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 2024 that have materially affected, or are reasonably likely to materially affect, these controls and procedures. 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, 2024, 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, 2024. 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, 2024 The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, 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 2024 that have materially affected, or are reasonably likely to materially effect, the Company’s internal control over financial reporting. 57 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, 2024, 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, 2024, 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, 2024 and 2023, 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, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated February 28, 2025 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, 2025 58 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 2025 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 Securities Authorized for Issuance under Equity Compensation Plans The following table sets forth certain information as of December 31, 2024, 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 — $ — 1,240,607 Equity Compensation Plans Not Approved by Security Holders — — — Total — $ — 1,240,607 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. 59 Table of Contents 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. (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. 10.1** Form of Indemnification Agreement between the Bancorp and its directors and certain officers. Previously filed with the Securities and Exchange Commission on March 1, 2022, as an exhibit to the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2021, and incorporated herein by reference. 60 Table of Contents 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** 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. 10.5.1** 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. 10.5.2**+ 2016 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. 10.5.3**+ 2016 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. 10.5.4**+ 2016 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. 10.5.5** 2016 Form of Cathay General Bancorp 2005 Incentive Plan (As Amended and Restated) Restricted Stock Unit Agreement (Clawback Rider), 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** 2024 Form of Cathay General Bancorp 2005 Incentive Plan (As Amended and Restated) Restricted Stock Unit Agreement (Performance Shares – EPS). Previously filed with the Securities and Exchange Commission on August 8, 2024, as an exhibit to the Bancorp’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, and incorporated herein by reference. 10.5.7** 2024 Form of Cathay General Bancorp 2005 Incentive Plan (As Amended and Restated) Restricted Stock Unit Agreement (Performance Shares – TSR). Previously filed with the Securities and Exchange Commission on August 8, 2024, as an exhibit to the Bancorp’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, and incorporated herein by reference. 10.5.8** 2024 Form of Cathay General Bancorp 2005 Incentive Plan (As Amended and Restated) Restricted Stock Unit Agreement (Performance Shares – ROA). Previously filed with the Securities and Exchange Commission on August 8, 2024, as an exhibit to the Bancorp’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, and incorporated herein by reference. 10.5.9**+ Form of Cathay General Bancorp 2005 Incentive Plan (As Amended and Restated) Restricted Stock Unit Agreement (Time-Based Shares). 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. 61 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. 10.6.3** 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. 10.6.4** 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. 10.7** 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. 19.1+ Cathay General Bancorp Insider Trading Policy. 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. 97.1 ‎ Cathay General Bancorp Incentive-Based Compensation Clawback Policy. ‎ Previously filed with the Securities and Exchange Commission on February 29, 2024 as an exhibit to the Bancorp’s ‎Annual Report on Form 10-K for the year ended December 31, 2023 and incorporated herein by reference. 101.INS+ Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 - the cover page SBRL tags are embedded within the Inline XBRL document* ** Management contract or compensatory plan or arrangement. + Filed herewith. ++ Filed herewith pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended. Item 16. Form 10-K Summary. None. 62 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, 2025 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, 2025 Chang M. Liu (principal executive officer) /s/ Heng W. Chen Executive Vice President, February 28, 2025 Heng W. Chen Chief Financial Officer/Treasurer (principal financial officer) (principal accounting officer) /s/ Dunson K. Cheng Executive Chairman of February 28, 2025 Dunson K. Cheng the Board /s/ Peter Wu Vice Chairman of the Board February 28, 2025 Peter Wu /s/ Anthony M. Tang Vice Chairman of the Board February 28, 2025 Anthony M. Tang /s/ Kelly L. Chan Director February 28, 2025 Kelly L. Chan /s/ Nelson Chung Director February 28, 2025 Nelson Chung /s/ Felix S. Fernandez Director February 28, 2025 Felix S. Fernandez /s/ Jane Jelenko Director February 28, 2025 Jane Jelenko /s/ Maan-Huei Hung Director February 28, 2025 Maan-Huei Hung /s/ Joseph C.H. Poon Director February 28, 2025 Joseph C.H. Poon /s/ Richard Sun Director February 28, 2025 Richard Sun /s/ Shally Wang Director February 28, 2025 Shally Wang /s/ Ann Yee Kono Director February 28, 2025 Ann Yee Kono /s/ Elizabeth Woo Director February 28, 2025 Elizabeth Woo 63 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets at December 31, 2024 and 2023 F-4 Consolidated Statements of Operations and Comprehensive Income for each of the years ended December 31, 2024, 2023, and 2022 F-5 Consolidated Statements of Changes in Stockholders' Equity for each of the years ended December 31, 2024, 2023, and 2022 F-6 Consolidated Statements of Cash Flows for each of the years ended December 31, 2024, 2023, and 2022 F-7 Notes to Consolidated Financial Statements F-8 Parent-only condensed financial information of Cathay General Bancorp is included in Note 20 to the Consolidated Financial Statements in this Annual Report on Form 10-K F-40 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, 2024, and 2023, 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, 2024, 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, 2024, and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, 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, 2024, 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, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. 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. Allowance for loan losses for loans evaluated on a collective basis modeled using an econometric methodology. As discussed in Note 4 to the consolidated financial statements, the Company’s total allowance for loan losses as of December 31, 2024 was $161.8 million, 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”). As discussed in Note 1, 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 calculates the collective ALL by estimating the probability of default during the reasonable and supportable forecast period using separate econometric regression models developed to correlate macroeconomic variables to loan risk rating performance for each of the six portfolios. Loss given default rates are computed based on the net charge-offs recognized and then applied to 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 linearly to long-term loss rates over the one-year reversion period. Management relies on multiple forecasts, which are weighted in determining a single loss estimate. 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. This included our assessment of the collective ALL methodology, including the econometric models used to estimate expected credit losses and their significant assumptions. Such significant assumptions included portfolio segmentation, the weighting of the economic forecast scenarios, the selection of macroeconomic variables, the length of the reasonable and supportable forecast 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. F-2 Table of Contents 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 related to the: ● continued use and appropriateness of the collective ALL methodology ● continued use and appropriateness of the econometric models ● identification and determination of the significant assumptions used in the econometric models ● continued use and appropriateness of changes in certain qualitative loss factors ● determination of risk ratings ● analysis of the collective ALL results, trends, and ratios. 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 validation documentation to determine whether the models are suitable for their intended use ● evaluating the judgments made by the Company in selecting the macroeconomic variables, including the reasonable and supportable forecast period and economic scenario 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, 2025 F-3 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 2024 2023 (In thousands, except share data) Assets Cash and due from banks $ 157,167 $ 173,988 Short-term investments and interest-bearing deposits 882,353 654,813 Securities available-for-sale (amortized cost of $ 1,668,661 in 2024 and $ 1,726,080 in 2023) 1,547,128 1,604,570 Loans held for sale — — Loans 19,375,955 19,548,140 Less: Allowance for loan losses ( 161,765 ) ( 154,562 ) Unamortized deferred loan fees, net ( 10,541 ) ( 10,720 ) Loans, net 19,203,649 19,382,858 Equity securities 34,429 40,406 Federal Home Loan Bank stock 17,250 17,746 Other real estate owned, net 23,071 19,441 Affordable housing investments and alternative energy partnerships, net 289,611 315,683 Premises and equipment, net 88,676 91,097 Customers’ liability on acceptances 14,061 3,264 Accrued interest receivable 97,779 97,673 Goodwill 375,696 375,696 Other intangible assets, net 3,335 4,461 Right-of-use assets- operating leases 28,645 32,076 Other assets 291,831 267,762 Total assets $ 23,054,681 $ 23,081,534 Liabilities and Stockholders’ Equity Deposits: Non-interest-bearing demand deposits $ 3,284,342 $ 3,529,018 Interest-bearing deposits: NOW deposits 2,205,695 2,370,685 Money market deposits 3,372,773 3,049,754 Savings deposits 1,252,788 1,039,203 Time deposits 9,570,601 9,336,787 Total deposits 19,686,199 19,325,447 Advances from the Federal Home Loan Bank 60,000 540,000 Other borrowings for affordable housing investments 17,740 15,787 Long-term debt 119,136 119,136 Acceptances outstanding 14,061 3,264 Lease liabilities - operating leases 30,851 34,797 Other liabilities 280,990 306,528 Total liabilities 20,208,977 20,344,959 Commitments and contingencies — — Stockholders’ Equity Common stock, $ 0.01 par value, 100,000,000 shares authorized, 91,615,458 issued and 70,863,324 outstanding at December 31, 2024, and 91,392,480 issued and 72,668,927 outstanding at December 31, 2023 916 914 Additional paid-in-capital 993,962 987,953 Accumulated other comprehensive loss, net ( 85,607 ) ( 85,416 ) Retained earnings 2,688,353 2,500,341 Treasury stock, at cost ( 20,752,134 shares at December 31, 2024, and 18,723,553 shares at December 31, 2023) ( 751,920 ) ( 667,217 ) Total equity 2,845,704 2,736,575 Total liabilities and equity $ 23,054,681 $ 23,081,534 See accompanying notes to Consolidated Financial Statements. F-4 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME Year Ended December 31, 2024 2023 2022 (In thousands, except share and per share data) Interest and Dividend Income Loan receivable $ 1,217,166 $ 1,130,242 $ 801,981 Investment securities 59,307 51,717 28,240 Federal Home Loan Bank stock 1,684 1,349 1,103 Deposits with banks 56,818 58,914 19,957 Total interest and dividend income 1,334,975 1,242,222 851,281 Interest Expense Time deposits 458,490 331,997 56,354 Other deposits 177,775 135,965 48,942 Advances from the Federal Home Loan Bank 14,283 22,164 5,880 Long-term debt 8,129 6,480 5,546 Short-term borrowings 2,243 3,870 862 Total interest expense 660,920 500,476 117,584 Net interest income before provision for credit losses 674,055 741,746 733,697 Provision for credit losses 37,500 25,978 14,543 Net interest income after provision for credit losses 636,555 715,768 719,154 Non-Interest Income Net (losses)/gains from equity securities ( 7,516 ) 18,248 392 Net gains/(losses) from securities available for sale 1,107 ( 3,000 ) — Letters of credit commissions 7,749 6,716 6,351 Depository service fees 6,574 6,432 6,523 Wealth management fees 24,055 17,506 16,436 Other operating income 23,695 22,390 27,112 Total non-interest income 55,664 68,292 56,814 Non-Interest Expense Salaries and employee benefits 167,376 154,149 142,546 Occupancy expense 23,281 22,270 22,808 Computer and equipment expense 20,135 17,478 13,603 Professional services expense 30,986 32,491 28,237 Data processing service expense 16,370 14,728 13,181 FDIC and State assessments 14,279 23,588 8,037 Marketing expense 6,520 5,887 6,863 Other real estate owned expense 2,699 761 127 Amortization of investments in low income housing and Alternative energy partnerships 72,633 86,616 42,065 Amortization of core deposit premium 1,098 1,310 1,892 Acquisition, integration and reorganization costs — 671 4,127 Other operating