What the changes say
- Geographic concentration in Los Angeles exposes profitability to local economic conditions and real estate markets.
- Elevated interest rates and uncertain rate trajectories strain loan portfolios and reduce borrowing demand.
- Reliance on third-party service providers, including emerging AI tools, increases operational and regulatory vulnerabilities.
- Significant holdings of commercial and SBA loans carry heightened credit, valuation, and repurchase risks.
What changed since the prior 10-K
New
- NewRisks Related to Our Business
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
Physical and third-party operational disruptions or privacy breaches could lead to regulatory penalties, financial losses, and reputational damage.
- NewRisks Related to Our Business
Our profitability is dependent upon the geographic concentration of the markets in which we operate
Our profitability is heavily dependent on commercial banking activities in the Los Angeles, California metropolitan area.
- NewRisks Related to Our Business
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
Third-party service providers using emerging artificial intelligence technologies create new operational, cybersecurity, and regulatory compliance risks.
- NewRisks Related to Our Business
Volatility and uncertainty in interest rates have adversely affected, and may continue to adversely affect, our loan portfolio, interest income, and financial condition, and may result in increased credit losses or higher provision expense
Elevated benchmark interest rates reduce client borrowing demand and negatively impact our loan portfolio and interest income.
- NewRisks Related to Our Business
elevated levels for prolonged periods, our borrowers may experience increasing difficulty in repaying their loans or, may defer additional borrowing decisions pending the resolution of both the political and market uncertainties
Prolonged high interest rates decrease the market value of our fixed-rate debt securities and increase borrower default risks.
- NewRisks Related to Our Business
Our operations and financial performance may be adversely affected by a prolonged or recurring shutdown of the U.S. federal government
A U.S. federal government shutdown can disrupt SBA loan programs and impair the ability of government-dependent customers to service loans.
- NewRisks Related to our SBA Loan Program
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
SBA loan sales and servicing asset valuations rely on assumptions that, if inaccurate, could misstate revenues and trigger repurchase obligations.
- NewRisks Related to our Credit Quality
Our allowance for credit losses may prove to be insufficient to absorb potential losses in our loan portfolio
Analytical models used to estimate our allowance for credit losses may prove inaccurate during market stress, resulting in insufficient reserves.
- NewRisks Related to our Growth Strategy
name or seek monetary damages, all of which could have a material adverse impact on our financial condition and results of operations. There are no approval rights of either party for any of the actions or omissions that either party may take under the Coexistence Agreement
A Coexistence Agreement restricts our geographic expansion outside Permitted Markets, limiting long-term growth.
- NewRisks Related to Legislation and Regulation
We are subject to extensive anti-money laundering laws, and failures to comply could result in significant penalties and reputational harm
Failures to comply with anti-money laundering laws like the BSA and USA PATRIOT Act could result in significant fines and enforcement actions.
- NewRisks Related to Our Common Stock
The provisions of our subordinated debt documents restrict our ability to pay dividends or repurchase our stock in certain circumstances
Our $25.0 million subordinated note issued in November 2025 prohibits dividend payments and stock repurchases if an event of default occurs.
Dropped
- DroppedRisks Related to Our Business
We may not keep pace with the rapid technological developments in the financial services industry. Fraudulent and other illegal activity involving our products, services and systems could adversely affect our financial position and results of operations
- DroppedRisks Related to Our Business
Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations
Rapid technological developments and fraudulent activity in the financial services industry.
- DroppedRisks Related to Our Business
Fluctuations in interest rates may reduce net interest income and otherwise negatively impact our financial condition and results of operations
- DroppedRisks Related to Our Business
We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate
Monetary policies and regulations of the Federal Reserve regulating the money supply.
- DroppedRisks Related to Our Business
A decline in general business and economic conditions and any regulatory responses to such conditions could have a material adverse effect on our business, financial position and results of operations
Fluctuations in short-term interest rates reducing net interest income.
- DroppedRisks Related to Our Loans
Many of our loans are to commercial borrowers, which have a higher degree of risk than other types of loans
Recognizing losses on securities held in our securities portfolio when interest rates rise.
- DroppedRisks Related to Our Loans
Increased scrutiny by regulators of commercial real estate concentrations could restrict our activities and impose financial requirements or limits on the conduct of our business
- DroppedRisks Related to Our Loans
Our use of appraisals in deciding whether to make a loan on or secured by real property does not ensure the value of the real property collateral
General business and economic conditions in California, including natural disasters.
- DroppedRisks Related to Our Loans
We may suffer losses in our loan portfolio despite our underwriting practices
- DroppedRisks Related to our SBA Loan Program
The recognition of gains on the sale of SBA loans and servicing asset valuations reflect certain assumptions
High concentration of commercial loans comprising 73.9% of total loans.
- DroppedRisks Related to our SBA Loan Program
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
- DroppedRisks Related to Our Deposits
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
- DroppedRisks Related to our Credit Quality
Our business depends on our ability to successfully manage credit risk
Increased regulatory scrutiny of commercial real estate concentrations.
