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FOR IMMEDIATE RELEASE | |||
| For: | Cathay General Bancorp | Contact: Heng W. Chen | |
| 777 N. Broadway | (213) 625-4752 | ||
| Los Angeles, CA 90012 | |||
CATHAY GENERAL BANCORP ANNOUNCES EARNINGS OF $19.2 MILLION, OR $0.39 PER SHARE, IN SECOND QUARTER 2008
Los Angeles, Calif., July 24: Cathay General Bancorp (the “Company”, NASDAQ: CATY), the holding company for Cathay Bank (the “Bank”), today announced preliminary results for the second quarter of 2008. See “Goodwill Evaluation” section below for the status of this evaluation which has not been completed and which may result in a non-cash goodwill impairment charge.
FINANCIAL PERFORMANCE
| Second Quarter 2008 | Second Quarter 2007 | ||||||
| Net income | $ | 19.2 million | $ | 30.6 million | |||
| Basic earnings per share | $ | 0.39 | $ | 0.60 | |||
| Diluted earnings per share | $ | 0.39 | $ | 0.60 | |||
| Return on average assets | 0.73 | % | 1.40 | % | |||
| Return on average stockholders’ equity | 7.66 | % | 13.13 | % | |||
| Efficiency ratio | 41.52 | % | 39.06 | % | |||
SECOND QUARTER HIGHLIGHTS
| · | Second quarter earnings of $19.2 million decreased $11.4 million, or 37.1%, compared to the same quarter a year ago. Included in the results was a non-cash after-tax charge of $3.4 million, or $0.07 per diluted share, for “other-than-temporary impairment” on agency preferred securities. Earnings for the second quarter of 2008 excluding the $3.4 million impairment charge decreased $8.0 million, or 26.1%, compared to the same quarter a year ago. |
| · | Fully diluted earnings per share was $0.39, a 35.0% decrease from the same quarter a year ago. Fully diluted earnings per share excluding the $3.4 million impairment charge was $0.46, a 23.3% decrease from the same quarter a year ago. |
| · | Return on average assets was 0.73% for the quarter ended June 30, 2008, compared to 1.07% for the quarter ended March 31, 2008 and compared to 1.40% for the same quarter a year ago. Return on average assets excluding the $3.4 million impairment charge was 0.86% for the quarter ended June 30, 2008. |
| · | Return on average stockholders’ equity was 7.66% for the quarter ended June 30, 2008, compared to 10.99% for the quarter ended March 31, 2008, and compared to 13.13% for the same quarter a year ago. Return on average stockholders’ equity excluding the $3.4 million impairment charge was 9.01% for the quarter ended June 30, 2008. |
| · | Gross loans increased by $408.9 million, or 5.9%, for the quarter to $7.3 billion at June 30, 2008, from $6.9 billion at March 31, 2008. |
| · | Total deposits increased by $453.5 million, or 7.2%, for the quarter to $6.7 billion at June 30, 2008, from $6.3 billion at March 31, 2008. |
| · | The Company’s total risk-based capital ratio increased to 11.02% at June 30, 2008 compared to 10.88% at March 31, 2008, as the Company remained well capitalized for both periods. |
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“We are pleased with the strong operating results for the second quarter of 2008. With the continued slowdown in residential construction and development, we recorded a provision for credit losses during the second quarter of $20.5 million which increased our reserve for credit losses to 1.23% of total loans. However, net chargeoffs during the second quarter remained low at $2.5 million or 0.14% of average loans,” commented Dunson Cheng, Chairman of the Board, Chief Executive Officer, and President of the Company.
“We generated strong deposit growth during the second quarter in all major deposit categories as customers recognized the Bank’s financial strength and stability. We also were pleased to see the solid growth in deposits in many new branches such as those in the Dallas, Chicago, and Seattle areas, and in Hong Kong,” said Peter Wu, Executive Vice Chairman and Chief Operating Officer.
“Our capital ratios increased during the second quarter even as we achieved record loan originations. Our dividend payout ratio on an operating basis excluding the other-than-temporary impairment charge on agency preferred stock was only 23%. As we have demonstrated through many recessions before, by remaining vigilant on credit quality while serving our loyal customers, we are optimistic that we shall emerge from this slowdown stronger and better positioned in our marketplace,” concluded Dunson Cheng.
INCOME STATEMENT REVIEW
Net interest income before provision for credit losses
Net interest income before provision for credit losses decreased to $72.1 million during the second quarter of 2008, a decline of $4.4 million, or 5.7%, compared to the $76.5 million during the same quarter a year ago. The decrease was due primarily to the decline in the net interest margin which was partially offset by strong growth in loans and investment securities.
The net interest margin, on a fully taxable-equivalent basis, was 2.94% for the second quarter of 2008. The net interest margin decreased 22 basis points from 3.16% in the first quarter of 2008 and decreased 84 basis points from 3.78% in the second quarter of 2007. The decrease in the net interest margin from prior quarters primarily resulted from the lag in the downward repricing of certificates of deposit to follow the decreases in the prime rate, a change in the mix of investment securities, and the increase in the borrowing rate on our long term repurchase agreements.
For the second quarter of 2008, the yield on average interest-earning assets was 5.86% on a fully taxable-equivalent basis, and the cost of funds on average interest-bearing liabilities equaled 3.34%. In comparison, for the second quarter of 2007, the yield on average interest-earning assets was 7.39% and cost of funds on average interest-bearing liabilities equaled 4.22%. The interest spread, defined as the difference between the yield on average interest-earning assets and the cost of funds on average interest-bearing liabilities, decreased 65 basis points to 2.52% for the quarter ended June 30, 2008, from 3.17% for the same quarter a year ago, primarily due to the reasons discussed above.