expense 19,300 20,529 19,946 Total non-interest expense 374,677 380,478 303,432 Income before income tax expense 317,542 403,582 472,536 Income tax expense 31,563 49,458 111,894 Net income $ 285,979 $ 354,124 $ 360,642 Other Comprehensive Income/(Loss), Net of Tax: Net holding gains/(losses) on securities available-for-sale 583 18,642 ( 105,043 ) Net holding (losses)/gains on cash flow hedge derivatives ( 774 ) ( 1,763 ) 5,813 Total other comprehensive income/(loss), net of tax ( 191 ) 16,879 ( 99,230 ) Total comprehensive income $ 285,788 $ 371,003 $ 261,412 Net Income Per Common Share Basic $ 3.97 $ 4.88 $ 4.85 Diluted $ 3.95 $ 4.86 $ 4.83 Cash dividends paid per common share $ 1.36 $ 1.36 $ 1.36 Average Common Shares Outstanding: Basic 72,068,850 72,573,025 74,337,265 Diluted 72,327,017 72,862,628 74,664,735 See accompanying notes to Consolidated Financial Statements. F-5 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ EQUITY Accumulated Common Stock Additional Other Total (In thousands, except shares and per share data) Number of Paid-in Comprehensive Retained Treasury Stockholders' Shares Amount Capital Loss Earnings Stock Equity Balance at December 31, 2021 75,750,862 $ 909 $ 972,474 $ ( 3,065 ) $ 1,985,168 $ ( 509,235 ) $ 2,446,251 Dividend Reinvestment Plan 86,501 1 3,718 — — — 3,719 Restricted stock units vested 112,473 1 — — — — 1 Shares withheld related to net share settlement of RSUs — — ( 2,905 ) — — — ( 2,905 ) Stock issued to directors 19,780 — 849 — — — 849 Purchases of treasury stock ( 3,227,465 ) — — — — ( 141,315 ) ( 141,315 ) Stock -based compensation — — 6,983 — — — 6,983 Cash dividends of $ 1.36 per share — — — — ( 100,955 ) — ( 100,955 ) Other comprehensive loss — — — ( 99,230 ) — — ( 99,230 ) Net income — — — — 360,642 — 360,642 Balance at December 31, 2022 72,742,151 $ 911 $ 981,119 $ ( 102,295 ) $ 2,244,855 $ ( 650,550 ) $ 2,474,040 Dividend Reinvestment Plan 93,182 1 3,490 — — — 3,491 Restricted stock units vested 183,324 2 — — — — 2 Shares withheld related to net share settlement of RSUs — — ( 4,490 ) — — — ( 4,490 ) Stock issued to directors 25,360 — 850 — — — 850 Purchases of treasury stock ( 375,090 ) — — — — ( 16,667 ) ( 16,667 ) Stock -based compensation — — 6,984 — — — 6,984 Cash dividends of $ 1.36 per share — — — — ( 98,638 ) — ( 98,638 ) Other comprehensive income — — — 16,879 — — 16,879 Net income — — — — 354,124 — 354,124 Balance at December 31, 2023 72,668,927 $ 914 $ 987,953 $ ( 85,416 ) $ 2,500,341 $ ( 667,217 ) $ 2,736,575 Dividend Reinvestment Plan 70,503 1 2,932 2,933 Restricted stock units vested 128,355 1 1 Shares withheld related to net share settlement of RSUs ( 3,726 ) ( 3,726 ) Stock issued to directors 24,120 850 850 Purchases of treasury stock ( 2,028,581 ) ( 84,703 ) ( 84,703 ) Stock -based compensation 5,953 5,953 Cash dividends of $ 1.36 per share ( 97,967 ) ( 97,967 ) Other comprehensive loss ( 191 ) ( 191 ) Net income 285,979 285,979 Balance at December 31, 2024 70,863,324 $ 916 $ 993,962 $ ( 85,607 ) $ 2,688,353 $ ( 751,920 ) $ 2,845,704 See accompanying notes to Consolidated Financial Statements. F-6 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2024 2023 2022 (In thousands) Cash Flows from Operating Activities Net income $ 285,979 $ 354,124 $ 360,642 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 37,500 25,978 14,543 Provision for losses on other real estate owned 1,164 — — Deferred tax benefit ( 20,756 ) ( 4,782 ) ( 2,088 ) Depreciation and amortization 7,183 8,371 9,958 Amortization of right-of-use asset 9,646 9,733 9,845 Change in operating lease liabilities ( 3,946 ) 2,279 ( 4,629 ) Net gains on sale and transfers of other real estate owned — — ( 6 ) Net losses/(gains) on sale of loans 737 — ( 1 ) Loss on sales or disposal of fixed assets — 6 67 Amortization of alternative energy partnerships, venture capital and other investments 72,633 86,616 42,065 Net gain on sales and calls of securities ( 1,107 ) — ( 101 ) Amortization/accretion of security premiums/discount, net ( 25,369 ) ( 11,373 ) 2,465 Unrealized loss/(gain) on equity securities 7,516 ( 18,248 ) ( 291 ) Write-off of AFS debt securities — 3,000 — Stock-based compensation and stock issued to officers as compensation 6,804 7,836 7,832 Net change in accrued interest receivable and other assets ( 10,050 ) ( 54,369 ) ( 80,411 ) Net change in other liabilities ( 38,779 ) ( 24,429 ) 107,467 Net cash provided by operating activities 329,155 384,742 467,357 Cash Flows from Investing Activities Purchase of investment securities available-for-sale ( 1,358,614 ) ( 618,334 ) ( 711,707 ) Proceeds from repayment, maturity, and call of investment securities available-for-sale 1,407,915 522,815 213,936 Proceeds from sale of investment securities available-for-sale 33,690 — — Proceeds from sale of equity securities — — 553 Benefits received from bank owned life insurance policies — — 4,013 Purchase of Federal Home Loan Bank stock ( 12,535 ) ( 29,381 ) ( 9,776 ) Redemption of Federal Home Loan Bank stock 13,031 28,885 9,776 Proceeds from sale of loans originally classified as held-for-investment 172,960 — 33 Net increase in loans ( 36,018 ) ( 1,327,048 ) ( 1,272,268 ) Purchase of premises and equipment ( 3,636 ) ( 3,401 ) ( 3,390 ) Proceeds from sales of other real estate owned — — 307 Net increase in investment in affordable housing and alternative energy partnerships ( 32,763 ) ( 50,616 ) ( 6,995 ) Acquisitions, net of cash acquired — — ( 73,882 ) Net cash provided/(used) for investing activities 184,030 ( 1,477,080 ) ( 1,849,400 ) Cash Flows from Financing Activities Increase/(decrease) in deposits 360,997 820,041 ( 128,803 ) Advances from Federal Home Loan Bank 6,968,000 14,035,000 5,480,000 Repayment of Federal Home Loan Bank borrowings ( 7,448,000 ) ( 13,980,000 ) ( 5,015,000 ) Cash dividends paid ( 97,967 ) ( 98,638 ) ( 100,955 ) Purchase of treasury stock ( 84,703 ) ( 16,667 ) ( 141,316 ) Proceeds from shares issued under Dividend Reinvestment Plan 2,933 3,491 3,720 Taxes paid related to net share settlement of RSUs ( 3,726 ) ( 4,490 ) ( 2,905 ) Net cash (used)/provided by financing activities ( 302,466 ) 758,737 94,741 Increase/(decrease) in cash, cash equivalents, and restricted cash 210,719 ( 333,601 ) ( 1,287,302 ) Cash, cash equivalents, and restricted cash, beginning of the year 828,801 1,162,402 2,449,704 Cash, cash equivalents, and restricted cash, end of the period $ 1,039,520 $ 828,801 $ 1,162,402 Supplemental Cash Flow Information Cash paid during the year for: Interest $ 662,066 $ 484,861 $ 105,521 Income taxes $ 56,172 $ 70,332 $ 96,881 Non-cash investing and financing activities: Net change in unrealized holding gain/(loss) on securities available-for-sale, net of tax $ 583 $ 18,642 $ ( 105,043 ) Net change in unrealized holding (loss)/gain on cash flow hedge derivatives $ ( 774 ) $ ( 1,763 ) $ 5,813 Transfers to other real estate owned from loans held-for-investment $ 4,794 $ 15,374 $ — Loans transferred from held-for-investment to held-for-sale $ 173,697 $ — $ 32 See accompanying notes to Consolidated Financial Statements. F-7 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, and eleven limited partnerships investing in affordable housing projects (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 clients. 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 credit 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, 2024 , gross loans were primarily comprised of 51.8 % of commercial real estate loans, 29.4 % of residential mortgage loans, and 16.0 % of commercial loans. As of December 31, 2024 , approximately 49.2 % of the Bank’s residential mortgages were for properties located in California. Securities Available for Sale. Debt securities Available For Sale (“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. 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 an entity intends to sell the debt security, or more likely than not will be required to sell the security before recovery of its amortized cost basis, any allowance for credit losses shall be written off and the amortized cost basis shall be written down to the debt security's fair value at the reporting date with any incremental impairment reported in earnings. 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 were $ 17.3 million and $ 17.7 million at December 31, 2024 , and 2023 , respectively. As of December 31, 2024 , the Company owned 172,500 shares of FHLB stock, which exceeded the minimum stock requirement of 150,000 shares. F- 8 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 ( “ ACL ” ) on Loans Held for Investment. The Company uses 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, adjusted for current conditions and reasonable and supportable forecasts, which may include forecasts of items such as GDP, unemployment rates, CRE and home price indexes, and reasonable and supportable economic forecasts of future events and circumstances. The ACL 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. Under the Company’s CECL approach, management estimates the ACL using relevant available information from internal and external sources, relating to past events, current conditions, 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 considers 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. 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 uses 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 loan risk rating performance for each of the six loan portfolios from the fourth quarter of 2007 to the fourth quarter of 2022. Loss given default rates are computed based on the net charge-offs recognized divided by the exposure at default of defaulted loans starting with the fourth quarter of 2007 through the fourth quarter of 2022. 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. F- 9 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The Company’s CECL methodology utilizes an eight -quarter reasonable and supportable (“R&S”) forecast period, and a four -quarter reversion period. Management relies on multiple forecasts, which are weighted in determining 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 reverts linearly 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 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. 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 loss experience with residential mortgage loans made to non-U.S. residents, oil & gas, the higher risk characteristics of purchased syndicated loans, model uncertainty, and loans with potential risk of loss given the current environment, including CRE and Office loans, but have not degraded to the point of qualifying for a specific reserve. 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 current expected credit losses 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. It is possible that others, given the same information, may at any point in time reach different conclusions that could result in a significant impact to the Company’s financial statements. 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, modifications to borrowers experiencing financial difficulty, or payment delinquency of 90 days or more. The Company has adopted ASU 2022 - 02, “Financial Instruments – Troubled Debt Restructurings and Vintage Disclosures” effective January 1, 2023. As part of the adoption, the Company has elected to apply the pending content prospectively and the practical expedient to exclude the accrued interest receivable balance from the disclosed amortized cost basis of loan modifications to debtors experiencing financial difficulty, consistent with our ACL approach discussed further below in this footnote. Under the new guidance on loan modifications made to borrowers experiencing financial difficulty, when a loan held for investment is modified and is considered to be a continuation of the original loan, the Company uses the post-modification contractual rate to derive the effective interest rate when using a discounted cash flow method to determine the allowance for credit loss. The amendments in this new guidance eliminate the previous TDR recognition and measurement guidance and, instead, require that an entity evaluate whether the modification represents a new loan or a continuation of an existing loan. Under the prior TDR guidance, 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 were considered TDRs, TDR loans that had, pursuant to the Bank’s policy, performed under the restructured terms and had demonstrated sustained performance under the modified terms for six months were returned to accrual status. The sustained performance considered by management pursuant to its policy included 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 restructuring to set up interest reserves. Loans classified as TDRs were reported as individually evaluated loans. The allowance for credit loss on a TDR was 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. Under the prior guidance when the value of a concession was measured using the discounted cash flow method, the allowance for credit loss was determined by discounting the expected future cash flows at the original interest rate of the loan. F- 10 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 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 13 in the Notes to Consolidated Financial Statements. 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. 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, 2024 , eleven 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 eleven 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 impairment charged against net income. 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. Goodwill and Other Intangible Assets. