Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion is based on the assumption that the reader has access to and has read the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Critical Accounting Policies

The discussion and analysis of the Company's financial condition and results of operations are based upon its unaudited Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues, and expenses, and related disclosures of contingent assets and liabilities at the date of the Consolidated Financial Statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies involve significant judgments, assumptions and uncertainties and are essential to understanding the Company's results of operations and financial condition. Management of the Company considers the following to be critical accounting policies:

Accounting for the allowance for loan losses involves significant judgments and assumptions by management, which have a material impact on, among other things, the carrying value of net loans. The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances as described in "Allowance for Credit Losses" under "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies" in the 2024 Form 10-K. For more information, please also see Note 2 to the Company's unaudited Consolidated Financial Statements.

Other Legislative Updates

In June 2025, California enacted Senate Bill No. 132 ("SB 132"), requiring banks and financial institutions to adopt a single sales factor for income apportionment, effective for tax years beginning on or after January 1, 2025. Prior to SB 132, financial institutions had been required to use an equally weighted three-factor apportionment formula, which considered property, payroll and sales equally in apportioning income for California tax purposes.

In July 2025, the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or the "GENIUS Act," was signed into law, establishing a federal licensing and supervisory framework for payment stablecoins and their issuers. The GENIUS Act may accelerate and increase the competition that non-traditional financial institutions pose to banks' payment services, but may also create opportunities for banks to hold stablecoin reserve assets, custody stablecoins, or issue stablecoins. Several key provisions of the GENIUS Act require federal regulatory agencies to adopt implementing regulations, and the Act will take effect the earlier of 18 months after its enactment or 120 days after the agencies issue final implementing regulations.

In July 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law, introducing significant tax changes. The OBBBA extends or makes permanent various tax provisions that were originally enacted in the 2017 Tax Cuts and Jobs Act and were set to expire at the end of this year. The OBBBA features modified versions of individual and business tax relief proposals, and other new tax relief measures. In addition, it includes various revenue-raising measures, including changes to certain Inflation Reduction Act clean energy tax credits and various limits on business and individual tax deductions, that are intended to offset part of the cost of the legislation. The Company is currently evaluating the impact of the OBBBA on its business and consolidated financial statements.

Highlights

●

Net interest margin increased to 3.31% during the third quarter from 3.04% in the third quarter of 2024.

	●	Total loans, excluding loans held for sale, increased to $20.10 billion or 3.8%, from $19.38 billion at December 31, 2024.
	●	Total deposits increased $835.0 million or 4.2%, to $20.52 billion from December 31, 2024.
	●	Provision for credit losses of $28.7 million for the third quarter of 2025, included an additional reserve of $9.1 million for two movie theatre loans and $3.8 million from a change in the CECL model.

Quarterly Statement of Operations Review

Net Income

Net income for the quarter ended September 30, 2025, was $77.7 million, an increase of $10.2 million, or 15.1%, compared to net income of $67.5 million for the same quarter a year ago. Diluted earnings per share for the quarter ended September 30, 2025, was $1.13 per share compared to $0.94 per share for the same quarter a year ago.

Return on average stockholders' equity was 10.60% and return on average assets was 1.29% for the quarter ended September 30, 2025, compared to a return on average stockholders' equity of 9.50% and a return on average assets of 1.15% for the same quarter a year ago.

Financial Performance

		Three months ended								Nine months ended
		September 30, 2025				September 30, 2024				September 30, 2025				September 30, 2024
		($ In millions, except per share and ratio data)
Net income		$	77.7			$	67.5			$	224.6			$	205.8
Basic earnings per common share		$	1.13			$	0.94			$	3.22			$	2.84
Diluted earnings per common share		$	1.13			$	0.94			$	3.21			$	2.83
Return on average assets			1.29	%			1.15	%			1.28	%			1.18	%
Return on average total stockholders' equity			10.60	%			9.50	%			10.39	%			9.84	%
Efficiency ratio			41.84	%			51.11	%			44.18	%			53.28	%

Net Interest Income Before Provision for Credit Losses

Net interest income before provision for credit losses increased $20.4 million, or 12.1%, to $189.6 million during the third quarter of 2025, compared to $169.2 million during the same quarter a year ago. The increase was due primarily to a decrease in interest expense from deposits, offset by a small decrease in interest income from loans and securities.

The net interest margin was 3.31% for the third quarter of 2025 compared to 3.04% for the third quarter of 2024.

For the third quarter of 2025, the yield on average interest-earning assets was 5.84%, the cost of funds on average interest-bearing liabilities was 3.32%, and the average cost of interest-bearing deposits was 3.28%. In comparison, for the third quarter of 2024, the yield on average interest-earning assets was 6.10%, the cost of funds on average interest-bearing liabilities was 3.99%, and the average cost of interest-bearing deposits was 3.95%. 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 2.52% for the quarter ended September 30, 2025, compared to 2.11% for the same quarter a year ago.

The following table sets forth information concerning average interest-earning assets, average interest-bearing liabilities, and the average yields and rates paid on those assets and liabilities for the three months ended September 30, 2025, and 2024. The average outstanding amounts included in the table are daily averages.

		Interest-Earning Assets and Interest-Bearing Liabilities
		Three Months Ended September 30,
		2025												2024
						Interest				Average								Interest				Average
		Average				Income/				Yield/				Average				Income/				Yield/
		Balance				Expense				Rate (1)(2)				Balance				Expense				Rate (1)(2)
		($ In thousands)
Interest-earning assets:
Total loans (1)		$	19,951,853			$	308,945				6.14	%		$	19,455,521			$	310,311				6.35	%
Investment securities			1,634,248				12,690				3.08				1,638,414				15,125				3.67
Federal Home Loan Bank stock			17,250				376				8.65				17,250				375				8.65
Deposits with banks			1,113,274				12,184				4.34				1,035,534				13,680				5.26
Total interest-earning assets			22,716,625				334,195				5.84				22,146,719				339,491				6.10
Non-interest earning assets:
Cash and due from banks			163,891												159,324
Other non-earning assets			1,150,545												1,211,110
Total non-interest earning assets			1,314,436												1,370,434
Less: Allowance for loan losses			(172,958	)											(153,122	)
Deferred loan fees			(14,723	)											(11,006	)
Total assets		$	23,843,380											$	23,353,025
Interest-bearing liabilities:
Interest-bearing demand accounts		$	2,189,376			$	9,369				1.70	%		$	2,134,807			$	11,286				2.10	%
Money market accounts			3,556,374				30,792				3.44				3,073,384				28,991				3.75
Savings accounts			1,419,953				6,139				1.72				1,212,870				5,641				1.85
Time deposits			9,698,744				93,087				3.81				10,250,601				119,786				4.65
Total interest-bearing deposits			16,864,447				139,387				3.28				16,671,662				165,704				3.95
Other borrowings			295,892				3,178				4.26				186,838				2,281				4.86
Long-term debt			119,136				2,043				6.80				119,136				2,351				7.85
Total interest-bearing liabilities			17,279,475				144,608				3.32				16,977,636				170,336				3.99
Non-interest bearing liabilities:
Demand deposits			3,384,141												3,230,150
Other liabilities			272,168												316,860
Total equity			2,907,596												2,828,379
Total liabilities and equity		$	23,843,380											$	23,353,025
Net interest spread											2.52	%											2.11	%
Net interest income						$	189,587											$	169,155
Net interest margin											3.31	%											3.04	%
(1) Yields and amounts of interest earned include loan fees. Non-accrual loans are included in the average balance.
(2) Calculated by dividing net interest income by average outstanding interest-earning assets.

