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What changed in OP Bancorp's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of OP Bancorp's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+354 added−784 removedSource: 10-K (2026-03-13) vs 10-K (2025-03-28)

Top changes in OP Bancorp's 2025 10-K

354 paragraphs added · 784 removed · 231 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

66 edited+27 added−166 removed48 unchanged
Biggest changeHaving grown our branch and loan production office network, we now operate through eleven full service branches located in the greater metropolitan area of Los Angeles, Orange, and Santa Clara Counties in California, the Dallas metropolitan area in Texas, Clark County in Nevada, and five loan production offices in the Korean-American communities in Pleasanton, California, Atlanta, Georgia, Aurora, Colorado, Lynnwood, Washington, and Fairfax, Virginia.
Biggest changeAdditionally, we maintain five loan production offices located in Pleasanton, California; Atlanta, Georgia; Aurora, Colorado; Lynnwood, Washington; and Fairfax, Virginia. Substantially all our business activities are conducted through the Bank.
We generally lend in markets where we have a physical presence through our branch and loan production offices. We attract retail deposits through our branch network which offers a wide range of deposit products for business and consumer banking customers. We offer a multitude of other products and services to our customers to complement our lending and deposit business.
We generally lend in markets where we have a physical presence through our branch and loan production offices. We attract retail deposits through our branch network which offers a wide range of deposit products for business and consumer banking customers. We offer a multitude of other banking products and services to our customers to complement our lending and deposit business.
We have a strong, values-based corporate culture rooted in personal community-based relationship banking that permeates throughout our entire organization. We strive to provide quality customer service that exceeds our customers’ expectations. We also heavily invest in our Korean-American communities through our annual contributions to the Open Stewardship Foundation.
We have a strong, values-based corporate culture rooted in personal community-based relationship banking that permeates throughout our entire organization. We strive to provide quality customer service that exceeds our customers’ expectations. We also heavily invest in the Korean-American communities through our annual contributions to the Open Stewardship Foundation.
We believe that our customers value a banking partner that is knowledgeable about their business needs with a willingness and commitment to reinvest in our communities. We assure our customers that banking with us indirectly provides them an opportunity to contribute to their community.
We believe that our customers value a banking partner that is knowledgeable about their business needs with a willingness and commitment to reinvest in their communities. We assure our customers that banking with us indirectly provides them an opportunity to contribute to their community.
The regulatory agencies have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies.
Regulatory agencies have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies.
Regulatory authorities routinely examine financial institutions for compliance with these obligations, and failure of a financial institution to 18 maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the institution, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required.
Regulatory authorities routinely examine financial institutions for compliance with these obligations, and failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the institution, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required.
Non-compliance with consumer protection requirements may also result in our failure to obtain any required bank regulatory approval for merger or acquisition transactions we may wish to pursue or prohibition from engaging in such transactions even if approval is not required. Cybersecurity . The federal bank regulatory agencies have increased their focus on cybersecurity through guidance, examination and regulations.
Non-compliance with consumer protection requirements may also result in our failure to obtain any required bank regulatory approval for merger or acquisition transactions we may wish to pursue or prohibition from engaging in such transactions even if approval is not required. Cybersecurity . Federal bank regulatory agencies have increased their focus on cybersecurity through guidance, examination and regulations.
A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to 19 a cyber-attack. If we fail to observe the regulatory guidance, we could be subject to various regulatory sanctions, including financial penalties.
A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to a cyber-attack. If we fail to observe the regulatory guidance, we could be subject to various regulatory sanctions, including financial penalties.
Financial institutions are required to design multiple layers of security controls to establish lines of defense and ensure that their risk management processes address the risk posed by compromised customer credentials and include security measures to authenticate customers accessing internet-based services of the financial institution.
Financial institutions are required to design and maintain multiple layers of security controls to establish lines of defense and ensure that their risk management processes address the risk posed by compromised customer credentials and include security measures to authenticate customers accessing internet-based services of the financial institution.
In such situation, the subsidiary bank will be required by the bank’s federal regulator to take “prompt corrective action.” Any capital loans by a bank holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of the bank.
In such situation, the subsidiary bank will be required by the bank’s federal regulator to take “prompt corrective action.” Any capital loans by a bank holding company to its subsidiary bank are statutorily subordinate in right of payment to deposits and to certain other indebtedness of the bank.
We generally do not have banking relationships that approach these limitations. Tie in Arrangements . Federal law prohibits a bank holding company and any subsidiary banks from engaging in certain tie in arrangements in connection with the extension of credit.
We generally do not have banking relationships that approach these limitations. 8 Tie in Arrangements . Federal law prohibits a bank holding company and any subsidiary banks from engaging in certain tie in arrangements in connection with the extension of credit.
It does not describe all of the applicable statutes, regulations and regulatory 15 policies, nor does it restate all of the requirements of those that are described. The descriptions are qualified in their entirety by reference to the particular statutory or regulatory provision.
It does not describe all of the applicable statutes, regulations and regulatory policies, nor does it restate all of the requirements of those that are described. The descriptions are qualified in their entirety by reference to the particular statutory or regulatory provision.
Source of Strength Doctrine . Federal Reserve policy historically required bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. Dodd-Frank codified this policy as a statutory requirement.
Federal Reserve policy historically required bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. Dodd-Frank codified this policy as a statutory requirement.
OP Bancorp is required to file with the Federal Reserve periodic reports of 16 its operations and such additional information as the Federal Reserve may require.
OP Bancorp is required to file with the Federal Reserve periodic reports of its operations and such additional information as the Federal Reserve may require.
Under the California Financial Code, the Bank is permitted to pay a dividend in the following circumstances: (i) without the consent of either the DFPI or the Bank’s shareholders, in an amount not exceeding the lesser of (a) the retained earnings of the Bank; or (b) the net income of the Bank for its last three fiscal years, less the amount of any distributions made during the prior period; (ii) with the prior approval of the DFPI, in an amount not exceeding the greatest of: (a) the retained earnings of the Bank; (b) the net income of the Bank for its last fiscal year; or (c) the net income for the Bank for its current fiscal year; and (iii) with the prior approval of the DFPI and the Bank’s shareholders (i.e., HCC) in connection with a reduction of its contributed capital.
Under the California Financial Code, the Bank is permitted to pay a dividend in the following circumstances: (i) without the consent of either the DFPI or the Bank’s shareholders, in an amount not exceeding the lesser of (a) the retained earnings of the Bank; or (b) the net income of the Bank for its last three fiscal years, less the amount of any distributions made during the prior period; (ii) with the prior approval of the DFPI, in an amount not exceeding the greatest of: (a) the retained earnings of the Bank; (b) the net income of the Bank for its last fiscal year; or (c) the net income for the Bank for its current fiscal year; and (iii) with the prior approval of the DFPI and the Bank’s shareholders (i.e., OP Bancorp) in connection with a reduction of its contributed capital.
The Company General . As a bank holding company, we are subject to regulation, supervision and periodic examination by the Federal Reserve under the Bank Holding Company Act of 1956, as amended (the “BHCA”), and by the DFPI in accordance with the California Financial Code.
OP Bancorp General . As a bank holding company, we are subject to regulation, supervision and periodic examination by the Federal Reserve under the Bank Holding Company Act of 1956, as amended (the “BHCA”), and by the DFPI in accordance with the California Financial Code.
If Open Bank S.A. decides to become a licensed bank in California or in any of the other Permitted Markets, 13 depending on its business and marketing plan, there could be confusion created by the use of the name “Open Bank” which could have a material adverse impact on our ability to build its brand in the Permitted Markets.
If Open Bank S.A. decides to become a licensed bank in California or in any of the other Permitted Markets, depending on its business and marketing plan, there could be confusion created by the use of the name “Open Bank,” which could have a material adverse impact on our ability to build its brand in the Permitted Markets.
Regulatory Capital Requirements The Bank is subject to a comprehensive capital framework (the “Capital Rules”) adopted by Federal banking regulators (including the Federal Reserve and the FDIC), and similar rules will apply to the Company once its total assets exceed $3 billion or if it engages in certain types of activities.
Regulatory Capital Requirements The Bank is subject to a comprehensive capital framework (the “Capital Rules”) adopted by Federal banking regulators (including the Federal Reserve and the FDIC), and similar rules will apply to OP Bancorp once its total assets exceed $3 billion or if it engages in certain types of activities.
The BHCA generally prohibits a bank holding company from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company that is not a bank or whose business is not “closely related to banking.” The Federal Reserve has the power to order any bank holding company or its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when the Federal Reserve has reasonable grounds to believe that continuing such activity, ownership or control constitutes a serious risk to a subsidiary's financial soundness, safety or stability.
The BHCA generally prohibits a bank holding company from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company that is not a bank or whose business is not “closely related to banking.” The Federal Reserve has the power to order any bank holding company or its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when the Federal Reserve has reasonable grounds to believe that continuing such activity, ownership or control constitutes a serious risk to a subsidiary's financial soundness, safety or stability. 7 Source of Strength Doctrine .
There are no approval rights of either party for any of the actions or no actions that either party may take under the Coexistence Agreement. To our knowledge Open Bank, S.A. has not initiated any business or marketing activities in the United States other than on the worldwide interest through its website.
There are no approval rights of either party for any of the actions or no actions that either party may take under the Coexistence Agreement. To our knowledge Open Bank S.A. has not initiated any business or marketing activities in the United States other than through its website.
The Capital Rules permit holding companies with less than $15 billion in total assets as of December 31, 2009 (which includes the Company) to continue to include trust preferred securities issued prior to May 19, 2010 in Tier 1 capital, generally up to 25% of other Tier 1 capital.
The Capital Rules permit holding companies with less than $15 billion in total assets as of December 31, 2009 (which includes OP Bancorp) to continue to include trust preferred securities issued prior to May 19, 2010 in Tier 1 capital, generally up to 25% of other Tier 1 capital.
We exercised the opt-out election regarding the treatment of AOCI in part to avoid significant variations in our capital levels resulting in changes in the fair market value of our available-for-sale investment securities portfolio as interest rates fluctuate. Additional Tier 1 capital generally includes non-cumulative preferred stock and related surplus subject to certain adjustments and limitations.
We exercised the opt-out election regarding the treatment of AOCI in part to avoid significant variations in our capital levels resulting in changes in the fair market value of our available-for-sale ("AFS") debt securities portfolio as interest rates fluctuate. Additional Tier 1 capital generally includes non-cumulative preferred stock and related surplus subject to certain 6 adjustments and limitations.
For example, the Bank may not extend credit, lease or sell property, furnish any services, fix or vary the consideration for any of the foregoing on the condition that: (i) the client must obtain or provide some additional credit, property or services from or to the Bank other than a loan, discount, deposit or trust services; (ii) the client must obtain or provide some additional credit, property or service from or to HCC or the Bank; or (iii) the client must not obtain some other credit, property or services from competitors, except reasonable requirements to assure soundness of credit extended.
For example, the Bank may not extend credit, lease or sell property, furnish any services, fix or vary the consideration for any of the foregoing on the condition that: (i) the client must obtain or provide some additional credit, property or services from or to the Bank other than a loan, discount, deposit or trust services; (ii) the client must obtain or provide some additional credit, property or service from or to OP Bancorp or Open Bank; or (iii) the client must not obtain some other credit, property or services from competitors, except reasonable requirements to assure soundness of credit extended.
The DFPI also has broad enforcement powers over us, including the power to impose orders, remove officers and directors, impose fines and appoint supervisors and conservators. The following is a summary of the material elements of the supervisory and regulatory framework applicable to the Company and its subsidiary, the Bank.
The DFPI also has broad enforcement powers over us, including the power to impose orders, remove officers and directors, impose fines and appoint supervisors and conservators. The following is a summary of the material elements of the supervisory and regulatory framework applicable to OP Bancorp and its subsidiary, the Bank.
Deposit Insurance . The Bank is a member of the Deposit Insurance Fund (“DIF”) administered by the FDIC, which insures client deposit accounts. The amount of federal deposit insurance coverage is $250,000 per depositor, for each account ownership category at each depository institution. The $250,000 amount is subject to periodic adjustments.
Deposit Insurance . The Bank is a member of the DIF administered by the FDIC, which insures client deposit accounts. The amount of federal deposit insurance coverage is $250,000 per depositor, for each account ownership category at each depository institution. The $250,000 amount is subject to periodic adjustments.
To be adequately capitalized, both the Company and the Bank are required to have a common equity Tier 1 capital ratio of at least 4.5% or more, a Tier 1 leverage ratio of 4.0% or more, a Tier 1 risk-based ratio of 6.0% or more and a total risk-based ratio of 8.0% or more.
To be adequately capitalized, both OP Bancorp and the Bank are required to have a common equity Tier 1 capital ratio of at least 4.5% or more, a Tier 1 leverage ratio of 4.0% or more, a Tier 1 risk-based ratio of 6.0% or more and a total risk-based ratio of 8.0% or more.
In addition to the preceding requirements, both the Company and the Bank are required to maintain a “conservation buffer” consisting of common equity Tier 1 capital, which is at least 2.5% above each of the required minimum levels.
In addition to the preceding requirements, both OP Bancorp and the Bank are required to maintain a “conservation buffer” consisting of common equity Tier 1 capital, which is at least 2.5% above each of the required minimum levels.
The Company must stand ready to use its available resources to provide adequate capital to the Bank during periods of financial stress or adversity. The Company must also maintain the financial flexibility and capital raising capacity to obtain additional resources for assisting the Bank.
OP Bancorp must stand ready to use its available resources to provide adequate capital to the Bank during periods of financial stress or adversity. OP Bancorp must also maintain the financial flexibility and capital raising capacity to obtain additional resources for assisting the Bank.
We believe our strategic approach creates opportunities for expanding our banking relationships with new and existing customers who value personalized attention, local decision making and view us as an alternative to the large-consolidated Korean-American financial institutions.
We believe our strategic approach creates opportunities for expanding our banking relationships with new and existing customers who value personalized attention, local decision making and view us as an alternative to larger, more consolidated Korean-American financial institutions.
In accordance with Federal Reserve laws and regulations, the Company is required to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances where the Company might not otherwise do so. Permitted Activities .
In accordance with Federal Reserve laws and regulations, OP Bancorp is required to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances where it might not otherwise do so. Permitted Activities .
The Company is required to act as a source of strength to the Bank and to commit capital and financial resources to support the Bank, including at times when the Company may not be in a financial position to do so.
OP Bancorp is required to act as a source of strength to the Bank and to commit capital and financial resources to support the Bank, including at times when it may not be in a financial position to do so.
Well capitalized institutions are not subject to limitations on brokered deposits, while an adequately capitalized institutions is able to accept, renew or roll over brokered deposits only with a waiver from 17 the FDIC and subject to certain restrictions on the yield paid on such deposits. Undercapitalized institutions are generally not permitted to accept, renew, or roll over brokered deposits.
Brokered Deposit Restrictions . Well capitalized institutions are not subject to limitations on brokered deposits, while an adequately capitalized institutions is able to accept, renew or roll over brokered deposits only with a waiver from the FDIC and subject to certain restrictions on the yield paid on such deposits.
We provide our customers with a high degree of service, convenience and the financial products we believe they need to achieve their financial objectives, by offering a customer-oriented product mix, competitive pricing, and convenient locations. Our lending activities are diversified and include commercial real estate, commercial and industrial, SBA, home mortgage, and consumer loans.
We provide our customers with a high degree of service, convenience and the financial products we believe they need to achieve their financial objectives, by offering a customer-oriented product mix, competitive pricing, and convenient locations. Our lending activities are diversified and include commercial real estate ("CRE"), commercial and industrial ("C&I"), Small Business Administration (“SBA”) , home mortgage, and consumer loans.
The Company’s failure to meet its source of strength obligations may constitute an unsafe and unsound practice, a violation of the Federal Reserve’s regulations, or both. The source of strength doctrine most directly affects bank holding companies whose subsidiary bank fails to maintain adequate capital levels.
OP Bancorp’s failure to meet its source of strength obligations may be construed as an unsafe and unsound practice, a violation of the Federal Reserve’s regulations, or both. The source of strength doctrine most directly affects bank holding companies whose subsidiary bank fails to maintain adequate capital levels.
An institution that does not meet the conservation buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases and discretionary bonuses to executive officers. The Capital Rules set forth the manner in which certain capital elements are determined, including but not limited to, requiring certain deductions related to mortgage servicing rights and deferred tax assets.
An institution that does not meet the conservation buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases and discretionary bonuses to executive officers. The Capital Rules determine how certain capital elements are assessed, including but not limited to, requiring certain deductions related to mortgage servicing rights and deferred tax assets.
We have not registered the trademark “Open Bank” under the trademark laws of the United States. Open Bank, S.A., a corporation organized and existing under the laws of Spain with its principal office located in Ciudad Grupo Santander, Av. Catabria Boadilla del Monte Madrid Spain (“Open Bank S.A.”) originally registered the trademark “Open Bank” (U.S.
Open Bank, S.A., a corporation organized and existing under the laws of Spain with its principal office located in Ciudad Grupo Santander, Av. Catabria Boadilla del Monte Madrid Spain (“Open Bank S.A.”) originally registered the trademark “Open Bank” (U.S. Registration No. 3397518) in 2008 with the United States Patent and Trademark Office.
These laws and regulations afford regulators, including the Federal Reserve, the FDIC and the DFPI with expansive authority and discretion and may affect the availability, timing and cost of initiatives that financial institutions might take as a means to effectuate strategic growth. Regulation and Supervision of The Bank General .
