2023 First Quarter Highlights compared with 2022 First Quarter:

•Financial Results:

◦Net income of $7.5 million, compared to $8.2 million

◦Diluted earnings per share of $0.48, compared to $0.53

◦Net interest income of $17.9 million, compared to $17.3 million

◦Net interest margin of 3.56%, compared to 4.12%

◦Adopted Current Expected Credit Losses (“CECL”) and recorded additional allowance for credit losses of $2.1 million on January 1, 2023

◦Reversal of credit losses of $338 thousand, compared to provision for credit losses of $341 thousand

◦Total assets of $2.2 billion, a 16% increase compared to $1.9 billion

◦Gross loans of $1.7 billion, a 18% increase compared to $1.4 billion

◦Total deposits of $1.9 billion, a 14% increase compared to $1.7 billion

•Credit Quality:

◦Allowance for credit losses to gross loans of 1.23%, compared to 1.17%, reflecting implementation of CECL

◦Net loan charge-offs (1) to average gross loans (2) of 0.02%, compared to 0.00%

◦Nonperforming loans to gross loans of 0.26%, compared to 0.20%

◦Criticized loans (3) to gross loans of 0.44%, compared to 0.27%

•Capital Levels:

◦Quarterly cash dividend of $0.12 per share, a 20% increase from $0.10 per share

◦Remained well-capitalized with a Common Equity Tier 1 (“CET1”) ratio of 12.06%.

◦Book value per common share increased to $12.02, compared to $10.97

◦Repurchased 76,990 shares of common stock at an average price of $9.25

___________________________________________________________

(1)    Annualized.

(2)    Includes loans held for sale.

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

LOS ANGELES, April 27, 2023 — OP Bancorp (the “Company”) (NASDAQ: OPBK), the holding company of Open Bank, today reported its financial results for the first quarter of 2023. Net income for the first quarter of 2023 was $7.5 million, or $0.48 per diluted common share, compared with $8.0 million, or $0.51 per diluted common share, for the fourth quarter of 2022, and $8.2 million, or $0.53 per diluted common share, for the first quarter of 2022.

Min Kim, President and Chief Executive Officer:

“With the unexpected recent turmoil in the banking industry, we have focused our effort on connecting with our customers to reassure them that the Company maintains strong liquidity and capital positions to withstand challenges in these unusual times,” said Min Kim, President and Chief Executive.

“Although we have experienced migration from noninterest bearing to interest bearing deposits amid higher rate environment, we did not have much outflow during the quarter. We are grateful for our customers’ loyalty and the trust that they have in us. As we continue to face many headwinds, we anticipate stress on our short-term earnings. However, we believe we are well positioned to build a stronger franchise as we remain focused in maintaining the safety and soundness of our operations.”

(1)Includes loans held for sale.

(2)Annualized.

(3)Represents noninterest expense divided by the sum of net interest income and noninterest income.

(1)Annualized.

(1)Annualized.

(2)Prepayment penalty income of $3 thousand, $172 thousand and $95 thousand for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively, was from commercial real estate and C&I loans.

(3)As of March 31, 2023, there were unamortized net deferred fees and unaccredited discounts of $4 thousand to be recognized over the estimated life of the loans as a yield adjustment on the loans.

During the second quarter of 2021, the Company purchased an SBA portfolio of 638 loans with an ending balance of $100.0 million, excluding loan discount of $8.9 million from Hana Small Business Lending, Inc. (“Hana”). The following table presents impacts of the Hana loan purchase on average loan yield and net interest margin:

(1)Annualized.

(2)See reconciliation of GAAP to non-GAAP financial measures.

Net interest income decreased $2.3 million, or 11.4%, primarily due to higher interest expense on time deposits, partially offset by higher interest income on loans and available-for-sale debt securities. Net interest margin was 3.56%, a decrease of 52 basis points from 4.08%.

◦A $1.3 million increase in interest income on loans was primarily due to a $33.8 million increase in average balance and a 29 basis point increase in contractual loan yield as a result of the Federal Reserve’s rate increases.