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Provision for credit losses
The provision for credit losses was $20.5 million for the second quarter of 2008 compared to $2.1 million for the second quarter of 2007 and $7.5 million for the first quarter of 2008. The provision for credit losses was based on the review of the adequacy of the allowance for loan losses at June 30, 2008. The provision for credit losses represents the charge or credit against current earnings that is determined by management, through a credit review process, as the amount needed to establish an allowance that management believes to be sufficient to absorb credit losses inherent in the Company’s loan portfolio. The following table summarizes the charge-offs and recoveries for the quarters as indicated:
| For the three months ended June 30, | For the six months ended June 30, | ||||||||||||
| (In thousands) | 2008 | 2007 | 2008 | 2007 | |||||||||
| Charge-offs: | |||||||||||||
| Commercial loans | $ | 1,870 | $ | 2,712 | $ | 2,121 | $ | 5,742 | |||||
| Construction loans | 879 | - | 5,009 | 190 | |||||||||
| Real estate loans | 207 | 57 | 721 | 118 | |||||||||
| Installment and other loans | - | 1 | - | 1 | |||||||||
| Total charge-offs | 2,956 | 2,770 | 7,851 | 6,051 | |||||||||
| Recoveries: | |||||||||||||
| Commercial loans | 380 | 302 | 567 | 2,773 | |||||||||
| Construction loans | 83 | 190 | 83 | 190 | |||||||||
| Real estate loans | - | 202 | - | 202 | |||||||||
| Installment and other loans | 8 | 19 | 12 | 25 | |||||||||
| Total recoveries | 471 | 713 | 662 | 3,190 | |||||||||
| Net Charge-offs | $ | 2,485 | $ | 2,057 | $ | 7,189 | $ | 2,861 | |||||
Non-interest income
Non-interest income, which includes revenues from depository service fees, letters of credit commissions, securities gains (losses), gains (losses) on loan sales, wire transfer fees, and other sources of fee income, was $9.2 million for the second quarter of 2008, an increase of $3.0 million, or 48.9%, compared to the non-interest income of $6.2 million for the second quarter of 2007. Net gains of $2.3 million from sale of securities were comprised of $8.16 million of gains from sales of agency mortgage backed securities which were partially offset by the $5.83 million “other-than-temporary impairment” charge on agency preferred stock, which had a carrying value of $30.3 million after the impairment write-down.
Depository service fees increased $138,000, or 13.3%, to $1.2 million in the second quarter of 2008 from $1.0 million in the same quarter a year ago, primarily due to the $111,000 increase in demand deposit account analysis charges.
Other operating income increased $601,000, or 16.3%, to $4.3 million in the second quarter of 2008 from $3.7 million in the same quarter a year ago, primarily due to higher gains from foreign currency and exchange transactions of $1.6 million, which amount was partially offset by decreases in venture capital income of $405,000 and in wealth management commissions of $252,000.
Non-interest expense
Non-interest expense increased $1.5 million, or 4.6%, to $33.8 million in the second quarter of 2008 compared to $32.3 million in the same quarter a year ago. The efficiency ratio was 41.52% for the second quarter of 2008 compared to 39.06% in the year ago quarter and 39.11% for the first quarter of 2008.
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Federal Deposit Insurance Corporation (“FDIC”) and State assessments increased to $1.5 million in the second quarter of 2008 from $261,000 in the same quarter a year ago as a result of the utilization of the remaining credit for prior years’ FDIC insurance premiums. Professional service expense increased $552,000, or 21.7%, primarily due to increases in information technology consulting expenses of $429,000 and appraisal expenses of $204,000. Other real estate owned expense increased $624,000 due to increases in other real estate owned transactions. Offsetting the above overall increases were decreases of $621,000 in computer and equipment expense due primarily to the decrease in software license fees, $478,000 in salaries and employee benefits as a result of lower current year bonus accrual, and $243,000 in recruiting, printing and supply, and travel expenses in the second quarter of 2008 compared to the same quarter a year ago.
Goodwill Evaluation
As a result of ongoing volatility in the financial services industry, the Company’s market capitalization has decreased to a level below book value as of June 30, 2008 which may make it necessary for the Company to perform an interim goodwill impairment test. The Company is in the process of determining whether a goodwill impairment charge, if any, is required as of June 30, 2008. The Company expects to complete this goodwill impairment assessment prior to the filing of its Form 10-Q for the second quarter. If a charge is required, the current results will be correspondingly adjusted and reported in the Form 10-Q. Although any goodwill impairment charge will reduce reported earnings, it will be non-cash in nature and thus will not affect the Company’s capital ratios.
Income taxes
The effective tax rate was 28.9% for the second quarter of 2008, compared to 36.7% for the same quarter a year ago and 36.2% for the full year 2007. The lower effective tax rate for the second quarter of 2008 was due to a reduction during the second quarter in the projected taxable income for the remainder of 2008 and increases in low income housing tax credits in 2008 compared to 2007.
