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 $6.9 MILLION, OR $0.14 PER SHARE, IN THIRD QUARTER 2008
Los Angeles, Calif., October 23: Cathay General Bancorp (the “Company”, NASDAQ: CATY), the holding company for Cathay Bank (the “Bank”), today announced results for the third quarter of 2008.
FINANCIAL PERFORMANCE
| Third Quarter 2008 | Third Quarter 2007 | ||||||
| Net income | $ | 6.9 million | $ | 34.0 million | |||
| Basic earnings per share | $ | 0.14 | $ | 0.68 | |||
| Diluted earnings per share | $ | 0.14 | $ | 0.67 | |||
| Return on average assets | 0.25 | % | 1.46 | % | |||
| Return on average stockholders’ equity | 2.71 | % | 14.45 | % | |||
| Efficiency ratio | 53.92 | % | 37.46 | % | |||
THIRD QUARTER HIGHLIGHTS
| · | Third quarter earnings of $6.9 million decreased $27.1 million, or 79.7%, compared to the same quarter a year ago. Included in the results was a non-cash after-tax charge of $20.3 million, or $0.41 per diluted share, for “other-than-temporary” impairment on agency preferred securities. Earnings for the third quarter of 2008 excluding the $20.3 million impairment charge decreased $6.8 million, or 20.0%, due in part to increased loan provision of $13.6 million, compared to the same quarter a year ago. |
| · | Fully diluted earnings per share was $0.14, a 79.1% decrease from the same quarter a year ago. Fully diluted earnings per share excluding the $20.3 million impairment charge was $0.55, a 17.9% decrease from the same quarter a year ago. |
| · | Return on average assets was 0.25% for the quarter ended September 30, 2008, compared to 0.73% for the quarter ended June 30, 2008, and compared to 1.46% for the same quarter a year ago. Return on average assets excluding the $20.3 million impairment charge was 0.99% for the quarter ended September 30, 2008. |
| · | Return on average stockholders’ equity was 2.71% for the quarter ended September 30, 2008, compared to 7.66% for the quarter ended June 30, 2008, and compared to 14.45% for the same quarter a year ago. Return on average stockholders’ equity excluding the $20.3 million impairment charge was 10.70% for the quarter ended September 30, 2008. |
| · | Gross loans increased by $171.6 million, or 2.3%, for the quarter to $7.5 billion at September 30, 2008, from $7.3 billion at June 30, 2008. |
| · | Total deposits increased by $107.1 million, or 1.6%, for the quarter to $6.8 billion at September 30, 2008, from $6.7 billion at June 30, 2008. |
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“In the midst of the most troubled times in many years, we are pleased with the fundamental operating results for the third quarter of 2008. We continue to bolster our reserves and recorded a provision for credit losses during the third quarter of $15.8 million which increased our reserve for credit losses to 1.29% of total loans. In addition, we have limited new loan growth to further strengthen our capital ratios,” commented Dunson Cheng, Chairman of the Board, Chief Executive Officer, and President of the Company.
“Our net interest margin has begun to stabilize and the interest rate floors on many of our floating rate loans should help mitigate the impact of lower short term interest rates. To provide better customer service in Northern California, we will be opening a new branch in Dublin in the first quarter of 2009,” said Peter Wu, Executive Vice Chairman and Chief Operating Officer.
“Our capital ratios are strong and qualify us as a well capitalized institution. However, in view of the current uncertain economic outlook, we deem it prudent to consider participating in the US Treasury Capital Purchase Program to position the Company to expand its services to its communities and to enhance its strategic position. 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 $73.6 million during the third quarter of 2008, a decline of $6.2 million, or 7.8%, compared to the $79.8 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 2.88% for the third quarter of 2008. The net interest margin decreased 6 basis points from 2.94% in the second quarter of 2008 and decreased 81 basis points from 3.69% in the third quarter of 2007. The decrease in the net interest margin from the prior year primarily resulted from the lag in the downward repricing of certificates of deposit following 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. The decrease in the net interest margin from the second quarter primarily resulted from the increase in the borrowing rates on securities sold under agreements to repurchase and other borrowed funds.
