Reserve") maintained the Federal Funds Rate target range at 3.50% to 3.75% at its July 29, 2026 meeting, continuing its pause in monetary policy adjustments. The Federal Reserve indicated that future policy decisions will remain dependent on incoming economic data and evolving economic conditions, including inflation trends, labor market conditions, economic growth, and broader uncertainties. The current interest rate environment continues to influence loan demand, deposit pricing, funding costs, and credit quality trends across the banking industry. Economic uncertainty and potential for future changes in monetary policy continue to present challenges in forecasting interest rate movements and economic conditions, which may affect the Company's balance sheet management strategies and its ability to effectively price loans and deposit products.
SEC Rulemaking Developments
In May 2026, the SEC issued proposed rule amendments that, if adopted, would permit public companies to elect semiannual reporting in lieu of quarterly reporting and would simplify the public company filer status framework while expanding certain reporting accommodations available to smaller issuers. The proposals remain subject to the SEC rulemaking process and public comment. The Company is monitoring these developments and evaluating their potential impact on its reporting and compliance obligations.
Community Bank Leverage Ratio
The Community Bank Leverage Ratio (“CBLR”) framework is an optional regulatory capital framework that allows qualifying community banking organizations to use a simple leverage ratio rather than calculating certain risk-based capital ratios. The Company plans to elect the CBLR framework beginning in the third quarter of 2026 and believes the election will simplify regulatory capital reporting and compliance requirements while remaining appropriate for the Company’s capital and risk profile.
The Company continues to monitor changes in the banking environment and adjust its operating, funding, and risk management strategies as appropriate.
33
FINANCIAL REVIEW
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| ($ in thousands, except share and per share data) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Income Statement Data: | ||||||||||||||||||||||||||
| Interest income | $ | 38,193 | $ | 37,665 | $ | 76,730 | $ | 72,524 | ||||||||||||||||||
| Interest expense | 18,125 | 17,944 | 36,139 | 35,385 | ||||||||||||||||||||||
| Net interest income | 20,068 | 19,721 | 40,591 | 37,139 | ||||||||||||||||||||||
| (Reversal of) provision for credit losses | (149) | 1,206 | 263 | 1,942 | ||||||||||||||||||||||
| Noninterest income | 5,651 | 3,968 | 9,683 | 8,784 | ||||||||||||||||||||||
| Noninterest expense | 14,826 | 14,037 | 29,059 | 27,851 | ||||||||||||||||||||||
| Income before income taxes | 11,042 | 8,446 | 20,952 | 16,130 | ||||||||||||||||||||||
| Income tax expense | 3,064 | 2,113 | 5,740 | 4,237 | ||||||||||||||||||||||
| Net income | 7,978 | 6,333 | 15,212 | 11,893 | ||||||||||||||||||||||
| Per Share Data: | ||||||||||||||||||||||||||
| Basic EPS | $ | 0.54 | $ | 0.42 | $ | 1.02 | $ | 0.79 | ||||||||||||||||||
| Diluted EPS | 0.53 | 0.42 | 1.02 | 0.79 | ||||||||||||||||||||||
| Book value per common share, at period-end | 15.99 | 14.36 | 15.99 | 14.36 | ||||||||||||||||||||||
| Shares of common stock outstanding, at period-end | 14,926,750 | 14,885,614 | 14,926,750 | 14,885,614 | ||||||||||||||||||||||
| Performance Ratios: | ||||||||||||||||||||||||||
Return on average assets ("ROAA") (1) | 1.18 | % | 1.00 | % | 1.13 | % | 0.96 | % | ||||||||||||||||||
Return on average equity ("ROAE") (1) | 13.61 | 11.97 | 13.09 | 11.36 | ||||||||||||||||||||||
Yield on average total loans (1) | 6.36 | 6.56 | 6.35 | 6.47 | ||||||||||||||||||||||
Yield on average interest-earning assets (1) | 5.87 | 6.18 | 5.94 | 6.11 | ||||||||||||||||||||||
Cost of average interest-bearing liabilities (1) | 3.82 | 4.18 | 3.85 | 4.24 | ||||||||||||||||||||||
Cost of deposits (1) | 2.93 | 3.15 | 2.95 | 3.19 | ||||||||||||||||||||||
Net interest margin (1) | 3.08 | 3.23 | 3.13 | 3.12 | ||||||||||||||||||||||
Efficiency ratio (2) | 57.64 | 59.25 | 57.80 | 60.65 | ||||||||||||||||||||||
(1) Annualized.
(2) Represents noninterest expense divided by the sum of net interest income and noninterest income.
34
Change | |||||||||||||||||||||||
| ($ in thousands) | June 30, 2026 | December 31, 2025 | % or Basis Point | ||||||||||||||||||||
| Balance Sheet Data: | |||||||||||||||||||||||
| Gross loans | $ | 2,259,061 | $ | 2,193,669 | 3 | % | |||||||||||||||||
| Allowance for credit losses on loans | 28,100 | 27,975 | 0 | % | |||||||||||||||||||
| Total assets | 2,744,306 | 2,650,226 | 4 | % | |||||||||||||||||||
| Total deposits | 2,368,339 | 2,280,547 | 4 | % | |||||||||||||||||||
| Shareholders’ equity | 238,643 | 227,893 | 5 | % | |||||||||||||||||||
| Asset Quality Data: | |||||||||||||||||||||||
| Nonperforming loans to gross loans | 0.76 | % | 0.64 | % | 12 | ||||||||||||||||||
| Allowance for credit losses on loans to nonperforming loans | 163 | 199 | (36) | % | |||||||||||||||||||
| Allowance for credit losses on loans to gross loans | 1.24 | 1.28 | (4) | ||||||||||||||||||||
| Balance Sheet and Capital Ratios: | |||||||||||||||||||||||
| Gross loans to total deposits | 95 | % | 96 | % | (100) | ||||||||||||||||||
| Noninterest-bearing deposits to total deposits | 23 | 23 | — | ||||||||||||||||||||
| Shareholders' equity to total assets | 8.70 | 8.60 | 10 | ||||||||||||||||||||
| Tier 1 leverage capital ratio | 9.21 | 8.99 | 22 | ||||||||||||||||||||
| Common equity tier 1 capital ratio | 10.98 | 10.93 | 5 | ||||||||||||||||||||
| Tier 1 risk-based capital ratio | 10.98 | 10.93 | 5 | ||||||||||||||||||||
| Total risk-based capital ratio | 13.32 | 13.31 | 1 | ||||||||||||||||||||
Net income for the second quarter of 2026 was $8.0 million, up $1.6 million, or 26%, compared with $6.3 million for the same period in 2025. For the first half of 2026, net income was $15.2 million, up $3.3 million, or 28%, compared with $11.9 million for the same period in 2025. The following were notable elements of the Company's performance for the periods presented:
•Net interest income and net interest margin: Second quarter 2026 net interest income increased to $20.1 million, up $347 thousand, or 2%, from the year ago quarter, while net interest margin decreased 15 basis points to 3.08%. For the first half of 2026, net interest income increased to $40.6 million, up $3.5 million, or 9%, from the year ago period, and net interest margin expanded one basis point to 3.13%.
•Profitability ratios: Second quarter 2026 ROAA and ROAE increased to 1.18% and 13.61%, respectively, up 18 and 164 basis points from the same period in 2025. For the first half of 2026, ROAA and ROAE increased to 1.13% and 13.09%, respectively, up 17 and 173 basis points from the year ago period.
•Efficiency ratios: Second quarter 2026 efficiency ratio was 57.64%, an improvement of 161 basis points from the same period in 2025, primarily reflecting higher noninterest income. For the first half of 2026, efficiency ratio was 57.80%, an improvement of 285 basis points from the same period in 2025, primarily due to growth in net interest income.
•Asset growth: Total assets were $2.74 billion as of June 30, 2026, up $94.1 million, or 4%, from December 31, 2025, primarily driven by a $65.4 million increase in gross loans.
•Loan growth: Gross loans were $2.26 billion, up $65.4 million, or 3%, from December 31, 2025, primarily reflecting $57.9 million of CRE loan growth.
•Deposit growth: Total deposits were $2.37 billion, up $87.8 million, or 4%, from December 31, 2025, reflecting growth in noninterest-bearing and money market and other deposits.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's significant accounting policies are described in Note 1. Significant Accounting Policies to Consolidated Financial Statements in the 2025 Annual Report on Form 10-K. Certain policies involve critical
35
accounting estimates requiring management judgment, and actual results may differ materially under different assumptions. Allowance for credit losses is considered critical to the Company's Consolidated Financial Statements, and there have been no material changes to our critical accounting policies and estimates since those described in our 2025 Annual Report on Form 10-K.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income, which represents the difference between interest income and interest expense, is the largest component of our total revenue and a key driver of our financial performance. Management monitors net interest income and the net interest margin, which are affected by the timing of premiums and discounts accretion on interest-earning assets, reversals of interest on nonaccrual loans, changes in prepayment speeds, and loan activity. We seek to maximize net interest income without assuming excessive interest rate risk through our asset and liability management policies, including monitoring the pricing, maturity, and repricing characteristics of interest-earning assets and interest-bearing liabilities.
36
The following table presents, for the periods indicated, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields, (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates, (iii) net interest income, (iv) the interest rate spread, and (v) the net interest margin.
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Average Balance | Interest Income/Expense | Average Yield/Rate(1) | Average Balance | Interest Income/Expense | Average Yield/Rate(1) | ||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits in other banks | $ | 128,022 | $ | 416 | 1.29 | % | (2) | $ | 147,874 | $ | 1,648 | 4.41 | % | |||||||||||||||||||||||||
Other investments (3) | 18,531 | 222 | 4.79 | 16,961 | 317 | 7.47 | ||||||||||||||||||||||||||||||||
| AFS debt securities | 206,877 | 1,824 | 3.53 | 180,193 | 1,437 | 3.19 | ||||||||||||||||||||||||||||||||
| CRE | 1,171,097 | 18,691 | 6.40 | 1,028,961 | 16,013 | 6.24 | ||||||||||||||||||||||||||||||||
| SBA | 314,060 | 6,077 | 7.76 | 283,130 | 6,618 | 9.38 | ||||||||||||||||||||||||||||||||
| C&I | 206,978 | 3,517 | 6.82 | 195,547 | 3,667 | 7.52 | ||||||||||||||||||||||||||||||||
| Home mortgage | 560,842 | 7,437 | 5.30 | 587,454 | 7,962 | 5.42 | ||||||||||||||||||||||||||||||||
| Consumer | 293 | 9 | 11.76 | 76 | 3 | 15.86 | ||||||||||||||||||||||||||||||||
Loans (4) | 2,253,270 | 35,731 | 6.36 | 2,095,168 | 34,263 | 6.56 | ||||||||||||||||||||||||||||||||
| Total interest-earning assets | 2,606,700 | 38,193 | 5.87 | 2,440,196 | 37,665 | 6.18 | ||||||||||||||||||||||||||||||||
| Noninterest-earning assets | 87,072 | 83,394 | ||||||||||||||||||||||||||||||||||||
| Total assets | $ | 2,693,772 | $ | 2,523,590 | ||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Money market deposits and others | $ | 404,975 | $ | 3,174 | 3.14 | % | $ | 408,667 | $ | 3,586 | 3.52 | % | ||||||||||||||||||||||||||
| Time deposits | 1,392,628 | 13,717 | 3.95 | 1,267,363 | 13,889 | 4.40 | ||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 1,797,603 | 16,891 | 3.77 | 1,676,030 | 17,475 | 4.18 | ||||||||||||||||||||||||||||||||
| Borrowings | 81,816 | 744 | 3.65 | 46,707 | 469 | 4.04 | ||||||||||||||||||||||||||||||||
| Subordinated note | 24,622 | 490 | 7.96 | — | — | — | ||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 1,904,041 | 18,125 | 3.82 | 1,722,737 | 17,944 | 4.18 | ||||||||||||||||||||||||||||||||
| Noninterest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing deposits | 518,218 | 547,545 | ||||||||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 36,969 | 41,624 | ||||||||||||||||||||||||||||||||||||
| Total noninterest-bearing liabilities | 555,187 | 589,169 | ||||||||||||||||||||||||||||||||||||
| Shareholders’ equity | 234,544 | 211,684 | ||||||||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 2,693,772 | $ | 2,523,590 | ||||||||||||||||||||||||||||||||||
| Net interest income / interest rate spreads | $ | 20,068 | 2.05 | % | $ | 19,721 | 2.00 | % | ||||||||||||||||||||||||||||||
| Net interest margin | 3.08 | % | 3.23 | % | ||||||||||||||||||||||||||||||||||
| Cost of deposits | 2.93 | % | 3.15 | % | ||||||||||||||||||||||||||||||||||
| Cost of funds | 3.00 | % | 3.17 | % | ||||||||||||||||||||||||||||||||||
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| Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Average Balance | Interest Income/Expense | Average Yield/Rate(1) | Average Balance | Interest Income/Expense | Average Yield/Rate(1) | ||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits in other banks | $ | 136,470 | $ | 1,743 | 2.54 | % | (2) | $ | 136,038 | $ | 3,020 | 4.41 | % | |||||||||||||||||||||||||
Other investments (3) | 17,885 | 792 | 8.86 | 16,716 | 619 | 7.40 | ||||||||||||||||||||||||||||||||
| AFS debt securities | 206,066 | 3,585 | 3.48 | 182,409 | 2,933 | 3.22 | ||||||||||||||||||||||||||||||||
| CRE | 1,162,852 | 36,505 | 6.33 | 1,014,772 | 30,993 | 6.16 | ||||||||||||||||||||||||||||||||
| SBA | 303,499 | 12,057 | 8.01 | 274,589 | 12,825 | 9.42 | ||||||||||||||||||||||||||||||||
| C&I | 209,943 | 7,069 | 6.79 | 203,781 | 7,445 | 7.37 | ||||||||||||||||||||||||||||||||
| Home mortgage | 563,002 | 14,945 | 5.31 | 557,058 | 14,681 | 5.27 | ||||||||||||||||||||||||||||||||
| Consumer and other | 787 | 34 | 8.70 | 154 | 8 | 11.27 | ||||||||||||||||||||||||||||||||
Loans (4) | 2,240,083 | 70,610 | 6.35 | 2,050,354 | 65,952 | 6.47 | ||||||||||||||||||||||||||||||||
| Total interest-earning assets | 2,600,504 | 76,730 | 5.94 | 2,385,517 | 72,524 | 6.11 | ||||||||||||||||||||||||||||||||
| Noninterest-earning assets | 81,980 | 80,624 | ||||||||||||||||||||||||||||||||||||
| Total assets | $ | 2,682,484 | $ | 2,466,141 | ||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Money market deposits and others | $ | 399,141 | $ | 6,183 | 3.12 | % | $ | 381,387 | $ | 6,671 | 3.53 | % | ||||||||||||||||||||||||||
| Time deposits | 1,391,565 | 27,553 | 3.99 | 1,237,862 | 27,412 | 4.47 | ||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 1,790,706 | 33,736 | 3.80 | 1,619,249 | 34,083 | 4.24 | ||||||||||||||||||||||||||||||||
| Borrowings | 78,841 | 1,423 | 3.64 | 62,736 | 1,302 | 4.19 | ||||||||||||||||||||||||||||||||
| Subordinated note | 24,612 | 980 | 7.96 | — | — | — | ||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 1,894,159 | 36,139 | 3.85 | 1,681,985 | 35,385 | 4.24 | ||||||||||||||||||||||||||||||||
| Noninterest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing deposits | 517,474 | 534,870 | ||||||||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 38,355 | 39,829 | ||||||||||||||||||||||||||||||||||||
| Total noninterest-bearing liabilities | 555,829 | 574,699 | ||||||||||||||||||||||||||||||||||||
| Shareholders’ equity | 232,496 | 209,457 | ||||||||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 2,682,484 | $ | 2,466,141 | ||||||||||||||||||||||||||||||||||
| Net interest income / interest rate spreads | $ | 40,591 | 2.09 | % | $ | 37,139 | 1.87 | % | ||||||||||||||||||||||||||||||
| Net interest margin | 3.13 | % | 3.12 | % | ||||||||||||||||||||||||||||||||||
| Cost of deposits | 2.95 | % | 3.19 | % | ||||||||||||||||||||||||||||||||||
| Cost of funds | 3.02 | % | 3.22 | % | ||||||||||||||||||||||||||||||||||
(1)Annualized.
