Cathay Financial Holding Co., Ltd.

2882

TW0002882008

Life & Health Insurance

End-of-day quote Taiwan S.E. Other stock markets 2026-06-11			5-day change	1st Jan Change
100.50 ^TWD	+0.60%		+6.46%	+32.59%

Jun. 02	Cathay Financial Unit Names Vice Chairman	MT
May. 29	Cathay Financial Holding Co., Ltd. Reports Earnings Results for the First Quarter Ended March 31, 2026	CI

Cathay Financial : 2025Q4 Financial Results Cathay United Bank Financial Statement (Consolidated)

Published on 05/05/2026 at 10:14 am EDT

Publicnow

CATHAY FINANCIAL HOLDING CO., LTD.

+0.60%

Cathay United Bank Co., Ltd. and Subsidiaries

Cons olidated Financial Statements for the Years Ended December 31, 2025 and 2024 and Independent Auditors' Report

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The Bank and its subsidiaries that are required to be included in the consolidated financial statements of affiliates in accordance with the "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises" for the year ended December 31, 2025 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting Standard

10 "Consolidated Financial Statements". Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we do not prepare a separate set of consolidated financial statements of affiliates.

Very truly yours,

CATHAY UNITED BANK CO., LTD.

By:

March 11, 2026

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders Cathay United Bank Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Cathay United Bank Co., Ltd. (the "Bank") and its subsidiaries (collectively referred to as the "Company"), which comprise the consolidated balance sheets as of December 31, 2025 and 2024, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information (collectively referred to as the "consolidated financial statements").

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2025 and 2024, its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Financial Statement Audit and Attestation Engagements of Certified Public Accountants and the Standards on Auditing of the Republic of China. Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the Company for the year ended December 31, 2025. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter of the Company's consolidated financial statements for the year ended December 31, 2025 is as follows:

Impairment Assessment of Loans

The domestic loans of the Bank, amounting to $2,679,596,426 thousand, were considered material to the financial statements as a whole. The assessment of impairment of loans involves accounting estimates and management's significant judgment, and since the amount of impairment assessed on loans under the relevant regulations issued by the authorities is substantially larger than those assessed under IFRS 9, we determined the impairment of the loans assessed under the relevant regulations prescribed by the authorities as a key audit matter.

The Bank's management regularly assesses its loans for impairment. Recognition of impairment loss on loans is based on compliance with regulations issued by the authorities regarding the classification of credit assets and the provision of impairment loss. For the accounting policies and relevant information on the impairment assessment of loans, refer to Notes 4, 5 and 14.

The main audit procedures we performed in response to the key audit matter described above were as follows:

We obtained an understanding of and tested its internal controls of impairment assessment on loans.
We tested the classification of the credit assets into their respective categories out of the total five categories and confirmed that such classification complies with the relevant regulations issued by the authorities.
We performed the tests on selected samples and confirmed the appropriateness of impairment based on the length of the overdue period and the value of the collateral for each respective loan.
We calculated the provision of impairment loss by classifying the credit assets into their respective categories and confirmed that such provision complies with the relevant regulations issued by the authorities.

Other Matter

We have also audited the parent company only financial statements of the Bank as of and for the year ended December 31, 2025 and 2024, on which we have issued an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the audit committee, are responsible for overseeing the Company's financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Standards on Auditing of the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the Standards on Auditing of the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2025 and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audits resulting in this independent auditors' report are Shiuh-Ran Cheng and Shu-Wan Lin.

Deloitte & Touche Taipei, Taiwan Republic of China

March 11, 2026

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors' report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors' report and consolidated financial statements shall prevail.

CATHAY UNITED BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2025 AND 2024

(In Thousands of New Taiwan Dollars)

2025 2024

ASSETS	Amount	%	Amount	%
CASH AND CASH EQUIVALENTS (Notes 4, 6 and 44)	$ 141,293,368	3	$ 163,215,658	4
DUE FROM THE CENTRAL BANK AND CALL LOANS TO BANKS (Notes 4 and 7)	428,777,214	8	304,995,700	7
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8, 44 and 49)	372,394,084	7	272,034,013	6
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (Notes 4, 9, 11, 44 and 49)	383,158,617	7	369,175,121	8
INVESTMENTS IN DEBT INSTRUMENTS AT AMORTISED COST (Notes 4, 10, 11, 45 and 49)	688,483,141	13	577,014,981	12
SECURITIES PURCHASED UNDER RESELL AGREEMENTS (Notes 4 and 12)	35,291,150	1	21,574,616	-
RECEIVABLES, NET (Notes 4, 13 and 44)	148,254,709	3	138,165,611	3
CURRENT INCOME TAX ASSETS (Notes 4 and 42)	66,082	-	494	-
DISCOUNTS AND LOANS, NET (Notes 4, 5, 14 and 44)	2,886,929,378	56	2,679,232,675	58
INVESTMENTS MEASURED BY EQUITY METHOD, NET (Notes 4 and 17)	1,983,287	-	1,820,873	-
OTHER FINANCIAL ASSETS, NET	362,394	-	36,710	-
PROPERTY AND EQUIPMENT, NET (Notes 4, 18 and 44)	25,617,373	1	24,858,921	1
RIGHT-OF-USE ASSETS, NET (Notes 4, 19 and 44)	6,870,873	-	6,147,818	-
INVESTMENT PROPERTIES, NET (Notes 4 and 20)	2,289,150	-	2,301,344	-
INTANGIBLE ASSETS, NET (Notes 4 and 21)	8,541,666	-	8,442,228	-
DEFERRED TAX ASSETS (Notes 4 and 42)	4,195,171	-	3,880,532	-
OTHER ASSETS, NET (Notes 22 and 44)	33,433,944	1	33,387,737	1
TOTAL	$ 5,167,941,601	100	$ 4,606,285,032	100
LIABILITIES AND EQUITY
DEPOSITS FROM THE CENTRAL BANK AND BANKS (Notes 23 and 44)	$ 178,790,871	4	$ 184,682,667	4
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8, 44 and 49)	104,236,118	2	132,772,775	3
NOTES AND BONDS ISSUED UNDER REPURCHASE AGREEMENTS (Notes 4 and 24)	2,110,900	-	10,942,366	-
PAYABLES (Notes 25 and 44)	47,069,691	1	44,107,624	1
CURRENT TAX LIABILITIES (Notes 4 and 42)	346,511	-	359,129	-
DEPOSITS AND REMITTANCES (Notes 26 and 44)	4,430,955,358	86	3,848,586,425	84
FINANCIAL DEBENTURES PAYABLE (Note 27)	18,600,000	-	12,700,000	-
OTHER FINANCIAL LIABILITIES (Note 28)	39,028,580	1	46,198,699	1
PROVISIONS (Notes 4, 15 and 29)	3,723,071	-	3,771,032	-
LEASE LIABILITIES (Notes 4, 19 and 44)	7,038,916	-	6,198,477	-
DEFERRED TAX LIABILITIES (Notes 4 and 42)	2,119,807	-	2,693,938	-
OTHER LIABILITIES (Notes 4, 31 and 44)	9,262,730	-	13,223,870	-
Total liabilities	4,843,282,553	94	4,306,237,002	93
EQUITY ATTRIBUTABLE TO OWNERS OF THE BANK (Note 32) Capital stock Common stock	128,220,970	2	120,113,139	3
Capital surplus	38,869,080	1	38,869,080	1
Retained earnings Legal reserve	105,507,583	2	94,311,239	2
Special reserve	6,141,468	-	8,504,431	-
Unappropriated earnings	40,877,456	1	37,320,398	1
Total retained earnings	152,526,507	3	140,136,068	3
Other equity	239,334	-	(3,728,683	) -
Total equity attributable to owners of the Bank	319,855,891	6	295,389,604	7
NON-CONTROLLING INTERESTS (Note 32)	4,803,157	-	4,658,426	-
Total equity	324,659,048	6	300,048,030	7
TOTAL	$ 5,167,941,601	100	$ 4,606,285,032	100

The accompanying notes are an integral part of the consolidated financial statements.