For the third quarter of 2008, the yield on average interest-earning assets was 5.70% on a fully taxable-equivalent basis, and the cost of funds on average interest-bearing liabilities equaled 3.21%. In comparison, for the third quarter of 2007, the yield on average interest-earning assets was 7.34% and cost of funds on average interest-bearing liabilities equaled 4.24%. 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 61 basis points to 2.49% for the quarter ended September 30, 2008, from 3.10% 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 $15.8 million for the third quarter of 2008 compared to $2.2 million for the third quarter of 2007 and $20.5 million for the second quarter of 2008. The provision for credit losses was based on the review of the adequacy of the allowance for loan losses at September 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 September 30, | For the nine months ended September 30, | ||||||||||||
| (In thousands) | 2008 | 2007 | 2008 | 2007 | |||||||||
| Charge-offs: | |||||||||||||
| Commercial loans | $ | 6,796 | $ | 511 | $ | 8,917 | $ | 6,253 | |||||
| Construction loans | 3,230 | - | 8,239 | 190 | |||||||||
| Real estate loans | 172 | 912 | 893 | 1,030 | |||||||||
| Installment and other loans | - | - | - | 1 | |||||||||
| Total charge-offs | 10,198 | 1,423 | 18,049 | 7,474 | |||||||||
| Recoveries: | |||||||||||||
| Commercial loans | 1,067 | 138 | 1,634 | 2,911 | |||||||||
| Construction loans | - | - | 83 | 190 | |||||||||
| Real estate loans | - | - | - | 202 | |||||||||
| Installment and other loans | 4 | 2 | 16 | 27 | |||||||||
| Total recoveries | 1,071 | 140 | 1,733 | 3,330 | |||||||||
| Net Charge-offs | $ | 9,127 | $ | 1,283 | $ | 16,316 | $ | 4,144 | |||||
Total charge-offs for the third quarter of 2008 included $5.1 million in charge-offs related to two distributors and a $3.2 million charge-off to a condominium conversion project in San Diego county that had been previously reported as a troubled debt restructuring.
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 negative $8.4 million for the third quarter of 2008, a decrease of $17.3 million compared to the non-interest income of $8.9 million for the third quarter of 2007. The decrease in non-interest income primarily resulted from the “Other-than-temporary impairment” charge of $27.8 million on agency preferred stock, which had a carrying value of $2.5 million after the impairment write-down, which was partially offset by net gains of $12.5 million from sale of agency mortgage backed securities.
Letters of credit commissions decreased $157,000, or 9.7%, to $1.5 million in the third quarter of 2008 from $1.6 million in the same quarter a year ago, primarily due to decreased international transactions as a result of the slowdown in the economy.
Gains from sale of premises and equipment decreased $2.7 million as a result of the sale of a former bank branch building in September 2007. Other operating income increased $992,000, or 30.1%, to $4.3 million in the third quarter of 2008 from $3.3 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 commissions from official check rebate of $275,000 and in wealth management commissions of $235,000.
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Non-interest expense
Non-interest expense increased $2.0 million, or 5.9%, to $35.2 million in the third quarter of 2008 compared to $33.2 million in the same quarter a year ago. The efficiency ratio was 53.92%, or 37.80% excluding the $27.8 million pre-tax impairment charge, compared to 37.46% for the same period a year ago, and 41.52%, or 38.74% excluding the $5.8 million pre-tax impairment charge for the second quarter of 2008.
Federal Deposit Insurance Corporation (“FDIC”) and State assessments increased to $1.3 million in the third quarter of 2008 from $284,000 in the same quarter a year ago as a result of the utilization of the remaining credit for prior years’ FDIC insurance premiums in March 2008. Professional service expense increased $1.0 million, or 42.8%, primarily due to increases in information technology consulting expenses of $518,000, appraisal expenses of $217,000, and legal expenses of $213,000. Other real estate owned (“OREO”) expense increased $1.2 million due to a $1.3 million write-down on the Company’s Texas apartment foreclosure. Expense from operations of affordable housing investments increased $300,000, or 11.8%, to $2.8 million compared to $2.5 million in the same quarter a year ago as a result of adjustments to estimated losses and additional investments in affordable housing projects.
Offsetting the above described increases were decreases of $584,000 in computer and equipment expense due primarily to the decrease in software license fees as a result of the Company’s new data processing contract, $517,000 in salaries and employee benefits as a result of lower current year bonus accrual, $253,000 in recruiting and education expenses, and $201,000 in litigation expenses in the third quarter of 2008 compared to the same quarter a year ago.
Income taxes
The effective tax rate was 51.7% for the third quarter of 2008 and 36.1% for the first nine months of 2008, compared to 36.2% for the same quarter a year ago and 36.2% for the full year 2007. The higher effective tax rate for the third quarter of 2008 resulted from the lack of tax benefits from that portion of the “other-than-temporary” impairment on agency preferred stock in excess of available capital gains. During the fourth quarter of 2008, an additional tax benefit of $4.6 million will be recognized as a result of the enactment on October 3 of the Emergency Economic Stabilization Act of 2008 which amended the tax code to permit the loss on sale of agency preferred stock by a financial institution to be treated as an ordinary loss instead of a capital loss.