(2)Interest income includes a one-time $739 thousand accrual adjustment related to the Federal Reserve Bank account.
(3)Includes FHLB and PCBB stocks, CRA qualified mutual fund and interest-earning time deposits with banks.
(4)Include loans held-for-sale.
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Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following tables set forth the effects of changing rates and volumes on our net interest income during the period shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volume and rate have been allocated to volume and rate ratably.
| Three Months Ended June 30, | ||||||||||||||||||||
| 2026 vs 2025 | ||||||||||||||||||||
| Increases (Decreases) Due to Change in | ||||||||||||||||||||
| ($ in thousands) | Volume | Rate | Total | |||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||
| Interest-bearing deposits in other banks | $ | (143) | $ | (1,089) | $ | (1,232) | ||||||||||||||
| Other investments | 26 | (121) | (95) | |||||||||||||||||
| AFS debt securities | 242 | 145 | 387 | |||||||||||||||||
| CRE | 2,240 | 438 | 2,678 | |||||||||||||||||
| SBA | 661 | (1,202) | (541) | |||||||||||||||||
| C&I | 236 | (386) | (150) | |||||||||||||||||
| Home mortgage | (325) | (200) | (525) | |||||||||||||||||
| Consumer | 8 | (2) | 6 | |||||||||||||||||
| Total loans | 2,820 | (1,352) | 1,468 | |||||||||||||||||
| Total interest-earning assets | 2,945 | (2,417) | 528 | |||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||
| Money market deposits and others | 7 | (419) | (412) | |||||||||||||||||
| Time deposits | 1,298 | (1,470) | (172) | |||||||||||||||||
| Total interest-bearing deposits | 1,305 | (1,889) | (584) | |||||||||||||||||
| Borrowings | 337 | (62) | 275 | |||||||||||||||||
| Subordinated note | 245 | 245 | 490 | |||||||||||||||||
| Total interest-bearing liabilities | 1,887 | (1,706) | 181 | |||||||||||||||||
| Net interest income | $ | 1,058 | $ | (711) | $ | 347 | ||||||||||||||
Comparison for the Three Months Ended June 30, 2026 and 2025
Net interest income for the second quarter of 2026 increased modestly by $347 thousand, or 2%, primarily driven by balance-sheet growth and lower deposit costs. These favorable factors were partially offset by lower loan yields, reduced interest income on interest-bearing deposits in other banks resulting from lower market rates earned on Federal Reserve Bank balances and a one-time interest accrual adjustment related to the Federal Reserve Bank account, as well as higher interest expense associated with the subordinated note issued in November 2025.
Interest income on loans increased by $1.5 million, or 4%, primarily due to growth in average loan balances, reflecting expansion in CRE loan portfolio. The increase was partially offset by lower loan yields, resulting from the repricing of adjustable-rate loans and lower rates on new originations following last year's federal funds rate cuts, as well as the absence of elevated interest income recognized from nonaccrual loans in the prior period.
Interest expense on interest-bearing deposits decreased by $584 thousand, or 3%, mainly due to lower deposit costs as time deposits repriced following the federal funds rate cuts. The decrease was partially offset by growth in average interest-bearing deposit balances, primarily in time deposits.
Interest income on interest-bearing deposits in other banks decreased by $1.2 million, primarily due to the aforementioned accrual adjustment of $739 thousand on the Federal Reserve Bank account, as well as lower yields on Federal Reserve Bank balances.
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Interest expense on subordinated note increased by $490 thousand, reflecting the issuance of the subordinated note in November 2025.
As a result, net interest margin decreased by 15 basis points, despite a five basis point increase in net interest spread, as average earning assets grew 7%, outpacing the 2% increase in net interest income.
| Six Months Ended June 30, | ||||||||||||||||||||
| 2026 vs 2025 | ||||||||||||||||||||
| Increases (Decreases) Due to Change in | ||||||||||||||||||||
| ($ in thousands) | Volume | Rate | Total | |||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||
| Interest-bearing deposits in other banks | $ | 8 | $ | (1,285) | $ | (1,277) | ||||||||||||||
| Federal funds sold and other investments | 49 | 124 | 173 | |||||||||||||||||
| AFS debt securities | 434 | 218 | 652 | |||||||||||||||||
| CRE | 4,586 | 926 | 5,512 | |||||||||||||||||
| SBA | 1,250 | (2,018) | (768) | |||||||||||||||||
| C&I | 274 | (650) | (376) | |||||||||||||||||
| Home mortgage | 322 | (58) | 264 | |||||||||||||||||
| Consumer and other | 32 | (6) | 26 | |||||||||||||||||
| Total loans | 6,464 | (1,806) | 4,658 | |||||||||||||||||
| Total interest-earning assets | 6,955 | (2,749) | 4,206 | |||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||
| Money market deposits and others | 340 | (828) | (488) | |||||||||||||||||
| Time deposits | 3,216 | (3,075) | 141 | |||||||||||||||||
| Total interest-bearing deposits | 3,556 | (3,903) | (347) | |||||||||||||||||
| Borrowings | 313 | (192) | 121 | |||||||||||||||||
| Subordinated note | 490 | 490 | 980 | |||||||||||||||||
| Total interest-bearing liabilities | 4,359 | (3,605) | 754 | |||||||||||||||||
| Net interest income | $ | 2,596 | $ | 856 | $ | 3,452 | ||||||||||||||
Comparison for the Six Months Ended June 30, 2026 and 2025
Net interest income for the first half of 2026 increased by $3.5 million, or 9%, primarily due to continued balance-sheet growth and lower deposits costs. These factors were partially offset by lower yields and reduced interest income on interest-bearing deposits in other banks, reflecting the previously discussed accrual adjustment and lower market rates on the Federal Reserve Bank account balances.
Interest income on loans increased by $4.7 million, or 7%, driven primarily by growth in average loan balances, resulting from the expansion of the CRE and SBA portfolios. The increase was partially offset by lower loan yields, reflecting the repricing of adjustable-rate loans and lower rates on new originations following last year's federal funds rate cuts, as well as the absence of elevated interest income recognized from nonaccrual loans in the prior period.
Interest expense on interest-bearing deposits decreased by $347 thousand or 1%, primarily due to lower interest-bearing deposit costs, resulting from the repricing of time deposits following the federal funds rate cuts. The decrease was mostly offset by growth in average interest-bearing deposit balances, mainly in time deposits.
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Interest income on interest-bearing deposits in other banks decreased by $1.3 million, primarily due to the previously discussed $739 thousand accrual adjustment related to the Federal Reserve Bank account, as well as lower market rates earned on those balances.
As a result, net interest margin increased by one basis point, as the 9% increase in net interest income slightly outpaced the 9% growth in average earning assets.
Provision for Credit Losses
Comparison for the Three Months Ended June 30, 2026 and 2025
Provision for credit losses was a reversal of $149 thousand for the second quarter of 2026, compared with a provision expense of $1.2 million in the same period a year ago. The decrease was primarily attributable to lower qualitative reserve requirements, reflecting a reduced impact from loan growth due to a lower growth rate relative to the prior period and an improved economic outlook, as well as a smaller quantitative reserve build driven by slower loan growth and less adverse changes in historical loss factors compared with the prior year period. In addition, the provision benefited from a lower specific reserve requirement resulting from the sale of one nonaccrual loan.
Comparison for the Six Months Ended June 30, 2026 and 2025
Provision for credit losses was $263 thousand for the first half of 2026, compared with $1.9 million in the same period a year ago. The decrease was primarily driven by the same factors discussed above, including lower qualitative reserve requirements and a smaller quantitative reserve build. These favorable factors were partially offset by higher specific reserve requirements associated with individually evaluated loans.
Noninterest Income
While interest income remains the largest single component of total revenues, noninterest income is also an important component. A portion of our noninterest income is associated with SBA lending activity, consisting of gains on the sale of loans sold in the secondary market and servicing income from loans sold with servicing retained. Other sources of noninterest income include service charges on deposit.
Comparison for the Three Months Ended June 30, 2026 and 2025
The following table presents the components of noninterest income for the second quarters of 2026 and 2025:
| Three Months Ended June 30, | ||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||
| Service charges on deposits | $ | 515 | $ | 1,017 | $ | (502) | (49) | % | ||||||||||||||||||
| Loan servicing fees, net of amortization | 974 | 900 | 74 | 8 | ||||||||||||||||||||||
| Gains on sale of loans | 3,370 | 1,441 | 1,929 | 134 | ||||||||||||||||||||||
| Other income | 792 | 610 | 182 | 30 | ||||||||||||||||||||||
| Total noninterest income | $ | 5,651 | $ | 3,968 | $ | 1,683 | 42 | % | ||||||||||||||||||
Noninterest income for the second quarter of 2026 increased year-over-year, primarily due to higher gains on sale of loans, partially offset by lower service charges on deposits.
Gains of sale of loans increased by $1.9 million, or 134%, driven by stronger SBA loan sale activity and higher premium rates. The Bank sold $49.1 million in SBA loans at an average premium rate of 8.17%, compared with $25.3 million sold at an average premium rate of 7.05% in the prior period.
Service charges on deposit decreased by $502 thousand, or 49%, largely reflecting lower balances in existing business analysis accounts and closure of certain currency exchange-related accounts during the third quarter of 2025.
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Comparison for the Six Months Ended June 30, 2026 and 2025
The following table presents the components of noninterest income for the first half of 2026 and 2025:
| Six Months Ended June 30, | ||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||
| Service charges on deposits | $ | 978 | $ | 2,017 | $ | (1,039) | (52) | % | ||||||||||||||||||
| Loan servicing fees, net of amortization | 1,696 | 1,907 | (211) | (11) | ||||||||||||||||||||||
| Gains on sale of loans | 5,420 | 3,460 | 1,960 | 57 | ||||||||||||||||||||||
| Other income | 1,589 | 1,400 | 189 | 14 | ||||||||||||||||||||||
| Total noninterest income | $ | 9,683 | $ | 8,784 | $ | 899 | 10 | % | ||||||||||||||||||
Noninterest income for the first half of 2026 increased year-over-year, primarily due to higher gains on sale of loans, partially offset by lower service charges on deposits.