◦A $329 thousand increase in interest income on available-for-sale debt securities was primarily due to a $24.0 million increase in average balance and a 28 basis point increase in average yield due to higher yields on recently purchased securities.

◦A $3.7 million increase in interest expense on time deposits was primarily due to a $216.8 million increase in average balance and a 126 basis point increase in average cost driven by the Federal Reserve’s rate increases.

Net interest income increased $602 thousand, or 3.5%, primarily due to higher interest income on loans and available-for-sale debt securities, mostly offset by higher interest expenses on time deposits and money market deposits. Net interest margin was 3.56%, a decrease of 56 basis point from 4.12%.

◦An $8.8 million increase in interest income on loans was primarily due to a $281.3 million increase in average balance and a 126 basis point increase in contractual loan yield as a result of the Federal Reserve’s rate increases.

◦A $1.0 million increase in interest income on available-for-sale debt securities was primarily due to a $53.5 million increase in average balance and a 159 basis point increase in average yield due to higher yields on recently purchased securities.

◦A $6.8 million increase in interest expense on time deposits was primarily due to a $411.8 million increase in average balance and a 329 basis point increase in average cost driven by the Federal Reserve’s rate increases.

◦A $2.9 million increase in interest expense on money market deposits was primarily due to a 287 basis point increase in average cost driven by the Federal Reserve’s rate increases.

(1)     Reversal of credit losses on off-balance sheet exposure of $80 thousand for the three months ended March 31, 2023 was included in total (reversal of) provision for credit losses. Prior to CECL adoption, provisions for credit losses on off-balance sheet exposure of $74 thousand and $5 thousand for the three months ended December 31, 2022 and March 31, 2022, respectively, were included in other expenses.

The Company recorded a $338 thousand reversal of credit losses, a decrease of $1.4 million, compared with a $1.1 million provision for credit losses. The $258 thousand reversal of credit losses on loans and the $80 thousand reversal of credit losses on off-balance sheet exposure were primarily due to changes in the qualitative adjustments, reflecting improving trends in loan concentration ratios.

The Company recorded a $338 thousand reversal of credit losses, a decrease of $684 thousand, compared with a $346 thousand provision for credit losses.

Noninterest income increased $1.1 million, or 33.3%, primarily due to higher gain on sale of loans.

◦Gain on sale of loans was $2.6 million, an increase of $886 thousand from $1.7 million, primarily due to a higher SBA loan sold amount and a higher average sales premium. The Company sold $44.7 million in SBA loans at an average premium rate of 7.33%, compared to the sale of $32.2 million at an average premium rate of 6.13%.

Noninterest income increased $79 thousand, or 1.9%, due to an increase in loan servicing fees and other income, mostly offset by lower gain on sale of loans.

◦Loan servicing fees were $846 thousand, an increase $399 thousand from $447 thousand, primarily due to an increase in servicing portfolio and a decrease in servicing asset amortization driven by slower loan prepayments in the first quarter of 2023.

◦Other income was $461 thousand, an increase of $318 thousand from $143 thousand, primarily due to an increase of $226 thousand in fair value of equity investment.

◦Gain on sale of loans was $2.6 million, a decrease of $668 thousand from $3.2 million, primarily due to a lower average sales premium partially offset by a higher SBA loans sold amount. The Company sold $44.7 million in SBA loans at an average premium rate of 7.33%, compared to the sale of $31.8 million at an average premium rate of 11.02%.

Noninterest expense increased $581 thousand, or 5.1%, primarily due to increases in FDIC insurance and regulatory assessments, salaries and employee benefits, and promotion and advertising.

◦FDIC insurance and regulatory assessments increased $291 thousand due to increases in FDIC assessment fees in 2023.

◦Salaries and employee benefits increased $172 thousand primarily due to lower employee incentive accruals in the fourth quarter of 2022.

◦Promotion and advertising increased $150 thousand primarily due to lower expense in the fourth quarter of 2022 from year-end accrual adjustments.

