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What changed in CATHAY GENERAL BANCORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CATHAY GENERAL BANCORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+365 added−341 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-29)

Top changes in CATHAY GENERAL BANCORP's 2024 10-K

365 paragraphs added · 341 removed · 308 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

81 edited+24 added−9 removed193 unchanged
Biggest changeChan 46 Senior Vice President, General Counsel and Corporate Secretary of Bancorp and the Bank since 2020; Sustainability Officer of Bancorp and the Bank since 2022; First Vice President and Associate General Counsel of Bancorp and the Bank from 2015 to 2020; Senior Counsel of Business Banking Group at Wells Fargo Bank from 2014 to 2015; and Senior Associate of the Finance Department at Latham & Watkins LLP from 2002 to 2011. 10 Table of Contents Available Information We invite you to visit our website at www.cathaygeneralbancorp.com, to access free of charge the Bancorp's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, all of which are made available as soon as reasonably practicable after we electronically file such material with or furnish it to the SEC.
Biggest changeAvailable Information We invite you to visit our website at www.cathaygeneralbancorp.com, to access free of charge the Bancorp's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, all of which are made available as soon as reasonably practicable after we electronically file such material with or furnish it to the SEC.
Real Estate Construction Loans. The Bank’s real estate construction loan activity focuses on providing short-term loans to individuals and developers, primarily for the construction of multi-unit projects. Residential real estate construction loans are typically secured by first deeds of trust and guarantees of the borrower.
The Bank’s real estate construction loan activity focuses on providing short-term loans to individuals and developers, primarily for the construction of multi-unit projects. Residential real estate construction loans are typically secured by first deeds of trust and guarantees of the borrower.
Given the small volume of such loans, we do not believe that this regulation will have a significant impact on our operations. 17 Table of Contents Risk Committee Framework Pursuant to Federal Reserve Board regulations promulgated under authority of the Dodd-Frank Act, as originally adopted, as a publicly traded bank holding company with $10.0 billion in assets, we were required and have established and maintained a risk committee responsible for enterprise-wide risk management practices, comprised of an independent chairman and at least one risk management expert.
Given the small volume of such loans, we do not believe that this regulation will have a significant impact on our operations. 11 Table of Contents Risk Committee Framework Pursuant to Federal Reserve Board regulations promulgated under authority of the Dodd-Frank Act, as originally adopted, as a publicly traded bank holding company with $10.0 billion in assets, we were required and have established and maintained a risk committee responsible for enterprise-wide risk management practices, comprised of an independent chairman and at least one risk management expert.
See discussion below in Part I — Item 1A — “Risk Factors.” 7 Table of Contents To compete with other financial institutions in our primary service areas, the Bank relies principally upon personal contacts by our officers, directors, employees, and stockholders, our long established relationships with the Chinese-American communities, the Bank’s responsiveness to client needs, local promotional activities, availability and pricing of loan and deposit products, extended hours on weekdays, Saturday banking in certain locations, Internet banking, an Internet website ( www.cathaybank.com ), and other specialized services.
See discussion below in Part I — Item 1A — “Risk Factors.” 5 Table of Contents To compete with other financial institutions in our primary service areas, the Bank relies principally upon personal contacts by our officers, directors, employees, and stockholders, our long established relationships with the Chinese-American communities, the Bank’s responsiveness to client needs, local promotional activities, availability and pricing of loan and deposit products, extended hours on weekdays, Saturday banking in certain locations, Internet banking, an Internet website ( www.cathaybank.com ), and other specialized services.
These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. 12 Table of Contents Specific federal and state laws and regulations which are applicable to banks regulate, among other things, the scope of their business, their investments, their reserves against deposits, the timing of the availability of deposited funds, their activities relating to dividends, the nature and amount of and collateral for certain loans, servicing and foreclosing on loans, borrowings, capital requirements, certain check-clearing activities, branching, and mergers and acquisitions.
These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. 8 Table of Contents Specific federal and state laws and regulations which are applicable to banks regulate, among other things, the scope of their business, their investments, their reserves against deposits, the timing of the availability of deposited funds, their activities relating to dividends, the nature and amount of and collateral for certain loans, servicing and foreclosing on loans, borrowings, capital requirements, certain check-clearing activities, branching, and mergers and acquisitions.
Return on Equity and Assets Information concerning the return on average assets, return on average stockholders’ equity, the average equity to assets ratio and the dividend payout ratio is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Interest Rates and Differentials Information concerning the interest-earning asset mix, average interest-earning assets, average interest-bearing liabilities, and the yields on interest-earning assets and interest-bearing liabilities is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Analysis of Changes in Net Interest Income An analysis of changes in net interest income due to changes in rate and volume is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Commitments and Letters of Credit Information concerning the Bank’s outstanding loan commitments and letters of credit is included in Note 14 to the Consolidated Financial Statements.
Return on Equity and Assets Information concerning the return on average assets, return on average stockholders’ equity, the average equity to assets ratio and the dividend payout ratio is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Interest Rates and Differentials Information concerning the interest-earning asset mix, average interest-earning assets, average interest-bearing liabilities, and the yields on interest-earning assets and interest-bearing liabilities is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Analysis of Changes in Net Interest Income An analysis of changes in net interest income due to changes in rate and volume is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Commitments and Letters of Credit Information concerning the Bank’s outstanding loan commitments and letters of credit is included in Note 13 to the Consolidated Financial Statements.
In the event of Bancorp’s bankruptcy, any commitment by Bancorp to a federal bank regulatory agency to maintain the capital of the Bank will be assumed by the bankruptcy trustee and entitled to priority of payment. 19 Table of Contents Enforcement Authority The federal and California regulatory structure gives the bank regulatory agencies extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.
In the event of Bancorp’s bankruptcy, any commitment by Bancorp to a federal bank regulatory agency to maintain the capital of the Bank will be assumed by the bankruptcy trustee and entitled to priority of payment. 12 Table of Contents Enforcement Authority The federal and California regulatory structure gives the bank regulatory agencies extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.
NASDAQ has also adopted corporate governance rules, which are intended to allow stockholders and investors to more easily and efficiently monitor the performance of companies and their directors. Under the Sarbanes-Oxley Act, management and the Bancorp’s independent registered public accounting firm are required to assess the effectiveness of the Bancorp’s internal control over financial reporting as of December 31, 2023.
NASDAQ has also adopted corporate governance rules, which are intended to allow stockholders and investors to more easily and efficiently monitor the performance of companies and their directors. Under the Sarbanes-Oxley Act, management and the Bancorp’s independent registered public accounting firm are required to assess the effectiveness of the Bancorp’s internal control over financial reporting as of December 31, 2024.
Information concerning the carrying value, maturity distribution, and yield analysis of the Company’s securities portfolio as well as a summary of the amortized cost and estimated fair value of the Bank’s securities by contractual maturity is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in Note 4 to the Consolidated Financial Statements.
Information concerning the carrying value, maturity distribution, and yield analysis of the Company’s securities portfolio as well as a summary of the amortized cost and estimated fair value of the Bank’s securities by contractual maturity is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in Note 3 to the Consolidated Financial Statements.
Information concerning types, distribution, and maturity of loans is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in Note 5 to the Consolidated Financial Statements. Financing of Tax-Advantaged Projects . We invest in and/or finance certain tax-advantaged projects promoting affordable housing and renewable energy sources.
Information concerning types, distribution, and maturity of loans is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in Note 4 to the Consolidated Financial Statements. Financing of Tax-Advantaged Projects . We invest in and/or finance certain tax-advantaged projects promoting affordable housing and renewable energy sources.
In June 2020, the federal agencies adopted new regulations that exempted venture capital funds from the definition of “covered funds” under the Volcker Rule, so the Bancorp’s remaining venture capital funds can be held indefinitely. We believe that the Volcker Rule will not require any material changes in our operations or business or security holdings.
In June 2020, the federal agencies adopted new regulations that exempted venture capital funds from the definition of “covered funds” under the Volcker Rule, so the Bancorp’s remaining venture capital funds can be held indefinitely. We believe that the Volcker Rule does not require any material changes in our operations or business or security holdings.
As of December 31, 2023, all securities and insurance products provided by Cathay Wealth Management are offered by, and all financial consultants are registered with, Cetera Investment Services LLC, a registered securities broker/dealer and licensed insurance agency and member of the Financial Industry Regulatory Authority and Security Investor Protection Corporation. Cetera Investment Services LLC and Cathay Bank are independent entities.
As of December 31, 2024, all securities and insurance products provided by Cathay Wealth Management are offered by, and all financial consultants are registered with, Cetera Investment Services LLC, a registered securities broker/dealer and licensed insurance agency and member of the Financial Industry Regulatory Authority and Security Investor Protection Corporation. Cetera Investment Services LLC and Cathay Bank are independent entities.
Small Business Administration (“SBA”) loans, residential mortgage loans, real estate construction loans, home equity lines of credit, and installment loans to individuals for, household and other consumer expenditures. 3 Table of Contents Through its Cathay Wealth Management business unit, the Bank offers clients a range of investment products and services, such as stocks, bonds, mutual funds, insurance, annuities, and advisory services.
Small Business Administration (“SBA”) loans, residential mortgage loans, real estate construction loans, home equity lines of credit, and installment loans to individuals for, household and other consumer expenditures. Through its Cathay Wealth Management business unit, the Bank offers clients a range of investment products and services, such as stocks, bonds, mutual funds, insurance, annuities, and advisory services.
Subsidiaries of Cathay Bank Cathay Holdings LLC (“CHLLC”) was incorporated in December 2007. The purpose of this subsidiary is to hold other real estate owned that was transferred from the Bank. As of December 31, 2023, CHLLC no longer owned properties.
Subsidiaries of Cathay Bank Cathay Holdings LLC (“CHLLC”) was incorporated in December 2007. The purpose of this subsidiary is to hold other real estate owned that was transferred from the Bank. As of December 31, 2024, CHLLC no longer owned properties.
In California, one larger Chinese-American bank competes for loans and deposits with the Bank and at least two super-regional banks compete with the Bank for deposits. In addition, there are many other banks that target the Chinese-American communities in both Southern and Northern California.
In California, one larger Chinese-American bank competes for loans and deposits with the Bank and at least two super-regional banks compete with the Bank for deposits. In addition, there are many other banks that target the Chinese-American communities in New York and in both Southern and Northern California.
Albert Sun 69 Executive Vice President and Chief Credit Officer of the Bank since January 2024; Executive Vice President, Special Advisor to the Office of the President from September 2023 to December 2023; Chief Credit Officer of Piermont Bank from 2022 to 2023: Chief Credit Officer of Grasshopper Bank from 2017 to 2021; and Chief Credit Officer of East West Bank from 2015 to 2017.
Albert Sun 70 Executive Vice President and Chief Credit Officer of the Bank since January 2024; Executive Vice President, Special Advisor to the Office of the President from September 2023 to December 2023; Chief Credit Officer of Piermont Bank from 2022 to 2023: Chief Credit Officer of Grasshopper Bank from 2017 to 2021; and Chief Credit Officer of East West Bank from 2015 to 2017.
Information concerning the types, amounts, and maturity of borrowings is included in in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in Note 9 and Note 10 to the Consolidated Financial Statements.
Information concerning the types, amounts, and maturity of borrowings is included in in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in Note 8 and Note 9 to the Consolidated Financial Statements.
In addition, because the Bank has more than $3.0 billion in total assets, it is subject to the FDIC requirements for audit committees of large institutions. Regulation of Non-Bank Subsidiaries Non-bank subsidiaries are subject to additional or separate regulation and supervision by other state, federal and self-regulatory bodies.
In addition, because the Bank has more than $3.0 billion in total assets, it is subject to the FDIC requirements for audit committees of large institutions. 16 Table of Contents Regulation of Non-Bank Subsidiaries Non-bank subsidiaries are subject to additional or separate regulation and supervision by other state, federal and self-regulatory bodies.
The Bancorp established Cathay Capital Trust I in June 2003, Cathay Statutory Trust I in September 2003, Cathay Capital Trust II in December 2003, Cathay Capital Trust III in March 2007, and Cathay Capital Trust IV in May 2007 (collectively, the “Trusts”) as wholly-owned subsidiaries. The Trusts are statutory business trusts.
The Bancorp established Cathay Capital Trust I in June 2003, Cathay Statutory Trust I in September 2003, Cathay Capital Trust II in December 2003, Cathay Capital Trust III in March 2007, and Cathay Capital Trust IV in May 2007 (collectively, the “Trusts”) as subsidiaries. The Trusts are statutory business trusts.
Cheng 79 Executive Chairman of the Boards of Directors of the Bancorp and the Bank since October 2016; Director of the Bancorp since 1990; Director of the Bank since 1982; Chairman of the Boards of Directors of the Bancorp and the Bank from 1994 to September 2016; President of the Bank from 1985 to March 2015; President and Chief Executive Officer of the Bancorp from 1990 to September 2016.
Cheng 80 Executive Chairman of the Boards of Directors of the Bancorp and the Bank since October 2016; Director of the Bancorp since 1990; Director of the Bank since 1982; Chairman of the Boards of Directors of the Bancorp and the Bank from 1994 to September 2016; President of the Bank from 1985 to March 2015; President and Chief Executive Officer of the Bancorp from 1990 to September 2016.
Employees Due to the limited nature of the Bancorp’s activities as a bank holding company, the Bancorp currently does not employ any persons other than the Bancorp’s management, which includes the Chief Executive Officer and President, Executive Chairman, the Chief Financial Officer, the Corporate Secretary and General Counsel, and the Assistant Corporate Secretary.
Employees Due to the limited nature of the Bancorp’s activities as a bank holding company, the Bancorp currently does not employ any persons other than the Bancorp’s corporate officers, which includes the Chief Executive Officer and President, Executive Chairman, the Chief Financial Officer, the Corporate Secretary, General Counsel and Sustainability Officer, and the Assistant Corporate Secretary.
Commercial real estate loans (also known as CRE loans) are typically secured by first deeds of trust on commercial properties. Our commercial real estate portfolio includes primarily commercial retail properties, shopping centers, and owner-occupied industrial facilities, and, secondarily, office buildings, multiple-unit apartments, hotels, and multi-tenanted industrial properties.
Commercial real estate loans (also known as CRE loans) are typically secured by first deeds of trust on commercial properties. Our commercial real estate portfolio includes primarily commercial real estate, commercial retail properties, office buildings, warehouse, and owner-occupied industrial facilities, and, secondarily, hotels, multiple-unit apartments, and multi-tenanted industrial properties.
Because the Bancorp is not the primary beneficiary of the Trusts, the financial statements of the Trusts are not included in our Consolidated Financial Statements. 2 Table of Contents Competition The Bancorp’s primary business is to act as the holding company for the Bank. Accordingly, the Bancorp faces the same competitive pressures as those expected by the Bank.
Because the Bancorp is not the primary beneficiary of the Trusts, the financial statements of the Trusts are not included in our Consolidated Financial Statements. Competition The Bancorp’s primary business is to act as the holding company for the Bank. Accordingly, the Bancorp faces the same competitive pressures as those expected by the Bank.
The Dodd-Frank Act and the Growth Act The Dodd-Frank Act financial reform legislation, adopted in July 2010, significantly revised and expanded the rulemaking, supervisory and enforcement authority of the federal bank regulatory agencies by implementing the following changes, among others: ● capital standards that, among other things, increase capital requirements and eliminate the treatment of trust preferred securities as Tier 1 regulatory capital for bank holding companies with assets of $15.0 billion or more (our assets exceed the $15.0 billion threshold and, as a result, our outstanding junior subordinated notes no longer qualify as Tier 1 capital for regulatory reporting purposes); ● restrictions on banking entities from engaging in proprietary trading, as well as having investments in, sponsoring, and maintaining relationships with hedge funds and private equity funds (commonly referred to as the “Volcker Rule”); ● the establishment of the Consumer Financial Protection Bureau (“CFPB”) responsible for consumer protection in the financial services industry and to examine financial institutions with $10.0 billion or more in assets, such as the Company, for compliance with regulations promulgated by the CFPB; ● additional risk management and other enhanced prudential standards for larger bank holding companies; ● limitations on interchange fees charged for debit card transactions; ● the revisions in the deposit insurance assessment base for FDIC insurance and the permanent increase in coverage to $250 thousand; ● the permissibility of paying interest on business checking accounts; ● the removal of barriers to interstate branching; ● required disclosure and shareholder advisory votes on executive compensation; and ● the establishment of new minimum mortgage underwriting standards for residential mortgages. 13 Table of Contents On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Growth Act”) was signed into law.
The Dodd-Frank Act and the Growth Act The Dodd-Frank Act financial reform legislation, adopted in July 2010, significantly revised and expanded the rulemaking, supervisory and enforcement authority of the federal bank regulatory agencies by implementing the following changes, among others: ● capital standards that, among other things, increase capital requirements and eliminate the treatment of trust preferred securities as Tier 1 regulatory capital for bank holding companies with assets of $15.0 billion or more (our assets exceed the $15.0 billion threshold and, as a result, our outstanding junior subordinated notes no longer qualify as Tier 1 capital for regulatory reporting purposes); ● restrictions on banking entities from engaging in proprietary trading, as well as having investments in, sponsoring, and maintaining relationships with hedge funds and private equity funds (commonly referred to as the “Volcker Rule”); ● the establishment of the Consumer Financial Protection Bureau (“CFPB”) responsible for consumer protection in the financial services industry and to examine financial institutions with $10.0 billion or more in assets, such as the Company, for compliance with regulations promulgated by the CFPB; ● additional risk management and other enhanced prudential standards for larger bank holding companies; ● limitations on interchange fees charged for debit card transactions; ● the revisions in the deposit insurance assessment base for FDIC insurance and the permanent increase in coverage to $250 thousand; ● the permissibility of paying interest on business checking accounts; ● the removal of barriers to interstate branching; ● required disclosure and shareholder advisory votes on executive compensation; and ● the establishment of new minimum mortgage underwriting standards for residential mortgages.