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Reconciliation of Reported Earnings to Earnings Excluding the Impairment Charge
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||
| 2008 | 2007 | 2008 | 2007 | ||||||||||
| (Dollars in thousands, except share and per share data) | |||||||||||||
| Net income as reported | $ | 6,891 | $ | 34,006 | $ | 53,421 | $ | 94,553 | |||||
| Add: Other-than-temporary impairment charge | 27,824 | 33,655 | |||||||||||
| Less: Tax benefit for non-cash | |||||||||||||
| other-than-temporary impairment charge | (7,525 | ) | - | (9,977 | ) | - | |||||||
| Earnings excluding the impairment charge | $ | 27,190 | $ | 34,006 | $ | 77,099 | $ | 94,553 | |||||
| Basic average common shares outstanding | 49,441,621 | 49,828,379 | 49,392,655 | 50,683,650 | |||||||||
| Diluted average common shares outstanding | 49,530,272 | 50,417,332 | 49,497,171 | 51,283,317 | |||||||||
| Earnings per share as reported: | |||||||||||||
| Basic | 0.14 | 0.68 | 1.08 | 1.87 | |||||||||
| Dilutive | 0.14 | 0.67 | 1.08 | 1.84 | |||||||||
| Earnings per share excluding the impairment charge | |||||||||||||
| Basic | 0.55 | 0.68 | 1.56 | 1.87 | |||||||||
| Dilutive | 0.55 | 0.67 | 1.56 | 1.84 | |||||||||
| Return on average assets | |||||||||||||
| As reported | 0.25 | % | 1.46 | % | 0.67 | % | 1.43 | % | |||||
| Excluding the impairment charge | 0.99 | % | 1.46 | % | 0.97 | % | 1.43 | % | |||||
| Return on average stockholders' equity | |||||||||||||
| As reported | 2.71 | % | 14.45 | % | 7.09 | % | 13.49 | % | |||||
| Excluding the impairment charge | 10.70 | % | 14.45 | % | 10.23 | % | 13.49 | % | |||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||
| 2008 | 2007 | 2008 | 2007 | ||||||||||
| (Dollars in thousands) | |||||||||||||
| Total revenues as reported | $ | 65,232 | $ | 88,686 | $ | 228,235 | $ | 249,981 | |||||
| Add: Other-than-temporary | |||||||||||||
| impairment charge | 27,824 | - | 33,655 | - | |||||||||
| Total revenues excluding the impairment charge | $ | 93,056 | $ | 88,686 | $ | 261,890 | $ | 249,981 | |||||
| Total non-interest expenses reported | $ | 35,171 | $ | 33,222 | $ | 100,881 | $ | 95,736 | |||||
| Efficiency ratio | |||||||||||||
| As reported | 53.92 | % | 37.46 | % | 44.20 | % | 38.30 | % | |||||
| Excluding the impairment charge | 37.80 | % | 37.46 | % | 38.52 | % | 38.30 | % | |||||
BALANCE SHEET REVIEW
Total assets increased by $647.8 million, or 6.2%, to $11.1 billion at September 30, 2008, from $10.4 billion at December 31, 2007. The increase in total assets was represented primarily by increases in available- for-sale securities of $244.7 million, or 10.4%, and increases in loans of $815.6 million, or 12.2%, offset by decreases of $366.1 million in securities purchased under agreements to resell.
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The growth of gross loans to $7.5 billion as of September 30, 2008, from $6.7 billion as of December 31, 2007, represents an increase of $815.6 million, or 12.2%, primarily due to increases in commercial mortgage loans and commercial loans.
The changes in the loan composition from December 31, 2007, are presented below:
Type of Loans: | September 30, 2008 | December 31, 2007 | % Change | |||||||
(Dollars in thousands) | ||||||||||
| Commercial | $ | 1,651,556 | $ | 1,435,861 | 15 | |||||
| Residential mortgage | 628,670 | 555,703 | 13 | |||||||
| Commercial mortgage | 4,129,201 | 3,762,689 | 10 | |||||||
| Equity lines | 154,764 | 108,004 | 43 | |||||||
| Real estate construction | 920,711 | 799,230 | 15 | |||||||
| Installment | 10,981 | 15,099 | (27 | ) | ||||||
| Other | 3,398 | 7,059 | (52 | ) | ||||||
| Gross loans and leases | $ | 7,499,281 | $ | 6,683,645 | 12 | |||||
| Allowance for loan losses | (92,068 | ) | (64,983 | ) | 42 | |||||
| Unamortized deferred loan fees | (10,290 | ) | (10,583 | ) | (3 | ) | ||||
| Total loans and leases, net | $ | 7,396,923 | $ | 6,608,079 | 12 | |||||
At September 30, 2008, total deposits were $6.8 billion, an increase of $570.8 million, or 9.1%, from $6.3 billion at December 31, 2007. Time deposit under $100,000 increased $239.2 million, or 18.2%, time deposits of $100,000 or more increased $144.2 million, or 4.9%, and interest-bearing demand deposits increased $142.5 million, or 15.6%. The changes in the deposit composition from December 31, 2007, are presented below:
Deposits | September 30, 2008 | December 31, 2007 | % Change | |||||||
(Dollars in thousands) | ||||||||||
| Non-interest-bearing demand | $ | 821,233 | $ | 785,364 | 5 | |||||
| NOW | 270,763 | 231,583 | 17 | |||||||
| Money market | 785,119 | 681,783 | 15 | |||||||
| Savings | 340,316 | 331,316 | 3 | |||||||
| Time deposits under $100,000 | 1,550,433 | 1,311,251 | 18 | |||||||
| Time deposits of $100,000 or more | 3,081,306 | 2,937,070 | 5 | |||||||
| Total deposits | $ | 6,849,170 | $ | 6,278,367 | 9 | |||||
At September 30, 2008, brokered deposits which are included in time deposits under $100,000 increased to $888.0 million, a $255.4 million increase from $632.6 million at December 31, 2007.
