OP Bancorp
For the period ended Jun 30, 2025. Filed Aug 11, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 11, 2025
OPBK$14.76-0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001628280-25-024201
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-11.
0001722010-25-000005
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsOverviewSelected Financial DataCritical Accounting Policies and EstimatesThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 135 previous paragraphs and 38 current paragraphs.
22 unchanged; 8 reworded; 8 added; 105 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 23 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
The Board of Governors of the Federal Reserve System ("Federal Reserve") has maintained the Federal Funds Rate range at 4.25% to 4.50%, reflecting a continued pause in its monetary tightening cycle. While inflation has shown signs of moderation, the Federal Reserve has signaled a cautious approach, seeking to balance its dual mandate of achieving maximum employment and price stability. Recent commentary from policymakers indicates the potential for gradual rate cuts later in 2025, contingent upon further evidence of sustained disinflation and softening labor market conditions. The current rate environment continues to influence lending activity, funding costs, and credit risk assessments across the financial sector. Additionally, the volatile and uncertain political climate further complicates the economic outlook, making it increasingly difficult to anticipate the timing and magnitude of future rate adjustments. These factors present ongoing challenges for management in forecasting economic conditions and in effectively pricing both loan products and longer-term deposit offerings.
Current report
We believe we have responded effectively to the evolving dynamics of the banking environment. Our ability to navigate recent challenges is largely attributable to the continued loyalty of our customers and the dedication and expertise of our employees and management team.
Current report
•Net interest income increased to $19.7 million, up $3.5 million, or 22%, from $16.2 million.
Current report
•Net income increased to $6.3 million or $0.42 diluted EPS, up $897 thousand, or 17%, from $5.4 million or $0.36 diluted EPS.
Current report
For the six months ended June 30, 2025 compared to six months ended June 30, 2024
Current report
•Net interest income increased to $37.1 million, up $5.0 million, or 15%, from $32.2 million.
Current report
•Net income increased to $11.9 million or $0.79 diluted EPS, up $1.2 million, or 12%, from $10.7 million or $0.70 diluted EPS.
Removed paragraphs (105)
Previous report
In recent periods, our earnings have been affected by a series of fluctuations in the “discount rate” for short-term borrowings updated by the Federal Reserve Board Open Markets Committee in response to perceived increases in inflationary pressures. Financial institutions and markets promptly followed the upward adjustments, significantly increasing interest rate pricing on loans and deposits. While such adjustments are commonplace and tend to affect the banking industry as a whole, the pace and degree of these adjustments were nearly unprecedented, resulting in banks, including the Bank, experiencing substantial pressure on multiple fronts. In particular, banks were forced to increase interest rates paid on deposits in order to meet competitive pressures from other financial institutions, as well as from treasury securities and other investment opportunities that offered greater earning capabilities for those customers. These increases correspondingly increased the Bank’s cost of funds and exerted downward pressure on our net interest margins. At the same time, they tended to reduce loan volumes by encouraging borrowers to refrain from initiating new loans and maintaining relatively lower balances on existing lines of credit.
Previous report
Recent interest rate increases also increased credit risk as they increased costs to customers at a time when the customers’ sources of repayment remained relatively lower, as a result of which borrowers found it more difficult to comply with their loan obligations. The combination of these factors has exerted downward pressure on our fee income, the volume of our interest-earning assets and our net interest income.
Previous report
More recently, the Federal Reserve Board Open Markets Committee, colloquially known as the “Fed,” which controls benchmark interest rates in the United States, has made small decreases in benchmark rates, but has taken a much more incremental approach to significant reductions in response to what appears to be improving economic data. The political climate in the United States appears to remain volatile and uncertain, making it difficult to predict whether and when the Fed may adjust rates further. These factors make it difficult for our management to predict and respond to economic conditions, and exacerbates the challenges of pricing loan and longer-term deposit products.