Noninterest expense increased $2.2 million, or 23.2%, primarily due to higher salaries and employee benefits and FDIC insurance and regulatory assessments.

◦Salaries and employee benefits increased $1.6 million primarily due to 23 additional full-time employees to support continued growth of the Company.

◦FDIC insurance and regulatory assessments increased $260 thousand primarily due to our deposit growth from the first quarter of 2022 and increases in FDIC assessment fees in 2023.

Income tax expense was $3.1 million, and the effective tax rate was 29.0%, compared to income tax expense of $3.1 million and the effective rate of 27.8%.

Income tax expense was $3.1 million and the effective tax rate was 29.0%, compared to income tax expense of $3.4 million and an effective rate of 29.1%.

The following table presents new loan originations based on loan commitment amounts for the periods indicated:

The following table presents changes in gross loans by loan activity for the periods indicated:

Gross loans were $1.69 billion as of March 31, 2023, up $14.2 million from December 31, 2022, primarily due to new loan originations and a decrease in loans held for sale, partially offset by loan sales, payoffs and paydowns.

New loan originations and loan payoffs and paydowns were $69.1 million and $68.7 million for the first quarter of 2023, respectively, compared with $174.2 million and $46.8 million for the fourth quarter of 2022, respectively.

Gross loans were $1.69 billion as of March 31, 2023, up $264.1 million from March 31, 2022, primarily due to new loan originations of $592.3 million and loan purchases of $155.7 million, primarily offset by loan sales of $191.5 million and loan payoffs and paydowns of $243.1 million.

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:

The Company adopted the CECL accounting standard effective as of January 1, 2023 under a modified retrospective approach. The adoption resulted in a $1.9 million increase to the allowance for credit losses on loans, a $184 thousand increase to the allowance for credit losses on off-balance sheet exposure, a $624 thousand increase to deferred tax assets, and a $1.5 million charge to retained earnings.

The following table presents impact of CECL adoption for allowance for credit losses and related items on January 1, 2023:

The following table presents allowance for credit losses and provision for credit losses as of and for the periods presented:

($ in thousands)						As of and For the Three Months Ended																		% Change 1Q23 vs.
						1Q2023						4Q2022						1Q2022						4Q2022						1Q2022
Allowance for credit losses on loans, beginning						$	19,241					$	18,369					$	16,123					4.7		%				19.3		%
Impact of CECL adoption						1,924						—						—						n/m						n/m
(Reversal of) provision for credit losses (1)						(258)						977						341						n/m						n/m
Gross charge-offs						(116)						(109)						(14)						6.4						728.6		%
Gross recoveries						23						4						17						475.0						35.3		%
Net (charge-offs) recoveries						(93)						(105)						3						(11.4)						n/m
Allowance for credit losses on loans, ending (2)						$	20,814					$	19,241					$	16,467					8.2		%				26.4		%
Allowance for credit losses on off-balance sheet exposure, beginning						$	263					$	189					$	167					39.2		%				57.5		%
Impact of CECL adoption						184						—						—						n/m						n/m
(Reversal of) provision for credit losses						(80)						74						5						n/m						n/m
Allowance for credit losses on off-balance sheet exposure, ending (2)						$	367					$	263					$	172					39.5		%				113.4		%

(1)    Excludes reversal of uncollectible accrued interest receivable of $205 thousand for the three months ended March 31, 2022.

(2)    Allowance for credit losses as of March 31, 2023 was calculated under the CECL methodology while allowance for loan losses for prior periods were calculated under the incurred loss methodology.

(1)Includes the guaranteed portion of SBA loans totaling $1.6 million, $1.0 million and $899 thousand as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

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

(3)Consists of substandard, doubtful and loss categories.

(4)See the Reconciliation of GAAP to NON-GAAP Financial Measures.

(5)Annualized.

(6)Includes loans held for sale

Overall, the Company continued to maintain solid asset quality with low levels of nonperforming loans and net charge-offs. Nonperforming assets and criticized loans remained below our historical norms, a reflection of our conservative credit culture and expertise in the industries we serve. Our allowance remained strong with an adjusted allowance to gross loans ratio of 1.27%.

