CATHAY GENERAL BANCORP

Previous wording

Net income for the quarter ended March 31, 2025, was $69.5 million, a decrease of $1.9 million, or 2.7%, compared to net income of $71.4 million for the same quarter a year ago. Diluted earnings per share for the quarter ended March 31, 2025, was $0.98 per share compared to $0.98 per share for the same quarter a year ago.

Current wording

Net income for the quarter ended June 30, 2025, was $77.5 million, an increase of $10.7 million, or 16.0%, compared to net income of $66.8 million for the same quarter a year ago. Diluted earnings per share for the quarter ended June 30, 2025, was $1.10 per share compared to $0.92 per share for the same quarter a year ago.

Previous wording

Return on average stockholders’ equity was 9.84% and return on average assets was 1.22% for the quarter ended March 31, 2025, compared to a return on average stockholders’ equity of 10.40% and a return on average assets of 1.23% for the same quarter a year ago.

Current wording

Return on average stockholders’ equity was 10.72% and return on average assets was 1.33% for the quarter ended June 30, 2025, compared to a return on average stockholders’ equity of 9.63% and a return on average assets of 1.15% for the same quarter a year ago.

Previous wording

Net interest income before provision for credit losses increased $8.0 million, or 4.7%, to $176.6 million during the first quarter of 2025, compared to $168.6 million during the same quarter a year ago. The increase was due primarily to a decrease in interest expense from deposits, offset by a decrease in interest income from loans and securities.

Current wording

Net interest income before provision for credit losses increased $15.9 million, or 9.6%, to $181.2 million during the second quarter of 2025, compared to $165.3 million during the same quarter a year ago. The increase was due primarily to a decrease in interest expense from deposits, offset by a decrease in interest income from loans and securities.

Previous wording

The net interest margin was 3.25% for the first quarter of 2025 compared to 3.05% for the first quarter of 2024.

Current wording

The net interest margin was 3.27% for the second quarter of 2025 compared to 3.01% for the second quarter of 2024.

Previous wording

For the first quarter of 2025, the yield on average interest-earning assets was 5.89%, the cost of funds on average interest-bearing liabilities was 3.46%, and the average cost of interest-bearing deposits was 3.43%. In comparison, for the first quarter of 2024, the yield on average interest-earning assets was 6.01%, the cost of funds on average interest-bearing liabilities was 3.87%, and the average cost of interest-bearing deposits was 3.78%. The decrease in the yield on average interest-bearing liabilities and on average interest-earning assets resulted mainly from lower interest rates on deposits and lower interest rates on loans and securities, respectively. The net interest spread, defined as the difference between the yield on average interest-earning assets and the cost of funds on average interest-bearing liabilities, was 2.43% for the quarter ended March 31, 2025, compared to 2.14% for the same quarter a year ago.

Current wording

For the second quarter of 2025, the yield on average interest-earning assets was 5.83%, the cost of funds on average interest-bearing liabilities was 3.37%, and the average cost of interest-bearing deposits was 3.35%. In comparison, for the second quarter of 2024, the yield on average interest-earning assets was 6.05%, the cost of funds on average interest-bearing liabilities was 3.97%, and the average cost of interest-bearing deposits was 3.94%. The decrease in the yield on average interest-bearing liabilities and on average interest-earning assets resulted mainly from lower interest rates on deposits and lower interest rates on loans and securities, respectively. The net interest spread, defined as the difference between the yield on average interest-earning assets and the cost of funds on average interest-bearing liabilities, was 2.46% for the quarter ended June 30, 2025, compared to 2.08% for the same quarter a year ago.

Previous wording

The Company recorded a provision for credit losses of $15.5 million in the first quarter of 2025 compared with $1.9 million in the first quarter of 2024. As of March 31, 2025, the allowance for credit losses, comprised of the reserve for loan losses and the reserve for unfunded loan commitments, increased $13.5 million to $184.9 million, or 0.96% of gross loans, compared to $171.4 million, or 0.88% of gross loans, as of December 31, 2024. The change in the allowance for credit losses during the first quarter of 2025 consisted of a $15.5 million provision for credit losses, the majority of which related to one commercial loan, and $2.0 million in net charge-offs.

Current wording

The Company recorded a provision for credit losses of $11.2 million in the second quarter of 2025 compared with $6.6 million in the second quarter of 2024. As of June 30, 2025, the allowance for credit losses, comprised of the reserve for loan losses and the reserve for unfunded loan commitments, increased $12.0 million to $183.4 million, or 0.93% of gross loans, compared to $171.4 million, or 0.88% of gross loans, as of December 31, 2024. The change in the allowance for credit losses during the six months ended June 30, 2025, consisted of a $26.7 million provision for credit losses, and $14.7 million in net charge-offs.