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Reconciliation of Reported Earnings to Earnings Excluding the Impairment Charge
| Three months ended June 30, | Six months ended June 30, | ||||||||||||
| 2008 | 2007 | 2008 | 2007 | ||||||||||
| (Dollars in thousands, except share and per share data) | |||||||||||||
| Net income as reported | $ | 19,231 | $ | 30,581 | $ | 46,530 | $ | 60,547 | |||||
| Add: Other-than-temporary impairment writedown | 5,830 | - | 5,830 | - | |||||||||
| Less: Tax benefit for non-cash | |||||||||||||
| other-than-temporary impairment writedown | (2,451 | ) | - | (2,451 | ) | - | |||||||
| Earnings excluding the impairment charge | $ | 22,610 | $ | 30,581 | $ | 49,909 | $ | 60,547 | |||||
| Basic average common shares outstanding | 49,389,522 | 50,558,218 | 49,367,903 | 51,118,374 | |||||||||
| Diluted average common shares outstanding | 49,429,348 | 51,158,029 | 49,480,439 | 51,723,487 | |||||||||
| Earnings per share as reported: | |||||||||||||
| Basic | 0.39 | 0.60 | 0.94 | 1.18 | |||||||||
| Dilutive | 0.39 | 0.60 | 0.94 | 1.17 | |||||||||
| Earnings per share excluding the impairment charge | |||||||||||||
| Basic | 0.46 | 0.60 | 1.01 | 1.18 | |||||||||
| Dilutive | 0.46 | 0.60 | 1.01 | 1.17 | |||||||||
| Return on average assets | |||||||||||||
| As reported | 0.73 | % | 1.40 | % | 0.90 | % | 1.42 | % | |||||
| Excluding the impariment charge | 0.86 | % | 1.40 | % | 0.96 | % | 1.42 | % | |||||
| Return on average stockholders' equity | |||||||||||||
| As reported | 7.66 | % | 13.13 | % | 9.32 | % | 13.00 | % | |||||
| Excluding the impariment charge | 9.01 | % | 13.13 | % | 9.99 | % | 13.00 | % | |||||
| Three months ended June 30, | Six months ended June 30, | ||||||||||||
| 2008 | 2007 | 2008 | 2007 | ||||||||||
| (Dollars in thousands) | |||||||||||||
| Total revenues as reported | $ | 81,289 | $ | 82,659 | $ | 163,003 | $ | 161,295 | |||||
| Add: Other-than-temporary | |||||||||||||
| impairment writedown | 5,830 | - | 5,830 | - | |||||||||
| Total revenues excluding the impairment charge | $ | 87,119 | $ | 82,659 | $ | 168,833 | $ | 161,295 | |||||
| Total non-interest expenses reported | $ | 33,754 | $ | 32,285 | $ | 65,710 | $ | 62,514 | |||||
| Efficiency ratio | |||||||||||||
| As reported | 41.52 | % | 39.06 | % | 40.31 | % | 38.76 | % | |||||
| Excluding the impairment charge | 38.74 | % | 39.06 | % | 38.92 | % | 38.76 | % | |||||
BALANCE SHEET REVIEW
Total assets increased by $409.4 million, or 3.9%, to $10.8 billion at June 30, 2008, from year-end 2007 of $10.4 billion. The increase in total assets was represented primarily by increases in available- for-sale securities of $185.7 million, or 7.9%, and increases in loans of $644.1 million, or 9.6% offset by decreases of $366.1 million in reverse repurchase agreements.
The growth of gross loans to $7.3 billion as of June 30, 2008, from $6.7 billion as of December 31, 2007, represents an increase of $644.1 million, or 9.6%, primarily due to increases in commercial mortgage loans and commercial loans.
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The changes in the loan composition from December 31, 2007, are presented below:
Type of Loans: | June 30, 2008 | December 31, 2007 | % Change | |||||||
(Dollars in thousands) | ||||||||||
| Commercial | $ | 1,584,280 | $ | 1,435,861 | 10 | |||||
| Residential mortgage | 609,132 | 555,703 | 10 | |||||||
| Commercial mortgage | 4,111,019 | 3,762,689 | 9 | |||||||
| Equity lines | 147,593 | 108,004 | 37 | |||||||
| Real estate construction | 860,490 | 799,230 | 8 | |||||||
| Installment | 11,145 | 15,099 | (26 | ) | ||||||
| Other | 4,065 | 7,059 | (42 | ) | ||||||
| Gross loans and leases | $ | 7,327,724 | $ | 6,683,645 | 10 | |||||
| Allowance for loan losses | (84,856 | ) | (64,983 | ) | 31 | |||||
| Unamortized deferred loan fees | (10,165 | ) | (10,583 | ) | (4 | ) | ||||
| Total loans and leases, net | $ | 7,232,703 | $ | 6,608,079 | 9 | |||||
At June 30, 2008, total deposits were $6.7 billion, an increase of $463.7 million, or 7.4%, from $6.3 billion at December 31, 2007. In the second quarter of 2008, time deposits of $100,000 or more increased $233.8 million, or 8.0% and time deposit under $100,000 increased $113.4 million, or 8.7%. The changes in the deposit composition from December 31, 2007, are presented below:
Deposits | June 30, 2008 | December 31, 2007 | % Change | |||||||
(Dollars in thousands) | ||||||||||
| Non-interest-bearing demand | $ | 818,776 | $ | 785,364 | 4 | |||||
| NOW | 261,005 | 231,583 | 13 | |||||||
| Money market | 732,410 | 681,783 | 7 | |||||||
| Savings | 334,328 | 331,316 | 1 | |||||||
| Time deposits under $100,000 | 1,424,692 | 1,311,251 | 9 | |||||||
| Time deposits of $100,000 or more | 3,170,831 | 2,937,070 | 8 | |||||||
| Total deposits | $ | 6,742,042 | $ | 6,278,367 | 7 | |||||
At June 30, 2008, brokered deposits which are included in time deposits under $100,000 increased to $788.1 million, a $155.5 million increase from $632.6 million at December 31, 2007.
Advances from Federal Home Loan Bank decreased $258.5 million to $1.1 billion at June 30, 2008, from $1.4 billion at December 31, 2007. Securities sold under agreement to repurchase increased to $1.6 billion at June 30, 2008, compared to $1.4 billion at December 31, 2007.
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ASSET QUALITY REVIEW
During the second quarter of 2008, total non-accrual loans increased by $24.4 million. The new non-accruals included two mixed use land loans in the Inland Empire totaling $13.2 million, a $6.6 million condo construction loan in Orange County for which a discounted payoff is expected in August, 2008, a $3.7 million commercial loan to a distributor, a $2.9 million single family residential mortgage in Los Altos, California, a $2.6 million land loan zoned for apartments in Seattle, Washington, other commercial real estate loans totaling $3.4 million, commercial loans totaling $1.3 million, and residential mortgage loans of $0.2 million. During the second quarter, charge-offs of non-accrual loans totaled $3.0 million including a $1.5 million charge-off to the principal related to the mixed use land loans in the Inland Empire and a $0.9 million charge-off related to the Orange County condo construction loan. At June 30, 2008, total residential construction loans were $429.0 million of which $18.7 million were in San Bernardino and Riverside counties in California and $20.6 million were in the Central Valley in California. Residential construction loans of $4.8 million in the Central Valley were on non-accrual status as of June 30, 2008. At June 30, 2008, total land loans were $237.5 million of which $42.9 million were in San Bernardino and Riverside counties and $1.8 million were in Central Valley. Land loans of $13.2 million in Riverside County were on non-accrual status as of June 30, 2008.
