•Financial Results:

◦Net income of $5.4 million, a 4.0% increase compared to $5.2 million

◦Diluted earnings per share of $0.36, a 5.9% increase compared to $0.34

◦Net interest income of $16.2 million, compared to $16.0 million

◦Net interest margin of 2.96%, compared to 3.06%

◦Provision for credit losses of $617 thousand, compared to $145 thousand

◦Total assets of $2.29 billion, a 2.5% increase compared to $2.23 billion

◦Gross loans of $1.87 billion, a 3.6% increase compared to $1.80 billion

◦Total deposits of $1.94 billion, a 2.4% increase compared to $1.90 billion

•Credit Quality:

◦Allowance for credit losses to gross loans of 1.22%, compared to 1.23%

◦Net charge-offs(1) to average gross loans(2) of (0.00)%, compared to 0.01%

◦Loans past due 30-89 days to gross loans of 0.36%, compared to 0.22%

◦Nonperforming loans to gross loans of 0.23%, compared to 0.24%

◦Criticized loans(3) to gross loans of 0.88%, compared to 0.64%

•Capital Levels:

◦Remained well-capitalized with a Common Equity Tier 1 (“CET1”) ratio of 12.01%

◦Book value per common share increased to $13.22, compared to $13.00

◦Repurchased 224,321 shares of common stock at an average price of $9.64 per share

◦Paid quarterly cash dividend of $0.12 per share for the periods

___________________________________________________________

(1)    Annualized.

(2)    Includes loans held for sale.

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

LOS ANGELES, July 25, 2024 — OP Bancorp (the “Company”) (NASDAQ: OPBK), the holding company of Open Bank (the “Bank”), today reported its financial results for the second quarter of 2024. Net income for the second quarter of 2024 was $5.4 million, or $0.36 per diluted common share, compared with $5.2 million, or $0.34 per diluted common share, for the first quarter of 2024, and $6.1 million, or $0.39 per diluted common share, for the second quarter of 2023.

Min Kim, President and Chief Executive Officer:

“Even with the extended pressure on the business and banking environment, we continued to grow our loans and deposits while improving net income and earnings per share over the last quarter. Our net interest margin was controlled with a slight decline while our credit quality remained strong. We remain optimistic about our future growth and performance and will continue to focus on executing our strategic goals while maintaining an optimal risk profile,” said Min Kim, President and Chief Executive.

(1)Includes loans held for sale.

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

(3)Annualized.

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

(1)Annualized.

(1)Annualized.

(2)Includes discount accretion from SBA loan payoffs of $564 thousand, $345 thousand and $459 thousand for the three months ended June 30, 2024, March 31, 2024 and June 30, 2023, respectively.

(3)Includes prepayment penalty income of $26 thousand, $115 thousand and $110 thousand for the three months ended June 30, 2024, March 31, 2024 and June 30, 2023, respectively, from Commercial Real Estate (“CRE”) and Commercial and Industrial (“C&I”) loans.

Net interest income increased $215 thousand, or 1.3%, primarily due to higher interest income on deposits in other banks and loans, coupled with lower interest expense on borrowings, but partially offset by higher interest expense on interest-bearing deposits. Net interest margin was 2.96%, a decrease of 10 basis points from 3.06%.

◦An $858 thousand increase in interest income on interest-bearing deposits in other banks was primarily due to a $62.9 million, or 86.2%, increase in average balance.

◦A $463 thousand increase in interest income on loans was primarily due to a $34.4 million, or 1.9%, increase in average balance.

◦A $439 thousand decrease in interest expense on borrowings was primarily due to a $31.4 million, or 28.9%, decrease in average balance.

◦A $1.7 million increase in interest expense on interest-bearing deposits was primarily due to a $119.3 million, or 9.0%, increase in average balance.

Net interest income decreased $1.1 million, or 6.1%, primarily due to higher interest expense on interest-bearing deposits, partially offset by higher interest income on loans and deposits in other banks as our deposit costs repriced quicker than our interest-earning asset yields following the Federal Reserve’s rate increases. Net interest margin was 2.96%, a decrease of 44 basis points from 3.40%.

◦A $5.4 million increase in interest expense on interest-bearing deposits was primarily due to a $239.8 million, or 20.0%, increase in average balance and a 86 basis point increase in average cost.

◦A $3.3 million increase in interest income on loans was primarily due to a $117.5 million, or 6.8%, increase in average balance and a 33 basis point increase in average yield.

◦An $844 thousand increase in interest income on interest-bearing deposits in other banks was primarily due to a $56.8 million, or 71.7%, increase in average balance and a 36 basis point increase in average yield.

The Company recorded a $617 thousand provision for credit losses, an increase of $472 thousand, compared with a $145 thousand provision for credit losses. Provision for credit losses on loans of $627 thousand was partially offset by a $10 thousand reversal of credit losses on off-balance sheet exposure.