The Bank participates or syndicates loans, typically more than $25.0 million in principal amount, with other financial institutions to limit its credit exposure. Commercial loan pricing is generally at a rate tied to the prime rate, as quoted in The Wall Street Journal , or the Bank’s reference rate. 4 Table of Contents SBA Loans.
The Bank participates or syndicates loans, typically more than $25.0 million in principal amount, with other financial institutions to limit its credit exposure. Commercial loan pricing is generally at a rate tied to the prime rate, as quoted in The Wall Street Journal , or the Bank’s reference rate. SBA Loans.
To achieve this level of value creation, we believe we must strive to find, develop and keep a world-class workforce. We invest in our employees by providing quality training and learning opportunities, promoting inclusion and diversity, and upholding a high standard of ethics and respect for human rights.
To achieve this level of value creation, we believe we must strive to find, develop and keep a world-class workforce. We invest in our employees by providing quality training and learning opportunities, promoting inclusion and talent recruitment and retention, and upholding a high standard of ethics and respect for human rights.
As of December 31, 2023, the Bank has branch offices in Southern California (24 branches), Northern California (19 branches), New York (9 branches), Washington (four branches), Illinois (two branches), Texas (two branches), Maryland (one branch), Massachusetts (one branch), Nevada (one branch), New Jersey (one branch), and Hong Kong (one branch) and a representative office in Beijing, Shanghai, and Taipei.
As of December 31, 2024, the Bank has branch offices in Southern California (24 branches), Northern California (18 branches), New York (9 branches), Washington (four branches), Illinois (two branches), Texas (two branches), Maryland (one branch), Massachusetts (one branch), Nevada (one branch), New Jersey (one branch), and Hong Kong (one branch) and a representative office in Beijing, Shanghai, and Taipei.
Liu 57 President and Chief Executive Officer, and Director of the Bancorp since October 2020; Chief Executive Officer of the Bank since October 2020; Director of the Bank since October 2019; President of the Bank from October 2019 to September 2020; Executive Vice President and Chief Operating Officer of the Bank from February 2019 to September 2019; Executive Vice President and Chief Lending Officer of the Bank from 2016 to 2019; Senior Vice President and Deputy Chief Lending Officer of the Bank from 2015 to 2016; Senior Vice President and Assistant Chief Lending Officer of the Bank from 2014 to 2015; Chief Lending Officer at Banc of California (formerly known as Pacific Trust Bank) from 2011 to 2014 Heng W.
Liu 58 President and Chief Executive Officer, and Director of the Bancorp since October 2020; Chief Executive Officer of the Bank since October 2020; Director of the Bank since October 2019; President of the Bank from October 2019 to September 2020; Executive Vice President and Chief Operating Officer of the Bank from February 2019 to September 2019; Executive Vice President and Chief Lending Officer of the Bank from 2016 to 2019; Senior Vice President and Deputy Chief Lending Officer of the Bank from 2015 to 2016; Senior Vice President and Assistant Chief Lending Officer of the Bank from 2014 to 2015; Chief Lending Officer at Banc of California (formerly known as Pacific Trust Bank) from 2011 to 2014.
Lo 62 Executive Vice President and Chief Administrative Officer of Cathay Bank since September 2023; Executive Vice President and Director of Commercial and International Banking of Cathay Bank from 2018 to 2023; Senior Vice President, Deputy Director of International and Business Banking and Deputy to Head of International and Commercial Banking of East West Bank from 2010 to 2018; and Executive Vice President and Group Manager in Orange County of Preferred Bank from 2007 to 2010 May K.
Lo 63 Executive Vice President and Chief Administrative Officer of Cathay Bank since September 2023; Executive Vice President and Director of Commercial and International Banking of Cathay Bank from 2018 to 2023; Senior Vice President, Deputy Director of International and Business Banking and Deputy to Head of International and Commercial Banking of East West Bank from 2010 to 2018; and Executive Vice President and Group Manager in Orange County of Preferred Bank from 2007 to 2010.
The outcome of examinations, any litigation, or any investigations initiated by state or federal authorities also may result in necessary changes in our operations and increased compliance costs. 27 Table of Contents
The outcome of examinations, any litigation, or any investigations initiated by state or federal authorities also may result in necessary changes in our operations and increased compliance costs.
Diversity and Inclusion Inclusion and diversity are the cultural hallmarks of Cathay Bank. We benefit from the diversity of our staff offering a multiplicity of viewpoints, backgrounds and experiences, in service of our clients and the commercial and financial industries in which we work.
Talent Strategy and Inclusion Talent recruitment and inclusion are the cultural hallmarks of Cathay Bank. We benefit from our staff offering a multiplicity of viewpoints, backgrounds and experiences, in service of our clients and the commercial and financial industries in which we work.
Among other relief, the Growth Act: ● raises the asset threshold for annual company-run stress tests required under the Dodd-Frank Act from $10.0 billion to $100.0 billion; ● raises the enhanced prudential supervision threshold for bank holding companies from $50.0 billion to $250.0 billion in total consolidated assets and the asset threshold for risk committee requirements for publicly traded bank holding companies from $10.0 billion to $50.0 billion; and ● implements other changes that may help reduce regulatory burden for the Company and other mid-sized financial institutions, such as (i) prohibiting federal banking regulators from imposing higher capital standards on High Volatility Commercial Real Estate exposures unless they are for acquisition, development or construction; (ii) requiring amendments to the Liquidity Coverage Ratio Rule to treat all qualifying investment-grade, liquid and readily-marketable municipal securities as level 2B liquid assets, making them potentially more attractive alternative investments; (iv) directing the CFPB to provide guidance on certain disclosure requirements for mortgage assumption transactions and construction-to-permanent home loans; and (iv) not requiring appraisals for certain transactions in rural areas valued at less than $400 thousand.
Among other relief, the Growth Act: ● raises the asset threshold for annual company-run stress tests required under the Dodd-Frank Act from $10.0 billion to $100.0 billion; ● raises the enhanced prudential supervision threshold for bank holding companies from $50.0 billion to $250.0 billion in total consolidated assets and the asset threshold for risk committee requirements for publicly traded bank holding companies from $10.0 billion to $50.0 billion; and ● implements other changes that may help reduce regulatory burden for the Company and other mid-sized financial institutions, such as (i) prohibiting federal banking regulators from imposing higher capital standards on High Volatility Commercial Real Estate exposures unless they are for acquisition, development or construction; (ii) requiring amendments to the Liquidity Coverage Ratio Rule to treat all qualifying investment-grade, liquid and readily-marketable municipal securities as level 2B liquid assets, making them potentially more attractive alternative investments; (iv) directing the CFPB to provide guidance on certain disclosure requirements for mortgage assumption transactions and construction-to-permanent home loans; and (iv) not requiring appraisals for certain transactions in rural areas valued at less than $400 thousand. 9 Table of Contents On October 15, 2019, the FDIC adopted a final rule that revised the FDIC’s requirements for stress testing by FDIC supervised institutions, such as the Bank, to conform with the Growth Act by raising the minimum threshold for applicability from $10.0 billion to $250.0 billion.
(See “Dividends” below) ● Safety and soundness requirements. Banks must be operated in a safe and sound manner and meet standards applicable to internal controls, information systems, internal audit, loan documentation, credit underwriting, interest rate exposure, asset growth, and compensation, as well as other operational and management standards.
Banks must be operated in a safe and sound manner and meet standards applicable to internal controls, information systems, internal audit, loan documentation, credit underwriting, interest rate exposure, asset growth, and compensation, as well as other operational and management standards.
The Bank primarily services individuals, professionals, and small to medium-sized businesses in the local markets in which its branches are located and provides commercial real estate loans, commercial loans, U.S.
The bank offers similar services that are available to consumers. The Bank primarily services individuals, professionals, and small to medium-sized businesses in the local markets in which its branches are located and provides commercial real estate loans, commercial loans, U.S.
The Bank generally retains all mortgage loans it originates in its portfolio. As such, the Bank was not impacted by the rule pertaining to risk retention implementing the risk retention requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), since the Bank does not securitize any of the loans it originates in its portfolio.
As such, the Bank was not impacted by the rule pertaining to risk retention implementing the risk retention requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), since the Bank does not securitize any of the loans it originates in its portfolio. Real Estate Construction Loans.
Notwithstanding these amendments to the stress testing requirements, the federal banking agencies indicated through interagency guidance that the capital planning and risk management practices of institutions with total assets less than $100.0 billion would continue to be reviewed through the regular supervisory process.
The final rule became effective on November 25, 2019. Notwithstanding these amendments to the stress testing requirements, the federal banking agencies indicated through interagency guidance that the capital planning and risk management practices of institutions with total assets less than $100.0 billion would continue to be reviewed through the regular supervisory process.
At December 31, 2023, (i) the Bancorp’s and the Bank’s common equity Tier 1 capital ratios were 12.84% and 13.23%, respectively; (ii) their total risk-based capital ratios were 14.31% and 14.09% respectively; (iii) their Tier 1 risk-based capital ratios were, 12.84% and 13.23% respectively; and (iv) their leverage capital ratios were, respectively, 10.55% and 10.87% respectively all of which exceeded the minimum percentage requirements to be deemed “well-capitalized” for regulatory purposes. 15 Table of Contents Bank regulators may also continue their past policies of expecting banks to maintain additional capital beyond the requirements of the Basel III Capital Rules.
At December 31, 2024, (i) the Bancorp’s and the Bank’s common equity Tier 1 capital ratios were 13.54% and 13.84%, respectively; (ii) their total risk-based capital ratios were 15.08% and 14.76% respectively; (iii) their Tier 1 risk-based capital ratios were, 13.54% and 13.84% respectively; and (iv) their leverage capital ratios were, respectively, 10.96% and 11.20% respectively all of which exceeded the minimum percentage requirements to be deemed “well-capitalized” for regulatory purposes. 10 Table of Contents Bank regulators may also continue their past policies of expecting banks to maintain additional capital beyond the requirements of the Basel III Capital Rules.
As of December 31, 2023, we have 60% of our employees participating in the Well-Being program. 9 Table of Contents Executive Officers of the Registrant The table below sets forth the names, ages, and positions at the Bancorp and the Bank of all executive officers of the Company as of February 15, 2024.
As of December 31, 2024, we have 64% of our employees participating in the Well-Being program. 6 Table of Contents Executive Officers of the Registrant The table below sets forth the names, ages, and positions at the Bancorp and the Bank of all executive officers of the Company as of February 14, 2025.
The Federal Deposit Insurance Act (FDI Act) requires the FDIC to take this action in connection with the systemic risk determination announced on March 12, 2023. See further discussion under Operation Risks.
The Federal Deposit Insurance Act (FDI Act) requires the FDIC to take this action in connection with the systemic risk determination announced on March 12, 2023.
As of December 31, 2023, Cathay Bank employed approximately 1,246 regular full-time equivalent employees, of whom 1,207 were located in the United States and 39 were located in China, Hong Kong and Taiwan. Of the total number of employees, 740 are banking officers. None of the employees are represented by a union.
As of December 31, 2024, Cathay Bank employed approximately 1,266 regular full-time equivalent employees, of whom 1,226 were located in the United States and 40 were located in China, Hong Kong and Taiwan. Of the total number of employees, 749 are banking officers. None of the employees are represented by a union.
Dividends Holders of the Bancorp’s common stock are entitled to receive dividends as and when declared by the board of directors out of funds legally available therefore under the laws of the State of Delaware.
See further discussion under Operational Risks. 13 Table of Contents Dividends Holders of the Bancorp’s common stock are entitled to receive dividends as and when declared by the board of directors out of funds legally available therefore under the laws of the State of Delaware.
In addition to existing regulations, federal and state-level regulation regarding certain environmental and social disclosures are emerging and compliance with future regulation will likely increase our compliance-related costs. See Item 1A.
In addition to existing regulations, federal and state-level regulation regarding certain environmental and social disclosures are emerging and compliance with future regulation will likely increase our compliance-related costs. See Item 1A. Risk Factors for a further discussion of risks related to regulations and liabilities.
Deposit accounts at the Hong Kong branch are not insured by the FDIC. Each branch has loan approval rights subject to the branch manager’s authorized lending limits. Current activities of the Beijing, Shanghai, and Taipei representative offices are limited to coordinating the transportation of documents to the Bank’s head office and performing liaison services.
Deposit accounts at the Hong Kong branch are not insured by the FDIC. Current activities of the Beijing, Shanghai, and Taipei representative offices are limited to coordinating the transportation of documents to the Bank’s head office and performing liaison services.
The Bank’s deposits are generally obtained from residents within its geographic market area. The Bank utilizes traditional marketing methods to attract new clients and deposits, by offering a wide variety of products and services and utilizing various forms of advertising media. From time to time, the Bank may offer special deposit promotions.
The Bank utilizes traditional marketing methods to attract new clients and deposits, by offering a wide variety of products and services and utilizing various forms of advertising media. From time to time, the Bank may offer special deposit promotions.
We invest in affordable housing and renewable energy projects; in addition, we offer community checking and various affordable home ownership and loan programs serving the underbanked, and routinely engage in collaboration with local nonprofit organizations working together to build and cultivate lives in low-to-moderate income communities.
We invest in affordable housing and renewable energy projects; in addition, we offer community checking and various affordable home ownership and loan programs serving the underbanked, and routinely engage in collaboration with local nonprofit organizations working together to build and cultivate lives in low-to-moderate income communities. We also promote inclusion among our supplier base, through the Cathay Bank Vendor Program.
If we are not current on our payment of interest on our Junior Subordinated Notes, we may not pay dividends on our common stock.
The terms of our Junior Subordinated Notes also limit our ability to pay dividends on our common stock. If we are not current on our payment of interest on our Junior Subordinated Notes, we may not pay dividends on our common stock.
Therefore, the Bancorp and any of its subsidiaries are subject to examination by, and may be required to file reports with, the DFPI. DFPI approvals are also required for bank holding companies to acquire control of banks.
The Bancorp is also a bank holding company within the meaning of Section 3700 of the California Financial Code. Therefore, the Bancorp and any of its subsidiaries are subject to examination by, and may be required to file reports with, the DFPI. DFPI approvals are also required for bank holding companies to acquire control of banks.
Each FHLB is financed primarily from the sale of consolidated obligations of the FHLB system. Each FHLB makes available loans or advances to its members in compliance with the policies and procedures established by the board of directors of the individual FHLB.
Each FHLB makes available loans or advances to its members in compliance with the policies and procedures established by the board of directors of the individual FHLB.
The Tax Reform Act included a number of provisions that impact us, including the following: ● Tax Rate. The Tax Reform Act replaces the corporate tax rates applicable under prior law, which imposed a maximum tax rate of 35%, with a reduced 21% tax rate for 2018.
The Tax Reform Act replaces the corporate tax rates applicable under prior law, which imposed a maximum tax rate of 35%, with a reduced 21% tax rate for 2018.
The program promotes the use of suppliers owned by minority, women, and small businesses, to help contribute to long-term economic sustainability in our communities. 8 Table of Contents Grow, Engage and Elevate The Bank believes that its future success is highly dependent upon its continued ability to attract qualified employees.
The program promotes the inclusiveness of the use of a wide range of suppliers to help contribute to long-term economic sustainability in our communities. Grow, Engage and Elevate The Bank believes that its future success is highly dependent upon its continued ability to attract qualified employees.
Information concerning non-performing loans, restructured loans, allowance for credit losses, loans charged-off, loan recoveries, and other real estate owned is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in Note 5 to the Consolidated Financial Statements.
Information concerning non-performing loans, restructured loans, allowance for credit losses, loans charged-off, loan recoveries, and other real estate owned is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in Note 4 to the Consolidated Financial Statements. 4 Table of Contents Deposits The Bank offers a variety of deposit products to meet its clients’ needs.
We and our bank are responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence. 18 Table of Contents Regulatory authorities routinely examine financial institutions for compliance with these obligations, and any failure by us to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required.
Regulatory authorities routinely examine financial institutions for compliance with these obligations, and any failure by us to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required.
Additionally, any foreign-based subsidiaries would also be subject to foreign laws and regulations. 26 Table of Contents Tax Cuts and Jobs Act of 2017 On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Reform Act”) was signed into law.
Additionally, any foreign-based subsidiaries would also be subject to foreign laws and regulations. Tax Cuts and Jobs Act of 2017 On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Reform Act”) was signed into law. The Tax Reform Act included a number of provisions that impact us, including the following: ● Tax Rate.
A substantial portion of the Bancorp’s funds to pay dividends or to pay principal and interest on our debt obligations is derived from dividends paid by the Bank. (See “Dividends” below) ● Limitations on dividends payable by bank subsidiaries. These dividends are subject to various legal and regulatory restrictions.
(See “Source of Strength” and “Prompt Corrective Action Provisions” below.) ● Limitations on dividends payable to Bancorp stockholders. The Bancorp’s ability to pay dividends is subject to legal and regulatory restrictions. A substantial portion of the Bancorp’s funds to pay dividends or to pay principal and interest on our debt obligations is derived from dividends paid by the Bank.
The Bank’s products include a fixed-rate residential mortgage loan and an adjustable-rate residential mortgage loan. Mortgage loans are underwritten in accordance with the Bank’s and regulatory guidelines, on the basis of the borrower’s financial capabilities, an independent appraisal of the value of the property, historical loan quality, and other factors deemed relevant by the Bank’s underwriting personnel.
Mortgage loans are underwritten in accordance with the Bank’s and regulatory guidelines, on the basis of the borrower’s financial capabilities, an independent appraisal of the value of the property, historical loan quality, and other factors deemed relevant by the Bank’s underwriting personnel. The Bank generally retains all mortgage loans it originates in its portfolio.
Although the reduced tax rate generally should be favorable to us by resulting in lower tax expense in future periods, it decreased the value of our existing deferred tax assets as of December 31, 2017. ● FDIC Insurance Premiums.
Although the reduced tax rate generally should be favorable to us by resulting in lower tax expense in future periods, it decreased the value of our existing deferred tax assets as of December 31, 2017. The Tax Reform Act expires at the end of 2025 if not extended or further legislation is enacted by Congress. ● FDIC Insurance Premiums.