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ASSET QUALITY REVIEW
At September 30, 2008, total non-accrual loans of $101.1 million included thirteen construction loans totaling $65.5 million, fourteen commercial real estate loans totaling $10.7 million, five land loans totaling $8.8 million, twenty-two commercial loans totaling $10.7 million, and ten residential mortgage loans totaling $5.4 million. The $65.5 million of construction loans included four condo construction loans of $32.4 million in Los Angeles County, a $5.0 million town house construction loan in Los Angeles County, a $2.7 million land development loan in Los Angeles County, two condo conversion loans of $10.1 million in San Diego County including a $7.9 million loan that was reported as a troubled debt restructuring in prior quarters, a $9.2 million condo construction loan in the state of Nevada, a $4.1 million construction loan in the Central Valley, California, and a $1.4 million condo construction loan in Boston, Massachusetts. The $10.7 million of non-accrual commercial real estate loans included four loans of $4.1 million secured by multi-family residences, a $1.7 million loan secured by a motel in Texas, and $4.9 million in loans secured by industrial buildings, a retail store, and a restaurant. Non-accrual loans of $15.8 million were paid off during the third quarter of 2008.
At September 30, 2008, total residential construction loans were $428.6 million of which $15.3 million were in San Bernardino and Riverside counties in California and $18.9 million were in the Central Valley in California. Residential construction loans of $4.1 million in the Central Valley were on non-accrual status as of September 30, 2008. At September 30, 2008, total land loans were $232.3 million of which $29.2 million were in San Bernardino and Riverside counties and $1.8 million were in Central Valley. Land loans in Riverside County, San Bernardino county and Central Valley were all on accrual status as of September 30, 2008.
At September 30, 2008, other real estate owned increased $14.3 million to $43.4 million from $29.1 million at June 30, 2008. OREO was comprised of thirteen properties, including $13.5 million land zoned for residential and retail purposes in Riverside County, California, $11.6 million for land zoned for apartments in Anaheim, California, an $8.1 million apartment building in Texas, a $6.8 million shopping center in Texas, a $1.4 million hotel in Texas, and seven other properties totaling $2.0 million.
Non-performing assets to gross loans and other real estate owned was 1.92% at September 30, 2008, compared to 1.25% at December 31, 2007. Total non-performing assets increased $60.8 million, or 72.7%, to $144.5 million at September 30, 2008, compared with $83.7 million at December 31, 2007, primarily due to a $42.8 million increase in non-accrual loans and a $27.3 million increase in OREO offset by a $9.3 million decrease in loans past due 90 days or more. There was no loan past due 90 days or more still accruing interest as of September 30, 2008.
The allowance for loan losses were $92.0 million and the allowance for off-balance sheet unfunded credit commitments were $5.0 million at September 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 $97.0 million at September 30, 2008, compared to $69.6 million at December 31, 2007. The allowance for credit losses represented 1.29% of period-end gross loans and 96.0% of non-performing loans at September 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) | September 30, 2008 | December 31, 2007 | % Change | |||||||
Non-performing assets | ||||||||||
| Accruing loans past due 90 days or more | $ | - | $ | 9,265 | (100 | ) | ||||
| Non-accrual loans: | ||||||||||
| Construction | 65,524 | 29,677 | 121 | |||||||
| Land | 8,841 | 6,627 | 33 | |||||||
| Commercial real estate, excluding land | 10,743 | 13,336 | (19 | ) | ||||||
| Commercial | 10,646 | 6,664 | 60 | |||||||
| Real estate mortgage | 5,347 | 1,971 | 171 | |||||||
| Total non-accrual loans: | $ | 101,101 | $ | 58,275 | 73 | |||||
| Total non-performing loans | 101,101 | 67,540 | 50 | |||||||
| Other real estate owned | 43,410 | 16,147 | 169 | |||||||
| Total non-performing assets | $ | 144,511 | $ | 83,687 | 73 | |||||
| Troubled debt restructurings | $ | 893 | $ | 12,601 | (93 | ) | ||||
| Allowance for loan losses | $ | 92,068 | $ | 64,983 | 42 | |||||
| Allowance for off-balance sheet credit commitments | 4,975 | 4,576 | 9 | |||||||
| Allowance for credit losses | $ | 97,043 | $ | 69,559 | 40 | |||||
| Total gross loans outstanding, at period-end | $ | 7,499,281 | $ | 6,683,645 | 12 | |||||
| Allowance for loan losses to non-performing loans, at period-end | 91.07 | % | 96.21 | % | ||||||
| Allowance for loan losses to gross loans, at period-end | 1.23 | % | 0.97 | % | ||||||
| Allowance for credit losses to non-performing loans, at period-end | 95.99 | % | 102.99 | % | ||||||
| Allowance for credit losses to gross loans, at period-end | 1.29 | % | 1.04 | % | ||||||
CAPITAL ADEQUACY REVIEW
At September 30, 2008, the Tier 1 risk-based capital ratio of 9.39%, total risk-based capital ratio of 11.09%, and Tier 1 leverage capital ratio of 7.65%, 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 nine months of 2008. At September 30, 2008, 622,500 shares remain under the Company’s November 2007 repurchase program.
YEAR-TO-DATE REVIEW
Net income was $53.4 million, or $1.08 per diluted share for the nine months ended September 30, 2008, a decrease of $41.1 million, or 43.5%, in net income compared to $94.5 million, or $1.84 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 $23.7 million impairment charge was $77.1 million, or $1.56 per diluted share for the nine months ended September 30, 2008, a decrease of $17.5 million, or 18.5%, compared to the same period a year ago. The net interest margin for the nine months ended September 30, 2008, decreased 77 basis points to 2.99% compared to 3.76% for the same period a year ago.
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Return on average stockholders’ equity was 7.09% and return on average assets was 0.67% for the nine months ended September 30, 2008, compared to a return on average stockholders’ equity of 13.49% and a return on average assets of 1.43% for the same period of 2007. Excluding the $23.7 million impairment charge, return on average stockholders’ equity was 10.23% and return on average assets was 0.97% for the nine months ended September 30, 2008. The efficiency ratio for the nine months ended September 30, 2008 was 44.20%, or 38.52% excluding the $33.7 million pre-tax impairment charge, compared to 38.30% 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 September 30, | Nine months ended September 30, | ||||||||||||||||||
| (Dollars in thousands, except per share data) | 2008 | 2007 | % Change | 2008 | 2007 | % Change | |||||||||||||
FINANCIAL PERFORMANCE | |||||||||||||||||||
| Net interest income before provision for credit losses | $ | 73,601 | $ | 79,827 | (8 | ) | $ | 220,905 | $ | 229,076 | (4 | ) | |||||||
| Provision for credit losses | 15,800 | 2,200 | 618 | 43,800 | 5,300 | 726 | |||||||||||||
| Net interest income after provision for credit losses | 57,801 | 77,627 | (26 | ) | 177,105 | 223,776 | (21 | ) | |||||||||||
| Non-interest income | (8,369 | ) | 8,859 | (194 | ) | 7,330 | 20,905 | (65 | ) | ||||||||||
| Non-interest expense | 35,171 | 33,222 | 6 | 100,881 | 95,736 | 5 | |||||||||||||
| Income before income tax expense | 14,261 | 53,264 | (73 | ) | 83,554 | 148,945 | (44 | ) | |||||||||||
| Income tax expense | 7,370 | 19,258 | (62 | ) | 30,133 | 54,392 | (45 | ) | |||||||||||
| Net income | $ | 6,891 | $ | 34,006 | (80 | ) | $ | 53,421 | $ | 94,553 | (44 | ) | |||||||
| Net income per common share: | |||||||||||||||||||
| Basic | $ | 0.14 | $ | 0.68 | (79 | ) | $ | 1.08 | $ | 1.87 | (42 | ) | |||||||
| Diluted | $ | 0.14 | $ | 0.67 | (79 | ) | $ | 1.08 | $ | 1.84 | (41 | ) | |||||||
| Cash dividends paid per common share | $ | 0.105 | $ | 0.105 | - | $ | 0.315 | $ | 0.300 | 5 | |||||||||
SELECTED RATIOS | |||||||||||||||||||
| Return on average assets | 0.25 | % | 1.46 | % | (83 | ) | 0.67 | % | 1.43 | % | (53 | ) | |||||||
| Return on average stockholders’ equity | 2.71 | % | 14.45 | % | (81 | ) | 7.09 | % | 13.49 | % | (47 | ) | |||||||
| Efficiency ratio | 53.92 | % | 37.46 | % | 44 | 44.20 | % | 38.30 | % | 15 | |||||||||
| Dividend payout ratio | 75.30 | % | 15.43 | % | 388 | 29.12 | % | 16.18 | % | 80 | |||||||||
YIELD ANALYSIS (Fully taxable equivalent) | |||||||||||||||||||
| Total interest-earning assets | 5.70 | % | 7.34 | % | (22 | ) | 6.00 | % | 7.39 | % | (19 | ) | |||||||
| Total interest-bearing liabilities | 3.21 | % | 4.24 | % | (24 | ) | 3.44 | % | 4.24 | % | (19 | ) | |||||||
| Net interest spread | 2.49 | % | 3.10 | % | (20 | ) | 2.56 | % | 3.15 | % | (19 | ) | |||||||
| Net interest margin | 2.88 | % | 3.69 | % | (22 | ) | 2.99 | % | 3.76 | % | (20 | ) | |||||||
CAPITAL RATIOS | September 30, 2008 | September 30, 2007 | December 31, 2007 | Well Capitalized Requirements | Minimum Regulatory Requirements | ||||||||||||||
| Tier 1 risk-based capital ratio | 9.39 | % | 9.22 | % | 9.09 | % | 6.0 | % | 4.0 | % | |||||||||
| Total risk-based capital ratio | 11.09 | % | 10.65 | % | 10.52 | % | 10.0 | % | 8.0 | % | |||||||||
