OP Bancorp

For the period ended Sep 30, 2025. Filed Nov 7, 2025.

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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.

Sep 30, 2025 · Filed Nov 7, 2025

OPBK$14.93+1.2%Stored close · as of Nov 9, 2026

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Contents

11 — Derivative Financial Instruments

Note 11 —Derivative Financial Instruments

Risk Management Objective of Using Derivatives

The Company is exposed to various risks arising from its business operations and broader economic conditions. It primarily addresses business and operational risks through the management of its core business activities. Economic risks, such as interest rate, liquidity, and credit risk, are managed by strategically adjusting the amount, sources, and duration of its assets and liabilities, as well as through the use of derivative financial instruments. Specifically, the Company utilizes derivatives to mitigate risks associated with business activities that involve the receipt or payment of future cash flows, whether known or uncertain, whose values are influenced by interest rate fluctuations.

Cash Flow Hedges of Interest Rate Risk

The Company utilizes interest rate derivatives to enhance the stability of interest expense and to manage exposure to fluctuations in interest rates. As part of its interest rate risk management strategy, the Company primarily employs interest rate swaps designated as cash flow hedges. These instruments involve receiving variable-rate payments from counterparties in exchange for making fixed-rate payments over the life of the agreements, without exchanging the underlying notional amounts. Beginning in 2024, the Company initiated the use of derivatives to hedge the variability of cash flows associated with its existing variable-rate debt.

For derivatives that are designated and qualified as cash flow hedges of interest rate risk, gains or losses are initially recorded in accumulated other comprehensive income ("AOCI"). These amounts are subsequently reclassified into interest expense during the same period(s) in which the hedged transactions impact earnings. Specifically, amounts recognized in AOCI related to these derivatives are reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. As of September 30, 2025, the Company anticipates reclassifying an estimated $437 thousand of pre-tax of deferred net gains from AOCI into earnings during the next 12 months.

The following table presents the notional amounts, fair values and classification on consolidated balance sheets of the Company's derivatives as of September 30, 2025 and December 31, 2024:

Derivative Assets · Derivative Liabilities
($ in thousands) · Notional Amount · Balance Sheet Location · Fair Value · Notional Amount · Balance Sheet Location · Fair Value
Derivatives designated as hedging instruments:
Interest rate products	$—	Other assets		$—	$75,000	Other liabilities	$886
Total derivatives designated as hedging instruments			$—			$886
Derivatives designated as hedging instruments:
Interest rate products	$25,000	Other assets		$368	$50,000	Other liabilities	$579
Total derivatives designated as hedging instruments			$368			$579

The following table presents the pre-tax changes in AOCI from cash flow hedges for the three and nine months ended September 30, 2025 and 2024:

Derivatives in Subtopic 815-20 Hedging Relationships ($ in thousands)	Amount of Gain (Loss) Recognized in AOCI on Derivative	Amount of Gain (Loss) Recognized in AOCI Included Component	Amount of Gain (Loss) Recognized in AOCI Excluded Component	Location of Gain (Loss) Recognized from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income Included Component	Amount of Gain (Loss) Reclassified from AOCI into Income Excluded Component
Derivatives in cash flow hedging relationships:
Interest rate products	$84	$84	$—	Interest expense	$31	$31	$—
Total	$84	$84	$—		$31	$31	$—
Derivatives in cash flow hedging relationships:
Interest rate products	$(1,131)	$(1,131)	$—	Interest expense	$152	$152	$—
Total	$(1,131)	$(1,131)	$—		$152	$152	$—
Derivatives in cash flow hedging relationships:
Interest rate products	$(548)	$(548)	$—	Interest expense	$91	$91	$—
Total	$(548)	$(548)	$—		$91	$91	$—
Derivatives in cash flow hedging relationships:
Interest rate products	$(1,385)	$(1,385)	$—	Interest expense	$233	$233	$—
Total	$(1,385)	$(1,385)	$—		$233	$233	$—

The following table presents the pre-tax changes of the Company’s derivative financial instruments on the consolidated statement of income for the three and nine months ended September 30, 2025 and 2024:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2025	2024	2025	2024
($ in thousands)	Interest Expense	Interest Expense	Interest Expense	Interest Expense
Total amounts presented in the consolidated statement of income	$31	$152	$91	$233
The effects of cash flow hedging:
Gain (loss) on cash flow hedging relationships
Interest contracts
Amount of gain reclassified from AOCI into income	$31	$152	$91	$233
Amount of gain (loss) reclassified from AOCI into income as a result that a forecasted transaction was no longer probable of occurring	—	—	—	—
Amount of gain reclassified from AOCI into income - included component	31	152	91	233
Amount of gain (loss) reclassified from AOCI into income - excluded component	—	—	—	—

The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company's derivatives as of September 30, 2025 and December 31, 2024. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheet:

Gross Amounts of Recognized Assets · Gross Amounts Offset in the Balance Sheet · Net Amounts of Assets presented in the Balance Sheet · Gross Amounts Not Offset in the Balance Sheet
($ in thousands) · Financial Instruments · Cash Collateral Received · Net Amount
Derivatives assets	$—	$—	$—	$—	$—	$—
Total	$—	$—	$—	$—	$—	$—
Derivatives assets	$368	$—	$368	$—	$368	$—
Total	$368	$—	$368	$—	$368	$—

Gross Amounts of Recognized Liabilities · Gross Amounts Offset in the Balance Sheet · Net Amounts of Liabilities presented in the Balance Sheet · Gross Amounts Not Offset in the Balance Sheet
($ in thousands) · Financial Instruments · Cash Collateral Posted · Net Amount
Derivatives liabilities	$886	$—	$886	$—	$886	$—
Total	$886	$—	$886	$—	$886	$—
Derivatives liabilities	$579	$—	$579	$—	$579	$—
Total	$579	$—	$579	$—	$579	$—

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