Our investments in these projects are designed to generate a return primarily through the realization of federal and state income tax credits, and other tax benefits, over specified time periods.
Our investments in these projects are designed to generate a return primarily through the realization of federal and state income tax credits, and other tax benefits, over specified time periods. For regulatory purposes, these investments are deemed loan-equivalent transactions and are made under the power of banks to make loans.
Our 12 member Board of Directors consists of 11 members of traditionally underrepresented racial/ethnic groups descent and a quarter of the Board seats are held by women. Our commitment to diversity and inclusion extends to our community.
Our 14 member Board of Directors consists of 12 members of minority racial/ethnic group descent and 36% of the Board seats are held by women. Our commitment to inclusion extends to our community.
Deposits The Bank offers a variety of deposit products to meet its clients’ needs. As of December 31, 2023, the Bank offered passbook accounts, checking accounts, money market deposit accounts, certificates of deposit, individual retirement accounts, and public funds deposits. These products are priced generally to promote growth of deposits in a safe and sound manner.
As of December 31, 2024, the Bank offered savings accounts, checking accounts, money market deposit accounts, certificates of deposit, individual retirement accounts, and public funds deposits. These products are priced generally to promote growth of deposits in a safe and sound manner. The Bank’s deposits are generally obtained from residents within its geographic market area.
Chen 71 Executive Vice President, Chief Financial Officer, and Treasurer of the Bancorp since 2003; Executive Vice President of the Bank since 2003; Chief Financial Officer of the Bank since 2004. Kim R.
Heng W. Chen 72 Executive Vice President, Chief Financial Officer, and Treasurer of the Bancorp since 2003; Executive Vice President of the Bank since 2003; Chief Financial Officer of the Bank since 2004. Diana G.
As of December 31, 2023, the Bancorp and the Bank met all requirements to be considered well-capitalized under the Basel III Capital Rules. 16 Table of Contents Volcker Rule In December 2013, the federal bank regulatory agencies adopted final rules that implement a part of the Dodd-Frank Act commonly referred to as the “Volcker Rule.” In the fall of 2019, the federal banking regulatory agencies adopted revised rules to simplify and tailor the Volcker Rules.
Volcker Rule In December 2013, the federal bank regulatory agencies adopted final rules that implement a part of the Dodd-Frank Act commonly referred to as the “Volcker Rule.” In the fall of 2019, the federal banking regulatory agencies adopted revised rules to simplify and tailor the Volcker Rules.
At December 31, 2023, we had $23.08 billion in total consolidated assets, $19.38 billion in net loans, $19.33 billion in deposits, and $2.74 billion in shareholders’ equity.
At December 31, 2024, we had $23.05 billion in total consolidated assets, $19.20 billion in net loans, $19.69 billion in deposits, and $2.85 billion in shareholders’ equity.
Other foreign, federal, state or local governments, including in states and countries which we do business, may try to implement similar or other privacy legislation, which, among other effects, could result in different privacy standards for different geographical regions, restrict our ability to do business and increase our costs of doing business. 23 Table of Contents Environmental Regulations In the course of the Bank’s business, the Bank may foreclose and take title to real estate and could be subject to environmental liabilities with respect to these properties.
Other foreign, federal, state or local governments, including in states and countries which we do business, may try to implement similar or other privacy legislation, which, among other effects, could result in different privacy standards for different geographical regions, restrict our ability to do business and increase our costs of doing business.
It is also the Federal Reserve’s policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of strength to their banking subsidiaries.
It is also the Federal Reserve’s policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of strength to their banking subsidiaries. The Federal Reserve also discourages dividend policy payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong.
Also, RESPA prohibits certain abusive practices, such as kickbacks, and places limitations on the amount of escrow accounts. Penalties under the above laws may include fines, reimbursements and other civil money penalties.
Also, RESPA prohibits certain abusive practices, such as kickbacks, and places limitations on the amount of escrow accounts.
Bank holding companies and banks engaged in significant trading activity may also be subject to the market risk capital guidelines and be required to incorporate additional market and interest rate risk components into their risk-based capital standards. 14 Table of Contents The federal bank regulatory agencies adopted final regulations in July 2013, which revised their risk-based and leverage capital requirements for banking organizations to meet requirements of the Dodd-Frank Act and to implement Basel III international agreements reached by the Basel Committee on Banking Supervision.
The federal bank regulatory agencies adopted final regulations in July 2013, which revised their risk-based and leverage capital requirements for banking organizations to meet requirements of the Dodd-Frank Act and to implement Basel III international agreements reached by the Basel Committee on Banking Supervision.
Federal banking agencies have also issued comprehensive guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. 25 Table of Contents In addition, the Dodd-Frank Act requires the federal bank regulatory agencies and the SEC to establish joint regulations or guidelines prohibiting certain incentive-based payment arrangements.
Federal banking agencies have also issued comprehensive guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
Due to heightened regulatory concern related to compliance with the CRA, TILA, FH Act, ECOA, HMDA and RESPA generally, the Bank may incur additional compliance costs or be required to expend additional funds for investments in its local community. The Federal Reserve and other bank regulatory agencies also have adopted guidelines for safeguarding confidential, personal client information.
Penalties under the above laws may include fines, reimbursements and other civil money penalties. 14 Table of Contents Due to heightened regulatory concern related to compliance with the CRA, TILA, FH Act, ECOA, HMDA and RESPA generally, the Bank may incur additional compliance costs or be required to expend additional funds for investments in its local community.
A number of lending practices have been found by the courts to be, or may be considered, illegal under the FH Act, including some that are not specifically mentioned in the FH Act itself. 22 Table of Contents The Home Mortgage Disclosure Act (“HMDA”) grew out of public concern over credit shortages in certain urban neighborhoods and provides public information that will help show whether financial institutions are serving the housing credit needs of the neighborhoods and communities in which they are located.
The Home Mortgage Disclosure Act (“HMDA”) grew out of public concern over credit shortages in certain urban neighborhoods and provides public information that will help show whether financial institutions are serving the housing credit needs of the neighborhoods and communities in which they are located.
In the exercise of their supervisory and examination authority, the regulatory agencies have recently emphasized corporate governance, stress testing, enterprise risk management and other board responsibilities; anti-money laundering compliance and enhanced high-risk client due diligence; vendor management; cyber security and fair lending and other consumer compliance obligations. 20 Table of Contents Deposit Insurance The FDIC is an independent federal agency that insures deposits, up to prescribed statutory limits, of federally insured banks and savings institutions and safeguards the safety and soundness of the banking and savings industries.
In the exercise of their supervisory and examination authority, the regulatory agencies have recently emphasized corporate governance, stress testing, enterprise risk management and other board responsibilities; anti-money laundering compliance and enhanced high-risk client due diligence; vendor management; cyber security and fair lending and other consumer compliance obligations.
SBA loan pricing is generally at a rate tied to the prime rate, as quoted in The Wall Street Journal . Residential Mortgage Loans. The Bank originates single-family-residential mortgage loans. The single-family-residential mortgage loans are comprised of conforming, non‐conforming, and jumbo residential mortgage loans, and are secured by first or subordinate liens on single (one-to-four) family residential properties.
SBA loan pricing is generally at a rate tied to the prime rate, as quoted in The Wall Street Journal . 3 Table of Contents Residential Mortgage Loans. The Bank originates single-family-residential mortgage loans.
At the manager-level, 73% are of Asian descent, 13% are members of non-Asian traditionally underrepresented racial/ethnic groups, and 14% are Caucasian. 57% of our management-level positions are held by women, and 65% of our employees are women.
In 2024, 79% of our employees are of Asian descent, 14% are members of non-Asian minority groups, and 7% are Caucasian. At the manager-level, 72% are of Asian descent, 14% are members of non-Asian minority groups, and 14% are Caucasian. 55% of our management-level positions are held by women, and 64% of our employees are women.
For regulatory purposes, these investments are deemed loan-equivalent transactions and are made under the power of banks to make loans. 5 Table of Contents Asset Quality The Bank’s lending and credit policies require management to regularly review the Bank’s loan portfolio so that the Bank can monitor the quality of its assets.
Asset Quality The Bank’s lending and credit policies require management to regularly review the Bank’s loan portfolio so that the Bank can monitor the quality of its assets.
These regulators must establish regulations or guidelines requiring enhanced disclosure to regulators of incentive-based compensation arrangements. The agencies proposed such regulations in April 2011, but the regulations have not been finalized. In April 2016, the agencies published a notice of proposed rulemaking further revising the incentive-based compensation standards originally proposed in 2011.
In addition, the Dodd-Frank Act requires the federal bank regulatory agencies and the SEC to establish joint regulations or guidelines prohibiting certain incentive-based payment arrangements. These regulators must establish regulations or guidelines requiring enhanced disclosure to regulators of incentive-based compensation arrangements. The agencies proposed such regulations in April 2011, but the regulations have not been finalized.
Information concerning types of deposit accounts, average deposits and rates, and maturity of time deposits is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in Note 9 to the Consolidated Financial Statements. 6 Table of Contents Borrowings Borrowings from time to time include securities sold under agreements to repurchase, the purchase of federal funds, funds obtained as advances from the FHLB, borrowing from other financial institutions, and the issuance of Junior Subordinated Notes.
Information concerning types of deposit accounts, average deposits and rates, and maturity of time deposits is included in Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in Note 8 to the Consolidated Financial Statements.
These statutes and regulations are intended primarily for the protection of depositors and the FDIC’s Deposit Insurance Fund, and secondarily for the stability of the U.S. banking system and are not intended for the benefit of stockholders of financial institutions.
These statutes and regulations are intended primarily for the protection of depositors and the FDIC’s Deposit Insurance Fund, and secondarily for the stability of the U.S. banking system and are not intended for the benefit of stockholders of financial institutions. 7 Table of Contents The following discussion of certain statutes and regulations to which the Bancorp and the Bank are subject is a summary and does not purport to be complete nor does it address all applicable statutes and regulations.
As a commercial bank, the Bank offers products and services to businesses, such as checking and deposit, lines of credits, commercial and commercial real estate loans, merchant services and payment processing, treasury management services, international banking and financing services, and other customary banking services. The bank offers similar services that are available to consumers.
Many of the Bank’s employees speak more than one language, including both English and one or more Chinese dialects or Vietnamese, and are thus able to serve the Bank’s English, Chinese and Vietnamese speaking clients. 2 Table of Contents As a commercial bank, the Bank offers products and services to businesses, such as checking and deposit, lines of credits, commercial and commercial real estate loans, merchant services and payment processing, treasury management services, international banking and financing services, and other customary banking services.
The federal banking agencies have indicated that paying dividends that deplete a depositary institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings.
Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. (See “Dividends” below) ● Safety and soundness requirements.
Bank Holding Company and Bank Regulation The Bancorp is a bank holding company within the meaning of the Bank Holding Company Act and is registered as such with the Federal Reserve. The Bancorp is also a bank holding company within the meaning of Section 3700 of the California Financial Code.
This discussion is qualified in its entirety by reference to the full statutes and regulations. Bank Holding Company and Bank Regulation The Bancorp is a bank holding company within the meaning of the Bank Holding Company Act and is registered as such with the Federal Reserve.
Risk Factors for a further discussion of risks related to regulations and liabilities. 24 Table of Contents Federal Home Loan Bank System The Bank is a member of the FHLB of San Francisco. Among other benefits, each FHLB serves as a reserve or central bank for its members within its assigned region.
Among other benefits, each FHLB serves as a reserve or central bank for its members within its assigned region. Each FHLB is financed primarily from the sale of consolidated obligations of the FHLB system.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRegulatory, Compliance and Legal Risks ● The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, could limit or restrict our activities, hamper our ability to increase our assets and earnings, and materially and adversely affect our profitability. ● We are subject to stringent risk-based capital and leverage requirements, including those adopted by the Federal Reserve ( ” the Basel III Capital Rules ” ). ● We may become subject to supervisory action by bank supervisory authorities that could have a material adverse effect on our business, financial condition, and the value of our common stock. ● We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations. ● We are subject to the Community Reinvestment Act (the “ CRA), fair lending and other laws and regulations, and our failure to comply with these laws and regulations could lead to material penalties. ● Governmental monetary policies and intervention to stabilize the U.S. financial system may affect our business and are beyond our control. ● Adverse results in legal proceedings could adversely affect our business and financial condition. ● Liabilities from environmental regulations could adversely affect our business and financial condition. ● Changes in accounting standards or tax laws and regulations could adversely affect our financial results. 30 Table of Contents Risks Related to Ownership of Our Common Stock ● The price of our common stock may fluctuate significantly, and this may make it difficult for a holder to sell shares of common stock at times or at prices such holder finds attractive. ● An investment in our common stock is not an insured deposit. ● Statutory and regulatory restrictions on dividends and other distributions from the Bank may adversely impact us by limiting the amount of distributions the Bancorp may receive.
Biggest changeRegulatory, Compliance and Legal Risks ● The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, could limit or restrict our activities, hamper our ability to increase our assets and earnings, and materially and adversely affect our profitability. ● We are subject to stringent risk-based capital and leverage requirements, including those adopted by the Federal Reserve ( ” the Basel III Capital Rules ” ). ● We may become subject to supervisory action by bank supervisory authorities that could have a material adverse effect on our business, financial condition, and the value of our common stock. ● We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations. ● We are subject to the Community Reinvestment Act (the “ CRA), fair lending and other laws and regulations, and our failure to comply with these laws and regulations could lead to material penalties. ● Governmental monetary policies and intervention to stabilize the U.S. financial system may affect our business and are beyond our control. ● Adverse results in legal proceedings could adversely affect our business and financial condition. ● Liabilities from environmental regulations could adversely affect our business and financial condition. ● Changes in accounting standards or tax laws and regulations could adversely affect our financial results.
Operational Risks ● We may incur significant losses as a result of ineffective risk management processes and strategies. ● Concentration of risk increases the potential for significant losses. ● Our commercial loan, CRE loan and construction loan portfolios expose us to risks that may be greater than the risks related to our other loans. ● Our investments and/or financings in certain tax-advantaged projects may not generate returns as anticipated and may have an adverse impact on our financial results. ● Our use of appraisals in deciding whether to make a loan on or secured by real property does not ensure the value of the real property collateral. ● Our use of third-party vendors and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention. ● Our deposit insurance premiums could increase in the future, which could have a material adverse impact on future earnings and financial condition. ● As we expand our business outside of California markets, including through acquisitions, we may encounter additional risks that could adversely affect our business and earnings. ● We face substantial competition from our competitors. ● We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects. ● Natural disasters, geopolitical events, public health crises and other catastrophic events beyond our control could adversely affect us. ● Increasing scrutiny and expectations on ESG matters, including climate change, from a variety of stakeholders may increase our costs or otherwise adversely affect our business. 29 Table of Contents Information, Information Technology and Privacy Risks ● We depend on the accuracy and completeness of information about clients. ● Our information systems may experience failures, interruptions, or breaches in security, which could have a material and adverse effect on our business, financial condition, results of operations and the value of our common stock. ● Our need to continue to adapt our information technology systems to allow us to provide new and expanded service could present operational issues, require significant capital spending, and disrupt our business. ● Managing reputational risk is important to attracting and maintaining clients, investors, and employees. ● Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities.
Operational Risks ● We may incur significant losses as a result of ineffective risk management processes and strategies. ● Concentration of risk increases the potential for significant losses. ● Our commercial loan, CRE loan and construction loan portfolios expose us to risks that may be greater than the risks related to our other loans. ● Our investments and/or financings in certain tax-advantaged projects may not generate returns as anticipated and may have an adverse impact on our financial results. ● Our use of appraisals in deciding whether to make a loan on or secured by real property does not ensure the value of the real property collateral. ● Our use of third-party vendors and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention. ● Our deposit insurance premiums could increase in the future, which could have a material adverse impact on future earnings and financial condition. ● As we expand our business outside of California markets, including through acquisitions, we may encounter additional risks that could adversely affect our business and earnings. ● We face substantial competition from our competitors. ● We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects. ● Natural disasters, geopolitical events, public health crises and other catastrophic events beyond our control could adversely affect us. ● Increasing scrutiny and expectations on ESG matters, including climate change, from a variety of stakeholders may increase our costs or otherwise adversely affect our business. 18 Table of Contents Information, Information Technology and Privacy Risks ● We depend on the accuracy and completeness of information about clients. ● Our information systems may experience failures, interruptions, or breaches in security, which could have a material and adverse effect on our business, financial condition, results of operations and the value of our common stock. ● Our need to continue to adapt our information technology systems to allow us to provide new and expanded service could present operational issues, require significant capital spending, and disrupt our business. ● Managing reputational risk is important to attracting and maintaining clients, investors, and employees. ● Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities.
These include general or local economic conditions and neighborhood characteristics, unemployment rates, real estate tax rates, the cost of operating the properties, governmental regulations and fiscal policies, acts of nature including earthquakes, floods, and hurricanes (which may result in uninsured losses), and other factors beyond our control.
These include general or local economic conditions and neighborhood characteristics, unemployment rates, real estate tax rates, the cost of operating the properties, governmental regulations and fiscal policies, acts of nature including wildfires, earthquakes, floods, and hurricanes (which may result in uninsured losses), and other factors beyond our control.
Statutory and contractual restrictions (including our outstanding debt securities) and our regulators may also restrict the Bancorp ’ s ability to pay dividends. ● The issuance of preferred stock could adversely affect holders of common stock. ● Our outstanding debt securities restrict our ability to pay dividends on our common stock. ● Certain provisions of our charter and bylaws could make acquiring our Company more difficult. ● We may need to raise additional capital, which may dilute the interests of holders of our common stock or otherwise have an adverse effect on their investment. 31 Table of Contents Market and Economic Risks Current unfavorable and uncertain economic and market conditions may adversely affect our industry and business.