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in an acquisition. Goodwill and other intangible assets are assessed for impairment annually as of December 31 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, 2024 , and 2023 . Other intangible assets. Other intangible assets are mainly comprised of core deposit intangible ("CDI"), which represents the purchase price over the fair value of the deposits acquired from other financial institutions. CDI 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. 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. The Company grants time-based RSUs, which include service conditions for vesting. Compensation cost for these time-based awards is based on the quoted market price of the Company’s common stock at the grant date. Compensation costs for time-based RSUs that will be settled in cash instead of shares are adjusted to fair value based on changes in the Company’s stock price up to the settlement date. In addition, the Company grants performance-based RSUs, which contain additional performance goals and market conditions that are required to be met in order for the awards to vest. Compensation expense for these performance-based RSUs is based on the grant-date fair value considers both performance and market conditions. Subsequently, the Company evaluates the probable outcome of the performance conditions quarterly and makes cumulative adjustments for current and prior periods in compensation expense in the period of change. Market conditions subsequent to the grant date have no impact on the amount of compensation expense the Company will recognize over the life of the award. Compensation cost is amortized on a straight-line basis over the requisite service period for the entire award, which is generally the maximum vesting period of the award. Excess tax benefits and deficiencies on share-based payment awards are recognized within Income tax expense on the Consolidated Statement of Income. As stock-based compensation expense is estimated based on awards ultimately expected to vest, it is reduced by the expense related to awards expected to be forfeited. Forfeitures are estimated at the time of grant and are updated quarterly. If the estimated forfeitures are revised, a cumulative effect of changes in estimated forfeitures for the current and prior periods is recognized in compensation expense in the period of change. Refer to Note 19 — Equity Incentive Plans on the Consolidated Financial Statements in this Form 10 -K for additional information. F- 11 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 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/(loss) 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. 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. The Company operates as a single operating segment. Our Chief Executive Officer is our chief operating decision maker (“CODM”). The CODM uses net income to evaluate financial performance and allocate resources based on net income that also is reported on the income statement as consolidated net income and compares to budgeted amounts. The accounting policies of the operating segment are the same as those of our consolidated entity and described in the summary of significant accounting policies. The measure of segment assets is reported on the balance sheet as total assets. The Company’s operations primarily consist of commercial banking services, 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 within the United States. As such the Company does not report any disaggregated financial information. The Company generates substantially all its revenues from banking services and does not have material operations outside the United States. F- 12 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Recent Accounting Pronouncements Adopted in 2024 In November 2023, ASU No. 2023 - 07, “Segment Reporting (Topic 280 ), Improvements to Reportable Segment Disclosures”, was issued. This ASU expands the disclosure requirements for reportable segments of public entities by adding the following disclosure requirements. The amendments require, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, on an annual and interim basis, disclose amount and description of composition of other segment items. This amount reconciles segment revenues, less the significant segment expenses, to the reported measure of segment profit or loss; expands the current interim disclosure requirements to require all existing annual disclosures about a reportable segment’s profit or loss and assets also be made on an interim basis; clarifies that if a CODM uses more than one measure of segment profit or loss, then the entity may disclose one or more measures, but at least one measure should be that which is most consistent with GAAP measurement principles; and requires annual disclosure of the title and position of the CODM as well as explanation of how the CODM uses the reported measures in assessing segment performance and allocating resources. The amendments in this update are effective for fiscal years beginning after December 15, 2023. The Company has determined that the adoption of ASU 2023 - 07 did not have a significant impact on the Company’s Consolidated Financial Statements. In March 2023, ASU 2023 - 02, “Investments-Equity Method and Joint Ventures (Topic 323 ): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method". ASU 2023 - 02 permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. ASU 2023 - 02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company elected not to apply the proportional method of amortization allowed as an election under ASU 2023 - 02. In June 2022, ASU 2022 - 03, “Fair Value Measurement (Topic 820 ): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” ASU 2022 - 03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. ASU 2022 - 03 also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction and requires certain new disclosures for equity securities subject to contractual sale restrictions. The adoption of ASU 2022 - 03 did not have a significant impact on our financial statements. Other Accounting Standards Pending Adoption In November 2024, ASU No. 2024 - 03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses”, was issued. This ASU requires disaggregated disclosure of income statement expenses for public business entities. ASU 2024 - 03 requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. The prescribed categories include, among other things, employee compensation, depreciation, and intangible asset amortization. Additionally, entities must disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. ASU 2024 - 03 is effective for us, on a prospective basis, for annual periods beginning in 2027, and interim periods within fiscal years beginning in 2028, though early adoption and retrospective application is permitted. ASU 2024 - 03 is not expected to have a significant impact on our financial statements. On March 6, 2024, the U.S. Securities and Exchange Commission ("SEC") adopted final rules under SEC Release No. 33 - 11275, “The Enhancement and Standardization of Climate-Related Disclosures for Investors”. This rule will require that climate-related information be included in a Company’s annual reports and registration statements. The disclosure requirements will apply to the Company's fiscal year beginning January 1, 2025; however, the SEC has determined to stay the application of this rule pending the completion of judicial review in legal challenges related to the rule. The Company is currently evaluating the final rule to determine its impact on the Company's disclosures. In December 2023, ASU No. 2023 - 09, “Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures” was issued. This ASU amends the disclosure requirements for income taxes, including the requirement for further disaggregation of the income tax rate reconciliation and income taxes paid disclosures. The amendments in this guidance are effective for annual periods beginning after December 15, 2024. These amendments should be applied prospectively, with the option to apply retrospectively. The Company is currently evaluating the impact of this guidance on the Company’s Consolidated Financial Statements. 2. Cash, Cash Equivalents and Restricted Cash The Company manages its cash and cash equivalents based upon the Company’s operating, investment, and financing activities. Cash and cash equivalents, for the purpose of reporting cash flows, consist of cash and due from banks, short-term investments, and interest-bearing deposits. Cash and due from banks include cash on hand, cash items in transit, cash due from the Federal Reserve Bank of San Francisco (“FRBSF”) and other financial institutions. Short-term investments and interest-bearing deposits include cash placed with other banks with original maturity of three months or less. The Company had average excess balance with FRBSF of $ 1.05 billion and $ 1.09 billion for the years ended December 31, 2024 , and 2023 , respectively. As of December 31, 2024 , and 2023 , the Company had $ 43.4 million and $ 53.8 million, respectively, as cash margin that serves as collateral on deposit in a cash margin account for interest rate swaps. Of the balances held in the cash margin account $ 8.6 million are restricted as of December 31, 2024 , and 2023 . As of December 31, 2024 , and December 31, 2023 , the Company held $ 0.3 million and $ 6.4 million, respectively, in a restricted escrow account with a major bank for its alternative energy investments. F- 13 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 3. Investment Securities Investment Securities. The following tables set forth the amortized cost, gross unrealized gains, gross unrealized losses, and fair values of debt securities available-for-sale ("AFS") as of December 31, 2024 , and December 31, 2023 : As of December 31, 2024 Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value (In thousands) Securities AFS U.S. treasury securities $ 621,212 $ 250 $ — $ 621,462 U.S. government agency entities 9,226 50 127 9,149 Mortgage-backed securities 797,145 67 113,196 684,016 Collateralized mortgage obligations 27,747 — 3,191 24,556 Corporate debt securities 213,331 145 5,531 207,945 Total $ 1,668,661 $ 512 $ 122,045 $ 1,547,128 As of December 31, 2023 Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value (In thousands) Securities AFS U.S. treasury securities $ 495,167 $ 153 $ 20 $ 495,300 U.S. government agency entities 48,282 117 230 48,169 Mortgage-backed securities 892,942 223 106,442 786,723 Collateralized mortgage obligations 31,238 — 3,194 28,044 Corporate debt securities 258,451 22 12,139 246,334 Total $ 1,726,080 $ 515 $ 122,025 $ 1,604,570 The amortized cost and fair value of AFS securities as of December 31, 2024 , 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 AFS As of December 31, 2024 Amortized Cost Fair Value (In thousands) Due in one year or less $ 671,499 $ 671,217 Due after one year through five years 169,826 164,819 Due after five years through ten years 109,494 102,445 Due after ten years 717,842 608,647 Total $ 1,668,661 $ 1,547,128 Proceeds from the sale of investment securities were $ 33.7 million during the year ended December 31, 2024 . There were no sales of investment securities during the years ended December 31, 2023, and 2022. Gross realized gain on sale of investment securities was of $ 1.1 million for the year ended December 31, 2024 . Allowance for Credit Losses The AFS securities that were in an unrealized loss position as of December 31, 2024 , 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 securities AFS that have declined below their cost before their anticipated recovery. Accordingly, no allowance for credit losses was recorded as of December 31, 2024 , and 2023 , against these securities, and there was no provision for credit losses recognized for the years ended December 31, 2024 , 2023 and 2022 . F- 14 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 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, 2024 , and December 31, 2023 : As of December 31, 2024 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 AFS U.S. government agency entities $ 4,199 $ 8 $ 2,108 $ 119 $ 6,307 $ 127 Mortgage-backed securities 29,955 959 653,236 112,237 683,191 113,196 Collateralized mortgage obligations — — 24,556 3,191 24,556 3,191 Corporate debt securities 24,900 100 127,744 5,431 152,644 5,531 Total $ 59,054 $ 1,067 $ 807,644 $ 120,978 $ 866,698 $ 122,045 As of December 31, 2023 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 AFS U.S. treasury securities $ 49,831 $ 20 $ — $ — $ 49,831 $ 20 U.S. government agency entities 18,301 108 1,313 122 19,614 230 Mortgage-backed securities — — 768,274 106,442 768,274 106,442 Collateralized mortgage obligations — — 28,044 3,194 28,044 3,194 Corporate debt securities 64,448 552 166,864 11,587 231,312 12,139 Total $ 132,580 $ 680 $ 964,495 $ 121,345 $ 1,097,075 $ 122,025 As of December 31, 2024 , the Company had a total of 182 AFS securities in a gross unrealized loss position with no credit impairment, consisting primarily of 154 mortgage-backed securities, 16 corporate debt securities, nine U.S. government agencies securities and three collateralized mortgage obligations. In comparison, as of December 31, 2023 , the Company had a total of 192 AFS securities in a gross unrealized loss position with no credit impairment, consisting primarily of 154 mortgage-backed securities, 24 corporate debt securities, eight U.S. government agencies securities, five collateralized mortgage obligations and one U.S. treasury security. AFS securities having a carrying value of $ 17.8 million and $ 134.2 million as of December 31, 2024 , and December 31, 2023 , respectively, were pledged to secure public deposits, and other borrowings. Equity securities were $ 34.4 million and $ 40.4 million as of December 31, 2024 , and 2023 , respectively. The Company recognized a net unrealized loss on equity securities of $ 7.5 million for the year ended December 31, 2024 . The company recognized net unrealized gains on equity securities of $ 18.2 million and $ 0.3 million for the years ended December 31, 2023 and 2022 , respectively. The Company received proceeds of $ 553 thousand and realized a loss of $ 101 thousand on the sale of equity securities for the year ended December 31, 2022. 