These laws and regulations afford regulators, including the Federal Reserve, the FDIC and the DFPI with expansive authority and discretion and may affect the availability, timing and cost of initiatives that financial institutions might take as a means to effectuate strategic growth. Open Bank General . The Bank is a California state-chartered commercial bank.
In February 2014, we entered into a Coexistence Agreement with Open Bank S.A. (the “Coexistence Agreement”), under which both parties agreed that we may use the name “Open Bank” in connection with banking and banking related services in the state of California and the cities of New York, Dallas, Atlanta, Chicago, Seattle and Fort Lee, New Jersey (the “Permitted Markets”).
(the “Coexistence Agreement”), under which both parties agreed that we may use the name “Open Bank” in connection with banking and banking related services in the state of California and the cities of New York, Dallas, Atlanta, Chicago, Seattle and Fort Lee, New Jersey (the “Permitted Markets”).
Federal and state banking laws impose a comprehensive system of supervision, regulation and enforcement on the operations of banks, their holding companies and affiliates. These laws are intended primarily for the protection of the FDIC’s Deposit Insurance Fund and bank customers rather than shareholders.
Federal and state banking laws impose a comprehensive system of supervision, regulation and enforcement on the operations of banks, their holding companies and certain of their affiliates. These laws are intended primarily to protect the Federal Deposit Insurance Corporation ("FDIC")’s Deposit Insurance Fund ("DIF") and bank customers rather than shareholders.
These statutes, regulations, regulatory policies and rules are significant to the financial condition and results of operations of the Company and its subsidiaries, including the Bank.
These statutes, regulations, regulatory policies and rules are significant to the financial condition and results of operations of OP Bancorp and its subsidiary, the Bank.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states, including California, have adopted laws and/or regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements.
Recently, several states, including California, have adopted laws and/or regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements.
Heritage Commerce Corp has paid a quarterly dividend to our shareholders every quarter since 2013. The primary source of funds for HCC is dividends from the Bank.
OP Bancorp has paid a quarterly dividend to our shareholders every quarter since 2019. The primary source of funds for OP Bancorp is dividends from the Bank.
Notification is required for incidents that have materially affected (or are reasonably likely to materially affect) the viability of a financial institution’s operations, its ability to deliver banking products and services, or the stability of the financial sector. We do not anticipate this rule to have a material impact on our operations at this time.
Notification is required for incidents that have materially affected (or are reasonably likely to materially affect) the viability of a financial institution’s operations, its ability to deliver banking products and services, or the stability of the financial sector.
Federal and state laws, and the related regulations of the bank regulatory agencies, affect, among other things, the scope of business, the kinds and amounts of investments banks and bank holding companies may make, their reserve requirements, capital levels relative to operations, the nature and amount of collateral for loans, the establishment of branches, the ability to merge, consolidate and acquire, dealings with insiders and affiliates and the payment of dividends.
Federal and state laws, and the related regulations of the bank regulatory agencies, affect, among other things, the scope of business, the kinds and amounts of investments banks and bank holding companies may make, their reserve requirements, capital levels relative to operations, the nature and amount of collateral for loans, the establishment of branches, the acceptance and management of risk, the ability to merge, consolidate and acquire, dealings with insiders and affiliates and the payment of dividends. 5 With respect to the OP Bancorp, we are regulated and examined by the California Department of Financial Protection and Innovation (“DFPI”) and the Federal Reserve Bank of San Francisco.
As of December 31, 2024, we had 231 full-time equivalent employees, compared with 222 full-time equivalent employees as of December 31, 2023. Our executive team is comprised of three females and five males. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements.
As of December 31, 2025, we had 249 full-time equivalent employees, compared with 231 full-time equivalent employees as of December 31, 2024. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements.
These regulations include extensive application filing and approval requirements as well as substantive regulation over the projected operations and financial performance of institutions proposing to merge or to be acquired.
The BHCA and the California Financial Code also substantially govern an institution’s ability to grow by acquisition. These regulations include extensive application filing and approval requirements as well as substantive regulation over the projected operations and financial performance of institutions proposing to merge or to be acquired.
If the regulatory agencies become concerned about our CRE loan concentrations, they could limit our ability to grow by restricting approvals for the establishment or acquisition of branches, or approvals of mergers or other acquisition opportunities.
If the regulatory agencies become concerned about our CRE loan concentrations, they could limit our ability to grow by restricting approvals for the establishment or acquisition of branches, or approvals of mergers or other acquisition opportunities. Consumer Protection . We are subject to a number of federal and state consumer protection laws that extensively govern our relationship with our clients.
The Capital Rules also require that a holding company seeking to pay dividends must maintain 2.5% in common equity Tier 1 capital attributable to the capital conservation buffer. See “Supervision and Regulation—Regulatory Capital Requirements,” above. Acquisitions, Activities and Change in Control . The BHCA and the California Financial Code also substantially govern an institution’s ability to grow by acquisition.
The Capital Rules also require that a holding company seeking to pay dividends must maintain 2.5% in common equity Tier 1 capital attributable to the capital conservation buffer. See Supervision and Regulation — Regulatory Capital Requirements in this Form 10-K. Acquisitions, Activities and Change in Control .
Human Capital Resources Our vision is to be known as a faith-based community bank focused on relationship banking. We have invested in developing a distinct corporate culture guided by a core set of values. These values underlie everything we do, including the way we engage with customers and vendors, collaborate with colleagues, do business and manage our resources.
Human Capital Resources: Our Focus on Relationships Our vision is to be known as a faith-based community bank focused on relationship banking. We have invested in developing a distinct corporate culture guided by a core set of values that arise directly from this vision.
We plan to continue to leverage our experienced management team, our personal relationship, community banking focus in the attractive Korean-American communities in which we serve, and our diversified lending approach to drive future organic growth.
We plan to continue to leverage our experienced management team, our personal relationship, community banking focus in the Korean-American communities in which we serve, and our diversified lending approach to drive future organic growth. While other institutions frequently enter new geographies through acquisitions, we have grown our geographic footprint through de novo branches, while remaining true to our business model.
We have committed to contribute annually 10% of our consolidated net income after taxes to the Foundation. Since inception, we have donated more than $17.5 million to the Foundation, aiding over 230 local non-profits.
We have committed to contribute annually 10% of our consolidated net income after taxes to the Foundation. Since inception, we have donated approximately $22.1 million to the Foundation, supporting over 250 local non-profit organizations through December 31, 2025.
This section offers a brief summary of the most significant aspects of applicable banking laws and regulations, but the implications and effects of these laws and regulations upon our business is far too extensive to be described completely, and readers should refer to the section of this Report entitled “Item 1A, Risk Factors,” for certain effects of these laws and regulations that may have a particular effect on our assets, results of operations and financial condition.
This section briefly summarizes of the most significant aspects of applicable banking laws and regulations, but the implications and effects of these laws and regulations upon our business is far too extensive to be described completely, and readers should refer to Item 1A.
Our values are fostered by stewardship, integrity, teamwork, and excellence. We believe our commitment to our communities, culture and quality of our people have been catalysts of our success and will continue to propel our future. We aim to recruit and retain a workforce that embraces our culture and values through our hiring process.
These values underlie everything we do, including the way we engage with customers and vendors, collaborate with colleagues, do business and manage our resources. Our values are fostered by stewardship, integrity, teamwork, and excellence. We believe our commitment to our communities, culture and quality of our people have been catalysts of our success and will continue to propel our future.
Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations. Concentrations in Commercial Real Estate . Concentration risk exists when a financial institution deploys too many assets to a specific industry or segment of the economy with the potential to produce losses large enough to threaten the financial institution’s health.
Concentration risk exists when a financial institution deploys too many assets to a specific industry or segment of the economy with the potential to produce losses large enough to threaten the financial institution’s health. Concentration stemming from CRE is one area of regulatory concern.
Many such states, including California, have also recently implemented or modified their data breach notification and data privacy requirements. We expect this trend of state-level activity in those areas to continue, and we continue to monitor relevant legislative and regulatory developments in California where many of our customers are located.
We expect this trend of state-level activity in those areas to continue, and we continue to monitor relevant legislative and regulatory developments in California where many of our customers are located. In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data.
The Bank is a California state-chartered commercial bank that is a member of the Federal Reserve System and whose deposits are insured by the FDIC. The Bank is thus subject to regulation, supervision, and regular examination by the DFPI and the Federal Reserve as the Bank’s primary federal regulator.
The Bank's deposit accounts are insured by the FDIC through the DIF to the maximum extent permitted under applicable federal law and FDIC regulations. The Bank is not a member of the Federal Reserve System. As a California-chartered nonmember bank, the Bank is subject to examination, supervision, and regulation by the DFPI, its chartering authority, and by the FDIC.
Investment Activities We manage our securities portfolio and cash to maintain adequate liquidity and to ensure the safety and preservation of invested principal, with a secondary focus on yield and returns.
Loans and Allowance for Credit Losses on Loans to the Consolidated Financial Statements in this Form 10-K. Investment Activities We manage our securities portfolio and cash with a goal of maintaining adequate liquidity and preserve principal, with a secondary focus on yield.
We employ a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats. Notwithstanding the strength of our defensive measures, the threat from cyber-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly.
Notwithstanding the strength of our defensive measures, the threat from cyber-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly.
We support employees’ personal ambitions and professional development by providing on-the-job training and educational assistance, including reimbursement for eligible expenses associated with attending trainings or educational programs. Additionally, in an effort to foster diversity and inclusion, we have a formal Affirmative Action Plan and other training/outreach programs to ensure equal employment opportunity.
We offer a 401(k) plan, which allows participants to contribute and invest a portion of each paycheck with a competitive employer match. We support employees’ personal ambitions and professional development by providing on-the-job training and educational assistance, including reimbursement for eligible expenses associated with attending trainings and educational programs.
We also believe that our overall capabilities, culture and opportunities for career growth will allow us to continue to attract talented and entrepreneurial commercial and retail bankers from larger financial institutions. We are dedicated to building and fostering an excellent relationship with our employees by promoting a healthy work environment, comprehensive total rewards package, open communications, and employee involvement.
We aim to recruit, train, incentivize and retain a workforce that embraces our culture and values beginning with our hiring process and flowing throughout our organization. We also believe that our overall capabilities, culture and opportunities for career growth will allow us to continue to attract talented and entrepreneurial commercial and retail bankers from larger financial institutions.
Registration No. 3397518) in 2008 with the United States Patent and Trademark Office. Open Bank S.A. provides financial services in Spain and solicits financial services in the United States through the internet. Open Bank S.A. is not licensed to engage in banking services in the United States, California and, to our knowledge, in any other state in the United States.
Open Bank S.A. provides financial services in Spain and solicits financial services in the United States through the internet. Open Bank S.A. is operating through Santander and is using the Santander license to engage in banking in the United States. In February 2014, we entered into a Coexistence Agreement with Open Bank S.A.
Our Company We began operations in 2005 as a California chartered banking association under the name First Standard Bank. In 2010, we rebranded the bank as “Open Bank” and in 2016, we incorporated OP Bancorp in California as a bank holding company with Open Bank as our sole subsidiary.
Item 1. Business. Overview Founded in 2005 as First Standard Bank, and rebranded as Open Bank in 2010, we formed OP Bancorp as our holding company in 2016. OP Bancorp, headquartered in Los Angeles, California, operates its commercial community banking activities through Open Bank ("Open Bank" or the "Bank"), our wholly owned banking subsidiary.
Litigation From time to time, we are party to claims and legal proceedings arising in the ordinary course of business. There are currently no claims or legal proceedings filed against us. Corporate Information Our principal executive office is located at 1000 Wilshire Boulevard, Suite 500, Los Angeles, California 90017, telephone number: (213) 892-9999. Our website address is www.myopenbank.com.
Available Information Our executive office is located at 1000 Wilshire Boulevard, Suite 500, Los Angeles, California 90017, and our main telephone number is (213) 892-9999.
The economic base of these areas is heavily dependent on small- and medium-sized businesses. Deposit Products We offer customers traditional retail deposit products through our branch network and the ability to access their accounts through online and mobile banking platforms.
Deposit Products We offer traditional retail deposit products through our branch network, along with online and mobile banking access. Our deposit offerings include demand, savings, money market, and time deposit accounts designed to serve our broad customer base.
We are headquartered in Los Angeles, California, and our common stock is quoted on The Nasdaq Global Market under the ticker symbol, "OPBK." Our commercial banking activities are operated through Open Bank, our wholly owned banking subsidiary. The Bank offers commercial banking services to small and medium-sized businesses, their owners and retail customers with a focus on the Korean-American community.
We provide commercial banking services to small and medium-sized businesses, their owners, and retail customers, with a focus on the Korean-American community. 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 the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data. We employ a layered, defensive approach that leverages people, processes and technology to manage and maintain cybersecurity controls.
We employ a layered, defensive approach that leverages people, processes and technology to manage and maintain cybersecurity controls. We employ a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats.
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Item 1. Business. Unless we state otherwise or the context otherwise requires, references in this Annual Report on Form 10-K (this "Report") to “we”, “our”, “us,” “ourselves,” “the company” and “the Company” refer to OP Bancorp, a California corporation, and its consolidated wholly-owned subsidiary, Open Bank, a California corporation, which is referred to as “Open Bank” or “the Bank”.
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Although our growth historically has been organic, we may in the future consider opportunistic strategic acquisitions to enhance our long-term growth strategy. Competition The banking and financial services industry in our primary markets in Southern California is highly competitive.
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As of December 31, 2024, we had consolidated total assets of $2.37 billion, total deposits of $2.03 billion, total loans outstanding, net of $24.8 million of allowance for credit losses, of $1.93 billion, and total shareholders’ equity of $205.0 million.
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Within the Korean‑American direct banking market, competition consists of a limited number of banks operating across varying asset sizes and ownership structures, most of which are California‑based. We also compete with other community and regional banks in our markets, including Chinese‑American and other 2 Asian‑American banks, where there is overlap in loan and deposit relationships.
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While other institutions frequently enter new geographies through acquisitions, we have grown our geographic footprint through de novo branches, while remaining true to our business model.
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We pursue growth in these markets primarily through organic expansion and, where appropriate, strategic acquisitions. In addition, we compete with a broad range of financial institutions and nonbank financial service providers, including large national and regional banks, savings institutions, credit unions, brokerage firms, mortgage companies, finance companies, insurance companies, and online‑focused financial services firms.
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Although our growth has historically been organic, we are amenable to considering opportunistic strategic acquisitions to enhance our long-term growth strategy. 3 Our Strategies Our vision is to be the leading Korean-American community-based commercial bank in the Korean-American communities we serve, to meet the financial needs of underserved small- and medium-sized businesses and individuals, and to give back to these communities.
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Many of these competitors have greater financial resources, longer operating histories, higher lending limits, broader product offerings, and greater access to capital markets, which may allow them to offer more competitive pricing, expanded services, or enhanced delivery channels. Competitive pressures are driven by industry consolidation, evolving regulatory requirements, technological innovation, and changing customer expectations.
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Our more specific strategic initiatives are discussed below. • Leverage our Franchise in the Korean-American Communities We Serve . The Korean-American banking landscape has seen increased consolidation among the larger Korean-American financial institutions that do business in our market areas.
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Customers increasingly demand multiple delivery channels and digital banking capabilities, intensifying competition from both traditional financial institutions and non‑depository providers. We compete primarily through relationship‑based banking, deep knowledge of the communities we serve, responsive decision‑making, disciplined risk management, and a scalable operating platform designed to support growth while maintaining asset quality and operational efficiency.
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We believe that customers at these larger institutions will look for an alternative banking experience tailored towards their specific financial objectives. We strive to be the most prominent alternative to the larger Korean-American financial institutions. We differentiate ourselves from our competitors by developing meaningful and personal relationships with our customers, and providing superior service.
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Core deposits are an important source of funding for our lending activities, and we strive to maintain a balanced and diversified deposit mix through competitive pricing, convenient branch locations, and relationship‑based service. We supplement core deposits with wholesale funding, including brokered deposits, as needed. We also employ conventional marketing initiatives and leverage our community involvement to attract and retain customers.
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These qualities make Open Bank an attractive choice for small- to medium-sized businesses, professionals and individuals. Our strong financial performance and growth derives, in part, from small- and medium-sized businesses’ and individuals’ desire for quality, personal relationship banking, local and responsive decision making and flexible and competitive pricing of deposit and loan products.
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In many cases, we require borrowers to maintain deposit relationships. For additional information on our deposits, see Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"). Financial Condition — Deposits and Other Sources of Funds and Note 7. Deposits to the Consolidated Financial Statements in this Form 10-K.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, while such valuations are subject to validation by an independent third party we believe these valuations reflect fair value, if they do not, then our business, financial condition and results of operations may be materially and adversely affected. 28 The non-guaranteed portion of SBA loans that we retain on our balance sheet as well as the guaranteed portion of SBA loans that we sell could expose us to various credit and default risks.
Biggest changeErrors in these assumptions could result in material revenue misstatements and adversely affect our business, results of operations, and financial condition, even though such valuations are subject to third‑party validation. We generally retain the non‑guaranteed portions of SBA loans, which carry higher credit risk than the guaranteed portions, and borrower financial difficulties could result in losses.
The unrealized losses resulting from holding these securities would be recognized in accumulated other comprehensive income and reduce total shareholders’ equity. Unrealized losses do not negatively impact our regulatory capital ratios. However, tangible common equity and the associated ratios would be reduced.
The unrealized losses resulting from holding these securities would be recognized in accumulated other comprehensive income and would reduce total shareholders’ equity. Unrealized losses do not negatively impact our regulatory capital ratios. However, tangible common equity and the associated ratios would be reduced.