At June 30, 2008, total non-accrual loans of $73.0 million were comprised of nine construction loans totaling $26.7 million, seven land loans totaling $22.3 million, fourteen commercial real estate loans totaling $11.5 million, fourteen commercial loans totaling $8.2 million and eight residential mortgage loans totaling $4.3 million. The $26.7 million of construction loans were comprised of a $6.6 million condo construction loan in Orange County, a $5.0 million town house construction loan in Los Angles County, a $4.0 million construction loan in the Central Valley, a $3.2 million land development loan in Los Angeles County, a $2.6 million condo construction loan in Boston, Massachusetts, a $2.6 million for a condo construction loans in San Diego County, a $1.4 million residential construction loan in Texas and two additional residential construction loans totaling $1.3 million. The $11.5 million of non-accrual commercial real estate loans were comprised of $2.3 million in loans secured by multi-family residences, a $2.2 million loan secured by a motel in Texas, a $2.1 million loan secured by an office building in San Jose, California, a $0.9 million loan secured by an office building in Texas, and $4.0 million in loans secured by industrial buildings, a retail store and a restaurant.
At June 30, 2008, other real estate owned is comprised of nine properties, including $11.6 million for land zoned for apartments in Anaheim, California, a $9.3 million apartment building in Texas, a $6.8 million shopping center in Texas, and six other properties totaling $1.4 million.
Non-performing assets to gross loans and other real estate owned was 1.40% at June 30, 2008, compared to 1.25% at December 31, 2007. Total non-performing assets increased $19.3 million, or 23.1%, to $103.0 million at June 30, 2008, compared with $83.7 million at December 31, 2007, primarily due to a $14.7 million increase in non-accrual loans and a $12.9 million increase in OREO offset by a $8.3 million decrease in loans past due 90 days or more.
The allowance for loan losses were $84.9 million and the allowance for off-balance sheet unfunded credit commitments were $5.5 million at June 30, 2008, and represented the amount that the Company believes to be sufficient to absorb credit losses inherent in the Company’s loan portfolio. The allowance for credit losses, the sum of allowance for loan losses and for off-balance sheet unfunded credit commitments, was $90.4 million at June 30, 2008, compared to $69.6 million at December 31, 2007. The allowance for credit losses represented 1.23% of period-end gross loans and 122% of non-performing loans at June 30, 2008. The comparable ratios were 1.04% of gross loans and 103% of non-performing loans at December 31, 2007. Results of the changes to the Company’s non-performing assets and troubled debt restructurings are highlighted below:
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(Dollars in thousands) | June 30, 2008 | December 31, 2007 | % Change | |||||||
Non-performing assets | ||||||||||
| Accruing loans past due 90 days or more | $ | 960 | $ | 9,265 | (90 | ) | ||||
| Non-accrual loans: | ||||||||||
| Construction | 26,727 | 29,677 | (10 | ) | ||||||
| Land | 22,282 | 6,627 | 236 | |||||||
| Commercial real estate, excluding land | 11,512 | 13,336 | (14 | ) | ||||||
| Commercial | 8,186 | 6,664 | 23 | |||||||
| Real estate mortgage | 4,299 | 1,971 | 118 | |||||||
| Total non-accrual loans: | $ | 73,006 | $ | 58,275 | 25 | |||||
| Total non-performing loans | 73,966 | 67,540 | 10 | |||||||
| Other real estate owned | 29,077 | 16,147 | 80 | |||||||
| Total non-performing assets | $ | 103,043 | $ | 83,687 | 23 | |||||
| Troubled debt restructurings | $ | 12,584 | $ | 12,601 | (0 | ) | ||||
| Allowance for loan losses | $ | 84,856 | $ | 64,983 | 31 | |||||
| Allowance for off-balance sheet credit commitments | 5,514 | 4,576 | 20 | |||||||
| Allowance for credit losses | $ | 90,370 | $ | 69,559 | 30 | |||||
| Total gross loans outstanding, at period-end | $ | 7,327,724 | $ | 6,683,645 | 10 | |||||
| Allowance for loan losses to non-performing loans, at period-end | 114.72 | % | 96.21 | % | ||||||
| Allowance for loan losses to gross loans, at period-end | 1.16 | % | 0.97 | % | ||||||
| Allowance for credit losses to non-performing loans, at period-end | 122.18 | % | 102.99 | % | ||||||
| Allowance for credit losses to gross loans, at period-end | 1.23 | % | 1.04 | % | ||||||
CAPITAL ADEQUACY REVIEW
At June 30, 2008, the Tier 1 risk-based capital ratio of 9.38%, total risk-based capital ratio of 11.02%, and Tier 1 leverage capital ratio of 7.83%, continue to place the Company in the “well capitalized” category, which is defined as institutions with a Tier 1 risk-based capital ratio equal to or greater than 6%, a total risk-based capital ratio equal to or greater than 10%, and a Tier 1 leverage capital ratio equal to or greater than 5%. At December 31, 2007, the Company’s Tier 1 risk-based capital ratio was 9.09%, the total risk-based capital ratio was 10.52%, and Tier 1 leverage capital ratio was 7.83%.
No shares were purchased during the six months of 2008. At June 30, 2008, 622,500 shares remain under the Company’s November 2007 repurchase program.
