OP Bancorp (OPBK) stock intrinsic value fair value estimate & owner earnings analysis

OP Bancorp is the holding company for Open Bank, a California state-chartered community bank founded in 2005 and based in Los Angeles. It lends to and takes deposits from small and medium-sized businesses, their owners and retail customers, with a focus on the Korean-American community. It runs twelve branches (nine in Los Angeles and Orange Counties, plus Santa Clara, California; Carrollton, Texas; and Las Vegas, Nevada) and loan production offices in other states. Gross loans were $2.26 billion and deposits $2.37 billion at June 30, 2026; the book is mostly commercial real estate, home mortgages (including non-qualified mortgages for recent Korean immigrants), SBA-guaranteed loans and business loans, and the bank also earns gains by selling the guaranteed portion of SBA loans. Shareholders' equity was $238.6 million, about $15.97 per share. How we measured earnings. We start from cash from operations, strip out the swings from loans originated for sale and other working-capital items, and subtract stock compensation and the spending needed to keep the business running, including investments in low-income housing partnerships whose amortization the cash flow statement adds back. On that basis owner earnings per share were $0.87 (2016), $0.98 (2017), $1.13 (2018), $1.01 (2019), $1.06 (2020), $1.77 (2021), $2.48 (2022), $1.66 (2023), $1.40 (2024) and $1.93 (2025). We anchor on the 2021-2025 median of $1.77: that window covers a full rate cycle (near-zero rates, the 2023-2024 deposit-cost squeeze and the 2025 margin recovery) for a bank near its current size. Owner earnings rose about 38% in 2025; we do not treat that as the new normal. The first half of 2026 supports the anchor: net interest income rose 9% to $40.6 million, the provision for credit losses was only $0.3 million, net income was $15.2 million and diluted earnings were $1.02 per share. How we treat debt. For a bank, deposits and Federal Home Loan Bank advances are the raw material of the business and their interest is already inside the earnings above, so we do not subtract them. The exception is the $25 million subordinated note the holding company issued in November 2025 at 7.50% fixed until November 2030, floating thereafter, maturing in 2035. Its interest is almost entirely absent from the anchor years, so we value the business before it and subtract it: $25.0 million plus about $1.3 million for paying 7.5% rather than 6% until the 2030 call date, about $26.3 million or $1.76 per share. The note also restricts dividends and buybacks in certain circumstances. Base case, $31.56 per share. The business is worth about $33.32 per share ($498 million); less $1.76 for the note leaves $31.56. The bank has grown for two decades by opening its own branches and loan offices rather than acquiring banks: net income rose from $14.3 million in 2018 to $25.6 million in 2025 and equity to $238.6 million while paying dividends. We credit 3% a year of growth for ten years, well below that record, and charge for it by retaining enough earnings each year to grow equity at the same 3%, so the cash available to owners starts at about $1.34 per share in year one. Year one growth of 3% compares with the 38% actual rise in 2025, so we assume a sharp slowdown. After year ten earnings are held flat at about $2.38 per share, because the deposit franchise, banking license and twenty-year record are features already in evidence. No credit is given to margin gains beyond 2025, acquisitions or faster expansion of the newer out-of-state offices. Bear case, $15.36 per share. The business is worth about $17.12 per share ($256 million); less $1.76 leaves $15.36, a little below book value. This case puts the bank through a credit cycle of the kind community lenders concentrated in commercial real estate went through in 2008-2010: cumulative losses of about 5% of today's $2.26 billion loan book (about $113 million) spread over three years, plus about $5 million a year of lost interest from a squeezed margin and nonaccruing loans. Against roughly $40 million a year of pre-tax, pre-provision earnings, that leaves the bank at about breakeven (a small loss of about $0.14 per share a year) for three years, with no growth and dividends effectively suspended. Equity per share would end near $15.55, so the cycle absorbs earnings but the capital base survives without forced dilution in this case. Afterward, earnings settle at $1.25 per share with no growth: the 2024 trough of $1.40, when deposit costs peaked, less about $0.15 for SBA loan-sale gains shrinking. The named exposures behind this are real: nonperforming loans rose by $6.3 million in 2025 to $14.1 million, driven by $5.9 million of SBA real estate loans moving to nonaccrual; commercial real estate is the largest part of the book; and funding leans on time deposits. The loss rates are our assumptions sized from that history, not reported figures. Bull case, $38.60 per share. The business is worth about $40.36 per share ($603 million); less $1.76 leaves $38.60. Earnings start from 2025's $1.93 per share, which the first half of 2026 is matching, and grow 5% a year for ten years, still below the bank's record, with equity retained at the same 5% to support it, then hold flat at about $3.14 per share. This requires the recovered margin to hold and credit costs to stay near 2025's net charge-offs of 0.02% of loans. What could make this wrong: a sharper deposit-cost squeeze or deeper commercial real estate losses in Southern California; heavy dependence on one community and one metropolitan area; and SBA loan-sale gains, which swing widely from year to year. Compared with our previous analysis, the base and bull cases are essentially unchanged; the bear case is lower because we now model a longer, deeper credit cycle taken from the industry's 2008-2010 experience rather than a two-year episode. Our margin-of-safety price. We are reasonably confident in the earnings level: it is a median over a full rate cycle and the first half of 2026 is running above it. The worst plausible outcome is a severe Los Angeles commercial real estate and small-business downturn hitting a book concentrated in one community; the bear case shows the bank absorbing that at roughly breakeven with its capital largely intact, but deeper losses than modeled would force dilution at low prices. If we are wrong about growth (none instead of 3%) and the margin settles nearer 2024's level, the shares would be worth roughly the low-to-mid $20s; if a credit cycle also arrives, the bear case's $15.36. The price assumes about a four-year holding period, with a dividend that was $0.48 per share in 2025 and is running at $0.56 a year in 2026. The margin-of-safety price is $16 per share: that is near book value and the bear-case value, so a credit cycle costs little permanent value, while the base case reached over four years with the current dividend implies about 21% a year from that price.