Provision for credit losses on loans of $627 thousand was primarily due to a $634 thousand increase in the qualitative reserve. The quantitative reserve was unchanged from the prior quarter. The increase in the qualitative reserve was primarily due to weakening economic and business conditions, increasing criticized loans, and declining collateral values for collateral dependent CRE loans.

The Company recorded a $617 thousand provision for credit losses, an increase of $617 thousand, compared with no provision for credit losses.

Noninterest income increased $598 thousand, or 16.7%, primarily due to higher gain on sale of loans and higher service charges on deposits, offset by lower loan servicing fee.

◦Gain on sale of loans was $2.3 million, an increase of $622 thousand from $1.7 million, primarily due to a higher Small Business Administration (“SBA”) loan sold amount and a higher average premium on sales. The Bank sold $32.1 million in SBA loans at an average premium rate of 8.58%, compared to the sale of $24.8 million at an average premium rate of 8.33%.

◦Service charges on deposits was $793 thousand, an increase of $181 thousand from $612 thousand, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts.

◦Loan servicing fees, net of amortization, was $575 thousand, a decrease of $197 thousand from $772 thousand, primarily due to an increase in servicing fee amortization driven by higher loan payoffs in loan servicing portfolio.

Noninterest income increased $579 thousand, or 16.1%, primarily due to higher gain on sale of loans, higher service charges on deposits and higher other income.

◦Gain on sale of loans was $2.3 million, an increase of $227 thousand from $2.1 million, primarily due to a higher average premium rate. The Bank sold $32.1 million in SBA loans at an average premium rate of 8.58%, compared to the sale of $36.8 million at an average premium rate of 6.64%.

◦Service charges on deposits was $793 thousand, an increase of $220 thousand from $573 thousand, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts.

◦Other income was $491 thousand, an increase of $152 thousand from $339 thousand, primarily due to an increase of $98 thousand in credit related fee income.

Noninterest expense increased $32 thousand, or 0.3%, primarily due to higher other expenses and data processing and communication, partially offset by lower salaries and employee benefits.

◦Other expenses increased $220 thousand, primarily due to an increase of $147 thousand in business development expense related to the addition of deposit analysis accounts and an increase of $84 thousand in Other Real Estate Owned (“OREO”) expense.

◦Data processing and communication increased $43 thousand, primarily due to an accrual adjustment made in the prior quarter for credits received on data processing fees.

◦Salaries and employee benefits decreased $273 thousand, primarily due to decreases in employer payroll taxes, employee incentive accruals, and employee vacation accruals.

Noninterest expense decreased $111 thousand, or 0.9%, primarily due to lower salaries and employee benefits and foundation donation and other contributions, partially offset by higher other expenses.

◦Salaries and employee benefits decreased $113 thousand, primarily due to decreases in employee incentive accruals and employee vacation accruals.

◦Foundation donations and other contributions decreased $55 thousand, primarily due to a lower donation accrual for Open Stewardship as a result of lower net income.

◦Other expenses increased $68 thousand, primarily due to an increase of $84 thousand in OREO expense.

Income tax expense was $2.1 million and the effective tax rate was 28.2%, compared to income tax expense of $2.0 million and the effective rate of 28.0%. The increase in income tax expense was in line with the increase in income before income taxes.

Income tax expense was $2.1 million and the effective tax rate was 28.2%, compared to income tax expense of $2.5 million and an effective rate of 28.8%. The decrease in the effective tax rate was primarily due to an increased tax benefits from an increase in low income housing tax credit investments.

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 $1.87 billion as of June 30, 2024, up $65.1 million, from March 31, 2024, primarily due to new loan originations, partially offset by loan sales, payoffs and paydowns. New loan originations, loan sales, and loan payoffs and paydowns were $101.1 million $32.1 million and $56.6 million, respectively, for the second quarter of 2024, compared with $121.6 million, $32.1 million and $53.1 million, respectively, for the first quarter of 2024.

Gross loans were $1.87 billion as of June 30, 2024, up $153.9 million, from June 30, 2023, primarily due to new loan originations of $415.7 million, primarily offset by loan sales of $127.7 million and loan payoffs and paydowns of $211.6 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 following table presents allowance for credit losses and provision for credit losses as of and for the periods presented:

(1)Excludes the guaranteed portion of SBA loans that are in liquidation totaling $3.5 million, $3.1 million and $5.4 million as of June 30, 2024, March 31, 2024 and June 30, 2023, respectively.

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

(3)Annualized.

(4)Includes loans held for sale.

Overall, the Bank continued to maintain low levels of nonperforming loans and net charge-offs. Our allowance remained strong with an allowance to gross loans ratio of 1.22%.