In addition, as a provider of relationship-based commercial banking services, we must attract and retain qualified banking personnel to continue to grow our business, and competition for such personnel can be intense. Our ability to effectively compete for senior executives and other qualified personnel by offering competitive compensation and benefit arrangements may be restricted by applicable banking laws and regulations.
In addition, as a provider of relationship-based commercial banking services, we must attract and retain qualified banking personnel to continue to grow our business, and competition for such personnel can be intense. Our ability to compete effectively for senior executives and other qualified personnel by offering competitive compensation and benefit arrangements may be restricted by applicable banking laws and regulations.
This demographic concentration makes us more prone to 34 circumstances that particularly affect this segment of the population. As a result, our financial condition and results of operations are subject to changes in the economic conditions affecting these communities. Our success depends upon the business activity, population, income levels, deposits and real estate activity in these communities.
This demographic concentration makes us more prone to circumstances that particularly affect this segment of the population. As a result, our financial condition and results of operations are subject to changes in the economic conditions affecting these communities. Our success depends upon the business activity, population, income levels, deposits and real estate activity in these communities.
Provisions in our charter documents and California law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies. Our articles of incorporation and bylaws contain a number of provisions relating to corporate governance and rights of shareholders that might discourage future takeover attempts.
Provisions in our charter documents and California law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies. 23 Our articles of incorporation and bylaws contain a number of provisions relating to corporate governance and rights of shareholders that might discourage future takeover attempts.
In addition, if Open Bank, S.A. were to assert that we breached the Coexistence Agreement, Open Bank, S.A. could file for an injunction, seek to have us change our name or seek monetary damages, all of which could have a material adverse impact on our financial condition and results of operations.
In addition, if Open Bank S.A. were to assert that we breached the Coexistence Agreement, Open Bank S.A. could file for an injunction, seek to have us change our 18 name or seek monetary damages, all of which could have a material adverse impact on our financial condition and results of operations.
If some investors find our common stock less attractive as a result, then there may be a less active trading market for our common stock, our stock price may be more volatile and the price of our common stock may decline. Item 1B. Unresolved Staff Comments. None.
If some investors find our common stock less attractive as a result, then there may be a less active trading market for our common stock, our stock price may be more volatile and the price of our common stock may decline. Item 1B. Unresolved Staff Comments. None. 24
Federal regulators generally would prohibit any company that is not engaged in financial activities and activities that are permissible for a bank holding company or a financial holding company from acquiring control of the Company. “Control” is generally defined as ownership of 25% or more of the voting stock or other exercise of a controlling influence.
Federal regulators generally would prohibit any company that is not engaged in financial activities and activities that are permissible for a bank holding company or a financial holding company from acquiring control of OP Bancorp . “Control” is generally defined as ownership of 25% or more of the voting stock or other exercise of a controlling influence.
We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance, would be adversely affected.
Risks Related to Our Capital We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance, would be adversely affected.
If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline. 43 The trading market for our common stock could be affected by whether equity research analysts publish research or reports about us and our business.
If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline. 22 The trading market for our common stock could be affected by whether equity research analysts publish research or reports about us and our business.
Under a rebuttable presumption established by the Federal Reserve, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Exchange Act, such as the Company, could constitute acquisition of control of the bank holding company.
Under a rebuttable presumption established by the Federal Reserve, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Exchange Act, such as OP Bancorp , could constitute acquisition of control of the bank holding company.
The occurrence of any failures or interruptions of our communications, information and technology systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition or results of operations.
Accordingly, any failures or interruptions of our communications, information and technology systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition or results of operations.
These requirements, and any other new regulations or capital distribution constraints, could adversely affect the ability of the Bank to pay dividends to the Company and, in turn, affect our ability to pay dividends on our common stock. We have limited the circumstances in which our directors will be liable for monetary damages.
These requirements, and any other new regulations or capital distribution constraints, could adversely affect the ability of the Bank to pay dividends to OP Bancorp and, in turn, affect our ability to pay dividends on our common stock. We have limited the circumstances in which our directors will be liable for monetary damages.
A person would be deemed to have acquired control of the Company if such person, directly or indirectly, has the power (i) to vote 25% or more of the voting power of the Company or (ii) to direct or cause the direction of the management and policies of the Company.
A person would be deemed to have acquired control of OP Bancorp if such person, directly or indirectly, has the power (i) to vote 25% or more of the voting power of OP Bancorp or (ii) to direct or cause the direction of the management and policies of OP Bancorp .
Item 1A. Risk Factors. You should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Report and other documents we file with the SEC. The following risks and uncertainties described below are those that we have identified as material.
Item 1A. Risk Factors. You should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Form 10-K and other documents we file with the SEC. The following risks and uncertainties described below are those that we have identified as material.
An investment in our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity.
An investment in our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other DIF or by any other public or private entity.
Our modest size makes it more difficult for us to compete. Our modest size makes it more difficult for us to compete with other financial institutions which are generally larger and can more easily afford to invest in the marketing and technologies needed to attract and retain customers.
Risks Related to Competition Our modest size makes it more difficult for us to compete. 19 Our modest size makes it more difficult for us to compete with other financial institutions which are generally larger and can more easily afford to invest in the marketing and technologies needed to attract and retain customers.
Although our common stock is listed for trading on The Nasdaq Global Market its trading volume is generally less than that of other, larger financial services companies, and investors are not assured that a liquid market will exist at any given time for our common stock.
Risks Related to Our Common Stock The trading volume in our common stock is less than that of other larger financial services companies. 21 Although our common stock is listed for trading on The Nasdaq Global Market its trading volume is generally less than that of other, larger financial services companies, and investors are not assured that a liquid market will exist at any given time for our common stock.
If customers move money out of bank deposits and into other investments, we could lose a relatively low cost source of funds, which would require us to seek wholesale funding alternatives in order to continue to grow, thereby increasing our funding costs and reducing our net interest income and net income.
If customers move money out of bank deposits and into other investments, we could lose a relatively low cost source of funds, which would require us to seek wholesale funding alternatives or to rely on existing credit lines in order to continue to grow, thereby increasing our funding costs and reducing our net interest income and net income.
For purposes of this law, a person who directly or indirectly owns or controls 10% or more of our outstanding common stock would be presumed to control the Company.
For purposes of this law, a person who directly or indirectly owns or controls 10% or more of our outstanding common stock would be presumed to control OP Bancorp .
Our SBA lending program is dependent upon the U.S. federal government. As an approved participant in the SBA Preferred Lender’s Program (an “SBA Preferred Lender”), we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not SBA Preferred Lenders.
As an approved participant in the SBA Preferred Lender’s Program (an “SBA Preferred Lender”), we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not SBA Preferred Lenders.
Additionally, to our knowledge, Open Bank S.A. had not undertaken any actions to engage in any business or marketing activities in the United States other than have a presence on the internet through their website. However, the Coexistence Agreement restricts our potential geographic expansion beyond the Permitted Markets, which could affect our overall growth over the long term.
It is our understanding that Open Bank S.A. has not undertaken any actions to engage in any business or marketing activities in the United States other than have through their website. However, the Coexistence Agreement restricts our potential geographic expansion beyond the Permitted Markets, which could affect our overall growth over the long term.
Risks Related to our Management We are highly dependent on our management team, and the loss of our senior executive officers or other key employees could harm our ability to implement our strategic plan, impair our relationships with customers and adversely affect our business, results of operations and growth prospects. 29 Our success depends, in large degree, on the skills of our management team and our ability to retain, recruit and motivate key officers and employees.
Risks Related to our Management We are highly dependent on our management team, and the loss of our senior executive officers or other key employees could harm our ability to implement our strategic plan, impair our relationships with customers and adversely affect our business, results of operations and growth prospects.
The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located.
The market value of real estate can fluctuate significantly and rapidly as a result of market conditions in the geographic area in which the real estate is located.
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, financial condition and results of operations. Risks Related to Our Capital We are subject to more stringent capital requirements.
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, financial condition and results of operations.
For example, we will typically require only one year of tax returns and only pay-stub verification of employment. We attempt to address this enhanced risk through our underwriting process, including requiring larger down payments and, in some cases, interest reserves.
For example, we will typically require only one year of tax returns and only pay-stub verification of employment. We attempt to address this enhanced risk through our underwriting process, including requiring larger down payments and, in some cases, interest reserves. Lack of seasoning of our loan portfolio could increase risk of credit defaults in the future.
(the “Coexistence Agreement”), under which both parties agreed that we may use the name “Open Bank” in connection with banking and banking related services in the state of California and the cities of New York, Dallas, Atlanta, Chicago, Seattle and Fort Lee, New Jersey (the “Permitted Markets”).
In February 2014, we entered into a Coexistence Agreement with Open Bank S.A. (the “Coexistence Agreement”), under which both parties agreed that we may use the name “Open Bank” in connection with banking and banking related services in the state of California and the cities of New York, Dallas, Atlanta, Chicago, Seattle and Fort Lee, New Jersey (the “Permitted Markets”).
The foregoing provisions of California and federal law could make it more difficult for a third party to acquire a majority of our outstanding voting stock, by discouraging a hostile bid, or delaying, preventing or deterring a merger, acquisition or tender offer in which our shareholders could receive a premium for their shares, or effect a proxy contest for control of our company or other changes in our management. 45 We are a smaller reporting company and the reduced regulatory and reporting requirements applicable to smaller reporting companies may make our common stock less attractive to investors.
The foregoing provisions of California and federal law could make it more difficult for a third party to acquire a majority of our outstanding voting stock, by discouraging a hostile bid, or delaying, preventing or deterring a merger, acquisition or tender offer in which our shareholders could receive a premium for their shares, or effect a proxy contest for control of our company or other changes in our management.
In addition, to attract and retain personnel with appropriate skills and knowledge to support our business, we may offer a variety of benefits, which could reduce our earnings. The loss of the services of any senior executive and, in particular, Ms.
In addition, to attract and retain personnel with appropriate skills and knowledge to support our business, we may offer a variety of benefits, which could reduce our earnings.
Compromises or interruptions in our employment-related systems may cause challenges in our relationships with our employees, upon whom we are heavily dependent in the conduct of our business and the development and maintenance of our relationships with customers and prospective customers.
Compromises or interruptions in our employment-related systems may cause challenges in our relationships with our employees, upon whom we are heavily dependent in the conduct of our business and the development and maintenance of our relationships with customers and prospective customers, and in certain circumstances may expose us to liabilities under certain federal and state employment laws.
Lack of seasoning of our loan portfolio could increase risk of credit defaults in the future. As a result of the organic growth of our loan portfolio over the past five years, a large portion of our loans and of our lending relationships are of relatively recent origin.
As a result of the organic growth of our loan portfolio over the past five years, a large portion of our loans and of our lending relationships are of relatively recent origin.
We cannot assure that such breaches, failures or interruptions will not occur or, if they do occur, that they will be adequately addressed by us or the third parties on which we rely. Our insurance may not fully cover all types of losses.
We cannot assure readers that such breaches, failures or interruptions will not occur or, if they do occur, that they will be adequately addressed by us or the third parties on which we rely.
Leadership changes occur from time to time, and we cannot predict whether significant resignations will occur or whether we will be able to recruit additional qualified personnel. Competition for senior executives and skilled personnel in the financial services and banking industry is intense, which means the cost of hiring, incentivizing and retaining talent may continue to increase.
We cannot predict whether any or all of these changes will be successful or that we will be able to recruit additional qualified personnel as our business continues to evolve. Competition for senior executives and skilled personnel in the financial services and banking industry is intense, which means the cost of hiring, incentivizing and retaining talent may continue to increase.
Registration No. 3397518) in 2008 with the United States Patent and Trademark Office. Open Bank S.A. provides financial services in Spain and solicits financial services in the United States through the internet.
We have not registered the trademark “Open Bank” under the trademark laws of the United States. Open Bank S.A. originally registered the trademark “Open Bank” (U.S. Registration No. 3397518) in 2008 with the United States Patent and Trademark Office. Open Bank S.A. provides financial services in Spain and solicits financial services in the United States through the internet.
Although we believe we have minimal exposure to customers that have direct economic ties to South Korea and other countries in Asia, we are still likely to feel the effects of adverse economic and political conditions in South Korea and Asia, including the effects of rising inflation or slowing growth and volatility in the real estate and stock markets in South Korea and other regions.
As a result, we are still likely to feel the effects of adverse economic and political conditions in South Korea and Asia, including the effects of rising inflation or slowing growth and volatility in the real estate and stock markets in that region.
Also, we have entered into agreements with our officers and directors in which we similarly agreed to provide indemnification that is otherwise discretionary. Future equity issuances could result in dilution, which could cause our common stock price to decline.
Also, we have entered into agreements with our officers and directors in which we similarly agreed to provide indemnification that is otherwise discretionary.
For information about the average age of our loans, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition-Nonperforming Loans.” Risks Related to our SBA Loan Program SBA lending is an important part of our business. Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans.
Risks Related to our SBA Loan Program SBA lending is an important part of our business. Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans. Our SBA lending program is dependent upon the U.S. federal government.
If general economic conditions negatively impact the markets in which we operate and our borrowers are otherwise affected by adverse business developments, our business, financial condition and results of operations may be adversely affected.
If general economic conditions negatively impact the markets in which we operate and our borrowers are otherwise affected by adverse business developments, our business, financial condition and results of operations may be adversely affected. Our single family residential loan product consists primarily of non-qualified single family home mortgage loans which may be considered less liquid and more risky.
Any such failure in management’s analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations.
Any such failure in management’s analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations. 20 We have significant deferred tax assets and we cannot assure that it will be fully realized.
Likewise, our employee data and related technologies allow us to communicate with our employees about routine and extraordinary matters, compensate our staff, maintain timekeeping, payroll and benefits records, and comply with an increasingly complex web of labor and employment laws and regulations.
Likewise, our employee data and related technologies allow us to communicate with our employees, compensate our staff, maintain timekeeping, payroll and benefits records, and comply with an increasingly complex web of labor and employment laws and regulations. The loss, interruption or disruption of these systems may damage our relationships with customers and correspondingly may harm our reputation.
We are permitted to comply with, and we generally elect to comply with, certain reduced reporting requirements for “smaller reporting companies” within the meaning of the rules of the SEC.
We are a smaller reporting company and the reduced regulatory and reporting requirements applicable to smaller reporting companies may make our common stock less attractive to investors. We are permitted to comply with, and we generally elect to comply with, certain reduced reporting requirements for “smaller reporting companies” within the meaning of the rules of the SEC.
Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income. Changes in interest rates also can affect the value of loans, securities and other assets. Rising interest rates will result in a decline in value of the fixed-rate debt securities we hold in our investment securities portfolio.
Changes in interest rates also can affect the value of loans, investment securities and other assets held in our portfolio or originated for sale. For example, rising interest rates would result in a decline in value of the fixed-rate debt securities we hold in our investment securities portfolio.
If delinquencies and defaults increase, we may be required to increase our provision for credit losses, which could materially and adversely affect our business, financial 27 condition and results of operations.
If delinquencies and defaults increase, we may be required to increase our provision for credit losses, which could materially and 15 adversely affect our business, financial condition and results of operations. For information about the average age of our loans, see MD&A. Financial Condition — Nonperforming Loans in this Form 10-K.
We, therefore, may not be able to raise additional capital if needed or on terms acceptable to us. 33 We are committed to contribute 10% of our consolidated after tax net income to the Open Stewardship Foundation. The Open Stewardship Foundation (“Foundation”) is our platform for our community outreach activities.
We are committed to contribute 10% of our consolidated after-tax net income to the Open Stewardship Foundation. The Open Stewardship Foundation (“Foundation”) is our platform for our community outreach activities.
We regularly assess available positive and negative evidence to determine whether it is more likely than not that our net deferred tax asset will be realized. Realization of a deferred tax asset requires us to apply significant judgment and is inherently speculative because it requires estimates that cannot be made with certainty.
Realization of a deferred tax asset requires us to apply significant judgment and is inherently speculative because it requires estimates that cannot be made with certainty.
If debt securities in an unrealized loss position are sold, such losses become realized and will reduce our regulatory capital ratios. We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.
If debt securities in an unrealized loss position are sold, such losses become realized and will reduce our regulatory capital ratios.
Given the lower trading volume of our common stock, significant sales of our common stock, or the expectation of these sales, could cause our stock price to fall. The trading price of our common stock could be volatile.
Given the lower trading volume of our common stock, significant sales of our common stock, or the expectation of these sales, could cause our stock price to fall. The provisions of our subordinated debt documents restrict our ability to pay dividends or repurchase our stock in certain circumstances.
Notwithstanding these investments, cybersecurity measures are, by their nature, largely reactive, and threats are constantly evolving. We expect that the development of AI-based technologies will accelerate both the number and the sophistication of these threats.
Cybersecurity measures are, by their nature, largely reactive, and threats are constantly evolving. We expect that the development of AI-based technologies will accelerate both the number and the sophistication of these threats. We routinely experience attempts to exploit our networks and systems, and we must continue investing in increasingly advanced (and concomitantly expensive) technology to counteract these threats.
Economic pressure on consumers and uncertainty regarding continuing economic improvement may result in changes in consumer and business spending, borrowing and saving habits. 25 Risks Related to Our Loans Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.
Risks Related to Our Loans Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses. 14 Adverse developments affecting real estate values in our market areas could increase the credit risk associated with our real estate loan portfolio.
Additional risks and uncertainties not presently known to us, or that we may currently view as not material, may also adversely impact our business, financial condition, and results of operations. Summary of Risk Factors The following is a summary of the most significant risks and uncertainties that we believe could adversely affect our business, financial condition and results of operations.