The following table summarizes the changes in interest income and interest expense attributable to changes in volume and changes in interest rates for the three months ended September 30, 2025 and 2024:

Taxable-Equivalent Net Interest Income - Changes Due to Volume and Rate(1)
		Three Months Ended September 30,
		2025-2024
		Increase/(Decrease) in
		Net Interest Income Due to
		Changes in Volume				Changes in Rate				Total Change
		($ In thousands)
Interest-earning assets:
Loans		$	8,133			$	(9,499	)		$	(1,366	)
Investment securities			(38	)			(2,397	)			(2,435	)
Federal Home Loan Bank stock			-				1				1
Deposits with other banks			975				(2,471	)			(1,496	)
Total changes in interest income			9,070				(14,366	)			(5,296	)
Interest-bearing liabilities:
Interest-bearing demand accounts			282				(2,201	)			(1,919	)
Money market accounts			4,343				(2,541	)			1,802
Savings accounts			923				(424	)			499
Time deposits			(6,123	)			(20,576	)			(26,699	)
Other borrowed funds			1,201				(304	)			897
Long-term debt			-				(308	)			(308	)
Total changes in interest expense			626				(26,354	)			(25,728	)
Changes in net interest income		$	8,444			$	11,988			$	20,432
(1) Changes in interest income and interest expense attributable to changes in both volume and rate have been allocated proportionately to changes due to volume and changes due to rate.

Provision for credit losses

The Company recorded a provision for credit losses of $28.7 million in the third quarter of 2025 compared with $14.5 million in the third quarter of 2024. Provision for credit losses of $28.7 million for the third quarter of 2025 included an additional reserve of $9.1 million for two movie theatre loans and $3.8 million from a change in the CECL model. As of September 30, 2025, the allowance for credit losses, comprised of the reserve for loan losses and the reserve for unfunded loan commitments, increased $25.1 million to $196.5 million, or 0.98% 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 nine months ended September 30, 2025, consisted of a $55.4 million provision for credit losses, and $30.4 million in net charge-offs.

The following table sets forth the charge-offs and recoveries for the periods indicated:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2025				2024				2025				2024
		($ In thousands)
Charge-offs:
Commercial loans		$	16,173			$	2,666			$	27,634			$	12,862
Real estate loans (1)			314				1,805				4,227				2,059
Installment and other loans			-				7				-				7
Total charge-offs			16,487				4,478				31,861				14,928
Recoveries:
Commercial loans			547				88				1,012				1,026
Construction loans			5				187				6				561
Real estate loans (1)			289				1				479				1
Total recoveries			841				276				1,497				1,588
Net charge-offs		$	15,646			$	4,202			$	30,364			$	13,340
(1) Real estate loans include commercial real estate loans, residential mortgage loans, and equity lines.

Non-Interest Income

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 $21.0 million for the third quarter of 2025, an increase of $0.6 million, or 2.9%, compared to $20.4 million for the third quarter of 2024. The increase was primarily due to an increase of $0.5 million in other operating income related to a legal settlement when compared to the same quarter a year ago.

Non-Interest Expense

Non-interest expense decreased $8.8 million, or 9.1%, to $88.1 million in the third quarter of 2025 compared to $96.9 million in the same quarter a year ago. The decrease in non-interest expense in the third quarter of 2025 was primarily due to a decrease of $11.9 million in amortization expense of investments in low-income housing and alternative energy partnerships, offset by an increase of $2.6 million in salaries and employee benefits and an increase of $1.0 million in computer and equipment expense when compared to the same quarter a year ago. The efficiency ratio was 41.84% in the third quarter of 2025 compared to 51.11% for the same quarter a year ago.

Income Taxes

The effective tax rate for the third quarter of 2025 was 17.2% compared to 13.6% for the third 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.

As a result of the enactment of the single sales factor apportionment by the State of California in June 2025, the Company recorded a $3.4 million write down of its deferred tax assets during the nine months ended September 30, 2025.

Year-to-Date Statement of Operations Review

Net Income

Net income for the nine months ended September 30, 2025, was $224.6 million, an increase of $18.8 million, or 9.1%, compared to net income of $205.8 million for the same period a year ago. Diluted earnings per share for the nine months ended September 30, 2025, was $3.21 per share compared to $2.83 per share for the same period a year ago.

Return on average stockholders' equity was 10.39% and return on average assets was 1.28% for the nine months ended September 30, 2025, compared to a return on average stockholders' equity of 9.84% and a return on average assets of 1.18% for the same period a year ago.

The following table sets forth information concerning average interest-earning assets, average interest-bearing liabilities, and the average yields and rates paid on those assets and liabilities for the nine months ended September 30, 2025, and 2024. The average outstanding amounts included in the table are daily averages.

		Interest-Earning Assets and Interest-Bearing Liabilities
		Nine Months Ended September 30,
		2025												2024
						Interest				Average								Interest				Average
		Average				Income/				Yield/				Average				Income/				Yield/
		Balance				Expense				Rate (1)(2)				Balance				Expense				Rate (1)(2)
		($ In thousands)
Interest-earning assets:
Total loans (1)		$	19,593,553			$	899,786				6.14	%		$	19,464,496			$	916,175				6.29	%
Investment securities			1,572,074				38,459				3.27				1,647,968				45,720				3.71
Federal Home Loan Bank stock			17,250				1,128				8.74				19,162				1,305				9.10
Interest-bearing deposits			1,139,060				37,135				4.36				1,042,413				41,793				5.36
Total interest-earning assets			22,321,937				976,508				5.85				22,174,039				1,004,993				6.05
Non-interest earning assets:
Cash and due from banks			166,859												168,027
Other non-earning assets			1,156,304												1,203,113
Total non-interest earning assets			1,323,163												1,371,140
Less: Allowance for loan losses			(169,464	)											(153,414	)
Deferred loan fees			(12,837	)											(11,405	)
Total assets		$	23,462,799											$	23,380,360
Interest-bearing liabilities:
Interest-bearing demand accounts		$	2,155,336			$	27,321				1.69	%		$	2,205,108			$	35,012				2.12	%
Money market accounts			3,468,421				89,062				3.43				3,134,940				86,546				3.69
Savings accounts			1,351,352				16,721				1.65				1,099,331				11,660				1.42
Time deposits			9,658,300				283,517				3.92				10,053,062				347,408				4.62
Total interest-bearing deposits			16,633,409				416,621				3.35				16,492,441				480,626				3.89
Other borrowings			204,953				6,348				4.14				383,563				15,389				5.36
Long-term debt			119,136				6,092				6.84				119,136				5,935				6.65
Total interest-bearing liabilities			16,957,498				429,061				3.38				16,995,140				501,950				3.95
Non-interest bearing liabilities:
Demand deposits			3,340,530												3,271,913
Other liabilities			274,190												318,923
Total equity			2,890,581												2,794,384
Total liabilities and equity		$	23,462,799											$	23,380,360
Net interest spread											2.47	%											2.10	%
Net interest income						$	547,447											$	503,043
Net interest margin											3.28	%											3.03	%
(1) Yields and amounts of interest earned include loan fees. Non-accrual loans are included in the average balance.
(2) Calculated by dividing net interest income by average outstanding interest-earning assets.

