OP BancorpOPBK
OP Bancorp Fair Value Disclosure
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or the price that would be paid to transfer a liability on the measurement date and is determined using an exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Assets and liabilities recorded at fair value on a recurring basis, such as AFS securities and equity investments. Additionally, from time to time, the Company records fair value adjustments on a nonrecurring basis. These nonrecurring adjustments typically involve application of lower of cost or fair value accounting and write-downs of individual assets.
The Company classifies its assets and liabilities recorded at fair value as one of the following three categories and a financial instrument’s level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement:
Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2 — Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy.
AFS Debt Securities — The fair values of investment securities are determined by matrix pricing, which is a mathematical technique used to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2). Management obtains the fair values of investment securities on a monthly basis from a third-party pricing service.
Equity Investments — The Company has an equity investment with readily determinable fair value. The fair value for the equity investment with readily determinable fair value is obtained from unadjusted quoted prices in active markets on the date of measurement and classified as Level 1.
Derivatives — The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2).
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024 are summarized below:
| Fair Value Measure on a Recurring Basis | ||||||||||||||||||||||||||
| ($ in thousands) | Total Fair Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| U.S. Government agencies or sponsored agency securities: | ||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | 32,694 | $ | — | $ | 32,694 | $ | — | ||||||||||||||||||
| Residential collateralized mortgage obligations | 154,463 | — | 154,463 | — | ||||||||||||||||||||||
| Municipal securities - tax exempt | 5,628 | — | 5,628 | — | ||||||||||||||||||||||
| Equity Investments: | ||||||||||||||||||||||||||
| Mutual fund - CRA qualified | 3,757 | 3,757 | — | — | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Derivative financial instruments | $ | 888 | $ | — | $ | 888 | $ | — | ||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| U.S. Government agencies or sponsored agency securities: | ||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | 37,076 | $ | — | $ | 37,076 | $ | — | ||||||||||||||||||
| Residential collateralized mortgage obligations | 143,041 | — | 143,041 | — | ||||||||||||||||||||||
| Municipal securities - tax exempt | 5,792 | — | 5,792 | — | ||||||||||||||||||||||
| Equity Investments: | ||||||||||||||||||||||||||
| Mutual fund - CRA qualified | 3,532 | 3,532 | — | — | ||||||||||||||||||||||
| Derivative financial instruments | 368 | — | 368 | — | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Derivative financial instruments | $ | 579 | $ | — | $ | 579 | $ | — | ||||||||||||||||||
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower of cost or fair value and write-downs of individual assets.
Collateral-dependent loans — Collateral-dependent loans are loans where repayment is expected to be provided solely by the sale or operation of the underlying collateral and there are no other available and reliable sources of repayment. Fair value for collateral-dependent loans are measured based on the value of the collateral securing these loans and are classified at a Level 3 in the fair value hierarchy. Collateral may include real estate, or business assets including equipment, inventory and accounts receivable. The value of real estate collateral is determined based on an appraisal by qualified licensed appraisers hired by the Company. The value of business equipment is based on an appraisal by qualified licensed appraisers hired by the Company if significant, or the equipment’s net book value on the business’ financial statements. Inventory and accounts receivable collateral are valued based on independent field examiner review or aging reports. Appraisals may utilize a single valuation approach or a combination or approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying
such loans. Appraised values are reviewed by management using historical knowledge, market considerations, and knowledge of the client and client’s business.
Other Real Estate Owned — Fair value of OREO is based primarily on third party appraisals, less costs to sell and result in a Level 3 classification of the inputs for determining fair value. Appraisals are required annually and may be updated more frequently as circumstances require and the fair value adjustments are made to OREO based on the updated appraised value of the property.
The following table presents the fair value hierarchy and fair value of assets that were still held and had fair value adjustments measured on a nonrecurring basis as of December 31, 2025 and 2024:
| Fair Value Measure on a Nonrecurring Basis | ||||||||||||||||||||||||||
| ($ in thousands) | Total Fair Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| Collateral-dependent loans: | ||||||||||||||||||||||||||
| CRE | $ | 450 | $ | — | $ | — | $ | 450 | ||||||||||||||||||
| SBA—real estate | 3,330 | — | — | 3,330 | ||||||||||||||||||||||
| Total | $ | 3,780 | $ | — | $ | — | $ | 3,780 | ||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| Collateral-dependent loans: | ||||||||||||||||||||||||||
| CRE | $ | 173 | $ | — | $ | — | $ | 173 | ||||||||||||||||||
| SBA—real estate | 952 | — | — | 952 | ||||||||||||||||||||||
OREO (1) | 1,237 | — | — | 1,237 | ||||||||||||||||||||||
| Total | $ | 2,362 | $ | — | $ | — | $ | 2,362 | ||||||||||||||||||
(1)Represents the carrying value of OREO property that was written down subsequent to its initial classification as OREO.