CATHAY UNITED BANK CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2025 2024 Changes Amount % Amount % (%)

NET INTEREST REVENUE (Notes 4,

33 and 44)
Interest income $ 126,663,555		108	$ 120,185,797	111	5
Interest expense (58,422,207)		(50)	(59,272,974)	(55)	(1)
Total net interest revenue 68,241,348		58	60,912,823	56	12
NET REVENUE OTHER THAN
INTEREST
Net service fee revenue (Notes 4, 34
and 44)	34,089,905	29	27,973,260	26	22
Gain on financial assets or liabilities at
fair value through profit or loss
(Notes 4, 35 and 44)	9,843,856	9	14,941,158	14	(34)
Realized gain on financial assets at fair
value through other comprehensive
income (Notes 4, 9 and 36)	1,084,976	1	1,136,832	1	(5)
Gain (loss) arising from derecognition
of financial assets measured at
amortised cost (Notes 4 and 10)	64	-	(12,538)	-	101
Foreign exchange gain (Notes 4
and 50)	2,667,088	2	2,322,734	2	15
Impairment reversal (loss) on assets
(Notes 4 and 37)	24,510	-	(116,431)	-	121
Share of profit of associates and joint
ventures accounted for using equity
method (Notes 4 and 17)	83,553	-	62,110	-	35
Net other revenue other than interest
income (Notes 4 and 44)	732,012	1	602,157	1	22
Total net revenue other than
interest	48,525,964	42	46,909,282	44	3
NET REVENUE	116,767,312	100	107,822,105	100	8
BAD DEBTS EXPENSE,
COMMITMENT AND GUARANTEE
LIABILITY PROVISION (Notes 4, 5, 13, 14, 15 and 38)	(7,292,804)	(6)	(9,211,440)	(8)	(21)

(Continued)

2025 Amount %			2024 Amount %		Changes (%)
TOTAL OPERATING EXPENSES Employee benefits expenses (Notes 4, 39 and 44)	$ (27,832,079)	(24)	$ (25,676,709)	(24)	8
Depreciation and amortization expense (Notes 4, 18, 19, 21 and 40)	(4,374,903)	(4)	(3,943,798)	(4)	11
Other general and administrative expense (Notes 4, 41 and 44)	(24,583,273)	(21)	(22,219,754)	(20)	11
Total operating expenses	(56,790,255)	(49)	(51,840,261)	(48)	10
PROFIT BEFORE TAX	52,684,253	45	46,770,404	44	13
INCOME TAX EXPENSE (Notes 4 and 42)	(9,174,467)	(8)	(8,429,626)	(8)	9
NET INCOME	43,509,786	37	38,340,778	36	13
OTHER COMPREHENSIVE INCOME

(Notes 4 and 32)

Components of other comprehensive income (loss) that will not be reclassified to profit or loss, net of tax

Remeasurement of defined benefit

plans (278,579) - (224,164) - 24

(3,338,849)	(3)	3,604,960	3	(193)
296,411	1	517,113	-	(43)

Revaluation (losses) gains on investments in equity instruments measured at fair value through other comprehensive income

Change in fair value of financial liability attributable to change in credit risk of liability

Share of other comprehensive income of associates and joint ventures accounted for using

equity method (Note 17) (2,228) - 16,796 - (113)

Income tax related to components of other comprehensive income that will not be reclassified to profit or

loss (Notes 4 and 42) 138,219 - (361,903) - 138

(Continued)

2025 Amount %			2024 Amount %		Changes (%)
Components of other comprehensive (loss) income that will be reclassified to profit or loss, net of tax Exchange differences on translating the financial statements of foreign operations	$ (1,026,250)	(1)	$ 2,587,733	2	(140)
Share of other comprehensive income (loss) of associates and joint ventures accounted for using equity method (Note 17)	109,560	-	(25,343)	-	532
Gains (losses) from investments in debt instruments measured at fair value through other comprehensive income	5,570,901	5	(3,153,776)	(3)	277
Income tax related to components of other comprehensive income that will be reclassified to profit or loss (Notes 4 and 42)	11,981	-	(449,322)	-	103
Other comprehensive income, net of tax	1,481,166	2	2,512,094	2	(41)
TOTAL COMPREHENSIVE INCOME	$ 44,990,952	39	$ 40,852,872	38	10
PROFIT ATTRIBUTABLE TO: Owners of the Bank	$ 43,008,233	37	$ 37,780,421	35	14
Non-controlling interests	501,553	-	560,357	1	(10)
	$ 43,509,786	37	$ 38,340,778	36	13
COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Bank	$ 44,846,221	39	$ 40,128,878	37	12
Non-controlling interests	144,731	-	723,994	1	(80)
	$ 44,990,952	39	$ 40,852,872	38	10
EARNINGS PER SHARE (Note 43) Basic	$ 3.35		$ 2.95

The accompanying notes are an integral part of the consolidated financial statements. (Concluded)

CATHAY UNITED BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024

(In Thousands of New Taiwan Dollars)

Equity Attributable to Owners of the Bank

Other Equity

Retained Earnings

Exchange Differences on Translating the Financial Statements of

Unrealized Gains (Losses) on Financial Assets at Fair Value Through Other

Changes in the Fair Value of Financial Liabilities Attributable to

Losses on

Remeasurements Gains (Losses)

Capital Stock Unappropriated Foreign Comprehensive Changes in the of Defined on Property Non-controlling

	Common Stock	Capital Surplus	Legal Reserve	Special Reserve	Earnings	Operations	Income	Credit Risk	Benefit Plans	Revaluation	Total	Interests	Total Equity
BALANCE AT JANUARY 1, 2024	$ 108,598,655	$ 38,869,080	$ 85,964,149	$ 16,832,170	$ 27,823,633	$ (1,520,460)	$ (2,847,253)	$ (833,793)	$ (2,567,037)	$ 1,612,099	$ (6,156,444)	$ 3,934,432	$ 275,865,675
Effects of initial application of IAS 29 "Financial Reporting in
Hyperinflationary Economies" -		-	-	-	(380,719)	-	-	-	-	-	-	-	(380,719)
IMPACT ON THE REMAINING BALANCE AT JANUARY 1, 2024 108,598,655		38,869,080	85,964,149	16,832,170	27,442,914	(1,520,460)	(2,847,253)	(833,793)	(2,567,037)	1,612,099	(6,156,444)	3,934,432	275,484,956
Appropriation of 2023 earnings Legal reserve -		-	8,347,090	-	(8,347,090)	-	-	-	-	-	-	-	-
Special reserve -		-	-	(8,327,739)	8,327,739	-	-	-	-	-	-	-	-
Cash dividends -		-	-	-	(16,289,798)	-	-	-	-	-	-	-	(16,289,798)
Stock dividends 11,514,484		-	-	-	(11,514,484)	-	-	-	-	-	-	-	-
Net income for the year ended December 31, 2024 -		-	-	-	37,780,421	-	-	-	-	-	-	560,357	38,340,778
Other comprehensive income (loss) for the year ended December 31, 2024, net of income tax -		-	-	-	-	1,880,055	236,609	413,691	(181,898)	-	2,348,457	163,637	2,512,094
Total comprehensive income (loss) for the year ended December 31, 2024 -		-	-	-	37,780,421	1,880,055	236,609	413,691	(181,898)	-	2,348,457	723,994	40,852,872
Disposals of investments in equity instruments designated as at fair value through other comprehensive income -		-	-	-	(79,304)	-	79,304	-	-	-	79,304	-	-
BALANCE AT DECEMBER 31, 2024 120,113,139		38,869,080	94,311,239	8,504,431	37,320,398	359,595	(2,531,340)	(420,102)	(2,748,935)	1,612,099	(3,728,683)	4,658,426	300,048,030
Appropriation of 2024 earnings Legal reserve -		-	11,196,344	-	(11,196,344)	-	-	-	-	-	-	-	-
Special reserve -		-	-	(2,362,954)	2,362,954	-	-	-	-	-	-	-	-
Cash dividends -		-	-	-	(20,379,934)	-	-	-	-	-	-	-	(20,379,934)
Stock dividends 8,107,831		-	-	-	(8,107,831)	-	-	-	-	-	-	-	-
Net income for the year ended December 31, 2025 -		-	-	-	43,008,233	-	-	-	-	-	-	501,553	43,509,786
Other comprehensive (loss) income for the year ended December 31, 2025, net of income tax -		-	-	-	-	(680,877)	2,502,255	237,128	(220,518)	-	1,837,988	(356,822)	1,481,166
Total comprehensive (loss) income for the year ended December 31, 2025 -		-	-	-	43,008,233	(680,877)	2,502,255	237,128	(220,518)	-	1,837,988	144,731	44,990,952
Disposals of investments in equity instruments designated as at fair value through other comprehensive income -		-	-	-	(2,130,777)	-	2,130,777	-	-	-	2,130,777	-	-
Others -		-	-	(9)	757	-	-	-	-	(748)	(748)	-	-
BALANCE AT DECEMBER 31, 2025 $ 128,220,970		$ 38,869,080	$ 105,507,583	$ 6,141,468	$ 40,877,456	$ (321,282)	$ 2,101,692	$ (182,974)	$ (2,969,453)	$ 1,611,351	$ 239,334	$ 4,803,157	$ 324,659,048

The accompanying notes are an integral part of the consolidated financial statements.