Statutory and contractual restrictions (including our outstanding debt securities) and our regulators may also restrict the Bancorp ’ s ability to pay dividends. ● The issuance of preferred stock could adversely affect holders of common stock. ● Our outstanding debt securities restrict our ability to pay dividends on our common stock. ● Certain provisions of our charter and bylaws could make acquiring our Company more difficult. ● We may need to raise additional capital, which may dilute the interests of holders of our common stock or otherwise have an adverse effect on their investment. 19 Table of Contents Market and Economic Risks Current unfavorable and uncertain economic and market conditions may adversely affect our industry and business.
Natural disasters such as earthquakes, landslides, wildfires, extreme weather conditions, droughts, hurricanes, floods, and other acts of nature, geopolitical events such as those involving civil unrest, changes in government regimes, terrorism or military conflict, climate change related events (including both chronic changes such as sea level rise as well as climate change’s contribution to the intensity and frequency of various natural disasters or other catastrophic events) and pandemics and other public health crises, and other catastrophic events could, among other things, (i) adversely affect our business operations and those of our clients, counterparties and service providers; (ii) cause substantial damage and loss to real and personal property, some of which may not be covered by insurance; (iii) impair our borrowers’ ability to service their loans; (iv) decrease the level and duration of deposits by clients; (v) erode the value of loan collateral; (vi) result in an increase in the amount of our non-performing loans and a higher level of non-performing assets (including real estate owned), net charge-offs, and provision for loan losses; (vii) reduce the availability of insurance at prices acceptable to us or our prospective borrowers; or (viii) lead to other operational difficulties and impair our ability to manage our business.
Natural disasters such as earthquakes, landslides, wildfires, extreme weather conditions, droughts, hurricanes, floods, and other acts of nature, geopolitical events such as those involving civil unrest, changes in government regimes, terrorism or military conflict, climate change related events (including both chronic changes such as sea level rise as well as climate change’s contribution to the intensity and frequency of various natural disasters or other catastrophic events) and pandemics and other public health crises, and other catastrophic events have in the past and may in the future, among other things, (i) adversely affect our business operations and those of our clients, counterparties and service providers; (ii) cause substantial damage and loss to real and personal property, some of which may not be covered by insurance; (iii) impair our borrowers’ ability to service their loans; (iv) decrease the level and duration of deposits by clients; (v) erode the value of loan collateral; (vi) result in an increase in the amount of our non-performing loans and a higher level of non-performing assets (including real estate owned), net charge-offs, and provision for loan losses; (vii) reduce the availability of insurance at prices acceptable to us or our prospective borrowers; or (viii) lead to other operational difficulties and impair our ability to manage our business.
Even if this is not the case, our current actions may subsequently be determined to be insufficient by various stakeholders, and we may be subject to various adverse consequences or investor or regulator engagement on our ESG initiatives and disclosures, even if such initiatives are currently voluntary. 41 Table of Contents Certain market participants, including major institutional investors and capital providers, use third-party benchmarks and scores to assess companies’ ESG profiles in making investment or voting decisions.
Even if this is not the case, our current actions may subsequently be determined to be insufficient by various stakeholders, and we may be subject to various adverse consequences or investor or regulator engagement on our ESG initiatives and disclosures, even if such initiatives are currently voluntary. 26 Table of Contents Certain market participants, including major institutional investors and capital providers, use third-party benchmarks and scores to assess companies’ ESG profiles in making investment or voting decisions.
The level of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates which may, in turn, impact the reliability of the process. ● The value of the portfolio of investment securities that we hold may be adversely affected by increasing interest rates and defaults by debtors. 32 Table of Contents ● There have been changes and discussions with respect to U.S. trade policies, legislation, treaties and tariffs, including trade policies and tariffs affecting other countries, including China, the European Union, Canada and Mexico and retaliatory tariffs by such countries.
The level of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates which may, in turn, impact the reliability of the process. ● The value of the portfolio of investment securities that we hold may be adversely affected by increasing interest rates and defaults by debtors. ● There have been changes and discussions with respect to U.S. trade policies, legislation, treaties and tariffs, including trade policies and tariffs affecting other countries, including China, the European Union, Canada and Mexico and retaliatory tariffs by such countries.
For example, the SEC has published proposed rules that would require companies to provide significantly expanded climate-related disclosures in their periodic reporting, which may require us to incur significant additional costs to comply, including the implementation of significant additional internal controls processes and procedures regarding matters that have not been subject to such controls in the past, and impose increased oversight obligations on our management and board of directors.
For example, the SEC published proposed rules that would require companies to provide significantly expanded climate-related disclosures in their periodic reporting, which would have required us to incur significant additional costs to comply, including the implementation of significant additional internal controls processes and procedures regarding matters that have not been subject to such controls in the past, and impose increased oversight obligations on our management and board of directors.
A significant decline in our stock price could result in substantial losses for individual stockholders and could lead to costly and disruptive securities litigation. 48 Table of Contents An investment in our common stock is not an insured deposit.
A significant decline in our stock price could result in substantial losses for individual stockholders and could lead to costly and disruptive securities litigation. 30 Table of Contents An investment in our common stock is not an insured deposit.
If the Company were to determine that the carrying amount of the goodwill exceeded its implied fair value, the Company would be required to write down the value of the goodwill on the balance sheet, adversely affecting earnings as well as stockholders equity. 36 Table of Contents Operational Risks We may incur significant losses as a result of ineffective risk management processes and strategies.
If the Company were to determine that the carrying amount of the goodwill exceeded its implied fair value, the Company would be required to write down the value of the goodwill on the balance sheet, adversely affecting earnings as well as stockholders equity. Operational Risks We may incur significant losses as a result of ineffective risk management processes and strategies.
To the extent we issue capital stock in connection with additional transactions, if any, these transactions and related stock issuances may have a dilutive effect on earnings per share and share ownership. 39 Table of Contents Our earnings, financial condition, and prospects after a merger or acquisition depend in part on our ability to successfully integrate the operations of the acquired company.
To the extent we issue capital stock in connection with additional transactions, if any, these transactions and related stock issuances may have a dilutive effect on earnings per share and share ownership. Our earnings, financial condition, and prospects after a merger or acquisition depend in part on our ability to successfully integrate the operations of the acquired company.
In addition, a recent change in accounting standards will result in a significant change in how we recognize credit losses as further disclosed in the risk factor below entitled, “Our financial results could be adversely affected by changes in accounting standards or tax laws and regulations.” 34 Table of Contents The allowance for credit losses is an estimate of expected credit losses.
In addition, a change in accounting standards could result in a significant change in how we recognize credit losses as further disclosed in the risk factor below entitled, “Our financial results could be adversely affected by changes in accounting standards or tax laws and regulations.” 21 Table of Contents The allowance for credit losses is an estimate of expected credit losses.
No banking organizations with total assets under $5 billion will pay a special assessment, based on data for the December 31, 2022 reporting period. ● Currently, the FDIC estimates that of the total cost of the failures of Silicon Valley Bank and Signature Bank, approximately $16.3 billion was attributable to the protection of uninsured depositors.
No banking organizations with total assets under $5 billion will pay a special assessment, based on data for the December 31, 2022, reporting period. ● The FDIC initial estimates of the total cost of the failures of Silicon Valley Bank and Signature Bank, were approximately $16.3 billion and was attributable to the protection of uninsured depositors.
If this were to occur, our business, financial condition and results of operations could be adversely affected, perhaps materially. Natural disasters, geopolitical events, public health crises and other catastrophic events beyond our control could adversely affect us.
If this were to occur, our business, financial condition and results of operations could be adversely affected, perhaps materially. 25 Table of Contents Natural disasters, geopolitical events, public health crises and other catastrophic events beyond our control could adversely affect us.
Our loan portfolio includes commercial loans and commercial real estate loans, which are secured by hotels and motels, shopping/retail centers, service station and car wash, industrial and warehouse properties, and other types of commercial properties.
Our loan portfolio includes commercial loans and commercial real estate loans, which are secured by hotels and motels, shopping/retail centers, service station and car wash, industrial and warehouse properties, residential apartments/multifamily, and other types of commercial properties.
These loss estimates will be periodically adjusted as assets are sold, liabilities are satisfied, and receivership expenses are incurred. ● The special assessment will be collected at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly assessment periods.
These loss estimates will be periodically adjusted as assets are sold, liabilities are satisfied, and receivership expenses are incurred. 24 Table of Contents ● The special assessment initially would be collected at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly assessment periods.
Any continued declines in real estate sales and prices coupled with any weakness in the economy and continued high unemployment will result in higher than expected loan delinquencies or problem assets, additional loan charge-offs and provisions for loan losses, a decline in demand for our products and services, or a lack of growth or a decrease in deposits, which may cause us to incur losses, adversely affect our capital, and hurt our business. 33 Table of Contents Adverse conditions in Asia and elsewhere could adversely affect our business.
Any continued declines in real estate sales and prices coupled with any weakness in the economy and continued high unemployment will result in higher than expected loan delinquencies or problem assets, additional loan charge-offs and provisions for loan losses, a decline in demand for our products and services, or a lack of growth or a decrease in deposits, which may cause us to incur losses, adversely affect our capital, and hurt our business.
See Part I — Item 1 — “Business — Regulation and Supervision.” We are subject to stringent capital requirements, including those required by Basel III.
See Part I — Item 1 — “Business — Regulation and Supervision.” 28 Table of Contents We are subject to stringent capital requirements, including those required by Basel III.
In addition, to the extent changes in the political environment have a negative impact on us or on the markets in which we operate our business, results of operations and financial condition could be materially and adversely impacted in the future. It remains unclear what the U.S.
In addition, to the extent changes in the political environment have a negative impact on us or on the markets in which we operate our business, results of operations and financial condition could be materially and adversely impacted in the future.
There can be no assurance that we would succeed in raising any such additional capital, and any capital we obtain may dilute the interests of holders of our common stock, or otherwise have an adverse effect on their investment. 50 Table of Contents
There can be no assurance that we would succeed in raising any such additional capital, and any capital we obtain may dilute the interests of holders of our common stock, or otherwise have an adverse effect on their investment. 31 Table of Contents Item 1B. Unresolved Staff Comments None.
Thus, our ultimate losses may be higher or lower, and possibly significantly so, than the amounts accrued for loss contingencies arising from legal proceedings, and these losses could have a material and adverse effect on our business, financial condition, results of operations and the value of our common stock.
Thus, our ultimate losses may be higher or lower, and possibly significantly so, than the amounts accrued for loss contingencies arising from legal proceedings, and these losses could have a material and adverse effect on our business, financial condition, results of operations and the value of our common stock. 29 Table of Contents Liabilities from environmental regulations could materially and adversely affect our business and financial condition.
Credit, Interest Rate and Liquidity Risks We may be required to make additional provisions for loan losses and charge off additional loans in the future, which could adversely affect our results of operations. At December 31, 2023, our allowance for loan losses totaled $154.6 million and we had net charge-offs of $17.6 million for 2023.
Credit, Interest Rate and Liquidity Risks We may be required to make additional provisions for loan losses and charge off additional loans in the future, which could adversely affect our results of operations. At December 31, 2024, our allowance for loan losses totaled $161.8 million and we had net charge-offs of $29.7 million for 2024.
Quoted market prices in active markets are the best evidence of fair value and are to be used as the basis for measuring impairment, when available. Other acceptable valuation methods include present value measurements based on multiples of earnings or revenues, or similar performance measures.
The Company tests goodwill for impairment on an annual basis, or more frequently, if necessary. Quoted market prices in active markets are the best evidence of fair value and are to be used as the basis for measuring impairment, when available. Other acceptable valuation methods include present value measurements based on multiples of earnings or revenues, or similar performance measures.
Managing reputational risk is important to attracting and maintaining clients, investors, and employees. Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, failure to protect confidential client information and questionable, illegal, or fraudulent activities of our clients.
Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, failure to protect confidential client information and questionable, illegal, or fraudulent activities of our clients.
Based on a review of the appropriateness of the allowance for loan losses at December 31, 2023 in light of current economic conditions, we recorded a provision for credit losses of $26.0 million in the year ended December 31, 2023.
Based on a review of the appropriateness of the allowance for loan losses at December 31, 2024, in light of current economic conditions, we recorded a provision for credit losses of $37.5 million in the year ended December 31, 2024.
Because a significant portion of our loan portfolio is comprised of commercial real estate loans, the banking regulators may require us to maintain higher levels of capital than we would otherwise be expected to maintain, which could limit our ability to leverage our capital and have a material adverse effect on our business, financial condition, results of operations and prospects.
Because a significant portion of our loan portfolio is comprised of commercial real estate loans, the banking regulators may require us to maintain higher levels of capital than we would otherwise be expected to maintain, which could limit our ability to leverage our capital and have a material adverse effect on our business, financial condition, results of operations and prospects. 23 Table of Contents In addition, the risks inherent in construction lending may continue to affect adversely our results of operations.
These law changes may be retroactive to previous periods and as a result could negatively affect our current and future financial performance.
In addition, changes to tax law could increase our effective tax rates. These law changes may be retroactive to previous periods and as a result could negatively affect our current and future financial performance.
This legislation and similar legislation that may be introduced in future may require us to incur various and significant costs to comply. Various banking regulators, including the FDIC and the New York Department of Financial Services, have also proposed guidelines for climate-related risk management.
The legislation authorizes regulations which could administer penalties against reporting entities for non-compliance. This legislation and similar legislation that may be introduced in future may require us to incur various and significant costs to comply. Various banking regulators, including the FDIC and the New York Department of Financial Services, have also proposed guidelines for climate-related risk management.
Although we have historically paid cash dividends on our common stock, we are not required to do so and our board of directors could reduce or eliminate our common stock dividend in the future, which could adversely affect the market price of our common stock. 49 Table of Contents The issuance of preferred stock could adversely affect holders of common stock, which may negatively impact their investment.
Although we have historically paid cash dividends on our common stock, we are not required to do so and our board of directors could reduce or eliminate our common stock dividend in the future, which could adversely affect the market price of our common stock.
Liabilities from environmental regulations could materially and adversely affect our business and financial condition. In the course of the Bank’s business, the Bank may foreclose and take title to real estate and could be subject to environmental liabilities with respect to these properties.
In the course of the Bank’s business, the Bank may foreclose and take title to real estate and could be subject to environmental liabilities with respect to these properties.
We regularly use third party vendors as part of our business. We also have substantial ongoing business relationships with other third parties. These types of third-party relationships are subject to increasingly demanding regulatory requirements and attention by our federal bank regulators.
Our use of third-party vendors and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention. We regularly use third party vendors as part of our business. We also have substantial ongoing business relationships with other third parties.
These risks are discussed more fully below and include, but are not limited to: Market and Economic Risks ● Unfavorable or uncertain economic and market conditions, including in California and the other markets in which we operate, can adversely affect our industry and business. ● Our loan portfolio is largely secured by real estate, and a downturn in the real estate market may adversely affect our results of operations. ● Adverse conditions in Asia and elsewhere could adversely affect our business. ● The soundness of other financial institutions could adversely affect us. 28 Table of Contents Credit, Interest Rate and Liquidity Risks ● We may be required to make additional provisions for loan losses and charge off additional loans in the future, which could adversely affect our results of operations. ● The allowance for credit losses is an estimate of expected credit losses.
These risks are discussed more fully below and include, but are not limited to: Market and Economic Risks ● Unfavorable or uncertain economic and market conditions, including in California and the other markets in which we operate, can adversely affect our industry and business. ● Our loan portfolio is largely secured by real estate, and a downturn in the real estate market may adversely affect our results of operations. ● Adverse conditions in Asia and elsewhere could adversely affect our business. ● The soundness of other financial institutions could adversely affect us.
Administration or foreign governments will or will not do with respect to tariffs already imposed, additional tariffs that may be imposed, or international trade agreements and policies.
It remains unclear what the current Administration in the U.S. or foreign governments will or will not do with respect to tariffs already imposed, additional tariffs that may be imposed, or international trade agreements and policies.
Failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies, civil money penalties, and/or reputation damage, which could have a material and adverse effect on our business, financial condition, results of operations and the value of our common stock. 44 Table of Contents Because our business is highly regulated, the laws, rules, regulations, and supervisory guidance and policies applicable to us are subject to regular modification and change.
Failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies, civil money penalties, and/or reputation damage, which could have a material and adverse effect on our business, financial condition, results of operations and the value of our common stock.
Deposit balances can decrease when clients perceive alternative investments as providing a better risk/return tradeoff. If clients move money out of bank deposits and into other investments, we would lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income.
If clients move money out of bank deposits and into other investments, we would lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income.
A trade war or other governmental action related to tariffs or international trade agreements or policies has the potential to negatively impact ours and/or our clients' costs, demand for our clients' products, and/or the U.S. economy or certain sectors thereof and, thus, adversely impact our business, financial condition and results of operations.
A trade war or other governmental action related to tariffs or international trade agreements or policies has the potential to negatively impact ours and/or our clients' costs, demand for our clients' products, and/or the U.S. economy or certain sectors thereof and, thus, adversely impact our business, financial condition and results of operations. ● The current Presidential Administration is seeking to enact significant changes that may impact economic and market conditions, including changes to the size and scope of the federal government.
Natural disasters, extreme weather conditions, geopolitical events, public health crises and other catastrophic events could also negatively affect our clients, counterparties and service providers, as well as result in disruptions in general economic activity and the financial and real estate markets. 40 Table of Contents Governmental and societal responses to climate change and other environmental impacts could adversely affect our business and performance, including indirectly through impacts on our clients.
Natural disasters, extreme weather conditions, geopolitical events, public health crises and other catastrophic events could also negatively affect our clients, counterparties and service providers, as well as result in disruptions in general economic activity and the financial and real estate markets.
We expect that our regulators will hold us responsible for deficiencies in our oversight and control of our third-party relationships and in the performance of the parties with which we have these relationships.
In certain cases, we may be required to renegotiate our agreements with these vendors to meet these enhanced requirements, which could increase our costs. We expect that our regulators will hold us responsible for deficiencies in our oversight and control of our third-party relationships and in the performance of the parties with which we have these relationships.