YEAR-TO-DATE REVIEW
Net income was $46.5 million, or $0.94 per diluted share for the six months ended June 30, 2008, a decrease of $14.0 million, or 23.2%, in net income compared to $60.5 million, or $1.17 per diluted share for the same period a year ago due primarily to increases in the provision for loan losses and the “other-than-temporary impairment” charge. Net income excluding the $3.4 million impairment charge was $49.9 million, or $1.01 per diluted share for the six months ended June 30, 2008, a decrease of $10.6 million, or 17.6%, compared to the same period a year ago. The net interest margin for the six months ended June 30, 2008, decreased 75 basis points to 3.05% compared to 3.80% for the same period a year ago.
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Return on average stockholders’ equity was 9.32% and return on average assets was 0.90% for the six months ended June 30, 2008, compared to a return on average stockholders’ equity of 13.00% and a return on average assets of 1.42% for the same period of 2007. Excluding the $3.4 million impairment charge, return on average stockholders’ equity was 9.99% and return on average assets was 0.96% for the six months ended June 30, 2008. The efficiency ratio for the six months ended June 30, 2008 was 40.31%, or 38.92% excluding the $5.8 million pre-tax impairment charge, compared to 38.76% for the same period a year ago.
ABOUT CATHAY GENERAL BANCORP
Cathay General Bancorp is the holding company for Cathay Bank, a California state-chartered bank. Founded in 1962, Cathay Bank offers a wide range of financial services. Cathay Bank currently operates 31 branches in California, nine branches in New York State, one in Massachusetts, two in Texas, three in Washington State, three in the Chicago, Illinois area, one in New Jersey, one in Hong Kong, and a representative office in Shanghai and in Taipei. Cathay Bank’s website is found at http://www.cathaybank.com/.
FORWARD-LOOKING STATEMENTS AND OTHER NOTICES
Statements made in this press release, other than statements of historical fact, are forward-looking statements within the meaning of the applicable provisions of the Private Securities Litigation Reform Act of 1995 regarding management’s beliefs, projections, and assumptions concerning future results and events. These forward-looking statements may include, but are not limited to, such words as "believes," "expects," "anticipates," "intends," "plans," "estimates," "may," "will," "should," "could," "predicts," "potential," "continue," or the negative of such terms and other comparable terminology or similar expressions. Forward-looking statements are not guarantees. They involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of Cathay General Bancorp to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties and other factors include, but are not limited to, adverse developments or conditions related to or arising from: the impact of any goodwill impairment that may be determined, deterioration in asset or credit quality; acquisitions of other banks, if any; fluctuations in interest rates; expansion into new market areas; earthquakes, wildfires, or other natural disasters; competitive pressures; changes in the availability of capital; legislative and regulatory developments; and general economic or business conditions in California and other regions where Cathay Bank has operations.
These and other factors are further described in Cathay General Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2007, its reports and registration statements filed with the Securities and Exchange Commission (“SEC”) and other filings it makes in the future with the SEC from time to time. Actual results in any future period may also vary from the past results discussed in this press release. Given these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements, which speak as of the date of this press release. Cathay General Bancorp has no intention and undertakes no obligation to update any forward-looking statements or to publicly announce the results of any revision of any forward-looking statement to reflect future developments or events.
Cathay General Bancorp's filings with the SEC are available to the public at the website maintained by the SEC at http://www.sec.gov, or by request directed to Cathay General Bancorp, 777 N. Broadway, Los Angeles, CA 90012, Attention: Investor Relations (213) 625-4749.
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CATHAY GENERAL BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||
| (Dollars in thousands, except per share data) | 2008 | 2007 | % Change | 2008 | 2007 | % Change | |||||||||||||
FINANCIAL PERFORMANCE | |||||||||||||||||||
| Net interest income before provision for loan losses | $ | 72,114 | $ | 76,497 | (6 | ) | $ | 147,304 | $ | 149,249 | (1 | ) | |||||||
| Provision for loan losses | 20,500 | 2,100 | 876 | 28,000 | 3,100 | 803 | |||||||||||||
