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 and in our 2025 Annual Report on Form 10-K. 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. See "Forward- Looking Statements"in this Form 10-Q.

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 nine months 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 outstanding 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") increased the Federal Funds Rate target range by 25 basis points to 3.75% to 4.00% at its September 16, 2026 meeting, citing elevated inflation amid continued solid economic activity and resilient domestic spending. The Federal Reserve indicated that the policy action was intended to support a timelier return of inflation to its 2% objective. The current interest rate environment continues to influence loan demand, deposit pricing, funding costs, and credit quality trends across the banking industry. Uncertainty regarding future monetary policy and economic conditions may affect the Company's balance sheet management strategies and its ability to effectively price loans and deposit products.

Community Bank Leverage Ratio

The CBLR framework is an optional regulatory capital framework that allows qualifying community banking organizations to use a simplified leverage ratio framework in lieu of generally applicable risk-based and leverage capital requirements. Effective September 30, 2026, the Bank elected to use the CBLR framework and has updated its regulatory capital disclosures accordingly. See Note 12. Regulatory Capital Matters to Consolidated Financial Statement in this Form 10-Q and MD&A. Financial Condition. Capital Requirements for additional information.

The Company continues to monitor changes in the banking environment and adjust its operating, funding, and risk management strategies as appropriate.