Gains on sale of loans increased $2.0 million, or 57%, primarily due to stronger SBA loan sale activity and higher premium rates. The Bank sold $81.3 million in SBA loans at an average premium of 8.21%, compared to sale of $56.4 million at an average premium rate of 7.62%.
Service charges on deposit decreased $1.0 million, or 52%, primarily driven by lower balances in existing business analysis accounts and closure of certain currency exchange-related accounts during the third quarter of 2025.
Noninterest Expense
Comparison for the Three Months Ended June 30, 2026 and 2025
The following table presents the components of noninterest expense for the second quarters of 2026 and 2025:
| Three Months Ended June 30, | ||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 9,733 | $ | 9,075 | $ | 658 | 7 | % | ||||||||||||||||||
| Occupancy and equipment | 1,901 | 1,584 | 317 | 20 | ||||||||||||||||||||||
| Data processing and communication | 380 | 306 | 74 | 24 | ||||||||||||||||||||||
| Professional fees | 454 | 418 | 36 | 9 | ||||||||||||||||||||||
| FDIC insurance and regulatory assessments | 387 | 506 | (119) | (24) | ||||||||||||||||||||||
| Promotion and advertising | 104 | 232 | (128) | (55) | ||||||||||||||||||||||
| Directors' fees | 164 | 198 | (34) | (17) | ||||||||||||||||||||||
| Foundation donation and other contributions | 811 | 636 | 175 | 28 | ||||||||||||||||||||||
| Other expenses | 892 | 1,082 | (190) | (18) | ||||||||||||||||||||||
| Total noninterest expense | $ | 14,826 | $ | 14,037 | $ | 789 | 6 | % | ||||||||||||||||||
Noninterest expense for the second quarter of 2026 increased year-over-year, primarily due to higher salaries and employee benefits, and increased occupancy and equipment.
Salaries and employee benefits for the second quarter of 2026 increased $658 thousand, or 7%, mainly driven by staffing growth and annual salary adjustments effective April 2026.
Occupancy and equipment for the second quarter of 2026 increased $317 thousand, or 20%, primarily due to the expiration of a common-area-maintenance concession on a lease that benefited the prior period.
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Comparison for the Six Months Ended June 30, 2026 and 2025
The following table presents the components of noninterest expense for the first half of 2026 and 2025:
| Six Months Ended June 30, | ||||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 19,009 | $ | 17,851 | $ | 1,158 | 6 | % | ||||||||||||||||||
| Occupancy and equipment | 3,712 | 3,165 | 547 | 17 | ||||||||||||||||||||||
| Data processing and communication | 791 | 602 | 189 | 31 | ||||||||||||||||||||||
| Professional fees | 853 | 825 | 28 | 3 | ||||||||||||||||||||||
| FDIC insurance and regulatory assessments | 805 | 993 | (188) | (19) | ||||||||||||||||||||||
| Promotion and advertising | 224 | 388 | (164) | (42) | ||||||||||||||||||||||
| Directors' fees | 308 | 378 | (70) | (19) | ||||||||||||||||||||||
| Foundation donation and other contributions | 1,536 | 1,192 | 344 | 29 | ||||||||||||||||||||||
| Other expenses | 1,821 | 2,457 | (636) | (26) | ||||||||||||||||||||||
| Total noninterest expense | $ | 29,059 | $ | 27,851 | $ | 1,208 | 4 | % | ||||||||||||||||||
Noninterest expense for the first half of 2026 increased year-over-year, primarily due to higher salaries and employee benefits, and increased occupancy and equipment, partially offset by lower other expenses.
Salaries and employee benefits for the first half of 2026 increased $1.2 million, or 6%, primarily due to higher staffing levels to support business growth, annual salary adjustments, and increased health insurance costs.
Occupancy and equipment for the first half of 2026 increased $547 thousand, or 17%, primarily due to the expiration of the common-area-maintenance concession on a lease that benefited the prior period, as well as increased software licensing and maintenance costs to support business growth and operations.
Other expenses for the first half of 2026 decreased $636 thousand, or 26%, primarily due to lower customer service expenses following the previously discussed currency exchange account closures.
Income Taxes
Income tax expense was $3.1 million for the second quarter of 2026, compared with $2.1 million for the second quarter of 2025, primarily reflecting higher pre-tax income. The effective income tax rate increased to 27.8% from 25.0% in the prior-year period, primarily due to the absence of a discrete tax adjustment that was recorded in the second quarter of 2025 and the impact of federal tax law changes that became effective in 2026.
Income tax expense was $5.7 million for the first half of 2026, compared with $4.2 million for the first half of 2025. primarily reflecting higher pre-tax income. The effective income tax rate increased to 27.4% from 26.3% in the prior-year period, primarily due to the impact of federal tax law changes effective in 2026.
We recorded net deferred tax assets of $12.5 million and $12.4 million as of June 30, 2026, and December 31, 2025, respectively. After evaluating all available positive and negative evidence, including recent financial performance, projected future taxable income, and tax planning strategies, we have concluded that it was more- likely-than-not that net deferred tax assets as of June 30, 2026, will be fully realized in future periods.
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FINANCIAL CONDITION
Investment Portfolio
The securities portfolio is the second largest component of our interest earning assets, after loans, and the structure and composition of this portfolio is important to an analysis of our financial condition. The portfolio serves the following purposes: (i) it provides a source of pledged assets for securing certain deposits and borrowed funds, as may be required by law or by specific agreement with a depositor or lender; (ii) it provides liquidity to even out cash flows from the loan and deposit activities of customers; (iii) it can be used as an interest rate risk management tool, because it provides a large base of assets, the maturity and interest rate characteristics of which can be changed more readily than the loan portfolio to better match changes in the deposit base and our other funding sources; and (iv) it is an alternative interest-earning use of funds when loan demand is weak or when deposits grow more rapidly than loans.
We classify our debt securities as either AFS or held-to-maturity at the time of purchase. Accounting guidance requires AFS debt securities to be marked to fair value with an offset to AOCI, a component of shareholders’ equity. Monthly adjustments are made to reflect changes in the fair value of our available-for-sale securities.
The following table summarizes the fair value of the AFS debt securities portfolio as of the dates presented:
| June 30, 2026 | December 31, 2025 | Ratings as of June 30, 2026 (1) | ||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Amortized Cost | Fair Value | Net Unrealized Loss | Amortized Cost | Fair Value | Net Unrealized Loss | AAA/AA | A | ||||||||||||||||||||||||||||||||||||||||||
| U.S. Government agencies or sponsored agency securities: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | 37,225 | $ | 34,422 | $ | (2,803) | $ | 35,279 | $ | 32,694 | $ | (2,585) | 100 | % | — | % | ||||||||||||||||||||||||||||||||||
| Residential collateralized mortgage obligations | 174,793 | 162,275 | (12,518) | 165,103 | 154,463 | (10,640) | 100 | — | ||||||||||||||||||||||||||||||||||||||||||
| Municipal securities - tax exempt | 5,946 | 5,809 | (137) | 5,913 | 5,628 | (285) | — | 100 | ||||||||||||||||||||||||||||||||||||||||||
| Total AFS debt securities | $ | 217,964 | $ | 202,506 | $ | (15,458) | $ | 206,295 | $ | 192,785 | $ | (13,510) | 97 | % | 3 | % | ||||||||||||||||||||||||||||||||||
(1)Credit ratings are independent assessments of the credit quality of debt securities. The Company determines the credit rating of a debt security based on the lowest rating assigned by any of the nationally recognized statistical rating organizations (“NRSROs”) that have rated the security. Investment grade debt securities are those rated BBB- or higher (as defined by NRSROs) and are generally considered by the rating agencies and market participants to represent low credit risk. Ratings percentages are presented based on fair value.
AFS debt securities increased by $9.7 million, or 5%, to $202.5 million as of June 30, 2026, from December 31, 2025. The increase was primarily due to a $34.5 million of purchases in residential collateralized mortgage obligations and mortgage-backed securities during the first half of 2026, partially offset by $22.7 million in paydowns/matured/called of residential collateralized mortgage obligations and mortgage-backed securities, and a $1.9 million increase in unrealized losses for the six months ended June 30, 2026.
Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. The unrealized losses were primarily attributable to interest rate movement, not credit quality. These securities (Fannie Mae, Ginnie Mae, and Freddie Mac) are guaranteed or sponsored by agencies of the U.S. government, and the issuers of the securities are of high credit quality. We believe that the net unrealized losses presented in the previous tables are temporary and no credit losses are expected. As a result, we expect full collection of the carrying amount of these securities, do not intend to sell the securities in an unrealized loss position, and believe it is more-likely-than-not we will not have to sell these securities prior to recovery of amortized cost.
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Accordingly, for AFS debt securities, we did not have allowance for credit losses as of June 30, 2026, and December 31, 2025.
The following table sets forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of the dates presented. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Due in One Year or Less | Due after One Year Through Five Years | Due after Five Years Through Ten Years | Due after Ten Years | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Amortized Cost | Weighted Average Yield | Amortized Cost | Weighted Average Yield | Amortized Cost | Weighted Average Yield | Amortized Cost | Weighted Average Yield | ||||||||||||||||||||||||||||||||||||||||||
| U.S. Government agencies or sponsored agency securities: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | 7 | 2.44 | % | $ | 390 | 2.20 | % | $ | 19,909 | 1.94 | % | $ | 16,919 | 3.26 | % | ||||||||||||||||||||||||||||||||||
| Residential collateralized mortgage obligations | — | — | 36 | 1.77 | 1,256 | 1.55 | 173,501 | 3.47 | ||||||||||||||||||||||||||||||||||||||||||
| Municipal securities - tax exempt | — | — | — | — | — | — | 5,946 | 5.70 | ||||||||||||||||||||||||||||||||||||||||||
| Total AFS debt securities | $ | 7 | 2.44 | % | $ | 426 | 2.17 | % | $ | 21,165 | 1.91 | % | $ | 196,366 | 3.52 | % | ||||||||||||||||||||||||||||||||||
Loans
Our loans represent the largest portion of our earning assets, substantially greater than the securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing our financial condition.
The loan distribution table that follows sets forth our gross loans outstanding, and the percentage distribution in each category as of the dates indicated:
| June 30, 2026 | December 31, 2025 | Change | ||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Amount | % of Total | Amount | % of Total | $ | % | ||||||||||||||||||||||||||||||||
| CRE | $ | 1,190,117 | 53 | % | $ | 1,132,223 | 52 | % | $ | 57,894 | 5 | % | ||||||||||||||||||||||||||
| SBA—real estate | 254,470 | 11 | 242,041 | 11 | 12,429 | 5 | % | |||||||||||||||||||||||||||||||
| SBA—non-real estate | 24,084 | 1 | 22,482 | 1 | 1,602 | 7 | % | |||||||||||||||||||||||||||||||
| C&I | 221,623 | 10 | 221,270 | 10 | 353 | 0 | % | |||||||||||||||||||||||||||||||
| Home mortgage | 568,512 | 25 | 574,300 | 26 | (5,788) | (1) | % | |||||||||||||||||||||||||||||||
| Consumer | 255 | 0 | 1,353 | 0 | (1,098) | (81) | % | |||||||||||||||||||||||||||||||
| Gross loans | 2,259,061 | 100 | % | 2,193,669 | 100 | % | 65,392 | 3 | % | |||||||||||||||||||||||||||||
| Allowance for credit losses | (28,100) | (27,975) | (125) | 0 | % | |||||||||||||||||||||||||||||||||
Net Loans(1) | $ | 2,230,961 | $ | 2,165,694 | $ | 65,267 | 3 | % | ||||||||||||||||||||||||||||||
(1)Includes net deferred loan costs (fees) and net unamortized premiums (unaccreted discounts) of $(1.8) million and $(331) thousand as of June 30, 2026, and December 31, 2025, respectively.
Gross loans increased $65.4 million, or 3%, to $2.26 billion as of June 30, 2026, from December 31, 2025. The growth was primarily driven by new loan originations in CRE and SBA loans, partially offset by payoffs in CRE loans and SBA loan sales.
Loans Concentration: Our loan portfolio is concentrated in CRE, including unguaranteed balances of SBA loans, home mortgage and commercial loans, primarily manufacturing, wholesale, and service-oriented businesses. We do not have any material concentrations by industry or group of industries within the loan portfolio. As of both June 30, 2026, and December 31, 2025, 89% of gross loans were secured by real property. We have established concentration limits for CRE, C&I, and unsecured lending, all of which were within established limits during the periods presented. We use underwriting guidelines to assess borrowers’ historical
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cash flow and debt service capacity, and further stress test debt service under higher interest rate scenarios. In addition, financial and performance covenants are commonly incorporated into commercial loan agreements to help monitor borrower performance and mitigate potential credit deterioration.
Loans — CRE: Our CRE loans include both owner occupied and non-owner occupied properties. We originate a mix of fixed- and adjustable-rate loans, with adjustable rates tied to the Wall Street Journal prime rate. As of June 30, 2026, our CRE loans totaled $1.19 billion, up from $1.13 billion as of December 31, 2025. During the first half of 2026, we originated $175.4 million in new CRE loans. Approximately 80% of the CRE portfolio consisted of fixed-rate loans as of both June 30, 2026, and December 31, 2025. Our policy sets the maximum loan-to-value ("LTV") for CRE at 70%. Our weighted average LTV ratio was 49% as of both June 30, 2026, and December 31, 2025.