4. Loans Most of the Company’s business activities are with clients 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 clients 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. F- 15 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following table presents the composition of the Company’s loans as of December 31, 2024 , and 2023 , were as follows: As of December 31, 2024 2023 (In thousands) Loans: Commercial loans $ 3,098,004 $ 3,305,048 Construction loans 319,649 422,647 Commercial real estate loans 10,033,830 9,729,581 Residential mortgage loans 5,689,097 5,838,747 Equity lines 229,995 245,919 Installment and other loans 5,380 6,198 Gross loans 19,375,955 19,548,140 Less: Allowance for loan losses ( 161,765 ) ( 154,562 ) Unamortized deferred loan fees ( 10,541 ) ( 10,720 ) Total loans held for investment, net $ 19,203,649 $ 19,382,858 Loans held for sale $ - $ - The Company pledged real estate loans of $ 14.55 billion as of December 31, 2024 , and $ 14.15 billion as of December 31, 2023 , to the Federal Home Loan Bank of San Francisco under its blanket lien pledging program. The Company pledged commercial loans of $ 474.8 million as of December 31, 2024 , and $ 388 thousand as of December 31, 2023 , to the Federal Reserve Bank’s Discount Window under the Borrower-in-Custody program. Loans serviced for others as of December 31, 2024 , totaled $ 172.2 million and were comprised of $ 63.3 million of residential mortgages, $ 44.5 million of commercial real estate loans, $ 22.6 million of construction loans, and $ 41.8 million of commercial loans. As of December 31, 2023 , loans serviced for others, totaled $ 203.0 million and were comprised of $ 70.7 million of residential mortgages, $ 76.1 million of commercial real estate loans, $ 11.8 million of construction loans and $ 44.4 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, 2024 , and 2023 . An analysis of the activity with respect to loans to related parties for the years indicated is as follows: December 31, 2024 2023 (In thousands) Balance at beginning of year $ 45,707 $ 33,217 Additional loans made 100,256 20,160 Payment received ( 60,715 ) ( 7,670 ) Balance at end of year $ 85,248 $ 45,707 F- 16 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Non-accrual Loans As of December 31, 2024 , recorded investment in non-accrual loans totaled $ 169.2 million compared to $ 66.7 million as of December 31, 2023 . The average balance of non-accrual loans was $ 130.1 million and $ 71.8 million as of December 31, 2024 , and 2023 , respectively. Interest recognized on non-accrual loans totaled $ 197 thousand, $ 321 thousand and $ 435 thousand for the years ended December 31, 2024 , 2023 and 2022 . For non-accrual loans, the amounts previously charged-off represent 11.7 % of the contractual balances for non-accrual loans as of December 31, 2024 , and 15.8 % as of December 31, 2023 . As of December 31, 2024, $ 115.2 million of the $ 169.2 million of non-accrual loans were secured by real estate compared to $ 52.3 million of the $ 66.7 million of non-accrual loans that were secured by real estate as of December 31, 2023. As of December 31, 2024 and 2023, collateral-dependent non-accrual loans were secured by real estate and personal property. The Bank generally seeks to obtain current appraisals, sales contracts, or other available market price information intended to provide updated factors in evaluating potential loss. The allowance for the collateral-dependent loans is calculated based on the difference between the outstanding loan balance and the value of the collateral as determined by recent appraisals, sales contracts, or other available market price information, less cost to sell. The allowance for collateral-dependent loans varies from loan to loan based on the collateral coverage of the loan at the time of designation as non-performing. We continue to monitor the collateral coverage of these loans, based on recent appraisals, on a quarterly basis and adjust the allowance accordingly. The following tables present the average balance and interest income recognized on non-accrual loans for the periods indicated: For the year ended December 31, 2024 Average Recorded Investment Interest Income Recognized (In thousands) Commercial loans $ 27,236 $ 1 Construction loans 17,183 — Commercial real estate loans 66,634 196 Residential mortgage and equity lines 19,073 — Installment and other loans — — Total $ 130,126 $ 197 For the year ended December 31, 2023 Average Recorded Investment Interest Income Recognized (In thousands) Commercial loans $ 18,008 $ 3 Construction loans 6,336 — Commercial real estate loans 35,742 318 Residential mortgage and equity lines 11,743 — Installment and other loans 1 — Total $ 71,830 $ 321 The following table presents non-accrual loans and the related allowance as of December 31, 2024 , and 2023 : As of December 31, 2024 Unpaid Principal Balance Recorded Investment Allowance (In thousands) With no allocated allowance: Commercial loans $ 56,022 $ 53,499 $ — Commercial real estate loans 100,316 82,936 — Residential mortgage and equity lines 19,340 18,831 — Subtotal $ 175,678 $ 155,266 $ — With allocated allowance: Commercial loans $ 18,769 $ 6,267 $ 1,208 Commercial real estate loans 194 193 1 Residential mortgage and equity lines 7,786 7,435 29 Subtotal $ 26,749 $ 13,895 $ 1,238 Total non-accrual loans $ 202,427 $ 169,161 $ 1,238 F- 17 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) As of December 31, 2023 Unpaid Principal Balance Recorded Investment Allowance (In thousands) With no allocated allowance: Commercial loans $ 26,310 $ 14,404 $ — Construction loans 7,736 7,736 — Commercial real estate loans 41,725 32,030 — Residential mortgage and equity lines 12,957 12,511 — Subtotal $ 88,728 $ 66,681 $ — With allocated allowance: Commercial loans $ — $ — $ — Commercial real estate loans — — — Residential mortgage and equity lines — — — Subtotal $ — $ — $ — Total non-accrual loans $ 88,728 $ 66,681 $ — The following table is a summary of non-accrual loans as of December 31, 2024 , 2023 , and 2022 and the related net interest foregone for the years then ended: As of December 31, 2024 2023 2022 (In thousands) Non-accrual portfolio loans $ 169,161 $ 66,681 $ 68,854 Contractual interest due $ 15,275 $ 6,270 $ 4,620 Interest recognized 197 321 435 Net interest foregone $ 15,078 $ 5,949 $ 4,185 The following tables present the aging of the loan portfolio by type as of December 31, 2024 , and December 31, 2023 : As of December 31, 2024 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 $ 25,164 $ 275 $ 2,590 $ 59,767 $ 87,796 $ 3,010,208 $ 3,098,004 Construction loans 5,334 — — — 5,334 314,315 319,649 Commercial real estate loans 16,525 13,934 1,460 83,128 115,047 9,918,783 10,033,830 Residential mortgage loans and equity lines 39,018 6,651 — 26,266 71,935 5,847,157 5,919,092 Installment and other loans — — — — — 5,380 5,380 Total loans $ 86,041 $ 20,860 $ 4,050 $ 169,161 $ 280,112 $ 19,095,843 $ 19,375,955 As of December 31, 2023 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 $ 11,771 $ 7,770 $ 508 $ 14,404 $ 34,453 $ 3,270,595 $ 3,305,048 Construction loans 25,389 22,998 — 7,736 56,123 366,524 422,647 Commercial real estate loans 27,900 1,503 6,649 32,030 68,082 9,661,499 9,729,581 Residential mortgage loans and equity lines 59,606 6,670 — 12,511 78,787 6,005,879 6,084,666 Installment and other loans 32 — — — 32 6,166 6,198 Total loans $ 124,698 $ 38,941 $ 7,157 $ 66,681 $ 237,477 $ 19,310,663 $ 19,548,140 F- 18 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The Company has adopted ASU 2022 - 02, “Financial Instruments – Troubled Debt Restructurings and Vintage Disclosures” effective January 1, 2023. As part of the adoption, the Company has elected to apply the pending content prospectively and the practical expedient to exclude the accrued interest receivable balance from the disclosed amortized cost basis of loan modifications to debtors experiencing financial difficulty, consistent with our Allowance for Credit Losses ("ACL") approach discussed further below in this footnote. Under this guidance on loan modifications made to borrowers experiencing financial difficulty, when a loan held for investment is modified and is considered to be a continuation of the original loan, the Company uses the post-modification contractual rate to derive the effective interest rate when using a discounted cash flow method to determine the allowance for credit loss. The amendments in this guidance require that an entity evaluate whether the modification represents a new loan or a continuation of an existing loans. Under the prior TDR guidance, 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 were considered TDRs, TDR loans that had, pursuant to the Bank’s policy, performed under the restructured terms and had demonstrated sustained performance under the modified terms for six months were returned to accrual status. The sustained performance considered by management pursuant to its policy included 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 restructuring to set up interest reserves. Loans classified as TDRs were reported as individually evaluated loans. The allowance for credit loss on a TDR was measured using the same method as all other loans held for investment, except when the value of a concession could not be measured using a method other than the discounted cash flow method. Under the prior guidance when the value of a concession was measured using the discounted cash flow method, the allowance for credit loss was 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 collective reserve. These individually evaluated loans are removed from the pooling approach for the quantitative baseline, and include non-accrual loans, loan modifications made to borrowers experiencing financial difficulty, and other loans as deemed appropriate by management. The Company applies the loan refinancing and restructuring guidance provided in ASU 2022 - 02 to determine whether a modification made to a borrower results in a new loan or a continuation of an existing loan. If economic conditions or other factors worsen relative to the assumptions the Company utilized, the expected loan losses will increase accordingly in future periods. As of December 31, 2022, under the prior TDR guidance, there was accruing TDRs of $ 15.1 million and non-accrual TDRs of $ 6.3 million. As of December 31, 2022, the Company allocated zero in reserves to accruing TDRs and $ 427 thousand to non-accrual TDRs. The following table presents TDRs that were modified during 2022, their specific reserve as of December 31, 2022, and charge-offs during 2022: Loans Modified as TDRs During the Year Ended December 31, 2022 No. of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Specific Reserve Charge-offs (In thousands) Commercial loans 4 $ 6,115 $ 6,115 $ 427 $ — Commercial real estate loans 3 3,676 3,669 — — Residential mortgage and equity lines 8 2,189 2,162 — — Total 15 $ 11,980 $ 11,946 $ 427 $ — Modifications of the loan terms in the twelve months ended December 31, 2024 , and December 31, 2023 , were in the form of payment deferrals, term extensions, and interest rate reductions, or a combination thereof. The following table presents the amortized cost of loans modified to borrowers experiencing financial difficulty disaggregated by class of financing receivable and type of concession granted and the financial effects of the modifications for the twelve months ended December 31, 2024 , and 2023 , by loan class and modification type: Twelve Months Ended December 31, 2024 Financial Effects of Loan Modifications Term Extension Rate Reduction Payment Delay Combo-Rate Reduction/Term Extension/Payment Delay Total Modification as a % of Loan Class Weighted-Average Change in Rate Weighted-Average Term Extension (in Years) Weighted-Average Payment Deferral (in Years) (In thousands) Loan Type Commercial loans $ 4,720 $ — $ 130 $ 4,092 $ 8,942 0.29 % 0.20 2.3 0.1 Residential mortgage loans — — 221 — 221 0.00 % 0.00 0.0 2.0 Total $ 4,720 $ — $ 351 $ 4,092 $ 9,163 F- 19 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Twelve Months Ended December 31, 2023 Financial Effects of Loan Modifications Term Extension Rate Reduction Payment Delay Combo-Rate Reduction/Term Extension/Payment Delay Total Modification as a % of Loan Class Weighted-Average Change in Rate Weighted-Average Term Extension (in Years) Weighted-Average Payment Deferral (in Years) (In thousands) Loan Type Commercial loans $ — $ — $ — $ 2,650 $ 2,650 0.08 % ( 1.10 ) 2.2 0.9 Residential mortgage loans — — 222 — 222 0.00 % ( 0.10 ) 0.0 2.0 Total $ — $ — $ 222 $ 2,650 $ 2,872 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 tracks the performance of modified loans. There were no loans that received a modification for the twelve months ended December 31, 2024 , and 2023 , that subsequently defaulted. A modified loan may become delinquent and may result in a payment default (generally 90 days past due) subsequent to modification. There were no loans that received modifications which subsequently defaulted for the twelve months ended December 31, 2024 , and 2023 . The Company closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of loans that were modified during the twelve months ended December 31, 2024 , and 2023 . Twelve Months Ended December 31, 2024 Current 30–89 Days Past Due 90+ Days Past Due Total (In thousands) Loan Type Commercial loans $ 8,942 $ — $ — $ 8,942 Residential mortgage loans 221 — — 221 Total $ 9,163 $ — $ — $ 9,163 Twelve Months Ended December 31, 2023 Current 30–89 Days Past Due 90+ Days Past Due Total (In thousands) Loan Type Commercial loans $ 2,650 $ — $ — $ 2,650 Residential mortgage loans 222 — — 222 Total $ 2,872 $ — $ — $ 2,872 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, 2024 , there were no commitments to lend additional funds to borrowers experiencing financial difficulty and whose loans were modified. 