The risk of not being able to realize the tax credits and other tax benefits depends on many factors outside of our control, including changes in the applicable provisions of the tax code and the ability of the projects to be completed and properly managed. 38 Table of Contents Our use of appraisals in deciding whether to make a loan on or secured by real property does not ensure the value of the real property collateral.
The risk of not being able to realize the tax credits and other tax benefits depends on many factors outside of our control, including changes in the applicable provisions of the tax code and the ability of the projects to be completed and properly managed.
Moreover, elevated interest rates may adversely affect real estate sales and the refinancing of existing real estate loans. As of December 31, 2023, we had approximately $10.15 billion in commercial real estate and construction loans.
However, a declining interest rate environment may positively affect real estate sales and the refinancing of existing real estate loans. As of December 31, 2024, we had approximately $10.35 billion in commercial real estate and construction loans.
Additionally, negative news about us or the banking industry in general could negatively impact market and/or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits.
Additionally, negative news about the Company or the banking industry in general could negatively impact market and/or customer perceptions of our business, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits. 22 Table of Contents If the Company ’ s goodwill were determined to be impaired, it would result in a charge against earnings and thus a reduction in stockholders ’ equity.
The business of banking is affected significantly by the fiscal and monetary policies of the Federal government and its agencies. Such policies are beyond our control. We are particularly affected by the policies established by the Federal Reserve in relation to the supply of money and credit in the United States.
We are particularly affected by the policies established by the Federal Reserve in relation to the supply of money and credit in the United States.
We are subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and we could be negatively impacted by these laws.
Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities. We are subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and we could be negatively impacted by these laws.
If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our common stock could significantly decline, and you could lose some or all of your investment.
If this were to happen, the value of our common stock could significantly decline, and you could lose some or all of your investment. 17 Table of Contents Risk Factors Summary The following is a summary of the material risks that we believe could adversely affect our business, operations and financial results.
Our board of directors is authorized to issue preferred stock without any action on the part of the stockholders.
The issuance of preferred stock could adversely affect holders of common stock, which may negatively impact their investment. Our board of directors is authorized to issue preferred stock without any action on the part of the stockholders.
We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our clients. As a result, our ability to effectively compete to retain or acquire new business may be impaired, and our business, financial condition or results of operations, may be adversely affected.
We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our clients.
These changes and their effects can be difficult to predict and can materially and adversely impact how we record and report our financial condition and results of operations. 47 Table of Contents In addition, changes to tax law could increase our effective tax rates.
In addition, from time to time, federal and state taxing authorities will change the tax laws and regulations, and their interpretations. These changes and their effects can be difficult to predict and can materially and adversely impact how we record and report our financial condition and results of operations.
Because the estimated loss pursuant to the systemic risk determination will be periodically adjusted, the FDIC retains the ability to cease collection early, impose an extended special assessment collection period after the initial eight-quarter collection period to collect the difference between losses and the amounts collected, and impose a one-time final shortfall special assessment after both receiverships terminate. ● The special assessment will be collected beginning with the first quarterly assessment period of 2024 (i.e., January 1 through March 31, 2024) with an invoice payment date of June 28, 2024.
Because the estimated loss pursuant to the systemic risk determination will continue to be periodically adjusted, the FDIC retains the ability to cease collection early, impose an extended special assessment collection period after the initial eight-quarter collection period to collect the difference between losses and the amounts collected, and impose a one-time final shortfall special assessment after both receiverships terminate. ● The extent to which any such additional future assessments will impact our future deposit insurance expense is currently uncertain.
Economic conditions in California and the other markets in which we operate may adversely affect our business. Our banking operations are concentrated primarily in California, and secondarily in New York, Washington, Illinois, Texas, Maryland, Massachusetts, Nevada, New Jersey, and Hong Kong.
Our banking operations are concentrated primarily in California, and secondarily in New York, Washington, Illinois, Texas, Maryland, Massachusetts, Nevada, New Jersey, and Hong Kong. The economic conditions in these local markets may be different from, and in some instances worse than, the economic conditions in the United States as a whole.
Other examples include debit card/credit card fraud, check fraud, mechanical devices attached to ATM machines, social engineering and phishing attacks to obtain personal information, impersonation of our clients through the use of falsified or stolen credentials, employee fraud, information theft and other malfeasance. 42 Table of Contents The secure maintenance and transmission of confidential information, as well as the secure execution of transactions over our systems, are essential to protect us and our clients against fraud and security breaches and to maintain our clients’ confidence.
These breaches can remain undetected for an extended period of time. Other examples include debit card/credit card fraud, check fraud, mechanical devices attached to ATM machines, social engineering and phishing attacks to obtain personal information, impersonation of our clients through the use of falsified or stolen credentials, employee fraud, information theft and other malfeasance.
Moreover, we have made a portion of these loans in recent years and the borrowers may not have experienced a complete business or economic cycle. Furthermore, the deterioration of our borrowers’ businesses may hinder their ability to repay their loans with us, which could adversely affect our results of operations.
Furthermore, the deterioration of our borrowers’ businesses may hinder their ability to repay their loans with us, which could adversely affect our results of operations.
In considering whether to make a loan secured by real property, we typically require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made.
Our use of appraisals in deciding whether to make a loan on or secured by real property does not ensure the value of the real property collateral. In considering whether to make a loan secured by real property, we typically require an appraisal of the property.
Virtually all of our assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on our performance than the general levels of inflation or deflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the price of goods and services.
The primary impact of inflation on our operations is reflected in increased operating costs. Conversely, deflation will tend to erode collateral values and diminish loan quality. Virtually all of our assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on our performance than the general levels of inflation or deflation.
Moreover, the long-term effects of the Federal Reserve’s unprecedented quantitative easing and tapering off are unknown, and while interest rates have risen, they remain at historically low levels.
Moreover, the long-term effects of the Federal Reserve’s unprecedented quantitative easing and tapering off are unknown, and while interest rates have risen, they still remain at relatively low levels. There can be no assurance that we will be successful in minimizing the adverse effects of changes in interest rates. Inflation and deflation may adversely affect our financial performance.
If the appraisal does not reflect the amount that may be obtained upon any sale or foreclosure of the property, we may not realize an amount equal to the indebtedness secured by the property. Our use of third-party vendors and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention.
However, an appraisal is only an estimate of the value of the property at the time the appraisal is made. If the appraisal does not reflect the amount that may be obtained upon any sale or foreclosure of the property, we may not realize an amount equal to the indebtedness secured by the property.
Liquidity risk could impair our ability to fund operations and jeopardize our financial condition. Liquidity is essential to our business. An inability to raise funds through deposits, FHLB advances and other borrowings, the sale of loans, the issuance of securities and other sources could have a material adverse effect on our liquidity.
An inability to raise funds through deposits, FHLB advances and other borrowings, the sale of loans, the issuance of securities and other sources could have a material adverse effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general.
Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us.
Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us. Deposit balances can decrease when clients perceive alternative investments as providing a better risk/return tradeoff.
We have policies and procedures in place that seek to protect our reputation and promote ethical conduct, but these policies and procedures may not be fully effective.
We have policies and procedures in place that seek to protect our reputation and promote ethical conduct, but these policies and procedures may not be fully effective. Negative publicity regarding our business, employees, or clients, with or without merit, may result in the loss of clients, investors, and employees, costly litigation, a decline in revenues, and increased governmental regulation.
At the state level, the California legislature recently passed legislation requiring that certain entities doing business in California with revenues exceeding $1 billion report their direct and indirect greenhouse gas emissions. The legislation authorizes regulations which could administer penalties against reporting entities for non-compliance.
In the absence of an SEC rule requiring such disclosures, certain states may be more likely to implement legislation at the state-level requiring climate and other environmental disclosure. For instance, the California legislature passed legislation requiring that certain entities doing business in California with revenues exceeding $1 billion report their direct and indirect greenhouse gas emissions.
If we are unable to meet the requirements of any corrective actions, we could become subject to supervisory action.
If we are unable to meet the requirements of any corrective actions, we could become subject to supervisory action. The terms of any such supervisory action could have a material and adverse effect on our business, financial condition, results of operations and the value of our common stock.
These principles require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation or deflation. The primary impact of inflation on our operations is reflected in increased operating costs. Conversely, deflation will tend to erode collateral values and diminish loan quality.
The Consolidated Financial Statements and related financial data presented in this report have been prepared in accordance with GAAP. These principles require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation or deflation.
The costs of defending, and any adverse outcome from, any such challenge could damage our reputation or could have a material adverse effect on our business, financial condition or results of operations. 46 Table of Contents Governmental monetary policies and intervention to stabilize the U.S. financial system may affect our business and are beyond our control.
Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. The costs of defending, and any adverse outcome from, any such challenge could damage our reputation or could have a material adverse effect on our business, financial condition or results of operations.
If we foreclose on these loans, our holding period for the collateral typically is longer than residential properties because there are fewer potential purchasers of the collateral. 37 Table of Contents Additionally, many of the Bank’s commercial real estate and commercial business loans are made to small and medium sized businesses that may have a heightened vulnerability to economic conditions.
The collateral securing these loans typically cannot be liquidated as easily as residential real estate. If we foreclose on these loans, our holding period for the collateral typically is longer than residential properties because there are fewer potential purchasers of the collateral.
The terms of any such supervisory action could have a material and adverse effect on our business, financial condition, results of operations and the value of our common stock. 45 Table of Contents We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
Recent regulation requires us to enhance our due diligence, ongoing monitoring and control over our third-party vendors and other ongoing third-party business relationships. In certain cases, we may be required to renegotiate our agreements with these vendors to meet these enhanced requirements, which could increase our costs.
These types of third-party relationships are subject to increasingly demanding regulatory requirements and attention by our federal bank regulators. Recent regulation requires us to enhance our due diligence, ongoing monitoring and control over our third-party vendors and other ongoing third-party business relationships.
Risk Factors Summary The following is a summary of the material risks that we believe could adversely affect our business, operations and financial results.
If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected.
Removed
The economic conditions in these local markets may be different from, and in some instances worse than, the economic conditions in the United States as a whole.
Added
Credit, Interest Rate and Liquidity Risks ● We may be required to make additional provisions for loan losses and charge off additional loans in the future, which could adversely affect our results of operations. ● The allowance for credit losses is an estimate of expected credit losses.
Removed
There can be no assurance that we will be successful in minimizing the adverse effects of changes in interest rates. 35 Table of Contents Inflation and deflation may adversely affect our financial performance. The Consolidated Financial Statements and related financial data presented in this report have been prepared in accordance with GAAP.
Added
Risks Related to Ownership of Our Common Stock ● The price of our common stock may fluctuate significantly, and this may make it difficult for a holder to sell shares of common stock at times or at prices such holder finds attractive. ● An investment in our common stock is not an insured deposit. ● Statutory and regulatory restrictions on dividends and other distributions from the Bank may adversely impact us by limiting the amount of distributions the Bancorp may receive.
Removed
If the Company ’ s goodwill were determined to be impaired, it would result in a charge against earnings and thus a reduction in stockholders ’ equity. The Company tests goodwill for impairment on an annual basis, or more frequently, if necessary.
Added
These changes, if implemented and taken as a whole, may have varied effects on the economy that are difficult to predict.
Removed
The collateral securing these loans typically cannot be liquidated as easily as residential real estate.
Added
To the extent such changes have an adverse impact on the regional and local economies where we operate, our business, financial condition and results of operations may be adversely impacted. 20 Table of Contents Economic conditions in California and the other markets in which we operate may adversely affect our business.
Removed
In addition, the risks inherent in construction lending may continue to affect adversely our results of operations.
Added
Adverse conditions in Asia and elsewhere could adversely affect our business.
Removed
These breaches can remain undetected for an extended period of time.
Added
Interest rates do not necessarily move in the same direction or in the same magnitude as the price of goods and services. Liquidity risk could impair our ability to fund operations and jeopardize our financial condition. Liquidity is essential to our business.
Removed
Negative publicity regarding our business, employees, or clients, with or without merit, may result in the loss of clients, investors, and employees, costly litigation, a decline in revenues, and increased governmental regulation. 43 Table of Contents Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities.
Added
Additionally, many of the Bank’s commercial real estate and commercial business loans are made to small and medium sized businesses that may have a heightened vulnerability to economic conditions. Moreover, we have made a portion of these loans in recent years and the borrowers may not have experienced a complete business or economic cycle.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

1 edited+0 added−0 removed23 unchanged
Biggest changeThe Chief Risk Officer and the board-level risk committees of the Company and the Bank report to the full board of directors on key cybersecurity risk management topics, as appropriate.
Biggest changeThe Chief Risk Officer and the board-level risk committees of the Company and the Bank report to the full board of directors on key cybersecurity risk management topics, as appropriate. 32 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−0 removed2 unchanged
Biggest changeThe other branch and representative offices and other properties are leased by the Bank under leases with expiration dates ranging from January 2024 to December 2029, exclusive of renewal options. As of December 31, 2023, the Bank’s investment in premises and equipment totaled $91.1 million, net of accumulated depreciation. See Note 7 and Note 15 to the Consolidated Financial Statements.
Biggest changeThe other branch offices of the Bank, as well as certain representative offices and loan production offices, are leased by the Bank under leases with expiration dates ranging from January 2025 to December 2029, exclusive of renewal options. As of December 31, 2024, the Bank’s investment in premises and equipment totaled $88.7 million, net of accumulated depreciation.
It also maintains certain of its administrative offices at its Corporate Center located at 9650 Flair Drive, El Monte, California 91731, and a building located at 4128 Temple city Boulevard, Rosemead. The Bank owns the buildings and land in all three locations. The Bank owns 16 of its branch offices.
It also maintains certain of its administrative offices at its Corporate Center located at 9650 Flair Drive, El Monte, California 91731, and a building located at 4128 Temple City Boulevard, Rosemead. The Bank owns the buildings and land in all three locations. In addition, the Bank owns 15 of its active branch offices as well as two former branch offices.
Added
See Note 6 and Note 14 to the Consolidated Financial Statements.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+3 added−2 removed3 unchanged
Biggest changePerformance Graph The graph and accompanying information furnished below shows the cumulative total shareholder return over a five-year period through December 31, 2023, assuming an investment of $100 was made and that all dividends were reinvested, in each of our common stock, the Standard & Poor’s (S&P) 500 Index, and the S&P U.S. BMI Banks–Western Region Index. The S&P U.S.
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans The information required by this item regarding equity compensation plans is incorporated by reference to the information set forth in Part III, Item 12 in this report. 33 Table of Contents Performance Graph The graph and accompanying information furnished below shows the cumulative total shareholder return over a five-year period through December 31, 2024, assuming an investment of $100 was made and that all dividends were reinvested, in each of our common stock, the Standard & Poor’s (S&P) 500 Index, and the S&P U.S.
We will furnish, without charge, on the written request of any person who is a stockholder of record as of the record date for the 2024 annual meeting of stockholders, a list of the companies included in the S&P U.S. BMI Banks–Western Region Index.
We will furnish, without charge, on the written request of any person who is a stockholder of record as of the record date for the 2025 annual meeting of stockholders, a list of the companies included in the S&P U.S. BMI Banks–Western Region Index.
Requests for this information should be addressed to May Chan, Corporate Secretary, Cathay General Bancorp, 777 North Broadway, Los Angeles, California 90012. 52 Table of Contents The comparisons in the graph below are based upon historical data and are not indicative of, or intended to forecast, the future performance of, or returns on, our common stock.
Requests for this information should be addressed to May Chan, Corporate Secretary, Cathay General Bancorp, 777 North Broadway, Los Angeles, California 90012. The comparisons in the graph below are based upon historical data and are not indicative of, or intended to forecast, the future performance of, or returns on, our common stock.
BMI Banks–Western Region Index is a market-weighted index comprised of publicly traded banks and bank holding companies (including the Company) most of which are based in California and the remainder of which are based in eight other western states, including Oregon, Washington, and Nevada.
BMI Banks–Western Region Index. The S&P U.S. BMI Banks–Western Region Index is a market-weighted index comprised of publicly traded banks and bank holding companies (including the Company) most of which are based in California and the remainder of which are based in eight other western states, including Oregon, Washington, and Nevada.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders Bancorp’s common stock is listed on the NASDAQ Global Select Market under the symbol “CATY.” As of February 15, 2024, Bancorp had outstanding approximately 72,669,738 shares of common stock with approximately 1,480 holders of record.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders Bancorp’s common stock is listed on the NASDAQ Global Select Market under the symbol “CATY.” As of February 14, 2025, Bancorp had outstanding approximately 70,285,292 shares of common stock with approximately 1,440 holders of record.
Unregistered Sales of Equity Securities There were no sales of any equity securities by the Company during the period covered by this Annual Report on Form 10-K that were not registered under the Securities Act. 53 Table of Contents Issuer Purchases of Equity Securities On May 26th, 2022, the Board of Directors approved a stock repurchase program to buyback up to $125.0 million of the Company’s common stock.
Unregistered Sales of Equity Securities There were no sales of any equity securities by the Company during the period covered by this Annual Report on Form 10-K that were not registered under the Securities Act. 34 Table of Contents Issuer Purchases of Equity Securities 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.
BMI Banks - Western Region Index 100.00 121.94 91.26 140.71 109.19 108.54 Source: S&P Global Market Intelligence © 2024 This information shall not be deemed to be ‘‘soliciting material’’ or to be ‘‘filed’’ with the SEC or subject to Regulation 14A (17 CFR 240.14a-1-240.14a-104), other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of section 18 of the Exchange Act (15 U.S.C. 78r).
BMI Banks - Western Region Index 100.00 74.84 115.39 89.54 89.01 123.76 Source: S&P Global Market Intelligence © 2025 This information shall not be deemed to be ‘‘soliciting material’’ or to be ‘‘filed’’ with the SEC or subject to Regulation 14A (17 CFR 240.14a-1-240.14a-104), other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of section 18 of the Exchange Act (15 U.S.C. 78r).