CATHAY UNITED BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
(In Thousands of New Taiwan Dollars)
	2025	2024
CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax	$ 52,684,253	$ 46,770,404
Adjustments: Depreciation expense	3,655,687	3,243,922
Amortization expense	719,216	699,876
Expected credit loss	7,292,804	9,211,440
Gains on financial assets and liabilities at fair value through profit or loss	(9,843,856)	(14,941,158)
Interest expense	58,422,207	59,272,974
Net (gains) losses arising from derecognition of financial assets measured at amortised cost	(64)	12,538
Interest income	(126,663,555)	(120,185,797)
Dividend income	(1,973,118)	(1,099,476)
Share of profit of associates and joint ventures accounted for using equity method	(83,553)	(62,110)
Losses (gains) on disposal of property and equipment	17,217	(62,562)
Gains on disposal of investment properties	(4,734)	(1,740)
Losses (gains) on disposal of investments	888,142	(37,356)
(Reversal of) impairment loss on financial assets	(24,510)	116,431
Gains on sale of nonperforming loans	(2,368)	(11,797)
Gains on fair value adjustment of investment property	(107,534)	(70,755)
Other adjustments	(76,004)	135,650
Changes in operating assets and liabilities
Due from the Central Bank and call loans to banks	(25,667,320)	(20,148,956)
Financial assets at fair value through profit or loss	(8,209,294)	188,607,848
Financial assets at fair value through other comprehensive income	(12,654,903)	(72,622,880)
Investments in debt instruments at amortised cost	(111,428,269)	100,607,161
Receivables	(10,157,986)	(22,871,875)
Discounts and loans	(214,329,500)	(406,760,283)
Other financial assets	(325,684)	117,003
Other assets	(769,855)	(4,756,399)
Deposits from the Central Bank and banks	(5,891,796)	67,551,813
Financial liabilities at fair value through profit or loss	(114,544,338)	(116,848,283)
Notes and bonds issued under repurchase agreement	(8,831,466)	(7,376,126)
Payables	2,454,063	2,116,721
Deposits and remittances	582,368,933	305,028,613
Other financial liabilities	(7,170,119)	(18,469,864)
Provisions	(256,334)	(235,764)
Other liabilities	(3,946,486)	1,029,102
Cash generated from (used in) operations	45,539,876	(22,041,685)
Interest received	131,404,704	125,404,465
Dividends received	1,996,173	1,118,290
Interest paid	(60,814,072)	(61,994,219)
Income tax paid	(8,555,015)	(6,860,153)

Net cash generated from operating activities 109,571,666 35,626,698 (Continued)

CATHAY UNITED BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
(In Thousands of New Taiwan Dollars)
	2025	2024
CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property and equipment	$ (2,225,796)	$ (1,928,120)
Proceeds from disposal of property and equipment	624	156,812
Acquisition of intangible assets	(277,053)	(539,546)
Proceeds from disposal of investment properties	102,000	13,520
Cash received of sale of nonperforming loans	53,539	38,790
Dividends received	28,471	25,363
Net cash used in investing activities	(2,318,215)	(2,233,181)
CASH FLOWS FROM FINANCING ACTIVITIES Issuance of financial debentures payable	5,900,000	-
Repayments of financial debentures payable	-	(14,400,000)
Payments of the principal portion of lease liabilities	(1,935,744)	(1,757,539)
Cash dividends paid	(20,379,934)	(16,289,798)
Net cash used in financing activities	(16,415,678)	(32,447,337)
EFFECTS OF EXCHANGE RATE AND PURCHASING POWER CHANGES ON CASH AND CASH EQUIVALENTS	(921,718)	1,922,907
NET INCREASE IN CASH AND CASH EQUIVALENTS	89,916,055	2,869,087
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR	371,168,287	368,299,200
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	$ 461,084,342	$ 371,168,287
December 31
	2025	2024
RECONCILIATIONS OF CASH AND CASH EQUIVALENTS REPORTED IN THE CONSOLIDATED STATEMENTS OF CASH FLOWS WITH THOSE REPORTED IN THE CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2025 AND 2024 Cash and cash equivalents reported in the consolidated balance sheets	$ 141,293,368	$ 163,215,658
Due from the Central Bank and call loans to banks qualifying for cash and cash equivalents under the definition of IAS 7	284,499,824	186,378,013
Securities purchased under resell agreements qualifying for cash and
cash equivalents under the definition of IAS 7	35,291,150	21,574,616
Cash and cash equivalents at the end of the year	$ 461,084,342	$ 371,168,287

The accompanying notes are an integral part of the consolidated financial statements. (Concluded)