The following table summarizes the changes in interest income and interest expense attributable to changes in volume and changes in interest rates for the nine months ended September 30, 2025 and 2024:

Taxable-Equivalent Net Interest Income - Changes Due to Volume and Rate(1)
		Nine Months Ended September 30,
		2025-2024
		Increase/(Decrease) in
		Net Interest Income Due to
		Changes in Volume				Changes in Rate				Total Change
		($ In thousands)
Interest-earning assets:
Loans		$	5,879			$	(22,268	)		$	(16,389	)
Investment securities			(2,046	)			(5,215	)			(7,261	)
Federal Home Loan Bank stock			(127	)			(50	)			(177	)
Deposits with other banks			3,633				(8,291	)			(4,658	)
Total changes in interest income			7,339				(35,824	)			(28,485	)
Interest-bearing liabilities:
Interest-bearing demand accounts			(777	)			(6,915	)			(7,692	)
Money market accounts			8,785				(6,268	)			2,517
Savings accounts			2,923				2,138				5,061
Time deposits			(13,272	)			(50,619	)			(63,891	)
Other borrowed funds			(6,075	)			(2,966	)			(9,041	)
Long-term debt			-				157				157
Total changes in interest expense			(8,416	)			(64,473	)			(72,889	)
Changes in net interest income		$	15,755			$	28,649			$	44,404
(1) Changes in interest income and interest expense attributable to changes in both volume and rate have been allocated proportionately to changes due to volume and changes due to rate.

Balance Sheet Review

Assets

Total assets were $24.07 billion as of September 30, 2025, an increase of $1.02 billion, or 4.4%, from $23.05 billion as of December 31, 2024.

Securities Available-for-Sale

Debt securities available-for-sale are measured at fair value and subject to impairment testing. When an available-for-sale debt security is considered impaired, the Company must determine if the decline in fair value has resulted from a credit-related loss or other factors and then, (1) recognize an allowance for credit losses by a charge to earnings for the credit-related component (if any) of the decline in fair value, and (2) recognize in other comprehensive income (loss) any non-credit related components of the fair value change. If the amount of the amortized cost basis expected to be recovered increases in a future period, the valuation reserve would be reduced, but not more than the amount of the current existing reserve for that security.

For available-for-sale ("AFS") debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, management considers the extent to which fair value is less than amortized cost, the payment structure of the security, failure of the issuer of the security to make scheduled interest or principal payments, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. Any fair value changes that have not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Losses are charged against the allowance when management believes the uncollectability of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Changes in the allowance for credit losses are recorded as provision for credit loss expense.

The amortized cost of the Company's AFS debt securities exclude accrued interest, which is included in "accrued interest income" on the Consolidated Balance Sheets. The Company has made an accounting policy election not to measure an allowance for credit losses for accrued interest receivables on AFS debt securities since the Company timely reverses any previously accrued interest when the debt security remains in default for an extended period. As each AFS debt security has a unique security structure, where the accrual status is clearly determined when certain criteria listed in the terms are met, the Company assesses the default status of each security as defined by the debt security's specific security structure. At September 30, 2025, no AFS debt securities were in default.

In the current period, management evaluated the securities in an unrealized loss position and determined that their unrealized losses were a result of the level of market interest rates relative to the types of securities and pricing changes caused by shifting supply and demand dynamics and not a result of downgraded credit ratings or other indicators of deterioration of the underlying issuers' ability to repay. Accordingly, we determined the unrealized losses were not credit-related and recognized the unrealized losses in "other comprehensive income/(loss)" in stockholders' equity. Although we periodically sell securities for portfolio management purposes, we do not foresee having to sell any impaired securities strictly for liquidity needs and believe that it is more likely than not we would not be required to sell any impaired securities before recovery of their amortized cost.

Securities available-for-sale represented 6.8% of total assets as of September 30, 2025, compared to 6.7% of total assets as of December 31, 2024. Securities available-for-sale were $1.64 billion as of September 30, 2025, compared to $1.55 billion as of December 31, 2024.

Securities available-for-sale having a carrying value of $19.5 million as of September 30, 2025, and $17.8 million as of December 31, 2024, were pledged to secure public deposits and other borrowings.

Loans

Gross loans held for investment were $20.10 billion at September 30, 2025, an increase of $728.8 million, or 3.8%, from $19.38 billion at December 31, 2024. The increase was primarily due to an increase of $451.1 million, or 4.5%, in commercial real estate loans, an increase of $126.0 million, or 2.2% in residential mortgage loans, an increase of $114.9 million, or 3.7%, in commercial loans, and an increase of $36.6 million, or 11.4% in real estate construction loans.

The loan held for investment balances and composition at September 30, 2025, compared to December 31, 2024, are set forth below:

		September 30, 2025				% of Gross Loans				December 31, 2024				% of Gross Loans				% Change
		($ In thousands)
Commercial loans		$	3,212,907				16.0	%		$	3,098,004				16.0	%			3.7	%
Construction loans			356,215				1.8				319,649				1.6				11.4
Commercial real estate loans			10,484,939				52.1				10,033,830				51.8				4.5
Residential mortgage loans and equity lines			6,047,394				30.1				5,919,092				30.6				2.2
Installment and other loans			3,261				-				5,380				-				(39.4	)
Gross loans held for investment		$	20,104,716				100	%		$	19,375,955				100	%			3.8	%
Allowance for loan losses			(186,647	)							(161,765	)							15.4
Unamortized deferred loan fees			(14,987	)							(10,541	)							42.2
Total loans held for investment, net		$	19,903,082							$	19,203,649								3.6	%

Non-performing Assets

Non-performing assets include loans past due 90 days or more and still accruing interest, non-accrual loans, and OREO. Our policy is to place loans on non-accrual status if interest and/or principal is past due 90 days or more, or in cases where management deems the full collection of principal and interest unlikely. After a loan is placed on non-accrual status, any previously accrued but unpaid interest is reversed and charged against current income and subsequent payments received are generally first applied towards the outstanding principal balance of the loan. Depending on the circumstances, management may elect to continue the accrual of interest on certain past due loans if partial payment is received and/or the loan is well collateralized and in the process of collection. The loan is generally returned to accrual status when the borrower has brought the past due principal and interest payments current and, in the opinion of management, the borrower has demonstrated the ability to make future payments of principal and interest as scheduled.