| Net interest income after provision for loan losses | 51,614 | 74,397 | (31 | ) | 119,304 | 146,149 | (18 | ) | |||||||||||
| Non-interest income | 9,175 | 6,162 | 49 | 15,699 | 12,046 | 30 | |||||||||||||
| Non-interest expense | 33,754 | 32,285 | 5 | 65,710 | 62,514 | 5 | |||||||||||||
| Income before income tax expense | 27,035 | 48,274 | (44 | ) | 69,293 | 95,681 | (28 | ) | |||||||||||
| Income tax expense | 7,804 | 17,693 | (56 | ) | 22,763 | 35,134 | (35 | ) | |||||||||||
| Net income | $ | 19,231 | $ | 30,581 | (37 | ) | $ | 46,530 | $ | 60,547 | (23 | ) | |||||||
| Net income per common share: | |||||||||||||||||||
| Basic | $ | 0.39 | $ | 0.60 | (35 | ) | $ | 0.94 | $ | 1.18 | (20 | ) | |||||||
| Diluted | $ | 0.39 | $ | 0.60 | (35 | ) | $ | 0.94 | $ | 1.17 | (20 | ) | |||||||
| Cash dividends paid per common share | $ | 0.105 | $ | 0.105 | - | $ | 0.210 | $ | 0.195 | 8 | |||||||||
SELECTED RATIOS | |||||||||||||||||||
| Return on average assets | 0.73 | % | 1.40 | % | (48 | ) | 0.90 | % | 1.42 | % | (37 | ) | |||||||
| Return on average stockholders’ equity | 7.66 | % | 13.13 | % | (42 | ) | 9.32 | % | 13.00 | % | (28 | ) | |||||||
| Efficiency ratio | 41.52 | % | 39.06 | % | 6 | 40.31 | % | 38.76 | % | 4 | |||||||||
| Dividend payout ratio | 26.96 | % | 17.56 | % | 54 | 22.28 | % | 16.59 | % | 34 | |||||||||
YIELD ANALYSIS (Fully taxable equivalent) | |||||||||||||||||||
| Total interest-earning assets | 5.86 | % | 7.39 | % | (21 | ) | 6.16 | % | 7.41 | % | (17 | ) | |||||||
| Total interest-bearing liabilities | 3.34 | % | 4.22 | % | (21 | ) | 3.56 | % | 4.24 | % | (16 | ) | |||||||
| Net interest spread | 2.52 | % | 3.17 | % | (21 | ) | 2.60 | % | 3.17 | % | (18 | ) | |||||||
| Net interest margin | 2.94 | % | 3.78 | % | (22 | ) | 3.05 | % | 3.80 | % | (20 | ) | |||||||
CAPITAL RATIOS | June 30, 2008 | June 30, 2007 | December 31, 2007 | Well Capitalized Requirements | Minimum Regulatory Requirements | ||||||||||||||
| Tier 1 risk-based capital ratio | 9.38 | % | 9.21 | % | 9.09 | % | 6.0 | % | 4.0 | % | |||||||||
| Total risk-based capital ratio | 11.02 | % | 10.69 | % | 10.52 | % | 10.0 | % | 8.0 | % | |||||||||
| Tier 1 leverage capital ratio | 7.83 | % | 8.46 | % | 7.83 | % | 5.0 | % | 4.0 | % | |||||||||
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Page 11
CATHAY GENERAL BANCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (In thousands, except share and per share data) | June 30, 2008 | December 31, 2007 | % change | |||||||
Assets | ||||||||||
| Cash and due from banks | $ | 114,270 | $ | 118,437 | (4 | ) | ||||
| Short-term investments | 6,408 | 2,278 | 181 | |||||||
| Securities purchased under agreements to resell | 150,000 | 516,100 | (71 | ) | ||||||
| Long-term certificates of deposit | - | 50,000 | (100 | ) | ||||||
| Securities available-for-sale (amortized cost of $2,566,135 in 2008 and | ||||||||||
| $2,348,606 in 2007) | 2,533,353 | 2,347,665 | 8 | |||||||
| Trading securities | 75 | 5,225 | (99 | ) | ||||||
| Loans | 7,327,724 | 6,683,645 | 10 | |||||||
| Less: Allowance for loan losses | (84,856 | ) | (64,983 | ) | 31 | |||||
| Unamortized deferred loan fees, net | (10,165 | ) | (10,583 | ) | (4 | ) | ||||
| Loans, net | 7,232,703 | 6,608,079 | 9 | |||||||
| Federal Home Loan Bank stock | 65,825 | 65,720 | 0 | |||||||
| Other real estate owned, net | 29,077 | 16,147 | 80 | |||||||
| Affordable housing investments, net | 103,795 | 94,000 | 10 | |||||||
| Premises and equipment, net | 88,699 | 76,848 | 15 | |||||||
| Customers’ liability on acceptances | 30,988 | 53,148 | (42 | ) | ||||||
| Accrued interest receivable | 45,984 | 53,032 | (13 | ) | ||||||
| Goodwill | 319,285 | 319,873 | (0 | ) | ||||||
| Other intangible assets, net | 32,588 | 36,097 | (10 | ) | ||||||
| Other assets | 58,865 | 39,883 | 48 | |||||||
| Total assets | $ | 10,811,915 | $ | 10,402,532 | 4 | |||||
Liabilities and Stockholders’ Equity | ||||||||||
| Deposits | ||||||||||
| Non-interest-bearing demand deposits | $ | 818,776 | $ | 785,364 | 4 | |||||
| Interest-bearing deposits: | ||||||||||
| NOW deposits | 261,005 | 231,583 | 13 | |||||||
| Money market deposits | 732,410 | 681,783 | 7 | |||||||
| Savings deposits | 334,328 | 331,316 | 1 | |||||||
| Time deposits under $100,000 | 1,424,692 | 1,311,251 | 9 | |||||||
| Time deposits of $100,000 or more | 3,170,831 | 2,937,070 | 8 | |||||||
| Total deposits | 6,742,042 | 6,278,367 | 7 | |||||||
| Federal funds purchased | 81,000 | 41,000 | 98 | |||||||
| Securities sold under agreements to repurchase | 1,550,000 | 1,391,025 | 11 | |||||||
| Advances from the Federal Home Loan Bank | 1,116,713 | 1,375,180 | (19 | ) | ||||||
| Other borrowings from financial institutions | 10,000 | 8,301 | 20 | |||||||
| Other borrowings from affordable housing investments | 19,577 | 19,642 | (0 | ) | ||||||
| Long-term debt | 171,136 | 171,136 | - | |||||||