Previous wording

Non-interest income, which includes revenues from depository service fees, letters of credit commissions, securities gains (losses), wealth management fees, and other sources of fee income, was $11.2 million for the first quarter of 2025, an increase of $4.6 million, or 69.7%, compared to $6.6 million for the first quarter of 2024. The increase was primarily due to a decrease of $4.8 million in unrealized loss on equity securities when compared to the same quarter a year ago.

Current wording

Non-interest income, which includes revenues from depository service fees, letters of credit commissions, securities gains (losses), wealth management fees, and other sources of fee income, was $15.4 million for the second quarter of 2025, an increase of $2.2 million, or 16.7%, compared to $13.2 million for the second quarter of 2024. The increase was primarily due to an increase of $2.4 million in derivative fees when compared to the same quarter a year ago.

Previous wording

Non-interest expense decreased $7.5 million, or 8.0%, to $85.7 million in the first quarter of 2025 compared to $93.2 million in the same quarter a year ago. The decrease in non-interest expense in the first quarter of 2025 was primarily due to a decrease of $5.4 million in amortization expense of investments in low-income housing and alternative energy partnerships and a decrease of $2.7 million in FDIC and state assessment when compared to the same quarter a year ago. The efficiency ratio was 45.60% in the first quarter of 2025 compared to 53.22% for the same quarter a year ago.

Current wording

Non-interest expense decreased $10.3 million, or 10.4%, to $89.1 million in the second quarter of 2025 compared to $99.4 million in the same quarter a year ago. The decrease in non-interest expense in the second quarter of 2025 was primarily due to a decrease of $12.2 million in amortization expense of investments in low-income housing and alternative energy partnerships, offset by an increase of $2.7 million in salaries and employee benefits when compared to the same quarter a year ago. The efficiency ratio was 45.34% in the second quarter of 2025 compared to 55.65% for the same quarter a year ago.

Previous wording

The effective tax rate for the first quarter of 2025 was 19.8% compared to 10.8% for the first quarter of 2024. The effective tax rate includes the impact of low-income housing tax credits in 2025 and solar tax credits and low-income housing tax credits in 2024.

Current wording

The effective tax rate for the second quarter of 2025 was 19.6% compared to 7.9% for the second quarter of 2024. The effective tax rate includes the impact of low-income housing tax credits in 2025 and solar tax credits and low-income housing tax credits in 2024.

Previous wording

Total assets were $23.21 billion as of March 31, 2025, an increase of $150.3 million, or 0.7%, from $23.05 billion as of December 31, 2024.

Current wording

Total assets were $23.72 billion as of June 30, 2025, an increase of $669.2 million, or 2.9%, from $23.05 billion as of December 31, 2024.

Previous wording

Securities available-for-sale represented 6.2% of total assets as of March 31, 2025, compared to 6.7% of total assets as of December 31, 2024. Securities available-for-sale were $1.43 billion as of March 31, 2025, compared to $1.55 billion as of December 31, 2024.

Current wording

Securities available-for-sale represented 6.9% of total assets as of June 30, 2025, compared to 6.7% of total assets as of December 31, 2024. Securities available-for-sale were $1.65 billion as of June 30, 2025, compared to $1.55 billion as of December 31, 2024.

Previous wording

Securities available-for-sale having a carrying value of $17.1 million as of March 31, 2025, and $17.8 million as of December 31, 2024, were pledged to secure public deposits and other borrowings.

Current wording

Securities available-for-sale having a carrying value of $17.7 million as of June 30, 2025, and $17.8 million as of December 31, 2024, were pledged to secure public deposits and other borrowings.

Previous wording

Gross loans held for investment were $19.35 billion at March 31, 2025, a decrease of $23.0 million, or 0.12%, from $19.38 billion at December 31, 2024. The decrease was primarily due to a decrease of $99.6 million, or 3.2%, in commercial loans, and a decrease of $65.5 million, or 1.2% in residential mortgage loans, offset, in part, by an increase of $127.1 million, or 1.3% in commercial real estate loans, and an increase of $13.1 million, or 4.1% in real estate construction loans.

Current wording

Gross loans held for investment were $19.78 billion at June 30, 2025, an increase of $408.7 million, or 2.11%, from $19.38 billion at December 31, 2024. The increase was primarily due to an increase of $329.3 million, or 3.3%, in commercial real estate loans, an increase of $96.7 million, or 3.1%, in commercial loans and an increase of $3.0 million, or 0.1% in residential mortgage loans, offset, in part, by a decrease of $18.5 million, or 5.8% in real estate construction loans.