Loans — SBA: We are designated as an SBA Preferred Lender under the SBA Preferred Lender Program. We offer SBA 7(a) variable-rate loans. We generally sell the 75% guaranteed portion of the SBA loans that we originate. Our SBA loans are typically made to small-sized manufacturing, wholesale, retail, hotel/motel and service businesses for working capital needs or business expansions. SBA loans have maturities up to 25 years. Typically, non-real estate secured loans mature in less than 10 years. Collaterals may also include inventory, accounts receivable and equipment, and may include personal guarantees. Our unguaranteed SBA loans, collateralized by real estate, are monitored by collateral type and included in our CRE Concentration Guidance.
As of June 30, 2026, our SBA portfolio totaled $278.6 million, up from $264.5 million as of December 31, 2025. Of the total portfolio, $254.5 million was secured by real estate, while $24.1 million was either unsecured or secured by business assets. In comparison, as of December 31, 2025, $242.0 million was secured by real estate and $22.5 million was either unsecured or secured by business assets.
Loans — C&I: C&I loans totaled $221.6 million as of June 30, 2026, up from $221.3 million as of December 31, 2025.
Loans - Home Mortgage: We primarily originate non-qualified, alternative documentation single-family home mortgage loans through our retail branches and our correspondent lender network. Our primary loan product is a five-year or seven-year hybrid adjustable-rate mortgage, which reprices after the initial five- or seven-year lock period to a selected SOFR plus applicable margin. We also purchase residential mortgage loans from third-party originators based on the underwriting quality and file review as opportunities arise.
Home mortgage loans totaled $568.5 million as of June 30, 2026, down from $574.3 million as of December 31, 2025.
Allowance for Credit Losses
The Company maintains its allowance for credit losses at a level it believes is adequate to absorb estimated future credit losses in accordance with GAAP. For further details on the policies, methodologies and significant judgments used in determining the allowance, refer to Item 7. MD&A — Critical Accounting Estimates, and Item 8. Financial Statements — Note 1 — Business and Basis of Presentation to the Consolidated Financial Statements, in the 2025 Annual Report on Form 10-K, as well as Note 3 — Loans and Allowance for Credit Losses on Loans to the Consolidated Financial Statements in this Form 10-Q.
The allowance for credit losses on loans was $28.1 million as of June 30, 2026, an increase of $125 thousand from $28.0 million as of December 31, 2025. The increase was primarily driven by specific reserves established on additional nonaccrual loans identified since December 31, 2025, partially offset by lower qualitative reserves reflecting a reduced impact from loan growth due to a lower growth rate and an improved economic outlook.
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Analysis of the Allowance for Credit Losses
The following tables summarize the activity in the allowance for credit losses on loans by loan segments for the three and six months ended June 30, 2026 and 2025:
| As of and for the Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Beginning | (Reversal) Provision | Net Recoveries (Charge-offs) | Ending | Beginning | Provision (Reversal) | Net (Charge-offs) Recoveries | Ending | ||||||||||||||||||||||||||||||||||||||||||
| CRE | $ | 12,007 | $ | (817) | $ | — | $ | 11,190 | $ | 9,010 | $ | 9 | $ | (49) | $ | 8,970 | ||||||||||||||||||||||||||||||||||
| SBA—real estate | 6,994 | 593 | 33 | 7,620 | 5,381 | 931 | (413) | 5,899 | ||||||||||||||||||||||||||||||||||||||||||
| SBA—non- real estate | 677 | 179 | (145) | 711 | 512 | (17) | 4 | 499 | ||||||||||||||||||||||||||||||||||||||||||
| C&I | 1,848 | (203) | (63) | 1,582 | 1,710 | (372) | 121 | 1,459 | ||||||||||||||||||||||||||||||||||||||||||
| Home mortgage | 6,877 | 118 | — | 6,995 | 8,755 | 704 | — | 9,459 | ||||||||||||||||||||||||||||||||||||||||||
| Consumer | 3 | (1) | — | 2 | — | — | $ | — | — | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | 28,406 | $ | (131) | $ | (175) | (175) | $ | 28,100 | $ | 25,368 | $ | 1,255 | $ | (337) | $ | 26,286 | |||||||||||||||||||||||||||||||||
| Gross loans | $ | 2,259,061 | $ | 2,071,580 | ||||||||||||||||||||||||||||||||||||||||||||||
| Average gross loans | $ | 2,221,252 | $ | 2,076,965 | ||||||||||||||||||||||||||||||||||||||||||||||
Net charge-offs to average gross loans (1) | 0.03 | % | 0.06 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses to gross loans | 1.24 | % | 1.27 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| As of and for the Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Beginning | Provision (Reversal) | Net Recoveries (Charge-offs) | Ending | Beginning | (Reversal) Provision | Net (Charge-offs) Recoveries | Ending | ||||||||||||||||||||||||||||||||||||||||||
| CRE | $ | 10,427 | $ | 749 | $ | 14 | $ | 11,190 | $ | 9,290 | $ | (271) | $ | (49) | $ | 8,970 | ||||||||||||||||||||||||||||||||||
| SBA—real estate | 6,385 | 1,188 | 47 | 7,620 | 5,557 | 755 | (413) | 5,899 | ||||||||||||||||||||||||||||||||||||||||||
| SBA—non- real estate | 587 | 266 | (142) | 711 | 418 | 72 | 9 | 499 | ||||||||||||||||||||||||||||||||||||||||||
| C&I | 1,611 | 34 | (63) | 1,582 | 1,844 | (477) | 92 | 1,459 | ||||||||||||||||||||||||||||||||||||||||||
| Home mortgage | 8,956 | (1,961) | — | 6,995 | 7,684 | 1,866 | (91) | 9,459 | ||||||||||||||||||||||||||||||||||||||||||
| Consumer | 9 | (7) | — | 2 | 3 | (3) | $ | — | — | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | 27,975 | $ | 269 | $ | (144) | $ | 28,100 | $ | 24,796 | $ | 1,942 | $ | (452) | $ | 26,286 | ||||||||||||||||||||||||||||||||||
| Gross loans | $ | 2,259,061 | $ | 2,071,580 | ||||||||||||||||||||||||||||||||||||||||||||||
| Average gross loans | $ | 2,214,009 | $ | 2,036,656 | ||||||||||||||||||||||||||||||||||||||||||||||
Net charge-offs to average gross loans (1) | 0.01 | % | 0.04 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses to gross loans | 1.24 | % | 1.27 | % | ||||||||||||||||||||||||||||||||||||||||||||||
(1) Annualized.
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The following table presents an allocation of the allowance for credit losses on loans by portfolio as of June 30, 2026 and December 31, 2025:
| June 30, 2026 | December 31, 2025 | Change | ||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance Allocation | % of Gross Loans | Allowance Allocation | % of Gross Loans | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Amount | % to Total Allowance | Amount | % to Total Allowance | $ | % | ||||||||||||||||||||||||||||||||||||||||||||
| CRE | $ | 11,190 | 40 | % | 0.94 | % | $ | 10,427 | 37 | % | 0.92 | % | $ | 763 | 7 | % | ||||||||||||||||||||||||||||||||||
| SBA—real estate | 7,620 | 27 | 2.99 | % | 6,385 | 23 | 2.64 | % | 1,235 | 19 | % | |||||||||||||||||||||||||||||||||||||||
| SBA—non- real estate | 711 | 2 | 2.95 | % | 587 | 2 | 2.61 | % | 124 | 21 | % | |||||||||||||||||||||||||||||||||||||||
| C&I | 1,582 | 6 | 0.71 | % | 1,611 | 6 | 0.73 | % | (29) | (2) | % | |||||||||||||||||||||||||||||||||||||||
| Home mortgage | 6,995 | 25 | 1.23 | % | 8,956 | 32 | 1.56 | % | (1,961) | (22) | % | |||||||||||||||||||||||||||||||||||||||
| Consumer | 2 | 0 | 0.78 | % | 9 | 0 | 0.67 | % | (7) | (78) | % | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 28,100 | 100 | % | 1.24 | % | $ | 27,975 | 100 | % | 1.28 | % | $ | 125 | 0 | % | ||||||||||||||||||||||||||||||||||
Nonperforming Assets
Loans are considered delinquent when principal or interest payments are past due 30 days or more. Delinquent loans may remain in accrual status between 30 days and 90 days past due. Typically, the accrual of interest on loans is discontinued when principal or interest payments are 90 days past due or when, in the opinion of management, there is reasonable doubts as to collectability in the normal course of business. In limited circumstances, loans may remain on accrual status beyond 90 days past due if they are well-secured and in the process of collection and management expects full repayment of principal and interest. When loans are placed on non-accrual status, all interest previously accrued, but not collected, is reversed against current period interest income. Income on non-accrual loans is subsequently recognized only to the extent that cash is received, and the loan’s principal balance is deemed collectible. Loans are restored to accrual status when loans become well-secured, and management believes full collectability of principal and interest is probable.
Nonperforming loans include loans that are 90 days past due and still accruing, loans accounted for on a non-accrual basis, and accruing restructured loans. Nonperforming assets consist of nonperforming loans plus OREO.
Nonperforming loans increased by $3.2 million, or 23% to $17.3 million as of June 30, 2026 from December 31, 2025. The increase was primarily driven by $5.5 million of loans migrating into nonaccrual loans, partially offset by paydowns, loan sales, payoffs totaling $2.6 million.
Real estate acquired through foreclosure or by deed-in-lieu of foreclosure is classified as OREO until sold and is initially recorded at fair value less costs to sell at the time of acquisition, establishing a new cost basis. Subsequent declines in fair value are recognized through valuation allowance and charged to expense. As of both June 30, 2026 and December 31, 2025, the Company had no OREO.
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The following table sets forth the allocation of our nonperforming assets among our different asset categories as of the dates indicated. Nonperforming loans include non-accrual loans, loans past due 90 days or more and still accruing interest, and loans modified under troubled debt restructurings.
Change | |||||||||||||||||||||||
| ($ in thousands) | June 30, 2026 | December 31, 2025 | $ | % or Basis Point | |||||||||||||||||||
| Nonaccrual loans | $ | 16,372 | $ | 14,071 | $ | 2,301 | 16 | % | |||||||||||||||
| Past due loans 90 days or more and still accruing | 892 | — | 892 | NA | |||||||||||||||||||
Total nonperforming loans(1) | 17,264 | 14,071 | 3,193 | 23 | % | ||||||||||||||||||
| Total nonperforming assets | $ | 17,264 | $ | 14,071 | 3,193 | 23 | % | ||||||||||||||||
| Nonperforming loans to gross loans | 0.76 | % | 0.64 | % | NA | 12 | |||||||||||||||||
| Nonperforming assets to total assets | 0.63 | 0.53 | NA | 10 | |||||||||||||||||||
| Allowance for credit losses on loans to nonperforming loans | 163 | 199 | NA | (36) | % | ||||||||||||||||||
NM — Not Meaningful
(1)Excludes guaranteed portion of SBA loans of $30.5 million and $20.9 million as of June 30, 2026 and December 31, 2025, respectively.
Deposits and Other Sources of Funds
We gather deposits primarily through our branch locations. We offer a variety of deposit products including demand deposits accounts, interest-bearing products, savings accounts and certificate of deposits. We dedicate continuing effort into gathering noninterest demand deposits accounts through marketing to our existing and new loan customers, customer referrals, our marketing staff and various involvement with community networks.
The following table shows the composition of deposits by type as of the dates presented:
| June 30, 2026 | December 31, 2025 | Change | ||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Amount | Percent | Amount | Percent | $ | % | ||||||||||||||||||||||||||||||||
| Noninterest-bearing demand | $ | 552,300 | 23 | % | 520,865 | 23 | % | $ | 31,435 | 6 | % | |||||||||||||||||||||||||||
| Interest-bearing: | ||||||||||||||||||||||||||||||||||||||
| Money market and others | 426,501 | 18 | 388,066 | 17 | 38,435 | 10 | % | |||||||||||||||||||||||||||||||
| Time deposits (greater than $250) | 746,386 | 32 | 683,956 | 30 | 62,430 | 9 | % | |||||||||||||||||||||||||||||||
| Time deposits ($250 or less) | 643,152 | 27 | 687,660 | 30 | (44,508) | (6) | % | |||||||||||||||||||||||||||||||
| Total interest-bearing | 1,816,039 | 77 | 1,759,682 | 77 | 56,357 | 3 | % | |||||||||||||||||||||||||||||||
| Total deposits | $ | 2,368,339 | 100 | % | $ | 2,280,547 | 100 | % | $ | 87,792 | 4 | % | ||||||||||||||||||||||||||
The following tables set forth the maturity of time deposits as of June 30, 2026:
| Maturity Within: | ||||||||||||||||||||||||||||||||
| ($ in thousands) | Three Months | Three to Six Months | Six to Twelve Months | After Twelve Months | Total | |||||||||||||||||||||||||||
| Time deposits (greater than $250) | $ | 328,950 | $ | 182,357 | $ | 234,210 | $ | 869 | $ | 746,386 | ||||||||||||||||||||||
| Time deposits ($250 or less) | 273,066 | 210,667 | 157,451 | 1,968 | 643,152 | |||||||||||||||||||||||||||
| Total time deposits | $ | 602,016 | $ | 393,024 | $ | 391,661 | $ | 2,837 | $ | 1,389,538 | ||||||||||||||||||||||
Other than deposits, we also utilized FHLB advances as a supplementary funding source to finance our operations. The advances from the FHLB are collateralized by residential and CRE loans. As of June 30, 2026 and December 31, 2025, the Company had maximum borrowing capacity from the FHLB of $806.0 million and $806.1 million, respectively. We had borrowings from FHLB of $75.0 million as of both June 30, 2026 and
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December 31, 2025. The Company had estimated uninsured deposits of $1.18 billion, or 50% of total deposits, and $1.09 billion, or 48% of total deposits, as of June 30, 2026 and December 31, 2025, respectively.