Through December 31, 2022, the Company repurchased 2,522,538 shares of common stock for a total of $108.4 million, at an average cost of $42.98 per share under the May 2022 buyback program.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources – Dividend Policy.”. Securities Authorized for Issuance under Equity Compensation Plans The information required by this item regarding equity compensation plans is incorporated by reference to the information set forth in Part III, Item 12 in this report.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources – Dividend Policy.”.
Removed
Period Ending Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Cathay General Bancorp 100.00 117.48 103.80 142.98 139.97 158.85 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 S&P U.S.
Added
Period Ending Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 Cathay General Bancorp 100.00 88.36 121.70 119.14 135.21 149.19 S&P 500 Index 100.00 118.40 152.39 124.79 157.59 197.02 S&P U.S.
Removed
The Company completed its May 2022 stock buyback program by repurchasing 375,090 shares at an average cost of $44.20 for a total of $16.6 million during the first quarter of 2023. Item 6. Reserved
Added
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.
Added
Issuer Purchases of Equity Securities Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs October 1, 2024 - October 31, 2024 157,237 $ 46.23 157,237 $ 57,661,375.00 November 1, 2024 - November 30, 2024 88,205 $ 45.98 88,205 $ 53,605,625.00 December 1, 2024 - December 31, 2024 261,209 $ 47.99 261,209 $ 41,069,402.00 Total 506,651 $ 47.10 506,651 $ 41,069,402.00 Item 6.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

149 edited+13 added−13 removed107 unchanged
Biggest changeIt 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. 77 Table of Contents The following table sets forth the information relating to the allowance for loan losses, charge-offs, recoveries, and the reserve for off-balance sheet credit commitments for the past five years: Allowance for Credit Losses Amount Outstanding as of December 31, 2023 2022 2021 2020 2019 (In thousands) Allowance for loan losses Balance at beginning of year $ 146,485 $ 136,157 $ 166,538 $ 123,224 $ 122,391 Impact of ASU 2016-13 adoption — — (1,560 ) — — Adjusted beginning balance $ 146,485 $ 136,157 $ 164,978 $ 123,224 $ 122,391 Provision/(reversal) for credit losses 25,655 12,913 (11,210 ) 57,500 (7,000 ) Charge-offs : Commercial loans (13,909 ) (3,222 ) (20,051 ) (21,996 ) (6,997 ) Construction loans (4,221 ) — — — — Commercial real estate loans and residential mortgage loans (5,341 ) (2,152 ) (3 ) — — Installment loans and other loans (15 ) (116 ) — — — Total charge-offs (23,486 ) (5,490 ) (20,054 ) (21,996 ) (6,997 ) Recoveries: Commercial loans 2,990 2,465 1,706 7,267 4,155 Construction loans — 6 76 — 4,612 Commercial real estate loans and residential mortgage loans 2,918 432 661 543 6,063 Installment loans and other loans — 2 — — — Total recoveries 5,908 2,905 2,443 7,810 14,830 Balance at end of period $ 154,562 $ 146,485 $ 136,157 $ 166,538 $ 123,224 Reserve for off-balance sheet credit commitments Balance at beginning of year $ 8,730 $ 7,100 $ 5,880 $ 3,855 $ 2,250 Impact of ASU 2016-13 adoption — — 6,018 — — Adjusted beginning balance $ 8,730 $ 7,100 $ 11,898 $ 3,855 $ 2,250 Provision/(reversal) for credit losses 323 1,630 (4,798 ) 2,025 1,605 Balance at the end of period $ 9,053 $ 8,730 $ 7,100 $ 5,880 $ 3,855 Average loans outstanding during the year (1) $ 18,763,271 $ 17,631,943 $ 15,827,550 $ 15,500,910 $ 14,510,678 Ratio of net charge-offs/(recoveries) to average loans outstanding during the year (1) 0.09 % 0.01 % 0.11 % 0.09 % (0.05 )% Provision/(reversal) for credit losses to average loans outstanding during the year (1) 0.14 % 0.07 % (0.07 )% 0.37 % (0.05 )% Allowance for credit losses to non-performing portfolio loans at year-end (2) 221.58 % 192.97 % 212.91 % 237.27 % 270.77 % Allowance for credit losses to gross loans at year-end (1) 0.84 % 0.85 % 0.88 % 1.10 % 0.84 % (1) Excluding loans held for sale (2) Excluding non-accrual loans held for sale 78 Table of Contents The table set forth below reflects management’s allocation of the allowance for loan losses by loan category and the ratio of each loan category to the total loans as of the dates indicated: Allocation of Allowance for Loan Losses As of December 31, 2023 2022 2021 2020 2019 Percentage Percentage Percentage Percentage Percentage of Loans in of Loans in of Loans in of Loans in of Loans in Each Each Each Each Each Category Category Category Category Category to Average to Average to Average to Average to Average Amount Gross Loans Amount Gross Loans Amount Gross Loans Amount Gross Loans Amount Gross Loans (In thousands) Type of Loans: Commercial loans $ 53,791 17.1 % $ 49,435 18.2 % $ 43,394 18.4 % $ 68,742 18.8 % $ 57,021 18.9 % Residential mortgage loans and equity lines 18,140 31.0 18,232 30.2 25,379 28.7 17,737 29.4 13,108 29.1 Commercial real estate loans 74,428 49.1 68,366 48.2 61,081 48.7 49,205 47.8 33,602 48.0 Construction loans 8,180 2.8 10,417 3.4 6,302 4.2 30,854 4.0 19,474 4.0 Installment and other loans 23 — 35 — 1 — — — 19 — Total $ 154,562 100.0 % $ 146,485 100.0 % $ 136,157 100.0 % $ 166,538 100.0 % $ 123,224 100.0 % The allowance allocated to commercial loans was $53.8 million at December 31, 2023, compared to $49.4 million at December 31, 2022.
Biggest changeThe following table sets forth the information relating to the allowance for loan losses, charge-offs, recoveries, and the reserve for off-balance sheet credit commitments for the past five years: Allowance for Credit Losses Amount Outstanding as of December 31, 2024 2023 2022 2021 2020 (In thousands) Allowance for loan losses Balance at beginning of year $ 154,562 $ 146,485 $ 136,157 $ 166,538 $ 123,224 Impact of ASU 2016-13 adoption — — — (1,560 ) — Adjusted beginning balance $ 154,562 $ 146,485 $ 136,157 $ 164,978 $ 123,224 Provision/(reversal) for credit losses 36,877 25,655 12,913 (11,210 ) 57,500 Charge-offs: Commercial loans (26,926 ) (13,909 ) (3,222 ) (20,051 ) (21,996 ) Construction loans — (4,221 ) — — — Commercial real estate loans and residential mortgage loans (4,531 ) (5,341 ) (2,152 ) (3 ) — Installment loans and other loans (15 ) (15 ) (116 ) — — Total charge-offs (31,472 ) (23,486 ) (5,490 ) (20,054 ) (21,996 ) Recoveries: Commercial loans 1,102 2,990 2,465 1,706 7,267 Construction loans — — 6 76 — Commercial real estate loans and residential mortgage loans 694 2,918 432 661 543 Installment loans and other loans 2 — 2 — — Total recoveries 1,798 5,908 2,905 2,443 7,810 Balance at end of period $ 161,765 $ 154,562 $ 146,485 $ 136,157 $ 166,538 Reserve for off-balance sheet credit commitments Balance at beginning of year $ 9,053 $ 8,730 $ 7,100 $ 5,880 $ 3,855 Impact of ASU 2016-13 adoption — — — 6,018 — Adjusted beginning balance $ 9,053 $ 8,730 $ 7,100 $ 11,898 $ 3,855 Provision/(reversal) for credit losses 623 323 1,630 (4,798 ) 2,025 Balance at the end of period $ 9,676 $ 9,053 $ 8,730 $ 7,100 $ 5,880 Average loans outstanding during the year (1) $ 19,434,614 $ 18,763,271 $ 17,631,943 $ 15,827,550 $ 15,500,910 Ratio of net charge-offs/(recoveries) to average loans outstanding during the year (1) 0.15 % 0.09 % 0.01 % 0.11 % 0.09 % Provision/(reversal) for credit losses to average loans outstanding during the year (1) 0.19 % 0.14 % 0.07 % (0.07 )% 0.37 % Allowance for credit losses to non-performing portfolio loans at year-end (2) 98.98 % 221.58 % 192.97 % 212.91 % 237.27 % Allowance for credit losses to gross loans at year-end (1) 0.88 % 0.84 % 0.85 % 0.88 % 1.10 % (1) Excluding loans held for sale (2) Excluding non-accrual loans held for sale 53 Table of Contents The table set forth below reflects management’s allocation of the allowance for loan losses by loan category and the ratio of each loan category to the total loans as of the dates indicated: Allocation of Allowance for Loan Losses As of December 31, 2024 2023 2022 2021 2020 Percentage Percentage Percentage Percentage Percentage of Loans in of Loans in of Loans in of Loans in of Loans in Each Each Each Each Each Category Category Category Category Category to Average to Average to Average to Average to Average Amount Gross Loans Amount Gross Loans Amount Gross Loans Amount Gross Loans Amount Gross Loans (In thousands) Type of Loans: Commercial loans $ 57,796 16.2 % $ 53,791 17.1 % $ 49,435 18.2 % $ 43,394 18.4 % $ 68,742 18.8 % Residential mortgage loans and equity lines 16,181 31.0 18,140 31.0 18,232 30.2 25,379 28.7 17,737 29.4 Commercial real estate loans 79,597 51.0 74,428 49.1 68,366 48.2 61,081 48.7 49,205 47.8 Construction loans 8,185 1.8 8,180 2.8 10,417 3.4 6,302 4.2 30,854 4.0 Installment and other loans 6 — 23 — 35 — 1 — — — Total $ 161,765 100.0 % $ 154,562 100.0 % $ 146,485 100.0 % $ 136,157 100.0 % $ 166,538 100.0 % The allowance allocated to commercial loans was $57.8 million at December 31, 2024, compared to $53.8 million at December 31, 2023.
The overall increase in interest expense was primarily due to increases in rates on interest bearing deposits, and volume and rate increases in other borrowings as discussed below: ● Changes in volume: Average interest-bearing deposits increased $1.58 billion, or 11.4%, and average FHLB advances and other borrowings increased $257.9 million, or 104.3%.
The overall increase in interest expense was primarily due to increases in rates on interest-bearing deposits, and rate increases in other borrowings as discussed below: ● Changes in volume: Average interest-bearing deposits increased $1.58 billion, or 11.4%, and average FHLB advances and other borrowings increased $257.9 million, or 104.3%.
The Board of Directors provides oversight for the allowance evaluation process, including quarterly evaluations, and determines whether the allowance is appropriate to absorb losses in the credit portfolio.
The Board of Directors provides oversight for the allowance evaluation process, including quarterly evaluations, and determines whether the allowance is appropriate to absorb losses in the credit portfolio.
Identified credit exposures that are determined to be uncollectible are charged against the allowance for credit losses. Recoveries of previously charged-off amounts, if any, are credited to the allowance for credit losses.
Identified credit exposures that are determined to be uncollectible are charged against the allowance for credit losses. Recoveries of previously charged-off amounts, if any, are credited to the allowance for credit losses.
We have identified the policy and estimate related to the allowance for credit losses on loans as a critical accounting policy. Our critical accounting policies and estimates are described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report Form 10-K.
We have identified the policy and estimates related to the allowance for credit losses on loans as a critical accounting policy. Our critical accounting policies and estimates are described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report Form 10-K.
We estimate the probability of default during the reasonable and supportable forecast period using separate econometric regression models developed to correlate macroeconomic variables, (GDP, unemployment, CRE prices and residential mortgage prices) to historical credit performance for each of the six loan portfolios from the fourth quarter of 2007 to the fourth quarter of 2022.
We estimate the probability of default during the reasonable and supportable forecast period using separate econometric regression models developed to correlate macroeconomic variables, (GDP, unemployment, CRE prices and residential mortgage prices) to historical credit performance for each of the six loan portfolios from the fourth quarter of 2007 through the fourth quarter of 2022.
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 credit risk ratings and loss rates currently assigned are reasonable and appropriate as of the reporting date.
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 credit risk ratings and inherent loss rates currently assigned are reasonable and appropriate as of the reporting date.
For liabilities, we use our historical experience and decay factors to estimate the deposit runoffs of interest-bearing transactional deposits. We use certain assumptions to estimate fair values and expected maturities that are described in Note 17 to the Consolidated Financial Statements. Off-balance sheet commitments to extend credit, letters of credit, and bill of lading guarantees represent the contractual unfunded amounts.
For liabilities, we use our historical experience and decay factors to estimate the deposit runoffs of interest-bearing transactional deposits. We use certain assumptions to estimate fair values and expected maturities that are described in Note 16 to the Consolidated Financial Statements. Off-balance sheet commitments to extend credit, letters of credit, and bill of lading guarantees represent the contractual unfunded amounts.
However, based on our historical runoff experience, we expect the outflow will not be significant and can be replenished through our normal growth in deposits. As of December 31, 2023, management believes all the above-mentioned sources will provide adequate liquidity during the next twelve months for the Bank to meet its operating needs.
However, based on our historical runoff experience, we expect the outflow will not be significant and can be replenished through our normal growth in deposits. As of December 31, 2024, management believes all the above-mentioned sources will provide adequate liquidity during the next twelve months for the Bank to meet its operating needs.
Quantitative Information about Interest Rate Risk The following table shows the carrying value of our financial instruments that are sensitive to changes in interest rates, categorized by expected maturity, as well as the instruments’ total fair values at December 31, 2023, and 2022. For assets, expected maturities are based on contractual maturity.
Quantitative Information about Interest Rate Risk The following table shows the carrying value of our financial instruments that are sensitive to changes in interest rates, categorized by expected maturity, as well as the instruments’ total fair values at December 31, 2024, and 2023. For assets, expected maturities are based on contractual maturity.
These loss estimates will be periodically adjusted as assets are sold, liabilities are satisfied, and receivership expenses are incurred. ● The special assessment will be collected at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly assessment periods.
These loss estimates will be periodically adjusted as assets are sold, liabilities are satisfied, and receivership expenses are incurred. ● The special assessment initially would be collected at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly assessment periods.
Our allowance for credit losses is sensitive to a number of inputs, including macroeconomic forecast assumptions and credit rating migrations during the period. Our macroeconomic forecasts used in determining the December 31, 2023, allowance for credit losses consisted of three scenarios as provided by an outside forecaster.
Our allowance for credit losses is sensitive to a number of inputs, including macroeconomic forecast assumptions and credit rating migrations during the period. Our macroeconomic forecasts used in determining the December 31, 2024, allowance for credit losses consisted of three scenarios as provided by an outside forecaster.
Dividends paid to the Bancorp by the Bank are subject to regulatory limitations. Management believes the Bancorp’s liquidity generated from its prevailing sources is sufficient to meet its operational needs. Please also see Note 14 to the Consolidated Financial Statements regarding commitments and contingencies.
Dividends paid to the Bancorp by the Bank are subject to regulatory limitations. Management believes the Bancorp’s liquidity generated from its prevailing sources is sufficient to meet its operational needs. Please also see Note 13 to the Consolidated Financial Statements regarding commitments and contingencies.
Financial Statements and Supplementary Data.” In calculating our allowance for credit losses for the year ended 2023, the change in Moody’s forecast of future GDP, unemployment rates, CRE and home price indexes, did not result in a significant impact to the allowance for credit losses.
Financial Statements and Supplementary Data.” In calculating our allowance for credit losses for the year ended 2024, the change in Moody’s forecast of future GDP, unemployment rates, CRE and home price indexes, did not result in a significant impact to the allowance for credit losses.
Our tax returns are open for audits by the Internal Revenue Service back to 2020 and by the California Franchise Tax Board back to 2019. From time to time, there may be differences of opinion with respect to the tax treatment accorded transactions.
Our tax returns are open for audits by the Internal Revenue Service back to 2021 and by the California Franchise Tax Board back to 2020. From time to time, there may be differences of opinion with respect to the tax treatment accorded transactions.
When the net interest rate simulation projects that our tolerance level will be met or exceeded, we seek corrective action after considering, among other things, market conditions, client reaction, and the estimated impact on profitability.
When the net interest rate simulation projects that our tolerance level will be met or exceeded, we seek corrective action after considering, among other things, market conditions and the estimated impact on profitability.
Our methodology and framework along with the 8-quarter reasonable and supportable forecast period and the 4-quarter reversion period have remained consistent since the implementation of CECL on January 1, 2021. Certain management assumptions are reassessed every quarter based on current expectations for credit losses, while other assumptions are assessed and updated on at least an annual basis.
Our methodology and framework along with the 8-quarter reasonable and supportable forecast period and the 4-quarter reversion period have remained consistent since the implementation of CECL. Certain management assumptions are reassessed every quarter based on current expectations for credit losses, while other assumptions are assessed and updated on at least an annual basis.
Recent Accounting Pronouncements Please see Note 1 to the Consolidated Financial Statements for details of other recent accounting pronouncements and their expected impact, if any, on the Consolidated Financial Statements. 80 Table of Contents Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market Risk Market risk is the risk of loss from adverse changes in market prices and rates.
Recent Accounting Pronouncements Please see Note 1 to the Consolidated Financial Statements for details of other recent accounting pronouncements and their expected impact, if any, on the Consolidated Financial Statements. Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market Risk Market risk is the risk of loss from adverse changes in market prices and rates.
All material transactions between these entities are eliminated. 54 Table of Contents Critical Accounting Policies The discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP.
All material transactions between these entities are eliminated. Critical Accounting Policies The discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP.
No banking organizations with total assets under $5 billion will pay a special assessment, based on data for the December 31, 2022 reporting period. ● Currently, the FDIC estimates that of the total cost of the failures of Silicon Valley Bank and Signature Bank, approximately $16.3 billion was attributable to the protection of uninsured depositors.
No banking organizations with total assets under $5 billion will pay a special assessment, based on data for the December 31, 2022, reporting period. ● The FDIC initial estimates of the total cost of the failures of Silicon Valley Bank and Signature Bank were approximately $16.3 billion and was attributable to the protection of uninsured depositors.