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 higher than average, but still acceptable, credit risk. The loans have sufficient sources of repayment to repay the loans in full, in accordance with all the terms and conditions and remains currently well protected by collateral values. ● Special Mention – Borrower is 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 inadequately protected by current sound worth, paying capacity or 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 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 considered uncollectible and of such little value that to continue to carry the loans as an active asset is no longer warranted. F- 20 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 as of December 31, 2024 , and 2023 , presented by loan portfolio segments, internal risk ratings and vintage year. The vintage year is the year of origination, renewal or major modification. Revolving loans that are converted to term loans presented in the table below are excluded from the term loans by vintage year column. Loans Amortized Cost Basis by Origination Year December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Revolving Converted to Term Loans Total (In thousands) Commercial loans Pass/Watch $ 400,836 $ 237,303 $ 203,190 $ 201,837 $ 27,359 $ 90,724 $ 1,675,260 $ 7,804 $ 2,844,313 Special Mention — 17,424 740 — 9,117 5,139 92,632 — 125,052 Substandard 50 5,070 12,104 6,773 22,357 6,256 67,553 222 120,385 Doubtful 1,857 — — 3,118 — — — — 4,975 Total $ 402,743 $ 259,797 $ 216,034 $ 211,728 $ 58,833 $ 102,119 $ 1,835,445 $ 8,026 $ 3,094,725 YTD gross write-offs $ 188 $ 1,586 $ 3,151 $ 8,950 $ 257 $ 64 $ 12,730 $ — $ 26,926 Construction loans Pass/Watch $ 22,562 $ 55,835 $ 126,200 $ 57,546 $ 3,021 $ — $ — $ — $ 265,164 Special Mention — — — 35,569 13,837 — — — 49,406 Substandard — 4,230 — — — — — — 4,230 Total $ 22,562 $ 60,065 $ 126,200 $ 93,115 $ 16,858 $ — $ — $ — $ 318,800 YTD gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate loans Pass/Watch $ 1,463,225 $ 1,987,280 $ 1,724,563 $ 1,428,124 $ 800,645 $ 2,108,143 $ 180,394 $ — $ 9,692,374 Special Mention 8,805 8,292 28,465 16,462 24,844 19,888 9,939 — 116,695 Substandard — 11,364 54,269 57,929 6,946 78,737 8,152 — 217,397 Total $ 1,472,030 $ 2,006,936 $ 1,807,297 $ 1,502,515 $ 832,435 $ 2,206,768 $ 198,485 $ — $ 10,026,466 YTD gross write-offs $ — $ — $ — $ — $ 296 $ 4,173 $ — $ — $ 4,469 Residential mortgage loans Pass/Watch $ 642,568 $ 1,020,419 $ 1,014,842 $ 781,218 $ 452,623 $ 1,745,923 $ — $ — $ 5,657,593 Special Mention — — — — 33 1,585 — — 1,618 Substandard 397 2,513 4,362 5,183 4,191 13,436 — — 30,082 Total $ 642,965 $ 1,022,932 $ 1,019,204 $ 786,401 $ 456,847 $ 1,760,944 $ — $ — $ 5,689,293 YTD gross write-offs $ — $ — $ — $ 59 $ — $ — $ — $ — $ 59 Equity lines Pass/Watch $ — $ — $ 72 $ — $ — $ — $ 211,374 $ 16,277 $ 227,723 Special Mention — — — — — — — 11 11 Substandard — — — — — — 2,927 161 3,088 Total $ — $ — $ 72 $ — $ — $ — $ 214,301 $ 16,449 $ 230,822 YTD gross write-offs $ — $ — $ — $ — $ — $ — $ 3 $ — $ 3 Installment and other loans Pass/Watch $ 5,264 $ — $ 44 $ — $ — $ — $ — $ — $ 5,308 Total $ 5,264 $ — $ 44 $ — $ — $ — $ — $ — $ 5,308 YTD gross write-offs $ — $ — $ 15 $ — $ — $ — $ — $ — $ 15 Total loans $ 2,545,564 $ 3,349,730 $ 3,168,851 $ 2,593,759 $ 1,364,973 $ 4,069,831 $ 2,248,231 $ 24,475 $ 19,365,414 Total YTD gross write-offs $ 188 $ 1,586 $ 3,166 $ 9,009 $ 553 $ 4,237 $ 12,733 $ — $ 31,472 F- 21 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Loans Amortized Cost Basis by Origination Year December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Revolving Converted to Term Loans Total (In thousands) Commercial loans Pass/Watch $ 381,705 $ 323,939 $ 326,650 $ 96,725 $ 75,281 $ 136,162 $ 1,775,162 $ 8,308 $ 3,123,932 Special Mention 4,488 4,875 8,559 23,380 — — 75,419 — 116,721 Substandard 1,752 653 9,895 2,462 763 5,775 40,131 116 61,547 Doubtful — — — — — — — — — Total $ 387,945 $ 329,467 $ 345,104 $ 122,567 $ 76,044 $ 141,937 $ 1,890,712 $ 8,424 $ 3,302,200 YTD gross write-offs $ — $ 977 $ 1,312 $ 384 $ 3,672 $ 6,044 $ 1,520 $ — $ 13,909 Construction loans Pass/Watch $ 29,550 $ 131,984 $ 153,977 $ 19,461 $ 13,298 $ 3,131 $ — $ — $ 351,401 Special Mention 1,911 — 11,707 25,389 — 22,998 — — 62,005 Substandard — — — — 7,736 — — — 7,736 Total $ 31,461 $ 131,984 $ 165,684 $ 44,850 $ 21,034 $ 26,129 $ — $ — $ 421,142 YTD gross write-offs $ — $ — $ — $ — $ — $ 4,221 $ — $ — $ 4,221 Commercial real estate loans Pass/Watch $ 2,121,489 $ 1,959,239 $ 1,585,010 $ 887,508 $ 1,019,952 $ 1,726,015 $ 184,601 $ — $ 9,483,814 Special Mention 37,604 18,910 38,405 3,499 10,303 17,210 1,384 — 127,315 Substandard — 11,870 12,170 2,965 17,293 66,205 — — 110,503 Total $ 2,159,093 $ 1,990,019 $ 1,635,585 $ 893,972 $ 1,047,548 $ 1,809,430 $ 185,985 $ — $ 9,721,632 YTD gross write-offs $ — $ — $ 208 $ — $ 969 $ 4,164 $ — $ — $ 5,341 Residential mortgage loans Pass/Watch $ 1,140,998 $ 1,128,526 $ 902,613 $ 524,315 $ 541,005 $ 1,583,118 $ — $ — $ 5,820,575 Special Mention — — — 33 — 1,619 — — 1,652 Substandard 7 652 3,325 2,577 1,334 9,311 — — 17,206 Total $ 1,141,005 $ 1,129,178 $ 905,938 $ 526,925 $ 542,339 $ 1,594,048 $ — $ — $ 5,839,433 YTD gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Equity lines Pass/Watch $ — $ 98 $ — $ — $ — $ — $ 227,502 $ 16,628 $ 244,228 Special Mention — 3 — — — — — — 3 Substandard — — — — — — 2,511 173 2,684 Total $ — $ 101 $ — $ — $ — $ — $ 230,013 $ 16,801 $ 246,915 YTD gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Installment and other loans Pass/Watch $ 5,114 $ 981 $ 3 $ — $ — $ — $ — $ — $ 6,098 Total $ 5,114 $ 981 $ 3 $ — $ — $ — $ — $ — $ 6,098 YTD gross write-offs $ — $ 15 $ — $ — $ — $ — $ — $ — $ 15 Total loans $ 3,724,618 $ 3,581,730 $ 3,052,314 $ 1,588,314 $ 1,686,965 $ 3,571,544 $ 2,306,710 $ 25,225 $ 19,537,420 Total YTD gross write-offs $ — $ 992 $ 1,520 $ 384 $ 4,641 $ 14,429 $ 1,520 $ — $ 23,486 Revolving loans that are converted to term loans presented in the table above are excluded from the term loans by vintage year columns. F- 22 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following table details activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2024 , and 2023 . Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. Commercial Residential Installment Commercial Construction Real Estate Mortgage and Other Loans Loans Loans and Equity Lines Loans Total (In thousands) Allowance for loan losses 2022 Ending Balance $ 49,435 $ 10,417 $ 68,366 $ 18,232 $ 35 $ 146,485 Provision/(reversal) for expected credit losses 15,275 1,984 8,570 ( 177 ) 3 25,655 Charge-offs ( 13,909 ) ( 4,221 ) ( 5,341 ) — ( 15 ) ( 23,486 ) Recoveries 2,990 — 2,833 85 — 5,908 Net (Charge-offs)/Recoveries $ ( 10,919 ) $ ( 4,221 ) $ ( 2,508 ) $ 85 $ ( 15 ) $ ( 17,578 ) 2023 Ending Balance $ 53,791 $ 8,180 $ 74,428 $ 18,140 $ 23 $ 154,562 Provision/(reversal) for expected credit losses 29,829 5 9,330 ( 2,283 ) ( 4 ) 36,877 Charge-offs ( 26,926 ) — ( 4,469 ) ( 62 ) ( 15 ) ( 31,472 ) Recoveries 1,102 — 308 386 2 1,798 Net (Charge-offs)/Recoveries $ ( 25,824 ) $ — $ ( 4,161 ) $ 324 $ ( 13 ) $ ( 29,674 ) 2024 Ending Balance $ 57,796 $ 8,185 $ 79,597 $ 16,181 $ 6 $ 161,765 Allowance for unfunded credit commitments, 2022 Ending Balance $ 4,840 $ 3,890 $ — $ — $ — $ 8,730 Provision/(reversal) for expected credit losses 2,048 ( 1,725 ) — — — 323 Allowance for unfunded credit commitments 2023 Ending Balance $ 6,888 $ 2,165 $ — $ — $ — $ 9,053 Provision/(reversal) for expected credit losses 892 ( 269 ) — — — 623 Allowance for unfunded credit commitments 2024 Ending Balance $ 7,780 $ 1,896 $ — $ — $ — $ 9,676 Residential mortgage loans in process of formal foreclosure proceedings were $ 6.7 million as of December 31, 2024 , and $ 242 thousand as of December 31, 2023 . 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 eleven 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. 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 $ 289.6 million and $ 315.7 million as of December 31, 2024 , and 2023 , respectively. The Company’s investments in these partnerships, net, are presented in the table below: As of December 31, 2024 2023 (In thousands) Investments in affordable housing partnerships, net $ 277,567 $ 295,740 Other borrowings for affordable housing limited partnerships $ 17,740 $ 15,787 Investments in affordable housing and alternative energy partnerships, unfunded commitments $ 99,521 $ 106,452 Investments in alternative energy tax credit partnerships, net $ 12,044 $ 19,943 As of December 31, 2024 , eleven 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 $ 26.0 million as of December 31, 2024 , and by $ 25.3 million as of December 31, 2023 . Recourse in other borrowings for affordable housing limited partnerships is limited to the assets of the limited partnerships. Investments in alternative energy partnerships were $ 12.0 million and $ 19.9 million as of December 31, 2024 , and 2023 , respectively. As of December 31, 2024 , and 2023 , $ 0.3 million and $ 6.4 million, respectively, of this investment were 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. F- 23 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) As of December 31, 2024 , 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) 2025 $ 44,076 2026 27,280 2027 13,105 2028 2,338 2029 8,646 Thereafter 4,076 Total unfunded commitments $ 99,521 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 $ 252.4 million for Federal and $ 5.1 million for State as of December 31, 2024 . 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 2024 and 2023 , non-interest expense included $ 6.1 million and $ 7.7 million in impairment charges for investments in low-income housing partnerships. The following table summarizes the Company’s usage of affordable housing and other tax credits including energy tax credits. As of December 31, 2024 2023 2022 (In thousands) Affordable housing and other tax credits recognized $ 35,448 $ 32,395 $ 29,524 Alternative energy tax credits recognized $ 28,517 $ 41,320 $ 4,707 6. Premises and Equipment Premises and equipment consisted of the following as of December 31, 2024 , and December 31, 2023 : As of December 31, 2024 2023 (In thousands) Land and land improvements $ 42,566 $ 42,566 Building and building improvements 82,111 81,796 Furniture, fixtures and equipment 70,490 68,371 Leasehold improvement 18,608 18,056 Construction in process 744 941 214,519 211,730 Less: Accumulated depreciation 125,843 120,633 Premises and equipment, net $ 88,676 $ 91,097 The amount of depreciation included in operating expense was $ 6.1 million, $ 7.1 million and $ 8.0 million for the years ended December 31, 2024 , 2023 and 2022 , respectively. 7. Goodwill and Other Intangible Assets Goodwill. Total goodwill was $ 375.7 million as of December 31, 2024 , and 2023 . Additional information pertaining to the Company’s accounting policy for goodwill is summarized in Note 1 — Summary of Significant Accounting Policies — Goodwill and Other Intangible Assets. The Company completed its annual goodwill impairment testing and additionally reviewed the macroeconomic conditions on its business performance and market capitalization and concluded that goodwill was not impaired as of December 31, 2024 , and 2023 . F- 24 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Core Deposit Intangibles. The following table presents the gross carrying amount and accumulated amortization of core deposits intangible assets as of December 31, 2024 , and 2023 : December 31, 2024 2023 (In thousands) Gross balance $ 10,562 $ 10,562 Accumulated amortization ( 6,292 ) ( 5,291 ) Impairment ( 1,324 ) ( 1,227 ) Net carrying balance $ 2,946 $ 4,044 There were $ 0.1 million, $ 0.3 million and $ 0.9 million in impairment write-down on core deposit intangibles during the year of December 31, 2024 , 2023 and 2022 , respectively, included in amortization of core deposit intangibles on the Consolidated Statements of Operations and Comprehensive Income. The Company amortizes the core deposit intangibles based on the projected useful lives of the related deposits. The amortization expense related to the core deposit intangible assets was $ 1.1 million, $ 1.3 million and $ 1.9 million for the years ended December 31, 2024 , 2023 and 2022 , respectively. Amount (In thousands) 2025 $ 946 2026 $ 870 2027 $ 870 2028 $ 260 Total $ 2,946 8. Deposits The following table displays deposit balances as of December 31, 2024 , and December 31, 2023 : As of December 31, 2024 2023 (In thousands) Deposits Non-interest-bearing demand deposits $ 3,284,342 $ 3,529,018 Interest bearing demand deposits 2,205,695 2,370,685 Money market deposits 3,372,773 3,049,754 Savings deposits 1,252,788 1,039,203 Time deposits 9,570,601 9,336,787 Total deposits $ 19,686,199 $ 19,325,447 Time deposits outstanding as of December 31, 2024 , mature as follows. Expected Maturity Date at December 31, 2025 2026 2027 2028 2029 Thereafter Total (In thousands) Time deposits $ 9,551,468 $ 11,107 $ 7,969 $ 23 $ 34 $ — $ 9,570,601 Accrued interest payable on client deposits was $ 27.9 million, $ 28.6 million, and $ 13.2 million as of December 31, 2024 , 2023 and 2022 , respectively. The following table summarizes the interest expense on deposits by account type for the years ended December 31, 2024 , 2023 , and 2022 : Year Ended December 31, 2024 2023 2022 (In thousands) Interest bearing demand $ 44,899 $ 40,952 $ 8,176 Money market accounts 115,428 86,097 39,913 Saving accounts 17,448 8,916 853 Time deposits 458,490 331,997 56,354 Total $ 636,265 $ 467,962 $ 105,296 F- 25 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The aggregate amount of domestic time deposits in denominations that meet or exceed the current FDIC insurance limit of $250 thousand was $ 5.60 billion and $ 5.30 billion as of December 31, 2024 , and 2023 , respectively. Foreign offices’ time deposits of $ 153.1 million and $ 174.2 million as of December 31, 2024 , and 2023 , respectively, were in denominations of greater than $250 thousand. 