Management reviews the loan portfolio regularly to seek to identify problem loans. During the ordinary course of business, management may become aware of borrowers that may not be able to meet the contractual requirements of their loan agreements. Such loans generally are placed under closer supervision with consideration given to placing the loans on non-accrual status, the need for an additional allowance for loan losses, and (if appropriate) partial or full charge-off.

The ratio of non-performing assets to total assets was 0.83% as of September 30, 2025, compared to 0.85% as of December 31, 2024. Total non-performing assets increased $2.4 million, or 1.2% to $198.7 million at September 30, 2025, compared to $196.3 million at December 31, 2024, primarily due to an increase of $9.9 million, or 43.0%, in other real estate owned, offset by a decrease of $3.9 million, or 97.3%, in accruing loans past due 90 days or more, and a decrease of $3.6 million, or 2.1%, in non-accrual loans.

As a percentage of gross loans, excluding loans held for sale, plus OREO, our non-performing assets were 0.99% and 1.01% as of September 30, 2025, and December 31, 2024, respectively. The non-performing loan portfolio coverage ratio, defined as the allowance for credit losses to non-performing loans, increased to 118.56% as of September 30, 2025, from 98.98% as of December 31, 2024.

The following table sets forth the changes in non-performing assets as of September 30, 2025, compared to December 31, 2024, and to September 30, 2024:

		September 30, 2025				December 31, 2024				% Change				September 30, 2024				% Change
		($ In thousands)
Non-performing assets
Accruing loans past due 90 days or more		$	110			$	4,050				(97	)		$	6,931				(98	)
Non-accrual loans:
Commercial real estate loans			103,158				83,128				24				87,577				18
Commercial loans			33,690				59,767				(44	)			52,074				(35	)
Residential mortgage loans			28,784				26,266				10				23,183				24
Total non-accrual loans		$	165,632			$	169,161				(2	)		$	162,834				2
Total non-performing loans			165,742				173,211				(4	)			169,765				(2	)
Other real estate owned			32,983				23,071				43				18,277				80
Total non-performing assets		$	198,725			$	196,282				1			$	188,042				6
Accruing loan modifications to borrowers experiencing financial difficulties		$	63,355			$	-							$	-
Allowance for loan losses		$	186,647			$	161,765				15			$	163,733				14
Allowance for unfunded loan commitments		$	9,860			$	9,677				2			$	9,542				3
Total gross loans outstanding, excluding loans held for sale, at period-end		$	20,104,716			$	19,375,955				4			$	19,373,593				4
Allowance for loan losses to non-performing loans, at period-end			112.61	%			93.39	%							96.45	%
Allowance for credit losses to non-performing loans, at period-end			118.56	%			98.98	%							102.07	%
Allowance for loan losses to gross loans, excluding loans held for sale, at period-end			0.93	%			0.83	%							0.85	%

Non-accrual Loans

As of September 30, 2025, total non-accrual loans were $165.6 million, a decrease of $3.6 million, or 2.1%, from $169.2 million at December 31, 2024, and an increase of $2.8 million, or 1.7%, from $162.8 million at September 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.

The following tables set forth the type of properties securing the non-accrual portfolio loans and the type of businesses the borrowers engaged in as of the dates indicated:

		September 30, 2025								December 31, 2024
		Real								Real
		Estate (1)				Commercial				Estate (1)				Commercial
		($ In thousands)
Type of Collateral
Single/multi-family residence		$	58,200			$	1,207			$	52,930			$	5,259
Commercial real estate			73,742				3,524				56,464				576
Personal property (UCC)			-				28,959				-				53,932
Total		$	131,942			$	33,690			$	109,394			$	59,767
(1) Real estate includes commercial real estate loans, construction loans, residential mortgage loans, equity lines and installment & other loans.

		September 30, 2025								December 31, 2024
		Real								Real
		Estate (1)				Commercial				Estate (1)				Commercial
		($ In thousands)
Type of Business
Real estate development		$	73,363			$	4,873			$	45,278			$	5,000
Wholesale/Retail			29,258				27,590				30,415				47,080
Food/Restaurant			46				40				56				250
Import/Export			-				867				-				6,795
Other			29,275				320				33,645				642
Total		$	131,942			$	33,690			$	109,394			$	59,767
(1) Real estate includes commercial real estate loans, construction loans, residential mortgage loans, equity lines and installment & other loans.

For non-accrual loans, the amounts previously charged-off represent 13.0% of the contractual balances for non-accrual loans as of September 30, 2025, and 11.7% as of December 31, 2024. As of September 30, 2025, $131.9 million, or 79.7%, of the $165.6 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.

The allowance for loan losses to non-performing loans was 112.61% as of September 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.

Loan Interest Reserves

In accordance with customary banking practice, construction loans and land development loans generally are originated where interest on the loan is disbursed from pre-established interest reserves included in the total original loan commitment. Our construction loans and land development loans generally include optional renewal terms after the maturity of the initial loan term. New appraisals are obtained prior to extension or renewal of these loans in part to determine the appropriate interest reserve to be established for the new loan term. Loans with interest reserves are generally underwritten to the same criteria, including loan to value and, if applicable, pro forma debt service coverage ratios, as loans without interest reserves. Construction loans with interest reserves are monitored on a periodic basis to gauge progress towards completion. Interest reserves are frozen if it is determined that additional draws would result in a loan to value ratio that exceeds policy maximums based on collateral property type. Our policy limits in this regard are consistent with supervisory limits and range from 50% in the case of land to 85% in the case of one to four family residential construction projects.

As of September 30, 2025, construction loans of $246.8 million were disbursed with pre-established interest reserves of $37.6 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 $3.2 million with pre-established interest reserves of $512 thousand at September 30, 2025, compared to $4.2 million with pre-established interest reserves of $53 thousand at December 31, 2024. Land loans of $9.2 million were disbursed with pre-established interest reserves of $1.0 million at September 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 September 30, 2025, and December 31, 2024.

At September 30, 2025, and December 31, 2024, the Bank had no loan on non-accrual status with available interest reserves. There were no non-accrual residential construction loans, non-accrual non-residential construction loans, and non-accrual land loans that were originated with pre-established interest reserves as of September 30, 2025, and December 31, 2024. 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.

Loan Concentration

Most of the Company's business activities are with clients located in the high-density Asian-populated areas of Southern and Northern California; New York City, New York; Dallas and Houston, Texas; Seattle, Washington; Boston, Massachusetts; Chicago, Illinois; Edison, New Jersey; Rockville, Maryland; and Las Vegas, Nevada. The Company also has loan clients in Hong Kong. The Company has no specific industry concentration, and generally our loans are collateralized with real property or other pledged collateral of the borrowers. The Company generally expects loans to be paid off from the operating profits of the borrowers, refinancing by another lender, or through sale by the borrowers of the collateral.

