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OP Bancorp Reports Net Income for Second Quarter 2025 of $6.3 Million and Diluted Earnings Per Share of $0.42

Second Quarter 2025 Highlights compared with First Quarter 2025:

• Financial Results:
  • Net income of $6.3 million, compared to $5.6 million
  • Diluted earnings per share (鈥淓PS鈥�) of $0.42, compared to $0.37
  • Net interest income of $19.7 million, compared to $17.4 million
  • Net interest margin of 3.23%, compared to 3.01%
  • Provision for credit losses of $1.2 million, compared to $736 thousand
  • Total assets of $2.56 billion, compared to $2.51 billion
  • Gross loans of $2.07 billion, compared to $2.04 billion
  • Total deposits of $2.25 billion, compared to $2.19 billion
• Credit Quality:
  • Allowance for credit losses on loans to gross loans of 1.27%, compared to 1.24%
  • Net charge-offs ⁽¹⁾ to average gross loans of 0.06%, compared to 0.02%
  • Loans past due 30-89 days to gross loans of 0.47%, compared to 0.32%
  • Nonperforming loans to gross loans of 0.43%, compared to 0.51%
  • Criticized loans ⁽²⁾ to gross loans of 1.15%, compared to 1.13%
• Capital Levels:
  • Remained well-capitalized with a Common Equity Tier 1 (鈥淐ET1鈥�) ratio of 11.01%
  • Book value per share increased to $14.36, compared to $14.09
  • Paid quarterly cash dividend of $0.12 per share for the periods

__________________________________________

(1) Annualized.

(2) Includes special mention, substandard, doubtful, and loss categories.

LOS ANGELES--(BUSINESS WIRE)-- OP Bancorp (the 鈥淐ompany鈥�) (NASDAQ: OPBK), the holding company of Open Bank (the 鈥淏ank鈥�), today reported its financial results for the second quarter of 2025. The Company reported net income of $6.3 million, or $0.42 diluted EPS, compared with $5.6 million, or $0.37 diluted EPS, for the first quarter of 2025, and $5.4 million, or $0.36 per diluted EPS, for the second quarter of 2024.

Sang K. Oh, President and Chief Executive Officer:

鈥淚 am honored to step into the role of Chief Executive Officer. As we look ahead, my priorities will be to strengthen our core banking operations, deepen customer engagement, and uphold the highest standards of trust and compliance. I am committed to delivering long-term value for our shareholders, supporting our customer鈥檚 financial goals, empowering our talented teams, and fostering a culture of integrity across the Company,鈥� said Sang K. Oh, President and Chief Executive Officer.

Mr. Oh continued, 鈥淭his was a solid quarter for OP Bancorp as we continued to execute on our clearly defined path to enhanced profitability. Our results were highlighted by sustained growth in loan and deposit portfolios, an expanded net interest margin, a more favorable deposit mix and an improved efficiency, all while continuing to maintain strong credit quality and capital position. We are also proud to announce the opening of our new full-service branch in Garden Grove, California, further expanding our footprint and enhancing accessibility for our customers in the region,鈥� said Sang K. Oh, President and Chief Executive Officer.

Second Quarter 2025 vs. First Quarter 2025

Net interest income increased $2.3 million, or 13%, primarily due to loan growth, higher loan yields and lower deposit costs, partially offset by deposit growth. Net interest margin increased 22 basis points to 3.23% from 3.01%.

• Interest income on loans increased $2.6 million, primarily driven by a $90.1 million increase in average loan balances and a 17 basis point improvement in loan yields, reflecting higher new loans rates compared to the prior quarter. The increase in loan yields also benefited from higher prepayment penalties and other related income, and lower amortization of premiums.

• Interest expense on deposits increased $867 thousand, primarily due to a $114.2 million increase in average interest-bearing deposit balances, partially offset by a 13 basis point decline in interest-bearing deposit costs, reflecting the repricing of time deposits in response to the downward shift in federal funds rate that begun in the latter part of 2024.

Second Quarter 2025 vs. Second Quarter 2024

Net interest income increased $3.5 million, or 22%, primarily due to loan growth. Net interest margin increased 27 basis points to 3.23% from 2.96%.

• Interest income on loans increased $3.7 million, primarily driven by a $251.9 million increase in average loan balances, partially offset by an 11 basis point decline in loan yields. The decline in loan yields was attributable to new loan originations at lower rates following the recent decrease in the federal funds rate.

• Interest expense on deposits remained relatively unchanged, as the impact of a $234.9 million increase in average interest-bearing deposit balances was offset by a 66 basis point decline in interest-bearing deposit costs. The decline in deposit costs was primarily due to the repricing of deposit products in response to the recent decrease in federal funds rate.

Second Quarter 2025 vs. First Quarter 2025

Provision for credit losses on loans increased $568 thousand, primarily due to higher historical loss factors from risk rating downgrades within the CRE portfolio and net charge-offs recognized during the quarter, partially offset by an improved qualitative outlook.

Second Quarter 2025 vs. Second Quarter 2024

Provision for credit losses on loans increased $628 thousand, primarily due to higher historical loss factors from risk rating downgrades and net charge-offs recognized during the quarter, partially offset by an improved qualitative outlook.

Second Quarter 2025 vs. First Quarter 2025

Noninterest income decreased $848 thousand, or 18%, primarily due to lower gains on sale of loans, other income and loan servicing fees.

• Gains on sale of loans declined $578 thousand, primarily due to reduced SBA loan sale activity and lower average premium rates. During the quarter, the Bank sold $25.3 million in SBA loans at an average premium rate of 7.05%, compared to the sale of $31.1 million at an average premium rate of 8.08%.

• Other income decreased $180 thousand, primarily due to a reduction in credit-related fees collected.