Previous wording

The ratio of non-performing assets to total assets was 0.75% as of March 31, 2025, compared to 0.85% as of December 31, 2024. Total non-performing assets decreased $22.6 million, or 11.5% to $173.7 million at March 31, 2025, compared to $196.3 million at December 31, 2024, primarily due to a decrease of $14.6 million, or 8.6%, in non-accrual loans, a decrease of $4.6 million, or 19.9% in other real estate owned, and a decrease of $3.4 million, or 85.3% in accruing loans past due 90 days or more.

Current wording

The ratio of non-performing assets to total assets was 0.84% as of June 30, 2025, compared to 0.85% as of December 31, 2024. Total non-performing assets increased $3.2 million, or 1.6% to $199.5 million at June 30, 2025, compared to $196.3 million at December 31, 2024, primarily due to an increase of $5.0 million, or 3.0%, in non-accrual loans and, an increase of $2.3 million, or 57.8%, in accruing loans past due 90 days or more, offset by a decrease of $4.1 million, or 17.7%, in other real estate owned.

Previous wording

As a percentage of gross loans, excluding loans held for sale, plus OREO, our non-performing assets were 0.90% as of March 31, 2025, compared to 1.01% as of December 31, 2024. The non-performing loan portfolio coverage ratio, defined as the allowance for credit losses to non-performing loans, increased to 119.16% as of March 31, 2025, from 98.98% as of December 31, 2024.

Current wording

As a percentage of gross loans, excluding loans held for sale, plus OREO, our non-performing assets were 1.01% as of June 30, 2025, compared to 1.01% as of December 31, 2024. The non-performing loan portfolio coverage ratio, defined as the allowance for credit losses to non-performing loans, increased to 101.60% as of June 30, 2025, from 98.98% as of December 31, 2024.

Previous wording

As of March 31, 2025, total non-accrual loans were $154.6 million, a decrease of $14.6 million, or 8.6%, from $169.2 million at December 31, 2024, and an increase of $56.5 million, or 57.6%, from $98.1 million at March 31, 2024. The allowance for the collateral-dependent loans is calculated based on the difference between the outstanding loan balance and the value of the collateral as determined by recent appraisals, sales contracts, or other available market price information, less cost to sell. The allowance for collateral-dependent loans varies from loan to loan based on the collateral coverage of the loan at the time of designation as non-performing. We continue to monitor the collateral coverage of these loans, based on recent appraisals, on a quarterly basis and adjust the allowance accordingly.

Current wording

As of June 30, 2025, total non-accrual loans were $174.2 million, an increase of $5.0 million, or 3.0%, from $169.2 million at December 31, 2024, and an increase of $66.9 million, or 62.4%, from $107.3 million at June 30, 2024. The allowance for the collateral-dependent loans is calculated based on the difference between the outstanding loan balance and the value of the collateral as determined by recent appraisals, sales contracts, or other available market price information, less cost to sell. The allowance for collateral-dependent loans varies from loan to loan based on the collateral coverage of the loan at the time of designation as non-performing. We continue to monitor the collateral coverage of these loans, based on recent appraisals, on a quarterly basis and adjust the allowance accordingly.

Previous wording

For non-accrual loans, the amounts previously charged-off represent 11.9% of the contractual balances for non-accrual loans as of March 31, 2025, and 11.7% as of December 31, 2024. As of March 31, 2025, $101.3 million, or 65.5%, of the $154.6 million of non-accrual loans were secured by real estate compared to $109.4 million, or 64.7%, of the $169.2 million of non-accrual loans that were secured by real estate as of December 31, 2024. 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.

Current wording

For non-accrual loans, the amounts previously charged-off represent 15.8% of the contractual balances for non-accrual loans as of June 30, 2025, and 11.7% as of December 31, 2024. As of June 30, 2025, $119.6 million, or 68.7%, of the $174.2 million of non-accrual loans were secured by real estate compared to $109.4 million, or 64.7%, of the $169.2 million of non-accrual loans that were secured by real estate as of December 31, 2024. 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.

Previous wording

The allowance for loan losses to non-performing loans was 112.06% as of March 31, 2025, compared to 93.39% as of December 31, 2024. The increase was due primarily to a decrease in non-accrual loans. Non-accrual loans also include those modified loans to borrowers experiencing financial difficulty that do not qualify for accrual status.

Current wording

The allowance for loan losses to non-performing loans was 96.12% as of June 30, 2025, compared to 93.39% as of December 31, 2024. The increase was due primarily to a net increase in the allowance for loan losses.