CATHAY UNITED BANK CO., LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

GENERAL INFORMATION
Cathay United Bank Co., Ltd. (the "Bank"), originally named United World Chinese Commercial Bank (UWCCB), was established in December 1974 after obtaining approval from the Ministry of Finance of the Republic of China (ROC) and officially started operations on May 20, 1975. The Bank is mainly engaged in the following operations: (1) all commercial banking operations authorized by the ROC Banking Act ("Banking Act"); (2) international banking business and related operations; (3) trust business; (4) offshore banking business; and (5) other financial operations related to the promotion of investments by overseas Chinese. The Bank's registered office and main business location is at No. 7, Songren Rd., Xinyi District, Taipei City, Republic of China (ROC).
The Bank's stock was originally trading on the Taiwan Stock Exchange (TWSE) until December 18, 2002, where it was delisted after becoming a wholly-owned subsidiary of Cathay Financial Holding Co., Ltd. ("Cathay Financial Holdings") on the same date through a share swap. Under the Financial Institutions Merger Act, the Bank merged with the former Cathay Commercial Bank, a wholly-owned subsidiary of Cathay Financial Holdings on October 27, 2003, with UWCCB as the surviving entity and was renamed Cathay United Bank Co., Ltd.
The Bank merged with Lucky Bank on January 1, 2007. The Bank was the surviving entity after this merger and Lucky Bank was the extinguished entity. In addition, the Bank acquired specific assets, liabilities, and business of China United Trust & Investment Corporation (CUTIC) on December 29, 2007.
In accordance with the information announced by the Center for Audit Quality (CAQ) in December 2024, the Bank has determined that Laos is operating in a hyperinflationary economic environment. Given the changes in the country's economic conditions, the Bank has prepared the financial statements of the foreign operations in Laos, where the functional currency is the Lao Kip, in accordance with IAS 29 "Financial Reporting in Hyperinflationary Economies". Refer to Note 32, for details on the relevant impact.
Cathay Financial Holdings is the Bank's ultimate parent company.
The consolidated financial statements are presented in the Bank's functional currency, the New Taiwan dollar.
APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements of the Bank and its subsidiaries (collectively, the "Company") were approved by the Bank's board of directors on March 11, 2026.
APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS
1. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Public Banks and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, the "IFRS Accounting Standards") endorsed and issued into effect by the Financial Supervisory Commission (FSC)
  Identification of related parties
  In accordance with the Q&A "Identification of Related Parties" issued by the Accounting Research and Development Foundation (ARDF) in June 2025, the Company has reassessed relationship with the funds managed by the securities investment trust company to determine whether it exercises control or significant influence, or if it solely provides key management services to them. Since the fellow subsidiary only provides key management services to certain managed funds, the previous identification of related parties based on the Q&A issued by the ARDF in July 2013 was revised. Accordingly, these funds are no longer identified as related parties of the Company, effective from January 1, 2025. Furthermore, in accordance with the Q&A issued by the FSC, comparative information for the year 2024 needs not to be restated, which means the identified and disclosed related party relationships and transactions in prior financial statements are not required to be adjusted retrospectively.
2. The IFRS Accounting Standards endorsed by the FSC for application starting from 2026
  New, Amended and Revised Standards and Interpretations
  Effective Date
  Announced by IASB
  Amendments to IFRS 9 and IFRS 7 "Amendments to the Classification and Measurement of Financial Instruments"
  Amendments to IFRS 9 and IFRS 7 "Contracts Referencing Nature-dependent Electricity"
  January 1, 2026
  January 1, 2026
  Annual Improvements to IFRS Accounting Standards - Volume 11 January 1, 2026
  IFRS 17 "Insurance Contracts" (including the 2020 and 2021 amendments to IFRS 17)
  January 1, 2023
  Amendments to IFRS 9 and IFRS 7 "Amendments to the Classification and
  Measurement of Financial Instruments"
  1. The amendments to the application guidance of classification of financial assets
    The amendments mainly amend the requirements for the classification of financial assets, including:
    1. If a financial asset contains a contingent feature that could change the timing or amount of contractual cash flows and the contingent event itself does not relate directly to changes in basic lending risks and costs (e.g., whether the debtor achieves a contractually specified reduction in carbon emissions), the financial asset has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding if, and only if,
      - In all possible scenarios (before and after the occurrence of a contingent event), the contractual cash flows are solely payments of principal and interest on the principal amount outstanding; and
      - In all possible scenarios, the contractual cash flows would not be significantly different from the contractual cash flows on a financial instrument with identical contractual terms, but without such a contingent feature.
    2. To clarify that a financial asset has non-recourse features if an entity's ultimate right to receive cash flows is contractually limited to the cash flows generated by specified assets.
    3. To clarify that the characteristics of contractually linked instruments include a prioritization of payments to the holders of financial assets using multiple contractually linked instruments (tranches) established through a waterfall payment structure, resulting in concentrations of credit risk and a disproportionate allocation of cash shortfalls from the underlying pool between the tranches.
  2. The amendments to the application guidance of derecognition of financial liabilities
    The amendments mainly stipulate that a financial liability is derecognized on the settlement date. However, when settling a financial liability in cash using an electronic payment system, the Company can choose to derecognize the financial liability before the settlement date if, and only if, the Company has initiated a payment instruction that resulted in:
    - The Company having no practical ability to withdraw, stop or cancel the payment instruction;
    - The Company having no practical ability to access the cash to be used for settlement as a result of the payment instruction; and
    - The settlement risk associated with the electronic payment system being insignificant.
    The Company shall apply the amendments retrospectively but is not required to restate prior periods. The effect of initially applying the amendments shall be recognized as an adjustment to the opening balance at the date of initial application. An entity may restate prior periods if, and only if, it is possible to do so without the use of hindsight.
    Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Company assessed that the application of other standards and interpretations will not have a material impact on the Company's financial position and financial performance.
3. The IFRS Accounting Standards in issue but not yet endorsed and issued into effect by the FSC
  New, Amended and Revised Standards and Interpretations
  Effective Date
  Announced by IASB (Note 1)
  Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets between an Investor and its Associate or Joint Venture"
  To be determined by IASB
  IFRS 18 "Presentation and Disclosure in Financial Statements" January 1, 2027 (Note 2)
  IFRS 19 "Subsidiaries without Public Accountability: Disclosures" (including the 2025 amendments to IFRS 19)
  Amendments to IAS 21 "Translation to a Hyperinflationary Presentation Currency"
  January 1, 2027
  January 1, 2027
  Note 1: Unless stated otherwise, the above IFRS Accounting Standards are effective for annual reporting periods beginning on or after their respective effective dates.
  Note 2: On September 25, 2025, the FSC announced that IFRS 18 will take effect starting from January 1, 2028. Domestic entities could elect to apply IFRS 18 for an earlier period after the endorsement of IFRS 18 by the FSC.
  IFRS 18 "Presentation and Disclosure in Financial Statements" and consequential amendments
  IFRS 18 will supersede IAS 1 "Presentation of Financial Statements". The main changes comprise:
  - To classify items of income and expenses presented in the statement of profit or loss into the operating, investing, financing, income taxes and discontinued operations categories, the Company shall assess whether it has specified main business activities of investing in particular types of assets and providing financing to customers.
  - The statement of profit or loss shall present totals and subtotals for operating profit or loss, profit or loss before financing and income taxes and profit or loss.
  - Provides guidance to enhance the requirements of aggregation and disaggregation: The Company shall identify the assets, liabilities, equity, income, expenses and cash flows that arise from individual transactions or other events and shall classify and aggregate them into groups based on shared characteristics, so as to result in the presentation in the primary financial statements of line items that have at least one similar characteristic. The Company shall disaggregate items with dissimilar characteristics in the primary financial statements and in the notes. The Company labels items as "other" only if it cannot find a more informative label.
  - Disclosures on Management-defined Performance Measures (MPMs): When in public communications outside financial statements and communicating to users of financial statements management's view of an aspect of the financial performance of the Company as a whole, the Company shall disclose related information about its MPMs in a single note to the financial statements, including the description of such measures, calculations, reconciliations to the subtotal or total specified by IFRS Accounting Standards and the income tax and non-controlling interests effects of related reconciliation items.
    In addition, the following consequential amendments have been made to IAS 7 "Statement of Cash Flows":
  - The Company shall use operating profit or loss as the starting point when presenting cash flows from operating activities under the indirect method.
  - Interest and dividends received by the Company shall be classified as investing activities, while interest and dividends paid shall be classified as financing activities. However, if, after assessment, the Company has a specific main operating activity, it shall determine how to classify dividends received, interest received and interest paid in the statement of cash flows by referring to how it classifies dividend income, interest income and interest expense in the statement of profit or loss. The total of each of these cash flows shall be classified in a single category in the statement of cash flows.
  Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Company is continuously assessing the other impacts of the above amended standards and interpretations on the Company's financial position and financial performance and will disclose the relevant impact when the assessment is completed.
SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION Statement of Compliance
The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, the "IFRS Accounting Standards") endorsed and issued into effect by the FSC.
Basis of Preparation
The consolidated financial statements have been prepared on the historical cost basis except for financial instruments and investment properties which are measured at fair value, and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets.
The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as follows:
1. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
2. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
3. Level 3 inputs are unobservable inputs for an asset or liability.
  Basis of Consolidation
  1. Principles for preparing the consolidated financial statements
    The consolidated financial statements incorporate the financial statements of the Bank and the entities controlled by the Bank (Indovina Bank, CUBC Bank and CUBCN Bank).
    The accounting policies used by subsidiaries are same with those used by the Bank.
    All intercompany transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Bank and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
    Changes in the Company's ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the interests of the Company and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Bank.
    The Bank's financial statements include the accounts of the head office, all branches, and OBU, in addition to the subsidiaries' accounts. All interbank transactions and accounts balances have been eliminated for consolidation purposes.
  2. Entities included in the consolidated financial statements
  See Note 16 for detailed information on subsidiaries (including percentages of ownership and main businesses).
  Foreign Currencies
  In preparing the financial statements of each entity in the group, transactions in currencies other than the Company's functional currency (i.e., foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.
  At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise except for exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investments.
  Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising from the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which cases, the exchange differences are also recognized in other comprehensive income.
  Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
  For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Company's foreign operations (including subsidiaries, associates and branches in other countries) that are prepared using functional currencies which are different from the currency of the Company are translated into the presentation currency, the New Taiwan dollar, as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; and income and expense items are translated at the exchange rates prevailing at the time of the transactions or the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income (attributed to the owners of the Bank and non-controlling interests as appropriate).
  Hyperinflationary Economy
