OP Bancorp's Net Interest Margin Rebounds After Fed Accrual

The Tip Desk · October 22, 2026 · 4 min read

Net interest income rose 11% to $22.21 million and the margin expanded 19 bps to 3.27% as loan growth and a Federal Reserve account normalization more than offset higher deposit costs.

OP Bancorp (OPBK), parent of Open Bank, reported third-quarter 2026 net interest income of $22.21 million, an 11% increase from the second quarter, reversing a 2% sequential decline in the prior period.

The company said the rise was driven by continued loan growth and the normalization of Federal Reserve Bank account income after a prior-quarter accrual adjustment, partially offset by higher interest expense on larger average interest-bearing deposit balances. Net interest margin expanded 19 bps to 3.27%, after compressing 11 bps to 3.08% in the second quarter on that one-time accrual item.

Average loans increased 4% to $2.33 billion, re-accelerating from a 1% sequential rise in the prior quarter, with CRE and home mortgage balances leading. Average loan yield rose 5 bps to 6.41%. Loan interest income increased $1.9 million, including an $80.9 million, or 4%, increase in average loan balances.

Average deposits increased 4% to $2.41 billion, after a 1% sequential increase in the prior quarter. Interest expense rose $1.0 million on a $76.4 million, or 4%, increase in average interest-bearing deposits, including money market and time accounts. The average cost of interest-bearing deposits increased only 2 bps to 3.79%.

Gross loans at period-end increased 1% to $2.29 billion. CRE loans rose 1% to $1.20 billion, SBA loans rose 8% to $302.2 million, and C&I loans fell 16% to $186.4 million on lower line utilization. Total deposits increased 3% to $2.43 billion, with time deposits up 5% to $1.46 billion and noninterest-bearing deposits down 2% to $539.3 million.

The provision for credit losses swung to a $1.60 million charge from a $149 thousand reversal in the second quarter. The company said the increase primarily reflected higher general reserve requirements associated with loan growth and changes in credit quality, including an increase in criticized loans, and higher specific reserves due to lower net collateral values on individually evaluated loans.

Criticized loans increased 132% to $77.6 million, or 3.39% of gross loans, from $33.4 million, or 1.48%, on $45.7 million of new additions, primarily CRE loans rated Special Mention. Special mention loans rose to $51.7 million from $8.8 million. The company said four relationships totaling $41.5 million accounted for most of the special-mention increase, including an $8.2 million C&I relationship and a $5.9 million CRE relationship downgraded on DCR covenant shortfalls but remaining current, a $6.2 million CRE loan in early delinquency on sponsor liquidity constraints, and a $21.3 million CRE developer relationship in downtown Los Angeles that remains current and performing with the property being marketed for sale. Management said it believes there is a viable path toward repayment or credit upgrades over the next few quarters.

Nonperforming loans rose 4% to $18.03 million, or 0.79% of gross loans, from $17.26 million, or 0.76%, as $2.2 million migrated into nonaccrual status. Net charge-offs rose to $821 thousand, or 0.14% of average gross loans, from $175 thousand, or 0.03%. The allowance for credit losses on loans ended at $28.84 million, or 1.26% of gross loans. The company said the allowance remained adequate.

Noninterest income decreased 6% to $5.30 million. Other income fell 28% on higher unrealized losses on CRA mutual funds from higher market interest rates. Gains on sale of loans declined 3% as the bank sold $51.1 million of SBA loans at an average premium rate of 8.06%, versus $49.1 million at 8.17% in the prior period. Noninterest expense increased 5% to $15.51 million, primarily from a $675 thousand rise in professional fees for non-recurring legal and professional services. The efficiency ratio was 56.40%.

Net income was $7.76 million, or $0.52 a share, compared with $7.98 million, or $0.53 a share, in the second quarter. Return on average assets was 1.11% and return on average equity was 12.94%. Book value per share was $16.07.

The board declared a quarterly cash dividend of $0.14 a share, payable on or about November 19, 2026. No shares were repurchased under the August 2025 program during the quarter. Tier 1 leverage was 9.09% at OP Bancorp and 10.01% at Open Bank, which elected the community bank leverage ratio framework effective September 30, 2026. President and Chief Executive Officer Sang K. Oh said the company remains committed to sustainable growth, disciplined risk management and operating efficiency as it enters the final quarter of 2026.