◦Criticized loans increased by $3.5 million or 91.8% from a year ago, and the criticized loans to gross loans ratio increased by 17 basis points. Criticized loans consist of loans categorized as Special Mention, Substandard, Doubtful and Loss categories defined by regulatory authorities.

◦Nonperforming assets increased $1.6 million to $4.4 million, or 0.20% of total assets from a year ago. As of March 31, 2023, $1.6 million of nonaccrual assets consisted of guaranteed portion of SBA loans that are in liquidation. The Company did not have OREO as of March 31, 2023 or 2022.

◦Net charge-offs were $93 thousand or 0.02% of average loans in the first quarter of 2023, compared to net charge-offs of $105 thousand, or 0.03%, of average loans in the fourth quarter of 2022 and net recoveries of $3 thousand, or 0.00%, of average loans in the first quarter of 2022.

Total deposits were $1.90 billion as of March 31, 2023, up $19.0 million from December 31, 2022, primarily due to growth in time deposits, mostly offset by decreases in noninterest bearing deposits and money market deposits and others. Time deposits grew $166.3 million to $824.1 million from $657.9 million, due to management’s actions to support loan growth during the third quarter of 2022 including upward adjustments of interest rates on customer deposits and increases in wholesale deposits. Noninterest-bearing deposits decreased $57.7 million to $643.9 million from $701.6 million, primarily due to decreases in transaction volumes in escrow and 1031 exchanges accounts and other decreases affected by market rate increases by the Federal Reserve.

Money market deposits and others decreased $89.5 million to $436.8 million from $526.3 million, primarily due to market rate increases as a result of the Federal Reserve’s rate increases.

Total deposits were $1.90 billion as of March 31, 2023, up $232.8 million from March 31, 2022, primarily driven by growth in time deposits, partially offset by a decrease in noninterest bearing deposits. Time deposits grew $457.5 million to $824.1 million from $366.6 million, primarily due to customers’ preference for high-rate deposit products driven by market rate increases as a result of the Federal Reserve’s rate increases. Noninterest-bearing deposits decreased $204.6 million to $643.9 million from $848.5 million, primarily due to decreases in transaction volumes in escrow and 1031 exchanges accounts and other decreases affected by market rate increases by the Federal Reserve.

The following table sets forth the maturity of time deposits as of March 31, 2023:

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:

The Company’s Board of Directors declared a quarterly cash dividend of $0.12 per share of its common stock. The cash dividend is payable on or about May 25, 2023 to all shareholders of record as of the close of business on May 11, 2023.

The Company repurchased 76,990 shares of its common stock at an average price of $9.25 during the first quarter of 2023. Since the announcement of the initial stock repurchase program in January 2019, the Company repurchased a total of 1.65 million shares of its common stock at an average repurchase price of $8.61 per share through March 31, 2023.

(1)The capital requirements are only applicable to the Bank, and the Company's ratios are included for comparison purpose.

(2)An additional 2.5% capital conservation buffer above the minimum capital ratios are required in order to avoid limitations on distributions, including dividend payments and certain discretionary bonus to executive officers.

In addition to GAAP measures, management uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance.

Pre-provision net revenue removes provision for credit losses and income tax expense. Management believes that this non-GAAP measure, when taken together with the corresponding GAAP financial measures (as applicable), provides meaningful supplemental information regarding our performance. This non-GAAP financial measure also facilitates a comparison of our performance to prior periods.

During the second quarter of 2021, the Company purchased 638 loans from Hana for a total purchase price of $97.6 million. The Company evaluated $100.0 million of the loans purchased in accordance with the provisions of ASC 310-20, Nonrefundable Fees and Other Costs, which were recorded with a $8.9 million discount. As a result, the fair value discount on these loans is being accreted into interest income over the expected life of the loans using the effective yield method. Adjusted loan yield and net interest margin for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022 excluded the impacts of contractual interest and discount accretion of the purchased Hana loans as management does not consider purchasing loan portfolios to be normal or recurring transactions. Management believes that presenting the adjusted average loan yield and net interest margin provide comparability to prior periods and these non-GAAP financial measures provide supplemental information regarding the Company’s performance.

