OP Bancorp

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 Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, 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. Additionally, we maintain five loan production offices located in Pleasanton, California; Atlanta, Georgia; Aurora, Colorado; Lynnwood, Washington; and Fairfax, Virginia.

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.

Banking Economy and Recent Developments

The Board of Governors of the Federal Reserve System ("Federal Reserve") lowered the Federal Funds Rate target range from 3.75% to 4.00% on October 29, 2025, following its earlier cut in September. This marks the second consecutive rate reduction this year and reflects the Federal Reserve's response to a weakening labor market amid persistent inflationary pressures. The decision underscores the Fed Reserve's evolving stance toward supporting employment while maintaining price stability. However, the Federal Reserve have emphasized that further reductions are not guaranteed, and any additional moves will depend on incoming data and evolving economic condition. While markets had anticipated more easing, recent statements highlight the uncertainty surrounding future adjustments, particularly given the ongoing government shutdown that has delayed key economic reports. Political dynamics have further intensified, with increased pressure from the executive branch and recent changes to the composition of the Federal Open Market Committee. The current rate environment continues to influence lending activity, funding costs, and credit risk assessments across the financial sector. Additionally, heightened political uncertainty complicates the economic outlook, making it more challenging to anticipate the timing and magnitude of future rate adjustments. These dynamics present ongoing challenges for management in forecasting economic conditions and effectively pricing both loan products and longer-term deposit offerings.

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.