CATHAY GENERAL BANCORP 10-K

Item 9A. Controls and Procedures   Disclosure Controls and Procedures   The Company's principal executive officer and principal financial officer have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) as of the end of the period covered by this Annual Report on Form 10-K. Based upon their evaluation, the principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.   There have not been any changes in the Company’s disclosure controls and procedures that occurred during its fourth fiscal quarter of 2021 that have materially affected, or are reasonably likely to materially affect, these controls and procedures.   93 Table of Contents   Management ’ s Report on Internal Control over Financial Reporting   The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles.   Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   As of December 31, 2021, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, the Company assessed the effectiveness of its internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control — Integrated Framework (2013),” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management determined that the Company maintained effective internal control over financial reporting as of December 31, 2021.   KPMG LLP, the independent registered public accounting firm that audited the Company’s Consolidated Financial Statements included in this Annual Report on Form 10-K, has also issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, is included in this Item under the heading “Report of Independent Registered Public Accounting Firm” below.   Changes in Internal Control over Financial Reporting   There have been no changes in the Company’s internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act, that occurred during the fourth fiscal quarter of 2021 that have materially affected, or are reasonably likely to materially effect, the Company’s internal control over financial reporting.   94 Table of Contents   Report of Independent Registered Public Accounting Firm   To the Stockholders and Board of Directors Cathay General Bancorp:   Opinion on Internal Control Over Financial Reporting   We have audited Cathay General Bancorp and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.   We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated February 28, 2022 expressed an unqualified opinion on those consolidated financial statements.   Basis for Opinion   The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.   Definition and Limitations of Internal Control Over Financial Reporting   A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.   Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.     /s/ KPMG LLP   Los Angeles, California February 28, 2022   95 Table of Contents   Item 9B.           Other Information   None.   Item 9C.           Disclosure Regarding Foreign Jurisdictions That Prevent Inspections   Not Applicable. PART III   Item 10.   Directors, Executive Officers and Corporate Governance   The information required by this item concerning our, directors, compliance with Section 16 of the Securities Exchange Act of 1934, the code of ethics that applies to our principal executive officer, principal financial officer and principal accounting officer, and matters relating to corporate governance is incorporated herein by reference from the information set forth under the captions “Proposal One—Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Board of Directors and Corporate Governance” and “Code of Ethics” in our Definitive Proxy Statement relating to our 2022 Annual Meeting of Stockholders (our “Proxy Statement”).   The information required by this item concerning our executive officers is set forth in Part I – Item 1. Business – Executive Officers of the Registrant in this Annual Report on Form 10-K.   Item 11.   Executive Compensation   The information required by this item is incorporated herein by reference from the information set forth under the captions “Board of Directors and Corporate Governance—Compensation of Directors,” “Executive Compensation,” and “Potential Payments Upon Termination or Change in Control” in our Proxy Statement.   Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   96 Table of Contents   Securities Authorized for Issuance under Equity Compensation Plans   The following table sets forth certain information as of December 31, 2021, with respect to compensation plans under which equity securities of the Company were authorized for issuance.   Plan Category   Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights     Weighted-average Exercise Price of Outstanding Options, Warrants, and Rights     Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans [Excluding Securities Reflected in Column (a)]       (a)     (b)     (c)   Equity Compensation Plans Approved by Security Holders     —     $ —       1,861,104   Equity Compensation Plans Not Approved by Security Holders     —       —       —   Total     —     $ —       1,861,104     Security Ownership of Certain Beneficial Owners and Management   The information required by this item is incorporated herein by reference from the information set forth under the captions “Security Ownership of Certain Beneficial Owners” and “Proposal One—Election of Directors— Security Ownership of Nominees, Continuing Directors, and Named Executive Officers” in our Proxy Statement.   Item 13.   Certain Relationships and Related Transactions, and Director Independence   The information required by this item is incorporated herein by reference to the information set forth under the captions “Transactions with Related Persons, Promoters and Certain Control Persons” and “Board of Directors and Corporate Governance— Director Independence” in our Proxy Statement.   Item 14.   Principal Accounting Fees and Services   The information required by this item is incorporated herein by reference from the information set forth under the caption “Principal Accounting Fees and Services” in our Proxy Statement.     PART IV   Item 15.   Exhibits, Financial Statement Schedules   Documents Filed as Part of this Report   (a)(1) Financial Statements   See “Index to Consolidated Financial Statements” on page F-1.   (a)(2) Financial Statement Schedules   Schedules have been omitted since they are not applicable, they are not required, or the information required to be set forth in the schedules is included in the Consolidated Financial Statements or Notes thereto.   97 Table of Contents   (b) Exhibits   The exhibits listed in the accompanying Index to Exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K. The following is a list of such Exhibits:   INDEX OF EXHIBITS   Exhibit No. Description of Exhibits         3.1    Restated Certificate of Incorporation. Previously filed with the Securities and Exchange Commission on February 29, 2016, as an exhibit to Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2015, and incorporated herein by reference.         3.1.1 Amendment to Restated Certificate of Incorporation. Previously filed with the Securities and Exchange Commission on February 29, 2016, as an exhibit to Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2015, and incorporated herein by reference.         3.2    Amended and Restated Bylaws, effective February 16, 2017. Previously filed with the Securities and Exchange Commission on February 17, 2017, as an exhibit to the Bancorp’s Current Report on Form 8-K and incorporated herein by reference.         3.3    Certificate of Designation of Series A Junior Participating Preferred Stock. Previously filed with the Securities and Exchange Commission on February 28, 2012, as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2011, and incorporated herein by reference.         3.4    Certificate of Designation of Fixed Rate Cumulative Perpetual Preferred Stock, Series B. Previously filed with the Securities and Exchange Commission on March 3, 2014, as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2013 and incorporated herein by reference.         4.1    Indenture, dated as of March 30, 2007, between Cathay General Bancorp and LaSalle Bank National Association (including form of debenture). Previously filed with the Securities and Exchange Commission on March 1, 2013, as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2012, and incorporated herein by reference.         4.1.1 Amended and Restated Declaration of Trust of Cathay Capital Trust III, dated as of March 30, 2007. Previously filed with the Securities and Exchange Commission on March 1, 2013, as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2012 and incorporated herein by reference.         4.1.2 Guarantee Agreement, dated as of March 30, 2007, between Cathay General Bancorp and LaSalle Bank National Association. Previously filed with the Securities and Exchange Commission on March 1, 2013, as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2012 and incorporated herein by reference.         4.1.3 Form of Capital Security Certificate of Cathay Capital Trust III (included within Exhibit 4.1.1).         4.2+ Description of the Bancorp’s Common Stock.   98 Table of Contents     10.1+    Form of Indemnification Agreement between the Bancorp and its directors and certain officers.         10.2**    Cathay Bank Employee Stock Ownership Plan, as amended and restated effective December 22, 2015. Previously filed with the Securities and Exchange Commission on March 1, 2018, as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2017, and incorporated herein by reference.         10.2.1** Amendment No. 1 to the Cathay Bank Employee Stock Ownership Plan, as amended and restated effective December 22, 2015. Previously filed with the Securities and Exchange Commission on March 1, 2018, as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2017, and incorporated herein by reference.         10.2.2** Amendment No. 2 to the Cathay Bank Employee Stock Ownership Plan, as amended and restated effective December 22, 2015. Previously filed with the Securities and Exchange Commission on March 1, 2018, as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2017, and incorporated herein by reference.         10.2.3** Amendment No. 3 to the Cathay Bank Employee Stock Ownership Plan, as amended and restated effective December 22, 2015. Previously filed with the Securities and Exchange Commission on August 9, 2018, as an exhibit to the Bancorp’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, and incorporated herein by reference.         10.3    Dividend Reinvestment Plan and Stock Purchase Plan (Amended and Restated) of the Bancorp. Previously filed with the Securities and Exchange Commission on July 27, 2015, as an exhibit to Registration Statement No. 333-205888, and incorporated herein by reference.         10.4** Cathay Bank Bonus Deferral Agreement (Amended and Restated). Previously filed with the Securities and Exchange Commission on March 1, 2013, as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2012 and incorporated herein by reference.         10.5.1** Cathay General Bancorp 2005 Incentive Plan (As Amended and Restated). Previously filed with the Securities and Exchange Commission on February 29, 2016 as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31,2015 and incorporated herein by reference.         10.5.2** Executive Officer Annual Cash Bonus Program under the Company’s 2005 Incentive Plan (As Amended and Restated). Previously filed with the Securities and Exchange Commission on March 2, 2020 as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2018, and incorporated herein by reference.         10.5.3** Form of Cathay General Bancorp 2005 Incentive Plan (As Amended and Restated) Restricted Stock Unit Agreement (Performance Shares – EPS), used to award performance-based restricted stock units. Previously filed with the Securities and Exchange Commission on December 21, 2016, as an exhibit to the Bancorp’s Current Report on Form 8-K and incorporated herein by reference.   99 Table of Contents     10.5.4** Form of Cathay General Bancorp 2005 Incentive Plan (As Amended and Restated) Restricted Stock Unit Agreement (Performance Shares – TSR), used to award performance-based restricted stock units. Previously filed with the Securities and Exchange Commission on December 21, 2016, as an exhibit to the Bancorp’s Current Report on Form 8-K and incorporated herein by reference.         10.5.5** Form of Cathay General Bancorp 2005 Incentive Plan (As Amended and Restated) Restricted Stock Unit Agreement (Performance Shares – ROA), used to award performance-based restricted stock units. Previously filed with the Securities and Exchange Commission on December 21, 2016, as an exhibit to the Bancorp’s Current Report on Form 8-K and incorporated herein by reference.     10.5.6** Form of Cathay General Bancorp 2005 Incentive Plan (As Amended and Restated) Restricted Stock Unit Agreement (Clawback Rider), used in connection with award of performance-based restricted stock units. Previously filed with the Securities and Exchange Commission on December 21, 2016, as an exhibit to the Bancorp’s Current Report on Form 8-K and incorporated herein by reference.         10.5.7** Form of Cathay General Bancorp 2005 Incentive Plan (As Amended and Restated) Restricted Stock Unit Agreement (Time-Based Shares). Previously filed with the Securities and Exchange Commission on March 30, 2017, as an exhibit to the Bancorp’s Current Report on Form 8-K, and incorporated herein by reference.         10.5.8** Form of Cathay General Bancorp 2005 Incentive Plan (As Amended and Restated) Restricted Stock Unit Agreement (Clawback Rider), used in connection with award of time-based restricted stock units. Previously filed with the Securities and Exchange Commission on March 30, 2017, as an exhibit to the Bancorp’s Current Report on Form 8-K and incorporated herein by reference.         10.5.9** Form of Cathay General Bancorp 2005 Incentive Plan (As Amended and Restated) Restricted Stock Unit Agreement (Immediate Vesting/Deferred Distribution). Previously filed with the Securities and Exchange Commission on May 10, 2018, as an exhibit to the Bancorp’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, and incorporated herein by reference.         10.6** Amended and Restated Change of Control Employment Agreement for Dunson K. Cheng dated as of December 18, 2008. Previously filed with the Securities and Exchange Commission on March 3, 2014 as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2013 and incorporated herein by reference.         10.6.1** Amended and Restated Change of Control Employment Agreement for Heng W. Chen dated as of December 18, 2008. Previously filed with the Securities and Exchange Commission on March 3, 2014 as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2013 and incorporated herein by reference.   100 Table of Contents     10.6.2** Amended and Restated Change of Control Employment Agreement for Kim R. Bingham dated as of December 18, 2008. Previously filed with the Securities and Exchange Commission on March 3, 2014, as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2013 and incorporated herein by reference.         10.7** Form of Change of Control Employment Agreement to be entered into with Executive Officers on or after July 16, 2020. Previously filed with the Securities and Exchange Commission on August 7, 2020 as an exhibit to the Bancorp’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and incorporated herein by reference.         10.8** Change of Control Employment Agreement for Chang M. Liu dated as of July 16, 2020. Previously filed with the Securities and Exchange Commission on November 9, 2020 as an exhibit to the Bancorp’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 and incorporated herein by reference.         10.9** Employment Agreement for Chang M. Liu dated as of July 16, 2020.  Previously filed with the Securities and Exchange Commission on November 9, 2020 as an exhibit to the Bancorp’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 and incorporated herein by reference.         21.1+ Subsidiaries of the Bancorp.         23.1+ Consent of Independent Registered Public Accounting Firm.         31.1+ Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.         31.2+ Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.         32.1++ Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.         32.2++ Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.         101.INS Inline XBRL Instance Document         101.SCH Inline XBRL Taxonomy Extension Schema Document         101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document         101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document         101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document         101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document         104 Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)     **         Management contract or compensatory plan or arrangement.   +           Filed herewith. ++         Furnished herewith pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.   101 Table of Contents   Item 16. Form 10-K Summary.   None.   102 Table of Contents   SIGNATURES   Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.     Cathay General Bancorp               By: /s/ Chang M. Liu     Chang M. Liu President and Chief Executive Officer     Date: February 28, 2022   Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.   Signature   Title   Date           /s/ Chang M. Liu   President and Chief Executive Officer, and Director   February 28, 2022 Chang M. Liu   (principal executive officer)               /s/ Heng W. Chen   Executive Vice President,   February 28, 2022 Heng W. Chen   Chief Financial Officer/Treasurer (principal financial officer) (principal accounting officer)               /s/ Dunson K. Cheng   Executive Chairman of   February 28, 2022 Dunson K. Cheng   the Board               /s/ Peter Wu   Vice Chairman of the Board   February 28, 2022 Peter Wu                   /s/ Anthony M. Tang   Vice Chairman of the Board   February 28, 2022 Anthony M. Tang                   /s/ Kelly L. Chan   Director   February 28, 2022 Kelly L. Chan                               /s/ Nelson Chung   Director   February 28, 2022 Nelson Chung           103 Table of Contents   /s/ Felix S. Fernandez   Director   February 28, 2022 Felix S. Fernandez                                /s/ Jane Jelenko   Director   February 28, 2022 Jane Jelenko                   /s/ Maan-Huei Hung   Director   February 28, 2022 Maan-Huei Hung                   /s/ Joseph C.H. Poon   Director   February 28, 2022 Joseph C.H. Poon                   /s/ Richard Sun   Director   February 28, 2022 Richard Sun                   /s/ Shally Wang   Director   February 28, 2022 Shally Wang           104 Table of Contents       INDEX TO CONSOLIDATED FINANCIAL STATEMENTS     Page     Report of Independent Registered Public Accounting Firm F-2     Consolidated Balance Sheets at December 31, 2021 and 2020 F-5     Consolidated Statements of Operations and Comprehensive Income for each of the years ended December 31, 2021, 2020, and 2019 F-6     Consolidated Statements of Changes in Stockholders' Equity for each of the years ended  December 31, 2021, 2020, and 2019 F-7     Consolidated Statements of Cash Flows for each of the years ended December 31, 2021,  2020 and 2019 F-8     Notes to Consolidated Financial Statements F-9     Parent-only condensed financial information of Cathay General Bancorp is included in Note 19 to the Consolidated Financial Statements in this Annual Report on Form 10-K F-9   F-1 Table of Contents   Report of Independent Registered Public Accounting Firm   To the Stockholders and Board of Directors Cathay General Bancorp:   Opinion on the Consolidated Financial Statements   We have audited the accompanying consolidated balance sheets of Cathay General Bancorp and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.   We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.   Change in Accounting Principle   As discussed in Note 1 and Note 4 to the consolidated financial statements, the Company has changed its method of accounting for the recognition and measurement of credit losses as of January 1, 2021 due to the adoption of ASU No. 2016-13, “ Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ”.   Basis for Opinion   These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.   Critical Audit Matter   The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.   F-2 Table of Contents   Allowance for credit losses for loans evaluated on a collective basis modeled using an econometric methodology   As discussed in Note 1 and Note 4 to the consolidated financial statements, the Company adopted ASU No. 2016-13, Financial Instruments – Credit Losses (ASC Topic 326), as of January 1, 2021. The total allowance for credit losses as of January 1, 2021 and December 31, 2021 was $165.0 and $136.2 million, respectively, a substantial portion of which relates to the allowance for loan losses on loans evaluated on a collective basis over residential mortgages, commercial and industrial loans, construction loans, commercial real estate for multifamily loans, commercial real estate for owner-occupied loans, and other commercial real estate loans (hereafter “six portfolios”) using a methodology that includes both econometric regression models and certain qualitative loss factors (the January 1, 2021 collective ALL and December 31, 2021 collective ALL, respectively, together the collective ALL). The collective ALL includes the measure of expected credit losses on a collective basis by pooling those loans that share similar risk characteristics into these six portfolios. The collective ALL methodology uses historical credit loss experience as a basis for estimation of expected credit losses at the collective pool basis over the contractual term of the loans, adjusted for expected prepayments when appropriate. The Company estimates the collective ALL using the probability of default during the reasonable and supportable forecast period using separate econometric regression models developed to correlate macroeconomic variables, to historical credit performance for each of the six portfolios. Loss given default rates are computed based on the net charge-offs recognized divided by the expected exposure at default of defaulted loans. The probability of default and the loss given default rates are applied to the expected amount at default at the loan level based on contractual scheduled payments and estimated prepayments.  The collective ALL incorporates reasonable and supportable forecasts of various macroeconomic variables over a two-year reasonable and supportable forecast period, reverting straight line to long term loss rates over the one year reversion period.  Adjustments to historical loss information are made for differences in current loan specific risk characteristics as well as for changes in environmental conditions.  The adjustments, or qualitative loss factors, consider idiosyncratic risk factors, conditions that may not be reflected in quantitatively derived results, or other relevant factors to seek to ensure the allowance for credit losses reflects the Company's best estimate of current expected credit losses.   We identified the assessment of the collective ALL as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment due to significant measurement uncertainty. Specifically, the assessment of the collective ALL methodology, including the econometric models used to estimate expected loss and their significant assumptions. Such significant assumptions included portfolio segmentation, prepayments, the period over which loss history is considered, the economic forecast scenarios and their weightings and macroeconomic variables, the length of the reasonable and supportable forecast period and corresponding reversion period, and risk ratings. The assessment also included the evaluation of the qualitative loss factors. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.   The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the collective ALL, including controls over the:     ● development of the collective ALL methodology     ● development of the econometric models     ● identification and determination of the significant assumptions used in the econometric models     ● development of the qualitative loss factors     ● determination of risk ratings     ● analysis of the collective ALL results, trends, and ratios.   F-3 Table of Contents   We evaluated the Company’s process to develop the collective ALL by testing certain sources of data, factors, and assumptions used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:     ● evaluating the collective ALL methodology for compliance with U.S. generally accepted accounting principles     ● evaluating judgments made relative to the development and performance monitoring of the econometric models, by comparing them to Company-specific metrics and trends and the applicable industry and regulatory practices     ● assessing the conceptual soundness and performance testing of the econometric models by inspecting the model documentation to determine whether the models are suitable for their intended use     ● evaluating the economic forecast scenarios and underlying assumptions driving the macroeconomic forecasts, including the determination of the reasonable and supportable forecast period and weightings used by comparing them to the Company’s business environment and relevant industry practice     ● determining whether the loan portfolio is segmented by similar risk characteristics by comparing to specific portfolio risk characteristics and trends     ● testing individual risk ratings for a selection of loans by evaluating the financial performance of the borrower, sources of repayment, and any relevant guarantees or underlying collateral     ● evaluating the methodology used to develop certain qualitative loss factors and the effect of those qualitative loss factors on the collective ALL compared with relevant credit risk factors and consistency with credit trends and identified limitations of the econometric models   We also assessed the sufficiency of audit evidence obtained related to the collective ALL by evaluating the:     ● cumulative results of the audit procedures     ● qualitative aspects of the Company’s accounting practices     ● potential bias in the accounting estimates   /s/ KPMG LLP   We have served as the Company’s auditor since 1991.   