9. Borrowed Funds There were no outstanding securities sold or entered into under agreements to repurchase at December 31, 2024 , 2023 and 2022 . 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. As of December 31, 2024 , and 2023 , there were no over-night borrowings from the FHLB. As of December 31, 2024 , all advances from the FHLB were $ 60.0 million at a weighted average rate of 5.08 % and $ 540.0 million at a weighted average rate of 5.64 % as of December 31, 2023 . As of December 31, 2024 , final maturity for the FHLB advances were $ 60.0 million that will mature in February 2025. Our unused borrowing capacity from the Federal Home Loan Bank as of December 31, 2024 , was $ 7.47 billion and unpledged securities at December 31, 2024 , was $ 1.53 billion. 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. The balance of deferred bonuses was $ 2.6 million and $ 2.4 million at December 31, 2024 , and 2023 , respectively. Accrued interest of deferred bonuses were $ 129 thousand during 2024 , $ 122 thousand during 2023 , and $ 116 thousand during 2022 . 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. As of December 31, 2024 , and 2023 , Junior Subordinated Notes totaled $ 119.1 million, with a weighted average interest rate of 7.75 % and 7.54 %, respectively. The Junior Subordinated Notes have a stated maturity term of 30 years. Interest expense on the Junior Subordinated Notes was $ 8.1 million, $ 6.5 million, and $ 5.5 million for years ended December 31, 2024 , 2023 and 2022 , respectively. Included in the 2022 and 2023 interest expense is the amortization of the gain on cash flow interest rate swaps, early terminated in 2022. 10. Capital Resources Total equity was $ 2.85 billion as of December 31, 2024 , an increase of $ 109.1 million, or 4.0 %, from $ 2.74 billion at December 31, 2023 , primarily due to net income of $ 286.0 million, stock based compensation of $ 6.0 million, proceeds from dividend reinvestment of $ 2.9 million, and stock issued to directors of $ 0.9 million, offset by common stock cash dividends of $ 98.0 million, purchases of treasury stock of $ 84.7 million, shares withheld related to net share settlement of RSU’s of $ 3.7 million, and other comprehensive loss of $ 0.2 million. The Company paid cash dividends of $ 1.36 per common share in 2024 , $ 1.36 per common share in 2023 , and $ 1.36 per common share in 2022 . On May 28th, 2024, the Company announced a new stock repurchase program to buy back up to $ 125.0 million of the Company's common stock. The previous $ 125.0 million share repurchase program announced on May 26, 2022, was completed on February 21, 2023, with the repurchase of 2,897,628 shares at an average cost of $ 43.14 . Through December 31, 2024 , the Company repurchased 2,028,581 shares of common stock for a total of $ 83.9 million, at an average cost of $ 41.37 per share under the May 2024 buyback program. 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, 2024 , and 2023 , 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- 26 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, 2024 , and 2023 : As of December 31, 2024 Principal Not Annualized Current Date of Payable/ Issuance Balance of Redeemable Stated Coupon Interest Rate Distribution Trust Name Date Notes Until Maturity Rate Rate Change Date (In thousands) Cathay Capital Trust I June 26, $ 20,619 June 30, June 30, 3-month 8.02 % December 29, March 30 2003 2008 2033 SOFR 2024 June 30 + 3.15% September 30 + 0.26161% December 30 Cathay Statutory Trust I September 17, 20,619 September 17, September 17, 3-month 8.20 % December 16, March 17 2003 2008 2033 SOFR 2024 June 17 + 3.00% September 17 + 0.26161% December 17 Cathay Capital Trust II December 30, 12,887 March 30, March 30, 3-month 7.77 % December 29, March 30 2003 2009 2034 SOFR 2024 June 30 + 2.90% September 30 + 0.26161% December 30 Cathay Capital Trust III March 28, 46,392 June 15, June 15, 3-month 6.69 % December 15, March 15 2007 2012 2037 SOFR 2024 June 15 + 1.48% September 15 + 0.26161% December 15 Cathay Capital Trust IV May 31, 18,619 September 6, September 6, 3-month 6.66 % December 5, March 6 2007 2012 2037 SOFR 2024 June 6 + 1.40% September 6 + 0.26161% December 6 Total Junior Subordinated Notes $ 119,136 As of December 31, 2023 Principal Not Annualized Current Date of Payable/ Issuance Balance of Redeemable Stated Coupon Interest Rate Distribution Trust Name Date Notes Until Maturity Rate Rate Change Date (In thousands) Cathay Capital Trust I June 26, $ 20,619 June 30, June 30, 3-month 8.81 % December 29, March 30 2003 2008 2033 SOFR 2023 June 30 + 3.15% September 30 + 0.26161% December 30 Cathay Statutory Trust I September 17, 20,619 September 17, September 17, 3-month 8.67 % December 17, March 17 2003 2008 2033 SOFR 2023 June 17 + 3.00% September 17 + 0.26161% December 17 Cathay Capital Trust II December 30, 12,887 March 30, March 30, 3-month 8.56 % December 29, March 30 2003 2009 2034 SOFR 2023 June 30 + 2.90% September 30 + 0.26161% December 30 Cathay Capital Trust III March 28, 46,392 June 15, June 15, 3-month 7.15 % December 14, March 15 2007 2012 2037 SOFR 2023 June 15 + 1.48% September 15 + 0.26161% December 15 Cathay Capital Trust IV May 31, 18,619 September 6, September 6, 3-month 7.06 % December 5, March 6 2007 2012 2037 SOFR 2023 June 6 + 1.40% September 6 + 0.26161% December 6 Total Junior Subordinated Notes $ 119,136 F- 27 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 11. Income Taxes For the years ended December 31, 2024 , 2023 , and 2022 , the current and deferred amounts of the income tax expense are summarized as follows: Year Ended December 31, 2024 2023 2022 (In thousands) Current: Federal $ 15,762 $ 5,428 $ 57,029 State 36,557 48,812 56,953 Total Current $ 52,319 $ 54,240 $ 113,982 Deferred: Federal $ ( 18,923 ) $ ( 1,676 ) $ ( 1,776 ) State ( 1,833 ) ( 3,106 ) ( 312 ) Total Deferred $ ( 20,756 ) $ ( 4,782 ) $ ( 2,088 ) Total income tax expense $ 31,563 $ 49,458 $ 111,894 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 as of December 31, 2024 , and 2023 are included in other assets in the accompanying Consolidated Balance Sheets and are as follows: As of December 31, 2024 2023 (In thousands) Deferred Tax Assets Loan loss allowance $ 52,484 $ 50,126 Accrual for bonuses 5,770 4,636 Non-accrual interest 3,642 2,164 Write-down on equity securities and venture capital investments 1,958 2,018 Depreciation and amortization — 765 State tax 2,910 5,693 Unrealized loss on securities available-for-sale, net 32,333 31,728 Tax credits carried forward 29,307 9,136 Net operating loss carried forward 3,249 3,787 Other, net 6,176 7,632 Gross deferred tax assets $ 137,829 $ 117,685 Deferred Tax Liabilities Deferred loan costs $ ( 9,569 ) $ ( 9,687 ) Unrealized gain on interest rate swaps ( 502 ) ( 838 ) Unrealized gain on equity securities ( 2,460 ) ( 4,863 ) Dividends on Federal Home Loan Bank common stock ( 976 ) ( 977 ) Other, net ( 4,712 ) ( 3,916 ) Gross deferred tax liabilities $ ( 18,219 ) $ ( 20,281 ) Net deferred tax assets $ 119,610 $ 97,404 Amounts for the current year are based upon estimates and assumptions and could vary from amounts shown on the tax returns as filed. At December 31, 2024 , the Company has California NOL carryovers of $ 33.5 million for which a California deferred tax asset of $ 3.2 million has been recorded reflecting the expected benefit of these California NOL carryovers. The annual IRC Section 382 limitation is $7.3 million per year. If not utilized, a portion of the Company’s state NOL’s will begin to expire in 2030. At December 31, 2024 , the Company’s federal tax credit carryovers total $ 28.7 million . If not utilized, the federal tax credit carryovers will begin to 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. F- 28 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The Company had current income tax receivables of $ 37.0 million as of December 31, 2024 , and $ 33.7 million as of December 31, 2023 . The Company had $ 20.2 million of tax credits generated in 2024 that will be carried forward to 2025. 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 2021 and by the California Franchise Tax Board back to 2020 . The Company is currently under audit by the California Franchise Tax Board for 2020 . 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, 2024 2023 2022 (In thousands) Tax provision at Federal statutory rate $ 66,684 21.0 % $ 84,752 21.0 % $ 99,233 21.0 % State income taxes, net of Federal income tax benefit 27,432 8.6 36,107 9.0 44,837 9.5 Excess deduction for stock option and RSUs ( 517 ) ( 0.2 ) ( 586 ) ( 0.1 ) ( 140 ) — Low income housing and other tax credits ( 63,965 ) ( 20.1 ) ( 73,715 ) ( 18.3 ) ( 34,231 ) ( 7.2 ) Other, net 1,929 0.6 2,900 0.7 2,195 0.4 Total income tax expense $ 31,563 9.9 % $ 49,458 12.3 % $ 111,894 23.7 % 12. 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, 2024 , is restricted to approximately $ 433.6 million. The amount of retained earnings available for cash dividends is restricted to approximately $ 420.4 million for December 31, 2023 . Activity in accumulated other comprehensive income, net of tax, and reclassification out of accumulated other comprehensive income for the years ended December 31, 2024 , and 2023 were as follows: 2024 2023 Pre-tax Tax expense/ (benefit) Net-of-tax Pre-tax Tax expense/ (benefit) Net-of-tax Beginning balance, loss, net of tax (In thousands) Securities AFS $ ( 86,190 ) $ ( 104,832 ) Cash flow hedge derivatives 774 2,537 Total $ ( 85,416 ) $ ( 102,295 ) Net unrealized gains/(losses) arising during the period Securities AFS $ 1,123 $ 332 $ 791 $ 24,315 $ 7,786 $ 16,529 Cash flow hedge derivatives ( 1,099 ) ( 325 ) ( 774 ) ( 2,503 ) ( 740 ) ( 1,763 ) Total 24 7 17 21,812 7,046 14,766 Reclassification adjustment for net gains/(losses) in net income Securities AFS ( 295 ) ( 87 ) ( 208 ) 3,000 887 2,113 Cash flow hedge derivatives — — — — — — Total ( 295 ) ( 87 ) ( 208 ) 3,000 887 2,113 Total other comprehensive income/(loss) Securities AFS $ 828 $ 245 583 27,315 8,673 18,642 Cash flow hedge derivatives ( 1,099 ) ( 325 ) ( 774 ) ( 2,503 ) ( 740 ) ( 1,763 ) Total $ ( 271 ) $ ( 80 ) $ ( 191 ) $ 24,812 $ 7,933 $ 16,879 Ending balance, gain/(loss), net of tax Securities AFS $ ( 85,607 ) $ ( 86,190 ) Cash flow hedge derivatives — 774 Total $ ( 85,607 ) $ ( 85,416 ) 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- 29 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, 2024 2023 2022 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 $ 285,979 $ 354,124 $ 360,642 Basic EPS, income $ 285,979 72,068,850 $ 3.97 $ 354,124 72,573,025 $ 4.88 $ 360,642 74,337,265 $ 4.85 Effect of dilutive stock options and RSU 258,167 289,603 327,470 Diluted EPS, income $ 285,979 72,327,017 $ 3.95 $ 354,124 72,862,628 $ 4.86 $ 360,642 74,664,735 $ 4.83 13. 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 clients. 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. Financial instruments for which contract amounts represent the amount of credit risk include the following: As of December 31, 2024 2023 (In thousands) Commitments to extend credit $ 3,470,296 $ 3,808,620 Standby letters of credit 439,769 368,618 Commercial letters of credit 12,347 11,308 Total $ 3,922,412 $ 4,188,546 Commitments to extend credit are agreements to lend to a client 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 client’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, 2024 , 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, 2024 , commitments to extend credit of $ 3.47 billion include commitments to fund fixed rate loans of $ 63.4 million and adjustable-rate loans of $ 3.41 billion. As of December 31, 2023 , commitments to extend credit of $ 3.81 billion and included commitments to fund fixed rate loans of $ 130.3 million and adjustable-rate loans of $ 3.69 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 clients 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 clients. F- 30 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 14. Leases The Company enters into operating leases in the normal course of business primarily for branch offices, office spaces and certain equipment. 