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% of the Bank's total risk-based capital as of September 30, 2025, and December 31, 2024. Total CRE loans represented 290% of total risk-based capital as of September 30, 2025, and 289% as of December 31, 2024, which were within the Bank's internal limit of 400%, of total capital.

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 as of September 30, 2025, and December 31, 2024. The following table summarizes the Company's total CREC loans by property type as of September 30, 2025, and December 31, 2024:

		As of September 30, 2025								As of December 31, 2024
($ In thousands)		Amount				%				Amount				%
Property type:
Retail		$	2,529,194				23	%		$	2,432,022				24	%
Multifamily			2,812,468				26	%			2,723,890				26	%
Office			1,470,359				14	%			1,449,049				14	%
Warehouse			1,340,593				13	%			1,248,439				12	%
Industrial			693,616				6	%			635,907				6	%
Hospitality			362,794				3	%			292,463				3	%
Construction & Land			425,637				4	%			403,060				4	%
Other			1,206,492				11	%			1,168,649				11	%
Total CREC loans		$	10,841,153				100	%		$	10,353,479				100	%

The weighted-average loan-to-value ("LTV") ratio of the total CREC loan portfolio was 49% as of September 30, 2025, and December 31, 2024. Approximately 86% and 85% of total CREC loans had an LTV ratio of 60% or lower as of September 30, 2025, and December 31, 2024, respectively.

The following tables provide a summary of the Company's CREC, multifamily residential, and construction and land loans by geography as of September 30, 2025, and December 31, 2024. The distribution of the total CREC loan portfolio reflects the Company's geographical footprint, which is primarily concentrated in California:

		As of September 30, 2025
($ In thousands)		CRE				%				Multifamily Residential				%				Construction and Land				%				Total				%
Geographic markets:
Southern California		$	2,630,409							$	964,456							$	268,462							$	3,863,327
Northern California			992,767								150,714								15,470								1,158,951
California			3,623,176				48	%			1,115,170				40	%			283,932				67	%			5,022,278				46	%
New York			2,362,885				31	%			1,266,524				45	%			111,932				26	%			3,741,341				35	%
Texas			420,579				5	%			162,723				6	%			2,600				1	%			585,902				5	%
Illinois			242,731				3	%			45,690				1	%			697				0	%			289,118				3	%
New Jersey			156,224				2	%			17,671				1	%			1,575				0	%			175,470				2	%
Nevada			206,991				3	%			31,020				1	%			4,042				1	%			242,053				2	%
Washington			83,697				1	%			144,291				5	%			12,529				3	%			240,517				2	%
Other markets			506,765				7	%			29,379				1	%			8,330				2	%			544,474				5	%
Total CREC loans		$	7,603,048				100	%		$	2,812,468				100	%		$	425,637				100	%		$	10,841,153				100	%

		As of December 31, 2024
($ In thousands)		CRE				%				Multifamily Residential				%				Construction and Land				%				Total				%
Geographic markets:
Southern California		$	2,498,806							$	928,376							$	235,618							$	3,662,800
Northern California			1,057,781								162,218								27,648								1,247,647
California			3,556,587				49	%			1,090,594				40	%			263,266				65	%			4,910,447				47	%
New York			2,194,173				31	%			1,202,183				44	%			101,887				25	%			3,498,243				34	%
Texas			343,271				5	%			160,207				6	%			6,130				2	%			509,608				5	%
Illinois			242,066				3	%			46,294				2	%			242				0	%			288,602				3	%
New Jersey			153,599				2	%			17,535				1	%			-				0	%			171,134				2	%
Nevada			161,095				2	%			28,775				1	%			23,205				6	%			213,075				2	%
Washington			85,784				1	%			146,258				5	%			-				0	%			232,042				2	%
Other markets			489,954				7	%			32,044				1	%			8,330				2	%			530,328				5	%
Total CREC loans		$	7,226,529				100	%		$	2,723,890				100	%		$	403,060				100	%		$	10,353,479				100	%

There were 46% and 47% of total CREC loans concentrated in California as of September 30, 2025, and December 31, 2024, respectively. Changes in California's economy and real estate values could have a significant impact on the collectability of these loans and the required level of allowance for loan losses.

Commercial Real Estate Loans

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 $7.60 billion as of September 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 September 30, 2025, and December 31, 2024, respectively. Interest rates on CRE loans may be fixed or variable. As of September 30, 2025, 20% and 38% 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.

Owner-occupied properties comprised 24% of the CRE loans as of both September 30, 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.

Commercial-Multifamily Residential Loans

The multifamily residential loan portfolio is largely comprised of loans secured by residential properties with five or more units. Multifamily residential loans totaled $2.81 billion as of September 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 September 30, 2025, and December 31, 2024. The Company offers a variety of first lien mortgages, including fixed and variable-rate loans. As of September 30, 2025, 24% and 38% 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.

Commercial-Construction and Land Loans

Construction and land loans provide financing for diversified projects by real estate property type. Construction and land loans totaled $425.6 million as of September 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 September 30, 2025, and December 31, 2024. Construction loan exposure was made up of $356.2 million in outstanding loans, plus $242.6 million in unfunded commitments as of September 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 $69.4 million as of September 30, 2025, compared with $83.4 million as of December 31, 2024.

Allowance for Credit Losses

The Bank maintains the allowance for credit losses at a level that the Bank's management considers appropriate to cover the estimated and known risks in the loan portfolio and off-balance sheet unfunded credit commitments. Allowance for credit losses is comprised of the allowance for loan losses and for off-balance sheet unfunded credit commitments. With this risk management objective, the Bank's management has an established monitoring system that is designed to identify individually evaluated and potential problem loans, and to permit periodic evaluation of impairment and the appropriate level of the allowance for credit losses in a timely manner.

In addition, the Company's Board of Directors has established a written credit policy that includes a credit review and control system that it believes should be effective in ensuring that the Bank maintains an appropriate allowance for credit losses. 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 determination of the amount of the allowance for credit losses and the provision for credit losses are based on management's current judgment about the credit quality of the loan portfolio and take into consideration known relevant internal and external factors that affect collectability when determining the appropriate level for the allowance for credit losses. The nature of the process by which the Bank determines the appropriate allowance for credit losses requires the exercise of considerable judgment. Additions or reductions to the allowance for credit losses are made by charges or credits to the provision for credit losses. While management utilizes its business judgment based on the information available, the ultimate appropriateness of the allowance is dependent upon a variety of factors, many of which are beyond the Bank's control, including but not limited to the performance of the Bank's loan portfolio, the economy and market conditions, changes in interest rates, and the view of the regulatory authorities toward loan classifications. 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. A weakening of the economy or other factors that adversely affect asset quality could result in an increase in the number of delinquencies, bankruptcies, or defaults, and a higher level of non-performing assets, net charge-offs, and provision for credit losses.