Previous report
We believe we have adapted reasonably well to these shifts in the banking economy, and our success in weathering the challenges to date owes to the loyalty of our customers and the talent and dedication of our employees and management. At the same time, these conditions have forced us to redirect our efforts toward liquidity and capital management, thus limiting our growth and our near-term profitability.
Previous report
•Net interest income decreased to $17.4 million, an increase of $1.4 million, or 9.0%, from $16.0 million.
Previous report
•Net income was $5.6 million or $0.37 per diluted common share, an increase of $334 thousand, or 6.4%, from $5.2 million or $0.34 per diluted common share.
Previous report
RESULTS OF OPERATIONS
Previous report
Net Income
Previous report
We reported net income for the three months ended March 31, 2025 of $5.6 million, an increase of $334 thousand, or 6.4%, compared to net income of $5.2 million for the same period of 2024. The increase was due to a $1.4 million increase in net interest income that resulted primarily from an increase in interest-earning assets, as well as a $1.2 million increase in noninterest income, partially offset by a $1.7 million increase in noninterest expense and a $591 thousand increase in provision for credit losses.
Previous report
Net Interest Income
Previous report
The management of interest income and expense is fundamental to our financial performance. Net interest income, the difference between interest income and interest expense, is the largest component of our total revenue. Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets). We seek to maximize net interest income without exposing ourselves to excessive interest rate risk through our asset and liability policies. Interest rate risk is managed by monitoring the pricing, maturity and repricing options of all classes of interest-bearing assets and liabilities. Our net interest margin also may be affected adversely from time to time when we are required to reverse previously accrued interest on loans that are reclassified as non-accrual.
Previous report
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.
Previous report
(1)Annualized.
Previous report
(2)Includes income and average balances for Federal Home Loan Bank (“FHLB”) and Pacific Coast Bankers Bank stock, CRA qualified mutual fund, term federal funds, interest-earning time deposits and other miscellaneous interest-earning assets.
Previous report
(3)Average loan balances include non-accrual loans and loans held for sale.
Previous report
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.
Previous report
Net interest income increased $1.4 million, or 9.0%, to $17.4 million for the three months ended March 31, 2025 from $16.0 million for the same period of 2024, primarily due to higher interest income on average earning assets (loans and interest-earning deposits in other banks), partially offset by higher interest expense on interest-bearing deposits.
Previous report
Interest income on loans increased $1.5 million, or 5.1%, to $31.7 million for the three months ended March 31, 2025, compared with $30.1 million for the same period of 2024, primarily due to a $196.1 million, or 10.8%, increase in average balance of loans, partially offset by a 30 basis point decrease in average yield on loans as a result of the Federal Reserve's rate cuts.
Previous report
Interest income on interest-bearing deposits in other banks increased $383 thousand, or 38.7%, to $1.4 million for the three months ended March 31, 2025, compared with $1.0 million for the same period of 2024. The increase was primarily due to a $51.0 million, or 69.8%, increase in average balance of interest-bearing deposits in other banks, partially offset by a 93 basis point decrease in average yield.
Previous report
Interest expense on interest-bearing deposits increased $933 thousand, or 6.0%, to $16.6 million for the three months ended March 31, 2025, compared with $15.7 million for the same period of 2024, primarily due to a $240.0 million, or 18.2%, increase in average balance of interest-bearing deposits, partially offset by a 46 basis point decrease in average cost of interest-bearing deposits driven by the Federal Reserve's rate cuts.
Previous report
Net interest margin decreased 5 basis points to 3.01% for the three months ended March 31, 2025 from 3.06% for the same period of 2024, as the negative impact from the 30 basis point decrease in average yield on loans outweighed the positive impacts from average balance increases and a 17 basis point increase in net interest spread.