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. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of the lease payments over the lease term. The Company uses its incremental borrowing rate to determine the present value of its lease liabilities. The Company has elected to not separate lease and non-lease components. The Company has also elected not to recognize a ROU asset and lease liability for leases with original lease term of 12 months or less (short-term leases). The Company does not possess any leases that have variable lease payments or residual value guarantees as of December 31, 2024 , and 2023 . The following table represents the operating lease amounts reported on the Consolidated Balance Sheets and other supplemental information as of December 31, 2024 , and December 31, 2023 : December 31, 2024 December 31, 2023 (In millions) Operating Leases: ROU assets $ 28.6 $ 32.1 Lease liabilities $ 30.9 $ 34.8 Weighted-average remaining lease term (in years) 3.8 4.1 Weighted-average discount rate 4.1 % 3.8 % Operating cash flows from operating leases $ 11.4 $ 11.4 ROU assets obtained in exchange for lease obligations $ 4.4 $ 12.6 Operating lease expense is recognized on a straight-line basis over the lease term. Operating lease expense was $ 13.4 million, $ 12.8 million and $ 13.1 million for the years ended December 31, 2024 , 2023 and 2022 , 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, 2024 : As of December 31, 2024 Operating Leases (In thousands) 2025 $ 10,239 2026 8,679 2027 6,451 2028 5,121 2029 2,231 Thereafter 641 Total lease payments $ 33,362 Less amount of payment representing interest ( 2,511 ) Total present value of lease payments $ 30,851 15. 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 our assets or liabilities and against risk in specific transactions. In such instances, the Company may protect its position through the purchase or sale of interest rate future 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. F- 31 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 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 clients. When derivative transactions are executed with its clients, 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 clients 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, 2024 , and 2023 , the Company had outstanding interest rate derivative contracts with certain clients and third -party financial institutions with a notional amount of $ 680.5 million and $ 650.9 million, respectively, with a fair value of $ 32.7 million and $ 38.6 million, respectively, for both clients and third -party financial institutions. As of December 31, 2024 , and 2023 , for borrower swap transactions, there were no notional amount of interest rate swaps cleared through the CCP. In May 2014, Bancorp entered into 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 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. The Company early terminated these cash flow derivative swaps in 2022 and realized a gain of $ 4.0 million for the year ended December 31, 2022, and is recognizing the amount as a reduction of long-term debt interest expense over the remaining life of the swaps on a straight-line basis ending in June 2024. As of December 31, 2024 , and 2023 , the Bank’s outstanding fair value interest rate swap contracts matched to individual fixed-rate commercial real estate loans had a notional amount of $ 81.3 million and $ 88.5 million with a fair value of $ 3.3 million and $ 4.2 million, respectively, and for various terms from three to ten years. 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, 2024 , and 2023 , the ineffective portion of these interest rate swaps was not significant. The Company has designated as a partial-term hedging election $ 793.8 million and $ 1.07 billion notional with a fair value of $ 321 thousand and $ 3.8 million as last-of-layer hedge on pools of loans with a notational value of $ 1.32 billion and $ 1.78 billion as of December 31, 2024 , and 2023 , respectively. The loans are 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 these pay-fixed and receive 1 -Month Term SOFR interest rate swaps to convert the last-of-layer $ 793.8 million portion of a $ 1.32 billion fixed rate loan pools in order to reduce the Company’s exposure to higher interest rates for the last-of-layer tranches. As of December 31, 2024 , and 2023 , the last-of-layer loan tranche had a net fair value basis adjustment of $ 1.2 million and $ 2.0 million, 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. Bancorp’s interest rate swaps have been assigned by the counterparties to a derivative clearing organization and daily margin is indirectly maintained with the derivative clearing organization. The notional amount and net unrealized loss of the Company’s fair value hedge derivative financial instruments as of December 31, 2024 , and December 31, 2023 , were as follows: December 31, 2024 December 31, 2023 Fair value swap hedges: (In thousands) Notional $ 875,117 $ 1,156,007 Weighted average fixed rate-pay 3.55 % 2.01 % Weighted average variable rate spread 0.22 % 0.32 % Weighted average variable rate-received 5.36 % 5.41 % Net gain/(loss) (1) $ 3,644 $ 7,935 F- 32 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Year ended December 31, 2024 December 31, 2023 Periodic net settlement of SWAPs (2) $ 16,477 $ 29,514 ( 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. Included in the total notional amount of $ 875.1 million and $ 1.16 billion of the fair value hedge contracts entered into with financial counterparties as of December 31, 2024 , and 2023 , was a notional amount of $ 572.8 million and $ 846.9 million of interest rate swaps that cleared through the CCP, respectively. Applying variation margin payments as settlement to CCP cleared derivative transactions resulted in a reduction in derivative asset fair values of $ 158 thousand and $ 257 thousand as of December 31, 2024 , and 2023 , respectively. 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, 2024 , and December 31, 2023 , were as follows: Derivative financial instruments December 31, 2024 December 31, 2023 not designated as hedging instruments: (In thousands) Notional amounts: Forward, and swap contracts with positive fair value $ 743,257 $ 775,324 Forward, and swap contracts with negative fair value $ 852,409 $ 752,250 Fair value: Forward, and swap contracts with positive fair value $ 33,237 $ 39,010 Forward, and swap contracts with negative fair value $ ( 33,531 ) $ ( 38,807 ) 16. 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. 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 judgment 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. 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, U.S. Government sponsored entities, state and municipal securities, mortgage-backed securities (“MBS”), collateralized mortgage obligations and corporate bonds. Warrants . The Company measures the fair value of warrants based on unobservable inputs based on assumptions and management judgment, a Level 3 measurement. F- 33 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 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. The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2024 , and at December 31, 2023 : As of December 31, 2024 Fair Value Measurements Using Total at Level 1 Level 2 Level 3 Fair Value Assets (In thousands) Securities AFS U.S. Treasury securities $ 621,462 $ — $ — $ 621,462 U.S. government agency entities — 9,149 — 9,149 Mortgage-backed securities — 684,016 — 684,016 Collateralized mortgage obligations — 24,556 — 24,556 Corporate debt securities — 207,945 — 207,945 Total securities available-for-sale 621,462 925,666 — 1,547,128 Equity securities Mutual funds 5,532 — — 5,532 Preferred stock of government sponsored entities 7,287 — — 7,287 Other equity securities 20,071 — — 20,071 Total equity securities 32,890 — — 32,890 Interest rate swaps — 39,958 — 39,958 Foreign exchange contracts 490 — 490 Total assets $ 654,352 $ 966,114 $ — $ 1,620,466 Liabilities Interest rate swaps $ — $ 36,319 $ — $ 36,319 Foreign exchange contracts — 785 — 785 Total liabilities $ — $ 37,104 $ — $ 37,104 As of December 31, 2023 Fair Value Measurements Using Total at Level 1 Level 2 Level 3 Fair Value Assets (In thousands) Securities AFS U.S. Treasury securities $ 495,300 $ — $ — $ 495,300 U.S. government agency entities — 48,169 — 48,169 Mortgage-backed securities — 786,723 — 786,723 Collateralized mortgage obligations — 28,044 — 28,044 Corporate debt securities — 246,334 — 246,334 Total securities available-for-sale 495,300 1,109,270 — 1,604,570 Equity securities Mutual funds 5,585 — — 5,585 Preferred stock of government sponsored entities 1,821 — — 1,821 Other equity securities 33,000 — — 33,000 Total equity securities 40,406 — — 40,406 Interest rate swaps — 54,268 — 54,268 Foreign exchange contracts 379 — 379 Total assets $ 535,706 $ 1,163,917 $ — $ 1,699,623 Liabilities Interest rate swaps $ — $ 45,762 $ — $ 45,762 Foreign exchange contracts — 175 — 175 Total liabilities $ — $ 45,937 $ — $ 45,937 F- 34 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Financial assets and liabilities 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 periods ended December 31, 2024 , and December 31, 2023 , 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. During the second quarter of 2024, the Company entered into a restructuring support agreement and received equity securities in a private company, a Level 3 measurement. The fair value of the Company’s Level 3 equity securities were measured using the private company’s projected earnings plus cash on hand. The primary inputs and assumptions used in the fair value measurement was derived from the issuer’s projected earnings and collateral, which included cash on hand, the financial standing of the issuer, the business and financial plan of the issuer, among other factors. Significant increases or decreases in any of the inputs or assumptions could result in a significant increase or decrease in the fair value measurement. For financial assets measured at fair value on a nonrecurring basis that were still reflected in the Consolidated Balance Sheets as of December 31, 2024 , and 2023 , the following tables set forth the level of valuation assumptions used to determine each adjustment, the carrying value of the related individual assets at December 31, 2024 , and December 31, 2023 , and the total losses for the periods indicated: As of December 31, 2024 Total Losses Fair Value Measurements Using Total at For the Twelve Months Ended Level 1 Level 2 Level 3 Fair Value December 31, 2024 December 31, 2023 Assets (In thousands) Non-accrual loans by type: Commercial loans $ — $ — $ 10,896 $ 10,896 $ 5,654 $ — Commercial real estate loans — — 15,320 15,320 4,049 4,069 Residential mortgage and equity lines — — 243 243 59 — Total non-accrual loans — — 26,459 26,459 9,762 4,069 Other real estate owned (1) — — 24,126 24,126 — — Other equity securities — — 1,539 1,539 — — Investments in venture capital — — 86 86 147 227 Total assets $ — $ — $ 52,210 $ 52,210 $ 9,909 $ 4,296 ( 1 ) Other real estate owned balance of $ 23.1 million in the Consolidated Balance Sheets is net of estimated disposal costs. As of December 31, 2023 Total Losses Fair Value Measurements Using Total at For the Twelve Months Ended Level 1 Level 2 Level 3 Fair Value December 31, 2023 December 31, 2022 Assets (In thousands) Non-accrual loans by type: Commercial loans $ — $ — $ 191 $ 191 $ — $ 1,786 Commercial real estate loans — — 6,882 6,882 4,069 2,091 Total non-accrual loans — — 7,073 7,073 4,069 3,877 Other real estate owned (1) — — 20,446 20,446 — — Investments in venture capital — — 237 237 227 268 Total assets $ — $ — $ 27,756 $ 27,756 $ 4,296 $ 4,145 ( 1 ) Other real estate owned balance of $ 19.4 million in the Consolidated Balance Sheets is net of estimated disposal costs. The significant unobservable (Level 3 ) inputs used in the fair value measurement of collateral for collateral-dependent individually evaluated loans are primarily based on the appraised value of collateral adjusted by estimated sales cost and commissions. The Company generally obtains new appraisal reports every twelve months as appropriate. 