• Loan servicing fees, net of amortization, decreased $107 thousand, primarily due to increased amortization of servicing assets, driven by elevated payoff activities in servicing portfolio.

Second Quarter 2025 vs. Second Quarter 2024

Noninterest income decreased $216 thousand, or 5%, primarily due to lower gains on sale of loans, partially offset by higher loan servicing fees and service charges on deposits.

• Gain on sale of loans declined $884 thousand, primarily due to reduced SBA loan sale activity and lower average premium rates. The Bank sold $25.3 million in SBA loans at an average premium rate of 7.05%, compared to the sale of $32.1 million at an average premium rate of 8.58%.

• Loan servicing fees, net of amortization, increased $325 thousand, primarily due to reduced amortization expense of servicing assets, resulting from decreased loan payoff activities.

• Service charges on deposits increased $224 thousand, primarily driven by higher deposit analysis fees, reflecting continued growth in the number of business customer accounts.

Second Quarter 2025 vs. First Quarter 2025

Noninterest expense increased $223 thousand, or 2%, primarily due to higher salaries and employee benefits, foundation donation and other contributions, and promotion and advertising, partially offset by a reduction in other expenses.

• Salaries and employee benefits increased $299 thousand, primarily due to higher incentive accruals and merit-based salary adjustments, partially offset by lower vacation and payroll tax accruals. Higher health insurance costs and lower loan origination costs also contributed to the increase in employee benefits.

• Foundation donation and other contributions increased $80 thousand, primarily due to higher donation accruals for the Open Stewardship Foundation, reflecting increased net income.

• Promotion and advertising increased $76 thousand, primarily due to a one-time accrual adjustment recorded during the second quarter of 2025.

• Other expenses decreased $293 thousand, primarily reflecting a return to normal credit-related expense level following an abnormally high amount in the prior quarter.

Second Quarter 2025 vs. Second Quarter 2024

Noninterest expense increased $1.8 million, or 15%, primarily due to higher salaries and employee benefits, and other expenses, as well as increased FDIC insurance and regulatory assessments, partially offset by a reduction in data processing and communication.

• Salaries and employee benefits increased $1.5 million, primarily due to higher incentive accruals as well as staffing growth and annual merit-based salary adjustments.

• Other expenses increased $303 thousand, primarily due to higher credit-related and business development expenses.

• FDIC insurance and regulatory assessments increased $128 thousand, primarily due to higher FDIC assessment charges. The increase was largely driven by growth in the Bank鈥檚 total assets, which expanded the assessment base, along with higher assessment rates.

• Data processing and communication decreased $224 thousand, primarily due to contractual credits received following the conversion to a new core banking system in the fourth quarter of 2024.

Income Tax Expense

Second Quarter 2025 vs. First Quarter 2025

Income tax expense was $2.1 million for both periods. The effective tax rate decreased to 25.02% from 27.64%. The decrease in effective tax rate was primarily attributable to the revaluation of deferred tax assets resulting from recent California state tax legislation. Additional contributing factors included changes in estimates related to the adoption of an enhanced interim state tax apportionment methodology and increased tax losses from a new investment in low-income housing partnerships.

Second Quarter 2025 vs. Second Quarter 2024

Income tax expense was $2.1 million for both periods. The effective tax rate decreased to 25.02% from 28.21%. The decrease in effective tax rate was primarily attributable to the revaluation of deferred tax assets resulting from recent California state tax legislation. Additional contributing factors included changes in estimates related to the adoption of an enhanced interim state tax apportionment methodology and higher discrete benefits associated with stock-based compensation.

The following table presents loan originations and the corresponding weighted average contractual rates for the periods indicated:

The following table summarizes the loan activity for the periods indicated:

The following table presents the composition of gross loans by interest rate type accompanied with the weighted average contractual rates as of the periods indicated:

The following table presents the maturity of gross loans by interest rate type accompanied with the weighted average contractual rates for the periods indicated:

Allowance for Credit Losses

The following table summarizes the activity in the allowance for credit losses for the periods presented:

Credit quality remained strong, with nonperforming loans declining to 0.43% of gross loans and annualized net charge-offs at a low 0.06%. The allowance remained adequate at 1.27% of gross loans.

• Accruing loans 30-89 days past due increased to $9.8 million or 0.47% of gross loans, compared with $6.5 million or 0.32% in the prior quarter.

• Nonperforming loans decreased $1.5 million, primarily attributable to increased payoffs across various loan categories, partially offset by the addition of a new nonaccrual home mortgage loan.

• Criticized loans increased $703 thousand, primarily attributable to the downgrade of SBA and home mortgage loans, partially offset by the payoffs of certain home mortgage loans and partial charge-offs.

As of June 30, 2025 vs. March 31, 2025

Total deposits increased $64.9 million or 3%, primarily driven by a $46.2 million increase in money market deposits and others, along with a $12.9 million increase in noninterest-bearing deposits. This growth reflects our continued strategic focus on expanding lower-cost deposit products, resulting in growth in both noninterest-bearing and money market deposit balances.

As of June 30, 2025 vs. June 30, 2024

Total deposits increased $313.9 million or 16%, primarily driven by growth of $167.6 million in time deposits, $99.1 million in money market deposits and others, and $47.2 million in noninterest-bearing deposits. This strong deposit growth reflects the continued strategic focus on developing and deepening deposit relationships with both new and existing customers.

The following table sets forth the maturity of time deposits as of June 30, 2025:

OTHER HIGHLIGHTS

Liquidity

The Company maintains ample access to liquidity, including highly liquid assets on our balance sheet and available unused borrowings from other financial institutions. The following table presents the Company's liquid assets and available borrowings as of dates presented: