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 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.

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.