Additional risks and uncertainties not presently known to us, or that we may currently view as not material, may also adversely impact our business, financial condition, and results of operations. Risks Related to Our Business Interruptions, cyber-attacks, fraudulent activity or other security breaches could have a material adverse effect on our business.
We have significant deferred tax assets and we cannot assure that it will be fully realized. 40 Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and tax basis of assets and liabilities computed using enacted tax rates.
Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and tax basis of assets and liabilities computed using enacted tax rates. We regularly assess available positive and negative evidence to determine whether it is more likely than not that our net deferred tax asset will be realized.
To accomplish these activities, we rely heavily upon electronic infrastructure that we own or that we obtain via license or other contractual arrangements with third parties.
Our business is highly dependent on the collection, storage, transmittal, sharing, processing and retention of information about our customers and employees. To accomplish these activities, we rely heavily upon electronic infrastructure that we own or that we obtain via license or other contractual arrangements with third parties.
We expect that our regulators will hold us responsible for deficiencies of our third party relationships which could result in 39 enforcement actions, including civil money penalties or other administrative or judicial penalties or fines, or customer remediation, any of which could have a material adverse effect on our business, financial condition or results of operations.
Such deficiencies could result in supervisory findings, enforcement actions, civil money penalties, litigation, customer remediation obligations, reputational harm, or other administrative or judicial penalties or fines, any of which could have a material adverse effect on our business, financial condition and results of operations. Adverse conditions in Asia and elsewhere could adversely affect our business.
Our ability to raise additional capital depends on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities, and on our financial condition and performance.
Our ability to raise additional capital will depend on a number of factors, including market conditions, investor perceptions of the banking industry, regulatory environment, and our financial condition and operating performance. During 2025, the Company demonstrated access to the capital markets through the issuance of subordinated debt.
Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations. We depend to a significant extent on relationships with third party service providers.
Our operations could be disrupted by our third‑party service providers, including risks arising from their use of artificial intelligence technologies, experiencing difficulty in providing their services, terminating their services, or failing to comply with banking regulations. We depend to a significant extent on relationships with third‑party service providers.
Likewise, breaches of our payroll, benefits, and other employee-related systems may give rise to liability under employment laws and may damage our relationships with our employees.
Likewise, breaches of our payroll, benefits, and other employee-related systems may give rise to liability under employment and privacy laws and may damage our 11 relationships with our employees. Further, we may have a limited ability to enforce warranties, indemnities or other remedies against the providers of these systems in the event we incur a loss.
Our dividend policy and/or share repurchase program may change without notice, and our future ability to pay dividends or repurchase or redeem shares is subject to restrictions. Since 2019, our board of directors have declared quarterly cash dividends on our common stock and have approved stock repurchase programs that authorized the repurchase of up to 2,620,000 shares of common stock.
Our dividend policy and/or share repurchase program may change without notice, and our future ability to pay dividends or repurchase or redeem shares is subject to restrictions. We may change our dividend policy and/or share repurchase program at any time without notice to holders of our common stock.
Our senior management team has significant industry experience, and their knowledge and relationships would be difficult to replace.
Our success depends, in large degree, on the skills of our management team and our ability to retain, recruit and motivate key officers and employees. Our senior management team has significant industry experience, and their knowledge and relationships would be difficult to replace.
Because of our geographic concentration, we are less able than regional or national financial institutions to diversify our credit risks across multiple markets. We have a continuing need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology.
Because of our geographic concentration, we are less able than regional or national financial institutions to diversify demand for our products or our credit risks across multiple markets.
These losses or defaults could have a material adverse effect on our business, financial condition and results of operations. 35 Severe weather, natural disasters, pandemics, acts of war or terrorism and other external events could significantly impact our business.
These events and any declines or losses that result from could have a material adverse effect on our business, financial condition and results of operations.
Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business and stock price.
Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business and stock price. As a public company, we are required to maintain effective internal control over financial reporting and to assess, and obtain auditor attestation on, its effectiveness under Section 404 of the Sarbanes‑Oxley Act.
However, should a significant number of these customers leave, it could have a material adverse effect on our business, financial condition and results of operations. Intense competition among U.S. banks for customer deposits, may increase our cost of retaining current deposits or procuring new deposits, and may otherwise negatively affect our ability to grow our deposit base.
However, should a significant number of these customers leave, it could have a material adverse effect on our business, financial condition and results of operations.
Generally, we do not maintain reserves or loss allowances for such potential claims and any such claims could materially and adversely affect our business, financial condition and results of operations. The laws, regulations and standard operating procedures that are applicable to SBA loan products may change in the future.
Generally, we do not maintain reserves or loss allowances for such potential claims and any such claims could materially and adversely affect our business, financial condition and results of operations. The recognition of gains on the sale of SBA loans and related servicing asset valuations is subject to significant assumptions and SBA lending exposes us to credit and repurchase risks.
These efforts may prove less successful or more expensive than we have estimated, and in certain cases could materially and adversely affect our results of operation or our financial condition. There is risk related to acquisitions. We plan to continue to grow our business organically.
To support our growth strategy, we recently expanded our geographic footprint by opening a new branch in Garden Grove, California in July 2025. However, our efforts to establish new locations may prove less successful or more expensive than we have estimated, and in certain cases could materially and adversely affect our results of operation or our financial condition.
Although management believes that the Company has sufficient capital to fund operations and growth initiatives for at least the next twenty-four months based on our estimated future operations, we may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments and business needs.
We face significant capital and other regulatory requirements as a financial institution. Although management believes that the Company has sufficient capital to fund operations and growth initiatives, we may need to raise additional capital in the future to business needs, growth, or regulatory requirements.
The Federal Reserve, the FDIC, and the DFPI periodically examine our business, including our compliance with laws and regulations.
Risks Related to Legislation and Regulation Federal and state regulators periodically examine our business, and adverse examination findings could materially affect our operations. The Federal Reserve, the FDIC, and the DFPI regularly examine our business and compliance with applicable laws and regulations.
Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information. We are subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and we could be negatively impacted by these laws.
Privacy, information security and data protection regulations could increase our costs and limit our business activities. We are subject to numerous federal and state privacy, data protection, and information security laws, including the Gramm-Leach-Bliley Act of 1999 and data breach notification requirements.
As a commercial bank, we provide services to a number of clients whose deposit levels vary considerably and have some seasonality. Our 10 largest retail depositor relationships accounted for approximately 7.4% of our deposits as of December 31, 2024. Our largest retail depositor relationship accounted for approximately 1.1% of our deposits as of December 31, 2024.
Risk Related to Our Deposits Our deposit portfolio includes significant concentrations and a large percentage of our deposits is attributable to a relatively small number of clients. 16 As a commercial bank, we provide services to a number of clients whose deposit levels vary considerably and have some seasonality.
Finance and Accounting Risks Our accounting estimates and risk management processes rely on analytical and forecasting models.
These losses or defaults could have a material adverse effect on our business, financial condition and results of operations. Risks Related to Finance and Accounting Our accounting estimates and risk management processes rely on analytical and forecasting models.
We have grown our consolidated assets to $2.37 billion as of December 31, 2024 from $2.15 billion as of December 31, 2023. Our deposits have grown to $2.03 billion as of December 31, 2024 from $1.81 billion as of December 31, 2023. Our ability to continue to grow successfully will depend to a significant extent on our capital resources.
Our ability to continue to grow successfully will depend to a significant extent on our capital resources.
The determination of these gains is based on assumptions regarding the value of unguaranteed loans retained, servicing rights retained and deferred fees and costs, and net premiums paid by purchasers of the guaranteed portions of U.S. government guaranteed loans.
Gains on the sale of SBA loans and the valuation of retained servicing rights and unguaranteed loan portions are based on assumptions regarding market conditions, prepayment rates, loan sale premiums, and origination costs.
Min Kim, our President and Chief Executive Officer, or other key personnel, or the inability to recruit and retain qualified personnel in the future, could have a material adverse effect on our business, financial condition and results of operations. Similarly, we recently announced and have begun to implement a leadership succession plan pursuant to which, among other things, Ms.
The loss of the services of any senior executive, or the inability to recruit and retain qualified personnel in the future, could have a material adverse effect on our business, financial condition and results of operations. Risks Related to our Credit Quality Our allowance for credit losses may prove to be insufficient to absorb potential losses in our loan portfolio.
If our service providers experience difficulties or terminate their services and we are unable to replace them, our operations could be interrupted. It may be difficult for us to timely replace some of our service providers, which may be at a higher cost due to the unique services they provide.
If our service providers experience operational difficulties, fail to perform in accordance with expectations, experience disruptions related to AI system failures or errors, suffer a cyberattack or other security breach, fail to comply with applicable laws or regulations, or terminate their services, and we are unable to replace them in a timely manner, our operations could be interrupted.
We generally retain the non-guaranteed portions of the SBA loans that we originate and sell, and to the extent the borrowers of such loans experience financial difficulties, our financial condition and results of operations would be materially and adversely impacted.
In addition, when we sell the guaranteed portions of SBA loans, we make representations and warranties to purchasers and may be required to repurchase loans or indemnify purchasers if breaches occur, which could materially adversely affect our business, financial condition, and results of operations.
Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could have a material adverse effect on our business, financial condition and results of operations.
Compliance with existing or future requirements may increase operational and technology costs and restrict how we collect, use, share, and safeguard customer and employee information. Failure to comply could result in regulatory investigations, litigation, fines, reputational damage, and other adverse consequences that could materially affect our business, financial condition and results of operations.
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The summary should be read in conjunction with the more detailed risk factors set forth in this “Risk Factors” section and the other information contained in this Report.
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Our profitability is dependent upon the geographic concentration of the markets in which we operate. A substantial portion of our business is derived from our commercial banking activities in the Los Angeles, California, Metropolitan Area.
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Risks Related to Our Business • Interruptions, cyber-attacks, fraudulent activity • Rapid technological developments • Adverse economic conditions in Asia, particularly South Korea • Monetary Policy and the Federal Reserve • Fluctuations in interest rates • Losses on our securities portfolio, particularly from increases in interest rates • Liquidity risks • Decline in general business and economic conditions Risks Related to Our Loans • Negative changes in the economy affecting real estate values and liquidity • Commercial borrowers present risks • Small and medium business loans subject to greater risks from adverse business developments 20 • Risks from non-qualified single family home mortgage lending business • Unreliability of loan appraisals used in real property loan decisions • Increased regulatory scrutiny of commercial real estate concentrations • Lack of seasoning of our loan portfolio due to recent growth over the last five years Risks Related to our SBA Loan Program • Dependence on U.S. federal government SBA loan program • Recognition of gains on sale of loans and servicing asset valuations subject to our assumptions we use • Credit risks from non-guaranteed portion of SBA loans we retain and do not sell • Credit risks from SBA loans we sell as a result of repurchase obligations Risks Related to Our Deposits • Concentrations of deposit relationships • Competition for deposits may increase cost of deposits negatively affecting our deposit growth Risks Related to Management • Success depends on the skills of our management and their retention • Competition for skilled and experienced senior level management employees Risks Related to Credit Quality • Our business ability to manage credit risk • Nonperforming assets demand management time to resolve and can affect our financial results • Allowance for credit losses may be insufficient to absorb potential losses in our loan portfolio Risks Related to our Growth Strategy • Inability to continue the growth of loans and deposits • Limited ability to expand because of an existing license agreement for the use of “Open Bank” • Managing risks of opening new branches • Managing risks of adding new lines of business Risks Related to Our Capital • Increased regulatory requirements • Raising new capital • Commitment to contribute 10% of our after tax income to the Open Stewardship Foundation Competition Risks • Competition among financial institutions, many of whom are much larger, have greater capital, more advanced technology • Focus on marketing to the Korean-American geographic areas we serve Other Business Risks • Soundness of other financial institutions • Severe weather, natural disasters (including fire and earthquakes), wide spread disease or pandemics (including the COVID-19 pandemic), acts of war, and terrorism • Climate change could have material negative impact Risks Related to Our Reputation • Failure to maintain a favorable reputation with our customers and communities • Risks associated with cyberattacks, cybersecurity incidents, and loss or compromise of customer information 21 • Failure of our risk management framework • Difficulties of our third-party providers, termination of their services, or their failure to comply with regulatory requirements • Employee misconduct Finance and Accounting Risks • Reliance on risk management processes and analytical and forecasting models • Realization of our deferred tax assets • Changes in accounting standards • Failure to maintain effective controls Legislative and Regulatory Risks • Legislative and regulatory actions now or in the future increase our costs, impact our business and financial results • Federal and state regulatory exams • Complaints and allegations of discriminatory lending practices • Noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations Risks Related to Our Common Stock • Small trading volume • Volatile trading price of our common stock • Equity research analysts interest in our common stock, unfavorable commentary or downgrade of our common stock • Changes in dividend policy • Potential dilution from issuance of additional equity securities • Charter documents and California law may have an anti-takeover effect limiting changes of control • Reduced regulatory and reporting requirements as a smaller reporting company Risks Related to Our Business Interruptions, cyber-attacks, fraudulent activity or other security breaches could have a material adverse effect on our business.
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As a result, our business, financial condition and results of operations are subject to the demand for our products in those areas and is also subject to changes in the economic conditions in those areas. Our success depends upon the business activity, population, income levels, deposits and real estate activity in these markets.
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In the normal course of business, we collect, store, share, process and retain sensitive and confidential information regarding our customers.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Chief Risk Officer chairs the Management Compliance and Risk Committee independently and has more than 20 years of experience in compliance and risk management. Monitoring Cybersecurity Incidents The company utilizes various industry-leading systems to provide 24/7 threat detection and response capability, many of which provide proactive measures to shut threats down before they can harm the organization.
Biggest changeMonitoring Cybersecurity Incidents The Company utilizes various industry-leading systems to provide 24/7 threat detection and response capability, many of which provide proactive measures to shut threats down before they can harm the organization. Additionally, the Company’s incident response team periodically performs proactive measures, searching for potential indicators of threats, compromise, and bad actors on our network.
Our Board of Directors has ultimate responsibility for providing oversight for third-party risk management and holding management accountable. The Board provides clear guidance to regarding strategic goals and acceptable risk appetite with respect to third-party relationships.
Our Board of Directors has the ultimate responsibility for providing oversight for third-party risk management and holding management accountable. The Board provides clear guidance to regarding strategic goals and acceptable risk appetite with respect to third-party relationships.
The Board reviews this policy on at least an annual basis to assure that we implement 46 procedures and practices have been established by management.
The Board reviews this policy on at least an annual basis to assure that we implement procedures and practices have been established by management.
Managing Material Risks & Integrated Overall Risk Management We have strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management. Our procedures and security program are the guiding policies over our cybersecurity risk management. Additionally, our IT team uses the best currently available tools to help protect against cybercriminals.
Managing Material Risks & Integrated Overall Risk Management We have integrated cybersecurity risk management strategically throughout our broader risk management framework to promote a company-wide culture of cybersecurity risk management. Our procedures and security program are the guiding policies over our cybersecurity risk management. Additionally, our IT team uses the best currently available tools to help protect against cybercriminals.
The ISO may determine that an incident has the potential to be materially relevant and would escalate that determination to the executive management, including Chief Executive Officer, Chief Risk Officer, Chief Information Officer, Chief Financial Officer, and other leaders and advisors of the Company. In addition, we maintain insurance that we believe is customary against certain insurable cybersecurity risks.
The ISO may determine that an incident has the potential to be materially relevant and would escalate that determination to the executive management, including Chief Executive Officer, Chief Risk Officer, Chief Technology Officer, Chief Financial Officer, and other leaders and advisors of the Company. In addition, we maintain insurance that we believe is customary against certain insurable cybersecurity risks.
In addition to regular meetings, the BRCC, the ISO, Chief Risk Officer, Chief Information Officer, and Chief Executive Officer maintain an ongoing dialogue regarding emerging or potential cybersecurity risks that we face, particularly as a financial institution. The Company’s Management Risk and Compliance Committee also reports directly to the BRCC regarding our risk management initiatives.
In addition to regular meetings, the BRCC, the ISO, Chief Risk Officer, Chief Technology Officer, and Chief Executive Officer maintain an ongoing dialogue regarding emerging or potential cybersecurity risks that we face, particularly as a financial institution. The Company’s Management Risk and Compliance Committee also reports directly to the BRCC regarding our risk management initiatives.
The BRCC reports periodically to the Board on the effectiveness of cybersecurity risk management processes and cybersecurity risk trends. The Board also receives specific reports from senior management with oversight responsibility for cybersecurity risks within the Company. These reports include risk assessments of cybersecurity and related risks, as well as the company’s vulnerability to those risks.
The Board also receives specific reports from senior management with oversight responsibility for cybersecurity risks within the Company. These reports include risk assessments of cybersecurity and related risks, as well as the Company’s vulnerability to those risks.
Item 1C. Cybersecurity. Risk Management and Strategy We believe that our cybersecurity program provides effective protection of client information and of our operating systems from known and reasonably expected risks, while also promoting the timely detection of, and defense against, cyberattacks and other unauthorized access to our information technology (“IT”) systems.
Item 1C. Cybersecurity. Risk Management and Strategy We believe our cybersecurity program is sufficient to protect our operating systems and our databases, including those containing client information and employee information, from known and reasonably expected risks, while promoting the timely detection of, and defense against, cyberattacks and other unauthorized access to our information technology (“IT”) systems.
Board of Directors Oversight The Board Risk and Compliance Committee ("BRCC") is central to the Board’s oversight of cybersecurity risks. The BRCC currently oversees various risk areas such as regulatory compliance, CRA, BSA/AMLA, enterprise risk management, cybersecurity, technology, and third-party risk management. The committee ensures that the Board maintains appropriate expertise to assure the appropriate management of cybersecurity risk.