| Tier 1 leverage capital ratio | 7.65 | % | 8.32 | % | 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) | September 30, 2008 | December 31, 2007 | % change | |||||||
Assets | ||||||||||
| Cash and due from banks | $ | 82,923 | $ | 118,437 | (30 | ) | ||||
| Short-term investments | 5,185 | 2,278 | 128 | |||||||
| 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 $2,619,804 in 2008 and | ||||||||||
| $2,348,606 in 2007) | 2,592,331 | 2,347,665 | 10 | |||||||
| Trading securities | 19 | 5,225 | (100 | ) | ||||||
| Loans | 7,499,281 | 6,683,645 | 12 | |||||||
| Less: Allowance for loan losses | (92,068 | ) | (64,983 | ) | 42 | |||||
| Unamortized deferred loan fees, net | (10,290 | ) | (10,583 | ) | (3 | ) | ||||
| Loans, net | 7,396,923 | 6,608,079 | 12 | |||||||
| Federal Home Loan Bank stock | 67,672 | 65,720 | 3 | |||||||
| Other real estate owned, net | 43,410 | 16,147 | 169 | |||||||
| Affordable housing investments, net | 105,748 | 94,000 | 12 | |||||||
| Premises and equipment, net | 98,182 | 76,848 | 28 | |||||||
| Customers’ liability on acceptances | 52,460 | 53,148 | (1 | ) | ||||||
| Accrued interest receivable | 41,394 | 53,032 | (22 | ) | ||||||
| Goodwill | 319,557 | 319,873 | (0 | ) | ||||||
| Other intangible assets, net | 30,945 | 36,097 | (14 | ) | ||||||
| Other assets | 63,544 | 39,883 | 59 | |||||||
| Total assets | $ | 11,050,293 | $ | 10,402,532 | 6 | |||||
Liabilities and Stockholders’ Equity | ||||||||||
| Deposits | ||||||||||
| Non-interest-bearing demand deposits | $ | 821,233 | $ | 785,364 | 5 | |||||
| Interest-bearing deposits: | ||||||||||
| NOW deposits | 270,763 | 231,583 | 17 | |||||||
| Money market deposits | 785,119 | 681,783 | 15 | |||||||
| Savings deposits | 340,316 | 331,316 | 3 | |||||||
| Time deposits under $100,000 | 1,550,433 | 1,311,251 | 18 | |||||||
| Time deposits of $100,000 or more | 3,081,306 | 2,937,070 | 5 | |||||||
| Total deposits | 6,849,170 | 6,278,367 | 9 | |||||||
| Federal funds purchased | 33,000 | 41,000 | (20 | ) | ||||||
| Securities sold under agreements to repurchase | 1,550,000 | 1,391,025 | 11 | |||||||
| Advances from the Federal Home Loan Bank | 1,276,713 | 1,375,180 | (7 | ) | ||||||
| Other borrowings from financial institutions | - | 8,301 | (100 | ) | ||||||
| Other borrowings from affordable housing investments | 19,541 | 19,642 | (1 | ) | ||||||
| Long-term debt | 171,136 | 171,136 | - | |||||||
| Acceptances outstanding | 52,460 | 53,148 | (1 | ) | ||||||
| Minority interest in consolidated subsidiaries | 8,500 | 8,500 | - | |||||||
| Other liabilities | 87,620 | 84,314 | 4 | |||||||
| Total liabilities | 10,048,140 | 9,430,613 | 7 | |||||||
| Commitments and contingencies | - | - | - | |||||||
| Total stockholders’ equity | 1,002,153 | 971,919 | 3 | |||||||
| Total liabilities and stockholders’ equity | $ | 11,050,293 | $ | 10,402,532 | 6 | |||||
| Book value per share | $ | 20.25 | $ | 19.70 | 3 | |||||
| Number of common stock shares outstanding | 49,477,706 | 49,336,187 | 0 | |||||||
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Page 12
CATHAY GENERAL BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||
| 2008 | 2007 | 2008 | 2007 | ||||||||||
| (In thousands, except share and per share data) | |||||||||||||
INTEREST AND DIVIDEND INCOME | |||||||||||||
| Loan receivable, including loan fees | $ | 114,005 | $ | 123,925 | $ | 341,880 | $ | 356,841 | |||||
| Investment securities- taxable | 27,575 | 25,127 | 84,507 | 71,381 | |||||||||
| Investment securities- nontaxable | 284 | 443 | 974 | 1,625 | |||||||||
| Federal Home Loan Bank stock | 1,004 | 639 | 2,685 | 1,689 | |||||||||
| Agency preferred stock | 313 | 174 | 1,621 | 512 | |||||||||
| Federal funds sold and securities | |||||||||||||
| purchased under agreements to resell | 2,899 | 7,615 | 12,294 | 15,382 | |||||||||
| Deposits with banks | 42 | 1,248 | 523 | 3,288 | |||||||||