Los Angeles, California February 28, 2022   F-4 Table of Contents     CATHAY GENERAL BANCORP AND SUBSIDIARIES   CONSOLIDATED BALANCE SHEETS       As of December 31,       2021     2020       (In thousands, except share and per share data)   Assets                 Cash and due from banks   $ 134,141     $ 138,616   Short-term investments and interest-bearing deposits     2,315,563       1,282,462   Securities available-for-sale (amortized cost of $ 1,126,867 in 2021 and $ 1,019,230 in 2020)     1,127,309       1,036,550   Loans     16,342,479       15,644,396   Less:  Allowance for loan losses     ( 136,157 )     ( 166,538 ) Unamortized deferred loan fees, net     ( 4,321 )     ( 2,494 ) Loans, net     16,202,001       15,475,364   Equity securities     22,319       23,744   Federal Home Loan Bank stock     17,250       17,250   Other real estate owned, net     4,368       4,918   Affordable housing investments and alternative energy partnerships, net     299,211       309,016   Premises and equipment, net     99,402       102,998   Customers’ liability on acceptances     8,112       13,753   Accrued interest receivable     56,994       59,032   Goodwill     372,189       372,189   Other intangible assets, net     4,627       5,434   Right-of-use assets- operating leases     27,834       30,919   Other assets     195,403       170,889   Total assets   $ 20,886,723     $ 19,043,134                     Liabilities and Stockholders ’ Equity                 Deposits:                 Non-interest-bearing demand deposits   $ 4,492,054     $ 3,365,086   Interest-bearing deposits:                 NOW deposits     2,522,442       1,926,135   Money market deposits     4,611,579       3,359,191   Savings deposits     915,515       785,672   Time deposits     5,517,252       6,673,317   Total deposits     18,058,842       16,109,401                     Advances from the Federal Home Loan Bank     20,000       150,000   Other borrowings for affordable housing investments     23,145       23,714   Long-term debt     119,136       119,136   Acceptances outstanding     8,112       13,753   Lease liabilities - operating leases     30,694       33,484   Other liabilities     180,543       175,502   Total liabilities     18,440,472       16,624,990   Commitments and contingencies     —       —   Stockholders ’ Equity                     Common stock, $ 0.01 par value, 100,000,000 shares authorized, 90,871,860 issued and 75,750,862 outstanding at December 31, 2021, and 90,643,206 issued and 79,508,265 outstanding at December 31, 2020     909       906   Additional paid-in-capital     972,474       964,734   Accumulated other comprehensive income, net     ( 3,065 )     5,310   Retained earnings     1,985,168       1,789,325   Treasury stock, at cost ( 15,120,998 shares at December 31, 2021, and 11,134,941 shares at December 31, 2020)     ( 509,235 )     ( 342,131 ) Total equity     2,446,251       2,418,144   Total liabilities and equity   $ 20,886,723     $ 19,043,134         See accompanying notes to Consolidated Financial Statements.   F-5 Table of Contents     CATHAY GENERAL BANCORP AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME       Year Ended December 31,       2021     2020     2019       (In thousands, except share       and per share data)   Interest and Dividend Income                         Loan receivable   $ 649,224     $ 677,193     $ 729,619   Investment securities     14,151       20,599       33,037   Federal Home Loan Bank stock     991       952       1,207   Deposits with banks     2,145       1,830       5,404   Total interest and dividend income     666,511       700,574       769,267                             Interest Expense                         Time deposits     40,542       111,629       152,791   Other deposits     21,259       25,396       25,311   Advances from the Federal Home Loan Bank     1,182       5,299       7,441   Long-term debt     5,773       5,791       7,847   Deferred payments from acquisition     —       115       568   Short-term borrowings     —       234       403   Total interest expense     68,756       148,464       194,361   Net interest income before provision/(reversal) for credit losses     597,755       552,110       574,906   Provision/(reversal) for credit losses     ( 16,008 )     57,500       ( 7,000 ) Net interest income after provision/(reversal) for credit losses     613,763       494,610       581,906                             Non-Interest Income                         Net (losses)/gains from equity securities     ( 1,426 )     ( 1,148 )     5,736   Securities gains, net     853       1,695       211   Letters of credit commissions     7,103       6,741       6,407   Depository service fees     5,584       4,949       4,763   Other operating income     42,489       30,583       27,634   Total non-interest income     54,603       42,820       44,751                             Non-Interest Expense                         Salaries and employee benefits     132,795       124,022       129,300   Occupancy expense     20,318       20,634       22,004   Computer and equipment expense     13,549       11,133       11,113   Professional services expense     23,666       21,856       23,107   Data processing service expense     13,607       14,897       13,210   FDIC and State assessments     7,132       8,999       9,617   Marketing expense     6,913       5,224       7,585   Other real estate owned expense/(income)     343       ( 3,091 )     1,115   Amortization of investments in low income housing and alternative energy partnerships     45,447       58,225       39,731   Amortization of core deposit premium     687       687       687   Cost associated with debt redemption     732       693       —   Acquisition, integration and reorganization costs     1,425       —       —   Other operating expense     19,909       20,186       19,819   Total non-interest expense     286,523       283,465       277,288                             Income before income tax expense     381,843       253,965       349,369   Income tax expense     83,539       25,105       70,234   Net income   $ 298,304     $ 228,860     $ 279,135                             Other Comprehensive Income/(Loss), Net of Tax:                         Unrealized holding gains/(losses) on securities available for sale     ( 11,388 )     7,680       23,628   Unrealized holding (losses)/gains on cash flow hedge derivatives     3,614       ( 3,478 )     ( 3,171 ) Less: reclassification adjustment for gains included in net income     601       1,194       149   Total other comprehensive income/(loss), net of tax     ( 8,375 )     3,008       20,308   Total comprehensive income   $ 289,929     $ 231,868     $ 299,443                             Net Income Per Common Share                         Basic   $ 3.81     $ 2.88     $ 3.49   Diluted   $ 3.80     $ 2.87     $ 3.48   Cash dividends paid per common share   $ 1.27     $ 1.24     $ 1.24   Average Common Shares Outstanding:                         Basic     78,268,369       79,584,560       79,999,703   Diluted     78,570,638       79,777,847       80,247,893       See accompanying notes to Consolidated Financial Statements.   F-6 Table of Contents     CATHAY GENERAL BANCORP AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ EQUITY                                 Accumulated                               Common Stock     Additional     Other                     Total   (In thousands, except number of shares)   Number of             Paid-in     Comprehensive     Retained     Treasury     Stockholders'       Shares     Amount     Capital     Income/(Loss)     Earnings     Stock     Equity   Balance at December 31, 2018     80,501,948     $ 898     $ 942,062     $ ( 18,006 )   $ 1,479,149     $ ( 282,237 )   $ 2,121,866                                                             Dividend Reinvestment Plan     93,143       1       3,365       —       —       —       3,366   Restricted stock units vested     123,762       1       —       —       —       —       1   Shares withheld related to net share settlement of RSUs     —       —       ( 2,311 )     —       —       —       ( 2,311 ) Stock issued to directors     21,160       —       749       —       —       —       749   Purchases of treasury stock     ( 1,010,594 )     —       —       —       —       ( 36,301 )     ( 36,301 ) Stock -based compensation     —       —       6,601       —       —       —       6,601   Cash dividends of $ 1.24 per share     —       —       —       —       ( 99,131 )     —       ( 99,131 ) Other comprehensive income     —       —       —       20,308       —       —       20,308   Net income     —       —       —       —       279,135       —       279,135   Balance at December 31, 2019     79,729,419     $ 900     $ 950,466     $ 2,302     $ 1,659,153     $ ( 318,538 )   $ 2,294,283                                                             Dividend Reinvestment Plan     358,157       4       9,773       —       —       —       9,777   Restricted stock units vested     189,557       2       —       —       —       —       2   Shares withheld related to net share settlement of RSUs     —       —       ( 1,911 )     —       —       —       ( 1,911 ) Stock issued to directors     31,110       —       800       —       —       —       800   Purchases of treasury stock     ( 799,978 )     —       —       —       —       ( 23,593 )     ( 23,593 ) Stock -based compensation     —       —       5,606       —       —       —       5,606   Cash dividends of $ 1.24 per share     —       —       —       —       ( 98,688 )     —       ( 98,688 ) Other comprehensive income     —       —       —       3,008       —       —       3,008   Net income     —       —       —       —       228,860       —       228,860   Balance at December 31, 2020     79,508,265     $ 906     $ 964,734     $ 5,310     $ 1,789,325     $ ( 342,131 )   $ 2,418,144                                                             Cumulative effect of change in accounting principle related to ASC 326 (1)     —       —       —       —       ( 3,139 )     —       ( 3,139 ) Dividend Reinvestment Plan     84,011       1       3,562       —       —       —       3,563   Restricted stock units vested     123,893       2       —       —       —       —       2   Shares withheld related to net share settlement of RSUs     —       —       ( 2,632 )     —       —       —       ( 2,632 ) Stock issued to directors     20,750       —       850       —       —       —       850   Purchases of treasury stock     ( 3,986,057 )     —       —       —       —       ( 167,104 )     ( 167,104 ) Stock -based compensation     —       —       5,960       —       —       —       5,960   Cash dividends of $ 1.27 per share     —       —       —       —       ( 99,322 )     —       ( 99,322 ) Other comprehensive income     —       —       —       ( 8,375 )     —       —       ( 8,375 ) Net income     —       —       —       —       298,304       —       298,304   Balance at December 31, 2021     75,750,862     $ 909     $ 972,474     $ ( 3,065 )   $ 1,985,168     $ ( 509,235 )   $ 2,446,251     (1)  Represents the impact of the adoption of Accounting Standards Update ASU 2016-13, Financial Instruments — Credit Losses (Topic 326) on January 1, 2021.       See accompanying notes to Consolidated Financial Statements.   F-7 Table of Contents     CATHAY GENERAL BANCORP AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CASH FLOWS       Year Ended December 31,       2021     2020     2019       (In thousands)   Cash Flows from Operating Activities                         Net income   $ 298,304     $ 228,860     $ 279,135   Adjustments to reconcile net income to net cash provided by operating activities:                         (Reversal)/provision for credit losses     ( 16,008 )     57,500       ( 7,000 ) Provision for losses on other real estate owned     17       717       681   Deferred tax (benefit)/ provision     9,168       ( 9,486 )     9,825   Depreciation and amortization     7,956       7,660       6,756   Amortization of right-of-use asset     8,160       8,852       8,366   Change in operating lease liabilities     ( 2,790 )     ( 2,389 )     ( 7,157 ) Net gains on sale and transfers of other real estate owned     ( 57 )     ( 4,216 )     ( 212 ) Net gains on sale of loans     ( 357 )     ( 413 )     ( 804 ) Proceeds from sale of loans     5,351       11,098       75,257   Originations of loans held for sale     ( 4,994 )     ( 10,685 )     ( 2,241 ) Loss on sales or disposal of fixed assets     55       45       14   Amortization of alternative energy partnerships, venture capital and other investments     45,447       58,131       39,898   Net gain on sales and calls of securities     ( 853 )     ( 1,695 )     ( 211 ) Amortization/accretion of security premiums/discount, net     7,865       8,617       3,834   Unrealized loss/(gain) on equity securities     2,036       1,148       ( 5,736 ) Stock-based compensation and stock issued to officers as compensation     6,810       6,406       7,350   Net change in accrued interest receivable and other assets     ( 34,196 )     ( 21,247 )     6,163   Net change in other liabilities     2,403       ( 18,948 )     21,061   Net cash provided by operating activities     334,317       319,955       434,979                             Cash Flows from Investing Activities                         Purchase of investment securities available-for-sale     ( 560,140 )     ( 434,165 )     ( 770,206 ) Proceeds from repayment, maturity, and call of investment securities available-for-sale     424,386       734,485       296,721   Proceeds from sale of investment securities available-for-sale     21,102       117,249       293,849   Proceeds from sale of equity securities     —       3,112       2,829   Purchase of Federal Home Loan Bank stock     —       ( 840 )     ( 1,815 ) Redemption of Federal Home Loan Bank stock     —       1,680       975   Net increase in loans     ( 715,862 )     ( 583,136 )     ( 1,147,019 ) Purchase of premises and equipment     ( 3,728 )     ( 5,778 )     ( 7,133 ) Benefits received on bank owned life insurance     2,752       —       —   Proceeds from sales of other real estate owned     795       4,308       2,822   Net increase in investment in affordable housing and alternative energy partnerships     ( 29,229 )     ( 79,119 )     ( 52,697 ) Net cash used for investing activities     ( 859,924 )     ( 242,204 )     ( 1,381,674 )                           Cash Flows from Financing Activities                         Net increase in deposits     1,949,728       1,417,310       989,942   Advances from Federal Home Loan Bank     50,000       1,450,000       4,355,000   Repayment of Federal Home Loan Bank borrowings     ( 180,000 )     ( 1,970,000 )     ( 4,215,000 ) Cash dividends paid     ( 99,322 )     ( 98,688 )     ( 99,131 ) Purchase of treasury stock     ( 167,104 )     ( 23,593 )     ( 36,301 ) Proceeds from issuance of short-term borrowings     —       —       25,683   Repayment of short-term borrowings     —       ( 25,683 )     —   Repayment of other borrowings     —       ( 7,663 )     ( 81,065 ) Proceeds from shares issued under Dividend Reinvestment Plan     3,563       9,777       3,366   Taxes paid related to net share settlement of RSUs     ( 2,632 )     ( 1,911 )     ( 2,311 ) Net cash provided by financing activities     1,554,233       749,549       940,183   Increase/(Decrease) in cash, cash equivalents, and restricted cash     1,028,626       827,300       ( 6,512 ) Cash, cash equivalents, and restricted cash, beginning of the year     1,421,078       593,778       600,290   Cash, cash equivalents, and restricted cash, end of the period   $ 2,449,704     $ 1,421,078     $ 593,778                             Supplemental Cash Flow Information                         Cash paid during the year for:                         Interest   $ 75,486     $ 162,434     $ 182,527   Income taxes   $ 92,691     $ 45,371     $ 61,548   Non-cash investing and financing activities:                         Net change in unrealized holding (loss)/gain on securities available-for-sale, net of tax   $ ( 11,989 )   $ 6,486     $ 23,479   Net change in unrealized holding gain/(loss) on cash flow hedge derivatives   $ 3,614     $ ( 3,478 )   $ ( 3,171 ) Transfers to other real estate owned from loans held for investment   $ 205     $ —     $ 860   Loans transferred to loans held for sale   $ —     $ —     $ 75,285     See accompanying notes to Consolidated Financial Statements.   F-8 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     1.           Summary of Significant Accounting Policies   The accompanying Consolidated Financial Statements include the accounts of Cathay General Bancorp (the “Bancorp”), a Delaware corporation, its wholly-owned subsidiaries, Cathay Bank (the “Bank”), a California state-chartered bank, ten limited partnerships investing in affordable housing projects, and GBC Venture Capital, Inc. (together, the “Company,” “we,” “us,” or “our”). All significant inter-company transactions and balances have been eliminated in consolidation. The Consolidated Financial Statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and general practices within the banking industry.   Organization and Background . The Bancorp’s primary business is to act as the holding company for the Bank.   The Bank is a commercial bank, servicing primarily the individuals, professionals, and small to medium-sized businesses in the local markets in which its branches are located. Its operations include the acceptance of checking, savings, and time deposits, and the making of commercial, real estate, and consumer loans. The Bank also offers trade financing, letters of credit, wire transfer, foreign currency spot and forward contracts, Internet banking, investment services, and other customary banking services to its customers. The Bank owns 100 % of the common securities of Cathay Holdings LLC.   Use of Estimates. The preparation of the Consolidated Financial Statements in accordance with GAAP requires management of the Company to make several estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The significant estimates subject to change relate to the allowance for loan losses.   Concentrations. The Bank was incorporated in California and started its business from California. Therefore, loans originated, and deposits solicited were mainly from California. As of December 31, 2021, gross loans were primarily comprised of 49.8 % of commercial mortgage loans, 25.6 % of residential mortgage loans, and 18.3 % of commercial loans. As of December 31, 2021, approximately 48.7 % of the Bank’s residential mortgages were for properties located in California.   Securities Available for Sale. Prior to January 1, 2021, available-for-sale (“AFS”) debt securities were measured at fair value and declines in the fair value were reviewed to determine whether the impairment was other-than-temporary. If we did not expect to recover the entire amortized cost basis of the security, then an other-than-temporary impairment (“OTTI”) was considered to have occurred. The cost basis of the security was written down to its estimated fair value and the amount of the write-down was recognized through a charge to earnings. If the amount of the amortized cost basis expected to be recovered increased in a future period, the cost basis of the security was not increased but rather recognized prospectively through interest income.   Effective January 1, 2021, upon the adoption of ASU 2016 - 13, debt securities AFS are measured at fair value and subject to impairment testing. When an AFS debt security is considered impaired, the Company must determine if the decline in fair value has resulted from a credit-related loss or other factors and then, ( 1 ) recognize an allowance for credit loss by a charge to earnings for the credit-related component (if any) of the decline in fair value, and ( 2 ) recognize in other comprehensive income (loss) any non-credit related components of the fair value change. If the amount of the amortized cost basis expected to be recovered increases in a future period, the valuation reserve would be reduced, but not more than the amount of the current existing reserve for that security.   Interest income includes amortization of premiums and discounts as an adjustment of yield on a level-yield basis. Premiums on callable debt securities are amortized to their earliest call date. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.   F- 9 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   A debt security is placed on nonaccrual status at the time any principal or interest payments become delinquent by 90 days or greater. Interest accrued but not received for a security placed on non-accrual is reversed against interest income. No interest was reversed against interest income during the period.   Allowance for Credit Losses on Available for Sale Securities. For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value with the credit component of the unrealized loss of the impaired AFS debt security recognized as an allowance for credit losses, and a corresponding provision for credit losses on the consolidated statement of income and the non-credit component is recognized in other comprehensive income (loss), net of applicable taxes. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, the payment structure of the security, failure of the issuer of the security to make scheduled interest or principal payments, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. Any fair value changes that have not been recorded through an allowance for credit losses is recognized in other comprehensive income.   Changes in the allowance for credit losses are recorded as provision for credit loss expense. Losses are charged against the allowance when management believes the uncollectability of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.   The amortized cost of the Company’s AFS debt securities exclude accrued interest, which is included in “accrued interest receivable” on the Consolidated Balance Sheets. The Company has made an accounting policy election not to measure an allowance for credit losses for accrued interest receivables on AFS debt securities since the Company timely reverses any previously accrued interest when the debt security remains in default for an extended period. As each AFS debt security has a unique security structure, where the accrual status is clearly determined when certain criteria listed in the terms are met, the Company assesses the default status of each security as defined by the debt security’s specific security structure.   Trading securities are reported at fair value, with unrealized gains or losses included in income.   Investment in Federal Home Loan Bank ( “ FHLB ” ) Stock. As a member of the FHLB system the Bank is required to maintain an investment in the capital stock of the FHLB. The amount of investment is also affected by the outstanding advances under the line of credit the Bank maintains with the FHLB. FHLB stock is carried at cost and is pledged as collateral to the FHLB. FHLB stock is periodically evaluated for impairment based on ultimate recovery of par value. The carrying amount of the FHLB stock was $ 17.3 million at December 31, 2021, and 2020. As of December 31, 2021, the Company owned 172,500 shares of FHLB stock, which exceeded the minimum stock requirement of 150,000 shares.   F- 10 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   Loans Held for Investment. Loans receivable that the Company has the intent and ability to hold for the foreseeable future or until maturity are stated at their outstanding principal, reduced by an allowance for loan losses and net of deferred loan fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Nonrefundable fees and direct costs associated with the origination or purchase of loans are deferred and netted against outstanding loan balances. The deferred net loan fees and costs are recognized in interest income as an adjustment to yield over the loan term using the effective interest method or straight-line method. Discounts or premiums on purchased loans are accreted or amortized to interest income using the effective interest method or straight-line method over the remaining period to contractual maturity. Interest on loans is calculated using the simple-interest method on daily balances of the principal amounts outstanding based on an actual or 360 -day basis.   Generally, loans are placed on nonaccrual status when they become 90 days past due. Loans are considered past due when contractually required principal or interest payments have not been made on the due dates. Loans are also placed on nonaccrual status when management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that full collection of principal or interest becomes uncertain, regardless of the length of past due status. Once a loan is placed on nonaccrual status, interest accrual is discontinued, and all unpaid accrued interest is reversed against interest income. As a result, accrued interest receivable does not carry a credit loss reserve. Interest payments received on nonaccrual loans are reflected as a reduction of principal and not as interest income. A loan is returned to accrual status when the borrower has demonstrated a satisfactory payment trend subject to management’s assessment of the borrower’s ability to repay the loan.   Loans held for sale . Loans held for sale are carried at the lower of aggregate cost or fair value. Gains and losses are recorded in non-interest income based on the difference between sales proceeds, net of sales commissions, and carrying value. When a determination is made at the time of commitment to originate or purchase loans as held-for-investment, it is the Company’s intent to hold these loans to maturity or for the “foreseeable future,” subject to periodic review under the Company’s management evaluation processes, including asset/liability management. When the Company subsequently changes its intent to hold certain loans, the loans are transferred from the loans held-for-investment portfolio at amortized cost to the loans held-for-sale portfolio at lower of aggregate cost or fair value and the existing ACL on the loans transferred is reversed.   Allowance for Credit Losses on Loans Held for Investment. Effective January 1, 2021, and upon the adoption of ASU 2016 - 13, the Company replaced the incurred loss accounting approach with the current expected credit loss (“CECL”) approach for financial instruments measured at amortized cost and other commitments to extend credit. CECL requires the immediate recognition of estimated credit losses expected to occur over the estimated remaining life of the asset. The forward-looking concept of CECL requires loss estimates to consider historical experience, GDP, unemployment rates, CRE and home price indexes, and reasonable and supportable economic forecasts of future events and circumstances.   The ACL on loans held for investment is the combination of the allowance for loan losses and the reserve for unfunded loan commitments. The allowance for loan losses is reported as a reduction of the amortized cost basis of loans, while the reserve for unfunded loan commitments is included within "other liabilities" on the Consolidated Balance Sheets. The amortized cost basis of loans does not include accrued interest receivable, which is included in "accrued interest receivable" on the Consolidated Balance Sheets. The "Provision for credit losses" on the Consolidated Statements of Operations and Comprehensive Income is a combination of the provision for loan losses and the provision for unfunded loan commitments.   