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. In the current year, the Company used borrower specific collateral discounts with various discount levels. The fair value of individually evaluated loans is 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 individually evaluated 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. F- 35 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Loans held for sale are recorded at the lower of cost or fair value upon transfer. Loans held for sale may be measured at fair value on a nonrecurring basis when fair value is less than cost. Fair value is generally determined based on available market data for similar loans and therefore, are classified as Level 2 measurement. The significant unobservable inputs (Level 3 ) used in the fair value measurement of other real estate owned (“OREO”) are primarily based on the appraised value of OREO adjusted by estimated sales cost and commissions. The Company applies estimated sales cost and commissions ranging from 3 % to 6 % of the collateral value of individually evaluated loans, quoted price, or loan sale price of loans held for sale, and appraised value of OREO. Fair value is estimated in accordance with ASC Topic 825. Fair value estimates are made at specific points in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Bank’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Bank’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. The following tables sets forth the carrying amounts and notional amounts and estimated fair value of financial instruments as of December 31, 2024 , and December 31, 2023 : December 31, 2024 December 31, 2023 Carrying Carrying Amount Fair Value Amount Fair Value (In thousands) Financial Assets Cash and due from banks $ 157,167 $ 157,167 $ 173,988 $ 173,988 Short-term investments 882,353 882,353 654,813 654,813 Securities AFS 1,547,128 1,547,128 1,604,570 1,604,570 Loans, net 19,203,649 19,500,647 19,382,858 19,605,152 Equity securities 34,429 34,429 40,406 40,406 Investment in Federal Home Loan Bank stock 17,250 17,250 17,746 17,746 Notional Notional Amount Fair Value Amount Fair Value Foreign exchange contracts $ 62,794 $ 490 $ 124,452 $ 379 Interest rate swaps 1,065,580 39,958 1,406,879 54,268 Financial Liabilities Carrying Carrying Amount Fair Value Amount Fair Value Deposits $ 19,686,199 $ 19,670,327 $ 19,325,447 $ 19,347,070 Advances from Federal Home Loan Bank 60,000 59,606 540,000 536,996 Other borrowings 17,740 15,281 15,787 13,978 Long-term debt 119,136 73,752 119,136 72,304 Notional Notional Amount Fair Value Amount Fair Value Foreign exchange contracts 171,945 785 101,378 175 Interest rate swaps 1,198,471 36,319 1,078,880 45,762 Notional Notional Amount Fair Value Amount Fair Value Off-Balance Sheet Financial Instruments Commitments to extend credit $ 3,470,296 $ ( 18,226 ) $ 3,808,620 $ ( 14,344 ) Standby letters of credit 439,769 ( 2,900 ) 368,618 ( 2,821 ) Other letters of credit 12,347 ( 14 ) 11,308 ( 10 ) F- 36 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following tables set forth the level in the fair value hierarchy for the estimated fair values of financial instruments as of December 31, 2024 , and December 31, 2023 , excluding financial instruments recorded at fair value on a recurring basis already presented in other tables in this note: As of December 31, 2024 Estimated Fair Value Measurements Level 1 Level 2 Level 3 (In thousands) Financial Assets Cash and due from banks $ 157,167 $ 157,167 $ — $ — Short-term investments 882,353 882,353 — — Loans, net 19,500,647 — — 19,500,647 Equity securities 1,539 — — 1,539 Investment in Federal Home Loan Bank stock 17,250 — 17,250 — Financial Liabilities Deposits 19,670,327 — — 19,670,327 Advances from Federal Home Loan Bank 59,606 — 59,606 — Other borrowings 15,281 — — 15,281 Long-term debt 73,752 — 73,752 — As of December 31, 2023 Estimated Fair Value Measurements Level 1 Level 2 Level 3 (In thousands) Financial Assets Cash and due from banks $ 173,988 $ 173,988 $ — $ — Short-term investments 654,813 654,813 — — Loans, net 19,605,152 — — 19,605,152 Equity securities 40,406 40,406 — — Investment in Federal Home Loan Bank stock 17,746 — 17,746 — Financial Liabilities Deposits 19,347,070 — — 19,347,070 Advances from Federal Home Loan Bank 536,996 — 536,996 — Other borrowings 13,978 — — 13,978 Long-term debt 72,304 — 72,304 — 17. Revenue from Contracts with Clients The Company’s revenue from contracts with clients consists primarily of service charges and fees related to deposit accounts and wealth management fees. The following is a summary of revenue from contracts with clients that are in-scope and not in-scope under ASC 606: Year Ended December 31, 2024 2023 2022 (In thousands) Non-interest income, in-scope: Fees and service charges on deposit accounts $ 9,305 $ 9,204 $ 9,394 Wealth management fees 24,055 17,506 16,436 Other service fees (1) 18,903 17,202 16,349 Total in-scope non-interest income 52,263 43,912 42,179 Non-interest income, not in-scope (2) 3,401 24,380 14,635 Total non-interest income $ 55,664 $ 68,292 $ 56,814 ( 1 ) Other service fees comprise of fees related to letters of credit, wire fees, fees on foreign exchange transactions and other immaterial individual revenue streams. ( 2 ) These amounts primarily represent revenue from contracts with clients that are out of the scope of ASC Topic 606 and primarily represent revenue from interest rate swap fees, unrealized gains and losses on equity securities and other miscellaneous income. F- 37 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 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. Wealth Management Fees The Company employs financial consultants to provide investment planning services for clients 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. 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 clients 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 clients 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 client pays for that good or service is one year or less. 18. 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 21,218 shares in 2024 , 16,555 shares in 2023 , and 18,808 shares in 2022 , of the Bancorp’s common stock at an aggregate cost of $ 867 thousand in 2024 , $ 613 thousand in 2023 , and $ 814 thousand in 2022 . The distribution of benefits to participants totaled 25,697 shares in 2024 , 33,554 shares in 2023 , and 29,363 shares in 2022 . As of December 31, 2024 , the ESOP owned 642,745 shares, or 0.91 %, 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 one month 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. Effective October 1, 2022, the vesting schedule for the matching contribution is 0 % for less than three years of service and 100 % 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 $ 4.3 million in 2024 , $ 4.5 million in 2023 , and $ 3.9 million in 2022 . 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, 2024 , and 2023 , cash surrender value of bank-owned life insurance was $ 52.1 million and $ 50.9 million, respectively. 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- 38 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 19. 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. As of December 31, 2024 , 1,240,607 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. The following table presents RSU activity for 2024 , 2023 , and 2022 : Time-Based RSUs Performance-Based RSUs Weighted-Average Weighted-Average Grant Date Grant Date Shares Fair Value Shares Fair Value Balance at December 31, 2021 235,944 $ 32.38 332,506 $ 31.82 Granted 67,652 46.69 112,393 40.24 Vested ( 89,386 ) 40.92 ( 81,934 ) 44.52 Forfeited ( 12,151 ) 34.07 — — Balance at December 31, 2022 202,059 $ 33.29 362,965 $ 31.56 Granted 86,809 37.92 123,504 38.41 Vested ( 92,075 ) 34.29 ( 136,808 ) 34.21 Forfeited ( 2,404 ) 37.77 — — Balance at December 31, 2023 194,389 $ 34.83 349,661 $ 32.94 Granted 77,361 37.75 121,412 37.79 Vested ( 42,241 ) 36.38 ( 113,764 ) 36.91 Forfeited ( 27,043 ) 41.71 ( 17,395 ) 39.26 Balance at December 31, 2024 202,466 $ 34.70 339,914 $ 33.02 The compensation expense recorded for RSUs was $ 6.0 million in 2024 , $ 7.0 million in 2023 , and $ 7.0 million in 2022 . Unrecognized stock-based compensation expense related to RSUs was $ 9.6 million and $ 9.9 million as of December 31, 2024 , and 2023 , respectively. As of December 31, 2024 , these costs are expected to be recognized over the next 2.0 years. F- 39 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 20. Condensed Financial Information of Cathay General Bancorp The condensed financial information of the Bancorp as of December 31, 2024 , and December 31, 2023 , and for the years ended December 31, 2024 , 2023 and 2022 is as follows: Balance Sheets As of December 31, 2024 2023 (In thousands, except share and per share data) Assets Cash $ 50,174 $ 24,262 Short-term certificates of deposit 336 335 Equity securities 25,171 34,441 Investment in Cathay Bank subsidiary 2,898,510 2,806,467 Investment in non-bank subsidiary 68 68 Other assets 3,747 3,896 Total assets $ 2,978,006 $ 2,869,469 Liabilities Junior subordinated debt $ 119,136 $ 119,136 Other liabilities 13,166 13,758 Total liabilities 132,302 132,894 Commitments and contingencies — — Stockholders' equity Common stock, $ 0.01 par value, 100,000,000 shares authorized, 91,615,458 issued and 70,863,324 outstanding at December 31, 2024, and 91,392,480 issued and 72,688,927 outstanding at December 31, 2023 916 914 Additional paid-in-capital 993,962 987,953 Accumulated other comprehensive loss, net ( 85,607 ) ( 85,416 ) Retained earnings 2,688,353 2,500,341 Treasury stock, at cost ( 20,752,134 shares at December 31, 2024, and 18,723,553 shares at December 31, 2023) ( 751,920 ) ( 667,217 ) Total equity 2,845,704 2,736,575 Total liabilities and equity $ 2,978,006 $ 2,869,469 Statements of Operations Year Ended December 31, 2024 2023 2022 (In thousands) Cash dividends from Cathay Bank $ 216,000 $ 134,000 $ 232,773 Interest income 19 44 30 Interest expense 8,129 6,480 5,560 Non-interest (loss)/income ( 9,371 ) 17,757 1,018 Non-interest expense 3,742 4,065 3,937 Income before income tax expense 194,777 141,256 224,324 Income tax (benefit)/expense ( 5,695 ) 1,707 ( 2,885 ) Income before undistributed earnings of subsidiaries 200,472 139,549 227,209 Undistributed earnings of subsidiary 85,507 214,575 133,433 Net income $ 285,979 $ 354,124 $ 360,642 F- 40 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Statements of Cash Flows Year Ended December 31, 2024 2023 2022 (In thousands) Cash flows from Operating Activities Net income $ 285,979 $ 354,124 $ 360,642 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries ( 85,507 ) ( 214,575 ) ( 133,433 ) Loss/(gain) on equity securities 9,271 ( 17,977 ) ( 733 ) Write-downs on venture capital and other investments 148 179 268 Loss/(gain) in fair value of warrants — 50 ( 27 ) Stock issued to directors as compensation 850 850 849 Net change in accrued interest receivable and other assets ( 2,350 ) 5,216 ( 434 ) Net change in other liabilities 980 ( 2,371 ) 8,531 Net cash provided by operating activities 209,371 125,496 235,663 Cash flows from Investment Activities Venture capital and other investments 4 168 ( 5 ) Net cash provided/(used) by investment activities 4 168 ( 5 ) Cash flows from Financing Activities Cash dividends paid ( 97,967 ) ( 98,638 ) ( 100,955 ) Proceeds from shares issued under the Dividend Reinvestment Plan 2,933 3,491 3,720 Taxes paid related to net share settlement of RSUs ( 3,726 ) ( 4,490 ) ( 2,905 ) Purchase of treasury stock ( 84,703 ) ( 16,667 ) ( 141,316 ) Net cash used in financing activities ( 183,463 ) ( 116,304 ) ( 241,456 ) Increase/(decrease) in cash, cash equivalents and restricted cash 25,912 9,360 ( 5,798 ) Cash, cash equivalents, and restricted cash, beginning of the year 24,262 14,902 20,700 Cash, cash equivalents, and restricted cash, end of the period $ 50,174 $ 24,262 $ 14,902 21. 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 70,503 shares for $ 2.9 million in 2024 , 93,182 shares for $ 3.5 million in 2023 , and 86,501 shares for $ 3.7 million in 2022 . 22. 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 %. As of December 31, 2024 , and 2023 , the Bank qualified as well capitalized under the regulatory framework for prompt corrective action. F- 41 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, 2024 , and December 31, 2023 , 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, 2024 (In thousands) Common Equity Tier 1 to Risk-Weighted Assets Cathay General Bancorp $ 2,521,240 13.54 $ 1,303,177 7.00 $ 1,210,093 6.50 Cathay Bank 2,574,047 13.84 1,302,198 7.00 1,209,184 6.50 Tier 1 Capital to Risk-Weighted Assets Cathay General Bancorp 2,521,240 13.54 1,582,429 8.50 1,489,345 8.00 Cathay Bank 2,574,047 13.84 1,581,240 8.50 1,488,226 8.00 Total Capital to Risk-Weighted Assets Cathay General Bancorp 2,808,181 15.08 1,954,765 10.50 1,861,681 10.00 Cathay Bank 2,745,488 14.76 1,953,297 10.50 1,860,283 10.00 Leverage Ratio Cathay General Bancorp 2,521,240 10.96 920,018 4.00 1,150,023 5.00 Cathay Bank 2,574,047 11.20 919,148 4.00 1,148,935 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, 2023 (In thousands) Common Equity Tier 1 to Risk-Weighted Assets Cathay General Bancorp $ 2,430,773 12.84 $ 1,325,277 7.00 $ 1,230,615 6.50 Cathay Bank 2,501,439 13.23 1,323,846 7.00 1,229,286 6.50 Tier 1 Capital to Risk-Weighted Assets Cathay General Bancorp 2,430,773 12.84 1,609,265 8.50 1,514,602 8.00 Cathay Bank 2,501,439 13.23 1,607,527 8.50 1,512,967 8.00 Total Capital to Risk-Weighted Assets Cathay General Bancorp 2,709,888 14.31 1,987,916 10.50 1,893,253 10.00 Cathay Bank 2,665,054 14.09 1,985,769 10.50 1,891,209 10.00 Leverage Ratio Cathay General Bancorp 2,430,773 10.55 921,473 4.00 1,151,841 5.00 Cathay Bank 2,501,439 10.87 920,670 4.00 1,150,838 5.00 F- 42 Table of Contents CATHAY GENERAL BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 23. 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, 2024 , and December 31, 2023 , 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, 2024 (In thousands) Assets: Derivatives $ 39,958 $ 34,609 $ 5,349 $ — $ 174 $ 5,175 Liabilities: Derivatives $ 36,319 $ — $ 36,319 $ — $ — $ 36,319 December 31, 2023 Assets: Derivatives $ 54,268 $ 335 $ 53,933 $ — $ 44,860 $ 9,073 Liabilities: Derivatives $ 45,762 $ — $ 45,762 $ — $ — $ 45,762 24. Subsequent Events On February 14, 2025, the Company’s Board of Directors declared first quarter 2025 dividends for the Company’s common stock. The common stock cash dividend of $ 0.34 per share will be paid on March 10, 2025 , to stockholders of record on February 27, 2025 . The Company has evaluated the effect of events that have occurred subsequent to December 31, 2024 , 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. F-43