Previous wording

As of March 31, 2025, construction loans of $247.1 million were disbursed with pre-established interest reserves of $31.6 million, compared to $227.9 million with pre-established interest reserves of $31.3 million at December 31, 2024. The balance for construction loans with interest reserves that have been extended was $4.2 million with pre-established interest reserves of $1.1 million at March 31, 2025, compared to $4.2 million with pre-established interest reserves of $53 thousand at December 31, 2024. Land loans of $1.1 million were disbursed with pre-established interest reserves of $97 thousand at March 31, 2025, compared to no land loans disbursements with pre-established interest reserves at December 31, 2024. There were no land loans with interest reserves which have been extended as of March 31, 2025, and December 31, 2024.

Current wording

As of June 30, 2025, construction loans of $247.2 million were disbursed with pre-established interest reserves of $32.5 million, compared to $227.9 million with pre-established interest reserves of $31.3 million at December 31, 2024. The balance for construction loans with interest reserves that have been extended was $4.2 million with pre-established interest reserves of $0.5 million at June 30, 2025, compared to $4.2 million with pre-established interest reserves of $53 thousand at December 31, 2024. Land loans of $6.1 million were disbursed with pre-established interest reserves of $1.0 million at June 30, 2025, compared to no land loans disbursements with pre-established interest reserves at December 31, 2024. There were no land loans with interest reserves which have been extended as of June 30, 2025, and December 31, 2024.

Previous wording

At March 31, 2025, and December 31, 2024, the Bank had no loans on non-accrual status with available interest reserves. At March 31, 2025, and December 31, 2024, there were no non-accrual non-residential construction loans, residential construction loans, or land loans that were originated with pre-established interest reserves. While we typically expect loans with interest reserves to be repaid in full according to the original contractual terms, some loans may require one or more extensions beyond the original maturity before full repayment. Typically, these extensions are required due to construction delays, delays in the sale or lease of the property, or some combination of these two factors.

Current wording

At June 30, 2025, the Bank had one loan on non-accrual status with $53 thousand in available interest reserves. At June 30, 2025, $4.2 million non-accrual residential construction loans had been originated with pre-established interest reserves. At December 31, 2024, there were no non-accrual non-residential construction loans, residential construction loans, or land loans that were originated with pre-established interest reserves. While we typically expect loans with interest reserves to be repaid in full according to the original contractual terms, some loans may require one or more extensions beyond the original maturity before full repayment. Typically, these extensions are required due to construction delays, delays in the sale or lease of the property, or some combination of these two factors.

Previous wording

The federal banking regulatory agencies issued final guidance on December 6, 2006, regarding risk management practices for financial institutions with high or increasing concentrations of commercial real estate (“CRE”) loans on their balance sheets. The regulatory guidance reiterates the need for sound internal risk management practices for those institutions that have experienced rapid growth in CRE lending, have notable exposure to specific types of CRE, or are approaching or exceeding the supervisory criteria used to evaluate the CRE concentration risk, but the guidance is not to be construed as a limit for CRE exposure. The supervisory criteria are: (1) total reported loans for construction, land development, and other land represent 100% of the institution’s total risk-based capital, and (2) both total CRE loans represent 300% or more of the institution’s total risk-based capital and the institution’s CRE loan portfolio has increased 50% or more within the last thirty-six months. The Bank’s loans for construction, land development, and other land represented 15% and 15% of the Bank’s total risk-based capital as of March 31, 2025, and December 31, 2024, respectively. Total CRE loans represented 286% of total risk-based capital as of March 31, 2025, and 289% as of December 31, 2024, which were within the Bank’s internal limit of 400%, of total capital.

Current wording

The federal banking regulatory agencies issued final guidance on December 6, 2006, regarding risk management practices for financial institutions with high or increasing concentrations of commercial real estate (“CRE”) loans on their balance sheets. The regulatory guidance reiterates the need for sound internal risk management practices for those institutions that have experienced rapid growth in CRE lending, have notable exposure to specific types of CRE, or are approaching or exceeding the supervisory criteria used to evaluate the CRE concentration risk, but the guidance is not to be construed as a limit for CRE exposure. The supervisory criteria are: (1) total reported loans for construction, land development, and other land represent 100% of the institution’s total risk-based capital, and (2) both total CRE loans represent 300% or more of the institution’s total risk-based capital and the institution’s CRE loan portfolio has increased 50% or more within the last thirty-six months. The Bank’s loans for construction, land development, and other land represented 13% and 15% of the Bank’s total risk-based capital as of June 30, 2025, and December 31, 2024, respectively. Total CRE loans represented 291% of total risk-based capital as of June 30, 2025, and 289% as of December 31, 2024, which were within the Bank’s internal limit of 400%, of total capital.