| Acceptances outstanding | 30,988 | 53,148 | (42 | ) | ||||||
| Minority interest in consolidated subsidiaries | 8,500 | 8,500 | - | |||||||
| Other liabilities | 87,270 | 84,314 | 4 | |||||||
| Total liabilities | 9,817,226 | 9,430,613 | 4 | |||||||
| Commitments and contingencies | - | - | - | |||||||
| Total stockholders’ equity | 994,689 | 971,919 | 2 | |||||||
| Total liabilities and stockholders’ equity | $ | 10,811,915 | $ | 10,402,532 | 4 | |||||
| Book value per share | $ | 20.13 | $ | 19.70 | 2 | |||||
| Number of common stock shares outstanding | 49,419,098 | 49,336,187 | 0 | |||||||
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Page 12
CATHAY GENERAL BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE (LOSS) INCOME
(Unaudited)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||
| 2008 | 2007 | 2008 | 2007 | ||||||||||
| (In thousands, except share and per share data) | |||||||||||||
INTEREST AND DIVIDEND INCOME | |||||||||||||
| Loan receivable, including loan fees | $ | 110,850 | $ | 118,737 | $ | 227,875 | $ | 232,916 | |||||
| Investment securities- taxable | 28,426 | 24,439 | 56,932 | 46,254 | |||||||||
| Investment securities- nontaxable | 324 | 583 | 690 | 1,182 | |||||||||
| Federal Home Loan Bank stock | 928 | 541 | 1,681 | 1,050 | |||||||||
| Agency preferred stock | 592 | 174 | 1,308 | 338 | |||||||||
| Federal funds sold and securities | |||||||||||||
| purchased under agreements to resell | 2,915 | 3,965 | 9,395 | 7,767 | |||||||||
| Deposits with banks | 27 | 1,254 | 481 | 2,040 | |||||||||
| Total interest and dividend income | 144,062 | 149,693 | 298,362 | 291,547 | |||||||||
INTEREST EXPENSE | |||||||||||||
| Time deposits of $100,000 or more | 28,304 | 31,900 | 60,172 | 63,052 | |||||||||
| Other deposits | 15,184 | 18,684 | 32,419 | 36,671 | |||||||||
| Securities sold under agreements to repurchase | 14,917 | 7,544 | 29,542 | 13,261 | |||||||||
| Advances from Federal Home Loan Bank | 11,323 | 11,677 | 23,444 | 23,458 | |||||||||
| Long-term debt | 2,010 | 2,899 | 4,859 | 4,875 | |||||||||
| Short-term borrowings | 210 | 492 | 622 | 981 | |||||||||
| Total interest expense | 71,948 | 73,196 | 151,058 | 142,298 | |||||||||
| Net interest income before provision for credit losses | 72,114 | 76,497 | 147,304 | 149,249 | |||||||||
| Provision for credit losses | 20,500 | 2,100 | 28,000 | 3,100 | |||||||||
| Net interest income after provision for loan losses | 51,614 | 74,397 | 119,304 | 146,149 | |||||||||
NON-INTEREST INCOME | |||||||||||||
| Securities gains, net | 2,333 | - | 2,333 | 191 | |||||||||
| Letters of credit commissions | 1,376 | 1,435 | 2,816 | 2,727 | |||||||||
| Depository service fees | 1,175 | 1,037 | 2,447 | 2,383 | |||||||||
| Other operating income | 4,291 | 3,690 | 8,103 | 6,745 | |||||||||
| Total non-interest income | 9,175 | 6,162 | 15,699 | 12,046 | |||||||||
NON-INTEREST EXPENSE | |||||||||||||
| Salaries and employee benefits | 16,408 | 16,886 | 34,267 | 33,863 | |||||||||
| Occupancy expense | 3,242 | 3,107 | 6,525 | 5,876 | |||||||||
| Computer and equipment expense | 1,932 | 2,553 | 4,176 | 4,777 | |||||||||
| Professional services expense | 3,095 | 2,543 | 5,480 | 4,271 | |||||||||
| FDIC and State assessments | 1,545 | 261 | 1,836 | 520 | |||||||||
| Marketing expense | 848 | 904 | 1,865 | 1,805 | |||||||||
| Other real estate owned expense | 641 | 17 | 624 | 261 | |||||||||
| Operations of affordable housing investments | 1,696 | 1,444 | 2,521 | 2,388 | |||||||||
| Amortization of core deposit intangibles | 1,722 | 1,767 | 3,474 | 3,531 | |||||||||
| Other operating expense | 2,625 | 2,803 | 4,942 | 5,222 | |||||||||
| Total non-interest expense | 33,754 | 32,285 | 65,710 | 62,514 | |||||||||
| Income before income tax expense | 27,035 | 48,274 | 69,293 | 95,681 | |||||||||
| Income tax expense | 7,804 | 17,693 | 22,763 | 35,134 | |||||||||
| Net income | 19,231 | 30,581 | 46,530 | 60,547 | |||||||||
| Other comprehensive loss, net of tax | (26,443 | ) | (8,093 | ) | (18,453 | ) | (3,410 | ) | |||||
| Total comprehensive (loss)/income | $ | (7,212 | ) | $ | 22,488 | $ | 28,077 | $ | 57,137 | ||||
| Net income per common share: | |||||||||||||
| Basic | $ | 0.39 | $ | 0.60 | $ | 0.94 | $ | 1.18 | |||||
| Diluted | $ | 0.39 | $ | 0.60 | $ | 0.94 | $ | 1.17 | |||||
| Cash dividends paid per common share | $ | 0.105 | $ | 0.105 | $ | 0.210 | $ | 0.195 | |||||
| Basic average common shares outstanding | 49,389,522 | 50,558,218 | 49,367,903 | 51,118,374 | |||||||||
| Diluted average common shares outstanding | 49,429,348 | 51,158,029 | 49,480,439 | 51,723,487 | |||||||||
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Page 13
CATHAY GENERAL BANCORP
AVERAGE BALANCES - SELECTED CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
| For the three months ended, | |||||||||||||||||||
| (In thousands) | June 30, 2008 | June 30, 2007 | March 31, 2008 | ||||||||||||||||