The BRCC currently oversees various risk areas such as regulatory compliance, CRA, BSA/AMLA, enterprise risk management, cybersecurity, technology, and third-party risk management. The committee ensures that the Board maintains appropriate expertise to assure the appropriate management of cybersecurity risk. The BRCC reports periodically to the Board on the effectiveness of cybersecurity risk management processes and cybersecurity risk trends.
Governance The Board recognizes the importance of managing risks associated with cybersecurity threats. The Board has established robust oversight procedures to promote effective governance in managing cybersecurity risks because of the significance of these threats to our operational integrity and shareholder confidence.
The Board has established robust oversight procedures to promote effective governance in managing cybersecurity risks because of the significance of these threats to our operational integrity and shareholder confidence. Board of Directors Oversight The Board Risk and Compliance Committee ("BRCC") is central to the Board’s oversight of cybersecurity risks.
Our chief risk officer is responsible for development and implementation of third-party risk management policies, procedures, and practices, commensurate with the Company’s strategic goals, risk appetite and the level of risk and complexity of its third-party relationships. This individual regularly reports to the Board of Directors regarding third-party risk management activities.
Our Chief Risk Officer is responsible for developing and implementing third-party risk management policies, procedures, and practices, commensurate with the Company’s strategic goals, risk appetite and the level of risk and complexity of its third-party relationships, and any potential changes in, this policy.
The Company’s internal audit staff also determines the frequency and scope of audits to examine the effectiveness of our third party risk management program. The Company recognizes that not all third-party relationships present the same level of risk, and therefore not all third-party relationships require the same level, degree or type of oversight or risk management.
The Company recognizes that not all third-party relationships present the same level of risk, and therefore not all third-party relationships require the same level, degree or type of oversight or risk management.
As part of its risk management program, management analyzes the specific risks associated with each third-party relationship, including but not limited to, cybersecurity and information security related risks. Risks from Cybersecurity Threats We have not encountered cybersecurity risks or threats that have materially impaired our business strategy, results of operations, or financial condition.
As part of its risk management program, management analyzes the specific risks associated with each third-party relationship, including but not limited to, cybersecurity and information security related risks. 25 Governance The Board recognizes the importance of managing risks associated with cybersecurity threats.
However, certain aspects of cybersecurity risks are not insurable, and the availability, extent, and cost of coverage may limit our recourse to these sources of risk mitigation. Reporting to Board of Directors The ISO, in his capacity as such, regularly reports to management and the BRCC on all aspects related to cybersecurity risks and incidents.
However, certain 26 aspects of cybersecurity risks are not insurable, and the availability, extent, and cost of coverage may limit our recourse to these sources of risk mitigation.
The Company maintains Business Continuity and Disaster Recovery plans, processes, and technology to restore systems affected by a cybersecurity incident.
Eradication of an attacker’s artifacts, such as user accounts and malicious code, would then be performed. The Company maintains Business Continuity and Disaster Recovery plans, processes, and technology to restore systems affected by a cybersecurity incident.
If an incident is identified, we attempt to contain the threat is immediately, such as if systems could be taken offline to stop the spread of an attack. Eradication of an attacker’s artifacts, such as user accounts and malicious code, would then be performed.
Endpoint and network detection tools alert IT staff of security events that warrant further analysis. The ISO is kept abreast of all active investigations. If an incident is identified, we attempt to contain the threat is immediately, such as if systems could be taken offline to stop the spread of an attack.
That individual also reports regularly to our Board of Directors, oversees certain policies and procedures that are intended to guard against, detect, and respond to potential breaches of our IT systems.
To mitigate these risks, our Information Security Officer ("ISO") has primary responsibility for assessing, monitoring, and managing cybersecurity risks, including the detection of and response to identified threats and incidents, and reports regularly to our Board of Directors while overseeing policies and procedures intended to guard against, detect, and respond to potential breaches of our IT systems.
The ISO holds various information security qualifications, such as a doctoral degree in information technology and cyber security and holds the Certified Information Systems Security Professional ("CISSP") certification. The ISO and Chief Risk Officer are responsible for managing the disclosure and communications related to cybersecurity incidents.
The ISO has extensive cybersecurity program management experience, holds advanced academic and professional credentials, including a doctoral degree in information technology and cybersecurity and the Certified Information Systems Security Professional ("CISSP") certifications, and works jointly with the Chief Risk Officer, who chairs the Management Compliance and Risk Committee and has more than 20 years of compliance and risk management experience, to manage cybersecurity incident disclosures and related communication.
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In order to accomplish these goals, we maintain up-to-date information security and monitoring controls, which we believe mitigates cybersecurity risks and threats while optimizing the utility of our systems.
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We maintain up-to-date information security and monitoring controls designed to mitigates cybersecurity risks while optimizing system utility; however, cyberattacks are becoming increasingly common, sophisticated, and destructive, and several large financial institutions have been successfully targeted in recent years, resulting in data loss, service disruptions, and reputational harms.
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At the same time, cyberattacks are increasingly common, sophisticated and destructive, and several large, highly sophisticated financial institutions have been successfully targeted in recent years, leading to significant losses of client data, denials and loss of online banking and other data services, and other critical functions that have become essential to modern banking.
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The Company’s internal audit also assesses and reports to the Board concerning the appropriate frequency and scope of audits to examine the effectiveness of our third-party risk management program.
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These events also have carried significant reputational risk for the successfully targeted institutions. In order to mitigate these risks, our Information Security Officer ("ISO") is responsible for our cybersecurity programs and for the detection of and response to any identified threats and incidents.
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Risk Management Personnel 47 Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the ISO, who has extensive cybersecurity program management experience working in various information security roles, including teaching as an information security instructor at a University.
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Additionally, the company’s incident response team periodically performs proactive measures, searching for potential indicators of threats, compromise, and bad actors on our network. Endpoint and network detection tools alert IT staff of security events that warrant further analysis. The ISO is kept abreast of all active investigations.
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This ensures that the highest levels of management are kept informed of our cybersecurity and the potential risks we face. In the event of certain cybersecurity matters which present increasing concern, our policies require escalating these cybersecurity and risk management decisions to the full Board.

Item 2. Properties

Properties — owned and leased real estate

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Item 2. Properties. Corporate Offices Our corporate offices are located at 1000 Wilshire Blvd., Los Angeles, California 90017 on the fifth floor of a twenty-two story Class-A type office building. Our corporate office space consists of 19,072 square feet and is subject to a lease which expires in January 2030.
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Item 2. Properties. Our principal office is located at 1000 Wilshire Blvd., Suite 500, Los Angeles, California 90017. The Company operates twelve leased full-service branches, five leased loan production offices, and one leased administrative office, and maintains its headquarters at a leased location. We believe our current facilities are adequate to support our operational needs.
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The current monthly rent for the fifth floor is $42,720 and is subject to 3.1% annual increases until the lease expires. 48 Branch Offices Office Location Wilshire Office 1000 Wilshire Blvd., Suite 100 Los Angeles, CA 90017 Fashion District Office 747 East 10th Street, Suite 310 Los Angeles, CA 90021 Aroma Office 3680 Wilshire Blvd., Suite 101 Los Angeles, CA 90010 Olympic Office 3030 West Olympic Blvd., Suite 110 Los Angeles, CA 90006 Western Office 550 South Western Avenue Los Angeles, CA 90020 Gardena Office 15435 South Western Avenue, Suite 100-D Gardena, CA 90249 Buena Park Office 5141 Beach Blvd., Building 2 Suite E Buena Park, CA 90621 Santa Clara Office 2998 East El Camino Real Santa Clara, CA 95051 Carrollton Office 2540 Old Denton Road, Suite 314 Carrollton, TX 75006 Cerritos Office 11811 South Street Cerritos, CA 90703 Spring Mountain Office 5599 Spring Mountain Road, Suite 100 Las Vegas, Nevada 89146 Wilshire Office .
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The Wilshire Office is located on the first floor at 1000 Wilshire Blvd, Los Angeles, California, where our corporate offices are also located. The office consists of 11,115 square feet and is subject to a lease which expires in January 2030. The current monthly rent is $24,171 and is subject to 3.0% annual increases until the lease expires.
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Fashion District Office . The Fashion District Office is located on the third floor in a four-story multi-tenant multi-use stand-alone building in Downtown, Los Angeles, California. The office consists of approximately 2,189 square foot and is subject to a lease which expires in June 2027.
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The current monthly rent is $6,142 and is subject to 3.0% annual increases until the lease expires. We have reserved the right to extend the term of the lease for two additional periods of five years. Aroma Office .
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In June 2013, we leased approximately 2,734 square feet on the ground floor in a five-story multi-tenant multi-use stand-alone building located in Koreatown, Los Angeles, California. We extended the lease for a period of five years until March 2028.
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The current monthly rent is $8,960 and is subject to annual increases equal to the Consumer Price Index (CPI), not to exceed 3.0%, until the lease expires. We have reserved the right to extend the term of the lease for an additional period of five years. Olympic Office .
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In April 2014, we leased approximately 3,800 square feet in a one-story shopping strip building. The current monthly rent is $11,635 and is subject to annual CPI adjustments until the lease expires in March 2029. We have reserved the right to extend the term of the lease for an additional period of five years. Western Office .
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In June 2015, we leased a building with approximately 12,450 square feet. The current monthly rent is $50,544 and is subject to 3.0% annual increases until the lease expires in May 2025. We have reserved the right to extend the term of the lease for two additional periods of five years each.
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The office utilizes approximately 4,000 square feet, and the remaining space, including the common area, is being used by two other departments. 49 Gardena Office . The Gardena Office is located on the first floor in a two-story multi-tenant, multi-use, stand-alone building.
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The office consists of approximately 1,520 square feet and is subject to a lease which expires on August, 2027. The current monthly rent payment is $5,479 and is subject to 3.0% annual increases until the lease expires. Buena Park Office . The Buena Park Office is located on a Class-A shopping strip building.
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The office consists of approximately 3,047 square feet and is subject to a lease which expires on March 2028. The current monthly rent is $13,358 and is subject to annual CPI adjustments until the lease expires. We have reserved the right to extend the term of the lease for an additional period of five years. Santa Clara Office .
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In August 2017, we leased approximately 2,678 square feet in a building. The current monthly rent is $10,790 and is subject to annual increases of 3.0% until the lease expires in August 2027. We have reserved the right to extend the term of the lease for two additional periods of five years each. Carrollton Office .
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In September 2018, we leased approximately 5,532 square feet in a commercial shopping center. The monthly rent is fixed at $16,135 until April 2024 and is subject to increase to $18,440 per month thereafter for the next five years until the lease expires in April 2029.
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We have reserved the right to extend the term of the lease for two additional periods of five years each. Cerritos Office . In September 2021, we leased approximately 2,750 square feet on the ground floor in a commercial shopping center.
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The monthly rent is fixed at $6,875 until October 2026 and is subject to increase to $7,563 per month thereafter until the lease expires in October 2031. We have reserved the right to extend the term of the lease for two additional periods of five years each. Spring Mountain Office .
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In December 2022, we leased approximately 2,650 square feet on the corner space of a building located in a newly-built commercial shopping center. The monthly rent is fixed at $10,000 until December 2024 and is subject to annual increases of 3.0% until the lease expires in December 2032.
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We have reserved the right to extend the term of the lease for two additional periods of five years each. Loan Production Offices We maintain loan production offices in Pleasanton, California; Atlanta, Georgia; Aurora, Colorado; Lynnwood, Washington; and Fairfax, Virginia.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. In the normal course of business, we are subject to legal proceedings or claims. Management has reviewed all legal claims against us and possible loss contingencies, and does not expect the amounts to be material to any of the consolidated financial statements. Item 4. Mine Safety Disclosures. Not applicable. 50 PART II
Biggest changeItem 3. Legal Proceedings. In the normal course of business, we are subject to legal proceedings or claims. Management has reviewed all legal claims against us and possible loss contingencies, and does not expect the amounts to be material to any of the Consolidated Financial Statements. Item 4. Mine Safety Disclosures. Not applicable. 27 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurity Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters — Securities Authorized for Issuance Under Equity Compensation Plans.” Recent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] 51
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans For information on the Securities Authorized for Issuance under the Company’s Equity Compensation Plan, see Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters and Note 12. Stock-Based Compensation to the Consolidated Financial Statements in this Form 10-K.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is traded on The Nasdaq Global Market under the symbol “OPBK.” As of March 21, 2025, we had 159 record holders of our common stock, not including beneficial owners whose shares are held in record names of brokers or other nominees.
Market Information and Holders The principal market on which our common stock is traded The Nasdaq Global Market under the symbol “OPBK.” As of February 27, 2026, there were 145 registered shareholders of our common stock, not including beneficial owners whose shares are held in record names of brokers or other nominees.
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Dividends OP Bancorp maintains a policy of returning capital to shareholders in a manner, and at times and amounts, that provide for what we believe is an optimum balance between preserving liquidity and capital to assure compliance with applicable regulatory requirements and state laws, on the one hand, while providing an attractive total return to shareholders after giving effect to fluctuations in our stock price.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Removed
Consistent with this policy, on July 28, 2022, the Company increased a quarterly cash dividend from $0.10 per share to $0.12 per share ($0.48 per share on an annualized basis and an annual yield of 3.0% based on a common share price of $15.81 per share as of December 31, 2024).
Added
Dividends For the frequency and amount of cash dividends declared, see Consolidated Statements of Changes in Shareholders' Equity and Consolidated Statements of Cash Flows. For information on the dividend restrictions, see Item 1. Business — Supervision and Regulation — OP Bancorp — Dividend Payments, Stock Redemptions , and Repurchases and Regulation and Supervision of The Bank — Dividend Payments .
Removed
We believe that current level of dividends is reasonable based on our review of our overall risk profile, and an evaluation of our current and anticipated capital, asset quality, earnings, liquidity and sensitivity position.
Added
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers There were no repurchase activities during the fourth quarter of 2025. Item 6. [Reserved] 28
Removed
However, the amount of dividends to be paid will be subject to our capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions. We cannot assure you that we will pay dividends in the future, or that any such dividends will not be reduced or eliminated in the future.
Removed
As a holding company, our ability to pay cash dividends is affected by the ability of our bank subsidiary, the Bank, to pay cash dividends.
Removed
The ability of the Bank (and our ability) to pay cash dividends in the future and the amount of any such cash dividends is and could be in the future further influenced by bank regulatory requirements and approvals and capital guidelines.
Removed
For information on the statutory and regulatory limitations on the ability of the Company to pay dividends and on the Bank to pay dividends to the Company see “Item 1 — Business — Supervision and Regulation — The Company — Dividend Payments, Stock Redemptions, and Repurchases” and “— The Bank — Dividend Payments.” Securities Authorized for Issuance Under Equity Compensation Plans For information on the Securities Authorized for Issuance under the Company’s Equity Compensation Plan see “Item 12.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

63 edited+48 added−97 removed15 unchanged
Biggest changeFor the year ended December 31, 2023 compared to 2022 • Net interest income decreased to $68.7 million, a decrease of $8.2 million, or 10.7%, from $76.9 million. • Net income was $23.9 million or $1.55 per diluted common share, a decrease of $9.4 million, or 28.2%, from $33.3 million or $2.14 per diluted common share. 53 SELECTED FINANCIAL DATA Year Ended December 31, ($ in thousands, except share and per share data) 2024 2023 2022 Income Statement Data: Interest income $ 137,620 $ 121,665 $ 88,212 Interest expense 72,012 52,978 11,301 Net interest income 65,608 68,687 76,911 Provision for credit losses 2,757 1,651 2,976 Noninterest income 16,427 14,181 17,619 Noninterest expense 50,199 47,726 44,830 Income before income taxes 29,079 33,491 46,724 Income tax expense 8,010 9,573 13,414 Net income 21,069 23,918 33,310 Per Share Data: Basic income per share $ 1.39 $ 1.55 $ 2.15 Diluted income per share 1.39 1.55 2.14 Book value per share 13.83 12.84 11.59 Shares of common stock outstanding 14,819,866 15,000,436 15,270,344 Performance Ratios: Return on average assets 0.92 % 1.13 % 1.74 % Return on average equity 10.68 13.05 19.57 Yield on total loans 6.63 6.33 5.25 Yield on average interest-earning assets 6.26 5.96 4.79 Cost of average interest-bearing liabilities 4.74 4.10 1.22 Cost of deposits 3.48 2.70 0.65 Net interest margin 2.99 3.37 4.18 Efficiency ratio (1) 61.19 57.59 47.42 (1) Represent noninterest expense divided by the sum of net interest income and noninterest income. 54 As of December 31, ($ in thousands) 2024 2023 Balance Sheet Data: Gross loans $ 1,956,852 $ 1,765,845 Loans held for sale 4,581 1,795 Allowance for credit losses 24,796 21,993 Total assets 2,366,013 2,147,730 Total deposits 2,027,285 1,807,558 Shareholders’ equity 204,993 192,626 Asset Quality Data: Nonperforming loans to gross loans 0.40 % 0.34 % Allowance for credit losses to nonperforming loans 317 362 Allowance for credit losses to gross loans 1.27 1.25 Balance Sheet and Capital Ratios: Gross loans to deposits 96.53 % 97.69 % Noninterest-bearing deposits to deposits 24.91 28.92 Average equity to average total assets 8.63 8.62 Leverage ratio 9.27 9.57 Common equity tier 1 ratio 11.35 12.52 Tier 1 risk-based capital ratio 11.35 12.52 Total risk-based capital ratio 12.60 13.77 Critical Accounting Policies and Estimates Our accounting and reporting policies conform to accounting principles generally accepted in GAAP and conform to general practices within the industry in which we operate.
