0001722010-26-000002
SEC filingOP Bancorp reported net income of $25.6 million for FY 2025, a 22% increase from $21.1 million in FY 2024. This growth was primarily driven by a 19% increase in net interest income to $78.3 million, resulting from higher average loan balances, which expanded the net interest margin to 3.19% from 2.99%. Total assets grew 12% to $2.65 billion, supported by a 12% increase in gross loans to $2.19 billion and a 12% increase in total deposits to $2.28 billion. The company maintained strong capital ratios, with a Tier 1 leverage ratio of 8.99% and a Common Equity Tier 1 ratio of 10.93%. Key forward-looking items include navigating the current interest rate environment, managing the impact of recent SBA program eligibility changes, and continuing its organic growth strategy.
OP Bancorp delivered strong financial results for FY 2025, with net income increasing 22% to $25.6 million from $21.1 million in FY 2024. This performance was primarily driven by a significant 19% increase in net interest income to $78.3 million, which expanded the net interest margin by 20 basis points to 3.19%. The company's return on average assets improved to 1.01% from 0.92%, while return on average equity increased to 11.91% from 10.68%. Total assets grew 12% to $2.65 billion, supported by robust loan growth of 12% to $2.19 billion and deposit growth of 12% to $2.28 billion. The efficiency ratio improved to 58.91% from 61.19%, reflecting better operating leverage.
Interest income totaled $150.3 million for FY 2025, with interest and fees on loans contributing $136.9 million. The yield on average total loans was 6.49%, slightly down from 6.63% in the prior year, reflecting the impact of downward repricing on adjustable-rate loans and lower rates on new originations following federal funds rate cuts. Noninterest income remained relatively stable at $16.3 million, with gains on sale of loans decreasing by $1.2 million to $7.1 million due to lower average premium rates on SBA loan sales. Other income increased by $0.8 million to $2.8 million, primarily driven by higher credit-related fees. The company's revenue mix continues to be heavily weighted toward net interest income, which represents the core of its banking operations.
Net interest margin expanded to 3.19% from 2.99% in the prior year, driven by a 48 basis point increase in net interest spread. The cost of deposits decreased to 3.13% from 3.48%, reflecting repricing of deposit products in response to federal funds rate cuts. Operating margin (income before income taxes as a percentage of total revenue) was 22.1%. Noninterest expense increased 11% to $55.8 million, primarily due to higher salaries and employee benefits ($4.3 million increase) and other expenses ($1.2 million increase). The provision for credit losses increased to $3.6 million from $2.8 million, reflecting higher quantitative reserves related to risk-rating downgrades and loan growth, as well as increased qualitative reserves.
Net cash provided by operating activities was $26.2 million for FY 2025. The company used $243.0 million in investing activities, primarily for net change in loans receivable ($211.6 million) and purchases of AFS debt securities ($29.6 million). Financing activities provided $249.2 million, driven by net change in deposits ($253.3 million) and proceeds from issuance of subordinated note ($24.6 million), partially offset by repayment of FHLB advances ($145.0 million). Total shareholders' equity increased to $227.9 million from $205.0 million. The company maintains strong liquidity with $360.1 million in liquid assets (cash and AFS securities) and $752.5 million in available borrowings. Capital ratios remain well above regulatory requirements, with Tier 1 leverage ratio at 8.99% and Common Equity Tier 1 ratio at 10.93%.
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. Management believes the company has responded effectively to the evolving banking environment and is well-positioned for the future. Recent changes to SBA program eligibility, effective March 1, 2026, eliminated a rule permitting SBA lending to borrowers with up to 5% equity ownership by noncitizens or non-U.S.-resident aliens. Management has assessed the impact and has not identified a material adverse effect on existing portfolios but continues to monitor the effect on future SBA loan originations. The company plans to continue leveraging its experienced management team and community banking focus to drive organic growth, while maintaining disciplined risk management and regulatory compliance.