  For the purposes of presenting the consolidated financial statements, if the functional currency of the Company foreign operations is that of a hyperinflationary economy, the financial statements of the foreign operations must first be restated in terms of the measuring unit current at the end of each reporting period. The gain or loss on the net monetary position is recognized in profit or loss for the period. Subsequently, all amounts in the financial statements are translated into the presentation currency using the closing exchange rate at the balance sheet date.
  Upon the initial application of IAS 29 "Financial Reporting in Hyperinflationary Economies", as well as in subsequent periods, the impact of restating the beginning financial information of the foreign operations is adjusted to retained earnings under equity. Exchange differences arising from the translation of financial statements are recorded in other comprehensive income.
  Since the functional currency of the Company, as well as the presentation currency (New Taiwan dollar), do not belong to a hyperinflationary economy, the comparative financial information of the foreign operations remains as previously reported in prior years' financial statements.
  Current and Non-current Assets and Liabilities
  Since the operating cycle in the banking industry cannot be reasonably identified, accounts included in the consolidated financial statements of the Company were not classified as current or non-current. Nevertheless, accounts were properly categorized in accordance with the nature of each account and sequenced by their liquidity.
  Cash and Cash Equivalents
  In the consolidated balance sheets, cash and cash equivalents comprise cash on hand, due from banks, and short-term, highly liquid time deposits that mature within 12 months from the date of acquisition and readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. In the consolidated statements of cash flows, cash and cash equivalents comprise cash and cash equivalents, due from the Central Bank, call loans to other banks, and securities purchased under resell agreements as reported in the consolidated balance sheets that correspond to the definition of cash and cash equivalents under IAS 7 "Statement of Cash Flows," as endorsed and issued into effect by the FSC.
  Financial Instruments
  Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
  Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issuance of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized in profit or loss.
  1. Financial assets
    All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.
    1. Measurement categories
      Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortised cost, and investments in debt instruments and equity instruments at FVTOCI.
      1. Financial assets at FVTPL
        Financial assets are classified as at FVTPL when such financial assets are mandatorily classified as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortised cost criteria or the FVTOCI criteria.
        Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gains or losses recognized in profit or loss incorporates any dividends or interest earned on the financial assets. Fair value is determined in the manner described in Note 49.
      2. Financial assets at amortised cost
        Financial assets that meet the following conditions are subsequently measured at amortised cost:
        The financial assets are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
        The contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
        Subsequent to initial recognition, financial assets at amortised cost, including cash and cash equivalents, due from the Central Bank and call loans to banks, investments in debt instruments at amortised cost, receivables and discounts and loans, are measured at amortised cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.
        Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset, except for:
        Purchased or originated credit-impaired financial asset, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortised cost of such financial assets; and
        Financial asset that is not credit impaired on purchase or origination but has subsequently become credit impaired, for which interest income is calculated by applying the effective interest rate to the amortised cost of such financial assets in subsequent reporting periods.
        A financial asset is credit impaired when one or more of the following events have occurred:
        Significant financial difficulty of the issuer or the borrower;
        Breach of contract, such as a default;
        It is becoming probable that the borrower will enter bankruptcy or undergo a financial reorganization; or
        The disappearance of an active market for that financial asset because of financial difficulties.
      3. Investments in debt instruments at FVTOCI
        Debt instruments that meet the following conditions are subsequently measured at FVTOCI:
        The debt instrument is held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of such financial assets; and
        The contractual terms of the debt instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
        Investments in debt instruments at FVTOCI are subsequently measured at fair value. Changes in the carrying amounts of these debt instruments relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and impairment losses or reversals are recognized in profit or loss. Other changes in the carrying amount of these debt instruments are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of.
      4. Investments in equity instruments at FVTOCI
        On initial recognition, the Company may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.
        Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, it will be transferred to retained earnings.
        Dividends on these investments in equity instruments are recognized in profit or loss when the Company's right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.
    2. Impairment of financial assets
      The Company recognizes a loss allowance for expected credit losses (ECLs) on financial assets at amortised cost, and investments in debt instruments that are measured at FVTOCI.
      The Company always recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.
      For receivables that do not contain a significant financing component, the allowance for losses is recognized at an amount equal to lifetime ECLs.
      Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.
      The definition of the financial assets in default is described in Note 50.
      The impairment loss of all financial assets is recognized in profit or loss by a reduction in their carrying amounts through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and the carrying amounts of such financial assets are not reduced.
      According to the Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans, the Bank assesses the customers' financial position, the overdue payments of the principal and interest, and the value of collateral to classify credit assets into normal credit assets (excluding loans to the ROC government) and unsound assets which should be further classified as special mention, substandard, doubtful and losses, for which the minimum provisions are 1%, 2%, 10%, 50% and 100% of the outstanding balance, respectively. Furthermore, the FSC stipulates that banks should recognize provision of at least 1.5% of normal credit assets in mainland China (including short-term advances for trade finance) and loans for mortgage and construction loans that have been classified as normal assets, and further determine the allowance for losses based on the higher of the above-mentioned provision and the assessment of the expected credit losses.
      The Company writes off credits deemed uncollectable after the write-off is proposed and approved by the board of directors. Recoveries of credits written off are recognized as a reversal of loss provision in the current period.
    3. Derecognition of financial assets
      The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
      On derecognition of a financial asset at amortised cost in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. However, on derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss which had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.
  2. Equity instruments
    Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability or an equity instrument.
    Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
    The repurchase of the Company's own equity instruments is recognized in and deducted directly from equity, and its carrying amounts are calculated based on weighted average by share types and calculated separately by repurchase category. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of the Company's own equity instruments.
  3. Financial liabilities
    1. Subsequent measurement
      Except for the cases stated below, all financial liabilities are measured at amortised cost using the effective interest method:
      1. Financial liabilities at FVTPL
        Financial liabilities are classified as at FVTPL when the financial liabilities are either held for trading or designated as at FVTPL.
        Financial liabilities held for trading are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss.
        A financial liability is classified as designated as at FVTPL upon initial recognition if:
        Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
        The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
        The contract contains one or more embedded derivatives so that the entire hybrid (combined) contract can be designated as at FVTPL.
        For a financial liability designated as at FVTPL, the amount of changes in fair value attributable to changes in the credit risk of the liability is presented in other comprehensive income, and it will not be subsequently reclassified to profit or loss. The gain or loss accumulated in other comprehensive income will be transferred to retained earnings when the financial liabilities are derecognized. The changes in fair value of the outstanding liabilities are recognized in profit or loss. If this accounting treatment related to credit risk would create or enlarge an accounting mismatch, all changes in fair value of the liability are presented in profit or loss.
        Fair value is determined in the manner described in Note 49.
      2. Financial guarantee contracts
        Financial guarantee contracts issued by the Company, if not designated as at FVTPL, are subsequently measured at the higher of the amount of the loss allowance reflecting expected credit losses and the amount after amortization.
    2. Derecognition of financial liabilities
      The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.
  4. Derivatives
    Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately. When the fair value of a derivative financial instrument is positive, the derivative is recognized as a financial asset; when the fair value of a derivative financial instrument is negative, the derivative is recognized as a financial liability.
    Derivatives embedded in hybrid contracts that contain financial asset hosts within the scope of IFRS 9 "Financial Instruments" are not separated; instead, the classification is determined in accordance with the entire hybrid contract. Derivatives embedded in non-derivative host contracts that are not financial assets within the scope of IFRS 9 "Financial Instruments" (e.g., financial liabilities) are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.
  5. Modification of financial instruments
  When a financial instrument is modified, the Company assesses whether the modification will result in derecognition. If modification of a financial instrument results in derecognition, it is accounted for as derecognition of financial assets or liabilities. If the modification does not result in derecognition, the Company recalculates the gross carrying amount of the financial asset or the amortised cost of the financial liability based on the modified cash flows discounted at the original effective interest rate with any modification gain or loss recognized in profit or loss. The cost incurred is adjusted to the carrying amount of the modified financial asset or financial liability and amortised over the modified remaining period.
  Investments in Associates
  An associate is an entity over which the Bank has significant influence and which is neither a subsidiary nor an interest in a joint venture.
  The Bank uses the equity method to account for its investments in associates. Under the equity method, investments in an associate are initially recognized at cost and adjusted thereafter to recognize the Bank's share of the profit or loss and other comprehensive income of the associate. The Bank also recognizes the changes in the Bank's share of the equity of associates attributable to the Bank.
  Any excess of the cost of acquisition over the Bank's share of the net fair value of the identifiable assets and liabilities of an associate at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortised. Any excess of the Bank's share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognized immediately in profit or loss.
  When the Bank subscribes for additional new shares of an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Bank's proportionate interest in the associate. The Bank records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in capital surplus from investments in associates accounted for using the equity method. If the Bank's ownership interest is reduced due to its additional subscription of the new shares of the associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required had the investee directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments measured by equity method is insufficient, the shortage is debited to retained earnings.
  When the Bank's share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Bank's net investment in the associate), the Bank discontinues recognizing its share of further loss, if any. Additional losses and liabilities are recognized only to the extent that the Bank has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.
  The entire carrying amount of an investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is not allocated to any asset, including goodwill, which forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.
  The Bank discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment's fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Bank accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required had that associate directly disposed of the related assets or liabilities. If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Bank continues to apply the equity method and does not remeasure the retained interest.
  When the Bank transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Bank's financial statements only to the extent of interests in the associate that are not related to the Bank.
  Non-accrual Loans