◦Loans 30-89 days past due and still accruing were $6.7 million or 0.36% of gross loans as of June 30, 2024, compared with $3.9 million or 0.22% as of March 31, 2024. The increase was due to two home mortgage loans totaling $2.2 million, one of which was paid current after the quarter, and one SBA relationship totaling $0.9 million.

◦Nonperforming loans were $4.4 million or 0.23% of gross loans as of June 30, 2024, compared with $4.3 million or 0.24% as of March 31, 2024.

◦Nonperforming assets were $5.6 million or 0.25% of total assets as of June 30, 2024, compared with $5.6 million or 0.25% as of March 31, 2024. OREO was $1.2 million as of June 30, 2024, which is secured by a mix-use property in Los Angeles Koreatown with 90% guaranteed by SBA.

◦Criticized loans were $16.4 million or 0.88% of gross loans as of June 30, 2024, compared with $11.6 million or 0.64% as of March 31, 2024. The increase was due to three Special Mention downgrades totaling $2.1 million and five Substandard downgrades totaling $3.2 million.

◦Net recoveries were $4 thousand or 0.00% of average loans in the second quarter of 2024, compared to net charge-offs of $57 thousand, or 0.01% of average loans in the first quarter of 2024 and of $12 thousand, or 0.00% of average loans in the second quarter of 2023.

Total deposits were $1.94 billion as of June 30, 2024, up $45.4 million from March 31, 2024, primarily due to increases of $61.9 million in time deposits and $4.4 million in money market deposits, offset by a $20.9 million decrease in noninterest-bearing deposit. Noninterest-bearing deposits, as a percentage of total deposits, decreased to 26.7% from 28.5%. The composition shift to time deposits driven by customers’ preference for high-rate deposit products continued but slowed to a lesser extent.

Total deposits were $1.94 billion as of June 30, 2024, up $81.2 million from June 30, 2023, primarily driven by a $209.5 million increase in time deposits, offset by decreases of $116.3 million in noninterest-bearing deposits and $12.0 million in money market deposits. Noninterest-bearing deposits, as a percentage of total deposits, decreased to 26.7% from 34.1%. The composition shift to time deposits was 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.

The following table sets forth the maturity of time deposits as of June 30, 2024:

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:

On July 25, 2024, 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 August 22, 2024 to all shareholders of record as of the close of business on August 8, 2024. The payment of the dividend is based primarily on dividends from the Bank to the Company, and future dividends will depend on the Board’s assessment of the availability of capital levels to support the ongoing operating capital needs of both the Company and the Bank.

The Company also repurchased 224,321 shares of its common stock at an average price of $9.64 per share during the second quarter of 2024 under the stock repurchase program announced in August 2023. Since the announcement of the stock repurchase program in August 2023, the Company repurchased a total of 424,018 shares of its common stock at an average repurchase price of $9.36 per share through June 30, 2024.

(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 bonuses to executive officers.

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 in California, the Dallas metropolitan area in Texas, and Clark County in Nevada 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 eleven full-service branch offices in Downtown Los Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Cerritos, Gardena, Buena Park, and Santa Clara, California, Carrollton, Texas and Las Vegas, Nevada. 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 Section 21E of the Securities Exchange Act of 1934, as amended, 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: the effects of substantial fluctuations in, and continuing elevated levels of, interest rates on our borrowers’ ability to perform in accordance with the terms of their loans and on our deposit customers’ expectation for higher rates on deposit products; cybersecurity risks, including the potential for the occurrence of successful cyberattacks and our ability to prevent and to mitigate the harms resulting from any such attacks; infrastructure risks and similar circumstances that affect our and our customers’ ability to communicate and to engage in routine online banking activities; business and economic conditions, particularly those affecting the financial services industry and our primary market areas; risks of international conflict, terrorism, civil unrest and domestic instability; the continuing effects of inflation and monetary policies, particularly those relating to the decisions and indicators of intent expressed by the Federal Reserve Open Markets Committee, as those circumstances impact our operations and our current and prospective borrowers and depositors; our ability to balance deposit liabilities and liquidity sources (including our ability to reprice those instruments and balancing our borrowings and investments to keep pace with changing market conditions) so as to meet current and expected withdrawals while promoting strong earning capacity; our ability to manage our credit risk successfully and to assess, adjust and monitor 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; the impacts of credit quality on our earnings and the related effects of increases to the reserve on our net income; our ability effectively to 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 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 banks and from 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; practical and regulatory constraints on the ability of Open Bank to pay dividends to us; 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; including internal controls that affect the reliability of our publicly reported financial statements; 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, 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, 2023 and in our subsequent filings with the Securities and Exchange Commission.

213.892.1192

Christine.oh@myopenbank.com

CONSOLIDATED BALANCE SHEETS (unaudited)

(1)Annualized.

(1)Annualized.