OP Bancorp

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, while 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 September 30, 2025 and December 31, 2024:

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 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 of unsecured federal funds lines with no amounts advanced as of both September 30, 2025 and December 31, 2024. In addition, on such dates we had lines of credit from the Federal Reserve discount window of $210.6 million and $215.1 million as of September 30, 2025 and December 31, 2024, respectively. The Federal Reserve discount window lines were collateralized by a pool of CRE loans and C&I loans totaling $288.7 million and $278.9 million as of September 30, 2025 and December 31, 2024, respectively. We had no borrowings outstanding with the Federal Reserve as of September 30, 2025 or December 31, 2024. 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 $430.9 million of additional borrowing availability with the FHLB as of September 30, 2025. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts.

Subsequent to September 30, 2025, in November 2025, the Company completed a private of $25.0 million principal amount of fixed-to-floating rate subordinated note due 2035 (the "Note"). The Note will mature on November 15, 2035. The Note will bear interest of 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 Note will bear interest at a floating rate, reset quarterly, equal to the three-month term SOFR plus 411 basis points and payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year. The Note was designed to qualify as Tier 2 capital under applicable capital adequacy regulations. The Company intends to use the net proceeds for general corporate purposes, including without limitation, strengthening the regulatory capital of the Bank and supporting its growth.

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 September 30, 2025 and December 31, 2024:

In addition to contractual obligations, other commitments of us impact liquidity. These include unused commitments to extend credit, standby letters of credit and commercial letters of credit. Since many of these commitments expire without being drawn upon, and each customer must continue to meet the conditions established in the contract, the total amount of these commercial commitments does not necessarily represent the future cash requirements of us. Our liquidity sources have been, and are expected to be, sufficient to meet the cash requirements of our lending activities. Information about our loan commitments, standby letters of credit and commercial letters of credit is provided in Note 8. Commitments and Contingencies, to the unaudited consolidated financial statements in this Report.