The allowance for loan losses was $186.6 million and the allowance for off-balance sheet unfunded credit commitments was $9.9 million at September 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 $196.5 million at September 30, 2025, compared to $171.4 million at December 31, 2024. The allowance for credit losses represented 0.98% of period-end gross loans and 118.56% of non-performing loans at September 30, 2025. The comparable ratios were 0.88% of period-end gross loans and 98.98% of non-performing loans at December 31, 2024.

Critical Accounting Policies and Estimates

Our accounting policies are fundamental to understanding management's discussion and analysis of results of operations and financial condition. We identify critical policies and estimates as those that require management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. 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 the 2024 Form 10-K. For more information, please also see Note 2 to the Company's unaudited Consolidated Financial Statements.

Expected Credit Losses Estimate for Loans

The allowance for credit losses is the combination of the allowance for loan losses and the reserve for unfunded loan commitments. The allowance for loan losses is reported as a reduction of the amortized cost basis of loans, while the reserve for unfunded loan commitments is included within "Other liabilities" on the Consolidated Balance Sheets. The amortized cost basis of loans does not include interest receivable, which is included in "Other assets" on the Consolidated Balance Sheets. The "Provision for credit losses" on the Consolidated Statement of Operations and Comprehensive Income is a combination of the provision for loan losses and the provision for unfunded loan commitments.

Under the CECL methodology, expected credit losses reflect losses over the remaining contractual life of an asset, considering the effect of prepayments and available information about the collectability of cash flows, including information about relevant historical experience, current conditions, and reasonable and supportable forecasts of future events and circumstances. 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 Note 8 to the unaudited Consolidated Financial Statements contained in "Item 1. Consolidated Financial Statements."

In calculating our allowance for credit losses in the third quarter of 2025, changes to the qualitative reserves, as well as an increase in individually evaluated reserves accounted for the increased allowance. 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.

The use of different economic forecasts, whether based on different scenarios, the use of multiple or single scenarios, or updated economic forecasts and scenarios, can change the outcome of the calculations. In addition to the economic forecasts, there are numerous components and assumptions that are integral to the overall estimation of allowance for credit losses.

The determination of the allowance for credit losses is complex and dependent on numerous models, assumptions, and judgments made by management. Management's current expectation for credit losses as quantified in the allowance for credit losses, considers the impact of assumptions and is reflective of historical credit experience, economic forecasts viewed to be reasonable and supportable, current loan composition, and relative credit risks known as of the balance sheet date.

Under the Company's CECL methodology, nine portfolio segments with similar risk characteristics are evaluated for expected loss. Six portfolios are modeled using econometric models and three smaller portfolios are evaluated using a simplified loss-rate method that calculates lifetime expected credit losses for the respective pools (simplified approach). The six portfolios subject to econometric modeling include residential mortgages; commercial and industrial loans ("C&I"); construction loans; commercial real estate ("CRE") for multifamily loans; CRE for owner-occupied loans; and other CRE loans. We estimate the probability of default during the reasonable and supportable forecast period using separate econometric regression models developed to correlate macroeconomic variables, (GDP, unemployment, CRE prices and residential mortgage prices) to historical credit performance for each of the six loan portfolios from the fourth quarter of 2007 through the fourth quarter of 2024. Loss given default rates are computed based on the charge-offs recognized and then applied to the expected exposure at default of defaulted loans starting with the fourth quarter of 2007 through the third quarter of 2025. The probability of default and the loss given default rates are applied to the expected amount at default at the loan level based on contractual scheduled payments and estimated prepayments. The amounts so calculated comprise the quantitative portion of the allowance for credit losses.

The Company's CECL methodology utilizes an eight-quarter reasonable and supportable ("R&S") forecast period, and a four-quarter reversion period. Management relies on multiple forecasts, blending them into a single loss estimate. Generally speaking, the blended scenario approach would include the Baseline, the Alternative Scenario 1 - Upside - 10th Percentile and the Alternative Scenario 3 - Downside - 90th Percentile forecasts. After the R&S period, the Company will revert straight-line for the four-quarter reversion period to the long-term loss rates for each of the six portfolios of loans. The contractual term excludes renewals and modifications but includes pre-approved extensions and prepayment assumptions where applicable.

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 September 30, 2025, allowance for credit losses consisted of three scenarios as provided by a reputable third-party economic forecaster. This quarter the scenario weighting remains the same as the macroeconomic forecasts continue to project marginally strong growth while still capturing several of the challenges facing the economy. The baseline scenario reflects modest ongoing GDP growth in spite of a slight rise in the unemployment rate, starting from 4.4% in the fourth 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, deportations and political tensions on the economy are worse than expected and contemplates a recession as rising inflation prompts the Federal Reserve to raise the fed funds rate during the fourth quarter of 2025. This results in negative GDP growth for three quarters peaking at 4.0% in the second quarter of 2026, rising unemployment that peaks at 8.4% in the fourth quarter of 2026, a decline in CRE prices of 20.4% and a decline in residential home prices of 10.4% during the forecast period.

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 September 30, 2025, would have been approximately $106.2 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.

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. It is possible that others, given the same information, may at any point in time reach different conclusions that could result in a significant impact to the Company's financial statements.

The following table sets forth information relating to the allowance for loan losses, charge-offs, recoveries, and the reserve for off-balance sheet credit commitments for the periods indicated:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2025				2024				2025				2024
		($ In thousands)
Allowance for loan losses
Balance at beginning of period		$	173,531			$	153,403			$	161,765			$	154,562
Provision for expected credit losses on loans			28,762				14,532				55,246				22,511
Charge-offs:
Commercial loans			(16,173	)			(2,666	)			(27,634	)			(12,862	)
Real estate loans (1)			(314	)			(1,805	)			(4,227	)			(2,059	)
Installment and other loans			-				(7	)			-				(7	)
Total charge-offs			(16,487	)			(4,478	)			(31,861	)			(14,928	)
Recoveries:
Commercial loans			547				88				1,012				1,026
Construction loans			5				-				6				-
Real estate loans (1)			289				187				479				561
Installment and other loans			-				1				-				1
Total recoveries			841				276				1,497				1,588
Balance at the end of period		$	186,647			$	163,733			$	186,647			$	163,733
Reserve for off-balance sheet credit commitments
Balance at beginning of period		$	9,892			$	9,574			$	9,676			$	9,053
(Reversal)/provision for expected credit losses on unfunded credit commitments			(31	)			(32	)			185			$	489
Balance at the end of period		$	9,861			$	9,542			$	9,861			$	9,542
Average loans outstanding during the period		$	19,951,853			$	19,455,521			$	19,593,553			$	19,464,496
Total gross loans outstanding, excluding loans held for sale, at period-end		$	20,104,716			$	19,373,593			$	20,104,716			$	19,373,593
Total non-performing loans, at period-end		$	165,742			$	169,765			$	165,742			$	169,765
Ratio of net charge-offs to average loans outstanding during the period(2)			0.31	%			0.09	%			0.21	%			0.09	%
Provision for expected credit losses to average loans outstanding during the period(2)			0.57	%			0.30	%			0.38	%			0.16	%
Allowance for credit losses to non-performing loans, at period-end			118.56	%			102.07	%			118.56	%			102.07	%
Allowance for credit losses to gross loans, excluding loans held for sale, at period-end			0.98	%			0.89	%			0.98	%			0.89	%
(1) Real estate loans include commercial real estate loans, residential mortgage loans, and equity lines.
(2) Annualized.