  Under the "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Nonaccrual Loans" issued by the authorities, loans and other credits (including the accrued interest) that remain unpaid on their maturity are transferred immediately to non-accrual loans.
  Non-accrual loans transferred from loans are recognized as discounts and loans, and those transferred from other credits are recognized as other financial assets.
  Repurchase and Resale Transactions
  Securities purchased under resell agreements and securities sold under repurchase agreements are generally treated as collateralized financing transactions. Interest earned on reverse repurchase agreements or interest incurred on repurchase agreements is recognized as interest income or interest expense on an accrual basis.
  Property and Equipment
  Property and equipment are stated at cost less accumulated depreciation and accumulated impairment loss.
  Property and equipment in the course of construction are measured at cost less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such assets are depreciated and classified to the appropriate categories of property and equipment when completed and ready for their intended use.
  Freehold land is not depreciated. Depreciation of property and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in the estimates accounted for on a prospective basis.
  On derecognition of an item of property and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.
  Investment Properties
  Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties also include land held for a currently undetermined future use.
  Investment properties are measured initially at cost, including transaction costs, and are subsequently measured using the fair value model. Changes in the fair value of investment properties are included in profit or loss for the period in which they arise.
  On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss.
  The Bank decides to transfer assets to or from investment property based on the actual use of assets.
  For a transfer from the property and equipment classification to investment property based on the actual use of assets, any difference between the fair value of the property at the transfer date and its previous carrying amount is recognized in other comprehensive income and accumulated in gain on property revaluation under other equity that will be transferred directly to retained earnings when the asset is derecognized.
  Goodwill
  Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss.
  For the purposes of impairment testing, goodwill is allocated to each of the Company's cash-generating units or groups of cash-generating units (referred to as "cash-generating units") that are expected to benefit from the synergies of the combination.
  A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then pro rata to the other assets of the unit based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. Any impairment loss recognized on goodwill is not reversed in subsequent periods.
  If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation which is disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.
  Foreclosed Collateral
  Collateral assumed (recorded in other assets) are recognized at cost, which includes the assumed prices and any necessary repairs to make the collateral saleable, and evaluated at the lower of cost or net realizable value as of the balance sheet date.
  Intangible Assets (Excluding Goodwill)
  1. Intangible assets acquired separately
    Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, and amortization methods are reviewed at the end of each reporting period, with the effect of any changes in the estimates accounted for on a prospective basis. Intangible assets with indefinite useful lives are measured at cost less accumulated impairment loss.
  2. Derecognition
  On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.
  Impairment of Property and Equipment, Right-of-use Assets and Intangible Assets (Excluding Goodwill)
  At the end of each reporting period, the Company reviews the carrying amounts of its property and equipment, right-of-use asset and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered any impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Corporate assets are allocated to cash-generating units on a reasonable and consistent basis of allocation.
  Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that the assets may be impaired.
  The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.
  When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized on the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.
  Leasing
  At the inception of a contract, the Company assesses whether the contract is, or contains, a lease.
  1. The Company as lessor
    Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
    Lease payments (less any lease incentives payable) from operating leases are recognized as income on a straight-line basis over the terms of the relevant leases. Initial direct costs incurred in obtaining operating leases are added to the carrying amounts of the underlying assets and recognized as expenses on a straight-line basis over the lease terms.
    Variable lease payments that do not depend on an index or a rate are recognized as income in the periods in which they are incurred.
    When a lease includes both land and building elements, the Company assesses the classification of each element separately as a finance or an operating lease based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Company. The lease payments are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of a contract. If the allocation of the lease payments can be made reliably, each element is accounted for separately in accordance with its lease classification. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease unless it is clear that both elements are operating leases; in which case, the entire lease is classified as an operating lease.
  2. The Company as lessee
  The Company recognizes right-of-use assets and lease liabilities for all leases at the commencement date of the lease, except for short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms.
  Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives received. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented on a separate line in the consolidated balance sheets.
  Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms.
  Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments, in-substance fixed payments, variable lease payments which depend on an index or a rate, residual value guarantees, the exercise price of a purchase option if the Company is reasonably certain to exercise that option, and payments of penalties for terminating a lease if the lease term reflects such termination, less any lease incentives receivable. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses the lessee's incremental borrowing rate.
  Subsequently, lease liabilities are measured at amortised cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term, a change in the amounts expected to be payable under a residual value guarantee, a change in the assessment of an option to purchase an underlying asset, or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, the Company remeasures the lease liabilities with a corresponding adjustment to the right-of-use assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line in the consolidated balance sheets.
  Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods in which they are incurred.
  Provisions
  Provisions are recognized when a present obligation (legal or constructive) is due to a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
  Provisions are the best estimate of the consideration required to settle a present obligation at the consolidated balance sheet date, taking the risks and uncertainties on the obligation into account. Provisions are measured using the discounted cash flows estimated to settle the present obligation.
  Employee Benefits
  1. Short-term employee benefits
    Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related services.
  2. Retirement benefits
    Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered services entitling them to the contributions.
    Defined benefit costs (including service cost, net interest and remeasurement) under defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost and past service cost) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expense in the period in which they occur. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in other equity and will not be reclassified to profit or loss.
    Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Company's defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.
  3. Termination benefits
    A liability for a termination benefit is recognized at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognizes any related restructuring costs.
  4. Employee preferential interest rate deposits
  The Bank offers preferential interest rate deposits for its current employees, which include preferential deposits and post-retirement preferential deposits for its current employees as well as preferential deposits for its retired employees, limited to a certain amount. The difference between the preferential interest rate and the market rate is considered as employee benefits.
  In accordance with Article 30 of the Regulations Governing the Preparation of Financial Reports by Public Banks, the excess of the interests incurred in post-employment preferential interest deposits over those imputed at the market rate should qualify as post-employment benefits under IAS 19 "Employee Benefits" since the beneficiaries are retired employees. The retirement benefits should be accrued by actuarial method.
  Income Tax
  Income tax expense represents the sum of the tax currently payable and deferred tax.
  1. Current tax
    Income tax payable (recoverable) is based on taxable profit (loss) for the period determined according to the applicable tax laws of each tax jurisdiction.
    According to the Income Tax Act in the ROC, an additional tax on unappropriated earnings is provided for as income tax in the year the shareholders approve to retain earnings.
    Adjustments of prior years' tax liabilities are added to or deducted from the current year's tax provision.
    Since 2002, in accordance with Article 49 of the Financial Holding Company Act, the Bank's financial holding company, as the taxpayer, and the Bank elected to jointly declare and report income tax of profit-seeking enterprise and tax surcharge on surplus retained earnings of profit-seeking enterprise in accordance with the relevant provisions of the Income Tax Act. Additional tax payable or tax receivable due to the joint declaration of income tax is recognized under the payables or receivables for allocation of integrated income tax system account.
  2. Deferred tax
    Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
    Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.
    Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are recognized only to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and these differences are expected to reverse in the foreseeable future.
    The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
    Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liabilities are settled or the assets are realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets should reflect the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
    If investment properties measured using the fair value model are non-depreciable assets, or are held under a business model whose objective is not to consume substantially all of the economic benefits embodied in the assets over time, the carrying amounts of such assets are presumed to be recovered entirely through sale.
    The Company has applied the exception to the recognition and disclosure of deferred tax assets and liabilities relating to Pillar Two income taxes. Accordingly, the Company neither recognizes nor discloses information about deferred tax assets and liabilities related to Pillar Two income taxes.
  3. Current and deferred taxes
  Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity; in which case, the current and deferred taxes are also recognized in other comprehensive income or directly in equity, respectively.
  Recognition of Interest Revenue and Expense
  Except for the financial assets and liabilities at fair value through profit or loss, the interest revenue and interest expense arising from all interest-bearing financial instruments are calculated using the effective interest method in accordance with the relevant regulations and standards and recognized in the consolidated statement of profit or loss under "interest revenue" and "interest expense" items.
  Recognition of Service Fee Revenue and Expense
  The service fee revenue and expense are generally recognized upon completion of the service to the customer for loan or other services; the service fee earned by the execution of the major project is recognized at the completion of the major project; the service fee revenue and expense related to subsequent lending services are either recognized over the service period or included in the calculation of the effective interest rate on loans and receivables.
  Customer Loyalty Program
  The points earned by customers under loyalty programs are treated as multiple-element revenue arrangements, in which consideration is allocated to the goods or services and the award credits based on their fair values through the eyes of the customer. The consideration is not recognized as earnings at the time of the original sales transaction but at the time when the points are redeemed and the obligation is fulfilled.
MATERIAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Company's accounting policies, the Company's management is required to make judgments, estimations and assumptions on the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.
When developing material accounting estimates, the Company considers the possible impact of inflation and interest rate fluctuations on cash flow projection, discount rates and other relevant material estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.
Assessment of Impairment of Loans
The assessment of impairment of loans is based on the value of the collateral, amount of principal and interest due, and the length of the overdue period. Changes in credit ratings on individual assets and the status of the collection are also considered during classification of the loans. The Company uses judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on the Company's historical experience, existing market conditions as well as forward looking estimates at the end of each reporting period. The inputs include risk of default and expected loss rates. For details of the key assumptions and inputs used, refer to Note 50.

