OP Bancorp

Loans are considered delinquent when principal or interest payments are past due 30 days or more. Delinquent loans may remain on accrual status between 30 days and 90 days past due. Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. 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 a reasonable doubt as to collectability in the normal course of business. 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 $4.5 million, or 57% to $12.3 million as of September 30, 2025 from December 31, 2024. The increase was primarily driven by reclassifications of $3.4 million in SBA—real estate loans from performing loans and migrations of a $1.4 million in home mortgage loan from the 60 - 89 days past due category.

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. During the third quarter of 2025, the Company recorded a decline of $392 thousand in the fair value of OREO balance to $845 thousand as of September 30, 2025 from $1.2 million as of December 31, 2024. Of this decline, $39 thousand was charged to expense, while the remaining $353 thousand, representing the SBA guaranteed portion, was recorded as a receivable. The OREO is secured by a mixed-use property in Los Angeles with 90% guaranteed by the SBA.

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.

(1)Excludes guaranteed portion of SBA loans of $17.6 million and $16.3 million as of September 30, 2025 and December 31, 2024, respectively.