Biggest changeMD&A of our 2024 Form 10-K filed with the SEC on March 28, 2025, which discussion is incorporated herein by reference. 30 Year Ended December 31, ($ in thousands, except share and per share data) 2025 2024 Income Statement Data: Interest income $ 150,328 $ 137,620 Interest expense 71,980 72,012 Net interest income 78,348 65,608 Provision for credit losses 3,580 2,757 Noninterest income 16,332 16,427 Noninterest expense 55,773 50,199 Income before income taxes 35,327 29,079 Income tax expense 9,692 8,010 Net income 25,635 21,069 Per Share Data: Basic EPS $ 1.72 $ 1.39 Diluted EPS 1.72 1.39 Book value per common share, at period-end 15.31 13.83 Shares of common stock outstanding, at period-end 14,889,540 14,819,866 Performance Ratios: Return on average assets ("ROA") 1.01 % 0.92 % Return on average equity ("ROE") 11.91 10.68 Yield on average total loans 6.49 6.63 Yield on average interest-earning assets 6.13 6.26 Cost of average interest-bearing liabilities 4.13 4.74 Cost of deposits 3.13 3.48 Net interest margin 3.19 2.99 Efficiency ratio (1) 58.91 61.19 (1) Represent noninterest expense divided by the sum of net interest income and noninterest income. 31 As of December 31, ($ in thousands) 2025 2024 Balance Sheet Data: Gross loans $ 2,193,669 $ 1,956,852 Allowance for credit losses on loans 27,975 24,796 Total assets 2,650,226 2,366,013 Total deposits 2,280,547 2,027,285 Shareholders’ equity 227,893 204,993 Asset Quality Data: Nonperforming loans to gross loans 0.64 % 0.40 % Allowance for credit losses on loans to nonperforming loans 199 317 Allowance for credit losses on loans to gross loans 1.28 1.27 Balance Sheet and Capital Ratios: Gross loans to deposits 96 % 97 % Noninterest-bearing deposits to deposits 23 25 Average equity to average total assets 8 9 Tier 1 leverage capital ratio 8.99 9.27 Common equity tier 1 capital ratio 10.93 11.35 Tier 1 risk-based capital ratio 10.93 11.35 Total risk-based capital ratio 13.31 12.60 The Company's net income for 2025 was $25.6 million, up $4.6 million, or 22%, from 2024 net income of $21.1 million.
This matrix considers the following nine factors, which are patterned after the guidelines provided under the Federal Financial Institutions Examination Council Interagency Policy Statement on the Allowance for Credit Losses, updated to reflect the adoption of CECL: • Changes in lending policies and procedures, including changes in underwriting standards and practices for collection, charge-offs, and recoveries; • Actual and expected changes in national and local economic and business conditions and developments in which the institution operates that affect the collectivity of loans; • Changes in the nature and volume of the loan portfolio; • Changes in the experience, ability, and depth of lending management and staff; • Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified loans; • Changes in the quality of the credit review function; • Changes in the value of the underlying collateral for loans that are not collateral-dependent; • The existence, growth, and effect of any concentrations of credit, and • The effect of other external factors, such as the regulatory, legal and technological environments; competition; and events such as natural disasters.
This matrix considers the following nine factors, which are patterned after the guidelines provided under the Federal Financial Institutions Examination Council Interagency Policy Statement on the Allowance for Credit Losses, updated to reflect the adoption of CECL: • Changes in lending policies and procedures, including changes in underwriting standards and practices for collection, charge-offs, and recoveries; • Actual and expected changes in national and local economic and business conditions and developments in which the institution operates that affect the collectivity of loans; • Changes in the nature and volume of the loan portfolio; • Changes in the experience, ability, and depth of lending management and staff; • Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified loans; • Changes in the quality of the credit review function; 33 • Changes in the value of the underlying collateral for loans that are not collateral-dependent; • The existence, growth, and effect of any concentrations of credit, and • The effect of other external factors, such as the regulatory, legal and technological environments; competition; and events such as natural disasters.
In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements. The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments.
In particular, management 32 has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements. The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments.
Liquidity and Capital Resources Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, while effectively balancing the related costs.
Liquidity and Capital Resources Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, while also effectively balancing the related costs.
We make critical accounting estimates, including the 55 judgments made in the application of significant accounting policies, sensitivity to change, and the likelihood of materially different reported results if different assumptions were used.
We make critical accounting estimates, including the judgments made in the application of significant accounting policies, sensitivity to change, and the likelihood of materially different reported results if different assumptions were used.
We expect that other alternative sources of funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis. Deposits are the primary funding source for the Bank. Deposits provide a stable source of funding and reduce our reliance on the wholesale funding markets.
We expect that other alternative sources of funds will be available to supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis. Deposits are the primary funding source for the Bank. Deposits provide a stable source of funding and reduce our reliance on the wholesale funding markets.
These analyses, however, are not intended to estimate changes in the overall allowance for credit losses as they do not capture all the potentially unknown variables that could arise in the forecast period, and do not represent management's view of expected credit losses as of December 31, 2024.
These analyses, however, are not intended to estimate changes in the overall allowance for credit losses as they do not capture all the potentially unknown variables that could arise in the forecast period, and do not represent management's view of expected credit losses as of December 31, 2025.
Management believes that the estimate for the allowance for credit losses was reasonable and appropriate as of December 31, 2024. In order to quantify the credit risk impact of other trends and changes within the loan portfolio, we utilize qualitative adjustments to the modeled estimated loss approaches.
Management believes that the estimate for the allowance for credit losses was reasonable and appropriate as of December 31, 2025. In order to quantify the credit risk impact of other trends and changes within the loan portfolio, we utilize qualitative adjustments to the modeled estimated loss approaches.
With the adoption of CECL, we elected not to consider accrued interest receivable in our estimated credit losses because we write off uncollectible accrued interest receivable in a timely manner. We consider writing off accrued interest amounts once the amounts become 90 days past due to be considered within a timely manner.
With the adoption of Current Expected Credit Losses ("CECL"), we elected not to consider accrued interest receivable in our estimated credit losses because we write off uncollectible accrued interest receivable in a timely manner. We consider writing off accrued interest amounts once the amounts become 90 days past due to be considered within a timely manner.
The portfolio serves the following purposes: (i) it provides a source of pledged assets for securing certain deposits and borrowed funds, as may be required by law or by specific agreement with a depositor or lender; (ii) it provides liquidity to even out cash flows from the loan and deposit activities of customers; (iii) it can be used as an interest rate risk management tool, because it provides a large base of assets, the maturity and interest rate characteristics of which can be changed more readily than the loan portfolio to better match changes in the deposit base and our other funding sources; and (iv) it is an alternative interest-earning use of funds when loan demand is weak or when deposits grow more rapidly than loans.
The portfolio serves the following purposes: (i) it provides a source of pledged assets for securing certain deposits and borrowed funds, as may be required by law or by specific agreement with a depositor or lender; (ii) it provides liquidity to cushion for cash flows from customer loan and deposit activities; (iii) it can be used as an interest rate risk management tool, because it provides a large base of assets, the maturity and interest rate characteristics of which can be changed more readily than the loan portfolio to better match changes in the deposit base and our other funding sources; and (iv) it is an alternative interest-earning use of funds when loan demand is weak or when deposits grow more rapidly than loans.
Economic conditions and the stability of capital markets impact the access to and the cost of wholesale funding. The access to capital markets is also affected by the ratings received from various credit rating agencies. We had $100.0 million of unsecured federal funds lines with no amounts advanced as of December 31, 2024 and 2023.
Economic conditions and the stability of capital markets impact the access to and the cost of wholesale funding. The access to capital markets is also affected by the ratings received from various credit rating agencies. We had $100.0 million of unsecured federal funds lines with no amounts advanced as of both December 31, 2025 and 2024.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Part II, Item 1A.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-K , including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Part II, Item 1A.
December 31, 2024 Due in One Year or Less Due after One Year Through Five Years Due after Five Years Through Ten Years Due after Ten Years ($ in thousands) Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield U.S.
December 31, 2025 Due in One Year or Less Due after One Year Through Five Years Due after Five Years Through Ten Years Due after Ten Years ($ in thousands) Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield U.S.
As part of our allowance for credit losses process, sensitivity analyses are performed to assess the impact of how changing certain key assumptions could impact our estimated allowance for credit losses as of December 31, 2024.
As part of our process for determining allowance for credit losses, sensitivity analyses are performed to assess the impact of how changing certain key assumptions could impact our estimated allowance for credit losses as of December 31, 2025.
We use underwriting guidelines to assess the borrowers’ historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending agreements to allow us to react to a borrower’s deteriorating financial condition, should that occur.
All loan types are within established limits. We use underwriting guidelines to assess the borrowers’ historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending agreements to allow us to react to a borrower’s deteriorating financial condition, should that occur.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 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 Report.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 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-K .
These estimates, assumptions and judgments are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement.
These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement.
We calculated alternative values for the allowance for credit losses by severely changing key assumptions, such as macroeconomic inputs from the economic forecasts, prepayment rates, historical loss factors, among others, and the calculated allowance for the quantitative component would have been between $5.8 million and $12.4 million higher than our estimate for the allowance as of December 31, 2024, depending on the forecast scenario.
We calculated alternative values for the allowance for credit losses by severely changing key assumptions, such as macroeconomic inputs from the economic forecasts, prepayment rates, historical loss factors, among others, and the calculated allowance for the quantitative component would have been between $11.0 million and $15.9 million higher than our estimate for the allowance as of December 31, 2025, depending on the forecast scenario.
Capital Requirements We are subject to various regulatory capital requirements administered by the federal and state banking regulators, although, as a “smaller bank holding company,” we are not subject to most of these standards at the holding company level.
Capital Requirements We are subject to regulatory capital requirements administered by federal and state banking regulators; however, as a “smaller bank holding company,” most of these standards apply only at the Bank level.
A portion of our noninterest income is associated with SBA lending activity, consisting of gains on the sale of loans sold in the secondary market and servicing income from loans sold with servicing retained.
A portion of our noninterest income is associated with SBA lending activity, consisting of gains on the sale of loans sold in the secondary market and servicing income from loans sold with servicing retained. Other sources of noninterest income include service charges on deposit.
Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume).
Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volume and rate have been allocated to volume and rate ratably.
In addition, on such dates we had lines of credit from the Federal Reserve discount window of $215.1 million and $183.0 million, respectively. The Federal Reserve discount window lines were collateralized by a pool of commercial real estate loans and commercial and industrial loans totaling $278.9 million and $251.0 million as of December 31, 2024 and 2023, respectively.
In addition, on such dates we had lines of credit from the Federal Reserve discount window of $208.9 million and $215.1 million, respectively. The Federal Reserve discount window lines were collateralized by a pool of CRE loans and commercial and industrial loans totaling $290.7 million and $278.9 million as of December 31, 2025 and 2024, respectively.
Our primarily objective concerning liquidity is to manage our position to meet our customers' daily cash flow needs, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders.
Our primarily objective concerning liquidity is to manage our position to meet our customers' daily cash flow needs, while maintaining an appropriate balance between assets and liabilities to promote an appropriate return on invested capital.
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. OVERVIEW We are a bank holding company headquartered in Los Angeles, California.
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.
We classify our securities as either available-for-sale or held-to-maturity at the time of purchase. Accounting guidance requires available-for-sale securities to be marked to fair value with an offset to accumulated other comprehensive income (loss), a component of shareholders’ equity. Monthly adjustments are made to reflect changes in the fair value of our available-for-sale securities.
We classify our debt securities as either AFS or held-to-maturity ("HTM") at the time of purchase. Accounting guidance requires AFS debt securities to be marked to fair value with an offset to accumulated other comprehensive income (loss), a component of shareholders’ equity.
As of December 31, 2024, our average loan to value for commercial real estate loans was 54.0%. Loans — SBA : We are designated as an SBA Preferred Lender under the SBA Preferred Lender Program. We offer mostly SBA 7(a) variable-rate loans. We generally sell the 75% guaranteed portion of the SBA loans that we originate.
Our weighted average LTV ratio was 49% as of December 31, 2025, compared to 54% as of December 31, 2024. Loans — SBA : We are designated as an SBA Preferred Lender under the SBA Preferred Lender Program. We offer mostly SBA 7(a) variable-rate loans. We generally sell the 75% guaranteed portion of the SBA loans that we originate.
The following table presents the loan and deposit balances, the loans-to-deposit ratios, and deposits as a percentage of total liabilities as of December 31, 2024 and 2023: ($ in thousands) December 31, 2024 December 31, 2023 Deposits $ 2,027,285 $ 1,807,558 Deposits as a % of total liabilities 93.8 % 92.5 % Loans, net $ 1,932,056 $ 1,743,852 Loans-to-deposits ratio 95.3 % 96.5 % In addition to deposits, we have access to various sources of wholesale funding, as well as borrowing capacity at the FHLB, Federal Reserve, and correspondent banks to sustain an adequate liquid asset portfolio, meet daily cash demands and allow management flexibility to execute the business strategy.
The following table presents the loan and deposit balances, the loans-to-deposit ratios, and deposits as a percentage of total liabilities as of December 31, 2025 and 2024: 44 Change ($ in thousands) December 31, 2025 December 31, 2024 $ % Deposits $ 2,280,547 $ 2,027,285 $ 253,262 12 % Deposits as a % of total liabilities 94 % 94 % NA — % Loans, net $ 2,165,694 $ 1,932,056 $ 233,638 12 % Loans-to-deposits ratio 95 % 95 % NA — % In addition to deposits, we have access to various sources of wholesale funding, as well as borrowing capacity at the FHLB, Federal Reserve, and correspondent banks to sustain an adequate liquid asset portfolio, meet daily cash demands and allow management flexibility to execute the business strategy.
The advances from the FHLB are collateralized by residential and commercial real estate loans. As of December 31, 2024 and 2023, we had maximum borrowing capacity from the FHLB of $677.0 million and $655.9 million, respectively. We had borrowings from FHLB of $95.0 million and $105.0 million as of December 31, 2024 and 2023, respectively.
The advances from the FHLB are collateralized by residential and CRE loans. As of December 31, 2025 and 2024, we had maximum borrowing capacity from the FHLB of $806.1 million and $677.0 million, respectively. We had borrowings from FHLB of $75.0 million and $95.0 million as of December 31, 2025 and 2024, respectively.
Additional information about these policies can be found in the “Notes to Consolidated Financial Statements, Note 1. Business and Summary of Significant Accounting Policies.” Allowance for Credit Losses We employ a modeled approach that takes into account current and future economic conditions to estimate lifetime expected losses on a collective basis.
For further information on the Company's accounting policies, refer to Note 1. Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-K. Allowance for Credit Losses We employ a modeled approach that takes into account current and future economic conditions to estimate lifetime expected losses on a collective basis.
We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts. We maintain access to additional liquidity that we believe is more than adequate, including highly liquid assets on our balance sheet and available unused borrowings from other financial institutions.
We maintain access to additional liquidity that we believe is more than adequate, including highly liquid assets on our balance sheet and available unused borrowings from other financial institutions.
Since many of these commitments expire without being drawn upon, and each customer must continue to meet the conditions established in the contract, the total amount of these commercial commitments does not necessarily represent the future cash requirements of us. Our liquidity sources have been, and are expected to be, sufficient to meet the cash requirements of our lending activities.
These include unused commitments to extend credit, standby letters of credit and commercial letters of credit. Since many of these commitments expire without being drawn upon, and each customer must continue to meet the conditions established in the contract, the total amount of these commercial commitments does not necessarily represent 45 the future cash requirements of us.
Net interest income, the difference between interest income and interest expense, is the largest component of our total revenue. Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets).
RESULTS OF OPERATIONS Net Interest Income The management of interest income and expense is fundamental to our financial performance. Net interest income, the difference between interest income and interest expense, is the largest component of our total revenue. Management closely monitors both total net interest income and the net interest margin.
(2) Average loan balances include non-accrual loans and loans held for sale. Changes in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates.
(2) Include non-accrual loans and loans held-for-sale. 35 Changes in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following tables set forth the effects of changing rates and volumes on our net interest income during the period shown.
We had estimated uninsured deposits of $961.7 million, or 47.4% of total deposits, and $781.0 million, or 43.2% of total deposits, as of December 31, 2024 and 2023, respectively.
We had estimated uninsured deposits of $1.09 billion, or 48% of total deposits, and $961.7 million, or 47% of total deposits, as of December 31, 2025 and 2024, respectively.
($ in thousands) December 31, 2024 December 31, 2023 Nonaccrual loans $ 7,820 $ 6,082 Past due loans 90 days or more and still accruing — — Total nonperforming loans (1) 7,820 6,082 Other real estate owned 1,237 — Total nonperforming assets $ 9,057 $ 6,082 Nonperforming loans to gross loans 0.40 % 0.34 % Nonperforming assets to total assets 0.38 0.28 Allowance for credit losses to nonperforming loans 317 362 (1) Excludes guaranteed portion of SBA loans of $16.3 million and $2.0 million as of December 31, 2024 and 2023, respectively.
Change ($ in thousands) December 31, 2025 December 31, 2024 $ % or Basis Point Nonaccrual loans $ 14,071 $ 7,820 $ 6,251 80 % Past due loans 90 days or more and still accruing — — — — % Total nonperforming loans (1) 14,071 7,820 6,251 80 % OREO — 1,237 (1,237) (100) % Total nonperforming assets $ 14,071 $ 9,057 $ 5,014 55 % Nonperforming loans to gross loans 0.64 % 0.40 % NA 24 Nonperforming assets to total assets 0.53 0.38 NA 15 Allowance for credit losses on loans to nonperforming loans 199 317 NA (118) % (1) Excludes guaranteed portion of SBA loans of $20.9 million and $16.3 million as of December 31, 2025 and 2024, respectively.