CASH AND CASH EQUIVALENTS

December 31

	2025	2024
Cash on hand	$ 23,482,321	$ 30,812,013
Checks for clearance	1,874,355	2,086,510
Due from banks	116,127,338	130,489,730
	141,484,014	163,388,253
Less: Allowance for impairment loss	(190,646)	(172,595)
	$ 141,293,368	$ 163,215,658

Due from banks includes time deposits that mature within 12 months from the date of acquisition.

DUE FROM THE CENTRAL BANK AND CALL LOANS TO BANKS

December 31

	2025	2024
Deposit reserves - general account	$ 131,889,259	$ 108,426,937
Deposit reserves - foreign currency account	12,431,910	10,226,770
Deposits in the Central Bank - general account	53,017,685	34,826,842
Call loans and overdrafts	231,482,139	151,551,171
	428,820,993	305,031,720
Less: Allowance for impairment loss	(43,779)	(36,020)
	$ 428,777,214	$ 304,995,700
The Bank

As provided by the Central Bank of the ROC, NTD-denominated deposit reserves are determined monthly at prescribed rates on the average balances of customers' NTD-denominated deposits, and the deposit reserves - general account is subject to withdrawal restrictions.

In addition, the foreign-currency deposit reserves are determined at prescribed rates on balances of additional foreign-currency deposits and recorded as deposit reserves - foreign currency account. These non-interest bearing reserves may be withdrawn at any time. As of December 31, 2025 and 2024, the balances of foreign-currency deposit reserves were $3,643,467 thousand and $1,866,557 thousand, respectively.

Indovina Bank

In accordance with the relevant local laws and regulations governing credit institutions, the amounts of compulsory reserves for the State Bank of Vietnam were $1,472,590 thousand and $1,451,753 thousand as of December 31, 2025 and 2024, respectively.

CUBC Bank

In accordance with the relevant local laws and regulations governing credit institutions, the amounts of compulsory reserves for the National Bank of Cambodia were $949,394 thousand and $1,085,341 thousand as of December 31, 2025 and 2024, respectively.

CUBCN Bank

In accordance with the relevant local laws and regulations governing credit institutions, the amounts of compulsory reserves for the People's Bank of China were $6,366,459 thousand and $5,823,119 thousand as of December 31, 2025 and 2024, respectively.

FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31

	2025	2024
Financial assets mandatorily classified as at fair value through profit or loss
Commercial paper	$ 205,054,265	$ 108,533,551
Financial debentures	48,679,322	30,958,831
Corporate bonds	30,550,253	21,499,407
Government bonds	23,422,669	13,978,028
Negotiable certificates of deposit	3,188,250	-
Stock investments	1,410,418	1,311,939
Treasury bills	1,274,073	-
Fund beneficiary certificates	66,202	-
Derivative financial instruments	313,645,452	176,281,756
Interest rate swap contracts	28,083,257	32,624,649
Foreign exchange forward contracts	23,660,088	56,291,289
Options	4,257,669	3,960,373
Cross-currency swap contracts	2,070,155	2,216,466
Others	677,463	659,480
	58,748,632	95,752,257
	$ 372,394,084	$ 272,034,013
Financial liabilities designated as at fair value through profit or loss
Bonds	$ 41,480,624	$ 42,151,047
Financial liabilities held for trading
Derivative financial instruments Interest rate swap contracts	28,682,070	31,474,362
Foreign exchange forward contracts	23,233,836	48,641,723
Options	7,928,420	7,502,696
Cross-currency swap contracts	2,228,781	2,321,309
Others	682,387	681,638
	62,755,494	90,621,728
	$ 104,236,118	$ 132,772,775

The Company engages in derivative transactions mainly to accommodate customers' needs, and to manage its exposure positions. The financial risk management objective of the Company is to minimize risk due to changes in fair value or cash flows.

The contract amounts (nominal amounts) of derivative transactions for accommodating customers' needs and for managing the Company's exposure positions as of December 31, 2025 and 2024 were as follows:

(Unit: Thousands of U.S. Dollars)

Contract Amounts

December 31

	2025	2024
The Bank
Foreign exchange forward contracts	$ 107,412,084	$ 165,399,675
Interest rate swap contracts	47,723,529	45,528,497
Options	5,885,031	4,926,508
Cross-currency swap contracts	4,376,033	4,690,438
Equity swap contracts	1,197,920	939,200
Futures	184,284	2,020,394
Indovina Bank
Foreign exchange forward contracts	221,000	246,000
CUBCN Bank
Foreign exchange forward contracts	2,184,524	2,410,956
Interest rate swap contracts	2,155,474	3,647,346
Options	1,408	2,178
Cross-currency swap contracts	-	10,000

As of December 31, 2025 and 2024, none of the financial assets at FVTPL was sold under repurchase agreements.

Financial Liabilities Designated as at Fair Value through Profit or Loss

In September 2014, the Bank was authorized to issue subordinated financial debentures amounting to US$990 million; as of October 8, 2014, the issued subordinated financial debentures were US$660 million (perpetual) and US$330 million (fifteen years) with a fixed interest rate of 5.10% and 4.00%, respectively, and the interest is payable annually. The Bank is authorized by the authorities to redeem the US$660 million of bonds at notional amount after 12 years.

In March 2017, the Bank was authorized to issue unsubordinated financial debentures amounting to US$300 million (thirty years), which were subsequently issued on November 24, 2017. In addition to the redemption of bonds by the exercise of call options, the bonds are redeemable on maturity; the bonds were issued in the form of zero-coupon bonds, and the internal rate of return is 4.10%.

The Bank converted fixed interest rates into floating interest rates with interest rate swap contracts to hedge against the fair value risk resulting from interest rate fluctuations. For the years ended December 31, 2025 and 2024, such interest rate swaps contracts were valued with a net gain of $966,019 thousand and a net loss of $1,319,621 thousand, respectively.

FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

December 31

2025 2024

Investments in equity instruments

Domestic listed shares	$ 12,959,126	$ 13,434,369
Overseas stock investments	11,560,441	11,673,561
Domestic unlisted shares	5,413,539	6,230,472
Domestic emerging shares	78,479	95,934
	30,011,585	31,434,336
Investments in debt instruments
Government bonds	170,931,591	152,205,241
Corporate bonds	95,809,805	94,278,310
Financial debentures	46,628,830	54,451,766
Asset-backed securities	31,028,033	30,790,555
Negotiable certificates of deposit	8,748,773	6,014,913
	353,147,032	337,740,785
	$ 383,158,617	$ 369,175,121

These investments in equity instruments are held for medium to long-term strategic purposes and expect to profit from long-term investments. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments' fair value in profit or loss would not be consistent with the Company's strategy of holding these investments for long-term purposes.

In consideration of its investment strategy, the Company sold its investments in equity instruments at FVTOCI with the fair value of $38,972,850 thousand and $19,009,052 thousand during the years ended December 31, 2025 and 2024, respectively, and the related unrealized losses of $2,130,777 thousand and

$79,304 thousand were transferred from other equity to retained earnings, accordingly.

The Company's dividends from financial assets at FVTOCI of $1,973,118 thousand and $1,099,476 thousand were recognized as income for the years ended December 31, 2025 and 2024, respectively. Those related to investments held as of December 31, 2025 and 2024 were $1,355,850 thousand and $775,176 thousand, respectively, and the remaining amounts were related to investments derecognized for the years ended December 31, 2025 and 2024.

As of December 31, 2025 and 2024, certain financial assets at FVTOCI were sold under repurchase agreements with notional amounts of $1,497,500 thousand and $8,862,877 thousand, respectively. The proceeds amounting to $1,661,079 thousand and $7,657,552 thousand, respectively, were recorded as notes and bonds sold under repurchase agreements and will be/were repurchased for $1,665,655 thousand and

$7,726,277 thousand before the end of June 2026 and June 2025, respectively.

As of December 31, 2025, none of the domestic listed shares of investments in equity instruments at FVTOCI were loaned out under security lending agreements. As of December 31, 2024, certain domestic listed shares of investments in equity instruments at FVTOCI had been loaned out under security lending agreement with the fair value of $135,038 thousand, and in accordance with the agreement, securities were returned progressively by the end of June 2025.

INVESTMENTS IN DEBT INSTRUMENTS AT AMORTISED COST

December 31

	2025	2024
Short-term bills	$ 454,425,000	$ 332,120,275
Asset-backed securities	106,595,453	74,591,605
Financial debentures	57,165,164	94,218,169
Government bonds	42,673,461	46,751,297
Corporate bonds	27,744,441	29,501,266
	688,603,519	577,182,612
Less: Allowance for impairment loss	(120,378)	(167,631)
	$ 688,483,141	$ 577,014,981

For the year ended December 31, 2025, due to early redemption of part of the bonds by the issuer prior to the maturity date, the Bank recognized the gain arising from derecognition of financial assets measured at amortised cost amounting to $64 thousand.

For the year ended December 31, 2024, the Bank disposed of certain bonds in advance due to the expected increase in credit risk, and recognized the loss arising from derecognition of financial assets measured at amortised cost amounting to $12,538 thousand.