F- 11 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   Under the Company’s CECL approach, management estimates the ACL using relevant available information from internal and external sources, relating to past events, GDP, unemployment rates, CRE and home price indexes, and reasonable and supportable economic forecasts that vary by loan portfolio. We use economic forecasts from Moody’s Analytics in this process. The economic forecast is updated monthly; therefore, the one used for each quarter-end calculation is generally based on a one -month lag based on the timing of when the forecast is released. The Company does not consider a one -month lag to create a material difference but will consider any subsequent material changes to our estimated loss forecasts as deemed appropriate. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in gross domestic product (or “GDP”), unemployment rates, property values, or other relevant factors.   Under the CECL methodology, quantitative and qualitative loss factors are applied to our population of loans on a collective pool basis when similar risk characteristics exist. When loans do not share similar risk characteristics, the Company would evaluate the loan for expected credit losses on an individual basis. The Company evaluates loans for expected credit losses on an individual basis if, based on current information and events, the loan does not share similar credit risk characteristics with other loans. The Company may choose to measure expected credit losses on an individual loan basis by using one of the following methods: ( 1 ) the present value of the expected future cash flows of the loan discounted at the loan’s original effective interest rate, or ( 2 ) if the loan is collateral dependent, the fair value of the collateral less costs to sell. For loans that are not collateral-dependent, the Company will use the present value of future cash flows.   Under the Company’s CECL methodology, nine portfolio segments with similar risk characteristics are evaluated for expected loss. Six portfolios are modeled using econometric models and three smaller portfolios are evaluated using a simplified loss-rate method that calculates lifetime expected credit losses for the respective pools (simplified approach). The six portfolios subject to econometric modeling include residential mortgages; commercial and industrial loans (“C&I”); construction loans; commercial real estate (“CRE”) for multifamily loans; CRE for owner-occupied loans; and other CRE loans. We estimate the probability of default during the reasonable and supportable forecast period using separate econometric regression models developed to correlate macroeconomic variables, (GDP, unemployment, CRE prices and residential mortgage prices) to historical credit performance for each of the six loan portfolios from 2007 to the fourth quarter of 2020.  Loss given default rates would be computed based on the net charge-offs recognized divided by the expected exposure at default of defaulted loans starting with the fourth quarter of 2007 through the fourth quarter of 2020. The probability of default and the loss given default rates are applied to the expected amount at default at the loan level based on contractual scheduled payments and estimated prepayments. The amounts so calculated comprise the quantitative portion of the allowance for credit losses.   The Company’s CECL methodology utilizes an eight -quarter R&S forecast period, and a four -quarter reversion period. Management relies on multiple forecasts, blending them into a single loss estimate. Generally speaking, the blended scenario approach would include the Baseline, the Alternative Scenario 1 – Upside – 10th Percentile and the Alternative Scenario 3 – Downside – 90th Percentile forecasts. After the R&S period, the Company will revert straight-line for the four -quarter reversion period to the long-term loss rates for each of the six portfolios of loans.   The Company’s CECL methodology estimates expected credit losses over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: (i) management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or (ii) the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.   F- 12 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The simplified approach portfolios include Small Business Administration (“SBA”) loans, Home Equity Lines of Credit (“HELOCs”) and cash-secured loans, which are not modelled econometrically due to the low loss history for these three pools of loans. The forecasted loss rate is based on the forecasted GDP and unemployment rates during the first eight quarters of the portfolio’s contractual life, reversion loss rates for the next four quarters of the portfolio’s contractual life on a linear declining rate, and the long-term loss rate projected over the remainder of the portfolio’s contractual life.   Under the Company’s CECL methodology, the qualitative portion of the reserve on pooled loans represents management’s judgment of additional considerations to account for internal and external risk factors that are not adequately measured in the quantitative reserve. The qualitative loss factors consider idiosyncratic risk factors, conditions that may not be reflected in quantitatively derived results, or other relevant factors to seek to ensure the allowance for credit losses reflects our best estimate of current expected credit losses. The qualitative reserves include reserves for policy exceptions, experience of management and staff, level of competition in the lending environment, weak risk identification, lack of historical experience with residential mortgage loans made to non-U.S. residents, oil & gas, included as part of the C&I loan portfolio, and the higher risk characteristics of purchased syndicated loans. Current and forecasted economic trends and underlying market values for collateral dependent loans also are considered within the econometric models described above.   The Company’s CECL methodology requires a significant amount of management judgment in determining the appropriate allowance for credit losses. Several of the steps in the methodology involve judgment and are subjective in nature including, among other things: segmenting the loan portfolio; determining the period over which loss history to consider; selecting predictive econometric regression models that use appropriate macroeconomic variables; determining the methodology to forecast prepayments; selecting the most appropriate economic forecast scenario; determining the length of the R&S forecast and reversion periods; estimating expected utilization rates on unfunded loan commitments; and assessing relevant and appropriate qualitative factors. In addition, the CECL methodology is dependent on economic forecasts that are inherently imprecise and will change from period to period. Although the allowance for credit losses is considered by management to be appropriate, there can be no assurance that it will be sufficient to absorb future losses.   Management believes the allowance for credit losses is appropriate for the CECL in our loan portfolio and associated unfunded commitments, and the risk ratings and inherent loss rates currently assigned are reasonable and appropriate as of the reporting date.   F- 13 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   Individually Evaluated Loans.   Loans that do not share similar risk characteristics with other financial assets are individually evaluated for impairment and excluded from loan pools used within the collective evaluation of estimated credit losses. We defined the following criteria for what constitutes a “default”, which results in a loan no longer sharing similar risk characteristics with other loans, and therefore requires an individual evaluation for expected credit losses. The criteria for default may include any one of the following: on nonaccrual status, modified under a troubled debt restructuring, or payment delinquency of 90 days or more.   Allowance for Loan Losses.   Prior to January 1, 2021, the determination of the amount of the provision for loan losses charged to operations reflects management’s current judgment about the credit quality of the loan portfolio and takes into consideration changes in lending policies and procedures, changes in economic and business conditions, changes in the nature and volume of the portfolio and in the terms of loans, changes in the experience, ability and depth of lending management, changes in the volume and severity of past due, non-accrual and adversely classified or graded loans, changes in the quality of the loan review system, changes in the value of underlying collateral for collateral-dependent loans, the existence and effect of any concentrations of credit and the effect of competition, legal and regulatory requirements, and other external factors. The nature of the process by which loan losses is determined and the appropriate allowance for loan losses requires the exercise of considerable judgment. The allowance is increased or decreased by the provision or credit to the allowance for loan losses and decreased by charge-offs when management believes the uncollectability of a loan is confirmed.  Subsequent recoveries, if any, are credited to the allowance.   The total allowance for loan losses consists of two components: specific allowances and general allowances. To determine the appropriateness of the allowance in each of these two components, two primary methodologies are employed, the individual loan review analysis methodology and the classification migration methodology.  These methodologies support the basis for determining allocations between the various loan categories and the overall appropriateness of our allowance to provide for probable losses inherent in the loan portfolio. These methodologies are further supported by additional analysis of relevant factors such as the historical losses in the portfolio, and environmental factors which include trends in delinquency and non-accrual, and other significant factors, such as the national and local economy, the volume and composition of the portfolio, strength of management and loan staff, underwriting standards, and the concentration of credit.   The Bank’s management allocates a specific allowance for “Impaired Credits,” in accordance with Accounting Standard Codification (“ASC”) Section 310 - 10 - 35. For non-Impaired Credits, a general allowance is established for those loans internally classified and risk graded Pass, Watch, Special Mention, or Substandard based on historical losses in the specific loan portfolio and a reserve based on environmental factors determined for that loan group. The level of the general allowance is established to provide coverage for management’s estimate of the credit risk in the loan portfolio by various loan segments not covered by the specific allowance.   Impaired Loans. Prior to January 1, 2021, a loan was considered impaired when it was probable that we would be unable to collect all amounts due according to the contractual terms of the loan or lease agreement. The measurement of impairment may be based on ( 1 ) the present value of the expected future cash flows of the impaired loan discounted at the loan’s original effective interest rate, ( 2 ) the observable market price of the impaired loan or ( 3 ) the fair value of the collateral of a collateral-dependent loan. The amount by which the recorded investment in the loan exceeds the measure of the impaired loan is recognized by recording a valuation allowance with a corresponding charge to the provision for loan losses. When loans are placed on an impaired status, previously accrued but unpaid interest is reversed against current income and subsequent payments received are generally first applied toward the outstanding principal balance of the loan.   Troubled Debt Restructured Loan ( “ TDR ” ). A TDR is a formal modification of the terms of a loan when the lender, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower. The concessions may be granted in various forms, including reduction in the stated interest rate, reduction in the loan balance or accrued interest, or extension of the maturity date. Although these loan modifications are considered TDRs, TDR loans that have, pursuant to the Bank’s policy, performed under the restructured terms and have demonstrated sustained performance under the modified terms for six months are returned to accrual status. The sustained performance considered by management pursuant to its policy includes the periods prior to the modification if the prior performance met or exceeded the modified terms. This would include cash paid by the borrower prior to the restructure to set up interest reserves. Loans classified as TDRs are reported as individually evaluated loans.   The allowance for credit loss on a TDR is measured using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the allowance for credit loss is determined by discounting the expected future cash flows at the original interest rate of the loan.   The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) as extended by the Consolidated Appropriation Act, 2021 (“CAA”) permits financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by COVID- 19 and is intended to provide interpretive guidance as to conditions that would constitute a short-term modification that would not meet the definition of a TDR. Such conditions include the following (i) the loan modification is made between March 1, 2020, and the earlier of January 1, 2022 or 60 days after the end of the coronavirus emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019.   Unfunded Loan Commitments. Unfunded loan commitments are generally related to providing credit facilities to clients of the Bank and are not actively traded financial instruments. These unfunded commitments are disclosed as off-balance sheet financial instruments in Note 12 in the Notes to Consolidated Financial Statements.   F- 14 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company, using the same loss factors as used for the allowance for loan losses. The reserve for unfunded loan commitments uses the expected historical usage rate of the unfunded commitments during the contractual life of the commitments. The allowance for unfunded commitments is included in “other liabilities” on the Consolidated Balance Sheets. Changes in the allowance for unfunded commitments are included in the provision for loan losses.   Letter of Credit Fees . Issuance and commitment fees received for the issuance of commercial or standby letters of credit are recognized over the term of the instruments.   Premises and Equipment. Premises and equipment are carried at cost, less accumulated depreciation. Depreciation is computed on the straight-line method based on the following estimated useful lives of the assets:   Type   Estimated Useful Life (years)   Buildings 15 to 45   Building improvements 5  to 20   Furniture, fixtures, and equipment 3 to 25   Leasehold improvements Shorter of useful lives or the terms of the leases     Improvements are capitalized and amortized to occupancy expense based on the above table. Construction in process is carried at cost and includes land acquisition cost, architectural fees, general contractor fees, capitalized interest and other costs related directly to the construction of a property.   Other Real Estate Owned ( “ OREO ” ). Real estate acquired in the settlement of loans is initially recorded at fair value, less estimated costs to sell. Specific valuation allowances on other real estate owned are recorded through charges to operations to recognize declines in fair value subsequent to foreclosure. Gain or loss on sale is recognized when certain criteria relating to the buyer’s initial and continuing investment in the property are met.   Investments in Affordable Housing Partnerships and Other Tax Credit Investments. The Company is a limited partner in limited partnerships that invest in low-income housing projects that are intended to qualify for Federal and/or State income tax credits and limited partnerships that invests in alternative energy systems that are intended to qualify for alternative energy tax credits. As further discussed in Note  5 to the Consolidated Financial Statements, the partnership interests are accounted for utilizing the equity method of accounting. As of December 31, 2021, ten of the limited partnerships in which the Company has an equity interest were determined to be variable interest entities for which the Company is the primary beneficiary. The Company therefore consolidated the financial statements of these ten limited partnerships into the Consolidated Financial Statements. The tax credits from these partnerships are recognized in the consolidated financial statements to the extent they are utilized on the Company’s income tax returns. The investments are reviewed for impairment on an annual basis or on an interim basis if an event occurred that would trigger potential impairment.   Investments in Venture Capital. The Company invests in limited partnerships that invest in nonpublic companies. These are commonly referred to as venture capital investments. These limited partnership interests are carried under the cost method with other-than-temporary impairment charged against net income.   Goodwill and Goodwill Impairment. Goodwill and other intangible assets are assessed for impairment annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable. The Company performed its annual impairment test and determined no impairment existed as of December 31, 2021.   F- 15 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   Core Deposit Intangible. Core deposit intangible, which represents the purchase price over the fair value of the deposits acquired from other financial institutions, is amortized over its estimated useful life to its residual value in proportion to the economic benefits consumed. If a pattern of consumption cannot be reliably determined, straight-line amortization is used. The Company assesses the recoverability of this intangible asset by determining whether the amortization of the premium balance over its remaining life can be recovered through the remaining deposit portfolio and amortizes core deposit premium over its estimated useful life.   Securities Sold Under Agreements to Repurchase. The Company sells certain securities under agreements to repurchase. The agreements are treated as collateralized financing transactions and the obligations to repurchase securities sold are reflected as a liability in the accompanying Consolidated Balance Sheets. The securities underlying the agreements remain in the applicable asset accounts.   Bank-Owned Life Insurance. We have purchased single premium life insurance policies (“bank-owned life insurance”) on certain officers. The Bank is the beneficiary under each policy. In the event of the death of a covered officer, we will receive the specified insurance benefit from the insurance carrier and pay a fixed dollar amount to the beneficiary designated by the officer. Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due, if any, that are probable at settlement.   Stock-Based Compensation. Stock option compensation expense is calculated based on the fair value of the award at the grant date for those options expected to vest and is recognized as an expense over the vesting period of the grant using the straight-line method. The Company uses the Black-Scholes option pricing model to estimate the value of granted options. This model takes into account the option exercise price, the expected life, the current price of the underlying stock, the expected volatility of the Company’s stock, expected dividends on the stock and a risk-free interest rate. The Company estimates the expected volatility based on the Company’s historical stock prices for the period corresponding to the expected life of the stock options. Restricted stock units are valued at the closing price of the Company’s stock on the date of the grant.   Derivatives . The Company follows ASC Topic 815 that establishes accounting and reporting standards for financial derivatives, including certain financial derivatives embedded in other contracts, and hedging activities. It requires the recognition of all financial derivatives as assets or liabilities in the Company’s Consolidated Balance Sheets at fair value. The accounting treatment of changes in fair value is dependent upon whether or not a financial derivative is designated as a hedge and, if so, the type of hedge. Fair value is determined using third -party models with observable market data. For derivatives designated as cash flow hedges, changes in fair value are recognized in other comprehensive income and are reclassified to earnings when the hedged transaction is reflected in earnings. For derivatives designated as fair value hedges, changes in the fair value of the derivatives are reflected in current earnings, together with changes in the fair value of the related hedged item if there is a highly effective correlation between changes in the fair value of the interest rate swaps and changes in the fair value of the underlying asset or liability that is intended to be hedged. If there is not a highly effective correlation between changes in the fair value of the interest rate swap and changes in the fair value of the underlying asset or liability that is intended to be hedged, then only the changes in the fair value of the interest rate swaps are reflected in the Company’s consolidated financial statements.   F- 16 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   Foreign Exchange Forwards and Foreign Currency Option Contracts. We enter into foreign exchange forward contracts and foreign currency option contracts with correspondent banks to mitigate the risk of fluctuations in foreign currency exchange rates for foreign currency certificates of deposit, foreign exchange contracts or foreign currency option contracts entered into with our clients. These contracts are not designated as hedging instruments and are recorded at fair value in our Consolidated Balance Sheets. Changes in the fair value of these contracts as well as the related foreign currency certificates of deposit, foreign exchange contracts or foreign currency option contracts, are recognized immediately in net income as a component of non-interest income. Period end gross positive fair values are recorded in other assets and gross negative fair values are recorded in other liabilities.   Income Taxes. The provision for income taxes is based on income reported for financial statement purposes, and differs from the amount of taxes currently payable, since certain income and expense items are reported for financial statement purposes in different periods than those for tax reporting purposes. The Company accounts for income taxes using the asset and liability approach, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance is established for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.   Comprehensive Income/(loss). Comprehensive income/(loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income/(loss) generally includes net income/(loss), unrealized gains and losses on investments in securities available-for-sale, and cash flow hedges. Comprehensive income/(loss) and its components are reported and displayed in the Company’s Consolidated Statements of Operations and Comprehensive Income.   Net Income per Common Share . Earnings per share (“EPS”) is computed on a basic and diluted basis. Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shares in the earnings of the Company. Potential dilution is excluded from computation of diluted per-share amounts when a net loss from operations exists.   Foreign Currency Translation. The Company considers the functional currency of its foreign operations to be the United States dollar. Accordingly, the Company remeasures monetary assets and liabilities at year-end exchange rates, while nonmonetary items are remeasured at historical rates. Income and expense accounts are remeasured at the average rates in effect during the year, except for depreciation, which is remeasured at historical rates. Foreign currency transaction gains and losses are recognized in income in the period of occurrence.   Statement of Cash Flows . Cash and cash equivalents include short-term highly liquid investments that generally have an original maturity of three months or less.   Segment Reporting. Through our branch network and lending units, we provide a broad range of financial services to individuals and companies. These services include demand, time and savings deposits; and commercial and industrial, real estate and consumer lending. While our chief decision makers monitor the revenue streams of our various products and services, operations are managed, and financial performance is evaluated on a company-wide basis. Accordingly, we consider all of our operations to be aggregated in one reportable operating segment.   F- 17 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   Accounting Standards adopted in 2021   In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016 - 13, “Financial Instruments - Credit Losses (Topic 326 ): Measurement of Credit Losses on Financial Instruments.”  This update requires an entity to use a broader range of R&S forecasts, in addition to historical experience and current conditions, to develop an expected credit loss estimate, referred to as the CECL model, for financial assets and net investments that are not accounted for at fair value through net income.  Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses to the amount by which fair value is below amortized cost.    The FASB issued additional ASUs containing clarifying guidance, transition relief provisions and minor updates to the original ASU. These include ASU 2018 - 19 (issued November 2018), ASU 2019 - 04 (issued April 2019), ASU 2019 - 05 (issued May 2019), ASU 2019 - 10 (issued November 2019), ASU 2019 - 11 (issued November 2019), ASU 2020 - 02 (issued February 2020) and ASU 2020 - 03 (issued March 2020). ASU 2016 - 13 and subsequent ASUs are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and subsequently extended by the CAA until the earlier of (i) the beginning of our fiscal year that begins after the date the COVID- 19 national emergency comes to an end or (ii) January 1, 2022. This amendment requires using a modified retrospective approach with a cumulative-effect adjustment to beginning retained earnings, as of the beginning of the first reporting period in which the guidance is effective.    Effective January 1, 2021, the Company adopted ASU 2016 - 13 and the related amendments to Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments - Credit Losses, to replace the incurred loss accounting approach with a CECL approach for financial instruments measured at amortized cost and other commitments to extend credit. The new standard is generally intended to require earlier recognition of credit losses. While the standard changes the measurement of the allowance for credit losses, it does not change the credit risk of our lending portfolios or the ultimate losses in those portfolios.   