Previous wording

The Company focuses on providing financing to experienced real estate investors and developers who have moderate levels of leverage, many of whom are long-time customers of the Bank. CRE loans totaled $7.35 billion as of March 31, 2025, compared with $7.23 billion as of December 31, 2024, and accounted for 38% and 37% of total loans held-for-investment, not including loans held for sale, as of March 31, 2025, and December 31, 2024, respectively. Interest rates on CRE loans may be fixed or variable. As of March 31, 2025, 28% and 35% of our CRE portfolio were variable rate and hybrid loans in their fixed period, respectively. In comparison, as of December 31, 2024, 25% and 37% of our CRE portfolio were variable rate and hybrid loans in their fixed period, respectively. Loans are underwritten with conservative standards for cash flows, debt service coverage and LTV.

Current wording

The Company focuses on providing financing to experienced real estate investors and developers who have moderate levels of leverage, many of whom are long-time customers of the Bank. CRE loans totaled $7.49 billion as of June 30, 2025, compared with $7.23 billion as of December 31, 2024, and accounted for 38% and 37% of total loans held-for-investment, not including loans held for sale, as of June 30, 2025, and December 31, 2024, respectively. Interest rates on CRE loans may be fixed or variable. As of June 30, 2025, 17% and 41% of our CRE portfolio were variable rate and hybrid loans in their fixed period, respectively. In comparison, as of December 31, 2024, 25% and 37% of our CRE portfolio were variable rate and hybrid loans in their fixed period, respectively. Loans are underwritten with conservative standards for cash flows, debt service coverage and LTV.

Previous wording

Owner-occupied properties comprised 24% of the CRE loans as of March 31, 2025, and December 31, 2024. The remainder were non-owner-occupied properties, where 50% or more of the debt service for the loan is typically provided by rental income from an unaffiliated third party.

Current wording

Owner-occupied properties comprised 23% and 24% of the CRE loans as of June 30, 2025, and December 31, 2024, respectively. The remainder were non-owner-occupied properties, where 50% or more of the debt service for the loan is typically provided by rental income from an unaffiliated third party.

Previous wording

The multifamily residential loan portfolio is largely comprised of loans secured by residential properties with five or more units. Multifamily residential loans totaled $2.72 billion as of March 31, 2025, compared with $2.72 billion as of December 31, 2024, and accounted for 14% of total loans held-for investment, not including loans held for sale, as of March 31, 2025, and December 31, 2024. The Company offers a variety of first lien mortgages, including fixed- and variable-rate loans. As of March 31, 2025, 20% and 40% of our multifamily residential loan portfolio were variable rate and hybrid loans in their fixed period, respectively. In comparison, as of December 31, 2024, 18% and 41% of our multifamily residential loan portfolio were variable rate and hybrid loans in their fixed period, respectively.

Current wording

The multifamily residential loan portfolio is largely comprised of loans secured by residential properties with five or more units. Multifamily residential loans totaled $2.80 billion as of June 30, 2025, compared with $2.72 billion as of December 31, 2024, and accounted for 14% of total loans held-for investment, not including loans held for sale, as of both June 30, 2025 and December 31, 2024. The Company offers a variety of first lien mortgages, including fixed and variable-rate loans. As of June 30, 2025, 23% and 40% of our multifamily residential loan portfolio were variable rate and hybrid loans in their fixed period, respectively. In comparison, as of December 31, 2024, 18% and 41% of our multifamily residential loan portfolio were variable rate and hybrid loans in their fixed period, respectively.

Previous wording

Construction and land loans provide financing for diversified projects by real estate property type. Construction and land loans totaled $417.9 million as of March 31, 2025, compared with $403.1 million as of December 31, 2024, and accounted for 2% of total loans held-for-investment, not including loans held for sale, as of March 31, 2025, and December 31, 2024. Construction loan exposure was made up of $332.7 million in outstanding loans, plus $158.6 million in unfunded commitments as of March 31, 2025, compared with $319.6 million in outstanding loans, plus $186.5 million in unfunded commitments as of December 31, 2024. Land loans totaled $85.2 million as of March 31, 2025, compared with $83.4 million as of December 31, 2024.

Current wording

Construction and land loans provide financing for diversified projects by real estate property type. Construction and land loans totaled $371.1 million as of June 30, 2025, compared with $403.1 million as of December 31, 2024, and accounted for 2% of total loans held-for-investment, not including loans held for sale, as of June 30, 2025, and December 31, 2024. Construction loan exposure was made up of $301.1 million in outstanding loans, plus $212.1 million in unfunded commitments as of June 30, 2025, compared with $319.6 million in outstanding loans, plus $186.5 million in unfunded commitments as of December 31, 2024. Land loans totaled $70.0 million as of June 30, 2025, compared with $83.4 million as of December 31, 2024.