Liquidity and Capital Resources
Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, and effectively balancing the related costs. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders. Our short-term and long-term liquidity requirements are primarily met through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, and increases in customer deposits. Other alternative sources of funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis.
Deposits are the primary funding source for the Bank. Deposits provide a stable source of funding and reduce our reliance on the wholesale funding markets. The following table presents the loan and deposit balances, the loans-to-deposit ratios, and deposits as a percentage of total liabilities as of June 30, 2026 and December 31, 2025:
Change | ||||||||||||||||||||||||||
| ($ in thousands) | June 30, 2026 | December 31, 2025 | $ | % | ||||||||||||||||||||||
| Deposits | $ | 2,368,339 | $ | 2,280,547 | $ | 87,792 | 4 | % | ||||||||||||||||||
| Deposits as a % of total liabilities | 95 | % | 94 | % | 1 | % | ||||||||||||||||||||
| Loans, net | $ | 2,230,961 | $ | 2,165,694 | $ | 65,267 | 3 | % | ||||||||||||||||||
| Loans-to-deposits ratio | 94 | % | 95 | % | (1) | % | ||||||||||||||||||||
In addition to deposits, we have access to various sources of wholesale funding, as well as borrowing capacity at the FHLB, Federal Reserve, and correspondent banks to sustain an adequate liquid asset portfolio, meet daily cash demands and allow management flexibility to execute the business strategy. Economic conditions and the stability of capital markets impact on our access to and the cost of wholesale funding. Our access to capital markets is also affected by the ratings received from various credit rating agencies.
We had $100.0 million in unsecured federal funds lines with no amounts advanced as of both June 30, 2026 and December 31, 2025. In addition, on such dates we had lines of credit from the Federal Reserve discount window of $216.7 million and $208.9 million as of June 30, 2026 and December 31, 2025, respectively. The Federal Reserve discount window lines were collateralized by a pool of CRE loans and C&I loans totaling $305.2 million and $290.7 million as of June 30, 2026 and December 31, 2025, respectively. We had no outstanding borrowings with the Federal Reserve as of June 30, 2026 or December 31, 2025. Our borrowing on these lines of credits is based upon our eligible collateral and thus may fluctuate from time to time.
Based on the values of loans pledged as collateral, we had $429.8 million of additional borrowing availability with the FHLB as of June 30, 2026. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts.
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We maintain ample access to liquidity, including highly liquid assets on our balance sheet and available unused borrowings from other financial institutions. The following table presents our liquid assets and available borrowings as of June 30, 2026 and December 31, 2025:
Change | ||||||||||||||||||||||||||
| ($ in thousands) | June 30, 2026 | December 31, 2025 | $ | % | ||||||||||||||||||||||
| Liquid assets: | ||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 175,051 | $ | 167,311 | $ | 7,740 | 5 | % | ||||||||||||||||||
| AFS debt securities (unpledged) | 202,506 | 192,785 | 9,721 | 5 | ||||||||||||||||||||||
| Liquid assets | $ | 377,557 | $ | 360,096 | 17,461 | 5 | % | |||||||||||||||||||
| Liquid assets to total deposits | 16 | % | 16 | % | ||||||||||||||||||||||
| Available borrowings: | ||||||||||||||||||||||||||
| FHLB | $ | 429,846 | $ | 443,629 | $ | (13,783) | (3) | % | ||||||||||||||||||
| Federal Reserve Bank | 216,666 | 208,859 | 7,807 | 4 | ||||||||||||||||||||||
| Pacific Coast Bankers Bank | 50,000 | 50,000 | — | — | ||||||||||||||||||||||
| Zions Bank | 25,000 | 25,000 | — | — | ||||||||||||||||||||||
| First Horizon Bank | 25,000 | 25,000 | — | — | ||||||||||||||||||||||
| Total available borrowings | $ | 746,512 | $ | 752,488 | $ | (5,976) | (1) | % | ||||||||||||||||||
| Total available borrowings to total deposits | 32 | % | 33 | % | ||||||||||||||||||||||
| Liquid assets and available borrowings to total deposits | 47 | % | 49 | % | ||||||||||||||||||||||
In addition to contractual obligations, we have unused commitments to extend credit, standby letters of credit, and commercial letters of credit that may impact liquidity. Because many of these commitments expire unused and remain subject to contractual conditions, they do not necessarily represent future cash requirements. Management believes existing liquidity sources are sufficient to meet the funding needs associated with these commitments. Additional information is provided in Note 8. Commitments and Contingencies, to the Consolidated Financial Statements in this Form 10-Q.
Capital Requirements
We are subject to various regulatory capital requirements administered by the federal and state banking regulators, although, as a “smaller bank holding company,” we are not subject to most of these standards at the holding company level. These standards are, however, applicable to the Bank, and failure to meet regulatory capital requirements may result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory framework for “prompt corrective action”, the Bank must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies. The capital amounts and classifications are subject to qualitative judgments by the federal banking regulators regarding components, risk weightings and other factors. Qualitative measures established by regulation to ensure capital adequacy required us to maintain minimum amounts and various ratios of CET1 capital, Tier 1 capital and total capital to risk-weighted assets and of Tier 1 capital to average consolidated assets, referred to as the “leverage ratio.”
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The table below summarizes the capital requirements applicable to us and the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as our and the Bank’s capital ratios as of June 30, 2026 and December 31, 2025. The Bank exceeded all regulatory capital requirements under the Basel III Capital Rules and were considered to be “well-capitalized” as of the dates reflected in the table below. As of June 30, 2026, the FDIC categorized us as well-capitalized under the prompt corrective action framework. There have been no conditions or events since June 30, 2026 that management believes would change this classification.
| As of June 30, 2026 | Actual(1) | Regulatory Capital Ratio Requirements | Minimum to be Considered "Well Capitalized" | Regulatory Capital Ratio Requirements, including fully phased in Capital Conservation Buffer | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||||||||||||
| Total capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | $ | 301,991 | 13.32 | % | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||
| Bank | 302,846 | 13.35 | $ | 181,523 | 8.00 | % | $ | 226,903 | 10.00 | % | $ | 238,249 | 10.50 | % | ||||||||||||||||||||||||||||||||||||
| Tier 1 capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 249,020 | 10.98 | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||
| Bank | 274,483 | 12.10 | 136,142 | 6.00 | 181,523 | 8.00 | 192,868 | 8.50 | ||||||||||||||||||||||||||||||||||||||||||
| CET1 capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 249,020 | 10.98 | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||
| Bank | 274,483 | 12.10 | 102,107 | 4.50 | 147,487 | 6.50 | 158,832 | 7.00 | ||||||||||||||||||||||||||||||||||||||||||
| Tier 1 leverage (to average assets) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 249,020 | 9.21 | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||
| Bank | 274,483 | 10.15 | 108,200 | 4.00 | 135,250 | 5.00 | 108,200 | 4.00 | ||||||||||||||||||||||||||||||||||||||||||
| As of December 31, 2025 | Actual(1) | Regulatory Capital Ratio Requirements | Minimum to be Considered "Well Capitalized" | Regulatory Capital Ratio Requirements, including fully phased in Capital Conservation Buffer | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||||||||||||
| Total capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | $ | 289,562 | 13.31 | % | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||
| Bank | 289,464 | 13.30 | $ | 174,139 | 8.00 | % | $ | 217,673 | 10.00 | % | $ | 228,557 | 10.50 | % | ||||||||||||||||||||||||||||||||||||
| Tier 1 capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 237,791 | 10.93 | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||
| Bank | 262,255 | 12.05 | 130,604 | 6.00 | 174,139 | 8.00 | 185,022 | 8.50 | ||||||||||||||||||||||||||||||||||||||||||
| CET1 capital (to risk-weighted assets) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 237,791 | 10.93 | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||
| Bank | 262,255 | 12.05 | 97,953 | 4.50 | 141,488 | 6.50 | 152,371 | 7.00 | ||||||||||||||||||||||||||||||||||||||||||
| Tier 1 leverage (to average assets) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 237,791 | 8.99 | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||
| Bank | 262,255 | 9.91 | 105,826 | 4.00 | 132,282 | 5.00 | 105,826 | 4.00 | ||||||||||||||||||||||||||||||||||||||||||
(1) Regulatory capital requirements apply only to Open Bank, and OP Bancorp’s ratios are presented solely for information purposes.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. We have identified interest rate risk as our primary source of market risk.
Interest Rate Risk
Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricing and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay home mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and SOFR (basis risk).
Our board’s asset liability management committee, or ALM, establishes broad policy limits with respect to interest rate risk. Our management’s asset liability committee, or ALCO, establishes specific operating guidelines within the parameters of the policies set by the ALM. In general, we seek to minimize the impact of changing interest rates on net interest income and the economic values of assets and liabilities. Our ALCO monitors the level of interest rate risk sensitivity on a quarterly basis to ensure compliance with the ALM-approved risk limits. The policy requires a periodic review of all key assumptions used, such as identifying appropriate interest rate scenarios, setting loan prepayment rates based on historical analysis, and noninterest-bearing and interest-bearing deposit durations based on historical analysis.
Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.
An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on our interest-earning assets would reprice upward more quickly than rates paid on our interest-bearing liabilities, thus expanding our net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.
Interest rate risk measurement is calculated and reported to the ALCO and ALM at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.
Evaluation of Interest Rate Risk
We use a net interest income simulation model to measure and evaluate potential changes in our net interest income. We run various hypothetical interest rate scenarios at least quarterly and compare these results against a scenario with no changes in interest rates. We use two approaches to model interest rate risk: Earnings at Risk, or EAR, and Economic Value of Equity, or EVE. Under EAR, net interest income is modeled utilizing various assumptions for assets and liabilities. EVE measures the period end market value of assets minus the market value of liabilities and the change in this value as rates change. EVE is a period end measurement.
Our simulation model incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results such as: (i) the timing of changes in interest rates; (ii) shifts or rotations in the yield curve; (iii) re-pricing characteristics for market-rate-sensitive instruments; (iv) varying loan prepayment speeds for different interest rate scenarios; and (v) the overall growth and mix of assets and liabilities. Because of limitations inherent in any approach used to measure interest rate risk, simulation results
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are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk.
Potential changes to our net interest income in hypothetical rising and declining rate scenarios calculated as of June 30, 2026 and December 31, 2025 are presented in the following table. The projections assume (1) immediate, parallel shifts downward of the yield curve of 100, 200 and 300 basis points and (2) immediate, parallel shifts upward of the yield curve of 100, 200, and 300 basis points over 12 months.
| Net Interest Sensitivity | Economic Value of Equity Sensitivity | |||||||||||||||||||||||||
| June 30, 2026 | December 31, 2025 | June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||
| +300 basis points | (1.83) | % | (0.16) | % | (22.77) | % | (21.31) | % | ||||||||||||||||||
| +200 basis points | (0.62) | 0.31 | (11.72) | (10.83) | ||||||||||||||||||||||
| +100 basis points | (0.19) | (0.03) | (4.19) | (3.66) | ||||||||||||||||||||||
| -100 basis points | (0.11) | 2.44 | 2.87 | 2.28 | ||||||||||||||||||||||
| -200 basis points | 0.10 | 5.90 | 0.67 | (0.57) | ||||||||||||||||||||||
| -300 basis points | 0.50 | 12.30 | (6.63) | (6.66) | ||||||||||||||||||||||
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
The Company’s management, including our President and Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered in this Form 10-Q. Based on such evaluation, our President and Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective as of that date to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer and its Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act), during the period covered by this Form 10-Q, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures and Internal Control over Financial Reporting
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of business, we are subject to legal proceedings or claims. Management has reviewed all legal claims against us and possible loss contingencies, and does not expect the liabilities associated with pending claims to be material to any of the Consolidated Financial Statements.
Item 1A. Risk Factors
You should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Form 10-Q and other documents we file with the SEC. The following risks and uncertainties described below are those that we have identified as material. Events or circumstances arising from one or more of these risks could adversely affect our business, financial condition, operating results and prospects and the value and price of our common stock could decline. The risks identified below are not a comprehensive list of all risks we face. Additional risks and uncertainties not presently known to us, or that we may currently view as not material, may also adversely impact our business, financial condition, and results of operations.
Risks Related to Our Business
Interruptions, cyber-attacks, fraudulent activity or other security breaches could have a material adverse effect on our business.