Previous report
Provision for Credit Losses
Previous report
Total provision for credit losses was $736 thousand for the three months ended March 31, 2025, compared to $145 thousand for the same period of 2024. The provision for credit losses on loans and on off-balance sheet exposure were $687 thousand and $49 thousand, respectively. The provision for credit losses on loans of $687 thousand for three months ended March 31, 2025 was primarily due to an $87.0 million, or 4.4%, increase in loan balances. Home mortgage, commercial real estate, and SBA loans increased $50.0 million, $43.0 million, and $5.1 million, respectively, whereas commercial and industrial loans decreased $10.8 million in the first quarter of 2025. The provision for credit losses on off-balance sheet exposure of $49 thousand was primarily due to increases in unfunded commitment balance.
Previous report
Noninterest Income
Previous report
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.
Previous report
The following table sets forth the various components of our noninterest income for the three months ended March 31, 2025 and 2024:
Previous report
Noninterest income for the three months ended March 31, 2025 was $4.8 million, an increase of $1.2 million, or 34.3%, compared to $3.6 million for the same period of 2024, primarily due to higher service charges on deposits, loan servicing fees, gain on sale of loans, and other income.
Previous report
Service charges on deposit were $1.0 million for the three months ended March 31, 2025, compared to $612 thousand for the same period of 2024, an increase of $388 thousand, or 63.4%, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts.
Previous report
Loan servicing fees was $1.0 million for the three months ended March 31, 2025, compared to $772 thousand for the same period of 2024, an increase of $235 thousand, or 30.4%, primarily due to a decrease in servicing fee amortization driven by lower loan payoffs in loan servicing portfolio.
Previous report
Gain on sale of loans was $2.0 million for the three months ended March 31, 2025, compared to $1.7 million for the same period of 2024, an increase of $316 thousand, or 18.6%. The increase was primarily due to a higher sold amount in SBA loans, partially offset by a lower average sales premium rate. We sold $31.1 million of SBA loans with an average premium of 8.08% for the three months ended March 31, 2025, compared to a sale of $24.8 million of SBA loans with an average premium of 8.33% in the same period of 2024.
Previous report
Other income was $790 thousand, an increase of $291 thousand from $499 thousand, primarily due to an increase in credit related fees collected and a decrease in unrealized loss of CRA-qualified mutual fund driven by market interest rate changes.
Previous report
Noninterest Expense
Previous report
The following table sets forth the major components of our noninterest expense for the three months ended March 31, 2025 and 2024:
Previous report
Noninterest expense for the three months ended March 31, 2025 was $13.8 million, compared with $12.2 million for the same period of 2024, an increase of $1.7 million, or 13.6%, primarily due to higher salaries and employee benefits and other expenses, partially offset by lower data processing and communication.
Previous report
Salaries and employee benefits for the three months ended March 31, 2025 was $8.8 million, an increase of $935 thousand, or 11.9%, compared with $7.8 million for the same period of 2024. The increase was primarily due to an increase in our employee headcount increased to 240 from 228.
Previous report
Other expenses increased $816 thousand, primarily due to an increase in credit related expenses and an increase in customer services expenses related to the increase in the number of analysis accounts.
Previous report
Data processing and communication for the three months ended March 31, 2025 was $296 thousand, a decrease of $191 thousand, or 39.2%, compared with $487 thousand for the same period of 2024. The decrease was primarily due to a reduction in data processing expenses following our core banking system change completed in the fourth quarter of 2024.
Previous report
Income Tax Expense
Previous report
Income tax expense was $2.1 million for the three months ended March 31, 2025, resulting in an effective tax rate of 27.6%, compared to income tax expense of $2.0 million for the same period of 2024, resulting in an effective tax rate of 28.0%. The decrease in effective tax rate was primarily due to tax benefits recognized from restricted stock awards vested in the first quarter of 2025.
Previous report
We recognized net deferred tax assets of $13.2 million and $14.9 million as of March 31, 2025 and December 31, 2024, respectively. After consideration of the matters in the preceding paragraph, we have determined that it is more likely than not that net deferred tax assets as of March 31, 2025 will be fully realized in future years.
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Reworded paragraphs (8)
Previous wording
OP Bancorp ("Company") are a bank holding company headquartered in Los Angeles, California. Our commercial community banking activities are operated through Open Bank ("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.