The following tables provide a summary of the Company’s CREC, multifamily residential, and construction and land loans by geography as of December 31, 2023 and 2022.
The following tables provide a summary of the Company’s CREC, multifamily residential, and construction and land loans by geography as of December 31, 2024, and 2023.
Total CRE loans represented 292% of total risk-based capital as of December 31, 2023, and 287% as of December 31, 2022, which were within the Bank’s internal limit of 400% of total capital. See Part I — Item 1A — “Risk Factors” for a discussion of some of the factors that may affect us.
Total CRE loans represented 289% of total risk-based capital as of December 31, 2024, and 292% as of December 31, 2023, which were within the Bank’s internal limit of 400% of total capital. See Part I — Item 1A — “Risk Factors” for a discussion of some of the factors that may affect us.
Most of our CREC loan property types had a low weighted-average LTV ratio. Approximately 83% of total CREC loans had an LTV ratio of 60% or lower as of December 31, 2023 and 2022, respectively.
Most of our CREC loan property types had a low weighted-average LTV ratio. Approximately 85% and 83% of total CREC loans had an LTV ratio of 60% or lower as of December 31, 2024, and 2023, respectively.
The Bank paid dividends to the Bancorp totaling $134.0 million during 2023, $232.8 million during 2022, and $230.0 million during 2021. 69 Table of Contents The Federal Reserve Board issued Federal Reserve Supervision and Regulation Letter SR-09-4 that states that bank holding companies are expected to inform and consult with the Federal Reserve supervisory staff prior to declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid.
The Bank paid dividends to the Bancorp totaling $216.0 million during 2024, $134.0 million during 2023, and $232.8 million during 2022. 46 Table of Contents The Federal Reserve Board issued Federal Reserve Supervision and Regulation Letter SR-09-4 that states that bank holding companies are expected to inform and consult with the Federal Reserve supervisory staff prior to declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid.
As of December 2023, our average monthly liquidity ratio (defined as net cash plus short-term and marketable securities to net deposits and short-term liabilities) was 13.6% compared to 13.7% for December 2022. The Bank is a shareholder of the FHLB, which enables the Bank to have access to lower-cost FHLB financing when necessary.
As of December 2024, our average monthly liquidity ratio (defined as net cash plus short-term and marketable securities to net deposits and short-term liabilities) was 14.4% compared to 13.6% for December 2023. The Bank is a shareholder of the FHLB, which enables the Bank to have access to lower-cost FHLB financing when necessary.
At December 31, 2023, if interest rates were to increase instantaneously by 200 basis points, the simulation indicated that the economic value of equity would decrease by 8.4%, and conversely, if interest rates were to decrease instantaneously by 200 basis points, the simulation indicated that the economic value of equity would increase by 12.5%. 81 Table of Contents Although we believe our simulation modeling is helpful in managing interest rate risk, the model does require significant assumptions for, among other factors, the projection of loan prepayment rates on mortgage related assets, loan volumes and pricing, and deposit and borrowing volume and pricing, that might prove inaccurate.
At December 31, 2024, if interest rates were to increase instantaneously by 200 basis points, the simulation indicated that the economic value of equity would decrease by 6.8%, and conversely, if interest rates were to decrease instantaneously by 200 basis points, the simulation indicated that the economic value of equity would increase by 4.7%. 55 Table of Contents Although we believe our simulation modeling is helpful in managing interest rate risk, the model does require significant assumptions for, among other factors, the projection of loan prepayment rates on mortgage related assets, loan volumes and pricing, and deposit and borrowing volume and pricing, that might prove inaccurate.
Thus, the CECL methodology incorporates a broad range of information in developing credit loss estimates. For further information regarding the calculation of the allowance for credit losses on loans held for investment using the CECL methodology effective January 1, 2021, see Notes 1 and 5 to the Consolidated Financial Statements contained in “Item 8.
Thus, the CECL methodology incorporates a broad range of information in developing credit loss estimates. For further information regarding the calculation of the allowance for credit losses on loans held for investment using the CECL methodology, see Notes 1 and 4 to the Consolidated Financial Statements contained in “Item 8.
The Bank had borrowing capacity of $1.42 million from the Federal Reserve Bank Discount Window at December 31, 2023. Liquidity can also be provided through the sale of liquid assets, which consist of federal funds sold, securities purchased under agreements to resell, securities available-for-sale.
The Bank had borrowing capacity of $395.1 million from the Federal Reserve Bank Discount Window at December 31, 2024. Liquidity can also be provided through the sale of liquid assets, which consist of federal funds sold, securities purchased under agreements to resell, securities available-for-sale ("AFS").
As of December 31, 2023, Junior Subordinated Notes totaled $119.1 million with a weighted average interest rate of 7.54%, compared to $119.1 million with a weighted average rate of 4.01% as of December 31, 2022. The Junior Subordinated Notes have a stated maturity term of 30 years and qualify as Total Capital for these periods.
As of December 31, 2024, Junior Subordinated Notes totaled $119.1 million with a weighted average interest rate of 7.75%, compared to $119.1 million with a weighted average rate of 7.54% as of December 31, 2023. The Junior Subordinated Notes have a stated maturity term of 30 years and qualify as Total Capital for these periods.
CRE and Construction Loans ("CREC") The Company’s total CREC loan portfolio is diversified by property type with an average CREC loan size of $1.8 million and $1.7 million as of December 31, 2023 and 2022, respectively.
CRE and Construction Loans ("CREC") The Company’s total CREC loan portfolio is diversified by property type with an average CREC loan size of $1.9 million and $1.8 million as of December 31, 2024, and 2023, respectively.
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 interest receivable shown separately on the Consolidated Balance Sheets.
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 interest receivable, which is included in "Other assets" on the Consolidated Balance Sheets.
Non-interest Expense Non-interest expense includes expenses related to salaries and benefits of employees, occupancy expenses, marketing expenses, computer and equipment expenses, amortization of core deposit intangibles, amortization of investment is affordable housing and alternative energy partnerships, and other operating expenses. Comparison of 2023 with 2022 Non-interest expense totaled $380.5 million in 2023 compared to $303.4 million in 2022.
Non-interest Expense Non-interest expense includes expenses related to salaries and benefits of employees, occupancy expenses, marketing expenses, computer and equipment expenses, amortization of core deposit intangibles, amortization of investment is affordable housing and alternative energy partnerships, and other operating expenses. Comparison of 2024 with 2023 Non-interest expense totaled $374.7 million in 2024 compared to $380.5 million in 2023.
Under this regulation, the amount of retained earnings available for cash dividends to the Company immediately after December 31, 2023, was restricted to approximately $420.4 million. For additional information on statutory and regulatory limitations on the ability of Bancorp to pay dividends to its shareholders and on the Bank to pay dividends to Bancorp, see “Item 1.
Under this regulation, the amount of retained earnings available for cash dividends to the Company immediately after December 31, 2024, was restricted to approximately $433.6 million. For additional information on statutory and regulatory limitations on the ability of Bancorp to pay dividends to its shareholders and on the Bank to pay dividends to Bancorp, see “Item 1.
As a result, the Company recorded an $11.3 million special assessment fee in the fourth quarter of 2023. Long-term Debt 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”).
As a result, the Company recorded an $11.3 million special assessment fee in the fourth quarter of 2023 and an additional $1.8 million in 2024. 45 Table of Contents Long-term Debt 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”).
CRE loans totaled $7.06 billion as of December 31, 2023, compared with $6.71 billion as of December 31, 2022, and accounted for 36% and 37% of total loans held-for-investment as of December 31, 2023 and 2022, respectively. Interest rates on CRE loans may be fixed, variable or hybrid.
CRE loans totaled $7.23 billion as of December 31, 2024, compared with $7.06 billion as of December 31, 2023, and accounted for 37% and 36% of total loans held-for-investment as of December 31, 2024, and 2023, respectively. Interest rates on CRE loans may be fixed, variable or hybrid.
Comparison of 2023 with 2022 The increase in non-interest income from 2022 to 2023 was primarily due to a $17.9 million increase in unrealized gain on equity securities, and a $1.1 million increase in wealth management fees, offset, in part, by a $3.0 million increase in securities losses, a $3.2 million decrease in derivative fees and a $1.7 million decrease in BOLI death benefit. 60 Table of Contents Comparison of 2022 with 2021 The increase in non-interest income from 2021 to 2022 was primarily due to a $1.4 million increase in wealth management fees, and a $1.8 million decrease in loss on equity securities.
Comparison of 2023 with 2022 The increase in non-interest income from 2022 to 2023 was primarily due to a $17.9 million increase in unrealized gain on equity securities, and a $1.1 million increase in wealth management fees, offset, in part, by a $3.0 million increase in securities losses, a $3.2 million decrease in derivative fees and a $1.7 million decrease in BOLI death benefit.
Non-accrual loans also include those modifications to borrowers experiencing financial difficulties (TDR's in 2022) that do not qualify for accrual status.
Non-accrual loans also include those modifications to borrowers experiencing financial difficulties that do not qualify for accrual status.
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 contractual term excludes renewals and modifications but includes pre-approved extensions and prepayment assumptions where applicable.
After the R&S period, the Company will revert to straight-line for the four-quarter reversion period to the long-term loss rates for each of the six portfolios of loans. The contractual term excludes renewals and modifications but includes pre-approved extensions and prepayment assumptions where applicable.
Income Tax Expense Income tax expense was $49.5 million in 2023, compared to $111.9 million in 2022, and $83.5 million in 2021. The effective tax rate was 12.3% for 2023, 23.7% for 2022, and 21.9% for 2021. The effective tax rate includes the impact of low-income housing and alternative energy investments.
Income Tax Expense Income tax expense was $31.6 million in 2024, compared to $49.5 million in 2023, and $111.9 million in 2022. The effective tax rate was 9.9% for 2024, 12.3% for 2023, and 23.7% for 2022. The effective tax rate includes the impact of low-income housing and alternative energy investments.
The Bank’s loans for construction, land development, and other land represented 19% of total risk-based capital as of December 31, 2023, and 27% as of December 31, 2022.
The Bank’s loans for construction, land development, and other land represented 15% of total risk-based capital as of December 31, 2024, and 19% as of December 31, 2023.
At December 31, 2023, $1.33 billion of unpledged treasury securities, US agency securities, U.S. agency mortgage-backed securities, or CMO based on current cost are available for pledging to the Federal Reserve Bank’s Bank Term Funding Program. Approximately 99.7% of our time deposits mature within one year or less as of December 31, 2023.
At December 31, 2024, $1.53 billion of unpledged treasury securities, US agency securities, U.S. agency mortgage-backed securities, or CMO based on current cost are available for pledging to the Federal Reserve Bank’s Bank Term Funding Program. 54 Table of Contents Approximately 99.8% of our time deposits mature within one year or less as of December 31, 2024.
At December 31, 2023, if interest rates were to increase instantaneously by 100 basis points, the simulation indicated that our net interest income over the next twelve months would increase by 6.9%, and if interest rates were to increase instantaneously by 200 basis points, the simulation indicated that our net interest income over the next twelve months would increase by 13.7%.
At December 31, 2024, if interest rates were to increase instantaneously by 100 basis points, the simulation indicated that our net interest income over the next twelve months would increase by 7.5%, and if interest rates were to increase instantaneously by 200 basis points, the simulation indicated that our net interest income over the next twelve months would increase by 14.9%.
Multifamily residential loans totaled $2.60 billion as of December 31, 2023, compared with $1.98 billion as of December 31, 2022, and accounted for 13% and 11% of total loans held-for investment as of December 31, 2023 and 2022, respectively. The Company offers a variety of first lien mortgages, including fixed- and variable-rate loans.
Multifamily residential loans totaled $2.72 billion as of December 31, 2024, compared with $2.60 billion as of December 31, 2023, and accounted for 14% and 13% of total loans held-for investment as of December 31, 2024, and 2023, respectively. The Company offers a variety of first lien mortgages, including fixed- and variable-rate loans.
Conversely, if interest rates were to decrease instantaneously by 100 basis points, the simulation indicated that our net interest income over the next twelve months would decrease by 4.4%, and if interest rates were to decrease instantaneously by 200 basis points, the simulation indicated that our net interest income over the next twelve months would decrease by 9.1%.
Conversely, if interest rates were to decrease instantaneously by 100 basis points, the simulation indicated that our net interest income over the next twelve months would decrease by 5.3%, and if interest rates were to decrease instantaneously by 200 basis points, the simulation indicated that our net interest income over the next twelve months would decrease by 10.3%.
At December 31, 2023, the Company’s Tier 1 risk-based capital ratio of 12.84%, total risk-based capital ratio of 14.31%, and Tier 1 leverage capital ratio of 10.55%, calculated under the Basel III Capital Rules, continue to place the Company in the “well capitalized” category for regulatory purposes, which is defined as institutions with a Tier 1 risk-based capital ratio equal to or greater than 8%, a total risk-based capital ratio equal to or greater than 10%, and a Tier 1 leverage capital ratio equal to or greater than 5%.
At December 31, 2024, the Company’s Tier 1 risk-based capital ratio of 13.54%, total risk-based capital ratio of 15.08%, and Tier 1 leverage capital ratio of 10.96%, calculated under the Basel III Capital Rules, continue to place the Company in the “well capitalized” category for regulatory purposes, which is defined as institutions with 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%.
The allowance for loan losses was $154.6 million and the allowance for off-balance sheet unfunded credit commitments was $9.1 million at December 31, 2023, which represented the amount believed by management to be appropriate to absorb lifetime credit losses in the loan portfolio, including unfunded credit commitments.
The allowance for loan losses was $161.8 million and the allowance for off-balance sheet unfunded credit commitments was $9.7 million at December 31, 2024, which represented the amount believed by management to be appropriate to absorb lifetime credit losses in the loan portfolio, including unfunded credit commitments.
The Bank recorded a provision for credit losses of $26.0 million in 2023 compared with a provision for credit losses of $14.5 million in 2022, and a reversal for credit losses of $16.0 million in 2021.
The Bank recorded a provision for credit losses of $37.5 million in 2024 compared with a provision for credit losses of $26.0 million in 2023, and a provision for credit losses of $14.5 million in 2022.
Investment Securities Investment securities were $1.60 billion and represented 7.0% of total assets at December 31, 2023, compared with $1.47 billion and 6.8% of total assets at December 31, 2022.
Investment Securities Investment securities were $1.55 billion and represented 6.7% of total assets at December 31, 2024, compared with $1.60 billion and 7.0% of total assets at December 31, 2023.
As of December 31, 2023, construction loans of $220.6 million were disbursed with pre-established interest reserves of $41.3 million compared to $443.9 million of such loans disbursed with pre-established interest reserves of $54.5 million at December 31, 2022.
As of December 31, 2024, construction loans of $227.9 million were disbursed with pre-established interest reserves of $31.3 million compared to $220.6 million of such loans disbursed with pre-established interest reserves of $41.3 million at December 31, 2023.
The allowance for loan losses was $154.6 million and the allowance for off-balance sheet unfunded credit commitments was $9.1 million at December 31, 2023, which represented the amount believed by management to be appropriate to absorb credit losses inherent in the loan portfolio, including unfunded credit commitments.
The allowance for loan losses was $161.8 million and the allowance for off-balance sheet unfunded credit commitments was $9.7 million at December 31, 2024, which represented the amount believed by management to be appropriate to absorb credit losses inherent in the loan portfolio, including unfunded credit commitments.
The following table displays average deposits and rates for the past five years: Average Deposits and Average Rates Year Ended December 31, 2023 2022 2021 2020 2019 Amount % Amount % Amount % Amount % Amount % (In thousands) Deposits Non-interest-bearing demand deposits $ 3,705,788 — % $ 4,386,526 — % $ 3,751,626 — % $ 3,158,828 — % $ 2,837,946 — % Interest bearing demand deposits 2,388,080 1.71 2,471,256 0.33 2,047,177 0.11 1,591,924 0.18 1,290,752 0.18 Money market deposits 3,164,739 2.72 4,902,357 0.81 4,034,246 0.45 2,903,837 0.74 2,012,306 1.07 Savings deposits 1,070,405 0.83 1,118,967 0.08 897,663 0.09 759,581 0.13 731,027 0.20 Time deposits 8,849,293 3.75 5,398,808 1.04 5,979,191 0.68 7,268,738 1.54 7,459,800 2.05 Total deposits $ 19,178,305 2.44 % $ 18,277,914 0.58 % $ 16,709,903 0.37 % $ 15,682,908 0.87 % $ 14,331,831 1.24 % Management considers the Bank’s time deposits of $250 thousand or more, which totaled $5.48 billion at December 31, 2023, to be generally less volatile than other wholesale funding sources primarily because approximately 83.5% of the Bank’s CDs of $250 thousand or more have been on deposit with the Bank for two years or more.
The following table displays average deposits and rates for the past five years: Average Deposits and Average Rates Year Ended December 31, 2024 2023 2022 2021 2020 Amount % Amount % Amount % Amount % Amount % (In thousands) Deposits Non-interest-bearing demand deposits $ 3,283,586 — % $ 3,705,788 — % $ 4,386,526 — % $ 3,751,626 — % $ 3,158,828 — % Interest bearing demand deposits 2,186,726 2.05 2,388,080 1.71 2,471,256 0.33 2,047,177 0.11 1,591,924 0.18 Money market deposits 3,166,318 3.65 3,164,739 2.72 4,902,357 0.81 4,034,246 0.45 2,903,837 0.74 Savings deposits 1,151,427 1.52 1,070,405 0.83 1,118,967 0.08 897,663 0.09 759,581 0.13 Time deposits 10,022,826 4.57 8,849,293 3.75 5,398,808 1.04 5,979,191 0.68 7,268,738 1.54 Total deposits $ 19,810,883 3.21 % $ 19,178,305 2.44 % $ 18,277,914 0.58 % $ 16,709,903 0.37 % $ 15,682,908 0.87 % Management considers the Bank’s time deposits of $250 thousand or more, which totaled $5.70 billion at December 31, 2024, to be generally less volatile than other wholesale funding sources primarily because approximately 86.7% of the Bank’s CDs of $250 thousand or more have been on deposit with the Bank for two years or more.