Our business is highly dependent on the collection, storage, transmittal, sharing, processing and retention of information about our customers and employees. To accomplish these activities, we rely heavily upon electronic infrastructure that we own or that we obtain via license or other contractual arrangements with third parties. These technologies affect, among other things, our customers’ ability to access and transfer funds, initiate and pay loans and leases, communicate with our customer service teams, and engage in a variety of other activities that form the foundation of modern financial services businesses. Likewise, our employee data and related technologies allow us to communicate with our employees, compensate our staff, maintain timekeeping, payroll and benefits records, and comply with an increasingly complex web of labor and employment laws and regulations. Further, the increasing perpetration of cybersecurity attacks by nation-state actors and sponsored groups, coupled with the ongoing military conflict between the United States and Iran and by the United States against certain paramilitary or terrorist groups believed to be sponsored by Iran, may have the effect of increasing the risk, frequency or intensity of such incidents. The loss, interruption or disruption of these systems may damage our relationships with customers and correspondingly may harm our reputation. Compromises or interruptions in our employment-related systems may cause challenges in our relationships with our employees, upon whom we are heavily dependent in the conduct of our business and the development and maintenance of our relationships with customers and prospective customers, and in certain circumstances may expose us to liabilities under certain federal and state employment laws.
Cybersecurity measures are, by their nature, largely reactive, and threats are constantly evolving. We expect that the development of AI-based technologies will accelerate both the number and the sophistication of these threats. We routinely experience attempts to exploit our networks and systems, and we must continue investing in increasingly advanced (and concomitantly expensive) technology to counteract these threats. Further, if our systems cannot timely detect and mitigate vulnerabilities, or cannot promptly respond to threats, we may experience damage to or interruptions in the availability of our computer networks, or we may experience a loss of data, unauthorized use or disclosure of customer information, or a loss of customer funds as a result of unauthorized access to customer accounts. Likewise, breaches of our payroll, benefits, and other employee-related systems may give rise to liability under employment and privacy laws and may damage our relationships with our employees. Further, we may have a limited ability to enforce warranties, indemnities or other remedies against the providers of these systems in the event we incur a loss.
Disruptions or failures in the physical infrastructure, controls or operating systems that support our businesses and customers, failures of the third parties on which we rely to adequately or appropriately provide their services or perform their responsibilities, or our failure to effectively manage or oversee our third-party relationships, could result in business disruptions, loss of revenue or customers, legal or regulatory
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proceedings, remediation and other costs, violations of applicable privacy and other laws, reputational damage, customer harm, or other adverse consequences, any of which could materially adversely affect our results of operations or financial condition. Further, new and evolving SEC regulations, as well as federal and state banking and consumer privacy laws and regulations, could require us to provide notices of security breaches. Such disclosures could result in increased regulatory scrutiny, exacerbate our potential legal liability, and result in a loss of confidence in the security of our systems or an adverse perception of our products and services.
The access by unauthorized persons to, or the improper disclosure by us or our third-party vendors of, confidential information regarding our customers or our own proprietary information, software, methodologies and business secrets, failures or disruptions in our communications, information and technology systems, or our failure to adequately address them, could negatively affect our customer relationship management, online banking, accounting or other systems. We cannot assure readers that such breaches, failures or interruptions will not occur or, if they do occur, that they will be adequately addressed by us or the third parties on which we rely.
Accordingly, any failures or interruptions of our communications, information and technology systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition or results of operations.
Our profitability is dependent upon the geographic concentration of the markets in which we operate.
A substantial portion of our business is derived from our commercial banking activities in the Los Angeles, California, Metropolitan Area. As a result, our business, financial condition and results of operations are subject to the demand for our products in those areas and is also subject to changes in the economic conditions in those areas. Our success depends upon the business activity, population, income levels, deposits and real estate activity in these markets. Further, although we have significant lending and deposit relationships in other areas, and our clients’ business and financial interests may extend well beyond these market areas, adverse economic conditions that affect these market areas could reduce our growth rate, affect the ability of our clients to repay their loans to us, could impair the value of the collateral securing our loans, or otherwise could affect our business, financial condition and results of operations. Because of our geographic concentration, we are less able than regional or national financial institutions to diversify demand for our products or our credit risks across multiple markets.
Similarly, geologic, weather-related, and other hazards such as wildfires, earthquakes, droughts, floods and storms, frequently threaten our markets, and in certain circumstances could be expected to have a disproportionate effect on our business as compared to financial institutions whose client and asset bases are more diversified. Such events may harm our business directly or may harm our clients and prospective clients in a way that increases the risks of defaults on our loans, reduces the value of our collateral, and increases clients’ need for liquidity, thus reducing our deposit base and potentially increasing our costs of funds.
Our operations could be disrupted by our third‑party service providers, including risks arising from their use of artificial intelligence technologies, experiencing difficulty in providing their services, terminating their services, or failing to comply with banking regulations.
We depend to a significant extent on relationships with third‑party service providers. Specifically, we utilize third‑party core banking services and receive credit card and debit card services, branch capture services, Internet banking services and services complementary to our banking products from various third‑party service providers. Certain of these third‑party service providers may incorporate or rely on artificial intelligence (“AI”), machine learning, automated decision‑making technologies or similar emerging technologies in the development or delivery of their products and services, including technologies that are evolving rapidly and for which regulatory expectations are continuing to develop. These third‑party relationships are subject to increasingly demanding regulatory requirements that require us to maintain and continue to enhance our due diligence, contractual controls, and ongoing monitoring and oversight of our vendors, including with respect to their information security practices, data governance, model risk management, operational resilience and compliance with applicable laws and regulations. The use of AI by our third‑party service providers may increase the complexity of these oversight obligations and may expose us to additional risks, including risks
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related to data privacy and security, model performance, bias or discrimination, explainability, intellectual property, and regulatory compliance. We may be required to renegotiate or modify our agreements to address these enhanced requirements or evolving supervisory expectations, which could increase our costs or may be impracticable. If our service providers experience operational difficulties, fail to perform in accordance with expectations, experience disruptions related to AI system failures or errors, suffer a cyberattack or other security breach, fail to comply with applicable laws or regulations, or terminate their services, and we are unable to replace them in a timely manner, our operations could be interrupted. It may be difficult for us to replace certain service providers promptly, particularly where the services involve specialized technologies or proprietary platforms, including AI‑enabled systems, and replacement services may be available only at higher cost or on less favorable terms.
In addition, many of our agreements with third‑party service providers limit our ability to recover damages, even for negligent actions that may result in customer harm, regulatory scrutiny, or enforcement actions. Regulatory requirements generally apply directly to financial institutions rather than to their service providers, and we expect that our regulators would hold us responsible for deficiencies in or failures of our third‑party relationships, including deficiencies related to the use of AI technologies by those providers. Such deficiencies could result in supervisory findings, enforcement actions, civil money penalties, litigation, customer remediation obligations, reputational harm, or other administrative or judicial penalties or fines, any of which could have a material adverse effect on our business, financial condition and results of operations.
Adverse conditions in Asia and elsewhere could adversely affect our business.
Although we believe we have minimal direct exposure to economic conditions in South Korea and other countries in Asia, many of our customers maintain significant investment, business, and other ties to the region. As a result, we are still likely to feel the effects of adverse economic and political conditions in South Korea and Asia, including the effects of rising inflation or slowing growth and volatility in the real estate and stock markets in that region. U.S. and global economic policies, military tensions in North Korea, and unfavorable global economic conditions may adversely impact the South Korean and other Asian economies. In addition, pandemics and other public health crises or concerns over the possibility of such crises could create economic and financial disruptions in the region. A significant deterioration of economic conditions in Asia, and in South Korea in particular, could expose us to, among other things, economic and transfer risk, and we could experience an outflow of deposits by those of our customers with connections to Asia. For example, among other things, we may experience increased credit risk or increased deposit withdrawal demands as a result of transfer risk if our clients with strong financial ties to Asia are unable to obtain the foreign exchange needed to meet their obligations or to provide liquidity.
Volatility and uncertainty in interest rates, combined with Iran-related energy concerns that may contribute to higher inflation and operating costs, could adversely affect our loan portfolio, interest income, and financial condition, and may result in increased credit losses or higher provision expense.
Although the Federal Reserve Open Markets Committee (commonly referred to as “the Fed”) has recently made modest incremental reductions in benchmark interest rates, the current interest rate environment remains significantly elevated from that of the recent past, and recent indications as of the date of this Form 10-Q are that further reductions are uncertain as to both timing and degree. Interest rates affect both our ability to reprice variable-rate loans and to originate new fixed-rate loans, and in times of significant uncertainty about interest rates, such as the present, clients and prospective investors often reduce their borrowing levels, which tends to have a deflating effect on our outstanding loan balances and thus on our interest income. In addition, geopolitical conflicts, including tensions in the Middle East, may contribute to volatility in global energy prices, which could increase inflationary pressures and operating costs across the economy and indirectly affect our borrowers' financial condition, credit quality, and demand for loans.
Although the Fed has indicated in recent public statements that economic conditions appeared to have stabilized, the committee has made only limited downward adjustments to benchmark rates, and, as a result, we are unable to predict changes in future interest rates. Further, even if further adjustments are made, the effect on overall markets remains uncertain. If rates resume increasing, or if they continue to remain at relatively elevated levels for prolonged periods, our borrowers may experience increasing difficulty in repaying their loans or, may defer additional borrowing decisions pending the resolution of both the political and market uncertainties.
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Changes in interest rates also can affect the value of loans, investment securities and other assets held in our portfolio or originated for sale. For example, rising interest rates would result in a decline in value of the fixed-rate debt securities we hold in our investment securities portfolio. The unrealized losses resulting from holding these securities would be recognized in AOCI and would reduce total shareholders’ equity. Unrealized losses do not negatively impact our regulatory capital ratios. However, tangible common equity and the associated ratios would be reduced. If debt securities in an unrealized loss position are sold, such losses become realized and will reduce our regulatory capital ratios.
To the extent interest rates remain relatively elevated, or if economic conditions affecting our borrowers worsen, our allowance for credit losses and related provision could be negatively impacted, which would result in a reduction in net income for the corresponding period, or in some cases we may experience losses in excess of established reserves, which would adversely affect our net income, common equity, and regulatory capital ratios. At the same time, relatively elevated rates (whether because rates are stabilized at current levels or because rate reductions are slower or smaller) may reduce demand and thus adversely affect our interest earning assets. Either of these outcomes, alone or in combination with other factors, may have a material adverse effect on our results of operations.
Liquidity risks could affect operations and adversely affect our business, financial condition, and results of operations.
Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and/or investment securities and through other sources could have a substantial negative effect on our liquidity. Our most important source of funds consists of our customer deposits. Such deposit balances can decrease when customers perceive alternative investments, such as money market funds, bonds and the stock market, as providing a better risk/return tradeoff. If customers move money out of bank deposits and into other investments, we could lose a relatively low cost source of funds, which would require us to seek wholesale funding alternatives or to rely on existing credit lines in order to continue to grow, thereby increasing our funding costs and reducing our net interest income and net income.
Any decline in available funding could adversely impact our ability to continue to implement our strategic plan, including our ability to originate loans, invest in securities, meet our expenses, or to fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse effect on our liquidity, business, financial condition and results of operations.
Our operations and financial performance may be adversely affected by a prolonged or recurring shutdown of the U.S. federal government.
A federal government shutdown could adversely affect customers that depend on government contracts, grants, or other government-related revenue, which may impair their ability to service loans or increase deposit withdrawals. In addition, shutdowns may delay the processing of government‑backed loans and the recognition of related income. In particular, the SBA typically suspends approvals under its core programs, including the 7(a) and 504 programs, during a shutdown, delaying loan closings and creating uncertainty for borrowers and lenders. Although we may continue internal processing and underwriting, final approvals and disbursements depend on SBA system availability. The timing, duration, and frequency of government shutdowns are unpredictable, and prolonged disruptions could materially adversely affect our business, financial condition, and results of operations.
Risks Related to Our Loans
Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.
Adverse developments affecting real estate values in our market areas could increase the credit risk associated with our real estate loan portfolio. The market value of real estate can fluctuate significantly and rapidly as a result of market conditions in the geographic area in which the real estate is located. Real estate values and real estate markets are generally affected by changes in national, regional or local economic conditions, the rate of unemployment, fluctuations in interest rates and the availability of loans to potential
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purchasers, changes in tax laws and other governmental statutes, regulations and policies and acts of nature, such as earthquakes and other natural disasters. Adverse changes affecting real estate values and the liquidity of real estate in one or more of our markets could increase the credit risk associated with our loan portfolio, significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses, which could result in losses that would adversely affect profitability. Moreover, a substantial portion of the collateral underlying our real estate loans is located in the Los Angeles Metropolitan Area, which is subject to elevated risk of loss from fire, earthquakes, flooding and other nature disasters. These events and any declines or losses that result from could have a material adverse effect on our business, financial condition and results of operations.
The small- and medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our business, financial condition and results of operations.
We target our business development and marketing strategy primarily to serve the banking and financial services needs of small- to medium-sized businesses. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need significant additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan. In addition, the success of a small- and medium-sized business often depends on the management talents and efforts of one or two people or a small group of people, and the death, disability or resignation of one or more of these people could have a material adverse impact on the business and its ability to repay its loan. If general economic conditions negatively impact the markets in which we operate and our borrowers are otherwise affected by adverse business developments, our business, financial condition and results of operations may be adversely affected.
Our single family residential loan product consists primarily of non-qualified single family home mortgage loans which may be considered less liquid and more risky.