| Total interest and dividend income | 146,122 | 159,171 | 444,484 | 450,718 | |||||||||
INTEREST EXPENSE | |||||||||||||
| Time deposits of $100,000 or more | 26,226 | 34,475 | 86,398 | 97,527 | |||||||||
| Other deposits | 17,100 | 20,068 | 49,519 | 56,739 | |||||||||
| Securities sold under agreements to repurchase | 15,174 | 9,865 | 44,716 | 23,126 | |||||||||
| Advances from Federal Home Loan Bank | 11,785 | 11,472 | 35,229 | 34,930 | |||||||||
| Long-term debt | 2,030 | 3,182 | 6,889 | 8,057 | |||||||||
| Short-term borrowings | 206 | 282 | 828 | 1,263 | |||||||||
| Total interest expense | 72,521 | 79,344 | 223,579 | 221,642 | |||||||||
| Net interest income before provision for credit losses | 73,601 | 79,827 | 220,905 | 229,076 | |||||||||
| Provision for credit losses | 15,800 | 2,200 | 43,800 | 5,300 | |||||||||
| Net interest income after provision for loan losses | 57,801 | 77,627 | 177,105 | 223,776 | |||||||||
NON-INTEREST INCOME | |||||||||||||
| Securities (losses) gains, net | (15,313 | ) | 88 | (12,980 | ) | 268 | |||||||
| Letters of credit commissions | 1,465 | 1,622 | 4,281 | 4,349 | |||||||||
| Depository service fees | 1,189 | 1,146 | 3,636 | 3,529 | |||||||||
| Gains from sale of premises and equipment | - | 2,705 | 21 | 2,714 | |||||||||
| Other operating income | 4,290 | 3,298 | 12,372 | 10,045 | |||||||||
| Total non-interest income | (8,369 | ) | 8,859 | 7,330 | 20,905 | ||||||||
NON-INTEREST EXPENSE | |||||||||||||
| Salaries and employee benefits | 16,376 | 16,893 | 50,643 | 50,756 | |||||||||
| Occupancy expense | 3,393 | 3,159 | 9,918 | 9,035 | |||||||||
| Computer and equipment expense | 1,848 | 2,432 | 6,024 | 7,209 | |||||||||
| Professional services expense | 3,410 | 2,388 | 8,890 | 6,659 | |||||||||
| FDIC and State assessments | 1,336 | 284 | 3,172 | 804 | |||||||||
| Marketing expense | 584 | 608 | 2,449 | 2,413 | |||||||||
| Other real estate owned expense | 1,182 | 23 | 1,806 | 284 | |||||||||
| Operations of affordable housing investments | 2,840 | 2,540 | 5,361 | 4,928 | |||||||||
| Amortization of core deposit intangibles | 1,722 | 1,767 | 5,196 | 5,298 | |||||||||
| Other operating expense | 2,480 | 3,128 | 7,422 | 8,350 | |||||||||
| Total non-interest expense | 35,171 | 33,222 | 100,881 | 95,736 | |||||||||
| Income before income tax expense | 14,261 | 53,264 | 83,554 | 148,945 | |||||||||
| Income tax expense | 7,370 | 19,258 | 30,133 | 54,392 | |||||||||
| Net income | 6,891 | 34,006 | 53,421 | 94,553 | |||||||||
| Other comprehensive income (loss), net of tax | 3,077 | 5,978 | (15,376 | ) | 2,568 | ||||||||
| Total comprehensive income | $ | 9,968 | $ | 39,984 | $ | 38,045 | $ | 97,121 | |||||
| Net income per common share: | |||||||||||||
| Basic | $ | 0.14 | $ | 0.68 | $ | 1.08 | $ | 1.87 | |||||
| Diluted | $ | 0.14 | $ | 0.67 | $ | 1.08 | $ | 1.84 | |||||
| Cash dividends paid per common share | $ | 0.105 | $ | 0.105 | $ | 0.315 | $ | 0.300 | |||||
| Basic average common shares outstanding | 49,441,621 | 49,828,379 | 49,392,655 | 50,683,650 | |||||||||
| Diluted average common shares outstanding | 49,530,272 | 50,417,332 | 49,497,171 | 51,283,317 | |||||||||
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Page 13
CATHAY GENERAL BANCORP
AVERAGE BALANCES - SELECTED CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
| For the three months ended, | |||||||||||||||||||
| (In thousands) | September 30, 2008 | September 30, 2007 | June 30, 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) | $ | 7,425,818 | 6.11 | % | $ | 6,298,452 | 7.81 | % | $ | 7,122,528 | 6.26 | % | |||||||
| Taxable investment securities | 2,484,473 | 4.42 | % | 1,769,245 | 5.63 | % | 2,475,628 | 4.62 | % | ||||||||||
| Tax-exempt investment securities (2) | 47,938 | 7.20 | % | 55,217 | 6.62 | % | 60,781 | 8.69 | % | ||||||||||
| FHLB stock | 64,228 | 6.22 | % | 50,297 | 5.04 | % | 65,879 | 5.67 | % | ||||||||||
| Federal funds sold and securities purchased | |||||||||||||||||||
