CATHAY GENERAL BANCORP Income Taxes Disclosure

11.         Income Taxes

 

For the years ended December 31, 2025, 2024, and 2023, the current and deferred amounts of the income tax expense are summarized as follows: 

 

		Year Ended December 31,
		2025				2024				2023
		($ In thousands)
Current:
Federal		$	20,278			$	15,762			$	5,428
State			42,651				36,557				48,812
Total Current		$	62,929			$	52,319			$	54,240
Deferred:
Federal		$	14,909			$	(18,923	)		$	(1,676	)
State			(2,764	)			(1,833	)			(3,106	)
Total Deferred		$	12,145			$	(20,756	)		$	(4,782	)
Total income tax expense		$	75,074			$	31,563			$	49,458

 

Temporary differences between the amounts reported in the financial statements and the tax basis of assets and liabilities give rise to deferred taxes. Net deferred tax assets as of December 31, 2025, and 2024 are included in other assets in the accompanying Consolidated Balance Sheets and are as follows:

 

		As of December 31,
		2025				2024
		($ In thousands)
Deferred Tax Assets
Loan loss allowance		$	64,866			$	52,484
Accrual for bonuses			7,093				5,770
Non-accrual interest			1,932				3,642
Write-down on equity securities and venture capital investments			4,010				1,958
Depreciation and amortization			1,703				—
Investment in affordable housing partnerships			2,913				—
State tax			—				2,910
Unrealized loss on securities available-for-sale, net			19,236				32,333
Tax credits carried forward			8,223				29,307
Net operating loss carried forward			3,276				3,249
Other, net			6,120				6,176
Gross deferred tax assets		$	119,372			$	137,829
Deferred Tax Liabilities
Investment in partnerships		$	(5,531	)		$	—
Deferred loan costs			(9,565	)			(9,569	)
Unrealized gain on interest rate swaps			(315	)			(502	)
Unrealized gain on equity securities			(4,899	)			(2,460	)
Dividends on Federal Home Loan Bank common stock			(990	)			(976	)
Other, net			(5,196	)			(4,712	)
Gross deferred tax liabilities		$	(26,496	)		$	(18,219	)
Net deferred tax assets		$	92,876			$	119,610

 

Amounts for the current year are based upon estimates and assumptions and could vary from amounts shown on the tax returns as filed.

 

At December 31, 2025, the Company has California NOL carryovers of $33.5 million for which a California deferred tax asset of $3.2 million has been recorded reflecting the expected benefit of these California NOL carryovers.  The annual IRC Section 382 limitation is $7.3 million per year. If not utilized, a portion of the Company’s state NOL’s will begin to expire in 2030. At December 31, 2025, the Company’s federal tax credit carryovers total $11.7 million.  If not utilized, the federal tax credit carryovers will begin to expire in 2028.  The AMT tax credit carryovers can be carried forward indefinitely.

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize all benefits related to these deductible temporary differences.

 

The Company had current income tax receivable of $13.3 million as of December 31, 2025, and $37.0 million as of December 31, 2024. The Company had $2.9 million of tax credits generated in 2025 that will be carried forward to 2026. Current income tax receivable is included in other assets in the accompanying Consolidated Balance Sheets.

 

The Company’s tax returns are open for audits by the Internal Revenue Service back to 2022 and by the California Franchise Tax Board back to 2021. It is reasonably possible that unrecognized tax benefits could change significantly over the next twelve months. The Company does not expect that any such changes would have a material impact on its annual effective tax rate.

 

Income tax expense from continuing operations results in effective tax rates that differ from the statutory federal income tax rate for the years indicated as follows:

 

		Year Ended December 31,
		2025								2024								2023
		($ In thousands)
US federal income tax rate expense computed at the statutory rate		$	81,942				21.0	%		$	66,684				21.0	%		$	84,752				21.0	%
Domestic Federal
Tax Credits:
Low-income housing tax credits			(40,179	)			(10.3	)			(35,448	)			(11.1	)			(32,395	)			(8.1	)
Solar investment tax credits			—				—				(28,517	)			(9.0	)			(41,320	)			(10.2	)
Non-taxable and non-deductible items			1,867				0.5				2,060				0.6				3,231				0.8
Other, net			(67	)			—				(648	)			(0.2	)			(917	)			(0.2	)
Domestic State and Local Income Taxes, Net of Federal Income Tax Effect (1)			31,511				8.0				27,432				8.6				36,107				9.0
Income tax expense and effective tax rate, as reported		$	75,074				19.2	%		$	31,563				9.9	%		$	49,458				12.3	%
(1) State and local income taxes in California, New York State and New York City comprise the majority (greater than 50 percent) of the tax effect in this category for years 2025, 2024 and 2023.

 

 

The table below shows income tax paid, net of refunds received, by jurisdiction for the years indicated as follows:

 

		Year Ended December 31,
		2025				2024				2023
		($ In thousands)
Federal income tax		$	4,147			$	16,000			$	18,200
State and local income tax
California		$	16,326			$	24,000			$	30,500
New York State			5,876				10,282				11,800
New York City			10,000				5,000				8,700
Other			1,349				863				1,112
Total State and local income tax		$	33,551			$	40,145			$	52,112
Total income tax paid		$	37,698			$	56,145			$	70,312