Under the CECL approach, the standard requires immediate recognition of estimated credit losses expected to occur over the estimated remaining life of the asset. The forward-looking concept of CECL requires loss estimates to consider historical experience, current conditions and reasonable and supportable forecasts. The standard modifies the other-than-temporary impairment model for available-for-sale debt securities to require entities to record an allowance when recognizing credit losses for available-for-sale securities, rather than reducing the amortized cost of the securities by direct write-offs.   The Company adopted the new standard using the modified retrospective approach and recognized a cumulative effect adjustment to decrease retained earnings by $ 3.1  million, net of taxes, and decrease the allowance for loan losses by $ 1.6  million and increase the reserve for unfunded loan commitments by $ 6.0 million without restating prior periods and applied the requirements of the new standard prospectively. There was no cumulative effect adjustment related to available-for-sale securities at adoption. The Company elected to account for accrued interest receivable separately from the amortized cost of loans and investment securities. Accrued interest receivable is included in "accrued interest receivables" on the Consolidated Balance Sheets. The Company elected the practical expedient to use the fair value of the collateral at the reporting date when determining the allowance for credit losses for a financial asset for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty based on the entity’s assessment as of the reporting date (collateral dependent financial asset). Additionally, the Company implemented new business processes, new internal controls, and modified existing and/or implemented new internal models and tools to facilitate the ongoing application of the new standard. See Note 8.  Loans for further details.   F- 18 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The following table sets forth the cumulative effect of the changes to the Company’s unaudited Consolidated Balance Sheets at January 1, 2021, for the adoption of ASC 326:         Balance at     Adjustments due to     Balance at       December 31, 2020     Adoption of ASC 326     January 1, 2021   Assets:   (In thousands)   Allowance for credit losses on loans   $ 166,538     $ ( 1,560 )   $ 164,978   Deferred tax assets     85,610       1,319       86,929                             Liabilities:                         Allowance for unfunded commitments   $ 5,880     $ 6,018     $ 11,898                             Stockholders' equity:                         Retained earnings, net of tax   $ 2,418,144     $ ( 3,139 )   $ 2,415,005     In July 2017, the FASB issued ASU 2017 - 11, “Earnings per Share (Topic 260 ), Distinguishing Liabilities from Equity (Topic 480 ) and Derivatives and Hedging (Topic 815 ).” There are two parts to this update. Part I addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments that result in the strike price being reduced on the basis of the pricing of future equity offerings. Part II addresses the difficulty in navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB ASC. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in this update are effective for fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in part I of this update should be applied in either of the following ways: (i) retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim periods in which the pending content that links to this paragraph is effective; or (ii) retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs 250 - 10 - 45 - 5 through 45 - 10. The amendments to Part II of this update do not require any transition guidance because those amendments do not have an accounting effect. Adoption of ASU 2017 - 11 did not have a material impact on the Company’s Consolidated Financial Statements.   In December 2019, the FASB issued ASU No. 2019 - 12, “Income Taxes (Topic 740 ); Simplifying the Accounting for Income Taxes.” This ASU removes specific exceptions to the general principles in Topic 740 in GAAP. It eliminates the need for an organization to analyze whether the following apply in a given period: exception to the incremental approach for intra-period tax allocation; exception to accounting for basis differences when there are ownership changes in foreign investments; and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The ASU also (i) improves financial statement preparers’ application of income tax-related guidance (ii) simplifies GAAP for franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; and separate financial statements of legal entities that are not subject to tax; and (iii) establishes changes in tax laws in interim periods. This ASU is effective for public business entities, for fiscal years beginning after December 15, 2020 with early adoption permitted for public business entities for periods for which financial statements have not yet been issued. Adoption of ASU 2019 - 12 did not have a material impact on the Company’s Consolidated Financial Statements. F- 19 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   In January 2020, the FASB issued ASU No. 2020 - 01, “'Investments—Equity Securities (Topic 321 ), Investments—Equity Method and Joint-Ventures (Topic 323 ), and Derivatives and Hedging (Topic 815 ). Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” This ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early application is permitted, including early adoption in an interim period for public business entities for periods for which financial statements have not yet been issued. An entity should apply ASU No. 2020 - 01 prospectively at the beginning of the interim period that includes the adoption date. This ASU, among other things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments—Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The new ASU clarifies that, when determining the accounting for certain forward contracts and purchased options a company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. Adoption of ASU 2020 - 01 did not have a material impact on the Company’s Consolidated Financial Statements.   Recent Accounting Pronouncements   In March 2020, the FASB issued ASU No. 2020 - 04, “Reference Rate Reform (Topic 848 ): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU No. 2020 - 04 is effective for all entities as of March 12, 2020, through December 31, 2022. This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. Therefore, it will be in effect for a limited time through December 31, 2022. In January 2021, the FASB issued ASU 2021 - 01 as subsequent amendments, which expanded the scope of Topic 848 to include all affected derivatives and clarified certain optional expedients and exceptions regarding the hedge accounting for derivative contracts affected by the discounting transition. The adoption of this guidance did not significantly impact the Company’s consolidated financial statements.     2.           Cash, Cash Equivalents and Restricted Cash   The Company manages its cash and cash equivalents, which consist of cash on hand, amounts due from banks, federal funds sold, and short-term investments with original maturity of three months or less, based upon the Company’s operating, investment, and financing activities. For the purpose of reporting cash flows, these same accounts are included in cash and cash equivalents.   The Company is required to maintain reserves with the Federal Reserve Bank. Reserve requirements are based on a percentage of deposit liabilities. The average reserve balances required were zero for 2021 and $ 60 thousand for 2020. The average excess balance with Federal Reserve Bank was $ 1,609.7 million in 2021 and $ 874.8 million in 2020. At December 31, 2021 and December 31, 2020, the Company had $ 24.3 million and $ 34.7 million, respectively, on deposit in a cash margin account that serves as collateral for interest rate swaps. These amounts included $ 5.9 million and $ 11.9 million, respectively, on deposit in a cash margin account that serves as collateral for the Bancorp’s interest rate swaps. As of December 31, 2021 and December 31, 2020, the Company held $ 689.9 thousand and $ 9.3 million, respectively, in a restricted escrow account with a major bank for its alternative energy investments.   F- 20 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)     3.           Investment Securities   Investment Securities. The following tables reflect the amortized cost, gross unrealized gains, gross unrealized losses, and fair values of debt securities available-for-sale as of December 31, 2021 and December 31, 2020:       As of December 31, 2021               Gross     Gross               Amortized     Unrealized     Unrealized               Cost     Gains     Losses     Fair Value       (In thousands)   Securities Available-for-Sale                                 U.S. treasury securities   $ —     $ —     $ —     $ —   U.S. government agency entities     86,475       1,169       135       87,509   Mortgage-backed securities     886,614       9,465       7,414       888,665   Collateralized mortgage obligations     9,547       —       430       9,117   Corporate debt securities     144,231       441       2,654       142,018   Total   $ 1,126,867     $ 11,075     $ 10,633     $ 1,127,309         As of December 31, 2020               Gross     Gross               Amortized     Unrealized     Unrealized               Cost     Gains     Losses     Fair Value       (In thousands)   Securities Available-for-Sale                                 U.S. treasury securities   $ 80,948     $ 6     $ 6     $ 80,948   U.S. government agency entities     99,944       441       546       99,839   Mortgage-backed securities     709,709       17,965       606       727,068   Collateralized mortgage obligations     10,358       —       34       10,324   Corporate debt securities     118,271       367       267       118,371   Total   $ 1,019,230     $ 18,779     $ 1,459     $ 1,036,550     The amortized cost and fair value of securities available-for-sale at December 31, 2021, by contractual maturities, are set forth in the table below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or repayment penalties.         Securities Available-for-Sale       As of December 31, 2021       Amortized Cost     Fair Value       (In thousands)   Due in one year or less   $ 5,005     $ 5,009   Due after one year through five years     126,871       124,148   Due after five years through ten years     137,989       141,331   Due after ten years     857,002       856,821   Total   $ 1,126,867     $ 1,127,309     Proceeds from the sale of investment securities were $ 21.1 million during 2021 compared to $ 117.2 million during 2020. Proceeds from repayments, maturities and calls of investment securities during 2021 were $ 424.4  million compared to $ 734.5 million during 2020. In 2021, the Company recorded realized gains of $ 853 thousand and zero losses on sales of investment securities compared to realized gains of $ 1.7 million and zero losses on sales of investment securities in 2020.   F- 21 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   Allowance for Credit Losses   The securities that were in an unrealized loss position at December 31, 2021, were evaluated to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or other factors. For a discussion of the factors and criteria the Company uses in analyzing securities for impairment related to credit losses, see Note 1 Summary of Significant Accounting Policies - Allowance for Credit Losses on Available for Sale Securities to the Consolidated Financial Statements.   The Company concluded the unrealized losses were primarily attributed to yield curve movement, together with widened liquidity spreads and credit spreads. The issuers have not, to the Company’s knowledge, established any cause for default on these securities. The Company expects to recover the amortized cost basis of its securities and has no present intent to sell and will not be required to sell available-for-sale securities that have declined below their cost before their anticipated recovery. Accordingly, no allowance for credit losses was recorded as of December 31, 2021, against these securities, and there was no provision for credit losses recognized for the year ended December 31, 2021.   The tables below show the related fair value and the gross unrealized losses of the Company’s investment portfolio, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2021, and December 31, 2020:       As of December 31, 2021                                                         Less than 12 months     12 months or longer     Total       Fair     Gross Unrealized     Fair     Gross Unrealized     Fair     Gross Unrealized       Value     Losses     Value     Losses     Value     Losses       (In thousands)                                                     Securities Available-for-Sale                                                 U.S. treasury securities   $ —     $ —     $ —     $ —     $ —     $ —   U.S. government agency entities     —       —       2,337       135       2,337       135   Mortgage-backed securities     527,276       6,659       6,496       755       533,772       7,414   Collateralized mortgage obligations     8,989       417       128       13       9,117       430   Corporate debt securities     103,720       2,122       19,468       532       123,188       2,654   Total   $ 639,985     $ 9,198     $ 28,429     $ 1,435     $ 668,414     $ 10,633         As of December 31, 2020                                                         Less than 12 months     12 months or longer     Total       Fair     Gross Unrealized     Fair     Gross Unrealized     Fair     Gross Unrealized       Value     Losses     Value     Losses     Value     Losses       (In thousands)                                                     Securities Available-for-Sale                                                 U.S. treasury securities   $ 40,952     $ 6     $ —     $ —     $ 40,952     $ 6   U.S. government agency entities     26,390       102       40,009       444       66,399       546   Mortgage-backed securities     1,694       23       8,093       583       9,787       606   Collateralized mortgage obligations     10,131       25       193       9       10,324       34   Corporate debt securities     58,405       267       —       —       58,405       267   Total   $ 137,572     $ 423     $ 48,295     $ 1,036     $ 185,867     $ 1,459         Securities available-for-sale having a carrying value of $ 30.5 million and $ 22.7 million as of December 31, 2021, and December 31, 2020, respectively, were pledged to secure public deposits, other borrowings, treasury tax and loans.   For the year ended December 31, 2021, the Company recognized a net loss of $ 1.4 million due to the decrease in fair value of equity investments with readily determinable fair values, compared to a net loss of $ 1.1 million in 2020. Equity securities were $ 22.3 million as of December 31, 2021, compared to $ 23.7 million as of December 31, 2020.   F- 22 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)     4.           Loans   Most of the Company’s business activities are with customers located in the high-density Asian-populated areas of Southern and Northern California; New York City, New York; Houston and Dallas, Texas; Seattle, Washington; Boston, Massachusetts; Chicago, Illinois; Edison, New Jersey; Rockville, Maryland; and Las Vegas, Nevada. The Company also has loan customers in Hong Kong. The Company has no specific industry concentration, and generally its loans, when secured, are secured by real property or other collateral of the borrowers. The Company generally expects loans to be paid off from the operating profits of the borrowers, from refinancing by another lender, or through sale by the borrowers of the secured collateral.   The types of loans in the Company’s Consolidated Balance Sheets as of December 31, 2021, and 2020, were as follows:       As of December 31,       2021     2020       (In thousands)   Type of Loans:                 Commercial loans   $ 2,982,399     $ 2,836,833   Real estate construction loans     611,031       679,492   Commercial mortgage loans     8,143,272       7,555,027   Residential mortgage loans     4,182,006       4,145,389   Equity lines     419,487       424,555   Installment and other loans     4,284       3,100   Gross loans     16,342,479       15,644,396   Less:                 Allowance for loan losses     ( 136,157 )     ( 166,538 ) Unamortized deferred loan fees     ( 4,321 )     ( 2,494 ) Total loans, net   $ 16,202,001     $ 15,475,364     The Company pledged real estate loans of $ 11.5 billion at December 31, 2021, and $ 11.2 billion at December 31, 2020, to the Federal Home Loan Bank of San Francisco under its blanket lien pledging program. In addition, the Company pledged $ 773 thousand at December 31, 2021, and $ 7.5 million at December 31, 2020, of its commercial loans to the Federal Reserve Bank’s Discount Window under the Borrower-in-Custody program.   Loans serviced for others as of December 31, 2021, totaled $ 141.2 million and were comprised of $ 92.1 million of residential mortgages, $ 17.0 million of commercial real estate loans, $ 30.1 million of construction loans, and $ 2.3 million of commercial loans.   The Company has entered into transactions with its directors, executive officers, or principal holders of its equity securities, or the associates of such persons (“Related Parties”). All loans to Related Parties were current as of December 31, 2021. An analysis of the activity with respect to loans to Related Parties for the years indicated is as follows:       December 31,       2021     2020       (In thousands)   Balance at beginning of year   $ 51,288     $ 43,952   Additional loans made     29,182       23,102   Payment received     ( 41,938 )     ( 15,766 ) Balance at end of year   $ 38,532     $ 51,288     F- 23 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   At December 31, 2021, recorded investment in non-accrual loans totaled $ 65.8 million. At December 31, 2020, recorded investment in impaired loans totaled $ 95.4 million and were comprised of nonaccrual loans of $ 67.7 million and accruing TDR’s of $ 27.7 million. The average balance of non-accrual loans was $ 72.7 million in 2021 and average balance of impaired loans was $ 91.4  million in 2020. Interest recognized on non-accrual loans totaled $ 1.1 million in 2021 and on impaired loans totaled $ 2.4 million in 2020. For non-accrual loans, the amounts previously charged off represent 10.7 % of the contractual balances for non-accrual loans as of December 31, 2021. For impaired loans, the amounts previously charged off represent 7.1 % of the contractual balances for impaired loans at December 31, 2020.   The following table presents the average balance and interest income recognized on non-accrual loans for the periods indicated:       For the year ended December 31, 2021       Average Recorded Investment     Interest Income Recognized       (In thousands)   Commercial loans   $ 21,453     $ —   Real estate construction loans     3,805       —   Commercial mortgage loans     38,047       1,044   Residential mortgage and equity lines     9,435       30   Total   $ 72,740     $ 1,074     In connection with the adoption of ASU 2016 - 13, the Company no longer provides information on impaired loans. The following table presents the average recorded investment and interest income recognized on individually evaluated loans for the period indicated:       For the year ended December 31, 2020       Average Recorded Investment     Interest Income Recognized       (In thousands)   Commercial loans   $ 31,009     $ 246   Real estate construction loans     4,408       294   Commercial mortgage loans     41,649       1,602   Residential mortgage and equity lines     14,287       252   Total   $ 91,353     $ 2,394     F- 24 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The following table presents non-accrual loans and the related allowance as of December 31, 2021:       As of December 31, 2021       Unpaid Principal Balance     Recorded Investment     Allowance       (In thousands)   With no allocated allowance:                         Commercial loans   $ 15,879     $ 11,342     $ —   Commercial mortgage loans     24,437       21,209       —   Residential mortgage and equity lines     6,020       5,850       —   Subtotal   $ 46,336     $ 38,401     $ —   With allocated allowance:                         Commercial loans   $ 14,294     $ 5,217     $ 894   Commercial mortgage loans     17,930       16,964       3,631   Residential mortgage and equity lines     6,048       5,264       22   Subtotal   $ 38,272     $ 27,445     $ 4,547   Total non-accrual loans   $ 84,608     $ 65,846     $ 4,547     In connection with the adoption of ASU 2016 - 13, the Company no longer provides information on impaired loans. The following table presents impaired loans and the related allowance as of December 31, 2020:       Impaired Loans       As of December 31, 2020       Unpaid Principal Balance     Recorded Investment     Allowance       (In thousands)   With no allocated allowance:                         Commercial loans   $ 23,784     $ 20,698     $ —   Real estate construction loans     5,776       4,286       —   Commercial mortgage loans     22,877       22,287       —   Residential mortgage and equity lines     6,379       6,307       —   Subtotal   $ 58,816     $ 53,578     $ —   With allocated allowance:                         Commercial loans   $ 13,703     $ 6,372     $ 1,030   Commercial mortgage loans     31,134       31,003       5,254   Residential mortgage and equity lines     5,005       4,452       145   Subtotal   $ 49,842     $ 41,827     $ 6,429   Total impaired loans   $ 108,658     $ 95,405     $ 6,429     The following table is a summary of non-accrual loans as of December 31, 2021, 2020, and 2019 and the related net interest foregone for the years then ended:       As of December 31,       2021     2020     2019       (In thousands)   Non-accrual portfolio loans   $ 65,846     $ 67,684     $ 40,523   Contractual interest due     4,032       3,093       1,775   Interest recognized     1,074       1,008       85   Net interest foregone   $ 2,958     $ 2,085     $ 1,690     F- 25 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The following tables present the aging of the loan portfolio by type as of December 31, 2021, and December 31, 2020:       As of December 31, 2021       30-59 Days Past Due     60-89 Days Past Due     90 Days or More Past Due     Non-accrual Loans     Total Past Due     Loans Not Past Due     Total   Type of Loans:   (In thousands)   Commercial loans   $ 4,294     $ 9,877     $ 1,439     $ 16,558     $ 32,168     $ 2,950,231     $ 2,982,399   Real estate construction loans     —       —       —       —       —       611,031       611,031   Commercial mortgage loans     8,389       —       —       38,173       46,562       8,096,710       8,143,272   Residential mortgage loans     20,129       3,138       —       11,115       34,382       4,567,111       4,601,493   Installment and other loans     —       —       —       —       —       4,284       4,284   Total loans   $ 32,812     $ 13,015     $ 1,439     $ 65,846     $ 113,112     $ 16,229,367     $ 16,342,479                                                                   As of December 31, 2020       30-59 Days Past Due     60-89 Days Past Due     90 Days or More Past Due     Non-accrual Loans     Total Past Due     Loans Not Past Due     Total   Type of Loans:   (In thousands)   Commercial loans   $ 52,601     $ 3,182     $ 2,947     $ 23,087     $ 81,817     $ 2,755,016     $ 2,836,833   Real estate construction loans     6,257       —       —       4,286       10,543       668,949       679,492   Commercial mortgage loans     45,186       18,069       2,035       33,715       99,005       7,456,022       7,555,027   Residential mortgage loans     14,315       4,223       —       6,596       25,134       4,544,810       4,569,944   Installment and other loans     43       —       —       —       43       3,057       3,100   Total loans   $ 118,402     $ 25,474     $ 4,982     $ 67,684     $ 216,542     $ 15,427,854     $ 15,644,396     A TDR is a formal modification of the terms of a loan when the lender, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower. The concessions may be granted in various forms, including a change in the stated interest rate, a reduction in the loan balance or accrued interest, or an extension of the maturity date. Although these loan modifications are considered TDRs, TDR loans that have, pursuant to the Bank’s policy, performed under the restructured terms and have demonstrated sustained performance under the modified terms for six months are returned to accrual status. The sustained performance considered by management pursuant to its policy includes the periods prior to the modification if the prior performance met or exceeded the modified terms. This would include cash paid by the borrower prior to the restructure to set up interest reserves. Loans classified as TDRs are reported as individually evaluated loans.   The allowance for credit loss on a TDR is measured using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the allowance for credit loss is determined by discounting the expected future cash flows at the original interest rate of the loan.   The Company establishes a specific reserve for individually evaluated loans that do not share similar risk characteristics with the loans included in the quantitative baseline. These individually evaluated loans are removed from the pooling approach discussed in the “Basis of Presentation and Summary of Significant Accounting Policies” above, for the quantitative baseline, and include non-accrual loans, TDRs, and other loans as deemed appropriate by management. In addition, the Company individually evaluates “reasonably expected” TDRs, which are identified by the Company as a commercial loan expected to be classified as a TDR. Individually evaluated loans also includes “reasonably expected” TDRs, identified by the Company as a consumer loan for which a borrower’s application of loan modification due to hardship has been received by the Company. Management judgment is utilized to make this determination.   F- 26 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   Although the Company took steps to incorporate the impact of the COVID- 19 pandemic on the economic conditions and other factors utilized to determine the expected loan losses, if the economic conditions or other factors worsen relative to the assumptions the Company utilized, the expected loan losses will increase accordingly in future periods.   