- DroppedRisks Related to our Credit Quality
As of December 31, 2024, our nonperforming loans (which consist of nonaccrual loans, loans past due 90 days or more and still accruing interest and loans modified under troubled debt restructurings) totaled $7.8 million, or 0.40% of our gross loans, and 0.33% of total assets
Inaccuracies in real property appraisals used for securing loans.
- DroppedRisks Related to our Credit Quality
Current U.S. generally accepted accounting principles (“GAAP”) requires credit loss recognition using a methodology that estimates current expected credit losses for the life of the loan and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates
Potential loan portfolio losses despite sound underwriting practices.
- DroppedRisks Related to our Growth Strategy
There is risk related to acquisitions
- DroppedRisks Related to our Growth Strategy
As we expand our business outside of California markets, we will encounter risks that could adversely affect us
Assumptions regarding gains on the sale of U.S. government-guaranteed loans.
- DroppedRisks Related to our Growth Strategy
We must effectively manage our branch growth strategy
Credit and default risks from retained non-guaranteed portions of SBA loans.
- DroppedRisks Related to Our Capital
We are subject to more stringent capital requirements
- DroppedRisks Related to Our Capital
We face strong competition from financial services companies and other companies that offer commercial banking services, which could harm our business
Intense competition among U.S. banks for customer deposits increasing funding costs.
- DroppedRisks Related to Our Capital
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
- DroppedRisks Related to Our Capital
The costs and effects of litigation, investigations or similar matters, or adverse facts and developments related thereto, could materially affect our business, operating results and financial condition
- DroppedRisks Related to Our Capital
Severe weather, natural disasters, pandemics, acts of war or terrorism and other external events could significantly impact our business
- DroppedRisks Related to Our Capital
Climate change could have a material negative impact on the Company and our customers
- DroppedRisks Related to Our Reputation and Operations
Our ability to maintain our reputation is critical to the success of our business, and the failure to do so may materially adversely affect our business and the value of our common stock
- DroppedRisks Related to Our Reputation and Operations
Our risk management framework may not be effective in mitigating risks and/or losses to us
- DroppedRisks Related to Our Reputation and Operations
Interruptions, cyberattacks, fraudulent activity or other security breaches may have a material adverse effect on our business
- DroppedRisks Related to Our Reputation and Operations
Our cybersecurity investments may create unforeseen implementation challenges that confer unexpected disruptions, unbudgeted costs, or delays in adaptation to crucial threats
- DroppedRisks Related to Our Reputation and Operations
Our relatively small size requires us to be heavily reliant upon third-party vendors for cybersecurity expertise. Those vendors may themselves be subject to vulnerabilities, and their failures may be harmful to our business
- DroppedRisks Related to Our Reputation and Operations
Cybersecurity incidents, failures or lapses could give rise to regulatory harms to the Company or the Bank
- DroppedRisks Related to Our Reputation and Operations
System failure or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities
- DroppedRisks Related to Our Reputation and Operations
Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations
- DroppedRisks Related to Our Reputation and Operations
We depend on the accuracy and completeness of information provided by customers and counterparties and any misrepresented information could adversely affect our business, financial condition and results of operations
- DroppedRisks Related to Our Reputation and Operations
Employee misconduct could expose us to significant legal liability and reputational harm
- DroppedRisks Related to Our Reputation and Operations
Changes in accounting standards could materially impact our financial statements
- DroppedRisks Related to Our Reputation and Operations
We are subject to extensive government regulation that could limit or restrict our activities, which in turn may adversely impact our ability to increase our assets and earnings
- DroppedRisks Related to Our Reputation and Operations
We face a risk of noncompliance and enforcement action with the BSA and other anti-money laundering statutes and regulations
- DroppedRisks Related to Our Common Stock
Future equity issuances could result in dilution, which could cause our common stock price to decline
- DroppedRisks Related to Our Common Stock
We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock
Reworded
- 100% rewrittenRisks Related to Our Business
Interruptions, cyber-attacks, fraudulent activity or other security breaches could have a material adverse effect on our business
Expanded to cover employee data systems and contractual reliance on third-party infrastructure alongside customer information.
- 97% rewrittenRisks Related to Legislation and Regulation
Privacy, information security and data protection regulations could increase our costs and limit our business activities
Added explicit references to employee information and potential litigation resulting from data protection non-compliance.
Was: Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information
- 96% rewrittenRisks Related to Legislation and Regulation
Federal and state regulators periodically examine our business, and adverse examination findings could materially affect our operations
Added the extreme regulatory risks of deposit insurance termination, receivership, or conservatorship.
Was: Federal and state regulators periodically examine our business, and we may be required to remediate adverse examination findings
- 95% rewrittenRisks Related to Finance and Accounting
Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business and stock price
Reflects the loss of emerging growth company status by adding mandatory auditor attestation requirements under Section 404(b).