As of December 31, 2025 and 2024, there were no debt securities sold under repurchase agreements among the financial assets measured at amortised cost mentioned above. As of December 31, 2025 and 2024, certain financial assets measured at amortised cost were sold under repurchase agreements with notional amounts of $459,267 thousand and $4,917,150 thousand, respectively. The proceeds amounting to

$449,821 thousand and $3,284,814 thousand, respectively, were recorded as notes and bonds sold under repurchase agreements and will be/were repurchased for $450,101 thousand and $3,338,746 thousand before the end of January 2026 and March 2025, respectively.

Refer to Note 45 for information relating to investments in debt instruments at amortised cost pledged as security.

CREDIT RISK MANAGEMENT FOR INVESTMENTS IN DEBT INSTRUMENTS

The credit risk management of the Company's financial assets at FVTOCI and investments in debt instruments at amortised cost is described as follows:

December 31, 2025

	Financial Assets at FVTOCI	Investments in Debt Instruments at Amortised Cost	Total
Gross carrying amount	$ 359,170,296	$ 688,603,519	$1,047,773,815
Less: Allowance for impairment loss	(126,441)	(120,378)	(246,819)
Adjustment to fair value	(5,896,823)	-	(5,896,823)
	$ 353,147,032	$ 688,483,141	$1,041,630,173

December 31, 2024
	Financial Assets	Investments in Debt Instruments at
	at FVTOCI	Amortised Cost	Total
Gross carrying amount	$ 349,113,021	$ 577,182,612	$ 926,295,633
Less: Allowance for impairment loss	(113,227)	(167,631)	(280,858)
Adjustment to fair value	(11,259,009)	-	(11,259,009)
	$ 337,740,785	$ 577,014,981	$ 914,755,766

The Company monitors the external credit rating information and price movements of their investments in debt instruments in order to assess whether there has been a significant increase in credit risk since initial recognition.

The Company takes into consideration the multi-period default probability table for each credit rating supplied by external rating agencies, and recovery rates of different types of bonds to assess the 12-month or lifetime expected credit losses.

The carrying amounts of financial assets at FVTOCI and investments in debt instruments at amortised cost sorted by credit rating of the Company are as follows:

Credit Rating Definition Basis for Recognizing ECLs Gross Carrying Amount at December 31, 2025

Low credit risk Low credit risk at the reporting date 12-month ECLs $ 1,047,534,107

Significant increase in credit risk

Credit risk has increased significantly since initial recognition

Lifetime ECLs (not credit-impaired)

204,989

Default Objective evidence of impairment at the reporting date

Lifetime ECLs (credit-impaired)

34,719

Credit Rating Definition Basis for Recognizing ECLs Gross Carrying Amount at December 31, 2024

Low credit risk Low credit risk at the reporting date 12-month ECLs $ 925,910,226

Significant increase in credit risk

Credit risk has increased significantly since initial recognition

Lifetime ECLs (not credit-impaired)

349,196

Default Objective evidence of impairment at the reporting date

Lifetime ECLs (credit-impaired)

36,211

The changes in allowance for impairment loss of financial assets at FVTOCI and investments in debt instruments at amortised cost sorted by credit rating of the Company are as follows:

For the year ended December 31, 2025		Credit Rating
	Low Credit	Doubtful (Lifetime	In Default (Lifetime
	Risk (12-month ECLs)	ECLs - Not Credit-impaired)	ECLs - Credit-impaired)
Balance at the beginning of the period	$ 161,645	$ 119,213	$ -
New debt instruments purchased	75,770	-	-
Derecognition	(61,040)	(45,371)	-
Effect of exchange rate changes and others	(2,408)	(990)	-
Balance at the end of the period	$ 173,967	$ 72,852	$ -
For the year ended December 31, 2024
		Credit Rating
	Low Credit	Doubtful (Lifetime	In Default (Lifetime
	Risk (12-month ECLs)	ECLs - Not Credit-impaired)	ECLs - Credit-impaired)
Balance at the beginning of the period	$ 174,217	$ 6,417	$ -
New debt instruments purchased	58,895	-	-
Derecognition	(77,460)	-	-
Effect of exchange rate changes and others	5,993	112,796	-
Balance at the end of the period	$ 161,645	$ 119,213	$ -

SECURITIES PURCHASED UNDER RESELL AGREEMENTS

December 31

	2025	2024
Corporate bonds	$ 23,368,480	$ 14,608,549
Government bonds	8,171,333	2,717,376
Financial debentures	3,754,534	2,325,264
Foreign bonds	-	1,925,397
	35,294,347	21,576,586
Less: Allowance for impairment loss	(3,197)	(1,970)
	$ 35,291,150	$ 21,574,616

As of December 31, 2025 and 2024, none of the securities purchased under resell agreements were sold under repurchase agreements.

RECEIVABLES, NET

December 31

	2025	2024
Notes and accounts receivable	$ 122,222,130	$ 117,004,931
Interest receivables	14,574,810	13,894,623
Factoring receivables	8,882,221	4,242,447
Acceptances	1,177,954	1,241,043
Others	4,467,870	4,770,326
	151,324,985	141,153,370
Less: Allowance for impairment loss	(3,070,276)	(2,987,759)
	$ 148,254,709	$ 138,165,611
Refer to Note 50 for impairment loss analysis of receivables.

The changes in the gross carrying amounts of the Company's receivables were as follows: For the year ended December 31, 2025

12-month ECLs Lifetime ECLs (Collectively Assessed) Lifetime ECLs (Neither Purchased nor Originated Credit-impaired Financial Assets) Total

Balance at the beginning of the
period	$ 136,497,189	$ 2,355,699	$ 2,300,482	$ 141,153,370
Changes of financial instruments
recognized at the beginning of
the current reporting period
Transferred to Lifetime ECLs	(572,441)	575,788	(3,347)	-
Transferred to credit-impaired
financial assets	(783,292)	(291,037)	1,074,329	-
Transferred to 12-month ECLs	229,159	(226,412)	(2,747)	-
Derecognition of financial
assets in the period	(79,420,646)	(2,294,284)	(641,725)	(82,356,655)
New financial assets purchased or
originated	90,996,040	1,875,477	897,720	93,769,237
Written-off as bad debt expense	-	-	(1,231,215)	(1,231,215)
Effects of exchange rate changes
and others	(3,671)	(1,513)	(4,568)	(9,752)
Balance at the end of the period	$ 146,942,338	$ 1,993,718	$ 2,388,929	$ 151,324,985

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Cathay Financial Holding Co. Ltd. published this content on May 05, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 05, 2026 at 14:12 UTC.

Latest news about Cathay Financial Holding Co., Ltd.

Jun. 02	Cathay Financial Unit Names Vice Chairman	MT
May. 29	Cathay Financial Holding Co., Ltd. Reports Earnings Results for the First Quarter Ended March 31, 2026	CI
May. 29	Cathay Financial Holding Co., Ltd., Q1 2026 Earnings Call, May 29, 2026
May. 06	Taiwan says foreign net fund inflow hit $26.411 bln in April	RE
Apr. 28	Cathay Financial Holding Co., Ltd. Announces Cash Dividend for the Year Ended December 31, 2025	CI
Apr. 28	Cathay Financial to inject 1 bln yuan additional capital into China life insurance venture	RE
Apr. 23	Cathay Financial unit in Singapore has raised $500 million via subordinated bonds	RE
Apr. 23	Taiwan to raise maximum net asset value mutual funds, ETFs, may invest in a single equity	RE
Apr. 15	Cathay Financial Holding says March net profit at T$5.03 bln	RE
Apr. 07	Cathay Financial launches long-term strategic cooperation with OpenAI	RE
Mar. 30	Fubon Securities Upgrades Cathay Financial to Buy from Neutral; Price Target is NT$83	MT
Mar. 27	Cathay Financial Holding Co., Ltd., Q4 2025 Earnings Call, Mar 27, 2026
Mar. 27	Cathay Financial will review lending positions in event of prolonged Middle East conflict	RE
Mar. 16	Cathay Financial Holding Co., Ltd. Reports Earnings Results for the Full Year Ended December 31, 2025	CI
Mar. 13	Fubon Financial February net profit T$20.57 billion	RE

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Company Profile

Cathay Financial Holding Co Ltd is a Taiwan-based financial holding company principally engaged in the investment and the management of investment business. The Company operates through five business segments. Banking Operating segment engages in commercial bank businesses, including foreign exchange business, guarantee business, and others. Life Insurance Operating segment engages in interest-sensitive sales of traditional insurance, investment-linked insurance and providing financial planning services. Property Insurance Operating segment engages in fire insurance, marine insurance, land and air insurance, liability insurance, and other insurance. Securities Operating segment engages in brokerage, dealership, and underwriting business. Other Operating segment includes assets, liabilities, revenue and expenditures which cannot be directly attributable to or reasonably allocated to certain operating segments.

Employees

51,797

Sector

Life & Health Insurance

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