Previous wording

The allowance for loan losses was $173.9 million and the allowance for off-balance sheet unfunded credit commitments was $11.0 million at March 31, 2025, which represented the amount estimated by management to be appropriate to absorb expected credit losses inherent in the loan portfolio, including unfunded credit commitments. The allowance for credit losses, which is the sum of the allowances for loan losses and for off-balance sheet unfunded credit commitments, was $184.9 million at March 31, 2025, compared to $171.4 million at December 31, 2024. The allowance for credit losses represented 0.96% of period-end gross loans and 119.16% of non-performing loans at March 31, 2025. The comparable ratios were 0.88% of period-end gross loans and 98.98% of non-performing loans at December 31, 2024.

Current wording

The allowance for loan losses was $173.5 million and the allowance for off-balance sheet unfunded credit commitments was $9.9 million at June 30, 2025, which represented the amount estimated by management to be appropriate to absorb expected credit losses inherent in the loan portfolio, including unfunded credit commitments. The allowance for credit losses, which is the sum of the allowances for loan losses and for off-balance sheet unfunded credit commitments, was $183.4 million at June 30, 2025, compared to $171.4 million at December 31, 2024. The allowance for credit losses represented 0.93% of period-end gross loans and 101.60% of non-performing loans at June 30, 2025. The comparable ratios were 0.88% of period-end gross loans and 98.98% of non-performing loans at December 31, 2024.

Previous wording

In calculating our allowance for credit losses in the first quarter of 2025, 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. The increase in the allowance for credit losses was primarily due to an increase in the specific reserve and an increase to the general reserve due to economic uncertainty. 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.

Current wording

In calculating our allowance for credit losses in the second quarter of 2025, increased sensitivity to the macroeconomic forecast, particularly unemployment, had a significant impact to the allowance for credit losses. However, the allowance for credit losses in the second quarter of 2025 also reflected the reversal of specific reserves for two loans as the result of charge-offs during the second quarter for a restructuring of one borrower and the other as a result of pledging of additional collateral and the reversal of a reserve for potential losses from tariffs due to additional developments during the second quarter. 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.

Previous wording

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 March 31, 2025, allowance for credit losses consisted of three scenarios as provided by a reputable third party economic forecaster. After increasing the weighting of the downside scenario in 2022 to reflect our expectations that a recession was more likely than not, we reduced the weighting of the severe scenario slightly during the third quarter of 2023, in light of the continued strength of the economy. At the end of 2024, with the economy continuing to expand at a solid pace, the downside scenario weighting was once again reduced while giving greater weight to the baseline scenario. This quarter the weighting remains the same, however, management made certain qualitative adjustments to the allowance for credit loss in light of the economic uncertainty. The baseline scenario reflects modest ongoing GDP growth in spite of a slight rise in the unemployment rate, starting from 4.03% in the second quarter of 2025, peaking at 4.38% in the third quarter of 2026, and dropping back down to 4.33% by the end of the R&S period. The upside scenario assumes the impacts of tariffs and deportations on the economy are less than expected and reflects higher GDP growth and lower unemployment rates with the stronger economy resulting in inflation and interest rates a bit higher than in the baseline scenario. The downside scenario assumes the impacts of tariffs and deportations on the economy are significantly worse than expected and contemplates a recession as rising inflation prompts the Federal Reserve to raise the fed funds rate in the second and third quarter of 2025. This results in negative GDP growth for three quarters peaking at 3.7% in the fourth quarter of 2025, rising unemployment that peaks at 8.3% in the second quarter of 2026, a decline in CRE prices of 16.9% and a decline in residential home prices of 10.8% during the forecast period.

Current wording

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 June 30, 2025 allowance for credit losses consisted of three scenarios as provided by a reputable third-party economic forecaster. After increasing the weighting of the downside scenario in 2022 to reflect our expectations that a recession was more likely than not, we reduced the weighting of the severe scenario slightly during the third quarter of 2023, in light of the continued strength of the economy. At the end of 2024, with the economy continuing to expand at a solid pace, the downside scenario weighting was once again reduced while giving greater weight to the baseline scenario. This quarter the weighting remains the same as the macroeconomic forecasts continue to capture more of the economic uncertainty. The baseline scenario reflects modest ongoing GDP growth in spite of a slight rise in the unemployment rate, starting from 4.3% in the third quarter of 2025, peaking at 4.8% in the fourth quarter of 2026, and decreasing back down to 4.7% by the end of the R&S period. The upside scenario assumes the impacts of tariffs and deportations on the economy are less than expected and reflects higher GDP growth and lower unemployment rates with the stronger economy resulting in inflation and interest rates a bit higher than in the baseline scenario. The downside scenario assumes the impacts of tariffs and deportations on the economy are significantly worse than expected and contemplates a recession as rising inflation prompts the Federal Reserve to raise the fed funds rate in the third and fourth quarter of 2025. This results in negative GDP growth for three quarters peaking at 4.0% in the first quarter of 2026, rising unemployment that peaks at 8.3% in the third quarter of 2026, a decline in CRE prices of 20.5% and a decline in residential home prices of 11.1% during the forecast period.