At December 31, 2021, accruing TDRs were $ 12.8 million and non-accrual TDRs were $ 8.2 million compared to accruing TDRs of $ 27.7 million and non-accrual TDRs of $ 9.0 million at December 31, 2020. The Company allocated seven thousand in reserves to accruing TDRs and three thousand to non-accrual TDRs at December 31, 2021, compared to $ 122 thousand to accruing TDRs and $ 24 thousand to non-accrual TDRs at December 31, 2020. The following table presents TDRs that were modified during 2021, their specific reserve at December 31, 2021, and charge-offs during 2021:       Loans Modified as TDRs During the Year Ended December 31, 2021       No. of Contracts     Pre-Modification Outstanding Recorded Investment     Post-Modification Outstanding Recorded Investment     Specific Reserve     Charge-offs       (Dollars in thousands)                                             Commercial loans     3     $ 2,150     $ 2,150     $ —     $ —   Residential mortgage and equity lines     2       3       3       —       —   Total     5     $ 2,153     $ 2,153     $ —     $ —     The following table presents TDRs that were modified during 2020, their specific reserve at December 31, 2020, and charge-offs during 2020:       Loans Modified as TDRs During the Year Ended December 31, 2020       No. of Contracts     Pre-Modification Outstanding Recorded Investment     Post-Modification Outstanding Recorded Investment     Specific Reserve     Charge-offs       (Dollars in thousands)                                             Commercial loans     5     $ 5,417     $ 5,417     $ —     $ —   Total     5     $ 5,417     $ 5,417     $ —     $ —     The following table presents TDRs that were modified during 2019, their specific reserve at December 31, 2019, and charge-offs during 2019:       Loans Modified as TDRs During the Year Ended December 31, 2019       No. of Contracts     Pre-Modification Outstanding Recorded Investment     Post-Modification Outstanding Recorded Investment     Specific Reserve     Charge-off       (Dollars in thousands)                                             Commercial loans     23     $ 25,937     $ 21,874     $ 2,190     $ 4,063   Residential mortgage and equity lines     1       42       42       —       —   Total     24     $ 25,979     $ 21,916     $ 2,190     $ 4,063     F- 27 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   A summary of TDRs by type of concession and by type of loans as of December 31, 2021, and December 31, 2020, are shown below:       December 31, 2021   Accruing TDRs   Payment Deferral     Rate Reduction     Rate Reduction and Payment Deferral     Total       (In thousands)   Commercial loans   $ 3,368     $ —     $ —     $ 3,368   Commercial mortgage loans     438       5,522       168       6,128   Residential mortgage loans     1,464       249       1,628       3,341   Total accruing TDRs   $ 5,270     $ 5,771     $ 1,796     $ 12,837         December 31, 2021   Non-accrual TDRs   Payment Deferral     Rate Reduction     Rate Reduction and Payment Deferral     Total       (In thousands)   Commercial loans   $ 7,717     $ —     $ —     $ 7,717   Residential mortgage loans     458       —       —       458   Total non-accrual TDRs   $ 8,175     $ —     $ —     $ 8,175         December 31, 2020   Accruing TDRs   Payment Deferral     Rate Reduction     Rate Reduction and Payment Deferral     Total       (In thousands)   Commercial loans   $ 3,983     $ —     $ —     $ 3,983   Commercial mortgage loans     515       5,635       13,425       19,575   Residential mortgage loans     1,724       275       2,164       4,163   Total accruing TDRs   $ 6,222     $ 5,910     $ 15,589     $ 27,721         December 31, 2020   Non-accrual TDRs   Payment Deferral     Rate Reduction     Rate Reduction and Payment Deferral     Total       (In thousands)   Commercial loans   $ 8,462     $ —     $ —     $ 8,462   Residential mortgage loans     523       —       —       523   Total non-accrual TDRs   $ 8,985     $ —     $ —     $ 8,985     F- 28 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   Modifications of the loan terms in the twelve months ended December 31, 2021, were in the form of extensions of maturity dates, which ranged generally from three to twelve months from the modification date.    We expect that the TDRs on accruing status as of December 31, 2021, which were all performing in accordance with their restructured terms, will continue to comply with the restructured terms because of the reduced principal or interest payments on these loans.  The ongoing impact of the COVID pandemic, however, could increase the risk of such TDRs becoming non-accrual due to the borrowers’ inability to continue to comply with their restructured terms.   The Company considers a loan to be in payment default once it is 60 to 90 days contractually past due under the modified terms.  The Company did not have any loans that were modified as a TDR during the previous twelve months and which had subsequently defaulted as of December 31, 2021.    Under the Company’s internal underwriting policy, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification in order to determine whether a borrower is experiencing financial difficulty.   As of December 31, 2021, there were no commitments to lend additional funds to those borrowers whose loans have been restructured, were considered individually evaluated, or were on non-accrual status.   The CARES Act, signed into law on March 27, 2020, and as extended by the CAA, 2021, permits financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by COVID- 19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of December 31, 2021 or 60 days after the end of the coronavirus emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. In addition, federal bank regulatory authorities have issued guidance to encourage financial institutions to make loan modifications for borrowers affected by COVID- 19 and have assured financial institutions that they will neither receive supervisory criticism for such prudent loan modifications, nor be required by examiners to automatically categorize COVID- 19 -related loan modifications as TDRs. The Company is applying this guidance to qualifying loan modifications.   F- 29 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   As part of the on-going monitoring of the credit quality of our loan portfolio, the Company utilizes a risk grading matrix to assign a risk rating to each loan. Loans are risk rated based on analysis of the current state of the borrower’s credit quality. The analysis of credit quality includes a review of sources of repayment, the borrower’s current financial and liquidity status and other relevant information. The risk rating categories can be generally described by the following grouping for non-homogeneous loans:     ●          Pass/Watch –   These loans range from minimal credit risk to lower than average, but still acceptable, credit risk.         ● Special Mention  – Borrower is deemed fundamentally sound, and the loan is currently protected but adverse trends are apparent that, if not corrected, may affect ability to repay. Primary source of loan repayment remains viable but there is increasing reliance on collateral or guarantor support.     ●          Substandard  – These loans are deemed inadequately protected by current sound worth, paying capacity or pledged collateral. Well-defined weaknesses exist that could jeopardize repayment of debt. Loss may not be imminent, but if weaknesses are not corrected, there is a good possibility of some loss.     ●          Doubtful – The possibility of loss is deemed extremely high, but due to identifiable and important pending events (which may strengthen the loan) a loss classification is deferred until the situation is better defined.     ●          Loss – These loans are deemed uncollectible and of such little value that to continue to carry the loans as an active asset is no longer warranted.   In connection with the adoption of ASU 2016 - 13, the Company no longer provides information on impaired loans. The following tables present loan portfolio by risk rating as of December 31, 2020:       As of December 31, 2020       Pass/Watch     Special Mention     Substandard     Doubtful     Total       (In thousands)   Commercial loans   $ 2,581,128     $ 141,344     $ 108,788     $ 5,573     $ 2,836,833   Real estate construction loans     593,196       82,010       4,286       —       679,492   Commercial mortgage loans     7,202,568       186,283       166,176       —       7,555,027   Residential mortgage and equity lines     4,547,052       11,647       11,245       —       4,569,944   Installment and other loans     3,100       —       —       —       3,100   Total gross loans   $ 14,927,044     $ 421,284     $ 290,495     $ 5,573     $ 15,644,396     F- 30 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The following table summarizes the Company’s loan held for investment by loan portfolio segments, risk ratings and vintage year. The vintage year is the year of origination, renewal or major modification:       Loans Amortized Cost Basis by Origination Year                           December 31, 2021   2021     2020     2019     2018     2017     Prior     Revolving Loans     Revolving Converted to Term Loans     Total       (In thousands)   Commercial loans                                                                         Pass/Watch   $ 606,770     $ 268,756     $ 183,468     $ 142,419     $ 80,701     $ 100,496     $ 1,437,463     $ 7,433     $ 2,827,506   Special Mention     395       780       1,138       1,645       3,157       —       40,761       49       47,925   Substandard     450       5,879       22,513       16,423       14,309       5,221       34,713       5,716       105,224   Doubtful     —       —       —       —       —       —       900       —       900   Total   $ 607,615     $ 275,415     $ 207,119     $ 160,487     $ 98,167     $ 105,717     $ 1,513,837     $ 13,198     $ 2,981,555                                                                             YTD period charge-offs   $ —     $ 1,478     $ 507     $ 366           $ 50     $ 17,650     $ —     $ 20,051   YTD period recoveries     —       ( 1 )     ( 29 )     ( 124 )           ( 191 )     ( 1,361 )     —       ( 1,706 ) Net   $ —     $ 1,477     $ 478     $ 242     $ —     $ ( 141 )   $ 16,289     $ —     $ 18,345                                                                             Real estate construction loans                                                                         Pass/Watch   $ 199,188     $ 188,782     $ 125,316     $ 24,548     $ —     $ —     $ —     $ —     $ 537,834   Special Mention     —       23,107       27,672       17,374       —       —       —       —       68,153   Substandard     —       —       1,919       —       —       —       —       —       1,919   Total   $ 199,188     $ 211,889     $ 154,907     $ 41,922     $ —     $ —     $ —     $ —     $ 607,906                                                                             YTD period charge-offs   $ —     $ —     $ —     $ —     $ —     $ —     $ —     $ —     $ —   YTD period recoveries     —       —       —       —       —       ( 76 )     —       —       ( 76 ) Net   $ —     $ —     $ —     $ —     $ —     $ ( 76 )   $ —     $ —     $ ( 76 )                                                                           Commercial mortgage loans                                                                         Pass/Watch   $ 1,893,807     $ 1,201,825     $ 1,253,548     $ 1,031,191     $ 727,916     $ 1,313,882     $ 198,869     $ —     $ 7,621,038   Special Mention     45,719       59,182       49,796       103,101       61,105       60,448       750       —       380,101   Substandard     1,110       —       13,483       42,803       1,580       76,906       3,297       —       139,179   Total   $ 1,940,636     $ 1,261,007     $ 1,316,827     $ 1,177,095     $ 790,601     $ 1,451,236     $ 202,916     $ —     $ 8,140,318                                                                             YTD period charge-offs   $ —     $ —     $ —     $ —     $ —     $ —     $ —     $ —     $ —   YTD period recoveries     —       —       ( 240 )     —       —       ( 28 )     ( 111 )     —       ( 379 ) Net   $ —     $ —     $ ( 240 )   $ —     $ —     $ ( 28 )   $ ( 111 )   $ —     $ ( 379 ) Residential mortgage loans                                                                         Pass/Watch   $ 978,375     $ 622,999     $ 678,775     $ 502,325     $ 453,992     $ 929,846     $ —     $ —     $ 4,166,312   Special Mention     —       46       1,576       1,064       836       438       —       —       3,960   Substandard     1,684       147       2,698       2,574       862       5,255       —       —       13,220   Total   $ 980,059     $ 623,192     $ 683,049     $ 505,963     $ 455,690     $ 935,539     $ —     $ —     $ 4,183,492                                                                             YTD period charge-offs   $ —     $ —     $ —     $ —     $ 3     $ —     $ —           $ 3   YTD period recoveries     —       —       —       —       —       ( 208 )     —             ( 208 ) Net   $ —     $ —     $ —     $ —     $ 3     $ ( 208 )   $ —     $ —     $ ( 205 )                                                                           Equity lines                                                                         Pass/Watch   $ —     $ —     $ —     $ —     $ —     $ 5     $ 389,069     $ 30,025     $ 419,099   Substandard     —       —       —       —       —       —       1,230       273       1,503   Total   $ —     $ —     $ —     $ —     $ —     $ 5     $ 390,299     $ 30,298     $ 420,602                                                                             YTD period charge-offs   $ —     $ —     $ —     $ —     $ —     $ —     $ —     $ —     $ —   YTD period recoveries     —       —       —       —       —       —       ( 10 )     ( 64 )     ( 74 ) Net   $ —     $ —     $ —     $ —     $ —     $ —     $ ( 10 )   $ ( 64 )   $ ( 74 )                                                                           Installment and other loans                                                                         Pass/Watch   $ 4,117     $ 168     $ —     $ —     $ —     $ —     $ —     $ —     $ 4,285   Total   $ 4,117     $ 168     $ —     $ —     $ —     $ —     $ —     $ —     $ 4,285                                                                             YTD period charge-offs   $ —     $ —     $ —     $ —     $ —     $ —     $ —     $ —     $ —   YTD period recoveries     —       —       —       —       —       —       —       —       —   Net   $ —     $ —     $ —     $ —     $ —     $ —     $ —     $ —     $ —   Total loans   $ 3,731,615     $ 2,371,671     $ 2,361,902     $ 1,885,467     $ 1,344,458     $ 2,492,497     $ 2,107,052     $ 43,496     $ 16,338,158   Net charge-offs/(recoveries)   $ —     $ 1,477     $ 238     $ 242     $ 3     $ ( 453 )   $ 16,168     $ ( 64 )   $ 17,611     Revolving loans that are converted to term loans presented in the table above are excluded from the term loans by vintage year columns.   F- 31 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The following table presents the balance in the allowance for loan losses by portfolio segment and based on impairment method as of December 31, 2020. This table is no longer presented after December 31, 2020, given the adoption of ASU 2016 - 13, which has a single impairment methodology.               Real Estate     Commercial     Residential                       Commercial     Construction     Mortgage     Mortgage     Consumer               Loans     Loans     Loans     and Equity Lines     and Other     Total       (In thousands)   December 31, 2020                                                 Loans individually evaluated for impairment                                                 Allowance   $ 1,030     $ —     $ 5,254     $ 145     $ —     $ 6,429   Balance   $ 27,070     $ 4,286     $ 53,289     $ 10,760     $ —     $ 95,405                                                     Loans collectively evaluated for impairment                                                 Allowance   $ 67,712     $ 30,854     $ 43,951     $ 17,592     $ —     $ 160,109   Balance   $ 2,809,763     $ 675,206     $ 7,501,738     $ 4,559,184     $ 3,100     $ 15,548,991                                                     Total allowance   $ 68,742     $ 30,854     $ 49,205     $ 17,737     $ —     $ 166,538   Total balance   $ 2,836,833     $ 679,492     $ 7,555,027     $ 4,569,944     $ 3,100     $ 15,644,396     The following table details activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2021, and 2020. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.               Real Estate     Commercial     Residential     Installment               Commercial     Construction     Mortgage     Mortgage     and Other               Loans     Loans     Loans     and Equity Lines     Loans     Total       (In thousands)   2020 Beginning Balance   $ 57,021     $ 19,474     $ 33,602     $ 13,108     $ 19     $ 123,224   Provision/(reversal) for loan losses     26,450       11,380       15,164       4,525       ( 19 )     57,500                                                     Charge-offs     ( 21,996 )     —       —       —       —       ( 21,996 ) Recoveries     7,267       —       439       104       —       7,810   Net (Charge-offs)/Recoveries     ( 14,729 )     —       439       104       —       ( 14,186 )                                                   2020 Ending Balance   $ 68,742     $ 30,854     $ 49,205     $ 17,737     $ —     $ 166,538   Reserve for impaired loans   $ 1,030     $ —     $ 5,254     $ 145     $ —     $ 6,429   Reserve for non-impaired loans   $ 67,712     $ 30,854     $ 43,951     $ 17,592     $ —     $ 160,109   Reserve for off-balance sheet credit commitments   $ 4,802     $ 690     $ 101     $ 284     $ 3     $ 5,880                                                     2021 Beginning Balance   $ 68,742     $ 30,854     $ 49,205     $ 17,737     $ —     $ 166,538   Impact of ASU 2016-13 adoption   $ ( 31,466 )   $ ( 24,307 )   $ 34,993     $ 19,211     $ 9     $ ( 1,560 ) Allowance for loan losses, January 1, 2020   $ 37,276     $ 6,547     $ 84,198     $ 36,948     $ 9     $ 164,978   Provision/(reversal) for loan losses     24,463       ( 321 )     ( 23,401 )     ( 11,943 )     ( 8 )     ( 11,210 )                                                   Charge-offs     ( 20,051 )     —       —       ( 3 )     —       ( 20,054 ) Recoveries     1,706       76       284       377       —       2,443   Net (Charge-offs)/Recoveries   $ ( 18,345 )   $ 76     $ 284     $ 374     $ —     $ ( 17,611 )                                                   2021 Ending Balance   $ 43,394     $ 6,302     $ 61,081     $ 25,379     $ 1     $ 136,157                                                     Allowance for unfunded credit commitments 2020 Ending Balance   $ 4,802     $ 690     $ 101     $ 284     $ 3     $ 5,880   Impact of ASU 2016-13 adoption     3,236       3,135       ( 66 )     ( 284 )     ( 3 )     6,018   Allowance for loan losses, January 1, 2021   $ 8,038     $ 3,825     $ 35     $ —     $ —     $ 11,898   Provision/(reversal) for possible credit losses     ( 4,313 )     ( 450 )     ( 35 )     —       —       ( 4,798 ) Allowance for unfunded credit commitments 2021 Ending Balance   $ 3,725     $ 3,375     $ —     $ —     $ —     $ 7,100     F- 32 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   An analysis of the activity in the allowance for credit losses for the years ended December 31, 2021, 2020, and 2019 is as follows:       For the year ended December 31,       2021     2020     2019   Allowance for Loan Losses:   (In thousands)   Balance at beginning of year   $ 166,538     $ 123,224     $ 122,391   Impact of ASU 2016-13 adoption     ( 1,560 )     —       —   Provision/(reversal) for credit losses     ( 11,210 )     57,500       ( 7,000 ) Loans charged off     ( 20,054 )     ( 21,996 )     ( 6,997 ) Recoveries of charged off loans     2,443       7,810       14,830   Balance at end of year   $ 136,157     $ 166,538     $ 123,224                             Reserve for Off-balance Sheet Credit Commitments:                         Balance at beginning of year   $ 5,880     $ 3,855     $ 2,250   Impact of ASU 2016-13 adoption     6,018       —       —   Provision/(reversal) for credit losses and transfers     ( 4,798 )     2,025       1,605   Balance at end of year   $ 7,100     $ 5,880     $ 3,855     Residential mortgage loans in process of formal foreclosure proceedings were $ 2.0 million at December 31, 2021, compared to $ 808 thousand at December 31, 2020.   The U. S. economy has gradually recovered from the COVID- 19 pandemic with improving gross national product and a declining unemployment rate in the 2021. This contributed to a positive economic outlook and forecasts that resulted in a decrease to the allowance for credit losses.   Despite the recovery in 2021, the ongoing COVID- 19 pandemic has caused significant disruption in the United States and international economies and financial markets. Although banks have generally been permitted to continue operating, the COVID- 19 pandemic has caused disruptions to our business and could cause material disruptions to our business and operations in the future. The Company has continued its efforts to support its customers affected by the pandemic and to maintain asset quality and balance sheet strength, including the following:     • The Company has provided loans through the SBA's Paycheck Protection Program, (or “PPP”). As of December 31, 2021, 671 PPP loans with a current balance of $ 90.5 million were outstanding and additional $ 337.0 million have been forgiven by the U.S. Government or repaid by the borrowers. These loans do not carry an allowance for loan losses.     • The Company has outstanding COVID- 19 modifications on approximately 7 commercial real estate loans, totaling $ 49.4 million as of December 31, 2021, which represented 0.6 % of the Bank’s CRE loans and 4 commercial loans, totaling $ 20.5 million, which represented 0.7 % of the total commercial loans.     5.    Investments in Affordable Housing and Alternative Energy Partnerships   The Company holds ownership interests in a number of limited partnerships that were formed to develop and operate housing for lower-income tenants throughout the United States and alternative energy partnerships that qualify for energy tax credits. The Company evaluates its interests in these partnerships to determine whether they meet the definition of a Variable Interest Entity (“VIE”) and whether the Company is required to consolidate these entities. A VIE is consolidated by its primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) a variable interest that could potentially be significant to the VIE. To determine whether or not a variable interest the Company holds could potentially be significant to the VIE, the Company considers both qualitative and quantitative factors regarding the nature, size and form of the Company's involvement with the VIE. While the Company has determined that its interests in these entities meet the definition of a variable interest in accordance with ASC 810, the Company has determined that the Company is not the primary beneficiary in all but ten of these partnerships because the Company does not have the power to direct the activities that most significantly impact the economic performance of the entities including operational and credit risk management activities.  As the Company is not the primary beneficiary, the Company did not consolidate the entities.   F- 33 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The investment in these entities approximates the maximum exposure to loss as a result of the Company’s involvement with these unconsolidated entities. The balance of the Company’s investments in these entities was $ 299.2 million and $ 309.0 million as of December 31, 2021, and 2020, respectively.   The Company’s investments in these partnerships, net, are presented in the table below:       As of December 31,       2021     2020       (In thousands)   Investments in affordable housing partnerships, net   $ 287,517     $ 279,981   Other borrowings for affordable housing limited partnerships   $ 23,145     $ 23,714   Investments in affordable housing and alternative energy partnerships, unfunded commitments   $ 107,652     $ 103,060   Investments in alternative energy tax credit partnerships, net   $ 11,694     $ 29,035     At December 31, 2021, ten of the limited partnerships in which the Company has an equity interest were determined to be variable interest entities for which the Company is the primary beneficiary. The consolidation of these limited partnerships in the Company’s Consolidated Financial Statements increased total assets and liabilities by $ 31.1 million at December 31, 2021, and by $ 31.4 million at December 31, 2020. Recourse in other borrowings for affordable housing limited partnerships is limited to the assets of the limited partnerships. Investments in alternative energy partnerships were $ 11.7 million as of December 31, 2021. At December 31, 2021, $ 690 thousand of this investment is in an escrow account with a major bank. Unfunded commitments for affordable housing limited partnerships and alternative energy tax credit partnerships were recorded under other liabilities.   As of December 31, 2021, the Company’s unfunded commitments related to investments in qualified affordable housing and alternative energy partnerships, net, are estimated to be paid as follows:       Amount   Year Ending December 31,   (In thousands)   2022   $ 49,206   2023     32,635   2024     17,722   2025     1,977   2026     1,489   Thereafter     4,623   Total unfunded commitments   $ 107,652     Each of the partnerships must meet regulatory requirements for affordable housing and alternative energy projects, including long-term minimum compliance periods (such as a 15 -year minimum compliance period for certain affordable housing tax credits) to fully utilize the tax credits. If the partnerships cease to qualify during the compliance period, the credits may be denied for any period in which the projects are not in compliance and a portion of the credits previously taken is subject to recapture with interest. The remaining tax credits to be utilized over a multiple-year period are $ 231.8 million for Federal and $ 4.5 million for state as of December 31, 2021. The possible inability to realize these tax credits and other returns from our investments in these partnerships can have a negative impact on our financial results. The risk of not being able to realize the tax credits and other returns depends on many factors, including changes in the applicable provisions of the tax code, the ability of the projects to be completed and properly managed and other factors that are outside of our control.  Losses in excess of the Bank’s investment in three limited partnerships have not been recorded in the Company’s Consolidated Financial Statements because the Company had fully satisfied all capital commitments required under the respective limited partnership agreements. In 2021 and 2020, non-interest expense included $ 1.8 million and $ 1.4 million in impairment charges for investments in low-income housing partnerships.   F- 34 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The following table summarizes the Company’s usage of affordable housing and other tax credits including energy tax credits.               As of December 31,       2021     2020     2019               (In thousands)   Affordable housing and other tax credits recognized   $ 26,459     $ 23,273     $ 21,523   Alternative energy tax credits recognized   $ 6,337     $ 29,706     $ 17,786       6.               