The following table presents an allocation of the allowance for credit losses by portfolio as of December 31, 2024 and 2023: December 31, 2024 December 31, 2023 ($ in thousands) Amount % to Total Amount % to Total Commercial real estate $ 9,290 37.5 % $ 7,915 36.0 % SBA—real estate 5,557 22.4 1,657 7.5 SBA—non- real estate 418 1.7 147 0.7 Commercial and industrial 1,844 7.4 1,215 5.5 Home mortgage 7,684 31.0 11,045 50.2 Consumer 3 — 14 0.1 Total $ 24,796 100.0 % $ 21,993 100.0 % Nonperforming Assets Loans are considered delinquent when principal or interest payments are past due 30 days or more.
The following table presents an allocation of the allowance for credit losses by portfolio as of December 31, 2025 and 2024: December 31, 2025 December 31, 2024 Change ($ in thousands) Amount % to Total Amount % to Total $ % CRE $ 10,427 37 % $ 9,290 38 % $ 1,137 12 % SBA—real estate 6,385 23 5,557 22 828 15 SBA—non- real estate 587 2 418 2 169 40 C&I 1,611 6 1,844 7 (233) (13) Home mortgage 8,956 32 7,684 31 1,272 17 Consumer 9 0 3 0 6 200 Total $ 27,975 100 % $ 24,796 100 % $ 3,179 13 % 42 Nonperforming Assets Loans are considered delinquent when principal or interest payments are past due 30 days or more.
Our unguaranteed SBA loans collateralized by real estate are monitored by collateral type and included in our commercial real estate Concentration Guidance. 68 As of December 31, 2024, our SBA portfolio totaled $253.7 million, compared to $239.7 million as of December 31, 2023. We originated $159.6 million for the year ended December 31, 2024.
Our unguaranteed SBA loans collateralized by real estate are monitored by collateral type and included in our CRE Concentration Guidance. As of December 31, 2025, our SBA portfolio totaled $264.5 million, up from $253.7 million as of December 31, 2024.
The loan distribution table that follows sets forth our gross loans outstanding, and the percentage distribution in each category as of the dates indicated: December 31, 2024 December 31, 2023 ($ in thousands) Amount % of Total Amount % of Total Commercial real estate $ 980,247 50.1 % $ 885,585 50.2 % SBA—real estate 231,962 11.9 224,695 12.7 SBA—non-real estate 21,748 1.1 14,997 0.8 Commercial and industrial 213,097 10.9 120,970 6.9 Home mortgage 509,524 26.0 518,024 29.3 Consumer 274 — 1,574 0.1 Gross loans receivable 1,956,852 100.0 % 1,765,845 100.0 % Allowance for credit losses (24,796) (21,993) Loans receivable, net (1) $ 1,932,056 $ 1,743,852 (1) Includes net deferred loan costs (fees) and unamortized premiums (unaccreted discounts) of $(702) thousand and $140 thousand as of December 31, 2024 and 2023, respectively.
The loan distribution table that follows sets forth our gross loans outstanding, and the percentage distribution in each category as of the dates indicated: December 31, 2025 December 31, 2024 Change ($ in thousands) Amount % of Total Amount % of Total $ % CRE $ 1,132,223 52 % $ 980,247 50 % $ 151,976 2 % SBA—real estate 242,041 11 231,962 12 10,079 (1) SBA—non-real estate 22,482 1 21,748 1 734 — C&I 221,270 10 213,097 11 8,173 (1) Home mortgage 574,300 26 509,524 26 64,776 — Consumer 1,353 0 274 0 1,079 — Gross loans receivable 2,193,669 100 % 1,956,852 100 % 236,817 12 % Allowance for credit losses (27,975) (24,796) (3,179) 13 % Loans receivable, net (1) $ 2,165,694 $ 1,932,056 $ 233,638 12 % (1) Includes net deferred loan costs (fees) and net unamortized premiums (discounts) of $(331) thousand and $(702) thousand as of December 31, 2025 and 2024, respectively.
Nonperforming loans include non-accrual loans, loans past due 90 days or more and still accruing interest, and loans modified under troubled debt restructurings.
The following table sets forth the allocation of our nonperforming assets among our different asset categories as of the dates indicated. Nonperforming loans include non-accrual loans, loans past due 90 days or more and still accruing interest, and loans modified under troubled debt restructurings.
As of December 31, 2024 Actual (1) Regulatory Capital Ratio Requirements Minimum to be Considered "Well Capitalized" Regulatory Capital Ratio Requirements, including fully phased in Capital Conservation Buffer ($ in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio Total capital (to risk-weighted assets) Consolidated $ 244,659 12.60 % N/A N/A N/A N/A N/A N/A Bank 242,966 12.50 $ 155,463 8.00 % $ 194,328 10.00 % $ 204,053 10.50 % Tier 1 capital (to risk-weighted assets) Consolidated 220,390 11.35 N/A N/A N/A N/A N/A N/A Bank 218,675 11.25 116,597 6.00 155,463 8.00 165,186 8.50 CET1 capital (to risk-weighted assets) Consolidated 220,390 11.35 N/A N/A N/A N/A N/A N/A Bank 218,675 11.25 87,448 4.50 126,313 6.50 136,035 7.00 Tier 1 leverage (to average assets) Consolidated 220,390 9.27 N/A N/A N/A N/A N/A N/A Bank 218,675 9.20 95,055 4.00 118,819 5.00 95,055 4.00 (1) The capital requirements are only applicable to the Bank, and our ratios are included for comparison purpose. 75 As of December 31, 2023 Actual (1) Regulatory Capital Ratio Requirements Minimum to be Considered "Well Capitalized" Regulatory Capital Ratio Requirements, including fully phased in Capital Conservation Buffer ($ in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio Total capital (to risk-weighted assets) Consolidated $ 229,544 13.77 % N/A N/A N/A N/A N/A N/A Bank 227,773 13.66 $ 133,353 8.00 % $ 166,691 10.00 % $ 175,025 10.50 % Tier 1 capital (to risk-weighted assets) Consolidated 208,707 12.52 N/A N/A N/A N/A N/A N/A Bank 206,936 12.41 100,014 6.00 133,353 8.00 141,687 8.50 CET1 capital (to risk-weighted assets) Consolidated 208,707 12.52 N/A N/A N/A N/A N/A N/A Bank 206,936 12.41 75,011 4.50 108,349 6.50 116,684 7.00 Tier 1 leverage (to average assets) Consolidated 208,707 9.57 N/A N/A N/A N/A N/A N/A Bank 206,936 9.49 87,207 4.00 109,008 5.00 87,207 4.00 (1) The capital requirements are only applicable to the Bank, and our ratios are included for comparison purpose.
This qualified as Tier 2 capital at the consolidated level and Tier 1 capital at the Bank level under current regulatory guidelines and interpretations. 46 The table below presents the regulatory “well-capitalized” requirements and the Company's and the Bank's capital ratios as of December 31, 2025 and 2024: As of December 31, 2025 Actual (1) Regulatory Capital Ratio Requirements Minimum to be Considered "Well Capitalized" Regulatory Capital Ratio Requirements, including fully phased in Capital Conservation Buffer ($ in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio Total capital (to risk-weighted assets) Consolidated $ 289,562 13.31 % N/A N/A N/A N/A N/A N/A Bank 289,464 13.30 $ 174,139 8.00 % $ 217,673 10.00 % $ 228,557 10.50 % Tier 1 capital (to risk-weighted assets) Consolidated 237,791 10.93 N/A N/A N/A N/A N/A N/A Bank 262,255 12.05 130,604 6.00 174,139 8.00 185,022 8.50 CET1 capital (to risk-weighted assets) Consolidated 237,791 10.93 N/A N/A N/A N/A N/A N/A Bank 262,255 12.05 97,953 4.50 141,488 6.50 152,371 7.00 Tier 1 leverage (to average assets) Consolidated 237,791 8.99 N/A N/A N/A N/A N/A N/A Bank 262,255 9.91 105,826 4.00 132,282 5.00 105,826 4.00 As of December 31, 2024 Actual (1) Regulatory Capital Ratio Requirements Minimum to be Considered "Well Capitalized" Regulatory Capital Ratio Requirements, including fully phased in Capital Conservation Buffer ($ in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio Total capital (to risk-weighted assets) Consolidated $ 244,659 12.60 % N/A N/A N/A N/A N/A N/A Bank 242,966 12.50 $ 155,463 8.00 % $ 194,328 10.00 % $ 204,053 10.50 % Tier 1 capital (to risk-weighted assets) Consolidated 220,390 11.35 N/A N/A N/A N/A N/A N/A Bank 218,675 11.25 116,597 6.00 155,463 8.00 165,186 8.50 CET1 capital (to risk-weighted assets) Consolidated 220,390 11.35 N/A N/A N/A N/A N/A N/A Bank 218,675 11.25 87,448 4.50 126,313 6.50 136,035 7.00 Tier 1 leverage (to average assets) Consolidated 220,390 9.27 N/A N/A N/A N/A N/A N/A Bank 218,675 9.20 95,055 4.00 118,819 5.00 95,055 4.00 (1) The capital requirements are only applicable to the Bank, and our ratios are included for comparison purpose.
Information about our loan commitments, standby letters of credit and commercial letters of credit is provided in Note 9. Commitments and Contingencies to the unaudited consolidated financial statements in this Report.
Our liquidity sources have been, and are expected to be, sufficient to meet the cash requirements of our lending activities. Information about our loan commitments, standby letters of credit and commercial letters of credit is provided in Note 11. Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-K.
Commercial real estate loans include owner-occupied and non-occupied commercial real estate. We originate both fixed and adjustable rate loans. Adjustable rate loans are based on the Wall Street Journal prime rate. Our commercial real estate loan portfolio totaled $980.2 million as of December 31, 2024 compared to $885.6 million as of December 31, 2023.
Loans — CRE : Our CRE loans include owner-occupied and non-occupied properties. We originate a mix of fixed- and adjustable-rate loans, with adjustable rate tied to the Wall Street Journal prime rate. As of December 31, 2025, our CRE loans totaled $1.13 billion, up from $980.2 million as of December 31, 2024.
The following table presents, for the periods indicated, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields, (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates, (iii) net interest income, (iv) the interest rate spread, and (v) the net interest margin. 57 Year Ended December 31, 2024 2023 ($ in thousands) Average Balance Interest and Fees Yield / Rate Average Balance Interest and Fees Yield / Rate Interest-earning assets: Interest-bearing deposits in other banks $ 109,579 $ 5,766 5.26 % $ 78,676 $ 4,040 5.14 % Federal funds sold and other investments (1) 16,371 1,266 7.74 14,963 1,031 6.89 Available-for-sale debt securities 194,969 6,227 3.19 202,167 6,131 3.03 Commercial real estate loans 929,890 56,883 6.12 857,124 48,312 5.64 SBA loans 263,442 27,978 10.62 260,507 28,514 10.95 Commercial and industrial loans 178,533 13,765 7.71 119,135 9,189 7.71 Home mortgage loans 504,030 25,648 5.09 507,125 24,384 4.81 Consumer & other loans 835 87 10.32 987 64 6.51 Loans (2) 1,876,730 124,361 6.63 1,744,878 110,463 6.33 Total interest-earning assets 2,197,649 137,620 6.26 2,040,684 121,665 5.96 Noninterest-earning assets 87,745 84,757 Total assets $ 2,285,394 $ 2,125,441 Interest-bearing liabilities: Money market deposits and others $ 346,104 $ 14,135 4.08 % $ 374,116 $ 13,830 3.70 % Time deposits 1,084,107 53,986 4.98 841,804 35,605 4.23 Total interest-bearing deposits 1,430,211 68,121 4.76 1,215,920 49,435 4.07 Borrowings 88,186 3,891 4.41 77,114 3,543 4.59 Total interest-bearing liabilities 1,518,397 72,012 4.74 1,293,034 52,978 4.10 Noninterest-bearing liabilities: Noninterest-bearing deposits 528,877 613,797 Other noninterest-bearing liabilities 40,839 35,377 Total noninterest-bearing liabilities 569,716 649,174 Shareholders’ equity 197,281 183,233 Total liabilities and shareholders’ equity $ 2,285,394 $ 2,125,441 Net interest income / interest rate spreads $ 65,608 1.52 % $ 68,687 1.86 % Net interest margin 2.99 % 3.37 % Cost of deposits 3.48 % 2.70 % Cost of funds 3.52 % 2.78 % (1) Includes income and average balances for Federal Home Loan Bank (“FHLB”) and Pacific Coast Bankers Bank stock, CRA qualified mutual fund, term federal funds, interest-earning time deposits and other miscellaneous interest-earning assets.
Our net interest margin is also adversely impacted by the reversal of interest on nonaccrual loans and the reinvestment of loan payoffs into lower yielding investment securities and other short-term investments. 34 The following table presents, for the periods indicated: (i) weighted average balances, the total interest income from interest-earning assets, and the resulting average yields; (ii) average balances, the total interest expense on interest-bearing liabilities, and the resulting average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin: Year Ended December 31, 2025 2024 ($ in thousands) Average Balance Interest and Fees Yield / Rate Average Balance Interest and Fees Yield / Rate Interest-earning assets: Interest-bearing deposits in other banks $ 135,551 $ 5,882 4.34 % $ 109,579 $ 5,766 5.26 % Other investments (1) 16,934 1,260 7.44 16,371 1,266 7.74 AFS debt securities 190,798 6,312 3.31 194,969 6,227 3.19 CRE 1,053,827 65,298 6.20 929,890 56,883 6.12 SBA 279,600 26,223 9.38 263,442 27,978 10.62 C&I 203,997 14,827 7.27 178,533 13,765 7.71 Home mortgage 572,093 30,501 5.33 504,030 25,648 5.09 Consumer 261 25 9.62 835 87 10.32 Loans (2) 2,109,778 136,874 6.49 1,876,730 124,361 6.63 Total interest-earning assets 2,453,061 150,328 6.13 2,197,649 137,620 6.26 Noninterest-earning assets 81,066 87,745 Total assets $ 2,534,127 $ 2,285,394 Interest-bearing liabilities: Money market deposits and others $ 394,603 $ 13,705 3.47 % $ 346,104 $ 14,135 4.08 % Time deposits 1,273,661 55,144 4.33 1,084,107 53,986 4.98 Total interest-bearing deposits 1,668,264 68,849 4.13 1,430,211 68,121 4.76 Borrowings 72,235 2,853 3.95 88,186 3,891 4.41 Subordinated note, net 3,502 278 7.93 — — — Total interest-bearing liabilities 1,744,001 71,980 4.13 1,518,397 72,012 4.74 Noninterest-bearing liabilities: Noninterest-bearing deposits 532,823 528,877 Other noninterest-bearing liabilities 42,152 40,839 Total noninterest-bearing liabilities 574,975 569,716 Shareholders’ equity 215,151 197,281 Total liabilities and shareholders’ equity $ 2,534,127 $ 2,285,394 Net interest income / interest rate spreads $ 78,348 2.00 % $ 65,608 1.52 % Net interest margin 3.19 % 2.99 % Cost of deposits 3.13 % 3.48 % Cost of funds 3.16 % 3.52 % (1) Includes FHLB and PCBB stocks, CRA qualified mutual fund and interest-earning time deposits with banks.
Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Weighted-average yields are computed based on amortized cost balances and yields on tax-exempt securities are not presented on a tax-equivalent basis. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
The following table summarizes the fair value of the available-for-sale securities portfolio as of the dates presented: December 31, 2024 December 31, 2023 ($ in thousands) Amortized Cost Fair Value Unrealized Loss Amortized Cost Fair Value Unrealized Loss U.S.
Monthly adjustments are made to reflect changes in the fair value of our AFS debt securities. 38 The following table summarizes the fair value of the AFS debt securities portfolio as of the dates presented: December 31, 2025 December 31, 2024 Ratings as of December 31, 2025 (1) ($ in thousands) Amortized Cost Fair Value Net Unrealized Loss Amortized Cost Fair Value Net Unrealized Loss AAA/AA A U.S.
During the year ended December 31, 2024, we originated $219.9 million of commercial real estate loans. As of December 31, 2024, approximately 76.1% of the commercial real estate portfolio consisted of fixed-rate loans. Our policy maximum loan-to-value, or LTV, is 70% for commercial real estate loans.
In 2025, we originated $269.8 million in new CRE loans. Approximately 80% of the CRE portfolio consisted of fixed/hybrid rated loans as of December 31, 2025, compared to 76% as of December 31, 2024. Our policy sets the maximum loan-to-value ("LTV") for CRE at 70%.
Nonperforming loans excluded the guaranteed portion of SBA loans of $16.3 million and $2.0 million as of December 31, 2024 and 2023, respectively. 71 Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as OREO until being sold, and is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.
Real estate acquired through foreclosure or by deed-in-lieu of foreclosure is classified as OREO until sold, and is initially recorded at fair value less costs to sell at the time of acquisition, establishing a new cost basis. Subsequent declines in fair value are recognized through valuation allowance and charged to expense.
Our major operating expenses are the interest we pay on deposits and other borrowings, the salaries and related benefits we pay our management and staff, and the 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.
We rely primarily on locally-generated deposits, mostly from the Korean-American market within California, to fund our loan activities although, from time to time, we may rely on brokered deposits or other source or liquidity.