The following table presents the increase (decrease) in value of certain assets held at the end of the reporting periods presented for which a nonrecurring fair value adjustment was recognized during the respective periods:
| Year Ended December 31, | ||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Collateral-dependent loans: | ||||||||||||||||||||
| SBA—real estate | $ | 27 | $ | — | $ | — | ||||||||||||||
| Total | $ | 27 | $ | — | $ | — | ||||||||||||||
The following table presents information about significant unobservable inputs utilized in the Company’s nonrecurring Level 3 fair value measurements as of December 31, 2025 and 2024:
| ($ in thousands) | Fair Value Measurements (Level 3) | Valuation Techniques | Unobservable Inputs | Range of Inputs | Weighted- Average of Inputs(1) | |||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Collateral-dependent loans: | ||||||||||||||||||||||||||||||||
| CRE | $ | 450 | Income approach - income capitalization | Capitalization rate | 7.9% to 11.0% | 8.3% | ||||||||||||||||||||||||||
| SBA—real estate | 3,145 | Income approach - income capitalization | Capitalization rate | 6.0% to 12.4% | 8.9% | |||||||||||||||||||||||||||
| SBA—real estate | 185 | Sales comparison | Market data comparison | (13.0)% to 13.0% | 1.5% | |||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Collateral-dependent loans: | ||||||||||||||||||||||||||||||||
| CRE | $ | 173 | Income approach - income capitalization | Capitalization rate | 5.5% to 7.3% | 6.0% | ||||||||||||||||||||||||||
| SBA—real estate | $ | 539 | Income approach - income capitalization | Capitalization rate | 5.5% to 7.3% | 10.4% | ||||||||||||||||||||||||||
| SBA—real estate | $ | 413 | Sales comparison approach | Market data / purchase price | n/a | n/a | ||||||||||||||||||||||||||
| OREO | $ | 1,237 | Sales comparison approach | Market data comparison | (3.7)% to 2.2% | (0.5)% | ||||||||||||||||||||||||||
(1)Weighted-average of inputs is based on the relative fair value of the respective assets as of December 31, 2025 and 2024.
Financial Instruments
The carrying amounts and estimated fair values of financial instruments that are not carried at fair value on a recurring basis as of December 31, 2025 and 2024 are as follows. These financial assets and liabilities are measured at amortized cost basis on the Company’s Consolidated Balance Sheets:
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| ($ in thousands) | Carrying Amount | Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 167,311 | $ | 167,311 | $ | — | $ | — | $ | 167,311 | ||||||||||||||||||||||
| Loans held-for-sale | 11,443 | — | 12,267 | — | 12,267 | |||||||||||||||||||||||||||
| Loans receivable, net | 2,165,694 | — | — | 2,243,772 | 2,243,772 | |||||||||||||||||||||||||||
| Accrued interest receivable, net | 10,482 | 7 | 1,708 | 8,767 | 10,482 | |||||||||||||||||||||||||||
| Other investments: | ||||||||||||||||||||||||||||||||
| FHLB and PCBB stock | 13,346 | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||
| Time deposits placed | 105 | — | 105 | — | 105 | |||||||||||||||||||||||||||
| Servicing assets | 10,057 | — | — | 14,846 | 14,846 | |||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | 2,280,547 | — | 2,283,339 | — | 2,283,339 | |||||||||||||||||||||||||||
| FHLB advances | 75,000 | — | 75,792 | — | 75,792 | |||||||||||||||||||||||||||
| Subordinated note, net | 24,586 | — | 24,845 | — | 24,845 | |||||||||||||||||||||||||||
| Accrued interest payable | 14,595 | — | 14,595 | — | 14,595 | |||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| ($ in thousands) | Carrying Amount | Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 134,943 | $ | 134,943 | $ | — | $ | — | $ | 134,943 | ||||||||||||||||||||||
| Loans held-for-sale | 4,581 | — | 4,946 | — | 4,946 | |||||||||||||||||||||||||||
| Loans receivable, net | 1,932,056 | — | — | 1,986,813 | 1,986,813 | |||||||||||||||||||||||||||
| Accrued interest receivable, net | 9,188 | 181 | 888 | 8,119 | 9,188 | |||||||||||||||||||||||||||
| Other investments: | ||||||||||||||||||||||||||||||||
| FHLB and PCBB stock | 12,805 | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||
| Time deposits placed | 100 | — | 100 | — | 100 | |||||||||||||||||||||||||||
| Servicing assets | 10,834 | — | — | 16,159 | 16,159 | |||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | 2,027,285 | — | 2,026,092 | — | 2,026,092 | |||||||||||||||||||||||||||
| FHLB advances | 95,000 | — | 94,986 | — | 94,986 | |||||||||||||||||||||||||||
| Accrued interest payable | 16,067 | — | 16,067 | — | 16,067 | |||||||||||||||||||||||||||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 13, 2026 | Showing above |
| 2024 | Mar 28, 2025 | |
| 2023 | Mar 29, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 18, 2022 | |
| 2020 | Mar 15, 2021 | |
| 2019 | Mar 16, 2020 | |
| 2018 | Mar 15, 2019 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.