Premises and Equipment   Premises and equipment consisted of the following as of December 31, 2021, and December 31, 2020:       As of December 31,       2021     2020       (In thousands)   Land and land improvements   $ 42,475     $ 42,476   Building and building improvements     81,290       79,953   Furniture, fixtures and equipment     62,138       62,835   Leasehold improvement     17,862       17,819   Construction in process     2,453       2,061         206,218       205,144   Less: Accumulated depreciation/amortization     106,816       102,146   Premises and equipment, net   $ 99,402     $ 102,998     The amount of depreciation/amortization included in operating expense was $ 7.7 million in 2021, $ 7.0 million in 2020, and $ 6.1 million in 2019.   F- 35 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)     7.           Deposits   The following table displays deposit balances as of December 31, 2021, and December 31, 2020:       As of December 31,       2021     2020       (In thousands)   Deposits                 Non-interest-bearing demand deposits   $ 4,492,054     $ 3,365,086   Interest bearing demand deposits     2,522,442       1,926,135   Money market deposits     4,611,579       3,359,191   Savings deposits     915,515       785,672   Time deposits     5,517,252       6,673,317   Total deposits   $ 18,058,842     $ 16,109,401     Time deposits outstanding as of December 31, 2021, mature as follows.       Expected Maturity Date at December 31,               2022     2023     2024     2025     2026     Thereafter     Total       (In thousands)   Time deposits   $ 5,318,805     $ 139,735     $ 58,088     $ 144     $ 467     $ 13     $ 5,517,252     Accrued interest payable on customer deposits was $ 1.7 million at December 31, 2021, $ 8.5 million at December 31, 2020, and $ 22.3 million at December 31, 2019. The following table summarizes the interest expense on deposits by account type for the years ended December 31, 2021, 2020, and 2019:       Year Ended December 31,       2021     2020     2019       (In thousands)   Interest bearing demand   $ 2,249     $ 2,816     $ 2,371   Money market accounts     18,241       21,574       21,508   Saving accounts     769       1,006       1,432   Time deposits     40,542       111,629       152,791   Total   $ 61,801     $ 137,025     $ 178,102     The aggregate amount of domestic time deposits in denominations that meet or exceed the current FDIC insurance limit of $250 thousand was $ 2.7 billion and $ 2.9 billion as of December 31, 2021, and 2020, respectively. Foreign offices’ time deposits of $ 156.9 million and $ 142.8 million as of December 31, 2021, and 2020, respectively, were in denominations of greater than $250 thousand.   F- 36 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)       8. Borrowed Funds   There were no outstanding securities sold under agreements to repurchase at December 31, 2021, and December 31, 2020.   Securities sold under agreements to repurchase, if any, are accounted for as collateralized financing transactions and recorded at the amounts at which the securities were sold. No securities sold under agreements to repurchased were entered into in 2021,2020, or 2019.   As of December 31, 2021, there were no over-night borrowings from the FHLB for both 2021 and 2020. As of December 31, 2021, the advances from the FHLB were $ 20 million at a weighted average rate of 2.89 % compared to $ 150 million at a weighted average rate of 2.15 % as of December 31, 2020. As of December 31, 2021, final maturity for the FHLB advances is $ 20.0 million in May 2023.   Other Liabilities. On November 23, 2004, the Company entered into an agreement with Mr. Dunson K. Cheng, pursuant to which he agreed to defer any bonus amounts in excess of $ 225 thousand for the year ended December 31, 2005, until the later of January 1 of the first year following his separation from service from the Company or the first day of the seventh month following his separation from service from the Company. Accordingly, an amount equal to $ 610 thousand was deferred in 2004 and was accrued in other liabilities in the Consolidated Balance Sheets. The Company agreed to accrue interest on the deferred portion of the bonus at 7.0 % per annum compounded quarterly. The deferred amount will be increased each quarter by the amount of interest computed for that quarter. On November 23, 2014, the interest rate was reset to 5.06 % based on 275 basis points above the interest rate on the ten -year Treasury Note on that date. On March 13, 2014, the Compensation Committee of the Company awarded Mr. Cheng a cash bonus in the amount of $ 300 thousand for the quarter ended December 31, 2013 and provided as part of the award that payment of the bonus would be deferred until the later of January 1 of the first year following his separation from service from the Company or the first day of the seventh month following his separation from service from the Company. The Company accrues interest on the deferred bonus at 5.02 % per annum compounded quarterly. On March 28, 2019, the interest rate was reset to 5.72 % based on 350 basis points above the interest rate on the five -year Treasury Note on that date.   Interest of $ 110 thousand during 2021, $ 105 thousand during 2020, and $ 99 thousand during 2019 was accrued on the deferred bonuses. The balance was $ 2.1 million at December 31, 2021, and $ 2.1 million at December 31, 2020.   We established three special purpose trusts in 2003 and two in 2007 for the purpose of issuing Guaranteed Preferred Beneficial Interests in their Subordinated Debentures to outside investors (“Capital Securities”). The proceeds from the issuance of the Capital Securities as well as our purchase of the common stock of the special purpose trusts were invested in Junior Subordinated Notes of the Company (“Junior Subordinated Notes”). The trusts exist for the purpose of issuing the Capital Securities and investing in Junior Subordinated Notes. Subject to some limitations, payment of distributions out of the monies held by the trusts and payments on liquidation of the trusts, or the redemption of the Capital Securities, are guaranteed by the Company to the extent the trusts have funds on hand at such time. The obligations of the Company under the guarantees and the Junior Subordinated Notes are subordinate and junior in right of payment to all indebtedness of the Company and will be structurally subordinated to all liabilities and obligations of the Company’s subsidiaries. The Company has the right to defer payments of interest on the Junior Subordinated Notes at any time or from time to time for a period of up to twenty consecutive quarterly periods with respect to each deferral period. Under the terms of the Junior Subordinated Notes, the Company may not, with certain exceptions, declare or pay any dividends or distributions on its capital stock or purchase or acquire any of its capital stock if it has deferred payment of interest on any Junior Subordinated Notes.   At December 31, 2021, Junior Subordinated Notes totaled $ 119.1 million with a weighted average interest rate of 2.38 %, compared to $ 119.1 million with a weighted average rate of 2.4 % at December 31, 2020. The Junior Subordinated Notes have a stated maturity term of 30 years. Interest expense, excluding impact of cash flow interest rate swaps entered into during June 2014, on the Junior Subordinated Notes was $ 2.8 million for 2021, $ 3.6 million for 2020, and $ 5.6 million for 2019.   F- 37 Table of Contents     CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)       9. Capital Resources   Total equity was $ 2.45 billion at December 31, 2021, an increase of $ 28.1 million, or 1.2 %, from $ 2.42 billion at December 31, 2020, primarily due to increases in net income of $ 298.3 million, proceeds from dividend reinvestment of $ 3.6 million, and stock based compensation of $ 6.0 million, offset by other comprehensive income of $ 8.4 million, shares withheld related to net share settlement of RSUs of $ 2.6 million, purchase of treasury stock of $ 167.1 million, and common stock cash dividends of $ 99.3 million. The Company paid cash dividends of $ 1.27 per common share in 2021 and $ 1.24 per common share in 2020.   On April 1, 2021, the Board of Directors approved a new stock repurchase program to buy back up to $ 75.0 million of the Company’s common stock. The $ 75.0 million share repurchase program was completed and terminated on August 5, 2021, with the repurchase of 1,832,481 shares for a total of $ 75.0  million, at an average cost of $ 40.93 per share.   On September 2, 2021, the Board of Directors approved a new stock repurchase program to buy back up to $ 125.0 million of the Company’s common stock. Under this program, the Company repurchased 2,153,576 shares for $ 92.1 million at an average cost of $ 42.77 for the year. During 2021, the Company repurchased 3,986,057 shares in total for approximately $ 167.1 million at an average cost of $ 41.92 .   The five special purpose trusts established for the purpose of issuing the Capital Securities are considered variable interest entities. Because the Bancorp is not the primary beneficiary of the trusts, the financial statements of the trusts are not included in the Consolidated Financial Statements of the Company. The Junior Subordinated Notes, all of which were issued before May 19, 2010, are currently included in the Tier 2 capital of the Bancorp for regulatory capital purposes. Under the Dodd-Frank Act, trust preferred securities issued before May 19, 2010, by bank holding companies with assets of less than $15.0 billion as of December 31, 2009, continue to qualify for Tier 1 capital treatment. As of December 31, 2021, and 2020, the Company’s assets exceeded the $15.0 billion threshold and, as a result, the Junior Subordinated Notes no longer qualify as Tier 1 capital for regulatory reporting purposes.   F- 38 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The table below summarizes the outstanding Junior Subordinated Notes issued by the Company to each trust as of December 31, 2021:             Principal   Not           Current   Date of   Payable/       Issuance   Balance of   Redeemable   Stated   Annualized   Interest   Rate   Distribution   Trust Name   Date   Notes   Until   Maturity   Coupon Rate   Rate   Change   Date   (Dollars in thousands)   Cathay Capital                                       Trust I   June 26,   $ 20,619   June 30,   June 30,   3-month     3.37 % December 31,   March 31       2003         2008   2033   LIBOR         2021   June 30                         + 3.15%             September 30                                       December 31   Cathay Statutory                                   Trust I   September 17,     20,619   September 17,   September 17,   3-month     3.22 % December 17,   March 17       2003         2008   2033   LIBOR         2021   June 17                         + 3.00%             September 17                                       December 17   Cathay Capital                                       Trust II   December 30,     12,887   March 30,   March 30,   3-month     3.12 % December 31,   March 31       2003         2009   2034   LIBOR         2021   June 30                         + 2.90%             September 30                                       December 31   Cathay Capital                                       Trust III   March 28,     46,392   June 15,   June 15,   3-month     1.68 % December 15,   March 15       2007         2012   2037   LIBOR         2021   June 15                         + 1.48%             September 15                                       December 15   Cathay Capital                                       Trust IV   May 31,     18,619   September 6,   September 6,   3-month     1.58 % December 6,   March 7       2007         2012   2037   LIBOR         2021   June 6                         + 1.4%             September 6                                       December 6   Total Junior Subordinated Notes   $ 119,136                               F- 39 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)       10. Income Taxes     For the years ended December 31, 2021, 2020, and 2019, the current and deferred amounts of the income tax expense are summarized as follows:       Year Ended December 31,       2021     2020     2019       (In thousands)   Current:                         Federal   $ 29,955     $ ( 2,196 )   $ 20,943   State     44,416       36,787       39,466   Total Current   $ 74,371     $ 34,591     $ 60,409                             Deferred:                         Federal   $ 5,986     $ ( 3,234 )   $ 7,464   State     3,182       ( 6,252 )     2,361   Total Deferred   $ 9,168     $ ( 9,486 )   $ 9,825                             Total income tax expense   $ 83,539     $ 25,105     $ 70,234     Temporary differences between the amounts reported in the financial statements and the tax basis of assets and liabilities give rise to deferred taxes. Net deferred tax assets at December 31, 2021, and at December 31, 2020, are included in other assets in the accompanying Consolidated Balance Sheets and are as follows:       As of December 31,       2021     2020       (In thousands)   Deferred Tax Assets                 Loan loss allowance, due to differences in computation of bad debts   $ 43,895     $ 52,899   Share-based compensation     —       1,936   Accrual for bonuses     4,935       3,356   Non-accrual interest     1,117       861   Write-down on equity securities and venture capital investments     2,000       1,833   State tax     4,691       3,882   Unrealized loss on interest rate swaps     1,394       2,934   Tax credits carried forward     9,136       9,136   Net operating loss carried forward     8,732       10,880   Other, net     3,765       3,864   Gross deferred tax assets     79,665       91,581                     Deferred Tax Liabilities                 Deferred loan costs     ( 9,936 )     ( 10,017 ) Depreciation and amortization     ( 3,150 )     ( 2,709 ) Unrealized gain on securities     ( 3,823 )     ( 8,712 ) OREO Installment Sale     ( 1,273 )     ( 1,274 ) Dividends on Federal Home Loan Bank common stock     ( 978 )     ( 979 ) Other, net     ( 2,168 )     ( 3,599 ) Gross deferred tax liabilities     ( 21,328 )     ( 27,290 ) Net deferred tax assets   $ 58,337     $ 64,291     Amounts for the current year are based upon estimates and assumptions and could vary from amounts shown on the tax returns as filed.   F- 40 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   As of December 31, 2021, the Company’s gross net operating loss (“NOL”) carryovers, all of which are subject to limitation under Section 382 of the Internal Revenue Code, totaled approximately $ 18.4 million for which a deferred tax asset of $ 3.87 million has been recorded reflecting the expected benefit of these federal NOL carryovers. At December 31, 2021, the Company has California NOL carryovers of $ 45.9 million for which a California deferred tax asset of $ 4.5 million has been recorded reflecting the expected benefit of these California NOL carryovers. The annual IRC Section 382 limitation is $10.2 million in 2021, $8.8 million in 2022 and decreases to $7.3 million per year thereafter. If not utilized, a portion of the Company’s federal and state NOL’s will begin to expire in 2031. At December 31, 2021, the Company’s federal tax credit carryovers and AMT tax credit carryovers total $ 7.5 million and $ 1.0 million, respectively. If not utilized, the federal tax credit carryovers will begin in expire in 2028. The AMT tax credit carryovers can be carried forward indefinitely.   In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize all benefits related to these deductible temporary differences.   The Company had current income tax receivables of $ 41.1  million at December 31, 2021, and $ 19.5 million at December 31, 2020. Current income tax receivable is included in other assets in the accompanying Consolidated Balance Sheets.   The Company’s tax returns are open for audits by the Internal Revenue Service back to 2018 and by the California Franchise Tax Board back to 2017. The audit by the Internal Revenue Service for 2017 was completed in July 2020 and did not have a material impact on income tax expense. It is reasonably possible that unrecognized tax benefits could change significantly over the next twelve months. The Company does not expect that any such changes would have a material impact on its annual effective tax rate.   Income tax expense results in effective tax rates that differ from the statutory federal income tax rate for the years indicated as follows:       Year Ended December 31,       2021     2020     2019               (Dollars in thousands)   Tax provision at Federal statutory rate   $ 80,187       21.0 %   $ 53,333       21.0 %   $ 73,368       21.0 % State income taxes, net of Federal income tax benefit     37,602       9.8       23,602       9.3       33,276       9.5   Excess deduction for stock option and RSUs     ( 20 )     ( 0.0 )     264       0.1       ( 398 )     ( 0.1 ) Low income housing and other tax credits     ( 32,795 )     ( 8.6 )     ( 52,979 )     ( 20.8 )     ( 37,519 )     ( 10.7 ) Other, net     ( 1,435 )     ( 0.4 )     885       0.3       1,507       0.4   Total income tax expense   $ 83,539       21.9 %   $ 25,105       9.9 %   $ 70,234       20.1 %   F- 41 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)       11. Stockholders ’  Equity and Earnings per Share              As a bank holding company, the Bancorp’s ability to pay dividends will depend upon the dividends it receives from the Bank and on the income it may generate from any other activities in which it may engage, either directly or through other subsidiaries.   Under California banking law, the Bank may not, without regulatory approval, pay a cash dividend that exceeds the lesser of the Bank’s retained earnings or its net income for the last three fiscal years, less any cash distributions made during that period. Under this regulation, the amount of retained earnings available for cash dividends to the Company immediately after December 31, 2021, is restricted to approximately $ 207.8 million.   Activity in accumulated other comprehensive income, net of tax, and reclassification out of accumulated other comprehensive income for the years ended December 31, 2021, and 2020 was as follows:         2021     2020       Pre-tax     Tax expense/ (benefit)     Net-of-tax     Pre-tax     Tax expense/ (benefit)     Net-of-tax       (In thousands)   Beginning balance, loss, net of tax                                                 Securities available-for-sale                   $ 12,200                     $ 5,714   Cash flow hedge derivatives                     ( 6,890 )                     ( 3,412 ) Total                   $ 5,310                     $ 2,302                                                     Net unrealized gains/(losses) arising during the period                                           Securities available-for-sale   $ ( 16,167 )   $ ( 4,779 )   $ ( 11,388 )   $ 10,903     $ 3,223     $ 7,680   Cash flow hedge derivatives     5,131       1,517       3,614       ( 4,938 )     ( 1,460 )     ( 3,478 ) Total     ( 11,036 )     ( 3,262 )     ( 7,774 )     5,965       1,763       4,202                                                     Reclassification adjustment for net gains in net income                                           Securities available-for-sale     ( 853 )     ( 252 )     ( 601 )     ( 1,695 )     ( 501 )     ( 1,194 ) Cash flow hedge derivatives     —       —       —       —       —       —   Total     ( 853 )     ( 252 )     ( 601 )     ( 1,695 )     ( 501 )     ( 1,194 )                                                   Total other comprehensive income/(loss)                                                 Securities available-for-sale     ( 17,020 )     ( 5,031 )     ( 11,989 )     9,208       2,722       6,486   Cash flow hedge derivatives     5,131       1,517       3,614       ( 4,938 )     ( 1,460 )     ( 3,478 ) Total   $ ( 11,889 )   $ ( 3,514 )   $ ( 8,375 )   $ 4,270     $ 1,262     $ 3,008   Ending balance, gain/(loss), net of tax                                                 Securities available-for-sale                   $ 211                     $ 12,200   Cash flow hedge derivatives                     ( 3,276 )                     ( 6,890 ) Total                   $ ( 3,065 )                   $ 5,310     The Board of Directors of the Bancorp is authorized to issue preferred stock in one or more series and to fix the voting powers, designations, preferences or other rights of the shares of each such class or series and the qualifications, limitations, and restrictions thereon. Any preferred stock issued by the Bancorp may rank prior to the Bancorp common stock as to dividend rights, liquidation preferences, or both, may have full or limited voting rights, and may be convertible into shares of the Bancorp common stock. There are no shares of preferred stock currently issued and outstanding.   F- 42 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The following is the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the years as indicated:       Year Ended December 31,       2021     2020     2019                       Per                     Per                     Per       Income     Shares     Share     Income     Shares     Share     Income     Shares     Share       (Numerator)     (Denominator)     Amount     (Numerator)     (Denominator)     Amount     (Numerator)     (Denominator)     Amount       (In thousands, except shares and per share data)                                                                             Net income   $ 298,304                     $ 228,860                     $ 279,135                   Basic EPS, income   $ 298,304       78,268,369     $ 3.81     $ 228,860       79,584,560     $ 2.88     $ 279,135       79,999,703     $ 3.49                                                                             Effect of dilutive stock options and RSU       302,269                       193,287                       248,190                                                                                     Diluted EPS, income   $ 298,304       78,570,638     $ 3.80     $ 228,860       79,777,847     $ 2.87     $ 279,135       80,247,893     $ 3.48         12. Commitments and Contingencies     Legal Proceedings. The Company is involved in various claims and legal proceedings that arise in the course of conducting the Company’s business. The outcome of such claims and legal proceedings are inherently difficult to predict. Management, after consultation with legal counsel and based upon its assessment of information currently available to the Company, believes that any liability resulting from the resolution of any claims and proceedings currently pending against the Company will not have a material effect upon the Company’s consolidated financial condition, results of operations, or liquidity taken as a whole.   In accordance with ASC 450, “Contingencies,” the Company accrues reserves for outstanding lawsuits, claims and proceedings when a loss contingency is probable and can be reasonably estimated. The Company estimates the amount of loss contingencies using current available information from legal proceedings, advice from legal counsel, and available insurance coverage. Due to the inherent subjectivity of the assessments and unpredictability of the outcomes of the legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s exposure and ultimate losses may be higher, and possibly significantly more than the amounts accrued.   Lending. In the normal course of business, the Company becomes a party to financial instruments with off-balance sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit in the form of loans or through commercial or standby letters of credit and financial guarantees. Those instruments represent varying degrees of exposure to risk in excess of the amounts included in the accompanying Consolidated Balance Sheets. The contractual or notional amount of these instruments indicates a level of activity associated with a particular class of financial instrument and is not a reflection of the level of expected losses, if any.   The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Unless noted otherwise, the Company does not require collateral or other security to support financial instruments with credit risk.   F- 43 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   Financial instruments for which contract amounts represent the amount of credit risk include the following:       As of December 31,       2021     2020       (In thousands)   Commitments to extend credit   $ 3,297,362     $ 2,977,528   Standby letters of credit     266,490       234,200   Commercial letters of credit     16,652       16,821   Bill of lading guarantees     —       238   Total   $ 3,580,504     $ 3,228,787     Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in the commitment agreement. These commitments generally have fixed expiration dates and are expected to expire without being drawn upon. The total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based on management’s credit evaluation of the borrowers.   As of December 31, 2021, the Company does not have fixed-rate or variable-rate commitments with characteristics similar to options, which provide the holder, for a premium paid at inception to the Company, the benefits of favorable movements in the price of an underlying asset or index with limited or no exposure to losses from unfavorable price movements.   As of December 31, 2021, commitments to extend credit of $ 3.3 billion include commitments to fund fixed rate loans of $ 111.4 million and adjustable-rate loans of $ 3.2 billion compared to December 31, 2020 commitments to extend credit of $ 3.0 billion and included commitments to fund fixed rate loans of $ 59.9 million and adjustable-rate loans of $ 2.9 billion.   Commercial letters of credit and bill of lading guarantees are issued to facilitate domestic and foreign trade transactions while standby letters of credit are issued to make payments on behalf of customers if certain specified future events occur. The credit risk involved in issuing letters of credit and bill of lading guarantees is essentially the same as that involved in making loans to customers.       13. Leases   The Company determines if a contract arrangement is a lease at inception and primarily enters into operating lease contracts for its branch locations, office space and certain equipment. As part of its property lease agreements, the Company may seek to include options to extend or terminate a lease when it is reasonably certain that the Company will exercise those options. The ROU lease asset also includes any lease payments made and lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company does not possess any leases that have variable lease payments or residual value guarantees as of December 31, 2021.   