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 average gross loans as of the dates indicated:

		September 30, 2025								December 31, 2024
						Percentage of								Percentage of
						Loans in Each								Loans in Each
						Category								Category
						to Average								to Average
		Amount				Gross Loans				Amount				Gross Loans
		($ In thousands)
Type of Loan:
Commercial loans		$	39,071				16.4	%		$	57,796				16.2	%
Construction loans			6,405				1.6				8,185				1.8
Commercial real estate loans			117,798				52.2				79,597				51.0
Residential mortgage loans and equity lines			23,361				29.8				16,181				31.0
Installment and other loans			12				0.0				6				0.0
Total loans		$	186,647				100	%		$	161,765				100	%

The allowance allocated to commercial loans decreased $18.7 million, or 32.4%, to $39.1 million at September 30, 2025, from $57.8 million at December 31, 2024. The decrease was mainly due to charge-offs of $27.6 million which were partially offset by provisions of $7.9 million.

The allowance allocated to construction loans decreased $1.8 million, or 22.0% to $6.4 million at September 30, 2025, from $8.2 million at December 31, 2024.

The allowance allocated to commercial real estate loans increased $38.2 million, or 48.0%, to $117.8 million at September 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 and a special $9.1 million reserve for two movie theatre loans acquired through our acquisition of Far East National Bank.

The allowance allocated for residential mortgage loans and equity lines increased $7.2 million, or 44.4% to $23.4 million at September 30, 2025, compared to $16.2 million at December 31, 2024. The increase was due primarily to an increase in residential real estate loans and use of a longer duration for residential mortgage loans for the allowance calculation at September 30, 2025.

Deposits

Total deposits were $20.52 billion as of September 30, 2025, an increase of $835.0 million, or 4.2% from $19.69 billion as of December 31, 2024.

The Company calculates its uninsured deposits based on the methodologies and assumptions used for regulatory reporting. Total uninsured deposits were $9.96 billion as of September 30, 2025, increasing approximately $525.5 million, from $9.43 billion as of December 31, 2024. Excluding $856.4 million in collateralized deposits, the uninsured and uncollateralized deposits of $9.10 billion was 44.4% of total deposits as of September 30, 2025. Our unused borrowing capacity from the Federal Home Loan Bank as of September 30, 2025, was $7.50 billion and unpledged securities at September 30, 2025, was $1.62 billion. These sources of available liquidity, including cash and short-term investments, were more than 100% of uninsured and uncollateralized deposits as of September 30, 2025.

The following table sets forth the deposit mix as of the dates indicated:

		September 30, 2025								December 31, 2024
		Amount				Percentage				Amount				Percentage
		($ In thousands)
Deposits
Non-interest-bearing demand deposits		$	3,574,567				17.4	%		$	3,284,342				16.7	%
NOW deposits			2,226,182				10.9				2,205,695				11.2
Money market deposits			3,586,301				17.5				3,372,773				17.1
Savings deposits			1,424,243				6.9				1,252,788				6.4
Time deposits			9,709,856				47.3				9,570,601				48.6
Total deposits		$	20,521,149				100.0	%		$	19,686,199				100.0	%

The following table sets forth the maturity distribution of time deposits as of September 30, 2025:

		As of September 30, 2025
		Time Deposits -under $250,000				Time Deposits -$250,000 and over				Total Time Deposits
		($ In thousands)
Three months or less		$	1,095,739			$	2,350,156			$	3,445,895
Over three to six months			1,862,440				2,010,971				3,873,411
Over six to twelve months			943,035				1,424,795				2,367,830
Over twelve months			14,418				8,302				22,720
Total		$	3,915,632			$	5,794,224			$	9,709,856
Percent of total deposits			19.1	%			28.2	%			47.3	%

FDIC Special Assessment and Uninsured Deposits

In November 2023, the FDIC approved a final rule that would impose a special deposit insurance assessment on banks in order to recover losses that the FDIC's Deposit Insurance Fund ("DIF") has incurred in the receiverships of failed institutions. Under the final rule, the FDIC would impose the special assessment for eight quarterly assessment periods beginning with the first quarter of 2024 assessment period, subject to adjustment if the total amount collected is insufficient to cover the DIF's cost. As of December 31, 2024, the total loss estimate to the DIF was $22.0 billion of which $19.1 billion is attributable to the protection of uninsured depositors and will be recovered through the special assessment. The quarterly special assessment will be collected at a quarterly rate of 3.36 basis points (0.0336%) of a bank's estimated uninsured deposits that exceeded $5 billion as of December 31, 2022. Given the update to the loss estimates and the increase in the aggregate special assessment base resulting from amendments to the reported amount of estimated uninsured deposits, the FDIC currently projects that the special assessment will be collected for an additional two quarters beyond the initial eight-quarter collection period, at a lower rate. Based on updated information received from the FDIC about the estimated losses for the failed institutions, the Company has recognized $12.9 million cumulatively related to the special assessment as of September 30, 2025. Depending on future adjustments to the DIF's estimated loss, the FDIC has retained the ability to cease collection early, extend the special assessment collection period, or impose a one-time final shortfall assessment.

Off-Balance-Sheet Arrangements and Contractual Obligations

The following table summarizes the Company's contractual obligations to make future payments as of September 30, 2025. Payments for deposits and borrowings do not include interest. Payments related to leases are based on actual payments specified in the underlying contracts:

		Payment Due by Period
						More than				3 years or
						1 year but				more but
		1 year				less than				less than				5 years
		or less				3 years				5 years				or more				Total
		($ In thousands)
Contractual obligations:
Deposits with stated maturity dates		$	9,687,136			$	22,641			$	66			$	13			$	9,709,856
Advances from the Federal Home Loan Bank			190,000				-				-				-				190,000
Other borrowings			-				-				-				17,628				17,628
Long-term debt			-				-				-				119,136				119,136
Operating leases			10,721				16,007				7,219				2,246				36,193
Total contractual obligations and other commitments		$	9,887,857			$	38,648			$	7,285			$	139,023			$	10,072,813

In the normal course of business, we enter into various transactions, which, in accordance with GAAP, are not included in our Consolidated Balance Sheets. We enter into these transactions to meet the financing needs of our clients. These transactions include commitments to extend credit and standby letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the Consolidated Balance Sheets.

Loan Commitments - We enter into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of our commitments to extend credit are contingent upon clients maintaining specific credit standards at the time of loan funding. We minimize our exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures. Management assesses the credit risk associated with certain commitments to extend credit in determining the level of the allowance for credit losses.