Previous wording

Keeping all other factors constant, we estimate that if we had applied 100% weighting to the downside scenario, the allowance for credit losses as of March 31, 2025, would have been approximately $65.2 million higher. This estimate is intended to reflect the sensitivity of the allowance for credit losses to changes in our scenario weights and is not intended to be indicative of future changes in the allowance for credit losses.

Current wording

Keeping all other factors constant, we estimate that if we had applied 100% weighting to the downside scenario, the allowance for credit losses as of June 30, 2025, would have been approximately $111.9 million higher. This estimate is intended to reflect the sensitivity of the allowance for credit losses to changes in our scenario weights and is not intended to be indicative of future changes in the allowance for credit losses.

Previous wording

The allowance allocated to commercial loans increased $11.2 million, or 19.4%, to $69.0 million at March 31, 2025, from $57.8 million at December 31, 2024. The increase was mainly due to an increase in specific reserves and economic uncertainty.

Current wording

The allowance allocated to commercial loans decreased $17.0 million, or 29.4%, to $40.8 million at June 30, 2025, from $57.8 million at December 31, 2024. The decrease was mainly due to a decrease in specific reserves.

Previous wording

The allowance allocated to construction loans increased $0.3 million, or 3.7% to $8.5 million at March 31, 2025, from $8.2 million at December 31, 2024.

Current wording

The allowance allocated to construction loans decreased $2.8 million, or 34.1% to $5.4 million at June 30, 2025, from $8.2 million at December 31, 2024. The decrease was mainly due to a decrease in construction loans.

Previous wording

The allowance allocated to commercial real estate loans increased $1.3 million, or 1.6%, to $80.9 million at March 31, 2025, from $79.6 million at December 31, 2024. The increase is due primarily to an increase in non-performing loans.

Current wording

The allowance allocated to commercial real estate loans increased $27.2 million, or 34.2%, to $106.8 million at June 30, 2025, from $79.6 million at December 31, 2024. The increase is due primarily to an increase in commercial real estate loans and non-performing loans.

Previous wording

The allowance allocated for residential mortgage loans and equity lines decreased $0.7 million, or 4.3% to $15.5 million at March 31, 2025, compared to $16.2 million at December 31, 2024.

Current wording

The allowance allocated for residential mortgage loans and equity lines increased $4.3 million, or 26.5% to $20.5 million at June 30, 2025, compared to $16.2 million at December 31, 2024. The increase was due primarily to an increase in residential real estate loans.

Previous wording

Total deposits were $19.82 billion as of March 31, 2025, an increase of $131.3 million, or 0.7% from $19.69 billion as of December 31, 2024.

Current wording

Total deposits were $20.01 billion as of June 30, 2025, an increase of $320.1 million, or 1.6% from $19.69 billion as of December 31, 2024.

Previous wording

The Company calculates its uninsured deposits based on the methodologies and assumptions used for regulatory reporting. Total uninsured deposits were $9.26 billion as of March 31, 2025, decreasing approximately $177.5 million, from $9.43 billion as of December 31, 2024. Excluding $791.5 million in collateralized deposits, the uninsured and uncollateralized deposits of $8.46 billion was 42.7% of total deposits as of March 31, 2025. Our unused borrowing capacity from the Federal Home Loan Bank as of March 31, 2025, was $7.35 billion and unpledged securities at March 31, 2025, was $1.42 billion. These sources of available liquidity, including cash and short-term investments, were more than 100% of uninsured and uncollateralized deposits as of March 31, 2025.

Current wording

The Company calculates its uninsured deposits based on the methodologies and assumptions used for regulatory reporting. Total uninsured deposits were $9.48 billion as of June 30, 2025, increasing approximately $46.1 million, from $9.43 billion as of December 31, 2024. Excluding $824.0 million in collateralized deposits, the uninsured and uncollateralized deposits of $8.66 billion was 43.3% of total deposits as of June 30, 2025. Our unused borrowing capacity from the Federal Home Loan Bank as of June 30, 2025, was $7.00 billion and unpledged securities at June 30, 2025, was $1.63 billion. These sources of available liquidity, including cash and short-term investments, were more than 100% of uninsured and uncollateralized deposits as of June 30, 2025.