ASU 2016 - 02, “Leases (Topic 842 ),” as amended by ASU No. 2018 - 01, “Land Easement Practical Expedient for Transition to Topic 842”; ASU No. 2018 - 10, “Codification Improvements to Topic 842, Leases”; and ASU No. 2018 - 11, “Targeted Improvements,” establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. The standard provides a number of optional practical expedients in transition. We have elected the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We also elected all of the new standard’s available transition practical expedients, including the short-term lease recognition exemption that includes not recognizing ROU assets or lease liabilities for existing short-term leases, and the practical expedient to not separate lease and non-lease components for all of our leases. The Company uses its incremental borrowing rate to determine the present value of its lease liabilities.   F- 44 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The following table represents the operating lease amounts reported on the Consolidated Balance Sheets and other supplemental information as of December 31, 2021, and December 31, 2020:       December 31, 2021     December 31, 2020       (Dollars in millions)   Operating Leases:                 ROU assets   $ 27.8     $ 30.9   Lease liabilities   $ 30.7     $ 33.5                     Weighted-average remaining lease term (in years)     4.4       4.7   Weighted-average discount rate     2.61 %     2.77 %                   Operating cash flows from operating leases   $ 9.9     $ 9.3   ROU assets obtained in exchange for lease obligations   $ 6.0     $ 5.7     Operating lease expense was $ 11.6 million and $ 11.7 million as of December 31, 2021, and December 31, 2020, respectively, and includes short-term leases that were immaterial.   The following table presents a maturity analysis of the Company’s operating lease liabilities as of  December  31, 2021:       As of December 31, 2021       Operating Leases       (In thousands)   2022   $ 9,438   2023     8,119   2024     5,689   2025     3,431   2026     2,639   Thereafter     3,248   Total lease payments     32,564   Less amount of payment representing interest     ( 1,870 ) Total present value of lease payments   $ 30,694     F- 45 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)       14. Financial Derivatives   The Company does not speculate on the future direction of interest rates. As part of the Company’s asset and liability management, however, the Company enters into financial derivatives to seek to mitigate exposure to interest rate risks related to its interest-earning assets and interest-bearing liabilities. The Company believes that these transactions, when properly structured and managed, may provide a hedge against inherent interest rate risk in assets or liabilities and against risk in specific transactions of the Company. In such instances, the Company may protect its position through the purchase or sale of interest rate futures contracts for a specific cash or interest rate risk position. Other hedging transactions may be implemented using interest rate swaps, interest rate caps, floors, financial futures, forward rate agreements, and options on futures or bonds. Prior to considering any hedging activities, the Company seeks to analyze the costs and benefits of the hedge in comparison to other viable alternative strategies. All hedges will require an assessment of basis risk and must be approved by the Bancorp or the Bank’s Investment Committee.   The Company follows ASC Topic 815 that establishes accounting and reporting standards for financial derivatives, including certain financial derivatives embedded in other contracts, and hedging activities. It requires the recognition of all financial derivatives as assets or liabilities in the Company’s Consolidated Balance Sheets and measurement of those financial derivatives at fair value. The accounting treatment of changes in fair value is dependent upon whether or not a financial derivative is designated as a hedge and, if so, the type of hedge. Fair value is determined using third -party models with observable market data. For derivatives designated as cash flow hedges, changes in fair value are recognized in other comprehensive income and are reclassified to earnings when the hedged transaction is reflected in earnings. For derivatives designated as fair value hedges, changes in the fair value of the derivatives are reflected in current earnings, together with changes in the fair value of the related hedged item if there is a highly effective correlation between changes in the fair value of the interest rate swaps and changes in the fair value of the underlying asset or liability that is intended to be hedged. If there is not a highly effective correlation between changes in the fair value of the interest rate swap and changes in the fair value of the underlying asset or liability that is intended to be hedged, then only the changes in the fair value of the interest rate swaps are reflected in the Company’s consolidated financial statements.   The Company offers various interest rate derivative contracts to its customers. When derivative transactions are executed with its customers, the derivative contracts are offset by paired trades with third -party financial institutions including with central counterparties (“CCP”). Certain derivative contracts entered with CCPs are settled-to-market daily to the extent the CCP’s rulebooks legally characterize the variation margin as settlement. Derivative contracts are intended to allow borrowers to lock in attractive intermediate and long-term fixed rate financing while not increasing the interest rate risk to the Company. These transactions are generally not linked to specific Company assets or liabilities on the Consolidated Balance Sheets or to forecasted transactions in a hedging relationship and, therefore, are economic hedges. The contracts are marked to market at each reporting period. The changes in fair values of the derivative contracts traded with third -party financial institutions are expected to be largely comparable to the changes in fair values of the derivative transactions executed with customers throughout the terms of these contracts, except for the credit valuation adjustment component.  The Company records credit valuation adjustments on derivatives to properly reflect the variances of credit worthiness between the Company and the counterparties, considering the effects of enforceable master netting agreements and collateral arrangements. As of December 31, 2021 and 2020, the Company had outstanding interest rate derivative contracts with certain customers and third -party financial institutions with a notional amount of $ 457.0 million and $ 83.2 million, respectively.   F- 46 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   In May 2014, the Bancorp entered into five interest rate swap contracts in the notional amount of $ 119.1 million for a period of ten years. The objective of these interest rate swap contracts, which were designated as hedging instruments in cash flow hedges, was to hedge the quarterly interest payments on the Bancorp’s $ 119.1 million of Junior Subordinated Debentures that had been issued to five trusts, throughout the ten -year period beginning in June 2014 and ending in June 2024, from the risk of variability of these payments resulting from changes in the three -month LIBOR interest rate. As of December 31, 2021, and 2020, the ineffective portion of these interest rates swaps was not significant. The notional amount and net unrealized loss of the Company’s cash flow derivative financial instruments as of December 31, 2021, and December 31, 2020, were as follows:       December 31, 2021     December 31, 2020       ($ in thousands)   Cash flow swap hedges:       Notional   $ 119,136     $ 119,136   Weighted average fixed rate-pay     2.61 %     2.61 % Weighted average variable rate-receive     0.16 %     0.44 %                   Unrealized loss, net of taxes (1)   $ ( 3,276 )   $ ( 6,890 )       Year ended       December 31, 2021     December 31, 2020   Periodic net settlement of swaps (2)   $ 2,949     $ 2,193     ( 1 )-Included in other comprehensive income. ( 2 )-the amount of periodic net settlement of interest rate swaps was included in interest expense.   As of December 31, 2021, the Bank’s outstanding interest rate swap contracts had a notional amount of $ 324.8 million for various terms from three to ten years. The Bank entered into these interest rate swap contracts that are matched to individual fixed-rate commercial real estate loans in the Bank’s loan portfolio. These contracts have been designated as hedging instruments to hedge the risk of changes in the fair value of the underlying commercial real estate loans due to changes in interest rates. The swap contracts are structured so that the notional amounts reduce over time to match the contractual amortization of the underlying loan and allow prepayments with the same pre-payment penalty amounts as the related loan. As of December 31, 2021, and 2020, the ineffective portion of these interest rate swaps was not significant.   The Company has designated as a partial-term hedging election $ 404.4 million and $ 25.0 million notional as last-of-layer hedge on a closed pool of loans with a stated amount of $ 748.6 million and $ 44.7 million as of December 31, 2021 and 2020, respectively. The hedge is not expected to be affected by prepayment, defaults, or other factors affecting the timing and amount of cash flows under the last-of-layer method. The Company has entered into a pay-fixed and receive 1 -Month LIBOR interest rate swap to convert the last-of-layer $ 404.4 million portion of a $ 748.6 million fixed rate loan tranche in order to reduce the Company’s exposure to higher interest rates for the last-of-layer tranche. As of December 31, 2021 and 2020, the last-of-layer loan tranche had a fair value basis adjustment of $ 30 thousand and $ 342 thousand, respectively. The interest rate swap converts this last-of-layer tranche into a floating rate instrument. The Company’s risk management objective with respect to this last-of-layer interest rate swap is to reduce interest rate exposure as to the last-of-layer tranche.   Interest rate swap contracts involve the risk of dealing with institutional derivative counterparties and their ability to meet contractual terms. Institutional counterparties must have a strong credit profile and be approved by the Company’s Board of Directors. The Company’s credit exposure on interest rate swaps is limited to the net favorable value and interest payments of all swaps by each counterparty. Credit exposure may be reduced by the amount of collateral pledged by the counterparty. The Bancorp’s interest rate swaps have been assigned by the counterparties to a derivatives clearing organization and daily margin is indirectly maintained with the derivatives clearing organization. Cash posted as collateral by the Bancorp related to fair value derivative contracts totaled $ 5.9 million as of December 31, 2021, and $ 11.9 million as of December 31, 2020.   F- 47 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The notional amount and net unrealized loss of the Company’s fair value derivative financial instruments as of December 31, 2021, and December 31, 2020, were as follows:       December 31, 2021     December 31, 2020   Fair value swap hedges:   ($ in thousands)   Notional   $ 729,280     $ 478,266   Weighted average fixed rate-pay     2.65 %     4.56 % Weighted average variable rate spread     1.31 %     2.46 % Weighted average variable rate-receive     1.43 %     3.11 %                   Net unrealized loss (1)   $ ( 1,013 )   $ ( 15,082 )       Year ended       December 31, 2021     December 31, 2020   Periodic net settlement of SWAPs (2)   $ ( 9,345 )   $ ( 7,719 )     ( 1 )-the amount is included in other non-interest income.   ( 2 )-the amount of periodic net settlement of interest rate swaps was included in interest income.   The Company enters into foreign exchange forward contracts with various counterparties to mitigate the risk of fluctuations in foreign currency exchange rates for foreign exchange certificates of deposit or foreign exchange contracts entered into with our clients. These contracts are not designated as hedging instruments and are recorded at fair value in our Consolidated Balance Sheets. Changes in the fair value of these contracts as well as the related foreign exchange certificates of deposit and foreign exchange contracts are recognized immediately in net income as a component of non-interest income. Period end gross positive fair values are recorded in other assets and gross negative fair values are recorded in other liabilities.   The notional amount and fair value of the Company’s derivative financial instruments not designated as hedging instruments as of December 31, 2021, and December 31, 2020, were as follows:       December 31, 2021     December 31, 2020   Derivative financial instruments not designated as hedging instruments:   (In thousands)   Notional amounts:                 Option contracts   $ 676     $ —   Forward, and swap contracts with positive fair value   $ 181,997     $ 151,244   Forward, and swap contracts with negative fair value   $ 51,782     $ 132,813   Fair value:                 Option contracts   $ 2,911     $ —   Forward, and swap contracts with positive fair value   $ 1,113     $ 4,658   Forward, and swap contracts with negative fair value   $ ( 327 )   $ ( 2,200 )       15. Fair Value Measurements and Fair Value of Financial Instruments   The Company uses fair value to measure certain assets and liabilities on a recurring basis, primarily securities available for-sale and derivatives. For assets measured at the lower of cost or fair value, the fair value measurement criteria may or may not be met during a reporting period and such measurements are therefore considered “nonrecurring” for purposes of disclosing our fair value measurements. Fair value is used on a nonrecurring basis to adjust carrying values for individually evaluated loans and other real estate owned and also to record impairment on certain assets, such as goodwill, CDI, and other long-lived assets.   F- 48 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The Company used valuation methodologies to measure assets at fair value under ASC Topic 820 and ASC Topic 825, as amended by ASU 2016 - 01 and ASU 2018 - 03, to estimate the fair value of financial instruments not recorded at fair value. The fair value of the Company’s assets and liabilities is classified and disclosed in one of the following three categories:     ● Level 1 – Quoted prices in active markets for identical assets or liabilities.     ● Level 2 – Observable prices in active markets for similar assets or liabilities; prices for identical or similar assets or liabilities in markets that are not active; directly observable market inputs for substantially the full term of the asset and liability; market inputs that are not directly observable but are derived from or corroborated by observable market data.     ● Level 3 – Unobservable inputs based on the Company’s own judgments about the assumptions that a market participant would use.   The classification of assets and liabilities within the hierarchy is based on whether inputs to the valuation methodology used are observable or unobservable, and the significance of those inputs in the fair value measurement. The Company’s assets and liabilities are classified in their entirety based on the lowest level of input that is significant to their fair value measurements as follows:   Financial assets and liabilities measured at fair value on a recurring basis   The Company uses the following methodologies to measure the fair value of its financial assets and liabilities on a recurring basis:   Securities Available for Sale and Equity Securities . For certain actively traded agency preferred stocks, mutual funds, U.S. Treasury securities, and other equity securities, the Company measures the fair value based on quoted market prices in active exchange markets at the reporting date, a Level 1 measurement. The Company also measures securities by using quoted market prices for similar securities or dealer quotes, a Level 2 measurement. This category generally includes U.S. Government agency securities, state and municipal securities, mortgage-backed securities (“MBS”), commercial MBS, collateralized mortgage obligations, asset-backed securities, corporate bonds and trust preferred securities.   Warrants . The Company measures the fair value of warrants based on unobservable inputs based on assumption and management judgment, a Level 3 measurement.   Currency Option Contracts and Foreign Exchange Contracts . The Company measures the fair value of currency option and foreign exchange contracts based on observable market rates on a recurring basis, a Level 2 measurement.   Interest Rate Swaps . The Company measures the fair value of interest rate swaps using third party models with observable market data, a Level 2 measurement.   F- 49 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The following tables present the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis at December 31, 2021, and at December 31, 2020:     As of December 31, 2021   Fair Value Measurements Using     Total at       Level 1     Level 2     Level 3     Fair Value   Assets   (In thousands)   Securities available-for-sale                                 U.S. Treasury securities   $ —     $ —     $ —     $ —   U.S. government agency entities     —       87,509       —       87,509   Mortgage-backed securities     —       888,665       —       888,665   Collateralized mortgage obligations     —       9,117       —       9,117   Corporate debt securities     —       142,018       —       142,018   Total securities available-for-sale     —       1,127,309       —       1,127,309                                     Equity securities                                 Mutual funds     6,230       —       —       6,230   Preferred stock of government sponsored entities     1,811       —       —       1,811   Other equity securities     14,278       —       —       14,278   Total equity securities     22,319       —       —       22,319   Warrants     —       —       23       23   Interest rate swaps     —       10,090       —       10,090   Foreign exchange contracts     —       1,113       —       1,113   Total assets   $ 22,319     $ 1,138,512     $ 23     $ 1,160,854                                     Liabilities                                 Interest rate swaps   $ —     $ 12,642     $ —     $ 12,642   Foreign exchange contracts     —       327       —       327   Total liabilities   $ —     $ 12,969     $ —     $ 12,969     As of December 31, 2020   Fair Value Measurements Using     Total at       Level 1     Level 2     Level 3     Fair Value   Assets   (In thousands)   Securities available-for-sale                                 U.S. Treasury securities   $ 80,948     $ —     $ —     $ 80,948   U.S. government agency entities     —       99,838       —       99,838   Mortgage-backed securities     —       727,068       —       727,068   Collateralized mortgage obligations     —       10,324       —       10,324   Corporate debt securities     —       118,372       —       118,372   Total securities available-for-sale     80,948       955,602       —       1,036,550                                     Equity securities                                 Mutual funds     6,413       —       —       6,413   Preferred stock of government sponsored entities     5,485       —       —       5,485   Other equity securities     11,846       —       —       11,846   Total equity securities     23,744       —       —       23,744   Warrants     —       —       21       21   Interest rate swaps     —       3,409       —       3,409   Foreign exchange contracts     —       4,658       —       4,658   Total assets   $ 104,692     $ 963,669     $ 21     $ 1,068,382                                     Liabilities                                 Interest rate swaps   $ —     $ 10,286     $ —     $ 10,286   Foreign exchange contracts     —       2,200       —       2,200   Total liabilities   $ —     $ 12,486     $ —     $ 12,486     Assets measured at estimated fair value on a non-recurring basis.   Certain assets or liabilities are required to be measured at estimated fair value on a nonrecurring basis subsequent to initial recognition. Generally, these adjustments are the result of lower-of-cost-or-fair value or other impairment write-downs of individual assets. In determining the estimated fair values during the period, the Company determined that substantially all the changes in estimated fair value were due to declines in market conditions versus instrument specific credit risk. For the year ended December 31, 2021, and December 31, 2020, there were no material adjustments to fair value for the Company’s assets and liabilities measured at fair value on a nonrecurring basis in accordance with GAAP.   F- 50 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   For financial assets measured at fair value on a nonrecurring basis that were still reflected in the balance sheet at December 31, 2021, and 2020, the following tables provide the level of valuation assumptions used to determine each adjustment and the carrying value of the related individual assets at December 31, 2021, and at December 31, 2020, and the total losses for the periods indicated:       As of December 31, 2021     Total Losses       Fair Value Measurements Using     Total at     For the Twelve Months Ended       Level 1     Level 2     Level 3     Fair Value     December 31, 2021     December 31, 2020   Assets   (In thousands)                                                     Impaired loans by type:                                                 Commercial loans   $ —     $ —     $ 4,327     $ 4,327     $ 1,012     $ 7,012   Commercial mortgage loans     —       —       13,335       13,335       —       —   Residential mortgage and equity lines     —       —       5,243       5,243       —       —   Total impaired loans     —       —       22,905       22,905       1,012       7,012   Other real estate owned (1)     —       —       4,589       4,589       17       717   Investments in venture capital     —       —       952       952       143       107   Total assets   $ —     $ —     $ 28,446     $ 28,446     $ 1,172     $ 7,836     ( 1 ) Other real estate owned balance of $ 4.4 million in the Consolidated Balance Sheets is net of estimated disposal costs.                 As of December 31, 2020     Total Losses/(Gains)       Fair Value Measurements Using     Total at     For the Twelve Months Ended       Level 1     Level 2     Level 3     Fair Value     December 31, 2020     December 31, 2019   Assets   (In thousands)                                                     Impaired loans by type:                                                 Commercial loans   $ —     $ —     $ 5,342     $ 5,342     $ 7,012     $ —   Commercial mortgage loans     —       —       25,749       25,749       —       —   Residential mortgage and equity lines     —       —       4,307       4,307       —       —   Total impaired loans     —       —       35,398       35,398       7,012       —   Other real estate owned (1)     —       905       4,236       5,141       717       681   Investments in venture capital     —       —       1,381       1,381       107       167   Total assets   $ —     $ 905     $ 41,015     $ 41,920     $ 7,836     $ 848     ( 1 ) Other real estate owned balance of $ 4.9 million in the Consolidated Balance Sheets is net of estimated disposal costs.             The significant unobservable inputs used in the fair value measurement of collateral for collateral-dependent impaired loans was primarily based on the appraised value of collateral adjusted by estimated sales cost and commissions. The Company generally obtains new appraisal reports on an annual basis. As the Company’s primary objective in the event of default would be to monetize the collateral to settle the outstanding balance of the loan, less marketable collateral would receive a larger discount. During the 2018 reported period, collateral discounts ranged from 55 % in the case of accounts receivable collateral to 65 % in the case of inventory collateral. In 2019, the Company began using borrower specific collateral discounts with various discount levels.   The fair value of impaired loans was calculated based on the net realizable fair value of the collateral or the observable market price of the most recent sale or quoted price from loans held for sale. The Company does not record loans at fair value on a recurring basis. Nonrecurring fair value adjustments to collateral dependent impaired loans are recorded based on the current appraised value of the collateral, a Level 2 measurement, or management’s judgment and estimation of value using discounted future cash flows or old appraisals which are then adjusted based on recent market trends, a Level 3 measurement.   The significant unobservable inputs used in the fair value measurement of OREO was primarily based on the appraised value of OREO adjusted by estimated sales cost and commissions.   F- 51 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The Company applies estimated sales cost and commission ranging from 3 % to 6 % of collateral value of impaired loans, quoted price or loan sale price of loans held for sale, and appraised value of OREOs.   The significant unobservable inputs in the Black-Scholes option pricing model for the fair value of warrants are the expected life of warrant ranging from one to six years, risk-free interest rate from 0.50 % to 1.47 %, and stock volatility of the Company from 12.32 % to 20.74 %.   Fair value estimates were made at specific points in time, based on relevant market information and information about the financial instrument. Because no market exists for a significant portion of the Bank’s financial instruments, fair value estimates were based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates were subjective in nature and involved uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.   