Average investment securities comprised 7.3% of total average interest-bearing assets in 2023, an increase from 6.5% in 2022. Interest expense increased by $382.9 million, or 325.6%, to $500.5 million in 2023, compared with $117.6 million in 2022, primarily due to increased average interest-bearing deposits, and FHLB advances.
Average investment securities comprised 7.3% of total average interest-bearing assets in 2023, an increase from 6.5% in 2022. 37 Table of Contents Interest expense increased by $382.9 million, or 325.6%, to $500.5 million in 2023, compared with $117.6 million in 2022, primarily due to increases in interest rates on average interest-bearing deposits.
Management anticipates that these deposits will reprice higher as a result of the increases in the target Fed funds rate that started in early 2022. Management anticipates that there may be some outflow of these deposits upon maturity due to the keen competition in the Bank’s marketplace.
Management anticipates that these deposits will reprice lower as a result of the decreases in the target Fed funds rate that started in late 2023. Management anticipates that there may be some outflow of these deposits upon maturity due to the keen competition in the Bank’s marketplace.
As of December 31, 2023 and 2022, the Company had $8.71 billion and $9.21 billion, respectively, of uninsured deposits outstanding. 66 Table of Contents Approximately 99.7% of the Bank’s CDs mature within one year as of December 31, 2023.
As of December 31, 2024, and 2023, the Company had $9.43 billion and $8.71 billion, respectively, of uninsured deposits outstanding. 44 Table of Contents Approximately 99.8% of the Bank’s CDs mature within one year as of December 31, 2024.
The balance for construction loans with interest reserves which have been extended was $6.4 million with pre-established interest reserves of $0.5 million at December 31, 2023, compared to $34.4 million with pre-established interest reserves of $1.0 million at December 31, 2022.
The balance for construction loans with interest reserves which have been extended was $4.2 million with pre-established interest reserves of $53 thousand at December 31, 2024, compared to $6.4 million with pre-established interest reserves of $0.5 million at December 31, 2023.
The classification of loans by type and amount outstanding as of December 31 for each of the past five years is presented below: Loan Type and Mix As of December 31, 2023 2022 2021 2020 2019 (In thousands) Commercial loans $ 3,305,048 $ 3,318,778 $ 2,982,399 $ 2,836,833 $ 2,778,744 Residential mortgage loans and equity lines 6,084,666 5,577,500 4,601,493 4,569,944 4,436,561 Commercial real estate loans 9,729,581 8,793,685 8,143,272 7,555,027 7,275,262 Construction loans 422,647 559,372 611,031 679,492 579,864 Installment and other loans 6,198 4,689 4,284 3,100 5,050 Gross loans 19,548,140 18,254,024 16,342,479 15,644,396 15,075,481 Less: Allowance for loan losses (154,562 ) (146,485 ) (136,157 ) (166,538 ) (123,224 ) Unamortized deferred loan fees (10,720 ) (6,641 ) (4,321 ) (2,494 ) (626 ) Total loans, net $ 19,382,858 $ 18,100,898 $ 16,202,001 $ 15,475,364 $ 14,951,631 Loans held for sale $ — $ — $ — $ — $ — The loan maturities in the table below are based on contractual maturities as of December 31, 2023.
Table of Contents The classification of loans by type and amount outstanding as of December 31 for each of the past five years is presented below: Loan Type and Mix As of December 31, 2024 2023 2022 2021 2020 (In thousands) Commercial loans $ 3,098,004 $ 3,305,048 $ 3,318,778 $ 2,982,399 $ 2,836,833 Residential mortgage loans and equity lines 5,919,092 6,084,666 5,577,500 4,601,493 4,569,944 Commercial real estate loans 10,033,830 9,729,581 8,793,685 8,143,272 7,555,027 Construction loans 319,649 422,647 559,372 611,031 679,492 Installment and other loans 5,380 6,198 4,689 4,284 3,100 Gross loans 19,375,955 19,548,140 18,254,024 16,342,479 15,644,396 Less: Allowance for loan losses (161,765 ) (154,562 ) (146,485 ) (136,157 ) (166,538 ) Unamortized deferred loan fees (10,541 ) (10,720 ) (6,641 ) (4,321 ) (2,494 ) Total loans, net $ 19,203,649 $ 19,382,858 $ 18,100,898 $ 16,202,001 $ 15,475,364 Loans held for sale $ — $ — $ — $ — $ — The loan maturities in the table below are based on contractual maturities as of December 31, 2024.
The comparable ratios were 0.85% of period-end gross loans and 193.0% of non-performing loans at December 31, 2022. 75 Table of Contents Critical Accounting Policies and Estimates Our accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition.
The comparable ratios were 0.84% of period-end gross loans and 221.58% of non-performing loans at December 31, 2023. 51 Table of Contents Critical Accounting Policies and Estimates Our accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition.
Comparison of 2022 with 2021 Non-interest expense totaled $303.4 million in 2022 compared to $286.5 million in 2021.
Comparison of 2023 with 2022 Non-interest expense totaled $380.5 million in 2023 compared to $303.4 million in 2022.
Commercial real estate loans consist primarily of commercial retail properties, shopping centers, owner-occupied industrial facilities, office buildings, multiple-unit apartments, hotels, and multi-tenanted industrial properties, and are typically secured by first deeds of trust on such commercial properties. 64 Table of Contents ● Commercial loans decreased $13.7 million, or 0.4%, to $3.31 billion at December 31, 2023, compared to $3.32 billion at December 31, 2022.
Commercial real estate loans consist primarily of commercial retail properties, shopping centers, owner-occupied industrial facilities, office buildings, multiple-unit apartments, hotels, and multi-tenanted industrial properties, and are typically secured by first deeds of trust on such commercial properties. ● Commercial loans decreased $207.0 million, or 6.3%, to $3.10 billion at December 31, 2024, compared to $3.31 billion at December 31, 2023.
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.
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 starting with the fourth quarter of 2007 through the fourth quarter of 2022.
Average interest-bearing cash on deposits with financial institutions decreased $120.2 million, or 9.5%, to $1.14 billion in 2023 from $1.26 billion in 2022. 56 Table of Contents Average interest-bearing deposits were $15.47 billion in 2023, an increase of $1.58 billion, or 11.4%, from $13.89 billion in 2022, primarily due to an increase of $3.45 billion, or 63.9%, in time deposits offset by decreases of $1.74 billion, or 35.4% in money market accounts, $83.2 million, or 3.4%, in interest bearing demand deposits, and $48.6 million, or 4.3%, in savings accounts.
Average interest-bearing deposits were $15.47 billion in 2023, an increase of $1.58 billion, or 11.4%, from $13.89 billion in 2022, primarily due to an increase of $3.45 billion, or 63.9%, in time deposits offset by decreases of $1.74 billion, or 35.4% in money market accounts, $83.2 million, or 3.4%, in interest bearing demand deposits, and $48.6 million, or 4.3%, in savings accounts.
Net charge-offs for 2023 were $17.6 million, or 0.09% of average loans, compared to net charge-offs of $2.6 million for 2022, or 0.01% of average loans, and net charge-offs of $17.6 million for 2021, or 0.11% of average loans.
Net charge-offs for 2024 were $29.7 million, or 0.15% of average loans, compared to net charge-offs of $17.6 million for 2023, or 0.09% of average loans, and net charge-offs of $2.6 million for 2022, or 0.01% of average loans.
These borrowings bear fixed rates and are secured by loans. See Note 10 to the Consolidated Financial Statements. At December 31, 2023, the Bank pledged $387.6 thousand of its commercial loans to the Federal Reserve Bank’s Discount Window under the Borrower-in-Custody program.
These borrowings bear fixed rates and are secured by loans. See Note 9 to the Consolidated Financial Statements. At December 31, 2024, the Bank pledged $474.8 million of its commercial loans to the Federal Reserve Bank’s Discount Window under the Borrower-in-Custody program.
At December 31, 2023, investment securities totaled $1.60 billion, with $134.2 million pledged as collateral for borrowings and other commitments. The remaining balance was available as additional liquidity or to be pledged as collateral for additional borrowings.
At December 31, 2024, investment securities totaled $1.55 billion, with $17.8 million pledged as collateral for borrowings and other commitments. The remaining balance was available as additional liquidity or to be pledged as collateral for additional borrowings.
Total commercial real estate loans accounted for 49.8% of gross loans at December 31, 2023, compared to 48.2% at December 31, 2022.
Total commercial real estate loans accounted for 51.8% of gross loans at December 31, 2024, compared to 49.8% at December 31, 2023.
Non-interest Income Non-interest income increased $11.5 million, or 20.2%, to $68.3 million for 2023, from $56.8 million in 2022, compared to $54.6 million in 2021. Non-interest income includes depository service fees, letters of credit commissions, securities gains (losses), gains (losses) from loan sales, gains from sale of premises and equipment, gains on acquisition, and other sources of fee income.
Non-interest Income Non-interest income decreased $12.6 million, or 18.5%, to $55.7 million for 2024, from $68.3 million in 2023, compared to $56.8 million in 2022. Non-interest income includes depository service fees, letters of credit commissions, securities gains (losses), gains (losses) from loan sales, gains from sale of premises and equipment, gains on acquisition, and other sources of fee income.
The $6.5 million decrease in net income from 2022 to 2023 was primarily the result of increases in non-interest expense, and provision for credit losses, partially offset by increases in net interest income and non-interest income. The return on average assets in 2023 was 1.56%, compared to 1.69% in 2022, and to 1.52% in 2021.
The $68.1 million decrease in net income from 2023 to 2024 was primarily the result of decreases in net-interest income, and non-interest income and increase in provision for credit losses, partially offset by decreases in non-interest expense. The return on average assets in 2024 was 1.22%, compared to 1.56% in 2023, and to 1.69% in 2022.
At December 31, 2023, the Bank had an approved credit line with the FHLB of San Francisco totaling $7.99 billion. Total advances from the FHLB of San Francisco were $540.0 million and standby letter of credits issued by FHLB on the Company’s behalf were $851.0 million as of December 31, 2023.
At December 31, 2024, the Bank had an approved credit line with the FHLB of San Francisco totaling $8.44 billion. Total advances from the FHLB of San Francisco were $60.0 million and standby letter of credits issued by FHLB on the Company’s behalf were $915.0 million as of December 31, 2024.
Compared with 2022, average commercial real estate loans increased $715.6 million, or 8.4%, average residential mortgage loans increased $597.3 million, or 12.1%, average equity lines decreased $97.9 million, or 26.1% and average construction loans decreased $84.1 million, or 13.9%. Average investment securities were $1.56 billion in 2023, an increase of $237.5 million, or 18.0%, from 2022.
Average loans for 2023 were $18.76 billion, a $1.13 billion, or an 6.4% increase from $17.63 billion in 2022. Compared with 2022, average commercial real estate loans increased $715.6 million, or 8.4%, average residential mortgage loans increased $597.3 million, or 12.1%, average equity lines decreased $97.9 million, or 26.1% and average construction loans decreased $84.1 million, or 13.9%.
The allowance for credit losses, which is the sum of the allowances for loan losses and for off-balance sheet unfunded credit commitments, was $163.7 million at December 31, 2023, compared to $155.2 million at December 31, 2022. The allowance for credit losses represented 0.84% of period-end gross loans and 221.6% of non-performing loans at December 31, 2023.
The allowance for credit losses, which is the sum of the allowances for loan losses and for off-balance sheet unfunded credit commitments, was $171.4 million at December 31, 2024, compared to $163.6 million at December 31, 2023. The allowance for credit losses represented 0.88% of period-end gross loans and 98.98% of non-performing loans at December 31, 2024.
The allowance for loan losses represented 0.79% of period-end gross loans and 209.33% of non-performing loans at December 31, 2023. The comparable ratios were 0.80% of period-end gross loans and 182.12% of non-performing loans at December 31, 2022.
The allowance for loan losses represented 0.83% of period-end gross loans and 93.39% of non-performing loans at December 31, 2024. The comparable ratios were 0.79% of period-end gross loans and 209.33% of non-performing loans at December 31, 2023.
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. 72 Table of Contents The allowance for loan losses to non-performing loans was 209.3% at December 31, 2023, compared to 182.1% at December 31, 2022, primarily due to a decrease in non-performing loans.
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. 48 Table of Contents The allowance for loan losses to non-performing loans was 93.39% at December 31, 2024, compared to 209.33% at December 31, 2023, primarily due to an increase in non-performing loans.
At December 31, 2022, the Company’s Tier 1 risk-based capital ratio was 12.21%, total risk-based capital ratio was 13.73%, and Tier 1 leverage capital ratio was 10.08%. A table displaying the Bancorp’s and the Bank’s capital and leverage ratios at December 31, 2023, and 2022, is included in Note 23 to the Consolidated Financial Statements.
At December 31, 2023, the Company’s Tier 1 risk-based capital ratio was 12.84%, total risk-based capital ratio was 14.31%, and Tier 1 leverage capital ratio was 10.55%. A table displaying the Bancorp’s and the Bank’s capital and leverage ratios at December 31, 2024, and 2023, is included in Note 22 to the Consolidated Financial Statements.
Equity Securities For the year ended December 31, 2023, the Company recognized a net gain of $18.2 million due to the increase in fair value of equity investments with readily determinable fair values during the year, compared to a net gain of $392 thousand in 2022.
Equity Securities For the year ended December 31, 2024, the Company recognized a net loss of $7.5 million due to the decrease in fair value of equity investments with readily determinable fair values, compared to a net gain of $18.2 million in 2023.
Construction loan exposure was made up of $422.6 million in loans outstanding, plus $280.5 million in unfunded commitments as of December 31, 2023, compared with $559.4 million in loans outstanding, plus $449.9 million in unfunded commitments as of December 31, 2022. Land loans totaled $71.8 million as of December 31, 2023, compared with $107.7 million as of December 31, 2022.
Construction loan exposure was made up of $319.6 million in loans outstanding, plus $186.5 million in unfunded commitments as of December 31, 2024, compared with $422.6 million in loans outstanding, plus $280.5 million in unfunded commitments as of December 31, 2023. Land loans totaled $83.4 million as of December 31, 2024, compared with $71.8 million as of December 31, 2023.
As of December 31, 2023, recorded investment in non-accrual loans was $66.7 million compared to $68.9 million as of December 31, 2022. For non-accrual loans, the amounts previously charged off represent 15.8% of the contractual balances for non-accrual loans as of December 31, 2023.
As of December 31, 2024, recorded investment in non-accrual loans was $169.2 million compared to $66.7 million as of December 31, 2023. 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.
At December 31, 2023 and 2022, there were no non-accrual residential loans, non-accrual non-residential construction loans and non-accrual land loans that were originated with pre-established interest reserves, respectively.
At December 31, 2024, and December 31, 2023, the Bank had no loans on non-accrual status with available interest reserves. At December 31, 2024, and 2023, there were no non-accrual residential loans, non-accrual non-residential construction loans and non-accrual land loans that were originated with pre-established interest reserves, respectively.
The non-performing portfolio loan, excluding loans held for sale, coverage ratio, defined as the allowance for credit losses to non-performing loans, excluding loans held for sale, increased to 221.6% at December 31, 2023, from 193.0% at December 31, 2022.
The non-performing portfolio loan, excluding loans held for sale, coverage ratio, defined as the allowance for credit losses to non-performing loans, excluding loans held for sale, decreased to 98.98% at December 31, 2024, from 221.58% at December 31, 2023.
Net income available to common stockholders and key financial performance ratios are presented below for the three years indicated: Year Ended December 31, 2023 2022 2021 (In thousands, except per share data) Net income $ 354,124 $ 360,642 $ 298,304 Basic earnings per common share $ 4.88 $ 4.85 $ 3.81 Diluted earnings per common share $ 4.86 $ 4.83 $ 3.80 Return on average assets 1.56 % 1.69 % 1.52 % Return on average stockholders' equity 13.56 % 14.70 % 12.11 % Total average assets $ 22,705,192 $ 21,383,526 $ 19,591,537 Total average equity $ 2,610,582 $ 2,453,391 $ 2,463,021 Efficiency ratio 46.97 % 38.38 % 43.92 % Effective income tax rate 12.25 % 23.68 % 21.88 % Net Interest Income Comparison of 2023 with 2022 Net interest income increased $8.0 million, or 1.1%, from $733.7 million in 2022 to $741.7 million in 2023.
Net income available to common stockholders and key financial performance ratios are presented below for the three years indicated: Year Ended December 31, 2024 2023 2022 (In thousands, except per share and ratio data) Net income $ 285,979 $ 354,124 $ 360,642 Basic earnings per common share $ 3.97 $ 4.88 $ 4.85 Diluted earnings per common share $ 3.95 $ 4.86 $ 4.83 Return on average assets 1.22 % 1.56 % 1.69 % Return on average stockholders' equity 10.18 % 13.56 % 14.70 % Total average assets $ 23,368,433 $ 22,705,192 $ 21,383,526 Total average equity $ 2,809,621 $ 2,610,582 $ 2,453,391 Efficiency ratio 51.35 % 46.97 % 38.38 % Effective income tax rate 9.94 % 12.25 % 23.68 % Net Interest Income Comparison of 2024 with 2023 Net interest income decreased $67.7 million, or 9.1%, from $741.7 million in 2023 to $674.1 million in 2024.
The changes in rate contributed to an interest income increase of $102.8 million. ● Change in the mix of interest-earning assets: Average gross loans, which generally have a higher yield than other types of investments, comprised 87.2% of total average interest-earning assets in 2022, an increase from 85.4% in 2021.
The changes in rate contributed to an interest income increase of $51.6 million. ● Change in the mix of interest-earning assets: Average gross loans, which generally have a higher yield than other types of investments, comprised 87.7% of total average interest-earning assets in 2024, an increase from 87.3% in 2023.

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