Current wording
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.
Previous wording
Our results of operations depend primarily on our 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. In addition to our net interest income, we derive earnings from fee income we receive in connection with our deposits, and from gains on the sale and service of SBA loans. Our major operating expenses are the salaries and related benefits we pay our management and staff, and the 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. We currently operate eight branches in Los Angeles and Orange Counties in California, one branch in Santa Clara, California, one branch in Carrollton, Texas and one branch near Las Vegas, Nevada. We have five loan production offices in Pleasanton, California, Atlanta, Georgia, Aurora, Colorado, Lynnwood, Washington, and Fairfax, Virginia.
Current wording
Our results of operations depend primarily on our 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. In addition to our net interest income, we derive earnings from fee income we receive in connection with our deposits, and from gains on the sale and service of SBA loans. Our major operating expenses are the salaries and related benefits we pay our management and staff, and the 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. We currently operate nine branches in Los Angeles and Orange Counties in California, one branch in Santa Clara, California, one branch in Carrollton, Texas and one branch near Las Vegas, Nevada. We have five loan production offices in Pleasanton, California, Atlanta, Georgia, Aurora, Colorado, Lynnwood, Washington, and Fairfax, Virginia.
Previous wording
•Total assets were $2.51 billion, an increase of $147.0 million, or 6.2%, from $2.37 billion.
Current wording
•Total assets were $2.56 billion, up $197.6 million, or 8%, from $2.37 billion.
Previous wording
•Gross loans were $2.04 billion, an increase of $87.0 million, or 4.4%, from $1.96 billion.
Current wording
•Gross loans were $2.07 billion, up $114.7 million, or 6%, from $1.96 billion.
Previous wording
•Total deposits were $2.19 billion, an increase of $162.6 million, or 8.0%, from $2.03 billion.
Current wording
•Total deposits were $2.25 billion, up $227.4 million, or 11%, from $2.03 billion.
Previous wording
•Shareholders’ equity was $210.1 million, an increase of $5.1 million, or 2.5%, from $205.0 million.
Current wording
•Shareholders’ equity was $213.7 million, up $8.7 million, or 4%, from $205.0 million.
Previous wording
There have been no material changes to our critical accounting policies and estimates since those described in our Annual Report on Form 10-K for the year ended December 31, 2024.
Current wording
There have been no material changes to our critical accounting policies and estimates since those described in our 2024 Annual Report on Form 10-K.
Previous wording
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 CECL, the Company elected not to consider accrued interest receivable in its estimated credit losses because the Company writes off uncollectible accrued interest receivable in a timely manner. The Company considers writing off accrued interest amounts once the amounts become 90 days past due to be considered within a timely manner. The Company has elected to write off accrued interest receivable by reversing interest income. The Company uses transition matrices to develop the Probability of Default ("PD") and Loss Given Default ("LGD") approach, incorporating quantitative factors and qualitative considerations in the calculation of the allowance for credit losses for collectively assessed loans. The model provides forecasts of PD and LGD 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. We make critical accounting estimates, including the judgments made in the application of significant accounting policies, sensitivity to change, and the likelihood of materially different reported results if different assumptions were used.
Current wording
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 CECL, the Company elected not to consider accrued interest receivable in its estimated credit losses because management writes off uncollectible accrued interest receivable in a timely manner. The Company considers writing off accrued interest amounts once the amounts become 90 days past due to be considered within a timely manner. The Company has elected to write off accrued interest receivable by reversing interest income. The Company uses transition matrices to develop the Probability of Default ("PD") and Loss Given Default ("LGD") approach, incorporating quantitative factors and qualitative considerations in the calculation of the allowance for credit losses for collectively assessed loans. The model provides forecasts of PD and LGD 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. We make critical accounting estimates, including the judgments made in the application of significant accounting policies, sensitivity to change, and the likelihood of materially different reported results if different assumptions were used.