Service charges on deposit was $2.1 million for the year ended December 31, 2023, compared to $1.7 million for the same period of 2022, an increase of $448 thousand or 26.7%, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts. 63 Noninterest Expense 2024 Compared to 2023 The following table sets forth the major components of our noninterest expense for the years ended December 31, 2024 and 2023: Year Ended December 31, ($ in thousands) 2024 2023 $ Change % Change Noninterest expense: Salaries and employee benefits $ 31,717 $ 29,593 $ 2,124 7.2 % Occupancy and equipment 6,673 6,490 183 2.8 Data processing and communication 2,245 2,109 136 6.4 Professional fees 1,535 1,571 (36) (2.3) FDIC insurance and regulatory assessments 1,672 1,457 215 14.8 Promotion and advertising 533 614 (81) (13.2) Directors' fees 640 680 (40) (5.9) Foundation donation and other contributions 2,108 2,400 (292) (12.2) Other expenses 3,076 2,812 264 9.4 Total noninterest expense $ 50,199 $ 47,726 $ 2,473 5.2 % Noninterest expense for the year ended December 31, 2024 was $50.2 million, an increase of $2.5 million, or 5.2%, compared to $47.7 million for the same period of 2023, primarily due to increases in salaries and employee benefits expense, other expenses, and FDIC insurance and regulatory assessments, partially offset by a decrease in foundation donation and other contributions.
Noninterest Expense The following table sets forth the various components of our noninterest expense for the years ended December 31, 2025 and 2024: Year Ended December 31, ($ in thousands) 2025 2024 $ Change % Change Noninterest expense: Salaries and employee benefits $ 35,987 $ 31,717 $ 4,270 13 % Occupancy and equipment 6,760 6,673 87 1 Data processing and communication 1,456 2,245 (789) (35) Professional fees 1,793 1,535 258 17 FDIC insurance and regulatory assessments 1,783 1,672 111 7 Promotion and advertising 505 533 (28) (5) Directors' fees 677 640 37 6 Foundation donation and other contributions 2,570 2,108 462 22 Other expenses 4,242 3,076 1,166 38 Total noninterest expense $ 55,773 $ 50,199 $ 5,574 11 % Noninterest expense for 2025 increased by $5.6 million, or 11%, primarily due to higher salaries and employee benefits, and other expenses, partially offset by a reduction in data processing and communication.
Other sources of noninterest income include service charges on deposit. 2024 Compared to 2023 The following table sets forth the various components of our noninterest income for the years ended December 31, 2024 and 2023: Year Ended December 31, ($ in thousands) 2024 2023 $ Change % Change Noninterest income: Service charges on deposits $ 3,261 $ 2,123 $ 1,138 53.6 % Loan servicing fees, net of amortization 2,898 2,449 449 18.3 Gain on sale of loans 8,313 7,843 470 6.0 Other income 1,955 1,766 189 10.7 Total noninterest income $ 16,427 $ 14,181 $ 2,246 15.8 % 62 Noninterest income for the year ended December 31, 2024 was $16.4 million, an increase of $2.2 million, or 15.8%, compared to $14.2 million for the same period of 2023, primarily due to increases in service charge on deposits, gain on sale of loans and loan servicing fees.
The following table sets forth the various components of our noninterest income for the years ended December 31, 2025 and 2024: Year Ended December 31, ($ in thousands) 2025 2024 $ Change % Change Noninterest income: Service charges on deposits $ 3,204 $ 3,261 $ (57) (2) % Loan servicing fees, net of amortization 3,281 2,898 383 13 Gains on sale of loans 7,070 8,313 (1,243) (15) Other income 2,777 1,955 822 42 Total noninterest income $ 16,332 $ 16,427 $ (95) (1) % Noninterest income for 2025 remained relatively stable year-over-year.
To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our accounting and reporting policies conform to accounting principles generally accepted in GAAP and conform to general practices within the industry in which we operate. To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information.
Accordingly, for available-for-sale debt securities, we did not have allowance for credit losses as of December 31, 2024 and 2023. The following table sets forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of the dates presented.
For additional information on AFS debt securities and the allowance for credit losses, see Note 1. Significant Accounting Policies and Note 2. Securities to the Consolidated Financial Statements in this Form 10-K. 39 The following table sets forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of the dates presented.
We sold SBA loans of $127.2 million with a 7.97% average premium during the year ended December 31, 2024. From our total SBA loan portfolio, $232.0 million is secured by real estate and $21.7 million is unsecured or secured by business assets as of December 31, 2024.
Of the total portfolio, $242.0 million was secured by real estate, while $22.5 million was unsecured or secured by business assets as of December 31, 2025. In comparison, as of December 31, 2024, $232.0 million was secured by real estate and $21.7 million was either unsecured or secured by business assets.
We did not have any borrowings outstanding with the Federal Reserve as of December 31, 2024 or 2023, and our borrowing capacity is limited only by eligible collateral. Based on the values of loans pledged as collateral, we had $401.9 million of additional borrowing availability with the FHLB as of December 31, 2024.
We had no borrowings outstanding with the Federal Reserve as of December 31, 2025 or 2024. Our borrowing capacity on these lines of credits is based upon our eligible collateral and thus may fluctuate from time to time.
We drive our income from interest received on our loan portfolio, the fee income we receive in connection with our deposits, and the sale and service of SBA loans.
In addition to our net interest income, the Bank derives earnings from fee income we receive in connection with our deposits, and from gains on the sale and service of SBA loans. Our major operating expenses are the salaries and related benefits we pay our management and staff, and the rent we pay on our leased properties.
The decrease, driven primarily by the ongoing economic uncertainties and the related unpredictability of market interest rates, was primarily due to a $3.1 million decrease in net interest income and a $2.5 million increase in noninterest expense, offset by a $2.2 million increase in noninterest income and a $1.6 million decrease in income tax expense.
The increase was primarily driven by higher net interest income, partially offset by increases in noninterest expense and income tax expense.
Loans Our loans represent the largest portion of our earning assets, substantially greater than the securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing our financial condition.
Government agencies or sponsored agency securities: Residential mortgage-backed securities $ 30 2.25 % $ 524 2.18 % $ 15,391 2.27 % $ 19,334 2.12 % Residential collateralized mortgage obligations — — 59 1.81 1,478 1.54 163,566 3.35 Municipal securities - tax exempt — — — — — — 5,913 5.69 Total AFS debt securities $ 30 2.25 % $ 583 2.15 % $ 16,869 2.20 % $ 188,813 3.30 % Loans Our loans represent the largest portion of our earning assets, substantially greater than the securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing our financial condition.
The following table show the composition of deposits by type as of the dates presented: December 31, 2024 December 31, 2023 ($ in thousands) Amount Percent Amount Percent Noninterest-bearing demand $ 504,928 24.9 % $ 522,751 28.9 % Interest-bearing: Money market and others 329,095 16.2 399,018 22.1 Time deposits (greater than $250) 565,813 27.9 433,892 24.0 Time deposits ($250 or less) 627,449 31.0 451,897 25.0 Total interest-bearing 1,522,357 75.1 1,284,807 71.1 Total deposits $ 2,027,285 100.0 % $ 1,807,558 100.0 % The following tables set forth the maturity of time deposits as of December 31, 2024: Maturity Within: ($ in thousands) Three Months Three to Six Months Six to Twelve Months After Twelve Months Total Time deposits (greater than $250) $ 206,324 $ 149,639 $ 209,399 $ 451 $ 565,813 Time deposits ($250 or less) 202,931 123,639 281,308 19,571 627,449 Total time deposits $ 409,255 $ 273,278 $ 490,707 $ 20,022 $ 1,193,262 72 Other than deposits, we also utilized FHLB advances as a supplementary funding source to finance our operations.
We dedicate continuing effort into gathering noninterest demand deposits accounts through marketing to our existing and new loan customers, customer referrals, our marketing staff and various involvement with community networks. 43 The following table show the composition of deposits by type as of the dates presented: December 31, 2025 December 31, 2024 Change ($ in thousands) Amount Percent Amount Percent $ % Noninterest-bearing demand $ 520,865 23 % $ 504,928 25 % $ 15,937 3 % Interest-bearing: Money market and others 388,066 17 329,095 16 58,971 18 Time deposits (greater than $250) 683,956 30 565,813 28 118,143 21 Time deposits ($250 or less) 687,660 30 627,449 31 60,211 10 Total interest-bearing 1,759,682 77 1,522,357 75 237,325 16 Total deposits $ 2,280,547 100 % $ 2,027,285 100 % $ 253,262 12 % The following tables set forth the maturity of time deposits as of December 31, 2025: Maturity Within: ($ in thousands) Three Months Three to Six Months Six to Twelve Months After Twelve Months Total Time deposits (greater than $250) $ 319,815 $ 119,285 $ 94,984 $ 149,872 $ 683,956 Time deposits ($250 or less) 323,978 141,651 121,394 100,637 687,660 Total time deposits $ 643,793 $ 260,936 $ 216,378 $ 250,509 $ 1,371,616 Other than deposits, we also utilized FHLB advances as a supplementary funding source to finance our operations.
There was no change in quantitative reserves in 2023 as a $450 thousand increase in reserves from loan growth in 2023 was offset by an equivalent release of reserves from decreases in historical loss factors. Noninterest Income While interest income remains the largest single component of total revenues, noninterest income is also an important component.
These increases were partially offset by lower specific reserves. 36 Noninterest Income While interest income remains the largest single component of total revenues, noninterest income is also an important component.
The capital amounts and classifications are subject to qualitative judgments by the federal banking regulators regarding components, 74 risk weightings and other factors.
The Bank, must meet capital guidelines under the Basel III framework and the prompt corrective action regulations, which include quantitative measures of capital based on risk-weighted assets and the leverage ratio. These capital amounts and classifications are subject to qualitative judgments by the federal banking regulators regarding classifications also involve qualitative judgments by regulators regarding risk-weighting and other factors.
Loans - Home Mortgage: We originate mainly non-qualified, alternative documentation single-family home mortgage loans (“home mortgage”) primarily through our retail branch network and our correspondent lender network. The primary loan product is a five-year or seven-year hybrid adjustable rate mortgage, which reprices after five years to a selected SOFR plus certain spreads.
Our primary loan product is a five-year or seven-year hybrid adjustable-rate mortgage, which reprices after the initial five- or 41 seven-year lock period to a selected SOFR plus applicable margin. We also purchase residential mortgage loans from third-party originators based on the underwriting quality and file review as opportunities arise.
We do not have any material concentrations by industry or group of industries in the loan portfolio. However, 88.0% of our gross loans were secured by real property as of December 31, 2024, compared to 92.2% as of December 31, 2023.
Our loan portfolio is concentrated in CRE, which includes unguaranteed balances in SBA loans, home mortgage and commercial (primarily manufacturing, wholesale, and services oriented entities). We do not have any material concentrations by industry or group of industries in the loan portfolio.
Government agencies or sponsored agency securities: Residential mortgage-backed securities $ 41,521 $ 37,076 $ (4,445) $ 48,318 $ 43,877 $ (4,441) Residential collateralized mortgage obligations 160,187 143,041 (17,146) 162,142 144,459 (17,683) Municipal securities - tax exempt 5,830 5,792 (38) 5,726 5,914 188 Total available-for-sale debt securities $ 207,538 $ 185,909 $ (21,629) $ 216,186 $ 194,250 $ (21,936) Available-for-sale debt securities decreased $8.3 million, or 4.3%, to $185.9 million as of December 31, 2024 from $194.3 million as of December 31, 2023, primarily due to principal paydowns and maturity of $27.7 million, partially offset by security purchases of $19.1 million for the year ended December 31, 2024.
Government agencies or sponsored agency securities: Residential mortgage-backed securities $ 35,279 $ 32,694 $ (2,585) $ 41,521 $ 37,076 $ (4,445) 100 % — % Residential collateralized mortgage obligations 165,103 154,463 (10,640) 160,187 143,041 (17,146) 100 — Municipal securities - tax exempt 5,913 5,628 (285) 5,830 5,792 (38) — 100 Total AFS debt securities $ 206,295 $ 192,785 $ (13,510) $ 207,538 $ 185,909 $ (21,629) 97 % 3 % (1) Credit ratings are independent assessments of the credit quality of debt securities.
Removed
Substantially all of our business activities consist of commercial community banking activities, which are conducted through Open Bank, our wholly owned banking subsidiary. 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.
Added
OVERVIEW 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 Report, and with the general description of our holding company, our subsidiary bank, and our business set forth in Part I. Item 1. Business above.
Removed
We currently operate eight branches in Los Angeles and Orange Counties in California, one branch in Santa Clara, California, one branch in Carrollton, Texas and one branch near Las Vegas, Nevada. We have five loan production offices in Pleasanton, California, Atlanta, Georgia, Aurora, Colorado, Lynnwood, Washington, and Fairfax, Virginia. Our results of operations depend primarily on our net interest income.
Added
Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, 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 I, Item 1A.
Removed
Banking Economy and Recent Developments In recent periods, our earnings have been affected by a series of fluctuations in the “discount rate” for short-term borrowings updated by the Federal Reserve Board Open Markets Committee in response to perceived inflationary pressures.
Added
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.
Removed
These fluctuations have included both negative and positive adjustments, but speaking generally, these rates are substantially higher than in years prior to 2022. Financial institutions and markets have struggled to keep pace with the effects of these adjustments, which have affected interest rate pricing on both loans and deposits.
Added
Our results of operations depend primarily on net interest income generated through Open Bank, which represents the interest we earn on loans and related products, reduced by the interest we pay on deposits and other borrowings.
Removed
While such adjustments are commonplace and tend to affect the banking industry as a whole, the pace and degree of these adjustments have been nearly unprecedented, resulting in banks, including the Bank, experiencing substantial pressure on multiple fronts.
Added
Current Developments Interest Rate Environment The Federal Reserve maintained the federal funds rate at 3.50% to 3.75% at its January 2026 meeting, following three consecutive reductions in late 2025. The decision reflects a labor market that has softened but stabilized in recent months, reducing the urgency for additional easing.
Removed
In particular, banks have been forced to increase interest rates paid on deposits in order to meet competitive pressures from other financial institutions, as well as experiencing rapid and significant fluctuations in the value of treasury securities and other investments.
Added
At the same time, inflation remains above the Federal Reserve’s 2% objective, and recent readings have been affected by data distortions tied to the prior government shutdown. Policymakers signaled a shift to a wait‑and‑see approach as they assess the outlook for employment and inflation.
Removed
Increases in market interest rates have significantly increased the Bank’s cost of funds and have exerted downward pressure on our net interest margins, and the expected reductions in rates anticipated for late 2024 and early 2025 have not materialized.
Added
The pause also occurs against a politically sensitive backdrop, with a new Federal Reserve Chair expected later this year; however, monetary policy decisions remain committee‑driven, limiting the potential for abrupt directional changes. The current rate environment continues to influence lending activity, deposit pricing, funding costs, and overall balance‑sheet management.
Removed
Further, as interest rates increased rapidly, and remain at unexpectedly elevated levels, the values of our investment portfolios have suffered as securities issued at what are now below-market interest rates have lost value. Hedging these risks in the face of such unpredictability has likewise proven challenging and costly.
Added
We believe we have responded effectively to the evolving dynamics of the banking environment and that we are well-positioned to do so in the future. Our ability to navigate recent challenges is largely attributable to the continued loyalty of our customers and the dedication and expertise of our employees and management team.
Removed
The fluctuations in market interest rates also affected loan pricing, which had multiple effects, including a reduction in borrowing (and thus a reduction in interest paid to banks) as rates increased and remain elevated, by customers that have the ability to avoid or defer additional indebtedness, a decline in the origination of new loans, and an increase in credit risk as borrowers who faced rising interest rates, especially on variable-rate loans, found it more difficult to comply with their loan obligations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeNet Interest Sensitivity Economic Value of Equity Sensitivity December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 +300 basis points 7.10 % 1.57 % (21.91) % (41.40) % +200 basis points 5.28 2.39 (11.24) (18.75) +100 basis points 2.80 1.54 (3.95) (6.32) -100 basis points (2.04) (0.97) 3.43 5.58 -200 basis points (2.29) (0.14) 1.76 3.41 -300 basis points (1.05) 1.77 (3.20) (3.47)
Biggest changeNet Interest Sensitivity Economic Value of Equity Sensitivity December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024 +300 basis points (0.16) % 7.10 % (21.31) % (21.91) % +200 basis points 0.31 5.28 (10.83) (11.24) +100 basis points (0.03) 2.80 (3.66) (3.95) -100 basis points 2.44 (2.04) 2.28 3.43 -200 basis points 5.90 (2.29) (0.57) 1.76 -300 basis points 12.30 (1.05) (6.66) (3.20)
Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate 76 lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.
Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.
The projections assume (1) immediate, parallel shifts downward of the yield curve of 100, 200 and 300 basis points and (2) immediate, parallel shifts upward of the yield curve of 100, 200, and 300 basis points over 12 months.
The projections assume (1) 48 immediate, parallel shifts downward of the yield curve of 100, 200 and 300 basis points and (2) immediate, parallel shifts upward of the yield curve of 100, 200, and 300 basis points over 12 months.
Potential changes to our net interest income in hypothetical rising and declining rate scenarios calculated as of December 31, 2024 and 2023 are presented in the following table.
Potential changes to our net interest income in hypothetical rising and declining rate scenarios calculated as of December 31, 2025 and 2024 are presented in the following table.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. We have identified interest rate risk as our primary source of market risk.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads.
Interest Rate Risk Interest rate risk is the risk to earnings and value arising from changes in market interest rates.
We have identified interest rate risk as our primary source of market risk. 47 Interest Rate Risk Interest rate risk is the risk to earnings and value arising from changes in market interest rates.

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