Standby Letters of Credit - Standby letters of credit are written conditional commitments issued by us to secure the obligations of a client to a third party. In the event the client does not perform in accordance with the terms of an agreement with the third party, we would be required to fund the commitment. The maximum potential amount of future payments we could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, we would be entitled to seek reimbursement from the client. Our policies generally require that standby letter of credit arrangements contain security and debt covenants similar to those contained in loan agreements.

Capital Resources

Total equity was $2.90 billion as of September 30, 2025, an increase of $56.6 million, from $2.85 billion as of December 31, 2024, primarily due to net income of $224.6 million, other comprehensive income of $25.9 million, stock-based compensation of $4.7 million, proceeds from dividend reinvestment of $2.0 million, and stock issued to directors of $1.0 million, offset by, purchase of treasury stock of $127.9 million, common stock cash dividends of $70.9 million, and shares withheld related to net share settlement of RSUs of $2.8 million.

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

		Nine Months Ended
		September 30, 2025
		($ In thousands)
Net income		$	224,607
Proceeds from shares issued through the Dividend Reinvestment Plan			1,970
Shares withheld related to net share settlement of RSUs			(2,758	)
Purchase of treasury stock			(127,923	)
Stocks issued to directors			1,020
Stock-based compensation			4,690
Cash dividends paid to common stockholders			(70,944	)
Restricted stock units vested			1
Other comprehensive income			25,909
Net increase in total equity		$	56,572

Capital Adequacy Review

Management seeks to retain our capital at a level sufficient to support future growth, protect depositors and stockholders, and comply with various regulatory requirements.

The following tables set forth actual and required capital ratios as of September 30, 2025, and December 31, 2024, for Bancorp and the Bank under the Basel III Capital Rules. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules. See the 2024 Form 10-K for a more detailed discussion of the Basel III Capital Rules.

		Actual								Minimum Capital Required - Basel III								Required to be Considered Well Capitalized
		Capital Amount				Ratio				Capital Amount				Ratio				Capital Amount				Ratio
		($ In thousands)
September 30, 2025
Common Equity Tier 1 to Risk-Weighted Assets
Cathay General Bancorp		$	2,564,145				13.17			$	1,362,406				7.00			$	1,265,091				6.50
Cathay Bank			2,650,169				13.62				1,361,613				7.00				1,264,355				6.50
Tier 1 Capital to Risk-Weighted Assets
Cathay General Bancorp			2,564,145				13.17				1,654,350				8.50				1,557,035				8.00
Cathay Bank			2,650,169				13.62				1,653,387				8.50				1,556,129				8.00
Total Capital to Risk-Weighted Assets
Cathay General Bancorp			2,876,153				14.78				2,043,608				10.50				1,946,294				10.00
Cathay Bank			2,846,677				14.63				2,042,419				10.50				1,945,161				10.00
Leverage Ratio
Cathay General Bancorp			2,564,145				10.90				940,584				4.00				1,175,730				5.00
Cathay Bank			2,650,169				11.28				939,957				4.00				1,174,946				5.00

		Actual								Minimum Capital Required - Basel III								Required to be Considered Well Capitalized
		Capital Amount				Ratio				Capital Amount				Ratio				Capital Amount				Ratio
		($ In thousands)
December 31, 2024
Common Equity Tier 1 to Risk-Weighted Assets
Cathay General Bancorp		$	2,521,240				13.54			$	1,303,177				7.00			$	1,210,093				6.50
Cathay Bank			2,574,047				13.84				1,302,198				7.00				1,209,184				6.50
Tier 1 Capital to Risk-Weighted Assets
Cathay General Bancorp			2,521,240				13.54				1,582,429				8.50				1,489,345				8.00
Cathay Bank			2,574,047				13.84				1,581,240				8.50				1,488,226				8.00
Total Capital to Risk-Weighted Assets
Cathay General Bancorp			2,808,181				15.08				1,954,765				10.50				1,861,681				10.00
Cathay Bank			2,745,488				14.76				1,953,297				10.50				1,860,283				10.00
Leverage Ratio
Cathay General Bancorp			2,521,240				10.96				920,018				4.00				1,150,023				5.00
Cathay Bank			2,574,047				11.20				919,148				4.00				1,148,935				5.00

As of September 30, 2025, capital levels at Bancorp and the Bank exceed all capital adequacy requirements under the fully phased-in Basel III Capital Rules. Based on the ratios presented above, capital levels as of September 30, 2025, at Bancorp and the Bank exceed the minimum levels necessary to be considered "well capitalized."

Dividend Policy

Holders of common stock are entitled to dividends as and when declared by our Board of Directors out of funds legally available for the payment of dividends. Although we have historically paid cash dividends on our common stock, we are not required to do so. We increased the common stock dividend from $0.24 per share in the fourth quarter of 2017, to $0.31 per share in the fourth quarter of 2018, to $0.34 per share in the fourth quarter of 2021. The amount of future dividends, if any, will depend on our earnings, financial condition, capital requirements and other factors, and will be determined by our Board of Directors. The terms of our Junior Subordinated Notes also limit our ability to pay dividends. If we are not current in our payment of dividends on our Junior Subordinated Notes, we may not pay dividends on our common stock.

The Company declared a cash dividend of $0.34 per share on 68,363,418 shares outstanding on August 15, 2025, for distribution to holders of our common stock on September 8, 2025. The Company paid total cash dividends of $23.2 million in the third quarter of 2025.

Liquidity

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 September 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 14.1% compared to 14.4% as of December 31, 2024.

The Bank is a shareholder of the FHLB, which enables the Bank to have access to lower-cost FHLB financing when necessary. At September 30, 2025, the Bank had an approved credit line with the FHLB of San Francisco totaling $8.30 billion. Total advances from the FHLB of San Francisco were $190.0 million and standby letters of credit issued by the FHLB on the Company's behalf were $949.0 million as of September 30, 2025. These borrowings bear fixed rates and are secured by the Bank's loans. See Note 10 to the Consolidated Financial Statements. At September 30, 2025, the Bank pledged $1.63 billion of its commercial loans and $1.5 million of securities to the Federal Reserve Bank's Discount Window under the Borrower-in-Custody program. The Bank had borrowing capacity of $1.48 billion from the Federal Reserve Bank Discount Window at September 30, 2025.

Liquidity can also be provided through the sale of liquid assets, which may consist of federal funds sold, securities purchased under agreements to resell, and securities available-for-sale. At September 30, 2025, investment securities totaled $1.64 billion, with $19.5 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.

Approximately 99.8% of our time deposits mature within one year or less as of September 30, 2025. Management anticipates that these deposits will reprice lower as a result of the expected decreases in the target Fed funds rate expected in 2025. Management anticipates that there may be some outflow of these deposits upon maturity due to the keen competition in the Bank's marketplace. 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 September 30, 2025, management believes all the above-mentioned sources will provide adequate liquidity during the next twelve months for the Bank to meet its operating needs.

The business activities of Bancorp consist primarily of the operation of the Bank and limited activities in other investments. The Bank paid dividends to Bancorp totaling $175.0 million and $156.0 million during the third quarter of 2025 and 2024, respectively.