F- 52 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The following tables present carrying amounts and estimated fair values of certain financial instruments as of the dates indicated:       December 31, 2021     December 31, 2020       Carrying             Carrying               Amount     Fair Value     Amount     Fair Value       (In thousands)   Financial Assets                                 Cash and due from banks   $ 134,141     $ 134,141     $ 138,616     $ 138,616   Short-term investments     2,315,563       2,315,563       1,282,462       1,282,462   Securities available-for-sale     1,127,309       1,127,309       1,036,550       1,036,550   Loans, net     16,202,001       16,499,869       15,475,364       16,103,471   Equity securities     22,319       22,319       23,744       23,744   Investment in Federal Home Loan Bank stock     17,250       17,250       17,250       17,250   Warrants     23       23       21       21         Notional             Notional               Amount     Fair Value     Amount     Fair Value   Foreign exchange contracts   $ 181,997     $ 1,113     $ 151,244     $ 4,658   Interest rate swaps     904,635       10,090       96,889       3,409     Financial Liabilities   Carrying             Carrying               Amount     Fair Value     Amount     Fair Value   Deposits   $ 18,058,842     $ 18,051,720     $ 16,109,401     $ 16,125,808   Advances from Federal Home Loan Bank     20,000       21,279       150,000       155,133   Other borrowings     23,145       18,945       23,714       19,632   Long-term debt     119,136       62,274       119,136       65,487         Notional             Notional               Amount     Fair Value     Amount     Fair Value   Option contracts   $ 676     $ 2,911     $ —     $ —   Foreign exchange contracts     51,782       327       132,813       2,200   Interest rate swaps     872,400       12,642       679,648       10,286         Notional             Notional               Amount     Fair Value     Amount     Fair Value   Off-Balance Sheet Financial Instruments                                 Commitments to extend credit   $ 3,297,362     $ ( 12,594 )   $ 2,977,528     $ ( 8,432 ) Standby letters of credit     266,490       ( 2,640 )     234,200       ( 1,630 ) Other letters of credit     16,652       ( 13 )     16,821       ( 16 ) Bill of lading guarantees     —       —       238       —     F- 53 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The following tables present the level in the fair value hierarchy for the estimated fair values of certain financial instruments at December 31, 2021, and December 31, 2020.       As of December 31, 2021       Estimated                               Fair Value                               Measurements     Level 1     Level 2     Level 3       (In thousands)   Financial Assets                                 Cash and due from banks   $ 134,141     $ 134,141     $ —     $ —   Short-term investments     2,315,563       2,315,563       —       —   Securities available-for-sale     1,127,309       —       1,127,309       —   Loans, net     16,499,869       —       —       16,499,869   Equity securities     22,319       22,319       —       —   Investment in Federal Home Loan Bank stock     17,250       —       17,250       —   Warrants     23       —       —       23   Financial Liabilities                                 Deposits     18,051,720       —       —       18,051,720   Advances from Federal Home Loan Bank     21,279       —       21,279       —   Other borrowings     18,945       —       —       18,945   Long-term debt     62,274       —       62,274       —         As of December 31, 2020       Estimated                               Fair Value                               Measurements     Level 1     Level 2     Level 3       (In thousands)   Financial Assets                                 Cash and due from banks   $ 138,616     $ 138,616     $ —     $ —   Short-term investments     1,282,462       1,282,462       —       —   Securities available-for-sale     1,036,550       80,948       955,602       —   Loans, net (1)     16,103,471       —       —       16,103,471   Equity securities     23,744       23,744       —       —   Investment in Federal Home Loan Bank stock     17,250       —       17,250       —   Warrants     21       —       —       21   Financial Liabilities                                 Deposits     16,125,808       —       —       16,125,808   Advances from Federal Home Loan Bank     155,133       —       155,133       —   Other borrowings     19,632       —       —       19,632   Long-term debt     65,487       —       65,487       —     F- 54 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)       16. Revenue from Contracts with Customers     On January 1, 2018, the Company adopted ASU 2014 - 09, Revenue from Contracts with Customers - Topic 606 and all subsequent ASUs that modified ASC 606, Revenue from Contracts with Customers. The Company adopted ASC 606 using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018. The new standard did not materially impact the timing or measurement of the Company’s revenue recognition as it is consistent with the Company’s existing accounting for contracts within the scope of the new standard. There was no cumulative effect adjustment to retained earnings as a result of adopting this new standard.   The following is a summary of revenue from contracts with customers that are in-scope and not in-scope under ASC 606:       Year Ended December 31,       2021     2020     2019       (In thousands)   Non-interest income, in-scope (1) :                         Fees and service charges on deposit accounts   $ 8,618     $ 7,965     $ 7,848   Wealth management fees     15,056       10,529       9,241   Other service fees (2)     15,400       13,742       14,392   Total in-scope non-interest income     39,074       32,236       31,481                             Noninterest income, not in-scope (3)     15,529       10,584       13,270   Total non-interest income   $ 54,603     $ 42,820     $ 44,751       ( 1 ) There were no adjustments to the Company's financial statements recorded as a result of the adoption of ASC 606. For comparability, the Company has adjusted consolidated prior period amounts to conform to the periods presentation.   ( 2 ) Other service fees comprise of fees related to letters of credit, wire fees, fees on foreign exchange transactions and other immaterial individual revenue streams.   ( 3 ) These amounts primarily represent revenue from contracts with customers that are out of the scope of ASC 606.   The major revenue streams by fee type that are within the scope of ASC 606 presented in the above tables are described in additional detail below:   Fees and Services Charges on Deposit Accounts   Fees and service charges on deposit accounts include charges for analysis, overdraft, cash checking, ATM, and safe deposit activities executed by our deposit clients, as well as interchange income earned through card payment networks for the acceptance of card-based transactions. Fees earned from our deposit clients are governed by contracts that provide for overall custody and access to deposited funds and other related services and can be terminated at will by either party. Fees received from deposit clients for the various deposit activities are recognized as revenue once the performance obligations are met. The adoption of ASU 2014 - 09 had no impact to the recognition of fees and service charges on deposit accounts.   Wealth Management Fees   The Company employs financial consultants to provide investment planning services for customers including wealth management services, asset allocation strategies, portfolio analysis and monitoring, investment strategies, and risk management strategies. The fees the Company earns are variable and are generally received monthly. The Company recognizes revenue for the services performed at quarter end based on actual transaction details received from the broker dealer the Company engages.   F- 55 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   Practical Expedients and Exemptions   The Company applies the practical expedient in ASC 606 - 10 - 50 - 14 and does not disclose the value of unsatisfied performance obligations as the Company’s contracts with customers generally have a term that is less than one year, are open-ended with a cancellation period that is less than one year or allow the Company to recognize revenue in the amount to which the Company has the right to invoice.   In addition, given the short-term nature of the Company’s contracts, the Company also applies the practical expedient in ASC 606 - 10 - 32 - 18 and does not adjust the consideration from customers for the effects of a significant financing component, if at contract inception, the period between when the entity transfers the goods or services and when the customer pays for that good or service is one year or less.         17. Employee Benefit Plans     Employee Stock Ownership Plan. Under the Company’s Amended and Restated Cathay Bank Employee Stock Ownership Plan (“ESOP”), the Company can make annual contributions to a trust in the form of either cash or common stock of the Bancorp for the benefit of eligible employees. Employees are eligible to participate in the ESOP after completing two years of service for salaried full-time employees or 1,000  hours for each of two consecutive years for salaried part-time employees. The amount of the annual contribution is discretionary except that it must be sufficient to enable the trust to meet its current obligations. The Company also pays for the administration of this plan and of the trust. The Company has not made contributions to the trust since 2004 and does not expect to make any contributions in the future. Effective June 17, 2004, the ESOP was amended to provide the participants the election either to reinvest the dividends on the Company stock allocated to their accounts or to have these dividends distributed to the participant. The ESOP trust purchased 18,338 shares in 2021, 32,128 shares in 2020, and 22,933 shares in 2019, of the Bancorp’s common stock at an aggregate cost of $ 781 thousand in 2021, $ 818 thousand in 2020, and $ 827 thousand in 2019. The distribution of benefits to participants totaled 47,617 shares in 2021, 33,629 shares in 2020, and 22,309 shares in 2019. As of December 31, 2021, the ESOP owned 718,874 shares, or 1.0 %, of the Company’s outstanding common stock.   401 (k) Plan. In 1997, the Board approved the Company’s 401 (k) Profit Sharing Plan, which began on March  1, 1997. Salaried employees who have completed three months of service and have attained the age of 21 are eligible to participate. Enrollment dates are on the first of each month. Participants may contribute up to 75 % of their eligible compensation for the year but not to exceed the dollar limit set by the Internal Revenue Code. Participants may change their contribution election on the enrollment dates. The vesting schedule for the matching contribution is 0 % for less than two years of service, 25 % after two years of service and from then on, at an increment of 25 % each year until 100 % is vested after three  years of service. Effective on June 1, 2018, the Company matches 100 % on the first 5.0 % of eligible compensation contributed per pay period by the participant, on the first day of the following month after 30 days of service. The Company’s contribution amounted to $ 3.6 million in 2021, $ 3.7 million in 2020, and $ 3.5 million in 2019. The Plan allows participants to withdraw all or part of their vested amount in the Plan due to certain financial hardship as set forth in the Internal Revenue Code and Treasury Regulations. Participants may also borrow up to 50 % of the vested amount, with a maximum of $ 50 thousand. The minimum loan amount is $ 1 thousand.   Bank-Owned Life Insurance. As of December 31, 2021, cash surrender value of bank-owned life insurance was $ 52.0 million. The Bank is the beneficiary under the policy. In the event of the death of a covered officer, we will receive the specified insurance benefit from the insurance carrier and pay a fixed dollar amount to the beneficiary designated by the officer.   F- 56 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)       18. Equity Incentive Plans     Pursuant to the Company’s 2005 Incentive Plan, as amended and restated in May 2015, the Company may grant incentive stock options (employees only), non-statutory stock options, common stock awards, restricted stock, RSUs, stock appreciation rights and cash awards to non-employee directors and eligible employees.   At December 31, 2021, 1,861,104 shares were available under the 2005 Incentive Plan for future grants.   In addition to stock options, the Company also grants restricted stock units (“RSUs”) that are generally granted at no cost to the recipient. RSUs generally vest ratably over three years or cliff vest after one or three years of continued employment from the date of the grant. While a portion of RSUs may be time-vesting awards, others may vest subject to the attainment of specified performance goals and are referred to as “performance-based RSUs.” All RSUs are subject to forfeiture until vested.   Performance-based RSUs are granted at the target amount of awards. Based on the Company’s attainment of specified performance goals and consideration of market conditions, the number of shares that vest can be adjusted to a minimum of zero and to a maximum of 150 % of the target. The amount of performance-based RSUs that are eligible to vest is determined at the end of each performance period and is then added together to determine the total number of performance shares that are eligible to vest. Performance-based RSUs generally cliff vest three years from the date of grant.   Compensation costs for the time-based awards are based on the quoted market price of the Company’s stock at the grant date. Compensation costs associated with performance-based RSUs are based on grant date fair value, which considers both market and performance conditions. Compensation costs of both time-based and performance-based awards are recognized on a straight-line basis from the grant date until the vesting date of each grant.   F- 57 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The following table presents RSU activity for 2021, 2020, and 2019:       Time-Based RSUs     Performance-Based RSUs               Weighted-Average             Weighted-Average               Grant Date             Grant Date       Shares     Fair Value     Shares     Fair Value   Balance at December 31, 2018     284,493       35.79       265,659       32.90   Granted     108,925       36.37       124,586       36.37   Vested     ( 93,729 )     35.14       ( 92,501 )     38.36   Forfeited     ( 26,489 )     39.34       —       —   Balance at December 31, 2019     273,200       35.90       297,744       32.65   Granted     110,495       21.79       212,369       22.96   Vested     ( 80,654 )     25.34       ( 193,240 )     21.68   Forfeited     ( 10,371 )     39.04       ( 14,071 )     39.08   Balance at December 31, 2020     292,670       33.37       302,802       32.55   Granted     63,467       41.18       113,764       37.13   Vested     ( 96,869 )     41.72       ( 76,292 )     41.69   Forfeited     ( 23,324 )     29.92       ( 7,768 )     40.85   Balance at December 31, 2021     235,944       32.38       332,506       31.82     The compensation expense recorded for RSUs was $ 6.0 million in 2021, $ 5.6 million in 2020, and $ 6.6 million in 2019. Unrecognized stock-based compensation expense related to RSUs was $ 8.6 million and $ 8.4 million as of December 31, 2021, and 2020, respectively. As of December 31, 2021, these costs are expected to be recognized over the next 1.7 years.   F- 58 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)       19. Condensed Financial Information of Cathay General Bancorp   The condensed financial information of the Bancorp as of December 31, 2021, and December 31, 2020, and for the years ended December 31, 2021, 2020, and 2019 is as follows:   Balance Sheets       As of December 31,       2021     2020       (In thousands, except       share and per share data)   Assets                 Cash   $ 19,629     $ 50,060   Cash pledged as margin for interest rate swaps     1,071       2,159   Short-term certificates of deposit     333       332   Equity securities     15,627       15,505   Investment in Cathay Bank subsidiary     2,530,850       2,467,643   Investment in non-bank subsidiary     807       845   Other assets     4,691       6,447   Total assets   $ 2,573,008     $ 2,542,991   Liabilities                 Junior subordinated debt   $ 119,136     $ 119,136   Other liabilities     7,621       5,711   Total liabilities     126,757       124,847   Commitments and contingencies     —       —   Stockholders' equity                     Common stock, $ 0.01 par value, 100,000,000 shares authorized, 90,871,860 issued and 75,750,862 outstanding at December 31, 2021, and 90,643,206 issued and 79,508,265 outstanding at December 31, 2020     909       906   Additional paid-in-capital     972,474       964,734   Accumulated other comprehensive loss, net     ( 3,065 )     5,310   Retained earnings     1,985,168       1,789,325   Treasury stock, at cost ( 15,120,998 shares at December 31, 2021, and 11,134,941 shares at December 31, 2020)     ( 509,235 )     ( 342,131 ) Total equity     2,446,251       2,418,144   Total liabilities and equity   $ 2,573,008     $ 2,542,991     F- 59 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   Statements of Operations       Year Ended December 31,       2021     2020     2019       (In thousands)   Cash dividends from Cathay Bank   $ 230,000     $ 146,000     $ 238,998   Interest income     36       49       90   Interest expense     5,773       5,906       8,415   Non-interest Income/(loss)     3,117       ( 435 )     4,634   Non-interest expense     3,224       4,846       3,491   Income before income tax expense     224,156       134,862       231,816   Income tax expense     ( 1,810 )     ( 3,692 )     ( 2,459 ) Income before undistributed earnings of subsidiaries     225,966       138,554       234,275   Undistributed earnings of subsidiary     72,338       90,306       44,860   Net income   $ 298,304     $ 228,860     $ 279,135     Statements of Cash Flows       Year Ended December 31,       2021     2020     2019       (In thousands)   Cash flows from Operating Activities                         Net income   $ 298,304     $ 228,860     $ 279,135   Adjustments to reconcile net income to net cash provided by operating activities:                         Equity in undistributed earnings of subsidiaries     ( 72,338 )     ( 90,306 )     ( 44,860 ) Loss/(gain) on equity securities     ( 122 )     641       ( 4,414 ) Write-downs on venture capital and other investments     73       107       105   Loss in fair value of warrants     —       18       145   Stock issued to directors as compensation     850       800       749   Net change in accrued interest receivable and other assets     1,918       ( 1,182 )     125   Net change in other liabilities     4,934       ( 9,853 )     ( 832 ) Net cash provided by operating activities     233,619       129,085       230,153   Cash flows from Investment Activities                         Proceeds from liquidation of subsidiary     —       2,399       —   Proceeds from sale of equity securities     —       3,112       2,829   Venture capital and other investments     357       116       399   Net cash provided by investment activities     357       5,627       3,228   Cash flows from Financing Activities                         Repayment of long-term debt     —       ( 7,644 )     ( 81,065 ) Cash dividends paid     ( 99,322 )     ( 98,688 )     ( 99,131 ) Proceeds from shares issued under the Dividend Reinvestment Plan     3,563       9,777       3,366   Taxes paid related to net share settlement of RSUs     ( 2,632 )     ( 1,911 )     ( 2,311 ) Purchase of treasury stock     ( 167,104 )     ( 23,593 )     ( 36,301 ) Net cash used in financing activities     ( 265,495 )     ( 122,059 )     ( 215,442 ) Increase/(decrease) in cash, cash equivalents and restricted cash     ( 31,519 )     12,653       17,939   Cash, cash equivalents, and restricted cash, beginning of the year     52,219       39,566       21,627   Cash, cash equivalents, and restricted cash, end of the period   $ 20,700     $ 52,219     $ 39,566     F- 60 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)       20. Dividend Reinvestment Plan   The Company has a Dividend Reinvestment Plan which allows for participants’ reinvestment of cash dividends and certain optional additional investments in the Bancorp’s common stock. Shares issued under the plan and the consideration received were 84,011 shares for $ 3.6 million in 2021, 358,157 shares for $ 9.8 million in 2020, and 93,143 shares for $ 3.4 million in 2019.       21. Regulatory Matters   The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts, and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.   The Federal Deposit Insurance Corporation has established five capital ratio categories: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” A well-capitalized institution must have a common equity tier 1 capital ratio equal to or greater than 6.5 %, a Tier 1 risk-based capital ratio equal to or greater than 8 %, a total risk-based capital ratio equal to or greater than 10 %, and a Tier 1 leverage capital ratio equal to or greater than 5 %. At December 31, 2021, and 2020, the Bank qualified as well capitalized under the regulatory framework for prompt corrective action.   F- 61 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)   The Bancorp’s and the Bank’s capital and leverage ratios as of December 31, 2021, and December 31, 2020, are presented in the tables below:       Actual     Minimum Capital Required - Basel III     Required to be Considered Well Capitalized       Capital Amount     Ratio     Capital Amount     Ratio     Capital Amount     Ratio   December 31, 2021   (In thousands)                                                     Common Equity Tier 1 to Risk-Weighted Assets                                           Cathay General Bancorp   $ 2,056,601       12.80     $ 1,124,381       7.00     $ 1,044,068       6.50   Cathay Bank     2,137,925       13.32       1,123,721       7.00       1,043,455       6.50                                                     Tier 1 Capital to Risk-Weighted Assets                                                 Cathay General Bancorp     2,056,601       12.80       1,365,320       8.50       1,285,007       8.00   Cathay Bank     2,137,925       13.32       1,364,519       8.50       1,284,253       8.00                                                     Total Capital to Risk-Weighted Assets                                                 Cathay General Bancorp     2,315,358       14.41       1,686,572       10.50       1,606,259       10.00   Cathay Bank     2,281,182       14.21       1,685,582       10.50       1,605,316       10.00                                                     Leverage Ratio                                                 Cathay General Bancorp     2,056,601       10.40       791,226       4.00       989,033       5.00   Cathay Bank     2,137,925       10.82       790,430       4.00       988,037       5.00         Actual     Minimum Capital Required - Basel III     Required to be Considered Well Capitalized       Capital Amount     Ratio     Capital Amount     Ratio     Capital Amount     Ratio   December 31, 2020   (In thousands)                                                     Common Equity Tier 1 to Risk-Weighted Assets                                           Cathay General Bancorp   $ 2,016,448       13.53     $ 1,042,967       7.00     $ 968,470       6.50   Cathay Bank     2,059,056       13.83       1,041,911       7.00       967,489       6.50                                                     Tier 1 Capital to Risk-Weighted Assets                                                 Cathay General Bancorp     2,016,448       13.53       1,266,460       8.50       1,191,963       8.00   Cathay Bank     2,059,056       13.83       1,265,178       8.50       1,190,755       8.00                                                     Total Capital to Risk-Weighted Assets                                                 Cathay General Bancorp     2,304,366       15.47       1,564,451       10.50       1,489,953       10.00   Cathay Bank     2,231,474       14.99       1,562,866       10.50       1,488,444       10.00                                                     Leverage Ratio                                                 Cathay General Bancorp     2,016,448       10.94       737,382       4.00       921,727       5.00   Cathay Bank     2,059,056       11.19       736,317       4.00       920,396       5.00     F- 62 Table of Contents   CATHAY GENERAL BANCORP AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS– (Continued)       22. Balance Sheet Offsetting   Certain financial instruments, including resell and repurchase agreements, securities lending arrangements and derivatives, may be eligible for offset in the Consolidated Balance Sheets and/or subject to master netting arrangements or similar agreements. The Company’s securities sold with agreements to repurchase and derivative transactions with upstream financial institution counter parties are generally executed under International Swaps and Derivative Association master agreements which include “right of set-off” provisions. In such cases, there is generally a legally enforceable right to offset recognized amounts and there may be an intention to settle such amounts on a net basis. Nonetheless, the Company does not generally offset such financial instruments for financial reporting purposes.   Financial instruments that are eligible for offset in the Consolidated Balance Sheets, as of December 31, 2021, and December 31, 2020, are presented in the following tables:                               Gross Amounts Not Offset in the Balance Sheet       Gross Amounts Recognized     Gross Amounts Offset in the Balance Sheet     Net Amounts Presented in the Balance Sheet     Financial Instruments     Collateral Posted     Net Amount   December 31, 2021   (In thousands)                                                     Assets:                                                 Derivatives   $ 10,090     $ —     $ 10,090     $ —     $ —     $ 10,090   Liabilities:                                                 Derivatives   $ 15,748     $ ( 3,106 )   $ 12,642     $ —     $ —     $ 12,642                                                     December 31, 2020                                                                                                   Assets:                                                 Derivatives   $ 3,409     $ —     $ 3,409     $ —     $ —     $ 3,409   Liabilities:                                                 Derivatives   $ 28,258     $ (17,972 )   $ 10,286     $ —     $ —     $ 10,286         23. Subsequent Events   On February 7, 2022, the Company subsidiary bank, Cathay Bank completed the purchase of the HSBC Bank USA’s West Coast mass market consumer banking business and retail business banking business, including  10 retail branches in California for total consideration of approximately $ 5.0 million.   On February 14, 2022, the Company’s Board of Directors declared first quarter 2022 dividends for the Company’s common stock. The common stock cash dividend of $ 0.34 per share will be paid on March 7, 2022 , to stockholders of record on February 25, 2022 .   On February 18, 2022, the Company completed its September 2021 stock buyback program by repurchasing 704,927 shares at an average cost of $ 46.67 for a total of $ 32.9 million.   The Company has evaluated the effect of events that have occurred subsequent to December 31, 2021, through the date of issuance of the Consolidated Financial Statements.  Based on this evaluation, the Company has determined none of these events would require recognition in the Consolidated Financial Statements or disclosure in the notes to the Consolidated Financial Statements.