The non-qualified single-family home mortgage loans that we originate are designed to assist mainly Korean-Americans who have recently immigrated to the United States and those Korean-Americans without sufficient documentation to qualify for a traditional home mortgage loan and as such are willing to provide higher down payment amounts and pay higher interest rates and fees in return for reduced documentation requirements. Non-qualified single-family home mortgage loans are considered to have a higher degree of risk and are less liquid than qualified single-family home mortgage loans because non-qualified loans are not able to be securitized and can only be sold directly to other financial institutions. Qualified loans require a minimum of two years of tax returns for borrowers to demonstrate their ability to repay the loan and other standard documentation to qualify for securitization. For non-qualified loans we do not require the standard documentation required for qualified loans. For example, we will typically require only one year of tax returns and only pay-stub verification of employment. We attempt to address this enhanced risk through our underwriting process, including requiring larger down payments and, in some cases, interest reserves.
Lack of seasoning of our loan portfolio could increase risk of credit defaults in the future.
As a result of the organic growth of our loan portfolio over the past five years, a large portion of our loans and of our lending relationships are of relatively recent origin. In general, loans do not begin to show signs of credit deterioration or default until they have been outstanding for some period of time, a process referred to as “seasoning.” As a result, a portfolio of older loans will usually behave more predictably than a newer portfolio.
Because a large portion of our portfolio is relatively new, the current level of delinquencies and defaults may not represent the level that may prevail as the portfolio becomes more seasoned. If delinquencies and defaults increase, we may be required to increase our provision for credit losses, which could materially and adversely affect our business, financial condition and results of operations. For information about the average age of our loans, see MD&A. Financial Condition — Nonperforming Loans in the 2025 Annual Report on Form 10-K.
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Risks Related to our SBA Loan Program
Recent changes to the requirements for new SBA loans may significantly reduce our ability to participate in these programs.
In February 2026, SBA announced revisions to its SBA loan program eligibility requirements, effective March 1, 2026, eliminating the prior exception that permitted limited ownership by certain non‑U.S. persons. Because a substantial portion of the Company’s banking activities involves SBA lending, this change could reduce the pool of eligible borrowers and adversely affect SBA loan originations, secondary market activity, and customer relationships. While management has evaluated the potential impact of this rule change on its SBA lending operations to date, the Company cannot predict the full effect on future lending volumes, asset quality, results of operations, or financial condition, particularly if SBA requirements or related federal policies continue to evolve.
SBA lending is an important part of our business. Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans.
Our SBA lending program is dependent upon the U.S. federal government. As an approved participant in the SBA Preferred Lender’s Program (an “SBA Preferred Lender”), we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not SBA Preferred Lenders. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions, including revocation of the lender’s SBA Preferred Lender status. If we lose our status as an SBA Preferred Lender, we may lose some or all of our customers to lenders who are SBA Preferred Lenders, and as a result we could experience a material adverse effect to our financial results. Further, any changes to the SBA program in addition to those described in the preceding risk factor, such as changes to the level of guarantee provided by the federal government on SBA loans, changes to program specific rules impacting volume eligibility under the guaranty program, as well as changes to the program amounts authorized by Congress, may also have a material adverse effect on our business. In addition, any default by the U.S. government on its obligations or any prolonged government shutdown could, among other things, impede our ability to originate SBA loans or sell such loans in the secondary market, which could have a material adverse effect on our business, financial condition and results of operations.
The SBA’s 7(a) Loan Program is the SBA’s primary program for helping start-up and existing small businesses, with financing guaranteed for a variety of general business purposes. Generally, we sell the guaranteed portion of our SBA 7(a) loans in the secondary market. These sales result in premium income for us at the time of sale and create a stream of future servicing income, as we retain the servicing rights to these loans. For the reasons described above, we may not be able to continue originating these loans or sell them in the secondary market. Furthermore, even if we are able to continue to originate and sell SBA 7(a) loans in the secondary market, we might not continue to realize premiums upon the sale of the guaranteed portion of these loans or the premiums may decline due to economic and competitive factors. When we originate SBA loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA. If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us. Generally, we do not maintain reserves or loss allowances for such potential claims and any such claims could materially and adversely affect our business, financial condition and results of operations.
Risk Related to Our Deposits
Our deposit portfolio includes significant concentrations and a large percentage of our deposits is attributable to a relatively small number of clients.
As a commercial bank, we provide services to a number of clients whose deposit levels vary considerably and have some seasonality. The loss of any combination of these depositors, or a significant decline in the deposit balances due to ordinary course fluctuations related to these customers’ businesses, would adversely affect our liquidity and require us to raise deposit rates to attract new deposits, purchase
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federal funds or borrow funds on a short-term basis to replace such deposits. Depending on the interest rate environment and competitive factors, low cost deposits may need to be replaced with higher cost funding, resulting in a decrease in net interest income and net income. While these events could have a material impact on our results, we expect, in the ordinary course of business, that these deposits will fluctuate and believe we are capable of mitigating this risk, as well as the risk of losing one of these depositors, through additional liquidity, and business generation in the future. However, should a significant number of these customers leave, it could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to our Management
We are highly dependent on our management team, and the loss of our senior executive officers or other key employees could harm our ability to implement our strategic plan, impair our relationships with customers and adversely affect our business, results of operations and growth prospects.
Our success depends, in large degree, on the skills of our management team and our ability to retain, recruit and motivate key officers and employees. Our senior management team has significant industry experience, and their knowledge and relationships would be difficult to replace. Further, we believe that our focus on particular aspects of our communities, including the Korean culture and language and our Christian leadership principles, would call for any replacements to embody these same traits, which may make it more difficult to replace management team members and other employees who leave the Company or who retire. We need to continue to attract and retain key employees and to recruit qualified individuals to succeed existing key personnel to ensure the continued growth and successful operation of our business. In addition, as a provider of relationship-based commercial banking services, we must attract and retain qualified banking personnel to continue to grow our business, and competition for such personnel can be intense. Our ability to compete effectively for senior executives and other qualified personnel by offering competitive compensation and benefit arrangements may be restricted by applicable banking laws and regulations. In addition, to attract and retain personnel with appropriate skills and knowledge to support our business, we may offer a variety of benefits, which could reduce our earnings. The loss of the services of any senior executive, or the inability to recruit and retain qualified personnel in the future, could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to our Credit Quality
Our allowance for credit losses may prove to be insufficient to absorb potential losses in our loan portfolio.
We maintain an allowance for credit losses based on our estimate of current expected credit losses in our loan portfolio, which relies on analytical models incorporating portfolio composition, growth, economic forecasts, and other assumptions. These models involve significant judgment and may be inaccurate, particularly during periods of market stress, unforeseen events, or due to design or implementation limitations. If our models used for credit loss estimation, interest rate risk, asset‑liability management, or fair value measurements are inadequate, our allowance for credit losses may be insufficient, or the value of financial instruments may fluctuate unexpectedly, resulting in increased losses. In addition, we may not identify all deteriorating loans in a timely manner, and credit quality could decline more rapidly than anticipated, requiring additional provisions for credit losses. Regulatory review of our allowance and related valuations may also result in required adjustments. Any of these factors could materially adversely affect our business, financial condition, and results of operations.
Environmental liabilities could materially and adversely affect our business and financial condition.
In the course of our business, we may foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or we may be required to investigate or clear up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, as the owner or former owner of any contaminated site, we may be subject to common law claims by third parties based on damages, and costs resulting from environmental
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contamination emanating from the property. If we ever become subject to significant environmental liabilities, our business, financial condition and results of operations could be materially and adversely affected.
Risks Related to our Growth Strategy
We may not be able to continue growing our business, particularly if we cannot increase loans and deposits through organic growth.
Our ability to continue to grow successfully will depend to a significant extent on our capital resources. It also will depend, in part, upon our ability to attract deposits and grow our loan portfolio and investment opportunities and on whether we can continue to fund growth while maintaining cost controls and asset quality, as well on other factors beyond our control, such as national, regional and local economic conditions and interest rate trends. To support our growth strategy, we recently expanded our geographic footprint by opening a new branch in Garden Grove, California in July 2025. However, our efforts to establish new locations may prove less successful or more expensive than we have estimated, and in certain cases could materially and adversely affect our results of operation or our financial condition.
Our ability to expand our business or make strategic acquisitions outside of California may be limited by our license agreement that restricts our ability to use the name “Open Bank.”
The intellectual property rights to the use of our name “Open Bank” will continue to be one of the components of our strategy to build a relationship community bank focused on the Korean-American population base. We have not registered the trademark “Open Bank” under the trademark laws of the United States. Open Bank S.A. originally registered the trademark “Open Bank” (U.S. Registration No. 3397518) in 2008 with the United States Patent and Trademark Office. Open Bank S.A. provides financial services in Spain and solicits financial services in the United States through the internet. In February 2014, we entered into a Coexistence Agreement with Open Bank S.A. (the “Coexistence Agreement”), under which both parties agreed that we may use the name “Open Bank” in connection with banking and banking related services in the state of California and the cities of New York, Dallas, Atlanta, Chicago, Seattle and Fort Lee, New Jersey (the “Permitted Markets”).
We agreed to limit all of the Bank’s marketing, advertising, publicity, soliciting and or media efforts using the “Open Bank” name to primarily the Korean-American community in the Permitted Markets, however, we have the right under the Coexistence Agreement to market through the internet. The Coexistence Agreement states that these limitations are not intended to mean that we should in any way engage in discriminatory tactics or policy or in any way discriminate against non-Korean-American customers or potential customers. Under the Coexistence Agreement, Open Bank S.A. retains the right to use and market its services in relation to its registered trademark in any state or territory in the United States. The Bank further agreed not to challenge Open Bank S.A.’s trademark registration or any future applications by Open Bank S.A. The Coexistence Agreement has no termination date and is perpetual. If Open Bank S.A. decides to become a licensed bank in California or in any of the other Permitted Markets, depending on its business and marketing plan, there could be confusion created by the use of the name “Open Bank” which could have a material adverse impact on our ability to build our brand in the Permitted Markets. In addition, if Open Bank S.A. were to assert that we breached the Coexistence Agreement, Open Bank S.A. could file for an injunction, seek to have us change our name or seek monetary damages, all of which could have a material adverse impact on our financial condition and results of operations. There are no approval rights of either party for any of the actions or omissions that either party may take under the Coexistence Agreement.
To date we have not received notice that we are in breach of the Coexistence Agreement or that our business cannot be operated as currently conducted and as proposed to be conducted. It is our understanding that Open Bank S.A. has not undertaken any actions to engage in any business or marketing activities in the United States other than have through their website. However, the Coexistence Agreement restricts our potential geographic expansion beyond the Permitted Markets, which could affect our overall growth over the long term.
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New lines of business or new products and services may subject us to additional risks.
From time to time, we may implement or may acquire new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and new products and services we may invest significant time and resources. We may not achieve target timetables for the introduction and development of new lines of business and new products or services and price and profitability targets may not prove feasible. External factors, such as regulatory compliance obligations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Our Capital
We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance, would be adversely affected.
We face significant capital and other regulatory requirements as a financial institution. Although management believes that the Company has sufficient capital to fund operations and growth initiatives, we may need to raise additional capital in the future to business needs, growth, or regulatory requirements. Our ability to raise additional capital will depend on a number of factors, including market conditions, investor perceptions of the banking industry, regulatory environment, and our financial condition and operating performance. During 2025, the Company demonstrated access to the capital markets through the issuance of subordinated debt. However, there can be no assurance that additional capital will be available when needed or that such capital could be raised on terms acceptable to us. Any limitation on our ability to access the capital markets could adversely affect our financial condition, liquidity, results of operations, and ability to maintain regulatory capital compliance.
We are committed to contribute 10% of our consolidated after-tax net income to the Open Stewardship Foundation.
The Open Stewardship Foundation (“Foundation”) is our platform for our community outreach activities. We support the Foundation through our commitment formalized in the Bank’s bylaws to donate an amount equal to 10% of our consolidated after-tax net income to the Foundation, subject to legal and regulatory restrictions. This commitment, therefore, reduces our net income and our ability to build capital through our retained earnings.
Risks Related to Competition
Our modest size makes it more difficult for us to compete.
Our modest size makes it more difficult for us to compete with other financial institutions which are generally larger and can more easily afford to invest in the marketing and technologies needed to attract and retain customers. Because our principal source of income is the net interest income we earn on our loans and investments after deducting interest paid on deposits and other sources of funds, our ability to generate the revenues needed to cover our expenses and finance such investments is limited by the size of our loan and investment portfolios. Accordingly, we are not always able to offer new products and services as quickly as our competitors. As a smaller institution, we are also disproportionately affected by the continually increasing costs of compliance with new banking and other regulations.
We focus on marketing our services to a limited segment of the population and any adverse change impacting such segment is likely to have an adverse impact on us.
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Our marketing focuses primarily on the banking needs of small- and medium-sized businesses, professionals and residents in the Korean-American communities that we serve. This demographic concentration makes us more prone to circumstances that particularly affect this segment of the population. As a result, our financial condition and results of operations are subject to changes in the economic conditions affecting these communities. Our success depends upon the business activity, population, income levels, deposits and real estate activity in these communities. Although our customers’ business and financial interests may extend well beyond these communities, adverse economic conditions that affect these communities could reduce our growth rate, affect the ability of our customers to repay their loans to us and generally affect our financial condition and results of operations. Because of our geographic concentration, we are less able than regional or national financial institutions to diversify our credit risks across multiple markets.
Other Risks Related to Our Business
Our reputation may be adversely affected by the soundness of other financial institutions.
Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies are interrelated as a result of trading, clearing, counterparty, and other relationships. We have exposure to different industries and counterparties, and through transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, and other institutional clients. As a result, defaults by, or even rumors or questions about, one or more financial services companies, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. These losses or defaults could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Finance and Accounting
Our accounting estimates and risk management processes rely on analytical and forecasting models.
Processes that management uses to estimate our expected credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depend upon the use of analytical and forecasting models and, ultimately, on the judgment of our executive leadership and our management-level accounting and credit analysis personnel. These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Even if these assumptions are accurate, the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation.
If the models that management uses for interest rate risk and asset liability management are inadequate, we may incur increased or unexpected losses upon changes in market interest rates or other market measures. If the models that management uses for determining our probable credit losses are inadequate, the allowance for credit losses may not be sufficient to support future charge offs. If the models that management uses to measure the fair value of financial instruments are inadequate, the fair value of such financial instruments may fluctuate unexpectedly or may not accurately reflect what we could realize upon sale or settlement of such financial instruments. Any such failure in management’s analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations.
We have a significant deferred tax asset and we cannot assure that it will be fully realized.
Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and tax basis of assets and liabilities computed using enacted tax rates and may depend, upon other things, on the likelihood and timing of the recognition of taxable income against which accrued operating loss carryforwards may be offset. We regularly assess available positive and negative evidence to determine whether it is more likely than not that our net deferred tax asset will be realized. Realization and valuation of a deferred tax asset requires us to apply significant judgment and is inherently speculative because it requires estimates that cannot be made with certainty. If we were to determine at some point in the future that we will not achieve sufficient future taxable income to realize our net deferred tax asset,
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we would be required, under U.S. generally accepted accounting principles, to establish a full or partial valuation allowance which would require us to incur a charge to operations for the period in which the determination was made.
Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business and stock price.
As a public company, we are required to maintain effective internal control over financial reporting and to assess, and obtain auditor attestation on, its effectiveness under Section 404 of the Sarbanes‑Oxley Act. We may identify control deficiencies that we are unable to remediate on a timely basis, and the testing and remediation of internal controls may divert management attention from other business priorities. If we are unable to conclude, or our independent auditor is unable to attest, that our internal control over financial reporting is effective, we may be unable to file timely and accurate reports with the SEC, face regulatory scrutiny, lose investor confidence, or experience a decline in the trading price of our common stock, any of which could materially adversely affect our business, financial condition, and results of operations.
Risks Related to Legislation and Regulation
Federal and state regulators periodically examine our business, and adverse examination findings could materially affect our operations.
The Federal Reserve, the FDIC, and the DFPI regularly examine our business and compliance with applicable laws and regulations. If regulators determine that any aspect of our operations is unsafe, unsound, or noncompliant, they may impose corrective actions or enforcement measures, including capital requirements, growth restrictions, civil money penalties, or removal of officers or directors. In extreme circumstances, regulators could terminate deposit insurance or place us into receivership or conservatorship. Any such action could materially affect our business, financial condition and results of operations.
We are subject to extensive anti-money laundering laws, and failures to comply could result in significant penalties and reputational harm.
We are subject to the BSA, the USA PATRIOT Act. OFAC regulations, and related anti-money laundering requirements, which require us to maintain effective compliance program and reporting systems. If our policies, procedures, or controls are deemed inadequate, we could be subject to enforcement actions, substantial fines, restrictions on dividends or growth activities, and reputational harm, any of which could materially adversely affect our business, financial condition, and results of operations.
Privacy, information security and data protection regulations could increase our costs and limit our business activities.
We are subject to numerous federal and state privacy, data protection, and information security laws, including the Gramm-Leach-Bliley Act of 1999 and data breach notification requirements. Compliance with existing or future requirements may increase operational and technology costs and restrict how we collect, use, share, and safeguard customer and employee information. Failure to comply could result in regulatory investigations, litigation, fines, reputational damage, and other adverse consequences that could materially affect our business, financial condition and results of operations.
Risks Related to Our Common Stock
The trading volume in our common stock is less than that of other larger financial services companies.
Although our common stock is listed for trading on The Nasdaq Global Market its trading volume is generally less than that of other, larger financial services companies, and investors are not assured that a liquid market will exist at any given time for our common stock. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace at any given time of willing buyers and sellers of our common stock. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. Given the lower trading
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volume of our common stock, significant sales of our common stock, or the expectation of these sales, could cause our stock price to fall.
The provisions of our subordinated debt documents restrict our ability to pay dividends or repurchase our stock in certain circumstances.
On November 7, 2025, we issued a 7.50% fixed-to-floating subordinated note (“Note”) in the amount of $25.0 million. The Note matures on November 15, 2035 and the interest rate thereunder will reset to a floating rate as of November 15, 2030. The Note prohibits our payment of dividends or the repurchase of our capital stock at any time when an event of default has occurred and is continuing under the Note. Thus, at times when we are not in material compliance with the terms of the Note we will be required to suspend the payment of dividends and other distributions on our capital stock, and we may not engage in stock repurchase programs. These factors, alone or in combination with other events or circumstances, may adversely affect the price or trading volumes of our capital stock.
The trading price of our common stock could be volatile.
The market price of our common stock may be volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include, among other things:
•actual or anticipated variations in our quarterly results of operations;
•recommendations by securities analysts;
•operating and stock price performance of other companies that investors deem comparable to us;
•news reports relating to trends, concerns and other issues in the financial services industry generally;
•perceptions in the marketplace regarding us and/or our competitors;
•fluctuations in the stock price and operating results of our competitors;
•domestic and international economic factors unrelated to our performance;
•general market conditions and, in particular, developments related to market conditions for the financial services industry;
•new technology used, or services offered, by competitors; and
•changes in government regulations.
In addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.
An investment in our common stock is not an insured deposit.
An investment in our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other DIF or by any other public or private entity. Investment in our common stock is inherently risky for the reasons described herein, and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire our common stock, you could lose some or all of your investment.
If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline.
The trading market for our common stock could be affected by whether equity research analysts publish research or reports about us and our business. We cannot predict at this time whether any research analysts will publish research and reports on us and our common stock. If one or more equity analysts do cover us and our common stock and publish research reports about us, the price of our stock could decline if one or more securities analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.
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If any of the analysts who elect to cover us downgrades our stock, our stock price could decline rapidly. If any of these analysts ceases coverage of us, we could lose visibility in the market, which in turn could cause our common stock price or trading volume to decline and our common stock to be less liquid.
Our dividend policy and/or share repurchase program may change without notice, and our future ability to pay dividends or repurchase or redeem shares is subject to restrictions.
We may change our dividend policy and/or share repurchase program at any time without notice to holders of our common stock. Holders of our common stock are only entitled to receive such cash dividends, as our board of directors, in its discretion, may declare out of funds legally available for such payments. Furthermore, consistent with our strategic plans, growth initiatives, capital availability, projected liquidity needs, and other factors, we have made, and will continue to make, capital management decisions and policies that could adversely affect the amount of dividends paid to holders of our common stock and the maintenance of share repurchase program.
We are a separate and distinct legal entity from our subsidiary, the Bank. We receive substantially all of our revenue from dividends from the Bank, which we use as the principal source of funds to pay our expenses. Various federal and/or state laws and regulations limit the amount of dividends that the Bank may pay us. Such limits are also tied to the earnings of our subsidiary. If the Bank does not receive regulatory approval or if the Bank’s earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, our ability to pay our expenses and our business, financial condition or results of operations could be materially and adversely impacted.
As a bank holding company, we are subject to regulation by the Federal Reserve. The Federal Reserve has indicated that bank holding companies should carefully review their dividend policy in relation to the organization’s overall asset quality, current and prospective earnings and level, composition and quality of capital. The guidance provides that we inform and consult with the Federal Reserve prior to declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in an adverse change to our capital structure, including interest on our debt obligations. If required payments on our debt obligations are not made or are deferred, or dividends on any preferred stock we may issue are not paid, we will be prohibited from paying dividends on our common stock.
The Capital Rules also introduced a new capital conservation buffer on top of the minimum risk-based capital ratios. Failure to maintain a capital conservation buffer above certain levels will result in restrictions on the Bank’s ability to make dividend payments, repurchases, redemptions or other capital distributions. These requirements, and any other new regulations or capital distribution constraints, could adversely affect the ability of the Bank to pay dividends to OP Bancorp and, in turn, affect our ability to pay dividends on our common stock.
We have limited the circumstances in which our directors will be liable for monetary damages.
We have included in our articles of incorporation a provision to eliminate the liability of directors for monetary damages to the maximum extent permitted by California law. The effect of this provision will be to reduce the situations in which we or our shareholders will be able to seek monetary damages from our directors. Our bylaws also have a provision providing for indemnification of our directors and executive officers and advancement of litigation expenses to the fullest extent permitted or required by California law, including circumstances in which indemnification is otherwise discretionary. Also, we have entered into agreements with our officers and directors in which we similarly agreed to provide indemnification that is otherwise discretionary.
Provisions in our charter documents and California law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies.
Our articles of incorporation and bylaws contain a number of provisions relating to corporate governance and rights of shareholders that might discourage future takeover attempts. As a result, shareholders who might desire to participate in such transactions may not have an opportunity to do so. In addition, these provisions will also render the removal of our board of directors or management more difficult. Our bylaws provide that shareholders seeking to make nominations of candidates for election as directors, or to bring other business before an annual meeting of the shareholders, must provide timely notice of their intent in writing and
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follow specific procedural steps in order for nominees or shareholder proposals to be brought before an annual meeting.
The California General Corporation Law, or the CGCL, could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial by our shareholders.
Under the California Financial Code, no person shall, directly or indirectly, acquire control of a California state bank or its holding company unless the DFPI has approved such acquisition of control. A person would be deemed to have acquired control of OP Bancorp if such person, directly or indirectly, has the power (i) to vote 25% or more of the voting power of OP Bancorp or (ii) to direct or cause the direction of the management and policies of OP Bancorp. For purposes of this law, a person who directly or indirectly owns or controls 10% or more of our outstanding common stock would be presumed to control OP Bancorp.
Federal regulators generally would prohibit any company that is not engaged in financial activities and activities that are permissible for a bank holding company or a financial holding company from acquiring control of OP Bancorp. “Control” is generally defined as ownership of 25% or more of the voting stock or other exercise of a controlling influence. In addition, any existing bank holding company would need the prior approval of the Federal Reserve before acquiring 5% or more of our voting stock. The Change in Bank Control Act of 1978, as amended, prohibits a person or group of persons from acquiring control of a bank holding company unless the Federal Reserve has been notified and has not objected to the transaction. Under a rebuttable presumption established by the Federal Reserve, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Exchange Act, such as OP Bancorp, could constitute acquisition of control of the bank holding company.
The foregoing provisions of California and federal law could make it more difficult for a third party to acquire a majority of our outstanding voting stock, by discouraging a hostile bid, or delaying, preventing or deterring a merger, acquisition or tender offer in which our shareholders could receive a premium for their shares, or effect a proxy contest for control of our company or other changes in our management.
We are a smaller reporting company and the reduced regulatory and reporting requirements applicable to smaller reporting companies may make our common stock less attractive to investors.
We are permitted to comply with, and we generally elect to comply with, certain reduced reporting requirements for “smaller reporting companies” within the meaning of the rules of the SEC. These rules, among other things, limit our obligation to report on certain matters, including an audit of our reports on internal control over financial reporting, reduced burdens for certain aspects of executive compensation reporting, and a reduction in our obligation to file current reports on Form 8-K pertaining to material cybersecurity incidents. These same rules also afford us certain expanded timelines for filing quarterly and annual reports with the SEC. For as long as we continue to meet the standards as a smaller reporting company, we may take advantage of these reduced regulatory and reporting requirements. We cannot predict if investors will find our common stock less attractive because of our reliance on certain of these exemptions. If some investors find our common stock less attractive as a result, then there may be a less active trading market for our common stock, our stock price may be more volatile and the price of our common stock may decline.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no unregistered sales of equity securities or repurchase activities during the quarter ended June 30, 2026.
Item 5. Other Information
None of the Company's directors or Section 16 reporting officers adopted terminated
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Item 6. Exhibits
| Exhibit Number | Description | |||||||
| 3.1 | Articles of Incorporation of OP Bancorp (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form S-1 Registration Statement (Registration No. 333-223444) filed on March 5, 2018) | |||||||
| 3.2 | Amended and Restated Bylaws of OP Bancorp (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Form S-1 Registration Statement (Registration No. 333-223444) filed on March 5, 2018) | |||||||
| 3.3 | First Amendment to the Amended and Restated Bylaws of OP Bancorp (incorporated herein by reference to Exhibit 3.3 to the Registrant’s Annual Report on Form 10-K (File No. 001-38437) filed on March 15, 2021) | |||||||
| 31.1 | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. | |||||||
| 31.2 | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. | |||||||
| 32.1 | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
| 32.2 | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
| 101.INS | Inline XBRL Instance Document, filed herewith. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document, filed herewith. | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith. | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document, filed herewith. | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document, filed herewith. | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith. | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101) | |||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| OP Bancorp | ||||||||
Date: August 7, 2026 | By: | /s/ Sang K. Oh | ||||||
Sang K. Oh President and Chief Executive Officer (Duly Authorized Officer) | ||||||||
Date: August 7, 2026 | By: | /s/ JAEHYUN PARK | ||||||
Jaehyun Park Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer) | ||||||||
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