Previous wording

Total equity was $2.87 billion as of March 31, 2025, an increase of $19.5 million, from $2.85 billion as of December 31, 2024, primarily due to net income of $69.5 million, other comprehensive income of $13.9 million, stock-based compensation of $1.5 million, and proceeds from dividend reinvestment of $0.7 million, offset by, purchase of treasury stock of $41.5 million, common stock cash dividends of $23.9 million, and shares withheld related to net share settlement of RSUs of $0.8 million.

Current wording

Total equity was $2.89 billion as of June 30, 2025, an increase of $40.6 million, from $2.85 billion as of December 31, 2024, primarily due to net income of $147.0 million, other comprehensive income of $16.4 million, stock-based compensation of $2.7 million, proceeds from dividend reinvestment of $1.3 million, and stock issued to directors of $1.0 million, offset by, purchase of treasury stock of $77.3 million, common stock cash dividends of $47.7 million, and shares withheld related to net share settlement of RSUs of $2.8 million.

Previous wording

The following table summarizes changes in total equity for the three months ended March 31, 2025:

Current wording

The following table summarizes changes in total equity for the six months ended June 30, 2025:

Previous wording

The Company declared a cash dividend of $0.34 per share on 70,163,216 shares outstanding on February 27, 2025, for distribution to holders of our common stock on March 10, 2025. The Company paid total cash dividends of $23.9 million in the first quarter of 2025.

Current wording

The Company declared a cash dividend of $0.34 per share on 70,133,321 shares outstanding on May 29, 2025, for distribution to holders of our common stock on June 9, 2025. The Company paid total cash dividends of $23.8 million in the second quarter of 2025.

Previous wording

Liquidity is our ability to maintain sufficient cash flow to meet maturing financial obligations and client credit needs, and to take advantage of investment opportunities as they are presented in the marketplace. Our principal sources of liquidity are growth in deposits, proceeds from the maturity or sale of securities and other financial instruments, repayments from securities and loans, Federal funds purchased, securities sold under agreements to repurchase, and advances from the FHLB. As of March 31, 2025, our average monthly liquidity ratio (defined as net cash plus short-term and marketable securities to net deposits and short-term liabilities) was 14.2% compared to 14.4% as of December 31, 2024.

Current wording

Liquidity is our ability to maintain sufficient cash flow to meet maturing financial obligations and client credit needs, and to take advantage of investment opportunities as they are presented in the marketplace. Our principal sources of liquidity are growth in deposits, proceeds from the maturity or sale of securities and other financial instruments, repayments from securities and loans, Federal funds purchased, securities sold under agreements to repurchase, and advances from the FHLB. As of June 30, 2025, our average monthly liquidity ratio (defined as net cash plus short-term and marketable securities to net deposits and short-term liabilities) was 13.9% compared to 14.4% as of December 31, 2024.

Previous wording

The Bank is a shareholder of the FHLB, which enables the Bank to have access to lower-cost FHLB financing when necessary. At March 31, 2025, the Bank had an approved credit line with the FHLB of San Francisco totaling $8.06 billion. Total advances from the FHLB of San Francisco were $95.0 million and standby letters of credit issued by the FHLB on the Company’s behalf were $920.0 million as of March 31, 2025. These borrowings bear fixed rates and are secured by the Bank’s loans. See Note 10 to the Consolidated Financial Statements. At March 31, 2025, the Bank pledged $392.1 million of its commercial loans and $1.0 million of securities to the Federal Reserve Bank’s Discount Window under the Borrower-in-Custody program. The Bank had borrowing capacity of $342.8 million from the Federal Reserve Bank Discount Window at March 31, 2025.

Current wording

The Bank is a shareholder of the FHLB, which enables the Bank to have access to lower-cost FHLB financing when necessary. At June 30, 2025, the Bank had an approved credit line with the FHLB of San Francisco totaling $8.12 billion. Total advances from the FHLB of San Francisco were $412.0 million and standby letters of credit issued by the FHLB on the Company’s behalf were $930.0 million as of June 30, 2025. These borrowings bear fixed rates and are secured by the Bank’s loans. See Note 10 to the Consolidated Financial Statements. At June 30, 2025, the Bank pledged $351.4 million of its commercial loans and $1.6 million of securities to the Federal Reserve Bank’s Discount Window under the Borrower-in-Custody program. The Bank had borrowing capacity of $305.0 million from the Federal Reserve Bank Discount Window at June 30, 2025.