(1)Annualized.

Adjusted allowance to gross loans ratio removes the impacts of purchased Hana loans, PPP loans and allowance on accrued interest receivable. Management believes that this ratio provides greater consistency and comparability between the Company’s results and those of its peer banks.

(1)Excludes purchased PPP loans of $8 thousand and $1.0 million as of December 31, 2022 and March 31, 2022, respectively.

(2)Excludes purchased accrued interest receivable on PPP loans of $11 thousand as of March 31, 2022.

OP Bancorp, the holding company for Open Bank (the “Bank”), is a California corporation whose common stock is quoted on the Nasdaq Global Market under the ticker symbol, “OPBK.” The Bank is engaged in the general commercial banking business in Los Angeles, Orange, and Santa Clara Counties, California, and Carrollton, Texas and is focused on serving the banking needs of small- and medium-sized businesses, professionals, and residents with a particular emphasis on Korean and other ethnic minority communities. The Bank currently operates ten full-service branch offices in Downtown Los Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Cerritos, Gardena, Buena Park, and Santa Clara, California and Carrollton, Texas. The Bank also has four loan production offices in Pleasanton, California, Atlanta, Georgia, Aurora, Colorado, and Lynnwood, Washington. The Bank commenced its operations on June 10, 2005 as First Standard Bank and changed its name to Open Bank in October 2010. Its headquarters is located at 1000 Wilshire Blvd., Suite 500, Los Angeles, California 90017. Phone 213.892.9999; www.myopenbank.com.

Certain matters set forth herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to: business and economic conditions, particularly those affecting the financial services industry and our primary market areas; the continuing effects of inflation and monetary policies, and the impacts of those circumstances upon our current and prospective borrowers and depositors; our ability to mitigate and manage deposit liabilities in a manner that balances the need to meet current and expected withdrawals while investing a sufficient portion of our assets to promote strong earning capacity; our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses; factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers, the success of construction projects that we finance, including any loans acquired in acquisition transactions; our ability to effectively execute our strategic plan and manage our growth; interest rate fluctuations, which could have an adverse effect on our profitability; external economic and/or market factors, such as changes in monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve, inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits, which may have an adverse impact on our financial condition; continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to less restrictive or less costly regulations than we are; challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services; restraints on the ability of Open Bank to pay dividends to us, which could limit our liquidity; increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all; a failure in the internal controls we have implemented to address the risks inherent to the business of banking; inaccuracies in our assumptions about future events, which could result in material differences between our financial projections and actual financial performance, particularly with respect to the effects of predictions of future economic conditions as those circumstances affect our estimates for the adequacy of our allowance for credit losses and the related provision expense; changes in our management personnel or our inability to retain motivate and hire qualified management personnel; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems; disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions; an inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies; risks related to potential acquisitions; political developments, uncertainties or instability, catastrophic events, acts of war or terrorism, or natural disasters, such as earthquakes, fires, drought, pandemic diseases (such as the coronavirus) or extreme weather events, any of which may affect services we use or affect our customers, employees or third parties with which we conduct business; incremental costs and obligations associated with operating as a public company; the impact of any claims or legal actions to which we may be subject, including any effect on our reputation; compliance with governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities and tax matters, and our ability to maintain licenses required in connection with commercial mortgage origination, sale and servicing operations; changes in federal tax law or policy; and our ability the manage the foregoing and other factors set forth in the Company’s public reports.

We describe these and other risks that could affect our results in Item 1A. “Risk Factors,” of our latest Annual Report on Form 10-K for the year ended December 31, 2022 and in our other subsequent filings with the Securities and Exchange Commission.

213.892.1192

Christine.oh@myopenbank.com

CONSOLIDATED BALANCE SHEETS (unaudited)

CONSOLIDATED STATEMENTS OF INCOME (unaudited)