Interest-earning assets | Average Balance | Average Yield/Rate (1) (2) | Average Balance | Average Yield/Rate (1) (2) | Average Balance | Average Yield/Rate (1) (2) | |||||||||||||
| Loans and leases (1) | $ | 7,122,528 | 6.26 | % | $ | 6,010,958 | 7.92 | % | $ | 6,804,599 | 6.92 | % | |||||||
| Taxable investment securities | 2,475,628 | 4.62 | % | 1,734,645 | 5.65 | % | 2,250,823 | 5.09 | % | ||||||||||
| Tax-exempt investment securities (2) | 60,781 | 8.69 | % | 66,206 | 6.89 | % | 69,668 | 8.94 | % | ||||||||||
| FHLB stock | 65,879 | 5.67 | % | 50,165 | 4.33 | % | 65,753 | 4.61 | % | ||||||||||
| Federal funds sold and securities purchased | |||||||||||||||||||
| under agreements to resell | 177,445 | 6.61 | % | 216,646 | 7.34 | % | 419,675 | 6.21 | % | ||||||||||
| Deposits with banks | 5,188 | 2.09 | % | 68,177 | 7.38 | % | 24,885 | 7.34 | % | ||||||||||
| Total interest-earning assets | $ | 9,907,449 | 5.86 | % | $ | 8,146,797 | 7.39 | % | $ | 9,635,403 | 6.46 | % | |||||||
Interest-bearing liabilities | |||||||||||||||||||
| Interest-bearing demand deposits | $ | 253,559 | 0.58 | % | $ | 233,260 | 1.29 | % | $ | 237,611 | 0.82 | % | |||||||
| Money market | 738,206 | 1.76 | % | 675,753 | 3.09 | % | 701,552 | 2.20 | % | ||||||||||
| Savings deposits | 337,512 | 0.33 | % | 353,562 | 1.01 | % | 330,504 | 0.54 | % | ||||||||||
| Time deposits | 4,452,317 | 3.58 | % | 3,683,089 | 4.76 | % | 4,180,871 | 4.26 | % | ||||||||||
| Total interest-bearing deposits | $ | 5,781,594 | 3.03 | % | $ | 4,945,664 | 4.10 | % | $ | 5,450,538 | 3.62 | % | |||||||
| Federal funds purchased | 37,720 | 2.24 | % | 34,780 | 5.35 | % | 43,341 | 3.54 | % | ||||||||||
| Securities sold under agreements to repurchase | 1,551,571 | 3.87 | % | 831,625 | 3.64 | % | 1,559,336 | 3.77 | % | ||||||||||
| Other borrowed funds | 1,134,448 | 4.01 | % | 982,126 | 4.78 | % | 1,156,238 | 4.23 | % | ||||||||||
| Long-term debt | 171,136 | 4.72 | % | 157,541 | 7.38 | % | 171,136 | 6.70 | % | ||||||||||
| Total interest-bearing liabilities | 8,676,469 | 3.34 | % | 6,951,736 | 4.22 | % | 8,380,589 | 3.80 | % | ||||||||||
| Non-interest-bearing demand deposits | 764,270 | 784,033 | 780,579 | ||||||||||||||||
| Total deposits and other borrowed funds | $ | 9,440,739 | $ | 7,735,769 | $ | 9,161,168 | |||||||||||||
| Total average assets | $ | 10,561,123 | $ | 8,787,525 | $ | 10,302,295 | |||||||||||||
| Total average stockholders’ equity | $ | 1,009,463 | $ | 934,313 | $ | 998,917 | |||||||||||||
| For the six months ended, | |||||||||||||||||||
| (In thousands) | June 30, 2008 | June 30, 2007 | |||||||||||||||||
Interest-earning assets | Average Balance | Average Yield/Rate (1) (2 | ) | Average Balance | Average Yield/Rate (1) (2 | ) | |||||||||||||
| Loans and leases | $ | 6,963,564 | 6.58 | % | $ | 5,900,074 | 7.96 | % | |||||||||||
| Taxable investment securities | 2,364,324 | 4.84 | % | 1,657,107 | 5.63 | % | |||||||||||||
| Tax-exempt investment securities (2) | 64,125 | 8.98 | % | 70,851 | 6.50 | % | |||||||||||||
| FHLB stock | 65,816 | 5.14 | % | 47,575 | 4.45 | % | |||||||||||||
| Federal funds sold and securities purchased | |||||||||||||||||||
| under agreements to resell | 298,560 | 6.33 | % | 217,151 | 7.21 | % | |||||||||||||
| Deposits with banks | 15,062 | 6.42 | % | 58,056 | 7.09 | % | |||||||||||||
| Total interest-earning assets | $ | 9,771,451 | 6.16 | % | $ | 7,950,814 | 7.41 | % | |||||||||||
Interest-bearing liabilities | |||||||||||||||||||
| Interest-bearing demand deposits | $ | 245,585 | 0.70 | % | $ | 232,960 | 1.28 | % | |||||||||||
| Money market deposits | 719,879 | 1.97 | % | 671,130 | 3.09 | % | |||||||||||||
| Savings deposits | 334,008 | 0.43 | % | 348,974 | 1.00 | % | |||||||||||||
| Time deposits | 4,316,594 | 3.91 | % | 3,669,048 | 4.74 | % | |||||||||||||
| Total interest-bearing deposits | $ | 5,616,066 | 3.32 | % | $ | 4,922,112 | 4.09 | % | |||||||||||
| Federal funds purchased | 40,530 | 2.94 | % | 30,039 | 5.35 | % | |||||||||||||
| Securities sold under agreements to repurchase | 1,555,454 | 3.82 | % | 724,616 | 3.69 | % | |||||||||||||
| Other borrowed funds | 1,145,343 | 4.12 | % | 952,862 | 5.00 | % | |||||||||||||
| Long-term debt | 171,136 | 5.71 | % | 131,493 | 7.48 | % | |||||||||||||
| Total interest-bearing liabilities | 8,528,529 | 3.56 | % | 6,761,122 | 4.24 | % | |||||||||||||
| Non-interest-bearing demand deposits | 772,424 | 778,183 | |||||||||||||||||
| Total deposits and other borrowed funds | $ | 9,300,953 | $ | 7,539,305 | |||||||||||||||
| Total average assets | $ | 10,431,709 | $ | 8,589,745 | |||||||||||||||
| Total average stockholders’ equity | $ | 1,004,190 | $ | 939,286 | |||||||||||||||
| (1) Yields and interest earned include net loan fees. Non-accrual loans are included in the average balance. | |||
| (2) The average yield has been adjusted to a fully taxable-equivalent basis for certain securities of states and political subdivisions | |||