- 85% rewrittenRisks Related to our Growth Strategy
We may not be able to continue growing our business, particularly if we cannot increase loans and deposits through organic growth
Discloses the July 2025 branch opening in Garden Grove, California, and the risks of new geographic expansion.
- 56% rewrittenRisks 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
Added a reference to the leadership transition plan announced in August 2024.
- 54% rewrittenRisks Related to Our Business
Adverse conditions in Asia and elsewhere could adversely affect our business
Specified that customers maintain significant investment and business ties to South Korea and Asia.
- 44% rewrittenRisks Related to Our Business
Liquidity risks could affect operations and adversely affect our business, financial condition, and results of operations
Added reliance on existing credit lines as an alternative to wholesale funding when deposit balances decline.
- 38% rewrittenRisks 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
- 37% rewrittenRisks Related to Our Loans
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
- 28% rewrittenRisk 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
All 41 risk factors
Headings as the filing states them, in filing order.
Risks Related to Our Business
- 01Interruptions, cyber-attacks, fraudulent activity or other security breaches could have a material adverse effect on our business100% rewritten
- 02relationships 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 lossNew
- 03Our profitability is dependent upon the geographic concentration of the markets in which we operateNew
- 04Our 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 regulationsNew
- 05Adverse conditions in Asia and elsewhere could adversely affect our business54% rewritten
- 06Volatility and uncertainty in interest rates have adversely affected, and may continue to adversely affect, our loan portfolio, interest income, and financial condition, and may result in increased credit losses or higher provision expenseNew
- 07elevated levels for prolonged periods, our borrowers may experience increasing difficulty in repaying their loans or, may defer additional borrowing decisions pending the resolution of both the political and market uncertaintiesNew
- 08Liquidity risks could affect operations and adversely affect our business, financial condition, and results of operations44% rewritten
- 09Our operations and financial performance may be adversely affected by a prolonged or recurring shutdown of the U.S. federal governmentNew
Risks Related to Our Loans
- 10Because 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 losses38% rewritten
- 11The small- and medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our business, financial condition and results of operations
- 12Our single family residential loan product consists primarily of non-qualified single family home mortgage loans which may be considered less liquid and more risky37% rewritten
- 13Lack of seasoning of our loan portfolio could increase risk of credit defaults in the future
Risks Related to our SBA Loan Program
- 14The 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 risksNew
Risk Related to Our Deposits
- 15Our deposit portfolio includes significant concentrations and a large percentage of our deposits is attributable to a relatively small number of clients28% rewritten
Risks Related to our Management
- 16We 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 prospects56% rewritten
Risks Related to our Credit Quality
- 17Our allowance for credit losses may prove to be insufficient to absorb potential losses in our loan portfolioNew
- 18Environmental liabilities could materially and adversely affect our business and financial condition
Risks Related to our Growth Strategy
- 19We may not be able to continue growing our business, particularly if we cannot increase loans and deposits through organic growth85% rewritten
- 20name or seek monetary damages, all of which could have a material adverse impact on our financial condition and results of operations. There are no approval rights of either party for any of the actions or omissions that either party may take under the Coexistence AgreementNew
- 21New lines of business or new products and services may subject us to additional risks
Risks Related to Our Capital
- 22We are committed to contribute 10% of our consolidated after-tax net income to the Open Stewardship Foundation
Risks Related to Competition
- 23Our modest size makes it more difficult for us to compete
- 24We focus on marketing our services to a limited segment of the population and any adverse change impacting such segment is likely to have an adverse impact on us
- 25Our reputation may be adversely affected by the soundness of other financial institutions
Risks Related to Finance and Accounting
- 26Our accounting estimates and risk management processes rely on analytical and forecasting models
- 27We have significant deferred tax assets and we cannot assure that it will be fully realized
- 28Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business and stock price95% rewritten
Risks Related to Legislation and Regulation
- 29Federal and state regulators periodically examine our business, and adverse examination findings could materially affect our operations96% rewritten
- 30We are subject to extensive anti-money laundering laws, and failures to comply could result in significant penalties and reputational harmNew
- 31Privacy, information security and data protection regulations could increase our costs and limit our business activities97% rewritten
Risks Related to Our Common Stock
- 32The trading volume in our common stock is less than that of other larger financial services companies
- 33The provisions of our subordinated debt documents restrict our ability to pay dividends or repurchase our stock in certain circumstancesNew
- 34The trading price of our common stock could be volatile
- 35An investment in our common stock is not an insured deposit
- 36If 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
- 37Our 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
- 38We have limited the circumstances in which our directors will be liable for monetary damages
- 39Provisions 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
- 40The California General Corporation Law, or the CGCL, could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial by our shareholders
- 41We 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
Other OP Bancorp 10-Ks
- FY2024 10-K risk factors69 risks
OP Bancorp relies heavily on real estate loans, commercial lending, and the Korean-American business community in California. Concentration risks and interest rate fluctuations dominate the bank's risk profile.
Filed Mar 28, 2025
About this page
The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.