| under agreements to resell | 188,522 | 6.12 | % | 371,413 | 8.13 | % | 177,445 | 6.61 | % | ||||||||||
| Deposits with banks | 8,941 | 1.87 | % | 71,843 | 6.89 | % | 5,188 | 2.09 | % | ||||||||||
| Total interest-earning assets | $ | 10,219,920 | 5.70 | % | $ | 8,616,467 | 7.34 | % | $ | 9,907,449 | 5.86 | % | |||||||
Interest-bearing liabilities | |||||||||||||||||||
| Interest-bearing demand deposits | $ | 268,802 | 0.57 | % | $ | 233,116 | 1.28 | % | $ | 253,559 | 0.58 | % | |||||||
| Money market | 760,679 | 1.81 | % | 699,679 | 3.18 | % | 738,206 | 1.76 | % | ||||||||||
| Savings deposits | 337,538 | 0.31 | % | 342,971 | 1.01 | % | 337,512 | 0.33 | % | ||||||||||
| Time deposits | 4,708,290 | 3.31 | % | 3,935,125 | 4.77 | % | 4,452,317 | 3.58 | % | ||||||||||
| Total interest-bearing deposits | $ | 6,075,309 | 2.84 | % | $ | 5,210,891 | 4.15 | % | $ | 5,781,594 | 3.03 | % | |||||||
| Federal funds purchased | 39,842 | 2.06 | % | 22,863 | 4.84 | % | 37,720 | 2.24 | % | ||||||||||
| Securities sold under agreements to repurchase | 1,550,000 | 3.89 | % | 1,041,577 | 3.76 | % | 1,551,571 | 3.87 | % | ||||||||||
| Other borrowed funds | 1,157,430 | 4.05 | % | 978,759 | 4.65 | % | 1,134,448 | 4.01 | % | ||||||||||
| Long-term debt | 171,136 | 4.72 | % | 171,136 | 7.38 | % | 171,136 | 4.72 | % | ||||||||||
| Total interest-bearing liabilities | 8,993,717 | 3.21 | % | 7,425,226 | 4.24 | % | 8,676,469 | 3.34 | % | ||||||||||
| Non-interest-bearing demand deposits | 788,028 | 774,513 | 764,270 | ||||||||||||||||
| Total deposits and other borrowed funds | $ | 9,781,745 | $ | 8,199,739 | $ | 9,440,739 | |||||||||||||
| Total average assets | $ | 10,926,283 | $ | 9,263,156 | $ | 10,561,123 | |||||||||||||
| Total average stockholders’ equity | $ | 1,010,503 | $ | 933,562 | $ | 1,009,463 | |||||||||||||
| For the nine months ended, | |||||||||||||
| (In thousands) | September 30, 2008 | September 30, 2007 | |||||||||||
Interest-earning assets | Average Balance | Average Yield/Rate (1) (2) | Average Balance | Average Yield/Rate (1) (2) | |||||||||
| Loans and leases | $ | 7,118,773 | 6.42 | % | $ | 6,034,326 | 7.91 | % | |||||
| Taxable investment securities | 2,404,666 | 4.69 | % | 1,694,897 | 5.63 | % | |||||||
| Tax-exempt investment securities (2) | 58,690 | 8.49 | % | 65,583 | 6.54 | % | |||||||
| FHLB stock | 65,283 | 5.49 | % | 48,493 | 4.66 | % | |||||||
| Federal funds sold and securities purchased | |||||||||||||
| under agreements to resell | 261,613 | 6.28 | % | 269,137 | 7.64 | % | |||||||
| Deposits with banks | 13,007 | 5.37 | % | 62,702 | 7.01 | % | |||||||
| Total interest-earning assets | $ | 9,922,032 | 6.00 | % | $ | 8,175,138 | 7.39 | % | |||||
Interest-bearing liabilities | |||||||||||||
| Interest-bearing demand deposits | $ | 253,380 | 0.65 | % | $ | 233,012 | 1.28 | % | |||||
| Money market deposits | 733,578 | 1.92 | % | 680,751 | 3.12 | % | |||||||
| Savings deposits | 335,193 | 0.39 | % | 346,951 | 1.00 | % | |||||||
| Time deposits | 4,448,113 | 3.70 | % | 3,758,715 | 4.75 | % | |||||||
| Total interest-bearing deposits | $ | 5,770,264 | 3.15 | % | $ | 5,019,429 | 4.11 | % | |||||
| Federal funds purchased | 40,299 | 2.65 | % | 27,621 | 5.20 | % | |||||||
| Securities sold under agreements to repurchase | 1,553,622 | 3.84 | % | 831,430 | 3.72 | % | |||||||
| Other borrowed funds | 1,149,401 | 4.10 | % | 961,589 | 4.88 | % | |||||||
| Long-term debt | 171,136 | 5.38 | % | 144,853 | 7.44 | % | |||||||
| Total interest-bearing liabilities | 8,684,722 | 3.44 | % | 6,984,922 | 4.24 | % | |||||||
| Non-interest-bearing demand deposits | 777,664 | 776,946 | |||||||||||
| Total deposits and other borrowed funds | $ | 9,462,386 | $ | 7,761,868 | |||||||||
| Total average assets | $ | 10,597,770 | $ | 8,816,682 | |||||||||
| Total average stockholders’ equity | $ | 1,006,310 | $ | 937,357 | |||||||||
| (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 |